G.R. No. 73913 - Moles vs. Intermediate Appellate Court

Petitioner Jerry T. Moles filed a complaint for rescission of contract with damages against respondent Mariano M. Diolosa in the trial court of Negros Occidental, Civil Case No. 13821, on May 17, 1978.
Respondent moved to dismiss the case on the ground of improper venue, relying on a Sales Invoice (No. 075A, dated April 23, 1977) which stipulated that all actions arising from the contract should be instituted in Iloilo City.
Petitioner contested that the document was not the formal contract of sale but merely a preliminary memorandum.

In 1977, petitioner, needing a linotype printing machine for his LM Press business in Bacolod City, sought to secure an industrial loan from the Development Bank of the Philippines (DBP).
Through an intermediary, petitioner was introduced to respondent, owner of Diolosa Publishing House in Iloilo City, who offered two available used yet functional linotype machines.
On his second visit to Iloilo, petitioner, accompanied by a letterpress operator, chose to purchase the Model 14 linotype machine.
To facilitate the DBP loan application, a pro forma invoice was executed on April 23, 1977, stating an amount of P50,000.00 (an increase from the agreed price of P40,000.00 to include the cost of new matrices).

The machine was delivered and installed at petitioner’s publishing house at Tangub, Bacolod City by respondent’s employee, Crispino Escurido, while another employee, Tomas Plondaya, provided training.
On August 29, 1977, respondent issued a certification warranting that the machine was in “A-1 condition,” which was critical for the release of petitioner’s DBP loan.
An official receipt (No. 0451, dated September 30, 1977) was executed by respondent, expressly stating receipt of the DBP check for P50,000.00 as full payment.

On November 29, 1977, petitioner complained that the machine was not functioning properly and cited defects—claiming it had been misrepresented as functioning well and “in A-1 condition.”
Respondent initially made no reply to the complaint. Subsequent telephone discussions led respondent to send technicians to perform repairs, but the machine still failed to operate.
Petitioner later engaged an expert witness, Gil Legaspina, who identified several major defects including worn parts and tear in the machine, concluding that significant repairs were necessary.

The trial court ruled in favor of petitioner by decreeing the rescission of the contract, ordering the return of the machine and accessories, refunding the purchase price with interest, and awarding damages and attorney’s fees.
Respondent appealed from this decision to the Intermediate Appellate Court, which reversed the trial court ruling by upholding the dismissal of petitioner’s complaint.
The appellate decision revived the venue issue, specifically the contention that the Sales Invoice—a document later admitted by respondent to be merely pro forma—mandated Iloilo City as the proper venue.

The express warranty given by respondent (stating the machine was in “A-1 condition”) became a central issue, as petitioner argued this warranty was an integral and binding part of the sale.
Later in the proceedings, respondent claimed that the action for rescission was barred by prescription, arguing for the six-month prescriptive period typical of redhibitory actions; however, petitioner contended that the general four-year period applied because the warranty was express.
The court considered the timing of the filing (one year after delivery) and the nature of the warranty in determining that the action was filed within the appropriate prescriptive period.

The Supreme Court found merit in petitioner’s cause, particularly in distinguishing between the pro forma Sales Invoice and the actual contract of sale.
The Court emphasized that the express warranty regarding the machine’s condition was not “dealer’s talk” but a binding representation, especially given its role in securing the loan.
Consequently, the Supreme Court reversed the Intermediate Appellate Court’s dismissal, reinstated the decision of the trial court, and held respondent liable for the defects and misrepresentations in the sale.

Whether the Sales Invoice No. 075A, which provided for venue in Iloilo City, constituted a binding contractual stipulation or was merely a pro forma document lacking the requisite deliberate intent to govern venue.
Whether the defects in the linotype machine amounted to redhibitory defects serious enough to warrant the rescission of the contract of sale.
Whether the express warranty given by respondent—asserting that the machine was in “A-1 condition”—was an integral, binding part of the sales contract or merely a casual remark.
Whether the claim for rescission of the contract, involving an express warranty, was timely filed within the applicable prescriptive period given the contention regarding the six-month rule for implied warranties versus the four-year rule for express warranties.