G.R. No. 1300 : February 3, 1904
E. C. McCullough, plaintiff-appellee, vs. R. Aenlle & Co., defendants-appellants.

FACTS:
On August 27, 1901, the parties executed a contract for the absolute sale of the “La Maria Cristina” tobacco factory, including its trademark, stock, and all appurtenances. The total price was approximately 153,500 pesos, subject to modification based on a subsequent inventory, with specific valuation rules (e.g., leaf tobacco at invoice price). The contract was perfected, obliging the plaintiff to buy all the leaf tobacco in the factory at the defendant’s invoice prices. A subsequent inventory and instruments finalized the price at 131,000 pesos, which the plaintiff paid. The inventory listed, among other items, two specific lots of leaf tobacco from Angadanan and Isabela, describing their class and crop year. Later, when the plaintiff sold the tobacco to a new company, these two lots were rejected for not being of the quality indicated. The plaintiff sued to recover the amounts paid for these lots, alleging they were practically worthless. The trial court found the tobacco was of inferior quality and valued it much lower than the invoice price paid, ordering the defendant to pay the difference.

ISSUE:
Whether the defendant-vendor is liable for the inferior quality of the tobacco delivered, notwithstanding the perfected contract of sale which fixed the price by reference to the vendor’s original invoices and did not contain a specific description or warranty of quality.

RULING:
Yes, the defendant is liable. The Supreme Court affirmed the trial court’s decision, holding the vendor responsible for hidden defects under the Civil Code.
1. The contract of August 27 was a perfected contract of sale (compraventa). The plaintiff agreed to buy all the leaf tobacco in the factory, and the price was made certain by reference to the defendant’s existing invoices (Civil Code, Art. 1447). The obligation was absolute and not contingent on the tobacco meeting a specific description or sample.
2. However, under Articles 1484 and 1485 of the Civil Code, the vendor is bound by a legal warranty against hidden defects which render the thing sold unfit for its intended use or diminish its value to such an extent that, had the vendee been aware, he would not have acquired it or would have given a lower price. This warranty exists even if the vendor was unaware of the defects, unless expressly excluded by stipulation.
3. The defects in the tobacco (being of such inferior quality that its value was only 8-11 pesos per quintal instead of the 40-42 pesos paid) were hidden defects. The tobacco was baled, and its poor quality could not be discovered by ordinary inspection without opening the bales. The plaintiff was not an expert in tobacco who, by his profession, should have perceived such defects.
4. Consequently, the plaintiff-vendee is entitled to a proportionate reduction of the price (Civil Code, Art. 1486). The correct measure of damages is the difference between the value of the tobacco if it had been free from hidden defects (i.e., its warranted value) and its actual value as delivered. The trial court’s award, based on the difference between the invoice price paid and the actual market value of the defective tobacco, was upheld.