Romero vs CA (1995)
FACTS:
Romero was engaged in the business of production, manufacture and exportation of perlite filter aids, permalite insulation and processed perlite ore.
Petitioner and his foreign partners decided to put up a central warehouse in Metro Manila on a land.
Alfonso Flores and his wife offered a parcel of land to petitioner.
Flores spouses called on petitioner with a proposal that should he advance the amount of P50k which could be used in taking up an ejectment case against the squatters, pr would agree to sell the property for only P800/sqm. Petitioner expressed his concurrence. A Deed of Conditional Sale was executed between petitioner and pr.
Pr then filed a complaint for ejectment against the squatters, which the court rendered in favor of the former.
However, the decision was handed down beyond the 60-day period (w/in to evict the squatters), as stipulated in the contract.
So Pr sought to return the P50k given by petitioner since “she could not get rid of the squatters”.
Then, Presidential Commission for the Urban Poor asked for a grace period of 45 days w/in which to evict the squatters.
Pr advised petitioner that the Deed of Conditional Sale had been rendered null and void by virtue of his failure to evict the squatters from the premises within the agreed 60-day period. She added she has "decided to retain the property." Pr, prompted by petitioner's continued refusal to accept the return of the P50k, filed for rescission of the deed of "conditional" sale.
RTC: pr had no right to rescind the contract since it was she who "violated her obligation to eject the squatters from the subject property" and that petitioner, being the injured party, was the party who could, under Article 1191 of the Civil Code, rescind the agreement.
CA: reversed; It opined that the contract entered into by the parties was subject to a resolutory condition, i.e., the ejectment of the squatters from the land, the non-occurrence of which resulted in the failure of the object of the contract; that pr substantially complied with her obligation to evict the squatters; that it was petitioner who was not ready to pay the purchase price and fulfill his part of the contract.ISSUE: I. W/N the vendor may demand the rescission of a contract for the sale of a parcel of land for a cause traceable to his own failure to have the squatters on the subject property evicted within the contractually-stipulated period?
HELD: I. VENDOR CANNOT DEMAND RESCISSION
1.
It would be futile to challenge the agreement here in question as not being a duly perfected contract. A sale is at once perfected when a person (the seller) obligates himself, for a price certain, to deliver and to transfer ownership of a specified thing or right to another (the buyer) over which the latter agrees.2.
Under the agreement, pr is obligated to evict the squatters on the property. The ejectment of the squatters is a condition, the operative act of which sets into motion the period of compliance by petitioner of his own obligation, i.e., to pay the balance of the purchase price. Pr's failure "to remove the squatters from the property" within the stipulated period gives petitioner the right to either refuse to proceed with the agreement or waive that condition in consonance with Article 1545 of the Civil Code.3. This option clearly belongs to petitioner and not to pr. Her action for rescission is not warranted. She is not the injured party.
4.
The right of resolution of a party to an obligation under Article 1191 of the Civil Code is predicated on a breach of faith by the other party that violates the reciprocity between them.It is pr who has failed in her obligation under the contract. Petitioner did not breach the agreement.Heirs of Pedro Escanlar vs CA (1997) FACTS:
Spouses Nombre and Cari-an died w/o a child. Nombre’s heirs include his nephews and grandnephews.
Two parcels of land formed part of the estate of Nombre and Cari-an.
The heirs of Cari-an (PR) executed a Deed of Sale in favor of Escanlar and Holgado (petitioners).
Petitioners paid P50k as a form of downpayment, but was unable to pay the remaining balance (paid only 12 installments). Being former lessees, petitioners continued in possession of the said lots, and continued to pay rent.
PR later sold the said lots to the spouses Chuas.
PR then filed an action for cancellation of sale against petitioners, for failure to pay the balance.
Petitioners however, sold their rights and interests over the said lots to Jayme, and turned over possession.
RTC: 1. Sale to petitioners was nullified since it was not approved by the probate court.2. Sale to the spouses Chuas, which was approved by the probate court, was upheld.
CA: affirmed, questioned deed of sale (one with petitioners) is a contract to sell because it shall become effective only upon approval by the probate court and upon full payment of the purchase price.
ISSUE: I. W/N Sale was a contract of sale or contract to sell.
HELD: I. CONTRACT OF SALE
1. PR as sellers did not reserve unto themselves the ownership of the property until full payment of the unpaid balance.
2. There is no stipulation giving the sellers the right to unilaterally rescind the contract the moment the buyer fails to pay w/in the fixed period.
3. Prior to the sale, petitioners were in possession of the subject property as lessees.
Upon sale to them of the rights and interests, they remained in possession, not in the concept of lessees anymore but as owners now through symbolic delivery known as traditio brevi manu.
4. In a contract of sale, the non-payment of the price is a resolutory condition which extinguishes the transaction that, for a time, existed and discharges the obligations created thereunder.
5. The Deed of Sale, complying as it does with the essential requisites, is a valid one.
However, it did not bear the stamp of approval of the court.
6.
This, notwithstanding the contract’s validity was not affected. In other words, only the effectivity and not the validity of the contract is affected.7. Petitioners are correct in saying that the need for approval by the probate court exists only where specific properties of the estate are sold and not when only ideal and invisible shares of an heir are disposed of.
Power Commercial and Industrial vs CA (1997)
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Power Commercial and Industrial Development Corporation, an industrial asbestosmanufacturer, entered into a contract of sale with the spouses Quiambao for a parcel of land in Makati. The contract stated that Power Commercial would pay P108k as downpayment and the balance of P295k upon the execution of the deed of transfer of the title over the property.
Plus Power Commercial assumed the existing mortgage on the land.
– In full satisfaction, Power Commercial paid P79k to PNB.
– The Quiambaos mortgaged the land again to PNB to guarantee a loan of P145k. Power Commercial agreed to assume payment of the loan.
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The parties executed a Deed of Absolute Sale With Assumption of Mortgage, where Power Commercial agreed to pay in full the entire amount of the mortgage to the mortgagee bank PNB. It also stated, “We warrant that we are the lawful and absolute owners, free from any lien and/or encumbrance, and we hereby agree and warrant to defend its title and peaceful possession thereof in favor of Power commercial against any claims whatsoever of any and all third persons.”–
But PNB informed the Quiambaos that, because of Power Commercial failing to submit papers, the application for assumption of mortgage was considered withdrawn, and the outstanding balance of P145k was deemed fully due and demandable. PNB demanded payment within 15 days.–
Power Commercial made some payments, and told PNB in a letter, “It was our understanding that this lot was free and clear of problems.. inasmuch as the previous owner was not able to keep his commitment, it will be necessary for us to take legal possession of this lot.” PNB replied, “This refers to the loan granted to Quiambao which was assumed by you. We request you to remit payments.”– Power Commercial filed a case against the Quiambaos for rescission and damages. And in reply to PNB’s letter, Power Commercial demanded the return of the payments it made on the ground that the assumption of mortgage was never approved. Also, they claimed that there were squatters on the lot that they could not eject, and the Quiambaos were at fault for this.
○ While the case was pending, the mortgage was foreclosed, and bought by PNB during the public auction.
○ RTC: The failure of the Quiambaos to deliver actual possession to Power Commercial entitled Power Commercial to rescind the sale, and in view of such failure and of the denial of Power Commercial’s assumption of mortgage, PNB was obliged to return the payments made by Power Commercial.
○
CA: Reversed. It ruled that the deed of sale between them did not obligate Power Commercial 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 rescission nor return of the payments.○ Power Commercial contends that there was a substantial breach of the contract between the parties warranting rescission, and there was a mistake in payment made by Power Commercial, obligating PNB to return such payments.
ISSUE: Is the seller’s failure to eject the lessees from a lot that is the subject of a contract of sale with assumption of mortgage a ground for (1) rescission of such
contract and (2) for a return by the mortgagee of the payments made by the buyer who assumed such mortgage? HELD: NO.
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The alleged “failure” of the Quiambaos to eject lessees from the lot and to deliver actual and physical possession cannot be considered a substantial breach for two reasons: (1) Such failure was not stipulated as a condition (whether resolutory or suspensive) in the contract.(2) Its effects and consequences were not specified either.
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The provision cited by Power Commercial (“We hereby warrant that we are the lawful and absolute owners..”) does not impose a condition or an obligation to eject the lessees from the lot. If the parties inteded to impose on the Quiambaos the obligation to eject tenants from the lot, it should have included a stipulation to that effect. Absent a stipulation therefore, the court cannot say that the parties intended to make its nonfulfillment a ground for rescission.– Power Commercial was well aware of the presence of the tenants, and even undertook the job of ejecting them. They actually filed suit to eject them.
– There was no fulfillment of the reqs for breach of warranty against eviction: 1) Purchaser has been deprived of the whole or part of the thing sold; 2) this eviction is by final judgment; 3) the basis thereof is by virtue of a right prior to the sale made by the vendor; 4) the vendor has been summoned and made co-defendant in the suit for eviction at the instance of the vendee.
– Power Commercial WAS deprived of ownership, BUT that was because it failed to pay the amortizations on the mortgage, causing the lot to be foreclosed. That’s entirely Power
Commercial’s fault. It was under obligation to pay the amortizations on the mortgage because of the contract.
Petition denied. CA decision affirmed.
Nutrimix Feeds Corporation vs CA (2004)
– The spouses Evangelista started to directly procure various kinds of animal feeds from Nutrimix. They were given a credit period of 30-45 days to postdate checks (this accommodation was made because the company president was close to the family).
– Initially, they were good paying customers, but eventually they failed to issue checks despite delivery. Their outstanding obligation became P766k. Their postdated checks were dishonored because the account was closed.
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Nutrimix filed a complaint for sum of money and damages. In their answer, the Evangelistas admitted their unpaid obligation but claimed that their animals had diedbecause of the feeds. The Evangelistas also filed a complaint for damages, for the untimely and unforeseen death of their animals supposedly effected by the feeds.
○ RTC: In favor of Nutrimix. The Evangelistas are to pay the amount of P766k to Nutrimix.
○ CA: Reversed. The Evangelistas were not obligated to pay Nutrimix, in view of its breach of warranty against hidden defects.
Issue: Is Nutrimix liable for hidden defects?
Held: NO.
– The provisions on warrant against hidden defects are in Articles 1561 and 1566 in the Civil Code.
– A hidden defect is one which is unknown or could not have been known to the vendee. Under the law, the requisites to recover on account of hidden defects are: 1) defect is hidden 2) defect must exist at time the sale was made 3) the defect must ordinarily have been excluded from the contract 4) the defect must be important (renders the thing unfit or considerably decreases fitness) 5) the action must be instituted within the statute of limitations
– To be able to prove liability on the basis of breach of implied warranty, three things must be established: 1) that they sustained injury because of the product;
2) the injury occurred because the product was defective or unreasonably unsafe; 3) the defect existed when the product left the hands of the petitioner.
○ The defect must be present upon delivery or manufacture, or when the product was sold to the purchaser.
– Nutrimix delivered the animal feeds in July, but the Evangelistas had them examined three months after their broilers and hogs had died. A difference of 3 months means the feeds could have already been contaminated by outside factors.
– One of the witnesses, Dr. Garcia, testified that the feeds submitted to her contained very high level of aflatoxin, possibly caused by mold.
– Several investigations (people from the Bureau of Plants Industry and the NBI) showed that the sample feeds yielded positive results for components in rat poison.
– The Evangelistas brought sample feeds in sealed bags and chickens to a specialist of the Phil Nuclear Research Institute. Chickens that were fed with the feeds died. But these bags were in sealed bags; there is no proof they were from Nutrimix.
– There is evidence that the Evangelistas combined different kinds of animal feeds and fed them to their animals.
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The Evangelistas failed to prove that Nutrimix is guilty of breach. The buyer of the product has the burden of proving that the seller of the product breached its warranty.–
It must be stressed that the remedy against violations of warrant against hidden defects is either to withdraw from the contract (accion redhibitoria) or todemand a proportionate reduction of the price (accion quanti minoris) with damages in either case. In any case, the Evangelistas had already admitted, both in their testimonies and pleadings, that they are indeed indebted to Nutrimix for the unpaid animal feeds delivered to them. For this reason alone, they should be held liable for their unsettled obligations to Nutrimix.