477 SCRA 666 Fernando Carrascoso, Jr.

vs
Court of Appeals
477 SCRA 666 Civil Law Law on Sale
Contract to Sell vs Contract of Sale
FACTS: 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 hell 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 Carrascosos
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
Carrascosos 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 Dorados 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
a Contract of Sale

warranty

in

(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.

Ang vs Court of Appeals, G.R. No. G.R. No.

177874
Petitioner: Jaime D. Ang
Respondent: Court of Appeals and Bruno
Soledad

FACTS: Under a car-swapping scheme,

respondent Soledad sold his Mitsubishi GSR
sedan 1982 model to petitioner Ang by Deed of
Absolute Sale dated July 28, 1992. Ang later
offered the Mitsubishi GSR for sale through Far
Eastern Motors, a second-hand auto display
center. The vehicle was eventually sold to a
certain 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 the amount of P62,038.47. Soledad
refused to reimburse the said amount, despite
repeated demands, drawing Ang to charge him
for Estafa with abuse of confidence. It was
dismissed later for insufficiency of evidence. Ang
filed the first complaint for damages against
Soledad. It was dismissed for failure to submit the
controversy to barangay conciliation. Ang
thereafter secured a certification to file action
and again filed a complaint for damages which
was dismissed on the ground that the amount
involved is not within its jurisdiction.
Ang thereupon filed with the Municipal Trial Court
in Cities (MTCC) a complaint the subject of the
instant petition. After trial, the MTCC dismissed
the complaint on the ground of prescription
pursuant to Article 1571.
Ang appealed to the RTC which affirmed the
dismissal of the complaint, albeit it 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. Soledads Motion for Reconsideration
was denied. He elevated the case to the Court of
Appeals. The appellate court accordingly reversed
the RTC decision and denied Angs motion for
reconsideration.
ISSUE: Whether Angs cause of action has
prescribed
RULING: The resolution of the sole issue of
whether the complaint had prescribed hinges on
a determination of what kind of warranty is
provided in the Deed of Absolute Sale subject of
the present case. Art. 1546 of the Civil Code
defines express warranty. Among the implied
warranty provisions of the Civil Code are: as to
the sellers title (Art. 1548), against hidden
defects and encumbrances (Art. 1561), as to
fitness or merchantability (Art. 1562), and against
eviction (Art. 1548). The earlier cited ruling in
Engineering & Machinery Corp. 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).
For actions based on breach of implied warranty,
the prescriptive period is, under Art. 1571
(warranty
against
hidden
defects
of
or
encumbrances upon the thing sold) and Art. 1548
(warranty against eviction), six months from the
date of delivery of the thing sold.
In declaring that he owned and had clean title to
the vehicle at the time the Deed of Absolute Sale
was forged, Soledad gave an implied warranty of
title. In pledging that he will defend the same
from all claims or any claim whatsoever [and] will
save the vendee from any suit by the government
of the Republic of the Philippines, Soledad gave
a warranty against eviction. Given Angs business
of buying and selling used vehicles, he could not
have merely relied on Soledads affirmation that
the car was free from liens and encumbrances.
He was expected to have thoroughly verified the
cars registration and related documents.
Since what Soledad, as seller, gave was an
implied warranty, the prescriptive period to file a
breach thereof is six months after the delivery of
the vehicle, following Art. 1571. But even if the
date of filing of the action is reckoned from the
date petitioner instituted his first complaint for
damages on November 9, 1993, and not on July
15, 1996 when he filed the complaint subject of
the present petition, the action just the same had
prescribed, it having been filed 16 months after
July 28, 1992, the date of delivery of the vehicle.
CARLOS B. DE GUZMAN, vs. TOYOTA CUBAO,
INC.,
G.R. NO. 141480, November 29, 2006
FACTS: On November 27, 1997, BUYER
purchased from SELLER a brand new vehicle. The
vehicle was delivered to BUYER two days later. On
October 18, 1998, BUYER demanded the
replacement of the engine of the vehicle because
it developed a crack after traversing Marcos
Highway during a heavy rain. As BUYER knows no
reason why the vehicle's engine would crack just
like that, the same could only be due to the fact
that said engine and/or the vehicle itself was
defective even from the time it was bought.
BUYER asserted that respondent should replace
the engine with a new one based on an implied
warranty. SELLER refused to answer for this
defect saying it is not covered by the vehicle's
warranty. It refused to replace the vehicle as
BUYER demanded (or at least its engine, or even
repair the damage). He further alleged that the
BUYER's cause of action had prescribed as the
case was filed more than six months from the
date the vehicle was sold and/or delivered.
ISSUES:

1) Whether the SELLER is liable for the redhibitory

defects of the vehicle.
2) Whether the BUYER's cause of action had
prescribed.
RULING:
The pertinent provisions of the Code set forth the
available remedies of a buyer against the seller
on the basis of a warranty against hidden defects:
Art. 1561. The vendor shall be responsible for
warranty against the hidden defects which the
thing sold may have, should they render it unfit
for the use for which it is intended, or should they
diminish its fitness for such use to such an extent
that, had the vendee been aware thereof, he
would not have acquired it or would have given a
lower price for it; but said vendor shall not be
answerable for patent defects or those which may
be visible, or for those which are not visible if the

vendee is an expert who, by reason of this trade

or profession, should have known them.
(Emphasis supplied)
Art. 1566. The vendor is responsible to the
vendee for any hidden faults or defects in the
thing sold, even though he was not aware
thereof.
This provision shall not apply if the contrary has
been stipulated and the vendor was not aware of
the hidden faults or defects in the thing sold.
Art. 1571. Actions arising from the provisions of
the preceding ten articles shall be barred after six
months from the delivery of the thing sold.
Wherefore, the SELLER is not liable for the
defects and a redhibitory action for violation of an
implied warranty against hidden defects has been
time-barred.