G.R. No.

166862 December 20, 2006

MANILA METAL CONTAINER CORPORATION, petitioner, ; REYNALDO C. TOLENTINO, intervenor, vs.

PHILIPPINE NATIONAL BANK, respondent, DMCI-PROJECT DEVELOPERS, INC., intervenor

Summary of Facts: MMC obtained a P900,000 loan from PNB and to secure it, petitioner executed a real estate mortgage
over a 8,015 square meter parcel of land located in Mandaluyong (now a City), Metro Manila. The property was covered
by Transfer Certificate of Title (TCT) No. 332098 of the Registry of Deeds of Rizal. Respondent PNB later granted
petitioner a new credit accommodation of P1,000,000.00; and, on November 16, 1973, petitioner executed an
Amendment4 of Real Estate Mortgage over its property. On March 31, 1981, petitioner secured another loan of
P653,000.00 from respondent PNB, payable in quarterly installments of P32,650.00, plus interests and other charges. On
August 5, 1982, respondent PNB filed a petition for extrajudicial foreclosure of the real estate mortgage and sought to
have the property sold at public auction for P911,532.21, petitioner's outstanding obligation to respondent PNB as of
June 30, 1982,6 plus interests and attorney's fees. After due notice and publication, the property was sold at public
auction on September 28, 1982 where respondent PNB was declared the winning bidder for P1,000,000.00. The
Certificate of Sale7 issued in its favor was registered with the Office of the Register of Deeds of Rizal, and was annotated
at the dorsal portion of the title on February 17, 1983. Thus, the period to redeem the property was to expire on
February 17, 1984. Petitioner sent a letter dated August 25, 1983 to respondent PNB, requesting that it be granted an
extension of time to redeem/repurchase the property on installments basis. In its reply dated August 30, 1983,
respondent PNB informed petitioner that the request had been referred to its Pasay City Branch for appropriate action
and recommendation. Petitioner sent another letter for a one-year extension but was answered that PNB does not
accept “partial redemption”. Since petitioner failed to redeem the property, the Register of Deeds cancelled TCT No.
32098 on June 1, 1984, and issued a new title in favor of respondent PNB.13 Petitioner's offers had not yet been acted
upon by respondent PNB. Meanwhile, the Special Assets Management Department (SAMD) had prepared a statement of
account, and as of June 25, 1984 petitioner's obligation amounted to P1,574,560.47. This included the bid price of
P1,056,924.50, interest, advances of insurance premiums, advances on realty taxes, registration expenses, miscellaneous
expenses and publication cost.14 When apprised of the statement of account, petitioner remitted P725,000.00 to
respondent PNB as "deposit to repurchase," and Official Receipt No. 978191 was issued to it. Thus, a number of
correspondences ensued in the ff:

Date Proposed by: Reason: Amount

June 25, Special Assets Management Prepared a statement of account for the total P 1,574,
1984 Department (SAMD) obligation as of that date 560.47
MMC When apprised of the statement of account, P725,000
petitioner remitted P725,000.00 to respondent PNB as
"deposit to repurchase," and Official Receipt No.
978191 was issued to it.
SAMD SAMD recommended to the management of P1,574,560
respondent PNB that petitioner be allowed to
repurchase the property for P1,574,560.00.
Nov. 14, PNB management Rejecting the offer and recommendation of SAMD; P2,660,000
1984 suggested that petitioner purchase the property for
P2,660,000 its minimum market value. PNB gave
petitioner until December 15, 1984 to act on the
proposal; otherwise, its P725,000.00 deposit would be
returned and the property would be sold to other
interested buyers.
December MMC Another letter for reconsideration
12, 1984
December PNB Reiterated its proposal that petitioner purchase the P2,660,000
28, 1984 property for P2,660,000.00
February MMC requested that PNB reconsider its letter dated P1,574,560.47
25, 1985 December 28, 1984. Petitioner declared that it had
already agreed to the SAMD's offer to purchase the
property for P1,574,560.47, and that was why it had
paid P725,000.00.
June 4, PNB informed petitioner that the PNB Board of Directors P1,931,389.53
1985 had accepted petitioner's offer to purchase the
property, but for P1,931,389.53 in cash less the
P725,000.00 already deposited with it.
On page two of the letter was a space above the
typewritten name of petitioner's President, Pablo
Gabriel, where he was to affix his signature. However,
Pablo Gabriel did not conform to the letter but merely
indicated therein that he had received it.20 Petitioner
did not respond, so PNB requested petitioner in a
letter dated June 30, 1988 to submit an amended
 offer to repurchase.
July 14, MMC Petitioner rejected respondent's proposal in a letter P643,452.34
1988 dated July 14, 1988. It maintained that respondent
PNB had agreed to sell the property for
P1,574,560.47, and that since its P725,000.00
downpayment had been accepted, respondent PNB
was proscribed from increasing the purchase price of
the property.21 Petitioner averred that it had a net
balance payable in the amount of P643,452.34.
Respondent PNB, however, rejected petitioner's offer
to pay the balance of P643,452.34 in a letter dated
August 1, 1989
Septembe PNB While the case was pending, respondent PNB
r 20, 1989 demanded that petitioner vacate the property within
15 days from notice
March 18, MMC offered to repurchase the property for P3,500,000.00 P3,500,000
1993
April 13, PNB Rejected. According to it, the prevailing market value P30,000,000
1993 of the property was approximately P30,000,000.00,
and as a matter of policy, it could not sell the property
for less than its market value
June 21, MMC petitioner offered to purchase the property for P4,250,000
1993 P4,250,000.00 in cash. offer was again rejected by
respondent PNB on September 13, 1993.
RTC ruling: there was no perfected contract of sale between the parties; hence, petitioner had no cause of action for
specific performance against respondent. That respondent had rejected petitioner's offer to repurchase the property.
Petitioner, in turn, rejected the terms and conditions contained in the June 4, 1985 letter of the SAMD. While petitioner
had offered to repurchase the property per its letter of July 14, 1988, the amount of P643,422.34 was way below the
P1,206,389.53 which respondent PNB had demanded. It further declared that the P725,000.00 remitted by petitioner to
respondent PNB on June 4, 1985 was a "deposit," and not a downpayment or earnest money.
Meanwhile, on June 17, 1993, petitioner's Board of Directors approved Resolution No. 3-004, where it waived, assigned and transferred its rights over the property covered by TCT
No. 33099 and TCT No. 37025 in favor of Bayani Gabriel, one of its Directors.34 Thereafter, Bayani Gabriel executed a Deed of Assignment over 51% of the ownership and
management of the property in favor of Reynaldo Tolentino, who later moved for leave to intervene as plaintiff-appellant. On July 14, 1993, the CA issued a resolution granting
the motion,35 and likewise granted the motion of Reynaldo Tolentino substituting petitioner MMCC, as plaintiff-appellant, and his motion to withdraw as intervenor

CA ruling: affirming the decision of the RTC.37 It declared that petitioner obviously never agreed to the selling price
proposed by respondent PNB (P1,931,389.53) since petitioner had kept on insisting that the selling price should be
lowered to P1,574,560.47. Clearly therefore, there was no meeting of the minds between the parties as to the price or
consideration of the sale. Thus, there was no contract and nothing to rescind. Motion for reconsideration was also
denied
Petitioner’s Contention: that it had accepted respondent's offer made through the SAMD, to sell the property for P1,574,560.00. When the acceptance was made in
its letter dated June 25, 1984; it then deposited P725,000.00 with the SAMD as partial payment, evidenced by Receipt No. 978194 which respondent had issued.
Petitioner avers that the SAMD's acceptance of the deposit amounted to an acceptance of its offer to repurchase. Moreover, as gleaned from the letter of SAMD dated
June 4, 1985, the PNB Board of Directors had approved petitioner's offer to purchase the property. It claims that this was the suspensive condition, the fulfillment of
which gave rise to the contract. Respondent could no longer unilaterally withdraw its offer to sell the property for P1,574,560.47, since the acceptance of the offer
resulted in a perfected contract of sale; it was obliged to remit to respondent the balance of the original purchase price of P1,574,560.47, while respondent was
obliged to transfer ownership and deliver the property to petitioner, conformably with Article 1159 of the New Civil Code.

Respondent’s contention: that the parties never graduated from the "negotiation stage" as they could not agree on the amount of the repurchase price of the
property. All that transpired was an exchange of proposals and counter-proposals, nothing more. It insists that a definite agreement on the amount and manner of
payment of the price are essential elements in the formation of a binding and enforceable contract of sale. There was no such agreement in this case. Primarily, the
concept of "suspensive condition" signifies a future and uncertain event upon the fulfillment of which the obligation becomes effective. It clearly presupposes the
existence of a valid and binding agreement, the effectivity of which is subordinated to its fulfillment. Since there is no perfected contract in the first place, there is no
basis for the application of the principles governing "suspensive conditions."

Held: Affirmed lower court’s ruling. When the petitioner was told that respondent did not allow "partial redemption,"58 it sent a
letter to respondent's President reiterating its offer to purchase the property.59 There was no response to petitioner's letters dated
February 10 and 15, 1984. The statement of account prepared by the SAMD stating that the net claim of respondent as of June 25,
1984 was P1,574,560.47 cannot be considered an unqualified acceptance to petitioner's offer to purchase the property. The
statement is but a computation of the amount which petitioner was obliged to pay in case respondent would later agree to sell the
property, including interests, advances on insurance premium, advances on realty taxes, publication cost, registration expenses and
miscellaneous expenses. There is no evidence that the SAMD was authorized by respondent's Board of Directors to accept
petitioner's offer and sell the property for P1,574,560.47. Any acceptance by the SAMD of petitioner's offer would not bind
respondent.

We do not agree with petitioner's contention that the P725,000.00 it had remitted to respondent was "earnest money" which could
be considered as proof of the perfection of a contract of sale under Article 1482 of the New Civil Code. the P725,000.00 was merely a
deposit to be applied as part of the purchase price of the property, in the event that respondent would approve the recommendation
of SAMD for respondent to accept petitioner's offer to purchase the property for P1,574,560.47. Unless and until the respondent
accepted the offer on these terms, no perfected contract of sale would arise. Absent proof of the concurrence of all the essential
elements of a contract of sale, the giving of earnest money cannot establish the existence of a perfected contract of sale. It appears
that although respondent requested petitioner to conform to its amended counter-offer, petitioner refused and instead requested
respondent to reconsider its amended counter-offer. Petitioner's request was ultimately rejected and respondent offered to refund
its P725,000.00 deposit. In sum, then, there was no perfected contract of sale between petitioner and respondent over the subject
property.

Ruling: IN LIGHT OF ALL THE FOREGOING, the petition is DENIED.

G.R. No. 194533

PHILIPPINE STEEL COATING CORP., Petitioner, vs. EDUARD QUINONES, Respondent.

Summary of Facts: This case arose from a Complaint for damages filed by respondent Quinones (owner of Amianan
Motors) against petitioner PhilSteel. The Complaint alleged that in early 1994, Richard Lopez, a sales engineer of
PhilSteel, offered Quinones their new product: primer-coated, long-span, rolled galvanized iron (G.I.) sheets. The latter
showed interest, but asked Lopez if the primer-coated sheets were compatible with the Guilder acrylic paint process
used by Amianan Motors in the finishing of its assembled buses. Uncertain, Lopez referred the query to his immediate
superior, Ferdinand Angbengco, PhilSteel's sales manager. Angbengco assured Quinones that the quality of their new
product was superior to that of the non-primer coated G.l. sheets being used by the latter in his business. Quinones
expressed reservations, as the new product might not be compatible with the paint process used by Amianan Motors.
Angbengco guaranteed that a laboratory test had in fact been conducted by PhilSteel, and that the results proved that
the two products were compatible; hence, Quinones was induced to purchase the product and use it in the manufacture
of bus units. However, sometime in 1995, Quinones received several complaints from customers who had bought bus
units, claiming that the paint or finish used on the purchased vehicles was breaking and peeling off. Quinones then sent a
letter-complaint to PhilSteel invoking the warranties given by the latter. According to respondent, the damage to the
vehicles was attributable to the hidden defects of the primer-coated sheets and/or their incompatibility with the Guilder
acrylic paint process used by Amianan Motors, contrary to the prior evaluations and assurances of PhilSteel. Because of
the barrage of complaints, Quinones was forced to repair the damaged buses. PhilSteel counters that Quinones himself
offered to purchase the subject product directly from the former without being induced by any of PhilSteel's
representatives. According to its own investigation, PhilSteel discovered that the breaking and peeling off of the paint
was caused by the erroneous painting application done by Quinones.

RTC Ruling: in favor of Quinones and ordered PhilSteel to pay damages. Lopez's testimony was damaging to PhilSteel's
position that the latter had not induced Quinones or given him assurance that his painting system was compatible with
PhilSteel's primer-coated G.I. sheets. The trial court concluded that the paint blistering and peeling off were due to the
incompatibility of the painting process with the primer-coated G .I. sheets. Also, the assurance made by Angbengco
constituted an express warranty under Article 1546 of the Civil Code. Quinones incurred damages from the repair of the
buses and suffered business reverses. In view thereof, PhilSteel was held liable for damages.

CA ruling: affirmed the ruling in toto. agreed with the R TC that PhilSteel was liable for both actual and moral damages.
For actual damages, the appellate court reasoned that PhilSteel committed a breach of duty against Quinones when the
company made assurances and false representations that its primer-coated sheets were compatible with the acrylic paint
process of Quinones. The CA awarded moral damages, ruling that PhilSteel's almost two years of undue delay in
addressing the repeated complaints about paint blisters constituted bad faith. In addition, the CA concurred with the RTC
that attorney's fees were in order since Quinones was forced to file a case to recover damages.

Held: We Deny the petition. this is a case of express warranty under Article 1546 of the Civil Code. the following
requisites must be established in order to prove that there is an express warranty in a contract of sale: (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 effect of the affirmation or promise is to induce the buyer to purchase the thing; and (3) the buyer purchases the
thing relying on that affirmation or promise.

 An express warranty can be oral when it is a positive affirmation of a fact that the buyer relied on.

At the outset, Quinones had reservations about the compatibility of his acrylic paint primer with the primer-coated G.I.
sheets of PhilSteel. But he later surrendered his doubts about the product after 4 to 5 meetings with Angbengco,
together with the latter's subordinate Lopez. Only after several meetings was Quinones persuaded to buy their G.I.
sheets. On 15 April 1994, he placed an initial order for petitioner's product and, following Angbengco's instructions, had
a bus painted with acrylic paint. The results of the painting test turned out to be successful. Satisfied with the initial
success of that test, respondent made subsequent orders of the primer-coated product and used it in Amianan Motors'
mass production of bus bodies. Thus, it was not accurate for petitioner to state that they had made no warranties. It
insisted that at best, they only gave "'assurances" of possible savings Quinones might have if he relied on PhilSteel's
primer-coated G.I. sheets and eliminated the need to apply an additional primer. All in all, these "vague oral statements"
were express affirmations not only of the costs that could be saved if the buyer used PhilSteel's G.I. sheets, but also of
the compatibility of those sheets with the acrylic painting process customarily used in Amianan Motors. Angbengco did
not aimlessly utter those "vague oral statements" for nothing, but with a clear goal of persuading Quinones to buy
PhilSteel's product. Taken together, the oral statements of Angbengco created an express warranty. They were positive
affirmations of fact that the buyer relied on, and that induced him to buy petitioner's primer-coated G .I. sheets.
Petitioner's former employee, Lopez, testified that he had to refer Quinones to the former's immediate supervisor,
Angbengco, to answer that question. As the sales manager of PhilSteel, Angbengco made repeated assurances and
affirmations and even invoked laboratory tests that showed compatibility. 13 In the eyes of the buyer Quinones,
PhilSteel - through its representative, Angbengco - was an expert whose word could be relied upon.

 The nonpayment of the unpaid purchase price was justified, since a breach of warranty was proven.

both the CA and the RTC concurred in their finding that the seller's breach of express warranty had been established.
Therefore, this Court finds that respondent has legitimately defended his claim for reduction in price and is no longer
liable for the unpaid balance of the purchase price of ₱448,04l.50.

Other

 The prescription period of the express warranty applies to the instant case.

The applicable prescription period is therefore that which is specified in the contract; in its absence, that period shall be
based on the general rule on the rescission of contracts: four years (see Article 1389, Civil Code). 18 In this case, no
prescription period specified in the contract between the parties has been put forward. Quinones filed the instant case
on 6 September 199619 or several months after the last delivery of the thing sold. 20 His filing of the suit was well within
the prescriptive period of four years; hence, his action has not prescribed.

 The buyer cannot be held negligent in the instant case.

It bears reiteration that Quinones had already raised the compatibility issue at the outset. He relied on the manpower
and expertise of PhilSteel, but at the same time reasonably asked for more details regarding the product. It was not an
impulsive or rush decision to buy. In fact, it took 4 to 5 meetings to convince him to buy the primed G .I. sheets. And
even after making an initial order, he did not make subsequent orders until after a painting test, done upon the
instructions of Angbengco proved successful. The test was conducted using their acrylic paint over PhilSteel's primer-
coated G.I. sheets. Only then did Quinones make subsequent orders of the primer-coated product, which was then used
in the mass production of bus bodies by Amianan Motors.

Ruling: WHEREFORE, in view of the foregoing, the instant Petition is DENIED. The Court of Appeals Decision dated 17
March 2010 and Resolution dated 19 November 20l0 denying petitioner's Motion for Reconsideration are hereby
AFFIRMED, except for the award of attorney's fees, which is hereby DELETED.

SO ORDERED.
March 25, 2019 G.R. No. 200676

SPOUSES LUIS G. BATALLA and SALVACION BATALLA, Petitioners vs. PRUDENTIAL BANK, NAGATOME AUTO PARTS, ALICIA
RANTAEL and HONDA CARS SAN PABLO, INC.,

Summary of Facts: In March 1998, petitioner Spouses Luis G. Batalla and Salvacion Batalla (Spouses Batalla) purchased a
brand new Honda Civic from respondent Honda Cars San Pablo, Inc. (Honda). Respondent Alicia Rantael (Rantael), then
acting manager of Pilipinas Bank, now merged with respondent Prudential Bank (Prudential), brokered the deal. To
finance the purchase of the said motor vehicle, Spouses Batalla applied for a car loan with Prudential. On March 23,
1998, they executed a promissory note for the sum of ₱292,200.00 payable within 36 months. On May 29, 1998, the Car
Loan Agreement5 was approved. As such, Prudential issued a Manager's Check in the said amount payable to Honda. For
their part, Spouses Batalla paid ₱214,000.00 corresponding to the remaining portion of the purchase price for the Honda
Civic. In addition, they also paid ₱11,000.000.00 for delivery cost and the installation of a remote control door
mechanism, and ₱28,333.56 for insurance. On April 21, 1998, Spouses Batalla received the car after Rantael informed
them that it was parked near Prudential. However, after three days, the rear right door of the car broke down. The
Spouses Batalla consulted a certain Jojo Sanchez (Sanchez), who claimed that the power lock of the rear right door was
defective and that the car was no longer brand new because the paint of the roof was merely retouched. On May 3,
1998, Spouses Batalla sent a letter to the manager of Prudential notifying it of the said defects and demanding the
immediate replacement of the motor vehicle. On August 27, 1998, they took the car to the Auto Body Shop for a
thorough evaluation of the status of the vehicle. According to Arturo Villanueva (Villanueva), the vehicle was no longer
brand new because the rooftop was no longer shiny in appearance. Thereafter, the manager of Prudential, together with
two individuals from Honda, met Spouses Batalla and offered to repair the vehicle. Spouses Batalla rejected it because
they wanted the car to be replaced with a brand new one without hidden defects. Unable to secure a brand new car in
replacement of the alleged defective vehicle, Spouses Batalla filed a Complaint for Rescission of Contracts and Damages
against Prudential and Honda.

RTC Decision: dismissed the Spouses Batalla's complaint. The trial court ruled that the car sold to Spouses Batalla was a
brand new one and that any perceived defects could not be attributed to Honda. It highlighted that Spouses Batalla
failed to prove that the defects in the car door were due to the fault of Honda and that the car was merely repainted to
make it appear brand new. In addition, the RTC expounded that the perceived defects were minor defects which did not
diminish the fitness of the car for its intended use. On the other hand, it posited that Spouses Batalla must pay the loan
amount to Prudential as they admitted that they have not paid the same.

CA ruling: affirmed with modification the RTC decision. The appellate court ruled that Spouses Batalla cannot rescind the
promissory note and car loan agreement on account of the car's alleged defects because they are distinct from the
contract of sale entered into with Honda. In any case, it found that the documentary evidence, which Spouses Batalla
never disputed, presented by Honda, proved that the motor vehicle was brand new with no signs of alteration and
tampering. The CA, however, reduced the attorney's fees in favor of Honda from ₱175,000.00 to ₱30,000.00.

Issue: WHETHER SPOUSES BATALLA MAY RESCIND THE CONTRACT OF SALE, CAR LOAN AGREEMENT AND PROMISSORY
NOTE DUE TO THE DEFECTS OF THE MOTOR VEHICLE SOLD.

Petitioner’s Contention: Spouses Batalla argued that the car loan it obtained from Prudential was for the purchase of a
brand new motor vehicle. They lamented that what was delivered to them was a defective vehicle as manifested by
Honda's offer to repair the vehicle. Spouses Batalla assailed that because of the breach of the implied warranty against
hidden defects, they were entitled to rescind the contract of sale, together with the car loan and the promissory note.

Held: petition is without merit. the evidence of the respondents outweighed the evidence presented by Spouses Batalla.
The trial court noted that several documentary evidence attest to the fact that the car was brand new. In addition, the
purported printout from the LTO was a mere photocopy and was never authenticated. Further, the document's
credibility is seriously in doubt, especially as to the entry that the car was first registered in 1994, because the car
model that Spouses Batalla bought was manufactured only in 1998. RTC gave little credence to the testimony of
Villanueva that the car delivered to Spouses Batalla was not brand new on account of the condition of its rooftop
painting. As pointed out by the trial court, Villanueva only had limited formal training in painting and that his
assessment as to the condition of the car paint was made only after a visual examination. As such, the RTC cannot be
faulted if it was left unconvinced of Villanueva's testimony for lack of certainty and technical basis. Here, the RTC found
that Villanueva had no special knowledge or training with regards to car painting and that his method of examination
of Spouses Batalla's vehicle was wanting as it was limited to a mere visual examination rendering its results
inconclusive. Even assuming that the car delivered to Spouses Batalla had a defective car door, they still do not have any
grounds for rescinding the contract of sale. As can be seen, the redhibitory action pursued by Spouses Batalla was
without basis. For one, it was not sufficiently proven that the defects of the car door were important or serious. The
hidden defect contemplated under Article 1561 of the Civil Code is an imperfection or defect of such nature as to
engender a certain degree of importance and not merely one of little consequence.23 Spouses Batalla failed to prove
that such defect had severely diminished the roadworthiness of the motor vehicle. In fact, they admitted that they had
no problem as to the road worthiness of the car. In addition, it cannot be ascertained whether the defects existed at the
time of the sale.1âшphi1 As previously mentioned, a remote control door mechanism was immediately installed after
the car was delivered to Spouses Batalla. The modification made to the motor vehicle raises the possibility that the
defect could have been caused or had occurred after the installation of the remote control door system. As the party
alleging hidden defects, Spouses Batalla had the burden to prove the same. Unfortunately, they failed to do so
considering that they did not present as witnesses, the persons who had actually examined the car door and found it
defective. Their testimony could have shed light on the origin of the said defect and whether it was of such extent that
the motor vehicle was unfit for its intended use or its fitness had been greatly diminished. Thus, other than Spouses
Batalla's own testimony claiming that the car doors were defective, no other evidence was presented to establish the
severity of the said defects and whether they had persisted at the time of the sale.

it is readily apparent that a contract of loan is distinct and separate from a contract of sale. In a loan, the object certain
is the money or consumable thing borrowed by the obligor, while in a sale the object is a determinate thing to be sold to
the vendee for a consideration. In addition, a loan agreement is perfected only upon the delivery of the object i.e.,
money or another consumable thing, while a contract of sale is perfected by mere consent of the parties. Under this
premise, it is not hard to see the absurdity in the position of Spouses Batalla that they could rescind the car loan
agreement and promissory note with Prudential on the ground of alleged defects of the car delivered to them by Honda.
The transactions of Spouses Batalla with Prudential and Honda are distinct and separate from each other. From the time
Spouses Batalla accepted the loan proceeds from Prudential, the loan agreement had been perfected. As such, they were
bound to comply with their obligations under the loan agreement regardless of the outcome of the contract of sale with
Honda. Even assuming that the car that Spouses Batalla received was not brand new or had hidden defects, they could
not renege on their obligation of paying Prudential the loan amount.

Ruling: WHEREFORE, the petition is DENIED. The October 10, 2011 Decision and February 1, 2012 Resolution of the
Court of Appeals in CA-G.R. CV No. 92097 are AFFIRMED.
G.R. No. 152219 October 25, 2004

NUTRIMIX FEEDS CORPORATION, petitioner, vs. COURT OF APPEALS and SPOUSES EFREN AND MAURA EVANGELISTA,
respondents.

Summary of Facts: On April 5, 1993, the Spouses Efren and Maura Evangelista, the respondents herein, started to
directly procure various kinds of animal feeds from petitioner Nutrimix Feeds Corporation. The petitioner gave the
respondents a credit period of thirty to forty-five days to postdate checks to be issued in payment for the delivery of the
feeds. The accommodation was made apparently because of the company president’s close friendship with Eugenio
Evangelista, the brother of respondent Efren Evangelista. The various animal feeds were paid and covered by checks with
due dates from July 1993 to September 1993. Initially, the respondents were good paying customers. In some instances,
however, they failed to issue checks despite the deliveries of animal feeds which were appropriately covered by sales
invoices. Consequently, the respondents incurred an aggregate unsettled account with the petitioner in the amount of
₱766,151.00. When the above-mentioned checks were deposited at the petitioner’s depository bank, the same were,
consequently, dishonored because respondent Maura Evangelista had already closed her account. The petitioner made
several demands for the respondents to settle their unpaid obligation, but the latter failed and refused to pay their
remaining balance with the petitioner. On December 15, 1993, the petitioner filed with the Regional Trial Court of
Malolos, Bulacan, a complaint, docketed as Civil Case No. 1026-M-93, against the respondents for sum of money and
damages with a prayer for issuance of writ of preliminary attachment. In their answer with counterclaim, the
respondents admitted their unpaid obligation but impugned their liability to the petitioner. They asserted that the nine
checks issued by respondent Maura Evangelista were made to guarantee the payment of the purchases, which was
previously determined to be procured from the expected proceeds in the sale of their broilers and hogs. They contended
that inasmuch as the sudden and massive death of their animals was caused by the contaminated products of the
petitioner, the nonpayment of their obligation was based on a just and legal ground.
It appears that in the morning of July 26, 1993, three various kinds of animal feeds, numbering 130 bags, were delivered to the residence of the respondents
in Sta. Rosa, Marilao, Bulacan. The deliveries came at about 10:00 a.m. and were fed to the animals at approximately 1:30 p.m. at the respondents’ farm in
Balasing, Sta. Maria, Bulacan. At about 8:30 p.m., respondent Maura Evangelista received a radio message from a worker in her farm, warning her that the
chickens were dying at rapid intervals. When the respondents arrived at their farm, they witnessed the death of 18,000 broilers. On July 27, 1993, the
respondents received another delivery of 160 bags of animal feeds from the petitioner, some of which were distributed to the contract growers of the
respondents. At that time, respondent Maura Evangelista requested the representative of the petitioner to notify Mr. Bartolome of the fact that their
broilers died after having been fed with the animal feeds delivered by the petitioner the previous day. She, likewise, asked that a technician or veterinarian
be sent to oversee the untoward occurrence. Nevertheless, the various feeds delivered on that day were still fed to the animals. On July 27, 1993, the
witness recounted that all of the chickens and hogs died.10 Efren Evangelista suffered from a heart attack and was hospitalized as a consequence of the
massive death of their animals in the farm. On August 2, 1993, another set of animal feeds were delivered to the respondents, but the same were not
returned as the latter were not yet cognizant of the fact that the cause of the death of their animals was the polluted feeds of the petitioner.

When respondent Maura Evangelista eventually met with Mr. Bartolome on an undisclosed date, she attributed the
improbable incident to the animal feeds supplied by the petitioner, and asked Mr. Bartolome for indemnity for the
massive death of her livestock. Mr. Bartolome disavowed liability thereon. On January 19, 1994, the respondents also
lodged a complaint for damages against the petitioner, docketed as Civil Case No. 49-M-94, for the untimely and
unforeseen death of their animals supposedly effected by the adulterated animal feeds the petitioner sold to them.
During the hearing, the petitioner presented Rufino Arenas, Nutrimix Assistant Manager, as its lone witness. He testified
that on the first week of August 1993, Nutrimix President Efren Bartolome met the respondents to discuss the possible
settlement of their unpaid account. The said respondents still pleaded to the petitioner to continue to supply them with
animal feeds because their livestock were supposedly suffering from a disease.

Vets examined the feed and the chickens. However, for the other vets, the feed that the respondents gave were placed in
an unlabeled sack. There were different findings summarized as follows:

 Dr. Juliana Garcia - a doctor of veterinary medicine and the Supervising Agriculturist of the Bureau of Animal
Industry; the feeds were negative of salmonella and that the very high aflatoxin level found therein would not
cause instantaneous death if taken orally by birds.
 Dr. Rodrigo Diaz - veterinarian who accompanied Efren at the Bureau of Animal Industry, testified that sometime
in October 1993, Efren sought for his advice regarding the death of the respondents’ chickens. He suggested that
the remaining feeds from their warehouse be brought to a laboratory for examination. The witness claimed that
the feeds brought to the laboratory came from one bag of sealed Nutrimix feeds which was covered with a sack.
 Dr. Florencio Isagani S. Medina III - Chief Scientist Research Specialist of the Philippine Nuclear Research
Institute; experimented with the chicken where a couple was fed with the feed from an unmarked sack that
respondents gave, and another 2 fed from another branded feed; 2 fed from unmarked sack died.
 Aida Viloria Magsipoc - Forensic Chemist III of the Forensic Chemist Division of the National Bureau of
Investigation; verified that the sample feeds yielded positive results to the tests for COUMATETRALYL
Compound, the active component of RACUMIN
 Paz Austria - the Chief of the Pesticide Analytical Section of the Bureau of Plants Industry; no pesticide residue
was detected in the samples received but it was discovered that the animal feeds were positive for Warfarin, a
rodenticide (anticoagulant), which is the chemical family of Coumarin.
RTC Ruling: ruled in favor of petitioner. ordering defendant spouses Efren and Maura Evangelista to pay unto plaintiff
Nutrimix Feeds Corporation the amount of ₱766,151.00 representing the unpaid value of assorted animal feeds
delivered by the latter to and received by the former, with legal interest thereon from the filing of the complaint on
December 15, 1993 until the same shall have been paid in full, and the amount of ₱50,000.00 as attorney’s fees. Costs
against the aforenamed defendants;

On the strength of the foregoing disquisition, the Court cannot sustain the Evangelistas’ contention that Nutrimix is liable
under Articles 1561 and 1566 of the Civil Code governing "hidden defects" of commodities sold. As already explained,
the Court is predisposed to believe that the subject feeds were contaminated sometime between their storage at the
bodega of the Evangelistas and their consumption by the poultry and hogs fed therewith, and that the contamination
was perpetrated by unidentified or unidentifiable ill-meaning mischief-maker(s) over whom Nutrimix had no control in
whichever way.

All told, the Court finds and so holds that for inadequacy of proof to the contrary, Nutrimix was not responsible at all for
the contamination or poisoning of the feeds supplied by it to the Evangelistas which precipitated the mass death of the
latter’s chickens and hogs.

CA ruling: Revered RTC’s decision. Dismissed the complaint in Civil Case No. 1026-M-93, the CA ruled that the
respondents were not obligated to pay their outstanding obligation to the petitioner in view of its breach of warranty
against hidden defects. The CA gave much credence to the testimony of Dr. Rodrigo Diaz, who attested that the sample
feeds distributed to the various governmental agencies for laboratory examination were taken from a sealed sack
bearing the brand name Nutrimix. The CA further argued that the declarations of Dr. Diaz were not effectively impugned
during cross-examination, nor was there any contrary evidence adduced to destroy his damning allegations.

Issue: whether or not there is sufficient evidence to hold the petitioner guilty of breach of warranty due to hidden
defects.

Held: Petition is meritorious. Petitioner CANNOT be made liable for warranty against hidden defects.
A hidden defect is one which is unknown or could not have been known to the vendee.26 Under the law, the requisites to recover on account of hidden
defects are as follows:

(a) the defect must be hidden; (b) the defect must exist at the time the sale was made; (c) the defect must ordinarily have been excluded from the contract;
(d) the defect, must be important (renders thing UNFIT or considerably decreases FITNESS); (e) the action must be instituted within the statute of
limitations

In the sale of animal feeds, there is an implied warranty that it is reasonably fit and suitable to be used for the purpose
which both parties contemplated. To be able to prove liability on the basis of breach of implied warranty, three things
must be established by the respondents. The first is that they sustained injury because of the product; the second is that
the injury occurred because the product was defective or unreasonably unsafe; and finally, the defect existed when the
product left the hands of the petitioner. A manufacturer or seller of a product cannot be held liable for any damage
allegedly caused by the product in the absence of any proof that the product in question was defective. The defect must
be present upon the delivery or manufacture of the product; or when the product left the seller’s or manufacturer’s
control;32 or when the product was sold to the purchaser; or the product must have reached the user or consumer
without substantial change in the condition it was sold. Tracing the defect to the petitioner requires some evidence that
there was no tampering with, or changing of the animal feeds. The nature of the animal feeds makes it necessarily
difficult for the respondents to prove that the defect was existing when the product left the premises of the petitioner. A
review of the facts of the case would reveal that the petitioner delivered the animal feeds, allegedly containing rat
poison, on July 26, 1993; but it is astonishing that the respondents had the animal feeds examined only on October 20,
1993, or barely three months after their broilers and hogs had died. We find it difficult to believe that the feeds delivered
on July 26 and 27, 1993 and fed to the broilers and hogs contained poison at the time they reached the respondents. A
difference of approximately three months enfeebles the respondents’ theory that the petitioner is guilty of breach of
warranty by virtue of hidden defects. In a span of three months, the feeds could have already been contaminated by
outside factors and subjected to many conditions unquestionably beyond the control of the petitioner. In fact, Dr. Garcia,
one of the witnesses for the respondents, testified that the animal feeds submitted to her for laboratory examination
contained very high level of aflatoxin, possibly caused by mold (aspergillus flavus). It bears stressing, too, that the
chickens brought to the Philippine Nuclear Research Institute for laboratory tests were healthy animals, and were not the
ones that were ostensibly poisoned. There was even no attempt to have the dead fowls examined. Neither was there any
analysis of the stomach of the dead chickens to determine whether the petitioner’s feeds really caused their sudden
death. Mere sickness and death of the chickens is not satisfactory evidence in itself to establish a prima facie case of
breach of warranty. Likewise, there was evidence tending to show that the respondents combined different kinds of
animal feeds and that the mixture was given to the animals. Also, during the meeting with Nutrimix President Mr.
Bartolome, the respondents claimed that their animals were plagued by disease, and that they needed more time to
settle their obligations with the petitioner. It was only after a few months that the respondents changed their
justification for not paying their unsettled accounts, claiming anew that their animals were poisoned with the animal
feeds supplied by the petitioner. It must be stressed, however, that the remedy against violations of warranty against
hidden defects is either to withdraw from the contract (accion redhibitoria) or to demand a proportionate reduction of
the price (accion quanti minoris), with damages in either case.

Ruling: WHEREFORE, in light of all the foregoing, the petition is GRANTED. The assailed Decision of the Court of Appeals,
dated February 12, 2002, is REVERSED and SET ASIDE. The Decision of the Regional Trial Court of Malolos, Bulacan,
Branch 9, dated January 12, 1998, is REINSTATED. No costs.

[ G.R. No. 239644. February 03, 2021 ]

SPOUSES MARIO AND JULIA GASPAR, PETITIONERS, VS. HERMINIO ANGEL E. DISINI, JR., JOSEPH YU, DOING BUSINESS
UNDER THE NAME AND STYLE LEGACY LENDING INVESTOR AND DIANA SALITA, RESPONDENTS.

Summary of Facts: The property subject of [the] litigation is a year 2000 model, white Mitsubishi Pajero with plate
number WVC-555. The subject vehicle, registered in the name of a certain Artemio Marquez (Marquez), was mortgaged
by the latter as security for a loan obtained from Legacy Lending Investor (Legacy). Legacy is owned by Joseph Yu (Yu).
Marquez failed to pay his loan, leading Legacy to seize the Pajero. To facilitate the disposal of the Pajero, Marquez
executed and signed a Deed of Sale in blank[,] that is, without the name and details of the buyer. [Spouses Gaspar] who
are engaged in the business of buying and selling second-hand vehicles, purchased the subject Pajero from Legacy for
the price of [P1,000,000.00], as shown by a manager's check for said amount, and a receipt therefor signed by x x x Diana
Salita [(Salita), Yu's employee], dated [July 12, 2002. Eventually, Rocky Gaspar (Rocky), son of the Spouses Gaspar, offered
the Pajero for sale to [Disini], who agreed to buy it for the total purchase price of [P]1,160,000.00. About a year later, on
[June 30, 2003], the police apprehended the subject Pajero while it was illegally parked in Makati. Further police
investigation revealed that the vehicle had been stolen from the Office of the President. It appears that the chassis
number had been overlaid with another number through welding in order to avoid identification. Disini immediately
informed the Spouses Gaspar about the confiscation of the subject Pajero, and the latter promised to return the full
purchase price that he had paid to them. In turn, the Spouses Gaspar sought reimbursement from [Yu] and Legacy, and
the latter gave back [P150,000.00]. The Spouses Gaspar turned over the [P150,000.00] to Disini on [July 22, 2003.] On
[August 5, 2003], the Spouses Gaspar paid further [P200,000.00] to Disini, and finally [P50,000.00] on [December 3,
2003] for a total reimbursement of [P400,000,00] and leaving an unpaid balance of [P760,000.00.] The Spouses Gaspar,
[Yu] failed to reimburse the balance of the purchase price paid by the Spouses Gaspar for the subject Pajero in the of
[P850,000.00.] due to insufficiency of funds. When written demand failed, Disini filed [a complaint for sum of money
with prayer for preliminary attachment (Complaint)] against Rocky and the Spouses Gaspar to collect the unpaid
reimbursement of what he paid for the subject Pajero. In turn, the [Spouses Gaspar] filed a third-party complaint against
[Yu] and his employee [Salita] for the unpaid reimbursement of P850.000.00.

RTC Ruling: (i) Spouses Gaspar to refund the amount of P760,000.00 with legal interest in favor of Disini, and pay the
latter attorney's fees in the amount of P50,000.00; (ii) Yu to reimburse Spouses Gaspar the amount of P850,000.00 with
legal interest, and to pay the latter attorney's fees also in the amount of P50,000.00.

Yu’s contention: They should not be held liable to reimburse Spouses Gaspar considering that: (i) their implied warranty
as sellers does not extend to defects which are apparent and can be ascertained by the buyers after examination; (ii)
Spouses Gaspar are engaged in the business of buying and selling cars and must bear the risk involved in the purchase of
the subject Pajero following the principle of caveat emptor; and (iii) as sellers, Yu and Salita relied on the Certificate of
Registration and clearances provided by their mortgagee, Marquez, and should thus be deemed sellers in good faith. Yu
and Salita also assailed the order directing them to pay attorney's fees in favor of Spouses Gaspar.

CA Ruling: Affirmed RTC’s ruling with modifications. (1)Award of Attorney’s fees to Disini is deleted (for not acting in bad
faith); (2) the third-party complaint against [Yu] and [Salita] is DISMISSED for having been filed out of time; (3)the RTC
erred in ordering Yu to reimburse Spouses Gaspar the amount they returned to Disini, and to pay them attorney's fees
since the sale gave rise to an implied warranty of title and against eviction. These warranties prescribe in 6 months form
the date of delivery of the thing sold but Sps. Gaspar filed 4 years after the delivery of the subject; (4)in any event,
Spouses Gaspar's line of business made it incumbent upon them to thoroughly verify and examine the subject Pajero's
registration and documents as against the physical body of the vehicle. Spouses Gaspar ought to have known that the
subject Pajero was stolen as they were the ones who secured the Philippine National Police clearances and Certificate of
Registration on Disini's behalf. Denied motion for reconsideration of sps. gaspar

Held:

 Prescription period of 6 months does not apply due to the ff:

Here, Spouses Gaspar argue that the basis of Yu and Salita's liability is the written "Contract of Sale" (COS) which they
entered into. On the other hand, Yu denies liability and claims that as seller, he is only liable for the subject Pajero's
hidden defects which do not exist in this case. He adds that the conditions necessary for the application of the implied
warranty against eviction are not present. In any event, Yu further claims that any cause of action that Spouses Gaspar
may have had based on said implied warranties have long prescribed. The Petition is granted, in part. The Court finds Yu
solely liable to reimburse Spouses Gaspar the unpaid portion of the purchase price of the subject Pajero with legal
interest. Yu's liability is anchored on the nullity of the COS he executed with Spouses Gaspar. In addition, Yu is liable to
pay Spouses Gaspar attorney's fees as he unjustifiably refused in bad faith to satisfy the latter's valid claim. Salita, being
an employee who merely acted under the direction of Yu, is absolved from liability. While this COS is more akin to a
receipt and leaves much to be desired, it ostensibly reflects all the elements of a perfected contract of sale, which are: (i)
the consent of the contracting parties; (ii) object certain which is the subject matter of the contract (that is, the subject
Pajero); and (iii) the cause of the obligation which is established, (that is, the payment of the specified price of
P1,000,000.00). With respect to the second element, it is further required that the thing which is the subject matter of
the contract must be licit, and that the vendor must have a right to transfer the ownership thereof at the time it is
delivered.[42]

Here, the object of the COS turned out to be a vehicle stolen from the Office of the President which was immediately
confiscated when Disini was cited for illegal parking. As a general rule, the possession of movable property acquired in
good faith is equivalent to a title. This general rule, however, does not apply in cases where the owner of said movable
property has been unlawfully deprived of the same,[43] as in this case where the vehicle subject of the COS had been
stolen. Evidently, Yu had no right to transfer the ownership of the subject Pajero at the time it was delivered to Spouses
Gaspar, as the object of the COS is clearly illicit. The second element of a valid contract of sale is consequently absent.
The COS executed between Yu and Spouses Gaspar is therefore void ab initio. These contracts cannot be ratified. Neither
can the right to set up the defense of illegality be waived. By filing a third-party complaint against Yu for the purpose of
seeking reimbursement of the purchase price they had paid for the subject Pajero, Spouses Gaspar effectively sought to
declare the COS null and void ab initio and recover what they had given on account of said void COS. The third-party
complaint thus assumes the nature of an action to declare the inexistence of a contract which does not prescribe.

Also, in this case, the facts do not satisfy the requisites to apply warranties. The implied warranty against hidden defects
pertains to defects which render the thing sold unfit for the use for which it is intended, or should diminish its fitness
for such use to such an extent that, had the vendee been aware thereof, would not have acquired it or would have
given a lower price. As its nomenclature suggests, hidden defects pertain to imperfections or defects of the object sold.
Such is not the case here, where the subject Pajero, albeit stolen, was in working condition, and was in fact being used by
Disini for its intended purpose when it was confiscated by the authorities.

On the other hand, a breach of the warranty against eviction presupposes the concurrence of the following requisites: (i)
the purchaser has been deprived of the whole or part of the thing sold; (ii) this eviction is by a final judgment; (iii) the
basis thereof is by virtue of a right prior to the sale made by the vendor; and (iv) the vendor has been summoned and
made co-defendant in the suit for eviction at the instance of the vendee. Here, Disini was not deprived of possession on
the basis of a final judgment. In fact, based on the records, it would appear that Disini did not contest the confiscation of
the subject Pajero when he was informed that it had been stolen from the Office of the President.

Since none of the foregoing warranties apply, the six-month prescriptive period under Article 1571 of the Civil Code is
inapplicable.

 Yu is in bad faith and is subject to pay for Sps. Gaspar’s attorney’s fees.

Good faith should have thus impelled Yu to reimburse Spouses Gaspar the full amount which they paid and seek redress
from Marquez, the subject Pajero's supposed original owner. Instead of doing so, Yu withheld further reimbursement
despite his earlier recognition of Spouses Gaspar's valid claim. Such unjustified refusal to satisfy Spouses Gaspar's valid
claim demonstrates Yu's gross and evident bad faith. On this basis, the Court finds the award of attorney's fees in favor of
Spouses Gaspar proper.

Ruling: premises considered, the Petition is GRANTED IN PART. The Decision dated January 12, 2018 and Resolution
dated May 21, 2018 issued by the Court of Appeals in CA-G.R. CV No. 107441 are REVERSED and SET ASIDE. The Decision
dated April 13, 2016 of the Regional Trial Court of Manila, Branch 18 in Civil Case No. 06-115408 is hereby REINSTATED,
insofar as it directs the following:

(i) Petitioners Spouses Mario and Julia Gaspar (Spouses Gaspar) to pay respondent Herminio Angel E. Disini, Jr.
(Disini) the amount of P760,000.00 with legal interest at the rate of six percent (6%) per annum, computed
from the date of filing of Disini's Complaint for Sum of Money until full payment;
(ii) Respondent Joseph Yu (Yu) to pay petitioners Spouses Gaspar the amount of P850,000.00 with legal interest
at the rate of six percent (6%) per annum, computed from the date of filing of the latter's third-party
complaint on October 9, 2006 until full payment; and
(iii) Respondent Yu to pay petitioners Spouses Gaspar attorney's fees in the amount of P50,000.00 with legal
interest at the rate of six percent (6%) per annum from finality of this Decision until full payment.

The dismissal of the third-party complaint filed by petitioners Spouses Gaspar against respondent DIANA SALITA is
AFFIRMED.

The award of attorney's fees in favor of respondent Disini is DELETED.