J.M Tuazon Co.

Inc vs CA
Facts:
On January 31, 1952, petitioner J.M. Tuason & Co., Inc. executed, in favor of Ricardo de Leon,
a contract to sell Lot No. 15, Block 460 of the Sta. Mesa Heights Subdivision containing an area
of 1,703.6 square meters with the agreed price of P24.60 per square meter or a total of
P41,908.56. At the execution of the contract, Ricardo de Leon paid the down-payment of
P4,190.86 and agreed to pay the balance in the monthly installment of P498.63 including the
agreed annual interest of 10%. Meanwhile, on April 10, 1953, petitioner signed a compromise
agreement with the Deudors.

On July 19, 1965 with the consent of the petitioner, Ricardo de Leon transferred all his rights to
the lot in favor of his parents, herein private respondents Alfonso and Rosario de Leon (exhibit
B). On the same date, private respondents paid the outstanding balance of the purchase price
(Exhibit 1-B). On August 5, 1965 petitioner executed in favor of private respondents the deed of
sale over the lot (Exhibit C) and upon its registration, the Register of Deeds issued to the
respondents the Transfer Certificate of Title No. 96143 (Exhibit 3; Annex B, Rollo, 39-40).

At the time of the execution of the contract to sell, the contracting parties knew that a portion of
the lot in question was actually occupied by Ramon Rivera. However, it was their understanding
that the latter will be ejected by the petitioner from the premises (Annex B, Id).

On May 13, 1958, herein petitioner filed a complaint of ejectment against Ramon Rivera before
the Court of First Instance of Rizal (Civil Case No. Q-2989) and later petitioner petitioner
Ricardo de Leon and respondents Alfonso and Rosario de Leon as necessary parties. In this
Civil Case No. Q-2989, the decision of the lower court, principally based on the compromise
agreement executed in another Civil Case No. Q-135 entitled Florencio Deudor, et al. vs. J.M.
Tuason, et al. has the following dispositive portion:
WHEREFORE, the complaint against the defendant Ramon Rivera is hereby DISMISSSED.

CA’s decision:
The appellate court, in this action of warranty against eviction, found that petitioner J.M. Tuason
& Co., Inc. failed to comply with its obligation to transfer ownership over the lot to the De Leons
due to the compromise agreement it entered with the Deudors, and that petitioner is guilty of
"wilful deception, intentional forsaking of one to whom defendant was bound in a contract to
convey, and worse yet, even at that, after the compromise, defendant still continued to collect
installments from buyer

Petitioner’s Arguments that the Trial Court erred in:

● in holding that the compromise agreement was the proximate cause of its failure to
comply with its contract to self in favor of Ricardo de Leon
● in holding that it entered into the compromise agreement without the knowledge and
behind the back of Ricardo de Leon and thereafter continued the collection of the
installments until the purchase price was fully paid and thus it wilfully committed fraud
against him
 ● in not considering that Ricardo de Leon was guilty of bad faith in entering into the
contract to sell and therefore he is not entitled to the warranty against eviction;

Issue:
whether respondents De Leon are entitled to the vendor's warranty against eviction and
damages.

Ruling:
Court holds that it was not petitioner's own making that it executed the compromise agreement
with the Deudors. This agreement was sanctioned by the court after the Deudors filed an action
against petitioner in Civil Case No. Q-135 entitled "Florencio Deudor, et al. vs. J.M. Tuason et
al." Petitioner claims, without having been contradicted, that it executed the compromise
agreement with the Deudors in the honest belief that the lots it already sold. like the lot in
question, were excluded from the coverage of the agreement. This claim finds support in
paragraph "SEVENTH" of the compromise agreement which reads ... It shall be the joint and
solidary obligation of the Deudors to make the buyers of the lots purportedly sold by them
recognize the title of the OWNERS over the property purportedly bought by them, and to make
them sign, whenever possible, new contracts of purchase for the said property at the current
prices and terms specified by the OWNERS in their sales of lots in their subdivision known as
Sta. Mesa Heights Subdivision ... "

This particular stipulation in the compromise agreement discloses an understanding between

the petitioner and the Deudors that the buyers of lots from the Deudors, like Ramon Rivera,
may, acquire lots from the subdivision being sold by petitioner and sign new contracts of
purchase with the latter 6 whenever possible", or only when said lots have not already been sold
to third 'parties. Relying on the above-quoted provision, petitioner believed in good faith that
said lot sold to the De Leons would not be adversely affected. Nonetheless, with the inevitable
and admitted fact that Ramon Rivera was a prior occupant thereof, petitioner was compelled by
judicial fiat in Civil Case No. 2989 of the Court of First Instance of Rizal, to recognize the
preferential right of Rivera to rightfully purchase the lot. This fact is not of itself a proof under the
circumstance just cited, of bad faith on the part of the petitioner or that it is guilty of committing
fraud and deception upon the respondents as the respondent court found.

The subsequent execution of a deed of sale upon the total payment of the purchase price in
favor of herein respondents on August 5, 1965 in lieu of the previous contract to sell made in
favor of Ricardo de Leon, through which deed of sale the respondents acquired a transfer
certificate of title over the questioned lot, is further evidence of the honesty and good faith of
petitioner in dealing with private respondents.

For all the foregoing circumstances, We have no hesitation to give to petitioner the benefit of the
doubt of its having acted in good faith, which is always presumed,, without any intention of
taking advantage of the other party dealing with it.
Moreover, at the time of the execution of the contract to sell it is an admitted fact that Ricardo de
Leon knew that a third party was occupying a part of the lot subject of the sale. Ricardo de Leon
ought to have known that he was buying a property with the distinct possibility of not being able
to possess and own the land due to the occupancy of another person on the same. So there
had to be an understanding between him and the petitioner for the latter to eject the occupant,
something which, by the facts then obtaining and the law relevant thereto, would make the
ejectment more speculative than certain. Nonetheless, Ricardo de Leon knowingly assumed the
risk when he bought the, land, and was even called a vendee in bad faith by the Court of
Appeals in doing so, clearly not an innocent purchaser in good faith.

This Court is impelled to declare that private respondents were lacking in good faith for knowing
beforehand, at the time of the sale, the presence of an obstacle to their taking over the
possession of the land, which, in effect, would amount to eviction from said land, and still they
bought the land without first removing that obstacle.

One who purchases real estate with knowledge of a defect or lack of title in his vendor cannot
claim that he has acquired title thereto in good faith, as against the true owner of the land or of
an interest therein; and the same rule must be applied to one who has knowledge of facts which
should have put him upon such inquiry and investigation as might be necessary to acquaint him
with the defects in the title of his vendor. A purchaser cannot close his eyes to facts which
should put a reasonable man upon his guard and then claim that he acted in good faith under
the belief that there was no defect in the title of the vendor. Without being shown to be vendees
in good faith, herein respondents are not entitled to the warranty against eviction nor are they
On titled to recover damages (Article 1555 of the Civil Code).
Escaler vs CA
Facts:
On March 7, 1958, the spouses Africa V. Reynoso and Jose L, Reynoso sold to petitioners
several others, a parcel of land, situated in Antipolo, Rizal with an area of 239,479 square
meters and covered by TCT No. 57400 of the Register of Deeds of the Province of Rizal. The
Deed of Sale contained the following covenant against eviction, to wit:
That the VENDOR warrants valid title to and ownership of said parcel of land and further,
warrant to defend the property herein sold and conveyed, unto the VENDEES, their heirs, and
assignees, from any and all claims of any persons whatsoever.

On April 21, 1961, the Register of Deeds of Rizal and A. Doronilla Resources Development, Inc.
filed Case No. 4252 before the Court of First Instance of Rizal for the cancellation of OCT No.
1526 issued in the name of Angelina C. Reynoso (predecessor-in-interest of private
respondents-vendors) on February 26, 1958.

On June 10, 1964, an Order was issued in the said case, the dispositive portion of which reads:
IN VIEW OF THE ABOVE CONSIDERATIONS, this Court is constrained to set aside Decree
No. 62373 issued in LRC. Rec. No. N-13783 and the Register of Deeds of Rizal is directed to
cancel OCT No. 1526 of his office and all Transfer Certificates of Title issued subsequently
thereafter to purchaser of said property or portions thereof, the same being null and void, the
expenses for such cancellation to be charged to spouses Angelina Reynoso and Floro
Reynoso.

On August 31, 1965, herein petitioners, spouses Maria de Leon Escaler and Ernesto Escaler
and spouses Cecilia J. Roxas and Pedro Roxas, filed Civil Case No. 9014 before the Court of
First Instance of Rizal against their vendors, herein private respondents, spouses Jose L.
Reynoso and Africa Reynoso for the recovery of the value of the property sold to them plus
damages on the ground that the latter have violated the vendors' "warranty against eviction."

The complaint among others, alleged that the Order issued in Case No. 4252 which cancelled
the title of Angelina C. Reynoso and all subsequent Transfer Certificates of Title derived and/or
emanating therefrom and which includes the titles of petitioners, is now final, and by reason
thereof petitioners lost their right over the property sold and that in said Case No. 4252, the
respondents were summoned and/or given their day in court at the instance of the petitioners.

Trial Court’s Decision:

Considering the foregoing motion for summary judgment and it appearing that the defendants
under a Deed of Absolute Sale (Annex "C") have expressly warranted their valid title and
ownership of the said parcel of land and further warranted to defend said property from any and
all claims of any persons whomever in favor of plaintiffs; that the said warranties were violated
when on June 10, 1964. Court hereby grants the motion for summary judgment, and hereby
orders the defendants to jointly and severally return to the plaintiffs Maria Luisa de Leon Escaler
and Ernesto Escaler, Cecilia J. Roxas and Pedro Roxas, the value of the property sold to them
at the time of eviction which is not to be less than P5,500.00 to reimburse to each one of the
plaintiffs the expenses of contract and litigation and the amount of P2,250.00 to pay the
attorney's fees of P1,000.00 plus the costs of suit.

CA’s Decision:
In reversing the decision of the trial court and dismissing the case, the then Court of Appeals
found and so ruled that petitioners as vendees had not given private respondents-vendors,
formal notice of the eviction case as mandated by Arts. 1558 and 1559 of the New Civil Code.

Issue:
Whether or not the CA erred in applying strictly to the instant case the provisions of Articles
1558 and 1559 of the new Civil Code

Ruling:
Article 1548, in relation to Articles 1558. and 1559 of the New Civil Code.
In order that a vendor's liability for eviction may be enforced, the following requisites must
concur—a) there must be a final judgment; b) the purchaser has been deprived of the whole or
part of the thing sold; c) said deprivation was by virtue of a right prior to the sale made by the
vendor; and d) the vendor has been summoned and made co-defendant in the suit for eviction
at the instance of the vendee.

In the case at bar, the fourth requisite—that of being summoned in the 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 the opposition
they (petitioners) filed in the eviction suit. Decidedly, this is not the kind of notice prescribed by
the aforequoted Articles 1558 and 1559 of the New Civil Code. The term "unless he is
summoned in the suit for eviction at the instance of the vendee" means that the respondents as
vendor/s should be made parties to the suit at the instance of petitioners-vendees, either by way
of asking that the former be made a co-defendant or by the filing of a third-party complaint
against said vendors. Nothing of that sort appeared to have been done by the petitioners in the
instant case.
Moles vs IAC
Facts:
Petitioner 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.
(hereinafter, DBP) for the purchase thereof. An agent of Smith, Bell and Co. who is a friend of
petitioner introduced the latter to private respondent, owner of the Diolosa Publishing House in
Iloilo City, who had two available machines. On his second visit to the Diolosa Publishing
House, petitioner together with Rogelio Yusay, a letter press machine operator, decided to buy
the linotype machine, Model 14. The transaction was basically verbal in nature but to facilitate
the loan application with the DBP, a pro forma invoice, dated April 23, 1977 and reflecting the
amount of P50,000.00 as the consideration of the sale, was signed by petitioner with an
addendum that payment had not yet been made but that he promised to pay the full amount
upon the release of his loan from the aforementioned bank on or before the end of the month.
Although the agreed selling price was only P40,000.00, the amount on the invoice was
increased by P10,000.00, said increase being intended for the purchase of new matrices for
said machine.

Sometime between April and May, 1977, the machine was delivered to petitioner's publishing
house at Tangub, Bacolod City where it was installed by one Crispino Escurido, an employee of
respondent Diolosa.

Under date of August 29, 1977, private respondent issued a certification wherein he warranted
that the machine sold was in A-1 condition, together with other express warranties.

It is to be noted that the aforesaid official receipt No. 0451, dated September 30, 1977 and
prepared and signed by private respondent, expressly states that he received from the petitioner
the DBP check for P50,000.00 issued in our favor in full payment of one (1) Unit Model 14
Linotype Machine as per Pro forma Invoice dated April 23, 1977. On November 29, 1977,
petitioner wrote private respondent that the machine was not functioning properly as it needed a
new distributor bar.

Private respondent made no reply to said letter, so petitioner engaged the services of other
technicians. Later, after several telephone calls regarding the defects in the machine, private
respondent sent two technicians to make the necessary repairs but they failed to put the
machine in running condition. In fact, since then petitioner was never able to use the machine.

On February 18, 1978, not having received from private respondent the action requested in his
preceding letter as herein before stated, petitioner again wrote private respondent, this time with
the warning that he would be forced to seek legal remedies to protect his interest.

Obviously in response to the foregoing letter, private respondent decided to purchase a new
distributor bar and, on March 16, 1978, private respondent delivered this spare part to petitioner
through one Pedro Candido. However, when thereafter petitioner asked private respondent to
pay for the price of the distributor bar, the latter asked petitioner to share the cost with him. It
turned out that the said linotype machine was the same machine that witness Legaspina had
previously inspected for Sy Brothers, a firm which also wanted to buy a linotype machine for
their printing establishment. Having found defects in said machine, the witness informed Sy
Brother about his findings, hence the purchase was aborted.

‘Petitioner Jerry T. Moles commenced a suit against private respondent Mariano M. Diolosa in
the aforesaid trial court, Branch IV in Bacolod City, for rescission of contract with damages.

Trial Court’s Decision:

Decreeing the rescission of the contract of sale involving one linotype machine No. 14 between
the defendant as seller and the plaintiff as buyer; Ordering the plaintiff to return to the defendant
at the latter's place of business in Iloilo City the linotype machine aforementioned together with
all accessories that originally were delivered to the plaintiff;Ordering the defendant to return to
the plaintiff the sum of Forty Thousand Pesos (P40,000.00) representing the price of the
linotype machine, plus interest at the legal rate counted from May 17, 1978 when this action
was instituted, until fully paid;

Issue:
when an article is sold as a secondhand item, a question arises as to whether there is an
implied warranty of its quality or fitness.

Ruling:
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 a 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. In a line of decisions rendered by the United States Supreme Court, it had
theretofore been held that there is no implied warranty as to the condition, adaptation, fitness, or
suitability for the purpose for which made, or the quality, of an article sold as and for a
secondhand article.

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;

Furthermore, and of a more determinative role in this case, a perusal of past American
decisions likewise reveals a uniform pattern of rulings to the effect that an express warranty can
be made by and also be binding on the seller even in the sale of a secondhand article.
To repeat, in the case before Us, a certification to the effect that the linotype machine bought by
petitioner was in A-1 condition was issued by private respondent in favor of the former. This
cannot but be considered as an express warranty. However, it is private respondent's
submission, that the same is not binding on him, not being a part of the contract of sale between
them. This contention is bereft of substance.

It must be remembered that the certification was a condition sine qua non for the release of
petitioner's loan which was to be used as payment for the purchase price of the machine.
Private respondent failed to refute this material fact. Neither does he explain why he made that
express warranty on the condition of the machine if he had not intended to be bound by it. In
fact, the respondent court, in declaring that petitioner should have availed of the remedy of
requiring repairs as provided for in said certification, thereby considered the same as part and
parcel of the verbal contract between the parties.

On the basis of the foregoing circumstances, the inescapable conclusion is that private
respondent is indeed bound by the express warranty he executed in favor of herein petitioner.

We disagree with respondent court that private respondents express warranty as to the A-1
condition of the machine was merely dealer's talk. Private respondent was not a dealer of
printing or linotype machines to whom could be ascribed the supposed resort to the usual
exaggerations of trade in said items. His certification as to the condition of the machine was not
made to induce petitioner to purchase it but to confirm in writing for purposes of the financing
aspect of the transaction his representations thereon.
Nutrimix Feeds Corporation vs. CA
Facts:
On April 5, 1993, the Spouses Efren and Maura Evangelista, the respondents herein, started to
directly procure various kinds of animal feeds from petitioner Nutrimix Feeds Corporation. The
petitioner gave the respondents a credit period of thirty to forty-five days to postdate checks to
be issued in payment for the delivery of the feeds. Initially, the respondents were good paying
customers. In some instances, however, they failed to issue checks despite the deliveries of
animal feeds which were appropriately covered by sales invoices.

When the above-mentioned checks were deposited at the petitioner's depository bank, the
same were, consequently, dishonored because respondent Maura Evangelista had already
closed her account. The petitioner made several demands for the respondents to settle their
unpaid obligation, but the latter failed and refused to pay their remaining balance with the
petitioner.

On December 15, 1993, the petitioner filed with the Regional Trial Court of Malolos, Bulacan, a
complaint, docketed as Civil Case No. 1026-M-93, against the respondents for sum of money
and damages with a prayer for issuance of writ of preliminary attachment.

On January 19, 1994, the respondents also lodged a complaint for damages against the
petitioner, docketed as Civil Case No. 49-M-94, for the untimely and unforeseen death of their
animals supposedly effected by the adulterated animal feeds the petitioner sold to them. Within
the period to file an answer, the petitioner moved to dismiss the respondents' complaint on the
ground of litis pendentia.

Respondent’s arguments:
● They asserted that the nine checks issued by respondent Maura Evangelista 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.

Dr. Juliana G. Garcia, a doctor of veterinary medicine and the Supervising Agriculturist of the
Bureau of Animal Industry, testified that on October 20, 1993, sample feeds for chickens
contained in a pail were presented to her for examination by respondent Efren Evangelista and
a certain veterinarian. The Clinical Laboratory Report revealed that the feeds were negative of
salmonella and that the very high aflatoxin level found therein would not cause instantaneous
death if taken orally by birds. Another witness for the respondents, Aida Viloria Magsipoc,
Forensic Chemist III of the Forensic Chemist Division of the National Bureau of Investigation,
affirmed that she performed a chemical analysis17 of the animal feeds, submitted to her by
respondent Maura Evangelista and Dr. Garcia in a sealed plastic bag, to determine the
presence of poison in the said specimen. The witness verified that the sample feeds yielded
positive results to the tests for COUMATETRALYL Compound, the active component of
RACUMIN, a brand name for a commercially known rat poison. According to the witness, the
presence of the compound in the chicken feeds would be fatal to internal organs of the
chickens, as it would give a delayed blood clotting effect and eventually lead to internal
hemorrhage, culminating in their inevitable death.

Paz Austria, the Chief of the Pesticide Analytical Section of the Bureau of Plants Industry,
conducted a laboratory examination to determine the presence of pesticide residue in the
animal feeds submitted by respondent Maura Evangelista and Dr. Garcia. The tests disclosed
that no pesticide residue was detected in the samples received but it was discovered that the
animal feeds were positive for Warfarin, a rodenticide (anticoagulant), which is the chemical
family of Coumarin.

Trial Court’s Decision:

Trial court was rendered a decision if favor of the petitioner. On the strength of the foregoing
disquisition, the Court cannot sustain the Evangelistas' contention that Nutrimix is liable under
Articles 1561 and 1566 of the Civil Code governing "hidden defects" of commodities sold. As
already explained, the 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. All told, the Court finds and so holds that for inadequacy of proof to the contrary, Nutrimix
was not responsible at all for the contamination or poisoning of the feeds supplied by it to the
Evangelistas which precipitated the mass death of the latter's chickens and hogs.

CA’s Decision:
In dismissing the complaint in Civil Case No. 1026-M-93, the CA ruled that the 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. The
CA further argued that the declarations of Dr. Diaz were not effectively impugned during
cross-examination, nor was there any contrary evidence adduced to destroy his damning
allegations.

Issue:
whether or not there is sufficient evidence to hold the petitioner guilty of breach of warranty due
to hidden defects.

Ruling:
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 seller's or manufacturer's 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. We agree with the contention of the petitioner that there is no evidence on
record to prove that the animal feeds taken to the various governmental agencies for laboratory
examination were the same animal feeds given to the respondents' broilers and hogs for their
consumption. In essence, we hold that the respondents failed to prove that the petitioner is
guilty of breach of warranty due to hidden defects. It is, likewise, rudimentary that common law
places upon the buyer of the product the burden of proving that the seller of the product
breached its warranty. The bevy of expert evidence adduced by the respondents is too shaky
and utterly insufficient to prove that the Nutrimix feeds caused the death of their animals. For
these reasons, the expert testimonies lack probative weight. The respondents' case of breach of
implied warranty was fundamentally based upon the circumstantial evidence that the chickens
and hogs sickened, stunted, and died after eating Nutrimix feeds; but this was not enough to
raise a reasonable supposition that the unwholesome feeds were the proximate cause of the
death with that degree of certainty and probability required. The rule is well-settled that if there
be no evidence, or if evidence be so slight as not reasonably to warrant inference of the fact in
issue or furnish more than materials for a mere conjecture, the court will not hesitate to strike
down the evidence and rule in favor of the other party. This rule is both fair and sound. Any
other interpretation of the law would unloose the courts to meander aimlessly in the arena of
speculation.
Philippine Steel Coating Corp. vs. Quinones
Facts:
The Complaint alleged that in early 1994, Richard Lopez, a sales engineer of PhilSteel, offered
Quinones their new product: primer-coated, long-span, rolled galvanized iron (G.I.) sheets. The
latter showed interest, but asked Lopez if the primer-coated sheets were compatible with the
Guilder acrylic paint process used by Amianan Motors in the finishing of its assembled buses.
Uncertain, Lopez referred the query to his immediate superior, Ferdinand Angbengco,
PhilSteel's sales manager.

Angbengco assured Quinones that the quality of their new product was superior to that of the
non-primer coated G.l. sheets being used by the latter in his business. Quinones expressed
reservations, as the new product might not be compatible with the paint process used by
Amianan Motors.

Angbengco guaranteed that a laboratory test had in fact been conducted by PhilSteel, and that
the results proved that the two products were compatible; hence, Quinones was induced to
purchase the product and use it in the manufacture of bus units.

However, sometime in 1995, Quinones received several complaints from customers who had
bought bus units, claiming that the paint or finish used on the purchased vehicles was breaking
and peeling off. Quinones then sent a letter-complaint to PhilSteel invoking the warranties given
by the latter. According to respondent, the damage to the vehicles was attributable to the hidden
defects of the primer-coated sheets and/or their incompatibility with the Guilder acrylic paint
process used by Amianan Motors, contrary to the prior evaluations and assurances of PhilSteel.
Because of the barrage of complaints, Quinones was forced to repair the damaged buses.

PhilSteel counters that Quinones himself offered to purchase the subject product directly from
the former without being induced by any of PhilSteel's representatives. According to its own
investigation, PhilSteel discovered that the breaking and peeling off of the paint was caused by
the erroneous painting application done by Quinones.

The RTC rendered a Decision in favor of Quinones and ordered PhilSteel to pay damages. The
trial court found that Lopez's testimony was damaging to PhilSteel's position that the latter had
not induced Quinones or given him assurance that his painting system was compatible with
PhilSteel's primer-coated G.I. sheets. The trial court concluded that the paint blistering and
peeling off were due to the incompatibility of the painting process with the primer-coated G .I.
sheets. The RTC also found that the assurance made by Angbengco constituted an express
warranty under Article 1546 of the Civil Code.

CA’s Decision:
The appellate court ruled that PhilSteel in fact made an express warranty that the primer-coated
G.I. sheets were compatible with the acrylic paint process used by Quinones on his bus units.
The assurances made by Angbengco were confirmed by PhilSteel's own employee, Lopez. The
CA further held that the cause of the paint damage to the bus units of Quinones was the
incompatibility of the primer-coated sheet with the acrylic paint process used by Amianan
Motors. The incompatibility was in fact acknowledged through a letter dated 29 June 1996 from
Angbengco himself.

Issue:
Whether vague oral statements made by seller on the characteristics of a generic good can be
considered warranties that may be invoked to warrant payment of damages’

Ruling:
This Court agrees with the CA that this is a case of express warranty under Article 1546 of the
Civil Code. As held in Carrascoso, Jr. v. CA, the following requisites must be established in
order to prove that there is 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 effect of the affirmation or promise is to induce the buyer to purchase the
thing; and (3) the buyer purchases the thing relying on that affirmation or promise.

Contrary to the assertions of petitioner, the finding of the CA was that the former, through
Angbengco, did not simply make vague oral statements on purported warranties. Petitioner
expressly represented to respondent that the primer-coated G .I. sheets were compatible with
the acrylic paint process used by the latter on his bus units. This representation was made in
the face of respondent's express concerns regarding incompatibility. Thus, it was not accurate
for petitioner to state that they had made no warranties. It insisted that at best, they only gave
"'assurances" of possible savings Quinones might have if he relied on PhilSteel's primer-coated
G.I. sheets and eliminated the need to apply an additional primer.

All in all, these "vague oral statements" were express affirmations not only of the costs that
could be saved if the buyer used PhilSteel's G.I. sheets, but also of the compatibility of those
sheets with the acrylic painting process customarily used in Amianan Motors. Angbengco did
not aimlessly utter those "vague oral statements" for nothing, but with a clear goal of persuading
Quinones to buy PhilSteel's product. Taken together, the oral statements of Angbengco created
an express warranty. They were positive affirmations of fact that the buyer relied on, and that
induced him to buy petitioner's primer-coated G .I. sheets. Under Article 1546 of the Civil Code,
"'[ n ]o affirmation of the value of the thing, nor any statement purporting to be a statement of the
seller's opinion only, shall be construed as a warranty, unless the seller made such affirmation
or statement as an expert and it was relied upon by the buyer." Despite its claims to the
contrary, petitioner was an expert in the eyes of the buyer Quinones.

Contrary however to petitioner's position, the so-called dealer's or trader's talk cannot be treated
as mere exaggeration in trade as defined in Article 1340 of the Civil Code. Quinones did not talk
to an ordinary sales clerk such as can be found in a department store or even a sari-sari store. If
Lopez, a sales agent, had made the assertions of Angbengco without true knowledge about the
compatibility or the authority to warrant it, then his would be considered dealer's talk. But
sensing that a person of greater competence and knowledge of the product had to answer
Quinones' concerns, Lopez wisely deferred to his boss, Angbengco.

Angbengco undisputedly assured Quinones that laboratory tests had been undertaken, and that
those tests showed that the acrylic paint used by Quinones was compatible with the
primer-coated G.I. sheets of Philsteel. Thus, Angbengco was no longer giving a mere seller's
opinion or making an exaggeration in trade. Rather, he was making it appear to Quinones that
Phil Steel had already subjected the latter's primed G.I. sheets to product testing.

We agree with petitioner that the nonpayment of the balance cannot be premised on a mere
allegation of nonexisting warranties. This Court has consistently ruled that whenever a breach of
warranty is not proven, buyers who refuse to pay the purchase price - or even the unpaid
balance of the goods they ordered - must be held liable therefor.

However, we uphold the finding of both the CA and the RTC that petitioner's breach of warranty
was proven by respondent.

Since what was proven was express warranty, the remedy for implied warranties under Article
1567 of the Civil Code does not apply to the instant case. Quinones has opted for a reduction in
price or nonpayment of the unpaid balance of the purchase price. Applying Article 1599 (1), this
Court grants this remedy.
Spouses Batalla vs. Prudential Bank
Facts:
In March 1998, petitioner Spouses Luis G. Batalla and Salvacion Batalla (Spouses Batalla)
purchased a brand new Honda Civic from respondent Honda Cars San Pablo, Inc. (Honda).
Respondent Alicia Rantael (Rantael), then acting manager of Pilipinas Bank, now merged with
respondent Prudential Bank (Prudential), brokered the deal. To finance the purchase of the said
motor vehicle, Spouses Batalla applied for a car loan with Prudential. On March 23, 1998, they
executed a promissory note for the sum of P292,200.00 payable within 36 months. On May 29,
1998, the Car Loan Agreement was approved. As such, Prudential issued a Manager's Check in
the said amount payable to Honda.

For their part, Spouses Batalla paid P214,000.00 corresponding to the remaining portion of the
purchase price for the Honda Civic. In addition, they also paid P11,000.000.00 for delivery cost
and the installation of a remote control door mechanism, and P28,333.56 for insurance.

On April 21, 1998, Spouses Batalla received the car after Rantael informed them that it was
parked near Prudential. However, after three days, the rear right door of the car broke down.
The Spouses Batalla consulted a certain Jojo Sanchez (Sanchez), who claimed that the power
lock of the rear right door was defective and that the car was no longer brand new because the
paint of the roof was merely retouched. On August 27, 1998, they took the car to the Auto Body
Shop for a thorough evaluation of the status of the vehicle. According to Arturo Villanueva
(Villanueva), the vehicle was no longer brand new because the rooftop was no longer shiny in
appearance. Thereafter, the manager of Prudential, together with two individuals from Honda,
met Spouses Batalla and offered to repair the vehicle. Spouses Batalla rejected it because they
wanted the car to be replaced with a brand new one without hidden defects.

Unable to secure a brand new car in replacement of the alleged defective vehicle, Spouses
Batalla filed a Complaint for Rescission of Contracts and Damages against Prudential and
Honda.

RTC’s and CA’sDecision:

In its July 23, 2008 Decision, the RTC dismissed the Spouses Batalla's complaint. The trial court
ruled that the car sold to Spouses Batalla was a brand new one and that any perceived defects
could not be attributed to Honda. It highlighted that Spouses Batalla failed to prove that the
defects in the car door were due to the fault of Honda and that the car was merely repainted to
make it appear brand new. In addition, the RTC expounded that the perceived defects were
minor defects which did not diminish the fitness of the car for its intended use.

Issues:
1. WHETHER THE MOTOR VEHICLE DELIVERED BY HONDA HAD HIDDEN DEFECTS
2. WHETHER SPOUSES BATALLA MAY RESCIND THE CONTRACT OF SALE, CAR
LOAN AGREEMENT AND PROMISSORY NOTE DUE TO THE DEFECTS OF THE
MOTOR VEHICLE SOLD.
Ruling:
1. As correctly observed by the RTC, however, the evidence of the respondents outweighed the
evidence presented by Spouses Batalla. The trial court noted that several documentary
evidence attest to the fact that the car was brand new. In addition, the purported printout from
the LTO was a mere photocopy and was never authenticated. Further, the document's credibility
is seriously in doubt, especially as to the entry that the car was first registered in 1994, because
the car model that Spouses Batalla bought was manufactured only in 1998. Even assuming that
the car delivered to Spouses Batalla had a defective car door, they still do not have any grounds
for rescinding the contract of sale.

Article 1561 of the Civil Code provides for an implied warranty against hidden defects in that the
vendor shall be responsible for any hidden defects which render the thing sold 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. In an implied warranty against hidden defects, vendors cannot raise the defense of
ignorance as they are responsible to the vendee for any hidden defects even if they were not
aware of its existence.

In order for the implied warranty against hidden defects to be applicable, the following
conditions must be met:
a. Defect is Important or Serious
i. The thing sold is unfit for the use which it is intended
ii. Diminishes its fitness for such use or to such an extent that the buyer would not have
acquired it had he been aware thereof
b. Defect is Hidden
c. Defect Exists at the time of the sale
d. Buyer gives Notice of the defect to the seller within reasonable time.

As can be seen, the redhibitory action pursued by Spouses Batalla was without basis. For one,
it was not sufficiently proven that the defects of the car door were important or serious. The
hidden defect contemplated under Article 1561 of the Civil Code is an imperfection or defect of
such nature as to engender a certain degree of importance and not merely one of little
consequence. Spouses Batalla failed to prove that such defect had severely diminished the
roadworthiness of the motor vehicle. In fact, they admitted that they had no problem as to the
road worthiness of the car.

In addition, it cannot be ascertained whether the defects existed at the time of the sale. As
previously mentioned, a remote control door mechanism was immediately installed after the car
was delivered to Spouses Batalla. The modification made to the motor vehicle raises the
possibility that the defect could have been caused or had occurred after the installation of the
remote control door system. As the party alleging hidden defects, Spouses Batalla had the
burden to prove the same. Unfortunately, they failed to do so considering that they did not
present as witnesses, the persons who had actually examined the car door and found it
defective.
2. Thus, it is readily apparent that a contract of loan is distinct and separate from a contract of
sale. In a loan, the object certain is the money or consumable thing borrowed by the obligor,
while in a sale the object is a determinate thing to be sold to the vendee for a consideration. In
addition, a loan agreement is perfected only upon the delivery of the object i.e., money or
another consumable thing, while a contract of sale is perfected by mere consent of the parties.

Under this premise, it is not hard to see the absurdity in the position of Spouses Batalla that
they could rescind the car loan agreement and promissory note with Prudential on the ground of
alleged defects of the car delivered to them by Honda. The transactions of Spouses Batalla with
Prudential and Honda are distinct and separate from each other. In the same vein, Spouses
Batalla's recourse in case of defects in the motor vehicle delivered to them was limited against
Honda and does not extend to Prudential as it merely lent the money to purchase the car.
Jurado vs. Spouses Chai
Facts:
Petitioners Asuncion and Catalina claimed to be the registered owners, together with their
deceased brother Fernando Zamora (Fernando; collectively, the Zamoras), of a 7,086-square
meter (sq. m.) parcel of land denominated as Lot 4900 of the Cadastral Survey of Santiago,
located in Santiago City, Isabela (Lot 4900), covered by TCT No. T-65150 which they inherited
from their father, Dominador Zamora (Dominador). Sometime in 1997, they discovered that
respondents unlawfully caused the subdivision of Lot 4900 into several parcels of land under
four (4) certificates of title (derivative titles), to wit: (1) TCT No. T-1943468 in the name of
Vicente Chai, married to Carmen T. Chai; (2) TCT No. T-1943479 in the name of Eduardo
Sarmiento, married to Josefina M. Sarmiento (Spouses Sarmiento); (3) TCT No. T-l94348 in the
name of Anastacio Palermo (Anastacio); and (4) TCT No. T-194349 in the names of Leonora
Pariñas and Margarita Pariñas (Pariñas heirs).

This prompted the Zamoras to file an annulment case against respondents, Spouses Sarmiento,
Anastacio, the Pariñas heirs with their spouses, and the Register of Deeds (RD) for Isabela in
Santiago City, Isabela (RD-Santiago), which was later amended to include the lessee, Petron
Corporation (Petron), as defendant (collectively, Chai, et al.). They claimed that the titles of
Chai, et al. proceeded from a fake Original Certificate of Title (OCT) No. 3429 that was
reconstituted judicially and administratively without notice to all concerned parties, and without
following the prescribed procedure.

For their part, respondents raised the defense of denial, and claimed that a portion of Lot 4900,
which was originally registered under OCT No. 3429 in the names of Spouses Pariñas (Pariñas
OCT 3429), was transferred to them on October 19, 1990, through an Extrajudicial Settlement
of Estate with Simultaneous Sale executed by the Heirs of Spouses Pariñas who gave them a
photocopy of Pariñas OCT 3429. They alleged that they inspected Lot 4900 and inquired its
status from the adjoining owners, who informed them that the same was owned by Spouses
Pariñas. After the ocular inspection, they instructed a certain Teresita Masa (Ms. Masa) to verify
the existence and genuineness of Pariñas OCT 3429 with the RD-Ilagan which issued a
Certification dated March 21, 1990 (RD-Ilagan Certification) stating that the subject 7,086-sq. m.
Lot 4900 situated in Poblacion, Santiago Isabela covered by Pariñas OCT 3429 is free from any
liens and encumbrances except Section 7 of Republic Act No. (RA) 2635 inscribed at the back
of said title.

RTC’s Decision:
In a Decision dated February 25, 2014, the RTC: (a) declared null and void TCT Nos. T-194346,
T-194348, and T-194349; (b) confirmed petitioners' ownership over Lot 4900 covered by TCT
No. T-65150; and (c) ordered Petron to pay petitioners the rentals stipulated in the Lease
Agreement dated September 20, 1996, or to consign the rentals in court while the case is under
litigation. It likewise ruled that respondents were not purchasers in good faith, pointing out that
the fact that Pariñas OCT 3429 was a reconstituted title should have alerted them to make an
investigation in the Register of Deeds, which could have disclosed such irregularity but they
failed to do so. Consequently, it ruled that Chai, et al. did not acquire valid title to Lot 4900, and
declared their titles null and void for having been derived from a spurious and fake reconstituted
title.

CA’s Decision:
In a Decision78 dated May 12, 2016, the CA reversed the RTC decision79 and dismissed the
annulment case for lack of merit. The CA ruled that respondents were purchasers in good faith
despite the irregularity which attended the reconstitution of Pariñas OCT 3429. It ratiocinated
that respondents had the right to believe that the said title was duly reconstituted since
reconstituted certificates of titles have the same validity and legal effect as the originals thereof.
Moreover, it observed that their act of verifying the existence of the title with the RD and their
honest belief that the sellers could legally convey the title to the land proved that respondents
were buyers in good faith. On the other hand, the CA held that petitioners were not able to
prove their right or interest in Lot 4900, pointing out that TCT No. T-65150 was not on file with
the RD-Ilagan and notwithstanding, they had not taken any immediate action to reconstitute the
same.

Issues:
1. Whether or not respondents are purchasers in good faith.
2. Whether or not petitioners have not proven their claim of ownership over Lot 4900.

Ruling:
1. Case law states that reconstituted titles shall have the same validity and legal effect as to the
originals thereof unless the reconstitution was made extrajudicially, or administratively. This is
because administrative reconstitution is essentially ex-parte and without notice, and thus,
administratively reconstituted titles do not share the same indefeasible character of the original
certificates of title. Anyone dealing with such copies are put on notice of such fact and warned to
be extra-careful. However, respondents only relied on a mere plain photocopy of Pariñas OCT
3429 when they purchased Lot 4900. Aside from instructing Ms. Masa to verify the existence
and genuineness of the said title with the RD-Ilagan, who claimed that she was shown the
original copy thereof, respondents had not conducted any other inquiry or investigation to
acquaint themselves with the defects of the said title. They had not even secured a certified true
copy thereof, and merely relied on the RD-Ilagan Certification stating that the 7,086-sq. m. Lot
4900 situated in Poblacion, Santiago, Isabela covered by Pariñas OCT 3429 is free from any
liens and encumbrances except Section 7 of RA 26 inscribed at the back of said title on June 2,
1977. Moreover, aside from the irregularity which attended its reconstitution, a perusal of
Pariñas OCT 3429 shows that it was purportedly transcribed in the Registration Book for the
Province of Isabela on February 19, 1937,106or more than one (1) year before the issuance on
November 17, 1938 of Decree No. 689655, decreeing the registration of Lot 4900 in the name
of the conjugal partnership of Spouses Pariñas. It cannot be overemphasized that the
transcription or entry of an original certificate of title can never precede the issuance of the
decree authorizing such registration.

Considering the foregoing, it is therefore apparent that Spouses Pariñas were not issued
Pariñas OCT 3429, and said title is totally inexistent. That it was reconstituted is of no moment
because an administrative reconstitution of title is merely a restoration or replacement of a lost
or destroyed title in its original form at the time of the loss or destruction. Consequently, this
Court finds respondents not to be innocent purchasers for value, and as such, acquired no
better title to Lot 4900 than what their predecessors-in-interest had, and which is without
prejudice to the rights of another person who may prove a better right thereto than their
transferors.

2. Contrary to the CA's ruling, petitioners have proven their claim of ownership over Lot 4900.
Petitioners have an owner's duplicate certificate of title in genuine/authentic Judicial Form
109-D. Petitioners are in possession of ancient documents showing acts of dominion by Antonio
Pariñas and Dominador Zamora over Lot 4900 prior to the supposed acquisition of the same
land by respondents.