ARTICLE 1498-1507

LAW ON SALES
ART. 1498
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. With regard to movable
property, its delivery may also be made by
the delivery of the keys of the place or
depository where it is stored or kept. (1463)
Execution of a public instrument
or document.
(1) Possession transferred to buyer by notarized deed of conveyance.
— The execution of a public instrument (i.e., an instrument or document attested
and certified by a public officer authorized to administer oath, such as a notary
public) as a manner of delivery applies to movable as well as immovable
property since the law does not make any distinction and it can be clearly
inferred by the use of the word “also” in paragraph 2 of Article 1498. This
manner of delivery is symbolic. The buyer may use the document as proof of his
ownership of the property sold.
(2) Delivery
presumptive only
Under Article 1498, the mere execution of the deed of sale in a public
document is equivalent to the delivery of the property “if from the
deed the contrary does not appear or cannot clearly be inferred.”
Therefore, prior physical delivery or possession is not required. Article
1498, however, lays down the general rule. It confines itself to
providing that “the execution thereof shall be equivalent” to delivery,
which means that there is only a presumptive (not conclusive)
delivery which can be rebutted by evidence to the contrary.
(a) Iffrom
it appearsfrom the document or it can be inferred there
that it
was not the intention of the parties to make
delivery, no tradition can be deemed to have taken place.
Such would be the case, for instance, where a certain date is
fixed when the purchaser should take possession of the thing,
or where the vendor reserves the right to use and enjoy the
property until a certain period, or where it is stipulated that
until payment of the last installment is made, the title to the
property should not be deemed to have been transmitted, or
where the vendor has no control over the thing sold at the
moment of the sale, and, therefore, its material delivery could
not have been made.
(b) Presumptive delivery by
execution of public
instrument can also be
negated by failure of the
vendee to take material
possession of the land
subject of the sale in the
concept of purchaser-
owner.
Illustrative Cases
1. After delivery of possession coupled with execution of the deed
of sale of real property embodied in a public instrument but
before its registration and payment of the price, buyer is being
made responsible for the payment of the realty tax.
Facts: S (PSDC) and B (PHHC, government
corporation
entered into a contract of sale embodied in a public instrument whereby S
conveyed unto B two parcels of land subject to certain terms and conditions
among which that S should register the deed of absolute sale and secure a
new title in the name of B before the latter can be compelled to pay the
purchase price.
Prior to the signing of the deed, B had acquired possession of the property
with the consent of S. The provincial treasurer requested B to withhold the
amount of P30,000.00 from the purchase price to be paid by it to S
representing the realty tax due on the property involved.
Issue: Who is liable to the payment of the real property tax, S or B?
Held: B. When the sale of real property is made in a public instrument the
execution thereof is equivalent to the delivery of the thing object of the
contract, if from the deed the contrary does not appear or cannot clearly be
inferred.
(1) Vendee actually placed in
possession.
In the case at bar, there is no question that the
vendor (S) had actually placed the vendee (B) in
possession and control over the property sold, even
before the date of the sale.

(2) Payment of price not essential to

transfer of ownership.
The condition that S should first register the deed of
sale and secure a new title in the name of B before
the latter shall pay the purchase price, did not
preclude the transmission of ownership. 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 of the goods.

(3) Title transferred to vendee

Since the delivery of possession coupled with the
execution of the deed of absolute sale, had
consummated the sale and transferred title to B, the
payment of the real estate tax after such transfer is the
responsibility of the purchaser.
 (2) Ownership
transferred by
delivery.
“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
specified in articles 1497 to 1501, or in any
other manner signifying an agreement that
the possession is transferred from the
vendor to the vendee.’ This right is
transferred, not by contract alone, but 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.’ Thus, it has been
held that while the execution of a public
instrument of sale is recognized by law as
equivalent to the delivery of the thing sold,
such constructive or symbolic delivery, being
merely presumptive, is deemed negated by
 (3) Concept of delivery.
“Delivery has been described as a composite act, a thing 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. In its natural sense,
delivery means something in addition to the delivery of
property or title; it means transfer of possession. In the Law
on Sales, delivery may be either actual or constructive, but
both forms of delivery contemplate ‘the absolute giving up of
the control and custody of the property on the part of the
vendor, and the assumption of the same by the vendee.’’’
 (4) ERD never took actual
control and possession of the
property sold to it.
“From the peculiar facts of this case, it is clear that petitioner never took
actual control and possession of the property sold, in view of respondent’s
timely objection to the sale and the continued actual possession of the
property. The objection took the form of a court action impugning the sale
which, as we know, was rescinded by a judgment rendered by this Court in
the mother case. It has been held that the execution of a contract of sale as a
form of constructive delivery is a legal fiction. It holds true only when there
is no impediment that may prevent the passing of the property from the
hands of the vendor into those of the vendee. When there is such
impediment, ‘fiction yields to reality — the delivery has not been effected.’
Hence, respondent’s opposition to the transfer of the property by way of sale
to ERD’s was a legally sufficient impediment that effectively prevented the
passing of the property into the latter’s hands.’’
 (5) Presumption of delivery by
execution of public instrument
is only prima facie.
“The execution of a public instrument gives rise, therefore,
only to a prima facie presumption of delivery. Such presumption
is destroyed when the instrument itself expresses or implies that
delivery was not intended; or when by other means it is shown
that such delivery was not effected, because a third person was
actually in possession of the thing. In the latter case, the sale
cannot be considered consummated.’’
 (6) ERD did not acquire rights to
fruits of property.
“However, the point may be raised that under Article 1164 of the Civil Code, ERD, as
buyer, acquired a right to the fruits of the thing sold from the time the obligation to deliver
the property to petitioner arose. That time arose upon the perfection of the Contract of
Sale on July 30, 1978, from which moment the laws provide that the parties to a sale may
reciprocally demand performance. Does this mean that despite the judgment rescinding the
sale, the right to the fruits belonged to, and remained enforceable by, ERD?

Article 1385 of the Civil Code answers this question in the negative, because
‘[r]rescission creates the obligation to return the things which were the object of the
contract, together with their fruits, and the price with its interest; x x x.’ Not only the land
and building sold, but also the rental payments paid, if any, had to be returned by the
buyer.’’
 (7) Rental payments by MT, Inc.
did not mean recognition of
ERD’s title.
“The fact that MT, Inc. paid rentals to ERD’s during the litigation should
not be interpreted to mean either actual delivery or ipso facto
recognition of ERD’s title. ERD as alleged buyer of the disputed
properties and as alleged successor-in-interest of CB rights as lessor —
submitted two ejectment suits against MT, Inc. Filed in the Metropolitan
Trial Court of Manila, the first was docketed as Civil Case No. 121570 on
July 9, 1987; and the second, as Civil Case No. 131944 on May 28, 1990.
MT, Inc. eventually won them both. However, to be able to maintain
physical possession of the premises while awaiting the outcome of the
mother case, it had no choice but to pay the rentals. The rental
payments made by MT, Inc., should not be construed as a recognition of
ERD as the new owner. They were made merely to avoid imminent
eviction.’’
(8) General principle that
rescissible contract is valid
until rescinded not
applicable.
“At bottom, it may be conceded that,
theoretically, a rescissible contract is valid until
rescinded. However, this general principle is not
decisive to the issue of whether ERD ever
acquired the right to collect rentals. What is
decisive is the civil law rule that ownership is
acquired, not by mere agreement, but by
tradition or delivery. Under the factual
environment of this controversy as found by
this Court in the mother case, ERD was never
put in actual and effective control or possession
of the property because of MT, Inc. timely
objection.
As pointed out by Justice Holmes, general
propositions do not decide specific cases.
Rather, ‘laws are interpreted in the context of
 (9) Sale of ERD not
consummated.
“In short, the sale to ERD may have
been valid from inception, but it was
judicially rescinded before it could be
consummated. Petitioner never
acquired ownership, not because the
sale was void, as erroneously claimed
by the trial court, but because the sale
was not consummated by a legally
effective delivery of the property sold.’’
(10)Benefits precluded
by ERD’s bad faith.
“Furthermore, assuming for the
sake of argument that there was
valid delivery, petitioner is not
entitled to any benefits from the
‘rescinded’ Deed of Absolute Sale
because of its bad faith. This being
the law of the mother case decided
in 1996, it may no longer be
changed because it has long
become final and executory. x x
x.’’(Equatorial and Realty
Development, Inc. vs. Mayfair
Theater, Inc.,158 SCAD 783, 370
SCRA 56 [2001].)
 (3) Sale of thing not subject to
control of vendor.
Symbolic `delivery by the execution of a public instrument is equivalent
to actual delivery only where the thing is subject to the control of the
vendor and there is no impediment that may prevent the passing of the
property from the hands of the vendor into those of the vendee. Hence,
the vendor who executes said public instrument fails in his obligation to
deliver it, if the vendee cannot enjoy its material possession because of
the opposition or resistance of a third person (e.g., squatter) who is in
actual possession. The legal fiction yields to reality. 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 in order that it can be said
that delivery has been effected. In other words, a seller cannot deliver
constructively if he cannot actually deliver even if he wants to. Of
course, if the sale had been made under the express agreement of
imposing upon the vendee the obligation to take the necessary steps to
obtain the material possession of the thing sold and if it were proven
that he knew that the thing was in the possession of a third person
claiming to have property rights thereon, such agreement would be
perfectly valid. (Ibid.)
(4) Sale of registered
land
The provisions of Article 1498 regarding
passing of title upon delivery by execution
of a public instrument must be deemed
modified by the provisions of the Property
Registration Decree (Pres. Decree No.
1529.) insofar as registered land is
concerned. Section 51 of the decree is very
clear that no deed purporting to convey or
affect registered land, shall take effect as a
conveyance or bind the land (as against
third persons) until its registration. In
accordance with this section, no act of the
parties can transfer the ownership of real
estate under the Torrens System. That is
done by the act of registration of the
conveyance which the parties have made.
 (5) Possession of a part as
constructive possession of
Wherewhole
apart from the delivery de jure of a land sold
by symbolic tradition resulting from the execution of
a public instrument of sale, the evidence shows that
the purchaser took actual possession of the
considerable portion of the land sold by the exercise
of possessory acts of clearing the area of trees and
of cultivating the same through tenants, such
possession and cultivation of a part is logically and
legally constructive possession of the whole. (Ramos
vs. Director of Lands, 39 Phil. 175 [1918].) Symbolic
tradition. Constructive delivery is symbolic when to
effect the delivery, the parties make use of a token
symbol to represent the thing delivered. The
delivery of the key where the thing sold is stored or
kept is equivalent to the delivery of the thing (par.
2.) because the key represents the thing. Similarly,
there is symbolic delivery of goods to vendee upon
delivery to him of delivery orders (see Art. 1636[1].)
which would authorize him to withdraw the goods
 ART. 1499
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 the sale, or
if the latter already had it in his possession for any other reason.
(1463a)
Traditio longa manu.
The first part of Article 1499 refers
to traditio longa manu.
This mode of delivery takes place
by the mere consent or agreement
of the contracting parties as when
the vendor merely points to the
thing sold which shall thereafter be
at the control and disposal of the
vendee.
It should be noted that delivery “by
the mere consent or agreement of
the contracting parties” is qualified
by the phrase “if the thing sold
cannot be transferred to the
Traditio brevi manu.

This mode of legal delivery

happens when the vendee has
already the possession of the
thing sold by virtue of another
title as when the lessor sells
the thing leased to the lessee.
Instead of turning over the
thing to the vendor so that the
latter may, in turn, deliver it,
all these are considered done
by action of law.
 ART. 1500
There may also be
tradition constitutum
possessorium. (n)
Traditio constitutum
possessorium.
This mode of delivery is the opposite of
traditio brevi manu.
It takes place when the vendor continues
in possession of the property sold not as
owner but in some other capacity, as for
example, when the vendor stays as a
tenant of the vendee. In this case, instead
of the vendor delivering the thing to the
vendee so that the latter may, in turn,
deliver it back to the vendor, the law
considers that all these have taken place
by mere consent or agreement of the
parties. (see Amig vs. Teves, 96 Phil. 252
[1954]; Bautista vs. Sioson, 39 Phil. 615
[1919]; Carbonell vs. Court of Appeals, 69
 ART. 1501
With respect to incorporeal
property, the provisions of
the first paragraph of
article 1498 shall govern. In
any other case wherein said
provisions are not
applicable, the placing of
the titles of ownership in
the possession of the
vendee or the use by the
vendee of his rights, with
the vendor’s consent, shall
be understood as a
Quasi-traditio.
Tradition can only be made with respect to
corporeal things. In the case of incorporeal
things, delivery is effected:
(1) by the execution of a public instrument; or
(2) when that mode of delivery is not applicable,
by the placing of the titles of ownership in the
possession of the vendee; or
(3) by allowing the vendee to use his rights as
new owner with the consent of the vendor.
This mode of delivery of incorporeal things or
rights is known as quasi-traditio. Thus, the
delivery to a person of a negotiable document
of title in which it is stated that the goods
referred to therein will be delivered to the
bearer amounts to delivery of the goods to such
person. (Arts. 1507, 1508.)
 Intention to deliver and to
accept a transfer of
possession.
(1) In all the forms of delivery, it is necessary that the act be
coupled with the intention of delivering the thing. For instance,
there is no constructive delivery, where the keys to the place
where the thing is deposited are delivered to the vendee in order
only that he may examine it or the titles of ownership of
property are placed in the possession of the vendee for his study
or inspection but not with the intention of making the delivery.
The act, without the intention to deliver, is insufficient. (see 10
Manresa 132.) Similarly, the issuance of a sales invoice does not
prove transfer of ownership of the thing sold to the buyer. An
invoice is nothing more than a detailed statement of the nature,
quality and cost of the thing sold and has been considered not a
bill of sale. (Norkis Distributors, Inc. vs. Court of Appeals, 193
SCRA 694 [1991]; P.T. Cerna Corp. vs. Court of Appeals, 221 SCRA
 (2) For the same reason, any act, although not provided for in the
preceding articles, but accompanied by the evident intention of the vendor
to deliver or of the vendee to receive the thing sold, will be considered as
constituting tradition. It is the intention which is essential. (ibid.) It is a well-
established rule that a mere contract for the sale of goods, where nothing
remains to be made by the vendor, as when the parties agreed that the
delivery of the logs should be made alongside a vessel of the vendee and
that was done by the vendor, transfers the right of property although the
price has not been paid, nor the thing sold actually delivered to the vendee
whose employees attempted to load them in the vessel but failed to do so
for want of the proper loading equipment. (Bean Admir vs. Cadwallader Co.,
10 Phil. 606 [1908].)

In other words, in all the different modes of effecting delivery, it is the

real intention of the parties, to deliver on the part ofthe vendor, and to
accept on the part of the vendee, which gives legal effect to the act. Without
such intention, there is no tradition. (see Abuan vs. Garcia, 14 SCRA 759
[1965]; Norkis Distributors, Inc. vs. Court of Appeals, supra.)
ART. 1502
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 fixed in the contract, or, if no
time has been fixed, within a
reasonable time. (n)

When goods are delivered to the buyer on

approval or on trial or on satisfaction, or other
 (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. (n)
Contract of sale or return, and of
sale on
trial or approval or satisfaction.
(1)In general. — It is evidently possible for the
parties to agree that the buyer shall temporarily
take the goods into his possession to see
whether they are satisfactory to him and that if
they are not, he may refuse to become owner. It
is clear also that the same object may be
attained by an agreement that the property
shall pass to the buyer on delivery but that he
may return the goods if they are unsatisfactory.
The question is one of fact in every case whether
the parties intend to make approval a condition,
without which the ownership shall not pass, or
whether their intent is that the ownership shall
pass at once with the right to return the goods.

(2)Sale or return. — It is a contract by which

property is sold but the buyer, who becomes the
owner of the property on delivery, has the
(a) Under this contract, the option to purchase
or return the goods rests entirely on the buyer
without reference to the quality of the goods.
The buyer may revest the ownership in the
seller by returning or tendering the goods
within the time fixed in the contract, or, if no
time has been fixed, within a reasonable time
(Art. 1502, par. 1.); otherwise, the sale
becomes absolute and the buyer is liable for
the price. The seller cannot, in this type of
sale, prevent the revesting of title by refusing
to accept the return of the property.

(b) Since title passes to the buyer on delivery,

the loss or destruction of the property prior to
the exercise of the buyer’s option to return
falls upon him and renders him responsible to
the seller for the purchase price or such part
thereof as remains unpaid. (Art. 1504; 46 Am.
Jur. 647.) The word “return” itself implies a
(3) Sale on trial or approval. — It is a
contract in the nature of an option to
purchase if the goods prove satisfactory, the
approval of the buyer being a condition
precedent. (77 C.J.S. 938.)

(a) In this kind of contract, the title shall

continue in the seller until the sale has
become absolute either by the buyer’s
approval of the goods, or by his failing to
comply with the express or implied
conditions of the contract as to giving
notice of dissatisfaction or as to returning
the goods (Ibid., 655; Art. 1502, Nos. 1 and
2.), or by his doing any other act adopting
the transaction such as mortgaging the
property or selling it to a third person.
“Sale or return” distinguished from
sale on trial.
The distinctions are the following:
(1) “Sale or return” is a sale subject to a
resolutory condition, while sale on trial is
subject to a suspensive condition;
(2) “Sale or return” depends entirely on the will
of the buyer, while sale on trial depends on the
character or quality of the goods;
(3) In “sale or return,” the ownership of the
goods passes to the buyer on delivery and
subsequent return of the goods reverts
ownership in the seller, while in sale on trial,
the ownership remains in the seller until the
buyer signifies his approval or acceptance to
the seller; and
(4) In “sale or return,” the risk of loss or injury
rests upon the buyer, while in sale on trial, the
ART. 1503
Where there is a contract of sale of specific
goods, the seller may, by the terms of the
contract, reserve the right of possession or
ownership in the goods until certain conditions
have been fulfilled. The right of possession or
ownership may be thus reserved
notwithstanding the delivery of the goods to
the buyer or to a carrier or other bailee for the
purpose of transmission to the buyer.

Where goods are shipped, and by the bill of

lading the goods are deliverable to the seller
or his agent, or to the order of the seller or of
his agent, the seller thereby reserves the
ownership in the goods. But if, except for the
form of the bill of lading, the ownership would
have passed to the buyer on shipment of the
goods, the seller’s property in the goods shall
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.

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. If,
however, the bill of lading provides that the goods are
deliverable to the buyer or to the order of the buyer,
or is indorsed in blank, or to the buyer by the
consignee named therein, on 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
When ownership not
transferred
upon delivery.
This article relates to a sale of specific
goods. (see Arts. 1494,= 1636.) As a
general rule, the ownership in the goods
sold passes to the buyer upon their delivery
to the carrier. There are, however, certain
exceptions and they are:
(1) if a contrary intention appears by the
terms of the contract (Arts. 1523, par. 1;
1503, par. 1; see Art. 1478.);
(2) in the cases provided in the second and
third paragraphs of Article 1523; and
(3) in the cases provided in the first,
second, and third paragraphs of Article
1503.
 Transfer of ownership where goods
sold delivered to carrier.

(1)General rule. — As stated above, the general rule is

that delivery, be it only constructive, passes title in
the thing sold (see Art. 1496.); and delivery to the
carrier is deemed to be a delivery to the buyer. (Art.
1523, par. 1.) The risk of loss, therefore, as between
the buyer and the seller, falls upon the buyer.

(2)Where right of possession or ownership of specific

goods sold reserved. — On the other hand, if the
seller directs the carrier to redeliver the goods at
their destination to the seller himself, or to his order,
it indicates an intention that the carrier shall be the
bailee for the seller and the ownership will remain in
the latter. (see 2 Williston, op. cit., p. 147.) The seller
Where seller or his agent
is consignee.
(1)Carrier becomes bailee for seller. — Where
goods are shipped and by the bill of lading4
(see Art. 1507.), the goods are deliverable to
the seller or his agent or to the order of the
seller or his agent, the seller thereby reserves
the ownership in the goods (par. 2.) and the
carrier is a bailee for him and not the buyer.
This principle is applicable even though the
goods are shipped on the buyer’s vessel.
(2) Rights of seller. — The seller may not only
retain the goods until the buyer performs his
obligation under the contract, but he may,
even in violation of the contract, dispose of
them to third persons. If the seller does this,
of course, he is liable for damages to the
buyer but the second purchaser from the
 Where seller’s title only for purpose
of security.

(1)Form of bill of lading not conclusive. — The form

in which the bill of lading is taken is not always
conclusive. The specification in the bill of lading
to the effect that the goods are deliverable to the
order of the seller or his agent does not
necessarily negate the passing of title to the
goods upon delivery to the carrier.
(2)Where ownership would have passed but for the
form of bill of lading. — The circumstances may be
such that were it not for the form of the bill of
lading, the ownership would have passed to the
buyer or shipment of the goods. This is true when
the object of the seller in reserving ownership is
simply to secure himself in regard to the
performance by the buyer of the latter’s
obligation. By shipping the goods, the seller has
definitely lost all use of them to the buyer. If the
Significance where title held
merely as security.

The importance of distinguishing between a

title held merely for the purpose of security and
the ordinary case where the seller retains
ownership are two-fold:
(1) Risk of loss on buyer. — In the first place,
the beneficial owner (buyer), not the one who
holds for security (seller), will be subject to the
risk of loss or deterioration from the time the
goods are delivered to the carrier even though
the legal title remains in the seller. That the
risk should be borne by the buyer if the seller
retains title merely to secure performance by
the buyer of his obligations under the contract
is a consequence of the theory that such a
bargain is, in effect, although not in form, a
sale to the buyer and a mortgage back by him
of the goods to secure the price. The title does
 (2) Buyer’s right of action based on ownership. — In
the second place, the buyer has more than a mere
contract right in regards to the goods. (Ibid., p. 157.)
As beneficial owner, he may, as against any one
except an innocent purchaser for value of the bill of
lading from the consignee, bring an action based on
ownership on making tender of the price.
Where buyer or his agent is
consignee but seller retains order
bill of
Where lading.
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
retains a right to the possession of the goods as
against the buyer.
(1) Effect of retention. — Although the property in the
goods will ordinarily pass to the buyer on delivery, the
latter is unable to obtain the goods without the bill.
The effect of the retention of the bill of lading, under
such circumstances, controlling as it does the
possession of the goods, is, therefore, closely
analogous to the retention of a lien by the seller after
(2) Surrender of order bill necessary. — The
carrier cannot be compelled to surrender
possession of the goods until the order bill
(properly indorsed) has been surrendered. In an
order bill, it cannot with certainty be determined
who is the person named to whose order the
goods are deliverable unless the bill of lading
itself is presented.

(3) Identification of consignee sufficient in case

of straight bill. — On the other hand, the shipper
who issues a straight bill of lading (goods are by
its terms deliverable not to the order of the
consignee but to the consignee only) ordinarily
does not require the surrender of the bill by the
Where a third person who retains
the bill is consignee.

A third method also in common use is to consign the

goods to a third person (usually a banker) requesting
the latter to retain the bill of lading or goods until
payment of the price. When the price is paid, the
consignee of the goods indorses the bill or delivers the
goods to the buyer.
(1)Immaterial whether bill an order or straight bill. —
For the success of this third device, it is immaterial,
so far as the protection of the seller is concerned,
whether the bill is a straight bill or an order bill.
(2)Legal title vested in third person. — By naming a
third person as consignee of the bill of lading, the
seller vests a legal title in the third person. This title
is held merely for the benefit of the seller if the
third person is the seller’s agent only and has not
advanced money of his own to the seller.
(3)Risk of loss on buyer. — The buyer as is true where
the seller consigns the goods to himself, or his
Where bill of lading sent forward
with draft attached.

Where the seller draws on the buyer for the price and
transmits the bill of exchange and the bill of lading
together to the buyer to secure acceptance or
payment of the bill of exchange, he title is regarded as
retained in the seller until the bill of exchange is paid.

(1) Duty of buyer if draft not paid. — The buyer is

bound to return the bill of lading if he does not honor
the bill of exchange. If he wrongfully retains the bill of
lading, he acquires no additional right thereby. In
carrying out the device in question, it is customary to
send the bill of lading with the draft attached thereto
to some person other than the buyer, for if the bill of
lading and the draft are sent directly to the buyer, the
latter may obtain the goods without paying the draft
and the seller, even if he has a good right of action
against the buyer on this account, is compelled to
enter upon litigation in order to enforce his rights,
(2) Effect of buyer obtaining possession of bill of lading
without honoring draft. — As regard third persons,
however, if the bill of lading provides that the goods are
deliverable to the buyer or to the order of the buyer, or
is indorsed in blank, or is indorsed to the buyer by the
consignee named therein , a purchaser in good faith for
value of 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.
Distinctions in regard to the form
of the bill of lading.

They must here be observed:

(1) If the seller has named the buyer as consignee, the
property has passed to the consignee or at least it
seems to have been so to one who inspects the
document;
(2) If the bill of lading, though naming the seller
as consignee, is indorsed by him to the buyer or
in blank, the possession of the document by the
buyer gives him, if not the actual title, at least
an apparent ownership; and

(3) If the bill of lading names the seller or a

third person as consignee and no endorsement
of the document had been made, possession by
the buyer would not indicate that the buyer had
title.
Where the document gives the buyer apparent
ownership and a third person purchases the
goods relying thereon, it seems clear on broad
principles of justice that since one of two
innocent parties must suffer, he should suffer
whose act has brought about the loss.
Consequently, the seller ought not to be allowed
to recover the goods from the third person
ART. 1504
Unless otherwise agreed, the goods remain
at the seller’s risk until the ownership
therein is transferred to the buyer, but when
the ownership therein is transferred to the
buyer, the goods are at the buyer’s risk
whether actual delivery has been made or
not, except that:
(1) Where delivery of the goods has been
made to the buyer or to a bailee for the
buyer, in pursuance of the contract and the
ownership in the goods has been retained by
the seller merely to secure performance by
the buyer of his obligations under the
contract, the goods are at the buyer’s risk
from the time of such delivery;
(2) Where actual delivery has been delayed
Risk of loss generally attends title.
As a general rule, if the thing is lost by
fortuitous event, the risk is borne by the
owner of the thing at the time of the loss
under the principle of res perit domino.

(1) Where the seller reserves the ownership of

the good merely to secure the performance
by the buyer of his obligations under the
contract, the ownership is considered
transferred to the buyer who, therefore,
assumes the risk from the time of delivery.
(see Lawyers Cooperative Publishing Co. vs.
Tabora, 13 SCRA 762 [1965].)
(2) Where actual delivery had been delayed
through the fault of either the buyer or
seller, the goods are at the risk of the party
at fault with respect to any loss which
Risk of loss by fortuitous event after
perfection but before delivery.

(1) Conflict between Article 1480 and Article

1504. — Under Article 1480, if the thing sold is

lost after perfection of the contract but before
its delivery, that is, even before the ownership is
transferred to the buyer, the risk of loss by
fortuitous event without the seller’s fault is
borne by the buyer as an exception to the rule of
res perit domino. Consequently, the buyer’s
obligation pay the price subsists if he has not yet
paid the same or if he had, he cannot recover it
from the seller although the latter’s obligation to
(2) Solution suggested to avoid conflict. — A
solution has been suggested to avoid the conflict,
to wit: Article 1504 should be restricted in its
application to sale of “goods” as this term is
defined in Article 1636, and Article 1480, to sales
of “things” which cannot be called “goods,” as
for the example, to sales of real estate. This
would make Article 1480 the general rule on risk
of loss and Article 1504, the exception. By this
conclusion, it is claimed, the cardinal rule of
statutory construction that all provisions of a law
should, as much as possible, be given effect is
satisfied; for to say that there is an irreconcilable
conflict between Article 1480 and Article 1504 is
to render either of them useless.

(3) Article 1480 states the correct rule. — It is

submitted that Article 1480 is the correct rule
governing loss of thing sold after the perfection
(a)The opinion of Manresa (an eminent Spanish
commentator on the Spanish Civil Code upon
which our Civil Code is based) that the obligation
of the buyer to pay the price is not extinguished
by the loss of the thing before delivery is the
settled construction of Article 1452 (now Art.
1480.) and this opinion is well known to the Code
Commission which prepared the draft of the Civil
Code.
(b) Article 1480 follows the Roman Law rule “that
risk of the thing sold passes to the buyer even
though the thing has not yet been delivered to the
buyer”;
(c)A reading of Article 1189 in relation to Article
1538 (infra.), shows that Article 1480 is in
consonance with Article 1189 (see Art. 1538.);
(d)Article 1504 cannot be reconciled with Articles
1480 and 1189, unless Article 1504 is applied only
to sale of “goods.” It must be noted, however, that
Article 1480 applies also to sale of fungible goods.
(e) In case of improvement, the rule is that it
should pertain to the buyer. (Art. 1189[5].) This is
a counterpart of the risk which the buyer assumes
for the loss of the thing;
(f) Furthermore, under Article 1537 (infra.), the
fruits pertain to the vendee from the perfection of
the contract. The same right is given to the
vendee under Article 1164 which together with
Articles 1165 and 1262, is referred to in Article
1480 as governing the question being discussed;
(g) Article 1165, paragraph 3, states: “If the
obligor delays, or has promised to deliver the
same thing to two or more persons who do not
have the same interest, he shall be responsible for
any fortuitous event until he has effected the
delivery.”
(h) Article 1262, paragraph 1, provides:
“An obligation which consists in the delivery of a
determinate thing shall be extinguished if it
(4) Contrary view. — On this question, a recognized
authority on Civil Law supports the contrary view as
follows:
“A contrary view to that expressed above, is held by
other writers on the Spanish Civil Code, like Perez and
Alguer, who say: This solution is not absolutely
certain and perhaps the contrary view is more in
harmony with equity and with the nature of reciprocal
obligations.”

To our mind, the latter view is really more logical: the

vendor in the case given, should bear the loss and the
vendee should not be bound to pay the price. The
following arguments may be advanced to support this
view:

(a) It is fundamental in the Civil Code, expressed in

Articles 1477 and 1496, that ownership is transferred
by delivery; hence, before delivery, the vendor owns
the thing and should suffer its loss: res perit domino.
(b) The obligations of vendor and vendee are
reciprocal, and, therefore, one depends upon the
other. If the obligation of the vendor to deliver is
extinguished, the correlative obligation of the vendee
to pay, which depends upon it, cannot remain
subsisting;

(c) Article 1480, paragraph 3, is not an exception but is

an expression of the general rule that the risk is not
imputed to the vendee until after delivery. That
paragraph considers the delivery completed only when
the fungibles have been weighed, counted, or
measured because it is only then that the thing
becomes determinate. Before such completion of
delivery, the vendor bears the risk; and
(5) Legislation necessary to avoid irreconcilable
conflict. — The contrary view is really “more in
harmony with equity” considering that, while the
vendee has a mere contract right to the thing
sold, the vendor has not only the ownership but
also the possession or control of it and even the
power to dispose of it to the prejudice of the
vendee; and having in mind also the reciprocal
character of the contract of sale, the vendor
should, therefore, be the one to shoulder the loss
and not the vendee. But until the law making body
adopts the contrary view, the correct rule, it is
believed, is that contained in Article 1480 under
which the vendee bears the risk of loss, and he is
 Art. 1505
ART. 1505. Subject to the provisions of this
Title, where goods are sold by a person who is
not the owner thereof, and who does not sell
them under authority or with the consent of the
owner, the buyer acquire no better title to the
goods than the seller had, unless the owner of
the goods is by his conduct precluded from
denying the seller’s authority to sell.
Nothing in this title, however, shall affect:
(1) The provisions of any factors’ acts,
recording laws, or any other provision of law
enabling the apparent owner of goods to
dispose of them as if he were the true owner
thereof;
(2) The validity of any contract of sale under
statutory power of sale or under the order of a
court of competent jurisdiction;
(3) Purchases made in a merchant’s store, or in
fairs, or markets, in accordance with the Code
of Commerce and special laws. (n)
Sale by a person not the owner.

It is a fundamental doctrine of law

that no one can give what he has
not or transfer a greater right to
another than he himself has. Sale is
a derivative mode of acquiring
ownership and the buyer gets only
such rights as the seller had. (see
Arts. 1458-1459.) A derivative right
cannot exist higher than its source.
(Reyes vs. Sierra, 73 SCRA 472
[1979].) The exceptions to the rule
are given below.
(1) Where the owner of the
goods is, by his conduct,
precluded from denying the
seller’s authority to sell.

(2) Where the law enables the

apparent owner to dispose of
the goods as if he were the
true owner thereof.

(3) Where the sale is

sanctioned by statutory or
judicial authority.
(4) Where the sale is made at
merchant’s stores, fairs or
markets.
No. 3 of Article 1505 is a case of an
imperfect or void title ripening into
a valid one as a result of some
intervening due causes. The sale is
necessary not only to facilitate
commercial sales on movables but
also to give stability to business
transactions especially in a country
like the Philippines, where free
enterprise prevails, for a buyer
cannot be reasonably expected to
look behind the title of every article
when he buys at a store.
(5) Where the seller has a
voidable title which has not
been avoided at the time of
the sale.

(6) Where seller subsequently

acquires title.
When a person conveys property to
another of which at the time he is not the
owner, his subsequent acquisition of title
validates his previous conveyance. (Llacer
vs. Munoz, 12 Phil. 328 [1908]; Abella vs.
Gonzaga, 56 Phil. 132 [1931]; see Art.
1434.) This doctrine is equally applicable
to conveyance of usufructs as well as to
transfers of full ownership. (Feria vs. Silva,
[C.A.] No. 6151-R, Aug. 10, 1951.)
 ART. 1506
Where the seller of goods has a voidable title thereto, but his title has not been
avoided at the time of the 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.
(n)
Sale by one having a voidable title.

(1)Requisites for acquisition of

good title by buyer.
— If the seller has only a voidable
title to the goods, the buyer
acquires a good title to the goods
provided he buys them: (a) before
the title of the seller has been
avoided; (b) in good faith for
value; and (c) without notice of
the seller’s defect of title. (see
Arts. 1385, 1388.)
(2) Basis of rule.
Article 1506 seems to be predicated on
the principle that where loss has
happened which must fall on one of
two innocent persons, it should be
borne by him who is the occasion of the
loss. It is similar to the rule in P.D. No.
1529 (Property Registration Decree)
referring to an innocent purchaser for
value in good faith (Sec. 51 thereof.)
and to the rule in Act No. 2031
(Negotiable Instruments Law) referring
to a holder in due course to whom a
negotiable instrument is negotiated for
value and in good faith. (see Sec. 57
thereof.)
 ART. 1507
A document of title in which it is stated
that the goods referred to therein will be delivered to
the bearer, or to the order of any person named in
such document is a negotiable document of title. (n)
 Definition of terms.

(1)Document of title to goods.

— Includes any bill of lading, dock
warrant, “quedan,” or warehouse
receipt or order for the delivery of
goods, or any other document used
in the ordinary course of business in
the sale or transfer of goods, as
proof of the possession or control of
the goods, or authorizing or
purporting to authorize the
possessor of the document to
transfer or receive, either by
endorsement or by delivery, goods
represented by such document. (Art.
1636[1].)
(2) Goods.
— Included all chattels personal but
not things in action or money of
legal tender in the Philippines. The
term includes growing fruits or
crops.

(3) Order.
— Relating to documents of title
means an order by endorsement on
the documents.
Nature and function of documents
of title.

(1)Receipts of, or orders upon,

a bailee of goods
represented.
— Documents of title refer to goods
and not to money. They all have this
in common: that they are receipts of
a bailee, or orders upon a bailee. A
different name is given in popular
speech to the document when it is
issued by a carrier and when it is
issued by a warehouseman, but in
substance the nature of the
document is the same in both cases.
(see 2 Williston, op. cit., p. 505.)
(2) Evidence of transfer of title and
possession of the goods and
contract between the parties.
— A document of title is symbol of the
goods covered by it, serving as
evidence of (a) transfer of title and (b)
transfer of possession. It also serves as
an evidence of the (c) contract between
the parties who are bound by its terms.
So far as concerns the transfer of
property between the parties, their
intention would be effectual without
the document, but where third parties’
rights are involved, the form of the
document (i.e., negotiable or non-
negotiable) becomes important.
Most common forms of documents
of title.

There are three most common forms or

documents of title, namely:
(1)Bill of lading.
— It is a contract and a receipt for the
transport of goods and their delivery to
the person named therein, to order, or
to bearer. It usually involves three
persons — the carrier, the shipper, and
the consignee.The shipper and the
consignee may be one and the same
person. Its acceptance generally
constitutes the contract of carriage
even though not signed. Such
instrument may be called a shipping
receipt, a forwarder’s receipt, or receipt
for transportation. The designation,
however, is immaterial (Saludo, Inc. vs.
(2) Dock warrant.
— It is an instrument given by dock
owners to an importer of goods
warehoused on the dock as a
recognition of the importer’s title to
the said goods, upon production of the
bill of lading (see Bouvier’s Law
Dictionary, p. 911.); and

(3) Warehouse receipt.

— a contract or receipt for goods
deposited with a warehouseman
containing the latter’s undertaking to
hold and deliver the said goods to a
specified person, to order, or to bearer.
Quedan is a warehouse receipt usually
for sugar received by a warehouseman.
Classes of documents of titles:

Documents of title may be

either:
(1) Negotiable documents of title or
those by the terms of which the
bailee undertakes to deliver the
goods to the bearer and those by
the terms of which the bailee
undertakes to deliver the goods to
the order of a specified person (Art.
1508.); or
(2) Non-negotiable documents of
title or those by the terms of which
the goods covered are deliverable
to a specified person. (Art. 1511.)