FIRST DIVISION me, either real or personal property (Exhibit
G.R. No. 144320 5). During the pendency of the proceedings and
Promulgated:
April 26, 2006
NATIVIDAD ARIAGA VDA. DE GURREA, CARLOS
GURREA, JULIETA GURREA, TERESA GURREA-
RODRIGUEZ, RICARDO GURREA, Jr., MA. VICTORIA
GURREA-CANDEL, and RAMONA GURREA-
MONTINOLA,
Petitioners,
- versus -
ENRIQUE SUPLICO,
Respondent.
x------------------------x
DECISION
AUSTRIA-MARTINEZ, J.:
Before us is a petition for review on certiorari under Rule 45 of
the Rules of Court assailing the Decision [1] of the Court of
Appeals (CA) dated February 24, 2000 in CA-G.R. CV No.
56210, which affirmed in toto the Decision[2] dated July 5, 1996
of the Regional Trial Court (RTC) of Pasig City, Branch 268, in
Civil Case No. 47543; and the CA Resolution [3] dated August 7,
2000 which denied petitioners motion for reconsideration.
The present petition arose from a complaint for annulment of
title with prayer for preliminary injunction filed with the Court
of First Instance (CFI) of Rizal, docketed as Civil Case No.
47543, by Rosalina Gurrea (plaintiff) in her capacity as
attorney-in-fact of the heirs of Ricardo Gurrea (Ricardo),
namely: Natividad, Carlos, Juliet and Ricardo, Jr., all surnamed
Gurrea, and Teresa Gurrea Colemenares. [4] The complaint was
filed against Atty. Enrique Suplico (defendant), Gen. Gaudencio
Tobias, in his capacity as General Manager of the National
Housing Authority, and Joseph Estrada, in his capacity as
Municipal Mayor of San Juan, Rizal.[5]
The CA adopted the facts of the case as summarized by the
RTC, to wit:
The lot in question situated at 245 Marne
Street, San Juan, Metro Manila was originally
owned by one of herein plaintiffs Attorney-in-Fact,
Rosalina Gurrea, as evidence (sic) by TCT No.
49767 (Exhibit A). That sometime in 1958, Rosalina
Gurrea transferred the ownership of said lot to
Adelina Gurrea, whose ownership was evidenced by
TCT No. 58253 (Exhibit
B). That Adelina Gurrea continued to be the owner
of the lot until her death. Thereafter, Special
Proceedings No. 7185 was instituted to have the will
she executed during her lifetime probated and to
settle her estate. Under the said will, the San
Juan lot was bequeathed to Pilar and Luis Gurrea,
while 700,000 pesetas, of the lot in Baguio City and
a one-hectare piece of land in Pontevedra, Negros
Occidental were given to Ricardo Gurrea.
Ricardo Gurrea, represented by and
through his counsel Atty. Enrique Suplico (the
defendant), filed an Opposition in Special Proc. No.
7185. In consideration of said representation,
Ricardo Gurrea agreed to pay Atty. Suplico a
contingent fee of twenty (20%) of whatever is due
upon the oral instructions of Ricardo Gurrea, Atty.
Suplico negotiated with the other heirs of Adelina
Gurrea regarding the transfer of the piso
(apartment building) in Spain to Ricardo Gurreas
daughter, Juliet Gurrea
de Melendres. Ricardo Gurrea further instructed
Atty. Suplico not to enter into any settlement with
the heirs unless the piso is transferred to his
daughter.Finally, the transfer of the piso worth
P64,000.00 was executed and the heirs arrived at
an amicable settlement regarding the estate of
Adelina Gurrea. Hence, Ricardo Gurrea withdrew
his Opposition and the heirs then drew up a project
of partition which was eventually approved by the
probate court. Pursuant to the project of partition,
the following properties were adjudicated to Ricardo
Gurrea: (1) the whole of the Baguio lot (with
assessed value of P26,350.00); (2) the whole of
the San Juan lot (with assessed value of
P9,630.00); and (3) a parcel of land in Pontevedra,
Negros Occidental (with assessed value of
P300.00). (Exhibit R for plaintiff and exhibit 19 for
defendant).
As payment of his attorneys fees, Ricardo
Gurrea offered the San Juan lot to Atty. Suplico
who was initially hesitant to accept the same as the
property is occupied by squatters. However, in order
not to antagonize his client, Atty. Suplico agreed to
Ricardo Gurreas proposal with the further
understanding that he will receive an additional
commission of 5% if he sells
the Baguio property. Thereafter, the deed of
Transfer of Rights and Interest was drafted. The
said deed was presented to Ricardo Gurrea for his
signature. That before signing the same, the
contents of the deed were first explained to Ricardo
Gurrea by Atty. Suplico and Atty. Manuel Pama, the
notary public. On August 20, 1975, the deed was
finally signed by Ricardo Gurrea at the office of
Atty. Pama, in the presence of the latter, Atty.
Suplico, Victor Tupas and another person, the last
two acting as witnesses. Later, on October 7, 1980,
Atty. Suplico registered the deed and obtained a
title/TCT to the San Juan property under his name.
Ricardo Gurrea died on October 22, 1980. After his
death, his heirs instituted Special Pro. No. 2722 for
the settlement of Ricardo Gurreas estate. In the
said proceedings, Atty. Suplico filed several claims
for unpaid attorneys fees (no claim was filed relative
to Special Proc. No. 7185); however, all were
dismissed with finality (Exhibits I and J). Also in
the same case, the estates administrator, Carlos
Gurrea, filed an Inventory of Properties left by the
decedent, which did not initially include the
property subject of this case. The said lot was
included only subsequently in the Amended
Inventory (Exhibit G).[6]
On July 11, 1985, the RTC issued an Order dismissing
the complaint on the ground that it does not state a cause of
action because the plaintiff is not the real party-in-interest.
[7]
The complaint-in-intervention was likewise
dismissed. Plaintiff filed an appeal with the CA questioning
the July 11, 1985 Order of the RTC.[8] The case was docketed as
CA-G.R. CV No. 14790.
Thereafter, defendant filed a Motion for Issuance of
Writ of Execution Pending Appeal. [9] In its Order dated May 20,
1986, the RTC granted defendants motion. [10] Plaintiff then filed
a petition for certiorari, prohibition and mandamus with the CA
seeking to annul the trial courts Order of May 20, 1986. The
case was docketed as CA-G.R. SP No. 09394.
Subsequently, CA-G.R. CV No. 14790 and CA-G.R. SP
No. 09394 were consolidated.
On November 21, 1989, the CA promulgated its
Decision in the consolidated cases, the dispositive portion of
which reads as follows:
WHEREFORE, judgment is hereby
rendered, as follows:
(1) REVERSING the order appealed
from in CA-G.R. CV No. 14790 and
GRANTING the appellant Rosalina Gurrea a
period of sixty (60) days from finality of this
decision within which to implead in Civil
Case No. 47543 the real parties-in-interest;
after compliance herewith by the appellant,
the trial court shall proceed to hear and
decide the case accordingly; and
(2) GRANTING the petition for
certiorari and prohibition in CA-G.R. SP No.
09394, hereby ANNULLING and SETTING
ASIDE the respondent Courts order dated
May 20, 1986, granting the respondent
Enrique Suplicos motion for execution
pending appeal (Annex C, petition), and the
writ issued pursuant thereto (Annex D,
petition).
Costs against the appellee and
respondent Enrique Suplico in both cases.
SO ORDERED.[11]
Accordingly, an Amended Complaint was filed in the
RTC impleading the heirs of Ricardo as additional plaintiffs, to
wit: Natividad Ariaga Vda. de Gurrea, Carlos Gurrea, Julieta
Gurrea, Teresa Gurrea-Rodriguez, Ricardo Gurrea, Jr., Ma.
Victoria Gurrea Candel and Ramona Gurrea-Montinola.
[12]
Thereafter, trial ensued.
In the course of the trial, Gen. Gaudencio Tobias of the
NHA and then Mayor Joseph Estrada of San Juan, were
dropped as defendants upon motion of plaintiffs and without
the objection of defendant.
After trial, the RTC rendered judgment the dispositive
portion of which reads:
WHEREFORE, taking all the
foregoing into consideration, the Court finds
that the preponderance of evidence is in favor
of the defendant and against the plaintiffs,
hence, orders the DISMISSAL of the above
entitled case. No pronouncement as to
damages, costs and attorneys fees.
SO ORDERED.[13]
On the other hand, defendant-appellant asserted that
the RTC erred in refusing to dismiss the complaint for lack of
cause of action; and in refusing to award counterclaim in his
favor.
On February 24, 2000, the CA rendered its Decision
affirming, in toto, the judgment of the RTC. The CA maintained
the lower courts ruling that the plaintiffs-appellants failed to
present clear and convincing evidence that defendant-appellant
defrauded and exerted undue influence on Ricardo in the latters
execution of the deed of Transfer of Rights and Interest and in
consequently transferring his ownership of the San Juan lot in
his (defendant-appellants) favor; and that based on the
evidence, the San Juan lot may be considered as reasonable
attorneys fees for defendant-appellant.
However, the CA did not discuss the issue of whether
the contract of attorneys fees between the late Ricardo and
defendant-appellant and the consequent transfer of rights and
interest in favor of the latter is invalid for being violative of
Article 1491 of the Civil Code.
Plaintiffs-appellants (hereinafter petitioners), with the
exception of plaintiff-appellant Rosalina Gurrea, who died on
June 2, 1999, filed a Motion for Reconsideration, but the CA
denied the same in a Resolution issued on August 7, 2000.
Hence, the present petition raising the following
issues:
1. WHETHER OR NOT, ASSUMING
WITHOUT ADMITTING, THAT THE
TRANSFER OF RIGHTS AND
INTERESTS (EXHIBIT E; 1) WAS DULY
EXECUTED BY RICARDO GURREA, THE
SAME VIOLATES ARTICLE 1491 OF THE
NEW CIVIL CODE AND, THEREFORE,
NULL AND VOID.
2. WHETHER OR NOT THE SUPPOSED
CONTRACT FOR ATTORNEYS FEES IN
THE FORM OF THE MANIFESTATION
DATED JUNE 24, 1972 (EXHIBIT 5)
PROVIDING FOR THE PAYMENT OF
ATTORNEYS FEES OUT OF THE
PROPERTIES IN LITIGATION, IS VALID;
3. WHETHER OR NOT, ASSUMING THAT
THE MANIFESTATION AND TRANSFER
OF RIGHTS AND INTERESTS ARE
VALID, AND FURTHER ASSUMING THAT
RESPONDENT-ATTORNEY HAS NOT YET
BEEN PAID HIS ATTORNEYS FEES IN
SPECIAL PROCEEDINGS NO. 7185, THE
PAYMENT OF SAID FEES BY WAY OF
THE WHOLE PROPERTY SUBJECT
MATTER OF THE INSTANT CASE IS
UNCONSCIONABLE OR
UNREASONABLE CONSIDERING THE
GUIDELINES FOR FIXING ATTORNEYS
FEES;

Plaintiffs and defendant appealed the case to the CA. 4. WHETHER OR NOT PETITIONERS ARE
ENTITLED TO THE CANCELLATION OF
Plaintiffs-appellants contended that the RTC erred: in RESPONDENT ATTORNEYS TITLE OVER
upholding the validity of the supposed contract of attorneys fees THE SUBJECT PROPERTY AND THE
between Ricardo and defendant-appellant which provided for RECONVEYANCE THEREOF TO THE
the payment of attorneys fees in the form of real property HEREIN PETITIONERS OR TO THE
because such an agreement is prohibited by Article 1491 of the ESTATE OF THE LATE RICARDO
Civil Code; in limiting its evaluation of the transfer of rights and GURREA.
interests in defendant-appelants favor only on the basis of
whether the deed evidencing said transfer of rights and 5. WHETHER OR NOT PETITIONERS ARE
interests was forged, without regard to the facts and ENTITLED TO THE DAMAGES CLAIMED
circumstances surrounding its execution; in not finding that IN THE ACTION SUBSTANTIATED BY
defendant-appellant has been fully paid for all the services he THEIR EVIDENCE.[14]
had rendered for Ricardo; in not declaring the payment of the
subject lot as attorneys fees to be unconscionable based on the
guidelines for determining attorneys fees.
 As to the first issue, petitioners argue on the premise
that, under the law, estate proceedings shall be deemed closed
and terminated when the court declares it to be so and only
after delivery of the remaining estate to the heirs entitled to
receive the same. Petitioners contend that no evidence was
presented to show that the probate court issued an order
declaring Special Proceedings No. 7185 closed and
terminated. In addition, when the Transfer of Rights and
Interest in favor of respondent was notarized on August 20,
1975, the title over the subject lot was still in the name of
Adelina Gurrea and that said title was transferred only in the
name of Ricardo on October 7, 1980. On these bases,
petitioners conclude that at the time the Transfer of Rights and
Interest was notarized, there is no dispute that the subject
property still formed part of the estate of Adelina Gurrea and
was, therefore, still the subject of litigation. Hence, the transfer
of rights and interest over the subject property in favor of Atty.
Suplico (respondent) is null and void.
Anent the second issue, petitioners contend that the
Manifestation dated June 24, 1972 executed by Ricardo
providing for the payment in favor of respondent of a contingent
fee of twenty percent (20%) of whatever is due to Ricardo, either
real or personal property is invalid because based on
jurisprudence, attorneys fees, based on a contingent fee
contract, may be paid only out of a certain percentage of the
value of the real property in litigation; and that the real
property itself may not be given as payment of attorneys fees.
As to the third issue, petitioners assert that even
assuming that the above-mentioned Manifestation and Transfer
of Rights and Interest are valid and that respondent had not yet
been paid his attorneys fees, the subject property is an
unreasonable and unconscionable payment for the actual
services that respondent had rendered for Ricardo, taking into
consideration the guidelines for fixing attorneys fees.
Petitioners did not elaborate on the fourth issue while,
in the fifth issue, they submitted to the discretion of the Court
their entitlement to damages and attorneys fees, as claimed
before the trial court.
On his part, respondent contends that the issue as to
whether Special Proceedings No. 7185 was already closed and
terminated at the time of execution of the deed of Transfer of
Rights and Interest, involves the determination of factual
matters and appreciation of pieces of evidence which cannot be
raised in a petition for review on certiorari before this
Court. Even assuming that petitioners may properly raise a
factual issue in the present petition, respondent submits that
there is sufficient evidentiary basis for the trial courts
conclusion that the Transfer of Rights and Interest was
executed and entered into after the termination of Special
Proceedings No. 7185. Respondent also contends that based on
jurisprudence, the Court has upheld the validity of contingency
fee contracts providing for the payment of attorneys fees out of a
portion or part of the property subject of litigation; that the
subject property is just, reasonable and equitable payment for
the services he rendered for the late Ricardo, consisting of the
signing of the Project of Partition, filing of an Opposition during
the estate proceedings, and negotiating with the other heirs
which resulted in Ricardos recovery of three parcels of land.
The Court finds the petition meritorious.
It is a fundamental rule that the Supreme
Courts jurisdiction in a petition for review
on certiorari as a mode of appeal under Rule 45 of the
Rules of Court, as amended, such as the one at bar, is
limited to reviewing only errors of law, not of fact. [15] The
rationale of this rule is founded on the fact that
the Court is not a trier of facts and does not normally
undertake the re-examination of the evidence presented
by the contending parties during the trial of the case
considering that the findings of facts of the CA are
conclusive and binding on the Court.[16]
However, there are recognized exceptions to this
rule, to wit:
(1) when the findings are
grounded entirely on speculation,
surmises or conjectures; (2) when the
inference made is manifestly mistaken,
absurd or impossible; (3) when there is
grave abuse of discretion; (4) when the
judgment is based on a
misapprehension of facts; (5) when the
findings of facts are conflicting; (6) when
in making its findings the CA went
beyond the issues of the case, or its
findings are contrary to the admissions
of both the appellant and the appellee;
(7) when the findings are contrary to the
trial court; (8) when the findings are
conclusions without citation of specific
evidence on which they are based; (9)
when the facts set forth in the petition
as well as in the petitioners main and
reply briefs are not disputed by the
respondent; (10) when the findings of
fact are premised on the supposed
absence of evidence and contradicted by
the evidence on record; and (11) when
the CA manifestly overlooked certain
relevant facts not disputed by the
parties, which, if properly considered,
could justify a different conclusion.[17]
The Court finds the present case falling under the
second exception for reasons discussed hereunder.
At the outset, it should be stressed that the
question as to whether the deed of Transfer of Rights and
Interest was forged was resolved by the CA when it
affirmed the ruling of the RTC that herein petitioners
failed to present clear, convincing and satisfactory
evidence that respondent defrauded Ricardo. The CA
also ruled that there is no evidence on record to show
that the signature of the late Ricardo on the questioned
deed is simulated or false. This matter is not assailed in
the present petition.
However, despite having been specifically
assigned as an error by petitioners in their appellants
brief filed with the CA, the appellate court failed to rule
on the question of whether the subject Transfer of Rights
and Interest was executed even before the estate
proceedings were closed and terminated.
Anent the first issue, it is necessary to resolve
whether the subject property was still the object of
litigation at the time the deed of Transfer of Rights and
Interest in favor of respondent was executed; and if so,
whether the same should be considered null and void for
being violative of the provisions of Article 1491 of the
Civil Code.
Article 1491(5) of the Civil Code provides:
1491. The following persons
cannot acquire by purchase, even at a
public or judicial auction, either in
person or through the mediation of
another:
(5) Justices, judges, prosecuting
attorneys, clerks of superior and inferior
 courts, and other officers and employees
connected with the administration of
justice, the property and rights in
litigation or levied upon an execution
before the court within whose
jurisdiction or territory they exercise
their respective functions; this
prohibition includes the act of
acquiring by assignment and shall
apply to lawyers, with respect to the
property and rights which may be the
object of any litigation in which they
may take part by virtue of their
profession.
(emphasis supplied)
In its Decision, the RTC made the following
disquisition:
[A]ccording to the evidence for
the defendant, a Motion for Termination
of Proceeding and Discharge of the
Executor and Bond dated June 20, 1975
was filed in the case, alleging in
paragraphs 3 and 5 thereof, that the
executor Angel E. Ordoez has already
turned over to the respective heirs and
devisees all their respective shares in
accordance with the Project of Partition
duly approved by the Court. Thereafter,
more than one month from the filing
thereof, the Transfer of Rights and
Interest was executed on August 20,
1975. Hence, at the time of the
execution of the questioned
document, it may be concluded that
Special Proceedings No. 7185 had
been terminated. The property in San
Juan is no longer the subject of a
litigation and may be alienated by the
client to his lawyer as payment of
attorneys fees rendered. (emphasis
supplied)
It is clear from the above-quoted ruling of the trial court
that its sole basis in concluding that Special Proceedings
No. 7185 had been terminated and that the subject
property is no longer the object of litigation at the time
the deed of Transfer of Rights and Interest was executed
on August 20, 1975 is the allegation of the executor,
Angel E. Ordoez, in his Motion[18] for Termination of
Proceeding and Discharge of the Executor and Bond
dated June 20, 1975, that he had already turned over to
the respective heirs and devisees all their respective
shares in accordance with the project of partition duly
approved by the probate court.
The Court finds the trial courts inference to be
without sufficient basis. How can the trial court
conclude that Special Proceedings No. 7185 had been
terminated and the subject property no longer the object
of litigation when no evidence was presented to show
that when the Transfer of Rights and Interest was
executed, the probate court had already issued an order
declaring the estate proceedings closed and
terminated? A thing is said to be in litigation not only if
there is some contest or litigation over it in court, but
also from the moment that it becomes subject to the
judicial action of the judge.[19] In the present case, there
is no proof to show that at the time the deed of Transfer
of Rights and Interest was executed, the probate court
had issued an order granting the Motion for Termination
of Proceeding and Discharge of the Executor and
Bond. Since the judge has yet to act on the above-
mentioned motion, it follows that the subject property
which is the subject matter of the deed of Transfer of
Rights and Interest, is still the object of litigation, that is
Special Proceedings No. 7185.
Furthermore, we agree with the petitioners
undisputed contention that when the deed of Transfer of
Rights and Interest was executed, the title over the
subject lot was still in the name of Adelina Gurrea and
that it was only on October 7, 1980 that the title was
transferred in the name of Ricardo. The rule is that as
long as the order for the distribution of the estate has
not been complied with, the probate proceedings cannot
be deemed closed and terminated.[20] The probate court
loses jurisdiction of an estate under administration only
after the payment of all the debts and the remaining
estate delivered to the heirs entitled to receive the same.
[21]
In the present case, while the subject lot was assigned
as Ricardos share in the project of partition executed by
the heirs of Adelina Gurrea, the title over the subject lot
was still in the name of the latter and was not yet
conveyed to Ricardo when the Transfer of Rights and
Interest was executed. As correctly cited by petitioners,
the Court held in Lucero v. Baaga[22] that:
[t]he term delivery or tradition
has two aspects: (1) the de jure delivery
or the execution of deeds of conveyance
and (2) the delivery of the material
possession (Florendo vs. Foz, 20 Phil.
388, 393). The usual practice is that, if
the land to be delivered is in the name of
the decedent, the administrator executes
a deed, conveying the land to the
distributee. That deed, together with the
project of partition, the order approving
it, the letters of administration and the
certification as to the payment of the
estate, inheritance and realty taxes, is
registered in the corresponding Registry
of Deeds. Title would then be issued to
the distributee. Thereafter, the
administrator or executor places him in
material possession of the land if the
same is in the custody of the former.[23]
It follows that, since at the time of execution of the deed
of Transfer of Rights and Interest, the subject property
still formed part of the estate of Adelina, and there being
no evidence to show that material possession of the
property was given to Ricardo, the probate proceedings
concerning Adelinas estate cannot be deemed to have
been closed and terminated and the subject property
still the object of litigation.
Having been established that the subject
property was still the object of litigation at the time the
subject deed of Transfer of Rights and Interest was
executed, the assignment of rights and interest over the
subject property in favor of respondent is null and void
for being violative of the provisions of Article 1491 of the
Civil Code which expressly prohibits lawyers from
acquiring property or rights which may be the object of
any litigation in which they may take part by virtue of
their profession.
 the court should determine who are the persons entitled to
Article 1409 of the same Code provides, among such indemnity.[26] The power of the courts to grant damages
others, that contracts which are expressly prohibited or and attorneys fees demands factual, legal and equitable
justification; its basis cannot be left to speculation or
declared void by law are considered inexistent and void
conjecture.[27] In the present case, no allegation, much less,
from the beginning. evidence was presented by petitioners to prove that they are
entitled to damages.
Anent the second issue, the Court has already
held that the said property is still the object of litigation WHEREFORE, the assailed Decision and Resolution of
at the time the subject Manifestation and Transfer of the Court of Appeals in CA-G.R. No. CV No. 56210 together with
Rights and Interest were executed and, thus, may not be the Decision dated July 5, 1996 of the Regional Trial Court of
acquired by respondent pursuant to the provisions of Pasig City, Branch 268 in Civil Case No. 47543
Article 1491 of the Civil Code. are REVERSED and SET ASIDE. A new judgment is rendered
canceling Transfer Certificate of Title No. 24474 in the name of
respondent Enrique P. Suplico and reinstating Transfer
Considering that the subject Transfer of Rights
Certificate of Title No. 24473 in the name of Ricardo Gurrea.
and Interest is null and void, the Court no longer finds it
necessary to resolve the third issue. No pronouncement as to costs.
SO ORDERED.
As to the fourth issue, it follows that
respondents title over the subject property should be
cancelled and the property reconveyed to the estate of
Ricardo, the same to be distributed to the latters
heirs. This is without prejudice, however, to respondents
right to claim his attorneys fees from the estate of
Ricardo, it being undisputed that he rendered legal
services for the latter.

Anent the last issue, the Court is not persuaded by

petitioners prayer for the grant of attorneys fees in an amount
as the Court may determine. The general rule is that attorneys
fees cannot be recovered as part of damages because no
premium should be placed on the right to litigate. [24] Article
2208 of the Civil Code provides that in the absence of
stipulation, attorneys fees and expenses of litigation, other than
G.R. No. 73913 January 31, 1989
judicial costs, cannot be recovered, except:
(1) When exemplary damages are awarded;
(2) When the defendants act or omission has JERRY T. MOLES, petitioner,
compelled the plaintiff to litigate with third vs.
persons or to incur expenses to protect his INTERMEDIATE APPELLATE COURT and MARIANO M.
interest;
DIOLOSA, respondents.
(3) In criminal cases of malicious prosecution
against the plaintiff;
(4) In case of a clearly unfounded civil action or Zoilo V. De la Cruz, Jr., Kenneth Barredo, Romeo Sabig and
proceeding against the plaintiff; Natalio V. Sitjao for petitioners.
(5) Where the defendant acted in gross and
evident bad faith in refusing to satisfy the Rolando N. Medalla and Jose G. Guinez, Jr., for private
plaintiffs plainly valid, just and demandable
respondents.
claim;
(6) In actions for legal support;
(7) In actions for the recovery of wages of
household helpers, laborers and skilled
workers; REGALADO, J.:
(8) In actions for indemnity under workmens
compensation and employers liability laws;
(9) In a separate civil action to recover civil liability This petition for review on certiorari assails the decision of the
arising from a crime; then Intermediate Appellate Court 1 dismissing the complaint
(10) When at least double judicial costs are awarded; filed by herein petitioner against the herein private respondent
(11) In any other case where the court deems it just in the former Court of First Instance of Negros Occidental in
and equitable that attorneys fees and expenses Civil Case No. 13821 thereof. 2

of litigation should be recovered.

The Court finds that the present case does not fall under any of
the enumerated exceptions. It is settled that even if a claimant
is compelled to litigate with third persons or to incur expenses
to protect its rights, still attorneys fees may not be awarded
where no sufficient showing of bad faith could be reflected in a
partys persistence in a case other than an erroneous conviction
of the righteousness of his cause. [25] In the present case, even
granting that petitioners were compelled to litigate and incur
expenses to protect their interests, attorneys fees may not be
awarded in their favor because there is no sufficient showing
that respondent acted in gross and evident bad faith in refusing
to satisfy their claim, in view of his erroneous belief and
judgment that he has lawfully acquired the subject property.
As to petitioners entitlement to other forms of damages, while
the complaint filed by herein petitioners with the trial court
contains a general prayer for the grant of other reliefs, the rule
is that evidence should be taken of the damages claimed and
The factual backdrop of this controversy, as culled from
the records, 3 shows that on May 17, 1978, petitioner
Jerry T. Moles commenced a suit against private
respondent Mariano M. Diolosa in the aforesaid trial
court, Branch IV in Bacolod City, for rescission of
contract with damages. Private respondent moved to
dismiss on the ground of improper venue, invoking
therefor Sales Invoice No. 075A executed between
petitioner and private respondent on April 23, 1977
which provides that all judicial actions arising from this
contract shall be instituted in the City of Iloilo. 4 This
was opposed by petitioner who averred that there is no
formal document evidencing the sale which is
substantially verbal in character. In an order dated June
23, 1978, the trial court denied the motion to dismiss, letter dated September 30, 1977, to accomplish the
holding that the question of venue could not be resolved following, with the explanations indicated by him:
at said stage of the case. The subsequent motion for
reconsideration was likewise denied. 1.) Crossed check for P15,407.10 representing.

Consequently, private respondent, invoking the aforesaid a) P 10,000.00-Overprice in the machine:

venue stipulation, preceeded to this Court on a petition
for prohibition with preliminary injunction in G.R. No. b) P203.00-Freight and handling of the machine;
49078, questioning the validity of the order denying his
aforesaid two motions and seeking to enjoin the trial c) P203.00-Share in the electric repair; and
court from further proceeding with the case. This
petition was dismissed for lack of merit in a resolution of d) P5,000.00- Insurance that Crispin will come
the Court, dated February 7, 1979, and which became back and repair the linotype machine at seller's
final on March 15, 1979. Thereafter, private respondent account as provided in the contract; after Crispin
filed his answer and proceeded to trial. has put everything in order when he goes home on
Sunday he will return the check of P15,000.00.
The aforecited records establish that sometime in 1977,
petitioner needed a linotype printing machine for his 2) Official receipt in the amount of P 50,000.00 as
printing business, The LM Press at Bacolod City, and full payment of the linotype machine.
applied for an industrial loan with the Development
Bank of the Philippines. (hereinafter, DBP) for the
These were immediately complied with by private
purchase thereof. An agent of Smith, Bell and Co. who is
respondent and on the same day, September 30,1977, he
a friend of petitioner introduced the latter to private 9
received the DBP check for P50,000.00.
respondent, owner of the Diolosa Publishing House in
Iloilo City, who had two available machines. Thereafter,
It is to be noted that the aforesaid official receipt No.
petitioner went to Iloilo City to inspect the two machines
0451, dated September 30, 1977 and prepared and
offered for sale and was informed that the same were
signed by private respondent, expressly states that he
secondhand but functional.
received from the petitioner the DBP check for
P50,000.00 issued in our favor in full payment of one (1)
On his second visit to the Diolosa Publishing House,
Unit Model 14 Linotype Machine as per Pro forma Invoice
petitioner together with Rogelio Yusay, a letter press 10
dated April 23, 1977.
machine operator, decided to buy the linotype machine,
Model 14. The transaction was basically verbal in nature
but to facilitate the loan application with the DBP, a pro On November 29, 1977, petitioner wrote private
forma invoice, dated April 23, 1977 and reflecting the respondent that the machine was not functioning
amount of P50,000.00 as the consideration of the sale, properly as it needed a new distributor bar. In the same
was signed by petitioner with an addendum that letter, petitioner unburdened himself of his grievances
payment had not yet been made but that he promised to and sentiments in this wise.
pay the full amount upon the release of his loan from the
aforementioned bank on or before the end of the We bought this machine in good faith
5
month. Although the agreed selling price was only because we trusted you very much being
our elder brother in printing and
P40,000.00, the amount on the invoice was increased by
publishing business. We did not hire
P10,000.00, said increase being intended for the
anybody to look over the machine, much
purchase of new matrices for said machine.
more ask for a rebate in your price of
P40,000.00 and believed what your
Sometime between April and May, 1977, the machine
trusted two men, Tomas and Crispin,
was delivered to petitioner's publishing house at Tangub,
said although they were hiding the real
Bacolod City where it was installed by one Crispino
and actual condition of the machine for
Escurido, an employee of respondent Diolosa. Another
your business protection.
employee of the Diolosa Publishing House, Tomas
Plondaya, stayed at petitioners house for almost a month
Until last week, we found out the worst
to train the latter's cousin in operating the machine. 6
ever to happen to us. We have been
cheated because the expert of the
Under date of August 29, 1977, private respondent
Linotype machine from Manila says, that
issued a certification wherein he warranted that the
the most he will buy your machine is at
machine sold was in A-1 condition, together with other 11
7 P5,000.00 only. ...
express warranties.

Private respondent made no reply to said letter, so

Prior to the release of the loan, a representative from the
petitioner engaged the services of other technicians.
DBP, Bacolod, supposedly inspected the machine but he
Later, after several telephone calls regarding the defects
merely looked at it to see that it was there . 8 The
in the machine, private respondent sent two technicians
inspector's recommendation was favorable and,
to make the necessary repairs but they failed to put the
thereafter, petitioner's loan of P50,000.00 was granted
machine in running condition. In fact, since then
and released. However, before payment was made to
petitioner was never able to use the machine. 12
private respondent, petitioner required the former, in a
On February 18, 1978, not having received from private
respondent the action requested in his preceding letter
as herein before stated, petitioner again wrote private
respondent, this time with the warning that he would be
forced to seek legal remedies to protect his interest.
(4) Ordering the defendant to indemnify
the plaintiff the sum of Four Thousand
Five Hundred Pesos (P4,500.00)
representing unearned income or actual
13
damages;

Obviously in response to the foregoing letter, private
respondent decided to purchase a new distributor bar
and, on March 16, 1978, private respondent delivered
this spare part to petitioner through one Pedro Candido.
However, when thereafter petitioner asked private
respondent to pay for the price of the distributor bar, the
latter asked petitioner to share the cost with him.
Petitioner thus finally decided to indorse the matter to
his lawyer.
An expert witness for the petitioner, one Gil Legaspina,
declared that he inspected the linotype machine involved
in this case at the instance of petitioner. In his
inspection thereof, he found the following defects: (1) the
vertical automatic stop lever in the casting division was
worn out; (2) the justification lever had a slight breach
(balana in the dialect); (3) the distributor bar was worn
out; (4) the partition at the entrance channel had a tear;
(5) there was no "pie stacker" tube entrance; and (6) the
slouch arm lever in the driving division was worn out.
It turned out that the said linotype machine was the
same machine that witness Legaspina had previously
inspected for Sy Brothers, a firm which also wanted to
buy a linotype machine for their printing establishment.
Having found defects in said machine, the witness
informed Sy Brother about his findings, hence the
purchase was aborted. In his opinion, major repairs were
needed to put the machine back in good running
condition. 14
After trial, the court a quo rendered a decision the
dispositive portion of which reads:
IN VIEW OF THE FOREGOING
CONSIDERATIONS, judgment is hereby
rendered as follows:
(1) Decreeing the rescission of the
contract of sale involving one linotype
machine No. 14 between the defendant
as seller and the plaintiff as buyer;
(2) Ordering the plaintiff to return to the
defendant at the latter's place of
business in Iloilo City the linotype
machine aforementioned together with
all accessories that originally were
delivered to the plaintiff;
(3) Ordering the defendant to return to
the plaintiff the sum of Forty Thousand
Pesos (P40,000.00) representing the
price of the linotype machine, plus
interest at the legal rate counted from
May 17, 1978 when this action was
instituted, until fully paid;
(5) Ordering the defendant to pay the
plaintiff the sum of One Thousand Pesos
(Pl,000.00) for attorney's fees.
Costs against the defendant. 15
From this decision, private respondent appealed to the
Intermediate Appellate Court which reversed the
judgment of the lower court and dismissed petitioner's
complaint, hence the present petition.
We find merit in petitioner's cause.
On the matter of venue, private respondent relies on the
aforementioned Sales Invoice No. 076A which allegedly
requires that the proper venue should be Iloilo City and
not Bacolod City. We agree with petitioner that said
document is not the contract evidencing the sale of the
linotype machine, it being merely a preliminary
memorandum of a proposal to buy one linotype machine,
using for such purpose a printed form used for printing
job orders in private respondent's printing business. As
hereinbefore explained, this issue on venue was brought
to Us by private respondent in a special civil action for
prohibition with preliminary injunction in G.R. No.
49078. After considering the allegations contained, the
issues raised and the arguments adduced in said
petition, as well as the comments thereto, the Court
dismissed the petition for lack of merit. Respondent
court erred in reopening the same issue on appeal, with
a contrary ruling.
Furthermore, it was error for the respondent court, after
adopting the factual findings of the lower court, to
reverse the latter's holding that the sales invoice is
merely a pro forma memorandum. The records do not
show that this finding is grounded entirely on
speculation, surmises or conjectures as to warrant a
reversal thereof. 16 In fact, as hereinbefore stated, private
respondent expressly admitted in his official receipt No.
0451, dated September 30, 1977, that the said sales
invoice was merely a pro forma invoice. Consequently, the
printed provisions therein, especially since the printed
form used was for purposes of other types of
transactions, could not have been intended by the
parties to govern their transaction on the printing
machine. It is obvious that a venue stipulation, in order
to bind the parties, must have been intelligently and
deliberately intended by them to exclude their case from
the reglementary rules on venue. Yet, even such
intended variance may not necessarily be given judicial
approval, as, for instance, where there are no restrictive
or qualifying words in the agreement indicating that
venue cannot be laid in any place other than that agreed
17 18
upon by the parties, and in contracts of adhesion.
Now, when an article is sold as a secondhand item, a
question arises as to whether there is an implied
warranty of its quality or fitness. 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 a secondhand articles there may be,
under some circumstances, an implied warranty of
fitness for the ordinary purpose of the article sold or for
19
the particular purpose of the buyer.
In a line of decisions rendered by the United States
Supreme Court, it had theretofore been held that there is
no implied warranty as to the condition, adaptation,
fitness, or suitability for the purpose for which made, or
the quality, of an article sold as and for a secondhand
20
article.
Thus, in finding for private respondent, the respondent
court cited the ruling in Sison vs. Ago, et al. 21 to the
effect that unless goods are sold as to raise an implied
warranty, as a general rule there is no implied warranty
in the sale of secondhand articles. 22
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;
xxx
In Drumar Mining Co. vs. Morris Ravine Mining Co., 23 the
District Court of Appeals, 3rd District, California, in
applying a similar provision of law, ruled:
'There is nothing in the Uniform Sales
Act declaring there is no implied
warranty in the sale of secondhand
goods. Section 1735 of the Civil Code
declares there is no implied warranty or
condition as to the quality or fitness for
any particular purpose, of goods
supplied under a contract to sell or a
sale, except (this general statement is
followed by an enumeration of several
exceptions). It would seem that the
legislature intended this section to apply
to all sales of goods, whether new or
secondhand. In subdivision 1 of this
section, this language is used: where the
buyer ... makes known to the seller the
particular purpose for which the goods
are required, and it appears that the
buyer relies on the seller's skill or
judgment ... there is an implied
warranty that the goods shall be
reasonably fit for such purpose.'
Furthermore, and of a more determinative role in this
case, a perusal of past American decisions 24 likewise
reveals a uniform pattern of rulings to the effect that an
express warranty can be made by and also be binding on
the seller even in the sale of a secondhand article.
In the aforecited case of Markman vs. Hallbeck, while
holding that there was an express warranty in the sale of
a secondhand engine, the court said that it was not
error to refuse an instruction that upon the sale of
secondhand goods no warranty was implied, since
secondhand goods might be sold under such
circumstances as to raise an implied warranty.
To repeat, in the case before Us, a certification to the
effect that the linotype machine bought by petitioner was
in A-1 condition was issued by private respondent in
favor of the former. This cannot but be considered as an
express warranty. However, it is private respondent's
submission, that the same is not binding on him, not
being a part of the contract of sale between them. This
contention is bereft of substance.
It must be remembered that the certification was a
condition sine qua non for the release of petitioner's loan
which was to be used as payment for the purchase price
of the machine. Private respondent failed to refute this
material fact. Neither does he explain why he made that
express warranty on the condition of the machine if he
had not intended to be bound by it. In fact, the
respondent court, in declaring that petitioner should
have availed of the remedy of requiring repairs as
provided for in said certification, thereby considered the
same as part and parcel of the verbal contract between
the parties.
On the basis of the foregoing circumstances, the
inescapable conclusion is that private respondent is
indeed bound by the express warranty he executed in
favor of herein petitioner.
We disagree with respondent court that private
respondents express warranty as to the A-1 condition of
the machine was merely dealer's talk. Private respondent
was not a dealer of printing or linotype machines to
whom could be ascribed the supposed resort to the
usual exaggerations of trade in said items. His
certification as to the condition of the machine was not
made to induce petitioner to purchase it but to confirm
in writing for purposes of the financing aspect of the
transaction his representations thereon. Ordinarily, what
does not appear on the face of the written instrument
should be regarded as dealer's or trader's
talk; 25 conversely, what is specifically represented as
true in said document, as in the instant case, cannot be
considered as mere dealer's talk.
On the question as to whether the hidden defects in the
machine is sufficient to warrant a rescission of the contract
between the parties, 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
26
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 and express warranty. Consequently, the
general rule on rescission of contract, which is four
years 27 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, 28 and this case does not have the
features for an exception to said rule.
WHEREFORE, the judgment of dismissal of the respondent
court is hereby REVERSED and SET ASIDE, and the decision of
the court a quo is hereby REINSTATED.
SO ORDERED.
G.R. No. 96271 June 26, 1992
NATIVIDAD VILLOSTAS, petitioner,
vs.
THE HON. COURT OF APPEALS, SECOND DIVISION,
THE HON. SALVADOR S. TENSUAN as Presiding
Judge of RTC, Makati, Branch 146 and ELECTROLUX
MARKETING, INCORPORATED, respondents.
PARAS, J.:
This is a petition for review on certiorari seeking the
annulment of the resolution 1 of the respondent Court of
Appeals, dated November 16, 1990, in CA-G.R. Sp. No.
23178 denying the petitioner's appeal which in effect
affirms the decision 2
of the Regional Trial Court in Civil
Case No. 90-1420 sustaining the decision 3 of the
Metropolitan Trial Court, Branch 64, Makati, Metro
Manila, dated November 15, 1989 ordering herein
petitioner to pay private respondent, among others, the
amount of P14,540.00.
The established facts of the case are as follows:
Desiring to have safe drinking water at home, herein
petitioner Villostas and her husband decided to buy a
water purifier. At about this time, private respondent's
Electrolux sales agents were making door to door selling
of its products in the subdivision where petitioner has
her residence. Because private respondent's sales agents
had assured petitioner of the very special features of
their brand of water purifier, petitioner Villostas placed
an order for one (1) unit of said water purifier. On
September 13, 1986, an Electrolux Aqua Guard water
purifier was delivered and installed at petitioner's
residence (Rollo, p. 38; 49). Consequently, petitioner
signed the Sales Order (Annex "B", p. 31) and the
Contract of Sale with Reservation of Title (Annex "A", p.
31) in October 1986 (Rollo, p. 38, 22). A warranty
certificate, Exhibit "l", was issued by private respondent
which provides that:
ELECTROLUX MARKETING,
INCORPORATED WARRANTS THIS
QUALITY ELECTROLUX PRODUCT TO
PERFORM EFFICIENTLY FOR ONE
FULL YEAR FROM DATE OF ORIGINAL
PURCHASE. (Rollo, p. 49)
The purchase of said unit was on installment basis
under which petitioner would pay the amount of
P16,190.00 in 20 monthly installments of P635.00 a
month.
After two (2) weeks, petitioner verbally complained for
the first time about the impurities, dirtiness and bad
odor coming out of the unit (Rollo, p. 22). On October 21,
1986, private respondent Electrolux sent its service
technician to examine and test the water purifier. The
water which came out was dirty so the unit was shut off
automatically (Ibid.).The technician changed the filter of
the unit on said date without charge with an instruction
that the filter should be changed every 6 months
otherwise the unit will not last long as the water in the
area was dirty (Ibid.).
After the filter was replaced, petitioner paid the amount
of Pl,650.00 on November 18, 1986 which included the
first amortization of P700.00 (Ibid.).
Petitioner complained for the second and third time
when dirty water still came out of the water purifier after
the replacement of the filter. It was on the third
complaint of petitioner Villostas when the service
technician gave advise that the filter should be changed
every six (6) months costing about P300.00 which was
considered to be uneconomical by the former (Rollo, pp.
22-23).
On December 9, 1986, petitioner sent a letter to the
private respondent's branch manager stating therein her
complaint that the actual performance of the carbon
filter was only for a month instead of the private
respondent's claim that the replacement of such filter
will be only once every six (6) months. The petitioner,
citing the above incident as uneconomical, decided to
return the unit and demand a refund for the amount
paid (Rollo, p. 76), Electrolux's branch manager offered
to change the water purifier with another brand of any of
its appliance of the unit in her favor. Petitioner did not
accept it as she was disappointed with the original unit
which did not perform as warranted. Consequently,
petitioner did not pay any more the subsequent
installments in the amount of P14,540.00 exclusive of
interests (Rollo, p. 23, 120).
Court of Makati rendered its judgment affirming the
disputed decision (Rollo, pp. 21-24).
A motion for reconsideration having been denied,
petitioner elevated the case to the Court of Appeals and
was given an inextendible period of 15 days to file a
petition for review. Anticipating that she would fail to
comply with the deadline, herein petitioner filed a second
extension to file a petition for review which, however, was
denied.
Herein, petitioner comes to this Court via petition for
review on certiorari.
Petitioner assigns the following errors:
I
WHETHER OR NOT THE PETITION MADE BY THE
PETITIONER TO THE SUPREME COURT IS PROPER
AND RIPE FOR JUDICIAL REVIEW.
II

What transpired next was an exchange of demand letter

WHETHER OR NOT PETITIONER IS ENTITLED TO
and reply between petitioner and private respondent.
RESCIND THE CONTRACT IN VIOLATION OF THE
WARRANTY FOR HIDDEN DEFECT OF THE ARTICLE
Ultimately, respondent Electrolux Marketing, Inc. filed a DELIVERED BY THE RESPONDENT.
complaint against petitioner Villostas with the MTC of
Makati for the recovery of the sum of P14,540.00
III
representing the unpaid balance of the purchase price of
one (1) Electrolux Water Purifier plus interest thereon at
WHETHER OR NOT PETITIONER IS BOUND TO PAY
the rate of 42% per annum in accordance with the Sales
RESPONDENT HER REMAINING BALANCE OF
Contract with Reservation of Title (Rollo, pp. 28-30).
P14,540.00 PLUS INTEREST THEREON PURSUANT TO
THE CONTRACT OF SALE.
In her amended answer, petitioner Villostas asserted that
by reason of private respondent's breach of warranty she
IV
was availing of the remedy of rescission of the contract of
sale and offered to return the water purifier to the seller
WHETHER OR NOT PETITIONER IS LIABLE TO PAY
as in fact, it was already being offered for return as early
RESPONDENT ATTORNEY'S FEES PURSUANT TO THE
as December 9, 1986, aside from claiming for the refund
CONTRACT PLUS COSTS OF SUIT.
of her payments. Petitioner prayed that the contract of
sale be declared rescinded and the payments refunded to
The main issue in the instant case is whether or not the
her together with the full grant of the claims asserted in
petitioner is entitled to rescind the contract on the basis
her counterclaims (Rollo, pp. 35-36).
of a violation of the warranty of the article delivered by
the respondent.
After trial on the merits. the MTC of Makati rendered its
decision, the dispositive portion of which reads:
Petitioner contends that the Regional Trial Court erred
when it ruled that its claim for rescission had prescribed
WHEREFORE, judgment is hereby rendered
inasmuch as she had formally notified the seller within a
ordering the defendant to pay plaintiff as follows:
reasonable time, that is, 2 months and 26 days, from the
delivery of water purifier on September 13, 1986 of her
1) the amount of P14,540.00 representing the
election to rescind.
unpaid outstanding balance of the aforesaid unit,
plus interest thereon at the rate of P42% per
Private respondent counters that the petitioner is not
annum until fully paid;
entitled to rescission vis-a-vis alleged violation of the
warranty for hidden defects for the reason that
2) the amount of P1,000.00 as attorney's fees and
rescission of contract sought by petitioner was beyond
the jurisdictional competence of the trial court. It adds
3) dismissing the counterclaim of defendant. that petitioner could no longer avail of rescission
because said legal recourse was time barred judging
SO ORDERED. (Rollo, pp. 38-44) from delivery of the water purifier on September 13,
1986 pursuant to Art. 1571 of the New Civil Code.
The petitioner, thereafter, filed a notice of appeal from
the judgment of said lower court. The Regional Trial The petition is impressed with merit.
Anent the jurisdictional competence of the Metropolitan
Trial Court to order rescission of contract, suffice it to
say that the action was initiated by herein private
respondent Electrolux when it filed a complaint for
collection of a sum of money worth P14,540.00, against
petitioner Villostas. Said amount is indubitably within
the jurisdiction of the Metropolitan Trial Court since it
does not exceed P20,000.00 exclusive of interest and
costs but inclusive of damages of whatever (Maceda v.
CA, G.R. No. 83545, 176 SCRA 440 [1989]). Moreover,
the jurisdiction of the court over the subject matter is
determined by the allegations of the complaint
irrespective of whether or not the plaintiff is entitled to
recover upon all or some of the claims asserted therein
(Caparros v. CA, G.R. No. 56803, 170 SCRA 758 [1989]).
When the petitioner, therefore, raised rescission of
contract in her answer, the court is not divested of its
jurisdiction over the case on account of defenses raised
by the answer. The court is then merely authorized to
receive evidence thereon (Dela Cruz v. Bautista, G.R. No.
39692, 186 SCRA 517, [1990]). Clearly, the jurisdiction
of the court cannot be made to depend upon the
defenses set up in the answer or upon the motion to
dismiss. Otherwise, the question of jurisdiction would
depend almost entirely upon the defendant (Caparros v.
CA, supra.).

As regards the contention that the action for rescission

is barred by prescription under Art. 1571 of the Civil
Code, the same is bereft of merit. It must be pointed out
that at the time the Electrolux Aqua Guard water
purifier was delivered and installed at petitioner
Villostas' residence a Warranty Certificate was issued by
private respondent Electrolux which reads:

ELECTROLUX MARKETING,
INCORPORATED WARRANTS THIS
QUALITY ELECTROLUX PRODUCT TO
PERFORM EFFICIENTLY FOR ONE
FULL YEAR FROM DATE OF ORIGINAL
PURCHASE.

The foregoing is clearly an express warranty regarding

the efficiency of the water purifier. On this regard the
court said that 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
SECOND DIVISION
warranties. The present case involves one with an
express warranty. Consequently, the general rule on
rescission of contract, which is four years (Article 1389, SPOUSES MICHAEL UY & G.R. No. 158370
Civil Coded) shall apply (Moles v. IAC, G.R. No. 73913, BONITA UY,
169 SCRA 777 [1989]). Inasmuch as the instant case Petitioners,
involves an express warranty, the filing of petitioner's
amended answer on September 30, 1988 is well within - versus - Present:

the four-year prescriptive period for rescission of

contract from September 13, 1986, which was the
delivery date of the unit.
PREMISES CONSIDERED, the decision appealed from is
REVERSED and SET ASIDE and the complaint of private
respondent is DISMISSED. The sale of the water purifier
is hereby RESCINDED.
SO ORDERED.
EDUARDO ARIZA, ERLINDA A. PUNO, J., Chairperson,
ABDON, BENJAMIN ARIZA, SANDOVAL-GUTIERREZ,
TERESITA A. SIMPORIOS, CORONA,
HEIRS OF MARIANO ARIZA, JR., *AZCUNA, and
namely: JUANITA L. ARIZA, GARCIA, JJ.
DENNIS L. ARIZA, ROLDAN L.
ARIZA, & JOVANNI L. ARIZA; and
the Heirs of FAUSTO ARIZA, namely:
JESUSA ARIZA, THELMA SOLLANO,
ARTURO ARIZA, ELDINA CONOS, Promulgated:
VILMA SABERON, & REBECCA
PADULLO,
Respondents. August 17, 2006
x------------------------------------x
DECISION
PUNO, J.:
The facts:
On October 8, 1996, spouses Michael and Bonita Uy,
petitioners, purchased 200 square meters of the parcel of land
designated as Lot No. 3229-C-2-F, covered by Transfer
Certificate of Title (TCT) No. T-20007, from respondents. The
contract stipulated that petitioners had the right of choice to
designate which portion of Lot No. 3229-C-2-F would be the
subject of the sale.[1]
Petitioners exercised their right to choose within two to three
months from the sale, informing respondents that they have
selected and in fact occupied around 200 square meters of a
portion of land.[2]
On August 4, 1997, petitioners purchased another 200 square
meters of the same Lot No. 3229-C-2-F, with the same option to
choose which portion. They selected and occupied an adjoining
portion to the lot in their first sale.[3]
It appears that the parcels of land petitioners had
chosen and occupied were already titled in the names of the
Delgados, namely, Carlos, Allan and Antonio, Jr. Although
originally part of Lot No. 3229-C-2-F, the two parcels of land
were part of some 3,500 square meters that were purportedly
sold by the respondents to the Delgados on July 31, 1985. This
deed of sale to the Delgados was annotated on TCT No. T-20007
(covering Lot No. 3229-C-2-F) on June 10, 1993, and a new title
for the covered area was issued on April 21, 1994, which was
likewise annotated on TCT No. T-20007 on the same date.
[4]
Thus, at the time of the first sale by the respondents to
petitioners, the two parcels of land had been cancelled from Lot
No. 3229-C-2-F (covered by TCT No. T-20007), and were already
part of Lot No. 3229-C-2-F-1 (covered by TCT No. T-39106). [5]
Petitioners were sued for unlawful detainer by the
Delgados. In September 1998, petitioners entered into a
compromise agreement with the Delgados and surrendered
possession of the subject parcels of land. Petitioners
compromised the case without giving notice to respondents. [6]
Thereafter, petitioners demanded from respondents that they be
allowed to choose again from Lot No. 3229-C-2-F. When
respondents refused, petitioners filed, on March 12, 1999, a
case for specific performance with delivery of possession of real
property and damages.[7] Petitioners anchored their claim for
specific performance on the averment that they could not
exercise [their] right to choose the portion bought from the
parcel of land afore-described because the portion pointed out
by the [petitioners] were already sold and claimed by third
persons[8]
Respondents filed their answer and by way of special and
affirmative defenses alleged that they had already complied with
their obligation to deliver, as petitioners had already chosen and
been in possession of the parcels of land they chose.
[9]
Respondents also faulted petitioners for losing possession of
the parcels of land by entering into a compromise agreement
with the Delgados on two grounds: first, because respondents
have allegedly initiated the necessary legal steps to defend their
possessory rights to the disputed land by filing a case for the
declaration of nullity of the title of the Delgados, and second,
because petitioners failed to interpose a third-party complaint
to implead respondents in the unlawful detainer case. [10]
The trial court denied respondents motion to dismiss based on
their Special and Affirmative Defenses as well as their motion
for reconsideration.[11] They went to the Court of Appeals on an
action for certiorari and prohibition contending that the trial
court committed grave abuse of discretion in holding that:
1. petitioners had a cause of action for
specific performance against respondents;
2. petitioners erroneously selected the
parcels of land by some unfortunate turn
of events so that the portions selected
were not owned by respondents but the
Delgados; and
3. the parcels of land were owned by the
Delgados, a conclusion that was
premature considering that the case for
the declaration of nullity of the Delgados
title covering the parcels was pending
before the trial court.
The Court of Appeals reversed and set aside the orders
of the trial court. It held that petitioners had no cause of action
to file a case of specific performance against respondents. [12] It
ruled that the proper remedy of the petitioners is an action for
enforcement of warranty against eviction.
Petitioners now come before this Court on a petition
for review on the following issues:
(1) whether the complaint filed in the RTC by
petitioners fails to state a cause of
action for specific performance with
delivery of possession of real property
and damages against respondents;
and
(2) whether the RTCs denial of the motion to
dismiss on lack of cause of action
was the proper subject of certiorari
before the Court of Appeals.
We deny the petition.
We quote with approval the following ruling of the
appellate court, viz:
At the outset, it could already be
seen that indeed, [petitioners] have no cause
of action against [respondents]. The case for
specific performance which was filed by
[petitioners] against [respondents] is not the
proper remedy in this case. Rather, said
action was purely an afterthought on the part
of [petitioners] when they were eventually
evicted from the lots they bought from
[respondents].
The facts of the case are very
clear. [Petitioners] bought from [respondents]
a 200 square meter lot which was part of a
bigger parcel of land covered by TCT No.
20007 registered in the names of
[respondents], and which [petitioners]
immediately took possession of. After a year,
[petitioners] again bought from [respondents]
and took possession of the adjacent lot also
measuring 200 square meters. Since the sale,
[petitioners] had been in peaceful possession
of the lots until they were evicted from the
same by third persons claiming to be the
owners of the said lots. Thus, if [petitioners]
have a cause of action against [respondents],
it would be one for the enforcement of
 warranty against eviction and not one for
specific performance.
The core of [petitioners] argument to
support their action for specific performance
was that [respondents] failed to deliver to
them the lots subject matter of the sale, since
what was delivered were not owned by
[respondents] but by third persons.They
likewise maintain that they were not able to
exercise their choice on which lot to occupy as
agreed upon by them. We do not find these
arguments tenable. The truth of the matter is
that [respondents] were able to deliver the
said parcels of land to [petitioners]. It could
not be said that [petitioners were] deprived of
their choice on which parcel of land they were
to buy and occupy. The fact that they even
decided to buy the lot adjacent to the first lot
they bought would clearly indicate that the
said lots were their choice. Moreover,
[petitioners] had been enjoying possession of
the same until an unlawful detainer case was
filed against them by third persons. After
having enjoyed the property for sometime,
[petitioners] cannot now come before the court
claiming that [respondents] failed to deliver
the property subject of the sale.
There is no denying also that these
lots were originally part of a bigger parcel of
land owned by [respondents] and covered by
TCT No. 20007. That third persons armed
with a certificate of title in their favor
suddenly surfaced claiming to be the owners
of the subject lots does not automatically
render the delivery made by [respondents] to
[petitioners] ineffectual. Stated otherwise,
although third persons later on claimed
ownership over the property, it does not mean
that [respondents] failed to deliver the lots
subject matter of the sale. It is also worth
mentioning that the claim of these third
persons to the subject lots is being disputed
by [respondents] as in fact, they filed an
action for the declaration of nullity of the title
of Allan, Carlos and Antonio Delgado over the
subject lots and which up to now is still
pending before the Court of Appeals. This
action on the part of [respondents] would
show that they do not recognize the right of
these third persons to the subject lots and
that [respondents] still maintain that they are
the lawful owners of the same.
What is before Us is a clear case of
eviction. Thus, the action for specific
performance filed by [petitioners] against
[respondents] must necessarily fail. If at all,
[petitioners] may file an action for the
enforcement of warranty in case of eviction
which every vendor of a parcel of land is
enjoined by law to guarantee as provided
under Article 1548 of the New Civil Code:
Art. 1548. Eviction shall take place whenever
by a final judgment based on a right prior to the sale
or an act imputable to the vendor, the vendee is
deprived of the whole or part of the thing purchased.
The vendor shall answer for the eviction even
though nothing has been said in the contract on the
subject.
The contracting parties, however, may
increase, diminish or suppress this legal obligation of
the vendor.
But even if [petitioners] would file an
action for the enforcement of warranty in case
of eviction against [respondents], We are
afraid that the same will not prosper. The
records of the case reveal that the unlawful
detainer case filed by third persons against
[petitioners], which led to the ouster of the
latter from the subject lots, was decided by
compromise agreement without impleading
[respondents] as third-party defendants. It
should be stressed that in order for the case
to prosper, it is a precondition that the seller
must have been summoned in the suit for the
eviction of the buyer. This rule is provided
under the provisions of Articles 1558 and
1559 of the New Civil Code, to wit:
Art. 1558. The
vendor shall not be
obliged to make good the
proper warranty, unless
he is summoned in the
suit for eviction at the
instance of the vendee.
Art. 1559. The
defendant vendee shall ask,
within the time fixed in the
Rules of Court for
answering the complaint,
that the vendor be made a
co-defendant.
Applying the above-quoted
provisions of law, the Supreme Court
enumerated the requisites in the enforcement
of a vendors liability for eviction, in the case
of Maria Luisa De Leon Escaler and Ernesto
Escaler v. Court of Appeals, et al., [G.R. No. L-
42636. August 1, 1985.], to wit:
In order that a vendors liability for eviction may be
enforced, the following requisites must concur a) there must be
a final judgment; b) the purchaser has been deprived of the
whole or part of the thing sold; c) said deprivation was by virtue
of a right prior to the sale made by the vendor; and d) the
vendor has been summoned and made co-defendant in the suit
for eviction at the instance of the vendee. In the case at bar, the
fourth requisite that of being summoned in the suit for eviction
(Case No. 4252) at the instance of the vendee is not present.
We need only add that petitioners could have filed a
third-party complaint against the respondents when they were
sued for eviction by the
Delgados under Rule 6, Section 11.[13] In Firestone Tire and
Rubber Co. of the Philippines v. Tempongko,[14] we explained
the function of a third-party complaint, viz:
The third-party complaint, is x x x a
procedural device whereby a third party who is
neither a party nor privy to the act or deed
complained of by the plaintiff, may be brought
into the case with leave of court, by the
defendant, who acts as third-party plaintiff to
enforce against such third-party defendant a
right for contribution, indemnity, subrogation
or any other relief, in respect of the plaintiffs
claim. The third-party complaint is actually
independent of and separate and distinct from
the plaintiffs complaint. Were it not for this
provision of the Rules of Court, it would have
to be filed independently and separately from
the original complaint by the defendant
against the third-party. But the Rules permit
defendant to bring in a third-party defendant
or so to speak, to litigate his separate cause of
action in respect of plaintiffs claim against a
third party in the original and principal case
with the object of avoiding circuitry of action
 and unnecessary proliferation of lawsuits and
of disposing expeditiously in one litigation the
entire subject matter arising from one
particular set of facts. Prior leave of Court is
necessary, so that where the allowance of a
third-party complaint would delay the
resolution of the original case, such as when
the third-party defendant cannot be located or
where matters extraneous to the issue of
possession would unnecessarily clutter a case
of forcible entry, or the effect would be to
introduce a new and separate controversy into
the action, the salutary object of the rule
would not be defeated, and the court should in
such cases require the defendant to institute a
separate action. x x x.
If petitioners filed the third-party complaint against the
respondents, they could have sought from the respondents x x x
contribution, indemnity, subrogation or any other relief in
respect of the claim of the Delgados. The phrase any other relief
includes a claim of a vendee for warranty against the vendor. [15]
IN VIEW WHEREOF, the petition is denied.
No cost.
SO ORDERED.
SECOND DIVISION
CARLOS B. DE GUZMAN, G.R. No. 141480
Petitioner,
Present:
- versus - CORONA,
AZCUNA, and
GARCIA, JJ.
TOYOTA CUBAO, INC.,
Respondent. Promulgated:
November 29, 2006
x -------------------------------------------- x
DECISION
AZCUNA, J.:
This is a petition for review on certiorari under Rule 45 of the
Rules of Court seeking to annul the Order,[1] dated September 9,
1999, of the Regional Trial Court of Quezon City (the RTC),
Branch 105, which dismissed the complaint for damages filed
by petitioner Carlos B. De Guzman against respondent Toyota
Cubao, Inc.
On November 27, 1997, petitioner purchased from respondent a
brand new white Toyota Hi-Lux 2.4 SS double cab motor
vehicle, 1996 model, in the amount of P508,000. Petitioner
made a down payment of P152,400, leaving a balance
of P355,600 which was payable in 36 months with 54%
interest. The vehicle was delivered to petitioner two days
later. On October 18, 1998, petitioner demanded the
replacement of the engine of the vehicle because it developed a
crack after traversing Marcos Highway during a 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.
On April 20, 1999, petitioner filed a complaint for
damages[2] against respondent with the RTC. Respondent moved
to dismiss the case on the ground that under Article 1571 of
the Civil Code, the petitioners cause of action had prescribed as
the case was filed more than six months from the date the
vehicle was sold and/or delivered.
In an Order dated September 9, 1999, the RTC granted
respondents motion and dismissed the complaint, thus:
For the Courts consideration are: (1) defendants Motion to
Dismiss; (2) plaintiffs Opposition thereto; (3) defendants
Reply; and (4) plaintiffs Rejoinder.
The Court agrees with the plaintiffs counsel that the
subject pick-up is a consumer product because it is used
for personal, family or agricultural purposes, contrary to
defendant counsels claim that it is not because it is a non-
consumable item.
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).
Under RA No. 7394, the provisions of the Civil Code on
conditions and warranties shall govern all contracts of
sale with condition and warranties (Art. 67). The duration
of the implied warranty (not accompanied by an express
warranty) shall endure not less than sixty days nor more
than one (1) year following the sale of new consumer
products (Art. 68, par. [e]). The two (2) year prescriptive
period under Art. 169 cannot prevail over Art. 68 because
the latter is the specific provision on the matter.
The Court has noted that the prescriptive period for
implied and express warranties cannot be the same. In the
Civil Code, a redhibitory action for violation of an implied
warranty against hidden defects prescribes in six (6)
months, while if it based on an express warranty[,] the
action prescribes in four (4) years. Under RA No. 7394, the
implied warranty cannot be more than one (1) year;
however, the implied warranty can only be of equal
duration to that an express warranty when the implied
warranty of merchantability accompanies an express
warranty (Art. 68, par. [e]). Therefore, the prescriptive
period of two years under Art. 169 does not cover an
implied warranty, which is not accompanied by an express
warranty. It is applicable to cases where there is an
express warranty in the sale of the consumer product.
Relative to plaintiffs argument that the claim for moral
and exemplary damages and attorneys fees is based
on quasi-delict or breach of contract, such are merely
ancillary to the main cause of action which is based
on warranty against hidden defects. Without the latter,
the former cannot stand alone.
Based on the record, the subject vehicle was
purchased on 27 November 1997 and delivered on 29
November 1997. This case was filed only on 20 April
1999 or almost nineteen (19) months from [the] sale
and/or delivery. Applying Art. 1571 of Civil Code, the
action is barred by prescription because the complaint
was filed more than six (6) months after the sale
and/or delivery of the vehicle. In addition, the
duration of the implied warranty of not more than one
(1) year under Art. 68, par (e) of RA No. 7394 has
already elapsed.
Accordingly, defendants Motion is granted and the
plaintiffs Complaint is ordered dismissed.
SO ORDERED[3]
On December 21, 1999, the RTC denied petitioners motion for
reconsideration, as follows:
Submitted for resolution are: (1) plaintiffs Motion for
Reconsideration; (2) defendants Opposition; and (3)
plaintiffs Reply.
Although plaintiffs motion was filed beyond the ten-
day period, the Court is convinced that it was not for
the purpose of delay; hence, it cannot be considered
as a mere scrap of paper.

After a thorough study, the Court resolves that while
reference to Art. 68, par. (e) of RA No. 7394 may have
been misplaced, yet the subject sale carried an
implied warranty whose prescriptive period is six (6)
months under Art. 1571 of the Civil Code.
Accordingly, plaintiffs Motion for Reconsideration is
DENIED.
SO ORDERED.[4]
Petitioner thereupon filed a petition for review on certiorari with
this Court.
The petition should be denied.
First, on procedural grounds, the petition should forthwith be
denied for violation of the hierarchy of courts. Petitioner states
that the present petition is an appeal by certiorari on pure
questions of law, from the final Order of Branch 105 of the
Regional Trial Court of Quezon City in Civil Case No. Q-99-
37381 under Rule 45 of the Rules of Court. Upon receipt of the
Order of the RTC, dated September 9, 1999, on September 21,
1999, petitioner filed a motion for reconsideration on September
28, 1999. On December 21, 1999, the RTC denied petitioners
motion. When petitioner received a copy of the said order
on January 18, 2000, he had fifteen (15) days from receipt
within which to appeal to the Court of Appeals by filing a notice
of appeal under Section 2(a) of Rule 41, from an order of the
RTC issued in the exercise of its original jurisdiction. The RTCs
order dated September 9, 1999 and its subsequent order
dated December 21, 1999 partake of the nature of a final
disposition of the case. Hence, the appropriate remedy
petitioner should have taken was to file a notice of appeal from
the RTC to the Court of Appeals, not a petition for review
on certiorari directly with this Court.
Although petitioner intended his petition, filed
on February 2, 2000, to be one filed under Rule 45 and he filed
it well within the 15-day reglementary period counted
from January 18, 2000, the same was in effect a petition
for certiorari under Rule 65, and is therefore dismissible for
violation of the hierarchy of courts under Section 4
thereof. Petitioner failed to show that special and important
reasons or exceptional and compelling circumstances exist to
justify a direct filing of the petition with this Court instead of
first taking an appeal to the Court of Appeals. [5] Likewise,
petitioner cannot find refuge in the argument that he was
raising pure questions of law. The sole matter petitioner assails
in this action is the RTCs order of dismissal of his complaint for
damages on the ground of prescription which was tantamount
to an adjudication on the merits. Again, petitioner should have
resorted to the remedy of appealing the case to the Court of
Appeals by filing a notice of appeal with the RTC.
Second, even if the Court were to disregard the procedural
infirmity, the petition should be denied for lack of merit.
In his complaint, petitioner alleged and prayed, thus:
2. Last 27 November 1997, the plaintiff
purchased from the defendant a brand new Toyota
Hilux 2.4 motor vehicle with [E]ngine [N]o. 2-L-
9514743. It was delivered to the plaintiff on 29
November 1997. Copies of the Vehicle Sales Invoice
and Vehicle Delivery Note issued by the defendant are
hereto attached as Annexes A and B, respectively.
3. Last 18 October 1998, after only 12,000
kilometers of use, the vehicles engine
cracked. Although it was previously driven through a
heavy rain, it didnt pass through flooded streets high
enough to stop sturdy and resistant vehicles. Besides,
vehicles of this class are advertised as being capable
of being driven on flooded areas or rugged terrain.
4. As plaintiff knows no reason why the
vehicles engine would crack just like that, the same
could only be due to the fact that said engine and/or
the vehicle itself was defective even from the time it
was bought.
5. Brought to the attention, defendant
refused to answer for this defect saying it is not
covered by the vehicles warranty. It refused to replace
the vehicle as plaintiff demanded (or at least its
engine, or even repair the damage).
6. As a result of defendants actions, plaintiff
suffered mental anxiety and sleepless nights for which
he demands an award of P200,000.00 moral damages.
7. By way of example for the public good,
plaintiff should also be awarded exemplary damages
in the amount of P200,000.00.
8. Forced to litigate to enforce his rights,
plaintiff incurred, and shall further incur, litigation-
related expenses (including those for his counsels fees)
in the total estimated sum of P100,000.
WHEREFORE, it is respectfully prayed that judgment
be rendered ordering defendant:
a. to replace the subject vehicle with a
brand new one or at least to replace its
engine all at defendants cost;
b. pay the plaintiff:
i. P200,000 moral damages;
ii. P200,000 exemplary damages;
iii. P200,000 attorneys fees and
litigation expenses; and
iv. the costs of suit.
Other reliefs just and equitable are, likewise, prayed
for.[6]
Petitioner contends that the dismissal on the ground
of prescription was erroneous because the applicable provision
is Article 169 of Republic Act No. 7394 (otherwise known as The
Consumer Act of the Philippines which was approved on April
13, 1992), and not Article 1571 of the Civil Code. Petitioner
specifies that in his complaint, he neither asked for a rescission
of the contract of sale nor did he pray for a proportionate
reduction of the purchase price. What petitioner claims is the
enforcement of the contract, that is, that respondent should
replace either the vehicle or its engine with a new one. In this
regard, petitioner cites Article 169 of Republic Act No. 7394 as
the applicable provision, so as to make his suit come within the
purview of the two-year prescriptive period. Tangentially,
petitioner also justifies that his cause of action has not yet
prescribed because this present suit, which was an action
based on quasi-delict, prescribes in four years.
On the other hand, respondent maintains that petitioners cause
of action was already barred by the statute of limitations under
Article 1571 of the Civil Code for having been filed more than
six months from the time the vehicle was purchased and/or
delivered. Respondent reiterates that Article 169 of Republic Act
No. 7394 does not apply.
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. Corollarily, the pertinent provisions of the Code
set forth the available remedies of a buyer against the seller on
the basis of a warranty against 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 for which it is intended, or should
they diminish its fitness for such use to such an extent that,
had the vendee been aware thereof, he would not have acquired
it or would have given a lower price for it; but said vendor shall
not be answerable for patent defects or those which may be
visible, or for those which are not visible if the vendee is an
expert who, by reason of this trade or profession, should have
known them. (Emphasis supplied)

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.
This provision shall not apply if the contrary has been
stipulated and the vendor was not aware of the hidden faults or
defects in the thing sold.
Art. 1571. Actions arising from the provisions of the preceding
ten articles shall be barred after six months from the delivery of
the thing sold.
(Emphasis supplied)
Under Article 1599 of the Civil Code, once an express
warranty is breached, the buyer can accept or keep the goods
and maintain an action against the seller for damages. 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 the
enforcement of an implied warranty against hidden defects, i.e.,
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 six months
from the delivery of the thing sold.[7] Since petitioner filed the
complaint on April 20, 1999, or more than nineteen
months counted from November 29, 1997 (the date of the
delivery of the motor vehicle), his cause of action had become
time-barred.
Petitioner contends that the subject motor vehicle
comes within the context of Republic Act No. 7394. Thus,
petitioner relies on Article 68 (f) (2) in relation to Article 169
of Republic Act No. 7394. Article 4 (q) of the said law defines
consumer products and services as goods, services and credits,
debts or obligations which are primarily for personal, family,
household or agricultural purposes, which shall include, but
not limited to, food, drugs, cosmetics, and devices. The following
provisions of Republic Act No. 7394 state:
Art. 67. Applicable Law on Warranties. The provisions
of the Civil Code on conditions and warranties shall
govern all contracts of sale with conditions and warranties.
Art. 68. Additional Provisions on Warranties. In
addition to the Civil Code provisions on sale with warranties,
the following provisions shall govern the sale of consumer
products with warranty:
e) Duration of warranty. The seller and the consumer
may stipulate the period within which the express warranty
shall be enforceable. If the implied warranty on merchantability
accompanies an express warranty, both will be of equal
duration.
Any other implied warranty shall endure not less than
sixty (60) days nor more than one (1) year following the sale of
new consumer products.
f) Breach of warranties xxx
xxx
2) In case of breach of implied warranty, the consumer
may retain in the goods and recover damages, or reject the
goods, cancel the contract and recover from the seller so much
of the purchase price as has been paid, including
damages. (Emphasis supplied.)
Consequently, even if the complaint is made to fall under
the Republic Act No. 7394, the same should still be dismissed
since the prescriptive period for implied warranty thereunder,
which is one year, had likewise lapsed.
WHEREFORE, the petition is DENIED for being in
violation of the hierarchy of courts, and in any event, for lack of
merit.
No costs.
SO ORDERED.
THIRD DIVISION
G.R. No. 154554
GOODYEAR PHILIPPINES, INC.,
Petitioner,
- versus -
ANTHONY SY and JOSE L. LEE,
Respondents.
Promulgated: November 9, 2005
x -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- x
DECISION
PANGANIBAN, J.:
A
complaint must contain a concise statement of the ultimate
facts constituting the plaintiffs cause of action. To determine
whether a cause of action is stated, the test is as follows:
admitting arguendothe truth of the facts alleged, can the court
render a valid judgment in accordance with the prayer? If the
answer is no, the complaint does not state a cause of action and
should be dismissed forthwith. If yes, then it does and must be
given due course.
The Case
Before us is a Petition for Review[1] under Rule 45 of
the Rules of Court, assailing the June 5, 2002 Decision [2] and
the August 8, 2002 Resolution [3] of the Court of Appeals (CA) in
CA-GR CV No. 61229. The dispositive portion of the challenged
Decision reads as follows:
WHEREFORE, the instant appeal is GRANTED. The
Order dated May 27, 1998 of the Regional Trial Court of Legazpi
City, Branch 9, is hereby REVERSED and the case is remanded
to the court a quo for the appropriate further proceedings. [4]
The assailed Resolution denied petitioners Motion for
Reconsideration.
The Antecedents
The CA narrated the antecedents of the case as
follows:
The subject of this case involves a motor vehicle,
particularly described as:
MAKE: 1984 Isuzu JCR 6-Wheeler
PLATE NUMBER: PEL 685
MOTOR NO.: 6BD1-371305
SERIAL NO.: JCR500BOF-21184
The vehicle was originally owned by Goodyear Philippines,
Inc. ([Goodyear]) which it purchased from Industrial and
Transport Equipment, Inc. in 1983. It had since been in the
service of [Goodyear] until April 30, 1986 when it was
hijacked. This hijacking was reported to the Philippine
National Police (PNP) which issued out an alert alarm on the
said vehicle as a stolen one. It was later on recovered also in
1986.
The vehicle was used by [Goodyear] until 1996, when it sold
it to Anthony Sy on September 12, 1996.
Sy, in turn, sold it to Jose L. Lee on January 29, 1997. But
the latter on December 4, 1997, filed an action for rescission
of contract with damages against Sy[,] because he could not
register the vehicle in his name due to the certification from
the PNP Regional Traffic Management Office in Legazpi City
 that it was a stolen vehicle and the alarm covering the same
was not lifted. Instead, the PNP in Legazpi City impounded
the vehicle and charged Lee criminally.
Upon being informed by Sy of the denial of the registration
of the vehicle in Lees name, [Goodyear] requested on July
10, 1997 the PNP to lift the stolen vehicle alarm status. This
notwithstanding, [Goodyear] was impleaded as third-party
defendant in the third-party complaint filed by Sy on
January 9, 1998.
A motion to dismiss was filed by [Goodyear] on March 24,
1998 on the twin grounds that the third-party complaint
failed to state a cause of action and even if it did, such
cause of action was already extinguished. An opposition
thereto was interposed by Sy on April 17, 1998.
The Regional Trial Court [(RTC)] resolved to dismiss the
third-party complaint on the basis of the first proffered
ground in its challenged Order dated May 27, 1998. It
ratiocinated:
A perusal of the third party complaint does not expressly
show any act or omission committed by the third party
defendant which violates a right of the third party
complainant. The third party complaint failed to show that
the vehicle in question belongs to a person other than the
third party defendant at the time the said motor vehicle was
sold by the third party defendant to the third party plaintiff.
On the contrary[,] the third party defendant has not denied
having sold to the third party plaintiff the said motor vehicle
which had been in its possession as owner from 1986 to
1996. The fact that the said motor vehicle was included by
the PNP in its alert status as stolen vehicle[,] resulted only
following the report by the third party defendant that it was
hijacked in 1986. But when the said motor vehicle was
recovered, the third party defendant informed the PNP about
the said recovery and requested the lifting of the alert status
on it as stolen vehicle.
If the PNP has not removed the said vehicle from its alert
status as a stolen vehicle, [then] that does not make
[Goodyear] not the owner thereof. Hence, [Goodyear], the
third party defendant, is not guilty of any breach resulting
from any flaw in the title over the said vehicle. This is
confirmed by the allegation of the third party plaintiff as
answering defendant in paragraph 6 of its Answer with
Counterclaim and Affirmative Defenses dated January 9,
1998, hereunder quoted as follows:
6. Defendant specifically denies the allegations contained
in paragraph 9 of [p]laintiffs complaint, the truth of the
matter is that [d]efendant help[ed] plaintiff in removing the
impediments in the registration and transfer of ownership
and that defendant ha[d] no knowledge of any flaw [in] the
title of Goodyear Philippines, Inc.
Under Rules 16, a motion to dismiss may be made on any of the
following grounds:
1) the legal right of the plaintiff;
g) That the pleading asserting the claim states no cause of
2) the correlative obligation of the defendant to respect that legal
action.
WHEREFORE, for failure of the third party complaint to state a
3) an act or omission of the defendant that violates such right. [13]
cause of action, the same is hereby ordered DISMISSED. [5]
Ruling of the Court of Appeals
In granting the appeal, the CA reasoned that the Third-Party
Complaint had stated a cause of action. First, petitioner did not
make good its warranty in the Deed of Sale: to convey the
vehicle to Respondent Anthony Sy free from all liens,
encumbrances and legal impediments. The reported hijacking of
the vehicle was a legal impediment that prevented its
subsequent sale.
Second, Respondent Sy had a right to protect and a warranty to
enforce, while petitioner had the corresponding obligation to
honor that warranty. The latter caused the impairment of that
right, though, when the vehicle it had sold to him was refused
registration, because of the non-lifting of the alert status issued
at its instance. That petitioner had to execute all documents
necessary to confer a perfect title to him before he could seek
recourse to the courts was deemed a ludicrous condition
precedent, because it could easily refuse to fulfill that condition
in order to obviate the filing of a case against it.
Hence, this Petition.[6]
The Issues
Petitioner raises the following issues for the Courts consideration:
I.
Whether or not the Court of Appeals erred in reversing and setting aside
the decision of the Regional Trial Court, dismissing the complaint against
petitioner for lack of a cause of action.
II.
Whether or not the Court of Appeals erred in failing to find that
petitioner did not breach any warranty in the absence of proof that at the
time it sold the subject vehicle to Sy, petitioner was not the owner
thereof.
III.
Whether or not the Court of Appeals erred in failing to find that the
cause of action, if ever it existed, was already extinguished.[7]
The foregoing issues actually point to one main question: did
the Third-Party Complaint state a cause of action against
petitioner?
The Courts Ruling
The Petition has merit.
Main Issue:
Whether a Cause of Action Was Stated in the Third-Party
Complaint
A cause of action is a formal statement of the operative facts
that give rise to a remedial right. [8] The question of whether the
complaint states a cause of action is determined by its
averments regarding the acts committed by the defendant.
[9]
Thus, it must contain a concise statement of the ultimate or
essential facts constituting the plaintiffs cause of action.
[10]
Failure to make a
sufficient allegation of a cause of action in the complaint
warrants its dismissal.[11]
Elements of a Cause of Action
A cause of action, which is an act or omission by which a
party violates the right of another,[12] has these elements:
right; and
In determining whether an initiatory pleading states a cause
of action, the test is as follows: admitting the truth of the
facts alleged, can the court render a valid judgment in
accordance with the prayer?[14] To be taken into account are
only the material allegations in the complaint; extraneous
facts and circumstances or other matters aliunde are not
considered.[15] The court may consider -- in addition to the
complaint -- the appended annexes or documents, other
pleadings of the plaintiff, or admissions in the records. [16]
No Cause of Action Against Petitioner
In the present case, the third element is missing. The Third-Party
Complaint filed by Sy is inadequate, because it did not allege
any act or omission that petitioner had committed in violation of
his right to the subject vehicle. The Complaint capitalized merely
on the fact that the vehicle -- according to the records of the PNP,
which was a stranger to the case -- was a stolen vehicle. The
pleading did not contain sufficient notice of the cause of
action[17] against petitioner.
Without even going into the veracity of its material allegations,
the Complaint is insufficient on its face.[18] No connection was
laid out between the owners sale of the vehicle and its
impounding by the PNP. That the police did not lift the alert
status did not make petitioner less of an owner.
The Deed of Sale between petitioner and Respondent Sy was
attached as Annex A[19] to the Third-Party Complaint filed by the
latter against the former. The Deed stated that petitioner was
the absolute owner of the subject vehicle. No contrary assertion
was made in the Complaint. Hence, the trial court correctly
observed that the Complaint had failed to show that, at the time
of its sale to Respondent Sy, the vehicle belonged to a person
other than petitioner.[20]
To reiterate, the Third-Party Complaint absolutely
failed to state an act or omission of petitioner that had
proximately caused injury or prejudice to Sy. Indeed, based on
that pleading alone, the latters claim for relief against petitioner
does not appear to exist.
Warranties Passed On By the Vendor to the Vendee
In a contract of sale, the vendor is bound to transfer the
ownership of and to deliver the thing that is the object of the
sale.[21] Moreover, the implied warranties are as follows: first, the
vendor has a right to sell the thing at the time that its
ownership is to pass to the vendee, as a result of which the
latter shall from then on have and enjoy the legal and peaceful
possession of the thing; [22] and, second, the thing shall be free
from any charge or encumbrance not declared or known to the
vendee.[23]
Upon the execution of the Deed of Sale, petitioner did transfer
ownership of and deliver the vehicle to Respondent Sy. [24] No other
owner or possessor of the vehicle had been alleged, and the ownership
and possession rights of petitioner over it had never been contested.
The Deed of Sale executed on September 12, 1996 showed that
petitioner was the absolute owner. Therefore, at the time that
ownership passed to Sy, petitioner alone had the right to sell the
vehicle.
In the same manner, when he sold the same truck to Jose L.
Lee,[25] Respondent Sy was exercising his right as absolute
owner. Unfortunately, though, from the time Respondent Lee
attempted to register the truck in his name, he could not have
or enjoy the legal and peaceful possession of the vehicle,
because it had been impounded by the PNP, which also opposed
its registration.
The impoundment of the vehicle and the failure to register it
were clearly acts that were not deliberately caused by petitioner,
but that resulted solely from the failure of the PNP to lift the
latters own alarm over the vehicle. Pursuant to Republic Act
6975,[26] these matters were purely administrative and
governmental in nature. Petitioner had no authority, much less
power, over the PNP. Hence, the former did not breach its
obligation as a vendor to Respondent Sy; neither did it violate
his right for which he could maintain an action for the recovery
of damages. Without this crucial allegation of a breach or
violation, no cause of action exists.[27]
A warranty is an affirmation of fact or any promise made by a
vendor in relation to the thing sold. As such, a warranty has a
natural tendency to induce the vendee -- relying on that
affirmation or promise -- to purchase the thing.[28] The vendor
impliedly warrants that that which is being sold is free from any
charge or encumbrance not declared or known to the vendee.
The decisive test is whether the vendor assumes to assert a fact
of which the vendee is ignorant.[29]
No Lien or Breach of Warranty
In the present case, petitioner did not breach the implied
warranty against hidden encumbrances. The subject vehicle
that had earlier been stolen by a third party was subsequently
recovered by the authorities and restored to petitioner, its
rightful owner. Whether Sy had knowledge of the loss and
subsequent recovery, the fact remained that the vehicle
continued to be owned by petitioner, free from any charge or
encumbrance whatsoever.
A lien is a legal right or interest that a creditor has in
anothers property, lasting usually until a debt or duty that it
secures is satisfied.[30] An encumbrance is a claim or liability
that is attached to property or some other right and that may
lessen its value, such as a lien or mortgage.[31] A legal
impediment is a legal hindrance or obstruction.[32]
The Third-Party Complaint did not allege that petitioner had a
creditor with a legal right to or interest in the subject vehicle.
There was no indication either of any debt that was secured by
the vehicle. In fact, there was not even any claim, liability or
some other right attached to the vehicle that would lessen its
value. Its impoundment, as well as the refusal of its
registration, was not the hindrance or obstruction in the
contemplation of law that the vendor warranted against. Neither
of those instances arose from any liability or obligation that
could be satisfied by a legal claim or charge on, or property
right to -- other than an ownership interest in -- the subject
vehicle.[33]
No Notice of Any Breach of Warranty
Gratia argumenti that there was a breach of the implied
warranty against hidden encumbrances, notice of the breach
was not given to petitioner within a reasonable time. Article
1586 of the Civil Code requires that notice be given after the
breach, of which Sy ought to have known. In his Third-Party
Complaint against petitioner, there was no allegation at all that
respondent had given petitioner the requisite notice. [34]
More important, an action for damages for a breach of implied
warranties must be brought within six months from the delivery
of the thing sold.[35] The vehicle was understood to have been
delivered to Sy when it was placed in his control or possession.
[36]
Upon execution of the Deed of Sale on September 12, 1996,
control and possession of the vehicle was transferred to
respondent. That the vehicle had been delivered is bolstered by
the fact that no contrary allegation was raised in the Third-
Party Complaint. Whether the period should be reckoned from
the actual or from the constructive delivery through a public
instrument, more than six months had lapsed before the filing
of the Third-Party Complaint.
Finally, the argument that there was a breach of the implied
warranty against eviction does not hold water, for there was
never any final judgment based on either a right prior to the
sale; or an act that could be imputed [37] to petitioner and deprive
Sy of ownership or possession of the vehicle purchased.
WHEREFORE, the Petition is hereby GRANTED, and
the assailed Decision and Resolution are REVERSED. The May
27, 1998 Order of the Regional Trial Court is REINSTATED. No
costs.
SO ORDERED.
EN BANC
G.R. No. L-19196 November 29, 1968
ANGEL VILLARICA and NIEVES PALMA GIL DE
VILLARICA, petitioners,
vs.
THE COURT OF APPEALS, JULIANA MONTEVERDE, decision of the Court of Appeals is now before us for review on
GAUDENCIO CONSUNJI and JOVITO S. questions of law.
FRANCISCO, respondents.
Petitioners contend that the Court of Appeals erred in finding that the
public instrument of absolute sale, Exh. "B", expressed the true intention
CAPISTRANO, J.: of the parties, arguing that under Article 1604 in relation to Articles
1602 and 1603 of the Civil Code, the instrument of absolute sale, Exh.
On May 19, 1951, the spouses Angel Villarica and Nieves Palma "B", should be presumed as an equitable mortgage on the grounds that
(1) the price of P35,000 was unusually inadequate; (2) the vendors
Gil de Villarica sold to the spouses Gaudencio Consunji and
remained in possession of the property sold; (3) the period of one year for
Juliana Monteverde a lot containing an area of 1,174 sq.
repurchase granted in the instrument Exh. "D" was extended for one
meters, situated in the poblacion of the City of Davao, for the
month; and (4) the vendors pay the taxes on the land sold. The
price of P35,000. The instrument of absolute sale dated May 19,
contention is unmeritorious in view of the following
1951 (Exh. "B"), in the form of a deed poll, drafted by Counselor
considerations:
Juan B. Espolong who had been appointed by the Villaricas as
their agent to sell the lot, was acknowledged on May 25, 1951,
(1) The price of P35,000 was not even inadequate. The land sold
before the same Juan B. Espolong who was also a Notary
was assessed for tax purposes at P8,870 effective 1950. It was
Public. The public instrument of absolute sale and the vendors'
purchased by the spouses Villarica from the Philippine Alien
TCT No. 2786 were delivered to the vendees. On the same day,
Property Custodian in October, 1950, for the price of P20,000.
May 25, 1951, the spouses Consunji executed another public
The Villaricas borrowed P7,400 from a Chinese named Domingo
instrument, Exh. "D", whereby they granted the spouses
Lua Chin Lam and, with this borrowed money, made part
Villarica an option to buy the same property within the period
payment of the price to the Philippine Alien Property Custodian.
of one year for the price of P37,750. In July, same year, the
Then they mortgaged the land to the Philippine Alien Property
spouses Consunji registered the absolute deed of sale, Exh. "B",
Custodian as security for the P10,000 unpaid balance of the
in consequence of which TCT No. 2786 in the names of the
purchase price. One year later, on May 19, 1951, they sold the
spouses Villarica was cancelled and a new TCT No. 3147 was
land by means of the instrument of absolute sale Exh. "B" to
issued in the names of the spouses Consunji. In February,
the Consunjis for the price of P35,000, thus making a profit of
1953, the spouses Consunji sold the lot to Jovito S. Francisco
P15,000 in one year without having invested their own money in
for the price of P47,000 by means of a public instrument of sale
buying the land. On February 21, 1953, the Consunjis sold the
Exh. "4". This public instrument of sale was registered in view of
land to Jovito S. Francisco for the price of P47,000, thus
which TCT No. 3147 in the names of the spouse Consunji was
making profit of P12,000. The price of P70,000 found by the
cancelled and a new TCT in the name of Jovito S. Francisco was
trial court to be the market price of the land at the time of the
issued.
trial in 1956 was not the market price in 1951 when the
Villaricas sold the lot to the Consunjis. Hence, it is evident that
On April 14, 1953, the spouses Villarica brought an action in
the price of P35,000 stated in the instrument of absolute sale
the Court of First Instance of Davao against the spouses
Exh. "B" was the market price of the lot in 1951.
Consunji and Jovito S. Francisco for the reformation of the
instrument of absolute sale, Exh. "B", into an equitable
(2) The vendors did not remain in possession of the land sold as
mortgage as a security for a usurious loan of P28,000 alleging
lessees or otherwise. On their request in order to help them in
that such was the real intention of the parties. Defendants
the expenses of their children in Manila, the vendors were
answered that the deed of absolute sale expressed the real
merely allowed by the vendees to collect the monthly rents of
intention of the parties and they also alleged a counterclaim for
P300 for five months up to October, 1951, on the understanding
sums of money borrowed by the plaintiffs from the Consunjis
that the amounts so collected would be charged against them.
which were then due and demandable. After trial, the Court of
But thereafter the vendees were the ones who collected the
First Instance of Davao rendered its decision holding that the
monthly rents from the tenants. It follows that the vendors did
instrument of absolute sale, Exh. "B", was really intended as an
not remain in possession of the land as lessees or otherwise.
equitable mortgage. Judgment was accordingly rendered
reforming the deed of absolute sale into an equitable mortgage.
Judgment was likewise rendered in favor of defendant (3) In Exh. "D" the Consunjis as new owners of the lot granted
Consunjis on their counterclaim for sums of money. Judgment the Villaricas an option to buy the property within the period of
was also rendered in favor of defendant Francisco as purchaser one year from May 25, 1951 for the price of P37,750. Said
in good faith. Both parties appealed to the Court of Appeals. option to buy is different and distinct from the right of
repurchase which must be reserved by the vendor, by
stipulation to that effect, in the contract of sale. This is clear
On September 15, 1961, the Court of Appeals rendered its
from Article 1601 of the Civil Code, which provides:
decision finding that the public instrument of absolute sale,
Exh. "B", expressed the true intention of the parties and that
the defendants-appellants' (Consunjis) counterclaim for sums of Conventional redemption shall take place when the
money was substantiated by the evidence. Accordingly the vendor reserves the right to repurchase the thing sold,
Court of Appeals rendered judgment as follows: with the obligation to comply with the provisions of
article 1616 and other stipulation which may have
WHEREFORE, the judgment appealed from is reversed and the
been agreed upon.
complaint is dismissed as to the defendant spouses, and the
plaintiffs are ordered to pay to them their remaining indebtedness of
fifteen thousand (P15,000.00) pesos with interest at 5% from July 7,
1951. That part of the judgment dismissing the complaint as to
Jovito S. Francisco is hereby affirmed, with the modification that the The right of repurchase is not a right granted the vendor by the
attorney's fees in the sum of P2,350.00 awarded to him is eliminated. vendee in a subsequent instrument, but is a right reserved by
The present case is not one of those enumerated in Article 2208 of the vendor in the same instrument of sale as one of the
the New Civil Code where attorney's fees may be recovered. Costs stipulations of the contract. Once the instrument of absolute
against the plaintiffs-appellants. sale is executed, the vendor can no longer reserve the right to
repurchase, and any right thereafter granted the vendor by the
On December 6, 1961, the spouses Villarica, plaintiffs- vendee in a separate instrument cannot be a right of repurchase
appellants in the Court of Appeals, petitioned the Supreme but some other right like the option to buy in the instant case.
Court for certiorari or review of the decision rendered by the Hence, Exhibits "B" and "D" cannot be considered as evidencing
Court of Appeals. The petition was given due course and the a contract of sale with pacto de retro. Since Exh. "D" did not
evidence a right to repurchase but an option to buy, the
extension of the period of one year for the exercise of the option
by one month does not fall under No. 3, of Article 1602 of the
Civil Code, which provides that:
When upon or after the expiration of the right to repurchase
another instrument extending the period of redemption or
granting a new period is executed.
(4) The taxes paid by the vendors were back taxes up to the time
of the sale on May 19, 1951. The vendors had the obligation to
pay the back taxes because they sold the land free of all liens
and encumbrances. The taxes due after the sale were paid by
the vendees.
The petitioners admit that they cannot now question the finding
of the Court of Appeals that they fully received the price of
P35,000 mentioned in the instrument of absolute sale Exh. "B".
In addition, we noted that the petitioners acknowledged in
writing (Exh. "4"-Consunji-Monteverde), dated May 28, 1951,
having received full payment of said price of P35,000. In view
hereof and of the foregoing considerations, petitioners'
contention that Exhibits "B" and "D" were used as a device to
cover a usurious loan, has absolutely no merit.
The findings of the Court of Appeals on the amounts due from the
spouses Villarica to the spouses Consunji as loans, evidenced by
promissory notes, after deducting partial payments made thereon being
factual, cannot be reviewed.
PREMISES CONSIDERED, the judgment of the Court of Appeals is
hereby affirmed, with costs against petitioners also in this instance.
SECOND DIVISION
G.R. No. L-65425 November 5, 1987
IRENEO LEAL, JOSE LEAL, CATALINA LEAL, BERNABELA
LEAL, VICENTE LEAL EUIOGIA LEAL PATERNO RAMOS,
MACARIO DEL ROSARIO, MARGARITA ALBERTO, VICTORIA
TORRES, JUSTINA MANUEL, JULIAN MANUEL, MELANIA
SANTOS, CLEMENTE SAMARIO, MARIKINA VALLEY, INC.,
MIGUELA MENDOZA, and REGISTER OF DEEDS OF
RIZAL, petitioners,
vs.
THE HONORABLE INTERMEDIATE APPELLATE COURT (4th
Civil Cases Division), and VICENTE SANTIAGO (Substituted
by SALUD M. SANTIAGO), respondents.
SARMIENTO, J.:
In its resolution dated September 27, 1983, the respondent
Intermediate Appellate Court, 1 speaking through Justice
Porfirio V, Sison, ordered, in part, the petitioners to accept the
sum of P5,600.00 from the private respondent as repurchase
price of the lots described in the "Compraventa" and, thereafter,
to execute a Deed of Repurchase to effect transfer over
ownership over the same properties to the private respondent.
This ruling was a complete reversal of the earlier
decision, 2 dated June 28, 1.978, penned by Justice Paras, of
the Court of Appeals, in the same case, affirming the trial
court's dismissal of the private respondent's complaint.
The petitioners, feeling aggrieved and astonished by the
complete turnaround of the respondent court, come to Us with
this petition for review by certiorari.
The antecedent facts are undisputed.
This case brings us back almost half a century ago, on
March 21, 1941, when a document entitled
"Compraventa," written entirely in the Spanish language,
involving three parcels of land, was executed by the
private respondent's predecessors-in-interest, Vicente
Santiago and his brother, Luis Santiago, in favor of
Cirilio Leal the deceased father of some of the
petitioners, Pursuant to this "Compraventa," the title
over the three parcels of land in the name of the vendors
was cancelled and a new one was issued in the name of
Cirilo Leal who immediately took possession and
exercised ownership over the said lands. When Cirilo
died on December 10, 1959, the subject lands were
inherited by his six children, who are among the
petitioners, and who caused the consolidation and
subdivision of the properties among themselves.
Between the years 1960 and 1965, the properties were
either mortgaged or leased by the petitioners-children of
Cirilo Leal to their co-petitioners.
Sometime before the agricultural year 1966-1967,
Vicente Santiago approached the petitioners and offered
re- repurchase the subject properties. Petitioners,
however, refused the offer. Consequently, Vicente
Santiago instituted a complaint for specific performance
before the then Court of First Instance of Quezon City on
August 2, 1967.
All the trial, the court a quo rendered its decision,-
dismissing the complaint on the ground that the same
was still premature considering that there was, as yet,
no sale nor any alienation equivalent to a sale. Not
satisfied with this decision, the private respondent
appealed to the Court of Appeals and the latter, acting
through the Fourth Division and with Justice Edgardo
Paras as ponente affirmed the decision of the court a
quo.
The petitioners seasonably filed a motion to amend the
dispositive portion of the decision so as to include an
order for the cancellation of the annotations at the back
of the Transfer certificates of Title issued in their favor.
The private respondent,-on the other hand, filed a-timely
motion for reconsideration of the above decision and an
opposition to petitioners' motion to amend. These
incidents were not resolved until then Court of Appeals
was abolished and in lieu of which the Intermideate
Appellate Court was established In view of the said
reorganization, case was reassigned to the Fourth Civil
in this cases Division.
Resolving the abovestated motion for reconsideration,
the respondent court, in a resolution penned by Justice
Sison and promulgated on September 27, 1983, ruled,
as follows:
WHEREFORE, Our decision of June 28, 1978 is hereby
reversed and set aside and another one is rendered
ordering: (1) defendants-appellees surnamed Leal to
accept the sum of P5,600.00 from plaintiff-appellant
(substituted by Salud M. Santiago) as repurchase price
of the lots described in the "Compraventa" of March 21,
1941, and thereafter to execute a deed of repurchase
sufficient in law to transfer ownership of the properties
to appellant Salud M. Santiago, the same to be done
within five (5) days from payment; (2) ordering the same
defendants Leals and defendant Clemente Samario to
indemnify appellant in the sum of P3,087.50 as rental
for the year 1967-1968 and the same amount every year
thereafter; (3) ordering an the defendants jointly and
severally to pay the sum of Pl,500.00 as attorney's fees
and other expenses of litigation; and (4) ordering
defendant Register of Deeds of Rizal to cancel Transfer
Certificate of Title No. 42535 in the names of Vicente
Santiago and Luis Santiago upon presentation of the
deed of sale herein ordered to be executed by the
appellees in favor of Salud M. Santiago and to issue
thereof another Transfer Certificate of Title in the name
alone of Salud M. Santiago. No costs here and in the
courts (sic) below.
SO ORDERED.
Verily, the well-spring whence the present controversy
arose is the abovementioned "Compraventa," more
particularly paragraph (b) thereof, to wit:
xxx xxx xxx
(b) En caso de venta, no podran vender a otros dichos
tres lotes de terreno sino al aqui vendedor Vicente
Santiago, o los herederos o sucesores de este por el
niismo precio de CINCO MIL SEISCIENTOS PESOS
(P5,600.00) siempre y cuando estos ultimos pueden
3
hacer la compra.
xxx xxx xxx
which is now the subject of varying and conflicting
interpretations.
xxx xxx xxx
It is admitted by both parties that the phrase "they shall
not sell to others these three lots but only to the seller
Vicente Santiago or to his heirs or successors" is an
express prohibition against the sale of the lots described
in the "Compraventa" to third persons or strangers to the
contract. However, while private respondent naturally
lauds the resolution of Justice Sison, which sustains the
validity of this prohibition, the petitioners, on the other
hand, endorse the decision penned by Justice Paras,
which states, in part:
xxx xxx xxx
Finally, there is grave doubt re the validity of the
ostensible resolutory condition here, namely, the
prohibition to sell the lots to persons other than the
vendor (appellant); uncertainly, a prohibition to alienate
should not exceed at most a period of twenty years,
otherwise there would be subversion of public policy,
which naturally frowns on unwarranted restrictions on
the right of ownership. 4
xxx xxx xxx
We agree with the Paras ponencia.
Contracts are generally binding between the parties,
their assigns and heirs; however, under Art. 1255 of the
Civil Code of Spain, which is applicable in this instance,
pacts, clauses, and conditions which are contrary to
public order are null and void, thus, without any binding
effect.
Parenthetically, the equivalent provision in the Civil Code
of the Philippines is that of Art. 1306, which states:
"That contracting parties may establish such
stipulations, clauses, terms and conditions as they may
deem convenient, provided they are not contrary to law,
morals, good customs, public order, or public policy.
Public order signifies the public weal public
policy. 5 Essentially, therefore, public order and public
policy mean one and the same thing. Public policy is
simply the English equivalent of "order publico" in Art.
6
1255 of the Civil Code of Spain.
One such condition which is contrary to public policy is
the present prohibition to self to third parties, because
the same virtually amounts to a perpetual restriction to
the right of ownership, specifically the owner's right to
freely dispose of his properties. This, we hold that any
such prohibition, indefinite and stated as to time, so
much so that it shall continue to be applicable even
beyond the lifetime of the original parties to the contract,
is, without doubt, a nullity. In the light of this
pronouncement, we grant the petitioners' prayer for the
cancellation of the annotations of this prohibition at the
back of their Transfer Certificates 'Title.
It will be noted, moreover, that the petitioners have never
sold, or even attempted to sell, the properties subject of
the "Compraventa. "
We now come to what we believe is the very issue in this
case which is, whether or not under the aforequoted
paragraph (b) of the "Compraventa" a right of repurchase
in favor of the private respondent exist.
The ruling of the Fourth Division (Justice Paras) is that
the said stipulation does not grant a right to repurchase.
Contrarily, the resolution of the Fourth Civil Cases
Division (Justice P. V. Sison) interpreted the same
provision as granting the right to repurchase subject to a
condition precedent.
Thus, the assailed Resolution, reversing the earlier
decision of the same respondent court, ruled
xxx xxx xxx
The all-importartant phrase "en caso de venta," must
of necessity refer to the sale of the properties either by
Cirilo or his heirs to the Santiago brothers themselves
or to their heirs, including appellants Vicente Santiago
including appellants Vicente Santiago and Salud M
Santiago, for the same sum of P5,600.00, "siempre y
cuando estos ultimos pueden hacer la compra" (when
the latter shall be able to buy it).
xxx xxx xxx
 ... We repeat, The words envision the situation
contemplated by the contracting parties themselves,
the resale of the lots to their owners, and NOT to a sale
of the lots to third parties or strangers to the contracts.
7
...

xxx xxx xxx

The law provides that for conventional redemption to

take place, the vendor should reserve, in no uncertain
terms, the right to repurchase the thing sold. 8 Thus, the
right to redeem must be expressly stipulated in the
contract of sale in order that it may have legal existence.

In the case before us, we cannot and any express or

implied grant of a right to repurchase, nor can we infer,
from any word or words in the questioned paragraph, the
existence of any such right. The interpretation in the
resolution (Justice Sison) is rather strained. The phrase
"in case case" of should be construed to mean "should
the buyers wish to sell which is the plain and simple
import of the words, and not "the buyers should sell,"
which is clearly a contorted construction of the same
phrase. The resort to Article 1373 of the Civil Code of the
Philippines is erroneous. The subject phrase is patent
and unambiguous, hence, it must not be given another
interpretation

But even assuming that such a right of repurchase is

granted under the "Compraventa," the petitioner
correctly asserts that the same has already prescribed.
Under Art. 1508 of the Civil Code of Spain (Art,. 1606 of
the Civil Code of the Philippines), the right to redeem or
SECOND DIVISION
repurchase, in the absence of an express agreement as
to time, shall last four years from the date of the
G.R. No. 75575 January 25, 1988
contract. In this case then, the right to repurchase, if it
was at four guaranteed under in the "Compraventa,"
SPOUSES ROGELIO BUCE and ANITA BUCE, petitioners,
should have been exercise within four years from March
vs.
21, 1941 (indubitably the date of execution of the
HON. COURT OF APPEALS and RAMON DELOS REYES, In
contract), or at the latest in 1945.
his Own Behalf And On Behalf Of RHODORA DELOS REYES
BERISH, respondents.
In the respondent court's resolution, it is further ruled
that the right to repurchase was given birth by the
SARMIENTO, J.:
condition precedent provided for in the phrase "siempre
y cuando estos ultimos pueden hacer la compra" (when
the buyer has money to buy). In other words, it is the
respondent court's contention that the right may be
The question posed in this petition for review is simple: Was the
exercised only when the buyer has money to buy. If this contract entered into between the petitioners and the private
were so, the second paragraph of Article 1508 would respondent one of sale or real estate mortgage?
apply there is agreement as to the time, although it is
indefinite, therefore, the right should be exercised within
ten years, because the law does not favor suspended
ownership. Since the alleged right to repurchase was The undisputed facts in this case, as found by the trial
attempted to be exercised by Vicente Santiago only in court, are as follows:

1966, or 25 years from the date of the contract, the said

xxx xxx xxx
right has undoubtedly expired.

The plaintiffs were the registered owners of three parcels of land

WHEREFORE, in view of the foregoing, the Resolution dated
September 27, 1983, of the respondent court is SET ASIDE and
the Decision promulgated on June 28, 1978 is hereby
REINSTATED. The annotations of the prohibition to sell at the
back of TCT Nos. 138837, 138838, 138839, 138840, 138841,
and 138842 are hereby ordered CANCELLED. Costs against the
private respondent.
SO ORDERED.
covered by TCT No. 495974 situated at Cainta, Taytay, Rizal, and
TCT Nos. 128979 and 128980, both situated at Pandacan, Manila,
which they mortgaged with Monte de Piedad & Savings Bank to
secure a loan of Pl78,953.37. When the loan matured, plaintiffs
could not pay, so, the mortgage was foreclosed by the Monte de
Piedad & Savings Bank. In July, 1979, plaintiffs sold to the
defendants-spouses the afore-mentioned properties, together with
all the improvements therein for a consideration of Pl79,000.00, and
the transaction is covered by a Deed of Sale marked as Exhibit "A"
for the plaintiff, and Exhibit "4" for the defendant. The consideration
of the deed of sale P179,000.00) was used by plaintiffs to
repurchase the foreclosed properties from the Monte de Piedad &
Savings Bank, as shown by Exhibits "1" and "1-A." After the
foreclosed properties were repurchased by the plaintiffs, they were
simultaneously sold and delivered to the defendants-spouses as
previously stated, by virtue of a deed of sale, Exhibit "A."
Plaintiffs filed this case for reformation of the deed of sale, Exhibit
"A", with damages, They alleged that although Exhibit "A" is an
absolute deed of sale, it does not reflect or express the true intention
between the parties by reason of fraud and/or inequitable conduct
on the part of the defendants, citing article 1369 of the Civil Code.
That the amount of P179,000.00, as consideration of the alleged
deed of sale, was only a loan extended by defendants to plaintiffs,
and that the properties described therein were mortgaged to secure
the loan. That the verbal understanding was for plaintiffs to pay a
monthly interest of P4,000.00, and that defendants actually paid
the amount of P20,000.00 as interest; Exhibit "B-1", where they
paid interest in the amount of' P40,000.00; Exhibit "B-2" where
they paid interest in the amount of P30,000.00, an Exhibits "C", "C-
l", "C-2" and "C-3". the computations showing that plaintiffs have
paid substantial amounts an interest. Plaintiffs farther presented
Exhibit "D" pictures of a house constructed in one of the lots in
Manila, showing that it is an expensive residential house, and
Exhibits "E", "E-l", and "E-2", which are showing that they were
1
paying the real estate taxes of the properties involved in this case.
xxx xxx xxx
After receiving and weighing the evidence of both parties, that trial
court rendered judgment dismissing the complaint with costs
2
against the plaintiffs.
The plaintiffs subsequently appealed to then Intermediate Appellate
Court, now Court of Appeals, which set aside the trial court's
decision, and entered another one
xxx xxx xxx
1. Declaring the subject document, denominated as Deed of Sale
(Exhibit a), as one of real estate mortgage.
2. Ordering the defendants-appellees Rogelio Buce and Anita Buce
to execute a formal Deed of Real Estate Mortgage covering the
subject properties in reformation of the document dated September
10, 1979, provided that if the said spouses fail to do so within thirty
(30) days from notice of this judgment, then the Clerk of the lower
court is hereby authorized to execute the same for and in behalf of
the said spouses, the defendants-appellees herein.
3. Directing the Register of Deeds for Manila to cancel and revoke
Transfer Certificates of Title Nos. 135302 and 135303 issued in the
name of defendants-appellees Rogelio Buce and his wife Anita Buce
and to reinstate Transfer Certificates of Titles Nos. 135028 and
3
135029.
xxx xxx xxx
From the foregoing judgment, the defendants-spouses, now
petitioners, filed the instant petition of appeal by certiorari.
We can not find any reversible error in the findings and conclusions
of the respondent court sufficient to warrant the setting aside of its
questioned decision. As correctly found by the respondent court, the
consideration of the supposed sale in the amount of P179,000.00 is
inadequate. Private respondent Ramon de los Reyes testified that
the market value of the property located along Narciso St.,
Pandacan, Manila, consisting of a house and lot, is P450,000; that
another house and lot situated in Talundon Pandacan, Manila is
valued at P150,000; while the vacant residential lot in Brookside
Subdivision, Cainta, Rizal is worth P100,000. Granting that the
respondent is not an expert at evaluating the market values of
properties, the petitioners themselves stated in their tax
declarations that the two Pandacan properties have an aggregate
market value of P236,220.00. When we add to this amount the
value of the third property located in Brookside Subdivision, the
inadequacy of the said consideration of P179,000 becomes even
more apparent. It will be noted that one of the two properties located
in Pandacan consists of a lot on which stands an expensive
residential house this alone would already command a hefty sum.
Furthermore, we cannot accept as purely coincidental the glaring
fact that while the stated consideration for the supposed sale was
P179,000, the private respondent's indebtedness to the bank
amounted to P178,953.37, or a difference of only P46.63. Thus, the
most logical conclusion that may be derived from the foregoing is
that the P179.000 pesos was, in truth, a loan by the petitioners to
the private respondent to enable the latter to redeem his property
which was foreclosed by the bank. Besides, had it been the private
respondent's real intention to sell rather than to mortgage, we
believe that he could have easily found buyers for the properties who
would be willing and able to pay a price considerably higher than
P179,000.00.
Furthermore, it has been satisfactorily proven that from the time of
execution of the contract in issue on September 10, 1979, the realty
taxes, for the years 1980 and 1981, on the three properties objects
of the "sale', were still paid by the private respondent-apparent
vendor (plaintiff-appellant below). And in the words of the
respondent court:
... While it may be true that the defendants-appellees paid the
real taxes on the subject properties in 1982, the fact remains
that such payment was made after the filing of the complaint on
September 9, 1981 and only after the plaintiff-appellant had
already paid the taxes for the first two years immediately
preceding (sic) the execution of the document in question.
Clearly, the payment of the taxes in 1982 by the defendants-
appellees was a belated attempt on their part to reinforce their
4
claim that the document was a deed of sale.
The conclusion of the respondent court to the effect that the private
respondent had been paying interest to the petitioners on the
P179,000.00 loan has not been assailed in the instant petition.
Petitioners, however, took exception to the conclusion of the
respondent court that the private respondent remained in
possession of the subject properties. The petitioners claimed that
the present occupancy by the private respondent of the house along
Narciso St., Pandacan is merely the consequence of a previous
verbal agreement between them and the respondent's mother,
allowing the latter to remain therein for two years, and the
respondent now refuses to vacate the premises despite the
expiration of the said grace period. It is repeatedly stressed by the
petitioners in their pleadings that the private respondent
deliberately refrained from presenting his mother as witness in
order to conceal from the trial court the existence of such an
agreement. Suffice it to state that were the petitioners really
determined to reveal this alleged verbal agreement, they could have
simply asked the court to subpoena the private respondent's mother
to appear as a witness, but they did not.
There is no real inconsistency between the ruling in the cases cited
by the private respondent and our present pronouncements because
in the former, we simply said that the mere disproportion of the
price to the value of the land, in the absence of other circumstances
incompatible with the contract of purchase and sale, can not alone
justify the conclusion that the transaction was a pure and simple
loan. Now, we are saying that in the instant case there exist other
circumstances, which, when considered jointly with our finding that
the price of the sale was unusually inadequate, would constitute
clear and convincing proof that the agreement in question was, in
truth, one of mortgage and not a sale.
In fine, Article 1602, 5 in relation to Article 1604 6 of the Civil Code
of the Philippines finds strong application in the case at hand in the
light of the following attendant circumstances: 1) the price of the
"sale" was unusually inadequate; 2) the apparent vendor remained
in possession of the properties "sold;" 3) the vendor continued to pay
the taxes on the things 'sold;" and 4) the vendor paid interest on the
supposed consideration of the "sale." From these circumstances it
may be fairly inferred that the real intention of the parties was to
secure payment of the P179,000 loan extended by the petitioners to
the respondent.
In sum, we are fully convinced that although the deed in question
purports to be one of sale, the real intention of the parties was to
execute a mortgage to guaranty the payment of a loan. Thus,
pursuant to Article 1605 7 of the Civil Code, the private respondent,
as the apparent vendor, may ask for the reformation of the
instrument.
WHEREFORE, in view of the foregoing, the petition for review is
hereby DENIED, for lack of merit, and the decision of the
respondent Intermediate Appellate Court (now Court of Appeals) is
hereby AFFIRMED. With costs against the petitioners.SO
ORDERED.