TIONGSON VS EMERGENCY PAWNSHOP BULA (2010)
of his reciprocal obligation, entitling the Sps. Tiongson to the rescission of the sales contract.
[G.R. No. 167874; January 15, 2010] Obligation and Contracts| Civil Code| Vitiated
Consent| Fraud
SPOUSES CARMEN S. TONGSON and JOSE C. TONGSON substituted by his children namely:
JOSE TONGSON, JR., RAUL TONGSON, TITA TONGSON, GLORIA TONGSON ALMA TONGSON,
Petitioners,
vs.
EMERGENCY PAWNSHOP BULA, INC. and DANILO R. NAPALA, Respondents.
FACTS:
Danilo Napala purchase a 364 sq.m. parcel of land from Sps. Tongson in Davao City for ₱3M.
As payment, Napala paid ₱200,000 in cash to the Sps.Tongson and issued a postdated PNB
check in the amount of ₱2.8M for the remaining balance of the subject property.
However, when presented for payment, the PNB check was dishonored for the reason
“Drawn Against Insufficient Funds.” Despite the repeated demands to Napala to either pay
the full value of the check or to return the subject parcel of land, the latter failed to do
either. Left with no other recourse, the Spouses Tongson filed for Annulment of Contract
and Damages to RTC.
RTC and CA ruled in favor of Sps. Tiongson finding that Napala employed fraud when he
misrepresented that the PNB check he issued would be properly funded at its maturity.
ISSUE:
Whether the Contract of Sale can be annulled based on the fraud employed by Napala.
HELD:
There is fraud in general sense, which involves a false representation of a fact, that the post-
dated check issued would be sufficiently funded at its maturity. The fraud surfaced not
during the negotiation and perfection stages of the sale but rather it existed in the
consummation stage of the sale when the parties are in the process of performing their
respective obligations under the perfected contract of sale.
Respondents failure to render payment clearly showed he committed a substantial breach
477 SCRA 666 – Civil Law – Law on Sale – Contract to Sell vs Contract of Sale
In March 1972, El Dorado Plantation, Inc. (El Dorado), through its board member Lauro
Leviste, executed a Deed of Sale with Fernando Carrascoso, Jr. The subject of the sale was a
1,825 hectare of land. It was agreed that Carrascoso was to pay P1.8M.; that P290K would
be paid by Carrascoso to PNB to settle the mortgage upon the said land. P210k would be
paid directly to Leviste. The balance of P1.3M plus 10% interest would be paid over the next
3 years at P519k every 25th of March. Leviste also assured that there were no tenants hence
the land does not fall under the Land Reform Code. Leviste allowed Carrascoso to mortgage
the land which the latter did.
Carrascoso obtained a total of P1.07M as mortgage and he used the same to pay the down
payment agreed upon in the contract. Carrascoso defaulted from his obligation which was
supposed to be settled on March 25, 1975. Leviste then sent him letters to make good his
end of the contract otherwise he will be litigated.
In 1977, Carrascoso executed a Buy and Sell Contract with PLDT. The subject of the sale was
the same land sold to Carrascoso by Leviste but it was only the 1000 sq. m. portion thereof.
The land is to be sold at P3M. Part of the terms and conditions agreed upon was that
Carrascoso is to remove all tenants from the land within one year. He was also being given a
6-month extension in case he’ll need one. Thereafter, PLDT will notify Carrascoso if whether
or not PLDt will finalize the sale. Eventually, PLDT gained possession of the land.
Meanwhile, El Dorado filed a civil case against Carrascoso. PLDT intervened averring that it
was a buyer in good faith. The Regional Trial Court (RTC) ruled in favor of Carrascoso. The
Court of Appeals (CA) reversed the RTC ruling.
ISSUE: What is the nature of each contract?
HELD: The contract executed between El Dorado and Carrascoso was a contract of sale. It
was perfected by their meeting of the minds and was consummated by the delivery of the
property to Carrascoso. However, El Dorado has the right to rescind the contract by reason
of Carrascoso’s failure to perform his obligation.
A contract of sale is a reciprocal obligation. The seller obligates itself to transfer the
ownership of and deliver a determinate thing, and the buyer obligates itself to pay therefor
a price certain in money or its equivalent. The non-payment of the price by the buyer is a
resolutory condition which extinguishes the transaction that for a time existed, and
discharges the obligations created thereunder. Such failure to pay the price in the manner
prescribed by the contract of sale entitles the unpaid seller to sue for collection or to rescind
the contract.

On the other hand, the contract between Carrascoso and PLDT is a contract to sell. This is
evidenced by the terms and conditions that they have agreed upon that after fulfillment of
Carrascoso’s obligation PLDT has “to notify Carrascoso of its decision whether or not to
finalize the sale.”

Side Issue: Carrascoso also averred that there was a breach on El Dorado’s part when it
comes to warranty. Carrascoso claimed that there were tenants on the land and he spent
about P2.9M relocating them. The SC ruled that Carrascoso merely had a bare claim without
additional proof to support it.

Requisites of Express warranty in a Contract of Sale

(1) the express warranty must be an affirmation of fact or any promise by the seller relating
to the subject matter of the sale;

(2) the natural tendency of such affirmation or promise is to induce the buyer to purchase
the thing; and

(3) the buyer purchases the thing relying on such affirmation or promise thereon.