G.R. No. 18999 ; November 24, 1922
ALBERT BRYAN, plaintiff-appellant, vs. THOMAS HANKINS and J. BIALOGLOWSKI, defendants-appellants.

FACTS

On October 20, 1920, the defendants sold the motor schooner “Sultan” to the plaintiff for P55,000. The plaintiff paid P20,000 and issued two promissory notes for the balance. Upon taking possession, the plaintiff had the vessel inspected in Iloilo on March 11, 1921. The inspection revealed the vessel was unseaworthy due to extensive dry rot and defective construction, requiring repairs that would cost more than the vessel’s worth. The plaintiff filed an action for rescission of the sale, alleging hidden defects and a breach of warranty of seaworthiness. The defendants counterclaimed for payment of the promissory notes. The trial court awarded the plaintiff P10,000 (the P20,000 paid minus P10,000 for the use of the vessel). Both parties appealed.

ISSUE

1. Whether the plaintiff’s claim for hidden defects is barred under Article 342 of the Code of Commerce for not being presented within thirty days of delivery.
2. Whether the Civil Code provisions on hidden defects (redhibitory defects) apply to the sale of a vessel.
3. Whether the plaintiff is entitled to rescind the contract and recover the purchase price paid.

RULING

1. No. Article 342 of the Code of Commerce, which requires a claim for inherent defects within thirty days, applies to the sale of merchandise for the purpose of resale. The trial court found the plaintiff purchased the vessel for his own personal business use, not for resale. Furthermore, a vessel is not considered “merchandise” within the meaning of that article. Therefore, the prescriptive period under the Code of Commerce does not apply.
2. Yes. The sale is governed by the Civil Code provisions on hidden or latent defects (Articles 1484 and 1485). The defects (extensive dry rot and use of green lumber) were latent, not visible upon ordinary inspection, and rendered the vessel unfit for its intended use. The plaintiff, not being an expert, could not have easily perceived them. Under Article 1485, the vendor is liable for latent defects even if unknown to him.
3. Yes, but subject to compensation for the use of the vessel. The plaintiff is entitled to rescind the contract due to the existence of redhibitory defects. He is entitled to recover the P20,000 paid. However, he used the vessel for nearly five months. Evidence of its rental value (P2,000/month) was admitted without objection. Therefore, the plaintiff’s recovery is properly reduced by P10,000, representing the reasonable value of his use. The trial court’s judgment awarding the plaintiff a net amount of P10,000 is affirmed.