CASE DIGEST: LAW OF SALES

GOODYEAR PHILIPPINES, INC. VS ANTHONY SY and JOSE L. LEE

G.R. No. 154554, November 9, 2005
Petitioners: Goodyear Philippines, Inc.
Respondents: Anthony Sy and Jose L. Lee
Ponente: J. Panganiban

GOODYEAR PHILIPPINES, INC. VS ANTHONY SY and JOSE L. LEE

FACTS:
1. Goodyear Philippines owned a motor vehicle, 1984 Isuzu JCR-6-Wheeler, purchased in
1983.
2. The vehicle was in service until hijacked on April 30, 1986.
3. It was reported to the Philippine National Police (PNP), which issued an alert alarm on
the said vehicle as a stolen one. 
4. Later that year, the vehicle was recovered.
5. Goodyear used the vehicle until 1996.
6. On September 12, 1996, Anthony Sy bought the vehicle.
7. On January 29, 1997, Sy sold it to Jose L. Lee.
8. On December 4, 1997, Lee filed an action for rescission of contract with damages
against Sy because he could not register the vehicle in his name since the PNP did not
lift the alert alarm of the said car.
9. PNP in Legazpi City impounded the vehicle and charged Lee criminally.
10. Lee informed Sy about it.
11. On January 9, 1998, Sy filed a third-party complaint (breach of warranty) wherein
Goodyear was impleaded as a third-party defendant.
12. Sy argued that Goodyear has the duty to convey the vehicle to Sy free from all liens,
encumbrances, and legal impediments.
13. The Regional Trial Court ruled in favor of Goodyear.
14. The Court of Appeals reversed the RTC decision. 

ISSUES:
1. Whether or not Goodyear breached any warranty in the absence of proof that at the time
it sold the subject vehicle to Sy, it was not the owner thereof.
HELD:
1. No. In a contract of sale, the vendor is bound to transfer the ownership of and to deliver
the thing that is the object of the sale. Moreover, there are implied warranties: (1) the
vendor has a right to sell the thing at the time that its ownership is to pass to the vendee,
as a result of which the latter shall from then on have and enjoy the legal and peaceful
possession of the thing; and, (2) the thing shall be free from any charge or encumbrance
not declared or known to the vendee.

The petitioner, Goodyear, did not violate any of them. The impoundment of the vehicle
was not Goodyear's fault, nor was it a legal impediment that prevented Sy from retaining
possession of the said subject. When Goodyear sold the vehicle to Sy, the former
transferred full ownership to the latter. Thus, when Sy sold the vehicle to Lee, he was
already exercising his right as an absolute owner. 

Unfortunately, Lee could not enjoy legal and peaceful possession of the car when he
attempted to register it in his name since the PNP failed to lift the alert alarm above the
vehicle. According to Republic Act 6975, these matters were purely administrative and
governmental. Therefore, Goodyear had no authority over the PNP. Hence, Goodyear
did not breach its obligation as a vendor to Respondent Sy; neither did it violate his right
for which he could maintain an action for the recovery of damages. Without this crucial
allegation of a breach or violation, no cause of action exists.

WHEREFORE, the Petition is hereby granted, and the assailed Decision and Resolution are
reversed. The May 27, 1998 Order of the Regional Trial Court is reinstated.

HARRISON MOTORS CORPORATION VS RACHEL A. NAVARRO

G.R. No. 132269, April 27, 2000
Petitioners: Harrison Motors Corporation
Respondents: Rachel A. Navarro
Ponente: J. Bellosillo

FACTS:
a) 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. 
b) Harrison Motors Corporation assembled the two (2) trucks using imported parts.
c) Before the sale, Renato Claros stated that all BIR taxes and customs duties for the parts
used on the two trucks were already paid. 
d) On September 10, 1987, the Bureau of Internal Revenue (BIR) and the Land
Transportation Office (LTO) entered into a Memorandum of Agreement (MOA) 
e) On June 16, 1988, the BIR, BOC, and LTO entered into a tripartite Memorandum of
Agreement (MOA).
f) The MOA states that before registration in the LTO of any locally assembled motor
vehicle using imported parts, a Certificate of Payment should first be acquired from BIR
and BOC to prove that all existing taxes and customs duties have been paid. 
g) In December of 1988, government agents seized and detained the two trucks of Navarro
after discovering that there were still unpaid BIR taxes and customs duties.
h) BIR and the BOC ordered Navarro to pay the proper assessments; otherwise, they
would impound her trucks.
i) Navarro went to Claros to ask for the receipts evidencing payment of BIR taxes and
customs duties; however, the latter refused to comply. 
j) Subsequently, Navarro demanded that Claros pay the assessed taxes and told him that
if she was forced to pay for the assessments herself, he would have to compensate her;
however, Claros ignored her demands.
k) To secure the immediate release of the trucks to meet her business commitments,
Navarro paid the assessed BIR taxes and customs duties amounting to P32,943.00.
l) Consequently, Navarro sent a demand letter to Claros after the latter refused to
reimburse her. 
m) On September 24, 1990, Navarro filed a complaint with the Regional Trial Court of
Makati after Claros ignored her letter.
n) On March 5, 1992, the RTC rendered a decision in favor of Navarro.
o) The petitioner was ordered to reimburse Navarro for the taxes and duties she paid in the
amount of P32,943.00 and to pay her attorney's fees in the amount of P7,500.00.
p) The Court of Appeals subsequently sustained the lower court.

ISSUES:
1. Whether or not the two MOAs impair the contract of sale between petitioner and private
respondent.

HELD:

1. No. The Memorandum Orders and the two Memoranda of Agreement do not impose
any additional taxes which would unduly impair the contract of sale between petitioner
and private respondent; its purpose is merely to enforce payment of existing BIR taxes
and customs duties at the time of importation.

Customs Memorandum Order No. 44-87 only provides a procedure for how owners or
purchasers could voluntarily initiate payment for any unpaid customs duties on locally
assembled vehicles using imported parts. While BIR Revenue Memorandum Order No.
44-87 merely outlines the procedure, which governs the processing and issuance of the
Certificate of Payment. The Memorandum Agreements virtually contained the same
provisions.

The petitioner's contention is unmeritorious. Sec. 10, Art. III of the Constitution only
prohibits the passage of a law that enlarges, abridges, or in any manner changes the
intention of the contracting parties.

WHEREFORE, the Decision of the Court of Appeals is affirmed. In addition, the amount of
P32,943.00 shall earn interest at the legal rate from 24 September 1990 when private
respondent filed her complaint with the trial court until fully paid.

PAZ GALVEZ, CARLOS TAM, and TYCOON PROPERTIES, INC. VS HON. COURT OF
APPEALS and PORFIRIO GALVEZ
G.R. No. 157954, March 24, 2006
Petitioners: Paz Galvez, Carlos Tam, and Tycoon Properties, Inc.
Respondents: Hon. Court of Appeals and Porfirio Galvez
Ponente: J. Chico-Nazario

FACTS:
a) Timotea F. Galves owns a parcel of land located at Pagdaraoan, San Fernando, La
Union.
b) Timotea has two children, namely Ulpiano and Paz Galvez.
c) On July 24, 1959, Ulpiano died and was survived by his son, Porfirio Galvez.
d) On April 28, 1965, Timotea died intestate and left the parcel of land.
e) The property passed by succession to Paz Galvez and Porfirio; the latter succeeded his
mother as heir of Timotea.
f) On May 4, 1970, Porfirio discovered that Paz Galvez executed an affidavit of
adjudication stating that she is the true and lawful owner of the said property. 
g) Tax Declarations No. 15749 and No. 12342 were issued in the name of Paz Galvez. 
h) On June 22, 1992, Paz Galvez sold the property to Carlos Tam for consideration
of P10,000.00 by way of a Deed of Absolute Sale, without the knowledge and consent of
Porfirio Galvez.
i) On January 21, 1994, the Original Certificate of Title No. 0-2602 of the Registry of
Deeds of San Fernando, La Union, was issued in the name of Carlos Tam after he
applied for registration.
j) On September 27, 1994, Carlos Tam sold the property to Tycoon Properties, Inc.
through a Deed of Absolute Sale. Thus, Transfer Certificate of Title (TCT) No. T-40390
was issued in favor of Tycoon Properties, Inc.
k) On May 12, 1994, Porfirio Galvez filed Civil Case No. 4895 before the RTC for Legal
Redemption with Damages and Cancellation of Documents.
l) RTC rendered a decisiom in favor of Porfirio Galvez.
m) CA affirmed the decision of the trial court.

ISSUES:
1. Whether or not the petitioners, Carlos Tam and Tycoon Properties, are buyers in good
faith and for value has the right to rely on the face of the title.
2. Whether or not Porfirio Galvez is justified with his claim for legal redemption against Paz
Galvez and Carlos Tam.
HELD:
1. No. A purchaser in good faith and for value buys a property without notice that some
other person has a right to or interest in such property; and, pays its fair price before he
has notice of the adverse claims and interest of another person in the same property.
So, it is the "honesty of intention" which constitutes good faith implies freedom from
knowledge of circumstances which ought to put a person on inquiry.

Both the trial and appellate courts found otherwise. Tam did not exert efforts to
determine the previous ownership of the property in question and relied only on the tax
declarations in the name of Paz Galvez. Moreover, despite receiving a copy of the
summons and the complaint, he sold the property to Tycoon Properties, Inc.
Notwithstanding the inscription on TCT No. T-40390 (notice of lis pendens), Tycoon
Properties, Inc. mortgaged the land to Far East Bank and Trust Company
for P11,172,600. Thus, all these attendant circumstances negate petitioners’ claim of
good faith.

2. Yes. The pertinent provisions of the Civil Code on legal redemption are stated in Article
1619 and Article 1620 of the Civil Code. Should two or more co-owners desire to
exercise the right of redemption, they may only do so in proportion to the share they may
respectively have in the thing owned in common. Furthermore, it is a one-way street that
is always in favor of the redemptioner and construed against the vendee. Since the
redemptioner can compel the vendee to sell to him; however, the former cannot be
compelled by the latter to buy the alienated property. 

Under Article 1620 of the Civil Code, a co-owner of a thing may exercise the right of
redemption in case the share of all the other co-owners or any of them are sold to a third
person. If the price of the alienation is grossly excessive, the redemptioner shall pay only
a reasonable one. There was no written notice sent to Porfirio Galvez by Paz Galvez
when she sold her share over the land to Carlos Tam. The written notice is mandatory
as required by Article 1623 (for co-owners). Hence, the right to redeem commenced
when the plaintiff sought to exercise it by instituting the complaint in the instant case on
June 12, 1994. The complaint of legal redemption may be filed even several years after
the consummation of the sale.

WHEREFORE, premises considered, the decision of the Court of Appeals dated 28 August
2002 and its Resolution dated 14 April 2003 are affirmed.