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MARIANO S. TUASON, plaintiff & appellant, vs.

defendant & appellee [1923]

⇒ 1913/1914: Lucena Electric Company was granted a 35-yr franchise. Rts
was passed on to Marquez on Sept. 10, 1919. However, the company
never functioned efficiently, thus, Marquez gave up the franchise, w/c was
subsequently cancelled by the Public Utility Commissioner on March 29,
⇒ March 5, 1921: Marquez entered into an agreement w/Tuason wherein the
latter purchased the plant for P14,400.00, P2,400 of w/c was payable w/in
60 days from the signing of the agreement and the balance of P12k payable
w/in a year. Only the first installment was paid. One pertinent clause in their
agreement mentioned that the rt to franchise/tax exemption (not sure which
of these 2 is the correct translation) is granted to the company to operate
the industry for w/c it is dedicated. Despite lack of franchise, Tuason was
still allowed to operate the company by means of a special license valid
until he obtains a new franchise. New franchise was granted w/certain
conditions w/c amounted to a renovation of the entire plant.
⇒ While in Tuason’s possession, the plant was ran by Consolidated Electric
Company for about 16mos. However, it was later on sold under execution
due to a judgment in the case of Levy Hermanos vs. Philippine Electric
Light Company. Buyer was Gregorio Marquez, Crisanto’s brother, who
bought it at P5,501.57.
⇒ Tuason then instituted an action against Crisanto for a rescission of the
contract plus judgment amounting to P37,400.00. Crisanto asked for
dismissal of the case & an allowance of a total of P12,654.50 from Tuason.
⇒ Lower court absolved Crisanto & allowed him to recover P12,240.00 w/legal
interest (P12k – amount still due from the sale and P240.00 – rent).

Issue & Ratio: WON Crisanto is guilty of fraud & misrepresentation in
selling an electric light plant w/a franchise when it fact it had none, which
should then be a ground for the rescission of the contract. – NO.
1. The contract, in mentioning the electric light company merely renewed a
previous inventory of the property. The franchise was not the determining
cause of the purchase. During the sale, franchise was still in force & either
party could have ascertained its status by simply applying at the Public
Utility Commissioner’s office. Innocent non-disclosure of a fact doesn’t
affect the formation of the contract or operate to discharge the parties from
their agreement. Caveat emptor (buyer alone is responsible for assessing
the quality of a purchase before buying) should be recalled.
2. Tuason is in estoppel for delay in asserting his rights. He operated the plant
for 16 mos w/o ques & he even paid the 1st payment. He only instituted the
action after the venture proved to be disastrous & a 3rd party now owns the
3. There was no proof of fraud on the part of Crisanto.

Holding: Lower court decision affirmed.