The Law on Sales: A Report on Chapters 8 and 9
Submitted by: Jose Parcon
Introduction
This report is written for
our subject, Law on Sales, under Atty. Maria Cristina Gimenez. The title of the
book from which we based our report is Law
on Sales by Cesar Villanueva. The book consists of 619 pages and published
by Rex Book Store.
The author of the book,
Cesar Villanueva obtained his Bachelor of Laws at Ateneo De Manila Law School.
He also holds a Master of Laws degree from Harvard Law School, and Doctor of
Laws from San Beda Graduate School of Law. He was also the Dean of Ateneo Law
School. He served as Chairman, Commercial Law Department of Philippine Judicial
Academy. He is also a founding Partner of the law firm, Villanueva Gabionza & De
Santos.
This is the 2009 edition
of Law on Sales by Cesar Villanueva,
published and distributed by Rex Book Store. Our Professor recommended
the book in the Law on Sales as our primary reference material for our
classroom discussions.
This report will focus on
Chapters 8 and 9 of the Law on Sales
by Villanueva.
CHAPTER 8
Sale by a Non-Owner or By One Having Voidable Title
In this Chapter,
Villanueva states that sale is a progressive contract. And he likened sale to
the metamorphosis that a butterfly goes through, a sale has stages as it goes
through its legal existence.
Stages in the Life of Sale
According to the author, a
contract of sale has two stages in its life, the perfection stage and the
consummation or performance stage.
The perfection stage is
the birth of the contract of sale. It is at this particular stage that
determines whether the contract exists at all and the nature of its existence
whether it is valid, voidable, unenforceable, rescissible, or void contract.
Consummation stage is the
living-out of that kind of life that has been set by the perfection stage. If
the contract of sale is valid at perfection, it remains valid throughout its
life and consummation has no choice but to lead the life of a valid contract
and the consequence thereof; consummation cannot change the nature of such
contract.
Breach and rescission are
legal concepts that necessarily pertain to the consummation or performance
stage. Because, according to the author, breach and rescission presupposes the
existence of a valid contract of sale. When a contract of sale is void, it
gives rise to no obligations that can be breached; neither does it allow a
rescission to a contract that has no legal existence in the first place.
Where the Seller is Not the Owner at the Time of
Perfection
A valid contract of sale
exists to bind both seller and buyer even if at the time of perfection the
seller was not the owner thereof since it does not even exist yet or even if it
existed then but did not belong to the seller at the time of perfection.
Where the Seller is Not the Owner at the Time of
Consummation
The Supreme Court, in Mindanao Academy, Inc. v. Yap, held: A
seller cannot transfer ownership by delivery of a thing that he does not own.
Article 1505 of the Civil
Code provides that, “where goods are sold by a person who is not the owner
thereof, and who does not sell them under authority or with consent of the
owner, the buyer acquires no better title to the goods than the seller had.”
The law stems from the
principle that nobody can dispose of that which does not belong to him.
Sale by Co-Owner of the Whole Property or Definite
Portion Thereof
When a co-owner prior to
partition sells the entire property owned in common, the sale of the property
itself is void, but valid as to his spiritual share. And when a co-owner, prior
to partition, sells a definite portion of the property owned in common, the
sale as to that portion is not valid as to the other co-owner but valid as to
his spiritual share.
Exceptions to the Rule on the Effect of Sale of a
Definite Portion by a Co-owner
As a general rule, the
sale of the entire property or a definite portion thereof owned in common, by
one of the co-owners, only affects the seller’s spiritual share. The exceptions
to the general rule are the following:
First, it does not apply
when the subject matter is indivisible by nature or by intent. Villanueva cited
the case of Mindanao Academy, Inc. v. Yap,
where one of the co-owners sold the school and its properties owned in common
with other co-owners, the Supreme Court held that the sale of the entire
property owned in common by one of the co-owners was void, and could not even
be binding as to the spiritual share of the seller since the prestation
involved in the sale was indivisible, and therefore incapable of partial
annulment, inasmuch as the buyer would not have entered into transaction except
to acquire all of the properties purchased by him.
Second, when a sale of a
particular portion of the thing owned in common is with the consent of the
other co-owners, there is in effect a partial partition, and the sale of the
definite portion is valid.
Third, a co-owner who
sells one of the parcels of land owned in common with another co-owner, and
does not turn over one-half of the proceeds of the sale to the other co-owner,
the latter may by law and equity, lay exclusive claim to the remaining parcel
of land.
Exceptions to the Rule on Legal Effects of Sale by
a Non-Owner
As a general rule, in a
sale by non-owner or without the consent of the owner, the buyer acquires no
better title than the seller had.
The exceptions are the
following:
First, when the owner is,
by his conduct, precluded from denying the seller’s authority to sell;
Second, when the contrary
is provided for in recording laws such as those embodied by the Property
Registration Decree;
Third, when the sale is
made under statutory power of sale or under the order of a court of competent
jurisdiction;
Fourth, when the sale is
made in a merchant’s store in accordance with the Code of Commerce and special
laws.
Sale by a Seller Who has Voidable Title on the
Thing Sold
Under Article 1506 of the
Civil Code, “where the seller of goods has a voidable title thereto, but his
title has not been avoided at the time of sale, the buyer acquires a good title
to the goods, provided he buys them in good faith, for value, and without
notice of the seller’s defect of title.”
Villanueva submitted that
the phrase, “title has not been avoided at the time of sale” refers to the
consummation stage. Especially since Article 1506 talks of title or ownership
to the property, since perfection stage of the contract of sale involves the
obligation to transfer ownership, but does not cover nor convey ownership
itself.
Villanueva added that
under Art. 1506, if the seller’s voidable title thereto is avoided after the
perfection of the contract of sale but before delivery, the buyer does not
obtain good title to the property.
“Title” as to Movable Properties
Article 559 of the Civil
Code provides – “The possession of movable property acquired in good faith is
equivalent to a title. Nevertheless, one who has lost any movable or has been
unlawfully deprived thereof, ma recover it from the person in possession of the
same.
If the possessor of a
movable lost or of which the owner has been unlawfully deprived, has acquired
it in good faith at a public sale, the owner cannot obtain its return without
reimbursing the price paid therefore.”
Even if the owner of a
movable has lost it or has been unlawfully deprived thereof, and even if he
offers to reimburse the buyer, he cannot recover the movable from the buyer who
bought it at a merchant’s store.
A merchant’s store is any
place where goods are kept for sale; or where goods are deposited and sold by
one engaged in buying and selling them.
Chapter 9
Loss, Deterioration, Fruits and Other Benefits
Introduction
In this Chapter,
Villanueva discusses on who will bear the loss, deterioration of the object in
a contract of sale. And to which of the contracting parties will the fruits and
benefits accrue.
Villanueva traces the
origin of where all these confusions came from. And according to him, the
confusion of the prevailing doctrines on the risk of loss and deterioration,
and the benefit of improvements on the object of a contract of sale was brought
about by the convergence of opposite principles in common law and civil law.
The Law on Sales in our
present Civil Code is a combination of the Uniform Sales Law of the United
States and the Roman law principle of the Spanish Civil Code.
Under the Roman law
principle embodied in the Spanish Civil Code, the moment there is a contract
perfected between the parties, and even without need of delivery of the subject
matter, the risk of loss passes to the purchaser; provided that the sale is
unconditional and the object is determinate or specific.
This means that even prior
to the time the buyer becomes the owner of the subject matter by delivery, he
already bears the risk of loss the moment an unconditional contract is
perfected, and the subject matter is ready for delivery.
On the other hand, under
the common law, it is the owner who bears the risk of loss, in the absence of
any stipulation to the contrary. And ownership of the subject matter is
transferred to the buyer from the moment the contract is entered into and the
goods are available to be delivered to the buyer.
In these two different
legal principles between the common law and Roman law, the legal consequences
from the point of perfection were the same: upon perfection of an unconditional
contract of sale involving specific or determinate subject matter, the risk of
loss, deterioration and the benefits of fruits and improvements were for the
account of the buyer.
Before Perfection
Before the perfection of a
contract of sale, the rules on loss, deterioration, fruits and improvement of
the would-be subject matter shall pertain to the would-be seller, since he owns
the thing.
At The Time of Perfection
Under Art. 1493 of the
Civil Code, if at the time the contract of sale is perfected, the thing that is
the object of the contract has been entirely lost, the contract shall be
“without any effect.” But if the thing should have been lost in part only, the
buyer may choose between withdrawing from the contract and demanding the
remaining part, paying its price in proportion to the total sum agreed upon.
In the sale of specific
goods, and without the knowledge of the seller that the goods have perished in
part or have wholly or in a material part so deteriorated in quality as to be
substantially changed in character, the buyer may at his option treat the sale
as either avoided, or as valid in all of the existing goods or in so much
thereof as have not deteriorated, and as binding the buyer to pay the agreed
price for the goods in which the ownership will pass if the sale was divisible.
After Perfection But Before Delivery
Loss of Subject Matter
In case of loss, the Civil
Code has adopted the common law rule of res
perit domino that it is the owner of the thing who bears the consequences
of its loss; but it retained the Roman law rule that ownership is transferred
only by delivery, whether actual or constructive. Consequently, the general
rule under Philippine jurisdiction is that after perfection but before
delivery, the risk of loss is borne by the seller under the rule of res perit domino.
The above legal principle
is the same with the works of Tolentino which states that the risk of loss is
still to be borne by the seller from the time of perfection up to before
delivery of thing, but he would no longer be liable for damages if the thing is
lost through fortuitous event.
Structuring the Proper Doctrine on the Rules of
Loss, Deterioration, Fruits and Improvements
The prevailing doctrine
under our jurisdiction on the subject matter of a contract of sale generally
depends on the issue of title pursuant to the principle of res perit domino or beneficial interest to the subject property.
Prior to perfection, both
title and beneficial interests pertain to the seller and therefore, he must
bear the risk of loss, deterioration, and benefits from the fruits and
improvements.
After delivery, which
effectively transfers title and beneficial interest to the buyer, the buyer
bears both the risk of loss and deterioration, as well as benefits from the
fruits and improvements of the subject matter of sale.
It is only after
perfection and before delivery that title and beneficial interests actually do
not pertain to the same person since title remains with the seller, but
beneficial interest actually pertains to the buyer.
When the seller intends to
have control over the goods until the buyer has complied with certain
obligations, such as C.O.D. sale, or where the buyer does not intend to have
dominion, use or control over the goods until certain conditions are met, such
as sale on approval or trial, the general rule is that the owner must bear the
risk of loss, which in this case would be the seller.
Under Article 1189, even
prior to delivery but where there is an existing obligation to deliver a
determinate thing, since the accompanying obligations of the obligor show that
he possesses the goods for the benefit of the buyer, although the seller has
ownership still over the subject matter, the benefits and improvements over the
subject matter are for the account of the obligee-buyer and in turn he must
bear the risk of deterioration.
According to Villanueva,
the unifying doctrine on the risk of loss, deterioration and improvement, the
same shall always be for the account of the person or party who has both title
and beneficial interest over the property or subject matter of the sale. When
the title and beneficial interest do not merge in the same party, then he who
bears the risk of loss or deterioration, and who benefits from the improvement
of the thing, should be the party who at that point in time is understood to
have real beneficial interest over the subject matter.
Bibliography
Arturo Tolentino,
Commentaries and Jurisprudence on the Civil Code of the Philippines, Volume 5,
Reprinted 2002, Central Lawbook Publishing.
Cesar Villanueva, Law on
Sales, 2009 Edition, Rex Book Store.
Civil Code of the
Philippines.
