SONGCO v.

SELLNER
1917
FACTS:
- Sellner was the owner of a farm in Pampanga which was contiguous to the farm owned by Songco, both with
considerable quantity of sugar cane to be cut
- Sellner wanted the sugar central nearby to mill his cane but the latter was not sure that it could and would not
promise to take it, so Sellner decided to buy Songcos sugar cane upon finding out that the mill was going to mill
Songcos, expecting to run his own cane at the same time
Another motive in buying Songcos cane was he wanted to get a right of way over Sellners land for conveying
his own sugar to the central
o
- Sellner bought Songcos cane for P12,000, he executed 3 promissory notes of P4000 eachtwo of these were
paid, while the present action is for the recovery of the third
o
- Sellner is now claiming that the promissory note was obtained by means of certain false and fraudulent
representations
ISSUE: WON Songcos exaggerated estimate would constitute false and fraudulent representation NO
HELD:

False representation was allegedly made by Songco with respect to the quantity of uncut cane standing in
the fields when Sellner purchased said cane
Songco estimated that his cane would produce 3,000 piculs of sugar and that Sellner bought the crop
believing the estimate to be substantially correct
It turned out that the crop produced only 2,017 piculs, gross, and after the toll for milling was deducted, the
net left was much less
In the course of negotitiations, Sellner requested Songco to guarantee the quantity which the latter claimed
to be in the fields, but Songco would not do so, he just repeated that he was sure the fields contained the quantity he
estimated but in the end, the harvest fell far short of Songcos estimate
- Shown by the evidence that Songco knew at the time he made the representation in question that he was
greatly exaggerating the probable produce of his fields, and it is impossible to believe that his estimate honestly
reflected his true opinionknew what these fields had been producing over a long period of years and he knew that
harvest of this year would fall far below the amount stated
- Nevertheless the Court is convinced that Sellner was bound and that he must pay the price stipulated
- Representation in question can only be considered matter of opinion as the cane was still standing in the
field, and the quantity of sugar it would produce could not be known with certainty until it should be harvested and
milled
Songco had better experience and better information on which to form an opinion on this question than
Sellner
Sellner could judge with his own eyes as to the character of the cane, and it is shown that he measured the fields
and ascertained that they contained 96 hectares
- A misrepresentation upon a mere matter of opinion is not an actionable deceit, nor is it a sufficient ground for
avoiding a contract as fraudulent
- There is a difference between giving an honest opinion and making a false representation as to what one's real
opinion isbut in this case, no distinction is needed to be drawn
- The law allows considerable latitude to seller's statements, or dealer's talk and experience teaches that it is
exceedingly risky to accept it at its face value
Refusal of the seller to warrant his estimate should have admonished the purchaser that that estimate
was put forth as a mere opinion
- A man who relies upon such an affirmation made by a person whose interest might so readily prompt him to
exaggerate the value of his property does so at his peril, and must take the consequences of his own imprudence
- It is not every false representation relating to the subject matter of a contract which will render it voidmust
be as to matters of fact substantially affecting the buyer's interest, not as to matters of opinion, judgment,
probability, or expectation
- When the purchaser undertakes to make an investigation of his own, and the seller does nothing to prevent
this investigation from being as full as he chooses to make it, the purchaser cannot afterwards allege that the
seller made misrepresentations
- Where one party to a contract, having special or expert knowledge, takes advantage of the ignorance of
another to impose upon him, the false representation may afford ground for relief but in this case, the fact that
Songco was an experienced farmer, while Sellner (as he claims) was a mere novice would bring the case within
the exception

GOCHANGCO v. DEAN

1925
FACTS:
The plaintiffs had purchased a land of the Pasay Estate by installments.
The defendant was the owner of two parcels of land situated in Masbate.
The plaintiffs and defendant agreed to exchange their respective properties, but before the final
execution of the contract of exchange, the plaintiff Gochangco went to Masbate to make an
examination of the parcels of land offered for exchange by the defendant.
The contract of exchange was later executed.where the defendant stated, among other things,
that: "It is also declared that the said described property is sold with all coconut trees growing on
it, and I declared that I believe there are more than 6,000 coconut trees so growing, together with
any and all improvements of any kind whatsoever existing on the said land including all movable
goods, chattel, etc., found thereof."
Gochangco alleges that Dean made false and fraudulent representations as to the existence of
6,000 coconut trees on his lands in Masbate offered for exchange.
ISSUE: Whether or not there Dean made false and fraudulent rpresentations.- NO
HELD:
Gochangcos allegation was not proven. It does not appear in the record that the defendant
deliberately violated the truth in stating his belief that there were such a number of coconut trees
on said lands.
Furthermore, it was shown that the plaintiff viewed the lands and that he himself estimated that
there were there more than six thousand coconut trees.
The facts herein proven, considered in the light of the provisions contained in article 1484 of the
Civil Code, made applicable to this case by article 1541 of said Code, prevent us from holding the
action brought by the plaintiffs to be of any merit.
They have not established their alleged right to the judgment prayed for in their complaint.
SIDE ISSUE:
As to the cross-complaint and counterclaim of the defendant, we find that in the deed Exhibit 1
executed by the plaintiffs in favor of the defendant, the former agreed to reimburse the latter what
he might pay in connection with perfecting his title to the property in Pasay, exchanged for that of
the defendant in Masbate, provided that the sum thus spent should exceed P1,500.
This was admitted by the plaintiffs in their reply to the cross-complaint and counterclaim of the
defendant, where they also admitted the fact that for perfecting his title to the property, the
defendant had spent the total sum of P1,914; there being, therefore, an excess of P414 which the
plaintiffs are under obligation to pay unto the defendant.

PHIL. MANUFACTURING CO. V. GO JOCO

1926
Facts:

Oct 25, 1922, Go Joco sold to Phil Manufacturing Co. (PMC) 500 tons of Coconut oil for P27/kilo. (1 st
Contract).
o Warranty: State or class of the oil: Not more than 5% Free Fatty Acid (F.F.A) PMC's secretary
and chemist, Mason, took samples of the oil from said tanks for analysis.
o He advised the defendant that he would analyze the samples and that if the result was
satisfactory, payment would be made at once.
o Later in the day the plaintiff gave the defendant its check for P137,500, the full amount of the
contract purchase price.
Nov. 17, 1922, the plaintiff sold the oil by contract in writing to the Portsmouth Cotton Oil Refining
Corporation at the price of $7.50, United States currency, per 100 pounds. (2 nd Contract)
o Coconut Oil bases 5 per cent free fatty acid, Maximum 7 per cent free fatty acid shall be fair
average of the season of the country in which it is pressed, and shall be sold on basis 5 per cent
free fatty acid, one per cent moisture and impurities;
Nov. 27, 1922, the oil was drawn from the tanks by the plaintiff and brought aboard the tank steamer
Acme for shipment to the Portsmouth Cotton Oil Refining Corporation at Norfolk, Virginia, together
with other oil manufactured by the plaintiff and by the Philippine Vegetable Oil Company
o Whole shipment amounting to approximately 901 long tons.
Portsmouth Cotton Oil Refining Corporation refused to accept the oil on the ground that it was
contaminated with cottonseed oil.
In Arbitration, Proctor and Gamble eventually bought the oil.
PMC filed a civil suit for damages against Go Jocco PMCs Argument: Even though the price
at which the oil was sold to Proctor & Gamble Co. was considerably higher than the price agreed upon
with the Portsmouth the expenses for rend of cars, transportation, brokerage, etc., greatly exceeded the
differences and t that it suffered a loss of P21,263.04. Go Joccos Argument: General denial and Special
Defenses:
Under the provisions of paragraph 1 of article 336 of the Code of Commerce, the plaintiff had no
right of action having examined the oil at the time of its delivery.
The plaintiff had lost its right of action by failing to make its claim within thirty days immediately
following the delivery.
That the loss plaintiff alleged to have suffered was due to its own fault.
That the coconut oil sold and delivered to the plaintiff by the defendant was of the quality called for in
the contract of sale.
That the oil having been delivered to, tested, accepted and paid for by the plaintiff, the respective
obligations of the parties were then and there terminated and extinguished.
TC: Absolve
CFI: Affirm (Insufficiency of Evidence + PMC produced Kapok oil while Go Jocco didnt deal such oil.)
Issue: WON Go Jocco is liable for the damages (P21k) of PMC NO
Held:
The lower courts did not err in its appreciation of the evidence.
But assuming that such contamination existed, we would still be of the opinion that the plaintiff has
established no cause of action.
o The comparatively small quantity of kapok oil alleged to have been mixed with the coconut oil
can only be regarded as an impurity and did not change the essential character of the merchandise
The contract of sale between the plaintiff and the defendant contains no express warranty against
impurities aside from the stipulation that not more than 5 per cent of free fatty acid would be allowed.

 This is, therefore, not an action on an express warranty.

There being no express warranty and the plaintiff having lost its right of action on the implied
warranties as to the quality of the merchandise, it must now necessarily base its cause of action on fraud
under article 344 of the Code which reads as follows:
o Commercial sales shall not be rescinded by reason of lesion; but the contracting party who
acted with malice or fraud, in the contract or in its fulfillment, shall indemnify for loss and damage, without
prejudice to the criminal action which may be proper.
Law on the subject of frauds with reference to sales is practically the same in this jurisdiction as in the
United States:
o Mechem: The concealment which shall amount to a false representation is that only which may
properly be designated as active. Mere passive non-disclosure which, as been seen, may suffice
to vitiate a contract uberrimae fidei, will not be sufficient here; 'there must be an active attempt to
deceive, either by a statement which is false or which is true so far as it goes, but is accompanied
with such a suppression of facts as to convey a misleading impression. "There must be some
active misstatement of fact, or, at all events, such a partial and fragmentary statement of fact as
that the withholding of that which is not stated makes that which is stated absolutely false."
An intention to deceive or mislead the other party to his prejudice is an essential element of the fraud
here considered.
It is true that such an intention may sometimes be imputed upon the principle that the party must be
presumed to intend the necessary consequences of his own acts or conduct, and need not necessarily be
proven by direct evidence.
At the time the sale was made, kapok oil commanded a higher price in the market than did coconut oil
and the defendant may well have been under the impression that a slight admixture of kapok oil did not
substantially impair the general market value of the oil purchased.
There is NOTHING in the evidence to show that for ordinary purposes, the coconut oil
suffered any material impairment in value from the mixture and it is to be observed that the defendant was
not advised of the fact that the oil was sold to the Portsmouth Cotton Oil Refining Corporation under an
express warranty against impurities and possibly for a special purpose.
o That it was still of good merchantable quality clearly appears from the fact that it was bought by
Proctor & Gamble Co. at current market prices.
o PMC, before purchasing, was given full opportunity to examine the oil and actually did so, thus,
the evidence is not sufficient to overcome the presumption of good faith and to establish fraud on
the part of the vendor.
In commercial sales, the fact that the vendor does not volunteer detailed statements of all he knows,
whether important or not, in regard to the goods sold by him, is not fraud per se.

Power Commercial and Industrial v. CA

1997
FACTS:
Power Commercial & Industrial Devt Corp (PCI), a manufacturer of asbestos, bought a 612- sqm
parcel of land in Makati from Spouses Quiambao.
Jan 31, 1979: they executed the contract of sale, wherein the parties agreed that PCI would pay
Quiambao P108K as down payment, and the balance of P295K would be paid upon the
execution of the deed of transfer of the title over the property; and that PCI would assume the
existing mortgage of the land amounting to P79,145.77.
June 1, 1979: Quiambao mortgaged the land to PNB again to guarantee a P145K loan, which
PCI agreed to assume the payment thereof. June 26, 1979: PCI and Quiambao executed a Deed
of Absolute Sale with Assumption of Mortgage, wherein the property was sold, transferred, and
conveyed to PCI; with the condition that PCI assumes to pay in full the entire amount of P145K to
PNB.
However, on Feb 15, 1980, PNB informed Quiambaos that since PCI failed to submit the
application papers for the assumption of mortgage, such application was considered withdrawn
and the outstanding balance was deemed due and demandable, to be paid within 15 days.
PCI then made payments of the loan to PNB on June (P41,880.45) and December (P20,283.14),
with a letter attached requesting that the mortgage and title be transferred in PCIs name so that
they may be able to take physical possession and clear the people occupying the property.
PNB replied, saying that the accounts were overdue, and that would have to be made in order to
place the account in current form.
PCI filed rescission case against Sps. Quiambao before RTC-Pasig, and then also amended the
complaint to implead PNB after the bank refused to return the payments of the loan (since the
assumption of mortgage was never approved) and foreclosed the mortgage on the property.
RTC ruled in favor of PCI, saying that the failure of the Quiambaos to deliver actual possession
to PCI entitled the latter to rescind the sale, and in view of such failure and of the denial of the
assumption of mortgage, PNB was obliged to return the payments made by PCI.
CA reversed the trial court, saying that there was no substantial breach to justify rescission of
the contract or the return of the payments, because the deed of sale did not obligate the former to
eject the lessees from the land in question as a condition of the sale, nor was the occupation
thereof by said lessees a violation of the warranty against eviction.
SC affirmed this CA decision.
ISSUES / HELD / RATIO:
1. WoN there was a substantial breach of an implied warranty? NO

There was no condition for the Quiambaos to eject the lessees from the lot and deliver actual and
physical possession to PCI.
The deed of sale only makes reference to the agreement of Quiambao to defend PCIs title and
peaceful possession against any claims of any and all third persons.
In fact, the general manager of PCI asked for the omission of the guarantee of the ejectment of
the occupants because of the presence of such agreement.
If the parties intended to impose on respondent spouses the obligation to eject the tenants from
the lot sold, it should have included in the contract a provision to that effect.
Absent such stipulation, there was no intention to make nonfulfillment as a ground for rescission.
In addition, PCI was aware of the presence of the tenants at the time it entered into the sales
transaction, and PCIs counsel even undertook the job of ejecting the occupants.
Also, there was an effective symbolic delivery, as the transfer of ownership and control was
effected through the execution of the deed of sale, a public document. Control was manifested
when PCI filed the ejectment suit, as it signified that PCI, as the new owner, intended to obtain for
itself and to terminate said occupants actual possession thereof. Prior physical delivery or


1.
2.
3.
4.

possession is not legally required and the execution of the deed of sale is deemed equivalent to
delivery.
A breach of this warranty requires the concurrence of the following circumstances:
The purchaser has been deprived of the whole or part of the thing sold;
This eviction is by a final judgment;
The basis thereof is by virtue of a right prior to the sale made by the vendor; and
The vendor has been summoned and made co-defendant in the suit for eviction at the instance of
the vendee.
Absent any proof that these requisites have been satisfied, no breach of warranty against eviction
can be appreciated.
The presence of lessees does not constitute a deprivation of the control over the property. The
deprivation occurred upon the foreclosure of the mortgage, but that was due to PCIs fault in not
paying the loan.

2. WoN there was a mistake in payment by PCI to PNB? NO

Solutio indebiti only applies where:
1. A payment is made when there exists no binding relation between the payor,who has no duty to
pay, and the person who received the payment, and
2. The payment is made through mistake, and not through liberality or some other cause.

Condition 1 does not exist because PCI and Quiambao agreed to abide by the requirements of
PNB in connection with the real estate mortgage.
Therefore, it cannot be said that it did not have a duty to pay PNB the amortization on the
mortgage.
Also, PCI insists that its payment of the amortization was a mistake because PNB disapproved its
assumption of mortgage.
But even if PCI was a third party in regard to the mortgage of the land purchased, the payment of
the loan by PCI was a condition clearly imposed by the contract of sale.
This fact alone disproves that there was a mistake in payment.
On the contrary, such payments were necessary to protect PCIs interest as a the buyer(s) and
new owner(s) of the lot.

ENGINEERING & MACHINERY CORPORATION vs. CA and PONCIANO L. ALMEDA

1996
Facts:
Sept. 10, 1962 - Engineering & Machinery Corp (EMC) undertook to fabricate, furnish, and install the
air-conditioning (A/C) system in Almeda's building for P210k. The system was completed in 1963 and
accepted by Almeda who paid the contract price in full.
Sept. 2, 1965 - Almeda sold the building to the National Investment and Development Corp (NIDC), but
the sale was eventually judicially rescinded because of NIDC's breach.
Almeda reacquired possession in 1971. He learned from NIDC employees of the defects of the A/C
system of the building. He commissioned Engr. Sapico to render a technical evaluation. The report
concluded the system was not capable of maintaining the desired temp. Almeda sued for damages.
EMC moved to dismiss, alleging the prescriptive period of 6 months had lapsed pursuant to CC156667, in relation to CC1571 (responsibility of vendor for hidden faults/defects).
Almeda: it was a contract for a piece of work, so the period is 10 years (CC1714).o EMC: CC1571
providing for a 6-month prescriptive period is applicable to a contract for a piece of work by virtue of
CC1714, which provides that such a contract shall be governed by the pertinent provisions on warranty
of title and against hidden defects and the payment of price in a contract of sale.
(EMC's motion) TC denied the motion to dismiss. EMC reiterated its claim of prescription as an
affirmative defense in its answer to Almeda's complaint.
(Almeda's complaint) TC ruled that the complaint was filed within the 10-year period although the
contract was for a piece of work. EMC committed breach in deviating from the plans, thus reducing the
operational effectiveness of the system. CA affirmed.
Issue 1: W/N Almeda's complaint was barred by prescription NO.
Held 1:
Clearly, the contract is one for a piece of work. EMC's business and particular field of expertise is the
fabrication and installation of such systems as ordered by customers. The obligations of a contractor
for a piece of work are in CC1714-15.
The provisions on warranty against hidden defects mentioned in CC1714 are in CC1561 and 1566.
The remedy against violations of the warranty against hidden defects is either to withdraw from the
contract (redhibitory action) or to demand a proportionate reduction of the price (accion quanti
minoris), with damages in either case.
Villostas v. CA: While CC1571 provides for a prescriptive period of 6 months for a redhibitory action, a
cursory reading of the 10 preceding articles to which it refers will reveal that said rule may be applied
only in case of implied warranties; and where there is an express warranty in the contract, the
prescriptive period is 1) the one specified in the express warranty, and 2) in the absence of such
period, the general rule on rescission, (4 years - CC1389), shall apply.
Based on the above, it would seem that the period had lapsed. However, a close scrutiny of the
complaint filed in the trial court reveals that the original action is not really for enforcement of the
warranties against hidden defects, but one for breach of contract. The applicable provision is CC1715.
Since the provision does not provide for a prescriptive period, the general law on prescription
(CC1144) applies. An action upon a written contract prescribes in 10 years. Since the governing
contract was executed on September 10, 1962 and the complaint was filed on May 8, 1971, it is clear
that the action has not prescribed.
Issue 2: W/N acceptance of the work relieves the contractor of liability for any defect NO.
Acceptance the work does not, ipso facto, relieve the petitioner from liability for deviations from and
violations of the written contract, as the law gives him 10 years within which to file an action based on
breach thereof. CA found that the defect in the installation was not apparent at the time of the delivery
and acceptance of the work, considering that Almeda is not an expert to recognize the same. From the
very nature of things, it is impossible to determine by the simple inspection of A/C system installed in
an 8-floor building whether it has been furnished and installed as per agreed specifications.
Held: Petition denied; CA decision affirmed.

NUTRIMIX FEEDS CORPORATION v. CA and SPOUSES EVANGELISTA

2004 Hidden Encumbrances or Defects

Facts:
On April 5, 1993, the Spouses Efren and Maura Evangelista started to directly procure various
kinds of animal feeds from Nutrimix Feeds Corporation (NFC).
NFC gave the spouses a credit period of thirty to forty-five days to postdate checks to be issued
in payment for the delivery of the feeds.
The accommodation was made apparently because of the company presidents close friendship
with Eugenio Evangelista, the brother of respondent Efren Evangelista.
The various animal feeds were paid and covered by checks with due dates from July 1993 to
September 1993. Initially, the respondents were good paying customers. In some instances,
however, they failed to issue checks despite the deliveries of animal feeds which were
appropriately covered by sales invoices.
Consequently, the respondents incurred an aggregate unsettled account with the petitioner in the
amount of P766,151.00.
When the above-mentioned checks were deposited at the NFCs depository bank, the same
were, consequently, dishonored because respondent Maura Evangelista had already closed her
account. NFC made several demands for the spouses to settle their unpaid obligation, but the
latter failed and refused to pay their remaining balance with the petitioner.
NFC filed a complaint for sum of money and damages with a prayer for issuance of writ of
preliminary attachment. The spouses contended that the sudden and massive death of their
animals was caused by the contaminated products of the petitioner, the nonpayment of their
obligation was based on a just and legal ground. The spouses filed a complaint for damages for
the untimely and unforeseen death of their animals supposedly effected by the adulterated animal
feeds the petitioner sold to them.
July 26, 1993, three various kinds of animal feeds, numbering 130 bags, were delivered to the
residence of the respondents in Sta. Rosa, Marilao, Bulacan.
The deliveries came at about 10:00 a.m. and were fed to the animals at approximately 1:30 p.m.
at the respondents farm in Balasing, Sta. Maria, Bulacan. At about 8:30 p.m., respondent Maura
Evangelista received a radio message from a worker in her farm, warning her that the chickens
were dying at rapid intervals. When the respondents arrived at their farm, they witnessed the
death of 18,000 broilers, averaging 1.7 kilos in weight, approximately forty-one to forty-five days
old. Efren Evangelista suffered from a heart attack and was hospitalized as a consequence of the
massive death of their animals in the farm.
Samples of the feeds were sent for testing and yielded positive results to the tests for
COUMATETRALYL Compound, the active component of RACUMIN, a brand name for a
commercially known rat poison.
TC: in favor of NFC - the Court cannot sustain the Evangelistas contention that Nutrimix is liable
under Articles 1561 and 1566 of the Civil Code governing hidden defects of commodities sold.
As already explained, the Court is predisposed to believe that the subject feeds were
contaminated sometime between their storage at the bodega of the Evangelistas and their
consumption by the poultry and hogs fed therewith, and that the contamination was perpetrated
by unidentified or unidentifiable ill-meaning mischief-maker(s) over whom Nutrimix had no control
in whichever way.
All told, the Court finds and so holds that for inadequacy of proof to the contrary, Nutrimix was not
responsible at all for the contamination or poisoning of the feeds supplied by it to the Evangelistas
which precipitated the mass death of the latters chickens and hogs. By no means and under no
circumstance, therefore, may Nutrimix be held liable for the sundry damages prayed for by the
Evangelistas in their complaint .
CA: reversed and dismissed - ruled that the respondents were not obligated to pay their
outstanding obligation to the petitioner in view of its breach of warranty against hidden defects.
The CA gave much credence to the testimony of Dr. Rodrigo Diaz, who attested that the sample
feeds distributed to the various governmental agencies for laboratory examination were taken
from a sealed sack bearing the brand name Nutrimix. The CA further argued that the declarations

of Dr. Diaz were not effectively impugned during cross-examination, nor was there any contrary
evidence adduced to destroy his damning allegations.
SC: reversed CA and reinstated TC ruling
The provisions on warranty against hidden defects are found in Articles 1561 and 1566 of the
New Civil Code of the Philippines.
A hidden defect is one which is unknown or could not have been known to the vendee. Under the
law, the requisites to recover on account of hidden defects are as follows:
o (a) the defect must be hidden;
o (b) the defect must exist at the time the sale was made;
o (c) the defect must ordinarily have been excluded from the contract;
o (d) the defect, must be important (renders thing UNFIT or considerably decreases
FITNESS);
o (e) the action must be instituted within the statute of limitations.
To be able to prove liability on the basis of breach of implied warranty, three things must be
established by the respondents:The first is that they sustained injury because of the product;the
second is that the injury occurred because the product was defective or unreasonably unsafe;
and finally, the defect existed when the product left the hands of the petitioner.
A manufacturer or seller of a product cannot be held liable for any damage allegedly caused by
the product in the absence of any proof that the product in question was defective.
The defect must be present upon the delivery or manufacture of the product; or when the product
left the sellers or manufacturers control; or when the product was sold to the purchaser; or the
product must have reached the user or consumer without substantial change in the condition it
was sold.
Tracing the defect to the petitioner requires some evidence that there was no tampering with, or
changing of the animal feeds.
The nature of the animal feeds makes it necessarily difficult for the respondents to prove that the
defect was existing when the product left the premises of the petitioner.
NFC delivered the animal feeds, allegedly containing rat poison, on July 26, 1993; but it is
astonishing that the respondents had the animal feeds examined only on October 20, 1993, or barely
three months after their broilers and hogs had died.
During the meeting with Nutrimix President Mr. Bartolome, the respondents claimed that their
animals were plagued by disease, and that they needed more time to settle their obligations with the
petitioner. It was only after a few months that the respondents changed their justification for not paying
their unsettled accounts, claiming anew that their animals were poisoned Spoused failed to prove that the
NFC is guilty of breach of warranty due to hidden defects.

De Guzman v. Toyota Cubao

2006
Facts:

November 27, 1997 Petitioner Carlos De Guzman purchased from respondent a brand new white Toyota
Hi-Lux 1996 model, in the amount of P508,000.
November 29 (two days later) vehicle was delivered
October 19, 1998 Petitioner demanded replacement of the engine of the vehicle because it developed a
crack after traversing Marcos Highway during heavy rain.
Petitioner asserted that respondent should replace the engine with a new one based on an implied warranty.
Respondent countered that the alleged damage on the engine was not covered by a warranty.
October 20, 1999 Petitioner filed a complaint for damages at the RTC; respondent moved to dismiss on
ground that the action has prescribed under Art 1571, which provided a 6 month prescription from date of
sale or delivery.
RTC granted respondents motion, and dismissed the complaint.
Thus, this petition for review on certiorari, praying for either the replacement of the subject vehicle with a
brand new one or at least replace the engine + 200k moral damages + 200k exemplary + 200k attys fees.

Issue WON De Guzmans cause of action prescribed with his filing of the case 19 months after the sale and/or
delivery
YES, the action is barred by prescription because the complaint was filed more than 6months after the sale
and/or delivery of the vehicle.
Held

Since no warranty card or agreement was attached to the complaint, the contract of sale of the subject pick
up carried an implied warranty that it was free from any hidden faults or defects, or any charge or
encumbrance not declared or known to the buyer.
The prescriptive period thereof is six (6) months under the Civil Code (Art. 1571).
Petitioner tried justifying his cause of action by saying it has not yet prescribed because the applicable law is
Art 169 of The Consumer Act of the Philippines, and not Art 1571 of the Civil Code.
Moreover, the cause of action has not prescribed because action was based on a quasi-delict, which
prescribes in 4 years.
Petitioners argument is erroneous. Article 1495 of the Civil Code states that in a contract of sale, the
vendor is bound to transfer the ownership of and to deliver the thing that is the object of sale. The pertinent
provisions of the Code provide remedies of a buyer against a seller on basis of hidden defects:
Art 1561 The vendor shall be responsible for warranty against the hidden defects which the thing sold
may have, should they render it unfit for the use it was intended, or should they diminish the fitness for such
use...
Art 1566 The vendor is responsible to the vendee for any hidden faults or defects in the thing sold, even
though he was not aware thereof (unless otherwise stipulated)
Art 1571 Actions arising from the preceding ten articles shall be barred 6 months from the delivery of the
thing sold
o In the absence of an existing express warranty on the part of the respondent, as in this case, the
allegations in petitioners complaint for damages were clearly anchored on an implied warranty that
the engine of the vehicle which respondent had sold to him was not defective. By filing this case,
petitioner wants to hold respondent responsible for breach of implied warranty for having sold a
vehicle with defective engine. Such being the case, petitioner should have exercised this right
within 6 months from the delivery of the thing sold.
o Since petitioner filed the complaint on April 20, 1999, or more than 19 months counted from
November 29, 1997 (the date of the delivery of the motor vehicle), his cause of action had become
timebarred.
o Even if the complaint is made to fall under The Consumer Act, the same should still be dismissed
because the prescriptive period for implied warranty thereunder, which is 1 year, had likewise
lapsed. Petition DENIED for lack of merit.

RODRIGUEZ v. FINDLAY
1909
Facts:
Rodriguez is the owner of the freight ship Constancia, a vessel currently under construction and
designated for coastwise trade in the Philippines.
On 19 September 1907, Rodriguez entered into a contract of sale with Findlay & Co. through the
agent William Swann, a construction engineer and naval architect and a long time employee of
the company. In the agreement, Rodriguez agreed to purchase certain machinery from Findlay to
be placed in the vessel. The point of contention in this case is the specifications of the brass
propeller.
The contract further stated:
"One brass propeller of 8' diameter and suitable pitch for an expected speed of ship about 9 12 knots.
*******"The whole to be suitable for a wooden ship of 150 ft. long by 24 ft. beam
and 14 ft. depth, as per plan supplied by Sr. Juan Rodriguez."
Prior to the written agreement of the parties, Swann visited the shipyard numerous times to
determine the kind and nature of the machine suitable for the ship being built.
Rodriguez stated the speed necessary that the Constancia should have in order to be
available as a coastwise vessel, and left the kind, nature, and construction of the
machinery to the greater knowledge and experience of Swann.
During the course of the negotiations and before the said contract was entered into, Rodriguez
delivered to Swann a plan of the vessel.
Thereafter, Swann delivered to Rodriguez a plan of the entire vessel, showing the machinery
placed therein, the length and breadth of the hull, its general outline and the number of feet of
water which it drew.
During the process of manufacturing the propeller, Findlay discovered that the 8 in diameter
brass propeller would not be able to generate the specified speed so Findlay asked Rodriguez if
he could instead place a 10 propeller.
Rodriguez disagreed with the proposal since a bigger propeller will not fit in the structure of the
vessel.
Upon the trial of the ship, after the installation of its machinery, it was found that all of the
machinery worked well except the propeller. This, instead of giving the ship a speed of about 9
12 knots an hour, gave a speed of less than 7 knots an hour. Furthermore, Findlay failed to
deliver some goods it promised to give to Rodriguez.
Rodriguez instituted a claim of damages for the damage it sustained due to Findlays breach of
contract.
Lower Court: The court ruled in favor of Findlay awarding it the amount of P9,216.60 which was
the unpaid balance of Rodriguez for the machineries installed. No findings as to the breach of
contract by Findlay.
Issue: WON Findlay is also required to meet the speed requirements of the ship. YES. Therefore,
Findlay is liable to pay damages.
Held:
1. The language is without ambiguity. The defendant agrees therein to furnish "One brass propeller of 8'
diameter and suitable pitch for an expected speed of ship about 9 12 knots;" and "The whole to be
suitable for a wooden ship 150 ft. long by 24 ft. beam and 14 ft. depth, as per plan supplied by Sr. Juan
Rodriguez."
2. Swann was a naval architect and marine engineer of long experience and the general details relative to
the kind and character of the machinery were left to the defendant. The thing mainly insisted upon by
Rodriguez was the result that should be produced. Rodriguez placed the condition only that it should
produce a certain result when attached to the ship Constancia.

3. Speed being so important in a vessel carrying freight in competition with other vessels having a speed
of 912 knots an hour, the parties placed in the contract a specification by which this vessel should receive
machinery of such a character that it would be able to compete with other vessels in a similar occupation.
These specifications required that the vessel should have a speed of about 9 12 knots per hour and that
the machinery furnished for the vessel should be arranged to that end, particularly the propeller.
4. The contention that the reason why the vessel did not have a speed of 9 12 knots an hour after the
installation of the machinery was because the propeller was, by the construction of the vessel, forced to
work in a position where it could not display its properties adequately has no merit. Moreover, the fact that
they used mathematical computations to make sure that the propeller will meet the standards set would
also not suffice. The agreement was clear and unambiguous that the propeller must be able to meet the
required speed of 9 12 knots per hour. For not meeting the set standards, Findlay is in breach of the
contract.
5. In an action against a manufacturer or dealer for a breach of warranty upon a sale of goods,
which he knew at the time of the sale were intended to be used for a particular purpose, the
measure of damages is not limited to the difference in value of the goods as warranted, and as
they prove to be, as in cases where like articles are sold as merchandise for general purposes;
but profits lost and expenses incurred, because of the breach, may be recovered.

The losses and damages for which a creditor in good faith is liable are those foreseen, or which
may have been foreseen, at the time of constituting the obligation, and which may be a necessary
consequence of its nonfulfillment. (Art. 1107, Old Civil Code.)

Due to the award of damages prayed for, Rodriguez should only pay Findlay the amount
P5,213.54, the difference of the unpaid price of the machinery and the award of damages
(P10,199.35 P4985.81).This case predated the NCC. Nonetheless, Findlay is liable to
Rodriguez because it breached the contract of sale they entered into. Rodriguez gave
specifications during their contract negotiations as to the speed requirement of the boat that
should be met by the brass propeller. Findlay was not able to meet such requirement and
therefore liable for having breached the warranty as to fitness of the propeller.

Spouses Torcuator v. Bernabe

2005
FACTS:
Spouses Salvador purchased a lot in Ayala Alabang Village subject to the condition that no lot
may be resold by the buyer unless a residential house has been constructed thereon.
Spouses Salvador sold the land to spouses Bernabe but in light of the said condition, the former
executed a special power of attorney to authorize the latter to construct the house and transfer
the property in their name.
The Bernabes, without making improvements, sold the land to spouse Torcuator and agreed that
a new deed of sale and irrevocable SPA to construct the house from Salvador to Torcuators shall
be made.
But the deed of sale was not consummated nor was payment effected. Bernabe sold it to
Angeles, brother in law.
Torcuators filed for specific performance or rescission with damages.
The trial court denied petitioners' complaint on three (3) grounds, namely:
o (1) the alleged nullity of the contract between the parties as it violated Ayala Corporation's
condition that the construction of a house is a prerequisite to any sale of lots in Ayala
Alabang Village;
o (2) non-payment of the purchase price; and
o (3) the nullity of the contract as it called for payment in United States Dollars. Court of
Appeals added a fourth basis for denying petitioners' appeal and that is the alleged nullity
of the agreement because it deprived the government of taxes.
Issue: (1) WON the vendee is obligated to pay the price before transfer- Yes
Held:
(1) This is a contract to sell.
Firstly, the agreement imposed upon petitioners the obligation to fully pay the agreed purchase
price for the property.
Petitioner Mario Torcuator acknowledged this fact when he testified that the deed of sale and
original special power of attorney were only to be delivered upon full payment of the purchase
price.
The records are bereft of any indication that petitioners ever attempted to tender payment or
consign the purchase price as required by law.
Mere sending of a letter by the vendee expressing the intention to pay without the accompanying
payment is not considered a valid tender of payment.
Consignation of the amount due in court is essential in order to extinguish the obligation to pay
and oblige the vendor to convey title.
Even assuming that the agreement was a contract of sale, respondents may not be compelled to
deliver the property and execute the deed of absolute sale; tender of payment and consignation is
needed.
Secondly, the parties clearly intended the construction of a residential house onthe property as
another suspensive condition which had to be fulfilled. If it was a contract of sale, the special
power of attorney would have been entirely unnecessary as petitioners would have had the right
to compel the Salvadors to transfer ownership to them.
Thirdly, there was neither actual nor constructive delivery of the property to petitioners. Taken by
itself, in fact, the special power of attorney can be interpreted as tied up with any number of
property arrangements, such as a contract of lease or a joint venture.
SPA and summary agreement executed in favor of Torcuators by the Salvadors does not
constitute as 1403 (E) of the Civil Code on Statute of Frauds concerning leases for longer than 1

year or sale of real property.

The special power of attorney does not contain the essential elements of the purported contract
and, more tellingly, does not even refer to any agreement for the sale of the property.
In any case, it was rendered virtually inoperable as a consequence of the Salvadors' adamant
refusal to part with their title to the property.
The summary of agreement, on the other hand, is fatally deficient in the fundamentals and
ambiguous in the rest of its terms; unclear purchase price and uncertain payment of taxes.
Be that as it may, considering our ruling that the agreement was a contract tosell, respondents
were not obliged to convey title to the property before the happening of two (2) suspensive
conditions, namely: full payment of the purchase price and construction of a residence on the
property.
They were acting perfectly within their right when they considered the agreement.

Side issues:
Petitioner condition of construction before selling not submitted as evidence.
The fact that petitioners agreed to construct a residential house on the property in the name of
the Salvadors further proves that they knew that a direct sale to them of a vacant lot would
contravene the condition imposed by Ayala Corporation on the original buyers of lots in Ayala
Alabang Village.
Hence, they agreed on the elaborate plan whereby the Salvador spouses, in whose names the
property was registered, would execute a special power of attorney in favor of petitioners
authorizing the latter to construct a residential house.
Morover, it was annotated in back of the title which was submitted as evidence.
Transaction did not offended good customs and morals, as TC and CA upheld, since the
condition of construction under deed of sale from Ayala before selling does not require the
construction by the original lot buyers himself. Since contract to sell, no transfer still.
Non-payment of capital gain tax is not an issue since contract to sell, no transfer of ownership.

BARENG v. CA
1960
Petitioner: Vicente BarengRespondents: CA, Patrocinio Alegria and Agustin Ruiz
Facts:
Nov. 29, 1951 Bareng purchased from Alegria the cinematographic equipment installed at the
Pioneer (now Rosamil) Theater in Laoag, Ilocos Norte for P15K, P10K of which was paid and for the
balance, Bareng signed 4 promissory notes falling due on the following dates: Dec. 15, 1951 P1K;
Feb. 15, 1952 P1.5K; Mar. 15, 1952 P1.5K; and April 1952 P1K.
First PN was duly paid.
Feb. 12, 1952 Ruiz informed Bareng that he was a co-owner of the equipment; several days
thereafter, Ruiz sent Bareng a telegram instructing him to suspend payments to Alegria as he was not
agreeable to the sale.
Alegria sought to collect upon the second PN but Bareng refused to pay. Only P400 was paid on the
second PN and thereafter, Bareng refused to make any more payments to Alegria until the latter had
settled his dispute with Ruiz.
Mar. 31, 1952 Ruiz filed a suit against Alegria and Bareng for his share in the price of the equipment.

May 21, 1952 Alegria and Ruiz reached a compromise; Aegria recognized Ruiz as co-owner and
promised to pay him 2/3 of whatever amount he could recover from the latter.
May 28, 1952 Alegria sued Bareng for P13.5K, the unpaid balance.
Barengs answer only P3.6K had not been paid; prayed for the rescission of the sale for supposed
violation by Alegria of certain express warranties as to the quantity of equipment and asked for
payment of damages for alleged violation of warranty of title.
Lower court decision Alegria and Ruiz are co-owners and dimissed the civil case without prejudice to
the co- owners filing another action against Bareng for the balance.
CA decision reversed; Bareng was ordered to pay Alegria P3.6K plus legal interest; Alegria was
ordered to pay Ruiz 2/3 of the total amount he would recover from Bareng.

Issue: WON the vendee (Bareng) has the right to suspend payment.
Held:

Yes. The right of the vendee to suspend payment of the price of the thing sold in the face of any
danger that he might be disturbed in its possession of ownership is conferred by Art. 1590, CC.
Bareng had the right to suspend payment of the balance of the price of the equipment to his vendor,
Alegria, from the time he was informed by Ruiz of the latter's claims of co-ownership thereof,
especially upon his receipt of Ruiz' telegram wherein the latter asserted that he was not agreeable to
the sale.
Nevertheless, said right of Bareng ended as soon as "the vendor has caused the disturbance or
danger to cease".
Alegria had caused the disturbance or danger to Bareng's ownership or possession to cease when he
(Alegria) reached a compromise with Ruiz in the civil case whereby Ruiz expressed his conformity to
the sale to Bareng, subject to the payment of his share in the price by Alegria.
Bareng cannot claim that he was not aware of this compromise agreement between the two owners,
because he was a party-defendant in the civil case.
From the time Alegria and Ruiz reached this settlement, there was no longer any danger of threat to
Bareng's ownership and full enjoyment of the equipment he bought from Alegria.
And it was by virtue of this settlement that Alegria, two days later, sued Bareng for the unpaid balance
of the price of said equipment. In his answer to Alegria's complaint, Bareng admitted his indebtedness
to Alegria in the amount of P3.6K, yet he did not tender payment of said amount nor did he deposit the
same in court, but instead sought to have the sale rescinded upon claims of violations of warranties by
Alegria, that the CA found not to have been proved or established.
It is clear, therefore, that Bareng was in default on the unpaid balance of the price of the equipment in

question from the date of the filing of the complaint by Alegria, and under Art. 2209, he must pay legal
interests thereon from said date. Decision affirmed.

Spouses Mahusay v. B.E. San Diego GR No. 179675 June 8, 2011 Nachura, J.
FACTS:

Spouses Mahusay (P) purchased several lots in Aurora Subdivision, Metro Manila, owned by
B.E. San Diego Inc. (R) They executed 2 contracts:
Contract to Sellexecuted May 4, 1973 for P33,000
Contract to Sellexecuted August 1, 1975 for P197,040 plus 12% interest p.a. payable in
monthly installments
Due to non-payment since October 1978, R was constrained to file a case for cancellation of
contracts. Case was dismissed by RTC for lack of jurisdiction.
October 13, 1989a Compromise Agreement was entered into, whereby, P agreed to pay R
the remaining balance of all the lots in the manner and under the terms agreed upon by them.
They again failed to comply with the terms embodied in this agreement, so R filed a complaint for
specific performance.
RTC: Ruled in favor of B.E. San Diego, ordered Sps Mahusay to comply with Compromise
Agreement + Damages Defense: It was the Housing and Land Use Regulatory Board and not
the RTC that had jurisdiction over subject matter. Moreover, the Compromise Agreement was
unenforceable because it was only Francisca Mahusay (wife) who signed it without the consent
of her husband.
CA: Affirmed with modification. RTC had jurisdiction because action was for Specific Performance
w/ Damages, which is in the nature of ordinary money claims filed by unpaid seller against buyer.
But the Compromise Agreement was null and void ab initio because the Agreement involved
conjugal properties; husband could not be bound because he did not sign. P to pay all unpaid
amortizations including amortization yet to be paid until the expiration of the contract to sell.
R filed a Motion for Clarification of the CA decision. It prayed for the inclusion of the penalties
and interest in the computation of the unpaid amortizations which it claimed is customary in real
estate business and compliant with the Contracts to Sell.
CA issued a resolution clarifying that its earlier decision included the payment of all penalties and
interest due on the unpaid amortizations.
P filed a Motion to Delete and Withdraw Resolution for the Amendment and Modification of
Original Decision; claimed that the Motion for Clarification wasnt intended to clarify but to amend
the decision to include the 12% interest. CA decision is already final and executory so no
amendments should be allowed. DENIED by the CA. It was only a clarification.

ISSUE: WoN P should pay the interest and penalties under the Contracts to Sell?
HELD: YES.
Rs Motion for Clarification did not really partake of the nature of a motion for reconsideration, as
to amend the December 20, 2001 Decision.
There was nothing substantial to vary, considering that the issues between the parties were
deemed resolved and laid to rest.
There was a compelling reason for the CA to clarify its original Decision to include the payment of
all penalties and interest due on the unpaid amortizations, as provided in the contracts
Considering that the validity of the contracts was never put in question, and there is nothing on
record to suggest that the same may be contrary to law, morals, public order, or public policy,
there is nothing unlawful in the stipulation requiring the payment of interest/penalty at the rate
agreed upon in the contract of the parties.
Court further notes that P are in actual/physical possession of the properties and enjoying the
beneficial use thereof, despite the payment of only P133,872.76, as of January 30, 1979.
It would be grossly unfair for respondent to be deprived of the amount it would have received
from the sale of their properties, while petitioners benefited from the use and continued
possession of the properties even if they made no payments since October 1978. This would

constitute unjust enrichment.

Moreover, the fair market value of the land has tremendously increased over the past years. They
should pay the interest/penalty for the delay in payment.
Finally, the Court notes that this case has dragged on for many years since 1978. In order to writ
finis to this protracted litigation between the parties, we resolve the case in accordance with
jurisprudence on the matter.
Undeniably, the instant case is a sale of real property where the purchase price is not paid in full.
The unpaid sellers remedy is either an action to collect the balance or to rescind the contract
within the time allowed by law.
Since rescission is no longer an option considering that petitioners have been in possession of
the properties for a considerable period of time, substantial justice dictates that respondent be
entitled to receive the unpaid balance of the purchase price, plus legal interest thereon:
In line with Eastern Shipping Lines Inc. v. CA: The legal interest to be paid on the amount shall be
12% per annum, which shall commence from April 18, 1990, when respondent filed the Complaint
for Specific Performance with the RTC, Branch 73, Malabon, in Civil Case No. 1433-MN, which
shall be considered as judicial demand, until the finality of this Decision.
Another 12% interest per annum shall be paid on the amount due and owing as of and from the
date of finality of the Decision until full payment.
DISPO: WHEREFORE, the petition is DENIED.
The Resolution of the Court of Appeals dated September 11, 2007 is AFFIRMED with
MODIFICATION.
The trial court is directed to compute the unpaid balance of the purchase price of each contract
(which is the unpaid amortization including amortizations yet to be paid until the expiration of the
Contracts to Sell) with dispatch.
The legal interest to be paid on said amount is TWELVE PERCENT (12%) per annum, which
shall commence from April 18, 1990, when judicial demand was made on petitioners.
Another 12% interest per annum shall be paid on the amount due and owing as and from the date
of finality of this Decision until full payment would have actually been made.

KATIGABAK v. CA

1962
Facts:

V.K. Lundberg, owner and operator of International Tractor and Equipment Co., Ltd. advertised for
the sale of a Double Drum Carco Tractor Winch. Artemio Katigbak agreed to purchase a winch for
Php12K, payable at Php 5K upon delivery and balance of Php 7K within 60 days from Daniel
Evangelista, the actual owner.
The winch needed some repairs, which could be done in the shop of Lundberg. It was stipulated that
the amount necessary for the repairs will be advanced by Katigbak but deductible from the initial
payment of Php 5K Repairs were undertaken and the total of Php 2,029.85 for spare parts was
advanced. For one reason or another, the sale was not consummated and Katigbak sued Evanglista,
Lundberg and the latter's company, for the refund of such amount.
Lundberg: No liability for the amount since the obligation for refund was purely a personal account
between Evangelista and Katigbak.
Evangelista: Katigbak refused to comply with his contract to purchase the winch and as a result
Evangelista was forced to sell the same to a third person for only Php 10K, thus incurring a loss of
Php 2K
LC: Ordered Lundberg and Evangelista to pay Php 2,029.85
CA: Reversed judgment because Evangelista had the right to recover his loss of Php 2K, which is
the difference between the contract price for the sale of the winch between him and appellee and the
actual price for which it was sold better the latter had refused to carry out his agreement
In Hanlon, if the purchaser fails to take delivery and pay the purchase price of the subject matter of
the contract, the vendor, without the need of first rescinding the contract judicially, is entitled to resell
the same, and if he is obliged to sell it for less than the contract price, the buyer is liable for the
difference.
This loss (Php 2K) should be set off against the sum claimed by Katigbak (Php2,029.85), which
would leave in his favor a balance of Php 29.85.

Issue WON Evangelista had a right to recover his loss as a result of the resale YES
Ratio

Facts of the case identical to those of the Hanlon v. Haussernan case

If the purchaser of goods upon an executory contract fails to take delivery and pay the purchase
price, the vendor is entitled to resell the goods. If he is obliged to sell for less than the contract
price, he holds the buyer for the difference; if he sells for as much as or more than the contract
price, the breach of contract by the original buyer is dammum absque injuria. But it has never
been held that there is any need of an action of rescission to authorize the vendor, who is still in
possession, to dispose of the property where the buyer fails to pay the price and take delivery.
Katigbak failed to take delivery of the winch and such failure or breach was attributable to him.
The right to resell the equipment, therefore, cannot be disputed
CA AFFIRMED