Vda. de Mistica v. Sps.

Naguiat (2003)

Petitioners: FIDELA DEL CASTILLO VDA. DE MISTICA

Respondents: SPOUSES BERNARDINO NAGUIAT AND MARIA PAULINA GERONA-NAGUIAT

Ponente: PANGANIBAN

Topic: Remedies for Breach

SUMMARY: (1-2 sentence summary of facts, issue, ratio and ruling)

FACTS:

- Eulalio Mistica, Fidela’s predecessor-in-interest, is the owner of a parcel of land in Malhacan, Meycauayan,
Bulacan. A portion thereof was leased to Bernardino Naguiat (Naguiat) sometime in 1970.

- On 5 April 1979, Eulalio entered into a contract to sell with Naguiat over a portion of the aforementioned lot
containing an area of 200 m2. This agreement was reduced to writing in a document entitled Kasulatan sa
Pagbibilihan.

`Na ang natitirang halagang LABING WALONG LIBONG PISO (P18,000.00) Kualtang Pilipino, ay
babayaran ng BUM[I]BILI sa loob ng Sampung (10) taon, na magsisimula sa araw din ng lagdaan
ang kasulatang ito.

`Sakaling hindi makakabayad ang Bumibili sa loob ng panahon pinagkasunduan, an[g]

BUMIBILI ay magbabayad ng pakinabang o interes ng 12% isang taon, sa taon nilakaran
hanggang sa ito'y mabayaran tuluyan ng Bumibili

- Naguiat gave a downpayment of P2,000.00. He made another partial payment of P1,000.00 on 7 February
1980. He failed to make any payments thereafter.

- Eulalio Mistica died sometime in October 1986.

- On 4 December 1991, Fidela filed a complaint for rescission alleging: that Naguiats’ failure and refusal to
pay the balance of the purchase price constitutes a violation of the contract which entitles her to rescind the
same.

- Naguiats contended that the contract cannot be rescinded on the ground that it clearly stipulates that in case
of failure to pay the balance as stipulated, a yearly interest of 12% is to be paid. Naguiat likewise alleged that
sometime in October 1986, during Eualalio’s wake, he offered to pay the remaining balance to Fidela but the
latter refused and hence, there is no breach or violation committed by them and no damages could yet be
incurred by the late Eulalio, his heirs or assigns pursuant to the said document.

- RTC disallowed rescission. CA affirmed. It held that the conclusion of the ten-year period was not a resolutory
term, because the Contract had stipulated that payment with interest of 12% could still be made if Naguiats
failed to pay within the period. Fidela did not disprove the allegation of Naguiats that they had tendered
payment of the balance of the purchase price during her husband's funeral, which was well within the ten-year
period. Moreover, rescission would be unjust to Naguiats, because they had already transferred the land title to
their names. The proper recourse, the CA held, was to order them to pay the balance of the purchase price,
with 12% interest.
- Before SC, Fidela claimed that she is entitled to rescind the Contract under A1191, because Naguiats
committed a substantial breach when they did not pay the balance of the purchase price within the 10-year
period.

ISSUES:

 WON there is a breach of obligation that warrants rescission under A1191

o NO. The transaction between Eulalio and Naguiats, as evidenced by the Kasulatan, was clearly
a Contract of Sale. A deed of sale is considered absolute in nature when there is neither a
stipulation in the deed that title to the property sold is reserved to the seller until the full payment
of the price; nor a stipulation giving the vendor the right to unilaterally resolve the contract the
moment the buyer fails to pay within a fixed period.
o In a contract of sale, the remedy of an unpaid seller is either specific performance or rescission.
Under A1191, the right to rescind an obligation is predicated on the violation of the reciprocity
between parties, brought about by a breach of faith by one of them. Rescission, however, is
allowed only where the breach is substantial and fundamental to the fulfillment of the obligation.
o Naguiats’ failure to pay the balance of the purchase price within 10 years from the execution of
the Deed did not amount to a substantial breach. In the Kasulatan, it was stipulated that
payment could be made even after ten years from the execution of the Contract, provided the
vendee paid 12 percent interest. The stipulations of the contract constitute the law between the
parties; thus, courts have no alternative but to enforce them as agreed upon and written.
o Moreover, it is undisputed that during the ten-year period, Fidela and her deceased husband
never made any demand for the balance of the purchase price. Fidela even refused the
payment tendered by Naguiats during her husband's funeral, thus showing that she was not
exactly blameless for the lapse of the ten-year period. Had she accepted the tender, payment
would have been made well within the agreed period.

NOTES: The issuance of a certificate of title in favor of Naguiats does not determine whether Fidela is entitled
to rescission.

DEL PRADO vs COURT OF APPEALS

Facts:

A lot No. 1109 was adjudicated in favor of spouses Caballero thru a Deed of Sale. They sold to
petitioner said lot on the basis of Tax Declaration covering the said property. In the Deed of Sale, it is
stated that the parcel of land sold to Carmen Del Prado only covers 4,000 square meters while the
total area of the said lot is 14,000 square meters.

Issue:

Whether or Not the sale of the land was for lump sum or not .

Held:

The court reiterated the rulings in Esguerra v. Trinidad; In sales involving real estate, the
parties may choose between two types of pricing agreement:

Unit price contract, where in the purchase price is determined by way of reference to stated rate per
area.
Lump sum, contract which states a full purchase price for an immovable, the area of which may be
declared based on the estimate or where both the area and boundaries are stated.

In the instant case the sale of the land was for lump sum because the parties agreed to
purchase the land at P 40,000 for pre-determined area of 4,000 square meters, more or less, with
boundaries stated therein. In a contract of sale of land in a mass, the specific boundaries stated in the
contract prevails over any other statement with respect to the area contained within its boundaries.

Ulep vs C.A (case)

ISSUE: Who has a better right over the 620 square meters of land—the spouses Samuel Ulep or INC?

HELD: The INC has a better right over the 620 square meters.

As the Court sees it, the present controversy is a classic case of double sale. On December 21, 1954,
Atinedoro Ulep, his wife Beatriz Ulep and sister Valentina Ulep sold the disputed area (620 square-meter) of
Lot 840 to INC. Subsequently, on January 18, 1971, a second sale was executed by the same vendors in
favor of spouses Samuel Ulep and Susana Ulep. The Court is, therefore, called upon to determine which of
the two groups of buyers has a better right to the area in question. x x x

The law provides that a double sale of immovable transfers ownership to (1) the first registrant in good faith; (2)
then, the first possessor in good faith; and (3) finally, the buyer who in good faith presents the oldest title.

Jurisprudence teaches that the governing principle is primus tempore, potior jure (first in time, stronger in
right). Knowledge gained by the first buyer of the second sale cannot defeat the first buyer’s rights except
where the second buyer registers in good faith the second sale ahead of the first, as provided by the afore
quoted provision of the Civil Code.

Such knowledge of the first buyer does not bar him from availing of his rights under the law, among them to
register first his purchase as against the second buyer. In converso, knowledge gained by the second buyer of
the first sale defeats his rights even if he is first to register the second sale, since such knowledge taints his
prior registration with bad faith. This is the price exacted by the same provision of the Civil Code for the second
buyer to be able to displace the first buyer; before the second buyer can obtain priority over the first, he must
show that he acted in good faith throughout (i.e. ignorance of the first sale and of the first buyer’s rights) from
the time of acquisition until the title is transferred to him by registration, or, failing registration, by delivery of
possession

Per records, the sale of the disputed 620 square-meter portion of Lot 840 to respondent INC was made on
December 21, 1954 and registered with the Registry of Deeds of Pangasinan on January 5, 1955. In fact, INC
was issued a title over the same portion on September 23, 1975. On the other hand, the conveyance to the
spouses Samuel Ulep and Susana Repogia-Ulep happened on January 18, 1971 and the spouses registered
their document of conveyance only on February 22, 1973

Clearly, not only was respondent INC the first buyer of the disputed area. It was also the first to register the
sale in its favor long before petitioners Samuel’s and Susana’s intrusion as second buyers. Although Samuel
and Susana thereafter registered the sale made to them, they did so only after 18 years from the time INC
caused the registration of its own document of sale

In the instant case, the registration made by respondent INC of its deed of sale more than satisfies this
requirement. The same thing cannot be said of petitioners Samuel Ulep and Susana Ulep. Said petitioners,
by their own admission, were aware that there existed an agreement between INC and vendors Atinedoro
Ulep, his wife Beatriz and sister Valentina Ulep involving a portion of 100 square meters of Lot 840. Knowledge
of such transaction should have put the spouses Samuel Ulep and Susana Ulep upon such inquiry or
investigation as might be necessary to acquaint them with the possible defects in the title of their vendors.

Petitioners insist that the conveyance of only 100 square meters to INC was in fact evidenced by a deed of
sale notarized by a certain Atty. Benjamin Fernandez.[19] However, they sorely failed to produce in court the
said alleged deed of sale. They could have, at the very least, presented Atty. Fernandez to prove the existence
of that deed, but they did not. The only plausible conclusion is that no such deed exists.

On the other hand, to bolster its claim of ownership, respondent INC presented the December 21, 1954 deed
of sale executed in its favor by the spouses Atinedoro and Beatriz Ulep and Valentina Ulep over a portion of
620 square meters of Lot 840. To be sure, INC’s deed of sale was duly notarized by Atty. Bernabe Salcedo
Calimlim

NUTRIMIX FEEDS CORP V. CA /CBR KING

FACTS: In 1993, private respondent spouses Evangelista procured various animal feeds from petitioner
Nutrimix Feeds Corp. Initially, the spouses were good paying customers. However, there were instances when
they failed to issue checks despite the delivery of goods. Consequently, the respondents incurred an
aggregate unsettled account with Nutrimix amounting to P766,151. When the checks were deposited by the
petitioner, the same were dishonored (closed account). Despite several demands from the petitioner, the
spouses refused to pay the remaining balance

Thereafter, Nutrimix filed a complaint against Evangelista for collection of money with damages.

The respondents admitted their unpaid obligation but impugned their liability contending that the 9 checks
issued 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 effected by the adulterated animal feeds the petitioner sold to them.

Nutrimix alleged that the death of the respondents’ animals was due to the widespread pestilence in their farm.
It, moreover, theorized that it was the respondents who mixed poison to its feeds to make it appear that the
feeds were contaminated.

ISSUE: WON Nutrimix is guilty of breach of warranty due to hidden defects

HELD: NO.

The provisions on warranty against hidden defects are found in Articles 1561 and 1566 of the New Civil Code
of the Philippines. A hidden defect is one which is unknown or could not have been known to the vendee.
Under the law, the requisites to recover on account of hidden defects are as follows:

a) the defect must be hidden;

b) the defect must exist at the time the sale was made;

c) the defect must ordinarily have been excluded from the contract;
d) the defect, must be important (renders thing UNFIT or considerably decreases FITNESS);

e) the action must be instituted within the statute of limitations

In alleging that there was a violation of warranty against hidden defects, the spouses assumed the burden of
proof. However, this they failed to overcome. Under the law, the defect must exist at the time the sale was
made and at the time the product left the hands of the seller, which the spouses failed to prove. The feeds
were belatedly tested—3 months after the death of the broilers and hogs. This means that at that time, they
may have already been contaminated. They failed to prove that the feeds delivered to be tested were the same
feeds that allegedly poisoned the animals. It is also common practice for them to mix different kinds of feeds.
The mere death of the animals does not raise a prima facie case of breach of warranty. In this case, the
evidence presented by the spouses are only circumstantial. The remedies of breach of warranty against hidden
defects are either withdrawal from the contract or to demand a proportionate reduction of the price plus
damages in either case. In this case, though the spouses failed to make out their case, hence they should be
liable for their debt.

In the sale of animal feeds, there is an implied warranty that it is reasonably fit and suitable to be used for the
purpose which both parties contemplated. To be able to prove liability on the basis of breach of implied
warranty, three things must be established by the respondents. The first is that they sustained injury because
of the product; the second is that the injury occurred because the product was defective or unreasonably
unsafe; and finally, the defect existed when the product left the hands of the petitioner.

Tracing the defect to the petitioner requires some evidence that there was no tampering with, or changing of
the animal feeds. The nature of the animal feeds makes it necessarily difficult for the respondents to prove
that the defect was existing when the product left the premises of the petitioner.

A review of the facts of the case would reveal that the petitioner delivered the animal feeds, allegedly
containing rat poison, on July 26, 1993; but it is astonishing that the respondents had the animal feeds
examined only on October 20, 1993, or barely three months after their broilers and hogs had died. A
difference of approximately three months enfeebles the respondents’ theory that the petitioner is guilty of
breach of warranty by virtue of hidden defects. In a span of three months, the feeds could have already been
contaminated by outside factors and subjected to many conditions unquestionably beyond the control of the
petitioner.