Guinhawa v.

People
468 SCRA 278 (2005)
G.R. No. 162822
DOCTRINE/S:
If, in a contract of sale, the vendor knowingly allowed the
vendee to be deceived as to the thing sold in a material
matter by failing to disclose an intrinsic circumstance that
is vital to the contract, knowing that the vendee is acting
upon the presumption that no such fact exists, deceit is
accomplished by the suppression of the truth.
Caveat Epmtor can only be applied where it is shown or
conceded that the parties to the contract stand on equal
footing and have equal knowledge or equal means of
knowledge and there is no relation of trust or confidence
between them.
Caveat emptor only requires the purchaser to exercise
care and attention ordinarily exercised by prudent men in
like business affairs, and only applies to defects which are
open and patent to the service of one exercising such
care.

FACTS: Jaime Guinhawa was engaged in the

business of selling brand new motor vehicles,
including Mitsubishi vans, under the business name
of Guinrox Motor Sales in Naga City. He employed
Gil Azotea as his sales manager.
Guinhawa purchased a brand new Mitsubishi L-300
Versa Van from the Union Motors Corporation
(UMC) in Paco, Manila.
Olayan, the driver of Guinhawa, drove the van from
Manila to Naga City. While traveling along a
highway, Olayan, the driver, suffered a heart attack.
Consequently, the van went out of control, traversed
the highway onto the opposite lane, and was ditched
into the canal parallel to the highway.
The van, after sustaining damages from the
accident, was repaired. After its repair, it was
subsequently offered for sale in Guinhawas
showroom.
Spouses Ralph and Josephine Silo wanted to buy a
new van for the transportation of the products of
their garment business from Manila to Naga and
back.
The spouses went to Guinhawas showroom and
were shown the L-300 Versa Van (the previously
damaged one) which was on display. The couple

only inspected the interior of the van. They no longer

inspected the other parts because they presumed
that the vehicle was brand new. They decided to
purchase the said van for 591,000 unaware that the
van had been damaged and repaired. The sale was
facilitated by Gil Azotea, sales manager.
Ralph Silo no longer conducted a test drive; he and
his wife assumed that there were no defects in the
van as it was brand new.
Josephine Silo, with Bayani Pingol as the driver,
heard a squeaking sound, which seemed to be
coming from underneath the van. Believing that the
van merely needed grease, it was brought to a Shell
gasoline station. Upon examination, it was found out
that some parts underneath the van had been
welded. Upon further examinations, it was confirmed
that the van has been previously repaired prior to
their purchase.
Upon complaint in his office, Guinhawa insisted that
the defects were mere factory defects. Spouses
requested that Guinhawa replace the van with 2
Charade-Daihatsu vehicles within a week or two.
Guinhawa initially agreed to this proposal but later
on changed his mind and told them that he has to
sell the van first.
Josephine Silo filed for rescission of the sale and
refund of their money with the Department of Trade
and Industry (DTI). However, after some time, the
spouses withdrew the complaint and instead
instituted a criminal complaint for other deceits made
by Guinhawa by making fraudulent representations
about the car being brand new and that it never
encountered an accident.
ISSUES: WON Guinhawa made a fraudulent
representation (YES)
WON the principle of Caveat Emptor may apply(NO)
RULING: YES. If, in a contract of sale, the vendor
knowingly allowed the vendee to be deceived as to
the thing sold in a material matter by failing to
disclose an intrinsic circumstance that it vital to the
contract, knowing that the vendee is acting upon the
presumption that no such fact exists, deceit is
accomplished by the suppression of the truth.
Article 1389 of the New Civil Code provides that
failure to disclose facts when there is a duty to
reveal them constitutes fraud. In a contract of sale, a
buyer and seller do not deal from equal bargaining
positions when the latter has knowledge, a material

fact which, if communicated to the buyer , would

render the grounds unacceptable or , at least,
substantially less desirable.

a defense in this case. Otherwise, the court will allow

the vendor from unjustifiably escaping with the fruits
of the fraud.

In this case, The van was placed in the showroom,

thus making it appear to the public that it was a
brand new unit despite the knowledge of Guinhawa
and Azotea that the van had figured in an accident,
was damaged and had to be repaired. Guinhawa
was mandated to reveal the foregoing facts to Silos
but they even obdurately declared when they
testified that the car did not figure in an accident, nor
had it been repaired.

(NO) Guinhawa posits that based on the principle

of caveat emptor, if the private complainant
purchased the van without first inspecting it, she
must suffer the consequences. The Court ruled that
Guinhawa may not use the principle of caveat
emptor as a defense in this case. Court said that the
principle of caveat emptor only requires the
purchaser to exercise care and attention ordinarily
exercised by prudent men in like business affairs,
and only applies to defects which are open and
patent to the service of one exercising such care.

Guinhawa is also not relieved of his criminal liability

for deceitful concealment of material facts, even if
the private complainant made a visual inspection of
the vans interior and exterior before she agreed to
buy it and failed to inspect its under chassis.
Jurisprudence provides that where the vendee
made only a partial investigation and relies, in
part, upon the representation of the vendee, and
is deceived by such representation to his injury,
he may maintain an action for such deceit. The
negligence, on the part of the vendee, should not be

Caveat Epmtor can only be applied where it is

shown or conceded that the parties to the
contract stand on equal footing and have equal
knowledge or equal means of knowledge and
there is no relation of trust or confidence
between them.