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Roman vs. Grimalt the terms of the sale, while the unit remained in Norkis' possession. On November 6,
6 Phil 96 1979, it was registered under Alberto Nepales’ name in the Land Transportation
April 1906 Commission.

FACTS: On January 22, 1980, the motorcycle was delivered to a certain Julian Nepales who
was allegedly the agent of Alberto Nepales but the latter denies it. The record shows,
In between the 13th to the 23d of June, 1904, petitioner Pedro Roman, the owner, and however, that Alberto and Julian Nepales presented the unit to DBP's Appraiser-
respondent Andres Grimalt, the purchaser, verbally agreed upon the sale of the Investigator Ernesto Arriesta at the DBP offices in Kabankalan, Negros Occidental
schooner Santa Marina. In his letter on June 23, Grimalt agreed to buy the vessel and Branch. On February 3, 1980, the motorcycle met an accident at Binalbagan, Negros
offered to pay in three installments of P500 each on July 15, September 15, and Occidental while being driven by a certain Zacarias Payba. The unit was a total wreck,
November 15, provided the title papers to the ves1qsel were in proper form. The title of was returned, and stored inside Norkis' warehouse.
the vessel, however, was in the name of one Paulina Giron and not in the name of
Roman as the alleged owner. Roman promised to perfect his title to the vessel, but On March 20, 1980, DBP released the proceeds of private respondent's motorcycle
failed so the papers he presented did not show that he was the owner of the vessel. On loan to Norkis in the total sum of P7,500. As the price of the motorcycle later increased
June 25, 1904, the vessel sank in the Manila harbor during a severe storm, even before to P7,828 in March, 1980, Nepales paid the difference of P328 and demanded the
Roman was able to produce for Grimalt the proper papers showing that the former was delivery of the motorcycle. Norkis failed to deliver the unit, and Nepales filed an action
in fact the owner of the vessel in question and not Paulina Giron. As a result, Grimalt for specific performance with damages in the RTC of Himamaylan, Negros Occidental.
refused to pay the purchase price when Roman made a demand on June 30, 1904. Norkis answered that the motorcycle had already been delivered to private respondent
before the accident, hence, he should bear the risk of loss or damage as owner of the
On July 2, 1904, Roman filed this complaint in the CFI of Manila, which found that the unit. The lower court ruled in favor of Nepales, and the Court of Appeals affirmed the
parties had not arrived at a definite understanding, and later dismissed said complaint. decision but deleted the award of damages "in the amount of P50.00 a day from
February 3, 1980 until payment of the present value of the damaged vehicle." Norkis
ISSUE: concedes that there was no "actual" delivery of the vehicle, but insists that there was
constructive delivery of the unit upon the issuance of the sales invoice, upon the
Who should bear the risk of loss? registration of the unit in Nepales’ name, and upon the issuance of the official receipt.

COURT RULING: ISSUE:

The Supreme Court affirmed the decision of the lower court and declared Roman as the Who should bear the risk of loss?
one who should bear the risk of lost because there was no actual contract of sale. If no
contract of sale was actually executed by the parties, the loss of the vessel must be COURT RULING:
borne by its owner and not by a party who only intended to purchase it and who was
unable to do so on account of failure on the part of the owner to show proper title to the Affirming the decision of the Court of Appeals, the Supreme Court reiterated that Article
vessel and thus enable them to draw up the contract of sale. Grimalt was under no 1496 of the Civil Code which provides that "in the absence of an express assumption of
obligation to pay the price of the vessel, the purchase of which had not been concluded. risk by the buyer, the things sold remain at seller's risk until the ownership thereof is
The conversations between the parties and the letter Grimalt had written to Roman did transferred to the buyer," is applicable in the case at bar for there was neither an actual
not establish a contract sufficient in itself to create reciprocal rights between the parties. nor constructive delivery of the thing sold.
Norkis Distributors Inc. vs. Court of Appeals, and Nepales
193 SCRA 694 The Court of Appeals correctly ruled that the purpose of the execution of the sales
February 1991 invoice dated September 20, 1979 and the registration of the vehicle in the name of
Alberto Nepales with the Land Registration Commission was not to transfer the
FACTS: ownership and dominion over the motorcycle to him, but only to comply with the
requirements of the DBP for processing private respondent's motorcycle loan. The
On September 20, 1979, private respondent Alberto Nepales bought from the Norkis circumstances in the case itself more than amply rebut the disputable presumption of
Distributors, Inc. (Norkis) in its Bacolod branch a brand new Yamaha Wonderbike delivery upon which Norkis anchors its defense to Nepales' action.
motorcycle Model YL2DX with Engine No.L2-329401K Frame No.NL2-0329401, color Sun Bros. Appliances, Inc. vs. Perez
maroon, which was then on display in the Norkis showroom. The Branch Manager April 30, 1963
Avelino Labajo agreed to accept the P7,500.00 price payable by means of a Letter of Labrador, J.
Guaranty from the Development Bank of the Philippines (DBP), Kabankalan. Hence,
credit was extended to Nepales, and as security for the loan, he executed a chattel SUMMARY: Sun Bro Appliances and Perez entered into a Conditional Sale
mortgage on the motorcycle in favor of DBP. Labajo issued the Norkis Sales Invoice Agreement on an air conditioner. The agreement states that the buyer shall bear the
No. 0120 perfecting the contract of sale, and Nepales signed the same to conform to loss for any cause, but the title is not transferred until full payment. The item was
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burned, Perez refused to pay the balance invoking fortuitous event as cause of loss. upon full payment of the case (bec. Full payment even if the title to the
The court ordered Perez to pay. price not yet made) property sold remained

DOCTRINE: The agreement making the buyer responsible for any loss whatsoever, The phrase “for any Should not be interpreted the terms "any cause"
fortuitous or otherwise, even if the title to the property remains in the vendor, is cause” in the agreement to include fortuitous used in the agreement
neither contrary to law, nor to morals or public policy. events. includes a fortuitous
event, and an express
Although 1174, CC stipulation making the
SELLER Sun Brothers Appliances, SUBJECT Admiral Air Conditioner recognizes an exception vendee responsible in
Inc. PROPERTY: to FE when parties such case is valid
BUYER Perez DOCUMENT: Conditional Sale expressly stipulate, “for
Agreement any cause” did not The stipulation in the
indicate such intention contract of sale whereby
FACTS: the buyer shall be liable
- Sun bros and Perez entered into a Conditional Sale Agreement of an Admiral for any loss, damage or
air conditioner, the price of which is 1,678php destruction for any
- The agreement contains the ff. stipulations: cause, is not contrary to
law, morals or public
"2. Title to said property shall vest in the Buyer only upon full payment of the policy and is specifically
entire account as herein provided, and only upon complete performance of all authorized to be
the other conditions herein specified: stipulated upon between
the parties by Article
"3. The Buyer shall keep said property in good condition and properly 1174 of the Civil Code
protected against the elements, at his/its address above-stated, and
undertakes that if said property or any part thereof be lost, damaged, or ISSUE: Who should bear the loss? - Buyer
destroyed for any causes, he shall suffer such loss, or repair such damage, it
being distinctly understood and agreed that said property remains at Buyer's RATIO:
risk after delivery;"
I. The agreement making the buyer responsible for any loss whatsoever, fortuitous or
- Pursuant to the contract, sun bros. delivered the item and was received by otherwise, even if the title to the property remains in the vendor, is neither contrary to
Perez law, nor to morals or public policy.
- Perez made a downpayment of 274php and the item was installed by sun bro
representatives II. Citing American decisions, the court held that the loss did not relieve the buyer from
- The said air conditioner was burned where it was installed by the plaintiff (no his obligation to pay
details about the fire in the case). The defendant claims that the destruction
was due to force majeure. III. Reason for the rule:
- Perez did not pay any of the monthly installments leaving a balance of 1, 1. The absolute and unconditional nature of the vendee's promise to pay for the
404php goods. The promise is nowise dependent upon the transfer of the absolute
title.
ACTION AND PRAYER:
Action to recover the balance of the item’s price 2. The fact that the vendor has fully performed his contract and has nothing
further to do except receive payment, and the vendee received what he
CFI RULING: Ordered Perez to pay bargained for when he obtained the right of possession and use of the goods
- As the buyer would be liable in case of loss for any cause, such buyer and the right to acquire title upon making full payment of the price
assumed liability even in case of loss by fortuitous event
3. Providing an incentive to care properly for the goods, they being exclusively
under the control and dominion of the vendee
Points of Contention Buyer’s interpretation Seller’s interpretation
The contract stipulates It follows that the vendor The risk of loss was DISPOSITIVE: Judgment of lower court affirmed.
that title would vest only bears the loss in this expressly stipulated to be
undertaken by the buyer, LAWYERS COOPERATIVE PUBLISHING COMPANY v. PERFECTO A. TABORA
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1965 / BAUTISTA ANGELO being the amount of the unpaid installments due under the express terms of the
FACTS contract at the date of the institution of the action; but declined to enter judgment for the
Perfecto Tabora bought from the Lawyers Cooperative Publishing Company a complete balance of the indebtedness on the ground that, under the express terms of the
set of AmJur, plus a set of AmJur, General Index. contract, it was not due and payable when the complaint was filed.
CONTRACT “Title to and ownership of the books shall remain with the seller until the From this judgment both parties appealed, and the record is now before us on their duly
purchase price shall have been fully paid. Loss or damage to the books after perfected bills of exceptions.
delivery to the buyer shall be borne by the buyer.” The defendant's contentions on this appeal are substantially limited to his claim that
Tabora made a partial payment of P300.00, leaving a balance of P1,382.40. The books under the terms of the deed of sale of the launch, Song Fo & Co. had obligated
were delivered and receipted for by Tabora. On the same day, a fire broke out, burning themselves to insure the launch, and since they had failed and neglected to do so, they
down Tabora’s law office and library. Tabora immediately reported it to LCBC. The themselves should suffer the loss resulting from the shipwreck of the launch without
company replied and as a token of goodwill it sent to Tabora free of charge 4 Philippine insurance.1awphil.net
Reports volumes. It cannot be denied that if the contract of sale did in fact impose on Song Fo & Co. an
As Tabora failed to pay the monthly installments agreed upon, LCBC filed an imperative obligation to insure the launch, which under the terms of the contract was
action to recover of the balance. mortgaged to secure the payment of the purchase price, and if Song Fo & Co. did in
TABORA’S CONTENTIONS fact fail and neglect to insure the launch in compliance with the terms of the contract,
 Contract: title to and the ownership of the books shall remain with the seller until the Oria would be entitled to have the amount of his indebtedness reduced by the amount
purchase price shall have been fully paid, so LCBC should bear the loss of the insurance which he would have been entitled to have applied to the payment of
 Even assuming that the ownership was transferred to Tabora, he should not answer the purchase price had Song Fo & Co. faithfully complied with the terms of the contract.
for the loss: force majeure (no evidence that Tabora contributed in any way) But an examination of the terms of the deed of sale of the launch discloses that Song
ISSUE & HOLDING Fo & Co. did not expressly obligated themselves to insure and keep the launch insured,
Who bears the loss? Tabora although it is true that the contract expressly authorized them to insure it in their own
RATIO name.
GENERAL RULE The loss of the object of the contract of sale is borne by the Counsel for Oria contend, however, that although the language of the contract did not in
owner or in case of force majeure the one under obligation to deliver the object express terms obligate Song Fo & Co. to insure the launch, it was their duty so to do
is exempt from liability under all the circumstances, and it is insisted that they should not be permitted to evade
the loss resulting from their negligence in the performance of that duty.
 THIS IS NOT APPLICABLE HERE Contract provides that loss or damage after
The contract expressly authorized Song Fo & Co. to insure the launch in their own
delivery shall be borne by the buyer
name and to charge the estimated cost of the premiums with interest at the rate of ten
FORCE MAJEURE DEFENSE FAILS
per centum to Oria, and there is much force in the contention of counsel for Oria at least
The rule only holds true when the obligation consists in the delivery of a determinate
to extent that under all the circumstances, it was the duty of Song Fo & Co. to insure
thing and there is no stipulation holding him liable even in case of fortuitous event.
the vessel if they could. But there is nothing in the record which would justify a holding
 NOT PRESENT IN THIS CASE that Song Fo & Co. obligated themselves to insure the launch at all events. There is
The obligation is pecuniaryin nature, and the obligor bound himself to assume the nothing in the written contract, examined in the light of all the surrounding
loss after the delivery. circumstances, which justifies an inference that there was any thought in the mind of
either of the parties that the vendor of the launch would himself insure her against loss
EN BANC or damage during the long period allowed for the payment of the purchase price; yet
G.R. No. L-10056 December 24, 1915 that substantially would be the effect of the effect of the assumption of an obligation of
SONG FO & CO., plaintiff-appellant, an obligation to insure and keep her insured at all events. On the contrary, the language
vs. of the contract, which authorized Song Fo & Co. to take out insurance in their own
MANUEL ORIA, defendant-appellant. name and to charge the amount of the premium to Oria, when read in the light of the
Gutierrez Repide and Socias for plaintiff. transaction of which it was a part, imposed at most, a duty upon Song Fo & Co. to take
Sanz, Opisso and Luzuriaga for defendant. such reasonable measures looking to the insurance of the vessel as might be required
of a prudent man in connection with the insurance of his own property.
The undisputed evidence of record shows that Song Fo & Co. did in fact make a bona
CARSON, J.: fide attempt to insure the launch, and to that end did all in their power and adopted all
Song Fo & Co., the original plaintiff in this action, sold a launch to Oria, the defendant, available means which could reasonably be required of them. It appears, however, that
for P16,500, payable in quarterly installments of P1,000, together with interest at the partly due to the dangerous nature of the coast of Samar along which Oria desired to
rate of ten per centum per annum. The launch was delivered to Oria in Manila, but was operate the launch, and partly due to the some lack of confidence in the character and
shipwrecked and became a total loss while en route to Oria's place of business in reputation of the owner of the property for which application for insurance was made,
Samar. No part of the purchase price has ever been paid and this action was instituted the local agents of the marine insurance companies declined to accept the risk without
for the recovery of the total amount of the purchase price with interest thereon until previous communication within their foreign principals: and the launch was lost before
paid. The trial court gave judgment in favor of the plaintiff for P6,000 and interest, that they could ascertain the wishes of these principals as to the execution of an insurance
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contract. It appears also that Oria, who had exclusive control of the operation of the rock crusher which Rizal Consolidated Corporation then had for sale. A brother of Sy
vessel, sent her from Manila to Samar on the trip in the course of which she was Bang, went to inspect the machine at the Rizal Consolidated’s plant site. Apparently
shipwrecked, well knowing that she had not yet been insured: and that Song Fo & Co. satisfied with the machine, the private respondents signified their intent to purchase the
had no power to interfere, or to keep her in port pending their application for insurance. same.
Indeed it is evident that under the terms of the deed of sale, they would not have had
the right to detain the vessel in a place of safety, against the wishes of Oria, had the Since he does not have the financing capability, Sy Bang applied for financial
insurance agents definitely declined their insurance proposals. assistance from Filinvest Credit Corporation. Filinvest agreed to extend financial aid on
Under these circumstances we are of opinion and so hold that Song Fo & Co. were in the following conditions: (1) that the machinery be purchased in the petitioner’s name;
no wise responsible under the contract for the loss of the launch without insurance and (2) that it be leased with option to purchase upon the termination of the lease period;
that the contentions of the defendant in this regard furnish no defense to the action and (3) that Sy Bang execute a real estate mortgage as security for the amount
against him for the purchase agreed upon in the deed of sale. advanced by Filinvest. A contract of lease of machinery (with option to purchase) was
Coming now to examine the contentions of the plaintiffs on their appeal, we think that entered into by the parties whereby they to lease from the petitioner the rock crusher for
the trial judge erred in declining to render judgment in their favor for the total amount of two years. The contract likewise stipulated that at the end of the two-year period, the
the purchase price of the launch. He appears to have relied upon the provisions of machine would be owned by Sy Bang.
article 1125 of the Civil Code but to have overlooked the co-related provisions of article
1129 of the same code. 3 months from the date of delivery, Sy Bang claiming that they had only tested the
These articles are as follows:itc-a1f machine that month, sent a letter-complaint to the petitioner, alleging that contrary to
1125. Obligations, the fulfillment of which has been fixed for a certain day, are the 20 to 40 tons per hour capacity of the machine as stated in the lease contract, the
exigible only when such day arrives. machine could only process 5 tons of rocks and stones per hour. They then demanded
By a certain day is understood one which shall necessarily arrive, even when that the petitioner make good the stipulation in the lease contract. Sy Bang stopped
the date of arrival is unknown. payment on the remaining checks they had issued to the petitioner.
When the uncertainty consists in the arrival or non-arrival of the day, then the
obligations is conditional and shall be controlled by the proceeding section. As a consequence of the non-payment, Filinvest extrajudicially foreclosed the real
1129. The debtor shall lose all right to profit by the term: estate mortgage.
1. When, after the obligation has been contracted, it appears that he is
insolvent, unless he gives security for the debt. Issue:
2. When he does not give to the creditor the security he is bound to give.
3. When by his own acts, he acts, he has reduced such security after giving it, WON the real transaction was lease or sale? SALE ON INSTALLMENTS.
or when it disappears through an unforeseen event (vis major), unless it is
immediately substituted by a new one equally safe. Held:
The security for the payment of the purchase price of the launch itself having
disappeared as a result of an unforeseen event (vis major), and no other security The real intention of the parties should prevail. The nomenclature of the agreement
having been substituted therefor, the plaintiffs were clearly entitled to recover judgment cannot change its true essence, i.e., a sale on installments. It is basic that a contract is
not only for the installments of the indebtedness due under the terms of the contract at what the law defines it and the parties intend it to be, not what it is called by the parties.
the time when the instituted their action, but also for all installments which, but for the It is apparent here that the intent of the parties to the subject contract is for the so-
loss of the vessel had not matured at that time. called rentals to be the installment payments. Upon the completion of the payments,
The judgment entered in the court below should be modified by substituting for so much then the rock crusher, subject matter of the contract, would become the property of the
thereof as provides for the recovery by the plaintiff of P6,000 together with interest of private respondents. This form of agreement has been criticized as a lease only in
November 1911, a provision for the recovery of P16,500 together with interest at the name.
rate of ten per centum per annum, from the 15th day of November, 1911, and thus
modified, the judgment appealed from should be affirmed with the costs of this instance Sellers desirous of making conditional sales of their goods, but who do not wish openly
against the appellant. So ordered. to make a bargain in that form, for one reason or another, have frequently resorted to
Arellano, C.J., Torres, Johnson, Moreland, Trent and Araullo, JJ., concur. the device of making contracts in the form of leases either with options to the buyer to
FILINVEST CREDIT CORPORATION vs. COURT OF APPEALS G.R. No. 82508 purchase for a small consideration at the end of term, provided the so-called rent has
September 29, 1989 been duly paid, or with stipulations that if the rent throughout the term is paid, title shall
FILINVEST CREDIT CORPORATION vs. COURT OF APPEALS thereupon vest in the lessee. It is obvious that such transactions are leases only in
G.R. No. 82508 September 29, 1989 name. The so-called rent must necessarily be regarded as payment of the price in
installments since the due payment of the agreed amount results, by the terms of
Facts: bargain, in the transfer of title to the lessee.

Spouses Sy Bang were engaged in the sale of gravel produced from crushed rocks and Indubitably, the device contract of lease with option to buy is at times resorted to as a
used for construction purposes. In order to increase their production, they looked for a means to circumvent Article 1484, particularly paragraph (3) thereof.Through the set-
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up, the vendor, by retaining ownership over the property in the guise of being the Thos. D. Aitken for appellant.
lessor, retains, likewise, the right to repossess the same, without going through the Perfecto Gabriel for appellee.
process of foreclosure, in the event the vendee-lessee defaults in the payment of the Facts:
installments. There arises therefore no need to constitute a chattel mortgage over the Both Defendant, George C. Sellner and the plaintiff, Lamberto Songco owned a farm
movable sold. More important, the vendor, after repossessing the property and, in which was contiguous to each other’s land. Both properties had the sugar cane ready to
effect, canceling the contract of sale, gets to keep all the installments-cum-rentals be cut. The Defendant bought the plaintiff’s cane for P12,000 and executed three
already paid. promissory notes of P4,000 each. Two of these notes were paid; and the third was was
instituted to recover. From a judgement rendered in favor of the plaintiff, the defendant
Even if there was a contract of sale, Filinvest is still not liable because Sy Bang is has appealed.
presumed to be more knowledgeable, if not experts, on the machinery subject of the The defendant denied all the allegations of the complaint. He said that the promissory
contract, they should not therefore be heard now to complain of any alleged deficiency note was obtained from him by means of certain false and fraudulent representations
of the said machinery. It was Sy Bang who was negligent, not Filinvest. Further, Sy therein specified.
Bang is precluded to complain because he signed a Waiver of Warranty. It is claimed that the plaintiff estimated that this cane would produce 3,000 piculs of the
sugar and that the defendant bought the crop believing this estimate to be substantially
Harrison Motors Corp v. Navarro, correct. As the crop turned out it produced 2,017 piculs, gross, and after the toll for
GR 132269 milling was deducted the net left to the defendant was very much less. The court
April 27, 2000 believed it is fairly shown that the plaintiff knew at the time he made the representation
Art. III exaggerated the probable produce of his fields, and it is impossible to believe that his
estimate honestly reflected his true opinion. He knew what these same fields had been
Facts: producing over a long period of years; and he knew that, judging from the customary
yield, the harvest of this year should fall far below the amount stated.
Harrison Motors Corp. sold 2 Isuzu Elf trucks to private respondent Navarro, Issue:
owner of RN Freight Lines, a franchise holder operating and maintaining a fleet of cargo Whether or not the plaintiff was guilty of fraudulent representation of his cane.
trucks all over Luzon. Petitioner assembled 2 trucks using component parts. Before the Held:
sale, all BIR Taxes and customs duties for the parts used on the two trucks had been No. Misinterpretation upon a mere matter of opinion is not an actionable deceit, nor is it
paid for. a sufficient ground for avoiding a contract as fraudulent. The law allows considerable
latitude to seller’s statements, or dealer’s talk; and experience teaches that it is
Subsequently, BIR, BOC, and LTO entered into a tripartite MOA that before exceedingly risky to accept it at its face value.
registration in the LTO of any locally assembled vehicle using imported parts, a Assertions concerning the property which is the subject of a contract of sale, or in
Certificate of Payment should first be obtained from BIR and BOC for proof that all regard to its qualities and characteristics, are the usual and ordinary means used by
taxes and custom duties have been paid. Government agents seized and detained the defendant to obtain a high price and are always understood as affording to buyers no
two trucks of Navarro after discovering that there were still unpaid taxes. Wanting to ground for omitting to make inquiries. A man who relies upon such an affirmation made
secure immediate release of trucks, Navarro paid the assessed BIR taxes and customs by a person whose interest might so readily prompt him to exaggerate the value of his
duties and ask for reimbursement but Claros again refused. property does so at his peril, and must take the consequences of his own imprudence.
[GUINHAWA v PEOPLE SEPARATE PDF]
Issue:
EN BANC
W/N the 2 MOA’s impair the contract of sale between petitioner and private G.R. No. L-23109 March 20, 1925
respondendt. SANTIAGO GOCHANGCO, ET AL., Plaintiffs-Appellants, vs. R.L. DEAN, Defendant-
Appellant.
Ruling: Bernardino Guerrero and Amador Constantino for plaintiffs-appellants.
G.E. Campbell for defendant-appellant.
The Memorandum of Agreement does not impose any additional taxes which ROMUALDEZ, J.:
would unduly impair the contract of sale between petitioner and private The plaintiffs seek to recover of the defendant the sum of P17,655 as the value of 5,885
respondent. Instead, these administrative orders were passed to enforce payment of coconut trees, plus P1,000 as attorney's fees.chanroblesvirtualawlibrary chanrobles
existing BIR taxes and customs duties at the time of importation. Petitioner’s contention virtual law library
is unmeritorious. What Sec. 10 Art. III of the Constitution prohibits is the passage of a The defendant answered with a general denial and a counterclaim for the sum of
law which enlarges, abridges or in any manner changes the intention of the contracting P1,914 paid by the defendant and which must be paid by the
parties. plaintiffs.chanroblesvirtualawlibrary chanrobles virtual law library
The Court of First Instance of Manila, where the action was instituted, rendered
Songco Vs. Sellner, 37 PHIL. 254 – ARTICLE 1340 judgment absolving the defendant from the complaint, and the plaintiffs from the cross-
April 23, 2017cdizonblog
6

complaint and counterclaim of the defendant.chanroblesvirtualawlibrary chanrobles The plaintiffs had purchased a land of the Pasay Estate by installments. the defendant
virtual law library was the owner of two parcels of land situated in Masbate. The plaintiffs and defendant
Both parties have appealed, the plaintiffs assigning the following errors: agreed to exchange their respective properties, but before the final execution of the
1. The denial of the two motions of the plaintiffs dated January 3 and 7, 1924, praying contract of exchange, the plaintiff Gochangco went to Masbate to make an examination
that the defendant be adjudged in default on the ground of not having appeared nor of the parcels of land offered for exchange by the
answered the complaint within the period fixed by the law, the court knowing, as it very defendant.chanroblesvirtualawlibrary chanrobles virtual law library
well knew, that said denial openly and manifestly violated the statutes and The contract of exchange (Exhibits D and 1) was later executed. In the deed Exhibit D,
jurisprudence of this high court on the matter (pp. 7-17, plaintiff's B. of the defendant stated, among other things, the following:
E.).chanroblesvirtualawlibrary chanrobles virtual law library It is also declared that the said described property is sold will all coconut trees growing
2. The finding that the plaintiffs seek to annul the contract of exchange in order to on it, and I declared that I believe there are more than 6,000 coconut trees so growing,
recover from the defendant the property exchanged (p. together with any and all improvements of any kind whatsoever existing on the said
28, Id.).chanroblesvirtualawlibrary chanrobles virtual law library land including all movable goods, chattel, etc., found thereof.
3. The finding that it was one Thompson who induced the plaintiffs and defendant to The plaintiffs allege that defendant made them false and fraudulent representations as
exchange their respective lands (p. 24, Id.), and not the defendant himself, or at least to the existence of 6,000 coconut trees on his lands in Masbate offered for exchange.
by express order of the latter.chanroblesvirtualawlibrary chanrobles virtual law library This was not proven. It does not appear in the record that the defendant deliberately
4. The finding that it was not proven that the defendant committed fraud and that he had violated the truth in stating his belief that there were such a number of coconut trees on
never had the intention to deceive the plaintiffs (p. 30, Id.), when, as a matter of fact, said lands. Furthermore, it was shown that the plaintiff viewed the lands and himself
the contradictory and improbable testimony of the defendant clearly shows the falsity, estimated that there were there more than six thousand coconut
bad faith or fraud committed by him, and the preconceived intention to secure the trees.chanroblesvirtualawlibrary chanrobles virtual law library
making of the exchange by fraudulent means.chanroblesvirtualawlibrarychanrobles The facts herein proven, considered in the light of the provisions contained in article
virtual law library 1484 of the Civil Code, made applicable to this case by article 1541 of said Code,
5. The finding that the defendant did not positively say (p. 26, Id.) that there were on the prevent us from holding the action brought by the plaintiffs to be of any merit. They
lands exchanged more, but not less, than 6,000 coconut trees, instead of finding that have not established their alleged right to the judgment prayed for in their
said defendant did so affirm, with full knowledge of the non-existence of said number of complaint.chanroblesvirtualawlibrary chanrobles virtual law library
trees, and that such existence of said number was the primary consideration of the As to the cross-complaint and counterclaim of the defendant, we find that in the deed
contract of exchange, without which the plaintiffs would not have accepted the carrying Exhibit 1 executed by the plaintiffs in favor of the defendant, the former agreed to
out of the transaction between them.chanroblesvirtualawlibrary chanrobles virtual law reimburse the latter what he might pay in connection with perfecting his title to the
library property in Pasay, exchanged for that of the defendant in Masbate, provided that the
6. The failure to hold, as shown by the record, that while the defendant attempted to sum thus spent should exceed P1,500.chanroblesvirtualawlibrary chanrobles virtual law
establish or has established the fact that there were on his lands more than 6,000 library
coconut trees, according to his estimate, statement or belief, yet the fact is that not all of This was admitted by the plaintiffs in their reply to the cross-complaint and counterclaim
said coconut trees belong to him exclusively. chanrobles virtual law library of the defendant, where they also admitted the fact that for perfecting his title to the
7. The admission of Exhibits 1 to 13 of the defendant upon which its findings immaterial property, the defendant had spent the total sum of P1,914; there being, therefore, an
to this case are based, taking into account that, aside from the fact that said exhibits excess of P414 which the plaintiffs are under obligation to pay unto the
have no bearing at all on the instant case, they were not even defendant.chanroblesvirtualawlibrary chanrobles virtual law library
identified.chanroblesvirtualawlibrary chanrobles virtual law library Wherefore the judgment appealed from is affirmed so far as it absolves the defendant
8. The unjust finding against the preponderance of the evidence of the plaintiffs, from the complaint, but reversed so far as it dismisses the cross-complaint and
apparently reconciling it with the evidence of the defendant, and the absolution of the counterclaim, and it is ordered that the plaintiffs pay the defendant the sum of P414,
latter from the complaint. with legal interest thereon from January 3, 1924, when the cross-complaint and
The defendant, in turn, assigns the following as error:chanrobles virtual law library counterclaim was filed, without special findings as to costs. So ordered.
1. The failure to render judgment in his favor and against the plaintiffs for the sum of Johnson, Malcolm, Villamor, Ostrand, and Johns, JJ., concur.
P414.chanroblesvirtualawlibrary chanrobles virtual law library
We find no merit in the first assignment of error made by the plaintiffs. The defendant's PHILIPPINE MANUFACTURING CO. (PMC) vs. GO JOCCO
default is made to consist in the fact of the latter not having furnished the plaintiffs a J. Ostrand | January 21, 1926
copy of his appearance and answer. Such a fact cannot in itself alone constitute
sufficient cause for adjudication of default. The record shows that said appearance and TOPIC: Express Warranties
answer were filed with the court in due time, although the plaintiffs aver that they did not Distinguished from False Representation
receive any copy thereof.chanroblesvirtualawlibrary chanrobles virtual law library
We find no error, much less injustice, in the denial of the motion for adjudication of FACTS
default based on such a defect.chanroblesvirtualawlibrary chanrobles virtual law library
The other assignments of error go to the merits of the On Oct. 25, 1922, PMC and Go Jocco entered into a contract.
case.chanroblesvirtualawlibrary chanrobles virtual law library  PMC bought 500 tons of coconut oil for 27.5 cents per kilo from Go.
7

 The class of the oil shall not be more than 5% free fatty acid that Go, in not disclosing the existence of kapok oil in the oil sold to PMC, was guilty of
fraud.
On Nov. 15, 1922, Go tried to collect the price of the oil from PMC but was told by Mr.
Mason that it would first examine the oil. On the same day, the quality of the oil was An intention to deceive or mislead the other party to his prejudice is an essential
found to be satisfactory. PMC gave Go its check for P137,500, the full amount of the element of the fraud here considered. It is true that such an intention may be imputed
contract purchase price. upon the principle that the party must be presumed to intend the necessary
consequences of his own acts and need not necessarily be proven by direct evidence,
On Nov. 17, 1922, PMC sold the oil to Portsmouth Cotton Oil Refining Co. at the price but in this case, nothing shows that such intention may be definitely inferred. Had there
of $7.50 per 100 pounds. The contract states that the quality of the oil is 5% free fatty been any mixing of other oils with the coconut oil in question, Go would have been
acid, maximum 7% free fatty acid, 1% moisture and impurities; provided, however, that aware thereof, but there is nothing from which we can presume that Go intended to
any oil which exceeds 5% free fatty acid but does not exceed 7% shall not be rejected mislead the PMC to his prejudice. It is not disputed that at the time the sale was made,
but shall be reduced in price. Upon its arrival, Portsmouth refused to accept the oil kapok oil commanded a higher price in the market than did coconut oil and Go may well
because it was contaminated with cottonseed oil. As such, the matter was submitted for have been under the impression that a slight admixture of kapok oil did not substantially
arbitration. Samples were tested and were found to be contaminated. impair the general market value of the oil purchased.

On Mar. 19, 1923, PMC sold to Proctor & Gamble the same oil which was duly Indeed, there is nothing in evidence to show that the coconut oil suffered any material
accepted. impairment in value from the mixture and it is to be observed that Go was not advised
that the oil was sold to the Portsmouth under an express warranty against impurities.
On Feb. 3, 1923, PMC wrote Go, notifying Go that the oil delivered by him contained That it was still of good merchantable quality clearly appears from the fact that it was
kapok or cottonseed oil and that the buyers in the USA are claiming damages. As such, bought by P&G at current market prices. And when it is further considered that PMC,
PMC holds Go to incur any resulting loss or damage. before purchasing, examined the oil, it seems obvious that the evidence is not sufficient
to overcome the presumption of good faith and to establish fraud on the part of Go. In
After some fruitless correspondence, PMC sued Go on Dec. 27, 1923 asking for commercial sales, the fact that the vendor does not volunteer detailed statements of all
P21,263 as damages. he knows, whether important or not, in regard to the goods sold by him, is not fraud per
se.
CFI: IN FAVOR OF GO. It was not established that the oil purchased from Go was
contaminated at the time of its delivery to PMC. Evidence show that the contamination JAIME D. ANG, Petitioner,
may been caused through the impurity of the oil manufactured by PMC itself in view of
the fact that PMC was partly engaged in the manufacturing of kapok oil while Go neither VS
dealt with nor manufactured such oil. The CFI found that PMC, before closing its
contract with Go, examined the oil to its satisfaction and therefore Par. 1 of Art. 336 of COURT OF APPEALS AND BRUNO SOLEDAD, Respondents.
the Code of Commerce was applicable and PMC’s cause of action extinguished.
ISSUE / RATIO G.R. No. 177874

WON GO has a cause of action? Yes, not based on express warranty but based on September 29, 2008
fraud or false representation.
FACTS:
The small quantity of kapok oil alleged to be mixed with the coconut oil can only be
regarded as an impurity and did not change the essential character of the oil. Respondent Soledad sold his car to petitioner Ang by Deed of Absolute Sale
Compared to the contract between PMC and Portsmouth, the contract between PMC dated July 28, 1992. Ang later offered the car he bought from Soldedad, for sale which
and Go contains no express warranty against impurities. Hence, this is not an action on was eventually sold to Paul Bugash. However, the vehicle was seized by virtue of a writ
an express warranty. of replevin on account of the alleged failure of Ronaldo Panes, the owner of the vehicle
prior to Soledad, to pay the mortgage debt constituted thereon.
There being no express warranty and PMC having lost its right of action on the implied To secure the release of the vehicle, Ang paid BA Finance but Soledad
warranties as to the quality of the oil, PMC must now necessarily base its cause of refused to reimburse the said amount, despite repeated demands. Ang filed on July 15,
action on fraud under Art. 344. 1996 with the MTCC a complaint which was however dismissed on the ground of
prescription since more than 6 months elapsed from the delivery of the subject vehicle
Anson defines fraud as “a false representation of fact, made with a knowledge of its to the plaintiff buyer to the filing of this action, pursuant to Article 1571.
falsehood, or recklessly, without belief in its truth, with the intention that it should be Ang appealed to the RTC which affirmed the dismissal of the complaint but
acted upon by the complaining party, and actually inducing him to act upon it. required defendant to reimburse the amount plaintiff paid BA Finance Corporation.
Concealment is sometimes equivalent to false representations, and it is here argued Soledad’s Motion for Reconsideration was denied hence, he elevated the case to the
Court of Appeals and accordingly reversed the RTC decision and denied the petition.
8

Hence, the present recourse – petition for review on certiorari, Ang maintaining
that his cause of action had not yet prescribed when he filed the complaint and he (1) The purchaser has been deprived of the whole
should not be blamed for paying the mortgage debt. or part of the thing sold;

ISSUE: (2) This eviction is by a final judgment;

1. Whether or not the defendant Soledad in executing the Deed of Absolute Sale (3) The basis thereof is by virtue of a right prior to
declaring that, “I hereby covenant my absolute ownership to (sic) the above- the sale made by the vendor; and
described property and the same is free from all liens and encumbrances…
xxx “ ,made an EXPRESS warranty, the prescriptive period for which is that (4) The vendor has been summoned and made co-
specified in the contract, and in the absence of such period, the general rule defendant in the suit for eviction at the instance of
on rescission of contract, which is four years; or an IMPLIED warranty which the vendee.
prescribes six months from the date of delivery of the thing sold.
2. Whether or not petitioner Ang is entitled to damages for warranty against For one, there is no judgment which deprived Ang of the vehicle. For another,
eviction by virtue of the writ of replevin issued on account of the alleged failure there was no suit for eviction in which Soledad as seller was impleaded as co-
of Ronaldo Panes, the owner of the vehicle prior to Soledad, to pay the defendant at the instance of the vendee.
mortgage debt constituted on the subject vehicle and pursuant to the
declaration of defendant Soledad in the Absolute Sale that, “I will defend the
same from all claims or any claim whatsoever; will save the vendee from any 090 Power Commercial and Industrial Corp. v. CA, supra
suit by the government of the Republic of the Philippines.” GR 119745, June 20, 1997
Topic: Implied warranties; warranty against eviction
HELD: Ponente: Panganiban, J.

In declaring that he owned and had clean title to the vehicle at the time the
FACTS:
Deed of Absolute Sale was forged, Soledad gave an implied warranty of title. In
1. Petitioner Power Commercial & Industrial Development Corporation
pledging that he "will defend the same from all claims or any claim whatsoever [and] will
(PowerCom), an industrial asbestos manufacturer, needed a bigger office space
save the vendee from any suit by the government of the Republic of the Philippines,"
and warehouse for its products.
Soledad gave a warranty against eviction.
2. January 31, 1979: Petitioner PowerCom entered into a contract of sale with the
A warranty is a statement or representation made by the seller of goods,
respondent spouses Reynaldo and Angelita R. Quiambao—involving a 612-sq.
contemporaneously and as part of the contract of sale, having reference to the
m. parcel of land in San Antonio Village, Makati City
character, quality or title of the goods, and by which he promises or undertakes to
3. The parties agreed that petitioner PowerCom would pay private respondents
insure that certain facts are or shall be as he then represents them.
spouses Quiambao P108,000.00 as down payment, and the balance of
Warranties by the seller may be express or implied. Art. 1546 of the Civil Code
P295,000.00 upon the execution of the deed of transfer of the title. Further,
defines express warranty as any affirmation of fact or any promise by the seller relating
petitioner assumed, as part of the purchase price, the existing mortgage on the
to the thing is an express warranty if the natural tendency of such affirmation or promise
land. In full satisfaction thereof, he paid P79,145.77 to respondent PNB
is to induce the buyer to purchase the same, and if the buyer purchases the thing
4. June 1, 1979: respondent spouses mortgaged again said land to PNB to
relying thereon.
guarantee a loan of P145,000.00… P80,000.00 of which was paid to respondent
On the other hand, an implied warranty is that which the law derives by
spouses. Petitioner PowerCom agreed to assume payment of the loan.
application or inference from the nature of the transaction or the relative situation or
5. June 26, 1979: the parties executed a Deed of Absolute Sale With
circumstances of the parties, irrespective of any intention of the seller to create it.
Assumption of Mortgage. On the same date, Mrs. C.D. Constantino, then
Among the implied warranty provisions of the Civil Code are: as to the seller’s title (Art.
General Manager of PowerCom, submitted to PNB said deed with a formal
1548), against hidden defects and encumbrances (Art. 1561), as to fitness or
application for assumption of mortgage
merchantability (Art. 1562), and against eviction (Art. 1548).
6. February 15, 1980: PNB informed respondent spouses that, for petitioner’s
Since what Soledad, as seller, gave was an implied warranty, the prescriptive
failure to submit the papers necessary for approval pursuant to the former’s
period to file a breach thereof is six months after the delivery of the vehicle, following
letter dated January 15, 1980, the application for assumption of mortgage was
Art. 1571. Ang’s action therefore has already prescribed.
considered withdrawn; that the outstanding balance of P145,000.00 was
On the merits of his complaint for damages, Ang cannot recover damages for
deemed fully due and demandable; and that said loan was to be paid in full
breach of warranty against eviction due to the absence of the following essential
within fifteen (15) days from notice
requisites for such breach, vìz:
7. Petitioner PowerCom paid PNB P41,880.45 on June 24, 1980 and P20,283.14
on December 23, 1980, payments which were to be applied to the outstanding
"A breach of this warranty requires the concurrence
loan.
of the following circumstances:
9

8. On March 17, 1982, petitioner filed Civil Case No. 45217 against respondent If the parties intended to impose on respondent spouses the obligation to eject
spouses for rescission and damages the tenants from the lot sold, it should have included in the contract a provision
9. Petitioner demanded the return of the payments it made on the ground that its similar to that referred to in Romero vs. Court of Appeals, where the ejectment
assumption of mortgage was never approved of the occupants of the lot sold by private respondent was the operative act
10. May 31, 1983: while this case was pending, the mortgage was foreclosed. The which set into motion the period of petitioner’s compliance with his own
property was subsequently bought by PNB during the public auction obligation, i.e., to pay the balance of the purchase price. In the case cited, the
11. TC: ruled that the failure of respondent spouses to deliver actual possession to contract specifically stipulated that the ejectment was a condition to be fulfilled;
petitioner entitled the latter to rescind the sale, and in view of such failure and of otherwise, the obligation to pay the balance would not arise. This is not so in
the denial of the latter’s assumption of mortgage, PNB was obliged to return the the case at bar.
payments made by the latter
12. CA: reversed the trial court. it held that the deed of sale between respondent Absent a stipulation therefor, we cannot say that the parties intended to make its
spouses and petitioner did not obligate the former to eject the lessees from the nonfulfillment a ground for rescission. If they did intend this, their contract
land in question as a condition of the sale, nor was the occupation thereof by should have expressly stipulated so.
said lessees a violation of the warranty against eviction. Hence, there was no
substantial breach to justify the rescission of said contract or the return of the 2. Requisites of Breach of Warranty Against Eviction: A breach of this warranty
payments made requires the concurrence of the following circumstances:
13. Petitioner contends: (a) The purchaser has been deprived of the whole or part of the thing sold;
 there was a substantial breach of the contract between the parties (b) This eviction is by a final judgment;
warranting rescission (c) The basis thereof is by virtue of a right prior to the sale made by the vendor;
 CA gravely erred in failing to consider in its decision that a breach of implied and
warranty under Article 1547 in relation to Article 1545 of the Civil Code (d) The vendor has been summoned and made co-defendant in the suit for
applies in the case-at-bar. eviction at the instance of the vendee.
ISSUE:
1. WON the alleged “failure” of respondent spouses to eject the lessees from In the absence of these requisites, a breach of the warranty against eviction
the lot in question and to deliver actual and physical possession can be under Article 1547 cannot be declared.
considered a substantial breach of condition
2. WON there was a substantial breach of the contract between the parties As correctly pointed out by CA, the presence of lessees does not constitute an
warranting rescission encumbrance of the land, nor does it deprive petitioner of its control thereof.
HELD:
1. No. We note, however, that petitioner’s deprivation of ownership and control finally
2. No. It is petitioner’s failure to establish any breach of the warranty against occurred when it failed and/or discontinued paying the amortizations on the
eviction. Despite its protestation that its acquisition of the lot was to enable mortgage, causing the lot to be foreclosed and sold at public auction. But this
it to set up a warehouse for its asbestos products and that failure to deliver deprivation is due to petitioner’s fault, and not to any act attributable to the
actual possession thereof defeated this purpose, still no breach of warranty vendor-spouses.
against eviction can be appreciated because the facts of the case do not
show that the requisites for such breach have been satisfied. DOCTRINE
RATIO: Requisites of Breach of Warranty Against Eviction: A breach of this warranty requires
The deed of sale provides: ““We hereby also warrant that we are the lawful and the concurrence of the following circumstances:
absolute owners of the above described property, free from any lien and/or (a) The purchaser has been deprived of the whole or part of the thing sold;
encumbrance, and we hereby agree and warrant to defend its title and peaceful (b) This eviction is by a final judgment;
possession thereof in favor of the said Power Commercial and Industrial (c) The basis thereof is by virtue of a right prior to the sale made by the vendor;
Development Corporation, its successors and assigns, against any claims and
whatsoever of any and all third persons; subject, however, to the provisions (d) The vendor has been summoned and made co-defendant in the suit for
hereunder provided to wit:” eviction at the instance of the vendee.
1. The alleged “failure” of respondent spouses to eject the lessees from the lot in
question and to deliver actual and physical possession thereof cannot be
considered a substantial breach of a condition for two reasons: first, such Engineering and Machinery Corp. v. CA [G.R. No. 52267. January 24, 1996.]
“failure” was not stipulated as a condition -- whether resolutory or suspensive -- Third Division, Panganiban (J): 3 concur
in the contract; and second, its effects and consequences were not specified Facts:
either. The provision adverted to by petitioner does not impose a condition or an Pursuant to the contract dated 10 September 1962 between the Engineering and Machi
obligation to eject the lessees from the lot neryCorporation (the Corporation) and Almeda, the former undertook to fabricate,
furnish and install the air-conditioning system in the latter’s building along Buendia
10

Avenue, Makati in consideration of P12,000.00.The Corporation was to furnish the theimposition of the sales tax if such articles are ordinarily manufactured by the
materials, labor, tools and all services required in order to so fabricate and install said taxpayer for sale to the public.”
system. The system was completed in 1963 and accepted by Almeda, who paid in full (Celestino Co. vs. Collector, 99 Phil. 8411).
the To Tolentino, the distinction between the two contracts depends on the intention of the
contractprice. On 2 September 1965, Almeda sold the building to the National Investme parties. Thus,if the parties intended that at some future date an object has to be
nt and DevelopmentCorporation (NIDC). The latter took possession of the building but delivered, without considering the work orlabor of the party bound to deliver, the
on account of NIDC’s noncompliance with the terms and conditions of the deed of sale, contract is one of sale. But if one of the parties accepts the undertakingon the basis
Almeda was able to secure judicial rescission thereof. The ownership of the building of some plan, taking into account the work he will employ personally or through another,
having been decreed back to Almeda, he re-acquired possession sometime in 1971.It there isa contract for a piece of work.
was then that he learned from some NIDC employees of the defects of the air- Contract in question is one for a piece of work
conditioning system of the building. Acting on this information, Almeda commissioned The contract in question is one for a piece of work. It is not the Corporation’s line of
Engineer David R. Sapico to render a technical evaluation of the system in relation to business tomanufacture air-conditioning systems to be sold “off-the-shelf.” Its business
the contract with the Corporation. In his report, Sapico enumerated the defects of the and particular field of expertiseis the fabrication and installation of such systems as
system and concluded that it was “not capable of maintaining the desired room ordered by customers and in accordance with theparticular plans and specifications
temperature of76ºF — 2ºF.”On the basis of this report, Almeda filed on 8 May 1971 an provided by the customers. Naturally, the price or compensation for thesystem
action for damages against the Corporation with the then CFI Rizal (Civil Case 14712). manufactured and installed will depend greatly on the particular plans and
The complaint alleged that the air-conditioning system installed by the Corporation did specifications agreed uponwith the customers.
not comply with the agreed plans and specifications, hence, Almeda prayed for the Obligations of a contractor for a piece of work
amount ofP210,000.00 representing the rectification cost, P100,000.00 as damages The obligations of a contractor for a piece of work are set forth in Articles 1714 and
and P15,000.00 as attorney’s fees. 1715 of the CivilCode. Article 1714 provides that “if the contractor agrees to produce
The Corporation moved to dismissed the case, alleging prescription, but which was the work from material furnished byhim, he shall deliver the thing produced to the
denied by the Court. Thereafter, Almeda filed an ex-parte motion for preliminary employer and transfer dominion over the thing. — Thiscontract shall be governed by the
attachment on the strength of the Corporation’s own statement to the effect that it had following articles as well as by the pertinent provisions on warranty of titleand against
sold its business and was no longer doing business in Manila. The tria lcourt granted hidden defects and the payment of price in a contract of sale.” Article 1715 provides
the motion and, upon Almeda’s posting of a bond of P50,000.00, ordered the issuance that “thecontractor shall execute the work in such a manner that it has the qualities
of a writ of attachment. In due course, and on 15 April 1974, the trial court rendered agreed upon and has no defectswhich destroy or lessen its value or fitness for its
a decision, which ordered the Corporation to pay Almeda the amount needed to rectify ordinary or stipulated use. Should the work be not of suchquality, the employer may
the faults and deficiencies of the air-conditioning system installed by the Corporation in require that the contractor remove the defect or execute another work. If thecontractor
Almeda’s building, plus damages, attorney’s fees and costs). Petitioner appealed to the fails or refuses to comply with this obligation, the employer may have the defect
Court of Appeals, which affirmed on 28 November 1978 the decision of the trial court. removed oranother work executed, at the contractor’s cost.”
Hence, it instituted a petition for review on certiorari under Rule 45 of the Rules of Provisions on warranty against hidden defects
Court. The Supreme Court denied the petition and affirmed the decision assailed; The provisions on warranty against hidden defects, referred to in Article 1714, are found
without costs. in Articles1561 and 1566. Article 1561 provides that “the vendor shall be responsible for
Contract of a piece of work defined warranty against the hidden defects which the thing sold may have, should they render
Article 1713 of the Civil Code defines a contract for a piece of work as “by the contract it unfit for the use for which it is intended, or should they diminish its fitness for such use
for a piece of work the contractor binds himself to execute a piece of work for the to such an extent that, had the vendee been aware thereof, he would not have acquired
employer, in consideration of a certain price or compensation. The contractor may it or would have given a lower price for it; but said vendor shall not be answerable for
either employ only his labor or skill, or also furnish the material.” patent defects or those which may be visible, or for those which are not visible if the
Contract for a piece of work distinguished from a contract of sale vendee is an expert who, by reason of his trade or profession, should have known
A contract for a piece of work, labor and materials may be distinguished from a contract them.” Article 1566 provides that “the vendor is responsible to the vendee for any
of sale by theinquiry as to whether the thing transferred is one not in existence and hidden faults or defects in the thing sold, even though he was not aware thereof,” and
which would never have existed but forthe order of the person desiring it . In such case, provides further that the provision “shall not apply if the contrary has been stipulated,
the contract is one for a piece of work, not a sale. On theother hand, if the thing subject and the vendor was not aware of the hidden faults or defects in the thing sold.”
of the contract would have existed and been the subject of a sale to some otherperson Remedy against violation of the warranty against hidden defects
even if the order had not been given, then the contract is one of sale.“A contract for the The remedy against violations of the warranty against hidden defects is either to
delivery at a certain price of an article which the vendor in the ordinary course ofhis withdraw from the contract (rehibitory action) or to demand a proportionate reduction of
business manufactures or procures for the general market whether the same is on hand the price (accion quanti minoris), with damages in either case.
at the time or not isa contract of sale, but if the goods are to be manufactured specially Prescriptive period as specified in express warranty, or in the absence of which,
for the customer and upon his specialorder, and not for the general market, it is a 4 years; Prescriptive period of 6 months for rehibitory action is applicable only in implied
contract for a piece of work (Art. 1467, Civil Code). The merefact alone that certain warranties
articles are made upon previous orders of customers will not argue against While it is true that Article 1571 of the Civil Code provides for a prescriptive period of
six months for a rehibitory action, a cursory reading of the ten preceding articles to
11

which it refers will reveal that said rule may be applied only in case of implied 3. Thereafter, Nutrimix filed a complaint against Evangelista for collection of money
warranties; and where there is an express warranty in the contract, the prescriptive with damages.
period is the one specified in the express warranty, and in the absence of such period, 4. The respondents admitted their unpaid obligation but impugned their liability. The
the general rule on rescission of contract, which is four years (Article 1389, Civil nine checks issued were made to guarantee the payment of the purchases, which was
Code) shall apply. previously determined to be procured from the expected proceeds in the sale of their
(Villostas v. CA) broilers and hogs. They contended that inasmuch as the sudden and massive death of
Original complaint is one for arising from breach of a written contact and not a suit to their animals was caused by the contaminated products of the petitioner, the
enforce warranty against hidden defects; Article 1715 in relation to Article 1144 apply, nonpayment of their obligation was based on a just and legal ground.
prescription in 10 years; Action not prescribed 5. The respondents also lodged a complaint for damages against the petitioner, for
The lower courts opined and so held that the failure of the defendant to follow the untimely and unforeseen death of their animals supposedly effected by the
the contract specifications and said omissions and deviations having resulted in the adulterated animal feeds the petitioner sold to them.
operational ineffectiveness of the system installed makes the defendant liable to the 6. Nutrimix alleged that the death of the respondents’ animals was due to the
plaintiff in the amount necessary to rectify to put the air conditioning system in its proper widespread pestilence in their farm. The petitioner, likewise, maintained that it received
operational condition to make it serve the purpose for which the plaintiff entered into the information that the respondents were in an unstable financial condition and even sold
contract with the defendant. Thus, having concluded that the original complaint is one their animals to settle their obligations from other enraged and insistent creditors. It,
for damages arising from breach of a written contract, and not a suit to enforce moreover, theorized that it was the respondents who mixed poison to its feeds to make
warranties against hidden defects, the governing law therefore is Article 1715. it appear that the feeds were contaminated.
However, inasmuch as this provision does not contain a specific prescriptive period, the 7. The trial court held in favor of petitioner on the ground that it cannot be held liable
general law on prescription, which is Article 1144 of the Civil Code, will apply. Said under Articles 1561 and 1566 of the Civil Code governing “hidden defects” of
provision states, inter alia, that actions “upon a written contract” prescribe in 10 years. commodities sold. The trial court is predisposed to believe that the subject feeds were
Since the governing contract was executed on 10 September 1962 and the complaint contaminated sometime between their storage at the bodega of the Evangelistas and
was filed on 8 May 1971, it is clear that the action has not prescribed. their consumption by the poultry and hogs fed therewith, and that the contamination
Acceptance of the work by the employer does not relieve the contractor of liability for was perpetrated by unidentified or unidentifiable ill-meaning mischief-maker(s) over
any defect in the work whom Nutrimix had no control in whichever way.
The mere fact that Almeda accepted the work does not, ipso facto, relieve the 8. CA modified the decision of the trial court, citing that respondents were not
Corporation from liability for deviations from and violations of the written contract, as the obligated to pay their outstanding obligation to the petitioner in view of its breach of
law gives him 10 years within which to file an action based on breach thereof. As held warranty against hidden defects. The CA gave much credence to the testimony of Dr.
by the Court of Appeals, “as the breach of contract consisted in appellant’s omission to Rodrigo Diaz, who attested that the sample feeds distributed to the various
install the equipment [sic], parts and accessories not in accordance with the plan and governmental agencies for laboratory examination were taken from a sealed sack
specifications provided for in the contract and the deviations made in putting into the bearing the brand name Nutrimix
air-conditioning system parts and accessories not in accordance with the contract
specifications, it is evident that the defect in the installation was not apparent at the time ISSUE: WON Nutrimix is guilty of breach of warranty due to hidden defects
of the delivery and acceptance of the work, considering further that Almeda is not an
expert to recognize the same. From the very nature of things, it is impossible to HELD: NO.
determine by the simple inspection of air conditioning system installed in an 8-floor The provisions on warranty against hidden defects are found in Articles 1561 and 1566
building whether it has been furnished and installed as per agreed specifications.” of the New Civil Code of the Philippines. A hidden defect is one which is unknown or
could not have been known to the vendee. Under the law, the requisites to recover on
account of hidden defects are as follows:
NUTRIMIX FEEDS CORP V. CA 441 SCRA 357 (2004) a) the defect must be hidden;
FACTS: In 1993, private respondent spouses Evangelista procured various animal b) the defect must exist at the time the sale was made;
feeds from petitioner Nutrimix Feeds Corp. the petitioner gave the respondents a credit c) the defect must ordinarily have been excluded from the contract;
period of 30-45 days to postdate checks to be issued as payment for the feeds. The d) the defect, must be important (renders thing UNFIT or considerably decreases
accommodation was made apparently because the company’s president was a close FITNESS);
friend of Evangelista. The various animal feeds were paid and covered by checks with e) the action must be instituted within the statute of limitations
due dates from July 1993-September 1993.
1. Initially, the spouses were good paying customers. However, there were instances In the sale of animal feeds, there is an implied warranty that it is reasonably fit and
when they failed to issue checks despite the delivery of goods. Consequently, the suitable to be used for the purpose which both parties contemplated. To be able to
respondents incurred an aggregate unsettled account with Nutrimix amounting to prove liability on the basis of breach of implied warranty, three things must be
P766,151 established by the respondents. The first is that they sustained injury because of the
2. When the checks were deposited by the petitioner, the same were dishonored product; the second is that the injury occurred because the product was defective or
(closed account). Despite several demands from the petitioner, the spouses refused to unreasonably unsafe; and finally, the defect existed when the product left the hands of
pay the remaining balance the petitioner. A manufacturer or seller of a product cannot be held liable for any
12

damage allegedly caused by the product in the absence of any proof that the product in lower price for it; but said vendor shall not be answerable for patent defects or those
question was defective. The defect must be present upon the delivery or manufacture of which may be visible, or for those which are not visible if the vendee is an expert who,
the product; or when the product left the seller’s or manufacturer’s control; or when the by reason of this trade or profession, should have known them. (Emphasis supplied)
product was sold to the purchaser; or the product must have reached the user or Art. 1566. The vendor is responsible to the vendee for any hidden faults or defects in
consumer without substantial change in the condition it was sold. Tracing the defect to the thing sold, even though he was not aware thereof.
the petitioner requires some evidence that there was no tampering with, or changing of This provision shall not apply if the contrary has been stipulated and the vendor was
the animal feeds. The nature of the animal feeds makes it necessarily difficult for the not aware of the hidden faults or defects in the thing sold.
respondents to prove that the defect was existing when the product left the premises of Art. 1571. Actions arising from the provisions of the preceding ten articles shall be
the petitioner. barred after six months from the delivery of the thing sold.
Wherefore, the SELLER is not liable for the defects and a redhibitory action for
A review of the facts of the case would reveal that the petitioner delivered the animal violation of an implied warranty against hidden defects has been time-barred.
feeds, allegedly containing rat poison, on July 26, 1993; but it is astonishing that the FIRST DIVISION
respondents had the animal feeds examined only on October 20, 1993, or barely three
months after their broilers and hogs had died. A difference of approximately three [G.R. No. 4606. October 19, 1909. ]
months enfeebles the respondents’ theory that the petitioner is guilty of breach of
warranty by virtue of hidden defects. In a span of three months, the feeds could have JUAN RODRIGUEZ, Plaintiff-Appellant, v. FINDLAY & CO., Defendant-Appellee.
already been contaminated by outside factors and subjected to many conditions
unquestionably beyond the control of the petitioner. Basilio R. Mapa for Appellant.

Even more surprising is the fact that during the meeting with Nutrimix President Mr. Kinney & Lawrence, and John W. Sleeper for Appellee.
Bartolome, the respondents claimed that their animals were plagued by disease, and
that they needed more time to settle their obligations with the petitioner. It was only SYLLABUS
after a few months that the respondents changed their justification for not paying their 1. SHIPS AND SHIPPING; BREACH OF CONTRACT; DAMAGES. — Where a contract
unsettled accounts, claiming anew that their animals were poisoned with the animal to furnish the machinery complete, including a propeller, for a freight ship for coastwise
feeds supplied by the petitioner. trade in these Islands contained the following: "One brass propeller of 8’ diameter and
suitable pitch for an expected speed of ship about 9 1/2 knots," and also the following
CARLOS B. DE GUZMAN, specification applying to the machinery as a whole: "The whole to be suitable for a
vs. wooden ship of 150 ft. long by 24 ft. beam and 14 ft. depth, as per plan supplied by Sr.
TOYOTA CUBAO, INC., Juan Rodriguez;" it appearing that the person who was to furnish such machinery knew
FACTS: the purpose for which the ship was to be used and its general form and construction.
On November 27, 1997, BUYER purchased from SELLER a brand new Held, That the propeller must be such as to give to such ship a speed of about 9 1/2
vehicle. The vehicle was delivered to BUYER two days later. On October 18, 1998, knots per hour, and that furnishing a propeller which gave the ship a speed of only
BUYER demanded the replacement of the engine of the vehicle because it developed a about 7 knots an hour was not a compliance with the terms of the contract: And, Held
crack after traversing Marcos Highway during a heavy rain. As BUYER knows no further, That the damages recoverable of a manufacturer or dealer for the breach of
reason why the vehicle's engine would crack just like that, the same could only be due warranty of a sale of goods which he knew at the time of the sale were intended to be
to the fact that said engine and/or the vehicle itself was defective even from the time it used for a particular purpose or to accomplish a particular result, the measure of
was bought. BUYER asserted that respondent should replace the engine with a new damages is not confined to the difference in value of the machinery as warranted and
one based on an implied warranty. SELLER refused to answer for this defect saying it is as it proves to be, but includes such consequential damages as are the direct,
not covered by the vehicle's warranty. It refused to replace the vehicle as BUYER immediate, and probable result of the breach.
demanded (or at least its engine, or even repair the damage). He further alleged that
the BUYER's cause of action had prescribed as the case was filed more than six
months from the date the vehicle was sold and/or delivered. DECISION
ISSUES:
1) Whether the SELLER is liable for the redhibitory defects of the vehicle.
2) Whether the BUYER's cause of action had prescribed. MORELAND, J. :
RULING:
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: The complaint asks damages for breach of a written contract between plaintiff and
Art. 1561. The vendor shall be responsible for warranty against the hidden defendant for the delivery of the machinery, complete, for a ship in process of
defects which the thing sold may have, should they render it unfit for the use for which it construction belonging to the plaintiff.
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 The defendant, in its answer, denies the allegations of the complaint generally, and sets
13

up as a counterclaim the balance due from plaintiff on the purchase price of the plaintiff a plan of the entire vessel, showing the machinery placed therein. The plans in
machinery aforesaid, and asks for an affirmative judgment against the plaintiff question showed length and breadth of the hull, its general outline and the number of
accordingly. feet of water which it drew. These plans also showed location and outline of the
sternpost and rudderpost of said ship.
The defendant secured in the court below an affirmative judgment against the plaintiff
for the sum of P9,216.60, with interest thereon, at the rate of 6 per cent per annum, In the process of manufacturing the propeller the defendant thought it discovered that
from February 28, 1907. The plaintiff made a motion for a new trial upon the grounds the propeller described in the contract would not give the speed required by the contract
that the evidence does not justify the decision of the court and that the decision is and notified the plaintiff to that effect, and at the same time asked permission to put in
contrary to law. This motion was denied, and the plaintiff duly excepted and perfected its place a propeller 10 feet in diameter. This the plaintiff declined to permit.
his appeal.
The machinery, so purchased, was delivered, except certain items which were required
On the 19th of September, 1907, the plaintiff was the owner of a freight ship called the to be upon all vessels by the rules of the customs officials of the city of Manila and
Constancia, then in course of construction in plaintiff’s shops in the city of Manila. The about which there is little or no dispute. Certain other articles of small value, necessary
vessel was designed for the coastwise trade in the Philippine Islands. On that date, and for the completion of the machinery, seem not to have been delivered, but concerning
for some time prior thereto, one William Swann was the consulting engineer of the these there is very little dispute between the parties.
defendant, in charge of its machinery department. Swann was at that time an engineer
and naval architect and had been working as an engineer substantially all his life. On The machinery was duly installed in the vessel upon its delivery. Upon the trial of the
the date mentioned he was, and for some time theretofore had been, a naval architect, ship, after the installation of its machinery, it was found that all of the machinery worked
a member of the Institute of Engineers and Shipbuilders of Scotland, and a member of well except the propeller. This, instead of giving the ship a speed of about 9 1/2 knots
the Institute of Naval Architects of Great Britain. The plaintiff was acquainted with an hour, gave a speed of less than 7 knots an hour. The failure of the propeller to give
Swann and knew him to be an engineer and naval architect of long experience. On the the required speed to the vessel is substantially the only point in controversy in this
date referred to Rogaciano Rodriguez, acting for and on behalf of the plaintiff and as his case.
agent, made a written contract with Swann, acting for and on behalf of the defendant
and as its agent, wherein an whereby the plaintiff agreed to purchase of the defendant, The contention of the plaintiff is that, under the terms of the contract, the defendant was
and the defendant agreed to sell and deliver to the plaintiff, certain machinery, obliged to furnish a propeller 8 feet in diameter which would give the Constancia a
complete, for the ship Constancia already referred to. Prior to the making of the contract speed of 9 1/2 knots an hour, and that, failing in that, the contract was broken and the
on the date referred to, and during the negotiations leading up to the contract and in defendant should be held liable for all damages resulting.
connection with them, Swann, the agent of the defendant, visited the shipyard of the
plaintiff and inspected the steamship Constancia, then being constructed. This he did The defendant contends that the machinery was to be according to the specifications in
several different times. The inspections were made for the purpose of determining the the contract and that, if these specifications were complied with, it does not matter what
kind and nature of the machinery which would be suitable to the ship referred to. may be the actual speed of the vessel. It claims that it had nothing to do with the
Neither the plaintiff nor his agent, Rogaciano Rodriguez, was a marine or other construction of the steamship or the placing therein of the machinery. The defendant
engineer and they knew little or nothing about the kind of machinery which should be also claims that, under the terms of the contract, there was no guaranty of speed, and
placed in the ship they were building. They relied entirely upon the recommendations, that, if the propeller was 8 feet in diameter and of brass, it would fulfill the terms of the
knowledge, and experience of the engineer Swann. The plaintiff had in mind and stated contract even though the speed of the vessel should not exceed a knot per hour.
to Swann, among other things, the speed which it was necessary that the Constancia
should have in order to be available as a coastwise vessel, and left the kind, nature, The contract, by its words, expressly requires that the defendant must furnish a
and construction of the machinery to the greater knowledge and experience of Swann. propeller which shall give to the steamship Constancia a speed of about 9 1/2 knots per
This is particularly true of the propeller placed in that vessel, the questions relative to hour.
which are the main issues of this case. The contract, so far as its interpretation is
disputed, reads as follows:jgc:chanrobles.com.ph The language of the contract is so plain, and the negotiations leading up to the
execution of the contract point in one direction so clearly, that there ought to be little
"One brass propeller of 8’ diameter and suitable pitch for an expected speed of ship need of discussion. But the parties have insisted so strongly upon the justice of their
about 9 1/2 knots. several contentions that a detailed discussion is considered advisable.
x x x
The language is without ambiguity. The defendant agrees therein to furnish "One brass
propeller of 8’ diameter and suitable pitch for an expected speed of ship about 9 1/2
"The whole to be suitable for a wooden ship of 150 ft. long by 24 ft. beam and 14 ft. knots;" and "The whole to be suitable for a wooden ship 150 ft. long by 24 ft. beam and
depth, as per plan supplied by Sr. Juan Rodriguez."cralaw virtua1aw library 14 ft. depth, as per plan supplied by Sr. Juan Rodriguez."cralaw virtua1aw library

Before the contract was entered into, the plaintiff delivered to Swann, as the The ship for which the machinery, including the propeller, was designed, is specifically
defendant’s agent, a plan of the hull of said vessel. Thereafter Swann delivered to the described in the contract and is identified without question. That ship is the Constancia,
14

a coastwise vessel 150 feet long, 24 feet wide and 14 feet deep. These are the an hour. Therefore, the specifications contained in the contract are not complied with
measurements contained in the contract. This was the only ship for which the plaintiff until the vessel shall have received from the machinery installed a speed of about 9 1/2
needed machinery. It was the only ship he was constructing. During the course of the knots an hour. The word "suitable" is perfectly definite and clear in its meaning and its
negotiations the defendant’s agent, Swann, its engineer and naval architect, in reference is undoubted.
company with the plaintiff or the plaintiff’s agent, several times visited the yard wherein
the ship was being built and examined it for the purpose of making the contract for the The defendant, in the contract, not only agrees to furnish a propeller 8 feet in diameter
machinery. During these different visits the kind of machinery, its purpose and value and of brass, but also agrees to furnish a propeller with certain other characteristics,
were discussed by the parties. This is conceded. Plans of the hull and the interior of the among them being a pitch suitable to produce a certain speed in a certain vessel. If the
vessel were exchanged by the parties at various times, either before or after the making pitch of the propeller was suitable to do that, it would do it. The failure of the propeller to
of the contract. The plaintiff, in particular, delivered to the defendant, prior to the give a speed anything like 9 1/2 knots an hour indicates clearly and beyond question
execution of the contract, a plan of the hull of the vessel, with its measurements. Later that the pitch of the propeller was not suitable for the purposes specified in the
the defendant delivered to the plaintiff a plan, in considerable detail, showing the vessel contract.
with the machinery figured as having been already placed in it.
The contention of the defendant is, further, that the pitch of the propeller as furnished,
Swann was a naval architect and marine engineer of long experience, which fact was viz, 15 1/2 feet, was suitable to give a speed of more than 9 1/2 knots an hour; and in
known to the plaintiff and his agent, and the general details relative to the kind and its argument it quotes the expert, Swann, who testifies, in relation to the pitch of the
character of the machinery were left to the defendant. The thing mainly insisted upon by propeller, that with the pitch of 15 1/2 feet the propeller would have a speed of a little
the plaintiff was the result that should be produced. The plaintiff himself testifies, and over 11 knots per hour. The defect in this contention is that a propeller has no such
this is undisputed by the defendant, that he relied upon Swann in these particulars, quality as speed; that the thing which Swann figures out as 11 knots an hour is not
especially in reference to the propeller and the pitch which it should have; and, by speed but pitch. A propeller has, aside from the material of its construction, three
reason of that reliance, the pitch in feet and inches which the propeller should have qualities — diameter, area, and pitch. A propeller has no such quality as speed. The
when placed in the ship was not stated in the contract. Instead, the plaintiff placed in pitch of the propeller is described by Swann and Gilchrist as the distance which it would
the contract what the propeller should do, rather than what it should be. The diameter of travel if it were turned one revolution in a substance which, although yielding sufficiently
the propeller was fixed by the structure of the vessel and could not exceed 8 feet or 8 to permit the passage of the propeller, would admit of no slip. In other words, if a
1/2 feet. The pitch which the propeller should have in order to give 9 1/2 knots an hour propeller were immersed in wax and then given a turn amounting to one revolution, the
to the steamship was left to the greater knowledge and experience of the defendant’s pitch of the propeller would be the distance which it would travel through the wax in that
agent, Swann. The plaintiff placed the condition only that it should produce a certain one revolution. The expert Swann says that the way to determine the speed of a
result when attached to the ship Constancia. propeller is to "take the pitch, multiply it by the revolutions, which would give me the
distance the propeller would advance in any one minute; then multiply that by sixty,
The words of the contract clearly demand, upon the part of the defendant, that it furnish which would give me the amount in one hour; then divide by 6,080, which is the number
a propeller with a pitch proper to give the steamship Constancia a speed of about 9 1/2 of feet in a knot, and that would give me the number of knots per hour which the
knots per hour. Language for that purpose could scarcely be made plainer than the propeller would advance;" and then says that the speed of the propeller would be more
language used. than 11 knots. The mere fact that Swann multiplies the pitch of the propeller by a
number of figures, and then divides that product by other figures, does not change pitch
The defendant contends that "the machinery was to be according to the specifications into speed. It remains pitch still. In other words, the 11 knots per hour which Swann
in the contract and that, if these specifications were complied with, it does not matter refers to as the speed of the propeller is the distance which the propeller, unattached to
what may be the actual speed of the vessel." The trouble with this contention is that one any vessel, would travel, in wax in one hour if it was turned at the rate of 84 revolutions
of the specifications of the contract is speed, namely, a speed of 9 1/2 knots per hour, per minute. But this is the acknowledged definition of pitch, not speed. It is manifestly
and the specifications of the contract can not be complied with unless a speed of 9 1/2 absurd to contend that the propeller can have a speed independent of the vessel to
knots an hour, or thereabouts, is given. Simply because the specific pitch in feet and which it may be attached. Speed is a quality of the vessel itself and not a quality of the
inches is not stated in the contract does not mean that there is no specification upon propeller. To be sure, the propeller, operated by the engine, is able to give speed to the
that point. The contract provides that the defendants shall supply to the plaintiff, among vessel, but in and of itself it has no such quality.
other things, one brass propeller 8 feet in diameter with suitable pitch for an expected
speed of ship about 9 1/2 knots. The word "suitable" has reference to two objects, the It is apparent, therefore, that the contention of the defendant that the propeller was so
antecedent subject, "pitch" of the propeller, and the subsequent object, "ship;" and the constructed as to have a speed of 11 knots an hour is absurd. In other words, the
meaning of the word requires that the subject, "pitch" of the propeller, shall have contention of the defendant is that a guaranty in a contract to give a ship a speed of 20
qualities which will harmonize so perfectly with the qualities of the object, "ship," that a knots an hour is complied with if there is furnished to that ship a propeller with a pitch,
certain and specified result, viz, a speed of 9 1/2 knots, shall be produced. The word which, multiplied by certain figures and divided by others, would produce twenty
"suitable," referring to the vessel in which the propeller is to be placed as well as to the something at the conclusion of the calculation, and this absolutely regardless of
propeller itself, the pitch of the propeller must, therefore, be suitable to that vessel, and whether the ship on which the propeller is to be placed is a war ship or a pleasure
it is not suitable to that vessel, under the terms of the contract, unless with the other yacht, whether it is 100 or 1,000 feet long, 10 feet or 100 feet wide, whether it draws 5
machinery mentioned in the contract it gives to that vessel a speed of about 9 1/2 knots feet or 60 feet of water and wholly regardless of the form of the vessel’s hull. It is
15

recognized by all authorities upon the construction of steamships that "the most a diameter only 6 inches more than the diameter of the propeller furnished by the
important point to be considered in propulsive efficiency is the shape of the vessel’s defendant, and the vessel immediately attained a speed of 9 knots, or thereabouts, per
hull." In respect of speed this is one of the greatest problems and one of the most hour. It is thus apparent that the expert Swann again made a serious mistake in
perplexing with which marine engineers have to deal. The defendant, by its contention, claiming that the failure of speed was due solely to the place in which the propeller
avoids all the trouble of figuring out this difficult problem by simply giving a speed to its worked.
propeller.
The defendant also maintains that the plaintiff ought not to recover in this case because
It was a condition, and not a theory, which confronted the plaintiff when he purchased before the propeller was constructed the defendant notified him that a propeller 8 feet in
the machinery in question including the propeller. He had a vessel which was designed diameter would not produce the results specified in the contract and that in order to
for the coastwise trade and, in order to be useful and efficient in that connection, it was attain those results it would be necessary to place in that ship a propeller 10 feet in
necessary that it should have a speed of about 9 1/2 knots an hour. All of this the diameter; that the plaintiff rejected this proposal and refused to accept a propeller of
defendant knew. Speed being so important in a vessel carrying freight in competition any dimensions different from that specified in the contract, and that, therefore, he
with other vessels having a speed of 9 1/2 knots an hour, the parties placed in the brought his misfortune on his own head. In reply to this contention it is sufficient to state
contract a specification by which this vessel should receive machinery of such a that, by reason of the construction of the vessel, which Swann knew perfectly before
character that it would be able to compete with other vessels in a similar occupation. hand, the placing of a propeller 10 feet in diameter in the ship in question would
These specifications required that the vessel should have a speed of about 9 1/2 knots necessitate cutting away a large portion of the rear part of the vessel’s hull. The plaintiff
per hour and that the machinery furnished for the vessel should be arranged to that was perfectly justified in refusing to change the whole structure of the rear of his vessel
end, particularly the propeller. in order to accommodate the defendant. His refusal was justified by subsequent events;
for, later, as before stated, a propeller 8 1/2 feet in diameter, but of different pitch and
The defendant not only asserts that it furnished a propeller with a speed of more than 9 area, was placed in the ship, without any change in the construction of the hull, and the
1/2 knots an hour, but also contends that the reason why the vessel did not have a vessel immediately attained a speed of 9 knots, or thereabouts, per hour.
speed of 9 1/2 knots an hour after the installation of the machinery was because the
propeller was, by the construction of the vessel, forced to work in a position where it There seems to be no question that the expert witness for the plaintiff was entirely
could not display its properties adequately. To this end, it asserts, through its expert correct when he stated that the fault of the propeller furnished by the defendant was in
witness Swann, "that the propeller was, so to speak, too close to both the stern and the its pitch and area. He testified that the pitch of the propeller was too coarse and the
rudder posts, so that the propeller could not receive the water or throw it away from it in area was too great for the kind of vessel in which it was placed.
the manner wanted; that is, in a line with the boat’s keel more or less. It could not do
anything else because it was practically watertight, so to speak, that is, to all intents and It is thus apparent that the defendant failed to comply with the terms of the contract in
purposes, watertight between these two large chocks of timber, the rudder and stern respect to the propeller therein described, and the plaintiff, in consequence, is entitled
posts, and hence could not throw the water off or receive the water from forward in the to recover appropriate damages by reason thereof.
manner it should, and hence would throw it sideways; that is the effect. The propeller
could not get a chance to work."cralaw virtua1aw library The damages recoverable of a manufacturer or dealer for the breach of warranty of
machinery which he contracts to furnish or place in operation for a known purpose are
The expert then goes on to assert that the pitch had nothing to do with it, that the not confined to the difference in value of the machinery as warranted and as it proves to
diameter of the propeller had nothing to do with it, and that the sole and only reason be, but include such consequential damages as are the direct, immediate, and probable
why the vessel did not receive a speed of 9 1/2 knots an hour from the propeller result of the breach. (30 Am. and Eng. Ency. of Law, p. 217, and cases there cited.)
furnished was because of the sternpost and the rudderpost.
The loss of the buyer’s time and of that of his laborers resulting from the breach is
It should be noted, however, that, before the contract was signed, the defendant, and its recoverable where the circumstances of the sale were such as to have put the seller
agent, Swann, were furnished with a plan or plans of the hull of the vessel, showing the upon notice that such a loss would probably result from a breach.
sternpost and the rudderpost fully and fairly; that Swann had himself inspected the
vessel several times at the yard where it was being built and knew all about the said Indemnity for losses and damages includes not only the amount of the loss which may
sternpost and rudderpost and their relative locations. Yet, with that plan in his hand and have been suffered, but also that of the profit which the creditor may have failed to
with that knowledge in his head, he, nevertheless, made a contract in which he agreed realize. (Art. 1106, Civil Code.)
to furnish a propeller which would give a speed of 9 1/2 knots an hour to that very ship.
It must also be remembered that the events proved the contention of the expert Swann The losses and damages for which a creditor in good faith is liable are those foreseen,
to be wholly unfounded when he claimed that the reason why the propeller would not or which may have been foreseen, at the time of constituting the obligation, and which
work was because of its position between the sternpost and the rudderpost. The trial of may be a necessary consequence of its nonfulfillment. (Art. 1107, Civil Code.)
the propeller furnished by the defendant having demonstrated that it was ineffective and
that its pitch was too coarse and its area too great for the purposes specified in the In an action against a manufacturer or dealer for a breach of warranty upon a sale of
contract, the plaintiff placed in the steamship another propeller in exactly the same goods, which he knew at the time of the sale were intended to be used for a particular
position in the vessel as the other, i. e., between the sternpost and the rudderpost, with purpose, the measure of damages is not limited to the difference in value of the goods
16

as warranted, and as they prove to be, as in cases where like articles are sold as Five 1/4-inch pet cocks for the donkey pump and two for the
merchandise for general purposes; but profits lost and expenses incurred, because of
the breach, may be recovered. (Swain v. Schieffelin, 134 N. Y., 471; New York and cylinder blow-off 15.00
Colorado Mining Syndicate and Company v. Fraser, 130 U. S., 611; Accumulator
Company v. Dubuque Street Railway Company, 64 Fed. Rep., 70.) One 1/8-inch air-cock for the donkey pump 1.80

It is apparent from the authorities above cited that the plaintiff is entitled to recover Two 1/2-inch test cocks with stuffing boxes for the steam
P375, the value of 30 tons of coal consumed in the trials necessarily made to determine
whether or not the propeller had the qualities specified in the contract; also the sum of gauges on boiler 9.00
P707, the wages of employees and other necessary expenses incurred during said
trials. Two straight 1/2-inch test cocks with stuffing box for the

The plaintiff not having presented competent proof as to the loss he sustained by boiler and donkey boiler 9.00
reason of his ship being out of commission during the time intervening between the trial
of the first propeller and the installation of the second, nothing can be awarded him as One lubricator with a 3/8 x 1 1/2-inch male thread for the donkey 3.40
damages in relation thereto. He is, however, entitled to be allowed as damages the sum
of P2,770.36, the amount paid by him for the first propeller, as its purchase price, the One 1-inch check valve with test cock and hand wheel for the
same being worthless to him for the purpose for which he bought it — said propeller to
be and remain the property of the defendant, with the right to retake the same if it has donkey boiler 26.25
not already done so.
One 1 1/4-inch globe valve with flange and wheel for the steam winch 18.00
The defendant failed to deliver to the plaintiff the following machinery and materials
which it agreed to deliver under the contract, which said machinery and materials the _______
plaintiff was obliged to purchase of other parties, paying therefor the following prices,
which this court finds reasonable in amount, to wit:chanrob1es virtual 1aw library Total 1,133.45

One brass cock with flange for the donkey feed, weight 57 We find, therefore, that the defendant is entitled to recover in this action of the plaintiff
the sum of P5,213.54, that being the difference between the balance remaining due
pounds P144.00 from plaintiff to the defendant on the purchase price of said machinery, viz, P10,199.35,
and the aggregate amount of the damages herein allowed to the plaintiff by reason of
One do. do. check valve for the engine, weight 62 pounds 124.00 the breach of said contract by the defendant, as aforesaid, viz, P4,985.81, with interest
on said P5,213.54 at the rate of 6 per cent per annum from February 28, 1907, and he
One do. do. 3/4-inch blow-off for the boiler 7.50 is hereby given judgment for that amount.

One cast brass elbow for the steam valve, weight 97 pounds 145.50 The judgment of the lower court is, therefore, modified to the extent and in the
particulars above enumerated, and, as modified, affirmed, with costs against the
One new 1 1/4-inch tube with flange for the blow-off cock of the donkey boiler 7.00 defendant.

One brass cock with flanges, connections, and strainer for Arellano, C.J., Torres and Johnson, JJ., concur.

the surface blow-off 166.00 SECOND DIVISION


[G.R. No. 134219. June 08, 2005]
For turning the two covers of the high and low pressure SPOUSES MARIO AND ELIZABETH TORCUATOR, petitioners, vs. SPOUSES
REMEGIO AND GLORIA BERNABE and SPOUSES DIOSDADO and
cylinders, and placing new bushes with 5/8 x 9 1/2-inch studs and nuts 85.00 LOURDES SALVADOR, respondents.
DECISION
Three cast-iron pistons, turned, with rod and spiral steel TINGA, J.:
In the instant Petition,[1] spouses Mario and Elizabeth Torcuator assail
springs, brass covers and valves for the cylinders 185.00 the Decision[2] of the Court of Appeals in C.A.-G.R. CV No. 36427, which affirmed the
trial courts dismissal of their complaint for specific performance, [3] and
Four cast-iron seatings for the boiler 217.00 its Resolution[4] which denied their motion for reconsideration.
The facts as summarized by the Court of Appeals are as follows:
17

The subject of this action is Lot 17, Block 5 of the Ayala Alabang Village, Muntinlupa, there were actually two sales, i.e., the first sale between the Salvadors and the
Metro-Manila, with an area of 569 square meters and covered by TCT No. S-79773. Bernabes and the second between the Bernabes and Torcuators, taxes should have
The lower court found that the above parcel of land was purchased by the spouses been paid for both transfers.[6]
Diosdado and Lourdes Salvador (Salvadors, for short) from the developers of Ayala The Court of Appeals denied petitioners motion for reconsideration in
Alabang subject, among others, to the following conditions:-- its Resolution[7] dated June 15, 1998.
It is part of the condition of buying a lot in Ayala Alabang Village (a) that the lot buyer Petitioners then filed the instant petition, averring that the appellate court erred in
shall deposit with Ayala Corporation a cash bond (about P17,000.00 for the Salvadors) dismissing their appeal on the strength of issues which were neither pleaded nor
which shall be refunded to him if he builds a residence thereon within two (2) years of proved. The conditions allegedly imposed by Ayala Corporation on the sale of lots in
purchase, otherwise the deposit shall be forfeited, (b) architectural plans for any Ayala Alabang Village were: (a) that the lot-buyer shall deposit with Ayala Corporation a
improvement shall be approved by Ayala Corporation, and (c) no lot may be resold by cash bond (about P17,000.00 for the Salvadors) which shall be refunded to him if he
the buyer unless a residential house has been constructed thereon (Ayala Corporation builds a residence thereon within two (2) years of purchase, otherwise the deposit shall
keeps the Torrens Title in their [sic] possession). be forfeited; (b) architectural plans for any improvement shall be approved by Ayala
(p. 5, RTC Decision) Corporation; and (c) no lot may be resold by the buyer unless a residential house has
Evidences on record further reveal that on December 18, 1980, the Salvadors sold the been constructed thereon (Ayala Corporation keeps the Torrens title in their (sic)
parcel of land to the spouses Remigio and Gloria Bernabe (Bernabes, for expediency). possession.)[8]
Given the above restrictions, the Salvadors concomitantly executed a special power of According to petitioners, the stipulation prohibiting the sale of vacant lots in Ayala
attorney authorizing the Bernabes to construct a residential house on the lot and to Alabang Village, adverted to by the appellate court in its decision as evidence that the
transfer the title of the property in their names. sale between the Bernabes and the Torcuators was tainted with serious irregularities,
The Bernabes, on the other hand, without making any improvement, contracted to sell was never presented or offered in evidence by any of the parties. Without such
the parcel of land to the spouses Mario and Elizabeth Torcuator (Torcuators, for brevity) stipulation having been presented, marked and offered in evidence, the trial court and
sometime in September of 1986. Then again, confronted by the Ayala Alabang the appellate court should not have considered the same.
restrictions, the parties agreed to cause the sale between the Salvadors and the The appellate court allegedly also erred in declaring that the contract of sale
Bernabes cancelled (Exhibit D), in favor of (a) a new deed of sale from the Salvadors subject of the case is void, as it was intended to deprive the government of revenue
directly to the Torcuators; (b) a new Irrevocable Special Power of Attorney (Exhibit F) since the matter of taxes was not even mentioned in the appealed decision of the trial
executed by the Salvadors to the Torcuators in order for the latter to build a house on court.
the land in question; and (c) an Irrevocable Special Power of Attorney (Exhibit E) from Further, petitioners assert that the contract was a perfected contract of sale not a
the Salvadors to the Bernabes authorizing the latter to sell, transfer and convey, with mere contract to sell. The trial court thus erred in declaring that the contract was void
power of substitution, the subject lot. due only to petitioners failure to deliver the agreed consideration. Likewise, the fact that
The Torcuators thereafter had the plans of their house prepared and offered to pay the the contract calls for the payment of the agreed purchase price in United States Dollars
Bernabes for the land upon delivery of the sale contract. For one reason or another, the does not result in the contract being void. The most that could be demanded, in
deed of sale was never consummated nor was payment on the said sale ever effected. accordance with jurisprudence, is to pay the obligation in Philippine currency.
Subseuqently, the Bernabes sold the subject land to Leonardo Angeles, a brother-in- Petitioners also dispute the trial courts finding that they did not suffer any real
law (Exh. 7). The document however is not notarized. As a result, the Torcuators damage as a result of the transaction. On the contrary, they claim that respondents
commenced the instant action against the Bernabes and Salvadors for Specific refusal to transfer the property caused them actual and moral damages.
Performance or Rescission with Damages. Respondents filed their Comment/Opposition (To the Petition for
After trial, the court a quo rendered its decision, the decretal portion reads:-- Certiorari)[9] dated November 4, 1998 countering that petitioners knew of the condition
From all the foregoing disquisition, especially since the plaintiffs did not suffer any real prohibiting the sale of vacant lots in Ayala Alabang Village as the same was annotated
damage (by January, 1987 they could have purchased another lot in Ayala Alabang, on the title of the property which was submitted and adopted by both parties as their
and the architectural plans they commissioned Arch. Selga to prepare could then be evidence. The fact that the agreement required petitioners to construct a house in the
used by the plaintiffs), the complaint filed by the plaintiff spouses is dismissed. Since name of the Salvadors shows that petitioners themselves knew of the condition and
the plaintiff acted with sincerity and without delay in asserting what they believed to be acknowledged its validity.
their prerogatives, i.e., without any malice or desire to take advantage of another, the As regards petitioners contention that the Court of Appeals should not have ruled
counter-claim interposed by the Bernabes against the Torcuator spouses is similarly on the matter of taxes due the government, respondents assert that the appellate court
dismissed. has the power to review the entire case to determine the validity of the judgment of the
Makati, Metro-Manila, August 20, 1991.[5] lower court. Thus, it may review even matters which were not raised on appeal.
The Court of Appeals dismissed the appeal, ruling that the sale between the Respondents refer to the circumstances surrounding the transaction as proof that
Bernabes and the Torcuators was tainted with serious irregularities and bad faith. The the parties entered into a mere contract to sell and not a contract of sale. Allegedly, the
appellate court agreed with the trial courts conclusion that the parties entered into the memorandum containing the agreement of the parties merely used the term offer. The
contract with the intention of reneging on the stipulation disallowing the sale or transfer payment of the purchase price was ostensibly a condition sine qua non to the execution
of vacant lots in Ayala Alabang Village. of the deed of sale in favor of petitioners, especially since the Bernabes came to the
It also ruled that the parties deprived the government of taxes when they made it Philippines with the express purpose of selling the property and were leaving for the
appear that the property was sold directly by the Salvadors to the Torcuators. Since United States as soon as they were paid. Moreover, petitioners were required to
18

construct a residential house on the property before it could be sold to them in Moreover, the deed of sale would have been issued only upon full payment of the
accordance with the condition imposed by Ayala Corporation. purchase price, among other things. Petitioner Mario Torcuator acknowledged this fact
Further, respondents maintain that the transaction was not consummated due to when he testified that the deed of sale and original special power of attorney were only
the fault of petitioners who failed not only to prepare the necessary documentation but to be delivered upon full payment of the purchase price. [17]
also to pay the purchase price for the property. They also argue that the special power As correctly observed by the trial court, the Salvadors did not execute a deed of
of attorney executed by the Salvadors in favor of petitioners merely granted the latter sale in favor of petitioners, and instead executed a special power of attorney authorizing
the right to construct a residential house on the property in the name of the Salvadors. the Bernabes to sell the property on their behalf, in order to afford the latter a measure
The original document was not even given to the Torcuators precisely because they of protection that would guarantee full payment of the purchase price before any deed
have not paid the purchase price. of sale in favor of petitioners was executed.
Petitioners filed a Reply[10] dated January 20, 1999 in reiteration of their Remarkably, the records are bereft of any indication that petitioners ever
arguments. attempted to tender payment or consign the purchase price as required by law.
In the Resolution[11] dated February 10, 1999, the parties were required to file their The Complaint[18] filed by petitioners makes no mention at all of a tender of payment or
respective memoranda. Accordingly, petitioners filed their Memorandum[12] on April 19, consignation having been made, much less that petitioners are willing and ready to pay
1999. On the other hand, in view of respondents disappearance without notice, the the purchase price. Petitioners averments to the effect that they have sufficient funds to
Court resolved to dispense with their memorandum.[13] pay for the property and have even applied for a telegraphic transfer from their bank
The trial court denied petitioners complaint on three (3) grounds, namely: (1) the account to the Bernabes bank account, uncoupled with actual tender and consignation,
alleged nullity of the contract between the parties as it violated Ayala Corporations are utterly self- serving.
condition that the construction of a house is a prerequisite to any sale of lots in Ayala The trial court correctly noted that petitioners should have consigned the amount
Alabang Village; (2) non-payment of the purchase price; and (3) the nullity of the due in court instead of merely sending respondents a letter expressing interest to push
contract as it called for payment in United States Dollars. To these reasons, the Court through with the transaction. Mere sending of a letter by the vendee expressing the
of Appeals added a fourth basis for denying petitioners appeal and that is the alleged intention to pay without the accompanying payment is not considered a valid tender of
nullity of the agreement because it deprived the government of taxes. payment. Consignation of the amount due in court is essential in order to extinguish the
An analysis of the facts obtaining in this case leads us to affirm the assailed obligation to pay and oblige the vendor to convey title. [19]
decisions although from a slightly different but related thrust. On this score, even assuming that the agreement was a contract of sale,
Let us begin by characterizing the agreement entered into by the parties, i.e., respondents may not be compelled to deliver the property and execute the deed of
whether the agreement is a contract to sell as the trial court ruled, or a contract of sale absolute sale. In cases such as the one before us, which involve the performance of an
as petitioners insist. obligation and not merely the exercise of a privilege or right, payment may be effected
The differences between a contract to sell and a contract of sale are well-settled in not by mere tender alone but by both tender and consignation. The rule is different in
jurisprudence. As early as 1951, we held that in a contract of sale, title passes to the cases which involve an exercise of a right or privilege, such as in an option contract,
buyer upon delivery of the thing sold, while in a contract to sell, ownership is reserved in legal redemption or sale with right to repurchase, wherein mere tender of payment
the seller and is not to pass until the full payment of the purchase price is made. In the would be sufficient to preserve the right or privilege.[20] Hence, absent a valid tender of
first case, non-payment of the price is a negative resolutory condition; in the second payment and consignation, petitioners are deemed to have failed to discharge their
case, full payment is a positive suspensive condition. Being contraries, their effect in obligation to pay.
law cannot be identical. In the first case, the vendor has lost and cannot recover the Secondly, the parties clearly intended the construction of a residential house on
ownership of the land sold until and unless the contract of sale is itself resolved and set the property as another suspensive condition which had to be fulfilled. Ayala
aside. In the second case, however, the title remains in the vendor if the vendee does Corporation retained title to the property and the Salvador spouses were precluded
not comply with the condition precedent of making payment at the time specified in the from selling it unless a residence had been constructed thereon. The Ayala stipulation
contract.[14] was a pervasive, albeit unwritten, condition in light of which the transaction in this case
In other words, in a contract to sell, ownership is retained by the seller and is not was negotiated. The parties undoubtedly understood that they had to contend with the
to pass to the buyer until full payment of the price or the fulfillment of some other Ayala stipulation which is why they resorted to the execution of a special power of
conditions either of which is a future and uncertain event the non-happening of which is attorney authorizing petitioners to construct a residential building on the property in the
not a breach, casual or serious, but simply an event that prevents the obligation of the name of the Salvadors. Had the agreement been a contract of sale as petitioners would
vendor to convey title from acquiring binding force. [15] impress upon the Court, the special power of attorney would have been entirely
We have carefully examined the agreement between the parties and are far from unnecessary as petitioners would have had the right to compel the Salvadors to transfer
persuaded that it was a contract of sale. ownership to them.[21]
Firstly, the agreement imposed upon petitioners the obligation to fully pay the Thirdly, there was neither actual nor constructive delivery of the property to
agreed purchase price for the property. That ownership shall not pass to petitioners petitioners. Apart from the fact that no public document evidencing the sale was
until they have fully paid the price is implicit in the agreement. Notably, respondent executed, which would have been considered equivalent to delivery, petitioners did not
Remigio Bernabe testified, without objection on the part of petitioners, that he take actual, physical possession of the property. The special power of attorney, which
specifically informed petitioners that the transaction should be completed, i.e., that he petitioners count on as evidence that they took possession of the property, can by no
should receive the full payment for the property, before he left for the United States on means be interpreted as delivery or conveyance of ownership over the property. Taken
October 14, 1986.[16] by itself, in fact, the special power of attorney can be interpreted as tied up with any
19

number of property arrangements, such as a contract of lease or a joint venture. That is That said, the question of whether the transaction violated the Uniform Currency
why respondents, especially the Salvadors, never intended to deliver the title to Act, Republic Act No. 529, is already moot. The contract having been cancelled, any
petitioners and conformably with that they executed only a special power of attorney. resolution regarding the validity of the stipulation requiring payment of the purchase
Indeed, continuously looming large as an essentiality in their judgment to dispose of price in foreign currency would not serve any further purpose.
their valuable property is the prior or contemporaneous receipt of the commensurate Petitioners next insist that the condition requiring the construction of a house on
price therefor. any residential lot located in Ayala Alabang Village before it can be sold was never
This brings us to the application of the Statute of Frauds. Article 1403 of the Civil submitted in evidence and was never testified to by any of the witnesses presented
Code provides: during the trial. Hence, the trial court and the Court of Appeals should not have used
Art. 1403. The following contracts are unenforceable unless they are ratified: this as basis for its denial of petitioners cause.
(2) Those that do not comply with the Statute of Frauds as set forth in this number. In This assertion, however, is completely untrue. While the Formal Offer of
the following cases an agreement hereafter made shall be unenforceable by action, Evidence[28] of petitioners, respondents Offer of Exhibits,[29] and the Formal Offer of
unless the same, or some note or memorandum thereof, be in writing, and subscribed Evidence (On Rebuttal)[30] of petitioners make no mention of any stipulation prohibiting
by the party charged, or by his agent; evidence, therefore, of the agreement cannot be the sale of vacant lots in Ayala Alabang Village, respondents maintain that petitioners
received without the writing, or a secondary evidence of its contents: are fully aware of the prohibition as the conditions imposed by Ayala Corporation on the
(e) An agreement for the leasing for a longer period than one year, or for the sale of real sale of Ayala Alabang lots are inscribed on the title of the property which was submitted
property or an interest therein; in evidence by both parties.
.... Despite petitioners remonstration that the inscriptions on the title are hardly
The term Statute of Frauds is descriptive of statutes which require certain classes legible,[31] we are inclined to give credence to respondents account. It is quite
of contracts, such as agreements for the sale of real property, to be in writing. It does implausible that a lawyer such as petitioner Mario Torcuator would not take the
not deprive the parties the right to contract with respect to the matters therein involved, precaution of checking the original title of the property with the Registry of Deeds to
but merely regulates the formalities of the contract necessary to render it enforceable. ascertain whether there are annotations therein that would prejudice his position.
The purpose of the statute is to prevent fraud and perjury in the enforcement of More importantly, petitioner Mario Torcuator himself testified on the existence of
obligations depending for their evidence on the unassisted memory of witnesses by the condition prohibiting the sale of vacant lots in Ayala Alabang Village, viz:
requiring certain enumerated contracts and transactions to be evidenced by a writing ATTY. J. DE DIOS, JR.
signed by the party to be charged.[22] The written note or memorandum, as Q -Mr. witness aside from this summary of agreement which has been
contemplated by Article 1403 of the Civil Code, should embody the essentials of the marked as Exhibit J do you still have a document relating to his
contract.[23] transaction between you and the defendant?
In the instant case, petitioners present as written evidence of the agreement the A -Yes, sir, as I indicated in my earlier testimony there was supposed to be a
special power of attorney executed in their favor by the Salvadors and the summary of letter addressed to Ayala Corporation which defendant Salvador should
agreement[24] allegedly initialed by respondent Remigio Bernabe. These documents do sign in order to request Ayala to deliver to me the TCT covering the lot
not suffice as notes or memoranda as contemplated by Article 1403 of the Civil Code. subject of the transaction.
The special power of attorney does not contain the essential elements of the Q -This letter that you are referring to do you still have a copy of that letter?
purported contract and, more tellingly, does not even refer to any agreement for the A -Yes, sir.
sale of the property. In any case, it was rendered virtually inoperable as a consequence Q -I am showing to you a xerox copy of a letter addressed to Ayala
of the Salvadors adamant refusal to part with their title to the property. Corporation and signed by Diosdado and Lourdes Salvador, can you
The summary of agreement, on the other hand, is fatally deficient in the please explain to this Court what is the relation of this document with
fundamentals and ambiguous in the rest of its terms. For one, it does not mention when what you are referring to executed by the defendant Diosdado Salvador
the alleged consideration should be paid and transfer of ownership effected. The and Lourdes Salvador addressed to Ayala Corporation?
document does not even refer to a particular property as the object thereof. For A -This is the letter of Mr. Salvador, sir, signed in my presence.
another, it is unclear whether the supposed purchase price is P600.00, P590.00 Q -Can you tell the Court where is the original of this document?
or P570.00/square meter. The other conditions, such as payment of documentary A -All of the original copies of that letter are with the defendant Bernabe, sir.
stamp taxes, capital gains tax and other registration expenses, are likewise uncertain. Q -Can you tell the Court how did you come to have a xerox copy of this
Conformably with Article 1405[25] of the Civil Code, however, respondents document?
acceptance of the agreement foisted by petitioners on them is deemed to have arisen A -Yes, because as soon as the copies of the documents for the transaction
from their failure to object to the testimony of petitioner Mario Torcuator on the were signed by Mrs. Salvador who was then in New York, they were
matter[26] and their cross-examination of said petitioner thereon.[27] sent by the spouses to the daughter of Mr. Salvador who in turn told
Be that as it may, considering our ruling that the agreement was a contract to sell, me that all the originals are supposed to be delivered to Mr. Bernabe
respondents were not obliged to convey title to the property before the happening of and I was given a xerox copy of the same.
two (2) suspensive conditions, namely: full payment of the purchase price and ATTY. J. DE DIOS, JR.
construction of a residence on the property. They were acting perfectly within their right - And which for purpose of identification, your Honor, may we request that
when they considered the agreement cancelled after unsuccessfully demanding this letter addressed to Ayala Corporation and signed by Diosdado
payment from petitioners.
20

Salvador and Lourdes Salvador be marked as Exhibit K for the plaintiff, of the deed of sale of Mr. Salvador to Remigio Bernabe, and
your Honor. cancellation also of the irrevocable power of attorney of
COURT Salvador to Bernabe, and power of attorney of Salvador
- Mark it. authorizing Remigio Bernabe to sell the property and power of
... attorney of Salvador given to Mr. Torcuator.[34]
ATTY. J. DE DIOS, JR. Petitioners therefore cannot feign ignorance of the condition imposed by Ayala
- Mr. Witness, this letter appears to be, does it contain any date? Can you Corporation.
tell this Court why this document does not contain the date? We do not agree, however, with the trial court and appellate courts ruling that the
ATTY. A. MAGNO transaction between the parties was void for being contrary to good customs and
- Incompetent, your Honor, because he was not the one who made that morals.[35]
document. In order to declare the agreement void for being contrary to good customs and
COURT morals, it must first be shown that the object, cause or purpose thereof contravenes the
- Let him explain. generally accepted principles of morality which have received some kind of social and
ATTY. MAGNO practical confirmation.[36]
- Yes, your Honor. We are not inclined to rule that the transaction in this case offended good customs
ATTY. J. DE DIOS, JR. and morals. It should be emphasized that the proscription imposed by Ayala
- Because, your Honor, there is a requirement by Ayala Corporation Corporation was on the resale of the property without a residential house having been
that no lot or property may be transferred until there is a constructed thereon. The condition did not require that the original lot buyer should
complete building or structure built on the lot and so what I himself construct a residential house on the property, only that the original buyer may
was supposed to get only from Mr. Salvador, aside from the not resell a vacant lot. In view of our finding that the agreement between the parties
deed of absolute sale, is merely a special power of attorney was a mere contract to sell, no violation of the condition may be inferred from the
to authorize me to construct my house in the lot and upon transaction as no transfer of ownership was made. In fact, the agreement in this case
completion of the house that is the time that I would be that petitioners will construct a residential house on the property in the name of the
allowed by Ayala Corporation to transfer the property in my Salvadors (who retained ownership of the property until the fulfillment of the twin
name. Therefore, the letter requesting Ayala Corporation to conditions of payment and construction of a residence) was actually in compliance with
release the title in the name of Mr. Salvador to was deliberately or obeisance to the condition.
undated because it would be only dated when I completed the Finally, the issue of whether the agreement violated the law as it deprived the
house.[32] [Emphasis supplied] government of capital gains tax is wholly irrelevant. Capital gains taxes, after all, are
The fact that petitioners agreed to construct a residential house on the property in only imposed on gains presumed to have been realized from sales, exchanges or
the name of the Salvadors further proves that they knew that a direct sale to them of a dispositions of property. Having declared that the contract to sell in this case was
vacant lot would contravene the condition imposed by Ayala Corporation on the original aborted by petitioners failure to comply with the twin suspensive conditions of full
buyers of lots in Ayala Alabang Village. Hence, they agreed on the elaborate plan payment and construction of a residence, the obligation to pay taxes never arose.
whereby the Salvador spouses, in whose names the property was registered, would Hence, any error the appellate court may have committed when it passed upon the
execute a special power of attorney in favor of petitioners authorizing the latter to issue of taxes despite the fact that no evidence on the matter was pleaded, adduced or
construct a residential house on the property in the name of the Salvadors. The records proved is rather innocuous and does not warrant reversal of the decisions under review.
even indicate that the documents to effectuate this plan were prepared by petitioner WHEREFORE, the instant petition is DENIED. Costs against petitioners.
Mario Torcuator himself. SO ORDERED.
In his testimony, for instance, petitioner Mario Torcuator stated that: [B]ased on Austria-Martinez, (Acting Chairman), Callejo, Sr., and Chico-Nazario, JJ., concur.
our discussion, your Honor, from the P600 per square meter price, we agreed upon, Puno, (Chairman), on official leave.
they agreed to give me a rebate of 5% in the form of discount because there was a
problem in the documentation which I tried to solve which are the papers in favor of Bareng vs. Court of Appeals
Bernabe missing. I suggested to Mr. Bernabe that we prepare a new set of document G.R. No. L-12973
which will be signed by Mr. Salvador as the previous owner and because of that I will be April 25, 1960
getting in effect a 5% discount as my commission.[33]
This was confirmed by respondent Remigio Bernabe: FACTS: Vicente Bareng purchased from respondent Alegria the cinematographic
Q - Now, where there any documents presented to you during that equipment installed at the Pioneer Theater in Laoag, Ilocos Norte, for the sum of
occasion? P15,000. P10,000 of which was paid, and Bareng signed 4 promissory notes for the
A - Yes, sir. balance. The first promissory note amounting to P1,000 was duly paid by Bareng. On
Q - By whom? February 15, 1952, shortly before the second note fell due, the other respondent
A - Mr. Torcuator prepared some documents for me to sign. Agustin Ruiz informed Bareng that he was a co-owner of the equipment in question,
Q - And do you recall what was that documents? and several days later, Ruiz sent Bareng a telegram instructing him to suspend
A - Yes, sir. Mr. Torcuator prepared a documents for cancellation payments to Alegria for thebalance of the price as he was not agreeable to the sale.
21

When Alegria sought to collect the second note on the same day, Bareng only paid Doctrine: The unpaid sellers remedy is either an action to collect the balance or to
P400 and refused to make any more payments on account of Ruiz’s claims. rescind the contract within the time allowed by law. Since rescission is no longer an
option considering that pets have been in possession of the properties for a
On March 31, 1952, Ruiz filed suit against Alegria and Bareng for his share in the price considerable period of time, substantial justice dictates that resp be entitled to receive
of the cinema equipment. Thereafter in May of the same year, Alegria and Ruiz reached the unpaid balance of the purchase price, plus legal interest thereon.
a compromise wherein the former recognized the latter as co-owner of the equipment
sold to Bareng and promised to pay 2/3 of whatever amount he could recover from the Facts:
latter. Alegria then sued Bareng for the amount of P13,500, allegedly the unpaid ● Pets purchased several lots in Aurora Subdivision, Malabon owned by resp.
balance of the price. But Bareng answered that only P3,600 had not been paid, and the transactions were covered by two contracts.
prayed for the rescission of the sale for the supposed violation of Alegria of certain ○ Contract to Sell No. 831 executed in May 14, 1973 for P33,000.
express warranties as to the quality of the equipment, and asked for payment of ○ Contract to Sell No. 874 dated Aug. 1, 1975 for P197,040.
damages for alleged violation of Alegria’s warranty of title. Bareng added that he is not ○ Plus interest of 12% per annum.
liable to pay interests to Alegria because he was justified in suspending payment of the ○ Both transactions payable in installments.
balance of the price of the equipment from the time he learned of Ruiz’s adverse claims ● Pet failed to pay the monthly amortizations since Oct. 1978 so resp was
over said equipment, pursuant to Art. 1590 of the Civil Code. constrained to file a case for cancellation of contracts.
● TC dismissed the case for lack of jurisdiction.
ISSUE: Whether or not Bareng is liable to pay interest of the unpaid balance of the ● The parties entered into a Compromise Agreement in Oct. 13, 1989 whereby
price of the equipment. pets agreed to pay resp the remaining balance in the manner and under the
terms agreed upon by them.
HELD: Bareng is liable to pay interest of the unpaid balance of the price of the ○ Pets failed to comply so resp filed a complaint for SP with the RTC.
equipment in question. Art. 1590 of the Civil Code provides that: “Should the vendee be ● RTC ruled in favor of resp.
disturbed in the possession or ownership of the thing acquired, or should he have ● Pet appealed:
reasonable grounds to fear such disturbance, by a vindicatory action or a foreclosure of ○ The Comp. Agrmnt. Was unenforceable because it was only
mortgage, he may suspend the payment of the price until the vendor has caused the Francisca who signed without the consent of her husband.
disturbance or danger to cease, unless the latter gives security for the return of the ● CA:
price in a proper case, or it has been stipulated that, notwithstanding any such ○ There is merit in the contention that the Comp. Agrmnt. Was not
contingency, the vendee shall be bound to make the payment. A mere act of trespass valid. The Agrmnt. involved the conjugal properties of pets.
shall not authorize the suspension of the payment of the price.” ○ But pets never denied the execution of the contracts to sell and they
admitted their debts to resp.
It is undisputed that petitioner had the right to suspend payment of the balance of the ○ Pets should pay resp the unpaid amortizations.
price of the cinema equipment in question to his vendor from the time he was informed ● CA decision became final and executory on Jan. 19, 2002. In the execution,
by Ruiz of the latter’s claims of co-ownership thereof, especially upon his receipt of the parties disagreed in the computation of the amount to be paid by pets.
Ruiz’s telegram wherein the latter asserted that he was not agreeable to the sale. ● Resp filed a Motion for Clarification of the CA decision.
However, said right of Barend ended as soon as “the vendor has caused the ○ Prayed for the inclusion of the penalties and interest in the
disturbance or danger to cease,” which, in this case, was when Alegria reached a computation of unpaid amortizations, which is customary in real
compromise with Ruiz whereby Ruiz expressed his conformity to the sale to Bareng, estate business and complaint with the Contract to Sell, for the proper
subject to the payment of his share in the price by Alegria. From the time Alegria and execution and implementation of the CA decision.
Ruiz reached this settlement, there was no longer any danger of threat to Bareng’s ● CA issued a Resolution on October 11, 2004 modifying its previous decision to
ownership and full enjoyment of the equipment he bought from Alegria, by virtue of include the payment of all penalties and interest due on the unpaid
which Alegria sued petitioner for the unpaid balance. Bareng admitted his indebtedness amortizations.
in the amount of P3,600, yet he did not tender payment of said amount nor did he ● Pets filed a Motion to Delete and Withdraw the Resolution.
deposit the same in court, but instead sought for rescission of the sale. It is clear that ○ A simple reading of the Motion for Clarification would show that it was
Bareng was in default on the unpaid balance of the price of the equipment from the date not intended to clarify but to amend the Decision to include the
of filing of the complaint by Alegria, and under Art. 2209 of the Civil Code, he must pay payment of 12% interest/penalty per annum in the payment of the
legal interests thereon from said date. amortizations.
○ The inclusion of 12% interest per annum is a very serious and
[SUSPENSION OF PAYMENTS] material amendment, because under the original Decision, petitioners
07 SPOUSES JUANITO MAHUSAY and FRANCISCA MAHUSAY V. B.E. SAN would be required to pay only P352,992.00, which is the amount of
DIEGO, INC. the unpaid amortizations for the said lots; while in the Amended
June 8, 2011 | Nachura, J. | Decision, they would be liable for P5,175,688.59, per computation
made by respondent.
22

○ The motion, ostensibly for clarification, filed by respondent more than ○ The fair market value of the land has tremendously increased over
two (2) years after the receipt of the original Decision, should not the past years. It is, therefore, just, fair, and equitable that petitioners
have been granted, according to petitioners. be made to pay interest/penalty for the delay in their payments.
● CA issued a Resolution on July 7, 2005 denying pet’s motion for lack of merit. ● The unpaid sellers remedy is either an action to collect the balance or to
○ The decision has not been amended but only clarified. rescind the contract within the time allowed by law. Since rescission is no
● Pets filed two more motions which the CA denied on the ground that the longer an option considering that pets have been in possession of the
allegations set forth by pets were all considered and passed upon in the Oct. properties for a considerable period of time, substantial justice dictates that
11 Resolution. resp be entitled to receive the unpaid balance of the purchase price, plus legal
interest thereon.
Petitioners:
 Resp’s Motion for Clarification, which was belatedly filed, does not really Dispositive
intend to clarify, but to reconsider, alter, and amend the original Decision of the WHEREFORE, the petition is DENIED. The Resolution of the Court of Appeals dated
CA, in contravention of the principle of immutability of judgments. September 11, 2007 is AFFIRMED with MODIFICATION. The trial court is directed to
compute the unpaid balance of the purchase price of each contract (which is the unpaid
Issue: amortization including amortizations yet to be paid until the expiration of the Contracts
W/N the payment of all penalties and interest due on the unpaid amortizations should to Sell) with dispatch. The legal interest to be paid on said amount is TWELVE
be included in the judgment for specific performance. PERCENT (12%) per annum, which shall commence from April 18, 1990, when judicial
demand was made on petitioners. Another 12% interest per annum shall be paid on the
Held: amount due and owing as and from the date of finality of this Decision until full payment
YES. Mini explanation to ruling would have actually been made.
● It is a settled rule is that a judgment which has acquired finality becomes EN BANC
immutable and unalterable; hence, it may no longer be modified in any respect G.R. No. L-16480 January 31, 1962
except only to correct clerical errors or mistakes. ARTEMIO KATIGBAK, petitioner,
○ Clarification after final judgment is, however, allowed when what is vs.
involved is a clerical error, or not a correction of an erroneous COURT OF APPEALS, DANIEL EVANGELISTA and V. K. LUNDBERG, respondents.
judgment, or dispositive portion of the Decision. Benjamin J. Molina for petitioner.
● The CA committed no reversible error in its Resolution clarifying the original Jesus B. Santos for respondent V. K. Lundberg.
Decision. Ledesma, Puno, Guytingco, Antonio and Associates for respondent Daniel Evangelista.
○ Resps Motion for Clarification did not really partake of the nature of a PAREDES, J.:
motion for reconsideration, as to amend the Decision. There was This case arose from an agreed purchase and sale of a Double Drum Carco Tractor
nothing substantial to vary, considering that the issues between the Winch. Artemio Katigbak upon reading an advertisement for the sale of the winch
parties were deemed resolved and laid to rest. placed by V. K. Lundberg, owner and operator of the International Tractor and
○ It is clear that pets do not deny the execution of the Contracts to Sell Equipment Co., Ltd., went to see Lundberg and inspected the equipment. The price
and, in fact, admit their liability for the unpaid amortizations. quoted was P12,000.00. Desiring a reduction of the price, Katigbak was referred to
○ The persistent violations of the contracts and the continuous delay in Daniel Evangelista, the owner. After the meeting, it was agreed that Katigbak was to
pets’ payments cannot simply be overlooked. There was a compelling purchase the winch for P12,000.00, payable at P5,000.00 upon delivery and the
reason for the CA to clarify its original Decision to include the balance of P7,000.00 within 60 days. The condition of the sale was that the winch
payment of all penalties and interest due on the unpaid amortizations, would be delivered in good condition. Katigbak was apprised that the winch needed
as provided in the contracts. some repairs, which could be done in the shop of Lundberg. It was then stipulated that
○ Considering that the validity of the contracts was never put in the amount necessary for the repairs will be advanced by Katigbak but deductible from
question, and there is nothing on record to suggest that the same the initial payment of P5,000.00. The repairs were undertaken and the total of
may be contrary to law, morals, public order, or public policy, there is P2,029.85 for spare parts was advanced by Katigbak for the purpose. For one reason
nothing unlawful in the stipulation requiring the payment of or another, the sale was not consummated and Katigbak sued Evangelista, Lundberg
interest/penalty at the rate agreed upon in the contract of the parties. and the latter's company, for the refund of such amount.
● Pets are in actual/physical possession of the properties and enjoying the Lundberg and Evangelista filed separate Answers to the complaint, the former alleging
beneficial use thereof, despite the payment of only P133,872.76, as of Jan. 30, non-liability for the amount since the same (obligation for refund) was purely a personal
1979. account between defendant Evangelista and plaintiff Katigbak. Lundberg asked
○ It would be grossly unfair for resp to be deprived of the amount it P500.00 by way of actual and compensatory damages and P5,000.00 as moral
would have received from the sale of their properties, while pets damages, claiming that the filing of the suit was malicious; that there is a misjoinder
benefited from the use and continued possession of the properties because he is a stranger in the case, not being a party to the agreement between
even if no payments were made by them since Oct. 1978. Evangelista and Katigbak.
23

Evangelista, on his part, claimed that while there was an agreement between him and than the contract price, the breach of contract by the original buyer is damnum
Katigbak for the purchase and sale of the winch and that Katigbak advanced the absque injuria. But it has never been held that there is any need of an action of
payment for the spare parts, he (Katigbak) refused to comply with his contract to rescission to authorize the vendor, who is still in possession, to dispose of the
purchase the same; that as a result of such refusal he (Evangelista) was forced to sell property where the buyer fails to pay the price and take delivery... (40 Phil.
the same to a third person for only P10,000.00, thus incurring a loss of P2,000.00, 815) .
which amount Katigbak should be ordered to pay, plus moral damages of P5,000.00 The facts of the case under consideration are identical to those of the Hanlon case. The
and P700.00 for attorney's fees. herein petitioner failed to take delivery of the winch, subject matter of the contract and
The lower court rendered judgment, the dispositive portion of which reads - . such failure or breach was, according to the Court of Appeals, attributable to him, a fact
WHEREFORE, judgment is hereby rendered ordering the defendants Daniel which We are bound to accept under existing jurisprudence. The right to resell the
Evangelista and V. K. Lundberg to pay plaintiff the sum of P2,029.85, with equipment, therefore, cannot be disputed. It was also found by the Court of Appeals
legal interest thereon from the filing of the complaint until fully paid, plus the that in the subsequent sale of the winch to a third party, the vendor thereof lost
sum of P300.00 as attorney's fees, and the costs." . P2,000.00, the sale having been only for P10,000.00, instead of P12,000.00 as agreed
The Court of Appeals, on September 5, 1959, reversed the judgment in the following upon, said difference to be borne by the supposed vendee who failed to take delivery
manner: — and/or to pay the price.
Notwithstanding the breach of contract committed by him, we may concede Of course, petitioner tried to draw a distinction between the Hanlon case and his case.
appellee's right to a refund of the sum of P2,029.85, but equally undeniable is The slight differences in the facts noted by petitioner are not, however, to our mode of
appellant Evangelista's right to recover from him his loss of P2,000.00, which thinking, sufficient to take away the case at bar from the application of the doctrine
is the difference between the contract price for the sale of the winch between enunciated in the Hanlon case.
him and appellee and the actual price for which it was sold after the latter had WHEREFORE, the petition is dismissed, and the decision appealed from is affirmed in
refused to carry out his agreement. As held in the above-cited case of Hanlon, all respects, with cost against petitioner.
if the purchaser fails to take delivery and pay the purchase price of the subject Bengzon, C.J., Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L., Barrera and De
matter of the contract, the vendor, without the need of first rescinding the Leon, JJ., concur.
contract judicially, is entitled to resell the same, and if he is obliged to sell it for Padilla and Dizon, JJ., took no part.
less than the contract price, the buyer is liable for the difference. This loss,
which is the subject matter of Evangelista's main counterclaim, should
therefore be set off against the sum claimed by appellee, which would leave in
favor of the latter a balance of P29.85.
Considering our finding that it was appellee who committed a breach of
contract, it follows that the present action was unjustified and he must be held
liable to appellant Evangelista for attorney's fees in the sum of P700.00.
Lastly, inasmuch as, according to the evidence appellant Lundberg was
merely an agent of his co-appellant, it is obvious that he cannot be held liable
to appellee in connection with the refund of the sum advanced by the
latter.1äwphï1.ñët
WHEREFORE, the appealed judgment is hereby modified by dismissing the
complaint as to V. K. Lundberg; by reducing the judgment in favor of appellee
to the sum of P29.85, and by sentencing him, in turn, to pay appellant
Evangelista the sum of P700.00 as attorney's fees".
Plaintiff-appellee Katigbak brought the matter to this Court on appeal by certiorari. In his
petition he claims that the Court of Appeals erroneously applied the doctrine enunciated
in the Hanlon v. Hausserman case (40 Phil. 796, 815-816), and failed to apply the law
relative to rescission of contracts. Other issues raised are strictly factual and will only be
mentioned here for reference.
We quote from the Hanlon case:
.... In the present case the contract between Hanlon and the mining company
was executory as to both parties, and the obligation of the company to deliver
the shares could not arise until Hanlon should pay or tender payment of the
money. The situation is similar to that which arises every day in business
transactions in which the purchaser of goods upon an executory contract fails
to take delivery and pay the purchase price. The vendor in such case is
entitled to resell the goods. If he is obliged to sell for less than the contract
price, he holds the buyer for the difference; if he sells for as much as or more

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