G.R. No. L-17025 - IN RE: Sy See vs. Republic

Case Summary (G.R. No. L-17025)

Transactional and Factual Summary

On 7 November 1990 petitioner and respondent executed a deed of absolute sale for certain machinery and refrigeration equipment (Lots Nos. 2, 3 and 5) sold on an as‑is‑where‑is basis; respondent paid P84,000, evidenced by Receipt No. 12844. The items were physically located in a compound leased to Creative Lines. Respondent sought delivery two days after payment. A gate pass was issued in March 1991 and respondent removed Lots Nos. 3 and 5; during removal of Lot No. 2 (originally sixteen items) only nine items were taken. Seven items remained in the compound and Creative Lines’ employees prevented removal. During litigation respondent later retrieved the remaining items but found them damaged and with missing parts.

Procedural History

Respondent filed a complaint for specific performance and damages against petitioner and Creative Lines. The Regional Trial Court held petitioner liable for breach of contract and awarded actual damages. The Court of Appeals affirmed the RTC decision. Petitioner filed a Rule 45 petition to the Supreme Court to challenge the appellate ruling.

Issues Presented

Petitioner raised four principal errors: (I) that it complied with its delivery obligation (arguing constructive delivery upon execution of the deed); (II) that the as‑is‑where‑is sale shifted responsibility for condition and physical removal to respondent; (III) that a disclaimer of warranty in the deed barred respondent’s claims; and (IV) that the failure to effect actual delivery was beyond petitioner’s control (attributable to Creative Lines) and therefore excused by fortuitous event.

Governing Legal Principles on Delivery and Transfer of Ownership

Under the Civil Code the ownership of a thing sold transfers to the vendee upon actual or constructive delivery. A thing is considered delivered when placed in the control and possession of the vendee. Execution of a public instrument creates a prima facie presumption of delivery where not contradicted by the deed or other circumstances; delivery of movables can be effected by delivering keys to a depository. However, for constructive delivery via a public instrument to operate, the purchaser must be placed in control of the thing sold: the vendor must have the control necessary that, at the moment of sale, material delivery could have been made. A vendor who lacks actual possession cannot transfer constructive possession simply by executing a public instrument.

Court’s Analysis on Constructive Delivery (Issue I)

The Court found no constructive delivery upon execution of the deed or issuance of the gate pass because APT did not have actual control or possession of the machinery at the time of sale — Creative Lines had physical possession of the assets. The prima facie presumption of delivery arising from a public instrument was displaced by the factual reality that the purchaser was not placed in possession or control. Thus APT had not effected delivery nor transferred ownership through constructive delivery.

Court’s Analysis on As‑Is‑Where‑Is Clause (Issue II)

The Court explained that the phrase “as‑is‑where‑is” describes the physical condition and location of the thing sold and does not concern its legal situation. It is descriptive of state and location only; it does not negate the vendor’s obligation to deliver or alter the legal requirement that ownership and risk pass only upon actual or constructive delivery. Therefore the as‑is‑where‑is characterization did not absolve petitioner from the duty to deliver or transfer possession.

Court’s Analysis on Disclaimer of Warranty (Issue III)

The Court reiterated the vendor’s fundamental obligations: to transfer ownership, deliver the thing sold, and warrant the thing. Although the deed contained reciprocal representations and warranties (including a disclaimer), those contractual disclaimers could not substitute for the absence of delivery. Because there was no actual or constructive delivery, petitioner had not performed its primary obligation to transfer ownership and possession, and the presence of a disclaimer did not defeat respondent’s entitlement to relief for non‑performance.

Court’s Analysis on Fortuitous Event and Responsibility for Failure to Deliver (Issue IV)

Petitioner argued that Creative Lines’ refusal to allow removal constituted a fortuitous event excusing liability. The Court applied Civil Code Art. 1174 and the established elements of fortuitous event: independence from human will, unforeseeability or inevitability, impossibility to perform the obligation in the normal manner, and absence of participation by the obligor in aggravating the injury. The Court found Creative Lines’ intervention wa

Case Syllabus (G.R. No. L-17025)

Procedural Posture

Petition for review under Rule 45 filed by Asset Privatization Trust (APT) seeking reversal of the Court of Appeals' decision and resolution which affirmed the Regional Trial Court's (RTC) decision holding petitioner liable for actual damages for breach of contract.
RTC decision dated 21 September 1998 (Judge Francisco B. Ibay) found petitioner liable for breach of contract and awarded actual damages to respondent.
Court of Appeals affirmed the RTC decision in toto by decision dated 31 August 2004 and resolution dated 17 February 2005 (Associate Justice Magdangal M. De Leon, with Associate Justices Romeo A. Brawner and Mariano C. Del Castillo).
Supreme Court decision rendered May 8, 2009 (G.R. No. 167195), Second Division, penned by Justice Tinga, affirming the Court of Appeals' decision in toto; costs against petitioner.

Parties and Nature of the Case

Petitioner: Asset Privatization Trust (APT), a government entity created to conserve, provisionally manage and dispose assets of government institutions (Proclamation No. 50, Sec. 9; RA No. 7886 extended APT's term to Dec. 31, 1999).
Respondent: T.J. Enterprises.
Subject matter: Action arising from an absolute deed of sale over machinery and refrigeration equipment sold on an as‑is‑where‑is basis; dispute centers on delivery, possession, and consequent damages for alleged breach of contract.

Relevant Facts

Petitioner acquired machinery and refrigeration equipment from the Development Bank of the Philippines (DBP), stored at Golden City compound, Pasay City, premises leased to and in the physical possession of Creative Lines, Inc.
On 7 November 1990, petitioner and respondent executed a Deed of Absolute Sale covering machinery and refrigeration equipment identified as Lots Nos. 2, 3 and 5; respondent paid P84,000.00 in full (Receipt No. 12844).
Two days after the sale respondent demanded delivery. In March 1991, petitioner issued Gate Pass No. 4955.
Respondent successfully removed Lots Nos. 3 and 5. During hauling of Lot No. 2 (originally sixteen items), respondent removed only nine items; seven items remained behind:
- Reefer Unit 1
- Reefer Unit 2
- Reefer Unit 3
- One unit blast freezer with all accessories
- One unit chest freezer
- One unit room air-conditioner
- One unit air compressor
Creative Lines' employees prevented respondent from hauling the remaining seven items.
Respondent filed a complaint for specific performance and damages against petitioner and Creative Lines.
During pendency of the case, respondent ultimately pulled out the remaining machinery and equipment, but inspection revealed damage and missing parts.
Petitioner maintained that by executing the deed of sale and issuing the gate pass it had complied with its delivery obligations; sale being on an as‑is‑where‑is basis, it asserted respondent’s duty to take possession and that constructive delivery had occurred.
RTC found no constructive delivery, held petitioner did not have control over the property at time of sale, and ruled petitioner liable for breach of contract and actual damages. Court of Appeals affirmed; Supreme Court affirmed the appellate court in toto.

Issues Presented to the Supreme Court

I. Whether the Court of Appeals erred in not finding that petitioner had complied with its obligation to make delivery of the properties subject of the contract of sale.
II. Whether the Court of Appeals erred in not considering that the sale was on an "as‑is‑where‑is" basis which, petitioner contends, placed the burden on respondent to take possession in the condition and place where located.
III. Whether respondent's acceptance of petitioner's disclaimer of warranty in the deed of sale precludes respondent from enforcing rights arising from the contract.
IV. Whether petitioner’s failure to make actual delivery was beyond its control and therefore excusable (i.e., whether Creative Lines' refusal constituted a fortuitous event relieving petitioner of liability for damages).

Legal Principles and Authorities Cited by the Court

Ownership transfer rule: "The ownership of a thing sold shall be transferred to the vendee upon the actual or constructive delivery thereof." (Civil Code, Art. 1477 — as cited in the decision)
Definition of delivery: "The thing sold shall be understood as delivered when it is placed in the control and possession of the vendee." (Civil Code, Art. 1497 — as cited)
Public instrument presumption: When sale is made through a public instrument, its execution is generally equivalent to delivery unless the deed indicates otherwise; for movables, delivery may be by turning over keys of depository. (Civil Code, Arts. 1498 and related discussion)
Prima facie presumption: Execution of a public instrument gives rise to a prima facie presumption of delivery, which is destroyed if delivery is not effected because of a legal impediment. (Cited cases: Santos v. Santos; Danguilan v. IAC; Ten Forty Realty and Development Corp. v. Cruz; Equatorial Realty Development Inc. v. Mayfair Theater, Inc.; Masallo v. Cesar; and authority BAVIERA, ARACELI — as quoted in the decision)
As‑is‑where‑is explanation: Phrase pertains solely to the physical condition and location of the thing sold, not its legal situation; it does not alter vendor’s responsibility to deliver. (National Development Company v. Madrigal Wan Hai Lines Corporation)
Vendor’s obligations: Vendor