PERFORMANCE OR

CONSUMMATION OF SALE OBLIGATIONS OF SELLER

1. To Preserve the Subject Matter

Article 1163 of the Civil Code lays down a rule applicable

to obligations and contracts in general, that “[E]very person

obliged to give a determinate thing is also obliged to take

care of it with the proper diligence of a good father of a family,

unless the law or the stipulation of the parties requires another

standard of care.”

When a sale covers a specifi c or determinate object, upon

perfection and even prior to delivery, and although the seller still

owns the subject matter, he is already obliged to take care of

the subject matter with the diligence of a good father of a family;

otherwise, he becomes liable to the buyer for breach of such

obligation, as when the thing deteriorates or is lost through

seller’s fault.

The ancillary obligation to preserve the subject matter of

the sale involves a personal obligation “to do,” rather than a real

obligation “to give,” and arises as a necessary legal assurance

to the buyer that the seller would be able to comply fully with the

main obligation to deliver the object of sale.

2. To Deliver the Subject Matter

Under Article 1495 of the Civil Code, the seller is bound: (a)

to transfer the ownership of, and (b) to deliver the thing, which

is the object of the sale to the buyer. Even in the defi nition of

sale under Article 1458, it covers the twin-obligations of the seller “to transfer the ownership of and to

deliver a determinate thing.”

Although the wordings of both Articles 1458 and 1495 seem to

separate “delivery” of the subject matter from the “transfer of

ownership,” nonetheless, the means by which the seller can

transfer the ownership of the subject matter is by the mode of

tradition or delivery, whether actual or constructive.

As early as in Kuenzle & Streiff v. Watson & Co., 1 the Supreme

Court held that where there is no express provision that the title

shall not pass until payment of the price, and the thing sold has

been delivered, title passes from the moment the thing sold is

placed in the possession and control of the buyer. In spite of the

reciprocal nature of a sale, it is not the prior payment of price that

determines the effects of delivery of the subject matter.

Ocejo, Perez & Co. v. International Banking Corp., 2 also

held that delivery produces its natural effects in law, the principal

and most important of which being the conveyance of ownership,

without prejudice to the right of the seller to claim payment of the

price. Normally therefore, as a consequence of a valid sale, the

delivery of the subject matter ipso jure transfers its ownership to

the buyer.

3. To Deliver the Fruits and Accessories

Under Article 1164 of the Civil Code, which applies only to

an obligation to deliver a determinate thing, the transferee has a

right to the fruits of the thing from the time the obligation to deliver

it arises; however, he shall acquire no real right over them until

the same has been delivered to him.

Every obligation to deliver a determinate thing is coupled with

a specifi c provision under Article 1537, that the seller is bound to

deliver the thing sold and its accessions and accessories in the

condition in which they were upon the perfection of the contract,

and all the fruits shall pertain to the buyer from the day on which

the contract was perfected.

Unlike in the principle of res perit domino where it is the

owner of the thing who bears the risk of loss and benefi ts from the

fruits of the thing owned, in a sale involving a determinate subject

matter, even prior to delivery and transfer of ownership thereof

to the buyer, the buyer already has certain rights enforceable

against the seller, pertaining to the subject matter. This is in

accordance with the principle that the accessories always

follow the principal; and since the subject matter is intended for

delivery to the buyer from the point of perfection of the sale, then

necessarily the accessories and fruits must from then on be held

for the account of the buyer.

4. To Warrant the Subject Matter

Under Article 1495 of the Civil Code, with the fulfi llment of

the primary obligation to deliver the subject matter, the seller is

then obliged to “warrant the thing which is the object of the sale.”

The warranties of the seller are discussed in details in Chapter

12.

TRADITION AS A CONSEQUENCE OF A VALID SALE

1. Essence of Tradition

Equatorial Realty Dev., Inc. v. Mayfair Theater, Inc., 3 had

explained quite vividly the mode of tradition when it held that

“ownership of the thing sold is a real right, which the buyer acquires

only upon delivery of the thing to him in any of the ways specifi ed

in Articles 1497 to 1501 of the Civil Code, or in any other manner

signifying an agreement that the possession is transferred from

the vendor to the vendee. This right is transferred, not merely by

contract, but also by tradition or delivery. Non nudis pactis sed

traditione dominia rerum transferantur. And there is said to be

delivery if and when the thing sold ‘is placed in the control and

possession of the vendee.’”4 The Court held further that delivery

is a composite act, in which both parties must join and the minds

of both parties concur; it is an act by which one party parts with the title to and the possession of the

property, and the other

acquires the right to and the possession of the same. 5

Santos v. Santos, 6 held that “the critical factor in the different

modes of effecting delivery, which gives legal effect to the act is

the actual intention of the vendor to deliver, and its acceptance

by the vendee. Without that intention, there is no tradition.”7 This

is quite an inelegant way to put forth the principle on tradition

based on two factors:

(a) Acceptance, although an obligation on the

part of the buyer, is not essential for delivery

by the seller to achieve its legal effects;

and

(b) An express intention on the matter by the

parties to a sale, at the point of delivery is

not essential for tradition to produce its legal

consequences.

The legal effects of the parties’ intention must be gauged at

the point of perfection by which the obligation to deliver the subject

matter is created: was there mutual intention and agreement to

transfer the ownership of the subject matter; if in the affi rmative,

there is a valid sale; if in the negative, we have a simulated sale

which is void ab initio. Besides, the rule has always been that

tradition that is effected by reason of a valid sale would produce

its legal consequences, without the parties having to say so, or

particularly intend it at the point of delivery. 8

The essence of the Equatorial Realty and Santos rulings is

that tradition produces its legal consequences from the fact that

delivery is effected pursuant to a valid sale. Consequently, in one

case, 9 it was held that there is no transfer of ownership by the execution of a deed of sale merely intended

to accommodate the

buyer to enable him to generate funds for his business venture,

simply because there was no valid sale behind the purported act

of constructive delivery.

In another case, 10 it was held that when the auction sale of

the subject properties to the bank was void, no valid title passed

in its favor; consequently, the subsequent sale and delivery of

the properties thereof by the bank was also nullity (i.e., title held

by the bank’s buyer was void) under the elementary principle of

nemo dat quod non habet, one cannot give what one does not

have.

a. Types of Delivery

The Law on Sales under the Civil Code recognizes two

general types of delivery that will effectively transfer ownership of

the subject matter to the buyer and would constitute compliance

by the seller of his obligations under a valid contract of sale: (a)

actual or physical delivery; and (b) constructive delivery.

Froilan v. Pan Oriental Shipping Co., 11 held that in the

absence of stipulation to the contrary, the ownership of the thing

sold passes to the buyer upon the actual or constructive delivery

thereof.

Alfredo v. Borras, 12 held that it is not necessary that the

seller himself delivers title of the property to the buyer because

the thing sold is understood as delivered when it is placed in the

control and possession of the buyer. In that decision, the seller

himself introduced the tenant to the buyers as the new owners of

the land, and from that time on the buyers acted as landlord, and

thereby there was deem to have been delivery.

1. Actual Delivery

Under Article 1497 of the Civil Code, there is actual or

physical delivery when the thing sold is placed in the control and possession of the buyer. 13 Although

possession is the best gauge

when there is control, nonetheless control can take other forms

other than actual physical possession.

Thus, Power Commercial and Industrial Corp. v. Court of

Appeals, 14 held that for both actual or constructive delivery “[t]he

key word is control, not possession,”15 in determining the legal

effect of tradition. Power Commercial considered that the lot sold

had been placed under the control of the buyer, as evidenced

by the subsequent fi ling by the buyer of an ejectment suit, which

signifi ed that the buyer was the new owner which intended

to obtain for itself, and to terminate said occupants’ actual

possession thereof.

2. Constructive Delivery

Under Article 1496 of the Civil Code, constructive delivery

can take several forms, and may be any “manner signifying an

agreement that the possession is transferred from the vendor

to the vendee.” The essence of most forms of constructive

delivery is the existence of an agreement between the seller

and the buyer, and that the latter is understood to have control

of the subject matter of sale.

The discussions on the execution of a public instrument as

a form of constructive delivery should be considered as setting

the same basic premise or principles as to all other forms of

constructive delivery. The importance of using the “execution of a

public instrument pursuant to a valid sale,” as the prime example

to highlight the doctrines to cover all types of constructive delivery

comes from its applicability to all types of subject matter, whether

movable or immovable, tangible or intangible.

a. Execution of Public Instrument

Under Article 1498 of the Civil Code, in the case of both

movables and immovables, when the sale is made through a

public instrument, the execution thereof shall be equivalent to the delivery of the subject matter of sale, if

from the deed the

contrary does not appear or cannot clearly be inferred. 16 In

several cases, 17 the Court held that the notarized deed of sale

has two functions:

(a) It operates as a formal or symbolic delivery

of the property sold; and

(b) It authorizes the buyer to use the document

as proof of ownership.

Therefore, the general rule is that the execution of a public

instrument has the same legal effects as actual or physical

delivery, i.e., it transfers the ownership of the subject matter to

the buyer, and constitutes valid compliance by the seller of his

primary obligations under the sale. 18

Of course, the foregoing rules apply only to a public instrument

that evidences a valid sale. Thus, Torcuator v. Bernabe, 19 held

that a special power of attorney authorizing the agents to execute

a deed of sale over the property can by no means be interpreted

as delivery or conveyance of ownership over said property, thus:

“Taken by itself, in fact, the special power of attorney can be

interpreted as tied up with any number of property arrangements,

such as a contract of lease or a joint venture.”20

(1) Constructive Delivery Has the Same Legal Effect

as Actual or Physical Delivery

Municipality of Victorias v. Court of Appeals, 21 held that the

legal effects and consequences of actual or physical delivery,

also apply equally to constructive delivery: “Similarly, when the

sale is made through a public instrument, the execution thereof shall be equivalent to the delivery of the

thing which is the object

of the contract, if from the deed, the contrary does not appear or

cannot be clearly inferred.”22

The concept has been aptly summed-up in Sabio v.

International Corporate Bank, 23 where the Court held —

Under Article 1498 ... the mere execution of the deed

of conveyance in a public instrument is equivalent to

the delivery of the property. ... prior physical delivery or

possession is not legally required. It is well-established

that ownership and possession are two entirely

different legal concepts. Just as possession is not a

defi nite proof of ownership, neither is non-possession

inconsistent with ownership. Thus, it is of no legal

consequence that respondents were never in actual

possession or occupation of the subject property. They,

nevertheless, perfected and completed ownership

and title to the subject property. Notwithstanding the

presence of illegal occupants on the subject property,

transfer of ownership by symbolic delivery under Article

1498 can still be effected through the execution of the

deed of conveyance. 24

The author therefore takes exception to the ruling in Ten

Forty Realty and Dev. Corp. v. Cruz, 25 where the Supreme

Court held that “[N]owhere in the Civil Code is it provided that

the execution of a Deed of Sale is a conclusive presumption of

delivery of possession of a piece of real estate. This Court has

held that the execution of a public instrument gives rise only

to a prima facie presumption of delivery. Such presumption is

destroyed when the delivery is not effected because of legal

impediment ... negated by the failure of the vendee to take

actual possession of the land sold.” The Ten Forty Realty ruling

confuses between the twin functions of a public instrument, fi rst being merely an evidence of a sale, and

second, a public

instrument being the main, but not the only ingredient, in what

constitutes constructive delivery. By itself a deed of sale is

merely a species of evidence, and it becomes an integral part

of tradition when coupled with other requirements mandated by

jurisprudence, namely, control over the subject matter at the time

of execution and the passage of reasonable time for the control

to remain.

(2)When Execution of Public Instrument

Does Not Produce Effects of Delivery

There are cases when the execution of public instruments

covering valid sales do not produce the effects of tradition.

First, when in the execution of a public instrument, there is

a stipulation to the contrary. 26 Phil. Suburban Dev. v. Auditor, 27

held that such express reservation or contrary inference would

be present when:

(a) A certain date is fi xed for the purchaser to

take possession of the property subject of

the conveyance;

(b) In case of sale by installments, it is stipulated

that until the last installment is made, the

title to the property should remain with the

seller;

(c) When the seller reserves the right to use

and enjoy the property until the gathering of

the pending crops; or

(d) Where the seller has no control over the

thing sold at the moment of the sale, and,

therefore, its material delivery could not

have been made.

Phil. Suburban held that since the execution of the public

instrument was preceded by actual delivery of the subject real estate, then tradition was effected in spite

of the condition stated

in the instrument that the seller should fi rst register the deed of

sale and secure a new title in the name of the buyer before the

latter shall pay the balance of the purchase price, which did not

preclude the transmission of ownership, thus: “In the absence

of an express stipulation to the contrary, the payment of the

purchase price of the goods is not a condition precedent to the

transfer of title to the buyer, but title passes by the delivery.”28

This well-established rule is contrary to what was said in

Heirs of Severina San Miguel v. Court of Appeals, 29 that “[i]n a

contract of sale, title only passes to the vendee upon full payment

of the stipulated consideration, or upon delivery of the thing

sold.” In fact, Balatbat v. Court of Appeals, 30 held that “[D]evoid

of stipulation that ‘ownership in the thing shall not pass to the

purchaser until he has fully paid the price’ [Art. 1478], ownership

in the thing shall pass from the seller to the buyer upon actual or

constructive delivery of the thing sold even if the purchase price

has not yet been fully paid. Failure of the buyer to make good the

price does not, in law, cause the ownership to revest to the seller

unless the bilateral contract of sale is fi rst rescinded or resolved

pursuant to Art. 1191.”31

In Fortune Tobacco Corp. v. NLRC, 32 where the resolution of

the issues boiled down to whether there was an actual sale of the

employer’s plant and facilities, the Court held that the execution

of the deed of conditional sale with provision that the fi nal deed of

sale was to be executed only upon full payment, did not transfer

ownership of the subject matter by the delivery thereof. It also

held that “even accepting that the plant and its facilities have been

sold on a conditional basis, there can be no actual sale thereof

[i.e., transfer of ownership] unless the plant and its facilities are

unconditionally conveyed ... by virtue of a ‘fi nal or absolute deed

of sale’ in accordance with the terms and conditions stated in the

agreement between the parties.”

Secondly, when at the time of the execution of the public

instrument, the subject matter was not subject to the control of

the seller, then the legal effects of delivery would not happen.

Addison v. Felix, 34 held earlier that it is the duty of the

seller to deliver the thing sold, and that symbolic delivery by the

execution of a public instrument is equivalent to actual delivery

only when the thing sold is subject to the control of the seller, so

that “at the moment of sale, its material delivery could have been

made,”35 which talks of capacity rather than an actual physical

delivery. The “moment of sale” referred to was of course the

consummation stage, thus —

The Code imposes upon the vendor the obligation

to deliver the thing sold. The thing is considered to be

delivered when it is placed “in the hands and possession

of the vendee.” ... It is true that the same article declares

that the execution of a public instrument is equivalent

to the delivery of the thing which is the object of the

contract, but, in order that this symbolic delivery may

produce the effect of tradition, it is necessary that the

vendor shall have such control over the thing sold that,

at the moment of the sale, its material delivery could

have been made. It is not enough to confer upon the

purchaser the ownership and the right of possession.

The thing sold must be placed in his control. When

there is no impediment whatsoever to prevent the thing

sold from passing into the tenancy of the purchaser by

the sole will of the vendor, symbolic delivery through

the execution of a public instrument is sufficient. But

if, notwithstanding the execution of the instrument, the

purchaser cannot have the enjoyment and material

tenancy of the thing and make use of it himself or

through another in his name, because such tenancy

and enjoyment are opposed by the interposition of

another will, then fiction yields to reality — the delivery

has not been effected

Addison however recognized that “if the sale had been made

under the express agreement of imposing upon the purchaser

the obligation to take the necessary steps to obtain the material

possession of the thing sold, and it were proven that she knew

that the thing was in the possession of a third person claiming to

have property rights therein, such agreement would perfectly be

valid,”37 and there would have been full compliance by the seller

of his obligations under the sale, by the mere execution of the

public instrument.

In effect, Addison does not intend to place constructive

delivery at a lower category than that of actual delivery, and

there is no implication in the ruling that for constructive delivery

to produce the effects of tradition, it has to be coupled by

subsequent actual delivery or by the actual taking of physical

possession by the buyer. Otherwise, if constructive delivery

cannot do the job without actual delivery being made later on,

then constructive delivery would not in reality be a separate

form of tradition.

The Addison doctrine was reiterated in Power Commercial

and Industrial Corp. v. Court of Appeals, 38 where the Court

emphasized that the operative word in the doctrine is not

“possession” but “control.” In Power Commercial, the buyer was

fully aware of the existence of squatters on the property at the

time of the transactions and even undertook the job of evicting

them. The Court held that the buyer cannot contend later on

that the execution of the deed of sale in a public document did

not operate as a symbolic delivery to transfer possession to the

buyer due to the presence of occupants on the lot sold, thus:

Although most authorities consider transfer of

ownership as the primary purpose of sale, delivery

remains an indispensable requisite as our law does

not admit the doctrine of transfer of property by mere

consent. 39The Civil Code provides that delivery can either

be (1) ACTUAL (Article 1497) or (2) CONSTRUCTIVE

(Articles 1498-1501). Symbolic delivery (Article 1498),

as a species of constructive delivery, effects the

transfer of ownership through the execution of a public

document. Its effi cacy can, however, be prevented if

the vendor does not possess control over the thing

sold, 40 in which case this legal fi ction must yield to

reality. The key word is control, not possession, of the

land ... Considering that the deed of sale between the

parties did not stipulate or infer otherwise, delivery was

effected through the execution of said deed. 41

Nevertheless, the statement in Power Commercial that

“our law does not admit the doctrine of transfer of property by

mere consent,” is not accurate, since under Article 1496 of the

Civil Code, the ownership of the thing sold is acquired by the

buyer from the moment it is delivered to him in any of the ways

specifi ed by law, “or in any other manner signifying an agreement

that the possession is transferred from the vendor to the vendee.”

As discussed hereunder, traditio longa manu and other forms of

symbolic delivery involve a mere agreement that buyer is now

the owner and possessor of the subject matter.

Thirdly, from the decision in Pasagui v. Villablanca, 42 we

can infer an additional element into the Addison doctrine, that

in order that the execution of public instrument to produce the

effect of tradition, not only must the seller have actual control

of the object of the sale at the execution of the instrument, but

that such control or ability to transfer physical possession and

enjoyment must subsist for a reasonable length of time after the

instrument’s execution.

We can only “infer” the ruling from the decision because

Pasagui actually covered the main issue of whether the proper

action that should have been fi led was one of forcible entry, which

required plaintiff’s prior possession; it was therefore a decision,

not on sale, but on jurisdiction and proper remedy. It held that

although a public instrument had been executed to cover the sale,

and despite the facts showing that the third-party claimants of the

subject parcel of land came into possession after the instrument

was executed, there was no delivery ever made by the seller

even by constructive delivery as to conclude that the buyer ever

had title, possession or control of the subject real estate.

The implied Pasagui ruling of control for a reasonable

period after execution of the instrument is an important ingredient

for constructive delivery; otherwise, the execution of a public

instrument, as a mode of delivery, would create undue burden on

the part of the buyer, who would be compelled to literally “jump”

into the possession of the subject matter soon after signing the

instrument, for he would then obtain no remedy from the seller.

The rationale for such inferred ruling should apply equally to all

forms of constructive delivery, since tradition being an obligation

on the part of the seller, the burden must continue to be with the

seller to grant the buyer reasonable period to take possession of

the subject matter. The ruling has since obtained doctrinal status

when it was reiterated in Danguilan v. Intermediate Appellate

Court, 43 and Vda. de Sarmiento v. Lesaca. 44

It is clear therefore, that without the other requisites mandated

by jurisprudence (i.e., control at time of delivery and passage

of reasonable time), the mere execution of a public instrument

does not create a conclusive presumption of delivery, which

presumption can be rebutted by clear and convincing evidence,

such as when the buyer failed to take actual possession or there

was continued enjoyment by the seller of possession. 45

(3) Special Variation to Addison Doctrine

The Addison doctrine seemed to have been strained in the

case of Dy, Jr. v. Court of Appeals, 46 where a brother bought

through a deed of absolute sale a tractor from his brother- seller, which at the time of the execution of the

instrument, was

mortgaged to and in the possession of the mortgagee. The

purchase was with the knowledge of the mortgagee who insisted

that delivery to the buyer shall be made only upon the clearing of

the check payment on the mortgage debt. In the meantime, the

tractor was executed upon by a judgment creditor of the brotherseller while still in the possession of the

mortgagee.

The issue before the Court was whether the execution

effected upon the tractor to enforce the brother-seller’s judgment

debt was still valid, since the tractor was already sold to the

brother-buyer. The judgment creditor insisted that at the time of

the execution of the deed of sale, no constructive delivery was

effected since the consummation of the sale was dependent upon

the clearance and encashment of the check which was issued in

payment of the tractor.

In ruling for the brother-buyer, Justice Gutierrez held in

Dy, Jr., that “[T]he mortgagor who gave the property as security

under a chattel mortgage did not part with the ownership over the

same. He had a right to sell it although he was under obligation

to secure the written consent of the mortgagor.”47 He held that

in addition to Article 1498 of the Civil Code which recognized

the execution of public instrument as constructive delivery, under

Article 1499, it is provided that the delivery of movable property

may likewise be made by the mere consent or agreement of

the contracting parties, if the thing sold cannot be transferred to

the possession of the vendee at the time of sale, or if the latter

already had it in his possession for any other reason.

Nevertheless, Justice Gutierrez recognized that “[I]n the

instant case, actual delivery of the subject tractor could not be

made. However, there was constructive delivery already upon

the execution of the public instrument pursuant to Art. 1498 and

upon the consent or agreement of the parties when the thing

sold cannot be immediately transferred to the possession of the

vendee. (Art. 1499).”48 With the acknowledgment that actual

delivery could not be effected, because possession of the tractor

was with the mortgagee, under the Addison doctrine, constructive

delivery through the execution of the public instrument could not

produce the effects of tradition, as to have made the brotherbuyer the owner of the subject matter.

In addressing this particular point raised by the respondent

Court of Appeals in its appealed decision, Justice Gutierrez held

that “[W]hile it is true that [the seller] was not in actual possession

and control of the subject tractor, his right of ownership was not

divested from him upon his default. Neither could it be said that

[the mortgagee] was the owner of the subject tractor because the

mortgagee can not become the owner of or convert and appropriate to himself the property mortgaged.

(Art. 2088, Civil Code)

Said property continues to belong to the mortgagor.”49 The only

proper way to treat the Dy, Jr. ruling is to consider that when it

comes to a third-party and the issue centers on the title or ownership of the subject matter of a sale, then

constructive delivery by

the execution of the public instrument would produce the effect

of tradition, but only insofar as title is concerned, provided that at

the time of the execution there was no legal impediment on the

part of the seller to transfer title to the buyer, even if at the time

of sale, control or possession of the subject matter was not in the

hands of the seller.

In any event, the variation in Dy, Jr. is not really that crucial,

since Addison itself recognized that “if the sale had been made

under the express agreement of imposing upon the purchaser

the obligation to take the necessary steps to obtain the material

possession of the thing sold, and it were proven that she knew

that the thing was in the possession of a third person claiming

to have property rights therein, such agreement would perfectly

be valid,”50 and therefore execution of the public document by

itself would produce the legal effects of tradition and effectively

transfer ownership to the buyer, even when the subject matter is

in the hands of a third party. Symbolic Delivery

As to movables, constructive delivery may also be made

by the delivery of the keys of the place or depository where the

movable is stored or kept. 51

Symbolic delivery must involve or cover the subject matter,

and cannot take a form relating to the payment of the purchase

price. Thus, Lorenzo Dev. Corp. v. Court of Appeals, 52 held that

the issuance of an acknowledgment receipt of the partial payment

for the property bought cannot be taken to mean a transfer of

ownership thereof to the buyer because “no constructive delivery

of the real property could have been effected by virtue thereof.”

c. Constitutum Possessorium

This mode of constructive delivery takes effect when at the

time of the perfection of the sale, the seller held possession of

the subject matter in the concept of owner, and pursuant to the

contract, the seller continues to hold physical possession thereof

no longer in the concept of an owner, but as a lessee or any other

form of possession other than in the concept of owner. 53

d. Traditio Brevi Manu

This mode of delivery is opposite that of constitutum

possessorium, where before the sale, the would-be buyer was

already in possession of the would-be subject matter of the

sale, say as a lessee, and pursuant to sale, he would now hold

possession in the concept of an owner. but as owners now through symbolic delivery known as traditio

brevi manu.

e. Traditio Longa Manu

This is delivery of a thing merely by agreement, such as when

the seller points the property subject matter of the sale by way of

delivery without need of actually delivering physical possession

thereof. Thus, under Article 1499 of the Civil Code, the delivery of

movable property may be made by the mere consent or agreement

of the contracting parties, if the thing sold cannot be transferred to

the possession of the buyer at the time of the sale.

f. Delivery of Incorporeal Property

An incorporeal property having no physical existence, its

delivery can only be effected by constructive delivery. Article

1501 of the Civil Code recognizes three (3) types of constructive

delivery specifi cally applicable to incorporeal property, thus:

(a) When the sale is made through a public

instrument, the execution thereof shall be

equivalent to the delivery of the thing which

is the object of the contract, if from the deed

the contrary does not appear or cannot

clearly be inferred;

(b) By the placing of the titles of ownership in

the possession of the buyer; or

(c) The use and enjoyment by the buyer of the

rights pertaining to the incorporeal property,

with the seller’s consent.

g. Delivery by Negotiable Document of Title

A person to whom a negotiable document of title has been

duly negotiated acquires thereby such title to the goods as

transferor had or had ability to convey to a purchaser in good

faith for value, and also the title of the persons to whom the

documents was originally. 55 Therefore, the buyer of the goods

Heirs of Pedro Escanlar v. Court of Appeals, 54 illustrates

the application of traditio brevi manu. In that case, prior to

the sale, would-be buyers were in possession of the subject

property as lessees. Upon sale to them of the rights, interests

and participation as to the one-half (½) portion pro indiviso, they

remained in possession, not in the concept of lessees anymore

can by the process of negotiation of the covering document have

a title better than that of his immediate seller.

On other hand, the buyer to whom a document of title has

been transferred by assignment, acquires only his transferor’s title

to the goods, and always subject to the terms of any agreement

with the transferor. 56

Since an invoice is not a negotiable document of title, the

issuance thereof would not constitute constructive delivery. 57

h. Delivery Through Carrier

Delivery through a carrier as a form of constructive delivery

necessarily pertains only to a sale of goods. The general rule,

and in the absence of stipulation or circumstances to the contrary,

delivery to carrier is deemed delivery to the buyer, the premise

being that the carrier acts as an agent of the buyer.

This default rule is best illustrated by Article 1523 of the Civil

Code, where, if in pursuance of a sale, the seller is authorized or

required to send the goods to the buyer, delivery of the goods to

a carrier, whether named by the buyer or not, for the purpose of

transmission to the buyer is deemed to be a delivery of the goods

to the buyer, unless a contrary intent appears.

Unless otherwise authorized by the buyer, the seller must

make such contract with the carrier on behalf of the buyer as may

be reasonable, having regard to the nature of the goods and the

other circumstances of the case. If the seller omits to do so, and

the goods are lost or damaged in the course of the transit, the

buyer may decline to treat the delivery to the carrier as delivery to

himself, or may hold the seller responsible for damages. 58

Unless otherwise agreed, where goods are sent by the seller

to the buyer under circumstances in which the seller knows or

ought to know that it is usual to insure, the seller must give such

notice to the buyer as may enable him to insure them during their

transit, and if the seller fails to do so, the goods shall be deemed

to be at his risk during such transit. 59

(1) F.A.S. Sales

Under such arrangement, “the seller pays all charges and is

subject to risk until the goods are placed alongside the vessel.”60

In other words, delivery of the goods alongside the vessel

completes the effect of tradition.

(2) F.O.B. Sales

In mercantile contracts of American origin, “f.o.b.” stands

for the words “free on board,” and under such arrangement

the seller shall bear all expenses until the goods are delivered,

depending on whether the goods are to be delivered “f.o.b.” at

the point of shipment or at the point of destination. 61 Under an

“f.o.b., shipping point” arrangement, delivery of the goods to the

carrier is equivalent to delivery to the buyer, and at that point the

risk of loss pertains to the buyer.

Under an “f.o.b., destination” arrangement, only when the

vessel has arrived at the point of destination would there be

delivery to the buyer and prior to that point in time, the risk of loss

over the subject matter of the sale will be borne by the seller.

(3) C.I.F. Sales

The letters “c.i.f.” found in British contracts stand for costs,

insurance, and freight; they signify that the price fi xed covers

not only the costs of the goods, but the expense of freight and

insurance to be paid by the seller. 62 Under that arrangement, the

amount quoted by the seller and agreed to by the buyer, covers

not only the cost of the merchandise (i.e., the price), but also the

cost of insurance and freight. There are two schools of thought

on the effect of delivery under c.i.f. sales.

Under the fi rst school of thought, since in a c.i.f. arrangement,

the costs of insurance and freight are ultimately to be borne by the

buyer, as part of the price he has obligated himself to pay, then

it would mean that the carrier acts as an agent of the buyer who

pays the freight, and therefore delivery to the carrier is delivery

to the buyer. In addition, since the insurance over the goods

shipped is for the account of the buyer, then clearly the buyer has

obtained ownership over the goods during the shipment period

since this is required under the insurance law for the buyer to

have insurable interest.

The other school of thought provides that in quoting a c.i.f.

price, that means that both parties agree that the seller takes on

the responsibility of insuring the goods and providing for their

shipment to the buyer, and for which responsibility he gets a

package price. Under such circumstances, delivery by the seller

of the goods to the carrier is not equivalent to delivery to the

buyer, and the seller must continue to bear the risk of loss during

the shipment period since this is an integral part of his obligation

under the agreed terms of the sale.

In the early case of Behn, Meyer & Co. v. Yangco, 63 where

the shipping terms were “c.i.f., Manila” on goods coming from

New York, the Court held that “[I]f the contract be silent as to

the person or mode by which the goods are to be sent, delivery

by the vendor to a common carrier, in the usual and ordinary

course of business, transfers the property to the vendee.”64 The

implication is clear therefore in Behn Meyer & Co. that a “c.i.f.”

arrangement “signifi es that the price fi xed covers not only the

costs of the goods, but the expense of freight and insurance

to be paid by the seller,” and therefore seller bears the risk of

loss during shipment. It held that “[A] specifi cation in a contract

relative to the payment of freight can be taken to indicate the

intention of the parties in regard to the place of delivery. If the

buyer is to pay the freight, it is reasonable to suppose that he

does so because the goods become his at the point of shipment.

On the other hand, if the seller is to pay the freight, the inference is equally strong that the duty of the

seller is to have the goods

transported to their ultimate destination and that title to property

does not pass until the goods have reached their destination.”65

Nevertheless, Behn, Meyer & Co. upheld the principle

that “both of the terms ‘c.i.f.’ and ‘f.o.b.’ merely make rules of

presumption which yield to proof of contrary intention.”66 The Court

then held that since in the instant case the “c.i.f.” arrangement

was accompanied with the word “Manila” which was the point of

destination, then this must be taken to mean “that the contract

price, covering costs, insurance, and freight, signifi es that the

delivery was to be made at Manila.”67

In Pacifi c Vegetable Oil Corp. v. Singzon, 68 the Court held

that under an arrangement “c.i.f. Pacifi c Coast” (the point of

destination), “the vendor is to pay not only the cost of the goods,

but also the freight and insurance expenses, and, as it was

judicially interpreted, this is taken to indicate that the delivery is

to be made at the port of destination.”

Behn, Meyer & Co. and Pacifi c Vegetable agree with the

second school of thought that since c.i.f. includes both insurance

and freight expenses to be paid by the seller, ordinarily therefore,

in a c.i.f. arrangement, the risk of loss for the account of the buyer

arises only when the vessel arrives at the point of destination.

On the other hand General Foods v. NACOCO, 69 upholds

the fi rst school of thought that “[t]here is no question that under

an ordinary C.I.F. agreement, delivery to the buyer is complete

upon delivery of the goods to the carrier and tender of the

shipping and other documents required by the contract and the

insurance policy taken in the buyer’s behalf.”70 General Foods

therefore holds that although it is the seller who may make the

arrangement for the insurance coverage and freightage of the

goods, he does this for the account and benefi t of the buyer, who

has agreed to pay for such amounts.

In General Foods, the price was quoted “CIF New York”

(the point of destination), and although the Court did not place

signifi cance on the indication of “New York” it held that “[t]here is

equally no question that the parties may, by express stipulation

or impliedly (by making the buyer’s obligation depend on arrival

and inspection of the goods), modify a CIF contract and throw

the risk upon the seller until arrival in the port of destination.”71

The Court took into consideration that the price agreed upon was

to be based on “net landed weights” and it held that delivery by

the seller to the carrier in Manila of the goods covered was not

delivery to the buyer, and the risk of loss of the goods during the

voyage was to be borne by the seller.

The lesson learned from all of these is that the shipping

arrangements in a sale create, by commercial usage, certain

presumptive effects; however, such presumptive effects must

give away, rather easily, to any stipulation or even intimation

to the contrary. The courts have therefore tended to look at

other stipulations or indications in the agreement to fi nd the

true intentions of the parties as to the transfer of the risk of

loss before they would apply the presumptive effects of such

acronyms. EFFECTS AND COMPLETENESS OF DELIVERY

For tradition to produce the twin legal consequences of

transferring ownership to the buyer and effecting the fulfi llment

of the primary obligations of the seller, two principles must apply,

namely:

(a) Delivery must be made pursuant to a valid

sale; and

(b) Delivery must be effected when seller has

ownership over the subject matter of sale

so delivered.

a. Delivery Must Be Made Pursuant to a Valid Sale

Since tradition takes effect in the consummation stage of

sale, it presupposes that there has been a valid passage through

perfection stage that has given rise to a valid and binding sale

that is capable of performance. Consequently, delivery would

produce the effect of transferring ownership to the buyer only

when it is made pursuant to a valid sale.

When a sale is fi ctitious, and therefore void and inexistent,

as there was no consideration for the same, no title over the

subject matter of the sale can be conveyed. Nemo potest nisi

quod de jure potest — No man can do anything except what he

can do lawfully. 72

b. Delivery Must Be Made By Seller Who Has

Ownership over the Subject Matter

Likewise, delivery would produce the effect of transferring

ownership only if at the time of delivery the seller still had

ownership over the subject matter. This stems from the principle

that no man can dispose of that which does not belong to him.

(Nemo dat quod non habet.)73

c. To Whom Delivery Must Be Made

Lagoon v. Hooven Comalco Industries, Inc., 74 held that

where it is stipulated that deliveries must be made to the buyer

or his duly authorized representative named in the contracts, the

seller is bound to deliver in such manner only, unless the buyer

specifi cally designated someone to receive delivery d. When Buyer Refuses to Accept

Since delivery of the subject matter of the sale is an

obligation on the part of the seller, the acceptance thereof by

the buyer is not a condition for the completeness of delivery. 75

Even with such refusal of acceptance, delivery, whether actual

or constructive, will produce its legal effects, as, for example,

transferring the risk of loss of the subject matter to the buyer who

has become the owner thereof.

Under Article 1588 of the Civil Code, when the buyer’s

refusal to accept the goods is without just cause, the title thereto

passes to him from the moment they are placed at his disposal.

However, even under such circumstances, the seller is still

legally obliged to take certain steps as not to be held liable for

consequent loss or damage to the goods.

1. Rules on Effects of Delivery for Movables

Article 1522 of the Civil Code provides the rules on the

delivery of goods —

(a) Where the seller delivers to the buyer

a quantity of goods less than what he

contracted to sell, the buyer may reject

them; but if the buyer accepts or retains the

goods so delivered, knowing that the seller

is not going to perform the contract in full,

he must pay for them at the contract rate;

(b) If, however, the buyer has used or disposed

of the goods delivered before he knows that

the seller is not going to perform his contract

in full, the buyer shall not be liable for more

than the fair value to him of the goods so

received;

(c) Where the seller delivers to the buyer

a quantity of goods larger than what he

contracted to sell, the buyer may accept the goods covered in the contract and reject the

rest; if the buyer accepts the whole of the

goods so delivered he must pay for them

at the contract rate; if the subject matter is

indivisible, the buyer may reject the whole

of the goods; or

(d) Where the seller delivers to the buyer the

goods contracted but mixed with goods of a

different description, the buyer may accept

the contracted goods and reject the rest; if

the subject matter is indivisible, the buyer

may reject the goods entirely.

a. When Goods Held by Third Party

Where the goods at the time of sale are in the possession of

a third person, the seller has not fulfi lled his obligation to deliver

to the buyer unless and until such third person acknowledges to

the buyer that he holds the goods on the buyer’s behalf. 76

b. Reservation of Ownership

Despite delivery, ownership will not transfer to the buyer in

case of express reservation, such as when the parties stipulate

that ownership will not transfer until the purchase price is fully

paid, 77 or until certain conditions are fulfi lled. 78

Article 1503 of the Civil Code gives the following instances

when there is an implied reservation of ownership:

(a) Where goods are shipped, and by the bill of

lading the goods are deliverable to the seller

or his agent, the seller thereby reserves the

ownership in the goods.

But, if except from the form of the bill of

lading, ownership would have passed to the

buyer on shipment of the goods, the seller’s property in the goods shall be deemed to be

only for purpose of securing performance of

the buyer’s obligations, in which case the

buyer bears the risk of loss;

(b) Where goods are shipped, and by the bill of

lading the goods are deliverable to the order

of the buyer or of his agent, but possession

of the bill of lading is retained by the seller or

his agent, the seller thereby reserves a right

to the possession of the goods as against

the buyer, and ownership is still transferred

to the buyer;

(c) Where the seller of goods draws on the

buyer for the price and transmits the bill of

exchange and bill of lading together to the

buyer to secure acceptance or payment of

the bill of exchange, the buyer is bound to

return the bill of lading if he does not honor

the bill of exchange, and if he wrongfully

retains the bill of lading he acquires no

added right thereby.

In the last case, however, if the bill of lading provides

that the goods are deliverable to the buyer or to the order of

the person named therein, one who purchases in good faith

for value the bill of lading, or goods from the buyer will obtain

the ownership in the goods, although the bill of exchange has

not been honored, provided that such purchaser has received

delivery of the bill of lading endorsed by the consignee named

therein, or of the goods, without notice of the facts making the

transfer wrongful. 79

c. Obligation as to Accessories and Accessions

In the sale of movables, in addition to the obligation of the

seller to deliver the accessories and accessions in the condition

in which they were upon the perfection of the contract, 80 the seller must deliver to the buyer a quantity of

goods that should not be

less than what he contracted to sell, otherwise the buyer may

reject them. 81

d. Sale in Mass of Movables

The sale of movables under Article 1522 of the NCC,

should be distinguished from the sale of specifi c mass under

Article 1480 which provides for the “sale of fungible things, made

independently and for a single price, or without consideration of

their weight, number, or measure.”

In Gaite v. Fonacier, 82 which involved the sale of iron ore,

it was held that if there is no provision in the contract for the

measuring or weighing of the fungible movables sold in order to

complete or perfect the sale, nor is the price agreed upon by the

parties to be based upon such measurement, then the “subject

matter of the sale is, therefore, a determinate object, the mass,

and not the actual number of units or tons contained therein, so

that all that was required of the seller Gaite was to deliver in good

faith to his buyer all of the ore found in the mass, notwithstanding

that the quantity delivered is less than the amount estimated by

them.”83

e. Sale by Description and/or Sample

In a sale of goods by description or sample, the sale may

be rescinded if the bulk of the goods delivered do not correspond

with the description or the sample, and if the contract be by

sample as well as by description, it is not suffi cient that the bulk of

goods correspond with the sample if they do not also correspond

with the description. 84 By their very nature, sales of goods by

sample and/or description, should allow the buyer a reasonable

opportunity of inspection or of comparing the bulk with the sample

or the description before accepting their delivery.

Mendoza v. David, 86 held that there is “sale by sample” when

a small quantity is exhibited by the seller as a fair specimen of the

bulk, which is not present and there is no opportunity to inspect

or examine the same, thus: “To constitute a sale by sample, it

must appear that the parties treated the sample as the standard

of quality and that they contracted with reference to the sample

with the understanding that the product to be delivered would

correspond with the sample.”87

Mendoza described a “sale of goods by description” as one

where “a seller sells things as being of a particular kind, the buyer

not knowing whether the seller’s representations are true or false,

but relying on them as true; or as otherwise stated, where the

buyer has not seen the article sold and relies on the description

given to him by the seller, or has seen the goods, but the want of

identity is not apparent on inspection.”88

The Court in Mendoza also held that the term “sale by

sample” does not include an agreement to manufacture goods

to correspond with the pattern, especially where in that case

the three sets of furniture were manufactured according to the

specifi cations provided by the buyer, and not in accordance with

the replicas displayed in the seller’s shop.

Engel v. Mariano Velasco & Co., 89 held that even in sales

by description and/or sample, the purchaser will not be released

from his obligation to accept and pay for the goods by deviations

on the part of the seller from the exact terms of the contract, if

the purchaser had acquiesced to such deviations after due notice

thereof.

Pacifi c Commercial Co. v. Ermita Market & Cold Stores, 90

held that when the machine delivered by the seller is in accordance

with the description stated in the sales contract, the buyer cannot

refuse to pay the balance of the purchase price and the cost of

installation even if it proves that the machine cannot be used satisfactorily for the purposes for which he

bought it when such

purpose was not made known to the seller.

f. “On Sale or Return”

Under Article 1502 of the NCC, when goods are delivered to

the buyer “on sale or return” to give the buyer an option to return

the goods instead of paying the price, the ownership passes to

the buyer on delivery, but he may revest the ownership in the

seller by returning or tendering the goods within the time fi xed

in the contract, or, if no time has been fi xed, within a reasonable

time.

g. “Sale on Approval, Trial, Satisfaction, or Acceptance”

On the other hand, Article 1502 provides that when goods

are delivered to the buyer on approval or on trial or on satisfaction, or other similar terms, the ownership

therein passes to the

buyer only: (a) when he signifi es his approval or acceptance to

the seller or does any other act adopting the transaction; or (b)

if the buyer does not signify his approval or acceptance, but retains the goods without giving notice of

rejection, then if a time

has been fi xed for the return of the goods, on the expiration of

such time, and, if no time has been fi xed, on the expiration of a

reasonable time.

Vallarta v. Court of Appeals, 91 held that when the sale of a

movable is “sale on acceptance,” no ownership could have been

transferred to the buyer although he took possession thereof,

because “[d]elivery, or tradition, as a mode of acquiring ownership

must be in consequence of a contract ..., e.g., sale,”92 and in that

case there was as yet no contract when delivery was effected.

h. Form of Such Special Sales

Industrial Textile Manufacturing Co. v. LPJ Enterprises,

Inc., 93 held that for a sale to be considered and construed as a

“sale or return” or a “sale on approval,” there must be a clear agreement to either of such effect,

otherwise, the provisions of

Article 1502 of the Civil Code governing such sales cannot be

invoked by either party to the contract, and therefore must be in

writing, and cannot be proved by parol evidence:

... The provision in the Uniform Sales Act and the

Uniform Commercial Code from which Article 1502 was

taken, clearly requires an express written agreement

to make a sales contract either a “sale or return” or a

“sale on approval.” Parol or extrinsic testimony could

not be admitted for the purpose of showing that an

invoice or bill of sale that was complete in every aspect

and purporting to embody a sale without condition or

restriction constituted a contract of sale or return. If the

purchaser desired to incorporate a stipulation securing

to him the right to return, he should have done so at

the time the contract was made. On the other hand,

the buyer cannot accept part and reject the rest of the

goods since this falls outside the normal intent of the

parties in the “on approval” situation. 94

i. Written Proof of Delivery

Lao v. Court of Appeals, 95 confi rmed that in case of goods,

delivery is generally evidenced by a written acknowledgment of a

person that he has actually received the thing or the goods, as in

delivery receipts, under the following rules:

(a) A bill of lading cannot substitute for a

delivery receipt, because it is a written

acknowledgment of receipt of the goods by

the carrier and an agreement to transport

and deliver them at a specifi c place to a

person named or upon his order; it does

not evidence receipt of the goods by the

consignee or the person named in the bill of

lading; and

(b) A factory consignment invoice is not

evidence of actual delivery of the goods

since in the invoice nothing more than a

detailed statement of the nature, quantity

and cost of the thing sold, and it not proof

that the thing or goods were actually

delivered to the buyer or the consignee.

j. Time and Place of Delivery

Whether it is for the buyer to take possession of the goods

or for the seller to send them to the buyer is a question depending

in each case on the contract, express or implied, between the

parties. Apart from such contract, express or implied, or usage

of trade to the contrary, the place of delivery is seller’s place of

business, if he has one, and if not, his residence. 96 In case of a

sale of specifi c goods, which to the knowledge of the parties when

the contract or the sale was made were in some other place, then

that place is the place of delivery. 97

Where by a sale the seller is bound to send the goods to the

buyer, but no time for sending them is fi xed, the seller is bound to

send them within a reasonable time. 98

Demand or tender of delivery may be treated as ineffectual

unless made at a reasonable hour; and what may be a reasonable

hour is a question of fact. 99

k. Seller Shall Pay Expenses of Delivery

Unless otherwise agreed, the expenses in putting the goods

into a deliverable state must be borne by the seller. 100

2. Rules on Effects of Delivery for Immovables

The following rules to determine completeness of delivery

shall apply when the subject matter of the sale is an immovable:

a. Where Immovables Sold Per Unit or Number

If the sale of real estate should be made with a statement

of its area, at the rate of a certain price for a unit of measure or

number, the seller is obliged to deliver to the buyer, if the latter

should demand it, all that may have been stated in the contract.

If this should not be possible, the buyer may choose between

a proportional reduction of the price, or the rescission of the

contract when in the latter case, the lack of area be not less than

one-tenth (1/10) of that stated. 101

In Rudolf Lietz, Inc. v. Court of Appeals, 102 it was held that

the statement of the area of the immovable is not conclusive and

the price may be reduced or increased depending on the area

actually delivered.

The rule applies, even when the area is the same, if any part

of the immovable is not of the quality specifi ed in the contract;

provided that rescission may take place when the inferior value

of the thing sold exceeds one-tenth (1/10) of the price agreed

upon. 103

Even when the smaller area or inferiority of quality does

not conform to the minimum amount or value provided by law

to allow rescission on the part of the buyer, nevertheless, if the

buyer would not have bought the immovable had he known of its

smaller area or inferior quality, he may rescind the sale. 104

On the other hand, if there is a greater area or number in

the immovable than that stated in the contract, the buyer may

accept the area included in the contract and reject the rest. If

he accepts the whole area, he must pay for the same at the

contract rate. 105

The foregoing rules also apply to judicial sales

b. Where Immovables Sold for a Lump Sum

In the sale of real estate made for a lump sum and not at

the rate of a certain sum for a unit of measure or number, there

shall be no increase or decrease of the price, although there

be a greater or lesser area or number than that stated in the

contract, 107 especially with the use of qualifying words of “more

or less” in describing the area. 108

The same rule applies when two or more immovables are

sold for a single price; but if, besides mentioning the boundaries

which is indispensable in every conveyance of real estate,

its area or number should be designated in the contract, the

vendor shall be bound to deliver all that is included within said

boundaries, even when it exceeds the area or number specifi ed

in the contract; and, should he not be able to do so, he shall

suffer a reduction in the price, in proportion to what is lacking in

the area or number, unless the contract is rescinded because

the buyer does not accede to the failure to deliver what has been

stipulated. 109

Nevertheless, in both Asiain v. Jalandoni, 110 and Roble v.

Arbasa, 111 the Court held that although under Article 1542, in

the sale of real estate by lump sum, there shall be no increase

or decrease of the price although there be a greater or lesser

area or number than that stated in the contract, the rule admits

of exception because the sale of land under description “more

or less” or similar words in designating quantity covers “only a

reasonable excess or defi ciency.”112 In Roble, the Court held that

a defi ciency or excess of “644 square meters” is not reasonable.

The exception to this rule is when expressly the buyer assumes

the risk on the actual area of the land bought.

c. Lump Sum Sale versus Sale by Unit

of Measure or Number

Santa Ana v. Hernandez, 114 clarifi ed the governing rule in

the sale of real property, whether to treat it as a lump-sum sale

or a sale per unit of measure or number. In that case, the sellersspouses sold to the buyer two separate

portions of a much

bigger land indicating in the instrument the total purchase price

and the areas of each of the sold portions totaling 17,000 square

meters, plus an indication of the boundaries. Subsequently, the

buyer refused to vacate the areas occupied by her which were

in excess of 17,000 square meters but which she alleged where

within the boundaries described in the instrument.

In affi rming that the contract between the parties was a

lump-sum sale, and therefore the buyer was entitled to occupy

all portions within the boundaries stated in the instrument,

even if they exceed 17,000 square meters, the Court held that

“the sale made was of a defi nite and identifi ed tract, a corpus

certum, that obligated the vendors to deliver to the buyer all the

land within the boundaries, irrespective of whether its real area

should be greater or smaller than what is recited in the deed. ...

To hold the buyer to no more than the area recited on the deed,

it must be made clear therein that the sale was made by unit of

measure at a defi nite price for each unit.”115

The Court also held that “[i]f the defendant intended to

buy by the meters he should have so stated in the contract.”

Also, based on the ruling of the Supreme Court of Spain, in

construing Article 1471 of the Spanish Civil Code, which was

copied verbatim in Article 1542 of our Civil Code, the Court

held that it “is highly persuasive that as between the absence

of a recital of a given price per unit of measurement, and the

specifi cation of the total area sold, the former must prevail and

determines the applicability of the norms concerning sales for

a lump sum. 116 In short, Santa Ana provides that if the price per

unit of measure or number is not expressly provided for in the contract, the rules of lump sum sale shall

prevail in the sale of

real property.

Balantakbo v. Court of Appeals, 117 reiterated that the rule is

quite well-settled that what really defi nes a piece of land is not

the area calculated with more or less certainty mentioned in the

description but the boundaries therein laid down as enclosing the

land and indicating its limits: where the land is sold for a lump sum

and not so much per unit of measure or number, the boundaries

of the land stated in the contract determine the effects and scope

of the sale not the area thereof. 118

In Esguerra v. Trinidad, 119 the Court held —

Under Article 1542, what is controlling is the entire

land included within the boundaries, regardless of

whether the real area should be greater or smaller than

that recited in the deed. This is particularly true since

the are of the land ... was described in the deed as

“humigit kumulang,” that is, more or less. A caveat is

in order, however, the use of “more or less” or similar

words in designating quantify covers only a reasonable

excess or defi ciency. A vendee of land sold in gross

or with the description “more or less” with reference

to its area does not thereby ipso facto take all risks of

quantity in the land. Numerical data are not of course

the sole gauge of unreasonableness of the excess

of defi ciency in area. Courts must consider a host of

other factors, in one case (Roble v. Arbas, 362 SCRA

69 [2001]), the Court found substantial discrepancy in

area due to contemporaneous circumstance. Citing

change in the physical nature of the property, it was

therein established that the excess area at the southern

portion was a product of reclamation, which explained

why the land’s technical description in the deed of

sale indicated the seashore as its southern boundary,

hence the inclusion of the reclaimed area was declared

unreasonable.” The increase by a fourth of a fraction of the area indicated in the deed of sale cannot be

considered an unreasonable excess. 120

d. Where Immovables Sold in Mass

A judicial sale in mass of separate known lots or parcels will

not be set aside, unless it is made to appear that a larger sum

could have been realized from a sale in parcels or that a sale

of less than the whole would have been suffi cient to satisfy the

debt. 121

e. Expenses of Delivery and Registration

on Real Estate

As discussed in greater details in the appropriate chapters,

the rules pertaining to, and the effects of, tradition, whether actual

or constructive, vary greatly when the subject matter of a valid

sale is real property, especially so when it is registered land. This

is because of the rather peremptory effect of “registration in good

faith as the operative act” principle under the Torrens system

embodied in the Property Registration Decree, 122 and the priority

of registration in good faith to determine ownership preference in

double sales rules in Article 1544 of the Civil Code.

The Supreme Court held in 2003 in Chua v. Court of

Appeals, 123 that registration of the title of the buyer over the

purchased real estate is not an ingredient necessary for tradition

to have full effect, thus —

The obligation of the seller is to transfer to the buyer

ownership of the thing sold. In the sale of real property,

the seller is not obligated to transfer in the name of the

buyer a new certifi cate of title, but rather to transfer

ownership of the real property. There is a difference

between transfer of the certifi cate of title in the name of

the buyer, and the transfer of ownership to the buyer. The

buyer may become the owner of the real property even

if the certifi cate of title is still registered in the name of the seller. As between the seller and buyer, ownership

is transferred not by issuance of a new certifi cate of

title in the name of the buyer but by the execution of the

instrument of sale in a public document. 124 x x x. The

recording of the sale with the proper Registry of Deeds

and the transfer of the certifi cate of title in the name of

the buyer are necessary only to bind third parties to

the transfer of ownership. As between the seller and

the buyer, the transfer of ownership takes effect upon

the execution of a public instrument conveying the real

estate. Registration of the sale with the Registry of

Deeds, or the issuance of a new certifi cate of title, does

not confer ownership on the buyer. Such registration

or issuance of a new certifi cate of title is not one of the

modes of acquiring ownership.

Chua also held that although the buyer of a parcel of land

has more interest in having the capital gains tax paid immediately

since this is a pre-requisite to the issuance of a new Torrens title

in his name, nevertheless, as far as the government is concerned,

the capital gains tax remains a liability of the seller since it is a

tax on the seller’s gain from the sale of the real estate. The Court

also emphasized that the payment of the capital gains tax is not

a pre-requisite to the transfer of ownership to the buyer, and

that the transfer of ownership took effect upon the signing and

notarization of the deed of absolute sale.

Earlier, Jose Clavano, Inc. v. HLURB, 125 held that a judgment

on a sale that decrees the obligations of the seller to execute and

deliver the deed of absolute sale and the certifi cate of title, does

not necessarily include within its terms the obligation on the part

of the seller to pay for the expenses in notarizing the deed of sale

and in obtaining new certifi cate of title.

The ruling in Jose Clavano, Inc. is contrary to the Court’s

subsequent ruling in Chua where the Court decreed the

obligations of the seller to deliver the documents necessary to

allow the buyer to be able to effect registration of his purchase.

In fact, Vive Eagle Land, Inc. v. Court of Appeals, 126

subsequently held that under Article 1487 of the Civil Code, the

expenses for the registration of the sale should be shouldered

by the seller unless there is a stipulation to the contrary; and that

under Article 1495, the seller is obliged to transfer title over the

property and deliver the same to the vendee. The ruling in Vive

Eagle Land is again in stark contrast to the Court’s earlier ruling in

Chua that registration of the title of the buyer over the purchased

real estate is not an ingredient necessary for tradition to have full

effect, and therefore “the seller is not obligated to transfer in the

name of the buyer a new certifi cate of title, but rather to transfer

ownership of the real property. There is a difference between

transfer of the certifi cate of title in the name of the buyer, and the

transfer of ownership to the buyer.”