Branch 19 of the Cebu City RTC, by Order9 dated May 4, 1995, encumbrances and I will defend the same
fend the same from all claims or any claim
JAIME D. G.R. No. 177874
ANG, Petitioner,
Present:
- versus - QUISUMBING, J., Chairperson,
COURT OF APPEALS CARPIO MORALES,
AND BRUNO TINGA,
SOLEDAD,Respondents. VELASCO, JR., and
BRION, JJ.
Promulgated:
September 29, 2008
x--------------------------------------------
- - - - - -x
DECISION
CARPIO MORALES, J.:
Under a "car-swapping" scheme, respondent Bruno Soledad
(Soledad) sold his Mitsubishi GSR sedan 1982 model to petitioner
Jaime Ang (Ang) by Deed of Absolute Sale1 dated July 28, 1992.
For his part, Ang conveyed to Soledad his Mitsubishi Lancer
model 1988, also by Deed of Absolute Sale2of even date. As
Ang’s car was of a later model, Soledad paid him an
additional P55,000.00.
Ang, a buyer and seller of used vehicles, later offered the
Mitsubishi GSR for sale through Far Eastern Motors, a second-
hand auto display center. The vehicle was eventually sold to a
certain Paul Bugash (Bugash) for P225,000.00, by Deed of
Absolute Sale3 dated August 14, 1992. Before the deed could be
registered in Bugash’s name, however, the vehicle was seized by
virtue of a writ of replevin4 dated January 26, 1993 issued by the
Cebu City Regional Trial Court (RTC), Branch 21 in Civil Case
No. CEB-13503, "BA Finance Corporation vs. Ronaldo and
Patricia Panes," on account of the alleged failure of Ronaldo
Panes, the owner of the vehicle prior to Soledad, to pay the
mortgage debt5 constituted thereon.
To secure the release of the vehicle, Ang paid BA Finance the
amount of P62,038.476 on March 23, 1993. Soledad refused to
reimburse the said amount, despite repeated demands, drawing
Ang to charge him for Estafa with abuse of confidence before the
Office of the City Prosecutor, Cebu City. By Resolution7 of July
15, 1993, the City Prosecutor’s Office dismissed the complaint for
insufficiency of evidence, drawing Ang to file on November 9,
1993 the first8 of three successive complaints for damages against
Soledad before the RTC of Cebu City where it was docketed as
Civil Case No. Ceb-14883.
1
dismissed Civil Case No. Ceb-14883 for failure to submit the
controversy to barangay conciliation.
Ang thereafter secured a certification to file action and again filed
a complaint for damages,10docketed as Ceb-17871, with the RTC
of Cebu City, Branch 14 which dismissed it, by Order11 dated
March 27, 1996, on the ground that the amount involved is not
within its jurisdiction.
Ang thereupon filed on July 15, 1996 with the Municipal Trial
Court in Cities (MTCC) a complaint,12docketed as R-36630, the
subject of the instant petition.
After trial, the MTCC dismissed the complaint on the ground of
prescription, vìz:
It appearing that the Deed of Sale to plaintiff o[f] subject vehicle
was dated and executed on 28 July 1992, the complaint before the
Barangay terminated 21 September 1995 per Certification to File
Action attached to the Complaint, and this case eventually was
filed with this Court on 15 July 1996, this action has already
been barred since more than six (6) months elapsed from the
delivery of the subject vehicle to the plaintiff buyer to the filing of
this action, pursuant to the aforequoted Article
1571."13 (Emphasis and underscoring supplied)
His motion for reconsideration having been denied, Ang appealed
to the RTC, Branch 7 of which affirmed the dismissal of the
complaint, albeit it rendered judgment in favor of Ang "for the
sake of justice and equity, and in consonance with the salutary
principle of non-enrichment at another’s expense." The RTC
ratiocinated:
xxxx
[I]t was error for the Court to rely on Art. 1571 of the Civil Code
to declare the action as having prescribed, since the action is not
one for the enforcement of the warranty against hidden defects.
Moreover, Villostas vs. Court of Appeals declared that the six-
month prescriptive period for a redhibitory action applies only to
implied warranties. There is here an express warranty. If at all,
what applies is Art. 1144 of the Civil Code, the general law on
prescription, which states, inter alia, that actions ‘upon a
written contract’ prescribes in ten (10) years [Engineering &
Machinery Corporation vs. Court of Appeals, G.R. No. 52267,
January 24, 1996].
More appropriate to the discussion would be defendant’s warranty
against eviction, which he explicitly made in the Deed of Absolute
Sale: I hereby covenant my absolute ownership to (sic) the above-
described property and the same is free from all liens and
whatsoever…"
Still the Court finds that plaintiff cannot recover under this
warranty. There is no showing of compliance with the requisites.
xxxx
Nonetheless, for the sake of justice and equity, and in consonance
with the salutary principle of non-enrichment at another’s expense,
defendant should reimburse plaintiff the P62,038.47which on March
23, 1993 he paid BA Finance Corporation to release the mortgage on the
car. (Emphasis and underscoring supplied)14
The RTC thus disposed as follows:
Wherefore, judgment is rendered directing defendant to pay
plaintiff P62,038.47, the amount the latter paid BA Finance Corporation
to release the mortgage on the vehicle, with interest at the legal rate
computed from March 23, 1993. Except for this, the judgment in the
decision of the trial court, dated October 8, 2001 dismissing the claims
of plaintiff is affirmed." (Underscoring supplied)15
Soledad’s Motion for Reconsideration was denied by Order16 of
December 12, 2002, hence, he elevated the case to the Court of Appeals,
Cebu City.
The appellate court, by the challenged Decision17 of August 30, 2006,
noting the sole issue to be resolved whether the RTC erred in directing
Soledad to pay Ang the amount the latter paid to BA Finance plus legal
interest, held that, following Goodyear Phil., Inc. v. Anthony Sy, 18 Ang
"cannot anymore seek refuge under the Civil Code provisions granting
award of damages for breach of warranty against eviction for the simple
fact that three years and ten months have lapsed from the execution of
the deed of sale in his favor prior to the filing of the instant complaint."
It further held:
It bears to stress that the deed of absolute sale was executed on July 28,
1992, and the instant complaint dated May 15, 1996 was received by the
MTCC on July 15, 1996.
While it is true that someone unjustly enriched himself at the expense of
herein respondent, we agree with petitioner (Soledad) that it is not he.
The appellate court accordingly reversed the RTC decision and denied
the petition.
By Resolution19 of April 25, 2007, the appellate court denied Ang’s
motion for reconsideration, it further noting that when Ang settled the
mortgage debt to BA Finance, he did so voluntarily in order to resell the
vehicle, hence, Soledad did not benefit from it as he was unaware of the
mortgage constituted on the vehicle by the previous owner.
The appellate court went on to hold that Soledad "has nothing to do with
the transaction anymore; his obligation ended when he delivered the
subject vehicle to the respondent upon the perfection of the
contract of sale." And it reiterated its ruling that the action, being
one arising from breach of warranty, had prescribed, it having
been filed beyond the 6-month prescriptive period.
The appellate court brushed aside Ang’s contention that Soledad
was the proximate cause of the loss due to the latter’s failure to
thoroughly examine and verify the registration and ownership of
the previous owner of the vehicle, given that Ang is engaged in
the business of buying and selling second-hand vehicles and is
therefore expected to be cautious in protecting his rights under the
circumstances.
Hence, the present recourse – petition for review on certiorari,
Ang maintaining that his cause of action had not yet prescribed
when he filed the complaint and he should not be blamed for
paying the mortgage debt.
To Ang, the ruling in Goodyear v. Sy is not applicable to this
case, there being an express warranty in the herein subject Deed
of Absolute Sale and, therefore, the action based thereon
prescribes in ten (10) years following Engineering & Machinery
Corp. v. CA20 which held that where there is an express warranty
in the contract, the prescriptive period is the one specified in the
contract or, in the absence thereof, the general rule on rescission
of contract.
Ang likewise maintains that he should not be blamed for paying
BA Finance and should thus be entitled to reimbursement and
damages for, following Carrascoso, Jr. v. Court of Appeals,21 in
case of breach of an express warranty, the seller is liable for
damages provided that certain requisites are met which he insists
are present in the case at bar.
The resolution of the sole issue of whether the complaint had
prescribed hinges on a determination of what kind of warranty is
provided in the Deed of Absolute Sale subject of the present case.
A warranty is a statement or representation made by the seller of
goods, contemporaneously and as part of the contract of sale,
having reference to the character, quality or title of the goods, and
by which he promises or undertakes to insure that certain facts are
or shall be as he then represents them.22
Warranties by the seller may be express or implied. Art. 1546 of
the Civil Code defines express warranty as follows:
"Art. 1546. Any affirmation of fact or any promise by the
seller relating to the thing is an express warranty if the
natural tendency of such affirmation or promise is to induce
the buyer to purchase the same, and if the buyer purchases
the thing relying thereon. No affirmation of the value of the
thing, nor any statement purporting to be a statement of the
2
seller’s opinion only, shall be construed as a warranty, unless the
seller made such affirmation or statement as an expert and it was
relied upon by the buyer."(Emphasis and underscoring supplied)
On the other hand, an implied warranty is that which the law
derives by application or inference from the nature of the
transaction or the relative situation or circumstances of the parties,
irrespective of any intention of the seller to create it.23 Among the
implied warranty provisions of the Civil Code are: as to the seller’s
title (Art. 1548), against hidden defects and encumbrances (Art.
1561), as to fitness or merchantability (Art. 1562), and against
eviction (Art. 1548).
The earlier cited ruling in Engineering & Machinery Corp. states
that "the prescriptive period for instituting actions based on a
breach of express warranty is that specified in the contract, and in
the absence of such period, the general rule on rescission of
contract, which is four years (Article 1389, Civil Code)."
As for actions based on breach of implied warranty, the
prescriptive period is, under Art. 1571 (warranty against hidden
defects of or encumbrances upon the thing sold) and Art. 1548
(warranty against eviction), six months from the date of delivery of
the thing sold.
The following provision of the Deed of Absolute Sale reflecting
the kind of warranty made by Soledad reads:
xxxx
I hereby covenant my absolute ownership to (sic) the above-
described property and the same is free from all liens and
encumbrances and I will defend the same from all claims or
any claim whatsoever; will save the vendee from any suit by the
government of the Republic of the Philippines.
x x x x (Emphasis supplied)
In declaring that he owned and had clean title to the vehicle at the
time the Deed of Absolute Sale was forged, Soledad gave an
implied warranty of title. In pledging that he "will defend the same
from all claims or any claim whatsoever [and] will save the vendee
from any suit by the government of the Republic of the
Philippines," Soledad gave a warranty against eviction.
Given Ang’s business of buying and selling used vehicles, he
could not have merely relied on Soledad’s affirmation that the car
was free from liens and encumbrances. He was expected to have
thoroughly verified the car’s registration and related documents.
Since what Soledad, as seller, gave was an implied warranty, the
prescriptive period to file a breach thereof is six months after the
delivery of the vehicle, following Art. 1571. But even if the date of
filing of the action is reckoned from the date petitioner instituted
his first complaint for damages on November 9, 1993, and not on
July 15, 1996 when he filed the complaint subject of the present
petition, the action just the same had prescribed, it having been filed 16
months after July 28, 1992, the date of delivery of the vehicle.
On the merits of his complaint for damages, even if Ang invokes breach
of warranty against eviction as inferred from the second part of the
earlier-quoted provision of the Deed of Absolute Sale, the following
essential requisites for such breach, vìz:
"A breach of this warranty requires the concurrence of the following
circumstances:
(1) The purchaser has been deprived of the whole or part of the thing
sold;
(2) This eviction is by a final judgment;
(3) The basis thereof is by virtue of a right prior to the sale made by
the vendor; and
(4) The vendor has been summoned and made co-defendant in the
suit for eviction at the instance of the vendee.
In the absence of these requisites, a breach of the warranty against
eviction under Article 1547 cannot be declared." 24 (Emphasis
supplied),
have not been met. For one, there is no judgment which deprived Ang of
the vehicle. For another, there was no suit for eviction in which Soledad
as seller was impleaded as co-defendant at the instance of the vendee.
Finally, even under the principle of solutio indebiti which the RTC
applied, Ang cannot recover from Soledad the amount he paid BA
Finance. For, as the appellate court observed, Ang settled the mortgage
debt on his own volition under the supposition that he would resell the
car. It turned out
that he did pay BA Finance in order to avoid returning the payment
made by the ultimate buyer Bugash. It need not be stressed that Soledad
did not benefit from Ang’s paying BA Finance, he not being the one
who mortgaged the vehicle, hence, did not benefit from the proceeds
thereof.
WHEREFORE, the petition is, in light of the foregoing disquisition,
DENIED.
SO ORDERED.
G.R. No. 141480 November 29, 2006
CARLOS B. DE GUZMAN, Petitioner,
vs.
TOYOTA CUBAO, INC., Respondent.
DECISION
AZCUNA, J.:
This is a petition for review on certiorari under Rule 45 of the Rules of
Court seeking to annul the Order,1 dated September 9, 1999, of the
Regional Trial Court of Quezon City (the RTC), Branch 105,
which dismissed the complaint for damages filed by petitioner
Carlos B. De Guzman against respondent Toyota Cubao, Inc.
On November 27, 1997, petitioner purchased from respondent a
brand new white Toyota Hi-Lux 2.4 SS double cab motor vehicle,
1996 model, in the amount of ₱508,000. Petitioner made a down
payment of ₱152,400, leaving a balance of ₱355,600 which was
payable in 36 months with 54% interest. The vehicle was
delivered to petitioner two days later. On October 18, 1998,
petitioner demanded the replacement of the engine of the vehicle
because it developed a crack after traversing Marcos Highway
during a heavy rain. Petitioner asserted that respondent should
replace the engine with a new one based on an implied warranty.
Respondent countered that the alleged damage on the engine was
not covered by a warranty.
On April 20, 1999, petitioner filed a complaint for
damages2 against respondent with the RTC. Respondent moved to
dismiss the case on the ground that under Article 1571 of the Civil
Code, the petitioner’s cause of action had prescribed as the case
was filed more than six months from the date the vehicle was sold
and/or delivered.
In an Order dated September 9, 1999, the RTC granted
respondent’s motion and dismissed the complaint, thus:
For the Court’s consideration are: (1) defendant’s Motion to
Dismiss; (2) plaintiff’s Opposition thereto; (3) defendant’s Reply;
and (4) plaintiff’s Rejoinder.
The Court agrees with the plaintiff’s counsel that the subject pick-
up is a consumer product because it is used for personal, family or
agricultural purposes, contrary to defendant counsel’s claim that it
is not because it is a non-consumable item.
Since no warranty card or agreement was attached to the
complaint, the contract of sale of the subject pick-up carried an
implied warranty that it was free from any hidden faults or
defects, or any charge or encumbrance not declared or known to
the buyer. The prescriptive period thereof is six (6) months under
the Civil Code (Art. 1571).
Under RA No. 7394, the provisions of the Civil Code on
conditions and warranties shall govern all contracts of sale with
condition and warranties (Art. 67). The duration of the implied
warranty (not accompanied by an express warranty) shall endure
not less than sixty days nor more than one (1) year following the
sale of new consumer products (Art. 68, par. [e]). The two (2)
year prescriptive period under Art. 169 cannot prevail over Art. 68
because the latter is the specific provision on the matter.
The Court has noted that the prescriptive period for implied and
express warranties cannot be the same. In the Civil Code, a
3
redhibitory action for violation of an implied warranty against
hidden defects prescribes in six (6) months, while if it based on an
express warranty[,] the action prescribes in four (4) years. Under
RA No. 7394, the implied warranty cannot be more than one (1)
year; however, the implied warranty can only be of equal duration
to that an express warranty when the implied warranty of
merchantability accompanies an express warranty (Art. 68, par.
[e]). Therefore, the prescriptive period of two years under Art. 169
does not cover an implied warranty, which is not accompanied by
an express warranty. It is applicable to cases where there is an
express warranty in the sale of the consumer product.
Relative to plaintiff’s argument that the claim for moral and
exemplary damages and attorney’s fees is based on quasi-delict or
breach of contract, such are merely ancillary to the main cause of
action which is based on warranty against hidden defects. Without
the latter, the former cannot stand alone.
Based on the record, the subject vehicle was purchased on 27
November 1997 and delivered on 29 November 1997. This case
was filed only on 20 April 1999 or almost nineteen (19) months
from [the] sale and/or delivery. Applying Art. 1571 of Civil Code,
the action is barred by prescription because the complaint was filed
more than six (6) months after the sale and/or delivery of the
vehicle. In addition, the duration of the implied warranty of not
more than one (1) year under Art. 68, par (e) of RA No. 7394 has
already elapsed.
Accordingly, defendant’s Motion is granted and the plaintiff’s
Complaint is ordered dismissed.
SO ORDERED3
On December 21, 1999, the RTC denied petitioner’s motion for
reconsideration, as follows:
Submitted for resolution are: (1) plaintiff’s Motion for
Reconsideration; (2) defendant’s Opposition; and (3) plaintiff’s
Reply.
Although plaintiff’s motion was filed beyond the ten-day period,
the Court is convinced that it was not for the purpose of delay;
hence, it cannot be considered as a mere scrap of paper.
After a thorough study, the Court resolves that while reference to
Art. 68, par. (e) of RA No. 7394 may have been misplaced, yet the
subject sale carried an implied warranty whose prescriptive period
is six (6) months under Art. 1571 of the Civil Code.
Accordingly, plaintiff’s Motion for Reconsideration is DENIED.
SO ORDERED.4
Petitioner thereupon filed a petition for review on certiorari with
this Court.
The petition should be denied.
First, on procedural grounds, the petition should forthwith be denied for
violation of the hierarchy of courts. Petitioner states that the present
petition is an "appeal by certiorari on pure questions of law, from the
final Order of Branch 105 of the Regional Trial Court of Quezon City in
Civil Case No. Q-99-37381 … under Rule 45 of the Rules of Court."
Upon receipt of the Order of the RTC, dated September 9, 1999, on
September 21, 1999, petitioner filed a motion for reconsideration on
September 28, 1999. On December 21, 1999, the RTC denied
petitioner’s motion. When petitioner received a copy of the said order
on January 18, 2000, he had fifteen (15) days from receipt within which
to appeal to the Court of Appeals by filing a notice of appeal under
Section 2(a) of Rule 41, from an order of the RTC issued in the exercise
of its original jurisdiction. The RTC’s order dated September 9, 1999
and its subsequent order dated December 21, 1999 partake of the nature
of a final disposition of the case. Hence, the appropriate remedy
petitioner should have taken was to file a notice of appeal from the RTC
to the Court of Appeals, not a petition for review on certiorari directly
with this Court.
Although petitioner intended his petition, filed on February 2, 2000, to
be one filed under Rule 45 and he filed it well within the 15-day
reglementary period counted from January 18, 2000, the same was in
effect a petition for certiorariunder Rule 65, and is therefore dismissible
for violation of the hierarchy of courts under Section 4 thereof.
Petitioner failed to show that special and important reasons or
exceptional and compelling circumstances exist to justify a direct filing
of the petition with this Court instead of first taking an appeal to the
Court of Appeals.5 Likewise, petitioner cannot find refuge in the
argument that he was raising pure questions of law. The sole matter
petitioner assails in this action is the RTC’s order of dismissal of his
complaint for damages on the ground of prescription which was
tantamount to an adjudication on the merits. Again, petitioner should
have resorted to the remedy of appealing the case to the Court of
Appeals by filing a notice of appeal with the RTC.
Second, even if the Court were to disregard the procedural infirmity, the
petition should be denied for lack of merit.
In his complaint, petitioner alleged and prayed, thus:
2. Last 27 November 1997, the plaintiff purchased from the
defendant a brand new Toyota Hilux 2.4 motor vehicle with
[E]ngine [N]o. 2-L-9514743. It was delivered to the plaintiff
on 29 November 1997. Copies of the Vehicle Sales Invoice
and Vehicle Delivery Note issued by the defendant are hereto
attached as Annexes "A" and "B," respectively.
3. Last 18 October 1998, after only 12,000 kilometers of use,
the vehicle’s engine cracked. Although it was previously
driven through a heavy rain, it didn’t pass through flooded
streets high enough to stop sturdy and resistant vehicles.
 Besides, vehicles of this class are advertised as being
capable of being driven on flooded areas or rugged
terrain.
4. As plaintiff knows no reason why the vehicle’s
engine would crack just like that, the same could only be
due to the fact that said engine and/or the vehicle itself
was defective even from the time it was bought.
5. Brought to the attention, defendant refused to answer
for this defect saying it is not covered by the vehicle’s
warranty. It refused to replace the vehicle as plaintiff
demanded (or at least its engine, or even repair the
damage).
6. As a result of defendant’s actions, plaintiff suffered
mental anxiety and sleepless nights for which he
demands an award of ₱200,000.00 moral damages.
7. By way of example for the public good, plaintiff
should also be awarded exemplary damages in the
amount of ₱200,000.00.
8. Forced to litigate to enforce his rights, plaintiff
incurred, and shall further incur, litigation-related
expenses (including those for his counsel’s fees) in the
total estimated sum of ₱100,000.
WHEREFORE, it is respectfully prayed that judgment be
rendered ordering defendant:
a. to replace the subject vehicle with a brand new one or
at least to replace its engine all at defendant’s cost;
b. pay the plaintiff:
i. ₱200,000 – moral damages;
ii. ₱200,000 – exemplary damages;
iii. ₱200,000 – attorney’s fees and litigation
expenses; and
iv. the costs of suit.
Other reliefs just and equitable are, likewise, prayed for.6
Petitioner contends that the dismissal on the ground of
prescription was erroneous because the applicable provision is
Article 169 of Republic Act No. 7394 (otherwise known as "The
Consumer Act of the Philippines" which was approved on April
13, 1992), and not Article 1571 of the Civil Code. Petitioner
specifies that in his complaint, he neither asked for a rescission of
the contract of sale nor did he pray for a proportionate reduction
of the purchase price. What petitioner claims is the enforcement
of the contract, that is, that respondent should replace either the
vehicle or its engine with a new one. In this regard, petitioner cites
Article 169 of Republic Act No. 7394 as the applicable provision,
4
so as to make his suit come within the purview of the two-year
prescriptive period. Tangentially, petitioner also justifies that his
cause of action has not yet prescribed because this present suit,
which was an action based on quasi-delict, prescribes in four years.
On the other hand, respondent maintains that petitioner’s cause of
action was already barred by the statute of limitations under
Article 1571 of the Civil Code for having been filed more than six
months from the time the vehicle was purchased and/or delivered.
Respondent reiterates that Article 169 of Republic Act No. 7394
does not apply.
Petitioner’s argument is erroneous. Article 1495 of the Civil Code
states that in a contract of sale, the vendor is bound to transfer the
ownership of and to deliver the thing that is the object of sale.
Corollarily, the pertinent provisions of the Code set forth the
available remedies of a buyer against the seller on the basis of a
warranty against hidden defects:
Art. 1561. The vendor shall be responsible for warranty against the
hidden defects which the thing sold may have, should they render
it unfit for the use for which it is intended, or should they diminish
its fitness for such use to such an extent that, had the vendee been
aware thereof, he would not have acquired it or would have given a
lower price for it; but said vendor shall not be answerable for
patent defects or those which may be visible, or for those which
are not visible if the vendee is an expert who, by reason of this
trade or profession, should have known them. (Emphasis supplied)
Art. 1566. The vendor is responsible to the vendee for any hidden
faults or defects in the thing sold, even though he was not aware
thereof.
This provision shall not apply if the contrary has been stipulated
and the vendor was not aware of the hidden faults or defects in the
thing sold.
Art. 1571. Actions arising from the provisions of the preceding ten
articles shall be barred after six months from the delivery of the
thing sold.
(Emphasis supplied)
Under Article 1599 of the Civil Code, once an express warranty is
breached, the buyer can accept or keep the goods and maintain an
action against the seller for damages. In the absence of an existing
express warranty on the part of the respondent, as in this case, the
allegations in petitioner’s complaint for damages were clearly
anchored on the enforcement of an implied warranty against
hidden defects, i.e., that the engine of the vehicle which respondent
had sold to him was not defective. By filing this case, petitioner
wants to hold respondent responsible for breach of implied
warranty for having sold a vehicle with defective engine. Such
being the case, petitioner should have exercised this right within
six months from the delivery of the thing sold.7 Since petitioner filed
the complaint on April 20, 1999, or more than nineteen months counted
from November 29, 1997 (the date of the delivery of the motor vehicle),
his cause of action had become time-barred.
Petitioner contends that the subject motor vehicle comes within the
context of Republic Act No. 7394. Thus, petitioner relies on Article 68
(f) (2) in relation to Article 169 of Republic Act No. 7394. Article 4 (q)
of the said law defines "consumer products and services" as goods,
services and credits, debts or obligations which are primarily for
personal, family, household or agricultural purposes, which shall
include, but not limited to, food, drugs, cosmetics, and devices. The
following provisions of Republic Act No. 7394 state:
Art. 67. Applicable Law on Warranties. — The provisions of the Civil
Code on conditions and warranties shall govern all contracts of sale with
conditions and warranties.
Art. 68. Additional Provisions on Warranties. — In addition to the Civil
Code provisions on sale with warranties, the following provisions shall
govern the sale of consumer products with warranty:
e) Duration of warranty. The seller and the consumer may stipulate the
period within which the express warranty shall be enforceable. If the
implied warranty on merchantability accompanies an express warranty,
both will be of equal duration.1âwphi1
Any other implied warranty shall endure not less than sixty (60) days
nor more than one (1) year following the sale of new consumer
products.
f) Breach of warranties — xxx
xxx
2) In case of breach of implied warranty, the consumer may retain in the
goods and recover damages, or reject the goods, cancel the contract and
recover from the seller so much of the purchase price as has been paid,
including damages. (Emphasis supplied.)
Consequently, even if the complaint is made to fall under the Republic
Act No. 7394, the same should still be dismissed since the prescriptive
period for implied warranty thereunder, which is one year, had likewise
lapsed.
WHEREFORE, the petition is DENIED for being in violation of the
hierarchy of courts, and in any event, for lack of merit.
No costs.
SO ORDERED.
G.R. No. 136500 December 3, 1999
CONRADO R. ISIDRO, petitioner,
vs.
NISSAN MOTOR PHILIPPINES, INC., respondent.
PARDO, J.:
The case before the Court is an appeal via certiorari from the
orders 1 of the Regional Trial Court, Branch 81, Quezon
City 2 dismissing the complaint below on the ground that the
action has prescribed.
The facts are as follows:
On December 21, 1995, petitioner bought from respondent a
brand new Nissan Sentra with an express manufacturer's warranty
against hidden defects for a period of 24 months or 50,000
kilometers, whichever comes first. 3
On August 31, 1998, or two years and nine months after delivery
of the car, petitioner filed with the Regional Trial Court, Quezon
City, assigned to Branch 81, a complaint against respondent for
breach of warranty. 4
On October 7, 1998, respondent filed with the trial court a motion
to dismiss the complaint alleging that petitioner's cause of action
is barred by the statute of limitation under Article 1571 of the
Civil Code. 5
On October 9, 1998, petitioner filed with the trial court an
opposition to the motion to dismiss pointing out that Article 1571
applies only to implied warranties and not to express warranty. 6
On November 11, 1998, the trial court issued an order dismissing
the complaint based on the ground that plaintiff's cause of action
has prescribed since the complainant was filed more than two
years after delivery of the car which is the period during which
respondent expressly warranted that it would repair/replace
defective parts of the car. 7
On November 20, 1998, petitioner filed with the trial court a
motion for reconsideration of the dismissal stating that the
prescribed period of warranty is four years in case of rescission
and ten years in case of specific performance. 8
On December 2, 1998, respondent filed with the trial court an
opposition to the motion for reconsideration. 9
On December 9, 1998, the trial court denied the motion for
reconsideration. 10
Hence, this petition. 11
On February 3, 1999, the Court required respondent to comment
on the petition within ten (10) days from notice. 12
On March 8, 1999, respondent filed its comment. 13
On September 6, 1999, we gave due course to the petition. 14
At issue is whether or not petitioner's action for enforcement of
the manufacturer's express warranty covering the subject motor
vehicle has prescribed.
5
We agree with the trial court that petitioner's action has prescribed. damages sought to be recovered. It is evident therefore, that the
The manufacturer's warranty covering the subject motor vehicle complaint was for a breach of contract of sale rather than a breach of
was for defective parts over a period of twenty four (24) months or warranty against hidden defects. This is so because an action for breach
fifty thousand (50,000) kilometers, whichever comes first. Where of warranty against hidden defects presupposes that the thing sold is the
there is an express warranty in the contract, as in the case at bar, same thing delivered but with hidden defects. Consequently, the six-
the prescriptive period is the one specified in the express warranty, month prescriptive period under Article 1571 of the civil Code is not
applicable.
if any. 15
The action to enforce the warranty was filed two and a half years 2. CIVIL LAW; OBLIGATIONS AND CONTRACTS;
from the date of the purchase or delivery of the vehicle subject of MISREPRESENTATION AS TO THE QUALITY OF THE OBJECT
the warranty. OF THE CONTRACT, AMOUNTS TO FRAUD OR BAD FAITH;
Clearly, the action has prescribed. The period of the guarantee RESTITUTION OF THE PURCHASE PRICE WITH INTEREST;
under the express warranty has expired. JUSTIFIED. — The petitioner committed a breach of contract
WHEREFORE, the Court hereby DENIES the petition for review against Respondent. The misrepresentation of the quality of the subject
on certiorari of the orders of the Regional Trial Court, Quezon Fordson diesel engine tantamount to fraud or bad faith. The return of the
City, Branch 81, dated November 11, 1998, and December 9, P7,590.00 purchase price with legal interest from the date of purchase
and computed pursuant to our ruling in Villoria v. Court of Appeals
1998, in Civil Case No. Q-98-35408, and AFFIRMS the aforesaid
orders. (G.R. No. 63398, June 29, 1983) is justified.
No costs. 3. ID.; ID.; DAMAGES RECOVERABLE IN CASE OF BREACH IF
SO ORDERED. DULY PROVED. — Article 2200 of the Civil Code entitles the
respondent to recover as compensatory damages not only the value of
[G.R. No. L-30965. November 29, 1983.]
the loss suffered but also prospective profits while Article 2201 entitles
G.A MACHINERIES, INC., Petitioner, v. HORACIO the respondent to recover all damages which may be attributed to the
YAPTINCHAY, doing business under the name and style "HI- non-performance of the obligation. However, in order to recover this
kind of damages, the plaintiff must prove his case.
WAY EXPRESS" and THE COURT OF APPEALS, Respondents.
Bengzon, Villegas & Zarraga & Jose P. Bengzon Law Office 4. ID.; ID.; AWARD OF ACTUAL DAMAGES NOT WARRANTED
for Petitioner. BY THE BEST EVIDENCE ON RECORD. — The next question refers
to the award of actual damages in the amount of P54,000.48. This
amount covers the probable income which the respondent failed to
Mariano V. Ampil, Jr. for Respondents.
realize because of the breach of contract. Is the award of damages in the
form of lucro cessante justified? The law on the matter is spelled out in
SYLLABUS Raagas v. Traya (22 SCRA 839). we find the evidence of the respondent
insufficient to be considered within the purview of "best evidence." The
bare assertion of the respondent that he lost about P54,000.00 and the
1. REMEDIAL LAW; ACTION FOR BREACH OF CONTRACT; accompanying documentary evidence presented to prove the amount
DELIVERY OF AN ENGINE NOT BRAND NEW INSTEAD OF lost are inadequate if not speculative. The document itself merely shows
A BRAND NEW ENGINE, A STIPULATED, DIFFERENT that everytime a truck travels, Mr. Yaptinchay earns P369.88. This
FROM BREACH OF WARRANTY AGAINST HIDDEN amount is then multiplied by the number of trips which the truck was
DEFECTS; PRESCRIPTIVE PERIOD UNDER ARTICLE 1571 allegedly unable to make. The estimates were prepared by a certain
OF THE CIVIL CODE HELD INAPPLICABLE. — The main Dionisio M. Macasieb whose identity was not even revealed by
thrust of the complaint is the contention that the Fordson diesel the Respondent. Mr. Yaptinchay was in the freight truck business. He
engine delivered by the petitioner to the respondent was not brand- had several freight trucks among them the truck with the subject Forson
new contrary to the representations of the former and the diesel engine, covering the route from Manila to Baguio. To prove
expectations of the latter. The complaint was couched in manner actual damages, it would have been easy to present the average actual
which shows that instead of the brand new Fordson diesel engine profits realized by the other freight trucks plying the Manila-Baguio
which was bought by the respondent from the petitioner, another route. With the presentation of such actual income the court could have
engine which was not brand new was delivered resulting in the arrived with reasonable certainty at the amount of actual damages
suffered by the Respondent. We rule that the award of actual
damages in the amount of P54,000.48 is not warranted by the
evidence on record.
DECISION
GUTIERREZ, JR., J.:
Petitioner G. A. Machineries, Inc. (hereinafter referred to as
GAMI) seeks the reversal of the decision of the Court of First
Instance of Rizal, affirmed by the Court of Appeals in the original
case entitled Horacio Yaptinchay, doing business under the name
and style "Hi-Way Express", v. G.A. Machineries Inc. for
recovery of damages.
The antecedent facts of the case are not seriously disputed and are
summarized by the Court of Appeals as
follows:jgc:chanrobles.com.ph
"Sometime early in January, 1962 appellant GAMI, thru a duly
authorized agent, offered to sell a brand-new Fordson Diesel
Engine to appellee Horacio Yaptinchay, owner of the freight
hauling business styled ‘Hi-Way Express’. Relying on the
representations of appellant’s representative that the engine
offered for sale was brandnew, appellee agreed to purchase the
same at the price of P7,590.00. Pursuant to the contract of sale
thus entered into, appellant delivered to appellee, on January 27,
1962, one (1) Fordson Diesel Engine assembly, Model 6-D, with
Engine Serial No. A-212193, at 1500 RPM, with fly wheel, fly
wheel housing, fuel injection assembly, exhauster, fuel filter, oil
filter, fuel lift pump, plus conversion kit for F-500, subject to the
standard warranties, particularly the representation, relied upon by
appellee, that the same was brandnew. Said engine was installed
by appellant in Unit No. 6 of the Hi-Way Express.
"Within the week after its delivery, however, the engine in
question started to have a series of malfunctions which
necessitated successive trips to appellant’s repair shop. Thus, it
first sprang an oil leak such that, on February 6, 1962, it was
brought in to ‘1. Adjust idling of engine and tappete clearance; 2.
Inspect and remedy oil leaks of engine; 3. Replace clutch disc and
pressure plate w/original; and 4. Replace release bearing hub
trunion bolt’ (Exhibit C). Thereafter, the malfunctioning persisted
and, on inspection, appellee’s mechanic noticed a worn out screw
which made appellee suspicious about the age of the engine. This
prompted appellee, thru his lawyer, to write appellant a letter,
dated February 10, 1962, protesting that the engine was not brand-
6
new as represented (Exhibit E). Because of the recurring defects,
the engine was again submitted to appellant’s shop to ‘1. Inspect
engine oil leaks on cylinder head; 2. Check up propeller shaft
(vibrating at high speed); and 3. Tighten bolts of pump.’ (Exhibit
F). All these notwithstanding, the engine could still not be returned
into operation because it continued not to function well. In fact, it
was sent back to appellant’s shop on the same day it was delivered
after the last repair work done on it. Another check up was
thereafter required to be made on March 5, 1962 (Exhibit G). Then
again, on March 10, 1962, the engine was back at the repair shop
to ‘1. Inspect leaks on No. 1 & 5 high pressure pipe; and 2. Change
engine oil with finishing & oil element’ (Exhibit H). Still, the oil
leaks remained unchecked and, on July 2, 1962, one last effort to
‘1. Remedy engine oil leaks’ (Exhibit 1) was made, but all to no
avail because, instead of improving, the engine’s condition became
worse as it developed engine knock and appellee had to stop its
operation altogether due to its unserviceability.
"These repeatedly recurring defects and continued failure of
appellant to put the engine in good operating condition only served
to firm up in appellee’s mind the suspicion that the engine sold to
him was not brand-new as represented. He then sought the
assistance of the PC Criminal Investigation Service to check on the
authenticity of the serial number of the engine, with due notice to
appellant. Scientific examination and verification tests revealed
that the original motor number of the engine aforesaid was
tampered. Further inquiries by appellee from the Manila Trading
Company, which also handles the importation and distribution of
similar engines, also disclosed that, unlike the engine delivered to
appellee whose engine body and injection pump were painted with
two different colors, brand-new engines are painted with only one
color all over.
"Thus convinced that a fraudulent misrepresentation as to the
character of the engine had been perpetrated upon him, appellee
made demands from appellant for indemnification for damages and
eventually instituted the present suit.
"In its defense, appellant interposed prescription of the action,
denied the imputation of misrepresentation, and disputed the
propriety and amount of damages claimed.." . .
After trial on the merits, the trial court ruled in favor of plaintiff
Yaptinchay as follows:chanrobles lawlibrary : rednad
"FOR ALL THE FOREGOING CONSIDERATIONS, the Court
hereby renders judgment ordering the defendant, G. A.
Machineries, Inc., to pay the plaintiff, Horacio Yaptinchay, actual
damages sustained in the sum of P54,000.48; to reimburse the
purchase price of the Fordson diesel engine in the amount of P7,590.00;
and to pay attorney’s fees to plaintiff’s counsel on the sum of P2,000.00
and costs.
"Plaintiff is, likewise, ordered to return the Fordson diesel engine with
serial number A-21219 to the defendant."cralaw virtua1aw library
Defendant GAMI appealed the decision to the Court of Appeals. As
stated earlier, the decision was affirmed by the Appellate Court. A
motion for reconsideration was denied. Hence, the instant petition.
Petitioner GAMI raises the following alleged errors of judgment of the
respondent court:chanrob1es virtual 1aw library
I
THE COURT OF APPEALS ERRED IN NOT APPLYING THE
PRESCRIPTIVE PERIOD OF ARTICLE 1571 OF THE CIVIL CODE
TO THE CASE AT BAR.
II
THE COURT OF APPEALS ERRED IN APPLYING THE
DOCTRINE IN THE CASE OF ASOCIACION ZANJERA CASILIAN
v. CRUZ, 46 O.G. 4813, 4820 REGARDING ADMISSION BY
FAILURE TO REBUT, TO THE ISSUE OF ACTUAL DAMAGES,
WHICH MUST BE PROVED BY THE BEST AND COMPETENT
EVIDENCE.
III
THE COURT OF APPEALS ERRED IN AWARDING ACTUAL
DAMAGES IN THE FORM OF UNREALIZED PROFITS (LUCRUM
CESSANTE) WHEN THE ISSUE RAISED BY THE PLEADINGS
REFERS ONLY TO ALLEGED ACTUAL DAMAGES IN THE
FORM OF DAMNUM EMERGENTE.
IV
THE COURT OF APPEALS ERRED IN FINDING THAT THE
FORDSON DIESEL ENGINE DELIVERED BY PETITIONER TO
RESPONDENT HORACIO YAPTINCHAY WAS NOT BRAND
NEW, REACHING SUCH FINDING BY WAY OF A MANIFESTLY
MISTAKEN INFERENCE AND ON THE BASIS OF A
MISAPPREHENSION OF FACTS AND SOLELY ON THE GROUND
OF SPECULATION, SURMISES AND CONJECTURES.

The assignments of errors raise the following issues: 1) whether or
not the respondent’s cause of action against the petitioner had
already prescribed at the time the complaint was filed in the trial
court; 2) whether or not the factual findings of both the trial and
appellate courts as regards the subject Fordson diesel engine are
supported by evidence and 3) whether or not the award of
damages was justified considering the evidence on record.
The first issue is premised on the petitioner’s proposition that the
respondent’s cause of action was for breach of warranty against
hidden defects as provided under Articles 1561 and 1566 of the
Civil Code. Article 1571 of the Civil Code provides for a six-
month prescriptive period from the delivery of the thing sold for
the filing of an action for breach of warranty against hidden
defects. According to petitioner GAMI when respondent
Yaptinchay filed the case with the trial court, more than six
months had already lapsed from the time the alleged defective
engine was delivered and, therefore, the action had prescribed.
The petitioner contends that Yaptinchay’s asserted cause of action
was premised and anchored on the delivery by the defendant of a
DEFECTIVE ENGINE and that the allegations in the complaint
that the engine was not brand new are clearly mere specifications
of the precise nature of the hidden defects.
A cursory reading of the complaint shows that the petitioner’s
arguments are not well-taken.
The main thrust of the complaint is the contention that the
Fordson diesel engine delivered by the petitioner to the
respondent was not brand-new contrary to the representations of
the former and the expectations of the latter. The complaint was
couched in a manner which shows that instead of the brand-new
Fordson diesel engine which was bought by the respondent from
the petitioner, another engine which was not brand new was
delivered resulting in the damages sought to be recovered. It is
evident therefore, that the complaint was for a breach of a contract
of sale rather than a breach of warranty against hidden defects.
This is so because an action for breach of warranty against hidden
defects presupposes that the thing sold is the same thing delivered
but with hidden defects. Consequently, the six-month prescriptive
period under Article 1571 of the Civil Code is not applicable.
The petitioner takes exception to the factual findings of the
appellate court and argues: 1) the fact that the Fordson diesel
engine developed oil leaks does not necessarily imply that the said
engine was not brand new and 2) the testimony of laboratory
technician Captain Garcia of the Philippine Constabulary to the
7
effect that the motor or serial number of the engine was tampered
does not deserve credence.chanrobles virtual lawlibrary
The first argument is premised on the proposition that even brand-
new engines in many cases develop oil leaks. To support this
proposition the petitioner presented documentary evidence
(Exhibits "5", "7", "8", "9", "10", "11", "12", "13", "14", "15", "16"
and "17") consisting of job orders for allegedly brand new engines
which developed oil leaks.
An examination of the documentary evidence shows that the job
orders were for twelve (12) different engines. Moreover, the
petitioner’s witness who testified on the said job orders admitted
that some engines were repaired only after a few months. On the
other hand, the subject Fordson diesel engine was repaired on the
complaint not only of oil leaks but also replacement of clutch disc
and pressure plate, replacement of release bearing hub trunion belt,
and other defects within a week after it was delivered to the
respondents or on February 6, 1962 (Exhibit "C"). Thereafter it
was returned for more repairs on February 28, 1962 (Exhibit "F"),
on March 10, 1962 (Exhibit "H") and on July 2, 1962 (Exhibit "I").
The documentary evidence of the petitioner consisting of the job
orders of the supposed brand-new engines which also developed
oil leaks is no reason to doubt the trial court’s and appellate court’s
factual findings. In fact, the documentary evidence and the
admissions of the petitioner’s witness enhance the respondent’s
allegation that the Fordson diesel engine sold to him was not
brand-new.
The second argument questions Captain Garcia’s findings that the
original motor number of the engine was tampered as shown by the
presence of fragmentary numbers which appeared in the engine
when he conducted a macro-etching test thereon by applying acid
on the surface of said engine. The petitioner emphasizes Captain
Garcia’s alleged testimony that." . . what he calls fragmentary
numeral" is not definitely a numeral or a fragment of a numeral
and states that the same could have been caused by any molecular
pressure applied to the area of the metal where it appeared. In
effect, the petitioner insists that the supposed fragmentary
numerals could have been merely scratches or indentations near
the serial number of the motor which might have been caused by
sparks from the welding process.
The arguments are not well-taken. First, the statements attributed
to Captain Garcia are not accurate. An examination of the record
shows that Captain Garcia positively stated the fragmentary
numeral to be a numeral or a number but in the absence of key
portions he could not positively identify the exact number or
numeral. He discounted the possibility that such fragmentary
numerals could be mere scratches. Second, the witness did not
categorically state that any molecular pressure could have caused the
fragmentary numeral. Hence, Captain Garcia under cross-examination
stated:jgc:chanrobles.com.ph
"Q. This fragmentary numeral could be caused deliberately by
tampering with the engine number or by other factor such as scratches
or burning by other foreign element, is that right?
"A. No, sir, they can be caused by scraping but not by scratching,
because by scraping there is molecular disturbance of metal.
"Q. When you say molecular disturbance does it mean you first apply in
the area, or would it disturb the molecule in or around that area?
"A. Once you stamped the number, you impressed it and there is
molecular disturbance in the structure of the metal.
"Q. If the metal is burned, there is also molecular disturbance in the
metal, is that correct?
"A. The metal will only expand.
"Q. There is no spark of the machine could not cause the molecular
disturbance in the steam, is that right?
"A. It cannot"
(T.S.N., Iluminado C. Palisoc, February 5, 1965, pp. 99-100)
The petitioner’s argument that the Court of Appeals findings are based
on manifestly mistaken inferences, misapprehension of facts, and purely
on speculation, surmises, and conjectures is without merit.
The Fordson diesel engine delivered to the respondent was not brand-
new.
We agree with the Court of Appeals that:jgc:chanrobles.com.ph
"Indeed, it would be too much to say that the successive malfunctions of
the engine, the defects and other discrepancies therein that cropped up
so soon after its delivery, the numerous trips it had to appellant’s repair
shop, the demonstrable tampering with its serial number, and its
ultimate breakdown despite appellant’s attempts to put it into good
working order could be attributed to mere coincidence. If all these mean
anything at all, it can only be that the engine aforesaid was not really
brand new.
The petitioner committed a breach of contract against the Respondent.
The misrepresentation of the quality of the subject Fordson diesel
engine is tantamount to fraud or bad faith. The return of the
P7,590.00 purchase price with legal interest from the date of
purchase and computed pursuant to our ruling in Villoria v. Court
of Appeals (G.R. No. 63398, June 29, 1983) is justified. The next
question refers to the award of actual damages in the amount of
P54,000.48. This amount covers the probable income which the
respondent failed to realize because of the breach of contract. Is
the award of damages in the form of lucro cessante
justified?chanrobles lawlibrary : rednad
The law on the matter is spelled out in Raagas v. Traya (22 SCRA
839), where we stated.
". . . In Abubakar Tan v. Tian Ho, L-18820, December 29, 1962
and Lim Giok v. Bataan Cigar and Cigarette Factory, L-15861,
April 16, 1960, we held that even if the allegations regarding the
amount of damages in the complaint are not specifically denied in
the answer, such damages are not deemed admitted. In Tomassi v.
Villa-Abrille, L-7047, August 21, 1958, Suntay Tanjangco v.
Jovellanos, et al, L-12332, June 30, 1960, and Delfin v. Court of
Agrarian Relations, Et Al., L-23348, March 14, 1967, 1967 A
PHILD 453, we declared in no uncertain terms that actual
damages must be proved, and that a court cannot rely on
‘speculation, conjecture or guesswork’ as to the fact and amount
of damages, but must depend on actual proof that damages had
been suffered and on evidence of the actual amount. . . ."cralaw
virtua1aw library
The fact that the defendant does not dispute the amount of this
kind of damages does not necessarily imply that the other party
outright is entitled to the award of damages.
Article 2200 of the Civil Code entitles the respondent to recover
as compensatory damages not only the value of the loss suffered
but also prospective profits while Article 2201 entitles the
respondent to recover all damages which may be attributed to the
non-performance of the obligation. However, in order to recover
this kind of damages, the plaintiff must prove his case —
"‘When the existence of a loss is established, absolute certainty as
to its amount is not required. The benefit to be derived from a
contract which one of the parties has absolutely failed to perform
is of necessity to some extent, a matter of speculation, but the
injured party is not to be denied all remedy for that reason alone.
He must produce the best evidence of which his case is
susceptible and if that evidence warrants the inference that he has
been damaged by the loss of profits which he might with
reasonable certainty have anticipated but for the defendant’s
wrongful act, he is entitled to recover." (Cerreno v. Tan Chuco, 28
Phil. 312 quoted in Central Bank of the Philippines v. Court of
Appeals, 63 SCRA 431, 457).
Applying the foregoing test to the instant case, we find the
evidence of the respondent insufficient to be considered within the
purview of "best evidence." The bare assertion of the respondent
that he lost about P54,000.00 and the accompanying documentary
evidence presented to prove the amount lost are inadequate if not
speculative. The document itself merely shows that everytime a
truck travels, Mr. Yaptinchay earns P369.88. This amount is then
multiplied by the number of trips which the truck was allegedly
unable to make. The estimates were prepared by a certain Dionisio
M. Macasieb whose identity was not even revealed by
the Respondent. Mr. Yaptinchay was in the freight truck business.
He had several freight trucks among them the truck with the
subject Fordson diesel engine, covering the route from Manila to
Baguio. To prove actual damages, it would have been easy to
present the average actual profits realized by the other freight
trucks plying the Manila-Baguio route. With the presentation of
such actual income the court could have arrived with reasonable
certainty at the amount of actual damages suffered by
the Respondent. We rule that the award of actual damages in the
amount of P54,000.08 is not warranted by the evidence on record.
WHEREFORE, the decision appealed from is hereby modified.
The award of actual damages in the amount of P54,000.48 is
deleted. The petitioner shall also pay six (6%) percent interest per
annum on the P7,590.00 purchase price from January 27, 1962 to
July 29, 1974 and twelve (12%) percent interest per annum from
July 30, 1974 until the purchase price is reimbursed. In all other
respects, the appealed decision is affirmed.
SO ORDERED.