G.R. No. L-65114 February 23, 1988
RENE KNECHT, petitioner, vs. COURT OF APPEALS and KATHERINE H. WILLIAMS, respondents.

FACTS

Petitioner Rene Knecht offered to purchase two lots with a house in Baguio City from Lilian Hamby (predecessor of respondent Katherine Williams) for US$47,500, payable in installments, and also proposed to assume Hamby’s lease on a beach property in Bauang, La Union. Hamby accepted. Knecht paid earnest money and took possession of the Baguio property. He was subsequently given copies of the titles and made partial payments on the down payment. However, Knecht later refused further payments and ignored demands for compliance.
Hamby filed a suit for rescission of the contract. Knecht defended his refusal by alleging two grounds: first, the discovery of a hidden defect, claiming the two lots were not contiguous as he believed but were separated by a strip of public land passing under the house; and second, Hamby’s failure to assign the Bauang lease to him. The trial court rescinded the contract, ordered Knecht to vacate, and relieved him of rental obligations. The Court of Appeals affirmed this decision in toto.

ISSUE

Whether the Court of Appeals erred in affirming the rescission of the contract and in rejecting Knecht’s defenses of hidden defect and failure to assign the lease.

RULING

The Supreme Court denied the petition and affirmed the Court of Appeals’ decision. The legal logic rests on the conclusive nature of the appellate court’s factual findings and the inapplicability of the alleged hidden defect under the Civil Code. The Court of Appeals found that Knecht was furnished copies of the titles early on, showing the existence of two separate lots, and he reacted with only mild surprise, making no immediate complaint. He even assured completion of the contract after an October 1966 survey. Regarding the Bauang lease, he was informed it was a separate transaction, yet he still made subsequent payments. These factual determinations are binding on the Supreme Court, which generally reviews only errors of law.
On the substantive defense, the alleged defect—the separating strip of public land—was not hidden under Article 1561. A defect is not hidden if the vendee, by reason of trade or profession, should have known it, or if the means to discover it were available. Knecht, a seasoned businessman in realty, took possession early and had the titles; thus, he had ample opportunity to investigate the property’s condition. His subsequent partial payments after this knowledge constituted a waiver of any right to annul the sale based on the defect. The failure to assign the Bauang lease, deemed a separate matter, did not justify breaching the main contract. Therefore, no reversible error was committed in upholding the rescission due to Knecht’s breach.