Anna Christiana S.

Cuna
2018-0502
CASE DIGEST – Chapter 13: Conditions and Warranties

Carrascoso vs CA
GR NO. 123672 & 164489, Dec 14, 2005
Facts:
In March 1972, El Dorado Plantation, Inc. (El Dorado), through its board member
LauroLeviste, 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 P290, 000.00
would be paid by Carrascoso to PNB to settle the mortgage upon the said land. P210, 000.00
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.

Subsequently, 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.Meanwhile, El Dorado filed a civil case
against Carrascoso.The Regional Trial Court (RTC) ruled in favor of Carrascoso. The Court of
Appeals (CA), however, reversed the RTC ruling.

Issue: W/N El Dorado may be held liable for breach of warranty of non-tenancy
Held:
No. Carasscoso alleges thaton March 8, 1972 or two weeks prior to the execution of the
Deed ofSale, he discovered, while inspecting the property on board ahelicopter, that there were
people and cattle in the area; when heconfronted El Dorado about it, he was told that the
occupants were that the occupants werecaretakers of cattle who would soon leavecaretakers of
cattle who would soon leave;69 four months after theexecution of the Deed of Sale, upon inquiry
with the Bureau ofLands and the Bureau of Soils, he was informed that there werepeople
claiming to be tenants in certain portions of the property.
The breach of an express warranty makes the seller liable fordamages. The following
requisites must be established in order thatthere be an express warranty in a contract of sale: (1)
the expresswarranty must be an affirmation of fact or any promise by the sellerrelating to the
subject matter of the sale; (2) the natural tendency ofsuch affirmation or promise is to induce the
buyer to purchase thething; and (3) the buyer purchases the thing relying on suchaffirmation or
promise thereon. The records do not show that the farmers were in fact tenants, therefore, El
Dorado may not be held liable for damages.
PNB vs Mega Prime Realty Holdings (Oct. 6, 2008)
G.R. No. 173454 : October 6, 2008

Facts:
In line with its privatization plan, PNB offered to sell its holdings of PNB-MADECOR to
Mega Prime Realty holdings. Mega Prime purchased the shares of PNB MADECOR in order to
get a hold of the Pantranco property, which the former planned to develop. However, the realty
company’s partner in the joint venture pulled out when they learned that part of the property in
question still belonged to the local government of Quezon City.

Mega Prime sought annulment of the deed of sale on the ground that PNB misrepresented
its assets when it sold the shares to the former and further sought a reimbursement of the amount
paid as well as damages.

Issue: W/N there is sufficient ground to annul the deed of sale

Held:
No. The court found that there was no fraud on the part of PNB with regard to the
perfection of the sale. The provisions of the deed of sale showed that the main consideration
were the stocks of PNB-MADECOR and not the properties that came with them therefore, any
defects in the title should not affect the entire sale. Although it is expressly stated in the deed that
transfer of the stocks will effectively transfer the properties to the buyer, a defect in the said titles
i.e., discovery that it was in the name of the government of QC, does not affect the integrity of
the sale.

However, the failure of PNB to effect a change in the ownership of the properties
amounts to a hidden defect within the contemplation of Arts. 1547 and 1561 of the NCC. The
title of the Pantranco property was still in the name of another realty company, and failure of
PNB to show that the titles were in the name of PNB-MADECOR amounted to a breach of
warranty. Hence the court found it proper to proportionately reduce the price of the sale.