HARRISON MOTORS CORPORATION, petitioner, vs.
RACHEL the BOC to prove that all existing taxes and customs duties have
A. NAVARRO, respondent.
DECISION
BELLOSILLO, J.:
This is a review on certiorari of the Decision of the Court of Appeals
affirming that of the Regional Trial Court of Makati which ordered
petitioner to pay private respondent P32,943.00 as reimbursement
for taxes paid, P7,500.00 as attorneys fees and the costs of suit.
[1]
 Sl-xm-is
Sometime in June of 1987 Harrison Motors Corporation through its
president, Renato Claros, sold two (2) Isuzu Elf trucks to private
respondent Rachel Navarro, owner of RN Freight Lines, a franchise
holder operating and maintaining a fleet of cargo trucks all over
Luzon. Petitioner, a known importer, assembler and manufacturer,
assembled the two (2) trucks using imported component parts.
[2]
 Prior to the sale, Renato Claros represented to private
respondent that all the BIR taxes and customs duties for the parts
used on the two (2) trucks had been paid for.[3]
On 10 September 1987 the Bureau of Internal Revenue (BIR) and
the Land Transportation Office (LTO) entered into a Memorandum
of Agreement (MOA) which provided that prior to registration in the
LTO of any assembled or re-assembled motor vehicle which used
imported parts, a Certificate of Payment should first be obtained
from the BIR to prove payment of all taxes required under existing
laws.[4]
On 12 October 1987 the Bureau of Customs (BOC)
issued Customs Memorandum Order No. 44-87 promulgating rules,
regulations and procedure for the voluntary payment of duties and
taxes on imported motor vehicles assembled by non-assemblers.[5]
Pursuant to the 10 September 1987 MOA between the BIR and the
LTO, the BIR issued on 18 December 1987 Revenue Memorandum
Order No. 44-87 which provided the procedure governing the
processing and issuance of the Certificate of Payment of internal
revenue taxes for purposes of registering motor vehicles.[6]
On 16 June 1988 the BIR, BOC and LTO entered into a tripartite
MOA which provided that prior to the registration in the LTO of any
locally assembled motor vehicle using imported component parts,
a Certificate of Payment should first be obtained from the BIR and
The Court of Appeals subsequently sustained the lower court,
been paid.[7]
In December of 1988 government agents seized and detained the
two (2) Elf trucks of respondent after discovering that there were
still unpaid BIR taxes and customs duties thereon. The BIR and the
BOC ordered private respondent to pay the proper assessments or
her trucks would be impounded. [8] Private respondent went to
Claros to ask for the receipts evidencing payment of BIR taxes and
customs duties; however, Claros refused to comply.[9] Private
respondent then demanded from Claros that he pay the assessed
taxes and warned him that he would have to reimburse her should
she be forced to pay for the assessments herself. Her demands
were again ignored. M-issdaa
But wanting to secure the immediate release of the trucks to comply
with her business commitments, private respondent paid the
assessed BIR taxes and customs duties amounting to P32,943.00.
[10]
 Consequently, she returned to petitioners office to ask for
reimbursement, but petitioner again refused, prompting her to send
a demand letter through her lawyer. [11] When petitioner still ignored
her letter, she filed a complaint for a sum of money on 24
September 1990 with the Regional Trial Court of Makati.[12]
On 24 May 1991 private respondent filed a Motion to Declare
Defendant in Default which was granted by the RTC on the same
day.
On 18 November 1991 private respondent filed a Manifestation and
Motion praying for the scheduling of the reception of her evidence
ex-parte since petitioner had not as yet filed a Motion to Lift Order
of Default. Thus, on 22 November 1991 the trial court ordered the
reception of private respondent's evidence ex-parte.[13]
It was only on 2 December 1991 when petitioner finally filed
a Motion to Lift Order of Default. However, on 20 January 1992 the
trial court denied petitioners motion for its failure to attach an
affidavit of merit showing that it had a valid and meritorious
defense.[14]
On 5 March 1992 the trial court rendered a decision ordering
petitioner to reimburse private respondent in the amount
of P32,943.00 for the customs duties and internal revenue taxes the
latter had to pay to discharge her two (2) Elf trucks from
government custody. Petitioner was also required to pay P7,500.00
for attorneys fees plus the costs.[15]
hence this recourse of petitioner.[16]
Petitioner argues that it was no longer obliged to pay for the
additional taxes and customs duties imposed on the imported
component parts by the Memorandum Orders and the two
(2) Memoranda of Agreement since such administrative regulations
only took effect after the execution of its contract of sale with private
respondent. Holding it liable for payment of the taxes specified in
the administrative regulations, which have the force and effect of
laws, would not only violate the non-impairment clause of the
Constitution but also the principle of non-retroactivity of laws
provided in Art. 4 of the Civil Code. [17] Furthermore, petitioner claims
that it did pay the assessed taxes and duties otherwise it would not
have been able to secure the release of such spare parts from the
customs and to register the vehicles with the LTO under its name.
The records however reveal that the Memorandum
Orders and Memoranda of Agreement do not impose any additional
BIR taxes or customs duties.
Customs Memorandum Order No. 44-87 is concerned with
the Rules, Regulations and Procedures in the Payment of Duties
and Taxes on Imported Vehicles Locally Assembled by Non-
Assemblers.[18] It does not charge any new tax. It simply provides
the procedure on how owners/consignees or their purchasers could
voluntarily initiate payment for any unpaid customs duties on locally
assembled vehicles using imported component parts.
Neither does BIR Revenue Memorandum Order No. 44-87[19] exact
any tax. It merely outlines the procedure which governs the
processing and issuance of the Certificate of Payment of internal
revenue taxes for purposes of registering motor vehicles with the
LTO. It was passed pursuant to the MOA entered into by the LTO
and the BIR on 10 September 1987 implementing Secs. 135-A and
163 of the 1987 National Internal Revenue Code (NIRC).[20]
It is likewise futile for petitioner to insist that the MOA executed by
the BIR and the LTO on 10 September 1987, and the tripartite MOA
executed by the BIR, LTO and BOC on 16 June 1988 are
administrative regulations prescribing additional taxes.
An examination of the 10 September 1987 MOA shows that it was
executed by the BIR and the LTO to curb the scheme employed by
unscrupulous importers who evade paying the correct taxes and
customs duties on imported vehicles by importing its parts,
assembling them locally, and subsequently selling the finished
1
products to local buyers. The aforementioned MOA mandated that
prior to registration in the LTO of any assembled automobile using
imported parts, a Certificate of Payment should first be obtained
from the BIR which would then transmit the Certificate to the LTO to
prove that all the BIR taxes required under existing laws have been
paid.
The 16 June 1988 tripartite MOA among the BIR, LTO and the BOC
virtually contained the same provisions. The MOA provided that
prior to registration with the LTO of any assembled motor vehicle
using imported component parts, a Certificate of Payment should
first be secured from the BIR or the BOC which should then be duly
forwarded to LTO. The Certificate would serve as proof that all
taxes and customs duties required under existing laws, rules and
regulations had already been settled.
Clearly, petitioners contention is unmeritorious. What Sec. 10, Art.
III, of the Constitution prohibits is the passage of a law which
enlarges, abridges or in any manner changes the intention of the
contracting parties.[21] The Memorandum Orders and the two
(2) Memoranda of Agreement do not impose any additional taxes
which would unduly impair the contract of sale between petitioner
and private respondent. Instead, these administrative regulations
were passed to enforce payment of existing BIR taxes and customs
duties at the time of importation.
But who should pay the BIR taxes and customs duties which the
administrative regulations sought to enforce?
Petitioner contends that private respondent should be the one to
pay the internal revenue taxes and customs duties. It claims that at
the time the Memorandum Orders and the two (2) Memoranda of
Agreement took effect the two (2) Elf trucks were already sold to
private respondent, thus, it no longer owned the vehicles. Whatever
payments private respondent made to the government after the
sale were solely her concern and such burden should not be
passed on to petitioner. [22] Petitioner further argues that holding it
liable for payment of BIR taxes and customs duties required under
the administrative regulations violates the principle of non-
retroactivity of laws under the Civil Code. Rtc-spped
Such contention deserves scant consideration. It is true that
administrative rulings and regulations are generally prospective in
nature.[23] An inspection of the two (2) Memoranda of
Agreement however demonstrates that their intent is to enforce
payment of taxes on assemblers/manufacturers who import
component parts without paying the correct assessments.
The WHEREAS clause of the 10 September 1987 MOA clearly
illustrates this -
WHEREAS, in order to avoid or evade the
higher taxes on imported motor vehicles,
certain persons import parts and assemble and
re-assemble them into complete motor
vehicles, or assemble or re-assemble motor
vehicles using imported parts;
While the WHEREAS clause of the 16 June 1988 MOA provides -
WHEREAS, in order to avoid or evade the
higher taxes on imported motor vehicles,
certain persons, firms or corporations who are
non-BOI licensed assemblers of imported
motor vehicle component parts would
assemble or re-assemble them into whole unit
motor vehicles;
It is also apparent in Par. 9 of the 16 June 1988 MOA that the taxes
to be enforced are designated as assemblers/manufacturers tax. It
states -
9. The BIR shall collect the
assemblers/manufacturers tax, while the BOC
shall collect the duties and taxes and ad
valorem tax.
Thus, although private respondent is the one required by the
administrative regulations to secure the Certificate of Payment for
the purpose of registration, petitioner as the importer and the
assembler/manufacturer of the two (2) Elf trucks is still the one
liable for payment of revenue taxes and customs duties. Petitioners
obligation to pay does not arise from the administrative regulations
but from the tax laws existing at the time of importation. Hence,
even if private respondent already owned the two (2) trucks when
the Memorandum Orders and Memoranda of Agreement took
effect, the fact remains that petitioner was still the one duty-bound
to pay for the BIR taxes and customs duties.
It is also quite obvious that as between petitioner, who is the
importer-assembler/manufacturer, and private respondent, who is
merely the buyer, it is petitioner which has the obligation to pay
taxes to the BIR and the BOC. Petitioner would be unjustly enriched
if private respondent should be denied reimbursement.[24] It would
inequitably amass profits from selling assembled trucks even if it
did not pay the taxes due on its imported spare parts. Imposing the
tax burden on private respondent would only encourage the
proliferation of smugglers who scheme to evade taxes by passing
on their tax obligations to their unsuspecting buyers.
In a last ditch effort to exempt itself from liability, petitioner claims
that it had paid the taxes due on the imported parts otherwise it
would not have been able to obtain their release from the BOC and
to register the vehicles with the LTO.
Non-sequitur. The fact that petitioner was able to secure the
release of the parts from customs and to register the assembled
trucks with the LTO does not necessarily mean that all taxes and
customs duties were legally settled. As a matter of fact, the
provisions of the two (2) Memoranda of Agreement clearly establish
that the government is aware of the widespread registration of
assembled motor vehicles with the LTO even if the taxes due on
their imported component parts remain unpaid. Paragraph 1 of the
10 September 1987 MOA states -
The LTO shall make as one of the
requirements for the registration of motor
vehicles that were assembled or re-assembled
using imported parts, the payment to the BIR of
the taxes required under existing laws.
The same requirement shall be imposed with
respect to the renewal of the registration of
such motor vehicles had they been
registered or their registration been
renewed in the past without the payment of
the required taxes,
While par. 1 of the 16 June 1988 MOA states - Scl-aw
The LTO shall make as one of the
requirements for the registration of motor
vehicles that were assembled or re-assembled
by non-BOI licensed assemblers using
imported component parts, the payment to the
BIR and the BOC of taxes and duties required
under existing laws, rules and regulations;
The same requirement shall be imposed with
respect to the renewal of the registration of
such motor vehicles even if they were
already registered or their registration had
2
 been renewed in the past without the damages, particularly seeking the reimbursement of the amount
payment of the required taxes. she paid to secure the release of her vehicles.

Obviously, the two (2) Memoranda of Agreement were executed to WHEREFORE, the Decision of the Court of Appeals dated 22
prevent the anomalous circumstance, as in the case at bar, where January 1998 ordering petitioner HARRISON MOTORS
assembled vehicles are registered with the LTO even if taxes and CORPORATION to reimburse private respondent RACHEL A.
customs duties remain unpaid. NAVARRO for the taxes and duties she paid in the amount
of P32,943.00 and to pay her attorneys fees in the amount
of P7,500.00 is AFFIRMED. In addition, the amount of P32,943.00
Besides, petitioners allegation that it already paid the BIR taxes and
shall earn interest at the legal rate from 24 September 1990 when
customs duties is highly doubtful. This entire controversy would
private respondent filed her complaint with the trial court until fully
have been avoided had petitioner simply furnished private
paid. Costs against petitioner.
respondent with the receipts evidencing payment of BIR taxes and
customs duties. If only private respondent had the receipts to prove
payment of such assessments then she would have easily secured
the release of her two (2) Elf trucks. But petitioner arbitrarily and
unjustly denied private respondents demands. Instead, petitioner
obstinately insisted that it was no longer concerned with the
problem involving the two (2) trucks since it no longer owned the
vehicles after the consummation of the sale.

It is true that the ownership of the trucks shifted to private

respondent after the sale. But petitioner must remember that prior
to its consummation it expressly intimated to her that it had already
paid the taxes and customs duties. [25] Such representation shall be
considered as a sellers express warranty under Art. 1546 of the
Civil Code which covers any affirmation of fact or any promise by
the seller which induces the buyer to purchase the thing and
actually purchases it relying on such affirmation or promise. [26] It
includes all warranties which are derived from express language,
whether the language is in the form of a promise or representation.
[27]
 Presumably, therefore, private respondent would not have
purchased the two (2) Elf trucks were it not for petitioners assertion
and assurance that all taxes on its imported parts were already
settled.

This express warranty was breached the moment petitioner refused

to furnish private respondent with the corresponding receipts since
such documents were the best evidence she could present to the
government to prove that all BIR taxes and customs duties on the
imported component parts were fully paid. Without evidence of
payment, she was powerless to prevent the trucks from being
impounded.

Under Art. 1599 of the Civil Code, once an express warranty is

breached the buyer can accept or keep the goods and maintain an
action against the seller for damages. This was what private
respondent did. She opted to keep the two (2) trucks which she
apparently needed for her business and filed a complaint for

3
JERRY T. MOLES, petitioner,  Thereafter, private respondent filed his answer and proceeded to
vs.
INTERMEDIATE APPELLATE COURT and MARIANO M.
DIOLOSA, respondents.
Zoilo V. De la Cruz, Jr., Kenneth Barredo, Romeo Sabig and
Natalio V. Sitjao for petitioners.
Rolando N. Medalla and Jose G. Guinez, Jr., for private
respondents.
REGALADO, J.:
This petition for review on certiorari assails the decision of the then
Intermediate Appellate Court 1 dismissing the complaint filed by
herein petitioner against the herein private respondent in the former
Court of First Instance of Negros Occidental in Civil Case No.
13821 thereof. 2
The factual backdrop of this controversy, as culled from the
records, 3 shows that on May 17, 1978, 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. Private respondent moved to dismiss on
the ground of improper venue, invoking therefor Sales Invoice No.
075A executed between petitioner and private respondent on April
23, 1977 which provides that all judicial actions arising from this
contract shall be instituted in the City of Iloilo. 4This was opposed by
petitioner who averred that there is no formal document evidencing
the sale which is substantially verbal in character. In an order dated
June 23, 1978, the trial court denied the motion to dismiss, holding
that the question of venue could not be resolved at said stage of the
case. The subsequent motion for reconsideration was likewise
denied.
Consequently, private respondent, invoking the aforesaid venue
stipulation, preceeded to this Court on a petition for prohibition with
preliminary injunction in G.R. No. 49078, questioning the validity of
the order denying his aforesaid two motions and seeking to enjoin
the trial court from further proceeding with the case. This petition
was dismissed for lack of merit in a resolution of the Court, dated
February 7, 1979, and which became final on March 15, 1979.
September 30, 1977, to accomplish the following, with the
trial. explanations indicated by him:
The aforecited records establish that sometime in 1977, petitioner 1.) Crossed check for P15,407.10 representing.
needed a linotype printing machine for his printing business, The
LM Press at Bacolod City, and applied for an industrial loan with the
a) P 10,000.00-Overprice in the machine:
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 b) P203.00-Freight and handling of the
Diolosa Publishing House in Iloilo City, who had two available machine;
machines. Thereafter, petitioner went to Iloilo City to inspect the two
machines offered for sale and was informed that the same were
c) P203.00-Share in the electric repair; and
secondhand but functional.
d) P5,000.00- Insurance that Crispin will come
On his second visit to the Diolosa Publishing House, petitioner
back and repair the linotype machine at seller's
together with Rogelio Yusay, a letter press machine operator,
account as provided in the contract; after
decided to buy the linotype machine, Model 14. The transaction
Crispin has put everything in order when he
was basically verbal in nature but to facilitate the loan application
goes home on Sunday he will return the check
with the DBP, a pro forma invoice, dated April 23, 1977 and
of P15,000.00.
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 2) Official receipt in the amount of P 50,000.00
the release of his loan from the aforementioned bank on or before as full payment of the linotype machine.
the end of the month. 5 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 These were immediately complied with by private respondent and
matrices for said machine. on the same day, September 30,1977, he received the DBP check
for P50,000.00. 9
Sometime between April and May, 1977, the machine was
It is to be noted that the aforesaid official receipt No. 0451, dated
delivered to petitioner's publishing house at Tangub, Bacolod City
September 30, 1977 and prepared and signed by private
where it was installed by one Crispino Escurido, an employee of
respondent, expressly states that he received from the petitioner
respondent Diolosa. Another employee of the Diolosa Publishing
the DBP check for P50,000.00 issued in our favor in full payment of
House, Tomas Plondaya, stayed at petitioners house for almost a
one (1) Unit Model 14 Linotype Machine as per Pro forma Invoice
month to train the latter's cousin in operating the machine. 6
dated April 23, 1977. 10
Under date of August 29, 1977, private respondent issued a
certification wherein he warranted that the machine sold was in A-1 On November 29, 1977, petitioner wrote private respondent that the
condition, together with other express warranties. 7 machine was not functioning properly as it needed a new distributor
bar. In the same letter, petitioner unburdened himself of his
grievances and sentiments in this wise.
Prior to the release of the loan, a representative from the DBP,
Bacolod, supposedly inspected the machine but he merely looked
at it to see that it was there . 8 The inspector's recommendation was We bought this machine in good faith because
favorable and, thereafter, petitioner's loan of P50,000.00 was we trusted you very much being our elder
granted and released. However, before payment was made to brother in printing and publishing business. We
private respondent, petitioner required the former, in a letter dated did not hire anybody to look over the machine,
much more ask for a rebate in your price of
P40,000.00 and believed what your trusted two
4
 men, Tomas and Crispin, said although they
were hiding the real and actual condition of the
machine for your business protection.
Until last week, we found out the worst ever to
happen to us. We have been cheated because
the expert of the Linotype machine from Manila
says, that the most he will buy your machine is
at P5,000.00 only. ... 11
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. 12
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. 13
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. Petitioner thus
finally decided to indorse the matter to his lawyer.
An expert witness for the petitioner, one Gil Legaspina, declared
that he inspected the linotype machine involved in this case at the
instance of petitioner. In his inspection thereof, he found the
following defects: (1) the vertical automatic stop lever in the casting
division was worn out; (2) the justification lever had a slight breach
(balana in the dialect); (3) the distributor bar was worn out; (4) the
partition at the entrance channel had a tear; (5) there was no "pie
stacker" tube entrance; and (6) the slouch arm lever in the driving
division was worn out.
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. In his opinion, major repairs were needed to put the
machine back in good running condition. 14
After trial, the court a quo rendered a decision the dispositive
portion of which reads:
IN VIEW OF THE FOREGOING
CONSIDERATIONS, judgment is hereby
rendered as follows:
(1) Decreeing the rescission of the contract of
sale involving one linotype machine No. 14
between the defendant as seller and the
plaintiff as buyer;
(2) 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;
(3) 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;
(4) Ordering the defendant to indemnify the
plaintiff the sum of Four Thousand Five
Hundred Pesos (P4,500.00) representing
unearned income or actual damages;
(5) Ordering the defendant to pay the plaintiff
the sum of One Thousand Pesos (Pl,000.00)
for attorney's fees.
Costs against the defendant.15
From this decision, private respondent appealed to the Intermediate
Appellate Court which reversed the judgment of the lower court and
dismissed petitioner's complaint, hence the present petition.
We find merit in petitioner's cause.
On the matter of venue, private respondent relies on the
aforementioned Sales Invoice No. 076A which allegedly requires
that the proper venue should be Iloilo City and not Bacolod City. We
agree with petitioner that said document is not the contract
evidencing the sale of the linotype machine, it being merely a
preliminary memorandum of a proposal to buy one linotype
machine, using for such purpose a printed form used for printing job
orders in private respondent's printing business. As hereinbefore
explained, this issue on venue was brought to Us by private
respondent in a special civil action for prohibition with preliminary
injunction in G.R. No. 49078. After considering the allegations
contained, the issues raised and the arguments adduced in said
petition, as well as the comments thereto, the Court dismissed the
petition for lack of merit. Respondent court erred in reopening the
same issue on appeal, with a contrary ruling.
Furthermore, it was error for the respondent court, after adopting
the factual findings of the lower court, to reverse the latter's holding
that the sales invoice is merely a pro forma memorandum. The
records do not show that this finding is grounded entirely on
speculation, surmises or conjectures as to warrant a reversal
thereof. 16 In fact, as hereinbefore stated, private respondent
expressly admitted in his official receipt No. 0451, dated September
30, 1977, that the said sales invoice was merely a pro
forma invoice. Consequently, the printed provisions therein,
especially since the printed form used was for purposes of other
types of transactions, could not have been intended by the parties
to govern their transaction on the printing machine. It is obvious that
a venue stipulation, in order to bind the parties, must have been
intelligently and deliberately intended by them to exclude their case
from the reglementary rules on venue. Yet, even such intended
variance may not necessarily be given judicial approval, as, for
instance, where there are no restrictive or qualifying words in the
agreement indicating that venue cannot be laid in any place other
than that agreed upon by the parties, 17 and in contracts of
adhesion. 18
Now, 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. 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. 19
5
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. 20
Thus, in finding for private respondent, the respondent court cited
the ruling in Sison vs. Ago, et al. 21 to the effect that unless goods
are sold as to raise an implied warranty, as a general rule there is
no implied warranty in the sale of secondhand articles.22
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;
xxx
In Drumar Mining Co. vs. Morris Ravine Mining Co., 23 the District
Court of Appeals, 3rd District, California, in applying a similar
provision of law, ruled:
'There is nothing in the Uniform Sales Act
declaring there is no implied warranty in the
sale of secondhand goods. Section 1735 of the
Civil Code declares there is no implied
warranty or condition as to the quality or fitness
for any particular purpose, of goods supplied
under a contract to sell or a sale, except (this
general statement is followed by an
enumeration of several exceptions). It would
seem that the legislature intended this section
to apply to all sales of goods, whether new or
secondhand. In subdivision 1 of this section,
this language is used: where the buyer ...
makes known to the seller the particular
purpose for which the goods are required, and
it appears that the buyer relies on the seller's
skill or judgment ... 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 24 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.
In the aforecited case of Markman vs. Hallbeck, while holding that
there was an express warranty in the sale of a secondhand engine,
the court said that it was not error to refuse an instruction that upon
the sale of secondhand goods no warranty was implied, since
secondhand goods might be sold under such circumstances as to
raise an implied warranty.
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. Ordinarily,
what does not appear on the face of the written instrument should
be regarded as dealer's or trader's talk; 25 conversely, what is
specifically represented as true in said document, as in the instant
case, cannot be considered as mere dealer's talk.
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.26
As already narrated, an expert witness for the petitioner
categorically established that the machine required major repairs
before it could be used. This, plus the fact that petitioner never
made appropriate use of the machine from the time of purchase
until an action was filed, attest to the major defects in said machine,
by reason of which the rescission of the contract of sale is sought.
The factual finding, therefore, of the trial court that the machine is
not reasonably fit for the particular purpose for which it was
intended must be upheld, there being ample evidence to sustain the
same.
At a belated stage of this appeal, private respondent came up for
the first time with the contention that the action for rescission is
barred by prescription. While it is true that Article 1571 of the Civil
Code provides for a prescriptive period of six months for a
redhibitory action a cursory reading of the ten preceding articles to
which it refers will reveal that said rule may be applied only in case
of implied warranties. The present case involves one with and
express warranty. Consequently, the general rule on rescission of
contract, which is four years 27 shall apply. Considering that the
original case for rescission was filed only one year after the delivery
of the subject machine, the same is well within the prescriptive
period. This is aside from the doctrinal rule that the defense of
prescription is waived and cannot be considered on appeal if not
raised in the trial court, 28 and this case does not have the features
for an exception to said rule.
WHEREFORE, the judgment of dismissal of the respondent court is
hereby REVERSED and SET ASIDE, and the decision of the
court a quo is hereby REINSTATED.
6
7
POWER COMMERCIAL AND INDUSTRIAL
CORPORATION, petitioner, vs. COURT OF APPEALS,
SPOUSES REYNALDO and ANGELITA R. QUIAMBAO
and PHILIPPINE NATIONAL BANK, respondents.
DECISION
PANGANIBAN, J.:
Is the sellers failure to eject the lessees from a lot that is the
subject of a contract of sale with assumption of mortgage a ground
(1) for rescission of such contract and (2) for a return by the
mortgagee of the amortization payments made by the buyer who
assumed such mortgage?
Petitioner posits an affirmative answer to such question in
this petition for review on certiorari of the March 27, 1995
Decision[1] of the Court of Appeals, Eighth Division, in CA-G.R. CV
Case No. 32298 upholding the validity of the contract of sale with
assumption of mortgage and absolving the mortgagee from the
liability of returning the mortgage payments already made. [2]
The Facts
Petitioner Power Commercial & Industrial Development
Corporation, an industrial asbestos manufacturer, needed a bigger
office space and warehouse for its products.For this purpose, on
January 31, 1979, it entered into a contract of sale with the spouses
Reynaldo and Angelita R. Quiambao, herein private
respondents. The contractinvolved a 612-sq. m. parcel of land
covered by Transfer Certificate of Title No. S-6686 located at the
corner of Bagtican and St. Paul Streets, San Antonio Village,
Makati City.The parties agreed that petitioner would pay private
respondents P108,000.00 as down payment, and the balance
of P295,000.00 upon the execution of the deed of transfer of the
title over the property. Further, petitioner assumed, as part of the
purchase price, the existing mortgage on the land. In full
satisfaction thereof, he paid P79,145.77 to Respondent Philippine
National Bank (PNB for brevity).
On June 1, 1979, respondent spouses mortgaged again said
land to PNB to guarantee a loan of P145,000.00, P80,000.00 of
which was paid to respondent spouses.Petitioner agreed to assume
payment of the loan.
On June 26, 1979, the parties executed a Deed of Absolute
Sale With Assumption of Mortgage which contained the following
terms and conditions:[3]
That for and in consideration of the sum of Two Hundred Ninety-Five
Thousand Pesos (P295,000.00) Philippine Currency, to us in hand paid in
cash, and which we hereby acknowledge to be payment in full and
received to our entire satisfaction, by POWER COMMERCIAL AND
INDUSTRIAL DEVELOPMENT CORPORATION, a 100% Filipino
Corporation, organized and existing under and by virtue of Philippine
Laws with offices located at 252-C Vito Cruz Extension, we hereby by
these presents SELL, TRANSFER and CONVEY by way of absolute sale
the above described property with all the improvements existing thereon
unto the said Power Commercial and Industrial Development Corporation,
its successors and assigns, free from all liens and encumbrances.
We hereby certify that the aforesaid property is not subject to nor covered
by the provisions of the Land Reform Code -- the same having no
agricultural lessee and/or tenant.
We hereby also warrant that we are the lawful and absolute owners of the
above described property, free from any lien and/or encumbrance, and we
hereby agree and warrant to defend its title and peaceful possession
thereof in favor of the said Power Commercial and Industrial
Development Corporation, its successors and assigns, against any claims
whatsoever of any and all third persons; subject, however, to the
provisions hereunder provided to wit:
That the above described property is mortgaged to the Philippine National
Bank, Cubao, Branch, Quezon City for the amount of one hundred forty-
five thousand pesos, Philippine, evidenced by document No. 163, found
on page No. 34 of Book No. XV, Series of 1979 of Notary Public Herita
L. Altamirano registered with the Register of Deeds of Pasig (Makati),
Rizal xxx;
That the said Power Commercial and Industrial Development Corporation
assumes to pay in full the entire amount of the said mortgage above
described plus interest and bank charges, to the said mortgagee bank, thus
holding the herein vendor free from all claims by the said bank;
That both parties herein agree to seek and secure the agreement and
approval of the said Philippine National Bank to the herein sale of this
property, hereby agreeing to abide by any and all requirements of the said
bank, agreeing that failure to do so shall give to the bank first lieu (sic)
over the herein described property.
On the same date, Mrs. C.D. Constantino, then General
Manager of petitioner-corporation, submitted to PNB said deed with
a formal application for assumption of mortgage. [4]
On February 15, 1980, PNB informed respondent spouses
that, for petitioners failure to submit the papers necessary for
approval pursuant to the formers letter dated January 15, 1980, the
application for assumption of mortgage was considered withdrawn;
that the outstanding balance of P145,000.00 was deemed fully due
and demandable; and that said loan was to be paid in full within
fifteen (15) days from notice.[5]
Petitioner paid PNB P41,880.45 on June 24, 1980
and P20,283.14 on December 23, 1980, payments which were to
be applied to the outstanding loan. On December 23, 1980, PNB
received a letter from petitioner which reads: [6]
With regard to the presence of the people who are currently in physical
occupancy of the (l)ot xxx it is our desire as buyers and new owners of this
lot to make use of this lot for our own purpose, which is why it is our
desire and intention that all the people who are currently physically
present and in occupation of said lot should be removed immediately.
For this purpose we respectfully request that xxx our assumption of
mortgage be given favorable consideration, and that the mortgage and title
be transferred to our name so that we may undertake the necessary
procedures to make use of this lot ourselves.
It was our understanding that this lot was free and clear of problems of this
nature, and that the previous owner would be responsible for the removal
of the people who were there. Inasmuch as the previous owner has not
been able to keep his commitment, it will be necessary for us to take legal
possession of this lot inorder (sic) to take physical possession.
On February 19, 1982, PNB sent petitioner a letter as follows:
[7]
(T)his refers to the loan granted to Mr. Reynaldo Quiambao which was
assumed by you on June 4, 1979 for P101,500.00. It was last renewed on
December 24, 1980 to mature on June 4, 1981.
A review of our records show that it has been past due from last maturity
with interest arrearages amounting to P25,826.08 as of February 19,
1982. The last payment received by us was on December 24, 1980
for P20,283.14. In order to place your account in current form, we request
you to remit payments to cover interest, charges, and at least part of the
principal.
8
 On March 17, 1982, petitioner filed Civil Case No. 45217
against respondent spouses for rescission and damages before the
Regional Trial Court of Pasig, Branch 159.Then, in its reply to PNBs
letter of February 19, 1982, petitioner demanded the return of the
payments it made on the ground that its assumption of mortgage
was never approved. On May 31, 1983,[8] while this case was
pending, the mortgage was foreclosed. The property was
subsequently bought by PNB during the public auction. Thus, an
amended complaint was filed impleading PNB as party defendant.
On July 12, 1990, the trial court [9] ruled that the failure of
respondent spouses to deliver actual possession to petitioner
entitled the latter to rescind the sale, and in view of such failure and
of the denial of the latters assumption of mortgage, PNB was
obliged to return the payments made by the latter. The dispositive
portion of said decision states: [10]
IN VIEW OF ALL THE FOREGOING, the Court hereby renders
judgment in favor of plaintiff and against defendants:
(1) Declaring the rescission of the Deed of Sale with Assumption of
Mortgage executed between plaintiff and defendants Spouses Quiambao,
dated June 26, 1979;
(2) Ordering defendants Spouses Quiambao to return to plaintiff the
amount of P187,144.77 (P108,000.00 plus P79,145.77) with legal interest
of 12% per annum from date of filing of herein complaint, that is, March
17, 1982 until the same is fully paid;
(3) Ordering defendant PNB to return to plaintiff the amount
of P62,163.59 (P41,880.45 and P20,283.14) with 12% interest thereon
from date of herein judgment until the same is fully paid.
No award of other damages and attorneys fees, the same not being
warranted under the facts and circumstances of the case.
The counterclaim of both defendants spouses Quiambao and PNB are
dismissed for lack of merit.
No pronouncement as to costs.
SO ORDERED.
On appeal by respondent-spouses and PNB, Respondent
Court of Appeals reversed the trial court. In the assailed Decision, it
held that the deed of sale between respondent spouses and
petitioner did not obligate the former to eject the lessees from the
land in question as a condition of the sale, nor was the occupation
thereof by said lessees a violation of the warranty against
eviction. Hence, there was no substantial breach to justify the
rescission of said contract or the return of the payments made. The
dispositive portion of said Decision reads:[11]
WHEREFORE, the Decision appealed from is hereby REVERSED and
the complaint filed by Power Commercial and Industrial Development
Corporation against the spouses Reynaldo and Angelita Quiambao and the
Philippine National Bank is DISMISSED. No costs.
Hence, the recourse to this Court .
Issues
Petitioner contends that: (1) there was a substantial breach of
the contract between the parties warranting rescission; and (2)
there was a mistake in payment made by petitioner, obligating PNB
to return such payments. In its Memorandum, it specifically assigns
the following errors of law on the part of Respondent Court:[12]
A. Respondent Court of Appeals gravely erred in failing to consider
in its decision that a breach of implied warranty
under Article 1547 in relation to Article 1545 of the
Civil Code applies in the case-at-bar.
B. Respondent Court of Appeals gravely erred in failing to consider
in its decision that a mistake in payment giving rise
to a situation where the principle
of solutio indebiti applies is obtaining in the case-at-
bar.
The Courts Ruling
The petition is devoid of merit. It fails to appreciate the
difference between a condition and a warranty and the
consequences of such distinction.
Conspicuous Absence of an Imposed Condition
The alleged failure of respondent spouses to eject the
lessees from the lot in question and to deliver actual and physical
possession thereof cannot be considered a substantial breach of a
condition for two reasons: first, such failure was not stipulated as a
condition -- whether resolutory or suspensive -- in the contract; and
second, its effects and consequences were not specified either. [13]
The provision adverted to by petitioner does not impose a
condition or an obligation to eject the lessees from the lot. The deed
of sale provides in part:[14]
We hereby also warrant that we are the lawful and absolute owners of the
above described property, free from any lien and/or encumbrance, and we
hereby agree and warrant to defend its title and peaceful possession
thereof in favor of the said Power Commercial and Industrial
Development Corporation, its successors and assigns, against any claims
whatsoever of any and all third persons; subject, however, to the
provisions hereunder provided to wit:
By his own admission, Anthony Powers, General Manager of
petitioner-corporation, did not ask the corporations lawyers to
stipulate in the contract that Respondent Reynaldo was
guaranteeing the ejectment of the occupants, because there was
already a proviso in said deed of sale that the sellers were
guaranteeing the peaceful possession by the buyer of the land in
question.[15] Any obscurity in a contract, if the above-quoted
provision can be so described, must be construed against the party
who caused it.[16] Petitioner itself caused the obscurity because it
omitted this alleged condition when its lawyer drafted said contract.
If the parties intended to impose on respondent spouses the
obligation to eject the tenants from the lot sold, it should have
included in the contract a provision similar to that referred to
in Romero vs. Court of Appeals,[17] where the ejectment of the
occupants of the lot sold by private respondent was the operative
act which set into motion the period of petitioners compliance with
his own obligation, i.e., to pay the balance of the purchase
price. Failure to remove the squatters within the stipulated period
gave the other party the right to either refuse to proceed with the
agreement or to waive that condition of ejectment in consonance
with Article 1545 of the Civil Code. In the case cited, the contract
specifically stipulated that the ejectment was a condition to be
fulfilled; otherwise, the obligation to pay the balance would not
arise. This is not so in the case at bar.
Absent a stipulation therefor, we cannot say that the parties
intended to make its nonfulfillment a ground for rescission. If they
9
did intend this, their contract should have expressly stipulated
so. In Ang vs. C.A.,[18] rescission was sought on the ground that the
petitioners had failed to fulfill their obligation to remove and clear
the lot sold, the performance of which would have given rise to the
payment of the consideration by private respondent. Rescission
was not allowed, however, because the breach was not substantial
and fundamental to the fulfillment by the petitioners of the obligation
to sell.
As stated, the provision adverted to in the contract pertains to
the usual warranty against eviction, and not to a condition that was
not met. The terms of the contract are so clear as to leave no room
for any other interpretation.[19]
Futhermore, petitioner was well aware of the presence of the
tenants at the time it entered into the sales transaction. As testified
to by Reynaldo,[20] petitioners counsel during the sales negotiation
even undertook the job of ejecting the squatters. In fact, petitioner
actually filed suit to eject the occupants. Finally, petitioner in its
letter to PNB of December 23, 1980 admitted that it was the
buyer(s) and new owner(s) of this lot.
Effective Symbolic Delivery
The Court disagrees with petitioners allegation that the
respondent spouses failed to deliver the lot sold. Petitioner asserts
that the legal fiction of symbolic delivery yielded to the truth that, at
the execution of the deed of sale, transfer of possession of said lot
was impossible due to the presence of occupants on the lot
sold. We find this misleading.
Although most authorities consider transfer of ownership as
the primary purpose of sale, delivery remains an indispensable
requisite as our law does not admit the doctrine of transfer of
property by mere consent.[21] The Civil Code provides that delivery
can either be (1) actual (Article 1497) or (2) constructive (Articles
1498-1501).Symbolic delivery (Article 1498), as a species of
constructive delivery, effects the transfer of ownership through the
execution of a public document. Its efficacy can, however, be
prevented if the vendor does not possess control over the thing
sold,[22] in which case this legal fiction must yield to reality.
The key word is control, not possession, of the land as
petitioner would like us to believe. The Court has consistently held
that:[23]
x x x (I)n order that this symbolic delivery may produce the effect of
tradition, it is necessary that the vendor shall have had such control  over
the thing sold that xxx its material delivery could have been made. It is not
enough to confer upon the purchaser the ownership and the right of
possession. The thing sold must be placed in his control. When there is no
impediment whatever to prevent the thing sold passing into the tenancy of
the purchaser by the sole will of the vendor, symbolic delivery through the
execution of a public instrument is sufficient. But if, notwithstanding the
execution of the instrument, the purchaser cannot have the enjoyment and
material tenancy of the thing and make use of it himself or through another
in his name, because such tenancy and enjoyment are opposed by the
interposition of another will, then fiction yields to reality -- the delivery
has not been effected.
Considering that the deed of sale between the parties did not
stipulate or infer otherwise, delivery was effected through the
execution of said deed. The lot sold had been placed under the
control of petitioner; thus, the filing of the ejectment suit was
subsequently done. It signified that its new owner intended to obtain
for itself and to terminate said occupants actual possession
thereof. Prior physical delivery or possession is not legally required
and the execution of the deed of sale is deemed equivalent to
delivery.[24]This deed operates as a formal or symbolic delivery of
the property sold and authorizes the buyer to use the document as
proof of ownership. Nothing more is required.
Requisites of Breach of Warranty Against Eviction
Obvious to us in the ambivalent stance of petitioner is its
failure to establish any breach of the warranty against
eviction. Despite its protestation that its acquisition of the lot was to
enable it to set up a warehouse for its asbestos products and that
failure to deliver actual possession thereof defeated this purpose,
still no breach of warranty against eviction can be appreciated
because the facts of the case do not show that the requisites for
such breach have been satisfied. A breach of this warranty requires
the concurrence of the following circumstances:
(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.[25]
In the absence of these requisites, a breach of the warranty against
eviction under Article 1547 cannot be declared.
Petitioner argues in its memorandum that it has not yet
ejected the occupants of said lot, and not that it has been evicted
therefrom. As correctly pointed out by Respondent Court, the
presence of lessees does not constitute an encumbrance of the
land,[26] nor does it deprive petitioner of its control thereof.
We note, however, that petitioners deprivation of ownership
and control finally occurred when it failed and/or discontinued
paying the amortizations on the mortgage, causing the lot to be
foreclosed and sold at public auction. But this deprivation is due to
petitioners fault, and not to any act attributable to the vendor-
spouses.
Because petitioner failed to impugn its integrity, the contract
is presumed, under the law, to be valid and subsisting.
Absence of Mistake In Payment
Contrary to the contention of petitioner that a return of the
payments it made to PNB is warranted under Article 2154 of the
Code, solutio indebiti does not apply in this case. This doctrine
applies where: (1) a payment is made when there exists no binding
relation between the payor, who has no duty to pay, and the person
who received the payment, and (2) the payment is made through
mistake, and not through liberality or some other cause. [27]
In this case, petitioner was under obligation to pay the
amortizations on the mortgage under the contract of sale and the
deed of real estate mortgage. Under the deed of sale (Exh. 2),
[28]
 both parties agreed to abide by any and all the requirements of
PNB in connection with the real estate mortgage. Petitioner was
aware that the deed of mortgage (Exh. C) made it solidarily and,
therefore, primarily[29] liable for the mortgage obligation: [30]
(e) The Mortgagor shall neither lease the mortgaged property xxx nor sell
or dispose of the same in any manner, without the written consent of the
Mortgagee. However, if not withstanding this stipulation and during the
existence of this mortgage, the property herein mortgaged, or any portion
thereof, is xxx sold, it shall be the obligation of the Mortgagor to impose
as a condition of the sale, alienation or encumbrance that the vendee, or
10
the party in whose favor the alienation or encumbrance is to be made,
should take the property subject to the obligation of this mortgage in the
same terms and condition under which it is constituted, it being
understood that the Mortgagor is not in any manner relieved of his
obligation to the Mortgagee under this mortgage by such sale, alienation
or encumbrance; on the contrary both the vendor and the vendee, or the
party in whose favor the alienation or encumbrance is made shall be
jointly and severally liable for said mortgage obligations. xxx.

Therefore, it cannot be said that it did not have a duty to pay to

PNB the amortization on the mortgage.

Also, petitioner insists that its payment of the amortization

was a mistake because PNB disapproved its assumption of
mortgage after it failed to submit the necessary papers for the
approval of such assumption.

But even if petitioner was a third party in regard to the

mortgage of the land purchased, the payment of the loan by
petitioner was a condition clearly imposed by the contract of
sale. This fact alone disproves petitioners insistence that there was
a mistake in payment. On the contrary, such payments were
necessary to protect its interest as a the buyer(s) and new owner(s)
of the lot.

The quasi-contract of solutio indebiti is one of the concrete

manifestations of the ancient principle that no one shall enrich
himself unjustly at the expense of another. [31] But as shown earlier,
the payment of the mortgage was an obligation petitioner assumed
under the contract of sale. There is no unjust enrichment where the
transaction, as in this case, is quid pro quo, value for value.

All told, respondent Court did not commit any reversible error
which would warrant the reversal of the assailed Decision.

WHEREFORE, the petition is hereby DENIED, and the

assailed Decision is AFFIRMED.

11
MARIA LUISA DE LEON ESCALER and
ERNESTO ESCALER, CECILIA J. ROXAS and
PEDRO ROXAS, petitioners,  constrained to set aside Decree No.
vs.
COURT OF APPEALS, JOSE L. REYNOSO, now
deceased, to be substituted by his heirs or legal
representatives and AFRICA V.
REYNOSO, respondents.
Avanceña Law Office for petitioners.
Bauza, Ampil, Suarez, and Paredes Law Office for
respondent Africa V. Reynoso.
CUEVAS, J.:
This is a Petition for Review on certiorari of the
Decision of the then Court of Appeals (now the
Intermediate Appellate Court) and of its Resolution
denying petitioners' Motion for Reconsideration, in
CA G.R. No. 41953-R, which was an appeal from
the judgment of the Court of First Instance of Rizal
in Civil Case No. 9014 entitled "Maria Luisa de
Leon Escaler, et al vs. Jose L. Reynoso and Africa
Reynoso."
The following are the pertinent background 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
1
eviction, to wit:
That the VENDOR is the absolute
owner of a parcel of land ... the
ownership thereof being evidenced
by an absolute deed of sale
executed in her favor by registered
owner ANGELINA C.
REYNOSO, ...;
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 under Decree No. 62373, LRC
Record No. N-13783, on the ground that the
property covered by said title is already previously
registered under Transfer Certificate of Title No.
42999 issued in the name of A. Doronilla
Development, Inc. Petitioners as vendees filed their
opposition to the said petition.
On June 10, 1964, an Order   was issued in the
2
said case, the dispositive portion of which reads:
IN VIEW OF THE ABOVE
CONSIDERATIONS, this Court is
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. The owner's
duplicates in the possession of the
transferees of the property covered
by OCT No. 1526 are declared null
and void and said transferees are
directed to surrender to the Register
of Deeds of Rizal, said owner's
duplicates for cancellation.
The other reliefs sought for by the
party oppositors are denied the
same not falling within the
jurisdiction of this Court under this
proceeding.
SO ORDERED.
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
12
Africa Reynoso for the recovery of the value of the at her given address at c/o Antipolo Petition for Cancellation of Original
property sold to them plus damages on the ground Enterprises, Antipolo, Rizal and the Registration, etc., covering the
that the latter have violated the vendors' "warranty latter had received the same, as parcel of land in question; that said
against eviction." evidenced by the photostatic copy order of June 10, 1964 has become
of the Registry Return Receipt final and executory there being no
The complaint among others, alleged that the thereto affixed as Annex "C-l"; appeal interposed thereto and
Order issued in Case No. 4252 which cancelled the defendants were summoned and
title of Angelina C. Reynoso and all subsequent xxx xxx xxx were given a day in court at the
Transfer Certificates of Title derived and/or instance of the plaintiffs in Case No.
emanating therefrom and which includes the titles 6. That he hereby executed this 4252, the Court hereby grants the
of petitioners, is now final, and by reason thereof Affidavit to prove that said motion for summary judgment, and
petitioners lost their right over the property sold; defendants Africa Reynoso and hereby orders the defendants to
and that in said Case No. 4252, the respondents Jose L. Reynoso were given their jointly and severally return to the
were summoned and/or given their day in court at day in Court and/or were afforded plaintiffs Maria Luisa de Leon
the instance of the petitioners. 
3
their opportunity to be heard in Escaler and Ernesto Escaler,
Case No. 4252 aforecited. Cecilia J. Roxas and Pedro Roxas,
The respondents, as defendants, filed their answer the value of the property sold to
alleging, among others, by way of affirmative them at the time of eviction which is
On September 27, 1967, judgment was rendered
defenses that "the cause of action, if any, of not to be less than P5,500.00 to
by the trial court, the pertinent portion of which
plaintiffs against defendants have been fully reimburse to each one of the
reads—
adjudicated in Case No. 4252 when plaintiffs failed plaintiffs the expenses of contract
to file a third-party complaint against defendants." 4 and litigation and the amount of
Considering the foregoing motion P2,250.00 to pay the attorney's fees
for summary judgment and it of P1,000.00 plus the costs of suit.
On August 18, 1967, petitioners, as plaintiffs, filed a appearing that the defendants
Motion for Summary Judgment, alleging the facts under a Deed of Absolute Sale
already averred in the complaint, and further SO ORDERED.
(Annex "C") have expressly
alleging that the defendants were summoned and warranted their valid title and
were given their day in court at the instance of ownership of the said parcel of land Private respondents appealed the aforesaid
plaintiffs in Case No. 4252. In support of their said and further warranted to defend decision to the then Court of Appeals   assigning as
5

motion, the plaintiffs attached the affidavit of Atty. said property from any and all
Alberto R. Avanceña who had represented the claims of any persons whomever in
plaintiffs in Case No. 4252 and had filed a joint favor of plaintiffs; that the said
opposition in behalf of all the vendees. The warranties were violated when on
pertinent portion of that affidavit, states— June 10, 1964, an Order was
promulgated by the Court of First
4. That he has furnished a copy of Instance of Rizal in Case No. 4252
said joint opposition to Africa (Related to LRC Case No. 1559,
Reynoso, wife of Jose L. Reynoso, LRC Record No. N13293). In Re:
sole error—that the lower court erred in finding that
they were summoned and were given their day in
court at the instance of petitioners-plaintiffs in Case
No. 4252.
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

13
notice of the eviction case as mandated by Arts.
1558 and 1559 of the New Civil Code.
Hence, the instant recourse, petitioners contending
— Art. 1558. The vendor shall not be
1) that the Court of Appeals erred in
applying strictly to the instant case
the provisions of Articles 1558 and
1559 of the new Civil Code; and
2) that the decision of the Court of
First Instance of Rizal should have
been affirmed by the Court of
Appeals or at least, the, Court of
Appeals should have remanded the
case to the trial court, for hearing on
the merits.
The petition is devoid of merit. Consequently, it
must be dismissed.
Article 1548, in relation to Articles 1558. and 1559
of the New Civil Code reads as follows:
Art. 1548, Eviction shall take place
whenever by a final judgment based
on a right prior to the sale or an act
imputable to the vendor, the vendee
is deprived of the whole or of a part
of the thing purchased.
The vendor shall answer for the
eviction even though nothing has
been said in the contract on the
subject.
The contracting parties, however, means that the respondents as vendor/s should be
may increase, diminish, or suppress made parties to the suit at the instance of
this legal obligation of the vendor. 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.
obliged to make good the proper Nothing of that sort appeared to have been done by
warranty, unless he is summoned the petitioners in the instant case.
in the suit for eviction at the
instance of the vendee. (emphasis IN VIEW OF THE FOREGOING
supplied) CONSIDERATIONS, the petition is DISMISSED
and the appealed decision of the then Court of
Art. 1559. The defendant vendee Appeals is AFFIRMED.
shall ask, within the time fixed in the
Rules of Court for answering the
complaint that the vendor be made
as co-defendant.
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.  6
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"
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