474 SCRA 427 – Civil Law – Law on Sales – Breach of Warranties – Contract of Sale
Goodyear Philippines was the owner of an Isuzu car which was hijacked in 1986. Goodyear reported it to the police. PNP issued an alert alarm on the stolen vehicle. Later that year the car was recovered. Goodyear told PNP to lift the alarm from the recovered car.
In 1996, Goodyear sold the car to Sy. In 1997, Sy sold the car to Jose Lee. Lee tried to register the car in his name but he was not able to do so because apparently PNP did not lift the alert alarm over the said car. The car was impounded and PNP sued Lee. Lee told Sy about it.
Sy then sue Goodyear for breach of warranty. Sy argued that Goodyear has the duty to convey the vehicle to Sy free from all liens, encumbrances and legal impediments. The RTC ruled in favor of Goodyear. CA reversed the RTC decision.
ISSUE: Whether or not there was a breach of warranty.
HELD: No. In a contract of sale, there are implied warranties: first, the vendor has a right to sell the thing at the time that its ownership is to pass to the vendee, as a result of which the latter shall from then on have and enjoy the legal and peaceful possession of the thing; and, second, the thing shall be free from any charge or encumbrance not declared or known to the vendee.
Goodyear did not break any of those. Certainly, the impoundment of the car was not Goodyear’s fault and it was not a legal impediment that deprived Sy from ownership of said car. When Sy sold the car to Lee, Sy was already the absolute owner. This is because when Goodyear sold the car to Sy, Goodyear transferred full ownership to Sy.
It was just unfortunate that the PNP did not lift the alert alarm from the said car placed on it in 1986. Certainly, Goodyear has no control over the PNP and PNP’s inaction is a purely administrative and government in nature. Hence, Goodyear did not breach its obligation as a vendor to Sy; neither did it violate Sy’s right for which he could maintain an action for the recovery of damages. Without this crucial allegation of a breach or violation, no cause of action exists.
A warranty is an affirmation of fact or any promise made by a vendor in relation to the thing sold. As such, a warranty has a natural tendency to induce the vendee — relying on that affirmation or promise — to purchase the thing. The vendor impliedly warrants that that which is being sold is free from any charge or encumbrance not declared or known to the vendee. The decisive test is whether the vendor assumes to assert a fact of which the vendee is ignorant.
A lien is a legal right or interest that a creditor has in another’s property, lasting usually until a debt or duty that it secures is satisfied.
An encumbrance is a “claim or liability that is attached to property or some other right and that may lessen its value, such as a lien or mortgage”
** A legal impediment is a legal “hindrance or obstruction.”