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1.[G.R. No. 130403. July 30, 2007.] FRANCISCO GONZALES, petitioner, vs. SEVERINO C.

LIM and TOYOTA SHAW, INC., respondents. FACTS: Petitioner Francisco Gonzales, Roque Ma. Gonzales and Carmen Gonzales (Gonzaleses) were the owners of Motown Vehicles, Inc. (Motown). Motown was the licensed distributor of Ford vehicles in the country. Its assets included two buildings standing on a 4,944 sq. m. lot leased from Tanglaw Realty, Inc. (Tanglaw).When Ford Philippines ceased operations, the Gonzaleses sold Motown's shares of stocks to respondents Severino C. Lim and Toyota Shaw, Inc. which was then putting up a Toyota car dealership. The "Agreement" signed by the parties stated that the sale included Motown's two lease contracts with Tanglaw After paying the initial installment of P6,246,000 to the Gonzaleses, respondents claimed they discovered that one of Motown's lease contracts had already been terminated prior to the sale. As a result, they were allegedly constrained to negotiate with Tanglaw for a new lease contract (with a higher rental). Subsequently, respondents filed a case in the Regional Trial Court (RTC), Branch 65 of Makati, for declaratory relief with damages against the Gonzaleses, seeking release from their obligation to pay the P500,000 balance. During the trial, Lim maintained that the Gonzaleses guaranteed a "continuing and unhampered use" of the premises but Tanglaw had nonetheless threatened to evict them from one of the leased portions. To support their claim, they presented in court a copy of the "Agreement" indicating the Gonzaleses' alleged warranty that the two lease contracts with Tanglaw were still good. Petitioner (with his then co-defendants) countered that respondents were well aware of the termination of one of the two lease contracts at the time of sale. He denied giving a warranty on both contracts and explained that he only signed the "Agreement" (showing Motown's two lease contracts with Tanglaw) on prodding by respondents that they needed it to convince Toyota Philippines they were ready with their dealership site. According to petitioner, respondents told him it was only "for show" and amendments thereto would be made later on. Petitioner added that his only undertaking was to help respondents negotiate a new lease contract that would have similar terms as his. As a counterclaim, petitioner asked for the payment of respondents' P500,000 balance. After trial, the RTC dismissed respondents' case but granted petitioner's counterclaim of P500,000. Respondents appealed to the CA which affirmed with modification the trial court's decision. It agreed with the RTC that respondents could not feign ignorance of Motown's terminated lease contract; however, it deleted the order directing respondents to pay petitioner P500,000. The CA ruled that the payment was not due since petitioner failed to obtain the required official communication from Tanglaw. ISSUE: Whether petitioner was still entitled to the payment of P500,000 despite failure to comply with the provision in the "Agreement" requiring him to obtain an official communication from Tanglaw regarding the continuation of Motown's lease contract. HELD: YES At the outset, petitioner's undertaking set forth in the "Agreement" may be deemed a "condition", a future and uncertain event upon which the existence of an obligation is made to depend or that which subordinates the existence of a liability under

a contract to a certain future event. 9 It was a condition that was imposed on an obligation after the consummation of the contract of sale, not a condition on the perfection of the contract itself (non-fulfillment of which could have prevented the juridical relation from coming into existence). Article 1545 of the Civil Code is pertinent: Art. 1545.Where the obligation of either party to a 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. In the case at bar, respondents obviously did not choose the first option as they proceeded with their contract with petitioner despite the latter's non-fulfillment of the condition in the agreement. Did respondents, however, waive fulfillment of the condition? Yes. The records reveal that respondents negotiated directly with Tanglaw for a new lease contract even without the required official communication that petitioner was supposed to obtain for them, a condition in the "Agreement" which they themselves imposed on the latter. . Respondents' conduct showed that they did not only disregard the condition but also placed petitioner in a position that his compliance was no longer necessary. We are thus constrained to rule that they had effectively waived compliance with the condition. Finally, the condition was deemed waived when respondents forged their new lease contract with Tanglaw.

2. [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.

PHILIPPINE LONG DISTANCE TELEPHONE COMPANY , petitioner, vs. LAURO LEVISTE, as Director and Minority Stockholder and On Behalf of Other Stockholders of El Dorado Plantation, Inc., EL DORADO PLANTATION, INC., represented by Minority Stockholder, Lauro P. Leviste, and FERNANDO CARRASCOSO, JR., respondent FACTS: A contract of sale was entered into between Leviste on behalf of the El Dorado plantation Inc. and Fernando Carrascoso. The sale involved a parcel of land owned by El Dorado with an area of approximately 1,825 hectares covered by Transfer Certificate of Title (TCT) No. T-93 situated in Sablayan, Occidental Mindoro. On the deed of sale, the seller warrants that the property is not being cultivated by any tenant and is therefore not covered by the provisions of the Land Reform Code. If, therefore, the VENDEE becomes liable under the said law, the VENDOR shall reimburse the VENDEE for all expenses and damages he may incur thereon. Carrascoso was to pay the full amount of the purchase price on March 23, 1975. Thereafter, Carrascoso and his wife Marlene executed a Real Estate Mortgage over the property in favor of Home Savings Bank (HSB) to secure a loan in the amount of P1,000,000.00. This undertaking was not objected by El Dorado and in fact cause the registration of the deed of sale them. On May 18, 1972, the real estate mortgage in favor of HSB was amended to include an additional three year loan of P70,000.00 as requested by the spouses Carrascoso. The 3-year period for Carrascoso to fully pay for the property on March 23, 1975 passed without him having complied therewith.

In the meantime, on July 11, 1975, Carrascoso and the Philippine Long Distance Telephone Company (PLDT), through its President Ramon Cojuangco, executed an Agreement to Buy and Sell whereby the former agreed to sell 1,000 hectares of the property to the latter at a consideration of P3,000.00 per hectare or a total of P3,000,000.00. Thereafter, Lauro Leviste, a stockholder and member of the Board of Directors of El Dorado, called the attention of the Board to Carrascoso's failure to pay the balance of the purchase price of the property amounting to P1,300,000.00. He then request for the rescission of the contract of sale. This was opposed by Carrascoso and PLDT. ISSUE: 1) Whether or not EL Dorado has the right to rescind the contract of sale. 2) Whether El Dorado has breach its warranty under the contract of sale. HELD: 1) Reciprocal obligations are those which arise from the same cause, and in which each party is a debtor and a creditor of the other, such that the obligation of one is dependent upon the obligation of the other. They are to be performed simultaneously such that the performance of one is conditioned upon the simultaneous fulfillment of the other. The right of rescission of a party to an obligation under Article 1191 is predicated on a breach of faith by the other party who violates the reciprocity between them. 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. In the case at bar, El Dorado already performed its obligation through the execution of the March 23, 1972 Deed of Sale of Real Property which effectively transferred ownership of the property to Carrascoso. The latter, on the other hand, failed to perform his correlative obligation of paying in full the contract price in the manner and within the period agreed upon. The terms of the Deed are clear and unequivocal: Carrascoso was to pay the balance of the purchase price of the property amounting to P1,300,000.00 plus interest thereon at the rate of 10% per annum within a period of three (3) years from the signing of the contract on March 23, 1972. When Jose Leviste informed him that El Dorado was seeking rescission of the contract by letter of February 21, 1977, the period given to him within which to fully satisfy his obligation had long lapsed. The El Dorado Board Resolution and the Affidavit of Jose Leviste interposing no objection to Carrascoso's mortgaging of the property to any bank did not have the effect of suspending the period to fully pay the purchase price, as expressly stipulated in the Deed, pending full payment of any mortgage obligation of Carrascoso 2)The breach of an express warranty makes the seller liable for damages. The following requisites must be established in order that there be an 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. Under the March 23, 1972 Deed of Sale of Real Property, El Dorado warranted that the property was not being cultivated by any tenant and was, and therefore, not covered by the provisions of the Land Reform Code. If Carrascoso would become liable under the said law, he would be reimbursed for all expenses and damages incurred thereon. Carrascoso claims to have incurred expenses in relocating persons found on the property four months after the execution of the Deed of Sale. Apart from such bare claim, the records are bereft of any proof that those persons were indeed tenants. The fact of tenancy not having been priorly established, El Dorado may not be held liable for actual damages.

HEIRS OF SOFIA QUIRONG, Represented by ROMEO P. QUIRONG, petitioners, vs. DEVELOPMENT BANK OF THE PHILIPPINES, respondent.

FACTS:
When the late Emilio Dalope died, he left a 589-square meter untitled lot in Sta. Barbara, Pangasinan, to his wife, Felisa Dalope and their nine children, one of whom was Rosa DalopeFuncion. To enable Rosa and her husband Antonio Funcion get a loan from respondent Development Bank of the Philippines , Felisa sold the whole lot to the Funcions. With the deed of sale in their favor and the tax declaration transferred in their names, the Funcions mortgaged the lot with the DBP. On February 12, 1979, after the Funcions failed to pay their loan, the DBP foreclosed the mortgage on the lot and consolidated ownership in its name. Four years later the DBP conditionally sold the lot to Sofia Quirong for the price of P78,000.00. In their contract of sale, Sofia Quirong waived any warranty against eviction. Two months after that sale or on November 28, 1983 Felisa and her eight children filed an action for partition and declaration of nullity of documents with damages against the DBP and the Funcions.2005cdasia On December 27, 1984, notwithstanding the suit, the DBP executed a deed of absolute sale of the subject lot in Sofia Quirong's favour. On December 16, 1992 the RTC rendered a

decision, declaring the DBP's sale to Sofia Quirong valid only with respect to the shares of Felisa and Rosa Funcion in the property. It declared Felisa's sale to the Funcions, the latter's mortgage to the DBP, and the latter's sale to Sofia Quirong void insofar as they prejudiced the shares of the eight other children of Emilio and Felisa who were each entitled to a tenth share in the subject lot. This judgment has become final and executor. On June 10, 1998 the Quirong heirs filed the present action against the DBP for rescission of the contract of sale between Sofia Quirong, their predecessor, and the DBP and praying for the reimbursement of the price of P78,000.00 that she paid the bank plus damages. The heirs alleged that they were entitled to the rescission of the sale because the decision in Civil Case D-7159 stripped them of nearly the whole of the lot that Sofia Quirong, their predecessor, bought from the DBP. The DBP filed a motion to dismiss the action on ground of prescription and res judicata but the RTC denied their motion.

ISSUE: 1) Whether or not the action of the heirs is barred by prescription. 2) Whether or not the heirs can rescind the contract of sale. HELD: Yes. The action is barred by prescription and they cannot rescind the contract. The DBP claims that it should be four years as provided under Article 1389 of the Civil Code. Article 1389 provides that "the action to claim rescission must be commenced within four years". The Quirong heirs, on the other hand, claim that it should be 10 years as provided under Article 1144 which states that actions "upon a written contract" must be brought "within 10 years from the date the right of action accrues". There is no question that their action was for rescission. The prescriptive period for rescission is four years. But it is not that simple. The remedy of "rescission" is not confined to the rescissible contracts enumerated under Article 1381. Article 1191 of the Civil Code gives the injured party in reciprocal obligations, such as what contracts are about, the option to choose between fulfillment and "rescission". Arturo M. Tolentino, a well-known authority in civil law, is quick to note, however, that the equivalent of Article 1191 in the old code actually uses the term "resolution" rather than the present "rescission". The calibrated meanings of these terms are distinct. "Rescission" is a subsidiary action based on injury to the plaintiff's economic interests as described in Articles 1380 and 1381. "Resolution", the action referred to in Article 1191, on the other hand, is based on the defendant's breach of faith, a violation of the reciprocity between the parties. As an action based on the binding force of a written contract, therefore, rescission (resolution) under Article 1191 prescribes in 10 years. Ten years is the period of prescription of actions based on a written contract under Article 1144. The distinction makes sense. Article 1191 gives the injured party an option to choose between, first, fulfillment of the contract and, second, its rescission. An action to enforce a written contract (fulfillment) is definitely an "action upon a written contract", which prescribes in 10 years (Article 1144). It will not be logical to make the remedy of fulfillment prescribe in 10 years while the alternative remedy of rescission (or resolution)

is made to prescribe after only four years as provided in Article 1389 when the injury from which the two kinds of actions derive is the same. 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. 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. 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.

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

FACTS: 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.

ISSUE: 1) Whether Ang's cause of action had not yet prescribed when he filed the complaint 2) Whether Ang can recover from Soledad the amount he paid BA Finance on account of the mortgage debt

HELD:

1. YES. 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 the case at bar, 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.

2. NO. On the merits of his complaint for damages, even if Ang invokes breach of warranty against eviction as inferred from the second part of the earlier-quoted provision of the Deed of Absolute Sale, the following essential requisites for such breach: (1) The purchaser has been deprived of the whole or part of the thing sold; (2) This eviction is by a final judgment; (3) The basis thereof is by virtue of a right prior to the sale made by the vendor; and (4) The vendor has been summoned and made co-defendant in the suit for eviction at the instance of the vendee, have not been met. For one, there is no judgment which deprived Ang of the vehicle. For another, there was no suit for eviction in which Soledad as seller was impleaded as co-defendant at the instance of the vendee. Finally, even under the principle of solutio indebiti which the RTC applied, Ang cannot recover from Soledad the amount he paid BA Finance. For, as the appellate court observed, Ang settled the mortgage debt on his own volition under the supposition that he would resell the car. It turned out that he did pay BA Finance in order to avoid returning the payment made by the ultimate buyer Bugash. It need not be stressed that Soledad did not benefit from Angs paying BA Finance, he not being the one who mortgaged the vehicle, hence, did not benefit from the proceeds thereof.

Andaya v. Manansala Facts: On June 13, 1934, one Isidro Fenis sold the land in question to Eustaquia Llanes, with right of repurchase within a period of five years. After the expiry of said period, and without repurchasing the said property, Isidro Fenis sold it again to Maria Viloria on January 13, 1944. Seven months later, or on August 21, 1914, Maria Viloria sold by way of sale with right to repurchase within a period of one year, the said property together with another parcel of land to the herein defendant Melencio Manansala. On August 1, 1946, upon the expiry of the said period, Manansala registered with the Register of Deeds an affidavit consolidating his title on the property. A year later, or on September 28, 1947, Maria Viloria sold by way of absolute sale the same property to Ciriaco Casio, Fidela Valdez, and the plaintiff spouses Ariston Andaya and Micaela Cabrito, for P4,800.00, which deed contained the following stipulation: The following month, or on October 18, 1947, Eustaquia Llanes, instituted Civil case No. 399 to quiet title and to recover possession of said parcel from Ciriaco Casio. Eight months later, or on June 9, 1949, a defendant Melencio Manansala sold by way of absolute sale, the property in question to the spouses Ciriaco Casio and Fidela Valdez, and the plaintiffs for P1,500.00 On March 23, 1956, plaintiffs spouses Ariston Andaya and Micaela Cabrito commenced this case in the Court of First Instance of Ilocos Sur against defendant Melencio Manansala to recover damages suffered by them by reason of the latter's breach of his warranty of title or against eviction embodied in his sale of the land in question to plaintiffs. Defendant Manansala denied liability for the damages claimed, and alleged that it was plaintiffs and their co-purchasers who pleaded with him to sell said land to them at a low price after they had been sued by Eustaquia Llanes in Civil Case No. 399, considering that Manansala had registered the land in his name with the office of the Register of Deeds. After the case was submitted for a summary judgment and the parties had agreed on a statement of facts, the lower court ordered Manansala to pay Andaya spouses and Cabrito P750.00 which represents one half of the purchase price.

Issue: WON Manansala is liable in recission of sale even if he is not liable for breach of warranty against eviction.

Held: No. The vendor's liability for warranty against eviction in a contract of sale is waivable and may be renounced by the vendee (last par., Art. 1475, Old Code; last par., Art. 1548, New). The contract of sale between herein appellant and the appellees included a stipulation as to the warranty; but the lower court found that the parties understood that such stipulation was merely pro forma and that the appellant vendor was not to be bound thereby, in view of the fact that the same land had been previously bought by appellees from Maria Viloria and that their only purpose in buying the same

again from appellant was to enable them to register their prior deed of sale; and the further fact that when the sale between appellant and appellee was made, the property was already the subject of a pending litigation between appellees and one Eustaquia Llanes, who claimed its title and possession by virtue of an earlier sale from the original owner, and it was by final judgment in this litigation that appellees were evicted from and land. Not having appealed from the decision of the court below, appellees are bound by these findings, the implication of which is that they not only renounced or waived the warranty against eviction, but that they knew of the danger of eviction and assumed its consequences. Neither may appellant be condemned to return the price received from appellees on the theory of rescission of their contract of sale, as held by the court below. In the first place, the remedy of rescission contemplates that the one demanding it is able to return whatever he has received under the contract; and when this can not be done, rescission can not be carried out (Art. 1295, Old Code; Art. 1385, New). It is for this reason that the law on sales does not make rescission a remedy in case the vendee is totally evicted from the thing sold, as in this case, for he can no longer restore the thing to the vendor. It is only when the vendee loses "a part of the thing sold of such importance, in relation to the whole, that he would not have purchased it without said part" that he may ask for rescission, but he has "the obligation return the thing without other encumbrances than those which it had when he acquired it" (Art. 1479, old Code; 1556, New). In the second place, appellees, as already stated, assumed the risk of eviction, which stops them from asking for rescission even were it possible for them to restore what they had received under the contract.

NUTRIMIX FEEDS CORPORATION vs. COURT OF APPEALS FACTS: Spouses Efren and Maura Evangelista, the respondents herein, started to directly procure various kinds of animal feeds from petitioner Nutrimix Feeds Corporation. Initially, the respondents were good paying customers. In some instances, however, they failed to pay the deliveries of animal feeds. Petitioner filed a complaint to recover the sum of money but the respondents counterclaimed that the feeds delivered by Nutrimix were contaminated which caused the death of their animals. As such, their non-payment of the obligation was based on a

just and legal ground. Moreover, respondents argued that the contaminated feeds are considered hidden defects, found in Articles 1561 and 1566 of the Civil Code, which will make Nutrimix liable to the respondents on the ground of breach of warranty. It appears that on July 26, 1993; July 27, 1993; and August 2, 1993, respondents received animal feeds from Nutrimix which were fed to the animals. Instantly, the animals died. About 2 months after, respondents have the feeds examined for any poison. The results yielded that the feeds contained an active ingredient found in RACUMIN, a brand of a rat poison. The trial court ruled against in favor of respondents, stating that Nutrimix cannot beliable for the hidden defects because there was inadequate proof that the feeds contained poison. However, this decision was reversed in the Court of Appeals. ISSUE: Whether or not Nutrimix is liable to respondents under Articles 1561 and 1566? HELD: NO. A hidden defect is one which is unknown or could not have been known to the vendee. Its requisites are: (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. 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 review of the facts of the case would reveal that it took respondents to have the feeds examined barely three months after their broilers and hogs had died. In this span, the feeds could have already been contaminated by outside factors and subjected to many conditions unquestionably beyond the control of the petitioner. In fact, Dr. Garcia, one of the witnesses for the respondents, testified that the animal feeds submitted to her for laboratory examination contained very high level of mold and that the same were placed only in a sealed bag. There is no evidence on record to prove that the animal feeds for laboratory examination were the same animal feeds given by Nutrimix. Also, the chickens brought for laboratory tests were healthy animals, and were not the ones that were poisoned. Mere sickness and death of the chickens is not satisfactory evidence in itself to establish a prima facie case of breach of warranty. Likewise, respondents combined different kinds of animal feeds and that the mixture was given to the animals since it was common practice among chicken and hog raisers. Moreover, during the meeting with Nutrimix officers and respondents, the latter claimed that their animals were plagued by disease, and that they needed more time to settle their obligations. It was only after a few months that they claimed that their animals were poisoned with the animal feeds supplied by the Nutrimix. In essence, we hold that the respondents failed to prove that the petitioner is guilty of breach of warranty due to hidden defects. As such, they should be held liable for their unsettled obligations to Nutrimix. JERRY T. MOLES vs. INTERMEDIATE APPELLATE COURT

Petitioner Jerry T. Moles needed a linotype printing machine for his printing business, The LM Press at Bacolod City, and applied for an industrial loan with the Development Bank of the Philippines (DBP), for the purchase thereof. Moles then decided to buy the 2 machines of Diolosa Publishing House, although these were secondhand. The transaction was basically verbal in nature but to facilitate the loan application with the DBP, a pro forma invoice in the amount of P50,000.00 as the consideration of the sale, was signed by Moles. The machine was delivered to Moles publishing house where it was installed by one Crispino Escurido. Diolosa issued a certification wherein he warranted that the machine sold was in "A-1 condition", together with other express warranties. However, Moles wrote Diolosa stating that the machine was not functioning properly as it needed a new distributor bar and that an expert of this machine from Manila told Moles that the machine is only worth P5,000. The failure of the Diolosa to repair the same and its inability to purchase a new distributor bar for its whole price prompted Moles to file this suit for the rescission of the contract of sale. ISSUE: Whether or not Moles may rescind the contract? HELD: YES. When an article is sold as a secondhand item, it is generally held that 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. Said general rule, however, is not without exceptions. Article 1562 of our Civil Code provides that there is an implied warranty where the buyer 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. In the case at bar, a certification to the effect that the machine was in A-1 condition was issued by Diolosa. This cannot but be considered as an express warranty. This certification was a condition sine qua non for the release of Moles loan which was to be used as payment for the machine. Indeed, Diolosa is bound by the said express warranty. On the question as to whether the hidden defects in the machine is sufficient to warrant a rescission of the contract between the parties, 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. In this case, the expert witness for Moles categorically established that the machine required major repairs before it could be used. This, plus the fact that he never made appropriate use of the machine from the time of purchase until an action was filed, attested to the major defects in said machine, by reason of which the rescission of the contract of sale is sought.