Art.

1545
The law protects vendors
and vendees from
contractual liability by
providing that the
fulfillment of conditions are
necessary for the perfection
of a contract and that the
absence of such fulfillment
from the other party, either
party may rescind the
contract or waive the
fulfillment of the condition.
Such action is not breach of
contract as there will have
been no perfection binding
the parties and making them
liable.
This protection
reflects the reciprocity of
contracts and their potential
for gratuity by wavier of the
fulfillment of conditions.
landmark
lim vs ca
[G.R. No. 118347. October 24, 1996.]
VICENTE and MICHAEL LIM, petitioners, vs. COURT OF APPEALS and LIBERTY H.
LUNA, respondents.
FACTS:
On September 2, 1988 private respondent Liberty Luna sold her 1,013.6 square meters parcel of land (located at the
corner of G. Araneta Avenue and Quezon Avenue in Quezon City. ) to petitioners Vicente and Michael Lim for
P3,547,600.00. She received P200k as earnest money from Zapata Ralty (petitioners' broker) and the balance shall be paid
in full afer the squatters/occupants have totally vacated the premises. It was also stated in their agreement that Luna
assumes responsibility to eject said squatters within 60 days from the date of receipt of earnest money;; and in case the
seller shall fail in her commitment to eject the squatters/occupants within said period, the seller shall refund to the buyer
this sum of P200,000.00; [plus another sum of ONE HUNDRED THOUSAND (P100,000.00) PESOS as liquidated
damages]; however, if the buyer shall fail to pay the balance after the seller has ejected the squatters/occupants, this sum
of P200,000.00 shall be forfeited by the seller. Luna signed the agreement but crossed out the additional P100k liquidated
damages. Private respondent Luna failed to eject the squatters from the land despite her alleged efforts to do so. It appears
that private respondent asked the help of a building official and a city engineer to effect ejectment. Nonetheless,
petitioners did not demand the return of their earnest money. Thereafter, parties met again to negotiate a price increase to
facilitate the ejectment of the squatters. The parties agreed to an increase of P500.00 per square meter, by rounding off the
total purchase price to P4,000,000.00, with the remaining 13.6 square meters of the 1,013.6 square meters given as a
discount. Less the P200,000.00 given as earnest money, the balance to be paid by petitioners was P3,800,000.00.After a
few days, private respondent tried to return the earnest money alleging her failure to eject the squatters. She claimed that
as a result of her failure to remove the squatters from the land, the contract of sale ceased to exist and she no longer had
the obligation to sell and deliver her property to petitioners.
ISSUE:
Whether the non-fulfillment of the condition of ejecting the squatters resulted in defendant's losing the right to demand
that plaintiff sell the land to them.
HELD:
NO.
The agreement, as quoted above, shows a perfected contract of sale. Under Art. 1475 of the Civil Code, there is a
perfected contract of sale if there is a meeting of the minds on the subject and the price. Indeed, the earnest money given
is proof of the perfection of the contract. . It is true that private respondent undertook to eject the squatters before delivery
of the property within a certain period and that for her failure to carry out her obligation she could be ordered to refund
the P200,000.00 earnest money. But whether she would be obliged to do so depends on petitioners who can waive the
condition and opt to proceed with the sale instead. Private respondent Luna contends that as the condition of ejecting the
squatters was not met, she no longer has an obligation to proceed with the sale of her lot. This contention is erroneous.
Private respondent fails to distinguish between a condition imposed on the perfection of the contract and a condition
imposed on the performance of an obligation. Failure to comply with the first condition results in the failure of a contract,
while failure to comply with the second condition only gives the other party the option either to refuse to proceed with the
sale or to waive the condition. Thus, Art. 1545 of the Civil Code states: ART. 1545.Where the obligation of either party to
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. Where
the ownership in the things has not passed, the buyer may treat the fulfillment by the seller of his obligation to deliver the
same as described
and as warranted expressly or by implication in the contract of sale as a
condition of the obligation of the buyer to perform his promise to accept and
pay for the thing. (Emphasis added)
In this case, there is already a perfected contract. The condition was imposed only
on the performance of the obligation. Hence, petitioners have the right to choose
whether to demand the return of P200,000.00 which they have paid as earnest money or
to proceed with the sale. They have chosen to proceed with the sale and private
respondent cannot refuse to do so.
Indeed, private respondent is not the injured party. She cannot rescind the contract
without violating the principle of mutuality of contracts, which prohibits allowing the
validity and performance of contracts to be left to the will of one of the parties.

affirming

Catungal vs. Rodriguez Facts: Agapita Catungal owned a parcel of land in her name situated in Talamban, Cebu city. Said
property was allegedly the exclusive paraphernal property of Agapita. Agapita, with the consent of her husband Jose,
entered into a Contract to Sell with respondent Rodriguez. Subsequently, the Contract to Sell was upgraded into a
Conditional Deed of Sale between the same parties. In accordance with theConditional Deed of Sale, Rodriguez actively
negotiated for the road right of way. Spouses Catungal requested an advance of P5,000,000.00 on the purchase price for
personal reasons. However, Rodriguez refused on the ground that the amount was not due under the terms of their
agreement. Further, he learned that the Catungals were offering the property for sale to third parties. Rodriguez then
received letterssigned by Atty. Jose Catungal demanding that the former to make up his mind about buying the land or
exercising his option to buy because the Catungals received other offers and they needed money to pay personal
obligations, and that should Rodriguez fail to exercise his option to buy the land, the Catungals warned that they would
consider the contract cancelled and that they were free to look for other buyers
On the other other hand, respondent Rodriguez contended that the Catungals unilateral rescission of the
Conditional Deed of Sale was unjustified. Spouses Catungal alleged that they have the right to rescind thecontract in view
of respondents failure to negotiate the road right of way and his refusal to pay the
additional P5,000,000.00. Catungal likewise contended that respondent Rodriquez did not have right to rescind contract
and that the contract being reciprocal, meant both parties had the right to rescind. Held: A provision in a Conditional Deed
of Sale stating that the vendee shall pay the balance of the purchase price when he has successfully negotiated and secured
a road right of way is not a condition on the perfection of the contract nor on the validity of the entire contract or its
compliance as contemplated by Article 1308 of the Civil Code- such condition is not purely potestative- such a condition
is likewise dependent on chance as there is no guarantee that the vendee and the third-party landowners would come to an
agreement regarding the road right of way, a type mixed condition expressly allowed under Article1182 of the Civil Code.
Where the so-called potestative condition is imposed not on the birth of the obligation but on its fulfillment, only the
condition is avoided, leaving unaffected the obligation itself
Art. 1546
The law provides vendee's
with protection from
vendors making fraudulent
claims and assertions by
making any guarantees the
vendors make express
warranties on the product, if
the vendee relies upon such
guarantee or makes it a
determining factor in
purchasing the goods.
However, the law grants
vendors latitude in their
statements and bargaining in
that a warranty becomes
expressed if the vendor's
landmark
Harrison Motors vs Navarra (Canada)Facts: June of 1987 Harrison Motors Corporation through its president, Renato
Claros, sold two (2) Isuzu Elf trucks to private respondentRachel Navarro, owner of RN Freight Lines, a franchise holder
operating and maintaining a fleet of cargo trucks all over Luzon. Petitioner, aknown importer, assembler and
manufacturer, assembled the two (2) trucks using imported component parts. Prior to the sale, RenatoClaros represented
to private respondent that all the BIR taxes and customs duties for the parts used on the two (2) trucks had been paidfor.10
September 1987 the Bureau of Internal Revenue (BIR) and the Land Transportation Office (LTO) entered into a
Memorandum of Agreement
(MOA) which provided that prior to registration in the LTO of any assembled or re-assembled motor vehicle which
usedimported parts, a
Certificate of Payment
should first be obtained from the BIR to prove payment of all taxes required under existing laws.On 12 October 1987 the
Bureau of Customs (BOC) issued
Customs Memorandum Order No. 44-87
promulgating rules, regulations andprocedure for the voluntary payment of duties and taxes on imported motor vehicles
assembled by non-assemblers. Pursuant to the 10 September 1987 MOA between the BIR and the LTO, the BIR issued on
18 December 1987
words and actions amount
to them. Simply stating an
opinion or likeliness that the
goods shall suffice is not a
warranty.
The vendor need not
use the words warrant,
guarantee, warranty, or
similar language in order to
establish an express
warranty. Any statement
clearly amounting to such
serves as an express
warranty.
Revenue MemorandumOrder No. 44-87
which provided the procedure governing the processing and issuance of the
Certificate of Payment
of internal revenuetaxes for purposes of registering motor vehicles. On 16 June 1988 the BIR, BOC and LTO entered into
a tripartite MOA which provided that prior to the registration in the LTO of any locallyassembled motor vehicle using
imported component parts, a
Certificate of Payment
should first be obtained from the BIR and the BOC toprove that all existing taxes and customs duties have been paid.In
December of 1988 government agents seized and detained the two (2) Elf trucks of respondent after discovering that there
were stillunpaid BIR taxes and customs duties thereon. The BIR and the BOC ordered private respondent to pay the
proper assessments or hertrucks would be impounded. Private respondent went to Claros to ask for the receipts evidencing
payment of BIR taxes and customsduties; however, Claros refused to comply. Private respondent then demanded from
Claros that he pay the assessed taxes and warnedhim that he would have to reimburse her should she be forced to pay for
the assessments herself. Her demands were again ignored.M- But wanting to secure the immediate release of the trucks to
comply with her business commitments, private respondent paid theassessed BIR taxes and customs duties amounting to
P32,943.00.
Consequently, she returned to petitioners office to ask for

reimbursement, but petitioner again refused, prompting her to send a demand letter through her lawyer. When petitioner
still ignored herletter, she filed a complaint for a sum of money on 24 September 1990 with the Regional Trial Court of
Makati Trial Court: ordering petitioner to reimburse private respondent in the amount of P32,943.00 for the customs
duties and internal revenuetaxes the latter had to pay to discharge her two (2) Elf trucks from government custody.
Petitioner was also required to pay P7,500.00 for
attorneys fees plus the costs.[15]
CA: sustained the lower court, hence this recourse of petitioner.
Petitioners Arguments:
a. that it was no longer obliged to pay for the additional taxes and customs duties imposed on the imported component
partsby the Memorandum Orders and the two (2) Memoranda of Agreement since such administrative regulations only
took effect after theexecution of its contract of sale with private respondent.Holding it liable for payment of the taxes
specified in the administrative regulations, which have the force and effect of laws,would not only violate the non-
impairment clause of the Constitution but also the principle of non-retroactivity of laws provided in Art. 4of the Civil
Code.b. that private respondent should be the one to pay the internal revenue taxes and customs duties.
It claims that at the timethe Memorandum Orders and the two (2) Memoranda of Agreement took effect the two (2) Elf
trucks were already sold to privaterespondent, thus, it no longer owned the vehicles.
Whatever payments private respondent made to the government after the sale weresolely her concern and such burden
should not be passed on to petitioner.c. that it had paid the taxes due on the imported parts otherwise it would not have
been able to obtain their release from theBOC and to register the vehicles with the LTO.
Issue (under warranty
): WON Petitioner is liable for warranty.YES
Ruling(under warranty
): It is true that the ownership of the trucks shifted to private respondent after the sale. But petitioner mustremember that
prior to its consummation it expressly intimated to her that it had already paid the taxes and customs duties. Such
representation shall be considered as a sellers express warranty under Art. 1546 of the Civil Code which covers any
affirmat
ion of fact orany promise by the seller which induces the buyer to purchase the thing and actually purchases it relying on
such affirmation or promise.



It includes all warranties which are derived from express language, whether the language is in the form of a promise or
representation.Presumably, therefore, private respondent would not have purchased the two (2) Elf trucks were i
t not for petitioners assertion and
assurance that all taxes on its imported parts were already settled.This express warranty was breached the moment
petitioner refused to furnish private respondent with the corresponding receipts sincesuch documents were the best
evidence she could present to the government to prove that all BIR taxes and customs duties on theimported component
parts were fully paid. Without evidence of payment, she was powerless to prevent the trucks from beingimpounded.Under
Art. 1599 of the Civil Code, once an express warranty is breached the buyer can accept or keep the goods and maintain an
actionagainst the seller for damages. This was what private respondent did. She opted to keep the two (2) trucks which she
apparently neededfor her business and filed a complaint for damages, particularly seeking the reimbursement of the
amount she paid to secure the releaseof her vehicles.Ruling(based on other arguments. For recit
?
):a.

Customs Memorandum Order No. 44-87 is concerned with the Rules, Regulations and Procedures in the Payment of
Duties and Taxes on Imported Vehicles Locally Assembled by Non-Assemblers.
It does not charge any new tax
. It simply provides the procedure on how owners/consignees or their purchasers couldvoluntarily initiate payment for any
unpaid customs duties on locally assembled vehicles using imported component parts.Neither does BIR Revenue
Memorandum Order No. 44-87[19] exact any tax.
It merely outlines the procedure which governsthe processing and issuance of the Certificate of Payment
of internal revenue taxes for purposes of registering motor vehicleswith the LTO.What Sec. 10, Art. III, of the
Constitution prohibits is the passage of a law which enlarges, abridges or in any manner changesthe intention of the
contracting parties. The Memorandum Orders and the two (2) Memoranda of Agreement do not imposeany additional
taxes which would unduly impair the contract of sale between petitioner and private respondent. Instead,
theseadministrative regulations were passed to enforce payment of existing BIR taxes and customs duties at the time of
importation.b. although private respondent is the one required by the administrative regulations to secure the Certificate of
Payment forthe purpose of registration, petitioner as the importer and the assembler/manufacturer of the two (2) Elf trucks
is still the one
liable for payment of revenue taxes and customs duties. Petitioners obligation to pay does not arise from the
administrative
regulations but from the tax laws existing at the time of importation. Hence, even if private respondent already owned the
two(2) trucks when the Memorandum Orders and Memoranda of Agreement took effect, the fact remains that petitioner
was stillthe one duty-bound to pay for the BIR taxes and customs duties.It is also quite obvious that as between petitioner,
who is the importer-assembler/manufacturer, and private respondent, whois merely the buyer, it is petitioner which has
the obligation to pay taxes to the BIR and the BOC.c. Non-sequitur. The fact that petitioner was able to secure the release
of the parts from customs and to register the assembledtrucks with the LTO does not necessarily mean that all taxes and
customs duties were legally settled. As a matter of fact, the provisions of the two (2) Memoranda of Agreement clearly
establish that the government is aware of the widespread registration of assembled motorvehicles with the LTO even if the
taxes due on their imported component parts remain unpaid. Paragraph 1 of the 10 September 1987



affirming
JAIME D. ANG v. COURT OF APPEALS AND BRUNO SOLEDAD

567 SCRA 53 (2008)

Even under the principle of solutio indebiti, Ang cannot recover from Soledad the amount he paid BA Finance since Ang
settled the mortgage debt on his own volition and that Soledad did not benefit therein, the latter not being the one who
mortgaged the vehicle.

Under a car-swapping scheme, Bruno Soledad sold his Mitsubishi GSR sedan 1982 model to Jaime Ang. For his part,
Ang conveyed to Soledad his Mitsubishi Lancer model 1988. 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 Paul Bugash. Before the deed could be registered in Bugashs name, however, the vehicle was seized by virtue of a writ
of replevin on account of the alleged failure of Ronaldo Panes, the owner of the vehicle prior to Soledad, to pay the
mortgage debt constituted thereon.

To secure the release of the vehicle, Ang paid BA Finance. Soledad refused to reimburse, despite repeated demands,
drawing Ang to charge him for Estafa with abuse of confidence. By Resolution, the City Prosecutors Office dismissed
the complaint for insufficiency of evidence, drawing Ang to file for consecutive complaints for damages against Soledad
before the Regional Trial Court (RTC) of Cebu City. Subsequently, the RTC rendered judgment in favor of Ang for the
sake of justice and equity, and in consonance with the salutary principle of non-enrichment at anothers expense. The
RTC then ordered Soledad to pay Ang the amount the latter paid to BA Finance.

Soledad then appealed to the Appellate Court, which reverses the decision of the RTC. The Court of Appeals dismissed
Angs petition on the ground that the filing of said complaint seeking the awarding of damages for breach of warranty has
already prescribed.

Hence, this petition to the High Court.

ISSUE:
Whether or not Angs cause of action had not yet prescribed when he filed the complaint


HELD:

First Issue

The resolution of the sole issue of whether the complaint had prescribed hinges on a determination of what kind of
warranty is provided in the Deed of Absolute Sale subject of the present case.

A warranty is a statement or representation made by the seller of goods, contemporaneously and as part of the contract of
sale, having reference to the character, quality or title of the goods, and by which he promises or undertakes to insure that
certain facts are or shall be as he then represents them. Warranties by the seller may be express or implied. Art. 1546 of
the Civil Code defines express warranty Any affirmation of fact or any promise by the seller relating to the thing is an
express warranty if the natural tendency of such affirmation or promise is to induce the buyer to purchase the same, and if
the buyer purchases the thing relying thereon. On the other hand, an implied warranty is that which the law derives by
application or inference from the nature of the transaction or the relative situation or circumstances of the parties,
irrespective of any intention of the seller to create it.

The ruling in Engineering & Machinery Corporation vs. Court of Appeals states that the prescriptive period for
instituting actions based on a breach of express warranty is that specified in the contract, and in the absence of such
period, the general rule on rescission of contract, which is four years (Article 1389, Civil Code).

As 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.

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.

Art. 1547 Landmark same ang v. ca
Implied warranties are
natural warranties that are
expected and need not be
expressed by either vendor
or vendee. There is a
presumption of good faith in
their transaction that
automatically renders
certain warranties to the
vendee, regardless of the
vendor's statements. The
presumption is that the
vendor has a right to sell the
goods and that they are in
good condition, which gives
rise to the implied
warranties to the seller's title
and against hidden defects
or unknown encumbrances.
However, this does
not apply to sales by virtue
of authority or law where
the sale of a thing is in the
legal or equittable interest
of a third person.
Art. 1548
The warranty of against
eviction is meant to protect
the vendee against fraud or
lack of diligence on the part
of the vendor, since it
hinges on a right existing
prior to the sale. This means
landmark
G.R. No. L-42636, 1 August 1985
Escaler vs. CAFacts: S
pouses Africa V. Reynoso and Jose L, Reynoso sold topetitioners several others, a parcel of land which Deed of
Salecontained a covenant against eviction. On April 21, 1961, theRegister of Deeds of Rizal and A. Doronilla Resources
Development,Inc. filed a case before the CFI of Rizal for the cancellation of the OCTissued in the name of Angelina
Reynoso (predecessor-in-interest of private respondents-vendors) on the ground that the propertycovered by said title is
already previously registered under a TCTissued in the name of A. Doronilla Development, Inc. In that case, anorder was
that the vendee is in good
faith.
The law also
protects the vendee by
virtue of the nature of
eviction where the vendee
would be deprived wholly
or partly of his right to the
use of the land. Considering
the socioeconomic value of
the land and the security it
provides, it is only right that
a vendee be protected
against eviction from rights
existing prior to the sale of
the land.
issued declaring the OCT null and void. Petitioners,spouses Maria de Leon Escaler and Ernesto Escaler and
spousesCecilia J. Roxas and Pedro Roxas, filed a civil case before the CFI of Rizal against their vendors, herein private
respondents, spouses JoseL. Reynoso and Africa Reynoso for the recovery of the value of theproperty sold to them plus
damages on the ground that the latterhave violated the vendors' "warranty against eviction."The CFI rendered a judgment
ordering the return to the plaintiffsMaria Luisa de Leon Escaler and Ernesto Escaler, Cecilia J. Roxas andPedro Roxas,
the value of the property sold to them at the time of eviction. The CA reversed this decision and ruled that petitioners
asvendees had not given private respondents-vendors, formal noticeof the eviction case as mandated by Arts. 1558 and
1559 of the NewCivil Code.
Issue:
WON a vendors liability for eviction may be enforced in the
case at bar.
Held:
The Court ruled that the petition is devoid of merit.Consequently, it must be dismissed.Article 1548, in relation to Articles
1558. and 1559 of the New CivilCode reads as follows:Art. 1548, Eviction shall take place whenever by a final judgment
based on a right prior to the sale or an actimputable to the vendor, the vendee is deprived of thewhole or of a part of the
thing purchased.The vendor shall answer for the eviction even thoughnothing has been said in the contract on the
subject.The contracting parties, however, may increase, diminish,or suppress this legal obligation of the vendor.XxxxArt.
1558. The vendor shall not be obliged to make goodthe proper warranty,
unless he is summoned in the suit for eviction at the instance of the vendee
. (emphasis supplied)Art. 1559. The defendant vendee shall ask, within the timefixed in the Rules of Court for answering
the complaintthat the vendor be made as co-defendant
In n order that a vendor's liability for eviction may be enforced, thefollowing requisites must concur:

a) there must be a final judgment; b) the purchaser has been deprived of the whole or partof the thing sold; c) said
deprivation was by virtue of a right prior tothe sale made by the vendor; and d) the vendor has beensummoned and made
co-defendant in the suit for eviction at theinstance of the vendee.In the case at bar, the fourth requisite

that of being summoned inthe suit for eviction (Case No. 4252) at the instance of the vendee

is not present. All that the petitioners did, per their very admission,was to furnish respondents, by registered mail, with a
copy of theopposition they (petitioners filed in the eviction suit. Decidedly, thisis not the kind of notice prescribed by the
aforequoted Articles 1558and 1559 of the New Civil Code. The term "unless he is summoned inthe suit for eviction at the
instance of the vendee" means that therespondents as vendor/s should be made parties to the suit at theinstance of
petitioners-vendees, either by way of asking that theformer be made a co- defendant or by the filing of a third-
partycomplaint against said vendors. Nothing of that sort appeared tohave been done by the petitioners in the instant case


affirming
quirong vs dbp
Here, the Quirong heirs alleged in their complaint that they were entitled to the rescission of the contract of sale of the lot
between the DBP and Sofia Quirong because the decision in Civil Case D-7159 deprived her heirs of nearly the whole of
that lot. But what was the status of that contract at the time of the filing of the action for rescission? Apparently, that
contract of sale had already been fully performed when Sofia Quirong paid the full price for the lot and when, in
exchange, the DBP executed the deed of absolute sale in her favor. There was a turnover of control of the property from
DBP to Sofia Quirong since she assumed under their contract, the ejectment of squatters and/or occupants on the lot, at
her own expense.

Actually, the cause of action of the Quirong heirs stems from their having been ousted by final judgment from the
ownership of the lot that the DBP sold to Sofia Quirong, their predecessor, in violation of the warranty against eviction
that comes with every sale of property or thing. Article 1548 of the Civil Code provides:

Article 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 thing purchased.

x x x x

With the loss of 80% of the subject lot to the Dalopes by reason of the judgment of the RTC in Civil Case D-7159, the
Quirong heirs had the right to file an action for rescission against the DBP pursuant to the provision of Article 1556 of the
Civil Code which provides:

Article 1556. Should the vendee lose, by reason of the eviction, a part of the thing sold of such importance, in relation to
the whole, that he would not have bought it without said part, he may demand the rescission of the contract; but with the
obligation to return the thing without other encumbrances than those which it had when he acquired it. x x x

Finally, the Court concluded that the action for rescission was barred by prescription as it was filed beyond the 4-year
prescriptive period:

And that action for rescission, which is based on a subsequent economic loss suffered by the buyer, was precisely the
action that the Quirong heirs took against the DBP. Consequently, it prescribed as Article 1389 provides in four years
from the time the action accrued. Since it accrued on January 28, 1993 when the decision in Civil Case D-7159 became
final and executory and ousted the heirs from a substantial portion of the lot, the latter had only until January 28, 1997
within which to file their action for rescission. Given that they filed their action on June 10, 1998, they did so beyond the
four-year period.
Art. 1549
The law protects the vendee
in cases where no appeal is
made. The absence of an
appeal does not absolve the
vendor of liability, nor can
the vendor blame the
vendee for lack of diligence
as it was the vendor's lack
of diligence that created the
situation of eviction.

Art. 1550
The law contemplates that a
vendee, in making a claim
to his right to the land he is
to purchase, must exercise
due diligence in bringing
action to protect his right to
the land. Should he fail to
exercise diligence and the
prescriptive period ends
after the transfer of the title,
the vendor has no liability
as it was the vendee's failure
to act that caused his loss.
No case
Art. 1551 No case
The law protects the vendee
from the vendor's fraudulent
and illegal acts of non-
payment of taxes. The
vendee, being unaware of
such a condition, is
protected from loss due to
the negligence or
fraudulence of the vendor
should the property be sold
in public auction due to the
non-payment of taxes.
Art. 1552
Article 1552 is based upon
the principle of non-
enrichment at the expense
of another, therefore
rendering the judgment
debtor liable for the sale of
property that he has no right
to sell. In case the judgment
creditor effected the sale, he
may not retain the proceeds
at the expense of the
purchaser.

Art. 1553
The law provides the vendor
with protection at the will of
the vendee if the vendor acts
in good faith. This being the
case, the vendee may
exempt the vendor from
answering for eviction.
Landmark jm tuason to be digested
However, if the vendee
knew of the defect of the
title, he is in bad faith, and
therefore has not right to the
warranty against eviction.
Art. 1554
The law contemplates two
situations where wavier of
warranty against eviction
occurs. In the first situation,
the vendee waives without
knowledge and assumption
of risks. His ignorance
renders the vendor liable for
the price of the thing sold at
the time of the eviction. The
second situation has a
vendee waiving his right to
warranty against eviction
with full knowledge and
assumption of risk, this
renders a vendor in good
faith free from liability.

Art. 1555
The law outlines the rights
of the vendee against the
vendor in the event of an
eviction. The law seeks to
duly protect the vendee and
encourage greater diligence
in vendors by expressly
providing the vendor and
vendee with respective

obligations and rights in the
event of an eviction.
The law ultimately
contemplates a situation
where there will be no
eviction of vendees arising
from rights, defects, or
encumbrances existing prior
to the sale and known by the
vendor. However, it is
unlikely that sellers of land
are fully aware of such
liabilities, nor are the buyers
aware of their rights. So the
law ultimately serves to
protect buyers in the event
of litigation.
Art. 1556
Here, the law contemplates
the protection of the
vendee's rights and his
original will paired with his
expectations. The right to
rescind the contract or sue
for damages hinges on the
vendee's need for the whole
of the thing due in the
former case of partial
eviction, and the necessary
need to purchase two things
in order to obtain the one
thing needed in the case of
the latter where the vendee

purchases two or more
things jointly sold.
The law avoids a
lengthy process of
negotiation by granting the
vendee the right to simply
rescind the contract in lieu
of suing for damages.
Art. 1557
This provision simply
reiterates the need for final
judgment in the
enforcement of warranty in
case of eviction in relation
to the two essential
elements of its enforcement:
(1) whole or partial
deprivation of the thing
sold, and (2) the existence
of a final judgment.
The reason is that
final judgment makes the
determination of the
respective rights of the
vendor and the vendee.
Enforcement in the absence
of final judgment could
potentially cause
unnecessary injustice when
simply waiting for judgment
to be final could avoid such
injustice.

Art. 1558
Summoned in suit refers to
making the vendor a party
to the suit. The absence of
the vendor being a party and
an opportunity to defend
himself unbinds him from
the warranty.
The laws object is to allow
the vendor a chance to
intervene and defend the
title he had transferred, as
he would know best the
circumstances behind the
palintiff's claim and be in
the best position to defend
the validity of his title.
Art. 1559
The law simply gives the
guidelines for the vendee to
protect his right by making
the vendor a co-defendant.
The vendee should call the
vendor and inform the court
of the vendor becoming a
co-defendant within the
time alotted by the Rules of
Court to preserve his right
of warranty. The co-
defendant vendor shal
answer the complaint of the
plaintiff seeking to deprive
the vendee of the property
purchased

Art. 1560
The law protects the vendee
from purchasing any
property he does not wish to
purchase by virtue of
encumbrances or burdens
that would have prevented
the vendee from purchasing
the same had he known of
their existence. Therefore
the vendee is allowed to
rescind the contract due to
these unknown
circumstances.
However, the law
prescribes a period for the
vendee's action of one year
from the execution of the
deed, and, one year from the
execution having passed, an
additional provision
allowing the vendee to bring
action one year from the
discovery of the
encumbrance. Failure to
bring action within the
prescribed period serves as
tacit acceptance of the
encumbrance.
Only genuinely
unknown encumbrances are
contemplated by this
provision. Any prior
No case
knowledge by the vendee of
the encumbrance, its
registry in the Registry of
Property, or the
encumbrance being
apparent and visible renders
this action unavailable to
the vendee.
Art. 1561
The law establishes the
vendors liability for the
defects of the property sold
that render it unfit or
diminishes its fitness for its
intended use. The vendee's
action depends on the action
they would have taken had
they known: recision if they
would have refused
purchase, and reduction of
price or damages had the
vendee still purchased the
property at a lowered price.
However, had the
vendee known of the defect,
or should the vendee be
expected to know to look
for the defect by reason of
his profession or exertise,
the vendor is not liable.
landmark
CONSOLIDATED PLYWOOD V. IFC
149 SCRA 448

FACTS:
Petitioner bought from Atlantic Gulf and Pacific Company, through its sister company Industrial Products Marketing, two
used tractors. Petitioner was issued a sales invoice for the two used tractors. At the same time, the deed of sale
with chattel mortgage with promissory note was issued.
Simultaneously, the seller assigned the deed of sale with chattel mortgage and promissory note to respondent. The used
tractors were then delivered but barely 14 days after, the tractors broke down. The seller sent mechanics but the
tractors were not repaired accordingly as they were no
longer serviceable. Petitioner would delay the payments on the promissory notes until the seller completes its obligation
under the warranty.
Thereafter, a collection suit was filed against petitioner for the payment of the promissory note.

HELD:
It is patent that the seller is liable for the breach in warranty against the petitioner. This liability as a general rule
extends to the corporation to whom it assigned its rights and interests unless the assignee is a holder in due course of
the promissory note in question, assuming the note is negotiable, in which case, the latters rights are based on
a negotiable instrument and assuming further that the petitioners defense may not prevail against it.

The promissory note in question is not a negotiable instrument. The promissory note in question lacks the so-
called words of negotiability. And as such, it follows that the respondent can never be a holder in due course but remains
merely an assignee of the note in question. Thus, the petitioner may raise against the respondents all defenses
available to it against the seller.

recent affirming
NUTRIMIX FEEDS CORP V. CA 441 SCRA 357 (2004)
FACTS: In 1993, private respondent spouses Evangelista procured various animal feeds from petitioner Nutrimix Feeds
Corp. the petitioner gave the respondents a credit period of 30-45 days to postdate checks to be issued as payment for the
feeds. The accommodation was made apparently because the companys president was a close friend of Evangelista. The
various animal feeds were paid and covered by checks with due dates from July 1993-September 1993.
1. 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
2. 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
3. Thereafter, Nutrimix filed a complaint against Evangelista for collection of money with damages.
4. The respondents admitted their unpaid obligation but impugned their liability. The nine 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.
5. 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.
6. Nutrimix alleged that the death of the respondents animals was due to the widespread pestilence in their farm. The
petitioner, likewise, maintained that it received information that the respondents were in an unstable financial condition
and even sold their animals to settle their obligations from other enraged and insistent creditors. It, moreover, theorized
that it was the respondents who mixed poison to its feeds to make it appear that the feeds were contaminated.
7. The trial court held in favor of petitioner on the ground that it cannot be held liable under Articles 1561 and 1566 of
the Civil Code governing hidden defects of commodities sold. The trial court is predisposed to believe that the subject
feeds were contaminated sometime between their storage at the bodega of the Evangelistas and their consumption by the
poultry and hogs fed therewith, and that the contamination was perpetrated by unidentified or unidentifiable ill-meaning
mischief-maker(s) over whom Nutrimix had no control in whichever way.
8. CA modified the decision of the trial court, citing that respondents were not obligated to pay their outstanding
obligation to the petitioner in view of its breach of warranty against hidden defects. The CA gave much credence to the
testimony of Dr. Rodrigo Diaz, who attested that the sample feeds distributed to the various governmental agencies for
laboratory examination were taken from a sealed sack bearing the brand name Nutrimix

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 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. A manufacturer or seller of a product cannot be held liable for any damage
allegedly caused by the product in the absence of any proof that the product in question was defective. The defect must be
present upon the delivery or manufacture of the product; or when the product left the sellers or manufacturers control; or
when the product was sold to the purchaser; or the 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 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.
Art. 1562
The law provides the buyer
JERRY T. MOLES VS. INTERMEDIATE APPELLATE COURT AND MARIANO M. DIOLOSA
G.R. No. 73913, January 31, 1989
with a warranty on the
condition of the goods sold
by reason of the seller's
profession in dealing with
such goods. The seller is
imbued with implied
expertise by virtue of his
profession presuming his
diligence in ensuring quality
goods.
There are two
instances contemplated in
this article. First is the
warranty of fitness that
provides that the goods are
fit for the specific purpose
that the buyer describes as
their ultimate use when he
consults with the seller. The
second it a warranty of
merchantability that
provides that the goods are
fit for the general purpose
for which they are sold.
FACTS:
Jerry Moles(petitioner) bought from Mariano Diolosa owner of Diolosa Publishing House a linotype printing
machine(secondhand machine). Moles promised Diolosa that will pay the full amount after the loan from DBP worth
P50,000.00 will be released. Private respondent on return issued a certification wherein he warrated that the machine was
in A-1 condition, together with other express warranties. After the release of the of the money from DBP, Petitioner
required the Respondent to accomplish some of the requirements. On which the dependant complied the requirements on
the same day.
On November 29, 1977, petitioner wrote private respondent that the machine was not functioning properly. The petitioner
found out that the said machine was not in good condition as experts advised and it was worth lesser than the purchase
price. After several telephone calls regarding the defects in the machine, private respondent sent two technicians to make
necessary repairs but they failed to put the machine in running condition and since then the petitioner wan unable to use
the machine anymore.

ISSUE/S:
1. Whether there is an implied warranty of its quality or fitness.
2. Whether the hidden defects in the machine is sufficient to warrant a rescission of the contract between the parties.

FACTS:
1. It is generally held that in the sale of a designated and specific article sold as secondhand, there is no implied
warranty as to its quality or fitness for the purpose intended, at least where it is subject to inspection at the time of the
sale. On the other hand, there is also authority to the effect that in a sale of secondhand articles there may be, under some
circumstances, an implied warranty of fitness for the ordinary purpose of the article sold or for the particular purpose of
the buyer.
Said general rule, however, is not without exceptions. Article 1562 of our Civil Code, which was taken from the Uniform
Sales Act, provides:
"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;"
Art. 1563
The law provides for the
No case
waiver of warranty of
fitness in cases where the
buyer exercises their own
judgement. But the warranty
subsists should the buyer
inform the seller of the
purpose and the seller
assures the buyer that the
product is capable of
fulfilling the purpose the
buyer intends.
Art. 1564
A warranty as to quality or
fitness for a particular
purpose may be attached to
a contract by usage or trade
in place of execution.
The law provides the
existence of an implied
warranty based on the
knowledge of the parties on
the usage of the goods. The
knowledge may be
expressed, where both
parties express the usage of
the goods, or implied, where
one party expresses
knowledge of the usage of
the goods and reasonably
assumes that the other party
is aware of such usage.
LA FUERZA, INC. vs. COURT OF APPEALS and ASSOCIATED ENGINEERING CO., INC. G.R. No. L-24069
decided on June 28, 1968 illustrates the limitations of the application of these warranties. La Fuerza, a winemaker
engaged Associated Engineering to manufacture and install a flat belt conveyor system for La Fuerza wine bottles.

In May 1960 the installation of the flat belt conveyors for wine bottles was completed and several trial runs until the
month of July 1960 were made in the presence of La Fuerza officers. La Fuerza discovered that the conveyor system,
when operated caused several bottles to collide with each other. In fact, some bottles jumped off the conveyor belt and
were broken, causing damage.

When Associated Engineering billed La Fuerza for the balance of the contract price, La Fuerza refused to pay as the
conveyor system installed did not serve the purpose for which it was manufactured and installed. Associated Engineering
filed a court action to collect the balance.

The Supreme Court applied the provisions on sales of the Civil Code, namely Articles 1561, 1564 and1567, where the
vendee may choose between withdrawing from the contract and demanding a proportionate reduction of the price, with
damages in either case. The choice of the remedy must be exercised within six months from the delivery of the thing sold.
The Court held that:

Article 1497 on sales of the Civil Code provides that when the thing subject of the sale is placed in the control and
possession of the vendee, delivery is complete. Delivery is an act of the vendor. The vendee has nothing to do with the act
of delivery by the vendor. On the other hand, acceptance is an obligation on the part of the vendee (Art. 1582). Delivery
and acceptance are two distinct and separate acts of different parties. Consequently, acceptance cannot be regarded as a
condition to complete delivery.

Thus, upon the completion of the installation of the conveyors in May 1960, and until after the last trial run, in July 1960,
La Fuerza could have exercised the right to categorically accept or reject the installation. Since the conveyors were
actually in its possession and control, the conveyors are considered as delivered and the six (6) month period to accept or
reject under Article 1571 had begun to run.

However, La Fuerza merely informed Associated Engineering of the defects and did not categorically avail of the right to
demand rescission or the withdrawal from the contract until April 1961, or over 10 months after the installation of the
conveyors in question had been completed on May 30, 1960. Due to the lapse in the six-month period provided, La Fuerza
was sentenced to pay Associated Engineering the balance of the contract price with interest from July 1960 until fully
paid, plus as attorneys fees and court costs.

While buyers are protected by the implied warranties provided by law, the Court was adamant that such remedies must be
exercised within the periods provided by law and not a day longer. The Court held in its closing statement in the case that:

Indeed, in contracts of the latter type, especially when goods, merchandise, machinery or parts or equipment thereof are
involved, it is obviously wise to require the parties to define their position, in relation thereto, within the shortest possible
time. Public interest demands that the status of the relations between the vendor and the vendee be not left in a condition
of uncertainty for an unreasonable length of time x x x.
Art. 1565
A seller's description of the
goods which is made part of
the basis of the transacrtion
creates a warranty that the
goods will conform to that
description.
There is a sale by
sample when a small
quantity is exhibited by the
seller as a fair specimen of
the bulk, which is not
present and there is no
No case
opportunity to inspect or
examine the same. To
consititute a sale by sample,
it must appear that the
parties treated the sample as
the standard of quality and
that they contracted with
reference to the sample with
the understanding that the
product to be delivered
would correspond with the
sample. In a contract of sale
by sample, there is an
implied warranty that the
goods shall be free from any
defect which is not apparent
on reasonable examination
of the sample and which
would render the goods
unmerchantable.
Art. 1566
If the seller is not aware of
the defects, the loss will not
make the seller liable. If the
seller was in bad faith, ther
seller remains liable on the
warranty.
The stipulation in a
lease with option to
purchase (treated as a sale
of movable on installments)
that the buyer-lesee
"absolutely releases the
CARLOS B. DE GUZMAN,
vs.
TOYOTA CUBAO, INC.,
FACTS:
On November 27, 1997, BUYER purchased from SELLER a brand new vehicle. The vehicle was delivered to BUYER
two days later. On October 18, 1998, BUYER demanded the replacement of the engine of the vehicle because it
developed a crack after traversing Marcos Highway during a heavy rain. As BUYER knows no reason why the vehicle's
engine would crack just like that, the same could only be due to the fact that said engine and/or the vehicle itself was
defective even from the time it was bought. BUYER asserted that respondent should replace the engine with a new one
based on an implied warranty. SELLER refused to answer for this defect saying it is not covered by the vehicle's
warranty. It refused to replace the vehicle as BUYER demanded (or at least its engine, or even repair the damage). He
further alleged that the BUYER's cause of action had prescribed as the case was filed more than six months from the date
the vehicle was sold and/or delivered.
lessor from any liability
whatsocer as to any and all
matters in relation to
warranty in accordance with
the provisions hereinafter
stipulated," was held as an
express wavier of warranty
against hidden defect in
facor of the seller-lessor
which "absolved the [seller-
lessor] from any liability
arising from any defect or
deficiency of the machinery
they bought."
ISSUES:
1) Whether the SELLER is liable for the redhibitory defects of the vehicle.
2) Whether the BUYER's cause of action had prescribed.
RULING:
The pertinent provisions of the Code set forth the available remedies of a buyer against the seller on the basis of a
warranty against hidden defects:
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 this trade or profession, should have known them. (Emphasis supplied)
Art. 1566. The vendor is responsible to the vendee for any hidden faults or defects in the thing sold, even though he was
not aware thereof.
This provision shall not apply if the contrary has been stipulated and the vendor was not aware of the hidden faults or
defects in the thing sold.
Art. 1571. Actions arising from the provisions of the preceding ten articles shall be barred after six months from the
delivery of the thing sold.
Wherefore, the SELLER is not liable for the defects and a redhibitory action for violation of an implied warranty against
hidden defects has been time-barred.
Art. 1567
The buyer may either:
withdraw (accion
redhibitoria), or demand a
reduction of the price
(accion quanti minoris).
Damages are awarded in
either case. The choice of
remedies is available only
when the thing has not been
lost.
landmark
Coca-Cola vs. Court of Appeals, 227 SCRA 293
Facts:
Respondent Lydia Geronimo was the proprietress of Kindergarten Wonderland Canteen, engaged in the sale of soft drinks
and other goods to the students of Kindergarten Wonderland and to the public. On August 12, 1989, some parents of the
students complained that the Coke and Sprite soft drinks contained fiber-like matter and other foreign substances. She
discovered the presence of some fiber-like substances in the contents of some unopened Coke bottles and a plastic matter
in the contents of an unopened Sprite bottle. The Department of Health informed her that the samples she submitted are
adulterated. Her sales of soft drinks plummeted, and not long after that, she had to close shop. She became jobless and
destitute. She demanded from the petitioner the payment of damages but was rebuffed by it. She then filed a complaint
before the RTC of Dagupan City, which granted the motion to dismiss filed by petitioner, on the ground that the
complaint is based on contract, and not on quasi-delict, as there exists pre-existing contractual relation between the
parties. Thus, on the basis of Article 1571, in relation to Article 1562, the complaint should have been filed within six
months from the delivery of the thing sold. The CA reversed the RTC decision and held that Geronimos complaint is one
for quasi-delict because of petitioners act of negligently manufacturing adulterated food items intended to be sold for
public consumption; and that the existence of contractual relations between the parties does not absolutely preclude an
action by one against the other for quasi-delict arising from negligence in the performance of a contract. Hence, this
petition.

Issue:
Whether or not the action for damages by the proprietess against the soft drinks manufacturer should be treated as one for
breach of implied warranty against hidden defects, which must be filed within six months from the delivery of the thing
sold, or one for quasi-delict, which can be filed within four years pursuant to Article 1146 of the Civil Code.

Held:
The action in based on quasi-delict, therefore, it prescribes in four years. The allegations in the complaint makes a
reference to the reckless and negligent manufacture of adulterated food items intended to be sold for public
consumption. The vendees remedies are not limited to those prescribed in Article 1567 of the Civil Code. The vendor
could be liable for quasi-delict under Article 2176, and an action based thereon may be brought by the vendee.

The existence of a contract between the parties does not bar the commission of a tort by the one against the other and the
consequent recovery of damages therefor. Liability for quasi-delict may still exist despite the presence of contractual
relations.

affirming
to be digested no digest available
Art. 1568
If it has been lost,
obligations of seller depend
on cause of loss, knowledge
of hidden defect by seller
and wheter there was a
wavier of the warranty.
when lost through hidden
faults while the seller was
aware, he shall bear the loss
and the return the price and
No case
expenses of the contract
with damages. If the seller
was not aware, he is obliged
only to return the price and
interest thereon, and
reimburse the expenses of
contract, but no damages.
When lost through
fortuitous event of through
fault of the buyer and the
seller was not aware, and
therefore in good faith, the
buyer may demand the price
he paid, less the falue of the
thing when it was lost. If the
seller is in bad faith, he shall
pay damages to the buyer.
Art. 1569
In the case of loss of the
thing sold with hidden
defects through fortuitous
event or vende's fault, the
vendee may demand price
paid less value of the thing
at the time of the loss plus
damages if the vendor acted
in bad faith.
No case
Art. 1570
Although there may be
hidden defects, the debtor
may not have been in bad
faith, especially if the
property was not his own
No case
but the guarantor's. As such,
the judgement-debtor
cannot be held liable for
damages for the hidden
defects.
Art. 1571
The law states the
prescriptive period for
breach of warranty of the
ten preceeding articles as
six months. But if the action
is for negligence or quasi-
delict, the period is for four
years. In express warranties,
the prescriptive period is 4
years, in accordance with
the general rule on recission
of contracts, unless another
period is specified in ther
express warranty.
c/o jv
Art. 1572
The law provides that only
the defective animal will be
subject to the enforcement
of the warranty or the
reduction of price, unless
the vendee's actions indicate
that the healthy animals
would not be purchased
without the defective
animals, as may be the case
with male and female
animals bought together.
No case
The law protects the
vendor from full recission
by the vendee except in the
latter case where purchasing
both animals together was
the vendee's intention. The
law also protects vendee's
by providing them with
sufficient waranty for the
defective animal.
Art. 1573
The law provides that the
previous provision applying
to animals shall also apply
to the sale of things sold
together with similar
protection from individual
defects in the group.
No case
Art. 1574
The law provides a general
exception to animals that
are purchased at fairs,
public autions, or those sold
as condemned. This is due
to the nature of the sales in
these situations where the
animal is not purchased for
their quality or capacity to
work.
No case
Art. 1575
The law is meant to protect
vendees from fraudulent
vendors or those not
No case
exercising the proper
diligence to protect the
vendees. The law renders
animals with contagious
diseases as outside the
commerce of man, and
renders sale of animals unfit
for the vendee's intended
purpose void as the vendee
would not purposefully
purchase incapable animals
Art. 1576
The law provides a
defenition for redhibitory
defects, that they are defects
hidden even from an expert
exercising due diligence
during examination.
However, a veterenarian
exercising negligence will
be held liable due to his
false certification of the
animal.
No case
Art. 1577
The article provides vendees
with a protection against the
sale of animals with
diseases and gives them an
expedient remedy in the
event of their failing health
and fitness. The idea is that
the vendor needs to exert
proper diligence before the
No case
sale of the animal.
Art. 1578
Vendor is liable if amimal
should die within 3 days
after its purchase, if causse
of death existed at time of
contract.
No case
Art. 1579
The animal should be
returned in the condition in
which it was sold and
delivered if the sale was
rescinded. Vendee is
anserwerable for any injury
due to his negligence and
not arising from the
redhibitory defect.
No case
Art. 1580
Remedies of buyer in sale
No case
Art. 1581 No case
Art. 1582
Art. 1583
Art. 1584 No case
Art. 1585
The law prevents confusion
regarding the absence of
expressed acceptance.
Considering the dynamic
nature of the business of
sales, every vendor cannot
reasonably expect every
vendee to inform them of
their expressed acceptance
landmark
Smith Bell & Co. vs Hon Gimenez G.R. No. L-17617 June 29, 1963

Facts:
Upon requisition of the Municipality of Paniqui, Tarlac, Smith Bell and Co. delivered a typewriter to theformer
amounting to PhP 820.00. The said typewriter wasreceived on August 30, 1958. However, on September 9,1958, at dawn,
the municipal building of Paniqui wastotally razed by fire. Among the office equipment burntwas the newly acquired
typewriter. Thereafter, theMunicipal Treasurer of Paniqui submitted to the Provincial Treasurer of Tarlac a voucher
covering the payment forthe lost typewriter. Provincial Treasurer forwarded thedocument to Auditor General Gimenez
who disapprovedof the payment. According to Respondent, Municipality isnot liable for the cost of typewriter. According
and vice versa; so the law
provides clear and
reasonable modes of
determining implied
acceptance by the acts of the
vendee.
The law also
conveys that the act of
delivery is not conclusive of
accptance, as the vendee
may display actions
indicative of non-
acceptance, as is the case if
the vendee does not treat the
goods as his own property
or treats them as the
property of the vendor.
toGimenez, the article in question was never presented forinspection and verification as agreed upon andconsequently, the
ownership of the typewriter did notpass to the consignee, and the risk of loss remained withthe seller.Issue: Whether or
not there was delivery of thetypewriter.Held: There was a delivery and the Municipality of Paniqui, Tarlac is liable for the
loss of the typewriter. Thefact that the municipal officials of Paniqui took delivery of the typewriter in question and made
use thereof for aperiod of 10 days, constitutes proof that said typewriterwas accepted and the municipality thereby, as a
buyer,became liable for the payment to the claim.

Article 1585 of the Civil Code provides: The buyer isdeemed to have accepted the goods when he intimatesto the seller
that he has accepted them, or when thegoods have been delivered to him, and he does any actin relation to them which is
inconsistent with theownership of the seller, or when, after the lapse of areasonable time, he retains the goods without
intimatingto the seller that he has rejected them.

Art. 1586.
The purpose of the law is to
protect the vendor from
vendees making belated
claims to breaches in any
promise of warranty. Such
belated claims impair the
ability of the vendor to
determine the true extent of
his liability and may allow
the vendee to defraud the
vendor.
Landmark
Goodyear vs Sy on June 29, 2010
November 9, 2005, 474 scra 427
Breach of Warranties Contract of Sale
Goodyear Philippines was the owner of an Isuzu car which was hijacked in 1986. Goodyear reported it to the police. PNP
issued an alert alarm on the stolen vehicle. Later that year the car was recovered. Goodyear told PNP to lift the alarm from
the recovered car.

In 1996, Goodyear sold the car to Sy. In 1997, Sy sold the car to Jose Lee. Lee tried to register the car in his name but he
was not able to do so because apparently PNP did not lift the alert alarm over the said car. The car was impounded and
PNP sued Lee. Lee told Sy about it.

Sy then sue Goodyear for breach of warranty. Sy argued that Goodyear has the duty to convey the vehicle to Sy free from
all liens, encumbrances and legal impediments. The RTC ruled in favor of Goodyear. CA reversed the RTC decision.

ISSUE: Whether or not there was a breach of warranty.

HELD: No. In a contract of sale, there are implied warranties: first, the vendor has a right to sell the thing at the time that
its ownership is to pass to the vendee, as a result of which the latter shall from then on have and enjoy the legal and
peaceful possession of the thing; and, second, the thing shall be free from any charge or encumbrance not declared or
known to the vendee.

Goodyear did not break any of those. Certainly, the impoundment of the car was not Goodyears fault and it was not a
legal impediment that deprived Sy from ownership of said car. When Sy sold the car to Lee, Sy was already the absolute
owner. This is because when Goodyear sold the car to Sy, Goodyear transferred full ownership to Sy.

It was just unfortunate that the PNP did not lift the alert alarm from the said car placed on it in 1986. Certainly, Goodyear
has no control over the PNP and PNPs inaction is a purely administrative and government in nature. Hence, Goodyear
did not breach its obligation as a vendor to Sy; neither did it violate Sys right for which he could maintain an action for
the recovery of damages. Without this crucial allegation of a breach or violation, no cause of action exists.

Warranty defined:
A warranty is an affirmation of fact or any promise made by a vendor in relation to the thing sold. As such, a warranty has
a natural tendency to induce the vendee relying on that affirmation or promise to purchase the thing. The vendor
impliedly warrants that that which is being sold is free from any charge or encumbrance not declared or known to the
vendee. The decisive test is whether the vendor assumes to assert a fact of which the vendee is ignorant.
Art. 1587.
The law draws a line
regarding the obligations of
the vendor and vendee in
the event of non-acceptance.
The vendee assumes the
position of a bailee in the
possession of good he does
not want; while he may
have no duty to return the
goods, he has a duty to
reasonably preserve them
until the vendor reclaims the

goods.
Acceptance of a
thing that is not desired is
an impairment of rights in
sales as the vendee would
then be bound to pay for
their agreeed price. This
operates as a loss to the
vendee and not an equal
exchange for value.
Art. 1588.
This law is meant to protect
the vendor from the whims
of the vendee. By not
having a just cause to refuse
the goods, the risk transfers
to the vendee regardless of
his refusal
No case
Art .1589 landmark
GREGORIO FULE vs. COURT OF APPEALS, NINEVETCH CRUZ and JUAN BELARMINO
Posted on June 24, 2013 by winnieclaire
Standard
[G.R. No. 112212. March 2, 1998]

Facts: Petitioner Gregorio Fule, a banker by profession and a jeweler at the same time, acquired a 10-hectare property in
Tanay, Rizal, which used to be under the name of Fr. Antonio Jacobe. Petitioner, as corporate secretary of the bank,
looked and found a buyer who might be interested in the Tanay property, herein private respondent Dr. Ninevetch Cruz. It
so happened that at the time, petitioner had shown interest in buying a pair of emerald-cut diamond earrings owned by Dr.
Cruz which he had seen in January of the same year when his mother examined and appraised them as genuine. Dr. Cruz,
however declined petitioners offer to buy the jewelry.
Subsequently, however, negotiations for the barter of the jewelry and the Tanay property ensued. Dr. Cruz requested
herein private respondent Atty. Juan Belarmino to check the property who, in turn, found out that no sale or barter was
feasible because the one-year period for redemption of the said property had not yet expired at the time.

In an effort to cut through any legal impediment, petitioner executed, a deed of redemption on behalf of Fr. Jacobe
purportedly in the amount of P15,987.78, and on even date, Fr. Jacobe sold the property to petitioner for P75,000.00.

As Dr. Cruz had already agreed to the proposed barter, petitioner went to Prudential Bank once again to take a look at the
jewelry. Petitioner, arrived at the residence of Atty. Belarmino to finally execute a deed of absolute sale. Since the jewelry
was appraised only at P160,000.00, the parties agreed that the balance of P40,000.00 would just be paid later in cash. Dr.
Cruz opened the safety deposit box at around 6:00PM, retrieving a transparent plastic or cellophane bag with the jewelry
inside and handing over the same to petitioner. The latter took the jewelry from the bag, went near the electric light at the
banks lobby, held the jewelry against the light and examined it for ten to fifteen minutes. After a while, Dr. Cruz asked,
Okay na ba iyan? Petitioner expressed his satisfaction by nodding his head. Later, at about 8:00 oclock in the evening
of the same day, petitioner arrived at the residence of Atty. Belarmino complaining that the jewelry given to him was
fake. He then used a tester to prove the alleged fakery. Thereafter, the group decided to go to the house of a certain
Macario Dimayuga, a jeweler, to have the earrings tested. Dimayuga, after taking one look at the earrings, immediately
declared them counterfeit.
Petitioner filed a complaint before the RTC against private respondents praying, among other things, that the contract of
sale over the Tanay property be declared null and void on the ground of fraud and deceit.
Trial Court ruled in favour of Dr Cruz and that the contract of sale was valid. Moreover, the trial court considered the
lapse of two (2) hours (6:00 to 8:00) more or less before plaintiff complained as unreasonable delay. The CA affirmed the
decision in toto.

Issue: Whether or not under the facts duly established herein, the contract can be voided in accordance with law so as to
compel the parties to restore to each other the things that have been the subject of the contract with their fruits, and the
price with interest.

Held: NO. The Civil Code provides that contracts are perfected by mere consent. From this moment, 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.[17] A contract of sale is perfected at the moment there is a
meeting of the minds upon the thing which is the object of the contract and upon the price. Being consensual, a contract of
sale has the force of law between the contracting parties and they are expected to abide in good faith by their respective
contractual commitments. Article 1358 of the Civil Code which requires the embodiment of certain contracts in a public
instrument, is only for convenience,[19] and registration of the instrument only adversely affects third parties. Formal
requirements are, therefore, for the benefit of third parties. Non-compliance therewith does not adversely affect the
validity of the contract nor the contractual rights and obligations of the parties thereunder.

Contracts that are voidable or annullable, even though there may have been no damage to the contracting parties are: (1)
those where one of the parties is incapable of giving consent to a contract; and (2) those where the consent is vitiated by
mistake, violence, intimidation, undue influence or fraud. Accordingly, petitioner now stresses before this Court that he
entered into the contract in the belief that the pair of emerald-cut diamond earrings was genuine. On the pretext that those
pieces of jewelry turned out to be counterfeit, however, petitioner subsequently sought the nullification of said contract on
the ground that it was, in fact, tainted with fraud such that his consent was vitiated.

There is fraud when, through the insidious words or machinations of one of the contracting parties, the other is induced to
enter into a contract which, without them, he would not have agreed to. The records, however, are bare of any evidence
manifesting that private respondents employed such insidious words or machinations to entice petitioner into entering the
contract of barter. Neither is there any evidence showing that Dr. Cruz induced petitioner to sell his Tanay property or that
she cajoled him to take the earrings in exchange for said property. On the contrary, Dr. Cruz did not initially accede to
petitioners proposal to buy the said jewelry. Rather, it appears that it was petitioner, through his agents, who led Dr. Cruz
to believe that the Tanay property was worth exchanging for her jewelry as he represented that its value was P400,000.00
or more than double that of the jewelry which was valued only at P160,000.00. If indeed petitioners property was truly
worth that much, it was certainly contrary to the nature of a businessman-banker like him to have parted with his real
estate for half its price. In short, it was in fact petitioner who resorted to machinations to convince Dr. Cruz to exchange
her jewelry for the Tanay property.
Moreover, petitioner did not clearly allege mistake as a ground for nullification of the contract of sale. Even assuming that
he did, petitioner cannot successfully invoke the same. To invalidate a contract, mistake must refer to the substance of
the thing that is the object of the contract, or to those conditions which have principally moved one or both parties to enter
into the contract.[25] An example of mistake as to the object of the contract is the substitution of a specific thing
contemplated by the parties with another. In his allegations in the complaint, petitioner insinuated that an inferior one or
one that had only Russian diamonds was substituted for the jewelry he wanted to exchange with his 10-hectare land. He,
however, failed to prove the fact that prior to the delivery of the jewelry to him, private respondents endeavored to make
such substitution.
Likewise, the facts as proven do not support the allegation that petitioner himself could be excused for the mistake. On
account of his work as a banker-jeweler, it can be rightfully assumed that he was an expert on matters regarding gems.
Indeed, the finger of suspicion of switching the genuine jewelry for a fake inevitably points to him. Such a mistake caused
by manifest negligence cannot invalidate a juridical act. As the Civil Code provides, (t)here is no mistake if the party
alleging it knew the doubt, contingency or risk affecting the object of the contract.
Both the trial and appellate courts, therefore, correctly ruled that there were no legal bases for the nullification of the
contract of sale. Ownership over the parcel of land and the pair of emerald-cut diamond earrings had been transferred to
Dr. Cruz and petitioner, respectively, upon the actual and constructive delivery thereof. Said contract of sale being
absolute in nature, title passed to the vendee upon delivery of the thing sold since there was no stipulation in the contract
that title to the property sold has been reserved in the seller until full payment of the price or that the vendor has the right
to unilaterally resolve the contract the moment the buyer fails to pay within a fixed period. Such stipulations are not
manifest in the contract of sale.

affirming
Well entrenched is the rule that factual findings of the trial court, especially when affirmed by the appellate court are
accorded the highest degree of respect and are considered conclusive between the parties. The rule however, is not
absolute and admits of exceptions:
when the findings of a trial court are grounded entirely on speculation, surmises, and conjectures;
when a lower court's inference from its factual findings is manifestly mistaken, absurd, or impossible;
when there is grave abuse of discretion in the appreciation of facts;
when the findings of the appellate court go beyond the issues of the case, or fails to notice certain relevant facts which if
properly considered, will justify a different conclusion;
when there is a misappreciation of facts;
when the findings of fact are conclusions without mention of the specific evidence on which they are based, are premised
on the absence of evidence, or are contradicted by evidence on record.
None if the laid down exceptions which would warrant a reversal of the assailed decision obtain herein.

As correctly ruled by the court a quo, the parties entered into a CONTRACT OF SALE ON CREDIT and thus, Article
1589 of the Civil Code applies, to wit:
Article 1589. The vendee shall owe interest for the period between the delivery of the thing and the payment of the price
in the following three cases:
Art .1590 landmark
Bareng vs. Court of AppealsG.R. No. L-12973April 25, 1960FACTS:
Vicente Bareng purchased from respondent Alegria the cinematographic equipmentinstalled at the Pioneer Theater in
Laoag, Ilocos Norte, for the sum of P15,000. P10,000 of which was paid, and Bareng signed 4 promissory notes for the
balance. The first promissorynote amounting to P1,000 was duly paid by Bareng. On February 15, 1952, shortly beforethe
second note fell due, the other respondent Agustin Ruiz informed Bareng that he was aco-owner of the equipment in
question, and several days later, Ruiz sent Bareng a telegraminstructing him to suspend payments to Alegria for
thebalance of the price as he was notagreeable to the sale. When Alegria sought to collect the second note on the same
day,Bareng only paid P400 and refused to make any more payments on account of Ruizs claims.On March 31, 1952,
Ruiz filed suit against Alegria and Bareng for his share in the price of thecinema equipment. Thereafter in May of the
same year, Alegria and Ruiz reached acompromise wherein the former recognized the latter as co-owner of the equipment
sold toBareng and promised to pay 2/3 of whatever amount he could recover from the latter.Alegria then sued Bareng for
the amount of P13,500, allegedly the unpaid balance of theprice. But Bareng answered that only P3,600 had not been
paid, and prayed for therescission of the sale for the supposed violation of Alegria of certain express warranties as tothe
quality of the equipment, and asked for payment of damages for alleged violation of Alegrias warranty of title. Bareng
added that he is not liable to pay interests to Alegriabecause he was justified in suspending payment of the balance of the
price of theequipment from the time he learned of Ruizs adverse claims over said equipment, pursuantto Art. 1590 of the
Civil Code.
ISSUE:
Whether or not Bareng is liable to pay interest of the unpaid balance of the price of the equipment.
HELD:
Bareng is liable to pay interest of the unpaid balance of the price of the equipment inquestion. Art. 1590 of the Civil Code
provides that: Should the vendee be disturbed in thepossession or ownership of the thing acquired, or should he have
reasonable grounds to fearsuch disturbance, by a vindicatory action or a foreclosure of mortgage,
he may suspend the payment of the price until the vendor has caused the disturbance or danger to cease
, unlessthe latter gives security for the return of the price in a proper case, or it has been stipulatedthat, notwithstanding
any such contingency, the vendee shall be bound to make thepayment. A mere act of trespass shall not authorize the
suspension of the payment of theprice.It is undisputed that petitioner had the right to suspend payment of the balance of
the priceof the cinema equipment in question to his vendor from the time he was informed by Ruiz of the latters claims of
co-ownership thereof, especially upon his receipt of Ruizs telegramwherein the latter asserted that he was not agreeable
to the sale. However, said right of Barend ended as soon as the vendor has caused the disturbance or danger to
cease,which, in this case, was when Alegria reached a compromise with Ruiz whereby Ruizexpressed his conformity to
the sale to Bareng, subject to the payment of his share in theprice by Alegria. From the time Alegria and Ruiz reached this
settlement, there was nolonger any danger of threat to Barengs ownership and full enjoyment of the equipment hebought
from Alegria, by virtue of which Alegria sued petitioner for the unpaid balance.Bareng admitted his indebtedness in the
amount of P3,600, yet he did not tender paymentof said amount nor did he deposit the same in court, but instead sought
for rescission of thesale. It is clear that Bareng was in default on the unpaid balance of the price of theequipment from the
date of filing of the complaint by Alegria, and under Art. 2209 of theCivil Code, he must pay legal interests thereon from
said date
Art .1591
Art .1592
Art .1593
Art .1594
Art .1595
Art .1596
Art .1597
Art .1598
Art .1599 Landmark
ididigest pa. no digest available
affirming
SUPERCARS V.FLORES (2004)
[ G.R. NO. 148173, DECEMBER 10, 2004 ]

Facts:

In the second week of December 1988, Filemon Flores, respondent, purchased from Supercars Management and
Development Corporation, petitioner, an Isuzu Carter Crew Cab. Upon delivery of the vehicle on December 27, 1988,
respondent paid petitioner the 30% down payment, plus premium for the vehicles comprehensive insurance policy
amounting to P7,374.80. The RCBC financed the balance of the purchase price. Its payment was secured by a chattel
mortgage of the same vehicle.

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. Upon their return to Manila in the first week of January 1989, respondent complained to petitioner about the
defects of the vehicle. Marquez then had the vehicle repaired and returned it to respondent that same day, assuring the
latter that it was already in good condition. 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.

On March 1, 1989, respondent sent petitioner a letter demanding the refund of his down payment, plus the premium he
paid for the vehicles insurance.

Petitioner failed to comply with petitioners demand. Consequently, respondent stopped paying the monthly amortization
for the vehicle.

On March 21, 1989, RCBC sent respondent a letter demanding that he settle his past overdue accounts for February 15
and March 15, 1989. In reply, respondent, through a letter dated March 31, 1989, informed RCBC that he had rescinded
the contract of sale and had returned the vehicle to petitioner. This prompted RCBC to file with the Office of the Clerk of
Court and Ex-Officio Sheriff, Regional Trial Court, Quezon City, a Petition for Extra-judicial Foreclosure of Chattel
Mortgage.

Issue:

WON Marquez and Catley committed any breach of warranty against hidden defects, claiming that the vehicle had only
minor and inconsequential defects which were promptly and satisfactorily repaired by petitioner Supercars pursuant to
its warranty as the seller. For in the part of RCBC, is it's claim that it has no liability whatsoever against respondent
correct because it merely enforced its right under the chattel mortgage law.

RTC decided in favor to Flores., the decision:
WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendants, ordering the latter to
jointly and severally pay the plaintiff.

Upon motion for reconsideration the RTC absolved RCBC on their liabilities dismissing the complaint against it. The
decision:
WHEREFORE, considering the foregoing premises, the Decision of the court, insofar as it holds defendant Rizal
Commercial Banking Corporation jointly and severally liable to the plaintiff, is hereby MODIFIED and the case against
said bank DISMISSED. Similarly, the compulsory counterclaim against the plaintiff is likewise dismissed.

From the above Decision and Order, petitioner, Marquez and Catley interposed an appeal to the Court of Appeals. In a
Decision dated November 29, 2000, the Appellate Court affirmed the RTC Decision with modification in the sense that
the complaint against Marquez and Catley was dismissed.

Petitioner filed a motion for reconsideration but denied.

Hence, the instant petition.

Petitioner contends that respondent has no right to rescind the contract of sale because the motor vehicle in question, as
found by the RTC and the Court of Appeals, is already in the hands of a third party, one Mr. Lim an innocent purchaser
for value. Thus, both courts erred in ordering petitioner to refund respondent of the amounts he paid for the vehicle.

The issue here is whether respondent has the right to rescind the contract of sale and to claim damages as a result thereof.

The SC ruled in favor for the respondent (Flores).

Respondents complaint filed with the RTC seeks to recover from petitioner the money he paid for the vehicle due to the
latters breach of his warranty against hidden defects under Articles 1547,[13] 1561,[14] and 1566[15] of the Civil Code.
The vehicle, after it was delivered to respondent, malfunctioned despite repeated repairs by petitioner. Obviously, the
vehicle has hidden defects. A hidden defect is one which is unknown or could not have been known to the vendee.[16]

The findings of both the RTC and Court of Appeals that petitioner committed a breach of warranty against hidden defects
are fully supported by the records. The Appellate Court correctly ruled:
The evidence clearly shows that Flores [now respondent] 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.

For when by letters of January 30, 1989 and February 7, 1989, which were followed up by another dated March 1, 1989,
Flores declared his rescission of the sale, which rescission was not impugned or opposed by appellants as in fact they
accepted the return of the vehicle on February 9, 1989, such extra-judicial rescission produced legal effect.

It is well within respondents right to recover damages from petitioner who committed a breach of warranty against
hidden defects. Article 1599 of the Civil Code partly provides:
Article 1599. Where there is a breach of warranty by the seller, the buyer may, at his election:

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. 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 cost of the vehicle paid by the respondent including insurance premiums should be returned
to Flores.

As further stated by the Court of Appeals:
Appellants invocation of Article 1191 of the Civil Code in support of his argument that as the vehicle had been sold to a
third party, rescission can no longer ensue is misplaced.

For, Flores is asking for the refund of the downpayment and payment for insurance premiums. This brings us to
appellants final argument.

Appellants professed excuse from their inability to give refund that refund would necessitate the return of the subject
motor vehicle which is impossible because it is now in the hands of an innocent purchaser for value miserably fails.

Supercars was paid the balance of the purchase price by RCBC and, therefore, in addition to the downpayment given by
Flores, it had been fully paid for the vehicle.

Decision:

WHEREFORE, the petition is DENIED. The assailed Decision dated September 20, 1999 and Resolution dated February
1, 2000 of the Court of Appeals in CA-G.R. CV No. 52177 are AFFIRMED with MODIFICATION. The award of moral
and exemplary damages and attorneys fees are DELETED. Costs against petitioner

Affirming
1599
DE GUZMAN V. TOYOTA; COCA-COLA V. GERONIMO;VILLOSTAS; case digest by valbuena

1. G.R. No. 141480 November 29, 2006CARLOS B. DE GUZMAN, Petitioner,vs. TOYOTA CUBAO, INC.,
Respondent.

On November 27, 1997, petitioner purchased from respondent a brand new white Toyota Hi-Lux. The vehicle was
delivered to petitioner two days later. On October 18, 1998, Mr. de Guzman demanded for the replacement of the engine
of the vehicle because it showed a crack during a trip that passes Marcos Highway during a heavy rain. Mr. De Guzman
demanded for the Toyota dealer to replace the engine with a new one based on an implied warranty.

On the other hand, Toyota Cubao maintains that Mr De Guzman's claim for replacement was already barred by the statute
of limitations amd had therefore prescribed under Article 1571 of the Civil Code for claiming cause of action for more
than six months from the time the vehicle was purchased and/or delivered. Respondent reiterates that Article 169 of
Republic Act No. 7394 does not apply.

SUPREME COURT HELD:

Under Article 1599 of the Civil Code, once an express warranty is breached, the buyer can accept or keep the goods and
maintain an action against the seller for damages. In the absence of an existing express warranty on the part of the
respondent, as in this case, the allegations in petitioners complaint for damages were clearly anchored on the enforcement
of an implied warranty against hidden defects, in which in this case, that the engine of the vehicle which Toyota had sold
to Mr. de Guzman was not defective.

By filing this case, Mr. de Guzman wants to hold Toyota responsible for breach of implied warranty for having sold a
vehicle with defective engine. Such being the case, petitioner should have exercised this right within six months from the
delivery of the thing sold. Since petitioner filed the complaint on April 20, 1999, or more than nineteen months counted
from November 29, 1997 (the date of the delivery of the motor vehicle), his cause of action had prescribed.