What Is the Implied Warranty Against Eviction?
Introduction
When a person buys real property, the seller is generally expected to deliver not only the property itself but also peaceful and lawful possession. If the buyer later loses the property, wholly or partly, because another person successfully asserts a right that existed before the sale, the seller may be required to compensate the buyer under the implied warranty against eviction.
This warranty operates by law even when the contract of sale does not expressly mention it. It protects buyers from losing the economic value of a purchase because of a prior title, ownership, or possessory claim attributable to another person.
What Is Eviction Under Philippine Law?
Under Article 1548 of the Civil Code of the Philippines, eviction occurs when the buyer is deprived of the whole or part of the property purchased through a final judgment based on a right existing before the sale or through an act attributable to the seller.
The seller must answer for the eviction even when the contract is silent on the subject. However, the parties may agree to increase, reduce, or eliminate the seller’s legal obligation, subject to the rules on valid contracts and the circumstances surrounding the buyer’s waiver.
The warranty generally concerns a legal deprivation of the property, not merely a physical inconvenience, construction problem, or ordinary defect in the property.
What Are the Requisites of the Warranty?
For an action based on the implied warranty against eviction to prosper, the following requisites generally must be present:
- A final judgment must have been rendered against the buyer.
- The buyer must have been deprived of the whole or part of the property.
- The deprivation must be based on a right existing before the sale or on an act attributable to the seller.
- The seller must have been summoned and impleaded in the eviction suit at the buyer’s instance.
The Supreme Court explained these requirements in Pilipinas Makro, Inc. v. Coco Charcoal Philippines, Inc., et al., G.R. No. 196419, 2017. The Court distinguished an implied warranty against eviction from an express contractual warranty and held that the statutory requisites for implied warranty do not automatically govern an independent express undertaking in the deed of sale.
Why Must the Seller Be Summoned in the Eviction Case?
The seller’s participation in the original eviction case gives the seller an opportunity to defend the title or right transferred to the buyer. It also allows the seller to present evidence, challenge the adverse claim, and prevent an avoidable loss.
Article 1558 of the Civil Code provides that the vendor is not obliged to make good the warranty unless summoned in the suit for eviction at the instance of the vendee. In Uy, et al. v. Ariza, et al., G.R. No. 158370, 2006, the Supreme Court held that a buyer who failed to implead the sellers in the earlier unlawful detainer case could not successfully enforce the warranty against eviction.
A buyer should therefore promptly notify the seller upon receiving a complaint or demand involving the property and should request that the seller be included as a party in the proceeding.
What May the Buyer Recover?
When the warranty applies, Article 1555 of the Civil Code allows the buyer to demand the following, depending on the circumstances:
| Recoverable item | Explanation |
|---|---|
| Value of the property | The value of the property at the time of eviction, whether higher or lower than the original purchase price. |
| Income or fruits | Income or fruits that the buyer was ordered to deliver to the party who prevailed in the eviction case. |
| Litigation costs | The costs of the eviction case and, when proper, the costs of the action against the seller for warranty. |
| Contract expenses | Expenses incurred in connection with the sale when paid by the buyer. |
| Damages, interest, and ornamental expenses | These may be recovered when the sale was made in bad faith. |
The amount recoverable is not necessarily limited to the price originally paid. Article 1555 refers to the value of the property at the time of eviction, which may have increased or decreased after the sale.
When Does the Seller Act in Bad Faith?
Bad faith may exist when the seller knew of the defect in title or competing claim and nevertheless proceeded with the sale without proper disclosure. It may also arise from conduct showing deliberate disregard of the seller’s obligation to defend or protect the title conveyed to the buyer.
In Bignay Ex-Im Philippines, Inc. v. Union Bank of the Philippines, G.R. No. 171590, 2014, the Supreme Court treated the seller’s gross negligence in defending its title, despite an express undertaking to protect the title against third-party claims, as bad faith. The buyer was consequently allowed to recover the value of the property and the cost of the building erected on it, together with the damages authorized by law.
Can the Buyer Waive the Warranty?
Yes. Article 1548 permits the parties to increase, reduce, or suppress the seller’s warranty against eviction. The effect of a waiver depends on its wording and on the buyer’s knowledge of the risks at the time of the sale.
Under Article 1554 of the Civil Code, if the buyer merely renounces the warranty and eviction occurs, the seller generally pays only the value of the property at the time of eviction. If the buyer waived the warranty with knowledge of the risk and expressly assumed its consequences, the seller may be completely free from liability.
In Andaya, et al. v. Manansala, G.R. No. 14714, 1960, the Supreme Court held that a buyer who knew of the danger of eviction and assumed its consequences could not recover damages or seek rescission, even where the contract contained a pro forma warranty clause.
A waiver should therefore be read together with the buyer’s actual knowledge, the disclosure made by the seller, and the surrounding circumstances of the transaction.
How Is an Express Warranty Different?
An express warranty is a promise, representation, or affirmation of fact contained in the contract. It may cover matters beyond the statutory warranty against eviction, including the property’s area, freedom from encumbrances, suitability for a stated purpose, or the seller’s undertaking to secure full possession.
In Pilipinas Makro, Inc. v. Coco Charcoal Philippines, Inc., et al., the Court held that an express warranty is distinct from an implied warranty because it arises from the language of the contract, while an implied warranty arises by operation of law.
Accordingly, a buyer may enforce an express contractual undertaking even when the requisites of an action based solely on implied warranty against eviction are absent. For example, a contractual promise to refund the price for an area lost to an encroachment may be enforceable without a final judgment of eviction, depending on the wording of the agreement.
Common Situations Involving Eviction
Prior ownership claim. A third party proves in court that it owned the property before the seller’s conveyance and obtains a final judgment requiring the buyer to surrender it.
Prior mortgage or encumbrance. A buyer loses the property because of a prior mortgage or lien that was not disclosed and that is validly enforced against the property.
Partial deprivation. The buyer retains part of the property but loses a portion because another person establishes a superior pre-existing right.
Seller’s act after the sale. The buyer is deprived of the property because of an act attributable to the seller, even if the competing right did not arise in exactly the same manner as a prior ownership claim.
Not every boundary disagreement or incomplete delivery constitutes eviction. The buyer must identify the legal basis of the deprivation and determine whether the matter is governed by an implied warranty, an express warranty, rescission, damages, or another remedy.
Practical Steps for Buyers
- Review the title, tax declarations, annotations, liens, easements, and other records before completing the purchase.
- Examine the deed of sale for express representations, exclusions, waivers, and risk-allocation clauses.
- Preserve evidence of the seller’s representations, including advertisements, disclosures, messages, and due diligence reports.
- Upon receiving an adverse claim or court summons, immediately notify the seller in writing.
- Request that the seller be summoned and impleaded in the eviction proceeding.
- Keep records of litigation expenses, improvements, income, and any payment or surrender required by the judgment.
Practical Steps for Sellers
Sellers should verify their ownership and authority to sell, disclose known adverse claims, and ensure that the deed accurately describes all encumbrances and limitations affecting the property.
A seller should also avoid broad assurances that the property is free from claims unless the seller has conducted sufficient due diligence to support that representation. An express warranty may create liability independent of the Civil Code’s implied warranty against eviction.
Conclusion
The implied warranty against eviction is a statutory protection that requires the seller to answer when the buyer is finally deprived of property because of a prior right or an act attributable to the seller. The buyer’s potential recovery may include the property’s value at the time of eviction, litigation expenses, contract expenses, income or fruits, and damages when the seller acted in bad faith.
The protection is subject to important conditions, particularly the requirement that the seller be summoned in the eviction case. Buyers should therefore act promptly, preserve the seller’s contractual and statutory liability, and distinguish an implied warranty from a separate express promise in the deed of sale.
About Nicolas and De Vega Law Offices
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