Liza Marie S.

Sira 111303

Mariano S. Tuason, plaintiff-appellant vs. Crisanto Marquez, defendant-appellee

G.R. No. L-20659; November 3, 1923
Article 1338- Fraud or dolo

FACTS:

In 1913 or 1914, a franchise of 35 years was granted to the electric light plan of Lucena Tayabas (Sucesos
del Lucena Electric). However, Crisanto Marquez, herein defendant, after acquiring rights over the
company in 1921, announced his intention to give up the franchise since the company was not doing well.
On March 29, 1921, the franchise was cancelled.

On March 5, 1921, Marquez gave an option to Atonio Tuason for the purchase of the plant for P14,400.
The option was taken advantage of by Mariano S. Tuason (herein plaintiff), and the formulated contracts
were ratified before a notary public. The agreement was for Tuason (buyer) to pay Marquez (seller) P14,400
where P2,400 is to be paid within sixty days, and the remaining amount to be paid within a year. The first
installment was paid beyond the sixty-day period, while the second installment was never paid.

A pertinent portion of the contract entered into by Tuason and Marquez mentioned that included as a portion
of the property is "el derecho a la franquicia concedido a la Compañia para la explotacion de la industria
a que la misma esta dedicada [the right of the franchise is conceded to the Compania for exploitation (use)
of the industry for which it (the company) is dedicated.]”

Tuason took ownership of the plant on March 20, 1921 until July 19, 1922. On the date last mentioned,
the property was sold under execution by reason of a judgment in the case of Levy Hermanos vs. The
Philippine Electric Light Company. The purchaser at said sale was Gregorio Marquez, brother of Crisanto
Marquez, who paid P5,501.57 for the property.

During Tuason’s possession of the plant, he was allowed to operate pursuant to a special license until they
obtained a new one. The new franchise had several conditions which amounted to a renovation of the
entire plant. After finding out what the Government expects through the new franchise, Tuason brought
this against Marquez for rescission of contract on the ground of fraud. Tuason argues that Marquez made
him fraudulently believe that the electric light plant was with a franchise when in fact, Marquez already has
given up such right.

The Court of First instance rendered judgment in favor of Marquez. Hence, this appeal.

ISSUE: Whether or not the contract should be rescinded due to fraud.

RULING:

No. The Court mentioned that the contract only mentioned of the franchise electric light company as an
inventory of the property. The franchise, in itself, was not the main cause of the purchase. Indeed, the
franchise was then in force and either party could easily have ascertained its status by applying at the office
of the Public Utility Commissioner. The fact that the franchise was not disclosed does not affect the
formation of the contract nor the capacity of the parties to fulfill their particular obligations.

The innocent non-disclosure of a fact does not affect the formation of the contract or operate to discharge
the parties from their agreement. The Court also mentioned that the maxim caveat emptor (let the buyer
beware) should be recalled.

The plaintiff operated the electric light plant for about sixteen months without question; he made the first
payment on the contract without protest; he bestirred himself to secure what damages he could from the
defendant only after the venture had proved disastrous and only after the property had passed into the
hands of a third party.

DISPOSITIVE:

In accordance with the foregoing, we are clearly of the opinion that judgment should be, as it is hereby
affirmed, with costs against the appellant. So ordered.