Parts VIII.

Conditions and Warranties SALES Twelfth Set_Case Digests

Part IX. Extinguishment of Sale II-Estrellado S.Y. 2013-2014

PART VIII: CONDITIONS AND notice relinquishing his rights over the property. The
VENDEE shall then be reimbursed by the VENDOR
WARRANTIES the sum of FIVE HUNDRED THOUSAND PESOS
(p.490, Villanueva 2009) (P500,000.00) representing the downpayment,
interest free, payable but contingent upon the event
A. Conditions (p. 490 ) that the VENDOR shall have been able to sell the
property to another party.8
1. Catungal vs. Rodriguez
(G.R. No. 146839, March 23, 2011) The Catungals requested an advance of 5M on the
ROLANDO T. CATUNGAL, JOSE T. CATUNGAL, JR., purchase price for personal reasons. Rodriguez
CAROLYN T. CATUNGAL and ERLINDA CATUNGAL- refused. Rodriguez soon learned that the Catungals
WESSEL, Petitioners, vs. ANGEL S. RODRIGUEZ, were offering the property for sale to third parties.
Respondent. Jose Catungal thereafter demanded that Rodriguez
make up his mind about buying the land or
FACTS: exercising his “option” to buy the property. Should
Agapita Catungal owned a parcel of land (Lot 10963). he fail to exercise this option, the Catungals warned
Agapita, with the consent of her husband Jose, that they would consider the contract cancelled and
entered into a Contract to Sell with respondent that they were free to look for other buyers.
Rodriguez. Subsequently, the CTS was purportedly Rodriguez registered his objections to what he
“upgraded” into a Conditional Deed of Sale (CDOS). termed as unwarranted demands, but Catungal still
cancelled the contract.
The provisions of the CDOS are as follows:
1. The VENDOR for and in consideration of the sum Rodriguez filed for a restraining order/writ of
of 25M payable as follows: preliminary injunction. Catungals contended that
there was a contractual breach and bad faith on the
a. 500k downpayment upon the signing of this part of Rodriguez. Rodriguez alleged that the
agreement, Catungals were guilty of several misrepresentations
b. The balance of 24.5M shall be payable in five which purportedly induced Rodriguez to buy the
separate checks. The first check shall be for 4.5M property at the price of 25M. RTC ruled in favor of
and the remaining balance to be paid in four checks Rodriguez, which was affirmed by CA.
in the amounts of 5M each after the VENDEE has
successfully negotiated, secured and provided a In the Motion for Reconsideration of the Catungals,
Road Right of Way consisting of 12 meters in width they argued that the CDOS violated the principle of
cutting across Lot 10884 up to the national road, mutuality of contracts under Art 1308 (constituting a
either by widening the existing Road Right of Way or potestative condition; thus, the contract was
by securing a new Road one of 12 meters in width. If supposedly void ab initio and the Catungals’
however said Road Right of Way could not be rescission thereof was unnecessary).
negotiated, the VENDEE shall give notice to the
VENDOR for them to reassess and solve the problem ISSUE: W/N the provisions of the CDOS constitute a
by taking other options and should the situation potestative condition NO
ultimately prove futile, he shall take steps to rescind
or cancel the herein Conditional Deed of Sale. HELD:
c. That the access road or Road Right of Way leading At the outset, it should be noted that what the
to Lot 10963 shall be the responsibility of the parties entered into is a Conditional Deed of Sale,
VENDEE to secure and any or all cost relative to the whereby the spouses Catungal agreed to sell and
acquisition thereof shall be borne solely by the Rodriguez agreed to buy Lot 10963 conditioned on
VENDEE. the payment of a certain price but the payment of
Xxx the purchase price was additionally made contingent
5. That the VENDEE has the option to rescind the on the successful negotiation of a road right of way.
sale. In the event the VENDEE exercises his option to It is elementary that "[i]n conditional obligations, the
rescind the herein Conditional Deed of Sale, the acquisition of rights, as well as the extinguishment or
VENDEE shall notify the VENDOR by way of a written loss of those already acquired, shall depend upon

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the happening of the event which constitutes the landowners would come to an agreement regarding
condition." the road right of way. This type of mixed condition is
expressly allowed under Article 1182.
Petitioners rely on Article 1308 of the Civil Code to In sum, Rodriguez’s option to rescind the contract is
support their conclusion regarding the claimed not purely potestative but rather also subject to the
nullity of the aforementioned provisions. Article same mixed condition as his obligation to pay the
1308 states that "[t]he contract must bind both balance of the purchase price – i.e., the negotiation
contracting parties; its validity or compliance cannot of a road right of way. In the event the condition is
be left to the will of one of them." fulfilled (or the negotiation is successful), Rodriguez
must pay the balance of the purchase price. In the
Article 1182 of the Civil Code, in turn, provides: event the condition is not fulfilled (or the
negotiation fails), Rodriguez has the choice either (a)
Art. 1182. When the fulfillment of the condition to not proceed with the sale and demand return of
depends upon the sole will of the debtor, the his downpayment or (b) considering that the
conditional obligation shall be void. If it depends condition was imposed for his benefit, to waive the
upon chance or upon the will of a third person, the condition and still pay the purchase price despite the
obligation shall take effect in conformity with the lack of road access. This is the most just
provisions of this Code. interpretation of the parties’ contract that gives
effect to all its provisions.
In the past, this Court has distinguished between a
condition imposed on the perfection of a contract NOTES:
and a condition imposed merely on the performance
of an obligation. While failure to comply with the
first condition results in the failure of a contract,
failure to comply with the second merely gives the
other party the option to either refuse to proceed
with the sale or to waive the condition. This principle
is evident in Article 1545 of the Civil Code on sales, B. Warranties
which provides in part:
1. Express Warranties (p. 493)
Art. 1545. Where the obligation of either party to a
contract of sale is subject to any condition which is
a. Harrison Motors vs. Navarro
not performed, such party may refuse to proceed
(G.R. No. 132269, April 27, 2000)
with the contract or he may waive performance of
HARRISON MOTORS CORPORATION, petitioner, vs.
the condition x x x.
RACHEL A. NAVARRO, respondent.
Paragraph 1(b) of the Conditional Deed of Sale,
FACTS:
stating that respondent shall pay the balance of the
Sometime in June 1987 Harrison Motors Corporation
purchase price when he has successfully negotiated
through its president, Renato Claros, sold two (2)
and secured a road right of way, is not a condition
Isuzu Elf trucks to private respondent Rachel
on the perfection of the contract nor on the validity
Navarro, owner of RN Freight Lines (fleet of cargo
of the entire contract or its compliance as
trucks). Petitioner, a known importer, assembler and
contemplated in Article 1308. It is a condition
manufacturer, assembled the two (2) trucks using
imposed only on respondent’s obligation to pay the
imported component parts. Prior to the sale, Renato
remainder of the purchase price. In our view and
Claros represented to Navarro that all the BIR taxes
applying Article 1182, such a condition is not purely
and customs duties for the parts used on the two
potestative as petitioners contend. It is not
(2) trucks had been paid for.
dependent on the sole will of the debtor but also on
the will of third persons who own the adjacent land
In December 1988 government agents seized and
and from whom the road right of way shall be
detained the two (2) Elf trucks of Navarro after
negotiated. In a manner of speaking, such a
discovering that there were still unpaid BIR taxes and
condition is likewise dependent on chance as there is
customs duties thereon. The BIR and the BOC
no guarantee that respondent and the third party-

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ordered Navarro to pay the proper assessments or This express warranty was breached the moment
her trucks would be impounded. Navarro went to petitioner refused to furnish Navarro with the
Claros to ask for the receipts evidencing payment of corresponding receipts since such documents were
BIR taxes and customs duties; however, Claros the best evidence she could present to the
refused to comply. Navarro then demanded from government to prove that all BIR taxes and customs
Claros that he pay the assessed taxes and warned duties on the imported component parts were fully
him that he would have to reimburse her should she paid. Without evidence of payment, she was
be forced to pay for the assessments herself. Her powerless to prevent the trucks from being
demands were again ignored. impounded.

But wanting to secure the immediate release of the Under Art. 1599 of the Civil Code, once an express
trucks to comply with her business commitments, warranty is breached the buyer can accept or keep
Navarro paid the assessed BIR taxes and customs the goods and maintain an action against the seller
duties amounting to P32,943. Consequently, she for damages. This was what private respondent did.
returned to Harrison Motor's office to ask for She opted to keep the two (2) trucks which she
reimbursement, but Harrison Motors again refused, apparently needed for her business and filed a
prompting her to send a demand letter through her complaint for damages, particularly seeking the
lawyer. When Harrison Motors still ignored her reimbursement of the amount she paid to secure the
letter, she filed a complaint for a sum of money on release of her vehicles.
with the RTC.
 Harrison Motors was ordered to reimburse
RTC rendered a decision ordering petitioner to Navarro for the taxes and duties she paid, with
reimburse Navarro for the customs duties and interest beginning from the time Navarro filed
internal revenue taxes the latter had to pay to her complaint with RTC until fully paid.
discharge her two (2) Elf trucks from government
custody. CA sustained. Petitioner insisted that it was NOTES:
no longer concerned with the payment of the
assessments involving two (2) trucks since it no
longer owned the vehicles after the consummation
of the sale.

ISSUE: WON Harrison Motors is liable to pay the

amount of customs duties and internal revenue 2. Implied Warranties (p. 495)
taxes. – YES
a. Escaler vs. CA
HELD: (138 SCRA 1, G.R. No. L-42636, August 1, 1985)
It is true that the ownership of the trucks shifted to MARIA LUISA DE LEON ESCALER and ERNESTO
Navarro after the sale. But petitioner must ESCALER, CECILIA J. ROXAS and PEDRO ROXAS,
remember that prior to its consummation it petitioners, vs. COURT OF APPEALS, JOSE L.
expressly intimated to her that it had already paid REYNOSO, now deceased, to be substituted by his
the taxes and customs duties. Such representation heirs or legal representatives and AFRICA V.
shall be considered as a seller's express warranty REYNOSO, respondents.
under Art. 1546 of the Civil Code which covers any
affirmation of fact or any promise by the seller which FACTS:
induces the buyer to purchase the thing and actually On March 7, 1958, the spouses Africa V.
purchases it relying on such affirmation or Reynoso and Jose L, Reynoso sold to petitioners
promise. It includes all warranties which are derived several others, a parcel of land. The Deed of Sale
from express language, whether the language is in contained the following covenant against eviction,
the form of a promise or representation. to wit:
Presumably, therefore, Navarro would not have
purchased the two (2) Elf trucks were it not for That the VENDOR is the absolute owner of a parcel of
petitioner's assertion and assurance that all taxes on land ... the ownership thereof being evidenced by an
its imported parts were already settled.

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absolute deed of sale executed in her favor by ISSUES:

registered owner ANGELINA C. REYNOSO, ...; 1. WON the provisions of Articles 1558 and 1559 of
the NCC will apply. YES
That the VENDOR warrants valid title to and 2. WON the requirement of summons as required in
ownership of said parcel of land and further, Article 1558 was complied. NO
warrant to defend the property herein sold and
conveyed, unto the VENDEES, their heirs, and HELD:
assignees, from any and all claims of any persons The petition is devoid of merit.
whatsoever. Consequently, it must be dismissed. Article 1548, in
relation to Articles 1558 and 1559 of the New Civil
On April 21, 1961, the Register of Deeds of Code reads as follows:
Rizal and A. Doronilla Resources Development, Inc.
filed Case No. 4252 before the Court of First Instance Art. 1548, Eviction shall take place whenever by a
of Rizal for the cancellation of OCT No. 1526 issued final judgment based on a right prior to the sale or
in the name of Angelina C. Reynoso (predecessor-in- an act imputable to the vendor, the vendee is
interest of private respondents-vendors) on deprived of the whole or of a part of the thing
February 26, 1958 under Decree No. 62373, LRC purchased. The vendor shall answer for the eviction
Record No. N-13783, on the ground that the even though nothing has been said in the contract on
property covered by said title is already previously the subject. The contracting parties, however, may
registered under Transfer Certificate of Title No. increase, diminish, or suppress this legal obligation of
42999 issued in the name of A. Doronilla the vendor.
Development, Inc. Petitioners as vendees filed their
opposition to the said petition. Art. 1558. The vendor shall not be obliged to make
good the proper warranty, unless he is summoned in
On August 31, 1965, herein petitioners, the suit for eviction at the instance of the vendee.
spouses Maria de Leon Escaler and Ernesto Escaler
and spouses Cecilia J. Roxas and Pedro Roxas, filed Art. 1559. The defendant vendee shall ask, within the
Civil Case No. 9014 before the Court of First Instance time fixed in the Rules of Court for answering the
of Rizal against their vendors, herein private complaint that the vendor be made as co-defendant.
respondents, spouses Jose L. Reynoso and Africa
Reynoso for the recovery of the value of the In order that a vendor's liability for eviction
property sold to them plus damages on the ground may be enforced, the following requisites must
that the latter have violated the vendors' "warranty concur—a) there must be a final judgment; b) the
against eviction." purchaser has been deprived of the whole or part of
the thing sold; c) said deprivation was by virtue of a
The complaint among others, alleged that right prior to the sale made by the vendor; and d)
the Order issued in Case No. 4252 which cancelled the vendor has been summoned and made co-
the title of Angelina C. Reynoso and all subsequent defendant in the suit for eviction at the instance of
Transfer Certificates of Title derived and/or the vendee.
emanating therefrom and which includes the titles
of petitioners, is now final, and by reason thereof In the case at bar, the fourth requisite—
petitioners lost their right over the property sold; that of being summoned in the suit for eviction (Case
and that in said Case No. 4252, the respondents No. 4252) at the instance of the vendee—is not
were summoned and/or given their day in court at present. All that the petitioners did, per their very
the instance of the petitioners. admission, was to furnish respondents, by
registered mail, with a copy of the opposition they
In reversing the decision of the trial court (petitioners) filed in the eviction suit. Decidedly, this
and dismissing the case, the then Court of Appeals is not the kind of notice prescribed by the
found and so ruled that petitioners as vendees had aforequoted Articles 1558 and 1559 of the New
not given private respondents-vendors, formal Civil Code. The term "unless he is summoned in the
notice of the eviction case as mandated by Arts. suit for eviction at the instance of the vendee"
1558 and 1559 of the New Civil Code. means that the respondents as vendor/s should be

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made parties to the suit at the instance of PNB did not approve the assumption of mortgage
petitioners-vendees, either by way of asking that because petitioner stopped paying the remaining
the former be made a co-defendant or by the filing arrears , interest, etc. The property was foreclosed
of a third-party complaint against said vendors. and sold to PNB.
Nothing of that sort appeared to have been done by
the petitioners in the instant case. Petitioner filed an action for rescission against
respondent for substantial breach of contract for the
NOTES: latter’s failure to eject the lessees . (Petitioner also
impleaded PNB and sought reimbursement of what it
has already paid )

ISSUE:
Is the failure of the respondents to eject the lessees
a substantial breach? NO
b. Power Commercial vs. CA
(G.R. No. 119745, June 20, 1997) HELD:
POWER COMMERCIAL AND INDUSTRIAL Such ‘Failure’ Cannot be Considered a Condition
CORPORATION, petitioner, vs. COURT OF APPEALS, Not only was such ‘failure’ not stipulated as a
SPOUSES REYNALDO and ANGELITA R. QUIAMBAO condition but the contract also did not specify what
and PHILIPPINE NATIONAL BANK, respondents. is the effect if the respondents would not be able to
eject the lessees.
FACTS:
Petitioner Corporation entered into a Contract of The provision adverted to by petitioner does not
Sale with assumption of mortgage for the purchase impose a condition or an obligation to eject the
of a land owned by respondents . Such land is to be lessees from the lot.
used by the former as office area.
By his own admission, Anthony Powers, General
The Deed of Transfer of Title was executed upon Manager of petitioner-corporation, did not ask the
payment by petitioner of the balance of the corporation’s lawyers to stipulate in the contract
purchase price. The Deed of Absolute Sale that Respondent Reynaldo was guaranteeing the
contained the following stipulations: ejectment of the occupants, because there was
Xxxx already a proviso in said deed of sale that the sellers
We hereby also warrant that we are the lawful and were guaranteeing the peaceful possession by the
absolute owners of the above described property, buyer of the land in question. Any obscurity in a
free from any lien and/or encumbrance, and we contract, if the above-quoted provision can be so
hereby agree and warrant to defend its title and described, must be construed against the party who
peaceful possession thereof in favor of the said caused it. Petitioner itself caused the obscurity
Power Commercial and Industrial Development because it omitted this alleged condition when its
Corporation, its successors and assigns, against any lawyer drafted said contract.
claims whatsoever of any and all third persons;
subject, however, to the provisions hereunder If the parties intended to impose on respondent
provided to wit: spouses the obligation to eject the tenants from the
XXX lot sold, it should have included in the contract a
provision similar to that referred to in Romero vs.
However, at this point the lessees of respondents Court of Appeals, where the ejectment of the
were still in physical possession of the land. occupants of the lot sold by private respondent was
Petitioner then made the necessary application to the operative act which set into motion the period
PNB for its assumption of the mortgage so that the of petitioner’s compliance with his own
title be passed to its name and it can undertake the obligation, i.e., to pay the balance of the purchase
necessary procedure to remove the lessees price. Failure to remove the squatters within the
immediately. stipulated period gave the other party the right to
either refuse to proceed with the agreement or to

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waive that condition of ejectment in consonance Petitioner argues in its memorandum that it has not
with Article 1545 of the Civil Code. yet ejected the occupants of said lot, and not that it
has been evicted therefrom. As correctly pointed
In the case cited, the contract specifically stipulated out by Respondent Court, the presence of lessees
that the ejectment was a condition to be fulfilled; does not constitute an encumbrance of the landnor
otherwise, the obligation to pay the balance would does it deprive petitioner of its control thereof.
not arise. This is not so in the case at bar. Absent a
stipulation therefor, we cannot say that the parties We note, however, that petitioner’s deprivation of
intended to make its nonfulfillment a ground for ownership and control finally occurred when it failed
rescission. If they did intend this, their contract and/or discontinued paying the amortizations on the
should have expressly stipulated so. mortgage, causing the lot to be foreclosed and sold
at public auction. But this deprivation is due to
In Ang vs. C.A., rescission was sought on the ground petitioner’s fault, and not to any act attributable to
that the petitioners had failed to fulfill their the vendor-spouses.
obligation “to remove and clear” the lot sold, the
performance of which would have given rise to the Because petitioner failed to impugn its integrity, the
payment of the consideration by private contract is presumed, under the law, to be valid and
respondent. Rescission was not allowed, however, subsisting.
because the breach was not substantial and
fundamental to the fulfillment by the petitioners of POLICY:
the obligation to sell. If a condition is to be imposed on a party, such
As stated, the provision adverted to in the contract condition and its effects must be expressly stipulated
pertains to the usual warranty against eviction, and in the contract.
not to a condition that was not met. The terms of
the contract are so clear as to leave no room for any NOTES:
other interpretation

Requisites of Breach of Warranty Against Eviction

Obvious to us in the ambivalent stance of petitioner
is its failure to establish any breach of the warranty
against eviction. Despite its protestation that its
acquisition of the lot was to enable it to set up a c. Supercars vs. Flores
warehouse for its asbestos products and that failure (G.R. No. 148173, December 10, 2004)
to deliver actual possession thereof defeated this SUPERCARS MANAGEMENT & DEVELOPMENT
purpose, still no breach of warranty against eviction CORPORATION, represented by its
can be appreciated because the facts of the case do President BENIGNO CHAN, petitioner, vs. THE LATE
not show that the requisites for such breach have FILEMON FLORES, substituted by his surviving
been satisfied. A breach of this warranty requires spouse, NORA C. FLORES, respondent.
the concurrence of the following circumstances:
FACTS:
(1) The purchaser has been deprived of the whole  Flores purchased from Supercars an Isuzu Carter
or part of the thing sold; Crew Cab for P212,000.00 payable monthly with a
(2) This eviction is by a final judgment; down payment equivalent to 30% of the price
(3) The basis thereof is by virtue of a right prior to or P63,600.00. The balance was to be financed by
the sale made by the vendor; and (RCBC). The sale was coursed through Pablito
(4) The vendor has been summoned and made co- Marquez, petitioner’s salesman.
defendant in the suit for eviction at the instance of  After driving the car for a few days, the vehicle
the vendee. flores purchased malfunctioned. Flores then
complained with the salesmen about the defects
In the absence of these requisites, a breach of the and the salesmen had the vehicle repaired and
warranty against eviction under Article 1547 cannot returned it to flores. However, after such repairs,
be declared. the defects resurfaced and so Flores sent a letter

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to the seller that flores is rescinding the sale and sale given the hidden defects of the vehicle,
also demanded for a refund plus the premium for allowance for the repair of which he patiently
insurance. extended, but which repair did not turn out to be
 The seller failed to comply with the demand and satisfactory.
so Flores stopped paying the monthly xxx
amortizations.
 RCBC demanded overdue accounts from Flores. For when by letters of January 30, 1989 and
The latter answered in a letter that he has already February 7, 1989, which were followed up by
rescinded the contract and has returned the another dated March 1, 1989, Flores declared
vehicle to Flores. RCBC an extrajudicial foreclosure his rescission of the sale, which rescission was
of chattel mortgage with the court. The auction not impugned or opposed by appellants as in
sale proceeded and RCBC was the highest bidder. fact they accepted the return of the vehicle on
RCBC the sold the vehicle to a third person. February 9, 1989, such extra-judicial rescission x
 Flores filed with RTC a complaint for rescission of x x produced legal effect (UP vs. de los Angeles,
contract with damages against petitioner, 35 SCRA 102 [1970]; Tolentino Commentaries
Marquez, Catley and RCBC. and Jurisprudence on the Civil Code,
 RTC ruled in favor of Flores but dismissed the citing Magdalena Estate v. Myrick, 71 Phil. 344
complaint against RCBC. [1940-1941]). x x x”
 CA affirmed with modification absolving Marquez
and Catley. It is well within respondent’s right to recover
 Petitioner contends that respondent has “no right damages from petitioner who committed a breach
to rescind the contract of sale” because “the of warranty against hidden defects. Article 1599 of
motor vehicle in question, as found by the RTC and the Civil Code partly provides:
the Court of Appeals, is already in the hands of a
third party, one Mr. Lim – an innocent purchaser “Article 1599. Where there is a breach of warranty
for value.” Thus, both courts erred in ordering by the seller, the buyer may, at his election:
petitioner to refund respondent of the amounts xxx
he paid for the vehicle. (4) Rescind the contract of sale and refuse to receive
the goods, or if the goods have already been
ISSUE: WON the respondent has the right to rescind received, return them or offer to return them to the
the contract of sale and to claim damages as a result seller and recover the price or any part thereof
thereof? YES which has been paid.
When the buyer has claimed and been granted a
HELD: remedy in anyone of these ways, no other remedy
Respondent’s complaint filed with the RTC can thereafter be granted, without prejudice to the
seeks to recover from petitioner the money he paid provisions of the second paragraph of Article 1191.
for the vehicle due to the latter’s breach of his x x x.” (Underscoring supplied)
warranty against hidden defects under Articles 1547,
1561, and 1566 of the Civil Code. The vehicle, after Petitioner’s contention that under Article 1191 of
it was delivered to respondent, malfunctioned the Civil Code, rescission can no longer be availed of
despite repeated repairs by petitioner. Obviously, as the vehicle was already in the hands of an
the vehicle has hidden defects. A hidden defect is innocent purchaser for value lacks merit. Rescission
one which is unknown or could not have been is proper if one of the parties to a contract commits
known to the vendee. a substantial breach of its provisions. It creates an
obligation to return the object of the contract. It can
The findings of both the RTC and Court of be carried out only when the one who demands
Appeals that petitioner committed a breach of rescission can return whatever he may be obliged to
warranty against hidden defects are fully supported restore. Rescission abrogates the contract from its
by the records. The Appellate Court correctly ruled: inception and requires a mutual restitution of the
benefits received. Petitioner is thus mandated by
“The evidence clearly shows that Flores [now law to give back to respondent the purchase price
respondent] was justified in opting to rescind the upon his return of the vehicle. Records show that at
the time respondent opted to rescind the contract,

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the vehicle was still in his possession. He returned it

to petitioner who, without objection, accepted it. Consequently, respondents incurred an aggregate
Accordingly, the 30% down payment equivalent unsettled account with the petitioner in the amount
toP63,600.00, plus the premium for the of P766,151. The checks issued were dishonored.
comprehensive insurance amounting to P7,374.80 Thereafter, petitioner made several demands for the
paid by respondent should be returned by respondents to settle their unpaid obligation, but
petitioner. the latter failed and refused to pay their remaining
balance with the petitioner.
As further stated by the Court of Appeals:
Hence, petitioner filed with the RTC, a complaint for
“Appellant’s invocation of Article 1191 of the Civil sum of money and damages. In their answer with
Code in support of his argument that as the vehicle counterclaim, the respondents admitted their
had been sold to a third party, rescission can no unpaid obligation but impugned their liability to the
longer ensue is misplaced. petitioner. They asserted that the nine checks issued
by respondent Maura Evangelista were made to
For, Flores is asking for the refund of the guarantee the payment of the purchases, which was
downpayment and payment for insurance previously determined to be procured from the
premiums. This brings us to appellant’s final expected proceeds in the sale of their broilers and
argument. hogs. They contended that inasmuch as the sudden
Appellant’s professed excuse from their inability to and massive death of their animals was caused by
give refund – that refund would necessitate the the contaminated products of the petitioner, the
return of the subject motor vehicle which is nonpayment of their obligation was based on a just
impossible because it is now in the hands of an and legal ground.
innocent purchaser for value – miserably fails.
x x x appellant Supercars was paid the balance of the ISSUE: WON there is sufficient evidence to hold the
purchase price by RCBC and, therefore, in addition to petitioner guilty of breach of warranty due to hidden
the downpayment given by Flores, it had been fully defects. - NO
paid for the vehicle.
HELD:
NOTES: The provisions on warranty against hidden defects
are found in Articles 1561 and 1566 of the New Civil
Code of the Philippines, which read as follows:

Art. 1561. The vendor shall be responsible

for warranty against hidden defects which
the thing sold may have, should they render
d. Nutrimix Feeds vs. CA it unfit for the use for which it is intended,
(441 SCRA 357, G.R. No. 152219, October 25, 2004) or should they diminish its fitness for such
NUTRIMIX FEEDS CORPORATION, petitioner, vs. use to such an extent that, had the vendee
COURT OF APPEALS and SPOUSES EFREN AND been aware thereof, he would not have
MAURA EVANGELISTA, respondents. acquired it or would have given a lower
price for it; but said vendor shall not be
FACTS: answerable for patent defects or those
Sometime in 1993, the Spouses Efren and Maura which may be visible, or for those which are
Evangelista, the respondents herein, started to not visible if the vendee is an expert who, by
directly procure various kinds of animal feeds from reason of his trade or profession, should
petitioner Nutrimix Feeds Corporation. Respondents have known them.
issued postdated checks in payment for the delivery
of the feeds. Initially, the respondents were good Art. 1566. The vendor is responsible to the
paying customers. In some instances, however, they vendee for any hidden faults or defects in
failed to issue checks despite the deliveries of animal the thing sold, even though he was not
feeds which were appropriately covered by sales aware thereof.
invoices.

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feeds examined only on October 20, 1993, or barely

This provision shall not apply if the contrary has three months after their broilers and hogs had died.
been stipulated, and the vendor was not aware of
the hidden faults or defects in the thing sold. We find it difficult to believe that the feeds delivered
on July 26 and 27, 1993 and fed to the broilers and
A hidden defect is one which is unknown or could hogs contained poison at the time they reached the
not have been known to the vendee. Under the law, respondents. A difference of approximately three
the requisites to recover on account of hidden months enfeebles the respondents’ theory that the
defects are as follows: petitioner is guilty of breach of warranty by virtue of
hidden defects. In a span of three months, the feeds
(a) the defect must be hidden; could have already been contaminated by outside
(b) the defect must exist at the time the sale was factors and subjected to many conditions
made; unquestionably beyond the control of the petitioner.
(c) the defect must ordinarily have been excluded Even more surprising is the fact that during the
from the contract; meeting with Nutrimix President, the respondents
(d) the defect, must be important (renders thing claimed that their animals were plagued by disease,
UNFIT or considerably decreases FITNESS); and that they needed more time to settle their
(e) the action must be instituted within the statute obligations with the petitioner. It was only after a
of limitations. few months that the respondents changed their
justification for not paying their unsettled accounts,
In the sale of animal feeds, there is an implied claiming anew that their animals were poisoned with
warranty that it is reasonably fit and suitable to be the animal feeds supplied by the petitioner.
used for the purpose which both parties
contemplated. To be able to prove liability on the In essence, we hold that the respondents failed to
basis of breach of implied warranty, three things prove that the petitioner is guilty of breach of
must be established by the respondents. The first is warranty due to hidden defects. It is, likewise,
that they sustained injury because of the product; rudimentary that common law places upon the
the second is that the injury occurred because the buyer of the product the burden of proving that the
product was defective or unreasonably unsafe; and seller of the product breached its warranty.
finally, the defect existed when the product left the
hands of the petitioner. A manufacturer or seller of It must be stressed, however, that the remedy
a product cannot be held liable for any damage against violations of warranty against hidden
allegedly caused by the product in the absence of defects is either to withdraw from the contract
any proof that the product in question was (accion redhibitoria) or to demand a proportionate
defective. The defect must be present upon the reduction of the price (accion quanti minoris), with
delivery or manufacture of the product; or when the damages in either case.
product left the seller’s or manufacturer’s control; or
when the product was sold to the purchaser; or the NOTES:
product must have reached the user or consumer
without substantial change in the condition it was
sold.

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 PART IX: EXTINGUISHMENT OF
animal feeds makes it necessarily difficult for the
respondents to prove that the defect was existing SALE
when the product left the premises of the petitioner. (p. 515)
A review of the facts of the case would reveal that
the petitioner delivered the animal feeds, allegedly A. Grounds
containing rat poison, on July 26, 1993; but it is B. Conventional Redemption (p. 515)
astonishing that the respondents had the animal 1. Kings Propeties vs. Galido

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(G.R. No. 170023, November 27, 2009) 1. The parties entered into a contract denominated
KINGS PROPERTIES CORPORATION, Petitioner, vs. as a contract of sale; and
CANUTO A. GALIDO, Respondent. 2. Their intention was to secure existing debt by way
of a mortgage.
FACTS:
In 1966, the heirs of Domingo Eniceo, namely Rufina In order for the presumption of equitable mortgage
Eniceo and Maria Eniceo, were awarded with a to apply, there must be: (1) something in the
Homestead Patent consisting of four parcels of land language of the contract; or (2) in the conduct of the
located in Antipolo. In September 1973, a deed of parties which shows clearly and beyond doubt that
sale covering the Antipolo property was executed they intended the contract to be a mortgage and not
between Rufina Eniceo and Maria Eniceo as vendors a pacto de retro sale. The presumption of equitable
and respondent as vendee. Rufina Eniceo and Maria mortgage under Article 1602 of the Civil Code is not
Eniceo sold the Antipolo property to respondent conclusive. It may be rebutted by competent and
for P250,000. Later in 1995, petitioner bought the satisfactory proof of the contrary.
property from Eniceo heirs. Respondent filed a civil
complaint with the RTC for the cancellation of the Petitioner claims that an equitable mortgage can be
certificates of title issued in favor of petitioner, and presumed because the Eniceo heirs remained in
the registration of the Deed of Sale and issuance of a possession of the Antipolo property. Apart from the
new TCT in his favor. Petitioner contends that the fact that the Eniceo heirs remained in possession of
DOS between Eniceo and respondent was in fact an the Antipolo property, petitioner has failed to
equitable mortgage. substantiate its claim that the contract of sale was
intended to secure an existing debt by way of
ISSUE: WON deed of sale delivered to respondent mortgage. In fact, mere tolerated possession is not
should be presumed an equitable mortgage enough to prove that the transaction was an
pursuant to Article 1602(2) and 1604 of the Civil equitable mortgage.
Code. – NO. It was a Contract of Sale.
Furthermore, petitioner has not shown any proof
HELD: that the Eniceo heirs were indebted to respondent.
Validity of the deed of sale to respondent On the contrary, the deed of sale executed in favor
The contract between the Eniceo heirs and of respondent was drafted clearly to convey that the
respondent executed on September 1973 was a Eniceo heirs sold and transferred the Antipolo
perfected contract of sale. The object of the sale is property to respondent. The deed of sale even
the Antipolo property and the price certain inserted a provision about defrayment of
is P250,000. The contract of sale has also been registration expenses to effect the transfer of title to
consummated because the vendors and vendee respondent.
have performed their respective obligations under
the contract. NOTES:

Equitable Mortgage
Petitioner contends that the deed of sale in favor of
respondent is an equitable mortgage because the
Eniceo heirs remained in possession of the Antipolo
property despite the execution of the deed of sale.

An equitable mortgage is "one which although

lacking in some formality, or form or words, or other
requisites demanded by a statute, nevertheless
reveals the intention of the parties to charge real
property as security for a debt, and contains nothing
impossible or contrary to law." The essential
requisites of an equitable mortgage are:

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2. Spouses Raymundo vs. Spouses Bandong Art. 1602. The contract shall be presumed to be
(526 SCRA 514, G.R. No. 171250, July 4, 2007) an equitable mortgage, in any of the following
SPS. CARLOS AND EULALIA RAYMUNDO and SPS. cases:
ANGELITO AND JOCELYN BUENAOBRA, Petitioners, (1) When the price of a sale with right to
vs. SPS. DOMINADOR and ROSALIA repurchase is unusually inadequate;
BANDONG, Respondents. (2) When the vendor remains in possession as
lessee or otherwise;
FACTS: (3) When upon or after the expiration of the
 Eulalia Raymundo was engaged in the business right to repurchase another instrument
of buying and selling cattle. extending the period of redemption or granting
 Dominador Bandong worked as a biyahero for a new period is executed;
Raymundo for 30 years. Because of his long (4) When the purchaser retains for himself a
years of service without any derogatory record, part of the purchase price;
Raymundo no longer required him to post any (5) When the vendor binds himself to pay the
security to perform his duties. taxes on the thing sold.
 Subsequently, Bandong incurred shortage in his (6) In any other case where it may be fairly
cattle procurement operation costing P70,000 inferred that the real intention of the parties is
 Bandong executed a Deed of Sale in favor of that the transaction shall secure the payment of
Raymundo on a 96 sq m parcel of land in a debt or the performance of any other
Caloocan City which he owned obligation.
 Raymundo sold said property to Buenaobra.
 Buenaobra instituted an action for ejectment Art. 1604. The provisions of Article 1602 shall
against Bandong. Bandong alleged that there also apply to a contract purporting to be an
was no sale intended but only equitable absolute sale.
mortgage to secure the shortage incurred by
Bandong to Raymundo.  For Articles 1602 and 1604 to apply, two
 Buenaobra alleged that she was a buyer in GF. requisites must concur
 RTC ruled in favor of Raymundo, declaring that
the Deed of Sale was valid and binding. CA 1. The parties entered into a contract
reversed, declaring that the transaction was an denominated as a contract of sale
equitable mortgage, not a sale. 2. Their intention was to secure an
existing debt by way of an equitable
ISSUE: WON the parties entered into a Contract of mortgage.
Sale or Equitable Mortgage? ~ Equitable Mortgage
 The decisive factor in evaluating such
HELD: agreement is the intention of the parties, as
 The transaction between Raymundo and shown not necessarily by the terminology used
Bandong was an equitable mortgage, not a sale. in the contract but by all the surrounding
Thus, Bandong can redeem the subject circumstances.
property.  Applying such principle, the SC ruled that in
 An equitable mortgage is one that - although executing the said Deed of Sale, Raymundo and
lacking in some formality or other requisites Bandong never intended to transfer ownership
demanded by a statute, nevertheless reveals the of the subject property but to burden the same
intention of the parties to charge a real property with an encumbrance to secure the
as security for a debt and contains nothing indebtedness incurred by Dominador on the
impossible or contrary to law. occasion of his employment with Eulalia.
 The instances when a contract, regardless of its  Eulalia admitted that it was her customary
nomenclature, may be presumed to be an business practice to require her biyaheros to
equitable mortgage are enumerated in the Civil deliver the titles to their real properties and
Code as follows: execute in her favor the corresponding deeds of
sale as security for the money she provided for
their cattle procurement task. This defeats the

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contention that Dominador easily ceded his survived by Leoncia and their three sons, Jose, Sr.,
property as payment for his obligation. Teofilo and Jose, Jr. Potenciana having predeceased
 The explicit provision of Article 1602 that any of her father. In July 1955, Leoncia and her three sons
those circumstances would suffice to construe a executed a deed denominated Kasulatan ng Biling
contract of sale to be one of equitable mortgage Mabibiling Muli (“Kasulatan”), whereby they sold
is in consonance with the rule that the law the land and its existing improvements to the
favors the least transmission of property rights. Spouses Francia for P500, subject to the vendors'
 The existence of any one of the conditions right to repurchase for the same amount sa oras na
under Article 1602, not a concurrence, or an sila'y makinabang. Despite such sale, Teofilo and
overwhelming number of such circumstances, Jose, Jr. and their respective families remained in
suffices to give rise to the presumption that the possession of the property and paid the realty taxes
contract is an equitable mortgage. thereon.
 Said transaction was not void in its entirety but
an equitable mortgage, thereby merely altering Leoncia and her children did not repay the amount
the relationship of the parties from seller and of P500. Alejandro, the son of Jose, Sr., first partially
buyer, to mortgagor and mortgagee, while the paid to the Spouses Francia the amount ofP265 for
subject property is not transferred but the obligation of Leoncia, his uncles and his father.
subjected to a lien. Alejandro later paid the balance of P235to the heirs
 Furthermore, Buenaobra cannot be a buyer in of Spouses Francia. Thus, in August 1970, the heirs
GF. She admitted that she was aware of Spouses Francia executed a deed
that Dominador and a certain Lourdes were in entitled Pagsasa-ayos ng Pag-aari at Pagsasalin
possession of the subject property. (Settlement of Estate and Assignment), whereby
 As regards the belated filing by Bandong of an they transferred and conveyed to Alejandro all their
action to annul the sale, the SC held that the rights and interests in the property forP500.
one who is in actual possession of a piece of
land claiming to be the owner thereof may Alejandro thereafter executed a Kasulatan ng
await to vindicate his right. Pagmeme-ari (Document of Ownership), wherein he
declared that he had acquired all the rights and
 Petition DENIED. interests of the heirs of the Spouses Francia,
including the ownership of the property, after the
NOTES: vendors had failed to repurchase within the given
period.

Nevertheless, in October 1970, Alejandro, his

grandmother (Leoncia), and his father (Jose, Sr.)
executed a Magkakalakip na Salaysay (Joint
Affidavit), by which Alejandro acknowledged the
3. Heirs of Reyes vs. Reyes right of Leoncia, Jose, Jr., and Jose, Sr. to repurchase
(G.R. No. 158377, August 4, 2010) the property at any time for the same amount
HEIRS OF JOSE REYES, JR., namely: MAGDALENA C. of P500.
REYES, OSCAR C. REYES, GAMALIEL C. REYES,
NENITA R. DELA CRUZ, RODOLFO C. REYES, and Leoncia died intestate. Even after her death, Teofilo
RODRIGO C. REYES, Petitioners, vs. AMANDA S. and Jose, Jr., with their respective families,
REYES, CONSOLACION S. REYES, EUGENIA R. continued to reside in the property.
ELVAMBUENA, LUCINA R. MENDOZA, PEDRITO S.
REYES, MERLINDA R. FAMODULAN, EDUARDO S. In 1993, Alejandro also died intestate. Surviving him
REYES, and JUNE S. REYES, Respondents. were his wife, Amanda Reyes, and their children
(respondents herein).
FACTS:
Antonio Reyes and his wife, Leoncia own a parcel of In 1994, Amanda asked the heirs of Teofilo and Jose,
residential land. On that land they constructed their Jr., to vacate the property because she and her
dwelling. Antonio Reyes died intestate, and was children already needed it. Petitioners refused to
comply. Respondents later on initiated a suit for

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quieting of title and reconveyance in the RTC,

alleging that their predecessor Alejandro had
acquired ownership of the property by virtue of
the deed Pagsasa-ayos ng Pag-aari at Pagsasalin

In their answer, the petitioners averred that

the Kasulatan was an equitable mortgage, not
a pacto de retro sale;

ISSUE: Was the Kasulatan ng Biling Mabibiling Muli

an equitable mortgage or a pacto de retro sale. –
EQUITABLE MORTGAGE.

HELD:
The Kasulatan ng Biling Mabibiling Muli was an
equitable mortgage, not a pacto de retro sale. There
was no dispute that the purported vendors had
continued in the possession of the property even
after the execution of the agreement; and that the
property had remained declared for taxation
purposes under Leoncia's name, with the realty
taxes due being paid by Leoncia, despite the
execution of the agreement. Such established
circumstances are among the badges of an equitable
mortgage enumerated in Article 1602, paragraphs 2
and 5 of the Civil Code, to wit:

Art. 1602. The contract shall be presumed to be an

equitable mortgage, in any of the following cases:
xxx
(2) When the vendor remains in possession as lessee
or otherwise;
xxx
(5) When the vendor binds himself to pay the taxes
on the thing sold;
xxx

The existence of any one of the conditions

enumerated under Article 1602 of the Civil Code, not
a concurrence of all or of a majority thereof, suffices
to give rise to the presumption that the contract is
an equitable mortgage. Consequently, the contract
between the vendors and vendees (Spouses Francia)
was an equitable mortgage.

NOTES:

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