Sales Part XII Page |1
ROBERTO Z. LAFORTEZA, GONZALO Z. LAFORTEZA, MICHAEL Z.
LAFORTEZA, DENNIS Z LAFORTEZA, and LEA Z. LAFORTEZA,
petitioners, vs. ALONZO MACHUCA, respondent.
Contracts; Sales; Words and Phrases; A contract of sale is a consensual
contract and is perfected at the moment there is a meeting of the minds
upon the thing which is the object of the contract and upon the price.—A
contract of sale is a consensual contract and is perfected at the moment
there is a meeting of the minds upon the thing which is the object of the
contract and upon the price. From that moment the parties may reciprocally
demand performance subject to the provisions of the law governing the form
of contracts. The elements of a valid contract of sale under Article 1458 of
the Civil Code are (1) consent or meeting of the minds; (2) determinate
subject matter; and (3) price certain in money or its equivalent.
Same: Same; Same; Options; An option is a contract granting a privilege to
buy or sell within an agreed time and at a determined price.—The six-month
period during which the respondent would be in possession of the property
as lessee, was clearly not a period within which to exercise an option. An
option is a contract granting a privilege to buy or sell within an agreed time
and at a determined price. An option contract is a separate and distinct
contract from that which the parties may enter into upon the consummation
of the option. An option must be supported by consideration. An option
contract is governed by the second paragraph of Article 1479 of the Civil
Code.
Same; Same; Failure to comply with the condition imposed upon the
perfection of the contract results in the failure of a contract, while failure to
comply with a condition imposed on the performance of an obligation only
gives the other party the option either to refuse to proceed with the sale or
to waive the condition.—The issuance of the new certificate of title in the
name of the late Francisco Laforteza and the execution of an extrajudicial
settlement of his estate was not a condition which determined the perfection
of the
contract of sale. Petitioners’ contention that since the condition was not met,
they no longer had an obligation to proceed with the sale of the house and
lot is unconvincing. The petitioners fail to distinguish between a condition
imposed upon the perfection of the contract and a condition imposed on the
performance of an obligation. Failure to comply with the first condition
results in the failure of a contract, while the failure to comply with the
second condition only gives the other party the option either to refuse to
proceed with the sale or to waive the condition.
Sales: Earnest Money; Words and Phrases; Earnest money is something of
value to show that the buyer was really in earnest, and given to the seller to
bind the bargain, and whenever earnest money is given in a contract of sale,
it is considered as part of the purchase price and proof of the perfection of
the contract.—What further militates against petitioners’ argument that they
did not enter into a contract of sale is the fact that the respondent paid thirty
thousand pesos (P30,000.00) as earnest money. Earnest money is something
of value to show that the buyer was really in earnest, and given to the seller
to bind the bargain. Whenever earnest money is given in a contract of sale,
it is considered as part of the purchase price and proof of the perfection of
the contract.
Same; Contract to Sell; Words and Phrases; A contract to sell, i.e. one
whereby the prospective seller would explicitly reserve the transfer of title to
the prospective buyer, meaning, the prospective seller does not as yet agree
or consent to transfer ownership of the property subject of the contract to
sell until the full payment of the price, such payment being a positive
suspensive condition, the failure of which is not considered a breach, casual
or serious, but simply an event which prevented the obligation from
acquiring any obligatory force.—We do not subscribe to the petitioners’ view
that the Memorandum Agreement was a contract to sell. There is nothing
contained in the Memorandum Agreement from which it can reasonably be
deduced that the parties intended to enter into a contract to sell, i.e. one
whereby the prospective seller would explicitly reserve the transfer of title to
the prospective buyer, meaning, the prospective seller does not as yet agree
or consent to transfer ownership of the property subject of the contract to
sell until the full payment of the price, such payment being a positive
suspensive condition, the failure of which is not considered a breach, casual
or serious, but simply an event which prevented the obligation from
acquiring any obliga-tory force. There is clearly no express reservation of title
made by the petitioners over the property, or any provision which would

impose non-payment of the price as a condition for the contract’s entering
into force.
Same; Words and Phrases; A deed of sale is absolute in nature although
denominated a conditional sale in the absence of a stipulation reserving title
in the seller until full payment of the purchase price; The mere fact that the
obligation of the buyer to pay the balance of the purchase price is made
subject to the condition that the seller first deliver the reconstituted title of
the house and lot does not make the contract a contract to sell for such
condition is not inconsistent with a contract of sale.—Although the
memorandum agreement was also denominated as a “Contract to Sell,” we
hold that the parties contemplated a contract of sale. A deed of sale is
absolute in nature although denominated a conditional sale in the absence of
a stipulation reserving title in the petitioners until full payment of the
purchase price. In such cases, ownership of the thing sold passes to the
vendee upon actual or constructive delivery thereof. The mere fact that the
obligation of the respondent to pay the balance of the purchase price was
made subject to the condition that the petitioners first deliver the
reconstituted title of the house and lot does not make the contract a contract
to sell for such condition is not inconsistent with a contract of sale.
Same; Obligations and Contracts; In reciprocal obligations, neither party
incurs in delay if the other party does not comply or is not ready to comply in
a proper manner with what was incumbent upon him.—Admittedly, the
failure of the respondent to pay the balance of the purchase price was a
breach of the contract and was a ground for rescission thereof. The
extension of thirty (30) days allegedly granted to the respondent by Roberto
Z. Laforteza (assisted by his counsel Attorney Romeo Gutierrez) was
correctly found by the Court of Appeals to be ineffective inasmuch as the
signature of Gonzalo Z. Laforteza did not appear thereon as required by the
Special Powers of Attorney. However, the evidence reveals that after the
expiration of the six-month period provided for in the contract, the
petitioners were not ready to comply with what was incumbent upon them,
i.e. the delivery of the reconstituted title of the house and lot. It was only on
September 18, 1989 or nearly eight months after the execution of the
Memorandum of Agreement when the petitioners informed the respondent
that they already had a copy of the reconsti-tuted title and demanded the
Sales Part XII Page |2
payment of the balance of the purchase price. The respondent could not
therefore be considered in delay for in reciprocal obligations, neither party
incurs in delay if the other party does not comply or is not ready to comply in
a proper manner with what was incumbent upon him.
Same; Rescission; A letter informing the buyer of the automatic rescission of
an agreement does not amount to a demand for rescis-sion if it is not
notarized; An offer to pay prior to the demand for rescission is sufficient to
defeat the seller’s right under Article 1592 of the Civil Code.—Even assuming
for the sake of argument that the petitioners were ready to comply with their
obligation, we find that rescission of the contract will still not prosper. The
rescission of a sale of an immovable property is specifically governed by
Article 1592 of the New Civil Code, which reads: “In the sale of immovable
property, even though it may have been stipulated that upon failure to pay
the price at the time agreed upon the rescission of the contract shall of right
take place, the vendee may pay, even after the expiration of the period, as
long as no demand for rescission of the contract has been made upon him
either judicially or by a notarial act. After the demand, the court may not
grant him a new term.” It is not disputed that the petitioners did not make a
judicial or notar-ial demand for rescission. The November 20, 1989 letter of
the petitioners informing the respondent of the automatic rescission of the
agreement did not amount to a demand for rescission, as it was not
notarized. It was also made five days after the respondent’s attempt to make
the payment of the purchase price. This offer to pay prior to the demand for
rescission is sufficient to defeat the petitioners’ right under Article 1592 of
the Civil Code.
Same; Same; A seller cannot unilaterally and extrajudicially rescind a
contract of sale where there is no express stipulation authorizing him to
extrajudicially rescind.—The Memorandum Agreement between the parties
did not contain a clause expressly authorizing the automatic cancellation of
the contract without court intervention in the event that the terms thereof
were violated. A seller cannot unilaterally and extrajudicially rescind a
contract of sale where there is no express stipulation authorizing him to
extrajudicially rescind. Neither was there a judicial demand for the rescission
thereof. Thus, when the respondent filed his complaint for specific

performance, the agreement was still in force inasmuch as the contract was
not yet rescinded.
Same; Same; Rescission of a contract will not be permitted for a slight or
casual breach, but only such substantial and fundamental breach as would
defeat the very object of the parties in making the agreement.—At any rate,
considering that the six-month period was merely an approximation of the
time it would take to reconstitute the lost title and was not a condition
imposed on the perfection of the contract and considering further that the
delay in payment was only thirty days which was caused by the respondents
justified but mistaken belief that an extension to pay was granted to him, we
agree with the Court of Appeals that the delay of one month in payment was
a mere casual breach that would not entitle the respondents to rescind the
contract. Rescission of a contract will not be permitted for a slight or casual
breach, but only such substantial and fundamental breach as would defeat
the very object of the parties in making the agreement.
Same; Consignation; The failure of the buyer to consignate the balance of
the purchase price is not tantamount to a breach of the contract for by the
fact of tendering payment, he was willing and able to comply with his
obligation.—Petitioners’ insistence that the respondent should have
consignated the amount is not determinative of whether respondent’s action
for specific performance will lie. Petitioners themselves point out that the
effect of consignation is to extinguish the obligation. It releases the debtor
from responsibility therefor. The failure of the respondent to consignate the
P600,000.00 is not tantamount to a breach of the contract for by the fact of
tendering payment, he was willing and able to comply with his obligation.
Damages; Moral damages may be awarded in case of a breach of contract
where the defendant acted in bad faith.—The Court of Appeals correctly
found the petitioners guilty of bad faith and awarded moral damages to the
respondent. As found by the said Court, the petitioners refused to comply
with their obligation for the reason that they were offered a higher price
therefor and the respondent was even offered P100,000.00 by the
petitioners’ lawyer, Attorney Gutierrez, to relinquish his rights over the
property. The award of moral damages is in accordance with Article 1191 of
the Civil Code pursuant to Article 2220 which provides that moral damages
Sales Part XII Page |3
may be awarded in case of a breach of contract where the defendant acted
in bad faith. The amount awarded depends on the discretion of the court
based on the circumstances of each case.
Under the circumstances, the award given by the Court of Appeals
amounting to P50,000.00 appears to us to be fair and reasonable. Laforteza
vs. Machuca, 333 SCRA 643, G.R. No. 137552 June 16, 2000
GONZAGA-REYES, J.:
This Petition for Review on Certiorari seeks the reversal of the Decision of the
Court of Appeals 1 in CA G.R. CV No. 147457 entitled "ALONZO MACHUCA
versus ROBERTO Z. LAFORTEZA, GONZALO Z. LAFORTEZA, LEA ZULUETA-
LAFORTEZA, MICHAEL Z. LAFORTEZA, and DENNIS Z. LAFORTEZA".
The following facts as found by the Court of Appeals are undisputed:
The property involved consists of a house and lot located at No. 7757
Sherwood Street, Marcelo Green Village, Parañaque, Metro Manila,
covered by Transfer Certificate of Title (TCT) No. (220656) 8941 of
the Registered of Deeds of Parañaque (Exhibit "D", Plaintiff, record,
pp. 331-332). The subject property is registered in the name of the
late Francisco Q. Laforteza, although it is conjugal in nature (Exhibit
"8", Defendants, record pp. 331-386).
On August 2, 1988, defendant Lea Zulueta-Laforteza executed a
Special Power of Attorney in favor of defendants Roberto Z. Laforteza
and Gonzalo Z. Laforteza, Jr., appointing both as her Attorney-in-fact
authorizing them jointly to sell the subject property and sign any
document for the settlement of the estate of the late Francisco Q.
Laforteza (Exh. "A", Plaintiff, record, pp. 323-325).
Likewise on the same day, defendant Michael Z. Laforteza executed a
Special Power of Attorney in favor of defendants Roberto Z. Laforteza
and Gonzalo Laforteza, Jr., likewise, granting the same authority (Exh.
"B", record, pp. 326-328) Both agency instruments contained a
provision that in any document or paper to exercise authority granted,
the signature of both attorneys- in-fact must be affixed.

On October 27, 1988, defendant Dennis Z. Laforteza executed a
Special Power of Attorney in favor of defendant Roberto Z. Laforteza
for the purpose of selling the subject property (Exh. "C", Plaintiff,
record, pp. 329-330). A year later, on October 30, 1989, Dennis Z.
Laforteza executed another Special Power of Attorney in favor of
defendants Roberto Z. Laforteza and Gonzalo Laforteza, Jr. naming
both attorneys-in-fact for the purpose of selling the subject property
and signing any document for the settlement of the estate of the late
Francisco Q. Laforteza. The subsequent agency instrument (Exh, "2",
record, pp. 371-373) contained similar provisions that both attorneys-
in-fact should sign any document or paper executed in the exercise of
their authority.1âwphi1.nêt
In the exercise of the above authority, on January 20, 1989, the heirs
of the late Francisco Q. Laforteza represented by Roberto Z. Laforteza
and Gonzalo Z. Laforteza, Jr. entered into a Memorandum of
Agreement (Contract to Sell) with the plaintiff 2 over the subject
property for the sum of SIX HUNDRED THIRTY THOUSAND PESOS
(P630,000.00) payable as follows:
(a) P30,000.00 as earnest money, to be forfeited in favor of
the defendants if the sale is not effected due to the fault of
the plaintiff;
(b) P600,000.00 upon issuance of the new certificate of title
in the name of the late Francisco Q. Laforteza and upon
execution of an extra-judicial settlement of the decedent's
estate with sale in favor of the plaintiff (Par. 2, Exh. "E",
record, pp. 335-336).
Significantly, the fourth paragraph of the Memorandum of Agreement
(Contract to Sell) dated January 20, 1989 (Exh. "E", supra.) contained
a provision as follows:
. . . . Upon issuance by the proper Court of the new title, the
BUYER-LESSEE shall be notified in writing and said BUYER-
LESSEE shall have thirty (30) days to produce the balance of
P600,000.00 which shall be paid to the SELLER-LESSORS
upon the execution of the Extrajudicial Settlement with sale.
Sales Part XII Page |4
On January 20, 1989, plaintiff paid the earnest money of THIRTY
THOUSAND PESOS (P30,000.00), plus rentals for the subject property
(Exh. "F", Plaintiff, record, p. 339).
On September 18, 1998 3 , defendant heirs, through their counsel
wrote a letter (Exh. 1, Defendants, record, p. 370) to the plaintiff
furnishing the latter a copy of the reconstituted title to the subject
property, advising him that he had thirty (3) days to produce the
balance of SIX HUNDRED PESOS (sic) (P600,000.00) under the
Memorandum of Agreement which plaintiff received on the same date.
On October 18, 1989, plaintiff sent the defendant heirs a letter
requesting for an extension of the THIRTY (30) DAYS deadline up to
November 15, 1989 within which to produce the balance of SIX
HUNDRED THOUSAND PESOS (P600,000.00) (Exh. "G", Plaintiff,
record, pp. 341-342). Defendant Roberto Z. Laforteza, assisted by his
counsel Atty. Romeo L. Gutierrez, signed his conformity to the
plaintiff's letter request (Exh. "G-1 and "G-2", Plaintiff, record, p. 342).
The extension, however, does not appear to have been approved by
Gonzalo Z. Laforteza, the second attorney-in-fact as his conformity
does not appear to have been secured.
On November 15, 1989, plaintiff informed the defendant heirs,
through defendant Roberto Z. Laforteza, that he already had the
balance of SIX HUNDRED THOUSAND PESOS (P600,000.00) covered
by United Coconut Planters Bank Manager's Check No. 000814 dated
November 15, 1989 (TSN, August 25, 1992, p. 11; Exhs. "H", record,
pp. 343-344; "M", records p. 350; and "N", record, p. 351). However,
the defendants, refused to accept the balance (TSN, August 24, 1992,
p. 14; Exhs. "M-1", Plaintiff, record, p. 350; and "N-1", Plaintiff, record,
p. 351). Defendant Roberto Z. Laforteza had told him that the subject
property was no longer for sale (TSN, October 20, 1992, p. 19; Exh.
"J", record, p. 347).
On November 20, 1998 4 , defendants informed plaintiff that they were
canceling the Memorandum of Agreement (Contract to Sell) in view of
the plaintiff's failure to comply with his contractual obligations (Exh.
"3").
Thereafter, plaintiff reiterated his request to tender payment of the
balance of SIX HUNDRED THOUSAND PESOS (P600,000.00).

Defendants, however, insisted on the rescission of the Memorandum
of Agreement. Thereafter, plaintiff filed the instant action for specific
performance. The lower court rendered judgment on July 6, 1994 in
favor of the plaintiff, the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered in favor of plaintiff
Alonzo Machuca and against the defendant heirs of the late
Francisco Q. Laforteza, ordering the said defendants.
(a) To accept the balance of P600,000.00 as full
payment of the consideration for the purchase of the
house and lot located at No. 7757 Sherwood Street,
Marcelo Green Village, Parañaque, Metro Manila,
covered by Transfer Certificate of Title No. (220656)
8941 of the Registry of Deeds of Rizal Parañaque,
Branch;
(b) To execute a registrable deed of absolute sale
over the subject property in favor of the plaintiff;
(c) Jointly and severally to pay the plaintiff the sum
of P20,000.00 as attorney's fees plus cost of suit.
SO ORDERED. (Rollo, pp. 74-75). 5
Petitioners appealed to the Court of Appeals, which affirmed with
modification the decision of the lower court; the dispositive portion of
the Decision reads:
WHEREFORE, the questioned decision of the lower court is
hereby AFFIRMED with the MODIFICATION that defendant
heirs Lea Zulueta-Laforteza, Michael Z. Laforteza, Dennis Z.
Laforteza and Roberto Z. Laforteza including Gonzalo Z.
Laforteza, Jr. are hereby ordered to pay jointly and severally
the sum of FIFTY THOUSAND PESOS (P50,000.00) as moral
damages.
SO ORDERED. 6 question. Rescission implies that a contract of sale was perfected
Sales Part XII Page |5
Motion for Reconsideration was denied but the Decision was modified
so as to absolve Gonzalo Z. Laforteza, Jr. from liability for the payment
of moral damages. 7 Hence this petition wherein the petitioners raise
the following issues:
I. WHETHER THE TRIAL AND APPELLATE COURTS
CORRECTLY CONSTRUED THE MEMORANDUM OF
AGREEMENT AS IMPOSING RECIPROCAL OBLIGATIONS.
II. WHETHER THE COURTS A QUO CORRECTLY RULED THAT
RESCISSION WILL NOT LIE IN THE INSTANT CASE.
III. WHETHER THE RESPONDENT IS UNDER ESTOPPEL FROM
RAISING THE ALLEGED DEFECT IN THE SPECIAL POWER OF
ATTORNEY DATED 30 OCTOBER 1989 EXECUTED BY DENNIS
LAFORTEZA.
IV. SUPPOSING EX GRATIA ARGUMENTI THE MEMORANDUM
OF AGREEMENT IMPOSES RECIPROCAL OBLIGATIONS,
WHETHER THE PETITIONERS MAY BE COMPELLED TO SELL
THE SUBJECT PROPERTY WHEN THE RESPONDENT FAILED
TO MAKE A JUDICIAL CONSIGNATION OF THE PURCHASE
PRICE?
V. WHETHER THE PETITIONERS ARE IN BAD FAITH SO TO
AS MAKE THEM LIABLE FOR MORAL DAMAGES? 8
The petitioners contend that the Memorandum of Agreement is merely
a lease agreement with "option to purchase". As it was merely an
option, it only gave the respondent a right to purchase the subject
property within a limited period without imposing upon them any
obligation to purchase it. Since the respondent's tender of payment
was made after the lapse of the option agreement, his tender did not
give rise to the perfection of a contract of sale.
It is further maintained by the petitioners that the Court of Appeals
erred in ruling that rescission of the contract was already out of the
unlike the Memorandum of Agreement in question which as previously
stated is allegedly only an option contract.

Petitioner adds that at most, the Memorandum of Agreement
(Contract to Sell) is a mere contract to sell, as indicated in its title. The
obligation of the petitioners to sell the property to the respondent was
conditioned upon the issuance of a new certificate of title and the
execution of the extrajudicial partition with sale and payment of the
P600,000.00. This is why possession of the subject property was not
delivered to the respondent as the owner of the property but only as
the lessee thereof. And the failure of the respondent to pay the
purchase price in full prevented the petitioners' obligation to convey
title from acquiring obligatory force.
Petitioners also allege that assuming for the sake of argument that a
contract of sale was indeed perfected, the Court of Appeals still erred
in holding that respondent's failure to pay the purchase price of
P600,000.00 was only a "slight or casual breach".
The petitioners also claim that the Court of Appeals erred in ruling that
they were not ready to comply with their obligation to execute the
extrajudicial settlement. The Power of Attorney to execute a Deed of
Sale made by Dennis Z. Laforteza was sufficient and necessarily
included the power to execute an extrajudicial settlement. At any rate,
the respondent is estopped from claiming that the petitioners were
not ready to comply with their obligation for he acknowledged the
petitioners' ability to do so when he requested for an extension of time
within which to pay the purchase price. Had he truly believed that the
petitioners were not ready, he would not have needed to ask for said
extension.
Finally, the petitioners allege that the respondent's uncorroborated
testimony that third persons offered a higher price for the property is
hearsay and should not be given any evidentiary weight. Thus, the
order of the lower court awarding moral damages was without any
legal basis.
The appeal is bereft of merit.
A perusal of the Memorandum Agreement shows that the transaction
between the petitioners and the respondent was one of sale and lease.
The terms of the agreement read:
Sales Part XII Page |6
1. For and in consideration of the sum of PESOS: SIX
HUNDRED THIRTY THOUSAND (P630,000.00) payable in a
manner herein below indicated, SELLER-LESSOR hereby
agree to sell unto BUYER-LESSEE the property described in
the first WHEREAS of this Agreement within six (6) months
from the execution date hereof, or upon issuance by the Court
of a new owner's certificate of title and the execution of
extrajudicial partition with sale of the estate of Francisco
Laforteza, whichever is earlier;
2. The above-mentioned sum of PESOS: SIX HUNDRED
THIRTY THOUSAND (P630,000.00) shall be paid in the
following manner:
P30,000.00 — as earnest money and as consideration
for this Agreement, which amount shall be forfeited
in favor of SELLER-LESSORS if the sale is not effected
because of the fault or option of BUYER-LESSEE;
P600,000.00 — upon the issuance of the new
certificate of title in the name of the late Francisco
Laforteza and upon the execution of an Extrajudicial
Settlement of his estate with sale in favor of BUYER-
LESSEE free from lien or any encumbrances.
3. Parties reasonably estimate that the issuance of a new title
in place of the lost one, as well as the execution of
extrajudicial settlement of estate with sale to herein BUYER-
LESSEE will be completed within six (6) months from the
execution of this Agreement. It is therefore agreed that during
the six months period, BUYER-LESSEE will be leasing the
subject property for six months period at the monthly rate of
PESOS: THREE THOUSAND FIVE HUNDRED
(P3,500.00). Provided however, that if the issuance of new
title and the execution of Extrajudicial Partition is completed
prior to the expiration of the six months period, BUYER-
LESSEE shall only be liable for rentals for the corresponding
period commencing from his occupancy of the premises to the
execution and completion of the Extrajudicial Settlement of
the estate, provided further that if after the expiration of six
(6) months, the lost title is not yet replaced and the extra

judicial partition is not executed, BUYER-LESSEE shall no
longer be required to pay rentals and shall continue to occupy,
and use the premises until subject condition is complied by
SELLER-LESSOR;
4. It is hereby agreed that within reasonable time from the
execution of this Agreement and the payment by BUYER-
LESSEE of the amount of P30,000.00 as herein above
provided, SELLER-LESSORS shall immediately file the
corresponding petition for the issuance of a new title in lieu of
the lost one in the proper Courts. Upon issuance by the proper
Courts of the new title, the BUYER-LESSEE shall have thirty
(30) days to produce the balance of P600,000.00 which shall
be paid to the SELLER-LESSORS upon the execution of the
Extrajudicial Settlement with sale. 9
A contract of sale is a consensual contract and is perfected at the
moment there is a meeting of the minds upon the thing which is the
object of the contract and upon the price. 10 From that moment the
parties may reciprocally demand performance subject to the
provisions of the law governing the form of contracts. 11 The elements
of a valid contract of sale under Article 1458 of the Civil Code are (1)
consent or meeting of the minds; (2) determinate subject matter and
(3) price certain money or its equivalent. 12
In the case at bench, there was a perfected agreement between the
petitioners and the respondent whereby the petitioners obligated
themselves to transfer the ownership of and deliver the house and lot
located at 7757 Sherwood St., Marcelo Green Village, Parañaque and
the respondent to pay the price amounting to six hundred thousand
pesos (P600,000.00). All the elements of a contract of sale were thus
present. However, the balance of the purchase price was to be paid
only upon the issuance of the new certificate of title in lieu of the one
in the name of the late Francisco Laforteza and upon the execution of
an extrajudicial settlement of his estate. Prior to the issuance of the
"reconstituted" title, the respondent was already placed in possession
of the house and lot as lessee thereof for six months at a monthly rate
of three thousand five hundred pesos (P3,500.00). It was stipulated
that should the issuance of the new title and the execution of the
extrajudicial settlement be completed prior to expiration of the six-
month period, the respondent would be liable only for the rentals
Sales Part XII Page |7
pertaining to the period commencing from the date of the execution
of the agreement up to the execution of the extrajudicial settlement.
It was also expressly stipulated that if after the expiration of the six
month period, the lost title was not yet replaced and the extrajudicial
partition was not yet executed, the respondent would no longer be
required to pay rentals and would continue to occupy and use the
premises until the subject condition was complied with the petitioners.
The six-month period during which the respondent would be in
possession of the property as lessee, was clearly not a period within
which to exercise an option. An option is a contract granting a privilege
to buy or sell within an agreed time and at a determined price. An
option contract is a separate and distinct contract from that which the
parties may enter into upon the consummation of the option. 13 An
option must be supported by consideration.14 An option contract is
governed by the second paragraph of Article 1479 of the Civil Code 15 ,
which reads:
Art. 1479. . . .
An accepted unilateral promise to buy or to sell a determinate
thing for a price certain is binding upon the promissor if the
promise is supported by a consideration distinct from the
price.
In the present case, the six-month period merely delayed the
demandability of the contract of sale and did not determine its
perfection for after the expiration of the six-month period, there was
an absolute obligation on the part of the petitioners and the
respondent to comply with the terms of the sale. The parties made a
"reasonable estimate" that the reconstitution the lost title of the house
and lot would take approximately six months and thus presumed that
after six months, both parties would be able to comply with what was
reciprocally incumbent upon them. The fact that after the expiration
of the six-month period, the respondent would retain possession of
the house and lot without need of paying rentals for the use therefor,
clearly indicated that the parties contemplated that ownership over
the property would already be transferred by that time.
The issuance of the new certificate of title in the name of the late Francisco
Laforteza and the execution of an extrajudicial settlement of his estate was

not a condition which determined the perfection of the contract of sale.
Petitioners' contention that since the condition was not met, they no longer
had an obligation to proceed with the sale of the house and lot is unconvincing.
The petitioners fail to distinguish between a condition imposed upon the
perfection of the contract and a condition imposed on the performance of an
obligation. Failure to comply with the first condition results in the failure of a
contract, while the failure to comply with the second condition only gives the
other party the option either to refuse to proceed with the sale or to waive the
condition. Thus, Art. 1545 of the Civil Code states:
Art. 1545. Where the obligation of either party to a contract of sale is
subject to any condition which is not performed, such party may
refuse to proceed with the contract or he may waive performance of
the condition. If the other party has promised that the condition
should happen or be performed, such first mentioned party may also
treat the nonperformance of the condition as a breach of warranty.
Where the ownership in the things has not passed, the buyer may
treat the fulfillment by the seller of his obligation to deliver the same
as described and as warranted expressly or by implication in the
contract of sale as a condition of the obligation of the buyer to perform
his promise to accept and pay for the thing. 16
In the case at bar, there was already a perfected contract. The condition was
imposed only on the performance of the obligations contained therein.
Considering however that the title was eventually "reconstituted" and that the
petitioners admit their ability to execute the extrajudicial settlement of their
father's estate, the respondent had a right to demand fulfillment of the
petitioners' obligation to deliver and transfer ownership of the house and lot.
What further militates against petitioners' argument that they did not enter
into a contract or sale is the fact that the respondent paid thirty thousand
pesos (P30,000.00) as earnest money. Earnest money is something of value
to show that the buyer was really in earnest, and given to the seller to bind
the bargain.17 Whenever earnest money is given in a contract of sale, it is
considered as part of the purchase price and proof of the perfection of the
contract. 18
We do not subscribe to the petitioners' view that the Memorandum Agreement
was a contract to sell. There is nothing contained in the Memorandum
Agreement from which it can reasonably be deduced that the parties intended
Sales Part XII Page |8
to enter into a contract to sell, i.e. one whereby the prospective seller would
explicitly reserve the transfer of title to the prospective buyer, meaning, the
prospective seller does not as yet agree or consent to transfer ownership of
the property subject of the contract to sell until the full payment of the price,
such payment being a positive suspensive condition, the failure of which is not
considered a breach, casual or serious, but simply an event which prevented
the obligation from acquiring any obligatory force. 19 There is clearly no
express reservation of title made by the petitioners over the property, or any
provision which would impose non-payment of the price as a condition for the
contract's entering into force. Although the memorandum agreement was also
denominated as a "Contract to Sell", we hold that the parties contemplated a
contract of sale. A deed of sale is absolute in nature although denominated a
conditional sale in the absence of a stipulation reserving title in the petitioners
until full payment of the purchase price. 20 In such cases, ownership of the
thing sold passes to the vendee upon actual or constructive delivery
thereof. 21 The mere fact that the obligation of the respondent to pay the
balance of the purchase price was made subject to the condition that the
petitioners first deliver the reconstituted title of the house and lot does not
make the contract a contract to sell for such condition is not inconsistent with
a contract of sale. 22
The next issue to be addressed is whether the failure of the respondent to pay
the balance of the purchase price within the period allowed is fatal to his right
to enforce the agreement.
We rule in the negative.
Admittedly, the failure of the respondent to pay the balance of the purchase
price was a breach of the contract and was a ground for rescission thereof.
The extension of thirty (30) days allegedly granted to the respondent by
Roberto Z. Laforteza (assisted by his counsel Attorney Romeo Gutierrez) was
correctly found by the Court of Appeals to be ineffective inasmuch as the
signature of Gonzalo Z. Laforteza did not appear thereon as required by the
Special Powers of Attorney. 23 However, the evidence reveals that after the
expiration of the six-month period provided for in the contract, the petitioners
were not ready to comply with what was incumbent upon them, i.e. the
delivery of the reconstituted title of the house and lot. It was only on
September 18, 1989 or nearly eight months after the execution of the
Memorandum of Agreement when the petitioners informed the respondent
that they already had a copy of the reconstituted title and demanded the
payment of the balance of the purchase price. The respondent could not

therefore be considered in delay for in reciprocal obligations, neither party
incurs in delay if the other party does not comply or is not ready to comply in
a proper manner with what was incumbent upon him. 24
Even assuming for the sake of argument that the petitioners were ready to
comply with their obligation, we find that rescission of the contract will still not
prosper. The rescission of a sale of an immovable property is specifically
governed by Article 1592 of the New Civil Code, which reads:
In the sale of immovable property, even though it may have been
stipulated that upon failure to pay the price at the time agreed upon
the rescission of the contract shall of right take place, the vendee may
pay, even after the expiration of the period, as long as no demand for
rescission of the contract has been made upon him either judicially or
by a notarial act. After the demand, the court may not grant him a
new term. 25
It is not disputed that the petitioners did not make a judicial or notarial demand
for rescission.1avvphi1 The November 20, 1989 letter of the petitioners
informing the respondent of the automatic rescission of the agreement did not
amount to a demand for rescission, as it was not notarized. 26 It was also made
five days after the respondent's attempt to make the payment of the purchase
price. This offer to pay prior to the demand for rescission is sufficient to defeat
the petitioners' right under article 1592 of the Civil Code. 27 Besides, the
Memorandum Agreement between the parties did not contain a clause
expressly authorizing the automatic cancellation of the contract without court
intervention in the event that the terms thereof were violated. A seller cannot
unilaterally and extrajudicially rescind a contract or sale where there is no
express stipulation authorizing him to extrajudicially rescind. 28 Neither was
there a judicial demand for the rescission thereof. Thus, when the respondent
filed his complaint for specific performance, the agreement was still in force
inasmuch as the contract was not yet rescinded. At any rate, considering that
the six-month period was merely an approximation of the time if would take
to reconstitute the lost title and was not a condition imposed on the perfection
of the contract and considering further that the delay in payment was only
thirty days which was caused by the respondents justified but mistaken belief
that an extension to pay was granted to him, we agree with the Court of
Appeals that the delay of one month in payment was a mere casual breach
that would not entitle the respondents to rescind the contract. Rescission of a
contract will not be permitted for a slight or casual breach, but only such
Sales Part XII Page |9
substantial and fundamental breach as would defeat the very object of the
parties in making the agreemant. 29
Petitioners' insistence that the respondent should have consignated the
amount is not determinative of whether respondent's action for specific
performance will lie. Petitioners themselves point out that the effect of
cansignation is to extinguish the obligation. It releases the debtor from
responsibility therefor. 30 The failure of the respondent to consignate the
P600,000.00 is not tantamount to a breach of the contract for by the fact of
tendering payment, he was willing and able to comply with his obligation.
The Court of Appeals correctly found the petitioners guilty of bad faith
and awarded moral damages to the respondent. As found by the said
Court, the petitioners refused to comply with, their obligation for the
reason that they were offered a higher price therefor and the
respondent was even offered P100,000.00 by the petitioners' lawyer,
Attorney Gutierrez, to relinquish his rights over the property. The
award of moral damages is in accordance with Article 1191 31 of the
Civil Code pursuant to Article 2220 which provides that moral damages
may be awarded in case of breach of contract where the defendant
acted in bad faith. The amount awarded depends on the discretion of
the court based on the circumstances of each
case. 32 Under the circumstances, the award given by the Court of
Appeals amounting to P50,000.00 appears to us to be fair and
reasonable.
ACCORDINGLY, the decision of the Court of Appeals in CA G.R. CV No. 47457
is AFFIRMED and the instant petition is hereby DENIED.
No pronouncement as to costs.
SO ORDERED.

G.R. No. 119777 October 23, 1997
THE HEIRS OF PEDRO ESCANLAR, FRANCISCO HOLGADO and the
SPOUSES DR. EDWIN A. JAYME and ELISA TAN-JAYME, petitioners,
vs.
THE HON. COURT OF APPEALS, GENEROSA MARTINEZ, CARMEN
CARI-AN, RODOLFO CARI-AN, NELLY CHUA CARI-AN, for herself
and as guardian ad litem of her minor son, LEONELL C. CARI-AN,
FREDISMINDA CARI-AN, the SPOUSES PAQUITO CHUA and NEY
SARROSA-CHUA and THE REGISTER OF DEEDS OF NEGROS
OCCIDENTAL, respondents.
G.R. No. 120690 October 23, 1997
FRANCISCO HOLGADO and HRS. OF PEDRO ESCANLAR, namely
BERNARDO, FELY, SONIA, LILY, DYESEBEL and NOEMI all surnamed
ESCANLAR, petitioners,
vs.
HON. COURT OF APPEALS, GENEROSA MARTINEZ, CARMEN CARI-
AN, RODOLFO CARI-AN, NELLY CHUA CARI-AN, for herself and as
guardian ad litem of her minor son, LEONELL C. CARI-AN, and SP.
PAQUITO CHUA and NEY SARROSA CHUA and REGISTER OF DEEDS
OF NEGROS OCCIDENTAL, respondents.
ROMERO, J.:
Before us are consolidated petitions for review of the decision of the Court of
Appeals in CA-G.R. CV No. 39975 which affirmed the trial court's
pronouncement that the deed of sale of rights, interests and participation in
favor of petitioners is null and void.
The case arose from the following facts:
Spouses Guillermo Nombre and Victoriana Cari-an died without issue in 1924
and 1938, respectively. Nombre's heirs include his nephews and
grandnephews. Victoriana Cari-an was succeeded by her late brother's son,
Gregorio Cari-an. The latter was declared as Victoriana's heir in the estate
proceedings for Nombre and his wife (Special Proceeding No. 7-7279).1 After
Gregorio died in 1971, his wife, Generosa Martinez, and children, Rodolfo,
Carmen, Leonardo and Fredisminda, all surnamed Cari-an, were also adjudged
as heirs by representation to Victoriana's estate. 2 Leonardo Cari-an passed
S a l e s P a r t X I I P a g e | 10
away, leaving his widow, Nelly Chua vda. de Cari-an and minor son Leonell,
as his heirs.
Two parcels of land, denominated as Lot No. 1616 and 1617 of the Kabankalan
Cadastre with an area of 29,350 square meters and 460,948 square meters,
respectively, formed part of the estate of Nombre and Cari-an.
On September 15, 1978, Gregorio Cari-an's heirs, herein collectively referred
to as private respondents Cari-an, executed the Deed of Sale of Rights,
Interests and Participation worded as follows:
NOW, THEREFORE, for and in consideration of the sum of TWO
HUNDRED SEVENTY-FIVE THOUSAND (P275,000.00) Pesos,
Philippine Currency, to be paid by the VENDEES to the VENDORS,
except the share of the minor child of Leonardo Cari-an, which should
be deposited with the Municipal Treasurer of Himamaylan, Province of
Negros Occidental, by the order of the Court of First Instance of
Negros Occidental, Branch VI, Himamaylan, by those presents, do
hereby SELL, CEDE, TRANSFER and CONVEY by way of ABSOLUTE
SALE, all the RIGHTS, INTERESTS and PARTICIPATION of the Vendors
as to the one-half (1/2) portion pro-indiviso of Lots Nos. 1616 and
1617 (Fishpond), of the Kabankalan Cadastre, pertaining to the one-
half (1/2) portion pro-indiviso of late Victoriana Cari-an unto and in
favor of the Vendees, their heirs, successors and assigns;
xxx xxx xxx
That this Contract of Sale of rights, interests and participations shall
become effective only upon the approval by the Honorable Court of
First Instance of Negros Occidental, Branch VI- Himamayla. (Emphasis
supplied.)
Pedro Escanlar and Francisco Holgado, the vendees, were concurrently the
lessees of the lots referred to above.3They stipulated that the balance of the
purchase price (P225,000.00) shall be paid on or before May 1979 in a Deed
of Agreement executed by the parties on the same day:
WHEREAS, at the time of the signing of the Contract, VENDEES has
(sic) only FIFTY THOUSAND (P50,000.00) Pesos available thereof, and
was not able to secure the entire amount;

WHEREAS, the Vendors and one of the Vendees by the name of Pedro
Escanlar are relatives, and absolute faith and trust exist between
them, wherein during economic crisis, has not failed to give monetary
succor to the Vendors;
WHEREAS, Vendors herein understood the present scarcity of securing
available each (sic) in the amount stated in the contract;
NOW THEREFORE, for and in consideration of the sum of FIFTY
THOUSAND (P50,000.00) Pesos, Philippine Currency, the balance of
TWO HUNDRED TWENTY FIVE THOUSAND (P25,000.00) Pesos to be
paid by the Vendees on or before May, 1979 , the Vendors herein, by
these Presents, do hereby CONFIRM and AFFIRM the Deed of Sale of
the Rights, Interests and Participation dated September 15, 1978, over
Lots Nos. 1616 and 1617 (fishpond) of the Kabankalan Cadastre in
favor of the VENDEES, their heirs and assigns.
That pending the complete payment thereof, Vendees shall not assign,
sell, lease, nor mortgage the lights, interests and participation thereof;
That in the event the Vendees fail and/or omit to pay the balance of
said purchase price on May 31, 1979 and the cancellation of said
Contract of Sale is made thereby, the sum of FIFTY THOUSAND
(P50,000.00) Pesos shall be deemed as damages thereof to Vendors.
(Emphasis supplied).4
Petitioners were unable to pay the Cari-an heirs' individual shares, amounting
to P55,000.00 each, by the due date. However, said heirs received at least 12
installments from petitioners after May 1979.5 Rodolfo Cari-an was fully paid
by June 21, 1979. Generosa Martinez, Carmen Cari-an and Fredisminda Cari-
an were likewise fully compensated for their individual shares, per receipts
given in evidence.6 The minor Leonell's share was deposited with the Regional
Trial Court on September 7, 1982.7
Being former lessees, petitioners continued in possession of Lot Nos. 1616 and
1617. Interestingly, they continued to pay rent based on their lease contract.
On September 10, 1981, petitioners moved to intervene in the probate
proceedings of Nombre and Cari-an as the buyers of private respondent Cari-
an's share in Lot Nos. 1616 and 1617. Petitioners' motion for approval of the
September 15, 1978 sale before the same court, filed on November 10, 1981,
was opposed by private respondents Cari-an on January 5, 1982.8
S a l e s P a r t X I I P a g e | 11
On September 16, 1982, the probate court approved a motion filed by the
heirs of Cari-an and Nombre to sell their respective shares in the estate. On
September 21, 1982, private respondents Cari-an, in addition to some heirs of
Guillermo Nombre,9 sold their shares in eight parcels of land including Lot Nos.
1616 and 1617 to the spouses Ney Sarrosa Chua and Paquito Chua for
P1,850,000.00. One week later, the vendor-heirs, including private
respondents Cari-an, filed a motion for approval of sale of hereditary
rights, i.e. the sale made on September 21, 1982 to the Chuas.
Private respondents Cari-an instituted this case for cancellation of sale against
petitioners (Escanlar and Holgado) on November 3, 1982. 10 They complained
of petitioners' failure to pay the balance of the purchase price by May 31, 1979
and alleged that they only received a total of P132,551.00 in cash and goods.
Petitioners replied that the Cari-ans, having been paid, had no right to resell
the subject lots; that the Chuas were purchasers in bad faith; and that the
court approval of the sale to the Chuas was subject to their existing claim over
said properties.
On April 20, 1983, petitioners also sold their rights and interests in the subject
parcels of land (Lot Nos. 1616 and 1617) to Edwin Jayme for
P735,000.0011 and turned over possession of both lots to the latter. The
Jaymes in turn, were included in the civil case as fourth-party defendants.
On December 3, 1984, the probate court approved the September 21, 1982
sale "without prejudice to whatever rights, claims and interests over any of
those properties of the estate which cannot be properly and legally ventilated
and resolved by the court in the same intestate proceedings." 12 The certificates
of title over the eight lots sold by the heirs of Nombre and Cari-an were later
issued in the name of respondents Ney Sarrosa Chua and Paquito Chua.
The trial court allowed a third-party complaint against the third-party
defendants Paquito and Ney Chua on January 7, 1986 where Escanlar and
Holgado alleged that the Cari-ans conspired with the Chuas when they
executed the second sale on September 21, 1982 and that the latter sale is
illegal and of no effect. Respondents Chua countered that they did not know
of the earlier sale of one-half portion of the subject lots to Escanlar and
Holgado. Both parties claimed damages.13
On April 28, 1988, the trial court approved the Chuas' motion to file a fourth-
party complaint against the spouses Jayme. Respondents Chua alleged that
the Jaymes refused to vacate said lots despite repeated demands; and that by

reason of the illegal occupation of Lot Nos. 1616 and 1617 by the Jaymes,
they suffered materially from uncollected rentals.
Meanwhile, the Regional Trial Court of Himamaylan which took cognizance of
Special Proceeding No. 7-7279 (Intestate Estate of Guillermo Nombre and
Victoriana Cari-an) had rendered its decision on October 30,
1987.14 The probate court concluded that since all the properties of the estate
were disposed of or sold by the declared heirs of both spouses, the case is
considered terminated and the intestate estate of Guillermo Nombre and
Victoriana Cari-an is closed. The court held:
As regards the various incidents of this case, the Court finds no cogent
reason to resolve them since the very object of the various incidents
in this case is no longer m existence, that is to say, the properties of
the estate of Guillermo Nombre and Victoriana Cari-an had long been
disposed of by the rightful heirs of Guillermo Nombre and Victoriana
Cari-an. In this respect, there is no need to resolve the Motion for
Subrogation of Movants Pedro Escanlar and Francisco Holgado to be
subrogated to the rights of the heirs of Victoriana Cari-an since all the
properties of the estate had been transferred and titled to in the name
of spouses Ney S.Chua and Dr. Paquito Chua. Since the nature of the
proceedings in this case is summary, this Court, being a Probate Court,
has no jurisdiction to pass upon the validity or invalidity of the sale of
rights of the declared heirs of Guillermo Nombre and Victoriana Cari-
an to third Parties. This issue must be raised in another action where
it can be properly ventilated and resolved. . . . Having determined,
after exhausted (sic) and lengthy hearings, the rightful heirs of
Guillermo Nombre and Victoriana Cari-an, the Court found out that the
second issue has become moot and academic considering that there
are no more properties left to be partitioned among the declared heirs
as that had long ago been disposed of by the declared heirs . . . .
(Emphasis supplied).
The seminal case at bar was resolved by the trial court on December 18, 1991
in favor of cancellation of the September 15, 1978 sale. Said transaction was
nullified because it was not approved by the probate court as required by the
contested deed of sale of rights, interests and participation and because the
Cari-ans were not fully paid. Consequently, the Deed of Sale executed by the
heirs of Nombre and Cari-an in favor of Paquito and Ney Chua, which was
approved by the probate court, was upheld. The dispositive portion of the
lower court's decision reads:
S a l e s P a r t X I I P a g e | 12
WHEREFORE, premises considered, judgment is hereby rendered as
follows:
1) Declaring the following contracts null and void and of no effect:
a) The Deed of Sale, dated Sept. 15, 1978, executed
by the plaintiffs in favor of the defendants Pedro
Escanlar and Francisco Holgado (Exh. "A," Plaintiffs)
b) The Deed of Agreement, dated Sept. 15, 1978,
executed by the plaintiffs in favor of the defendants,
Pedro Escanlar and Francisco Holgado (Exh. "A,"
Plaintiffs)
c) The Deed of Sale, dated April 20, 1983, executed
by the defendants in favor of the fourth-party
defendants, Dr. Edwin Jayme and Elisa Tan Jayme
d) The sale of leasehold rights executed by the
defendants in favor of the fourth-party defendants
2) Declaring the amount of Fifty Thousand Pesos (P50,000.00) paid
by the defendants to the plaintiffs in connection with the Sept. 15,
1978 deed of sale, as forfeited in favor of the plaintiffs, but ordering
the plaintiffs to return to the defendants whatever amounts they have
received from the latter after May 3, 1979 and the amount of Thirty
Five Thousand Two Hundred Eighteen & 75/100
(P35,218.75) 15 deposited with the Treasurer of Himamaylan, Negros
Occidental, for the minor Leonell C. Cari-an —
3) Declaring the deed of sale, dated September 23, 1982, executed
by Lasaro Nombre, Victorio Madalag, Domingo Campillanos, Sofronio
Campillanos, Generosa Vda. de Martinez, Carmen Cari-an, Rodolfo
Cari-an, Nelly Chua Vda. de Cari-an, for herself and as guardian ad
litem of the minor Leonell C. Cari-an, and Fredisminda Cari-an in favor
of the third-party defendants and fourth-party plaintiffs, spouses Dr.
Paquito Chua and Ney Sarrosa Chua (Exh. "2"-Chua) as legal, valid
and enforceable provided that the properties covered by the said deed
of sale are subject of the burdens of the estate, if the same have not
been paid yet.

4) Ordering the defendants Francisco Holgado and Pedro Escanlar and
the fourth-party defendants, spouses Dr. Edwin Jayme and Elisa Tan
Jayme, to pay jointly and severally the amount of One Hundred
Thousand Pesos (P100,000.00 as moral damages and the further sum
of Thirty Thousand Pesos (P30,000.00) as attorney's fees to the third-
party defendant spouses, Dr. Paquito Chua and Ney Sarrosa-Chua.
5) Ordering the fourth-party defendant spouses, Dr. Edwin Jayme and
Elisa Tan Jayme, to pay to the third-party defendants and fourth-party
plaintiffs, spouses Dr. Paquito Chua and Ney Sarrosa-Chua, the sum
of One Hundred Fifty Seven Thousand Pesos (P157,000.00) as rentals
for the riceland and Three Million Two Hundred Thousand Pesos
(P3,200,000.00) as rentals for the fishpond from October, 1985 to July
24, 1989 plus the rentals from the latter date until the property shall
have been delivered to the spouses Dr. Paquito Chua and Ney Sarrosa-
Chua;
6) Ordering the defendants and the fourth-party defendants to
immediately vacate Lots Nos. 1616 and 1617, Kabankalan Cadastre;
7) Ordering the defendants and the fourth-party defendants to pay
costs.
SO ORDERED.16
Petitioners raised the case to the Court of Appeals.17 Respondent court
affirmed the decision of the trial court on February 17, 1995 and held that the
questioned deed of sale of rights, interests and participation 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.18
Petitioners' motion for reconsideration was denied by respondent court on April
3, 1995.19 Hence, these petitions.20
1. We disagree with the Court of Appeals' conclusion that the September 15,
1978 Deed of Sale of Rights, Interests and Participation is a contract to sell
and not one of sale.
The distinction between contracts of sale and contracts to sell with reserved
title has been recognized by this Court in repeated decisions, according to
Justice J.B.L. Reyes in Luzon Brokerage Co. Inc. v. Maritime Building
S a l e s P a r t X I I P a g e | 13
Co.,Inc.,21 upholding the power of promisors under contracts to sell in case of
failure of the other party to complete payment, to extrajudicially terminate the
operation of the contract, refuse the conveyance, and retain the sums of
installments already received where such rights are expressly provided for.
In contracts to sell, ownership is retained by the seller and is not to pass until
the full payment of the price. Such payment is a positive suspensive condition,
the failure of which is not a breach of contract but simply an event that
prevented the obligation of the vendor to convey title from acquiring binding
force.22 To illustrate, although a deed of conditional sale is denominated as
such, absent a proviso that title to the property sold is reserved in the vendor
until full payment of the purchase price nor a stipulation giving the vendor the
right to unilaterally rescind the contract the moment the vendee fails to pay
within a fixed period, by its nature, it shall be declared a deed of absolute
sale.23
The September 15, 1978 sale of rights, interests and participation as to 1/2
portion pro indiviso of the two subject lots is a contract of sale for the following
reasons: First, private respondents as sellers did not reserve unto themselves
the ownership of the property until full payment of the unpaid balance of
P225,000.00. Second, there is no stipulation giving the sellers the right to
unilaterally rescind the contract the moment the buyer fails to pay within the
fixed period.24 Prior to the sale, petitioners were in possession of the subject
property as lessees. Upon sale to them of the rights, interests and participation
as to the 1/2 portion pro indiviso, they remained in possession, not in concept
of lessees anymore but as owners now through symbolic delivery known
as traditio brevi manu.25 Under Article 1477 of the Civil Code, the ownership
of the thing sold is acquired by the vendee upon actual or constructive delivery
thereof.26
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. The remedy of an unpaid seller in a contract
of sale is to seek either specific performance or rescission. 27
2. Next to be discussed is the stipulation in the disputed September 15, 1978
Deed of Sale of Rights, Interests and Participation which reads: "(t)his Contract
of Sale of rights, interests and participations shall become effective only upon
the approval by the Honorable Court of First Instance of Negros Occidental,
Branch VI-Himamaylan." Notably, the trial court and the Court of Appeals both

held that the deed of sale is null and void for not having been approved by the
probate court.
There has arisen here a confusion in the concepts of validity and the efficacy
of a contract. Under Art. 1318 of the Civil Code, the essential requisites of a
contract are: consent of the contracting parties; object certain which is the
subject matter of the contract and cause of the obligation which is established.
Absent one of the above, no contract can arise. Conversely, where all are
present, the result is a valid contract. However, some parties introduce various
kinds of restrictions or modalities, the lack of which will not, however, affect
the validity of the contract.
In the instant case, 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. This notwithstanding, the contract's validity was not affected for in
the words of the stipulation, " . . . this Contract of Sale of rights, interests and
participations shall become effectiveonly upon the approval by the Honorable
Court . . ." In other words, only the effectivity and not the validity of the
contract is affected.
Then, too, 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 indivisible shares of an heir are disposed of.
In the case of Dillena v. Court of Appeals, the Court declared that it is within
28
the jurisdiction of the probate court to approve the sale of properties of a
deceased person by his prospective heirs before final adjudication. 29 It is
settled that court approval is necessary for the validity of any disposition of
the decedent's estate. However, reference to judicial approval cannot
adversely affect the substantive rights of the heirs to dispose of their ideal
share in the co-heirship and/or co-ownership among the heirs.30 It must be
recalled that during the period of indivision of a decedent's estate, each heir,
being a co-owner, has full ownership of his part and may therefore alienate
it.31 But the effect of the alienation with respect to the co-owners shall be
limited to the portion which may be allotted to him in the division upon the
termination of the
co-ownership. 32
From the foregoing, it is clear that hereditary rights in an estate can be validly
sold without need of court approval and that when private respondents Cari-
S a l e s P a r t X I I P a g e | 14
an sold their rights, interests and participation in Lot Nos. 1616 and 1617, they
could legally sell the same without the approval of the probate court.
As a general rule, the pertinent contractual stipulation (requiring court
approval) should be considered as the law between the parties. However, the
presence of two factors militate against this conclusion. First, the evident
intention of the parties appears to be contrary to the mandatory character of
said stipulation.33 Whoever crafted the document of conveyance, must have
been of the belief that the controversial stipulation was a legal requirement
for the validity of the sale. But the contemporaneous and subsequent acts of
the parties reveal that the original objective of the parties was to give effect
to the deed of sale even without court approval. 34 Receipt and acceptance of
the numerous installments on the balance of the purchase price by the Cari-
ans and leaving petitioners in possession of Lot Nos. 1616 and 1617 reveal
their intention to effect the mutual transmission of rights and obligations. It
was only after private respondents Cari-an sold their shares in the subject lots
again to the spouses Chua, in September 1982, that these same heirs filed the
case at bar for the cancellation of the September 1978 conveyance. Worth
considering too is the fact that although the period to pay the balance of the
purchase price expired in May 1979, the heirs continued to accept payments
until late 1979 and did not seek judicial relief until late 1982 or three years
later.
Second, we hold that the requisite approval was virtually rendered impossible
by the Cari-ans because they opposed the motion for approval of the sale filed
by petitioners35 and sued the latter for the cancellation of that sale. The
probate court explained:
(e) While it is true that Escanlar and Holgado filed a similar motion for
the approval of Deed of Sale executed by some of the heirs in their
favor concerning the one-half (1/2) portions of Lots 1616 and 1617 as
early as November 10, 1981, yet the Court could not have favorably
acted upon it, because there exists a pending case for the rescission
of that contract, instituted by the vendors therein against Pedro
Escanlar and Francisco Holgado and filed before another branch of
this Court. Until now, this case, which attacks the very source of
whatever rights or interests Holgado and Escanlar may have acquired
over one-half (1/2) portions of Lots Nos. 1616 and 1617, is pending
resolution by another court. Otherwise, if this Court meddles on these
issues raised in that ordinary civil action seeking for the rescission of

an existing contract, then, the act of this Court would be totally
ineffective, as the same would be in excess of its jurisdiction. 36
Having provided the obstacle and the justification for the stipulated
approval not to be granted, private respondents Cari-an should not be allowed
to cancel their first transaction with petitioners because of lack of approval by
the probate court, which lack is of their own making.
3. With respect to rescission of a sale of real property, Article 1592 of the Civil
Code governs:
In the sale of immovable property, even though it may have been
stipulated that upon failure to pay the price at the time agreed upon
the rescission of the contract shall of right take place, the vendee may
pay, even after the expiration of the period, as long as no demand for
rescission of the contract has been made upon him either judicially or
by a notarial act. After the demand, the court may not grant him a
new term. (Emphasis added)
In the instant case, the sellers gave the buyers until May 1979 to pay the
balance of the purchase price. After the latter failed to pay installments due,
the former made no judicial demand for rescission of the contract nor did they
execute any notarial act demanding the same, as required under Article 1592.
Consequently, the buyers could lawfully make payments even after the May
1979 deadline, as in fact they paid several installments to the sellers which the
latter accepted. Thus, upon the expiration of the period to pay, the sellers
made no move to rescind but continued accepting late payments, an act which
cannot but be construed as a waiver of the right to rescind. When the sellers,
instead of availing of their right to rescind, accepted and received delayed
payments of installments beyond the period stipulated, and the buyers were
in arrears, the sellers in effect waived and are now estopped from exercising
said right to rescind.37
4. The matter of full payment is another issue taken up by petitioners. An
exhaustive review of the records of this case impels us to arrive at a conclusion
at variance with that of both the trial and the appellate courts.
The sole witness in the cancellation of sale case was private respondent herein
Fredisminda Cari-an Bustamante. She initially testified that after several
installments, she signed a receipt for the full payment of her share in
December 1979 but denied having actually received the P5,000.00 intended
S a l e s P a r t X I I P a g e | 15
to complete her share. She claims that Escanlar and Holgado made her sign
the receipt late in the afternoon and promised to give the money to her the
following morning when the banks opened. She also claimed that while her
brother Rodolfo
Cari-an's share had already been fully paid, her mother Generosa Martinez
only received P28,334.00 and her sister-in-law Nelly Chua vda. de Cari-an
received only P11,334.00. Fredisminda also summed up all the installments
and came up with the total of P132,551.00 from the long list on a sheet of a
calendar which was transferred from a small brown notebook. She later
admitted that her list may not have been complete for she gave the receipts
for installments to petitioners Escanlar and Holgado. She thus claimed that
they were defrauded because petitioners are wealthy and private respondents
are poor.
However, despite all her claims, Fredisminda's testimony fails to convince this
Court that they were not fully compensated by petitioners. Fredisminda admits
that her mother and her sister signed their individual receipts of full payment
on their own and not in her presence. 38 The receipts presented in evidence
show that Generosa Martinez was paid P45,625.00; Carmen Cari-an ,
P45,625.00; Rodolfo Cari-an , P47,500.00 on June 21, 1979; Nelly Chua vda.
de Cari-an, P11,334.00 and the sum of P34,218.00 was consigned in court for
the minor Leonell Cari-an.39Fredisminda insists that she signed a receipt for
full payment without receiving the money therefor and admits that she did not
object to the computation. We find it incredible that a mature woman like
Fredisminda Cari-an, would sign a receipt for money she did not receive.
Furthermore, her claims regarding the actual amount of the installments paid
to her and her kin are quite vague and unsupported by competent evidence.
She even admits that all the receipts were taken by petitioner
Escanlar.40 Worth noting too is the absence of supporting testimony from her
co-heirs and siblings Carmen Cari-an, Rodolfo Cari-an and Nelly Chua vda. de
Cari-an.
The trial court reasoned out that petitioners, in continuing to pay the rent for
the parcels of land they allegedly bought, admit not having fully paid the Cari-
ans. Petitioners' response, that they paid rent until 1986 in compliance with
their lease contract, only proves that they respected this contract and did not
take undue advantage of the heirs of Nombre and Cari-an who benefited from
the lease. Moreover, it is to be stressed that petitioners purchased the
hereditary shares solely of the Cari-ans and not the entire lot.
 S a l e s P a r t X I I P a g e | 16

The foregoing discussion ineluctably leads us to conclude that the
Cari-ans were indeed paid the balance of the purchase price, despite having
accepted installments therefor belatedly. There is thus no ground to rescind
the contract of sale because of non-payment.
5. Recapitulating, we have held that the September 15, 1978 deed of sale of
rights, interests and participations is valid and that the sellers-private
respondents Cari-an were fully paid the contract price. However, it must be
emphasized that what was sold only the Cari-an's hereditary shares in Lot Nos.
1616 and 1617 being held pro indiviso by them and is thus a valid conveyance
only of said ideal shares. Specific or designated portions of land were not
involved.
Consequently, the subsequent sale of 8 parcels of land, including Lot Nos.
1616 and 1617, to the spouses Chua is valid except to the extent of what was
sold to petitioners in the September 15, 1978 conveyance. It must be noted
however, that the probate court in Special Proceeding No. 7-7279 desisted
from awarding the individual shares of each heir because all the properties
belonging to the estate had already been sold. 41 Thus it is not certain how
much private respondents Cari-an were entitled to with respect to the two lots,
or if they were even going to be awarded shares in said lots.
The rate of rental payments to be made were given in evidence by Ney Sarrosa
Chua in her unrebutted testimony on July 24, 1989: For the fishpond (Lot No.
1617) — From 1982 up to 1986, rental payment of P3,000.00 per hectare;
from 1986-1989 (and succeeding years), rental payment of P10,000.00 per
hectare. For the riceland (Lot No. 1616) — 15 cavans per hectare per year;
from 1982 to 1986, P125.00 per cavan; 1987-1988, P175.00 per cavan; and
1989 and succeeding years, P200.00 per cavan.43
WHEREFORE, the petitions are hereby GRANTED. The decision of the Court of
Appeals under review is hereby REVERSED AND SET ASIDE. The case is
REMANDED to the Regional Trial Court of Negros Occidental, Branch 61 for
petitioners and private respondents Cari-an or their successors-in-interest to
determine exactly which 1/2 portion of Lot Nos. 1616 and 1617 will be owned
by each party, at the option of petitioners. The trial court is DIRECTED to order
the issuance of the corresponding certificates of title in the name of the
respective parties and to resolve the matter of rental payments of the land not
delivered to the Chua spouses subject to the rates specified above with legal
interest from date of demand.

The proceedings surrounding the estate of Nombre and Cari-an having

attained finality for nearly a decade now, the same cannot be re-opened. The
protracted proceedings which have undoubtedly left the property under a
cloud and the parties involved in a state of uncertainty compels us to resolve
it definitively.

The decision of the probate court declares private respondents Cari-an as the
sole heirs by representation of Victoriana Cari-an who was indisputably entitled
to half of the estate.42 There being no exact apportionment of the shares of
each heir and no competent proof that the heirs received unequal shares in
the disposition of the estate, it can be assumed that the heirs of Victoriana
Cari-an collectively are entitled to half of each property in the estate. More
particularly, private respondents Cari-an are entitled to half of Lot Nos. 1616
and 1617, i.e. 14,675 square meters of Lot No. 1616 and 230,474 square
meters of Lot No. 1617. Consequently, petitioners, as their successors-in-
interest, own said half of the subject lots and ought to deliver the possession
of the other half, as well as pay rents thereon, to the private respondents Ney
Sarrosa Chua and Paquito Chua but only if the former (petitioners) remained
in possession thereof.

JAIME GUINHAWA, petitioner, vs. PEOPLE OF THE PHILIPPINES,
respondent.
Criminal Procedure; Information; Pleadings and Practice; The real nature of
the offense charged is to be ascertained by the facts alleged in the body of
the information and punishment provided by law, not by the title or caption
given by the Prosecutor.—Section 6, Rule 110 of the Rules of Criminal
Procedure requires that the Information must allege the acts or omissions
complained of as constituting the offense: SEC. 6. Sufficiency of complaint or
information.—A complaint or information is sufficient if it states the name of
the accused; the designation of the offense given by the statute; the acts or
omissions complained of as constituting the offense; the name of the
offended party; the approximate date of the commission of the offense; and
the place where the offense was committed. When an offense is committed
by more than one person, all of them shall be included in the complaint or
information. The real nature of the offense charged is to be ascertained by
the facts alleged in the body of the Information and the punishment
provided by law, not by the designation or title or caption given by the
Prosecutor in the Information. The Information must allege clearly and
accurately the elements of the crime charged.
Criminal Law; Other Deceits; The false or fraudulent representation by a
seller that what he offers for sale is brand new, when in fact, it is not, is not
one of those deceitful acts envisaged under paragraph 1, Article 318 of the
Revised Penal Code.—As can be gleaned from its averments, the Information
alleged the essential elements of the crime under paragraph 1, Article 318 of
the Revised Penal Code. The false or fraudulent representation by a seller
that what he offers for sale is brand new (when, in fact, it is not) is one of
those deceitful acts envisaged in paragraph 1, Article 318 of the Revised
Penal Code. The provision reads: Art. 318. Other deceits.—The penalty of
arresto mayor and a fine of not less than the amount of the damage caused
and not more than twice such amount shall be imposed upon any person
who shall defraud or damage another by any other deceit not mentioned in
the preceding articles of this chapter.
Same; Same; Elements; Article 318 of the Revised Penal Code includes any
kind of conceivable deceit other than those enumerated in Articles 315 to
S a l e s P a r t X I I P a g e | 17
317—it is a catchall provision for that purpose with all its broad scope and
intendment.—For one to be liable for “other deceits” under the law, it is
required that the prosecution must prove the following essential elements:
(a) false pretense, fraudulent act or pretense other than those in the
preceding articles; (b) such false pretense, fraudulent act or pretense must
be made or executed prior to or simultaneously with the commission of the
fraud; and (c) as a result, the offended party suffered damage or prejudice.
It is essential that such false statement or fraudulent representation
constitutes the very cause or the only motive for the private complainant to
part with her property. The provision includes any kind of conceivable deceit
other than those enumerated in Articles 315 to 317 of the Revised Penal
Code. It is intended as the catchall provision for that purpose with its broad
scope and intendment.
Same; Same; Estafa; Art. 315, par. 2(a), Revised Penal Code; Statutory
Construction; Ejusdem Generis; Under the principle of ejusdem generis,
where a statement ascribes things of a particular class or kind accompanied
by words of a generic character, the generic words will usually be limited to
things of similar nature.—The petitioner’s reliance on paragraph 2(a), Article
315 of the Revised Penal Code is misplaced. The said provision reads: 2. By
means of any of the following false pretenses or fraudulent acts executed
prior to or simultaneously with the commission of the fraud: (a) By using
fictitious name, or falsely pretending to possess power, influence,
qualifications, property, credit, agency, business or imaginary transactions;
or by means of other similar deceits. The fraudulent representation of the
seller, in this case, that the van to be sold is brand new, is not the deceit
contemplated in the law. Under the principle of ejusdem generis, where a
statement ascribes things of a particular class or kind accompanied by words
of a generic character, the generic words will usually be limited to things of a
similar nature with those particularly enumerated unless there be something
in the context to the contrary.
Same; Same; Jurisdictions; Batas Pambansa Bilang 129; Section 32 of BP
129 provides that the Municipal Trial Court has the exclusive jurisdiction over
the offenses punishable with imprisonment not exceeding six years,
irrespective of the amount of fine; The MTC has exclusive jurisdiction over
the offense of other deceits since it is punishable by arresto mayor.—

Jurisdiction is conferred by the Constitution or by law. It cannot be conferred
by the will of the parties, nor diminished or waived by them. The jurisdiction
of the court is determined by the averments of the complaint or Information,
in relation to the law prevailing at the time of the filing of the criminal
complaint or Information, and the penalty provided by law for the crime
charged at the time of its commission. Section 32 of Batas Pambansa Blg.
129, as amended by Republic Act No. 7691, provides that the MTC has
exclusive jurisdiction over offenses punishable with imprisonment not
exceeding six years, irrespective of the amount of the fine. * * * Since the
felony of other deceits is punishable by arresto mayor, the MTC had
exclusive jurisdiction over the offense lodged against the petitioner.
Same; Same; Words and Phrases; Representation may be in form of words,
or conduct resorted to by an individual to serve as an advantage over
another.—On the merits of the petition, the Court agrees with the
petitioner’s contention that there is no evidence on record that he made
direct and positive representations or assertions to the private complainant
that the van was brand new. The record shows that the private complainant
and her husband Ralph Silo were, in fact, attended to by Azotea. However, it
bears stressing that the representation may be in the form of words, or
conduct resorted to by an individual to serve as an advantage over another.
Indeed, as declared by the CA based on the evidence on record: Petitioner
cannot barefacedly claim that he made no personal representation that the
herein subject van was brand new for the simple reason that nowhere in the
records did he ever refute the allegation in the complaint, which held him out
as a dealer of brand new cars. It has thus become admitted that the
petitioner was dealing with brand new vehicles—a fact which, up to now,
petitioner has not categorically denied. Therefore, when private complainant
went to petitioner’s showroom, the former had every right to assume that
she was being sold brand new vehicles there being nothing to indicate
otherwise. But as it turned out, not only did private complainant get a
defective and used van, the vehicle had also earlier figured in a road
accident when driven by no less than petitioner’s own driver.
Same; Same; Fraud or deceit may be committed by omission.— The CA is
correct in ruling that fraud or deceit may be committed by omission. As the
Court held in People v. Balasa: Fraud, in its general sense, is deemed to
S a l e s P a r t X I I P a g e | 18
comprise anything calculated to deceive, including all acts, omissions, and
concealment involving a breach of legal or equitable duty, trust, or
confidence justly reposed, resulting in damage to another, or by which an
undue and unconscientious advantage is taken of another. It is a generic
term embracing all multifarious means which human ingenuity can device,
and which are resorted to by one individual to secure an advantage over
another by false suggestions or by suppression of truth and includes all sur-
prise, trick, cunning, dissembling and any unfair way by which another is
cheated. On the other hand, deceit is the false representation of a matter of
fact whether by words or conduct, by false or misleading allegations, or by
concealment of that which should have been disclosed which deceives or is
intended to deceive another so that he shall act upon it to his legal injury.
Same; Same; Words and Phrases; Concealment; Mere silence is not in itself
concealment—the concealment which the law denounces as fraudulent
implies a purpose or design to hide facts which the other party sought to
know; Fraudulent non-disclosure and fraudulent concealment are of the
same genre.—It is true that mere silence is not in itself concealment.
Concealment which the law denounces as fraudulent implies a purpose or
design to hide facts which the other party sought to know. Failure to reveal a
fact which the seller is, in good faith, bound to disclose may generally be
classified as a deceptive act due to its inherent capacity to deceive.
Suppression of a material fact which a party is bound in good faith to
disclose is equivalent to a false representation. Moreover, a representation is
not confined to words or positive assertions; it may consist as well of deeds,
acts or artifacts of a nature calculated to mislead another and thus allow the
fraud-feasor to obtain an undue advantage. Fraudulent nondisclosure and
fraudulent concealment are of the same genre. Fraudulent concealment
presupposes a duty to disclose the truth and that disclosure was not made
when opportunity to speak and inform was presented, and that the party to
whom the duty of disclosure, as to a material fact was due, was induced
thereby to act to his injury.
Same; Same; Sales; 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, 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. 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.
Same; Same; Same; Where a vendee only made a partial investigation and
relies in part upon the representation of the vendor, and is deceived by such
representation to his injury, he may maintain an action for such deceit.—The
petitioner is not relieved of his criminal liability for deceitful concealment of
material facts, even if the private complainant made a visual inspection of
the van’s interior and exterior before she agreed to buy it and failed to
inspect its under chassis. Case law has it 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 seller cannot be heard to say that the
vendee should not have relied upon the fraudulent concealment; that
negligence, on the part of the vendee, should not be a defense in order to
prevent the vendor from unjustifiably escaping with the fruits of the fraud.
Same; Same; Same; Principle of Caveat Emptor; 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.—On
the petitioner’s insistence that the private complainant was proscribed from
charging him with estafa based on the principle of caveat emptor, case law
has it that this rule only requires the purchaser to exercise such care and
attention as is usually exercised by ordinarily prudent men in like business
affairs, and only applies to defects which are open and patent to the service
of one exercising such care. In an avuncular case, it was held that: . . . The
rule of caveat emptor, like the rule of sweet charity, has often been invoked
to cover a multitude of sins; but we think its protecting mantle has never
S a l e s P a r t X I I P a g e | 19
been stretched to this extent. It 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. But, where one party undertakes to sell to
another property situated at a distance and of which he has or claims to
have personal knowledge and of which the buyer knows nothing except as
he is informed by the seller, the buyer may rightfully rely on the truth of the
seller’s representations as to its kind, quality, and value made in the course
of negotiation for the purpose of inducing the purchase. If, in such case, the
representations prove to be false, neither law nor equity will permit the seller
to escape responsibility by the plea that the buyer ought not to have
believed him or ought to have applied to other sources to ascertain the facts.
...
Same; Same; Same; Agency; Where the doing of a certain act or the
transaction of a given affair, of the performance of certain business is
confided to an agent, the authority to so act will carry with it by implication
the authority to do all the collateral acts which are natural and ordinary
incidents of the main act or business authorized.—The petitioner cannot pin
criminal liability for his fraudulent omission on his general manager, Azotea.
The two are equally liable for their collective fraudulent silence. Case law has
it that wherever the doing of a certain act or the transaction of a given affair,
or the performance of certain business is confided to an agent, the authority
to so act will, in accordance with a general rule often referred to, carry with
it by implication the authority to do all of the collateral acts which are the
natural and ordinary incidents of the main act or business authorized.
Same; Same; Penalties; Indeterminate Sentence Law (Act 4103); The
Indeterminate Sentence Law does not apply if the maximum term of
imprisonment does not exceed one year—if the trial court opts to impose
penalty of imprisonment less than one year, it should not impose
indeterminate penalty but straight penalty of one year or less instead; An
indeterminate sentence may be imposed if the minimum of the penalty is
one year or less, and the maximum exceeds one year.—The MTC sentenced
the petitioner to suffer imprisonment of from two months and one day, as
minimum, to four months of arresto mayor, as maximum. The CA affirmed
the penalty imposed by the trial court. This is erroneous. Section 2 of Act

4103, as amended, otherwise known as the Indeterminate Sentence Law,
provides that the law will not apply if the maximum term of imprisonment
does not exceed one year: * * * In this case, the maximum term of
imprisonment imposed on the petitioner was four months and one day of
arresto mayor. Hence, the MTC was proscribed from imposing an
indeterminate penalty on the petitioner. An indeterminate penalty may be
imposed if the minimum of the penalty is one year or less, and the maximum
exceeds one year. For example, the trial court may impose an indeterminate
penalty of six months of arresto mayor, as minimum, to two years and four
months of prision correccional, as maximum, since the maximum term of
imprisonment it imposed exceeds one year. If the trial court opts to impose a
penalty of imprisonment of one year or less, it should not impose an
indeterminate penalty, but a straight penalty of one year or less instead.
Thus, the petitioner may be sentenced to a straight penalty of one year, or a
straight penalty of less than one year, i.e., ten months or eleven months. We
believe that considering the attendant circumstances, a straight penalty of
impr Guinhawa vs. People, 468 SCRA 278, G.R. No. 162822 August 25, 2005
DECISION
CALLEJO, SR., J.:
Jaime Guinhawa was engaged in the business of selling brand new motor
vehicles, including Mitsubishi vans, under the business name of Guinrox Motor
Sales. His office and display room for cars were located along Panganiban
Avenue, Naga City. He employed Gil Azotea as his sales manager.
On March 17, 1995, Guinhawa purchased a brand new Mitsubishi L-300 Versa
Van with Motor No. 4D56A-C8929 and Serial No. L069WQZJL-07970 from the
Union Motors Corporation (UMC) in Paco, Manila. The van bore Plate No. DLK
406. Guinhawa’s driver, Leopoldo Olayan, drove the van from Manila to Naga
City. However, while the van was traveling along the highway in Labo, Daet,
Camarines Norte, Olayan suffered a heart attack. The van went out of control,
traversed the highway onto the opposite lane, and was ditched into the canal
parallel to the highway.1 The van was damaged, and the left front tire had to
be replaced.
S a l e s P a r t X I I P a g e | 20
The incident was reported to the local police authorities and was recorded in
the police blotter.2 The van was repaired and later offered for sale in
Guinhawa’s showroom.3
Sometime in October 1995, the spouses Ralph and Josephine Silo wanted to
buy a new van for their garment business; they purchased items in Manila and
sold them in Naga City.4 They went to Guinhawa’s office, and were shown the
L-300 Versa Van which was on display. The couple inspected its interior portion
and found it beautiful. They no longer inspected the under chassis since they
presumed that the vehicle was brand new.5 Unaware that the van had been
damaged and repaired on account of the accident in Daet, the couple decided
to purchase the van for ₱591,000.00. Azotea suggested that the couple make
a downpayment of ₱118,200.00, and pay the balance of the purchase price by
installments via a loan from the United Coconut Planters Bank (UCPB), Naga
Branch, with the L-300 Versa Van as collateral. Azotea offered to make the
necessary arrangements with the UCPB for the consummation of the loan
transaction. The couple agreed. On November 10, 1995, the spouses executed
a Promissory Note6 for the amount of ₱692,676.00 as payment of the balance
on the purchase price, and as evidence of the chattel mortgage over the van
in favor of UCPB.
On October 11, 1995, the couple arrived in Guinhawa’s office to take delivery
of the van. Guinhawa executed the deed of sale, and the couple paid the
₱161,470.00 downpayment, for which they were issued Receipt No.
0309.7They were furnished a Service Manual 8 which contained the warranty
terms and conditions. Azotea instructed the couple on how to start the van
and to operate its radio. 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. 9
On October 12, 1995, Josephine Silo, accompanied by Glenda Pingol, went to
Manila on board the L-300 Versa Van, with Glenda’s husband, Bayani Pingol
III, as the driver. Their trip to Manila was uneventful. However, on the return
trip to Naga from Manila on October 15 or 16, 1995, Bayani Pingol heard a
squeaking sound which seemed to be coming from underneath the van. They
were in Calauag, Quezon, where there were no humps along the road. 10 Pingol
stopped the van in Daet, Camarines Norte, and examined the van underneath,
but found no abnormalities or defects.11 But as he drove the van to Naga City,
the squeaking sound persisted.
Believing that the van merely needed grease, Pingol stopped at a Shell gasoline
station where it was examined. The mechanic discovered that some parts
underneath the van had been welded. When Pingol complained to Guinhawa,

the latter told him that the defects were mere factory defects. As the defects
persisted, the spouses Silo requested that Guinhawa change the van with two
Charade-Daihatsu vehicles within a week or two, with the additional costs to
be taken from their downpayment. Meanwhile, the couple stopped paying the
monthly amortization on their loan, pending the replacement of the van.
Guinhawa initially agreed to the couple’s proposal, but later changed his mind
and told them that he had to sell the van first. The spouses then brought the
vehicle to the Rx Auto Clinic in Naga City for examination. Jesus Rex Raquitico,
Jr., the mechanic, examined the van and discovered that it was the left front
stabilizer that was producing the annoying sound, and that it had been
repaired.12 Raquitico prepared a Job Order containing the following notations
and recommendations:
1. CHECK UP SUSPENSION (FRONT)
2. REPLACE THE ROD END
3. REPLACE BUSHING
NOTE: FRONT STEP BOARD HAS BEEN ALREADY DAMAGED AND REPAIRED.
NOTE: FRONT LEFT SUSPENSION MOUNTING IS NOT ON SPECIFIED
ALIGNMENT/MEASUREMENT13
Josephine Silo filed a complaint for the rescission of the sale and the refund of
their money before the Department of Trade and Industry (DTI). During the
confrontation between her and Guinhawa, Josephine learned that Guinhawa
had bought the van from UMC before it was sold to them, and after it was
damaged in Daet. Subsequently, the spouses Silo withdrew their complaint
from the DTI.
On February 14, 1996, Josephine Silo filed a criminal complaint for violation of
paragraph 1, Article 318 of the Revised Penal Code against Guinhawa in the
Office of the City Prosecutor of Naga City. After the requisite investigation, an
Information was filed against Guinhawa in the Municipal Trial Court (MTC) of
Naga City. The inculpatory portion reads:
The undersigned Assistant Prosecutor of Naga City accuses Jaime Guinhawa
of the crime of OTHER DECEITS defined and penalized under Art. 318, par. 1
of the Revised Penal Code, committed as follows:
S a l e s P a r t X I I P a g e | 21
"That on or about October 11, 1995, in the City of Naga, Philippines, and within
the jurisdiction of this Honorable Court, the said accused, being a motor
vehicle dealer using the trade name of Guinhawa Motor Sales at Panganiban
Avenue, Naga City, and a dealer of brand new cars, by means of false
pretenses and fraudulent acts, did then and there willfully, unlawfully and
feloniously defraud private complainant, JOSEPHINE P. SILO, as follows: said
accused by means of false manifestations and fraudulent representations, sold
to said private complainant, as brand new, an automobile with trade name L-
300 Versa Van colored beige and the latter paid for the same in the amount
of ₱591,000.00, when, in truth and in fact, the same was not brand new
because it was discovered less than a month after it was sold to said Josephine
P. Silo that said L-300 Versa Van had defects in the underchassis and
stepboard and repairs had already been done thereat even before said sale,
as was found upon check-up by an auto mechanic; that private complainant
returned said L-300 Versa Van to the accused and demanded its replacement
with a new one or the return of its purchase price from said accused but
despite follow-up demands no replacement was made nor was the purchase
price returned to private complainant up to the present to her damage and
prejudice in the amount of ₱591,000.00, Philippine Currency, plus other
damages that may be proven in court."14
Guinhawa testified that he was a dealer of brand new Toyota, Mazda, Honda
and Mitsubishi cars, under the business name Guinrox Motor Sales. He
purchased Toyota cars from Toyota Philippines, and Mitsubishi cars from UMC
in Paco, Manila.15 He bought the van from the UMC in March 1995, but did not
use it; he merely had it displayed in his showroom in Naga City. 16 He insisted
that the van was a brand new unit when he sold it to the couple. 17 The spouses
Silo bought the van and took delivery only after inspecting and taking it for a
road tests.18 His sales manager, Azotea, informed him sometime in November
1995 that the spouses Silo had complained about the defects under the left
front portion of the van. By then, the van had a kilometer reading of 4,000
kilometers.19 He insisted that he did not make any false statement or
fraudulent misrepresentation to the couple about the van, either before or
simultaneous with its purchase. He posited that the defects noticed by the
couple were not major ones, and could be repaired. However, the couple
refused to have the van repaired and insisted on a refund of their payment for
the van which he could not allow. He then had the defects repaired by the
UMC.20 He claimed that the van was never involved in any accident, and denied
that his driver, Olayan, met an accident and sustained physical injuries when
he drove the van from Manila to Naga City.21 He even denied meeting Bayani
Pingol.

The accused claimed that the couple filed a Complaint 22 against him with the
DTI on January 25, 1996, only to withdraw it later.23 The couple then failed to
pay the amortizations for the van, which caused the UCPB to file a petition for
the foreclosure of the chattel mortgage and the sale of the van at public
auction.24
Azotea testified that he had been a car salesman for 16 years and that he sold
brand new vans.25 Before the couple took delivery of the vehicle, Pingol
inspected its exterior, interior, and underside, and even drove it for the
couple.26He was present when the van was brought to the Rx Auto Clinic,
where he noticed the dent on its front side.27 He claimed that the van never
figured in any vehicular accident in Labo, Daet, Camarines Norte on March 17,
1995.28 In fact, he declared, he found no police record of a vehicular accident
involving the van on the said date.29 He admitted that Olayan was their driver,
and was in charge of taking delivery of cars purchased from the manufacturer
in Manila.30
On November 6, 2001, the trial court rendered judgment convicting Guinhawa.
The fallo of the decision reads:
WHEREFORE, premises considered, judgment is hereby rendered declaring the
accused, JAIME GUINHAWA, guilty of the crime of Other Deceits defined and
penalized under Art. 318(1) of the Revised Penal Code, the prosecution having
proven the guilt of the accused beyond reasonable doubt and hereby imposes
upon him the penalty of imprisonment from 2 months and 1 day to 4 months
of Arresto Mayor and a fine of One Hundred Eighty Thousand Seven Hundred
and Eleven Pesos (₱180,711.00) the total amount of the actual damages
caused to private complainant.
As to the civil aspect of this case which have been deemed instituted with this
criminal case, Articles 2201 and 2202 of the Civil Code provides:
"Art. 2201. In contracts and quasi-contracts, the damages for which the
obligor who acted in good faith is liable shall be those that are the natural and
probable consequences of the breach of the obligation, and which the parties
have foreseen or could have reasonably foreseen at the time the obligation
was constituted.
"In case of fraud, malice or wanton attitude, the obligor shall be responsible
for all damages which may be reasonably attributed to the non-performance
of the obligation."
S a l e s P a r t X I I P a g e | 22
"Art. 2202. In crimes and quasi-delicts, the defendant shall be liable for all
damages which are the natural and probable consequences of the act or
omission complained of. It is not necessary that such damages have been
foreseen or could have reasonably been foreseen by the defendant."
Thus, accused is condemned to pay actual damages in the amount of One
Hundred Eighty Thousand Seven Hundred and Eleven Pesos (Php180,711.00),
which represents the 20% downpayment and other miscellaneous expenses
paid by the complainant plus the amount of Nineteen Thousand Two Hundred
Forty-One (Php19,241.00) Pesos, representing the 1st installment payment
made by the private complainant to the bank. Accused is, likewise, ordered to
pay moral damages in the amount of One Hundred Thousand Pesos
(Php100,000.00) in view of the moral pain suffered by the complainant; for
exemplary damages in the amount of Two Hundred Thousand Pesos
(Php200,000.00) to serve as deterrent for those businessmen similarly inclined
to take undue advantage over the public’s innocence. As for attorney’s fees,
the reasonable amount of One Hundred Thousand Pesos (Php100,000.00) is
hereby awarded.
SO ORDERED.31
The trial court declared that the accused made false pretenses or
misrepresentations that the van was a brand new one when, in fact, it had
figured in an accident in Labo, Daet, Camarines Norte, and sustained serious
damages before it was sold to the private complainant.
Guinhawa appealed the decision to the Regional Trial Court (RTC) of Naga
City, Branch 19, in which he alleged that:
1. The lower court erred in its finding that the repair works on the left front
portion and underchassis of the van was the result of the accident in Labo,
Camarines Norte, where its driver suffered an attack of hypertension.
2. The lower court erred in its four (4) findings of fact that accused-appellant
made misrepresentation or false pretenses "that the van was a brand new
car," which constituted deceit as defined in Article 318, paragraph 1 of the
Revised Penal Code.
3. The lower court erred in finding accused-appellant civilly liable to
complainant Josephine Silo. But, even if there be such liability, the action

therefor has already prescribed and the amount awarded was exhorbitant,
excessive and unconscionable.32
Guinhawa insisted that he never talked to the couple about the sale of the
van; hence, could not have made any false pretense or misrepresentation.
On August 1, 2002, the RTC affirmed the appealed judgment.33
Guinhawa filed a petition for review with the Court of Appeals (CA), where he
averred that:
I
THE COURT A QUO ERRED IN CONVICTING PETITIONER OF THE CRIME OF
OTHER DECEITS AND SENTENCING HIM TO SUFFER IMPRISONMENT OF TWO
MONTHS AND ONE DAY TO FOUR MONTHS OF ARRESTO MAYOR AND TO PAY
FINE IN THE AMOUNT OF ₱180,711.00.
II
THE COURT A QUO ERRED IN ORDERING PETITIONER TO PAY PRIVATE
COMPLAINANT ₱180,711.00 AS DOWNPAYMENT, ₱19,241.00 AS FIRST
INSTALLMENT WITH UCPB NAGA, ₱100,000.00 AS MORAL DAMAGES,
₱200,000.00 AS EXEMPLARY DAMAGES AND ₱100,000.00 AS ATTORNEY’S
FEES.34
On January 5, 2004, the CA rendered judgment affirming with modification the
decision of the RTC. The fallo of the decision reads:
WHEREFORE, premises considered, the instant petition is hereby partially
granted insofar as the following are concerned: a) the award of moral damages
is hereby REDUCED to ₱10,000.00 and b) the award of attorney’s fees and
exemplary damages are hereby DELETED for lack of factual basis. In all other
respects, We affirm the decision under review.
Costs against petitioner.
SO ORDERED.35
S a l e s P a r t X I I P a g e | 23
The CA ruled that the private complainant had the right to assume that the
van was brand new because Guinhawa held himself out as a dealer of brand
new vans. According to the appellate court, the act of displaying the van in
the showroom without notice to any would-be buyer that it was not a brand
new unit was tantamount to deceit. Thus, in concealing the van’s true
condition from the buyer, Guinhawa committed deceit.
The appellate court denied Guinhawa’s motion for reconsideration, prompting
him to file the present petition for review on certiorari, where he contends:
I
THE COURT A QUO ERRED IN NOT HOLDING THAT THE INFORMATION
CHARGED AGAINST PETITIONER DID NOT INFORM HIM OF A CHARGE OF
OTHER DECEITS.
II
THE COURT A QUO ERRED IN HOLDING THAT PETITIONER EMPLOYED
FRAUD OR DECEIT AS DEFINED UNDER ARTICLE 318, REVISED PENAL CODE.
III
THE COURT A QUO ERRED IN NOT CONSIDERING THE CIRCUMSTANCES
POINTING TO THE INNOCENCE OF THE PETITIONER.36
The issues for resolution are (1) whether, under the Information, the petitioner
was charged of other deceits under paragraph 1, Article 318 of the Revised
Penal Code; and (2) whether the respondent adduced proof beyond
reasonable doubt of the petitioner’s guilt for the crime charged.
The petitioner asserts that based on the allegations in the Information, he was
charged with estafa through false pretenses under paragraph 2, Article 315 of
the Revised Penal Code. Considering the allegation that the private
complainant was defrauded of ₱591,000.00, it is the RTC, not the MTC, which
has exclusive jurisdiction over the case. The petitioner maintains that he is not
estopped from assailing this matter because the trial court’s lack of jurisdiction
can be assailed at any time, even on appeal, which defect cannot even be
cured by the evidence adduced during the trial. The petitioner further avers
that he was convicted of other deceits under paragraph 1, Article 318 of the

Revised Penal Code, a crime for which he was not charged; hence, he was
deprived of his constitutional right to be informed of the nature of the charge
against him. And in any case, even if he had been charged of other deceits
under paragraph 1 of Article 318, the CA erred in finding him guilty. He insists
that the private complainant merely assumed that the van was brand new,
and that he did not make any misrepresentation to that effect. He avers that
deceit cannot be committed by concealment, the absence of any notice to the
public that the van was not brand new does not amount to deceit. He 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. Moreover, he did not attend to the private complainant when
they examined the van; thus, he could not have deceived them.
The petitioner maintains that, absent evidence of conspiracy, he is not
criminally liable for any representation Azotea may have made to the private
complainant, that the van was brand new. He insists that the respondent was
estopped from adducing evidence that the vehicle was involved in an accident
in Daet, Camarines Norte on March 17, 1995, because such fact was not
alleged in the Information.
In its comment on the petition, the Office of the Solicitor General avers that,
as gleaned from the material averments of the Information, the petitioner was
charged with other deceits under paragraph 1, Article 318 of the Revised Penal
Code, a felony within the exclusive jurisdiction of the MTC. The petitioner was
correctly charged and convicted, since he falsely claimed that the vehicle was
brand new when he sold the same to the private complainant. The petitioner’s
concealment of the fact that the van sustained serious damages as an
aftermath of the accident in Daet, Camarines Norte constituted deceit within
the meaning of paragraph 1 of Article 318.
The Information filed against the petitioner reads:
That on or about October 11, 1995, in the City of Naga, Philippines, and within
the jurisdiction of this Honorable Court, the said accused, being a motor
vehicle dealer using the trade name of Guinhawa Motor Sales at Panganiban
Avenue, Naga City, and dealer of brand new cars, by means of false pretenses
and fraudulent acts, did then and there, willfully, unlawfully and feloniously
defraud private complainant, JOSEPHINE P. SILO, as follows: said accused by
means of false manifestations and fraudulent representations, sold to said
private complainant, as brand new, an automobile with trade name L-300
Versa Van colored beige and the latter paid for the same in the amount of
S a l e s P a r t X I I P a g e | 24
₱591,000.00, when, in truth and in fact, the same was not brand new because
it was discovered less than a month after it was sold to said Josephine P. Silo
that said L-300 Versa Van had defects in the underchassis and stepboard and
repairs have already been done thereat even before said sale, as was found
upon check-up by an auto mechanic; that private complainant returned said
L-300 Versa Van to the accused and demanded its replacement with a new
one or the return of its purchase price from said accused but despite follow-
up demands no replacement was made nor was the purchase price returned
to private complainant up to the present to her damage and prejudice in the
amount of ₱591,000.00, Philippine Currency, plus other damages that may be
proven in court.
CONTRARY TO LAW.37
Section 6, Rule 110 of the Rules of Criminal Procedure requires that the
Information must allege the acts or omissions complained of as constituting
the offense:
SEC. 6. Sufficiency of complaint or information. – A complaint or information
is sufficient if it states the name of the accused; the designation of the offense
given by the statute; the acts or omissions complained of as constituting the
offense; the name of the offended party; the approximate date of the
commission of the offense; and the place where the offense was committed.
When an offense is committed by more than one person, all of them shall be
included in the complaint or information.
The real nature of the offense charged is to be ascertained by the facts alleged
in the body of the Information and the punishment provided by law, not by
the designation or title or caption given by the Prosecutor in the
Information.38 The Information must allege clearly and accurately the
elements of the crime charged.39
As can be gleaned from its averments, the Information alleged the essential
elements of the crime under paragraph 1, Article 318 of the Revised Penal
Code.
The false or fraudulent representation by a seller that what he offers for sale
is brand new (when, in fact, it is not) is one of those deceitful acts envisaged
in paragraph 1, Article 318 of the Revised Penal Code. The provision reads:

Art. 318. Other deceits. – The penalty of arresto mayor and a fine of not less
than the amount of the damage caused and not more than twice such amount
shall be imposed upon any person who shall defraud or damage another by
any other deceit not mentioned in the preceding articles of this chapter.
This provision was taken from Article 554 of the Spanish Penal Code which
provides:
El que defraudare o perjudicare a otro, usando de cualquier engaño que no se
halle expresado en los artículos anteriores de esta sección, será castigado con
una multa del tanto al duplo del perjuicio que irrogare; y en caso de
reincidencia, con la del duplo y arresto mayor en su grado medio al máximo.
For one to be liable for "other deceits" under the law, it is required that the
prosecution must prove the following essential elements: (a) false pretense,
fraudulent act or pretense other than those in the preceding articles;
(b) such false pretense, fraudulent act or pretense must be made or executed
prior to or simultaneously with the commission of the fraud; and (c) as a result,
the offended party suffered damage or prejudice.40 It is essential that such
false statement or fraudulent representation constitutes the very cause or the
only motive for the private complainant to part with her property.
The provision includes any kind of conceivable deceit other than those
enumerated in Articles 315 to 317 of the Revised Penal Code. 41 It is intended
as the catchall provision for that purpose with its broad scope and
intendment.42
Thus, the petitioner’s reliance on paragraph 2(a), Article 315 of the Revised
Penal Code is misplaced. The said provision reads:
2. By means of any of the following false pretenses or fraudulent acts executed
prior to or simultaneously with the commission of the fraud:
(a) By using fictitious name, or falsely pretending to possess power, influence,
qualifications, property, credit, agency, business or imaginary transactions; or
by means of other similar deceits.
The fraudulent representation of the seller, in this case, that the van to be sold
is brand new, is not the deceit contemplated in the law. Under the principle
of ejusdem generis, where a statement ascribes things of a particular class or
kind accompanied by words of a generic character, the generic words will
S a l e s P a r t X I I P a g e | 25
usually be limited to things of a similar nature with those particularly
enumerated unless there be something in the context to the contrary. 43
Jurisdiction is conferred by the Constitution or by law. It cannot be conferred
by the will of the parties, nor diminished or waived by them. The jurisdiction
of the court is determined by the averments of the complaint or Information,
in relation to the law prevailing at the time of the filing of the criminal
complaint or Information, and the penalty provided by law for the crime
charged at the time of its commission.
Section 32 of Batas Pambansa Blg. 129, as amended by Republic Act No. 7691,
provides that the MTC has exclusive jurisdiction over offenses punishable with
imprisonment not exceeding six years, irrespective of the amount of the fine:
Sec. 32. Jurisdiction of Metropolitan Trial Courts, Municipal Trial Courts and
Municipal Circuit Trial Courts in Criminal Cases. – Except in cases falling within
the exclusive original jurisdiction of Regional Trial Courts and of the
Sandiganbayan, the Metropolitan Trial Courts, Municipal Trial Courts, and
Municipal Circuit Trial Courts shall exercise:
(1) Exclusive original jurisdiction over all violations of city or municipal
ordinances committed within their respective territorial jurisdiction; and
(2) Exclusive original jurisdiction over all offenses punishable with
imprisonment not exceeding six (6) years irrespective of the amount of fine,
and regardless of other imposable accessory or other penalties, including the
civil liability arising from such offenses or predicated thereon, irrespective of
kind, nature, value or amount thereof: Provided, however, That in offenses
involving damage to property through criminal negligence, they shall have
exclusive original jurisdiction thereof.
Since the felony of other deceits is punishable by arresto mayor, the MTC had
exclusive jurisdiction over the offense lodged against the petitioner.
On the merits of the petition, the Court agrees with the petitioner’s contention
that there is no evidence on record that he made direct and positive
representations or assertions to the private complainant that the van was
brand new. The record shows that the private complainant and her husband
Ralph Silo were, in fact, attended to by Azotea. However, it bears stressing
that the representation may be in the form of words, or conduct resorted to

by an individual to serve as an advantage over another. Indeed, as declared
by the CA based on the evidence on record:
Petitioner cannot barefacedly claim that he made no personal representation
that the herein subject van was brand new for the simple reason that nowhere
in the records did he ever refute the allegation in the complaint, which held
him out as a dealer of brand new cars. It has thus become admitted that the
petitioner was dealing with brand new vehicles – a fact which, up to now,
petitioner has not categorically denied. Therefore, when private complainant
went to petitioner’s showroom, the former had every right to assume that she
was being sold brand new vehicles there being nothing to indicate otherwise.
But as it turned out, not only did private complainant get a defective and used
van, the vehicle had also earlier figured in a road accident when driven by no
less than petitioner’s own driver.44
Indeed, the petitioner and Azotea obdurately insisted in the trial court that the
van was brand new, and that it had never figured in vehicular accident. This
representation was accentuated by the fact that the petitioner gave the Service
Manual to the private complainant, which manual
contained the warranty terms and conditions, signifying that the van was
"brand new." Believing this good faith, the private complainant decided to
purchase the van for her buy-and-sell and garment business, and even made
a downpayment of the purchase price.
As supported by the evidence on record, the van was defective when the
petitioner sold it to the private complainant. It had ditched onto the shoulder
of the highway in Daet, Camarines Norte on its way from Manila to Naga City.
The van was damaged and had to be repaired; the rod end and bushing had
to be replaced, while the left front stabilizer which gave out a persistent
annoying sound was repaired. Some parts underneath the van were even
welded together. Azotea and the petitioner deliberately concealed these facts
from the private complainant when she bought the van, obviously so as not to
derail the sale and the profit from the transaction.
The CA is correct in ruling that fraud or deceit may be committed by omission.
As the Court held in People v. Balasa:45
Fraud, in its general sense, is deemed to comprise anything calculated to
deceive, including all acts, omissions, and concealment involving a breach of
legal or equitable duty, trust, or confidence justly reposed, resulting in damage
to another, or by which an undue and unconscientious advantage is taken of
S a l e s P a r t X I I P a g e | 26
another. It is a generic term embracing all multifarious means which human
ingenuity can device, and which are resorted to by one individual to secure an
advantage over another by false suggestions or by suppression of truth and
includes all surprise, trick, cunning, dissembling and any unfair way by which
another is cheated. On the other hand, deceit is the false representation of a
matter of fact whether by words or conduct, by false or misleading allegations,
or by concealment of that which should have been disclosed which deceives
or is intended to deceive another so that he shall act upon it to his legal
injury.46
It is true that mere silence is not in itself concealment. Concealment which the
law denounces as fraudulent implies a purpose or design to hide facts which
the other party sought to know.47 Failure to reveal a fact which the seller is, in
good faith, bound to disclose may generally be classified as a deceptive act
due to its inherent capacity to deceive. 48 Suppression of a material fact which
a party is bound in good faith to disclose is equivalent to a false
representation.49 Moreover, a representation is not confined to words or
positive assertions; it may consist as well of deeds, acts or artifacts of a nature
calculated to mislead another and thus allow the fraud-feasor to obtain an
undue advantage.50
Fraudulent nondisclosure and fraudulent concealment are of the same genre.
Fraudulent concealment presupposes a duty to disclose the truth and that
disclosure was not made when opportunity to speak and inform was
presented, and that the party to whom the duty of disclosure, as to a material
fact was due, was induced thereby to act to his injury. 51
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. 52 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.53
In the present case, the petitioner and Azotea knew that the van had figured
in an accident, was damaged and had to be repaired. Nevertheless, the van
was placed in the showroom, thus making it appear to the public that it was a

brand new unit. The petitioner was mandated to reveal the foregoing facts to
the private complainant. But the petitioner and Azotea even obdurately
declared when they testified in the court a quo that the vehicle did not figure
in an accident, nor had it been repaired; they maintained that the van was
brand new, knowing that the private complainant was going to use it for her
garment business. Thus, the private complainant bought the van, believing it
was brand new.
Significantly, even when the petitioner was apprised that the private
complainant had discovered the van’s defects, the petitioner agreed to replace
the van, but changed his mind and insisted that it must be first sold.
The petitioner is not relieved of his criminal liability for deceitful concealment
of material facts, even if the private complainant made a visual inspection of
the van’s interior and exterior before she agreed to buy it and
failed to inspect its under chassis. Case law has it 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.54 The seller cannot be heard to say that the vendee
should not have relied upon the fraudulent concealment; that negligence, on
the part of the vendee, should not be a defense in order to prevent the vendor
from unjustifiably escaping with the fruits of the fraud.
In one case,55 the defendant who repainted an automobile, worked it over to
resemble a new one and delivered it to the plaintiff was found to have
warranted and represented that the automobile being sold was new. This was
found to be "a false representation of an existing fact; and, if it was material
and induced the plaintiff to accept something entirely different from that which
he had contracted for, it clearly was a fraud which, upon its discovery and a
tender of the property back to the seller, [it] entitled the plaintiff to rescind
the trade and recover the purchase money."56
On the petitioner’s insistence that the private complainant was proscribed from
charging him with estafa based on the principle of caveat emptor, case law
has it that this rule only requires the purchaser to exercise such care and
attention as is usually exercised by ordinarily prudent men in like business
affairs, and only applies to defects which are open and patent to the service
of one exercising such care.57 In an avuncular case, it was held that:
… The rule of caveat emptor, like the rule of sweet charity, has often been
invoked to cover a multitude of sins; but we think its protecting mantle has
S a l e s P a r t X I I P a g e | 27
never been stretched to this extent. It 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. But, where one party undertakes to sell to
another property situated at a distance and of which he has or claims to have
personal knowledge and of which the buyer knows nothing except as he is
informed by the seller, the buyer may rightfully rely on the truth of the seller’s
representations as to its kind, quality, and value made in the course of
negotiation for the purpose of inducing the purchase. If, in such case, the
representations prove to be false, neither law nor equity will permit the seller
to escape responsibility by the plea that the buyer ought not to have believed
him or ought to have applied to other sources to ascertain the facts. …58
It bears stressing that Azotea and the petitioner had every opportunity to
reveal to the private complainant that the van was defective. They resolved to
maintain their silence, to the prejudice of the private complainant, who was a
garment merchant and who had no special knowledge of parts of motor
vehicles. Based on the surrounding circumstances, she relied on her belief that
the van was brand new. In fine, she was the innocent victim of the petitioner’s
fraudulent nondisclosure or concealment.
The petitioner cannot pin criminal liability for his fraudulent omission on his
general manager, Azotea. The two are equally liable for their collective
fraudulent silence. Case law has it that wherever the doing of a
certain act or the transaction of a given affair, or the performance of certain
business is confided to an agent, the authority to so act will, in accordance
with a general rule often referred to, carry with it by implication the authority
to do all of the collateral acts which are the natural and ordinary incidents of
the main act or business authorized.59
The MTC sentenced the petitioner to suffer imprisonment of from two months
and one day, as minimum, to four months of arresto mayor, as maximum. The
CA affirmed the penalty imposed by the trial court. This is erroneous. Section
2 of Act 4103, as amended, otherwise known as the Indeterminate Sentence
Law, provides that the law will not apply if the maximum term of imprisonment
does not exceed one year:
SEC. 2. This Act shall not apply to persons convicted of offenses punished with
death penalty or life-imprisonment; to those convicted of treason, conspiracy
or proposal to commit treason; to those convicted of misprision of treason,
rebellion, sedition or espionage; to those convicted of piracy; to those who are
 S a l e s P a r t X I I P a g e | 28

habitual delinquents; to those who shall have escaped from confinement or

evaded sentence; to those who having been granted conditional pardon by
the Chief Executive shall have violated the terms thereof; to those whose
maximum term of imprisonment does not exceed one year, not to those
already sentenced by final judgment at the time of approval of this Act, except
as provided in Section 5 hereof. (As amended by Act No. 4225.)

In this case, the maximum term of imprisonment imposed on the petitioner

was four months and one day of arresto mayor. Hence, the MTC was
proscribed from imposing an indeterminate penalty on the petitioner. An
indeterminate penalty may be imposed if the minimum of the penalty is
one year or less, and the maximum exceeds one year. For example, the trial
court may impose an indeterminate penalty of six months of arresto mayor,
as minimum, to two years and four months of prision correccional, as
maximum, since the maximum term of imprisonment it imposed exceeds one
year. If the trial court opts to impose a penalty of imprisonment of one year
or less, it should not impose an indeterminate penalty, but a straight penalty
of one year or less instead. Thus, the petitioner may be sentenced to a straight
penalty of one year, or a straight penalty of less than one year, i.e., ten
months or eleven months. We believe that considering the attendant
circumstances, a straight penalty of imprisonment of six months is reasonable.

Conformably with Article 39 in relation to paragraph 3, Article 38 of the Revised

Penal Code, the petitioner shall suffer subsidiary imprisonment if he has no
property with which to pay the penalty of fine.

IN LIGHT OF ALL THE FOREGOING, the petition is DENIED. The assailed

Decision and Resolution are AFFIRMED WITH MODIFICATION.
Considering the surrounding circumstances of the case, the petitioner is
hereby sentenced to suffer a straight penalty of six (6) months imprisonment.
The petitioner shall suffer subsidiary imprisonment in case of insolvency.

Costs against the petitioner.

SO ORDERED.

NUTRIMIX FEEDS CORPORATION, petitioner, vs. COURT OF
APPEALS and SPOUSES EFREN AND MAURA EVANGELISTA,
respondents.
Remedial Law; Appeals; Court may review the factual findings of the Court of
Appeals should they be contrary to those of the trial court.—Oft repeated is
the rule that the Supreme Court reviews only errors of law in petitions for
review on certiorari under Rule 45.
However, this rule is not absolute. The Court may review the factual findings
of the CA should they be contrary to those of the trial court. Conformably,
this Court may review findings of facts when the judgment of the CA is
premised on a misapprehension of facts.
Civil Law; Contracts; Sales; Hidden Defects; A hidden defect is one which is
unknown or could not have been known to the vendee; Requisites to
Recover on Account of Hidden Defects.—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 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.
Same; Same; Same; Same; Things to be Established in Order to Prove
Liability on the Basis of Breach of Implied Warranty.—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;
S a l e s P a r t X I I P a g e | 29
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. Nutrimix Feeds Corporation vs. Court of Appeals, 441 SCRA 357,
G.R. No. 152219 October 25, 2004
DECISION
CALLEJO, SR., J.:
For review on certiorari is the Decision1 of the Court of Appeals in CA-G.R. CV
No. 59615 modifying, on appeal, the Joint Decision2 of the Regional Trial Court
of Malolos, Bulacan, Branch 9, in Civil Case No. 1026-M-933 for sum of money
and damages with prayer for issuance of writ of preliminary attachment, and
Civil Case No. 49-M-944 for damages. The trial court dismissed the complaint
of the respondents, ordering them to pay the petitioner the unpaid value of
the assorted animal feeds delivered to the former by the latter, with legal
interest thereon from the filing of the complaint, including attorney’s fees.
The Factual Antecedents
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
Sales Invoice
Date Amount
Number
21334 June 23, 1993 ₱ 7,260.00
21420 June 26, 1993 6,990.00
21437 June 28, 1993 41,510.00
 S a l e s P a r t X I I P a g e | 30

21722 July 12, 1993 45,185.00

Total: ₱490,520.00
22048 July 26, 1993 44,540.00 ==========
22054 July 27, 1993 45,246.00
When the above-mentioned checks were deposited at the petitioner’s
22186 August 2, 1993 84,900.00 depository bank, the same were, consequently, dishonored because
respondent Maura Evangelista had already closed her account. The petitioner
Total: ₱275,631.00 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.

respondents incurred an aggregate unsettled account with the petitioner in On December 15, 1993, the petitioner filed with the Regional Trial Court of
the amount of ₱766,151.00. The breakdown of the unpaid obligation is as Malolos, Bulacan, a complaint, docketed as Civil Case No. 1026-M-93, against
follows: 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
Check
Bank Due Date Amount the petitioner. They asserted that the nine checks issued by respondent Maura
Number
Evangelista were made to guarantee the payment of the purchases, which was
United Coconut previously determined to be procured from the expected proceeds in the sale
BTS052084 July 30, 1993 ₱ 47,760.00 of their broilers and hogs. They contended that inasmuch as the sudden and
Planters Bank
massive death of their animals was caused by the contaminated products of
-do- BTS052087 July 30, 1993 131,340.00 the petitioner, the nonpayment of their obligation was based on a just and
legal ground.
-do- BTS052091 July 30, 1993 59,700.00

August 4, On January 19, 1994, the respondents also lodged a complaint for damages
-do- BTS062721 47,860.00 against the petitioner, docketed as Civil Case No. 49-M-94, for the untimely
1993
and unforeseen death of their animals supposedly effected by the adulterated
August 5, animal feeds the petitioner sold to them. Within the period to file an answer,
-do- BTS062720 43,780.00
1993 the petitioner moved to dismiss the respondents’ complaint on the ground of
litis pendentia. The trial court denied the same in a Resolution5 dated April 26,
August 6, 1994, and ordered the consolidation of the case with Civil Case No. 1026-M-
-do- BTS062774 15,000.00
1993 93. On May 13, 1994, the petitioner filed its Answer with Counterclaim, alleging
that the death of the respondents’ animals was due to the widespread
September
-do- BTS062748 47,180.00 pestilence in their farm. The petitioner, likewise, maintained that it received
11, 1993
information that the respondents were in an unstable financial condition and
September even sold their animals to settle their obligations from other enraged and
-do- BTS062763 48,440.00 insistent creditors. It, moreover, theorized that it was the respondents who
11, 1993
mixed poison to its feeds to make it appear that the feeds were contaminated.
September
-do- BTS062766 49,460.00
18, 1993 A joint trial thereafter ensued.

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.6
For her part, respondent Maura Evangelista testified that as direct buyers of
animal feeds from the petitioner, Mr. Bartolome, the company president, gave
them a discount of ₱12.00 per bag and a credit term of forty-five to seventy-
five days.7 For the operation of the respondents’ poultry and piggery farm, the
assorted animal feeds sold by the petitioner were delivered in their residence
and stored in an adjacent bodega made of concrete wall and galvanized iron
sheet roofing with monolithic flooring.8
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,
averaging 1.7 kilos in weight, approximately forty-one to forty-five days old.
The broilers then had a prevailing market price of ₱46.00 per kilo. 9
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.11
S a l e s P a r t X I I P a g e | 31
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 and,
thereafter, filed a case against the respondents. 12
After the meeting with Mr. Bartolome, respondent Maura Evangelista
requested Dr. Rolando Sanchez, a veterinarian, to conduct an inspection in the
respondents’ poultry. On October 20, 1993, the respondents took ample
amounts remaining from the feeds sold by the petitioner and furnished the
same to various government agencies for laboratory examination.
Dr. Juliana G. Garcia, a doctor of veterinary medicine and the Supervising
Agriculturist of the Bureau of Animal Industry, testified that on October 20,
1993, sample feeds for chickens contained in a pail were presented to her for
examination by respondent Efren Evangelista and a certain veterinarian. 13 The
Clinical Laboratory Report revealed that the feeds were negative of
salmonella14 and that the very high aflatoxin level 15 found therein would not
cause instantaneous death if taken orally by birds.
Dr. Rodrigo Diaz, the 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, informed the trial court that respondent
Maura Evangelista and Dr. Garcia brought sample feeds and four live and
healthy chickens to him for laboratory examination. In his Cytogenetic
Analysis,16 Dr. Medina reported that he divided the chickens into two
categories, which he separately fed at 6:00 a.m. with the animal feeds of a
different commercial brand and with the sample feeds supposedly supplied by
the petitioner. At noon of the same day, one of the chickens which had been
fed with the Nutrimix feeds died, and a second chicken died at 5:45 p.m. of
the same day. Samples of blood and bone marrow were taken for chromosome
analysis, which showed pulverized chromosomes both from bone marrow and
blood chromosomes. On cross-examination, the witness admitted that the
feeds brought to him were merely placed in a small unmarked plastic bag and

that he had no way of ascertaining whether the feeds were indeed
manufactured by the petitioner.
Another witness for the respondents, Aida Viloria Magsipoc, Forensic Chemist
III of the Forensic Chemist Division of the National Bureau of Investigation,
affirmed that she performed a chemical analysis17 of the animal feeds,
submitted to her by respondent Maura Evangelista and Dr. Garcia in a sealed
plastic bag, to determine the presence of poison in the said specimen. The
witness verified that the sample feeds yielded positive results to the tests for
COUMATETRALYL Compound,18 the active component of RACUMIN, a brand
name for a commercially known rat poison. 19 According to the witness, the
presence of the compound in the chicken feeds would be fatal to internal
organs of the chickens, as it would give a delayed blood clotting effect and
eventually lead to internal hemorrhage, culminating in their inevitable death.
Paz Austria, the Chief of the Pesticide Analytical Section of the Bureau of Plants
Industry, conducted a laboratory examination to determine the presence of
pesticide residue in the animal feeds submitted by respondent Maura
Evangelista and Dr. Garcia. The tests disclosed that no pesticide residue was
detected in the samples received20but it was discovered that the animal feeds
were positive for Warfarin, a rodenticide (anticoagulant), which is the chemical
family of Coumarin.21
After due consideration of the evidence presented, the trial court ruled in favor
of the petitioner. The dispositive portion of the decision reads:
WHEREFORE, in light of the evidence on record and the
laws/jurisprudence applicable thereon, judgment is hereby rendered:
1) in Civil Case No. 1026-M-93, 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; and
S a l e s P a r t X I I P a g e | 32
2) dismissing the complaint as well as counterclaims in Civil
Case No. 49-M-94 for inadequacy of evidence to sustain the
same. No pronouncement as to costs.
SO ORDERED.22
In finding for the petitioner, the trial court ratiocinated as follows:
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. By no
means and under no circumstance, therefore, may Nutrimix be held
liable for the sundry damages prayed for by the Evangelistas in their
complaint in Civil Case No. 49-M-94 and answer in Civil Case No. 1026-
M-93. In fine, Civil Case No. 49-M-94 deserves dismissal.
Parenthetically, vis-à-vis the fulminations of the Evangelistas in this
specific regard, the Court does not perceive any act or omission on
the part of Nutrimix constitutive of "abuse of rights" as would render
said corporation liable for damages under Arts. 19 and 21 of the Civil
Code. The alleged "callous attitude and lack of concern of Nutrimix"
have not been established with more definitiveness.
As regards Civil Case No. 1026-M-93, on the other hand, the Court is
perfectly convinced that the deliveries of animal feeds by Nutrimix to
the Evangelistas constituted a simple contract of sale, albeit on a
continuing basis and on terms or installment payments.23
Undaunted, the respondents sought a review of the trial court’s decision to the
Court of Appeals (CA), principally arguing that the trial court erred in holding

that they failed to prove that their broilers and hogs died as a result of
consuming the petitioner’s feeds.
On February 12, 2002, the CA modified the decision of the trial court. The fallo
of the decision reads:
WHEREFORE, premises considered, the appealed decision is hereby
MODIFIED such that the complaint in Civil Case No. 1026-M-93 is
dismissed for lack of merit.
So ordered.24
In dismissing 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.
On March 7, 2002, the petitioner filed with this Court the instant petition for
review on the sole ground that –
THE HONORABLE COURT OF APPEALS ERRED IN CONCLUDING THAT
THE CLAIMS OF HEREIN PETITIONER FOR COLLECTION OF SUM OF
MONEY AGAINST PRIVATE RESPONDENTS MUST BE DENIED
BECAUSE OF HIDDEN DEFECTS.
The Present Petition
The petitioner resolutely avers that the testimony of Dr. Diaz can hardly be
considered as conclusive evidence of hidden defects that can be attributed to
the petitioner. Parenthetically, the petitioner asserts, assuming that the sample
feeds were taken from a sealed sack bearing the brand name Nutrimix, it
cannot decisively be presumed that these were the same feeds brought to the
respondents’ farm and given to their chickens and hogs for consumption.
S a l e s P a r t X I I P a g e | 33
It is the contention of the respondents that the appellate court correctly
ordered the dismissal of the complaint in Civil Case No. 1026-M-93. They
further add that there was sufficient basis for the CA to hold the petitioner
guilty of breach of warranty thereby releasing the respondents from paying
their outstanding obligation.
The Ruling of the Court
Oft repeated is the rule that the Supreme Court reviews only errors of law in
petitions for review on certiorari under Rule 45. However, this rule is not
absolute. The Court may review the factual findings of the CA should they be
contrary to those of the trial court. Conformably, this Court may review
findings of facts when the judgment of the CA is premised on a
misapprehension of facts.25
The threshold issue is whether or not there is sufficient evidence to hold the
petitioner guilty of breach of warranty due to hidden defects.
The petition is meritorious.
The provisions on warranty against hidden defects are found in Articles 1561
and 1566 of the New Civil Code of the Philippines, which read as follows:
Art. 1561. The vendor shall be responsible for warranty against hidden
defects which the thing sold may have, should they render it unfit for
the use for which it is intended, or should they diminish its fitness for
such use to such an extent that, had the vendee been aware thereof,
he would not have acquired it or would have given a lower price for
it; but said vendor shall not be answerable for patent defects or those
which may be visible, or for those which are not visible if the vendee
is an expert who, by reason of his trade or profession, should have
known them.
Art. 1566. The vendor is responsible to the vendee for any hidden
faults or defects in the thing sold, even though he was not aware
thereof.
This provision shall not apply if the contrary has been stipulated, and the
vendor was not aware of the hidden faults or defects in the thing sold.
 S a l e s P a r t X I I P a g e | 34

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. 27
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.28 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. 29 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.30 The defect must be present upon the delivery or
manufacture of the product;31 or when the product left the seller’s or
manufacturer’s control;32 or when the product was sold to the purchaser;33 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.
Atty. Cruz:
Q Madam Witness, you said in the last hearing that believing that the
250 bags of feeds delivered to (sic) the Nutrimix Feeds Corporation on
August 2, 1993 were poison (sic), allegedly your husband Efren
Evangelista burned the same with the chicken[s], is that right?
A Yes, Sir. Some, Sir.
Q And is it not a fact, Madam Witness, that you did not, as according
to you, used (sic) any of these deliveries made on August 2, 1993?
A We were able to feed (sic) some of those deliveries because we did
not know yet during that time that it is the cause of the death of our
chicks (sic), Sir.
Q But according to you, the previous deliveries were not used by you
because you believe (sic) that they were poison (sic)?
A Which previous deliveries, Sir[?]
Q Those delivered on July 26 and 22 (sic), 1993?
A Those were fed to the chickens, Sir. This is the cause of the death
of the chickens.
Q And you stated that this last delivery on August 2 were poison (sic)
also and you did not use them, is that right?
Atty. Roxas:
That is misleading.

A review of the facts of the case would reveal that the petitioner delivered the Atty. Cruz:
animal feeds, allegedly containing rat poison, on July 26, 1993; but it is
astonishing that the respondents had the animal feeds examined only on She stated that.
October 20, 1993, or barely three months after their broilers and hogs had
died. On cross-examination, respondent Maura Evangelista testified in this Atty. Roxas:
manner:

She said some were fed because they did not know yet of the
poisoning.
Court:
And when the chickens died, they stopped naturally feeding it to the
chickens.
Atty. Cruz:
Q You mean to say, Madam Witness, that although you believe (sic)
that the chickens were allegedly poisoned, you used the same for
feeding your animals?
A We did not know yet during that time that the feeds contained
poison, only during that time when we learned about the same after
the analysis.
Q Therefore you have known only of the alleged poison in the Nutrimix
Feeds only after you have caused the analysis of the same?
A Yes, Sir.
Q When was that, Madam Witness?
A I cannot be sure about the exact time but it is within the months of
October to November, Sir.
Q So, before this analysis of about October and November, you were
not aware that the feeds of Nutrimix Feeds Corporation were,
according to you, with poison?
A We did not know yet that it contained poison but we were sure that
the feeds were the cause of the death of our animals. 34
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
S a l e s P a r t X I I P a g e | 35
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).35 We agree with the contention of the
petitioner that there is no evidence on record to prove that the animal feeds
taken to the various governmental agencies for laboratory examination were
the same animal feeds given to the respondents’ broilers and hogs for their
consumption. Moreover, Dr. Diaz even admitted that the feeds that were
submitted for analysis came from a sealed bag. There is simply no evidence
to show that the feeds given to the animals on July 26 and 27, 1993 were
identical to those submitted to the expert witnesses in October 1993.
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. 36
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.
Respondent Maura Evangelista testified that it was common practice among
chicken and hog raisers to mix animal feeds. The testimonies of respondent
Maura Evangelista may be thus summarized:
Cross-Examination
Atty. Cruz:
Q Because, Madam Witness, you ordered chicken booster mash from
Nutrimix Feeds Corporation because in July 1993 you were taking care
of many chickens, as a matter of fact, majority of the chickens you
were taking care [of] were chicks and not chickens which are
marketable?
A What I can remember was that I ordered chicken booster mash on
that month of July 1993 because we have some chicks which have to
be fed with chicken booster mash and I now remember that on the
particular month of July 1993 we ordered several bags of chicken

booster mash for the consumption also of our chicken in our other
poultry and at the same time they were also used to be mixed with
the feeds that were given to the hogs.
Q You mean to say [that], as a practice, you are mixing chicken
booster mash which is specifically made for chick feeds you are
feeding the same to the hogs, is that what you want the Court to
believe?
A Yes, Sir, because when you mix chicken booster mash in the feeds
of hogs there is a better result, Sir, in raising hogs. 37
… anew that their animals were poisoned with the animal feeds supplied by the
Re-Direct Examination
Atty. Roxas:
Q Now, you mentioned that shortly before July 26 and 27, 1993,
various types of Nutrimix feeds were delivered to you like chicks
booster mash, broiler starter mash and hog finisher or hog grower
mash. What is the reason for simultaneous deliveries of various types
of feeds?
A Because we used to mix all those together in one feeding, Sir.
Q And what is the reason for mixing the chick booster mash with
broiler starter mash?
A So that the chickens will get fat, Sir.
… Any other interpretation of the law would unloose the courts to meander
Re-Cross Examination
Atty. Cruz:
Q Madam Witness, is it not a fact that the mixing of these feeds by
you is your own concuction (sic) and without the advice of a
veterinarian expert to do so?
S a l e s P a r t X I I P a g e | 36
A That is common practice among raisers to mix two feeds, Sir.
Q By yourself, Madam Witness, who advised you to do the mixing of
these two types of feeds for feeding your chickens?
A That is common practice of chicken raisers, Sir.38
Even more surprising is the fact that 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
petitioner. The volte-face of the respondents deserves scant consideration for
having been conjured as a mere afterthought.
In essence, we hold that the respondents failed to prove that the petitioner is
guilty of breach of warranty due to hidden defects. It is, likewise, rudimentary
that common law places upon the buyer of the product the burden of proving
that the seller of the product breached its warranty.39 The bevy of expert
evidence adduced by the respondents is too shaky and utterly insufficient to
prove that the Nutrimix feeds caused the death of their animals. For these
reasons, the expert testimonies lack probative weight. The respondents’ case
of breach of implied warranty was fundamentally based upon the
circumstantial evidence that the chickens and hogs sickened, stunted, and died
after eating Nutrimix feeds; but this was not enough to raise a reasonable
supposition that the unwholesome feeds were the proximate cause of the
death with that degree of certainty and probability required. 40The rule is well-
settled that if there be no evidence, or if evidence be so slight as not
reasonably to warrant inference of the fact in issue or furnish more than
materials for a mere conjecture, the court will not hesitate to strike down the
evidence and rule in favor of the other party.41 This rule is both fair and sound.
aimlessly in the arena of speculation.42
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.43 In any case, the respondents have
already admitted, both in their testimonies and pleadings submitted, that they
are indeed indebted to the petitioner for the unpaid animal feeds delivered to
 S a l e s P a r t X I I P a g e | 37

them. For this reason alone, they should be held liable for their unsettled
obligations to the petitioner.

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.

SO ORDERED.