G.R. No. 27300
December 17, 1927

SERAFIN DE LA RIVA, plaintiff-appellee, vs. MARIA ESCOBAR VIUDA DE LIMJAP, defendant-appellant, and the BANK OF THE PHILIPPINE ISLANDS, defendant-appellee.

FACTS

1. On May 4, 1917, the Bank of the Philippine Islands (BPI) sold parcels of land in Catanduanes to Mariano Limjap. The contract stipulated that if registration of any parcel was denied after due diligence, BPI would refund the price for that parcel. The price for parcel No. 10 was fixed at P7,500.
2. On September 9, 1919, Limjap sold the same lands to Serafin de la Riva for the same price, subrogating De la Riva to all rights under Limjap’s contract with BPI, including any refund. De la Riva took over Limjap’s application for land registration.
3. The court denied registration of parcel No. 10. De la Riva filed a complaint against BPI and Limjap, seeking joint and several payment of P7,500.
4. BPI filed a demurrer, arguing no privity with De la Riva. The trial court sustained the demurrer; De la Riva did not amend his complaint.
5. Limjap sought to file a counterclaim against BPI and to have BPI included as a necessary party. Both motions were denied.
6. The trial court later dismissed the complaint against BPI based on the sustained demurrer. It then rendered judgment ordering Limjap’s estate (substituted after his death) to pay De la Riva P7,500, and De la Riva to pay the estate P2,000 on a counterclaim.
7. Limjap’s administratrix appealed, contesting the judgment on the merits and the denial of her motions regarding BPI.

ISSUE

1. Whether the trial court erred in denying Limjap’s motions to file a counterclaim against BPI and to have BPI included as a necessary party.
2. Whether the trial court erred in dismissing the complaint against BPI.
3. Whether Limjap was liable to De la Riva for the refund without having notified BPI of the eviction (registration denial) in the registration proceeding.

RULING

1. On the denial of motions: The trial court erred. The basis for denying Limjap’s motions was the incorrect view that Limjap had waived his right to warranty by not notifying BPI of the eviction *in the present action*. Under Articles 1481 and 1482 of the Civil Code, notification to the warrantor must be given in the *original eviction proceeding* (the registration case), not in the subsequent warranty action. Since Limjap did not notify BPI in the registration case, he may have lost his right to warranty against BPI. However, BPI was a necessary party to the present action because its liability directly affected whether Limjap or BPI was ultimately responsible to De la Riva. The subrogation clause effectively transferred Limjap’s warranty rights against BPI to De la Riva, making BPI’s presence essential for a complete determination of the controversy.
2. On the dismissal against BPI: The Supreme Court declined to review the dismissal order because the trial court’s grounds were not in the record. However, this issue was rendered moot by the remand.
3. On liability: The judgment on the merits was set aside. The case was remanded to allow Limjap’s administratrix to file a counterclaim against BPI and to adjudicate the rights of all parties. The Court clarified that a vendor’s warranty liability arises only if the warrantor was notified of the eviction suit to enable defense. Since BPI was not notified in the registration case, Limjap may be solely liable to De la Riva, but BPI’s involvement was necessary to resolve the entire dispute.

DISPOSITIVE:
The judgment is set aside. The case is remanded to the trial court to allow the administratrix to present a counterclaim against BPI and to proceed with the case involving all parties. No costs.