1 Carbonell vs.

Court of Appeals, and Poncio

ISSUE:

69 SCRA 99 January 1976

Who has the superior right over the subject property?

FACTS:

COURT RULING:

On January 27, 1955, respondent Jose Poncio executed a

private memorandum of sale of his parcel of land with
improvements situated in San Juan, Rizal in favor of petitioner
Rosario Carbonell who knew that the said property was at that
time subject to a mortgage in favor of the Republic Savings
Bank (RSB) for the sum of P1,500.00. Four days later, Poncio, in
another private memorandum, bound himself to sell the same
property for an improved price to one Emma Infante for the
sum of P2,357.52, with the latter still assuming the existing
mortgage debt in favor of the RSB in the amount of P1,177.48.
Thus, in February 2, Poncio executed a formal registerable deed
of sale in her (Infante's) favor. So, when the first buyer
Carbonell saw the seller Poncio a few days afterwards, bringing
the formal deed of sale for the latter's signature and the
balance of the agreed cash payment, she was told that he
could no longer proceed with formalizing the contract with her
(Carbonell) because he had already formalized a sales contract
in favor of Infante.

The Supreme Court reversed the appellate courts decision and

declared the first buyer Carbonell to have the superior right
over the subject property, relying on Article 1544 of the Civil
Code. Unlike the first and third paragraphs of said Article 1544,
which accord preference to the one who first takes possession
in good faith of personal or real property, the second paragraph
directs that ownership of immovable property should be
recognized in favor of one "who in good faith first recorded" his
right. Under the first and third paragraphs, good faith must
characterize the prior possession, while under the second
paragraph, good faith must characterize the act of anterior
registration.

To protect her legal rights as the first buyer, Carbonell

registered on February 8, 1955 with the Register of Deeds her
adverse claim as first buyer entitled to the property.
Meanwhile, Infante, the second buyer, was able to register the
sale in her favor only on February 12, 1955, so that the transfer
certificate of title issued in her name carried the duly
annotated adverse claim of Carbonell as the first buyer. The
trial court declared the claim of the second buyer Infante to be
superior to that of the first buyer Carbonell, a decision which
the
Court
of
Appeals
reversed.
Upon
motion
for
reconsideration, however, Court of Appeals annulled and set
aside its first decision and affirmed the trial courts decision.

When Carbonell bought the lot from Poncio on January 27,

1955, she was the only buyer thereof and the title of Poncio
was still in his name solely encumbered by bank mortgage duly
annotated thereon. Carbonell was not aware - and she could
not have been aware - of any sale to Infante as there was No
such sale to Infante then. Hence, Carbonell's prior purchase of
the land was made in good faith which did not cease after
Poncio told her on January 31, 1955 of his second sale of the
same lot to Infante. Carbonell wanted to meet Infante but the
latter refused so to protect her legal rights, Carbonell
registered her adverse claim on February 8, 1955. Under the
circumstances, this recording of Carbonells adverse claim
should be deemed to have been done in good faith and should
emphasize Infante's bad faith when the latter registered her
deed of sale 4 days later.

2. DAGUPAN TRADING VS. MACAM 14 SCRA 99 ; MAY

1965
FACTS:
Sammy Maron and his seven brothers and sisters were proindiviso owners of a parcel of unregistered land located in
barrio Parayao, Binmaley, Pangasinan. In 1955, while their
application for registration of said land under Act No. 496 was
pending, they executed, on June 19 and on September 21, two
deeds of sale conveying the property to herein respondent
Rustico Macam who thereafter took possession of the property
and made substantial improvements upon it. On October 14,
1955, OCT No. 6942 covering the land was issued in the name
of the Marons, free from all liens and encumbrances.
On August 4, 1956, however, by virtue of a final judgment of
the Municipal Court of Manila in a civil case in favor of Manila
Trading and Supply Co. (Manila Trading) against Sammy Maron,
levy was made upon whatever interest he had in the subject
property. Thereafter, said interest was sold at public auction to
the judgment creditor Manila Trading. The corresponding notice
of levy, certificate of sale and the sheriff's certificate of final
sale in favor of Manila Trading - because nobody exercised the
right of redemption - were duly registered, and on March 1,
1958, the latter sold all its rights and title in the property to
herein petitioner Dagupan Trading Company (Dagupan
Trading).
On September 4, 1958, Dagupan Trading filed an action against
Macam, praying that it be declared owner of one-eighth portion
of the subject property. The CFI of Pangasinan dismissed the
said complaint, and the Court of Appeals affirmed its decision.
ISSUE:
Who has the superior right over the one-eight portion of the
subject property?

COURT RULING:
The Supreme Court likewise affirmed both decisions of the
lower courts. At the time of the levy, Sammy Maron already
had no interest on the one-eight portion of the property he and
his siblings have inherited because for a considerable time
prior to the levy, said interest had already been conveyed upon
Macam "fully and irretrievably" - as the Court of Appeals held.
Consequently, the subsequent levy made on the property for
the purpose of satisfying the judgment rendered against
Sammy Maron in favor of the Manila Trading Company was void
and of no effect.
The unregistered sale and the consequent conveyance of title
and ownership in favor Macam could not have been cancelled
and rendered of no effect upon the subsequent issuance of the
Torrens title over the entire parcel of land. Moreover, upon the
execution of the deed of sale in his favor by Sammy Maron,
Macam had immediately taken possession of the land
conveyed as its new owner and introduced considerable
improvements upon it himself. To deprive him, therefore, of the
same by sheer force of technicality would be against both
justice and equity.

6. CRUZ VS. CABAA 129 SCRA 656 ; JUNE 1984

FACTS:
In June 1965, respondent Leodegaria Cabaa sold the subject
property to respondent spouses Teofilo Legaspi and Iluminada
Cabaa (spouses Legaspi) under their contract entitled
Bilihang Muling Mabibili which stipulated that Cabaa can
repurchase the land within one year from December 31, 1966.
The said land was not repurchased, however, so the spouses
Legaspi took possession of the said property. Later, Cabaa
requested that the land title be lent to her in order to mortgage

the property to the Philippine National Bank (PNB), to which the

spouses Legaspi yielded. On October 21, 1968, Cabaa
formally sold the land to spouses Legaspi by way of an absolute
sale. The spouses Legaspi then attempted to register the deed
of sale, but failed because they could not present the owner's
duplicate of title which was still in the possession of the PNB as
mortgage. Subsequently, they were able to register the
document of sale on May 13, 1969 under Primary Entry No.
210113 of the Register of Deeds of Quezon Province.
On November 29, 1968, Cabaa sold the same property to
herein petitioner Abelardo Cruz (now deceased), who, in turn,
tried to register the deed of sale on September 3, 1970.
However, he was informed that Cabaa had already sold the
property to the spouses Legaspi, so he was only able to register
the land in his name on February 9, 1971. The CFI of Quezon
Province declared the spouses Legaspi as the true and rightful
owners of the subject property and the land title that Cruz had
acquired as null and void. The Court of Appeals affirmed said
decision, but ordered Cabaa reimburse to Cruz's heirs the
amounts of P2,352.50, which the late petitioner Abelardo Cruz
paid to PNB to discharge the mortgage obligation of Cabaa in
favor of said bank, and the amount of P3,397.50, representing
the amount paid by said Abelardo Cruz to her as consideration
of the sale with pacto de retro of the subject property.

There is no question that spouses Legaspi were the first buyers,

first on June 1, 1965 under a sale with right of repurchase and
later on October 21, 1968 under a deed of absolute sale and
that they had taken possession of the land sold to them; that
Abelardo Cruz was the second buyer under a deed of sale
dated November 29, 1968, which to ail indications, contrary to
the text, was a sale with right of repurchase for ninety (90)
days. There is no question, either, that spouses Legaspi were
the first and the only ones to be in possession of the subject
property.
The knowledge of the first sale Abelardo Cruz had gained
defeats his rights even if he is first to register the second sale,
since such knowledge taints his prior registration with bad
faith. This is the price exacted by Article 1544 of the Civil Code.
Before the second buyer can obtain priority over the first, he
must show that he acted in good faith throughout (i.e. in
ignorance of the first sale and of the first buyer's rights) - from
the time of acquisition until the title is transferred to him by
registration or failing registration, by delivery of possession.
The second buyer must show continuing good faith and
innocence or lack of knowledge of the first sale until his
contract ripens into full ownership through prior registration as
provided by law."

ISSUE:
Who is the rightful owner of the subject property?
COURT RULING:
The Supreme Court affirmed the decision of the appellate court
with modification ordering and sentencing respondent
Leodegaria Cabaa to reimburse and pay to petitioner's heirs
the total sum of P5,750.00.

8. NUGUID VS. COURT OF APPEALS, AND GUEVARRA

171 SCRA 213 MARCH 1989
FACTS:
The deceased spouses Victorino and Crisanta dela Rosa
(spouses dela Rosa) were registered owners of a parcel of land
in Orani, Bataan, and covered by OCT No. 3778. On or about

May 4, 1931, Victorino dela Rosa (widowed by then) sold onehalf of the said property to Juliana Salazar for P95.00. This sale
between him and Salazar, though evidenced by a document,
was not registered. Nevertheless, Juliana Salazar constructed a
house on the lot she purchased immediately after the sale. On
March 10, 1964, petitioner spouses Diosdado Nuguid and
Marqiueta Venegas (spouses Nuguid) caused the registration of
a document entitled "Kasulatan ng Partihan at Bilihan"
(Kasulatan) dated June 6, 1961. In this document, Marciana
dela Rosa, together with the heirs of Victorino and Crisanta
dela Rosa, sold to spouses Nuguid the entire area of the
property for the sum of P300.00. Subsequently, OCT No. 3778
was cancelled by the Register of Deeds of Bataan, and TCT No.
T-12782 was issued in the spouses Nuguids names.
Private respondents claimed that the presented by spouses
Nuguid was forged. They also allegedly discovered the forged
deed as well as the certificate of title in the name of the
petitioners much later, that is, on February 28, 1978, when
respondents Amorita Guevarra and Teresita Guevarra thought
of having the title of their grandmother Juliana Salazar,
registered. On the other hand, spouse Nuguid assert that in the
latter part of 1960, Nicolas dela Rosa, uncle of respondent
Marciana dela Rosa and grandfather of the other heirssignatories, offered to sell the subject land to them. Apparently,
Nicolas dela Rosa claimed that he had already purchased the
shares of the heirs over the subject property as evidenced by a
private document entitled "Kasunduan" (Kasunduan) dated
August 31, 1955, and as a matter of fact, he had in his
possession the original certificate of title covering the property
in the name of the deceased Victorino and Crisanta dela Rosa.
The CFI of Bataan dismissed the complaint filed by private
respondents, but the Court of Appeals reversed said decision
and ordered the spouses Nuguid to execute a deed of
reconveyance in favor of herein respondents.

ISSUE:
Who is the rightful owner of the subject property?
COURT RULING:
The Supreme Court reinstated the decision of the CFI of
Bataan. The basis for the Court of Appeals' conclusion that
petitioners were buyers in bad faith is ambiguous because said
court relied on the singular circumstance that the petitioners
are from Orani, Bataan, and should have personally known that
the private respondents were the persons in actual possession.
However, at the time of the purchase, the spouses Nuguid
dealt with Pedro Guevarra and Pascuala Tolentino, the latter
being the actual occupants. The respondents Guevarras,
children of the said Pedro and Pascuala Guevarra, came into
the picture only after their parents died. As for the respondent
heirs of Victorino dela Rosa, their being in actual possession of
any portion of the property was, likewise, simply presumed or
taken for granted by the Court of Appeals.
The private respondents cannot also honestly claim that they
became aware of the spouses Nuguids title only in 1978,
because ever since the latter bought the property in 1961, the
spouse Nuguid have occupied the same openly, publicly, and
continuously in the concept of owners, even building their
house thereon. For seventeen years they were in peaceful
possession, with the respondents Guevarras occupying less
than one-half of the same property.

9. RADIOWEALTH FINANCE CO. VS. PALILEO

197 SCRA 245 MAY 1991
FACTS:
Spouses Castro sold a parcel of unregistered coconut land in
Surigao del Norte to Manuelito Palileo. The sale is evidenced by
a notarized deed of sale and Palileo exercised acts of ownership
through his mother and also paid real estate taxes.
Meanwhile, a judgment over a civil case was rendered agains
Enriqur Castro ordering him to pay 22K to Radiowealth Finance
Co.
Pursuant to this, the provincial sheriff levied upon and sold in
public auction the subject land that was previously sold to
Palileo. A certificate of sale was issued in favor of Radiowealth
being the lone bidder and after the expiration of the period of
redemption, a deed of final sale was also executed in their
favor and both deeds was registered to the Registry of Deeds.
ISSUE:
WON the sale in public auction is valid.
HELD:
Had Art.1544 been applied, the judgment should be rendered
in favor of Radiowealth being the one who registered the land
first. But since the subject land is an unregistered land, a
different rule should apply.
Under Act.3344 mere registration of a sale in one's favor does
not give him any right over the land if the vendor was not
anymore the owner of the land having previously sold the same
to somebody else even if the earlier sale was unrecorded.
Article 1544 of the Civil Code has no application to land not
registered under the torrens system. It was explained that this
is because the purchaser of unregistered land at a sheriffs
execution sale only steps into the shoes of the judgment
debtor, and merely acquires the latter's interest in the property
sold as of the time the property was levied upon. As such, the

execution sale of the unregistered land in favor of petitioner is

of no effect because the land no longer belonged to the
judgment debtor as of the time of the said execution sale.
10. TAEDO V. CA (January 22, 1996)
FACTS:
Lazaro Taedo executed a deed of absolute sale in favor of
Ricardo Taedo and Teresita Barrera in which he conveyed a
parcel of land which he will inherit. Upon the death of his father
he executed an affidavit of conformity to reaffirm the said sale.
He also executed another deed of sale in favor of the spouses
covering the parcel of land he already inherited. Ricardo
registered the last deed of sale in the registry of deeds in their
favor.
Ricardo later learned that Lazaro sold the same property to his
children through a deed of sale.
ISSUE:
WON the Taedo spouses have a better right over the property
against the children of Lazaro Taedo.
HELD:
Since a future inheritance generally cannot be a subject of a
contract, the deed of sale and the affidavit of conformity made
by Lazaro has no effect. The subject of dispute therefore is the
deed of sale made by him in favor of spouses Taedo and
another to his children after he already legally acquired the
property.
Thus, although the deed of sale in favor of private respondents
was later than the one in favor of petitioners, ownership would
vest in the former because of the undisputed fact of
registration. On the other hand, petitioners have not registered
the sale to them at all.
Petitioners contend that they were in possession of the
property and that private respondents never took possession
thereof. As between two purchasers, the one who registered
the sale in his favor has a preferred right over the other who

has not registered his title, even if the latter is in actual

possession of the immovable property.

11. SPOUSES OCCENA VS ESPONILLA

Facts: After the death of the Tordesillas spouses, the lot was
inherited by their children Harod and Angela, and grandchildren
Arnold and Lilia. In 1951, the heirs executed a Deed of Pacto de
Retro Sale1 in favor of Alberta Morales covering the
southwestern portion of the lot in 1954, Arnold and Lilia
executed a Deed of Definite Sale of Shares, Rights, Interests
and Participations2over the same 748 sq. m. lot in favor of
Alberta Morales.
Alberta possessed the lot as owner,
constructed a house on it and appointed a caretaker to oversee
her property. Thereafter, in July 1956, vendor Arnold dela Flor
borrowed the OCT from Alberta covering the lot. He executed
an Affidavit3 acknowledging receipt of the OCT in trust and
undertook to return said title free from changes, modifications
or cancellations. Arnold and Angela, nephew and daughter
respectively of the Tordesillas spouses, without the knowledge
of Alberta, executed a Deed of ExtrajudicialSettlement4
declaring the two of them as the only co-owners of the
undivided 1,198 sq. m. lot no. 265, without acknowledging their
previous sale of 748 sq.m. thereof to Alberta. In 1985, vendee
Alberta Morales died. Her nieces-heirs, Lydia, Elsa and Dafrosa,
succeeded in the ownership of the lot. Months later, as the
heirs were about to leave for the United States, they asked
Arnold to deliver to them the title to the land so they can
register it in their name. Arnold repeatedly promised to do so
but failed to deliver the title to them. On December 4, 1986,
after Albertas heirs left for the States, Arnold used the OCT he
borrowed from the deceased vendee Alberta Morales,
subdivided the entire lot no. 265 into three sub lots, and

registered them all under his name, viz: lot no. 265-A (with
TCTNo. 16895), lot no. 265-B (with TCT No. 16896) and lot no.
265-C (with TCT No. 16897). He then paid the real estate taxes
on the property. After the death of Arnold, the three (3) niecesheirs of Alberta Morales learned about the second sale oftheir
lot to the Occea spouses when they were notified by caretaker
Abas that they were being ejected from the land. The heirs
filed a case7 for annulment of sale and cancellation of titles,
with damages, against the second vendees Occea spouses. In
their complaint, they alleged that the Occeas purchased the
land in bad faith as they were aware that the lots sold to them
had already been sold to Alberta Morales in 1954. They averred
that before the sale, when Tomas Occea conducted an ocular
inspection of the lots, Morito Abas, the caretaker appointed by
Alberta Morales to oversee her property, warned them not to
push through with the sale as the land was no longer owned by
vendor Arnold as the latter had previously sold the lot to
Alberta Morales who had a house constructed thereon. For their
part, the Occea spouses claimed that the OCT in the name of
the original owners of the lots, the Tordesillas spouses, was
cancelled after it was subdivided between Angela and Arnold
in 1969; that new TCTs had been issued in the latters names;
that they were unaware that the subject lots were already
previously sold to Morales as they denied that Tomas had a talk
with caretaker Abas on the matter; that as of December 4,
1987, the TCTs covering the lots were in the name of Arnold
and his wife, without any adverse claim annotated thereon;
that vendor Arnold represented to them that the occupants
they saw on the land were squatters and that he merely
tolerated their presence; that they did not personally
investigate the alleged squatters on the land and
merely relied on the representation of vendor Arnold; that
sometime in 1966-1967, Arnold and his co-heir Angela caused
the survey of the original lot and subdivided it into 3 lots,
without opposition from Morales or her heirs. Thus, three (3)

TCTs were issued in 1969 to Arnold and Angela and, two of the
lots were then sold to the Occea spouses, again without
objection from Alberta Morales. The Occea spouses alleged
that they were buyers in good faith as the titles to the subject
lots were free from liens or encumbrances when they
purchased them. They claimed that in 1989, Arnold offered to
sell the subject lots to them. On August 13, 1990,after they
verified with the Antique Registry of Deeds that Arnolds TCTs
were clean and unencumbered, Arnold signed the instrument of
sale over the subject lots in favor of the Occeas
forP100,000.00 and new titles were issued in their names. The
Occeas likewise set up the defenses of laches and
prescription. They argue that Alberta and plaintiffs-heirs were
barred from prosecuting their action as they failed to assert
their right for forty(40) years.
Issue: Whether Or Not The Period Of More Than Forty (40)
Years Without Positive Action Taken By Respondents, As Well As
By Alberta Morales, To Protect Their Interest Can Be Considered
Laches And Thus Their Present Action Has Prescribed
Ruling: the action to annul title filed by respondents-heirs is not
barred by laches and prescription. Firstly, laches is a creation of
equity and its application is controlled by equitable
considerations. Laches cannot be used to defeat justice or
perpetuate fraud and injustice. Neither should its application be
used to prevent the rightful owners of a property from
recovering what has been fraudulently registered in the name
of another.17 Secondly, prescription does not apply when the
person seeking annulment of title or reconveyance is in
possession of the lot because the action partakes of a suit to
quiet title which is imprescriptible.18 In this case, Morales had
actual possession of the land when she had a house built
thereon and had appointed a caretaker to oversee her property.
Her undisturbed possession of the land for a period of fifty (50)
long years gave her and her heirs a continuing right to seek the
aid of a court of equity to determine the nature of the claim of

ownership of petitioner-spouses. In the case at bar, Morales

caretaker became aware of the second sale to petitionerspouses only in 1991 when he received from the latter a notice
to vacate the land. Respondents-heirs did not sleep on their
rights for in 1994, they filed their action to annul petitioners
title over the land. It likewise bears to stress that when vendor
Arnold reacquired title to the subject property by means of
fraud and concealment after he has sold it to Alberta Morales, a
constructive trust was created in favor of Morales and her
heirs. As the defrauded parties who were in actual possession
of the property, an action of the respondents-heirs to enforce
the trust and recover the property cannot prescribe. They may
vindicate their right over the property regardless of the lapse of
time.21 Hence, the rule that registration of the property has
the effect of constructive notice to the whole world cannot be
availed of by petitioners and the defense of prescription cannot
be successfully raised against respondents.
12. JERRY T. MOLES VS. INTERMEDIATE APPELLATE
COURT AND MARIANO M. DIOLOSA G.R. No. 73913, January
31, 1989
FACTS:
Jerry Moles(petitioner) bought from Mariano Diolosa owner of
Diolosa
Publishing
House
a
linotype
printing
machine(secondhand machine). Moles promised Diolosa that
will pay the full amount after the loan from DBP worth
P50,000.00 will be released. Private respondent on return
issued a certification wherein he warranted that the machine
was in A-1 condition, together with other express warranties.
After the release of the money from DBP, Petitioner required
the Respondent to accomplish some of the requirements. On
which the dependant complied the requirements on the same
day.

On November 29, 1977, petitioner wrote private respondent

that the machine was not functioning properly. The petitioner
found out that the said machine was not in good condition as
experts advised and it was worth lesser than the purchase
price. After several telephone calls regarding the defects in the
machine, private respondent sent two technicians to make
necessary repairs but they failed to put the machine in running
condition and since then the petitioner wan unable to use the
machine anymore.
ISSUE/S:
1.
Whether there is an implied warranty of its quality or
fitness.
2. Whether the hidden defects in the machine is sufficient to
warrant a rescission of the contract between the parties.
HELD1.
It is generally held that in the sale of a designated
and specific article sold as secondhand, there is no implied
warranty as to its quality or fitness for the purpose intended, at
least where it is subject to inspection at the time of the sale.
On the other hand, there is also authority to the effect that in a
sale of secondhand articles there may be, under some
circumstances, an implied warranty of fitness for the ordinary
purpose of the article sold or for the particular purpose of the
buyer.
Said general rule, however, is not without exceptions. Article
1562 of our Civil Code, which was taken from the Uniform Sales
Act, provides:
"Art. 1562. In a sale of goods, there is an implied warranty or
condition as to the quality or fitness of the goods, as follows:
(1)
Where the buyer, expressly or by implication, makes
known to the seller the particular purpose for which the goods
are acquired, and it appears that the buyer relies on the seller's

skill or judgment (whether he be the grower or manufacturer or

not), there is an implied warranty that the goods shall be
reasonably fit for such purpose;"
2.
We have to consider the rule on redhibitory defects
contemplated in Article 1561 of the Civil Code. A redhibitory
defect must be an imperfection or defect of such nature as to
engender a certain degree of importance. An imperfection or
defect of little consequence does not come within the category
of being redhibitory.
As already narrated, an expert witness for the petitioner
categorically established that the machine required major
repairs before it could be used. This, plus the fact that
petitioner never made appropriate use of the machine from the
time of purchase until an action was filed, attest to the major
defects in said machine, by reason of which the rescission of
the contract of sale is sought. The factual finding, therefore, of
the trial court that the machine is not reasonably fit for the
particular purpose for which it was intended must be upheld,
there being ample evidence to sustain the same.
At a belated stage of this appeal, private respondent came up
for the first time with the contention that the action for
rescission is barred by prescription. While it is true that Article
1571 of the Civil Code provides for a prescriptive period of six
months for a redhibitory action, a cursory reading of the ten
preceding articles to which it refers will reveal that said rule
may be applied only in case of implied warranties. The present
case involves one with an express warranty. Consequently, the
general rule on rescission of contract, which is four years shall
apply. Considering that the original case for rescission was
filed only one year after the delivery of the subject machine,
the same is well within the prescriptive period. This is aside
from the doctrinal rule that the defense of prescription is
waived and cannot be considered on appeal if not raised in the

trial court, and this case does not have the features for an
exception to said rule.

2) Corrollarily whether the claim for refund was extinguished by

prescription? NO.
Held:

13. ENGINEERING AND MACHINERY CORP. VS. COURT OF

APPEALS
G.R. No. 52267 January 24, 1996
Facts:
Almeda and Engineering signed a contract, wherein
Engineering undertook to fabricate, furnish and install the airconditioning system in the latters building along Buendia
Avenue, Makati in consideration of P210,000.00. Petitioner was
to furnish the materials, labor, tools and all services required in
order to so fabricate and install said system. The system was
completed in 1963 and accepted by private respondent, who
paid in full the contract price.
Almeda learned from the employees of NIDC of the defects of
the air-conditioning system of the building. Almeda spent for
the repair of the air-conditioning system. He now sues
Engineering for the refund of the repair. Engineering contends
that the contract was of sale and the claim is barred by
prescription since the responsibility of a vendor for any hidden
faults or defects in the thing sold runs only for 6 months (Arts
1566, 1567, 1571). Almeda contends that since it was a
contract for a piece of work, hence the prescription period was
ten years (Hence Art 1144 should apply on written contracts).
RTC found that Engineering failed to install certain parts and
accessories called for by the contract, and deviated from the
plans of the system, thus reducing its operational effectiveness
to achieve a fairly desirable room temperature.
Issue:
1) Whether the contract for the fabrication and installation of a
central air-conditioning system in a building, one of sale or
for a piece of work? CONTRACT FOR PIECE OF WORK.

1) A contract for a piece of work, labor and materials may be

distinguished from a contract of sale by the inquiry as to
whether the thing transferred is one not in existence and which
would never have existed but for the order, of the person
desiring it. In such case, the contract is one for a piece of work,
not a sale. On the other hand, if the thing subject of the
contract would have existed and been the subject of a sale to
some other person even if the order had not been given, then
the contract is one of sale.
A contract for the delivery at a certain price of an article which
the vendor in the ordinary course of his business manufactures
or procures for the general market, whether the same is on
hand at the time or not is a contract of sale, but if the goods
are to be manufactured specially for the customer and upon his
special order, and not for the general market, it is a contract for
a piece of work .
The contract in question is one for a piece of work. It is not
petitioners line of business to manufacture air-conditioning
systems to be sold off-the-shelf. Its business and particular
field of expertise is the fabrication and installation of such
systems as ordered by customers and in accordance with the
particular plans and specifications provided by the customers.
Naturally, the price or compensation for the system
manufactured and installed will depend greatly on the
particular plans and specifications agreed upon with the
customers.
2)The original complaint is one for damages arising from
breach of a written contract and not a suit to enforce
warranties against hidden defects we here with declare that
the governing law is Article 1715 (supra). However, inasmuch
as this provision does not contain a specific prescriptive period,
the general law on prescription, which is Article 1144 of the
Civil Code, will apply. Said provision states, inter alia, that
actions upon a written contract prescribe in ten (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.