G.R. No. 167195; May 8, 2009
ASSET PRIVATIZATION TRUST, Petitioner, vs. T.J. ENTERPRISES, Respondent.

FACTS

Petitioner Asset Privatization Trust (APT), a government entity, sold specific machinery and refrigeration equipment (Lots 2, 3, and 5) to respondent T.J. Enterprises via an absolute deed of sale on an “as-is-where-is” basis. The assets were stored in a compound leased and physically controlled by a third party, Creative Lines, Inc. Respondent paid the full purchase price. Upon attempting to haul the purchased items, respondent was prevented by Creative Lines’ employees from taking seven items from Lot No. 2. Respondent filed a complaint for specific performance and damages.
During the case’s pendency, respondent eventually retrieved the remaining items but discovered they were damaged and had missing parts. The Regional Trial Court (RTC) held APT liable for breach of contract and awarded actual damages, a decision affirmed by the Court of Appeals. APT appealed, arguing it had fulfilled its delivery obligation through the execution of the deed of sale, constituting constructive delivery, and that the “as-is-where-is” nature of the sale and a disclaimer of warranty absolved it of liability.

ISSUE

Whether petitioner APT complied with its obligation to deliver the sold properties, thereby transferring ownership and relieving it of liability for damages.

RULING

The Supreme Court denied the petition and affirmed the lower courts’ decisions. The Court held that there was no valid constructive delivery of the machinery to respondent. While the execution of a public instrument like a deed of sale generally presumes delivery, this presumption is destroyed when a legal impediment prevents the vendor from placing the vendee in control of the property. Here, APT did not have actual possession or control of the assets at the time of sale; Creative Lines did. Therefore, APT could not have transferred constructive possession through the deed alone.
The “as-is-where-is” stipulation pertained only to the physical condition and location of the goods, not to the vendor’s fundamental obligation to deliver and transfer ownership. It did not excuse APT’s failure to give respondent control over the items sold. Furthermore, the contractual disclaimer of warranty related to hidden defects or the fitness of the goods, not to the vendor’s primary obligation to deliver the thing sold. APT’s breach was the failure to deliver, not a breach of warranty. Consequently, APT was liable for actual damages arising from its breach of contract, as it failed to uphold its essential duty to transfer ownership by placing the sold properties in the buyer’s control and possession.