Sales: Sale by a Non-Owner or One Having Voidable Title: The "Life" of a Contract of Sale
CHAPTER 8
SALE BY A NON-OWNER OR ONE HAVING VOIDABLE TITLE:
THE "LIFE" OF A CONTRACT OF SALE
PHILOSOPHICAL DISCUSSIONS ON STAGES IN THE “LIFE OF SALE”
WHEN SELLER IS NOT OWNER OF THE SUBJECT MATTER
At Perfection
At Consummation
Sales by Co-owners
Exceptions to Rule on Effect of Sale of Definite Portion by Co-owner
EXCEPTIONS TO RULES ON LEGAL EFFECTS OF SALE BY A NON-OWNER
When Real Owner Estopped
Recording Laws
Statutory Power; Judicial Sales
Sales at Merchant Stores
When Seller Has Only Voidable Title to the Subject Matter
Applicable Rules to Immovables
“Title” as to Movable Properties
I. PHILOSOPHICAL DISCUSSIONS ON STAGES IN THE “LIFE OF SALE”
The discussion involves sale by a seller who:
(a) is not the owner of the subject matter sold, or
(b) only has a voidable title
Sale is a progressive contract, likened to metamorphosis, undergoing distinct stages in its legal life.
Stages in the Life of a Sale
Perfection Stage
The moment the contract comes into existence.
Requires meeting of minds on:
Subject matter
Price
Determines whether the contract exists and its nature (e.g., valid, voidable, unenforceable, rescissible, or void).
If a sale is valid at perfection, it remains valid throughout its existence.
Consummation Stage
The stage where obligations arising from the sale are performed:
Seller: Deliver possession and transfer ownership.
Buyer: Pay the price.
This stage cannot change the nature of the contract:
A valid sale remains valid.
A voidable sale remains valid unless annulled or ratified.
A rescissible sale remains valid but is subject to rescission.
An unenforceable sale is valid but cannot be enforced unless it falls under exceptions.
A void sale remains nonexistent, and no performance can make it valid.
Perfection determines the contract's nature, while consummation is merely its execution.
Breach and rescission belong to the consummation stage and require a valid sale.
Breach of Contract
Occurs when either party fails to fulfill contractual obligations:
Seller: Fails to deliver possession or transfer ownership.
Buyer: Fails to pay the price.
Because of the reciprocal nature of obligations, no prior demand is required to establish breach.
Rescission or Resolution
If one party breaches, the other party (not at fault) may rescind or resolve the sale.
Rescission presupposes a valid sale.
If a sale is void, no obligations exist, and thus, no breach or rescission can occur.
II. WHEN SELLER IS NOT OWNER OF THE SUBJECT MATTER
At Perfection
Consensual Nature of Sale
A contract of sale is perfected by mere consent, without requiring delivery or payment (Art. 1475, Civil Code).
Agreement must cover three essential elements:
Subject matter
Price
Terms of payment
Validity Despite Absence of Ownership at Perfection
A valid sale may cover:
Existing things
Things with potential existence (Art. 1461, Civil Code)
Things subject to a resolutory condition
Ownership at perfection is not a requirement; the obligation to transfer ownership arises upon delivery (Art. 1459, Civil Code).
Legal Basis for Transfer of Ownership
Ownership does not transfer upon perfection but upon actual or constructive delivery (Art. 1477, Civil Code).
Vendor must have the right to transfer ownership at the time of delivery (Art. 1459, Civil Code).
Doctrine of Estoppel (Art. 1434, Civil Code)
If a non-owner sells a thing and later acquires ownership, such ownership automatically transfers to the buyer by operation of law.
At Consummation
General Rule: Nemo dat quod non habet
No one can give what one does not have.
A seller can only transfer what they legally own or are authorized to sell.
Article 1505, Civil Code: Consequences of Sale by a Non-Owner
A buyer acquires no better title than the seller had, unless:
The owner is estopped from asserting ownership.
The sale falls under exceptions such as sales by agents, factors, or in the ordinary course of business.
Cases
Mindanao Academy, Inc. v. Yap
Sale by a co-owner without consent of other co-owners.
Ruled null and void as to the portions not owned by the seller.
Highlights importance of determining which stage of sale (perfection vs. consummation) is being referred to.
Estoque v. Pajimula
Seller sold a specific portion of land when he was only a co-owner.
Upon acquiring full ownership, the sale was validated under Art. 1434 (estoppel principle).
Almendra v. IAC
Surviving spouse sold a specific portion of conjugal property before partition.
Sale was void for lack of authority over a definite portion.
Noel v. CA
Reiterated that the seller must be the owner at the time of delivery for the sale to be valid.
Reinforced the nemo dat quod non habet principle.
DBP v. CA
If a seller has no title at all, the sale is considered void.
Remedy: Rescission and restitution to restore the parties to their original status.
Nool v. CA
Sellers no longer had ownership at the time of sale.
SC applied the concept of “impossible service” under Art. 1409(5), but this reasoning is debated since seller’s obligation is real (to give) and not personal (to do).
Perfection vs. Consummation
Perfection: Requires meeting of minds on subject matter, price, and terms; seller need not be the owner.
Consummation: Requires delivery of ownership; seller must have the right to transfer ownership.
Effects of Sale by a Non-Owner
If seller later acquires ownership → Sale is validated under Art. 1434 (Estoque case).
If seller never acquires ownership → Void; Buyer cannot obtain ownership unless exceptions apply (e.g., estoppel, agency, etc.).
If subject matter does not exist at perfection but later comes into existence → Sale remains valid.
Legal Remedies
Rescission: If seller fails to deliver ownership.
Nullity: If sale is inherently void (e.g., conjugal property not partitioned, sale of non-existent subject without potential existence).
Restitution: To restore parties to original condition if the sale is void.
Sales by Co-owners
General Rule on Co-Ownership and Sale
Under co-ownership, no co-owner may claim a specific portion of the property before partition.
A co-owner may sell only his undivided share but not a specific portion of the property.
If a co-owner sells an entire property without consent from other co-owners, the sale affects only his spiritual share, not the whole property.
Principle of Sale by Co-Owner
Lopez v. Cuaycong:
A co-owner's sale of a definite portion is not void but is only valid for his share.
Bailon-Casilao v. Court of Appeals:
The buyer only acquires the seller’s pro-indiviso share and becomes a co-owner.
Paulmitan v. Court of Appeals:
Sale of the entire property by one co-owner is not void but is valid only for the seller’s share.
Tomas Claudio Memorial College, Inc. v. Court of Appeals:
The proper remedy is partition, not nullification of the sale.
Exception:
If the buyer relied on acquiring the entire property or a specific portion, the contract may be void under Article 1409(6) of the Civil Code (when the principal object is uncertain).
The buyer should have the option to:
rescind the contract or
accept the spiritual share with a proportional price reduction.
Exceptions to Rule on Effect of Sale of Definite Portion by Co-owner
Indivisible Property
Mindanao Academy, Inc. v. Yap:
If the subject matter is indivisible (e.g., a school), the sale is void, even for the seller's share.
Consent of Co-Owners
Pamplona v. Moreto:
If co-owners do not object when a seller marks a definite portion, it amounts to a partial partition, and the sale is valid.
Non-Turnover of Proceeds
Imperial v. Court of Appeals:
If a co-owner sells one property and does not share proceeds, the other co-owner may claim exclusive rights to the remaining property.
Ipso Jure Transfer of Ownership
PisueΓ±a v. Heirs of Petra Unating:
If a co-owner later acquires full ownership after a sale, the buyer automatically becomes the owner under Article 1434 of the Civil Code.
Effect of Torrens System Registration
Cruz v. Leis:
If a Torrens title shows sole ownership, a buyer in good faith acquires valid title even if the property was actually co-owned.
A co-owner can sell his undivided share but not a specific portion unless agreed upon by co-owners.
A sale of the whole property by one co-owner is not void but only valid as to his share.
The buyer only acquires the seller's spiritual share and becomes a co-owner.
In commercial transactions, if the buyer was misled, he may rescind the sale or accept a reduced price.
Exceptions apply when:
The property is indivisible.
Other co-owners consent to the sale.
The seller fails to share proceeds.
The seller later acquires full ownership.
Torrens title indicates sole ownership.
III. EXCEPTIONS TO RULES ON LEGAL EFFECTS OF SALE BY A NON-OWNER
Exceptions Under Article 1505
A person who is not the owner of goods and sells without authority or consent from the owner cannot transfer better title than what he possesses.
However, there are several exceptions where the buyer may acquire valid ownership.
When the owner is estopped
The owner’s conduct prevents him from denying the seller’s authority to sell.
Example:
Article 1434 – If a non-owner sells property and later acquires ownership, title automatically transfers to the buyer (e.g., Bucton v. Gabar).
Recording Laws
Some laws provide exceptions through registration, e.g.:
chattel mortgage
corporate share hierarchy rules
However, the principle of "registration as the operative act" mainly applies to land under the Property Registration Decree.
Statutory Power of Sale; Judicial Sale
Court judgments can transfer ownership even if the court itself is not the owner.
Example:
A sheriff’s sale at public auction validly transfers ownership to the highest bidder.
Sale in Merchant’s Store
Sales made in merchant stores are protected under the Civil Code and the Code of Commerce.
Sun Brothers & Co. v. Velasco:
Buyers from merchant stores acquire valid title even if the seller had no ownership.
Rationale: To protect commercial transactions and promote business stability.
City of Manila v. Bugsuk Lumber Co.:
A store must have goods for sale, not just be an office for transactions.
Additional Exceptions to Article 1505
Sale by a Seller with Voidable Title (Article 1506)
If the seller had voidable title but it was not avoided at the time of sale, the buyer in good faith acquires valid title.
The cut-off point is delivery: If the seller’s voidable title is annulled before delivery, the buyer does not acquire ownership.
If a deed of sale shifts risks to the buyer instead of guaranteeing title, it may indicate bad faith.
Acquisition of Movables in Good Faith (Article 559)
A possessor in good faith with a claim of ownership acquires valid title unless the real owner was unlawfully deprived of the movable.
Special Rights of an Unpaid Seller (Articles 1526 & 1533)
An unpaid seller may have rights to resell goods under certain conditions.
The default rule under Article 1505 prevents non-owners from passing valid title, but various statutory and jurisprudential exceptions exist.
Buyers in good faith who purchase through specific legal channels may still acquire ownership despite defects in the seller’s title.
Estoppel, statutory provisions, judicial sales, commercial transactions, and good faith acquisitions are significant considerations in determining ownership rights in sales by non-owners.
Applicable Rules to Immovables
Applicability of Articles 1505 and 1506 to Immovables
Articles 1505 and 1506 of the Civil Code primarily apply to movables (goods), as they require the element of transfer of possession as the primary test of ownership.
Unlike movables, ownership of immovables requires more than just delivery and good faith purchase.
If a seller has only a voidable title to land at the time of sale and delivery, the buyer does not acquire a better title than the seller, even if the buyer acted in good faith and for value.
General Rule: A buyer of land acquires only the same title that the seller had, even with delivery.
Exception: The principle of “registration in good faith as the operative act” under Sec. 113 of the Property Registration Decree, which upholds the sanctity of the Torrens system.
Cases
Heirs of Spouses Benito Gavino v. Court of Appeals
The Torrens system protects innocent third-party buyers who rely on the correctness of a certificate of title.
Even if a prior sale was void (e.g., fictitious transfer), subsequent innocent buyers who rely on the title retain their rights.
Courts avoid canceling certificates of title to preserve public confidence in the Torrens system.
Cavite Development Bank v. Spouses Cyrus Lim
Foreclosure sales are still considered sales under Article 1458.
Ownership transfer is obligatory upon foreclosure, making the highest bidder the new owner.
Even if a mortgagor's title is fraudulent, the principle of “mortgagee in good faith” protects creditors relying on a Torrens title.
Tsai v. Court of Appeals
Indefeasibility of Torrens title applies only to land, not necessarily to improvements built on it.
Buyers must confirm whether the property includes structures separately owned by another party.
Insurance Services and Commercial Traders, Inc. v. Court of Appeals
A buyer in good faith must acquire title from the registered owner, not from a forged deed.
Indefeasibility of title does not extend to forged documents.
“Title” as to Movable Properties
Article 559 of the Civil Code
Possession in good faith of a movable = ownership.
Original owners can recover lost or stolen movables from anyone, except:
If the movable was purchased in good faith at a public sale, the original owner must reimburse the buyer.
If the buyer purchased from a merchant store, even without reimbursement, the original owner cannot recover it.
If the buyer acquired from a seller with a voidable title, the original owner cannot recover it before rescission.
Cases
Tagatac v. Jimenez
A seller was not unlawfully deprived of a vehicle despite non-payment.
The buyer, who later resold it, transferred a valid title to the subsequent buyer in good faith.
Ownership does not revert to the seller unless a court annuls the sale.
Aznar v. Yapdiangco
If the original owner never consented to the sale, the new buyer cannot claim ownership.
Since the initial possessor had no title, the sale was void, allowing the original owner to recover the property.
EDCA Publishing & Distributing Corp. v. Santos
An impostor fraudulently acquired books and resold them to a buyer in good faith.
Fraudulent acquisition did not constitute unlawful deprivation under Article 559.
Since the first sale was only voidable, the second buyer obtained good title.
Article 1506 acts as an exception to Article 559:
If a movable is obtained fraudulently (not stolen) and resold before rescission, the new buyer gets a valid title.
Ownership transfers upon delivery unless explicitly reserved.
Perfection: The contract is finalized once there is a meeting of minds.
Consummation: Ownership transfers upon delivery, not just upon contract agreement.
A seller’s non-payment does not invalidate a sale but gives the original owner the right to rescind.
For immovables, registration under the Torrens system is the ultimate determinant of ownership, protecting buyers in good faith.
For movables, possession in good faith is generally equivalent to title, except in cases of unlawful deprivation.
A sale is perfected by agreement but ownership transfers upon delivery unless explicitly reserved.
The Court consistently upholds public confidence in the Torrens system for land and buyer protection for movables acquired in good faith.