Title
Moles vs. Intermediate Appellate Court
Case
G.R. No. 73913
Decision Date
Jan 31, 1989
Petitioner purchased a defective secondhand linotype machine from respondent, who warranted it as "A-1 condition." Supreme Court ruled in favor of rescission, citing express warranty, significant defects, and timely filing.
printing business owner
complaint
rescission of contract

Case Summary (G.R. No. 73913)

Factual Background

The parties transacted for the sale of a secondhand linotype machine, Model 14, in April 1977 after petitioner inspected machines at respondent Mariano M. Diolosa’s establishment in Iloilo City. The agreement was essentially verbal, but a pro forma sales invoice dated April 23, 1977, reflecting P50,000, was prepared to facilitate petitioner’s industrial loan application with the Development Bank of the Philippines. The negotiated selling price was P40,000, the P50,000 figure including an additional P10,000 intended for new matrices. The machine was delivered, installed in petitioner’s Bacolod premises, and Diolosa’s employees assisted in installation and training. Respondent issued a written certification on August 29, 1977, warranting that the machine was in “A-1 condition.” An inspector from DBP merely verified the machine’s presence and petitioner’s loan of P50,000 was released; Diolosa received payment pursuant to official receipt No. 0451 dated September 30, 1977, which expressly referred to the pro forma invoice. After delivery petitioner discovered substantial defects, wrote letters of complaint on November 29, 1977 and February 18, 1978, requested repairs or redress, and retained technicians whose evaluations indicated major defects rendering the machine unserviceable.

Trial Court Proceedings

Jerry T. Moles filed an action for rescission and damages on May 17, 1978. Mariano M. Diolosa moved to dismiss for improper venue, relying on a printed clause in Sales Invoice No. 075A designating Iloilo City as the forum. The Court of First Instance denied the motion to dismiss by order of June 23, 1978, and denied reconsideration. Mariano M. Diolosa sought prohibition and injunctive relief in G.R. No. 49078, which the Supreme Court dismissed on February 7, 1979 (final March 15, 1979). The trial proceeded, an expert for petitioner testified to multiple serious mechanical defects, and the trial court rendered judgment rescinding the sale, ordering return of the machine to respondent in Iloilo, ordering respondent to return P40,000 plus legal interest from May 17, 1978, awarding P4,500 as actual damages, P1,000 for attorney’s fees, and costs against respondent.

Intermediate Appellate Court Ruling

The Intermediate Appellate Court reversed the trial court and dismissed petitioner’s complaint. The appellate court adopted some factual findings of the lower court but held that the pro forma sales invoice effected a venue stipulation and treated the transaction in a manner unfavorable to petitioner, concluding essentially that there was no warranty or that petitioner should have availed himself of repair remedies under any warranty asserted.

The Parties’ Contentions on Venue

Respondent relied upon Sales Invoice No. 075A to contend that venue lay exclusively in Iloilo City. Petitioner countered that the invoice was merely a pro forma memorandum and not the contract of sale. The Supreme Court observed that the venue question had been previously litigated in G.R. No. 49078 and that the High Court had dismissed respondent’s petition for prohibition. The Intermediate Appellate Court erred in reopening the venue issue and in regarding the printed invoice provisions as binding contractual stipulations when the trial court had properly found the invoice to be provisional and preparatory to financing rather than the operative contract. The Supreme Court further held that respondent’s official receipt acknowledging receipt of the DBP check as full payment and referring to the pro forma invoice supported the trial court’s finding that the invoice was pro forma and not a fully negotiated contract with an intended venue clause.

Warranties: Implied and Express

The Supreme Court reviewed applicable principles on sale of secondhand goods, noting that while the general rule is that no implied warranty arises in sales of secondhand articles, exceptions exist where the buyer relied on the seller’s skill or where the circumstances show an implied warranty under Art. 1562, Civil Code. The Court emphasized that an express warranty may be made and be binding even in sales of secondhand articles. The certification by Mariano M. Diolosa that the linotype machine was in “A-1 condition” was treated as an express warranty. The Court found that the certification was material to the financing and purchase, that respondent did not repudiate its role in inducing release of DBP funds, and that the appellate court erred in dismissing the certification as mere “dealer’s talk.” The certification was not mere puffery because it served as a condition precedent for the loan and payment and was specifically embodied in written form.

Rescission for Redhibitory Defects

On the merits, the Supreme Court examined the nature and extent of the defects. An expert witness for petitioner testified to multiple significant mechanical defects requiring major repairs and testified that the machine was the same unit previously rejected by another buyer on that basis. The Court applied the doctrine of redhibitory defects under Art. 1561, Civil Code, and held that the defects were of sufficient gravity to render the machine unfit for its intended purpose. The trial court’s factual finding that the machine was not reasonably fit for the particular purpose for which it was acquired was supported by substantial evidence and therefore had to be upheld.

Prescription and Preservation of Defenses

Respondent raised prescription on appeal, asserting that a redhibitory action is subject to the six-month prescriptive period of Art. 1571, Civil Code. The Supreme Court explained that the six-month rule applies principally to cases of implied warranty and that where an express warranty governs the relation, the general four-year prescriptive period for rescission under Art. 1389, Civil Code, applies. Moreover, the Court noted the procedural doctrine that prescription is an affirmative defense which, if not pleaded in the trial court, is ordinarily waived and cannot be raised for the first time on appeal. Because the case involved an express warranty and prescription was not timely invoked at trial, respondent’s belated prescription claim failed.

Legal Basis and Reasoning of the Supreme Court

The Supreme Court concluded that the Intermediate Appellate Court erred on multiple fronts: it improperly reopened the venue question previously resolved by the High Court; it mischaracterized the pro forma invoice and ignored respondent’s own written acknowledgments; it subordinated the written exp

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