Yap Kim Chuan v. Tiaoqui GR No.

1006, September 18, 1915

FACTS: The plaintiff in this case is a lessee of the defendant. During the
period of lease, his merchandise was damaged due to leaks in the roof of
the storeroom in the leased building. For this reason, he asked the
defendant-lessor to indemnify him for damage caused by the leaks in the
roof. The defendant-lessor, on the other hand, argued that the building
being occupied by the plaintiff was new and was built based on standard
required by the government. The leak was due to a torrential rain the
heaviest from the month of January of that year. He further argued that
the leak was not solely caused by the heavy rain but also due to
improper location of said merchandise inside the building.
ISSUE: Can the lessor be held liable for indemnity for the damage
caused to the goods of lessee? Did he fail to perform his obligations as
lessor?
HELD: No. Article 1562 of the Civil Code reads: "If, at the time of the
lease of the estate, the condition of the same was not mentioned, the law
presumes that the lessee received it in good condition, unless there be
proof to the contrary."
Moreover, there is no evidence in the case that he failed in the
performance of the obligations he assumed in executing the lease, nor
does there appear to have been stipulated therein the liability now
imputed to him. The fact is that neither the lessor no the lessees knew
that the roof was defective and was going to leak when it rained, for they
only became aware of the leaks during the rainstorm; and therefore only
on the hypothesis that the lessor had known of such defect and had
concealed it from the plaintiffs could he be held responsible for the
consequences thereof on account of the leakages that occurred.
Indeed lessor is liable for warranty against any hidden defects. But this
liability for warranty of the thing leased does not amount to an obligation
to indemnify the tenant for damages, which is only to be allowed when
there is proof that the lessor acted with fraud and in bad faith by
concealing to the lessee.

JERRY T. MOLES v. INTERMEDIATE APPELLATE COURT AND

MARIANO M. DIOLOSA
G.R. No. 73913, January 31, 1989
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.
HELD:
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;"
2. We have to consider the rule on redhibitory defects contemplated in
Article 1561 of the Civil Code. A redhibitory defect must be an
imperfection or defect of such nature as to engender a certain degree of
importance. An imperfection or defect of little consequence does not
come
within
the
category
of
being redhibitory.
As already narrated, an expert witness for the petitioner categorically
established that the machine required major repairs before it could be
used. This, plus the fact that petitioner never made appropriate use of
the machine from the time of purchase until an action was filed, attest to
the major defects in said machine, by reason of which the rescission of
the contract of sale is sought. The factual finding, therefore, of the trial
court that the machine is not reasonably fit for the particular purpose for
which it was intended must be upheld, there being ample evidence to
sustain
the
same.

At a belated stage of this appeal, private respondent came up for the first
time with the contention that the action for rescission is barred by
prescription. While it is true that Article 1571 of the Civil Code provides
for a prescriptive period of six months for a redhibitory action, a cursory
reading of the ten preceding articles to which it refers will reveal that said
rule may be applied only in case of implied warranties. The present case
involves one with an express warranty. Consequently, the general rule
on rescission of contract, which is four years shall apply. Considering
that the original case for rescission was filed only one year after the
delivery of the subject machine, the same is well within the prescriptive
period. This is aside from the doctrinal rule that the defense of
prescription is waived and cannot be considered on appeal if not raised
in the trial court, and this case does not have the features for an
exception to said rule.

BRICKTOWN DEVELOPMENT CORP. and MARIANO Z. VERALDE

vs. AMOR TIERRA DEVELOPMENT CORPORATION and the HON.
COURT OF APPEALS
G.R. No. 112182 December 12, 1994
CONTRACT AS A SOURCE OF OBLIGATION
FACTS:
Bricktown Development Corporation, represented by its
President and co-petitioner Mariano Z. Velarde, executed two Contracts
to Sell in favor of Amor Tierra Development Corporation, represented in
these acts by its Vice-President, Moises G. Petilla, covering a total of 96
residential lots at the Multinational Village Subdivision, La Huerta,
Paraaque, Metro Manila.
The total price of P21,639,875.00 was stipulated to be paid by
private respondent in such amounts and maturity dates, as follows:
P2,200,000.00 on 31 March 1981; P3,209,968.75 on 30 June 1981;
P4,729,906.25 on 31 December 1981; and the balance of

P11,500,000.00 to be paid by means of an assumption by private

respondent of petitioner corporation's mortgage liability to the Philippine
Savings Bank or, alternately, to be made payable in cash. On date,
March 31, 1981, the parties executed a Supplemental Agreement,
providing that private respondent would additionally pay to petitioner
corporation the amounts of P55,364.68, or 21% interest on the balance
of down payment for the period from 31 March to 30 June 1981, and of
P390,369.37 representing interest paid by petitioner corporation to the
Philippine Savings Bank in updating the bank loan for the period from 01
February to 31 March 1981.
Private respondent was only able to pay petitioner corporation
the sum of P1,334,443.21. However, the parties continued to negotiate
for a possible modification of their agreement, but nothing conclusive
happened. And on October 12, 1981, petitioners counsel sent private
respondent a Notice of Cancellation of Contract because of the latters
failure to pay the agreed amount.
Several months later, private respondents counsel, demanded
the refund of private respondent's various payments to petitioner
corporation, allegedly "amounting to P2,455,497.71," with interest within
fifteen days from receipt of said letter, or, in lieu of a cash payment, to
assign to private respondent an equivalent number of unencumbered lots
at the same price fixed in the contracts. When the demand was not
heeded, Amor Tierra filed an action with the court a quo which rendered
a decion in its favor. The decision of the lower court was affirmed in toto
by the Court of Appeals. Hence, this petition.
ISSUE:
1. Whether or not the contract was properly rescinded.
2. Whether or not Bricktown properly forfeited the payments of
Amor Tierra.
RULING:

The contract between Bricktown and Amor Tierra was validly

rescinded because of the failure of the latter to pay the agreed amounts
stipulated in the contract on the proper date even after the sixty-days
grace period. Furthermore, the records showed that private respondent
corporation paid less than the amount agreed upon. The Supreme Court
also added that such cancellation must be respected. It may also be
noteworthy to add that in a contract to sell, the non-payment of the
purchase price can prevent the obligation to convey title from acquiring
any obligatory force.
On the second issue, the Supreme Court ruled that since the
private respondent did not actually possessed the property under the
contract, the petitioner is then ordered to return to private respondent the
amount remitted.
However, to adjudge any interest payment by
petitioners on the amount to be thus refunded, private respondent should
not be allowed to totally free itself from its own breach.

EDCA PUBLISHING v. SANTOS

FACTS:
The movable property in this case consists of books, which were bought
from EDCA by an impostor who sold it to SANTOS. EDCA Publishing
sold to a person identifying himself as Professor Jose Cruz who placed
an order by telephone with the former for 406 books, payable on delivery.
EDCA prepared the corresponding invoice and delivered the books as
ordered, for which Cruz issued a personal check. On October 7, 1981,
Cruz then sold the 120 of the books to Leonor Santos who asked for
verification, and was then showed the invoice for the books.
Meanwhile, EDCA having become suspicious over a second order
placed by Cruz even before clearing of his first check, made inquiries
with the De la Salle College where he had claimed to be a dean and was
informed that there was no such person in its employ. Further verification

revealed that Cruz had no more account or deposit with the Philippine
Amanah Bank, against which he had drawn the payment check. EDCA
then went to the police, which set a trap and arrested Cruz. Investigation
disclosed his real name as Tomas de la Pea and his sale of 120 of the
books he had ordered from EDCA to the private respondents.
ISSUE:
Whether or not EDCA PUBLISHINGAND DISTRIBUTING CORP was
unlawfully deprived of the property?

NCC Article 1191. The power to rescind obligations is implied in

reciprocal ones, in case one of the obligors should not comply with
what is incumbent upon him.
The injured party may choose between the fulfillment and the
rescission of the obligation, with the payment of damages in either
case. He may also seek rescission, even after he has chosen
fulfillment, if the latter should become impossible.
The court shall decree the rescission claimed, unless there be
just cause authorizing the fixing of a period.

HELD:
NO. Santos was a good faith buyer after taking steps to verify the identity
of the seller. When she was showed the invoice, she reasonably believed
that he was a legitimate seller. With regard to unlawful deprivation, EDCA
was not unlawfully deprived of the property by mere failure of
consideration. There was already a perfected contract of sale. Proof was
even substantiated when EDCA gave the invoice as proof of payment
upon delivery of the books. This did not amount to unlawful taking,
because by the delivery of EDCA to Cruz, ownership of the books
already transferred to him.
It would certainly be unfair now to make the SANTOSES bear the
prejudice sustained by EDCA as a result of its own negligence. We
cannot see the justice in transferring EDCA's loss to the
SANTOSES who had acted in good faith, and with proper care, when
they bought the books from Cruz.
PILAR T. OCAMPO, v. COURT OF APPEALS and MAGDALENA S.
VILLARUZ
G.R. No. 97442 June 30, 1994
TOPIC: Consequences of Failure to Comply with Prestation

This is understood to be without prejudice to the rights of third

persons who have acquired the thing, in accordance with articles
1385 and 1388 and the Mortgage Law. (1124)
NCC Article 1592. In the sale of immovable property, even though it
may have been stipulated that upon failure to pay the price at the time
agreed upon the rescission of the contract shall of right take place, the
vendee may pay, even after the expiration of the period, as long as no
demand for rescission of the contract has been made upon him either
judicially or by a notarial act. After the demand, the court may not grant
him a new term. (1504a)
FACTS: Two (2) documents, an "Agreement to Sell Real Property" and
a "Contract to Sell," covering the same parcel of land were executed by
a seller in favor of two (2) different buyers. Both buyers now assert
against each other a better title to the property.
Tolosa and Ocampo (represented by Borres) entered into an
"Agreement to Sell Real Property" 3whereby Tolosa "sells,
cedes and transfers" the land to Ocampo in consideration of
P25,000.00, P12,500.00 of which was paid upon signing of the
deed and the balance to be due within six (6) months thereafter.
Paragraph 4 of the contract provides that "immediately upon
complete payment of the purchase price . . . by the VENDEE,

the VENDOR . . . agrees to execute and deliver unto the

VENDEE whatever pertinent document or documents
necessary to implement this sale and to transfer title to the
VENDEE."
Subject property is mortgaged the land to the
Philippine Veterans Bank and had the
encumbrance annotated on his certificate of title

Ocampo. The petition was however denied but Tolosa was able
to get a favourable decision in another branch of the court.
The contract of sale between Tolosa and Villaruz was
registered and a new title in the name of Villaruz was
eventually issued.
Aggrived Ocampo filed a third party complaint against Villaruz

Before the six-month period to complete the payment of the

purchase price expired, Ocampo paid but only the total of
P16,700.00. 4Nevertheless Tolosa accepted her subsequent late
payments amounting to P3,900.00.

RTC decided in favour of Ocampo declaring the agreement

between Talosa and Villaruz as null and void and ordered
Tolosa to execute the corresponding Deed of Sale in favour of
Ocampo.

Upon learning of the mortgage lien, Ocampo caused her adverse

claim to be annotated on Tolosas certificate of title

CA reversed RTC s decision upholding the agreement

between Tolosa and Villaruz, hence, this appeal. The appellate
court upheld the sale in favor of Villaruz on the theory that the
21 April 1975 agreement of Tolosa and Ocampo was merely a
contract to sell. It claimed that in the absence of a deed of
absolute sale in favor of Ocampo, in relation to par. 4 of the
contract, Tolosa retained ownership over the land and validly
conveyed
the
same
to
Villaruz.chanroblesvirtualawlibrarychanrobles

Later on, Tolosa sought the cancellation of Ocampos adverse

claim and presented her with two options, namely, a refund of
payments made, or a share from the net proceeds if sold to a
third party.
Subsequently, Tolosa and Magdalena S. Villaruz executed a
"Contract to Sell" 9whereby Tolosa "sells, cedes, transfers, and
conveys" to Villaruz the same land in consideration of
P94,300.00. The amount of P15,000.00 was to be paid upon
execution and the balance upon cancellation of all liens and
encumbrances from the certificate of title. The contract
stipulated the immediate conveyance of the physical
possession of the land to Villaruz, although no deed of definite
sale would be delivered to her unless the price was fully paid.
Tolosa wrote Ocampo offering to reimburse her what she paid
provided she would sign a document canceling her adverse
claim. Failing to convince Ocampo, Tolosa filed a petition in the
Court of First Instance of Iloilo to cancel the adverse claim of

ISSUE: WON Tolosa has the right to rescind the contract entered
between him and Ocampo.
RULING: NO. CA decision reversed and set aside and RTC ruling
reinstated
The agreement between Tolosa and Ocampo dated 21 April 1975
although titled "Agreement to Sell Real Property" was a perfected
contract of absolute sale. Paragraph 4 pertains to the undertaking of the
seller to execute and deliver to the buyer any document deemed
necessary by law to implement the sale and transfer title since the
parties were unsure of what documents were pertinent. If the intent was

for the seller to retain ownership and possession of the land through
non-delivery of certain documents unless the price be fully paid, par. 4
alone should be inutile; it should have been complemented with a
proviso that the sale would not be implemented nor the title considered
transferred unless another document specifically for said purpose be first
executed and delivered to the buyer. In this regard, no right to retain
ownership and possession of the land pending full payment of the price
can be inferred from the fact that no delivery was made to Ocampo. The
failure of the buyer to pay the price in full within a fixed period does not,
by itself, bar the transfer of the ownership or possession, 19much less
dissolve the contract of sale.
Under Art. 1592 of the Civil Code, the failure of Ocampo to complete her
payment of the purchase price within the stipulated period merely
accorded Tolosa the option to rescind the contract of sale upon judicial or
notarial demand.obles virtual law library
However, the letter of 2 August 1977 claimed to have been sent by
Tolosa to Ocampo rescinding the contract of sale was defective because
it was not notarized and, more importantly, it was not proven to have
been received by Ocampo. hanrobles Likewise, Civil Case No. 12163
could not be considered a judicial demand under Art. 1592 of the Civil
Code because it did not pray for the rescission of the contract. Although
the complaint sought the cancellation of Ocampos adverse claim on
Tolosas OCT and for the refund of the payments made, these could not
be equivalent to a rescission. Even assuming arguendo that Civil Case
No. 12163 was a valid judicial demand, rescission is not granted as a
matter of course. Before Civil Case No. 12163 was filed on 7 October
1977, Ocampo not only paid Tolosa a total of P20,600.00 but also
discharged Tolosas mortgage debt in the amount of P4,453.41. Had not
Tolosa ordered the Philippine Veterans Bank to return the mortgage debt
payment by Ocampo, the purchase price would have been deemed fully
paid.

Tolosa, on the other hand, is now precluded from raising the issue of late
payments. His unqualified acceptance of payments after the six-month
period expired constitutes waiver of the period and, hence, of the ground
to rescind under Art. 1592
In any case, however, the breach on the part of Ocampo was only slight
if not outweighed by the bad faith of Tolosa in reneging in his own
prestations, hence, judicial rescission of the contract cannot be justified.
Angeles v. Calasanz.
While the contract dated 3 June 1977 in favor of Villaruz is also a
contract of sale, that of Ocampo should prevail pursuant to Art. 1544 of
the Civil code on double sales. While Villaruz may have registered his
contract or came into possession ahead of Ocampo, Villaruz was never
in good faith since Ocampo already had her adverse claim annotated on
Tolosas title before the sale between Tolosa and Villaruz.

SOUTHERN MOTORS, INC. vs. MOSCOSO

2 SCRA 168 G.R. No. L-14475, May 30, 1961

FACTS:
Plaintiff Southern Motors, Inc. sold to defendant Angel Moscoso one
Chevrolet truck on installment basis, for P6,445.00. Upon making a down
payment, the defendant executed a promissory note for the sum
of P4,915.00, representing the unpaid balance of the purchase price to
secure the payment of which, a chattel mortgage was constituted on the
truck in favor of the plaintiff. Of said account, the defendant had paid a
total of P550.00, of which P110.00 was applied to the interest and
P400.00 to the principal, thus leaving an unpaid balance of P4,475.00.
The defendant failed to pay 3 installments on the balance of the
purchase price. Plaintiff filed a complaint against the defendant, to
recover the unpaid balance of the promissory note. Upon plaintiff's

petition, a writ of attachment was issued by the lower court on the

properties of the defendant. Pursuant thereto, the said Chevrolet truck,
and a house and lot belonging to defendant, were attached by the Sheriff
and said truck was brought to the plaintiff's compound for safe keeping.
After attachment and before the trial of the case on the merits, acting
upon the plaintiff's motion for the immediate sale of the mortgaged truck,
the Provincial Sheriff of Iloilo sold the truck at public auction in which
plaintiff itself was the only bidder for P1,OOO.OO. The trial court
condemned the defendant to pay the plaintiff the amount of P4,475.00
with interest at the rate of 12% per annum from August 16, 1957,until
fully paid, plus 10% thereof as attorneys fees and costs. Hence, this
appeal by the defendant.
ISSUE:
Whether or not the attachment caused to be levied on the truck and its
immediate sale at public auction, was tantamount to the foreclosure of
the chattel mortgage on said truck.
HELD:
No. Article 1484 of the Civil Code provides that in a contract of sale of
personal property the price of which is payable in installments, the
vendor may exercise any of the following remedies: (I) Exact fulfillment
of the obligation, should the vendee fail to pay; (2) Cancel the sale,
should the vendee's failure to pay cover two or more installments; and
(3) Foreclose the chattel mortgage on the thing sold, if one has been
constituted, should the vendee's failure to pay cover two or more
installments. In this case, he shall have no further action against the
purchaser to recover any unpaid balance of the price. Any agreement to
the contrary shall be void. The plaintiff had chosen the first remedy. The
complaint is an ordinary civil action for recovery of the remaining unpaid
balance due on the promissory note. The plaintiff had not adopted the
procedure or methods outlined by Sec. 14 of the Chattel Mortgage Law
but those prescribed for ordinary civil actions, under the Rules of Court.

Had the plaintiff elected the foreclosure, it would not have instituted this
case in court; it would not have caused the chattel to be attached under
Rule 59, and had it sold at public auction, in the manner prescribed by
Rule 39. That the plaintiff did not intend to foreclose the mortgage truck,
is further evinced by the fact that it had also attached the house and lot
of the appellant at San Jose, Antique.
We perceive nothing unlawful or irregular in plaintiff's act of attaching the
mortgaged truck itself. Since the plaintiff has chosen to exact the
fulfillment of the appellant's obligation, it may enforce execution of the
judgment that may be favorably rendered hereon, on all personal and
real properties of the latter not exempt from execution sufficient to satisfy
such judgment. It should be noted that a house and lot at San Jose,
Antique were also attached. No one can successfully contest that the
attachment was merely an incident to an ordinary civil action. The
mortgage creditor may recover judgment on the mortgage debt and
cause an execution on the mortgaged property and may cause an
attachment to be issued and levied on such property, upon beginning his
civil action.
Nonato v. IAC.
GR no. L-67181, November 22, 1985

FACTS:
In 1976, Spouses Restituto Nonato and Ester Nonato purchased a
volkswagen from the Peoples Car Inc on installment basis.
1.
To secure their complete payment, Nonato executed a promissory
note and a chattel mortgage in favor of Peoples Car Inc.
2.
Subsequently, Peoples Car Inc assigned its rights and interest over
the note and mortagge in favor of Investors Finance Corp (IFC).
3.
For failure of the spouses to pay two or more installments, despite
demands, the car was repossessed by IFC.

4.
Despite repossession, IFC still demanded from Nonato that they
pay the balance of the price of the car. IFC, then, filed a complaint for the
payment of the price of the car with damages

installments. In this case, he shall have no further action against the

purchaser to recover any unpaid balance of the price. Any agreement to
the contrary shall be void.

5.
Nonato, in their defense, argued that when the company
repossessed the car, IFC had, by that act, effectively cancelled the sale
of the vehicle. As such, it was barred from exacting the recovery of the
unpaid balance of the purchase price as mandated by Art 1484.

This provision means that should the vendee or the purchaser of a

personal property default in the payment of two or more of the agreed
installments, the vendor or the seller has the option to avail any of these
3 remedieseither to exact fulfillment by the purchaser of the obligation,
or to cancel the sale, or to foreclose the mortgage on the purchased
personal property, if one was constituted. These remedies have been
recognized as an alternative, not cumulative, that the exercise of one
should bar the exercise of the others.

6.
The trial court rendered in favor of IFC and ordered the
spouses Nonato pay the balance of the purchase price of the car with
interest. CA affirmed the same.

ISSUE: WON a vendor or his assignee, who had cancelled the sale of a
motor vehicle for failure of the buyer to pay two or more of the stipulated
installments, may also demand payment of the balance of the purchase
price

HELD: No. The applicable law in the case at bar is Art 1484 which
provides that:
In a contract of sale of personal property the price of which is payable in
installments, the vendor may exercise any of the following remedies:
(1) Exact fulfillment of the obligation, should the vendee fail to pay;
(2) Cancel the sale, should the vendee's failure to pay cover two or
more installments;
(3) Foreclose the chattel mortgage on the thing sold, if one has been
constituted, should the vendee's failure to pay cover two or more

In the present case, it is not disputed that IFC had taken possession of
the car purchased by the Nonatos after the spouses defaulted in their
payments. The defense of IFC that it the repossession of the vehicle was
only for the purpose of appraising its value and for storage and
safekeeping pending full payment of the spouses is untenable. The
receipt issued by IFC to the spouses when it took possession of the
vehicle that the vehicle could be redeemed within 15 days. This could
only mean that should the spouses fail to redeem the car within the
period provided, IFC would retain permanent possession of the vehicle.
IFC even notified the spouses Nonato that the value of the car was not
sufficient to cover the balance of the purchase price and there was no
attempt at all on the part of the company to return the car.
The acts performed by IFC are consistent with the conclusion that it had
opted to cancel the sale of the vehicle. Therefore, it is barred from
exacting payment from the petitioners of the balance of the price of the
vehicle which it had already repossessed (it cannot have its cake and eat
it too)