Quiz 2 - recto law til mortgage and pledge

Sale of Personal Property in Installment

● Recto Law – Article 1484

● Remedies of the seller

● The buyer benefits from this law

Recto Law (Remedies of the Seller)

• Exact fulfillment of the obligation

Should the vendee fail to pay

• Sue the debtor in court for collection of money

Recto Law (Remedies of the Seller)

• Cancel the sale

should the vendee's failure to pay cover two or more installments;

○ Rescission of sale plus repossess of the property

(Recto Law - Remedies of the Seller)

• Foreclosure of Chattel Mortgage (on the thing sold)

• should the vendee's failure to pay cover two or more installments

• Action: Sell the personal property in public.

• Note: If sale results in a deficiency, the creditor/seller can recover; if it results in an excess, return to the debtor.

Important: Any agreement stating otherwise shall be void.

Remedies if Vendee Fails to Pay (PERSONAL PROPERTY)

• Exact Fulfillment: Demand payment if the vendee fails to pay.

• Cancel the Sale: If failure covers two or more installments.

• Foreclose Chattel Mortgage: If constituted and failure covers two or more installments; no further action against the purchaser to recover unpaid balance allowed. Any contrary agreement is void.

Requirements of Recto Law

1. Sale of personal property in installments

2. Chattel mortgage is constituted upon the personal property

3. Buyer/ debtor fails to pay at least two installments

4. Seller foreclosed the chattel mortgage above (walang piniling remedy kundi yung foreclosure)

Sale of Real Property in Installment

● Maceda Law (RA No. 6552)

● The buyer benefits from this law

● Rights on the part of the buyer

MACEDA LAW

Realty Installment Buyers Protection Act

Sale of Real Property in installments

for residential real properties only (not including commercial or industrial real properties)

Maceda Law (Rights of the Buyer)

At least 2 years of installments

in case of default, buyer has grace period of 1 month per year of payment – as if there is no delay

○ To pay unpaid installment sue without additional interest within the grace period

• Can be exercised ONCE EVERY FIVE YEARS ONLY

If contract is canceled, refund of the cash surrender value (50% of the total payments made and after 5 years, there would be additional 5% every year but not exceed 90% payments made)

Notice of cancelation or demand for rescission must be by notarial act

Actual cancelation shall take after 30 days from receipt of notice or demand and full payment of the cash surrender value.

Maximum Refund for at least 2 years of payment

You can only get back up to 90% of all the money you paid.

Less than 2 years

The buyer is given a grace period of not less than 60 days

• What if grinant ka ng seller ng more than 60 days? – Pwede raw yun, 60 days or more

Rights of Buyers in Real Estate Installments

Applicability: Applies to sales/financing of real estate on installment payments (excludes industrial lots, commercial buildings, and certain sales).

Buyer Rights After 2 Years of Installments:

• Grace Period: Pay unpaid installments without additional interest within a grace period of one month for every year of installments made. This right can be exercised once every five years.

• Refund Upon Cancellation: If cancelled, the seller refunds 50% of total payments made, plus an additional 5% for each year after five years, up to 90%. Cancellation occurs 30 days after buyer receives notice and full payment of cash surrender value.

Less than 2 Years of Installments: Seller must provide at least a 60-day grace period. If unpaid after that, seller can cancel the contract 30 days after notice is received.

Who may enter into a contract of sales?

● All persons

● Unless incapacitated

Kinds of Incapacity

• One Party Incapable: Contract is voidable.

• Both Parties Incapable: Contract is unenforceable.

Property Sales Between Spouses:

• Spouses cannot sell property to each other, except:

  • Separation of Property: Agreed upon in marriage settlements.

  • Judicial Separation: Under Article 191.

Absolute Incapacity

Article 1489: they can’t enter into a contract of sales in all circumstances

1. Minors:

   • Can enter valid contracts for necessaries (e.g., clothing, food).

   • If they misrepresent as of legal age, the contract remains valid.

2. Insane Persons:

   • Contracts entered during a lucid interval are valid.

3. Demented Persons:

   • Incapacity applies; contracts are voidable.

4. Deaf Mutes:

   • Particularly those who do not know how to write; contracts are voidable.

• General Rule: If any of these individuals enter a contract of sale, it is voidable and remains valid until annulled.

Relative Incapacity in Contracts

refers to individuals who are prohibited from acquiring certain properties through purchase, including at public or judicial auctions, and involves specific relationships.

• Categories of Relative Incapacity:

  1. Husband and Wife (Article 1490):

     • Applies to common law spouses; contracts are voidable.

  2. Guardians:

     • Cannot purchase property of those under their guardianship.

  3. Agents:

     • Cannot purchase property entrusted to them without the principal’s consent.

  4. Executors and Administrators:

     • Cannot purchase property of the estate they are administering.

  5. Public Officers and Employees:

     • Cannot purchase property of the State or GOCC under their administration.

  6. Judicial Officers:

     • Justices, judges, prosecuting attorneys, and clerks of court cannot purchase property and rights in litigation.

Loss of Specific Thing at the Time of Perfection

● Entirely lost = contract is without effect (void)

● If partially lost = buyer may:

• Withdraw

• Demand remaining part and pay its proportionate price

Principal Obligations of the Vendor/Seller (Article 1495)

● Transfer the ownership (cannot be waived)

● Deliver the thing (cannot be waived)

● Warrant the thing (can be waived)

● Preserve the thing sold with the diligence of a good father of a family unless the law or the stipulation of the parties requires another standard of care.

● Pay the expenses of the sale - can be shifted to the buyer with stipulations from both parties

• Capital Gains Tax

• Documentary Stamp Tax

• Other related expenses

● Other stipulated conditions

Delivery

is a mode of acquiring ownership

Very important that the seller need not be the owner at the time of sale (or perfection stage) BUT must be the owner at the time of delivery

• buyer only acquires the title of the seller at the time of delivery

Kahit hindi pa sayo, pwede mo na ibenta basta at the time of delivery ikaw na dapat ang owner. Otherwise, you will be liable.

Anti-Fencing Law

when you buy stolen goods or properties, good faith or bad faith is not a defense

Except in the following cases: the buyer acquires a better title than the seller

1. Merchant store sales

● To protect commercial transactions

○ A stole the television of B and sold it to C. Tatamaan ng Anti-Fencing Law si C.

○ A stole the television of B and sold it to XYZ Store na buyer and seller ng second hand goods. C bought the television from XYZ. C acquired a better title than the seller.

○ May official receipt si C from XYZ store, yung official receipt is a valid proof of ownership.

2. Estopped (si real owner)

3. Court ordered sales

When is Ownership Transferred?

As a rule: upon delivery there would be a transfer of ownership

• Parties may agree na maglalagay ng condition kung kailan lang magkakaron ng transfer of ownership (conditional contract of

  sale)

Actual Delivery (Act. 1497)

thing sold is placed in the control and possession of the vendee

Legal or Constructive Delivery

Execution of public instrument (By legal formalities)

Symbolic delivery (traditio simbolica or traditio clavium)

Traditio longa manu

Traditio brevi manu

Traditio constitutum possessorium

Execution of public instrument (By legal formalities)

Sale is made through a public document, the execution thereof shall be equivalent to the delivery of the thing sold. It applies to both movable and immovable property (Ex. Deed of sale).

Symbolic delivery (traditio simbolica or traditio clavium)

It that takes place by delivering the keys of the place or depository where the movable is stored or kept (Ex. Delivery of the key for the sale of a car).

Traditio longa manu

Delivery of movable property 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 the sale (by mere pointing).

Traditio brevi manu

Vendee already had possession of the thing sold for any other reason It applies to movables only.

• Ex. Nirerentahan mo yung building and biglang binenta sayo. Technically na-deliver na dahil nandyan ka na sa property. No need for actual delivery because the person is already in possession

Traditio constitutum possessorium

Vendor continues in possession of the thing sold after the sale but in another capacity.

• Binenta ni owner yung property pero nakiusap syang huwag muna syang paalisin sa property, in return magbabayad pa rin siya ng renta

Delivery of Incorporeal Property

Execution of public document.

Quasi-tradition

Quasi-tradition

for incorporeal or intangible properties (i.e. shares of stock); Similar to execution of a public instrument. A term used to designate that a person is in the use of the property of another, which the latter suffers and does not oppose.

○ By placing the titles of ownership in the possession of the vendee

○ Through the use by the vendee of his rights with consent of the vendor

sale or return

ownership is transferred to the buyer upon delivery

sale on approval

ownership to the buyer is not transferred upon the delivery. The ownership passes to the buyer:

(1) When he signifies his approval or acceptance to the seller or does any other act adopting the transaction;

(2) If he does not signify his approval or acceptance to the seller, but retains the goods without giving notice of rejection,

then if a time has been fixed for the return of the goods, on the expiration of such time, and, if no time has been fixed,

on the expiration of a reasonable time. What is a reasonable time is a question of fact.

Seller of Goods is not the Owner (Article 1505)

• General Rule:

  • If goods are sold by someone who is not the owner and without authority or consent from the owner, the buyer acquires no better title than the seller had.

  • Example: If S, an agent of P, sells property to B, then B would only have the rights of an agent of P.

• Exceptions:

  1. Estoppel: If the owner’s conduct prevents them from denying the seller’s authority to sell.

  2. Factors' Act and Recording Laws: Laws that allow apparent owners to dispose of goods as if they were the true owners.

  3. Statutory Power of Sale: Validity of contracts under statutory power of sale or court orders.

  4. Purchases in Merchant’s Store: Valid purchases made in accordance with the Code of Commerce and special laws at stores, fairs, or markets.

Seller has a Voidable Title (Article 1506) (Buyer acquires good title when)

a. title has not been avoided at the time of the sale,

b. he buys them in good faith,

c. for value, and

d. without notice of the seller's defect.

Place of delivery

a. Place stipulated in the contract.

b. In case there is no stipulation, place fixed by usage or trade.

c. In the absence of a and b, the seller’s place of business if he has one; if none, the seller’s place of residence.

d. In the case of specific goods, the place where the goods are located at the time of perfection of contract of sale.

Time of delivery

a. At the time agreed upon.

b. In the absence of time agreed upon, within reasonable time from the execution of the contract.

Unpaid Seller

● A seller na hindi pa nabayaran

Rights of Unpaid Seller

● Possessory Lien

● Right of Stoppage in Transitu

● Right to Rescale

● Right to Rescind

Possessory Lien / Lien on the Goods / Right to Retain:

Seller must be in possession

● Cases when unpaid seller may exercise possessory lien:

○ Where the goods have been sold without any stipulation as to credit.

○ Where the goods have been sold on credit, but the credit term has expired.

○ Where the buyer is insolvent.

● Cases when unpaid seller losses possessory lien:

○ When the seller delivers the goods to a carrier or other bailee for the purpose of transmission to the buyer without

reserving the ownership in the goods or the right to the possession thereof.

○ When the buyer or his agent lawfully obtains possession of the goods

○ By waiver of the possessory lien.

Right of Stoppage in Transit

• Grounds:

  • The goods must be in transit.

  • The buyer must be insolvent.

• Goods in Transit:

  • Defined from when they are delivered to the carrier or bailee until the buyer or their agent takes delivery.

  • If the buyer rejects the goods and the carrier continues to possess them (even if the seller refuses to take them back).

• Goods Not in Transit:

  • If the buyer takes delivery before the appointed destination.

  • If the carrier acknowledges to the buyer or their agent that they hold the goods after arrival at the destination.

  • If the carrier wrongfully refuses to deliver the goods.

• Exercising the Right of Stoppage:

  • Obtain actual possession of the goods.

  • Give notice of the claim to the carrier or bailee in possession of the goods.

Right of Resale

Grounds

○ The goods are of perishable nature.

○ The seller has expressly reserved the right to resell the goods in case the buyer should make default.

○ The buyer has been in default for an unreasonable time.

Notice Requirement:

• It is not essential for the seller to give notice of intention to resell to the original buyer for the resale to be valid.

• However, if the ground for resale is the buyer’s unreasonable default, giving notice becomes relevant to determine the unreasonableness of the default.

● Effects of resale:

○ The seller shall not be liable to the original buyer for the delivery of the goods.

○ The seller may recover damages from the original buyer for any loss occasioned by the breach of the contract of sale.

○ The new buyer acquires a good title against the original buyer.

The unpaid seller is prohibited from participating as a bidder, directly or indirectly, in the public sale or private sale of the goods

Place of Resale

○ Public sale; or

○ Private sale

Right to Rescind the Sale

• Grounds for Rescission:

  1. The seller expressly reserves the right to rescind the sale if the buyer defaults.

  2. The buyer has been in default on payment for an unreasonable time.

• Effects of Rescission:

  • The seller is not liable to the buyer under the contract of sale.

  • The seller may recover damages from the buyer for losses caused by the breach.

  • The seller resumes ownership of the goods.