Manila Remnant Co. v.

CA 1 March 16, 1994

Facts: That case involved parcels of land in Quezon City which were owned by petitioner MRCI and became the subject of its agreement with A.U. Valencia and Co., Inc., (AUVCI) by virtue of which the latter was to act as the petitioner's agent in the development and sale of the property. For a stipulated fee, AUVCI was to convert the lands into a subdivision, manage the sale of the lots, execute contracts and issue official receipts to the lot buyers. Pursuant to the above agreement, AUVCI executed two contracts to sell dated, covering Lots 1 and 2, Block 17, in favor of spouses Oscar C. Ventanilla and Carmen Gloria Diaz for the combined contract price of P66,571.00, payable monthly in ten years. After ten days and without the knowledge of the Ventanilla couple, Valencia, as president of MRCI, resold the same parcels to Carlos Crisostomo, one of his sales agents, without any consideration. Upon orders of Valencia, the monthly payments of the Ventanillas were remitted to the MRCI as payments of Crisostomo, for which receipts were issued in his name. The receipts were kept by Valencia without the knowledge of the Ventanillas and Crisostomo. The Ventanillas continued paying their monthly installments. On May 30, 1973, MRCI informed AUVCI that it was terminating their agreement because of discrepancies discovered in the latter's collections and remittances. Valencia was removed by the board of directors of MRCI as its president. The Ventanilla spouses, having learned of the supposed sale of their lots to Crisostomo, commenced an action for specific performance, annulment of deeds, and damages against Manila Remnant Co., Inc., A.U. Valencia and Co., Inc., and Carlos Crisostomo. The trial court rendered a decision declaring the contracts to sell in favor of the Ventanillas valid and subsisting, and annulling the contract to sell in favor of Crisostomo. It ordered the MRCI to execute an absolute deed of sale in favor of the Ventanillas, free from all liens and encumbrances. When a writ of execution was issued by the trial court, MRCI filed a manifestation alleging that the subject properties could not be delivered to the Ventanillas because they had already been sold to Samuel Marquez, while their petition was pending in this Court. The Ventanillas accepted the amount of P210,000.00 as damages and attorney's fees but opposed the reimbursement offered by MRCI in lieu of the execution of the absolute deed of sale. They contended that the alleged sale to Samuel Marquez was void, fraudulent, and in contempt of court and that no claim of ownership over the properties in question had ever been made by Marquez. The Court of Appeals ruled that the contract to sell in favor of Marquez did not constitute a legal impediment to the immediate
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execution of the judgment. MRCI further maintains that the sale to Samuel Marquez was valid and constitutes a legal impediment to the execution of the absolute deed of sale to the Ventanillas. At the time of the sale to Marquez, the issue of the validity of the sale to the Ventanillas had not yet been resolved. Furthermore, there was no specific injunction against the petitioner re-selling the property. Lastly, the petitioner insists that Marquez was a buyer in good faith and had a right to rely on the recitals in the certificate of title. The subject matter of the controversy having passed to an innocent purchaser for value, the respondent court erred in ordering the execution of the absolute deed of sale in favor of the Ventanillas. For their part, the respondents argue that the validity of the sale to them had already been established even while the previous petition was still pending resolution. That petition only questioned the solidary liability of MRCI to the Ventanillas. The portion of the decision ordering the MRCI to execute an absolute deed of sale in favor of the Ventanillas became final and executory when the petitioner failed to appeal it to the Supreme Court. There was no need then for an order enjoining the petitioner from re-selling the property in litigation. They also point to the unusual lack of interest of Marquez in protecting and asserting his right to the disputed property, a clear indication that the alleged sale to him was merely a ploy of the petitioner to evade the execution of the absolute deed of sale in their favor. ISSUE: Whether or not the contract to sell in question can prevail over the final and executory judgement ordering MRCI to execute a deed of absolute sale over the Ventanillas. RULING: No. There are circumstances that cast suspicion on the validity, not to say the very existence, of the contract with Marquez. First, the contract to sell in favor of Marquez was entered into after the lapse of almost ten years from the rendition of the judgment of the trial court upholding the sale to the Ventanillas. Second, the petitioner did not invoke the contract with Marquez during the hearing on the motion for the issuance of the writ of execution filed by the private respondents. It disclosed the contract only after the writ of execution had been served upon it. Third, in its manifestation and motion dated December 21, 1990, the petitioner said it was ready to deliver the titles to the Ventanillas provided that their counterclaims against private respondents were paid or offset first. There was no mention of the contract to sell with Marquez on February 7, 1990.

Fourth, Marquez has not intervened in any of these proceedings to assert and protect his rights to the subject property as an alleged purchaser in good faith. At any rate, even if it be assumed that the contract to sell in favor of Marquez is valid, it cannot prevail over the final and executory judgment ordering MRCI to execute an absolute deed of sale in favor of the Ventanillas. No less importantly, the records do not 2 show that Marquez has already paid the supposed balance amounting to P616,000.00 of the original price of over P800,000.00. The Court notes that the petitioner stands to benefit more from the supposed contract with Marquez than from the contract with the Ventanillas with the agreed price of only P66,571.00. Even if it paid the P210,000.00 damages to the private respondents as decreed by the trial court, the petitioner would still earn more profit if the Marquez contract were to be sustained. Regarding the refusal of the petitioner to execute the absolute deed of sale, Section 10 of Rule 39 of the Rules of Court reads as follows: Sec. 10. Judgment for specific act; vesting title If a judgment directs a party to execute a conveyance of land, or to deliver deeds or other documents, or to perform any other specific act, and the party fails to comply within the time specified, the court may direct the act to be done at the cost of the disobedient party by some other person appointed by the court and the act when so done shall have like effect as if done by the party. If real or personal property is within the Philippines, the court in lieu of directing a conveyance thereof may enter judgment divesting the title of any party and vesting it in others and such judgment shall have the force and effect of a conveyance executed in due form of law. In sum, the court find that: No legal impediment exists to the execution, either by the petitioner or the trial court, of an absolute deed of sale of the subject property in favor of the respondent Ventanillas. The petition is DENIED and the challenged decision of the Court of Appeals is AFFIRMED in toto,

Nullity of a contract which is void ab initio operates to restore things to the state and condition in which they were found before the execution thereof.

DPB v. CA 2 October 16, 1995 Facts: DBP acquired a parcel of land through an extra judicial sale. Later on, DBP sold the same lot to sps mangubat (buyer for brevity). Thereafter, Buyer contracted a loan with DBP bank, as a security buyer mortgaged the said lot to DBP. Upon verification, it was discovered that the lot is classified as timberland, nonetheless, DBP constituted the lot as mortgage. Later on, buyer seeks to annul the sale on the ground that Later on, buyer seeks to annul the sale on the ground that the subject of the sale is classified as

Aslor

timberland hence inalienable land of public domain. Issue: Held: Whether or not the buyer can reimburse from DBP the purchase price.

Effects of sale under a voidable contract: Being a voidable contract, it is susceptible of either ratification or annulment. If the contract is ratified, the action to annul it is extinguished (Article 1392, N.C.C.) and the contract is cleansed from all its defects (Article 1396, N.C.C.); if the contract is annulled, the contracting parties are restored to their respective situations before the contract and mutual

Yes. Buyer should be reimbursed of the purchase price. Whenever money is paid upon the representation of the receiver that he has either a certain title in property transferred in consideration of the payment or a certain authority to receive the money paid, when in fact he has no such title or authority, then, although there be no fraud or intentional misrepresentation on his part, yet there is no consideration for the payment, the money remains, in equity and good conscience, the property of the payer and may be recovered back by him. Therefore, the purchaser is entitled to recover the money paid by him where the contract is set aside by reason of the mutual material mistake of the parties as to the identity or quantity of the land sold. And where a purchaser recovers the purchase money from a vendor who fails or refuses to deliver the title, he is entitled as a general rule to interest on the money paid from the time of payment. A contract which the law denounces as void is necessarily no contract whatever, and the acts of the parties in an effort to create one can in no wise bring about a change of their legal status. The parties and the subject matter of the contract remain in all particulars just as they did before any act was performed in relation thereto. An action for money had and received lies to recover back money paid on a contract, the consideration of which has failed. As a general rule, if one buys the land of another, to which the latter is supposed to have a good title, and, in consequence of facts unknown alike to both parties, he has no title at all, equity will cancel the transaction and cause the purchase money to be restored to the buyer, putting both parties in status quo. EDCA Publishing v. Santos 3 April 26, 1990 Facts: EDCA sold bought to a certain Jose Cruz. Before full payment of the said books, EDCA delivered the books to Cruz. Upon receipt thereof, Cruz prepared a personal check as partial payment for the said books. Afterward, Cruz then sold the books to sps Santos. When EDCA tried to encash the check, it was dishonored by drawee bank. Upon dishonor of the check, EDCA then seeks to annul the contract of sale between Cruz and Santos contending that he was unlawfully deprived of such books. Issue: Held: No. EDCA cannot annul the sale between Cruz and sps Santos. The contract of sale entered into by Cruz and Santos were Voidable Contract. It remains Valid until annulled. Being a voidable contract, it is susceptible of either ratification or annulment. If the contract is ratified, the action to annul Whether or not the Contract of sale can be annulled by EDCA.

Aslor

restitution follows as a consequence (Article 1398, N.C.C.).

it is extinguished (Article 1392, N.C.C.) and the contract is cleansed from all its defects (Article 1396, N.C.C.); if the contract is annulled, the contracting parties are restored to their respective situations before the contract and mutual restitution follows as a consequence (Article 1398, N.C.C.). However, as long as no action is taken by the party entitled, either that of annulment or of ratification, the contract of sale remains valid and binding. At the time the books were sold to sps Santos, his (Cruz) title thereto had not been avoided and he therefore conferred a good title on the latter, provided he (Santos) bought the books in good faith, for value and without notice of the defect in Cruzs title (Article 1506, N.C.C.). Actual delivery of the books having been made, Cruz acquired ownership over the books which he could then validly transfer to the private respondents. The fact that he had not yet paid for them to EDCA was a matter between him and EDCA and did not impair the title acquired by the private respondents to the books. Clemente v. Razo 4 452 SCRA 769 Facts Gregoria Yaptengco Keh sold a parcel of land to Ken Marten Clemente and Charlie Clemente III. Later , the successors-ininterest of Eugenio Razo filed an action for annulment of title and reconveyance against the Keh . ISSUE Whether or not petitioners may be considered as innocent purchaser for value. HELD A person dealing with registered land has a right to rely on the Torrens certificate of title and to dispense with the need of inquiring further except when the party has factual knowledge of facts and circumstances that would impel a reasonably cautious man to make such inquiry or when the purchaser has knowledge of a defect or the lack of title in his vendor or of sufficient facts to induce a reasonably prudent man to inquire into the status of the title of the property in litigation. Philippine Trust co. v. PNB 5 GR. 16483, Dec 7, 1921 Facts: On January, 1919, the firm of Salvador Hermanos executed to the Philippine National Bank the eight promissory notes, and that each note was secured by the quedan, or warehouse receipt, of Nieva, Ruiz and Company, issued to the firm of Salvador Hermanos for so many piculs of copra. That the notes are of the same form, the only difference being the date and the amount of the note, and the number of the quedan, or warehouse receipt, and the amount of copra in piculs. Each warehouse receipt was duly numbered, dated and signed by Nieva, Ruiz and Company, and recites "received from Salvador Hermanos the following packages of copra as specified below, which are stored in warehouse No. 2, subject to the terms and conditions stated on the face

Negotiable documents of title mat be delivered by: 1. Where by the terms of the document the carrier, warehouseman or other bailee issuing the same undertakes to deliver the goods to the bearer.

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and back hereof, to be delivered unto Salvador Hermanos, or order," giving the number of the warehouse where located, and the number of sacks, gross weight and the declared value; across the face of each receipt is stamped in red ink the words "Negotiable Warrant." Based upon its insolvency petition, and in the ordinary course of business, the firm of Salvador Hermanos was adjudged insolvent, and on July 19, 1919, the Philippine Trust Company was elected assignee of said firm and duly qualified. September 13, 1919, as such assignee, it made a demand upon the bank for the surrender and delivery of the property described in all of the above receipts, and, upon the bank's refusal, commenced this action. Issue: Held: Each quedan, or warehouse receipt, was specifically described in a given note, and was made a part of it, and the note recites that, for any breach of its terms or conditions, the bank has full power and authority "to sell, assign, transfer and deliver the whole of the said security, or any part thereof, etc.," and that "at any such sale, the said bank may itself purchase the whole any part of the property sold, free from any right of redemption on the part of the undersigned, which is hereby waived and released." In addition, the quedan itself was delivered to and held by the bank, and the warehouseman recognized the bank as the owner of the property. Legally speaking, the owner of the quedans, or warehouse receipts, was the owner of the property described in them, and the quedans were given as collateral to secure promissory notes, which, for value received, were executed to the bank. Great Eastern Life Ins Co. v. Hong Kong Shanghai Bankking Corp. 6 43 Phil 678 Facts: May 3, 1920, the plaintiff drew its check for P2,000 on the Hongkong and Shanghai Banking Corporation with whom it had an account, payable to the order of Lazaro Melicor. E. M. Maasim fraudulently obtained possession of the check, forged Melicor's signature, as an endorser, and then personally endorsed and presented it to the Philippine National Bank where the amount of the check was placed to his credit. After having paid the check, and on the next day, the Philippine national Bank endorsed the check to the Hongkong and Shanghai Banking Corporation which paid it and charged the amount of the check to the account of the plaintiff. In the ordinary course of business, the Hongkong Shanghai Banking Corporation rendered a bank statement to the plaintiff showing that the amount of the check was charged to its account, and no objection was then made to the statement. About four months after the check was charged to the account of the plaintiff, it developed that Lazaro Melicor, to whom the check was made payable, had never received it, and that his signature, as an endorser, was forged by Maasim, who presented and deposited it to his private account in the Philippine National Bank. With this knowledge , the plaintiff promptly made a demand upon the Hongkong and Shanghai Banking Corporation that it should be given credit for the amount of the forged check, which the bank refused to do, and the plaintiff commenced this action to recover the P2,000 which was paid on the forged check. On the petition Who is the owner and entitled to possession of the property.

Section 23 of Act No. 2031, known as the Negotiable Instruments Law, says: When a signature is forged or made without the authority of the person whose signature it purports to be, it is wholly inoperative, and no right to retain the instrument, or to give a discharge therefor, or to enforce payment thereof

Monforte

against any party thereto, can be acquired through or under such signature, unless the party against whom it is sought to enforce such right is precluded from setting up the forgery or want of authority.

of the Shanghai Bank, the Philippine National Bank was made defendant. The Shanghai Bank denies any liability, but prays that, if a judgment should be rendered against it, in turn, it should have like judgment against the Philippine National Bank which denies all liability to either party. Issue: Who is responsible for the refund to the drawer of the amount of the check drawn and payable to order, when its value was collected by a third person by means of forgery of the signature of the payee. Held: The money was on deposit in the Shanghai Bank, and it had no legal right to pay it out to anyone except the plaintiff or its order. Here, the plaintiff ordered the Shanghai Bank to pay the P2,000 to Melicor, and the money was actually paid to Maasim and was never paid to Melicor, and he never paid to Melicor, and he never personally endorsed the check, or authorized any one to endorse it for him, and the alleged endorsement was a forgery. Hence, upon the undisputed facts, it must follow that the Shanghai Bank has no defense to this action. It is admitted that the Philippine National Bank cashed the check upon a forged signature, and placed the money to the credit of Maasim, who was a forger. That the Philippine National Bank then endorsed the check and forwarded it to the Shanghai Bank by whom it was paid. The Philippine National Bank had no license or authority to pay the money to Maasim or anyone else upon a forge signature. It was its legal duty to know that Melicor's endorsment was genuine before cashing the check. Its remedy is against Maasim to whom it paid the money. Siy Cong Bieng v. Hong Kong Shanghai Bankking Corp. 7 March 5, 1932 FACTS: This action was brought in the Court of First Instance of Manila to recover the sum of P31,645, the value of 464 bales of hemp deposited in certain bonded warehouses as evidenced by the quedans (warehouse receipts) described in the complaint, said quedans having been delivered as pledge by one Otto Ranft to the herein defendant, the Hongkong and Shanghai Banking Corporation, for the guarantee of a preexisting debt of the former to the latter. On June 25, 1926, Ranft called at the office of the herein plaintiff to purchase hemp (abaca), and he was offered the bales of hemp as described in the quedans . The parties agreed to the aforesaid price, and on the same date the quedans, together with the covering invoice, were sent to Ranft by the plaintiff, without having been paid for the hemp, but the plaintiff's understanding was that the payment would be made against the same quedans, and it appear that in previous transaction of the same kind between the bank and the plaintiff, quedans were paid one or two days after their delivery to them. In the evening of the day upon which the quedans in question were delivered to the herein defendant, Ranft died, and when the plaintiff found that such was the case, it immediately demanded the return of the quedans, or the payment of the value, but was told that the quedans had been sent to the herein defendant as soon as they were received by Ranft. Demand had been made by the plaintiff on the defendant bank for the return of the quedans, or their value, which

Article 1512. A negotiable document of title may be negotiated: 2.) By any person to whom the possession or custody of the document has been entrusted by the owner, if, by the terms of the document the bailee issuing the document undertakes to deliver the goods to the order of the person to whom the possession or custody of the document has been entrusted, or if at the time of such entrusting the document is in such form that it may be negotiated
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by delivery.

demand was refused by the bank on the ground that it was a holder of the quedans in due course. Thereupon the plaintiff filed its first complaint against the defendant, wherein it alleged that it has "sold" the quedans in question to the deceased O. Ranft for cash, but that the said O. Ranft had not fulfilled the conditions of the sale. Later on, plaintiff filed an amended complaint, wherein they changed the word "sold" referred to in the first complaint to the words "attempted to sell". ISSUE: Whether or not the defendant is a holder in due course and for value of the quedans? HELD: Yes. The defendant bank is a holder in due course and for value of the said quedans. It may be noted, first, that the quedans in question were negotiable in form;second, that they were pledge by Otto Ranft to the defendant bank to secure the payment of his preexisting debts to said bank; third, that such of the quedans as were issued in the name of the plaintiff were duly endorsed in blank by the plaintiff and by Otto Ranft; and fourth, that the two remaining quedans which were duly endorsed in blank by him. The quedans (negotiable warehouse receipts) were pledged by Otto Ranft to the defendant Hongkong & Shanghai Banking Corporation to secure the payment of his preexisting debts to the latter, and taking into consideration that the quedans were negotiable in form and duly endorsed in blank by the plaintiff and by Otto Ranft, it follows that on the delivery of the qeudans to the bank they were no longer the property of the indorser unless he liquidated his debt with the bank. . The person who may negotiate the receipt is either the "owner thereof", or a "person to whom the possession or custody of the receipt has been intrusted by the owner" if the receipt is in the form described. The negotiation of the receipt to a purchaser for value without notice is not impaired by the fact that it is a breach of duty, or that the owner of the receipt was induced "by fraud, mistake, or duree" to intrust the receipt to the person who negotiated it. One to whom the negotiable receipt has been duly negotiated acquires such title to the goods as the person negotiating the receipt to him, or the depositor or person whose order the goods were delivered by the terms of the receipt, either had or "had ability to convey to a purchaser in good faith for value. The negotiable quedans were duly negotiated to the bank and as far as the record shows, there has been no fraud on the part of the defendant. De La Riva v. Lizarraga Hermanos 8 January 28, 1907 FACTS: Teodoro Carranza built at Atimonan in Tayabas two boats on the oral order of Antonio de la Riva, to be paid for through the house of Gutierrez Hermanos at Manila, with which at the time both parties had standing accounts, the exact price being left to be determined by their cost. From time to time moneys were advanced Carranza by Gutierrez Hermanos, but without any charge on the books against de la Riva or any adjustment of the accounts as between the parties, which was deferred until the business should be closed. After some months, the boats being finished, Behn, Meyer & Co., who at that time were also de la Rivas correspondents at Manila, chartered of Gutierrez Hermanos the steamer Magallanes, which carried them to Manila under a bill of

Article 1514. (Par. 2) If the document is non-negotiable, such person also acquires the right to notify the bailee who issued the document of the transfer thereof, and thereby to acquire the direct obligation of such bailee to hold possession of the goods for him acoording to the terms of
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the document (Par. 3) Prior to the notification to such bailee by the transferor or transferee of a nonnegotiable document of title, the title of the transferee to the goods and the right to acquire the obligation of such bailee may be defeated by the levy of an attachment of execution upon the goods by a creditor of the transferor or a subsequent purchaser from the transferor of a subsequent sale of the goods by the transferor. No person can be compelled to accept partial delivery. Rights of buyer if there is partial delivery: May accept the goods despite partial delivery. Reject the whole. Obligation of the buyer if he accepts the goods despite incomplete delivery: If buyer retains the goods despite incomplete delivery and with knowledge

landing signed by the captain, in which Teodoro Carranza was named shipper and Behn, Meyer, andCo. consignees, delivery being directed to them, but not on their order. On some date not shown, after the arrival of the boats at Manila, this order was indorsed by the consignees with a direction for their delivery to de la Riva. Upon seeking them under this order, de la Riva found them in the possession of the sheriff under an attachment in favor of Lizarraga Hermanos. ISSUE: Whether or not De la Riva acquires ownership over the boat? HELD: No. De la Riva failed to establish his title to the boats and Carranza owned the boats until their legal transfer. Teodoro Carranza built these boats, not as a mandatory, of de la Riva but on his own account, retaining the ownership of them until their legal transfer. This was not affected by reason of the payments advanced by Gutierrez Hermanos through the unjusted accounts of the parties, nor by the shipment of the boats or the remittance of the bill of lading of Behn, Meyer & Co., who were merely the consignees of the builder and represented him, nor yet by the indorsement of the consignees. Had the bill of lading run to their order, then title would have passed by the indorsement of it, or had it been payable to the bearer, then in that case by the mere delivery of it. By terms, however, the freight was deliverable to the consignees by name and their interest could be transferred only by document purporting to convey the property. Therefore, de la Riva failed to establish his title as against the sheriff under the attachment. Chrysler Phil Corp. v. CA 9 GR. L-55684 FACTS: Petitioner is a domestic corporation engaged in the assembling and sale of motor vehicles and other automotive products. Respondent Sambok Motors Co., a general partnership, during the period relevant to these proceedings, was its dealer for automotive products. On September 7, 1972, petitioner filed with the Court of First Instance of Rizal, a Complaint for Damages against Allied Brokerage Corporation, Negros Navigation Company and Sambok, Bacolod, alleging that on October 2, 1970, Sambok, Bacolod, ordered from petitioner various automotive products worth P30,909.61, payable in 45 days; that on November 25, 1970, petitioner delivered said products to its forwarding agent, Allied Brokerage Corporation, for shipment; that Allied Brokerage loaded the goods on board the M/S Doa Florentina, a vessel owned and operated by Negros Navigation Company, for delivery to Sambok, Bacolod; that when petitioner tried to collect from the latter the amount of P31,037.56, representing the price of the spare parts plus handling charges, Sambok, Bacolod, refused to pay claiming that it had not received the merchandise; that petitioner also demanded the return of the merchandise or their value from Allied Brokerage and Negros Navigation, but both denied any liability. In its Answer, Sambok, Bacolod, denied having received from petitioner or from any of its co-defendants, the automotive products referred to in the Complaint, and professed no knowledge of having ordered from petitioner said articles.

Cardio

of the sellers inability to perform the contract in full pay the goods at the contract rate. If without knowledge of inability of seller to perform the contract but appropriated some of the goods before such knowledge, the buyer shall be liable only for the fair value. If seller delivers more than agreed upon the buyer may: May accept all the goods delivered including the excess. Accept what has been agreed upon and reject the rest (1522 (2))

ISSUE: Whether or not buyer can be compelled to accept delivery less than the agreed quantity. HELD: No. Sambok cannot be compleeled to accept partial or incomplete delivery. Under the circumstances, Sambok, Bacolod, cannot be faulted for not accepting or refusing to accept the shipment from Negros Navigation four years after shipment. The evidence is clear that Negros Navigation could not produce the merchandise nor ascertain its whereabouts at the time Sambok, Bacolod, was ready to take delivery. Where the seller delivers to the buyer a quantity of goods less than he contracted to sell, the buyer may reject them. From the evidentiary record, Negros Navigation was the party negligent in failing to deliver the complete shipment either to Sambok, Bacolod, or to Sambok. Thus, in the last analysis, it is petitioner that must shoulder the resulting loss. The general rule that before, delivery, the risk of loss is home by the seller who is still the owner, under the principle of "res petit domino", is applicable in petitioner's case. Quiroga v. Parsons 10 August 23, 1918 FACTS: On Jan 24, 1911, plaintiff and the respondent entered into a contract making the latter an agent of the former. The contract stipulates that Don Andres Quiroga, herein petitioner, grants exclusive rights to sell his beds in the Visayan region to J. Parsons. The contract only stipulates that J.Parsons should pay Quiroga within 6 months upon the delivery of beds. Quiroga files a case against Parsons for allegedly violating the following stipulations: not to sell the beds at higher prices than those of the invoices; to have an open establishment in Iloilo; itself to conduct the agency; to keep the beds on public exhibition, and to pay for the advertisement expenses for the same; and to order the beds by the dozen and in no other manner. With the exception of the obligation on the part of the defendant to order the beds by the dozen and in no other manner, none of the obligations imputed to the defendant in the two causes of action are expressly set forth in the contract. But the plaintiff alleged that the defendant was his agent for the sale of his beds in Iloilo, and that said obligations are implied in a contract of commercial agency. The whole question, therefore, reduced itself to a determination as to whether the defendant, by reason of the contract hereinbefore transcribed, was a purchaser or an agent of the plaintiff for the sale of his beds. ISSUE: Whether or not the plaintiff can validly disregard the order if it is not order by dozen and constitutes a breach of contract? HELD: Yes. The plaintiff can disregard the order of the defendant if it is not order by dozen. In respect to the defendants obligation to order by the dozen, the only one expressly imposed by the contract, the effect of its breach would only entitle the plaintiff to disregard the orders which the defendant might place under other conditions; but if the plaintiff consents to fill them, he waives his right and cannot complain for having acted thus at his own free will.

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Matute v. Cheong Boo 11 GR. L-11109 FACTS: Upon January 14, 1915, a contract was made between the plaintiff, Amadeo Matute, and the defendant Cheong Boo, by which it was stipulated that the former should deliver and the latter should receive, within the month of February of the same year, a quantity of more than 300 and less than 500 piculs of mastic (almaciga) at the price of P8.50 per picul. The plaintiff Matute performed his part of the contract by collecting and transporting to the city of Zamboanga some 500 piculs of the resin within the time stated in the contract. Upon the arrival of this shipment at Zamboanga, on February 22, 1915, the plaintiff notified the defendant, but the latter refused to accept delivery. The plaintiff thereupon stored the almaciga; and upon February 27, 1915, he instituted this action in the Court of First Instance of the Province of Zamboanga, praying that the court should enter judgment in his favor requiring the defendant to fulfill the contract and accept the almaciga in question and furthermore should enter judgment for the price of the almaciga, plus damages and costs. At the hearing the court found that the contract was made, as alleged; that the almaciga was merchantable quality, and that the defendant had violated his contract in refusing to receive it. The plaintiff thereupon stored the almaciga; and upon February 27, 1915, he instituted this action in the Court of First Instance of the Province of Zamboanga, praying that the court should enter judgment in his favor requiring the defendant to fulfill the contract and accept the almaciga in question and furthermore should enter judgment for the price of the almaciga, plus damages and costs. At the hearing the court found that the contract was made, as alleged; that the almaciga was merchantable quality, and that the defendant had violated his contract in refusing to receive it. ISSUE: WoN the seller should be held liable for the expenses incurred by the plaintiff in the extra-judicial deposit of the goods by reason of sellers refusal to receive the same. HELD: As to the right of the plaintiff to recover all of the expenses incident to the storage of the almaciga pending this litigation, it is to be observed that under the last paragraph of section 332 of the Code of Commerce it is expressly stated that the expenses incident to the deposit of the goods shall be charged to the delinquent party. This provision of course contemplates the case where a judicial deposit is effected in accordance with the provisions of the Spanish Code of Civil Procedure, and it may be said that this provision has no application in the case of extrajudicial deposit. These expenses are, however, a necessary consequence of the refusal of the buyer to accept the goods in accordance with his contract, and are therefore in any event recoverable as general damages under article 1124 of the Civil Code. From what has been said it follows that the plaintiff is entitled to recover P678.50, being the full amount expended by him upon account of storage prior to July 15, 1915, instead of the amount of P141 allowed by the court. He is also entitled to be reimbursed for all reasonable expenditures made upon the same account subsequent to July 15, 1915, up to the time when the almaciga shall be delivered by him to the purchaser in pursuance of the judgment of the court, or until the almaciga shall be sold if a sale should become necessary. The plaintiff is also entitled to recover the item of P3.60, being
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the expense incurred in guarding the property while upon the pier at Zamboanga, No allowance will be made upon account of certain other items of damage claimed by the plaintiff, such as the expense of personal transportation of himself from Monserrat to Zamboanga, interest paid out upon the invested capital, and loss incident to the drying of the almaciga. The judgment rendered in the court below must therefore be modified to conform to the following tenor: The defendant shall receive and accept the 500 piculs of almaciga tendered by the plaintiff; and judgment is rendered against the defendant in favor of the plaintiff for the sum of P5,402.27, plus interests as the lawful rate to be calculated upon P4,864.77 from February 27, 1915, and upon P537.50 from July 15, 1915, together with the costs of first instance. In case the defendant shall refuse to accept said almaciga and pay to the plaintiff the amount of this judgment within thirty days, together with reasonable costs of storage paid by the plaintiff shall sell almaciga for the highest price possible crediting the amount received, less cost of storage since July 15, 1915, upon this judgment. Delsan Transport v. American Home Assurance Corp. 12 August 15, 2006 FACTS: Delsan is a domestic corporation which owns and operates the vessel MT Larusan. On the other hand, respondent American Home Assurance Corporation (AHAC for brevity) is a foreign insurance company duly licensed to do business in the Philippines through its agent, the American-International Underwriters, Inc. (Phils.). It is engaged, among others, in insuring cargoes for transportation within the Philippines. On August 7, 1984, the shipment arrived in Bacolod City. Immediately thereafter, unloading operations commenced. The discharging of the diesel oil started at about 1:30 PM of the same day. However, at about 10:30 PM, the discharging had to be stopped on account of the discovery that the port bow mooring of the vessel was intentionally cut or stolen by unknown persons. Because there was nothing holding the vessel, it drifted away and stretched westward and the flexible hose attached to the vessel was severed causing the diesel to spill into the sea. the shore tender, who was waiting for the completion of the water flushing was surprised when the tanker signaled a red light which meant stop pumping. Unaware of what happened, the shore tender, thinking that the vessel would, at any time, resume pumping, did not shut the storage tank gate valve. As all the gate valves remained open, the diesel oil that was earlier discharged from the vessel into the shore tank backflowed. Due to non-availability of a pump boat, the vessel could not send somebody ashore to inform the people at the depot about what happened. After almost an hour, a gauger and an assistant surveyor from the Caltexs Bulk Depot Office boarded the vessel. It was only then that they f ound out what had happened. Thereafter, the duo immediately went ashore to see to it that the shore tank gate valve was closed. The loss of diesel oil due to spillage was placed at 113.788 k/l while some 435,081 k/l thereof backflowed from the shore tank. As a result of spillage and backflow of diesel oil, Caltex sought recovery of the loss from Delsan, but the latter refused to pay. ISSUE:

Common carriers are bound to observe extraordinary diligence in the vigilance over the goods transported by them. They are presumed to have been at fault or to have acted negligently if the goods are lost, destroyed or deteriorated. To overcome the presumption of negligence in case of loss, destruction or deterioration of the goods, the common carrier must prove that it exercised extraordinary diligence.

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WoN Delsan exercised the necessary diligence in handling its cargo to exempt it from liability. HELD: Common carriers are bound to observe extraordinary diligence in the vigilance over the goods transported by them. They are presumed to have been at fault or to have acted negligently if the goods are lost, destroyed or deteriorated. To overcome the presumption of negligence in case of loss, destruction or deterioration of the goods, the common carrier must prove that it exercised extraordinary diligence. There are, however, exceptions to this rule. Article 1734 of the Civil Code enumerates the instances when the presumption of negligence does not attach: Art. 1734. Common carriers are responsible for the loss, destruction, or deterioration of the goods, unless the same is due to any of the following causes only: 1) 2) 3) 4) 5) Flood storm, earthquake, lightning, or other natural disaster or calamity; Act of the public enemy in war, whether international or civil; Act or omission of the shipper or owner of the goods; The character of the goods or defects in the packing or in the containers; Order or act of competent public authority.

Both the trial court and the CA uniformly ruled that Delsan failed to prove its claim that there was a contributory negligence on the part of the owner of the goods Caltex. the crew of the vessel should have promptly informed the shore tender that the port mooring line was cut off. However, Delsan did not do so on the lame excuse that there was no available banca. As it is, Delsans personnel signaled a red light which was not a sufficient warning because such signal only meant that the pumping of diesel oil had been finished. Neither did the blowing of whistle suffice considering the distance of more than 2 kilometers between the vessel and the Caltex Bulk Depot, aside from the fact that it was not the agreed signal. Had the gauger and the escort surveyor from Caltex Bulk Depot not gone aboard the vessel to make inquiries, the shore tender would have not known what really happened. The crew of the vessel should have exerted utmost effort to immediately inform the shore tender that the port bow mooring line was severed. To be sure, Delsan, as the owner of the vessel, was obliged to prove that the loss was caused by one of the excepted causes if it were to seek exemption from responsibility. Unfortunately, it miserably failed to discharge this burden by the required quantum of proof. Delsan, being a common carrier, should have exercised extraordinary diligence in the performance of its duties. Consequently, it is obliged to prove that the damage to its cargo was caused by one of the excepted causes if it were to seek exemption from responsibility. Having failed to do so, Delsan must bear the consequences.

If the buyer is to pay the freight, it is reasonable to suppose that he does so because the goods become his at the point of shipment. On the other hand, if the seller is to pay the freight, the inference is equally so strong that the duty of the seller is to have the goods transported to their ultimate destination and that title to property does not pass until the goods have reached their destination.

Bhen Myer and Co. v. Yangco 13 38 Phil 602 Facts: The contract between the parties was for 80 drums of caustic soda, 76 per cent "Carabao" brand, at the price of $9.75 per one hundred pounds, cost, insurance, and freight included, to be shipped during March, 1916, to be delivered to Manila and paid for on delivery of the documents. However, the steamship was detained by the British authorities at Penang, and part of the cargo, including seventy-one drums of caustic soda, was removed. Defendant refused to accept delivery of the remaining nine drums of soda on the ground that the goods were in bad order. Defendant also refused the optional offer of the plaintiff, of waiting for the remainder of the shipment until its arrival, or of accepting the substitution of seventy-one drums of caustic soda of similar grade from plaintiff's stock. Plaintiff company contended that the specific soda confiscated at Penang belong to the defendant and therefore, are indebted for the contract price of the same. Issue: Whether or not the defendant is the owner of the goods. Held: Yes, it is the defendant, who owns the goods. If the contract be silent as to the person or mode by which the goods are to be sent, delivery by the vendor to a common carrier, in the usual and ordinary course of business, transfers the property to the vendee. Further, in the instant case, the payment of freight can be taken to indicate the intention of the parties. If the buyer is to pay the freight, it is reasonable to suppose that he does so because the goods become his at the point of shipment. On the other hand, if the seller is to pay the freight, the inference is equally so strong that the duty of the seller is to have the goods transported to their ultimate destination and that title to property does not pass until the goods have reached their destination. However, because plaintiff defaulted in its obligation to deliver the goods in Manila, the buyer may therefore rescind the contract of sale because of a breach in substantial particulars going to the essence of the contract. Therefore, the defendant has no obligation to pay the contracted price for the goods. General Foods v. Nacoco 14 GR. L-8717 Facts: National Coconut Corporatio(NACOCO) sold to General Foods Co. tons of copra at $163 per ton of 2,000 pounds, under the agreement the Net Landed Weights were to govern. NACOCO shipped 1054.6278 short tons of copra to Appellant on board the S. S. Mindoro. However, upon arrival in New York, the net cargo was reweighed by Appellant and was found to weigh only 898.792 short tons. Appellant demanded from Appellee the refund of the amount of $24,154.59 which was refused by NACOCO. It is the contention of the Appellant that although the sale between the parties quoted a CIF New York price, the agreement

Under CIF arrangement, the person shoulders the cost, insurance and freight is presumed to be the owner of the goods while it is in the possession of the bailee. There is a presumption that whoever shoulders the CIF
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is presumed to be the principal and the bailee merely acts as an agent of the principal. NB. Apply the doctrine of res perit domino to identify who should shoulder the risk of loss.

contemplated the payment of the price according to the weight and quality of the cargo upon arrival in New York, the port of destination, and that therefore, the risk of the shipment was upon the seller. NACOCO, on the other hand, insists that the contract in question was an ordinary C. I. F. agreement wherein delivery to the carrier is delivery to the buyer. Issue: Whether or not NACOCO should be held liable. Held: Yes. NACOCO is liable to pay the refund in favor of the Appellant. There is no question that under an ordinary C.I.F. agreement, delivery to the buyer is complete upon delivery of the goods to the carrier. There is equally no question that the parties may, by express stipulation or impliedly, modify a CIF contract and throw the risk upon the seller until arrival in the port of destination. In the present case, there is an express agreement that the Net Landed Weights were to govern, and the pri ce was to be ascertained on the basis of outturn weights and quality of the cargo at the port of discharge. Therefore, While the risk of loss was apparently placed on the Appellant after delivery of the cargo to the carrier, it was nevertheless agreed that the payment of the price was to be according to the net landed weight, thus, NACOCO is bound to the outturn weight of the copra at the por t of discharge. Katigbak vs CA 15 L-16480 Facts: Artemio Katigbak, upon reading an advertisement for the sale of a tractor winch, went to V.K Lundberg to inspect the equipment. The price quoted was 12,000.00 php. Desiring a reduction of the price, Katigbak was referred to Daniel Evangelista, the owner of the tractor. They agreed that Katigbak will purchase the wich for 12,000.00 php, payable at 5,000.00 php upon delivery and the balance of 7,000.00 php within 60 days. The condition of the sale was that the winch would be delivered in good condition. The sale was not consummated, the winch has defect and Lundberg failed to repair the defect. This triggered Katigbak to sue Evangelista, Lundberg and the latter's company, for the refund of the money paid. Arguments According to Lundberg, he is not liable for the amount since the obligation for refund was purely a personal account between defendant Evangelista and Katigbak. Lundberg asked for actual and moral damages, claiming that the filing of the suit was malicious. According to Evangelista, while there was an agreement between him and Katigbak for the purchase and sale of the winch and that Katigbak advanced the payment for the spare parts, Katigbak refused to comply with his contract to purchase the same. This forced him to sell the winch to a third party. Lower Courts Judgment In favor of Katigbak. Daniel Evangelista and V. K. Lundberg were ordered to pay Katigbak the sum of 2,029.85 php, with legal interest from the filing of the complaint until fully paid, plus the sum of 300.00 php as attorney's fees, and the costs.

Rights of an unpaid seller: Possessory lien Stoppage in transitu Rescission Resale The rights of rescission and resale can only be invoked if the possessory lien or stoppage in transitu has already been exhausted. Without exhaustion of the first two rights, rescission and resale cannot be available as a remedy.

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Court of Appeals Judgment CA reversed the decision of the lower court. The complaint was dismissed as to Lundberg; reducing the judgment in favor of Katigbak to the sum of 29.00 php and ordered Katigbak, in turn, to pay Evangelis ta the sum of 700.00 php as attorneys fees. Katigbak elevated the case to the Supreme Court claiming that CA failed to apply the law relative to rescission of contracts. Issue: Whether or not Evangelista (The Vendor) is entitled to resell the winch. Held: YES. He may resell the winch because of Katigbaks failure to comply with his obligation. The contract between Evangelista and Katigbak was binding between them, and the obligation of the former to deliver the winch could not arise until the latter should pay or tender payment of money. The purchaser (Katigbak) failed to pay the purchase price, so the vendor (Evangelista) is entitled to resell the winch. Florendo v. Foz 16 GR. 6565 Facts: Foz and Florendo entered into a contract whereby, for a consideration of 6,000.00 php, the former would sell and convey forever and perpetually to the latter his house and camarin and the lot on which they are erected. Of the six thousand pesos, Foz received from Florendo, 2,000.00 php. The remaining 4,000.00 php will be given when Foz go to Vigan. When Foz went to Vigan, Florendo tendered to the former the 4,000.00 php but Foz refused to receive them, saying that the true price of the sale, recorded in another instrument held by Florendo was 10,000.00 php. Florendo instituted a suit against Foz for specific performance. Foz Argument Foz alleged that the contract was false that he had sold his property for the price of 6,000 php; that, if he signed the deed of sale, he was deceived in so doing, as he had heard, or believed that he had heard, when it was previously read to him, that the amount stated therein was P10,000, which was the true sum agreed upon between himself and the plaintiff as the price of the property. He asked that the deed of sale be declared to be false, null and void, and prayed that the plaintiff be compelled to return to him the ownership title of the property, which was in the plaintiff's possession. Lower Courts Judgment Rendered judgment in conformity with the plaintiff's petition. Issue: Whether or not the contract is valid and effective. If yes, Whether or not Foz is obliged to deliver the subject matter of the contract. Held: YES. The instrument of contract is valid and effective. From the validity and force of the contract is derived the obligation

The vendor shall not be bound to deliver the thing sold, if the vendee should not have paid the price, or if a period for the payment has not been fixed in the contract. If in the contract a period has been fixed for the payment, the vendor must deliver the thing sold. In the contract in question, a period was fixed for the payment.

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of the part of the vendor to deliver the thing sold. Pursuant to article 1466 of the Civil Code, the vendor shall not be bound to deliver the thing sold, if the vendee should not have paid the price, or if a period for the payment has not been fixed in the contract. If in the contract a period has been fixed for the payment, the vendor must deliver the thing sold. In the contract in question, a period was fixed for the payment. The provisions of the said Article 1466, contain a rule and an exception: the rule is that the thing shall not be delivered, unless the price be paid; and the exception is that the thing must be delivered, though the price be not first paid, if a time for such payment has been fixed in the contract. In the case, the contract provides a period for payment, that is, when the vendor shall have arrived at Vigan; and if he does not arrive at Vigan, the vendee may send the rest to Manila, should the vendor not arrive at Vigan. Garcia v. Velasco 17 October 23, 1923 Facts: On July 1, 1929, Florentino Garcia, as duly appointed guardian of the minors, Elisa, Maria, Anita, Pastor, Gabino, Jose and Pacita, all surnamed Garcia, leased to defendant Paz E. Velasco, for period of ten years at an annual rental of P750, a fish pond belonging to said minors, situated in Paombong, Bulacan. On May 22, 1931, pursuant to authority granted him by the court, he sold the fish pond to said defendant for a lump sum of P14 000. On October 29, 1935, Emiliano E. Garcia, who was appointed guardian in substitution of Florentino Garcia, was ordered by the court to institute an appropriate action for the recovery from the defendant of the purchase price of the fish pond. The action was instituted in the Court of First Instance of Manila where said guardian resides. Defendant, in a special appearance, objected to the courts jurisdiction over her person, and on the overruling of the object ion, the demurrer was interposed reasserting the original ground of objection and adding, as another ground, want of the courts jurisdiction over the subject matter of the action. The demurrer having been overruled, defendant filed her answer in which she renewed her objection to the courts jurisdiction over her person and the subject matter, pleads the special defense of payment, and sets up a counterclaim for P249.57. On the issue thus joined, the trial court rendered judgment dismissing the action on the ground of lack of jurisdiction and that the amount claimed has already been paid. Hence, this appeal. Issue: Whether or not upon a sale of real property in gross and for a lump sum, the purchaser may be entitled to an equitable reduction in the price in proportion to what is lacking in the area as designated in the contract.

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Ruling: NO Upon the question of law of whether upon a sale of real property in gross and for a lump sum, the purchaser may be entitled to an equitable reduction in the price in proportion to what is lacking in the area as designated in the contract, the trial court credited the defendant the sum of P3 824 upon the evidence that the fish pond purchased by him was only eight (8) hectares, when it was described in the contract to contain una extension superficial de once (11) hectares treinta y ocho (38) areas, y setenta y siete (77) centiareas, poco mas o menos. The question is controlled by article 1471 now 1542 of the Civil Code which provides that in case of the sale of real estate for a lump sum and not at the rate of a specified price for each unit of measure or number there shall be no increase or decrease of the price even if the area or number be found to be more or less than that stated in the contract. The transaction here i nvolved is, according to paragraph 5 of the deed of sale (Exhibit D), one for a lump sum and not at a specified price for each unit of measure and, therefore no reduction can be authorized although the area was less than what was stated in the contract. There are instances in which equitable relief may be granted to the purchaser, as where the deficiency is very great for, under such circumstance, gross mistake may be inferred. (Asiain vs. Jalandoni, 45, Phil., 296.) But, in the instant case, we are satisfied that, although the shortage amounts to practically one-fourth of the total area, the purchaser clearly intended to take the risk of the quantity, ad that the area has been mentioned in the contract merely for purpose of description. From the circumstance that the defendant, before her purchase of the fish pond, had been in possession and control thereof for two years as lessee, she can rightly be presumed to have acquired a good estimate of its value and are, and her subsequent purchase thereof must have been premised on the knowledge of such value and are. Accordingly, she cannot now be heard to claim an equitable reduction in the purchase price on the pretext that the property is much less than she thought it was. Asian v. Jalandoni 18 GR. 20435 Facts: Asiain and Jalandoni are owners of two adjacent jaciendas in Negros Occidenta.Later, Asiain said to Jalandoni tahthe was willing to sell a portion of his haciendafor the sum of P55,000. With a wave of his hand, Asiain indicated the tract of land in question affirming that it contained between 25 and 30 hectares, and that the crop of sugar cane then planted would produce not less than 2,000 piculs of sugar. Since Jalandoni was in doubt of the area and the pciuls of sugar produced that Asiain informed him they entered into two written agreements and the subsequent one lead to the sale of said land. While in possession of the land, Jalandoni did two things.He had the sugar cane ground in La Carlota Sugar Central with the result that it gave an output of 800 piculs and 23 cates of centrifugal sugar. When opportunity offered, he secured the certificate of title of Asiain and produced a surveyor to survey the land. Of the purchase price of P55,000, Jalandoni had paid P30,000 leaving a balance unpaid of P25,000 and to recover the balance or obtain the certificate of title and rent from him, an

Sale of real estate: Particular area (1539-1540) The excess of the area agreed upon may be accepted or rejected by the buyer. If accepted, the buyer will pay the excess at the contract price. If what has been delivered is less than the agreed area: The buyer may rescind the
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S. Barreda

contract if the lack in area should be not less than one-tenth of that stated The buyer may accept the lot and ask for proportionate reduction of the price. The same rule shall apply if the seller delivers a lot mixed with inferior quality, Lump-sum 1541 There shall be no increase or decrease in the purchase price. The actual area delivered is immaterial.

action was instituted against defendant Jalandoni. The trial court ruled in favor of the defendant. Issue: Whether or not Article 1542 is applicable in this case. Ruling: YES. The true facts need to give us pause. They are as found by the trial judge and as practically agreed to by the parties. It is necessary to keep in mind that apparently there was always a difference of opinion between Asian Jalandoni as to the area of the tract and as to the crop of sugar cane; that the agreement between them mentions lands containing25 hectares more or less, giving the boundaries and a crop estimated and in one sense warranted at 2 000 piculs, ad that in reality the land contained only a little more than 18 hectares and produced a crop of only about 800 piculs. The facts seem to fall within article 1471 now 1541. Its first paragraph provides that in case of the sale of real estate for a lump sum and not at the rate of specified price of each unit or measure, there shall be no increase or decrease of the price even if area be found to be more or less than that stated in the contract. The next paragraph provides that the same rule is applicable when two or more estates are sold for a single price. Then comes the following: but, if in addition to a statement of the boundaries, which is indispensable in every conveyance of real estate, the area estate should be designated in the contract, the vendor shall be obliged to deliver all that is included within such boundaries, even should it exceed the area specified in the contract; and, should he not be able to do so, he shall suffer a reduction of the price in proportion to what is lacking of the area, unless the contract be annulled by reason of the vendees refusal to accept anything other than that which was stipulated. Dagupan Trading Company v. Macam 19 May 31, 1965 FACTS: Sammy Maron and his seven brothers and sisters were pro-indiviso owners of a parcel of unregistered land located in barrio Parayao, Binmaley, Pangasinan. In 1955, while their application for registration of said land under Act No. 496 was pending, they executed, on June 19 and on September 21, two deeds of ale conveying the property to herein respondent Rustico Macam who thereafter took possession of the property and made substantial improvements upon it. On October 14, 1955, OCT No. 6942 covering the land was issued in the name of the Marons, free from all liens and encumbrances. On August 4, 1956, however, by virtue of a final judgment of the Municipal Court of Manila in a civil case in favor of Manila Trading and Supply Co. (Manila Trading) against Sammy Maron, levy was made upon whatever interest he had in the subject property. Thereafter, said interest was sold at public auction to the judgment creditor Manila Trading. The corresponding notice of levy, certificate of sale and the sheriff's certificate of final sale in favor of Manila Trading - because nobody exercised the right of

Rules on Double Sale: Immovable Property, who has a better right: A. The person who first registered it in good faith. Ratio: Registration is the operative act to convey or affect the land insofar as third persons are concerned B. In the absence of registration, the person who first took possession over the property in good faith
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S. Barreda

The Person who can present the oldest title. Registration Art 1544 talks about ACTUAL registration to the Registry of Deeds. i.e registry of the sale to the books of register. Mere notice to the Registry of Deeds without the registration is not sufficient. Possession may be ACTUAL or CONSTRUCTIVE. Title the title conveyed upon the execution of the Deed of Sale.

C.

redemption - were duly registered, and on March 1, 1958, the latter sold all its rights and title in the property to herein petitioner Dagupan Trading Company (Dagupan Trading). On September 4, 1958, Dagupan Trading filed an action against Macam, praying that it be declared owner of one-eighth portion of the subject property. The CFI of Pangasinan dismissed the said complaint, and the Court of Appeals affirmed its decision. ISSUE: Who has the superior right over the one-eight portion of the subject property? COURTRULING: The Supreme Court likewise affirmed both decisions of the lower courts. At the time of the levy, Sammy Maron already had no interest on the one-eight portion of the property he and his siblings have inherited because for a considerable time prior to the levy, said interest had already been conveyed upon Macam "fully and irretrievably" - as the Court of Appeals held. Consequently, the subsequent levy made on the property for the purpose of satisfying the judgment rendered against Sammy Maron in favor of the Manila Trading Company was void and of no effect. The unregistered sale and the consequent conveyance of title and ownership in favor Macam could not have been cancelled and rendered of no effect upon the subsequent issuance of the Torrens title over the entire parcel of land. Moreover, upon the execution of the deed of sale in his favor by Sammy Maron, Macam had immediately taken possession of the land conveyed as its new owner and introduced considerable improvements upon it himself. To deprive him, therefore, of the same by sheer force of technicality would be against both justice and equity. Cruz v. Cabana 20 GR. L-56232 Facts: Leodegaria Cabana sold a parcel of land to sps Legazpi and Cabana on October 21, 1968. The said sps tried to register the Deed of Sale but said registration was accomplished because they could not present the owners Duplicate of title. Likewise, Cabana sold the same lot to to a certain Abelardo Cruz on September 3, 1970. Said plaintiff was informed that the owner thereof had sold the land to defendants-spouses on October 21, 1968. Plaintiff was able to register the land in his name on February 9, 1971. With the admission of both parties that the land in question was sold to two persons, the main issue to be resolved in this appeal is as to who of said vendees has a better title to said land. Issue: Held: Who has a better title to the disputed lot.

Lack of Good faith A purchaser who has knowledge of fact which would put him upon inquiry and investigation as to possible defects of the title of the vendor and fails to make such inquiry and investigation, cannot claim that he is a purchaser in good faith.

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Sps Legazpi and Cabana has a better title to the disputed lot. The transaction in question is governed by Article 1544 of the Civil Code. While the title was registered in plaintiff- appellant's name on February 9, 1971 (Exh. A), it appears that he knew of the sale of the land to defendants-spouses Legaspi as he was informed in the Office of the Register of Deeds of Quezon. It appears that the defendants-spouses registered their document of sale on May 13, 1965. Under the foregoing circumstances, the right of ownership and title to the land must be resolved in favor of the defendants- spouses Legaspi. The plaintiff-appellant was not in good faith in registering the title in his name. Consistent is the jurisprudence in this jurisdiction that in order that the provisions of Article 1544 of the new Civil Code may be invoked, it is necessary that the conveyance must have been made by a party who has an existing right in the thing and the power to dispose of it (10 Manresa 170, 171). It cannot be set up by a second purchaser who comes into possession of the property that has already been acquired by the first purchaser in full dominion this not withstanding that the second purchaser records his title in the public registry, if the registration be done in bad faith, the philosophy underlying this rule being that the public records cannot be covered into instruments of fraud and oppression by one who secures an inscription therein in bad faith . A purchaser who has knowledge of fact which would put him upon inquiry and investigation as to possible defects of the title of the vendor and fails to make such inquiry and investigation, cannot claim that he is a purchaser in good faith. Knowledge of a prior transfer of a registered property by a subsequent purchaser makes him a purchaser in bad faith and his knowledge of such transfer vitiates his title acquired by virtue of the latter instrument of conveyance which creates no right as against the first purchaser. Navera v. CA 21 April 26, 1990

The possession mentioned in Article 1544 for determining who has better right when the same piece of land has been sold several times by the same vendor includes not only the material but also the symbolic possession, which is acquired by the execution of a public instrument(constructive delivery).

Facts:

Leocadio Navera has five (5) children, namely: Elena, Mariano, Basilio, Eduarda and Felix, all surnamed Navera. Mariano Navera is the father of petitioner Genaro Navera. Elena Navera, on the other hand has three children by Antonio Nares. Two of them are respondent Arsenio Nares and Felix Nares. The other child, Dionisia is already deceased and has left children. Way back in 1916, Leocadio Navera donated to Fausto Mustar in a private instrument a certain property in consideration of the marriage of the former's son, Mariano Navera, to the daughter of Fausto Mustar by the name of Restituta Mustar. On July 19, 1927, Original Certificate of Title No. RO-154(NA) was issued in the name of "Elena Navera, et al.", covering the land in dispute, namely Lot 1460, situated in the Municipality of Camalig, Albay On May 14, 1947, Eduarda Navera, by means of a public instrument, sold to her nephew, respondent Arsenio Nares, all of her share

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Monforte

in Lot 1460, which is titled in the name of "Elena Navera, et al." Eduarda Navera's share in the aforementioned lot is one-half (1/2) of the total area of Lot 1460. On June 26, 1948, Eduarda Navera sold for the second time a portion of Lot 1460 to Mariano Navera. On January 30, 1953, respondent Arsenio Nares sold to Perpetua Dacillo a portion of Lot No. 4167 containing an area of five thousand seven hundred twenty six (5,726) square meters. Perpetua Dacillo thereafter donated the said property to Francisco Dacillo. On August 13, 1955, Mariano Navera, sold to his brother-in-law, Serapio Mustar, the lot which he bought from Eduarda Navera. On April 7, 1959, Serapio Mustar later sold to petitioner Genaro Navera Lot 1460 which he bought from the latter's father, Mariano Navera, containing an area of nineteen thousand nine hundred sixty nine (19,969) square meters more or less. On September 3, 1971, Francisco Dacillo sold to petitioner Genaro Navera the land which the former received by way of donation from Perpetua Dacillo. Issue: Who has the better right of ownership.

Held: In the instant case, the first sale of Eduarda Navera's share in the said lot to Arsenio Nares was made in a public instrument on May 14, 1947. The second sale of the same property was executed also in a public instrument in favor of Mariano Navera, who is the predecessor in interest of petitioner Genaro Navera, on June 26, 1948, or more than a year after the first sale. Since the records show that both sales were not recorded in the Registry of Property, the law clearly vests the ownership upon the person who in good faith was first in possession of the disputed lot. The possession mentioned in Article 1544 for determining who has better right when the same piece of land has been sold several times by the same vendor includes not only the material but also the symbolic possession, which is acquired by the execution of a public instrument. This means that after the sale of a realty by means of a public instrument, the vendor, who resells it to another, does not transmit anything to the second vendee, and if the latter, by virtue of this second sale, takes material possession of the thing, he does it as mere detainer, and it would be unjust to protect this detention against the rights of the thing lawfully acquired by the first vendee (Quimson vs. Rosete, 87 Phil. 159; Sanchez vs. Ramos, 40 Phil. 614; Florendo vs. Foz, 20 Phil. 388). In the case at bar, the prior sale of the land to respondent Arsenio Nares by means of a public instrument is clearly tantamount to a delivery of the land resulting in the material and symbolic possession thereof by the latter. Verily, factual evidence points to the prior actual possession by respondent Nares before he was evicted from the land by petitioners and their predecessors in 1957 when the latter entered the disputed property. No other evidence exists on record to show the contrary. Fudot v. Cattleya Land Inc. 22 GR. 171008 FACTS:

Elements of a Double sale: 1. Plurality of vendees 2. Same object 3. Same vendor

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4.

Plurality of valid sale

The Civil Law provision on double sale is not applicable where there is only one valid sale, the previous sale having been found to be fraudulent. The act of registration does not validate petitioners otherwise void contract. Registration is a mere ministerial act by which a deed, contract, or instrument is sought to be inscribed in the records of the Office of the Register of Deeds and annotated at the back of the certificate of title covering the land subject of the deed, contract, or instrument. It does not add to the titles validity nor converts an invalid instrument into a valid one as between the parties.

Sometime in July 1992, Cattleya Land, Inc. (hereinafter referred to as respondent) asked someone to check, on its behalf, the titles of nine (9) lots, the subject land included, which it intended to buy from the spouses Troadio and Asuncion Tecson. Finding no defect on the titles, respondent purchased the nine lots through a Deed of Conditional Sale on 6 November 1992. Subsequently, on 30 August 1993, respondent and the Tecsons executed a Deed of Absolute Sale over the same properties. The Deed of Conditional Sale and the Deed of Absolute Sale were registered with the Register of Deeds on 06 November 1992 and 04 October 1993, respectively. The Register of Deeds, Atty. Narciso dela Serna, refused to actually annotate the deed of sale on the titles because of the existing notice of attachment in connection with Civil Case No. 3399 pending before the Regional Trial Court of Bohol. The attachment was eventually cancelled by virtue of a compromise agreement between the Tecsons and their attaching creditor which was brokered by respondent. Titles to six (6) of the nine (9) lots were issued, but the Register of Deeds refused to issue titles to the remaining three (3) lots , because the titles covering the same were still unaccounted for. On 23 January 1995, petitioner presented for registration before the Register of Deeds the owners copy of the title of the subject property, together with the deed of sale purportedly executed by the Tecsons in favor of petitioner on 19 December 1986. On the following day, respondent sent a letter of protest/opposition to petitioners application. Much to its surprise, respondent learned that the Register of Deeds had already registered the deed of sale in favor of petitioner and issued a new title in her name. On 5 May 1995, respondent filed its Complaint for Quieting Of Title &/Or Recovery Of Ownership, Cancellation Of Title With Damages before the Regional Trial Court of Tagbilaran City. On 26 June 1995, Asuncion filed a complaint-in-intervention, claiming that she never signed any deed of sale covering any part of their conjugal property in favor of petitioner. She averred that her signature in petitioners deed of sale was forged thus, said deed should be declared null and void.

Petitioner, for her part, alleged in her answer that the spouses Tecson had sold to her the subject property for P20,000.00 and delivered to her the owners copy of the title on 26 December 1986. She claims that she subsequently presented the said title to the Register of Deeds but the latter refused to register the same because the property was still under attachment. Petitioner avers that she was the first buyer in good faith and even had in her possession the owners copy of the title so much so that she was able to register the deed of sale in her favor and caused the issuance of a new title in her name. Respondent maintains that there is no room to speak of petitioner as a buyer in good faith since she was never a buyer in the first place, as her claim is based on a null and void deed of sale, so the court a quo found. ISSUES: 1.) Whether or not there was a double sale? 2.) Whether or not the petitioner has a better title over the subject property? HELD 1.) There is no double sale to speak of. Art. 1544 of the Civil Code, which provides the rule on double sale, applies only to a situation where the same property is validly sold to different vendees. In this case, there is only one sale to advert to, that between the spouses Tecson and respondent. The sale between petitioner and Asuncion is null and void due to the forged signature of Asuncion. The Civil Law provision on double sale is not applicable where there is only one valid sale, the previous sale

having been found to be fraudulent. 2.) Petitioner cannot claim that she has a better right over the property. The act of registration does not validate petitioners otherwise void contract. Registration is a mere ministerial act by which a deed, contract, or instrument is soug ht to be inscribed in the records of the Office of the Register of Deeds and annotated at the back of the certificate of title covering the land subject of the deed, contract, or instrument. It does not add to the titles validity nor converts an invalid instrument into a valid one as between the parties. The respondent was a buyer in good faith, having purchased the nine (9) lots, including the subject lot, without any notice of a previous sale, but only a notice of attachment relative to a pending civil case. In fact, in its desire to finally have the title to the properties transferred in its name, it persuaded the parties in the said case to settle the same so that the notice of attachment could be cancelled. Art. 1561. The vendor shall be responsible for warranty against the hidden defects which the thing sold may have, should they render it unfit for the use for which it is intended, or should they diminish its fitness for such use to such an extent that, had the vendee been aware thereof, he would not have acquired it or would have given a lower price for it; but said vendor shall not be answerable for patent defects or those which may be visible, or for those which are not visible if the vendee is an expert who, by reason of his trade or profession, should have known them. (1484a) Art. 1562. In a sale of goods, there is an implied warranty or condition as to the quality or fitness of the goods, as follows: (1) Where the buyer, expressly or by implication, makes known to the seller the particular purpose for which the goods are acquired, and it appears that the buyer relies on the seller's skill or judgment (whether he be the grower or manufacturer or not), there is an implied warranty that the goods shall be reasonably fit for such purpose; (2) Where the goods are brought by description from a seller who deals in goods of that description (whether he be the grower or manufacturer or not), there is an implied warranty that the goods shall be of merchantable quality. Naawan Community Rural Bank v. CA 23 395 SCRA 43 FACTS: Spouses Lumo are interested to buy a property from Guillermo Comayas which led them to check with the Office of the Register of Deeds of Cagayan de Oro City where the property is located and the Bureau of Lands on the legal status of the vendors title. They found out that the property was mortgaged for P8,000 to a certain Mrs. Galupo and that the owners copy of the Certificate of Title to said property was in her possession. Private respondents directed Guillermo Comayas to redeem the property from Galupo at their expense, giving the amount of P10,000 to Comayas for that purpose. On May 30, 1988, a release of the adverse claim of Galupo was annotated on TCT No. T-41499 which covered the subject property. After obtaining their TCT, private respondents requested the issuance of a new tax declaration certificate in their names. However, they were surprised to learn from the City Assessors Office that the property was also declared for tax purposes in the name of petitioner Naawan Community Rural Bank Inc. Records in the City Assessors Office revealed that, for the lot covered by TCT No. T-50134, Alfredo Lumos T/D # 83324 bore the note: This lot is also declared in the name of Naawan Community Rural Bank Inc. under T/D # 71210. Apparently, on February 7, 1983, Guillermo Comayas obtained a P15,000 loan from petitioner Bank using the subject property as
23

Belen

For the rules on double sale to apply, it is indispensible that there should be two or more valid contracts of sale. Nullity of either of the contracts of sale, Art 1544 should not apply. For in the eyes of the law there is only one valid sale that is subsisting. Hence, the rules on double sale should not apply. It is indispensible that there should be two valid sale. Otherwise Art 1544 cannot be applied.

security. For failure of Comayas to pay, the real estate mortgage was foreclosed and the subject property sold at a public auction to the mortgagee Naawan Community Rural Bank as the highest bidder. ISSUE: WoN spouses Lumo may be considered as purchasers in good faith making them entitled for the property in despute. HELD: Yes, the spouses Lumo exercised the required diligence in ascertaining the legal condition of the title to the subject property so as to be considered as innocent purchasers for value and in good faith. It is a well-known rule in this jurisdiction that persons dealing with registered land have the legal right to rely on the face of the Torrens Certificate of Title and to dispense with the need to inquire further, except when the party concerned has actual knowledge of facts and circumstances that would impel a reasonably cautious man to make such inquiry. Before private respondents bought the subject property from Guillermo Comayas, inquiries were made with the Registry of Deeds and the Bureau of Lands regarding the status of the vendors title. No liens or encumbrances were found to have been annotated on the certificate of title. Neither were private respondents aware of any adverse claim or lien on the property other than the adverse claim of a certain Geneva Galupo to whom Guillermo Comayas had mortgaged the subject property. But, as already mentioned, the claim of Galupo was eventually settled and the adverse claim previously annotated on the title cancelled. Thus, having made the necessary inquiries, private respondents did not have to go beyond the certificate of title. Otherwise, the efficacy and conclusiveness of the Torrens Certificate of Title would be rendered futile and nugatory. Considering therefore that private respondents exercised the diligence required by law in ascertaining the legal status of the Torrens title of Guillermo Comayas over the subject property and found no flaws therein, they should be considered as innocent purchasers for value and in good faith. Espiritu v. Valerio 24 GR. L-18018 Facts: Valerio filed an action to quiet title in the above mentioned Court against appellants, alleging in his complaint that he was the owner of a parcel of unregistered land, having acquired the same from the former owner, Pelagia Vegilia, as evidenced by a deed of sale executed by the latter in his favor. Appellant, however, alleged that they were the owners of the land in question, having acquired it by inheritance from the late Santiago Apostol, husband and father of appellants Espiritu and Apostol. Issue: Held: The answer depends entirely upon the validity of the Deed of Sale alleged by both parties. This case concerns the sales of one parcel of land by the same vendor but in favor of two different vend ees. The trial court on its examination of the two deed of sale correctly concluded that the deed of sale of the Defendant Espiritu were falsified. "An examination of Exh. "1" reveals the glaring fact that it cannot be determined whose thumbmark is the one appearing on said Exh. "1" for the simple reason that it To whom should the ownership of the land be granted.

24

Du

Rules on double sale will only apply where the land is registered under the Torrens System. If the land is of Spanish title the rules on double sale will not apply. Act 3344 is the governing law in case of lands recorded under Spanish Title. Under Act 3344, nemo dat quod non habet, is controlling. The seller cannot dispose what he does not own.

immediately precedes the name Anselmo Vegilia but it is under the name Pelagia Vegilia. Furthermore, it is also very clear that the one who wrote the name Anselmo Vegilia is the very one who wrote the name Pelagia Vegilia. Being one with a valid deed of sale, Francisco Valerio, is the owner of the subject land. Naval v. CA 25 483 SCRA 102 Facts: On December 2, 1969, Ildefonso A. Naval sold a parcel of land located in Sto. Tomas, Magarao, Camarines Sur to Gregorio B. Galarosa. The sale was recorded in the Registry of Property of the Registry of Deeds of Camarines Sur pursuant to Act No. 3344, the law governing registrations of all instruments on unregistered lands. Subsequently, Gregorio sold portions of the land to respondents Conrado Rodrigo Balilla, Jaime Nacio and spouses Ireneo and Ester Moya, and Juanito Camalla. All buyers occupied the portion they bought, built improvements thereon, and paid the taxes due thereto. Juanita Naval (Great granddaughter of Ildefonso Naval) filed a complaint for recovery of possession against Bartolome Aguirre, Conrado Balila, Ireneo Moya, Jaime Nacion and Domingo Nacion, She claimed that she bought the subject land from Ildefonso in 1972. The case was dismissed without prejudice16 for failure to prosecute the action for an unreasonable length of time. Almost 20 years later, petitioner re-filed the complaint for recovery of possession with damages. Issue: Whether or not Juanita Naval is the legal owner of the subject land. Held: No. The respondents have a better right to possess the subject land in view of the bona fide registration of the sale with the Register of Deeds of Camarines Sur by Ildefonso and Gregorio. Article 1544, concerning the rules on double sale, is not applicable in this case since the subject land was unregistered at the time of the first sale. The law applicable is Act No. 3344, which provides for the registration of all instruments on land neither covered by the Spanish Mortgage Law nor the Torrens System. Under this law, registration by the first buyer is constructive notice to the second buyer that can defeat his right as such buyer in good faith. The registration of an instrument involving unregistered land in the Registry of Deeds creates constructive notice and binds third person who may subsequently deal with the same property. Even if petitioner argues that she purchased and registered the subject land in good faith and without knowledge of any adverse claim thereto, respondents still have superior right over the disputed property. The issue of good faith or bad faith of the buyer is relevant only where the subject of the sale is registered land and the purchaser is buying the same from the registered owner whose title to the land is clean x x x in such case the purchaser who relies on the clean title of the registered owner is protected if he is a purchaser in good faith for value. Assuming Article 1544 is applicable, the facts would nonetheless show that respondents and their predecessors-in-interest registered first the source of their ownership and possession. Applying the doctrine of "priority in time, priority in rights" or "prius tempore, potior jure," respondents are entitled to the ownership and possession of the subject land .

25

Zamora

Sandejas v. Lina 26 GR. 141634 Facts: On February 17, 1981, Eliodoro Sandejas, Sr. filed a petition, in the lower court praying that letters of administration be issued in his favor for the settlement of the estate of his wife, Remedios Sandejas, who died on April 17, 1955. On July 1, 1981, Letters of Administration were issued by the lower court appointing Eliodoro Sandejas, Sr. as administrator of the estate of the late Remedios Sandejas. Likewise on the same date, Eliodoro Sandejas, Sr. took his oath as administrator. On November 19, 1981, the 4th floor of Manila City Hall was burned and among the records burned were the records of Branch XI of the Court of First Instance of Manila. As a result, he filed a Motion for Reconstitution of the records of the case on February 9, 1983. On February 16, 1983, the lower court in its Order granted the said motion. On April 19, 1983, an Omnibus Pleading for motion to intervene and petition-in-intervention was filed by Movant Alex A. Lina alleging among others that on June 7, 1982, movant and administrator Eliodoro P. Sandejas, in his capacity as seller, bound and obligated himself, his heirs, administrators, and assigns, to sell forever and absolutely and in their entirety the following parcels of land which formed part of the estate of the late Remedios R. Sandejas. It showed that there was receipt of money with promise to sell and to buy with the sum of P100,000.00 Issues: a) Whether or not Eliodoro P. Sandejas Sr. is legally obligated to convey title to the property referred to in the subject document which was found to be in the nature of a contract to sell where court approval was not complied with? b) Whether or not he was guilty of bad faith despite the conclusion of the CA that he [bore] the burden of proving that a motion for authority to sell had been filed in court? c) Whether or not undivided shares of Eliodoro in the subject property is (3/5) and the administrator of the latter should execute deeds of conveyance within thirty days from receipt of the balance of the purchase price from the respondent? d)Whether or not the respondent's petition-in-intervention was converted to a money claim and whether the [trial court] acting as a probate court could approve the sale and compel the petitioners to execute [a] deed of conveyance even for the share alone of Eliodoro P. Sandejas Sr.?
26

P. Barreda

Held: The Petition is partially meritorious. Obligation With a Suspensive Condition Petitioners argue that the CA erred in ordering the conveyance of the disputed 3/5 of the parcels of land, despite the nonfulfillment of the suspensive condition -- court approval of the sale -- as contained in the "Receipt of Earnest Money with Promise to Sell and to Buy" (also referred to as the "Receipt"). Instead, they assert that because this condition had not been satisfied, their obligation to deliver the disputed parcels of land was converted into a money claim. The agreement between Eliodoro Sr. and respondent is subject to a suspensive condition -- the procurement of a court approval, not full payment. There was no reservation of ownership in the agreement. In accordance with paragraph 1 of the Receipt, petitioners were supposed to deed the disputed lots over to respondent. This they could do upon the court's approval, even before full payment. Hence, their contract was a conditional sale, rather than a contract to sell as determined by the CA. When a contract is subject to a suspensive condition, its birth or effectivity can take place only if and when the condition happens or is fulfilled. Thus, the intestate court's grant of the Motion for Approval of the sale filed by respondent resulted in petitioners' obligation to execute the Deed of Sale of the disputed lots in his favor. The condition having been satisfied, the contract was perfected. Henceforth, the parties were bound to fulfill what they had expressly agreed upon. Court approval is required in any disposition of the decedent's estate per Rule 89 of the Rules of Court. Reference to judicial approval, however, cannot adversely affect the substantive rights of heirs to dispose of their own pro indiviso shares in the coheirship or co-ownership. In other words, they can sell their rights, interests or participation in the property under administration. A stipulation requiring court approval does not affect the validity and the effectivity of the sale as regards the selling heirs. It merely implies that the property may be taken out of custodia legis, but only with the court's permission. It would seem that the suspensive condition in the present conditional sale was imposed only for this reason. First Collateral Issue: Jurisdiction of Settlement Court Petitioners also fault the CA Decision by arguing, inter alia, (a) jurisdiction over ordinary civil action seeking not merely to enforce a sale but to compel performance of a contract falls upon a civil court, not upon an intestate court; and (b) that Section 8 of Rule 89 allows the executor or administrator, and no one else, to file an application for approval of a sale of the property under administration. In the present case, the Motion for Approval was meant to settle the decedent's obligation to respondent; hence, that obligation clearly falls under the jurisdiction of the settlement court. To require respondent to file a separate action -- on whether petitioners should convey the title to Eliodoro Sr.'s share of the disputed realty -- will unnecessarily prolong the settlement of the intestate

estates of the deceased spouses. Second Collateral Issue: Intervenor's Standing Petitioners contend that under said Rule 89, only the executor or administrator is authorized to apply for the approval of a sale of realty under administration. Hence, the settlement court allegedly erred in entertaining and granting respondent's Motion for Approval. Third Collateral Issue: Bad Faith Petitioners assert that Eliodoro Sr. was not in bad faith, because (a) he informed respondent of the need to secure court approval prior to the sale of the lots, and (2) he did not promise that he could obtain the approval. However, Eliodoro Sr. did not misrepresent these lots to respondent as his own properties to which he alone had a title in fee simple. The fact that he failed to obtain the approval of the conditional sale did not automatically imply bad faith on his part. The CA held him in bad faith only for the purpose of binding him to the conditional sale. This was unnecessary because his being bound to it is, as already shown, beyond cavil. Fourth Collateral Issue: Computation of Eliodoro's Share Petitioners aver that the CA's computation of Eliodoro Sr.'s share in the disputed parcels of land was erroneous because, as the conjugal partner of Remedios, he owned one half of these lots plus a further one tenth of the remaining half, in his capacity as a one of her legal heirs. Hence, Eliodoro's share should be 11/20 of the entire property. Respondent poses no objection to this computation. On the other hand, the CA held that, at the very least, the conditional sale should cover the one half (1/2) pro indiviso conjugal share of Eliodoro plus his one tenth (1/10) hereditary share as one of the ten legal heirs of the decedent, or a total of three fifths (3/5) of the lots in administration. Petitioners' correct. The CA computed Eliodoro's share as an heir based on one tenth of the entire disputed property. It should be based only on the remaining half, after deducting the conjugal share. Ruling The proper determination of the seller-heir's shares requires further explanation. Succession laws and jurisprudence require that when a marriage is dissolved by the death of the husband or the wife, the decedent's entire estate - under the concept of conjugal properties of gains -- must be divided equally, with one half going to the surviving spouse and the other half to the heirs of the deceased.25 After the settlement of the debts and obligations, the remaining half of the estate is then distributed to the legal heirs, legatees and devices. We assume, however, that this preliminary determination of the decedent's estate has already been

taken into account by the parties, since the only issue raised in this case is whether Eliodoro's share is 11/20 or 3/5 of the disputed lots. WHEREFORE, The Petition is hereby PARTIALLY GRANTED. The appealed Decision and Resolution are AFFIRMED with the MODIFICATION that respondent is entitled to only a pro-indiviso share equivalent to 11/20 of the disputed lots.
Where the obligation of either party to a contract of sale is subject to any condition which is not performed, such party may refuse to proceed with the contract or he may waive performance of the condition. If the other party has promised that the condition should happen or be performed, such first mentioned party may also treat the nonperformance of the condition as a breach of warranty. Distinguish between conditions imposed prior to the perfection of sale and during the effectively of the contract of sale.

Romero v. CA 27 November 23, 1995 Facts: A contract denominated as Conditional Sale was executed between Romero and Ongsiang where the amount of P 50 000 was received from Romero for the purpose of ejecting the squatters therein. However Seller was unable to evict the squatters in the said lot so seller tried to return the amount for her failure to do one of the conditions stipulated in the contract. Thereafter, seller filed a case with the trial court seeking to rescind the conditional sale. Issue: Whether or not seller has the right to rescind the contract of sale. Held: No. As provided for under Art. 1545, it is the aggrieved party who has the right to rescind the contract of sale. In this case, it is only the buyer who can invoke such right, as he Is the aggrieved party and not the seller. From the moment the contract is perfected, the parties are bound not only to the fulfillment of what has been expressly stipulated but also to all the consequences which, according to their nature, may be in keeping with good faith, usage and law. Under the agreement, private respondent is obligated to evict the squatters on the property. The ejectment of the squatters is a condition the operative act of which sets into motion the period of compliance by petitioner of his own obligation, i.e., to pay the balance of the purchase price. Private respondent's failure "to remove the squatters from the property" within the stipulated period gives petitioner the right to either refuse to proceed with the agreement or waive that condition in consonance with Article 1545 of the Civil Code. This option clearly belongs to petitioner and not to private respondent. Escanlar v. CA 28 281 SCRA 176 Facts: The heirs of Cari-an executed a Deed of Absolute Sale in favor of Escanlar and Holgado.

Petitioner paid P 50 000.00 as a form of downpayment, but was unable to pay the remaining balance. Being former lessees, petitioners continued in possession of said lots and continued to pay the rent thereon. Cari-an later sold the lot to Chuas, CAri-an then filed an action for cancellation of sale against petitioner for failure to pay the balance. Petioners however sold the rights and interest over the said lot to Jayme and turned over the possession over the RTC.
27 28

Aslor Aslor

Issue: Held:

whether the sale is a contract of sale or contract to sell Contract of Sale.

If purchaser was allowed to inspect the property prior to the sale, the purchaser cannot afterwards claim of misrepresentation against the vendor.

In a contract of sale, the non-payment of the price is the resolutory condition which extinguishes the transaction that, for time, existed and discharges the obligation created thereunder. The Deed of sale comply as it does with the requisites as of a valid one. As a general rule, the pertinent contractual stipulation (requiring court approval) should be considered as the law between the parties. However, the presence of two factors militate against this conclusion. First, the evident intention of the parties appears to be contrary to the mandatory character of said stipulation. Whoever crafted the document of conveyance, must have been of the belief that the controversial stipulation was a legal requirement for the validity of the sale. But the contemporaneous and subsequent acts of the parties reveal that the original objective of the parties was to give effect to the deed of sale even without court approval. Receipt and acceptance of the numerous installments on the balance of the purchase price by the Cari-ans and leaving petitioners in possession of Lot Nos. 1616 and 1617 reveal their intention to effect the mutual transmission of rights and obligations. It was only after private respondents Cari-an sold their shares in the subject lots again to the spouses Chua, in September 1982, that these same heirs filed the case at bar for the cancellation of the September 1978 conveyance. Worth considering too is the fact that although the period to pay the balance of the purchase price expired in May 1979, the heirs continued to accept payments until late 1979 and did not seek judicial relief until late 1982 or three years later. Azarraga v. Gay 29 52 Phil 599 FACTS The appellant alleges that the plaintiff induced the defendant by deceit, to pay him the stipulated price for the two parcels he sold, stating falsely in the deed of sale that the second of the said parcels had an area of 98 hectares when he knew that in reality it only had about 60 hectares more or less, or at least, if such deceit was not practiced that there was mistake on the part of Maria Gay in believing that said second parcel contained 98 hectares. ISSUE HELD When the purchaser proceeds to make investigations by himself, and the vendor does nothing to prevent such investigation from being as complete as the former might wish, the purchaser cannot later allege that the vendor made false representation to him. Schmid and Oberly, Inc v. RJL Martinez 30 October 18, 1988 Whether or not there is false representation on the implied warranty.

29 30

Climaco Climaco

FACTS RJL purchased from NAGATA 12 Nagata-brand generators, Schmid as the broker. The test revealed that the generators were overrated. RJL demanded from Schmid that it be refunded the cost of 12 generators paid and pay damages. ISSUE Whether or not Schmid is liable under its warranty against hidden defects. HELD Schmid was merely acting as an ondentor in the purchase and sale of 12 generators . Not being the vendor, Schmid cannot be held liable for the implied warranty for hidden defects under Art. 1561 of the Civil Code.
For actions based on breach of implied warranty, the prescriptive period is, under Art. 1571 (warranty against hidden defects of or encumbrances upon the thing sold) and Art. 1548 (warranty against eviction), six months from the date of delivery of the thing sold.

Ang v. CA 31 GR. 177874 Facts: Under a "car-swapping" scheme, respondent Bruno Soledad (Soledad) sold his Mitsubishi GSR sedan 1982 model to petitioner Jaime Ang (Ang) by Deed of Absolute Sale dated July 28, 1992. For his part, Ang conveyed to Soledad his Mitsubishi Lancer model 1988, also by Deed of Absolute Sale of even date. As Angs car was of a later model, Soledad paid him an additional P55,000.00. Ang, a buyer and seller of used vehicles, later offered the Mitsubishi GSR for sale through Far Eastern Motors, a second-hand auto display center. The vehicle was eventually sold to a certain Paul Bugash (Bugash) for P225,000.00, by Deed of Absolute Sale dated August 14, 1992. Before the deed could be registered in Bugashs name, however, the vehicle was seized by virtue of a writ of replevin dated January 26, 1993 issued by the Cebu City Regional Trial Court (RTC), Branch 21 in Civil Case No. CEB-13503, "BA Finance Corporation vs. Ronaldo and Patricia Panes," on account of the alleged failure of Ronaldo Panes, the owner of the vehicle prior to Soledad, to pay the mortgage debt constituted thereon. To secure the release of the vehicle, Ang paid BA Finance the amount of P62,038.47on March 23, 1993. Soledad refused to reimburse the said amount, despite repeated demands, drawing Ang to charge him for Estafa with abuse of confidence before the Office of the City Prosecutor, Cebu City. By Resolution of July 15, 1993, the City Prosecutors Office dismissed the complain t for 8 insufficiency of evidence, drawing Ang to file on November 9, 1993 the first of three successive complaints for damages against Soledad before the RTC of Cebu City where it was docketed as Civil Case No. Ceb-14883.

31

Monforte

Issue: 1) Whether the complaint had prescribed. 2) What kind of warranty is provided in the Deed of Absolute Sale subject of the present case. Held: In declaring that he owned and had clean title to the vehicle at the time the Deed of Absolute Sale was forged, Soledad gave an implied warranty of title. In pledging that he "will defend the same from all claims or any claim whatsoever [and] will save the vendee from any suit by the government of the Republic of the Philippines," Soledad gave a warranty against eviction. Given Angs business of buying and selling used vehicles, he could not have merely relied on Soledads affirmation that the car was free from liens and encumbrances. He was expected to have thoroughly verified the cars registration and related documents. Since what Soledad, as seller, gave was an implied warranty, the prescriptive period to file a breach thereof is six months after the delivery of the vehicle, following Art. 1571. But even if the date of filing of the action is reckoned from the date petitioner instituted his first complaint for damages on November 9, 1993, and not on July 15, 1996 when he filed the complaint subject of the present petition, the action just the same had prescribed, it having been filed 16 months after July 28, 1992, the date of delivery of the vehicle. Sps. Uy v. Ariza 32 GR L-18497 Facts: On October 8, 1996, spouses Michael and Bonita Uy, petitioners, purchased 200 square meters of the parcel of land designated as Lot No. 3229-C-2-F, covered by Transfer Certificate of Title (TCT) No. T-20007, from respondents. The contract stipulated that petitioners had the right of choice to designate which portion of Lot No. 3229-C-2-F would be the subject of the sale. Petitioners exercised their right to choose within two to three months from the sale, informing respondents that they have selected and in fact occupied around 200 square meters of a portion of land. On August 4, 1997, petitioners purchased another 200 square meters of the same Lot No. 3229-C-2-F, with the same option to

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Monforte

choose which portion. They selected and occupied an adjoining portion to the lot in their first sale. It appears that the parcels of land petitioners had chosen and occupied were already titled in the names of the Delgados, namely, Carlos, Allan and Antonio, Jr. Although originally part of Lot No. 3229-C-2-F, the two parcels of land were part of some 3,500 square meters that were purportedly sold by the respondents to the Delgados on July 31, 1985. Petitioners were sued for unlawful detainer by the Delgados. In September 1998, petitioners entered into a compromise agreement with the Delgados and surrendered possession of the subject parcels of land. Petitioners compromised the case without giving notice to respondents. Thereafter, petitioners demanded from respondents that they be allowed to choose again from Lot No. 3229-C-2-F. When respondents refused, petitioners filed, on March 12, 1999, a case for specific performance with delivery of possession of real property and damages. Issue: Whether the complaint filed in the RTC by petitioners fails to state a cause of action for specific performance with delivery of possession of real property and damages against respondents. Held: What is before us is a clear case of eviction. Thus, the action for specific performance filed by [petitioners] against [respondents] must necessarily fail. If at all, [petitioners] may file an action for the enforcement of warranty in case of eviction which every vendor of a parcel of land is enjoined by law to guarantee as provided under Article 1548 of the New Civil Code. But even if [petitioners] would file an action for the enforcement of warranty in case of eviction against [respondents], we are afraid that the same will not prosper. The records of the case reveal that the unlawful detainer case filed by third persons against [petitioners], which led to the ouster of the latter from the subject lots, was decided by compromise agreement without impleading [respondents] as third-party defendants. It should be stressed that in order for the case to prosper, it is a precondition that the seller must have been summoned in the suit for the eviction of the buyer. In order that a vendors liability for eviction may be enforced, the following requisites must concur a) there must be a final judgment; b) the purchaser has been deprived of the whole or part of the thing sold; c) said deprivation was by virtue of a right prior to the sale made by the vendor; and d) the vendor has been summoned and made co-defendant in the suit for eviction at the instance of the vendee. In the case at bar, the fourth requisite that of being summoned in the suit for eviction at the instance of the vendee is not present.

Art. 1548. Eviction shall take place whenever by a final judgment based on a right prior to the sale or an act imputable to the vendor, the vendee is deprived of the whole or of a part of the thing purchased. The vendor shall answer for the eviction even though nothing has been said in the contract on the subject. The contracting parties, however, may increase, diminish, or suppress this legal obligation of the vendor.

Canizares v. Torrejon 33 21 Phil 127 FACTS: This is an action upon "the warranty of the title to a parcel of land. The plaintiff, Don Leopoldo Caizares Tiana, purchased from the defendant, Don Jose Maria Torrejon, for the sum of P2,500, a lot with buildings and improvements, situated in the municipality of Jolo, same district, Moro Province, Philippine Islands. At the sale of the said lot and improvements, the vendor, Jose Maria Torrejon, warranted the title thereto as appears from the wordings of the contract of sales and purchase, dated June 17, 1905, which states: "I further covenant and agree to the responsibility to the aforesaid Leopoldo Canizares Tiana, his heirs and his successor in interest, for the property, and bind myself to defend the title thereto now and forever against any just claims, by whomsoever present." It appears that the lot with its buildings and improvements, the subject of this litigation, passed into the possession of military authorities in the month of May, 1908. On December 14, 1909, the plaintiff Tiana demanded that the defendant Torrejon return or repay to him the sum of P2,500. It further appears that Torrejon knew of the Government's objection to the application in case No. 1440 and that the land, buildings and improvements described in case No. 1440, were wholly included within the boundaries of the military reservation of Jolo, Sulu, Moro Province, This is an action upon the warranty of the title to the property in case of eviction, under article 1475 of the Civil Code. In such case there are three indispensable requisites: (1) Final judgment; (2) that the vendee be deprived of the whole or a part o the thing sold; and, (3) a right prior to the sale (Manresa on the Civil Code, volume 10, pages 161 to 170); and, finally, another indispensable requisite is that prescribed in article 1481 of the Civil Code: that the vendor be given notice of the suit at the instance of the vendee. On the merit of the present case, and the preponderance of the plaintiff's evidence, and from the facts established, all the foregoing requisites appear herein. In his brief the defendant alleges that the decree issued in case No. 1440 was not final and that the plaintiff could and should have appealed from it. Such a case is expressly decided by the illustrious and learned author, Manresa, in his commentaries on the Civil Code, volume 10, page 163, in the following manner: ISSUE: Can the vendor escape his obligation of warranty by alleging that although there may be final judgment against the vendee, such judgment became final with the latter's consent?

HELD: No. The vendee's right should not suffer the least impairment because he did not appeal. On the allegation of the defendant, Torrejon, that he was not notified of the suit, that is, of the objection presented by the government in case No. 1440, he can not set up such a defense, for he was himself the application in that case, without the intervention of Tiana, and such objection on the part of the government to his claims already. The court holds that the plaintiff, Don Leopoldo Caizares Tiana, is entitled to recover from the defendant, Don Jose Maria Torrejon, the sum of P2,500, the price of the real estate involved in the present suit, and that he is also entitled to receive
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The vendor shall not be obliged to make good the proper warranty, unless he is summoned in the suit for eviction at the instance of the vendee.

the sum of P36 a month from May, 1098, up to the day on which this judgment is executed. With reference to the counterclaim of the defendant, the court is of the opinion that he has no right to recover anything from the plaintiff. Jovellano v. Lualhati 34 47 Phil 371 FACTS: On November 6, 1911, Dionisia Solmirano, Lucio Solmirano, and Macario Solmirano sold to Enrique Jovellano a parcel of land situated in the municipality of Nagcarlan, Laguna, for P150. The deed of sale contained the usual covenant against eviction, namely: "That we, Dionisia, Lucio and Macario Solmirano, the vendors herein, agree, to answer in case of eviction and to warrant the property hereby sold." In pursuance of this agreement, Jovellano entered upon the land. On March 4, 1913, one Maxima Dorado instituted action in the justice of the peace court of Nagcarlan against Jovellano to recover the possession of the land. Maxima Dorado won her case against Jovellano. Instead of appealing from the decision, Jovellano presented a new complaint in the Court of First Instance of Laguna against the same Maxima Dorado to determine the ownership of the property. Jovellano was defeated again, and on appeal, this judgment was affirmed by the Supreme Court. The present action was initiated by Enrique Jovellano and his wife Isabel Joyosa against Lucio Solmirano, Macario Solmirano, and Antonia Lualhati, the daughter of Dionisio Solmirano, to recover from the defendants the price paid for the land, together with all the expenses incurred in improving it and in maintaining the suits. One of the grounds of the demurrer and one of the allegations of the defense was that defendants had not been notified as provided by law. ISSUE: Whether or not the vendor ( herein referred to as the defendants) can be held liable for warranty against eviction in the absence of notice of the suit for eviction? HELD: No. The vendor cannot be held liable for warranty against eviction in the absence of notice of the suit for eviction. The warranty is lost in the absence of notification to the vendor. The buyer who fails to cite his vendor in warranty loses all recourse against him. There is only one condition to be complied with by the vendee, and that is to give notice of the complaint. Once this is proven, his right to the warranty is perfect, and the vendor cannot set up anything against it. This is the preparation for the exercise of the action for eviction; the warranty, according to article 1480, cannot be enforced until a final judgment is rendered, but the action for eviction is prepared, before that judgment, by causing a notice of the complaint to be given to the vendor. Therefore, there is no cause of action against the vendor of real property to make him responsible for warranty in case of eviction because the vendee failed to give notice of the suit for eviction. The vendor should not be held liable in the case at bar. Nutrimix Feeds Corp. v. CA 35 GR. 152219

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FACTS: On April 5, 1993, the Spouses Efren and Maura Evangelista, the respondents herein, started to directly procure various kinds of animal feeds from petitioner Nutrimix Feeds Corporation. The petitioner gave the respondents a credit period of thirty to forty-five days to postdate checks to be issued in payment for the delivery of the feeds. Consequently, the respondents incurred an aggregate unsettled account with the petitioner in the amount of P766,151.00. When the checks covering the aggregate unsettled accounts were deposited at the petitioners depository bank, the same were, consequently, dishonored because respondent Maura Evangelista had already closed her account. The petitioner made several demands for the respondents to settle their unpaid obligation, but the latter failed and refused to pay their remaining balance with the petitioner. The petitioner filed a complaint for the collection of sum of money. The respondents admitted their unpaid obligation but impugned their liability to the petitioner. They asserted that the nine checks issued by respondent Maura Evangelista were made to guarantee the payment of the purchases, which was previously determined to be procured from the expected proceeds in the sale of their broilers and hogs. They contended that inasmuch as the sudden and massive death of their animals was caused by the contaminated products of the petitioner, the nonpayment of their obligation was based on a just and legal ground. The respondents also lodged a complaint for damages against the petitioner, for the untimely and unforeseen death of their animals supposedly affected by the adulterated animal feeds the petitioner sold to them. The trial court ruled in favor of the petitioner and ordered the respondents to pay the outstanding balance of the obligation. But the Court of Appeals modified the decision of the trial court and ruled that the respondents were not obligated to pay their outstanding obligation to the petitioner in view of its breach of warranty against hidden defects. ISSUE: Whether or not there is sufficient evidence to hold the petitioner guilty of breach of warranty due to hidden defects?

HELD: No. The petitioner cannot be held guilty of breach of warranty due to hidden defects. The court holds that the respondents failed to prove that the petitioner is guilty of breach of warranty due to hidden defects. The bevy of expert evidence adduced by the respondents is too shaky and utterly insufficient to prove that the Nutrimix feeds caused the death of their animals. For these reasons, the expert testimonies lack probative weight. The respondents case of breach of implied warranty was fundamentally based upon the circumstantial evidence that the chickens and hogs sickened, stunted, and died after eating Nutrimix feeds; but this was not enough to raise a reasonable supposition that the unwholesome feeds were the proximate cause of the death with that degree of certainty and probability required. The rule is well-settled that if there be no evidence, or if evidence be so slight as not reasonably to warrant inference of the fact in issue or furnish more than materials for a mere conjecture, the court will not hesitate to strike down the evidence and rule in favor of the other party. This rule is both fair and sound. Any other interpretation of the law would unloose the courts to meander aimlessly in the arena of speculation.

Filinvest Credit Corp v. CA 36 September 29, 1989 FACTS: The private respondents, the spouses Jose Sy Bang and Iluminada Tan, were engaged in the sale of gravel produced from crushed rocks and used for construction purposes. They found a rock crusher; the private respondents signified their intent to purchase the same. They were however confronted with a problem-the rock crusher carried a cash price tag of P 550,000.00. Bent on acquiring the machinery, the private respondents applied for financial assistance from the petitioner, Filinvest Credit Corporation. The petitioner agreed to extend to the private respondents financial aid on the following conditions: that the machinery be purchased in the petitioner's name; that it be leased (with option to purchase upon the termination of the lease period) to the private respondents; and that the private respondents execute a real estate mortgage in favor of the petitioner as security for the amount advanced by the latter. Accordingly, on May 18,1981, a contract of lease of machinery (with option to purchase) was entered into by the parties whereby the private respondents agreed to lease from the petitioner the rock crusher for two years start. The contract likewise stipulated that at the end of the two-year period, the machine would be owned by the private respondents. In addition, to guarantee their compliance with the lease contract, the private respondents executed a real estate mortgage over two parcels of land in favor of the petitioner. Three months from the date of delivery of the machinery, the private respondents, sent a letter-complaint to the petitioner, alleging that contrary to the 20 to 40 tons per hour capacity of the machine as stated in the lease contract, the machine could only process 5 tons of rocks and stones per hour. They then demanded that the petitioner make good the stipulation in the lease contract. They followed that up with similar written complaints to the petitioner, but the latter did not, however, act on them. Subsequently, the private respondents stopped payment on the remaining checks they had issued to the petitioner. As a consequence of the non-payment by the private respondents of the rentals on the rock crusher as they fell due despite the repeated written demands, the petitioner extrajudicially foreclosed the real estate mortgage. On April 18, 1983, the private respondents received a Sheriff s Notice of Auction Sale informing them that their mortgaged properties were going to be sold at a public auction to satisfy their indebtedness to the petitioner. To thwart the impending auction of their properties, the private respondents filed before the Regional Trial Court of Quezon, on May 4, 1983, a complaint against the petitioner, for the rescission of the contract of lease, annulment of the real estate mortgage, and for injunction and damages, with prayer for the issuance of a writ of preliminary injunction.

The petitioner argues that it is a financing institution engaged in quasi-banking activities, primarily the lending of money to entrepreneurs such as the private respondents and the general public, but certainly not the leasing or selling of heavy machineries like the subject rock crusher. The petitioner denies being the seller of the rock crusher and only admits having financed its acquisition by the private respondents. Further, the petitioner absolves itself of any liability arising out of the lease contract it signed with the private respondents due to the waiver of warranty made by the latter. The petitioner likewise maintains that the
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private respondents being presumed to be knowledgeable about machineries should be held responsible for the detection of defects in the machine they had acquired, and on account of that, they are estopped from claiming any breach of warranty. ISSUES: 1.) Whether or not the petitioner is not the seller of the machinery? 2.) Whether or not the petitioner can be held liable of any liability arising out of the lease contract despite the waiver by the respondent of the defects on the machinery? HELD: 1.) The petitioner is the seller of the machinery. While it is accepted that the petitioner is a financing institution, it is not, however, immune from any recourse by the private respondents. Notwithstanding the testimony of private respondent Jose Sy Bang that he did not purchase the rock crusher from the petitioner, the fact that the rock crusher was purchased from Rizal Consolidated Corporation in the name and with the funds of the petitioner proves beyond doubt that the ownership thereof was effectively transferred to it. It is precisely this ownership which enabled the petitioner to enter into the "Contract of Lease of Machinery and Equipment" with the private respondents. 2.) No. The petitioner cannot be held liable due to the waiver made by the respondents on the defects of the machinery. It is the private respondents, by reason of their business, who are presumed to be more knowledgeable, if not experts, on the machinery subject of the contract, they should not therefore be heard now to complain of any alleged deficiency of the said machinery. It is their failure or neglect to exercise the caution and prudence of an expert, or, at least, of a prudent man, in the selection, testing, and inspection of the rock crusher that gave rise to their difficulty and to this conflict. A well- established principle in law is that between two parties, he, who by his negligence caused the loss, shall bear the same. Even if the private respondents could not be adjudged as negligent, they still are precluded from imputing any liability on the petitioner. One of the stipulations in the contract they entered into with the petitioner is an express waiver of warranties in favor of the latter. By so signing the agreement, the private respondents absolved the petitioner from any liability arising from any defect or deficiency of the machinery they bought. The stipulation on the machine's production capacity being "typewritten" and that of the waiver being "printed" does not militate against the latter's effectivity. Common sense dictates that a buyer inspects a product before purchasing it (under the principle of caveat emptor or "buyer beware") and does not return it for defects discovered later on, particularly if the return of the product is not covered by or stipulated in a contract or warranty. In the case at bar, to declare the waiver as non-effective, as the lower courts did, would impair the obligation of contracts. Certainly, the waiver in question could not be considered a mere surplus age in the contract between the parties. Moreover, nowhere is it shown in the records of the case that the private respondent has argued for its nullity or illegality. In any event, there is no ambiguity in the language of the waiver or the release of warranty. There is therefore no room for any interpretation as to its effect or applicability vis-a- vis the deficient output of the rock crusher. Suffice it to say that the private respondents have validly excused the petitioner from any warranty on the rock crusher. Hence, they should bear the loss for any defect found therein.

Chong Yong Tek v. Santos 37 13 Phil 52 FACTS: It appears from the record that on the 15th day of January, 1904, and the 25th day of September, 1905, the plaintiff sold to the defendant a certain quantity of tobacco, amounting in all to the sum of P894. The defendant does not deny the purchase of the tobacco in question nor the amount which was originally promised to be paid for the same. No part of the said amount of P894 having been paid, the plaintiff commenced an action on the 24th of January, 1907, for its recovery. The only defense presented by the defendant was that the tobacco delivered by the plaintiff was not of good quality. ISSUE: WoN the buyer may be held answerable for the goods that were delivered to her despite the alleged poor quality of the products. HELD: Yes, she may be held liable for the following reasons: The defendant does not allege that it was not of different kind or quality of tobacco than that purchased. Neither does the defendant allege that she intended to purchase or did purchase a particular quality of tobacco and that the quality was not delivered. Neither does the record show that the defendant had made any complaint to the plaintiff concerning the quality of the tobacco or that it was not the kind of tobacco which she had purchased, until after the present action had been commenced. The defendant admits that she had sold the tobacco in question. The defendant does not allege nor attempt to prove that she did not have an opportunity to examine the tobacco delivered, for the purpose of determining its quality. Neither does the record disclose that the plaintiff made any false representation with reference to the quality. Neither does the defendant allege or attempt to prove that the tobacco in question contained any hidden defects which might not have been discovered upon the slightest investigation. There is no attempt to show that the plaintiff undertook to warrant the quality of the tobacco. In the absence of an express warranty, a vendor of merchandise only warrants: First. The legal and peaceable possession of the thing sold; and Second. That there are no hidden faults or defects therein. (Art. 1474, Civil Code.) Moreover, it appears from the record that the defendant did examine the tobacco in question at the time of the sale by opening many of the bundles and examining the contents thereof. It not being proven that the plaintiff made any warranty or any misrepresentations with reference to the quality of the tobacco in question, and it having been proven that the tobacco in question at the time of purchase and not having made any objection whatever until after a lapse of more than three years and not then until after an action had been brought, and making no objection whatever as to the price agreed upon, nor as to the quantity of the tobacco delivered, in our opinion she should be held liable for the payment of the amount agreed upon. Supercars Management 7 Development Corp. v. Flores 38 December 10, 2004

Rescission is proper if one of the parties to a contract

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commits a substantial breach of its provisions. It creates an obligation to return the object of the contract. It can be carried out only when the one who demands rescission can return whatever he may be obliged to restore. Rescission abrogates the contract from its inception and requires a mutual restitution of the benefits received. Petitioner is thus mandated by law to give back to respondent the purchase price upon his return of the vehicle.

FACTS: Filemon Flores, respondent, purchased from Supercars Management and Development Corporation, petitioner, an Isuzu Carter Crew Cab for P212,000.00 payable monthly with a down payment equivalent to 30% of the price orP63,600.00. The balance was to be financed by the Rizal Commercial Banking Corporation (RCBC). The sale was coursed through Pablito Marquez, petitioners salesman. A day after the vehicle was delivered, respondent used it for his familys trip to Bauang, La Union. While traversing the national highway in Tarlac, Tarlac, the fan belt of the vehicle snapped. Then its brakes hardened after several stops and did not function properly; the heater plug did not also function; the engine could not start; and the fuel consumption increased. But after driving the vehicle for a few days, the same defects resurfaced, prompting respondent to send petitioner a letter dated January 30, 1989 rescinding the contract of sale and returning the vehicle due to breach of warranty against hidden defects. A copy of the letter was furnished to RCBC. Consequently, Flores stopped paying his monthly amortization and there had been extra judicial forclosure of chattel mortgage. The vehicle was sold to a third person. On Novembaer 3, 1989, respondent filed with the Regional Trial Court (RTC), Branch 150, Makati City a complaint for rescission of contract with damages against petitioner, Marquez, Catley and RCBC ISSUE: WoN respondent has the right to rescind the contract of sale and to claim damages as a result thereof. HELD: Yes, the evidence clearly shows that Flores was justified in opting to rescind the sale given the hidden defects of the vehicle, allowance for the repair of which he patiently extended, but which repair did not turn out to be satisfactory. It is well within respondents right to recover damages from petitioner who committed a breach of warranty against hidden defects. Article 1566 of the Civil Code partly provides: Article 1566. Where there is a breach of warranty by the seller, the buyer may, at his election: (4) Rescind the contract of sale and refuse to receive the goods, or if the goods have already been received, return them or offer to return them to the seller and recover the price or any part thereof which has been paid. When the buyer has claimed and been granted a remedy in anyone of these ways, no other remedy can thereafter be granted, without prejudice to the provisions of the second paragraph of Article 1191. Petitioners contention that under Article 1191 of the Civil Code, rescission can no longer be availed of as the vehicle was already in the hands of an innocent purchaser for value lacks merit. Rescission is proper if one of the parties to a contract commits

a substantial breach of its provisions. It creates an obligation to return the object of the contract. It can be carried out only when the one who demands rescission can return whatever he may be obliged to restore. Rescission abrogates the contract from its inception and requires a mutual restitution of the benefits received. Petitioner is thus mandated by law to give back to respondent the purchase price upon his return of the vehicle. Records show that at the time respondent opted to rescind the contract, the vehicle was still in his possession. He returned it to petitioner who, without objection, accepted it. Accordingly, the 30% down payment equivalent to P63,600.00, plus the premium for the comprehensive insurance amounting to P7,374.80 paid by respondent should be returned by petitioner.
Warranty on goods bought For a specific or particular purpose there is a warranty that the goods is fit for the purpose which it was intended. For general use that the good is of merchantable quality.

Bryan v. Hankins 39 44 Phil 87 Facts: Defendants made a bill of sale to the plaintiff of the motor schooner Sultan for the agreed purchase price of P55,000 of which the plaintiff paid P20,000, and executed to the defendants two promissory notes. The vessel was then delivered to the plaintiff in Iloilo. It was only then that the plaintiff inspected the vessel. It was found out that the vessel was unseaworthy. Plaintiff then filed an action against the defendant alleging that if plaintiff had knowledge of such defects he would not have bought said vessel; that said defects were hidden and plaintiff could not perceive them; that defendants warranted said vessel to be in seaworthy condition. As a defense, defendant assert that the plaintiff "by his conduct at the time of the sale waived any right to an implied warranty against hidden defects. Issue: Whether or not the defendant should be held liable for the defect. Held: Yes. Defendant is held liable for the hidden defects of the goods delivered. In the present case, the defects of construction of the vessel were hidden and concealed and were unknown to the plaintiff until the official inspection was made. Such hidden defects rendered the vessel unfit for the use for which it was intended, and that the plaintiff did not have any knowledge of such defects, and that no sane man would ever have purchased it with such knowledge. This is sanctioned by Art. 1484 of the Civil Code and Art. 1485 it expressly provides that the vendor is liable to the vendee for any latent faults or defects of the thing sold, even if they were unknown to him.

While it is true that Article 1571 of the Civil Code provides for a prescriptive period of six months for a

Engineering & Machinery v. CA 40 GR. 52267 Facts:

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redhibitory action, said rule may be applied only in case of implied warranties"; and where there is an express warranty in the contract, as in the instant case, the prescriptive period is the one specified in the express warranty, and in the absence of such period, "the general rule on rescission of contract, which is four years, Article 1389 shall apply. Prescriptive period: Implied warranty: 6 months Express warranty: 4 years.

Petitioner and private respondent, Almeda, entered into a contract whereby petitioner undertook to fabricate, furnish and install the air-conditioning system in the latter's building. The system was completed and accepted by private respondent. However, Almeda later learned that there are defects of the air-conditioning system of the building. Private respondent filed an action for damages against petitioner. Petitioner moved to dismiss the complaint, alleging that the prescriptive period of six months had set. Private respondent contended that the contract was not a contract for sale but a contract for a piece of work under Article 1713 and in accordance with Article 1144 (1) of the Civil Code, the complaint was timely brought within the ten-year prescriptive period. Issue: Whether or not the prescriptive period in the instant case is the 10 year prescriptive period. Held: Yes. In case there is a violation of the warranty against the hidden defects. The remedy for this is either to withdraw from the contract (redhibitory action) or to demand a proportionate reduction of the price (accion quanti manoris), with damages in either case. However, while it is true that Article 1571 of the Civil Code provides for a prescriptive period of six months for a redhibitory action, said rule may be applied only in case of implied warranties"; and where there is an express warranty in the contract, as in the instant case, the prescriptive period is the one specified in the express warranty, and in the absence of such period, "the general rule on rescission of contract, which is four years, Article 1389 shall apply. It would then appear that the instant petition is barred by prescription because the complaint was filed more than four years after the execution of the contract and the completion of the air-conditioning system. But, taking into consideration that the original complaint is one for damages arising from breach of a written contract and not a suit to enforce warranties against hidden defects, the governing law is Article 1715. Nevertheless, inasmuch as this provision does not contain a specific prescriptive period, the general law on prescription, which is Article 1144 of the Civil Code, will apply. Said provision states that actions "upon a written contract" prescribe in ten (10) years. Therefore, since the governing contract was executed on September 10, 1962 and the complaint was filed on May 8, 1971, it is clear that the action has not prescribed.