G.R. No. L-14714 - Andaya vs. Masala

In June 1934, Isidro Fenis sold a parcel of land to Eustaquia Llanes with a right of repurchase within five years.
After the repurchase period lapsed without exercise, Fenis sold the same land to Maria Viloria on January 13, 1944.
Maria Viloria, seven months later on August 21, 1944, sold the property—together with another parcel—to Melencio Manansala via a sale with a right to repurchase within one year.
On August 1, 1946, upon expiration of the repurchase period, Manansala registered an affidavit consolidating his title with the Register of Deeds.

On September 28, 1947, Maria Viloria sold the property by way of an absolute sale to Ciriaco Casino, Fidela Valdez, and the plaintiff spouses, Ariston Andaya and Micaela Cabrito, for P4,800.00. This deed carried a warranty stipulation regarding the title.
Eustaquia Llanes, asserting her earlier transaction rights, instituted Civil Case No. 399 on October 18, 1947, to quiet title and recover the possession of the property from Ciriaco Casino.
On June 9, 1949, Melencio Manansala sold again the same property by way of an absolute sale, incorporating an express warranty clause absolving him in case of eviction, to the spouses Ciriaco Casino and Fidela Valdez along with the plaintiffs.
The deed from Manansala was recorded under Act No. 3344 on June 9, 1948.
Throughout these transactions, multiple parties became involved in litigation concerning title and possession, including additional defendants being named in subsequent pleadings and amended complaints.

On March 23, 1956, the plaintiff spouses Ariston Andaya and Micaela Cabrito filed a case in the Court of First Instance of Ilocos Sur against Melencio Manansala.
They sought damages for breach of his warranty of title (or against eviction) which was embodied in the sale of the land, alleging that Manansala’s warranty was breached when they were later evicted by virtue of a final judgment in the earlier title case filed by Eustaquia Llanes.
In the lower court’s summary judgment, after the parties agreed on the facts, it was held that:

The plaintiffs’ acquisition of the land for a low price was merely to facilitate the registration of their prior deed of sale.
The warranty clause in the deed was deemed pro forma, as the plaintiffs were aware that the land was subject to pending litigation regarding its title and possession.
Given these findings, the court ruled that the appropriate remedy was not a warranty action under Article 1555 of the New Civil Code but rather a rescission of the contract of sale.
Consequently, the lower court ordered Manansala to refund P750.00 (representing half the sale price) with interest from June 9, 1948, plus the costs of the suit.

Melencio Manansala appealed from the lower court’s decision, challenging the imposition of liability under a rescission theory despite his earlier consolidation of title and the understanding between the parties.
Manansala contended that:

The warranty against eviction was waivable, and the plaintiffs had effectively assumed the risk of eviction by their actions.
The remedy of rescission was inapplicable since rescission requires the possibility of returning what was received under the contract, a condition not met in a case of complete eviction.
The plaintiffs’ subsequent claim for additional damning damages under Article 1555 of the New Civil Code was improper, especially as they had not contested the lower court’s findings regarding the waiver.

Whether the vendor’s liability for warranty against eviction in a contract of sale is absolute or may be waived by the vendee.

Examination of the contractual stipulation regarding warranty and its real intent given the context of the property’s title history.
Determination if the plaintiffs’ actions (acquiring the property at a low price and being aware of ongoing litigation) constitute a waiver or renunciation of such warranty.

Whether the remedy of rescission is an appropriate recourse in cases where the vendee has been totally evicted and is unable to return the property to the vendor.

Discussion of whether partial return of benefit under the contract is a prerequisite for rescission.
Analysis of the limitations imposed by the relevant provisions of the Old and New Civil Codes when the entire subject matter of the sale has been lost.

Whether awarding additional damages beyond the mere refund of the purchase price (with interest) is legally sustainable given that the plaintiffs did not contest the findings regarding waiver of the warranty.