Friday, August 3, 2012

REDHIBITORY DEFECTS

Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 73913 January 31, 1989

JERRY T. MOLES, petitioner,
vs.
INTERMEDIATE APPELLATE COURT and MARIANO M. DIOLOSA, respondents.

Zoilo V. De la Cruz, Jr., Kenneth Barredo, Romeo Sabig and Natalio V. Sitjao for petitioners.

Rolando N. Medalla and Jose G. Guinez, Jr., for private respondents.

REGALADO, J.:

This petition for review on certiorari assails the decision of the then Intermediate Appellate Court 1 dismissing the complaint filed by herein petitioner against the herein private respondent in the former Court of First Instance of Negros Occidental in Civil Case No. 13821 thereof. 2

The factual backdrop of this controversy, as culled from the records, 3 shows that on May 17, 1978, petitioner Jerry T. Moles commenced a suit against private respondent Mariano M. Diolosa in the aforesaid trial court, Branch IV in Bacolod City, for rescission of contract with damages. Private respondent moved to dismiss on the ground of improper venue, invoking therefor Sales Invoice No. 075A executed between petitioner and private respondent on April 23, 1977 which provides that all judicial actions arising from this contract shall be instituted in the City of Iloilo. 4 This was opposed by petitioner who averred that there is no formal document evidencing the sale which is substantially verbal in character. In an order dated June 23, 1978, the trial court denied the motion to dismiss, holding that the question of venue could not be resolved at said stage of the case. The subsequent motion for reconsideration was likewise denied.

Consequently, private respondent, invoking the aforesaid venue stipulation, preceeded to this Court on a petition for prohibition with preliminary injunction in G.R. No. 49078, questioning the validity of the order denying his aforesaid two motions and seeking to enjoin the trial court from further proceeding with the case. This petition was dismissed for lack of merit in a resolution of the Court, dated February 7, 1979, and which became final on March 15, 1979. Thereafter, private respondent filed his answer and proceeded to trial.

The aforecited records establish that sometime in 1977, petitioner needed a linotype printing machine for his printing business, The LM Press at Bacolod City, and applied for an industrial loan with the Development Bank of the Philippines. (hereinafter, DBP) for the purchase thereof. An agent of Smith, Bell and Co. who is a friend of petitioner introduced the latter to private respondent, owner of the Diolosa Publishing House in Iloilo City, who had two available machines. Thereafter, petitioner went to Iloilo City to inspect the two machines offered for sale and was informed that the same were secondhand but functional.

On his second visit to the Diolosa Publishing House, petitioner together with Rogelio Yusay, a letter press machine operator, decided to buy the linotype machine, Model 14. The transaction was basically verbal in nature but to facilitate the loan application with the DBP, a pro forma invoice, dated April 23, 1977 and reflecting the amount of P50,000.00 as the consideration of the sale, was signed by petitioner with an addendum that payment had not yet been made but that he promised to pay the full amount upon the release of his loan from the aforementioned bank on or before the end of the month. 5 Although the agreed selling price was only P40,000.00, the amount on the invoice was increased by P10,000.00, said increase being intended for the purchase of new matrices for said machine.

Sometime between April and May, 1977, the machine was delivered to petitioner's publishing house at Tangub, Bacolod City where it was installed by one Crispino Escurido, an employee of respondent Diolosa. Another employee of the Diolosa Publishing House, Tomas Plondaya, stayed at petitioners house for almost a month to train the latter's cousin in operating the machine. 6

Under date of August 29, 1977, private respondent issued a certification wherein he warranted that the machine sold was in A-1 condition, together with other express warranties. 7

Prior to the release of the loan, a representative from the DBP, Bacolod, supposedly inspected the machine but he merely looked at it to see that it was there . 8 The inspector's recommendation was favorable and, thereafter, petitioner's loan of P50,000.00 was granted and released. However, before payment was made to private respondent, petitioner required the former, in a letter dated September 30, 1977, to accomplish the following, with the explanations indicated by him:

1.) Crossed check for P15,407.10 representing.

a) P 10,000.00-Overprice in the machine:

b) P203.00-Freight and handling of the machine;

c) P203.00-Share in the electric repair; and

d) P5,000.00- Insurance that Crispin will come back and repair the linotype machine at seller's account as provided in the contract; after Crispin has put everything in order when he goes home on Sunday he will return the check of P15,000.00.

2) Official receipt in the amount of P 50,000.00 as full payment of the linotype machine.

These were immediately complied with by private respondent and on the same day, September 30,1977, he received the DBP check for P50,000.00. 9

It is to be noted that the aforesaid official receipt No. 0451, dated September 30, 1977 and prepared and signed by private respondent, expressly states that he received from the petitioner the DBP check for P50,000.00 issued in our favor in full payment of one (1) Unit Model 14 Linotype Machine as per Pro forma Invoice dated April 23, 1977. 10

On November 29, 1977, petitioner wrote private respondent that the machine was not functioning properly as it needed a new distributor bar. In the same letter, petitioner unburdened himself of his grievances and sentiments in this wise.

We bought this machine in good faith because we trusted you very much being our elder brother in printing and publishing business. We did not hire anybody to look over the machine, much more ask for a rebate in your price of P40,000.00 and believed what your trusted two men, Tomas and Crispin, said although they were hiding the real and actual condition of the machine for your business protection.

Until last week, we found out the worst ever to happen to us. We have been cheated because the expert of the Linotype machine from Manila says, that the most he will buy your machine is at P5,000.00 only. ... 11

Private respondent made no reply to said letter, so petitioner engaged the services of other technicians. Later, after several telephone calls regarding the defects in the machine, private respondent sent two technicians to make the necessary repairs but they failed to put the machine in running condition. In fact, since then petitioner was never able to use the machine. 12

On February 18, 1978, not having received from private respondent the action requested in his preceding letter as herein before stated, petitioner again wrote private respondent, this time with the warning that he would be forced to seek legal remedies to protect his interest. 13

Obviously in response to the foregoing letter, private respondent decided to purchase a new distributor bar and, on March 16, 1978, private respondent delivered this spare part to petitioner through one Pedro Candido. However, when thereafter petitioner asked private respondent to pay for the price of the distributor bar, the latter asked petitioner to share the cost with him. Petitioner thus finally decided to indorse the matter to his lawyer.

An expert witness for the petitioner, one Gil Legaspina, declared that he inspected the linotype machine involved in this case at the instance of petitioner. In his inspection thereof, he found the following defects: (1) the vertical automatic stop lever in the casting division was worn out; (2) the justification lever had a slight breach (balana in the dialect); (3) the distributor bar was worn out; (4) the partition at the entrance channel had a tear; (5) there was no "pie stacker" tube entrance; and (6) the slouch arm lever in the driving division was worn out.

It turned out that the said linotype machine was the same machine that witness Legaspina had previously inspected for Sy Brothers, a firm which also wanted to buy a linotype machine for their printing establishment. Having found defects in said machine, the witness informed Sy Brother about his findings, hence the purchase was aborted. In his opinion, major repairs were needed to put the machine back in good running condition. 14

After trial, the court a quo rendered a decision the dispositive portion of which reads:

IN VIEW OF THE FOREGOING CONSIDERATIONS, judgment is hereby rendered as follows:

(1) Decreeing the rescission of the contract of sale involving one linotype machine No. 14 between the defendant as seller and the plaintiff as buyer;

(2) Ordering the plaintiff to return to the defendant at the latter's place of business in Iloilo City the linotype machine aforementioned together with all accessories that originally were delivered to the plaintiff;

(3) Ordering the defendant to return to the plaintiff the sum of Forty Thousand Pesos (P40,000.00) representing the price of the linotype machine, plus interest at the legal rate counted from May 17, 1978 when this action was instituted, until fully paid;

(4) Ordering the defendant to indemnify the plaintiff the sum of Four Thousand Five Hundred Pesos (P4,500.00) representing unearned income or actual damages;

(5) Ordering the defendant to pay the plaintiff the sum of One Thousand Pesos (Pl,000.00) for attorney's fees.

Costs against the defendant. 15

From this decision, private respondent appealed to the Intermediate Appellate Court which reversed the judgment of the lower court and dismissed petitioner's complaint, hence the present petition.

We find merit in petitioner's cause.

On the matter of venue, private respondent relies on the aforementioned Sales Invoice No. 076A which allegedly requires that the proper venue should be Iloilo City and not Bacolod City. We agree with petitioner that said document is not the contract evidencing the sale of the linotype machine, it being merely a preliminary memorandum of a proposal to buy one linotype machine, using for such purpose a printed form used for printing job orders in private respondent's printing business. As hereinbefore explained, this issue on venue was brought to Us by private respondent in a special civil action for prohibition with preliminary injunction in G.R. No. 49078. After considering the allegations contained, the issues raised and the arguments adduced in said petition, as well as the comments thereto, the Court dismissed the petition for lack of merit. Respondent court erred in reopening the same issue on appeal, with a contrary ruling.

Furthermore, it was error for the respondent court, after adopting the factual findings of the lower court, to reverse the latter's holding that the sales invoice is merely a pro forma memorandum. The records do not show that this finding is grounded entirely on speculation, surmises or conjectures as to warrant a reversal thereof. 16 In fact, as hereinbefore stated, private respondent expressly admitted in his official receipt No. 0451, dated September 30, 1977, that the said sales invoice was merely a pro forma invoice. Consequently, the printed provisions therein, especially since the printed form used was for purposes of other types of transactions, could not have been intended by the parties to govern their transaction on the printing machine. It is obvious that a venue stipulation, in order to bind the parties, must have been intelligently and deliberately intended by them to exclude their case from the reglementary rules on venue. Yet, even such intended variance may not necessarily be given judicial approval, as, for instance, where there are no restrictive or qualifying words in the agreement indicating that venue cannot be laid in any place other than that agreed upon by the parties, 17 and in contracts of adhesion. 18

Now, when an article is sold as a secondhand item, a question arises as to whether there is an implied warranty of its quality or fitness. It is generally held that in the sale of a designated and specific article sold as secondhand, there is no implied warranty as to its quality or fitness for the purpose intended, at least where it is subject to inspection at the time of the sale. On the other hand, there is also authority to the effect that in a sale of a secondhand articles there may be, under some circumstances, an implied warranty of fitness for the ordinary purpose of the article sold or for the particular purpose of the buyer. 19

In a line of decisions rendered by the United States Supreme Court, it had theretofore been held that there is no implied warranty as to the condition, adaptation, fitness, or suitability for the purpose for which made, or the quality, of an article sold as and for a secondhand article. 20

Thus, in finding for private respondent, the respondent court cited the ruling in Sison vs. Ago, et al. 21 to the effect that unless goods are sold as to raise an implied warranty, as a general rule there is no implied warranty in the sale of secondhand articles. 22

Said general rule, however, is not without exceptions. Article 1562 of our Civil Code, which was taken from the Uniform Sales Act, provides:

Art. 1562. In a sale of goods, there is an implied warranty or condition as to the quality or fitness of the goods, as follows:

(1) Where the buyer, expressly or by implication, makes known to the seller the particular purpose for which the goods are acquired, and it appears that the buyer relies on the seller's skill or judgment (whether he be the grower or manufacturer or not), there is an implied warranty that the goods shall be reasonably fit for such purpose;

x x x

In Drumar Mining Co. vs. Morris Ravine Mining Co., 23 the District Court of Appeals, 3rd District, California, in applying a similar provision of law, ruled:

'There is nothing in the Uniform Sales Act declaring there is no implied warranty in the sale of secondhand goods. Section 1735 of the Civil Code declares there is no implied warranty or condition as to the quality or fitness for any particular purpose, of goods supplied under a contract to sell or a sale, except (this general statement is followed by an enumeration of several exceptions). It would seem that the legislature intended this section to apply to all sales of goods, whether new or secondhand. In subdivision 1 of this section, this language is used: where the buyer ... makes known to the seller the particular purpose for which the goods are required, and it appears that the buyer relies on the seller's skill or judgment ... there is an implied warranty that the goods shall be reasonably fit for such purpose.'

Furthermore, and of a more determinative role in this case, a perusal of past American decisions 24 likewise reveals a uniform pattern of rulings to the effect that an express warranty can be made by and also be binding on the seller even in the sale of a secondhand article.

In the aforecited case of Markman vs. Hallbeck, while holding that there was an express warranty in the sale of a secondhand engine, the court said that it was not error to refuse an instruction that upon the sale of secondhand goods no warranty was implied, since secondhand goods might be sold under such circumstances as to raise an implied warranty.

To repeat, in the case before Us, a certification to the effect that the linotype machine bought by petitioner was in A-1 condition was issued by private respondent in favor of the former. This cannot but be considered as an express warranty. However, it is private respondent's submission, that the same is not binding on him, not being a part of the contract of sale between them. This contention is bereft of substance.

It must be remembered that the certification was a condition sine qua non for the release of petitioner's loan which was to be used as payment for the purchase price of the machine. Private respondent failed to refute this material fact. Neither does he explain why he made that express warranty on the condition of the machine if he had not intended to be bound by it. In fact, the respondent court, in declaring that petitioner should have availed of the remedy of requiring repairs as provided for in said certification, thereby considered the same as part and parcel of the verbal contract between the parties.

On the basis of the foregoing circumstances, the inescapable conclusion is that private respondent is indeed bound by the express warranty he executed in favor of herein petitioner.

We disagree with respondent court that private respondents express warranty as to the A-1 condition of the machine was merely dealer's talk. Private respondent was not a dealer of printing or linotype machines to whom could be ascribed the supposed resort to the usual exaggerations of trade in said items. His certification as to the condition of the machine was not made to induce petitioner to purchase it but to confirm in writing for purposes of the financing aspect of the transaction his representations thereon. Ordinarily, what does not appear on the face of the written instrument should be regarded as dealer's or trader's talk; 25 conversely, what is specifically represented as true in said document, as in the instant case, cannot be considered as mere dealer's talk.

On the question as to whether the hidden defects in the machine is sufficient to warrant a rescission of the contract between the parties, we have to consider the rule on redhibitory defects contemplated in Article 1561 of the Civil Code. A redhibitory defect must be an imperfection or defect of such nature as to engender a certain degree of importance. An imperfection or defect of little consequence does not come within the category of being redhibitory. 26

As already narrated, an expert witness for the petitioner categorically established that the machine required major repairs before it could be used. This, plus the fact that petitioner never made appropriate use of the machine from the time of purchase until an action was filed, attest to the major defects in said machine, by reason of which the rescission of the contract of sale is sought. The factual finding, therefore, of the trial court that the machine is not reasonably fit for the particular purpose for which it was intended must be upheld, there being ample evidence to sustain the same.

At a belated stage of this appeal, private respondent came up for the first time with the contention that the action for rescission is barred by prescription. While it is true that Article 1571 of the Civil Code provides for a prescriptive period of six months for a redhibitory action a cursory reading of the ten preceding articles to which it refers will reveal that said rule may be applied only in case of implied warranties. The present case involves one with and express warranty. Consequently, the general rule on rescission of contract, which is four years 27 shall apply. Considering that the original case for rescission was filed only one year after the delivery of the subject machine, the same is well within the prescriptive period. This is aside from the doctrinal rule that the defense of prescription is waived and cannot be considered on appeal if not raised in the trial court, 28 and this case does not have the features for an exception to said rule.

WHEREFORE, the judgment of dismissal of the respondent court is hereby REVERSED and SET ASIDE, and the decision of the court a quo is hereby REINSTATED.

SO ORDERED.

Melencio-Herrera (Chairperson), Paras, Padilla and Sarmiento, JJ., concur.

Footnotes

1 Special Fourth Civil Cases Division; Justice Marcelino R. Veloso. ponente, Justices Mariano A. Zosa and Abdulwahid A. Bidin, concurring.

2 Judge Segundino G. Chua, presiding.

3 Rollo, 5-10; 19-28.

4 Exhibit A.

5 Exhibit A, ante.

6 TSN., Aug. 11, 1980, 21-23; 36-38.

7 Exhibit C; Rollo, 22.

8 TSN, Oct. 8, 1979, 47.

9 Rollo, 22.

10 Exhibit B.

11 Exhibit E.

12 T.S.N., Oct. 8, 1979, 15-16, 25-27.

13 Exhibit F.

14 TSN, Feb. 28, 1980, 5-8, 11-15.

15 Rollo, 19-20.

16 Legaspi vs. Court of Appeals, et al. 142 SCRA 82 (1986).

17 Polytrade Corporation vs. Blanco, 30 SCRA 187 (1969).

18 Sweet Lines, Inc. vs. Teves, et al., 83 SCRA 361 (1978).

19 46 Am. Jur. 545.

20 Fairbanks Steam Shovel Co. vs. Holt and Jeffrey, 79 Wash. 361; Perine Machinery Co. vs. Buck, 156 Pac. 20; Ramming vs. Caldwell, 43 III. App. 626; and Hanna-Breckinridge Co. vs. Holey-Matthews Mfg. Co., 140 SW 923, cited in Durbin vs. Denham, 29 ALR 1227.

21 11 CA Rep. 2d 530.

22 Markman vs. Hallbeck, 206 III. App. 465, cited in Capistrano, Civil Code, Vol. IV, 124.

23 92 P 2d 424, 46 Am. Jur. 545-546.

24 Fairbanks Steam Shovel Co. vs. Holt & Jeffrey, 79 Wash. 361; Yello Jacket Min. Co. vs. Tegarden, 104 Ark. 573; Hanna Breckinridge Co. vs. Holey-Matthews Mfg. Co., 160 Mo. Appeal 437; and Markman vs. Hallbeck, 206 11). App. 465, as reported in 29 ALR 12311236.

25 Puyat & Sons, Inc. vs. Arco Amusement Co., 72 Phil. 402 (1941).

26 10 Manresa, 1950 Ed., 250.

27 Art. 1389, Civil Code.

28 Ramos vs. Osorio, et al., 38 SCRA (1971); Director of Lands vs. Dano, et al., 96 SCRA 161 (1980).

Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 96271 June 26, 1992

NATIVIDAD VILLOSTAS, petitioner,

vs.

THE HON. COURT OF APPEALS, SECOND DIVISION, THE HON. SALVADOR S. TENSUAN as Presiding Judge of RTC, Makati, Branch 146 and ELECTROLUX MARKETING, INCORPORATED, respondents.

PARAS, J.:

This is a petition for review on certiorari seeking the annulment of the resolution 1 of the respondent Court of Appeals, dated November 16, 1990, in CA-G.R. Sp. No. 23178 denying the petitioner's appeal which in effect affirms the decision 2 of the Regional Trial Court in Civil Case No. 90-1420 sustaining the decision 3 of the Metropolitan Trial Court, Branch 64, Makati, Metro Manila, dated November 15, 1989 ordering herein petitioner to pay private respondent, among others, the amount of P14,540.00.

The established facts of the case are as follows:

Desiring to have safe drinking water at home, herein petitioner Villostas and her husband decided to buy a water purifier. At about this time, private respondent's Electrolux sales agents were making door to door selling of its products in the subdivision where petitioner has her residence. Because private respondent's sales agents had assured petitioner of the very special features of their brand of water purifier, petitioner Villostas placed an order for one (1) unit of said water purifier. On September 13, 1986, an Electrolux Aqua Guard water purifier was delivered and installed at petitioner's residence (Rollo, p. 38; 49). Consequently, petitioner signed the Sales Order (Annex "B", p. 31) and the Contract of Sale with Reservation of Title (Annex "A", p. 31) in October 1986 (Rollo, p. 38, 22). A warranty certificate, Exhibit "l", was issued by private respondent which provides that:

ELECTROLUX MARKETING, INCORPORATED WARRANTS THIS QUALITY ELECTROLUX PRODUCT TO PERFORM EFFICIENTLY FOR ONE FULL YEAR FROM DATE OF ORIGINAL PURCHASE. (Rollo, p. 49)

The purchase of said unit was on installment basis under which petitioner would pay the amount of P16,190.00 in 20 monthly installments of P635.00 a month.

After two (2) weeks, petitioner verbally complained for the first time about the impurities, dirtiness and bad odor coming out of the unit (Rollo, p. 22). On October 21, 1986, private respondent Electrolux sent its service technician to examine and test the water purifier. The water which came out was dirty so the unit was shut off automatically (Ibid.).The technician changed the filter of the unit on said date without charge with an instruction that the filter should be changed every 6 months otherwise the unit will not last long as the water in the area was dirty (Ibid.).

After the filter was replaced, petitioner paid the amount of Pl,650.00 on November 18, 1986 which included the first amortization of P700.00 (Ibid.).

Petitioner complained for the second and third time when dirty water still came out of the water purifier after the replacement of the filter. It was on the third complaint of petitioner Villostas when the service technician gave advise that the filter should be changed every six (6) months costing about P300.00 which was considered to be uneconomical by the former (Rollo, pp. 22-23).

On December 9, 1986, petitioner sent a letter to the private respondent's branch manager stating therein her complaint that the actual performance of the carbon filter was only for a month instead of the private respondent's claim that the replacement of such filter will be only once every six (6) months. The petitioner, citing the above incident as uneconomical, decided to return the unit and demand a refund for the amount paid (Rollo, p. 76), Electrolux's branch manager offered to change the water purifier with another brand of any of its appliance of the unit in her favor. Petitioner did not accept it as she was disappointed with the original unit which did not perform as warranted. Consequently, petitioner did not pay any more the subsequent installments in the amount of P14,540.00 exclusive of interests (Rollo, p. 23, 120).

What transpired next was an exchange of demand letter and reply between petitioner and private respondent.

Ultimately, respondent Electrolux Marketing, Inc. filed a complaint against petitioner Villostas with the MTC of Makati for the recovery of the sum of P14,540.00 representing the unpaid balance of the purchase price of one (1) Electrolux Water Purifier plus interest thereon at the rate of 42% per annum in accordance with the Sales Contract with Reservation of Title (Rollo, pp. 28-30).

In her amended answer, petitioner Villostas asserted that by reason of private respondent's breach of warranty she was availing of the remedy of rescission of the contract of sale and offered to return the water purifier to the seller as in fact, it was already being offered for return as early as December 9, 1986, aside from claiming for the refund of her payments. Petitioner prayed that the contract of sale be declared rescinded and the payments refunded to her together with the full grant of the claims asserted in her counterclaims (Rollo, pp. 35-36).

After trial on the merits. the MTC of Makati rendered its decision, the dispositive portion of which reads:

WHEREFORE, judgment is hereby rendered ordering the defendant to pay plaintiff as follows:

1) the amount of P14,540.00 representing the unpaid outstanding balance of the aforesaid unit, plus interest thereon at the rate of P42% per annum until fully paid;

2) the amount of P1,000.00 as attorney's fees and

3) dismissing the counterclaim of defendant.

SO ORDERED. (Rollo, pp. 38-44)

The petitioner, thereafter, filed a notice of appeal from the judgment of said lower court. The Regional Trial Court of Makati rendered its judgment affirming the disputed decision (Rollo, pp. 21-24).

A motion for reconsideration having been denied, petitioner elevated the case to the Court of Appeals and was given an inextendible period of 15 days to file a petition for review. Anticipating that she would fail to comply with the deadline, herein petitioner filed a second extension to file a petition for review which, however, was denied.

Herein, petitioner comes to this Court via petition for review on certiorari.

Petitioner assigns the following errors:

I

WHETHER OR NOT THE PETITION MADE BY THE PETITIONER TO THE SUPREME COURT IS PROPER AND RIPE FOR JUDICIAL REVIEW.

II

WHETHER OR NOT PETITIONER IS ENTITLED TO RESCIND THE CONTRACT IN VIOLATION OF THE WARRANTY FOR HIDDEN DEFECT OF THE ARTICLE DELIVERED BY THE RESPONDENT.

III

WHETHER OR NOT PETITIONER IS BOUND TO PAY RESPONDENT HER REMAINING BALANCE OF P14,540.00 PLUS INTEREST THEREON PURSUANT TO THE CONTRACT OF SALE.

IV

WHETHER OR NOT PETITIONER IS LIABLE TO PAY RESPONDENT ATTORNEY'S FEES PURSUANT TO THE CONTRACT PLUS COSTS OF SUIT.

The main issue in the instant case is whether or not the petitioner is entitled to rescind the contract on the basis of a violation of the warranty of the article delivered by the respondent.

Petitioner contends that the Regional Trial Court erred when it ruled that its claim for rescission had prescribed inasmuch as she had formally notified the seller within a reasonable time, that is, 2 months and 26 days, from the delivery of water purifier on September 13, 1986 of her election to rescind.

Private respondent counters that the petitioner is not entitled to rescission vis-a-vis alleged violation of the warranty for hidden defects for the reason that rescission of contract sought by petitioner was beyond the jurisdictional competence of the trial court. It adds that petitioner could no longer avail of rescission because said legal recourse was time barred judging from delivery of the water purifier on September 13, 1986 pursuant to Art. 1571 of the New Civil Code.

The petition is impressed with merit.

Anent the jurisdictional competence of the Metropolitan Trial Court to order rescission of contract, suffice it to say that the action was initiated by herein private respondent Electrolux when it filed a complaint for collection of a sum of money worth P14,540.00, against petitioner Villostas. Said amount is indubitably within the jurisdiction of the Metropolitan Trial Court since it does not exceed P20,000.00 exclusive of interest and costs but inclusive of damages of whatever (Maceda v. CA, G.R. No. 83545, 176 SCRA 440 [1989]). Moreover, the jurisdiction of the court over the subject matter is determined by the allegations of the complaint irrespective of whether or not the plaintiff is entitled to recover upon all or some of the claims asserted therein (Caparros v. CA, G.R. No. 56803, 170 SCRA 758 [1989]). When the petitioner, therefore, raised rescission of contract in her answer, the court is not divested of its jurisdiction over the case on account of defenses raised by the answer. The court is then merely authorized to receive evidence thereon (Dela Cruz v. Bautista, G.R. No. 39692, 186 SCRA 517, [1990]). Clearly, the jurisdiction of the court cannot be made to depend upon the defenses set up in the answer or upon the motion to dismiss. Otherwise, the question of jurisdiction would depend almost entirely upon the defendant (Caparros v. CA, supra.).

As regards the contention that the action for rescission is barred by prescription under Art. 1571 of the Civil Code, the same is bereft of merit. It must be pointed out that at the time the Electrolux Aqua Guard water purifier was delivered and installed at petitioner Villostas' residence a Warranty Certificate was issued by private respondent Electrolux which reads:

ELECTROLUX MARKETING, INCORPORATED WARRANTS THIS QUALITY ELECTROLUX PRODUCT TO PERFORM EFFICIENTLY FOR ONE FULL YEAR FROM DATE OF ORIGINAL PURCHASE.

The foregoing is clearly an express warranty regarding the efficiency of the water purifier. On this regard the court said that while it is true that Article 1571 of the Civil Code provides for a prescriptive period of six months for a redhibitory action, a cursory reading of the ten preceding articles to which it refers will reveal that said rule may be applied only in case of implied warranties. The present case involves one with an express warranty. Consequently, the general rule on rescission of contract, which is four years (Article 1389, Civil Coded) shall apply (Moles v. IAC, G.R. No. 73913, 169 SCRA 777 [1989]). Inasmuch as the instant case involves an express warranty, the filing of petitioner's amended answer on September 30, 1988 is well within the four-year prescriptive period for rescission of contract from September 13, 1986, which was the delivery date of the unit.

PREMISES CONSIDERED, the decision appealed from is REVERSED and SET ASIDE and the complaint of private respondent is DISMISSED. The sale of the water purifier is hereby RESCINDED.

SO ORDERED.

Narvasa, C.J., Padilla and Regalado, JJ., concur.

Nocon, J., is on leave.

Footnotes

1 Penned by Justice Asaali Isnani, concurred in by Justices Jose Melo and Antonio Martinez.

2 Penned by Judge Salvador Tensuan.

3 Penned by Judge Romulo Lapuz.

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Republic of the Philippines
SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 52267 January 24, 1996

ENGINEERING & MACHINERY CORPORATION, petitioner,
vs.
COURT OF APPEALS and PONCIANO L. ALMEDA, respondent.

DECISION

PANGANIBAN, J.:

Is a contract for the fabrication and installation of a central air-conditioning system in a building, one of "sale" or "for a piece of work"? What is the prescriptive period for filing actions for breach of the terms of such contract?

These are the legal questions brought before this Court in this Petition for review on certiorari under Rule 45 of the Rules of Court, to set aside the Decision1 of the Court of Appeals2 in CA-G.R. No. 58276-R promulgated on November 28, 1978 (affirming in toto the decision3 dated April 15, 1974 of the then Court of First Instance of Rizal, Branch II4 , in Civil Case No. 14712, which ordered petitioner to pay private respondent the amount needed to rectify the faults and deficiencies of the air-conditioning system installed by petitioner in private respondent's building, plus damages, attorney's fees and costs).

By a resolution of the First Division of this Court dated November 13, 1995, this case was transferred to the Third. After deliberating on the various submissions of the parties, including the petition, record on appeal, private respondent's comment and briefs for the petitioner and the private respondent, the Court assigned the writing of this Decision to the undersigned, who took his oath as a member of the Court on October 10, 1995.

The Facts

Pursuant to the contract dated September 10, 1962 between petitioner and private respondent, the former undertook to fabricate, furnish and install the air-conditioning system in the latter's building along Buendia Avenue, Makati in consideration of P210,000.00. Petitioner was to furnish the materials, labor, tools and all services required in order to so fabricate and install said system. The system was completed in 1963 and accepted by private respondent, who paid in full the contract price.

On September 2, 1965, private respondent sold the building to the National Investment and Development Corporation (NIDC). The latter took possession of the building but on account of NIDC's noncompliance with the terms and conditions of the deed of sale, private respondent was able to secure judicial rescission thereof. The ownership of the building having been decreed back to private respondent, he re-acquired possession sometime in 1971. It was then that he learned from some NIDC, employees of the defects of the air-conditioning system of the building.

Acting on this information, private respondent commissioned Engineer David R. Sapico to render a technical evaluation of the system in relation to the contract with petitioner. In his report, Sapico enumerated the defects of the system and concluded that it was "not capable of maintaining the desired room temperature of 76ºF - 2ºF (Exhibit C)"5 .

On the basis of this report, private respondent filed on May 8, 1971 an action for damages against petitioner with the then Court of First Instance of Rizal (Civil Case No. 14712). The complaint alleged that the air-conditioning system installed by petitioner did not comply with the agreed plans and specifications. Hence, private respondent prayed for the amount of P210,000.00 representing the rectification cost, P100,000.00 as damages and P15,000.00 as attorney's fees.

Petitioner moved to dismiss the complaint, alleging that the prescriptive period of six months had set in pursuant to Articles 1566 and 1567, in relation to Article 1571 of the Civil Code, regarding the responsibility of a vendor for any hidden faults or defects in the thing sold.

Private respondent countered that the contract dated September 10, 1962 was not a contract for sale but a contract for a piece of work under Article 1713 of the Civil Code. Thus, in accordance with Article 1144 (1) of the same Code, the complaint was timely brought within the ten-year prescriptive period.

In its reply, petitioner argued that Article 1571 of the Civil Code providing for a six-month prescriptive period is applicable to a contract for a piece of work by virtue of Article 1714, which provides that such a contract shall be governed by the pertinent provisions on warranty of title and against hidden defects and the payment of price in a contract of sale6 .

The trial court denied the motion to dismiss. In its answer to the complaint, petitioner reiterated its claim of prescription as an affirmative defense. It alleged that whatever defects might have been discovered in the air-conditioning system could have been caused by a variety of factors, including ordinary wear and tear and lack of proper and regular maintenance. It pointed out that during the one-year period that private respondent withheld final payment, the system was subjected to "very rigid inspection and testing and corrections or modifications effected" by petitioner. It interposed a compulsory counterclaim suggesting that the complaint was filed "to offset the adverse effects" of the judgment in Civil Case No. 71494, Court of First Instance of Manila, involving the same parties, wherein private respondent was adjudged to pay petitioner the balance of the unpaid contract price for the air-conditioning system installed in another building of private respondent, amounting to P138,482.25.

Thereafter, private respondent filed an ex-parte motion for preliminary attachment on the strength of petitioner's own statement to the effect that it had sold its business and was no longer doing business in Manila. The trial court granted the motion and, upon private respondent's posting of a bond of F'50,000.00, ordered the issuance of a writ of attachment.

In due course, the trial court rendered a decision finding that petitioner failed to install certain parts and accessories called for by the contract, and deviated from the plans of the system, thus reducing its operational effectiveness to the extent that 35 window-type units had to be installed in the building to achieve a fairly desirable room temperature. On the question of prescription, the trial court ruled that the complaint was filed within the ten-year court prescriptive period although the contract was one for a piece of work, because it involved the "installation of an air-conditioning system which the defendant itself manufactured, fabricated, designed and installed."

Petitioner appealed to the Court of Appeals, which affirmed the decision of the trial court. Hence, it instituted the instant petition.

The Submissions of the Parties

In the instant Petition, petitioner raised three issues. First, it contended that private respondent's acceptance of the work and his payment of the contract price extinguished any liability with respect to the defects in the air-conditioning system. Second, it claimed that the Court of Appeals erred when it held that the defects in the installation were not apparent at the time of delivery and acceptance of the work considering that private respondent was not an expert who could recognize such defects. Third, it insisted that, assuming arguendo that there were indeed hidden defects, private respondent's complaint was barred by prescription under Article 1571 of the Civil Code, which provides for a six-month prescriptive period.

Private respondent, on the other hand, averred that the issues raised by petitioner, like the question of whether there was an acceptance of the work by the owner and whether the hidden defects in the installation could have been discovered by simple inspection, involve questions of fact which have been passed upon by the appellate court.

The Court's Ruling

The Supreme Court reviews only errors of law in petitions for review on certiorari under Rule 45. It is not the function of this Court to re-examine the findings of fact of the appellate court unless said findings are not supported by the evidence on record or the judgment is based on a misapprehension of facts7 of Appeals erred when it held that the defects in the installation were not apparent at the time of delivery and acceptance of the work considering that private respondent was not an expert who could recognize such defects. Third. it insisted that, assuming arguendo that there were indeed hidden defects, private respondent's complaint was barred by prescription under Article 1571 of the Civil Code, which provides for a six-month prescriptive period.

Private respondent, on the other hand, averred that the issues raised by petitioner, like the question of whether here was an acceptance of the work by the owner and whether the hidden defects in the installation could have been discovered by simple inspection, involve questions of fact which have been passed upon by the appellate court.

The Court has consistently held that the factual findings of the trial court, as well as the Court of Appeals, are final and conclusive and may not be reviewed on appeal. Among the exceptional circumstances where a reassessment of facts found by the lower courts is allowed are when the conclusion is a finding grounded entirely on speculation, surmises or conjectures; when the inference made is manifestly absurd, mistaken or impossible; when there is grave abuse of discretion in the appreciation of facts; when the judgment is premised on a misapprehension of facts; when the findings went beyond the issues of the case and the same are contrary to the admissions of both appellant and appellee. After a careful study of the case at bench, we find none of the above grounds present to justify the re-evaluation of the findings of fact made by the courts below.8

We see no valid reason to discard the factual conclusions of the appellate court. . . . (I)t is not the function of this Court to assess and evaluate all over again the evidence, testimonial and documentary, adduced by the parties, particularly where, such as here, the findings of both the trial court and the appellate court on the matter coincide.9 (Emphasis supplied)

Hence, the first two issues will not be resolved as they raise questions of fact.

Thus, the only question left to be resolved is that of prescription. In their submissions, the parties argued lengthily on the nature of the contract entered into by them, viz., whether it was one of sale or for a piece of work.

Article 1713 of the Civil Code defines a contract for a piece of work thus:

By the contract for a piece of work the contractor binds himself to execute a piece of work for the employer, in consideration of a certain price or compensation. The contractor may either employ only his labor or skill, or also furnish the material.

A contract for a piece of work, labor and materials may be distinguished from a contract of sale by the inquiry as to whether the thing transferred is one not in existence and which would never have existed but for the order, of the person desiring it10 . In such case, the contract is one for a piece of work, not a sale. On the other hand, if the thing subject of the contract would have existed and been the subject of a sale to some other person even if the order had not been given, then the contract is one of sale11 .

Thus, Mr. Justice Vitug12 explains that -

A contract for the delivery at a certain price of an article which the vendor in the ordinary course of his business manufactures or procures for the general market, whether the same is on hand at the time or not is a contract of sale, but if the goods are to be manufactured specially for the customer and upon his special order, and not for the general market, it is a contract for a piece of work (Art. 1467, Civil Code). The mere fact alone that certain articles are made upon previous orders of customers will not argue against the imposition of the sales tax if such articles are ordinarily manufactured by the taxpayer for sale to the public (Celestino Co. vs. Collector, 99 Phil. 841).

To Tolentino, the distinction between the two contracts depends on the intention of the parties. Thus, if the parties intended that at some future date an object has to be delivered, without considering the work or labor of the party bound to deliver, the contract is one of sale. But if one of the parties accepts the undertaking on the basis of some plan, taking into account the work he will employ personally or through another, there is a contract for a piece of work13 .

Clearly, the contract in question is one for a piece of work. It is not petitioner's line of business to manufacture air-conditioning systems to be sold "off-the-shelf." Its business and particular field of expertise is the fabrication and installation of such systems as ordered by customers and in accordance with the particular plans and specifications provided by the customers. Naturally, the price or compensation for the system manufactured and installed will depend greatly on the particular plans and specifications agreed upon with the customers.

The obligations of a contractor for a piece of work are set forth in Articles 1714 and 1715 of the Civil Code, which provide:

Art. 1714. If the contractor agrees to produce the work from material furnished by him, he shall deliver the thing produced to the employer and transfer dominion over the thing. This contract shall be governed by the following articles as well as by the pertinent provisions on warranty of title and against hidden defects and the payment of price in a contract of sale.

Art. 1715. The contractor shall execute the work in such a manner that it has the qualities agreed upon and has no defects which destroy or lessen its value or fitness for its ordinary or stipulated use. Should the work be not of such quality, the employer may require that the contractor remove the defect or execute another work. If the contractor fails or refuses to comply with this obligation, the employer may have the defect removed or another work executed, at the contractor's cost.

The provisions on warranty against hidden defects, referred to in Art. 1714 above-quoted, are found in Articles 1561 and 1566, which read as follows:

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 his trade or profession, should have known them.

xxx xxx xxx

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.

The remedy against violations of the warranty against hidden defects is either to withdraw from the contract (redhibitory action) or to demand a proportionate reduction of the price (accion quanti manoris), with damages in either case14 .

In Villostas vs. Court of Appeals15 , we held that, "while it is true that Article 1571 of the Civil Code provides for a prescriptive period of six months for a redhibitory action, a cursory reading of the ten preceding articles to which it refers will reveal that said rule may be applied only in case of implied warranties"; and where there is an express warranty in the contract, as in the case at bench, the prescriptive period is the one specified in the express warranty, and in the absence of such period, "the general rule on rescission of contract, which is four years (Article 1389, Civil Code) shall apply"16 .

Consistent with the above discussion, it would appear that this suit is barred by prescription because the complaint was filed more than four years after the execution of the contract and the completion of the air-conditioning system.

However, a close scrutiny of the complaint filed in the trial court reveals that the original action is not really for enforcement of the warranties against hidden defects, but one for breach of the contract itself. It alleged17 that the petitioner, "in the installation of the air conditioning system did not comply with the specifications provided" in the written agreement between the parties, "and an evaluation of the air-conditioning system as installed by the defendant showed the following defects and violations of the specifications of the agreement, to wit:

GROUND FLOOR:

"A. RIGHT WING:

Equipped with Worthington Compressor, Model 2VC4 directly driven by an Hp Elin electric motor 1750 rmp, 3 phase, 60 cycles, 220 volts, complete with starter evaporative condenser, circulating water pump, air handling unit air ducts.

Defects Noted:

1. Deteriorated evaporative condenser panels, coils are full of scales and heavy corrosion is very evident.

2. Defective gauges of compressors;

3. No belt guard on motor;

4. Main switch has no cover;

5. Desired room temperature not attained;

Aside from the above defects, the following were noted not installed although provided in the specifications.

1. Face by-pass damper of G.I. sheets No. 16. This damper regulates the flow of cooled air depending on room condition.

2. No fresh air intake provision were provided which is very necessary for efficient comfort cooling..

3. No motor to regulate the face and by-pass damper.

4. Liquid level indicator for refrigerant not provided.

5. Suitable heat exchanger is not installed. This is an important component to increase refrigeration efficiency.

6. Modulating thermostat not provided.

7. Water treatment device for evaporative condenser was not provided.

8. Liquid receiver not provided by sight glass.

B. LEFT WING:

Worthington Compressor Model 2VC4 is installed complete with 15 Hp electric motor, 3 phase, 220 volts 60 cycles with starter.

Defects Noted:

Same as right wing. except No. 4, All other defects on right wing are common to the left wing.

SECOND FLOOR: (Common up to EIGHT FLOORS)

Compressors installed are MELCO with 7.5 Hp V-belt driven by 1800 RPM, -220 volts, 60 cycles, 3 phase, Thrige electric motor with starters.

As stated in the specifications under, Section No. IV, the MELCO compressors do not satisfy the conditions stated therein due to the following:

1. MELCO Compressors are not provided with automatic capacity unloader.

2. Not provided with oil pressure safety control.

3. Particular compressors do not have provision for renewal sleeves.

Out of the total 15 MELCO compressors installed to serve the 2nd floor up to 8th floors, only six (6) units are in operation and the rest were already replaced. Of the remaining six (6) units, several of them have been replaced with bigger crankshafts.

NINTH FLOOR:

Two (2) Worthington 2VC4 driven by 15 Hp, 3 phase, 220 volts, 60 cycles, 1750 rpm, Higgs motors with starters.

Defects Noted are similar to ground floor.

GENERAL REMARKS:

Under Section III, Design conditions of specification for air conditioning work, and taking into account "A" & "B" same, the present systems are not capable of maintaining the desired temperature of 76 = 2ºF (sic).

The present tenant have installed 35 window type air conditioning units distributed among the different floor levels. Temperature measurements conducted on March 29. 1971, revealed that 78ºF room (sic) is only maintained due to the additional window type units.

The trial court, after evaluating the evidence presented, held that, indeed, petitioner failed to install items and parts required in the contract and substituted some other items which were not in accordance with the specifications18 , thus:

From all of the foregoing, the Court is persuaded to believe the plaintiff that not only had the defendant failed to install items and parts provided for in the specifications of the air-conditioning system be installed, like face and by-pass dampers and modulating thermostat and many others, but also that there are items, parts and accessories which were used and installed on the air-conditioning system which were not in full accord with contract specifications. These omissions to install the equipments, parts and accessories called for in the specifications of the contract, as well as the deviations made in putting into the air-conditioning system equipments, parts and accessories not in full accord with the contract specification naturally resulted to adversely affect the operational effectiveness of the air-conditioning system which necessitated the installation of thirty-five window type of air-conditioning units distributed among the different floor levels in order to be able to obtain a fairly desirable room temperature for the tenants and actual occupants of the building. The Court opines and so holds that the failure of the defendant to follow the contract specifications and said omissions and deviations having resulted in the operational ineffectiveness of the system installed makes the defendant liable to the plaintiff in the amount necessary to rectify to put the air conditioning system in its proper operational condition to make it serve the purpose for which the plaintiff entered into the contract with the defendant.

The respondent Court affirmed the trial court's decision thereby making the latter's findings also its own.

Having concluded that the original complaint is one for damages arising from breach of a written contract - and not a suit to enforce warranties against hidden defects - we here - with declare that the governing law is Article 1715 (supra). However, inasmuch as this provision does not contain a specific prescriptive period, the general law on prescription, which is Article 1144 of the Civil Code, will apply. Said provision states, inter alia, that actions "upon a written contract" prescribe in ten (10) years. Since the governing contract was executed on September 10, 1962 and the complaint was filed on May 8, 1971, it is clear that the action has not prescribed.

What about petitioner's contention that "acceptance of the work by the employer relieves the contractor of liability for any defect in the work"? This was answered by respondent Court19 as follows:

As the breach of contract which gave rise to the instant case consisted in appellant's omission to install the equipments (sic), parts and accessories not in accordance with the plan and specifications provided for in the contract and the deviations made in putting into the air conditioning system parts and accessories not in accordance with the contract specifications, it is evident that the defect in the installation was not apparent at the time of the delivery and acceptance of the work, considering further that plaintiff is not an expert to recognize the same. From the very nature of things, it is impossible to determine by the simple inspection of air conditioning system installed in an 8-floor building whether it has been furnished and installed as per agreed specifications.

Verily, the mere fact that the private respondent accepted the work does not, ipso facto, relieve the petitioner from liability for deviations from and violations of the written contract, as the law gives him ten (10) years within which to file an action based on breach thereof.

WHEREFORE, the petition is hereby DENIED and the assailed Decision is AFFIRMED. No costs.

SO ORDERED.

Narvasa, C.J., Davide Jr., Melo and Francisco, JJ., concur.

Footnotes

1 Rollo, pp. 36-51.

2 Special Tenth Decision, composed of J. Porfirio V. Sison, ponente, and JJ. Mariano Serrano and Rodolfo A. Nocon, members.

3 Record on Appeal, pp. 497-510.

4 Judge Pedro C. Navarro presiding.

5 CA Decision, p. 6; rollo, p. 40.

6 Record on Appeal, p. 94.

7 Navarro vs. Court of Appeals., 209 SCRA 612 (June 8, 1992), citing Remalante vs. Tibe, et al., 158 SCRA 138 (February 25, 1988).

8 Chua Tiong Tay vs. Court of Appeals and Goldrock Construction and Development Corp., G.R. No. 112130, March 31, 1995; J. Flerida Ruth P. Romero, ponente.

9 South Sea Surety and Insurance Company, Inc. vs. Hon. Court of Appeals, et al., G.R. No. 102253, June 2, 1995; J. Jose C. Vitug, ponente.

10 Aquino and Aquino, The Civil Code of the Philippines, 1990 ed., vol. 3, p. 246.

11 Comissioner of Internal Revenue vs. Engineering Equipment and Supply Co., 64 SCRA 590 (June 30, 1975); Inchausti & Co. vs. Ellis Cromwell, 20 Phil. (October 16, 1911).

12 Vitug, Compendium on Civil Law and Jurisprudence, 1993 ed., p. 581.

13 Tolentino, Commentaries and Jurisprudence on the Civil Code of the Philippines, 1992 ed., vol. 5, p. 286, citing 4 Colin & Capitant 477.

14 Art. 1567, Civil Code.

15 210 SCRA 490 (June 26, 1992).

16 Id., citing Moles vs. Intermediate Appellate Court, 169 SCRA 777 (January 31, 1989).

17 Record on Appeal, pp. 3-8.

18 Record on Appeal, pp. 508-509.

19 Rollo, p. 48-49.


The Lawphil Project - Arellano Law Foundation


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Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 141480 November 29, 2006

CARLOS B. DE GUZMAN, Petitioner,
vs.
TOYOTA CUBAO, INC.,
Respondent.

D E C I S I O N

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 P508,000. Petitioner made a down payment of P152,400, leaving a balance of P355,600 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 damages 2 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 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 ORDERED 3

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 certiorari under 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 P200,000.00 moral damages.

7. By way of example for the public good, plaintiff should also be awarded exemplary damages in the amount of P200,000.00.

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 P100,000.

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. P200,000 – moral damages;

ii. P200,000 – exemplary damages;

iii. P200,000 – 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, 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.

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

x x x

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.

ADOLFO S. AZCUNA

Associate Justice

WE CONCUR:

REYNATO S. PUNO

Chairperson
Associate Justice

ANGELINA SANDOVAL-GUTIERREZ, RENATO C. CORONA

Associate Justice Associate Justice

CANCIO C. GARCIA
Associate Justice

A T T E S T A T I O N

I attest that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

REYNATO S. PUNO

Associate Justice

Chairperson, Second Division

C E R T I F I C A T I O N

Pursuant to Section 13, Article VIII of the Constitution and the Division Chairperson’s Attestation, it is hereby certified that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

ARTEMIO V. PANGANIBAN
Chief Justice

Footnotes

1 Per Judge Benedicto B. Ulep.

2 Civil Case No. 99-37381, entitled "Carlos B. De Guzman v. Toyota Cubao, Inc."

3 Rollo, pp. 15-16.

4 RTC Records, p. 39.

5 See Manalo v. Gloria, G.R. No. 106692, September 1, 1994, 236 SCRA 130.

6 RTC Records, pp. 1-2.

7 See Goodyear Philippines, Inc. v. Sy, G.R. No. 154554, November 9, 2005, 474 SCRA 427.

Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 110295 October 18, 1993

COCA-COLA BOTTLERS PHILIPPINES, INC.,
vs.

THE HONORABLE COURT OF APPEALS (Fifth Division) and MS. LYDIA GERONIMO, respondents.

Angara, Abello, Concepcion, Regala & Cruz Law Offices for petitioner.

Alejandro M. Villamil for private respondent.

DAVIDE, JR., J.:

This case concerns the proprietress of a school canteen which had to close down as a consequence of the big drop in its sales of soft drinks triggered by the discovery of foreign substances in certain beverages sold by it. The interesting issue posed is whether the subsequent action for damages by the proprietress against the soft drinks manufacturer should be treated as one for breach of implied warranty against hidden defects or merchantability, as claimed by the manufacturer, the petitioner herein which must therefore be filed within six months from the delivery of the thing sold pursuant to Article 1571 of the Civil Code, or one for quasi-delict, as held by the public respondent, which can be filed within four years pursuant to Article 1146 of the same Code.

On 7 May 1990, Lydia L. Geronimo, the herein private respondent, filed a complaint for damages against petitioner with the Regional Trial Court (RTC) of Dagupan City. 1 The case was docketed as Civil Case No. D-9629. She alleges in her complaint that she was the proprietress of Kindergarten Wonderland Canteen docketed as located in Dagupan City, an enterprise engaged in the sale of soft drinks (including Coke and Sprite) and other goods to the students of Kindergarten Wonderland and to the public; on or about 12 August 1989, some parents of the students complained to her that the Coke and Sprite soft drinks sold by her contained fiber-like matter and other foreign substances or particles; he then went over her stock of softdrinks and discovered the presence of some fiber-like substances in the contents of some unopened Coke bottles and a plastic matter in the contents of an unopened Sprite bottle; she brought the said bottles to the Regional Health Office of the Department of Health at San Fernando, La Union, for examination; subsequently, she received a letter from the Department of Health informing her that the samples she submitted "are adulterated;" as a consequence of the discovery of the foreign substances in the beverages, her sales of soft drinks severely plummeted from the usual 10 cases per day to as low as 2 to 3 cases per day resulting in losses of from P200.00 to P300.00 per day, and not long after that she had to lose shop on 12 December 1989; she became jobless and destitute; she demanded from the petitioner the payment of damages but was rebuffed by it. She prayed for judgment ordering the petitioner to pay her P5,000.00 as actual damages, P72,000.00 as compensatory damages, P500,000.00 as moral damages, P10,000.00 as exemplary damages, the amount equal to 30% of the damages awarded as attorney's fees, and the costs. 2

The petitioner moved to dismiss 3 the complaint on the grounds of failure to exhaust administrative remedies and prescription. Anent the latter ground, the petitioner argued that since the complaint is for breach of warranty under Article 1561 of the said Code. In her Comment 4 thereto, private respondent alleged that the complaint is one for damages which does not involve an administrative action and that her cause of action is based on an injury to plaintiff's right which can be brought within four years pursuant to Article 1146 of the Civil Code; hence, the complaint was seasonably filed. Subsequent related pleadings were thereafter filed by the parties. 5

In its Order of 23 January 1991, 6 the trial court granted the motion to dismiss. It ruled that the doctrine of exhaustion of administrative remedies does not apply as the existing administrative remedy is not adequate. It also stated that the complaint is based on a contract, and not on quasi-delict, as there exists pre-existing contractual relation between the parties; thus, on the basis of Article 1571, in relation to Article 1562, the complaint should have been filed within six months from the delivery of the thing sold.

Her motion for the reconsideration of the order having been denied by the trial court in its Order of 17 April 1991, 7 the private respondent came to this Court via a petition for review on certiorari which we referred to the public respondent "for proper determination and disposition. 8 The public respondent docketed the case as CA-G.R. SP No. 25391.

In a decision promulgated on 28 January 1992, 9 the public respondent annulled the questioned orders of the RTC and directed it to conduct further proceedings in Civil Case No. D-9629. In holding for the private respondent, it ruled that:

Petitioner's complaint being one for quasi-delict, and not for breach of warranty as respondent contends, the applicable prescriptive period is four years.

It should be stressed that the allegations in the complaint plainly show that it is an action or damages arising from respondent's act of "recklessly and negligently manufacturing adulterated food items intended to be sold or public consumption" (p. 25, rollo). It is truism in legal procedure that what determines the nature of an action are the facts alleged in the complaint and those averred as a defense in the defendant's answer (I Moran 126; Calo v. Roldan, 76 Phil. 445; Alger Electric, Inc. v. CA, 135 SCRA 340).

Secondly, despite the literal wording of Article 2176 of the Civil code, the existence of contractual relations between the parties does not absolutely preclude an action by one against the other for quasi-delict arising from negligence in the performance of a contract.

In Singson v. Court of Appeals (23 SCRA 1117), the Supreme Court ruled:

It has been repeatedly held: that the existence of a contract between the parties does not bar the commission of a tort by the one against the other and the consequent recovery of damages therefor
. . . . Thus in Air France vs. Carrascoso, . . . (it was held that) although the relation between a passenger and a carrier is "contractual both in origin and in nature the act that breaks the contract may also be a tort.

Significantly, in American jurisprudence, from which Our law on Sales was taken, the authorities are one in saying that he availability of an action or breach of warranty does not bar an action for torts in a sale of defective goods. 10

Its motion for the reconsideration of the decision having been denied by the public respondent in its Resolution of 14 May 1993, 11 the petitioner took his recourse under Rule 45 of the Revised Rules of Court. It alleges in its petition that:

I.

THE HONORABLE COURT OF APPEALS COMMITTED A GRAVE AND REVERSIBLE ERROR IN RULING THAT ARTICLE 2176, THE GENERAL PROVISION ON QUASI-DELICTS, IS APPLICABLE IN THIS CASE WHEN THE ALLEGATIONS OF THE COMPLAINT CLEARLY SHOW THAT PRIVATE RESPONDENT'S CAUSE OF ACTION IS BASEDON BREACH OF A SELLER'S IMPLIED WARRANTIES UNDER OUR LAW ON SALES.

II.

CORROLARILY, THE HONORABLE COURT OF APPEALS COMMITTED A GRAVE AND REVERSIBLE ERROR IN OVERRULING PETITIONER'S ARGUMENT THAT PRIVATE RESPONDENT'S CAUSE OF ACTION HAD PRESCRIBED UNDER ARTICLE 1571 OF THE CIVIL CODE. 12

The petitioner insists that a cursory reading of the complaint will reveal that the primary legal basis for private respondent's cause of action is not Article 2176 of the Civil Code on quasi-delict — for the complaint does not ascribe any tortious or wrongful conduct on its part — but Articles 1561 and 1562 thereof on breach of a seller's implied warranties under the law on sales. It contends the existence of a contractual relation between the parties (arising from the contract of sale) bars the application of the law on quasi-delicts and that since private respondent's cause of action arose from the breach of implied warranties, the complaint should have been filed within six months room delivery of the soft drinks pursuant to Article 171 of the Civil Code.

In her Comment the private respondent argues that in case of breach of the seller's implied warranties, the vendee may, under Article 1567 of the Civil Code, elect between withdrawing from the contract or demanding a proportionate reduction of the price, with damages in either case. She asserts that Civil Case No. D-9629 is neither an action for rescission nor for proportionate reduction of the price, but for damages arising from a quasi-delict and that the public respondent was correct in ruling that the existence of a contract did not preclude the action for quasi-delict. As to the issue of prescription, the private respondent insists that since her cause of action is based on quasi-delict, the prescriptive period therefore is four (4) years in accordance with Article 1144 of the Civil Code and thus the filing of the complaint was well within the said period.

We find no merit in the petition. The public respondent's conclusion that the cause of action in Civil Case No. D-9629 is found on quasi-delict and that, therefore, pursuant to Article 1146 of the Civil Code, it prescribes in four (4) years is supported by the allegations in the complaint, more particularly paragraph 12 thereof, which makes reference to the reckless and negligent manufacture of "adulterated food items intended to be sold for public consumption."

The vendee's remedies against a vendor with respect to the warranties against hidden defects of or encumbrances upon the thing sold are not limited to those prescribed in Article 1567 of the Civil Code which provides:

Art. 1567. In the case of Articles 1561, 1562, 1564, 1565 and 1566, the vendee may elect between withdrawing from the contract and demanding a proportionate reduction of the price, with damages either
case. 13

The vendee may also ask for the annulment of the contract upon proof of error or fraud, in which case the ordinary rule on obligations shall be applicable. 14 Under the law on obligations, responsibility arising from fraud is demandable in all obligations and any waiver of an action for future fraud is void. Responsibility arising from negligence is also demandable in any obligation, but such liability may be regulated by the courts, according to the circumstances. 15 Those guilty of fraud, negligence, or delay in the performance of their obligations and those who in any manner contravene the tenor thereof are liable for damages. 16

The vendor could likewise be liable for quasi-delict under Article 2176 of the Civil Code, and an action based thereon may be brought by the vendee. While it may be true that the pre-existing contract between the parties may, as a general rule, bar the applicability of the law on quasi-delict, the liability may itself be deemed to arise from quasi-delict, i.e., the acts which breaks the contract may also be a quasi-delict. Thus, in Singson vs. Bank of the Philippine Islands, 17 this Court stated:

We have repeatedly held, however, that the existence of a contract between the parties does not bar the commission of a tort by the one against the other and the consequent recovery of damages therefor. 18 Indeed, this view has been, in effect, reiterated in a comparatively recent case. Thus, in Air France vs. Carrascoso, 19 involving an airplane passenger who, despite hi first-class ticket, had been illegally ousted from his first-class accommodation and compelled to take a seat in the tourist compartment, was held entitled to recover damages from the air-carrier, upon the ground of tort on the latter's part, for, although the relation between the passenger and a carrier is "contractual both in origin and nature . . . the act that breaks the contract may also be a tort.

Otherwise put, liability for quasi-delict may still exist despite the presence of contractual relations. 20

Under American law, the liabilities of a manufacturer or seller of injury-causing products may be based on negligence, 21 breach of warranty, 22 tort, 23 or other grounds such as fraud, deceit, or misrepresentation. 24 Quasi-delict, as defined in Article 2176 of the Civil Code, (which is known in Spanish legal treaties as culpa aquiliana, culpa extra-contractual or cuasi-delitos) 25 is homologous but not identical to tort under the common law, 26 which includes not only negligence, but also intentional criminal acts, such as assault and battery, false imprisonment and deceit. 27

It must be made clear that our affirmance of the decision of the public respondent should by no means be understood as suggesting that the private respondent's claims for moral damages have sufficient factual and legal basis.

IN VIEW OF ALL THE FOREGOING, the instant petition is hereby DENIED for lack of merit, with costs against the petitioner.

SO ORDERED.

Cruz, Bellosillo and Quiason, JJ., concur.

Griño-Aquino, J., is on leave.

# Footnotes

1 Annex "C" of Petition; Rollo, 46-49.

2 Rollo, 46-48.

3 Annex "D" of Petition; Rollo, 58-59.

4 Annex "E" of Petition; Rollo, 58-59.

5 Reply to the Comment (Annex "F" of Petition); Rejoinder to Reply (Annex "G" of Petition); Surrejoinder (Annex "H" of Petition).

6 Annex "I" of Petition; Rollo, 77-78. Per Judge Eloy R. Bello, Jr.

7 Annex "J" of Petition; Rollo, 79-81.

8 Rollo, 13, 39.

9 Annex "A" of Petition; Rollo, 36-43. Per Associate Justice Ricardo L. Pronove, Jr., concurred in by Associate Justices Nicolas P. Lapeña, Jr. and Consuelo Ynares-Santiago.

10 Rollo, 40-41. Citing CJS Supp. Products Liability § 9; Guarino vs. Mine Safety Appliance Co., 44 ALR 3d 470, 255 N.E. 2d 173; Goldberg vs. Kollsman Instrument Corp., 12 N.Y. 2d 432, 436, 191 N.E. 2d 82-83; Greco vs. S.S. Kresge Co. 12 N.E. 2d 557, 561.

11 Annex "B" of Petition; Rollo, 45.

12 Rollo, 14-15.

13 The first remedy is known as the redhibitory action and the second, the accion quanti minoris. (TOLENTINO, A.M., Commentaries and Jurisprudence on the Civil Code of the Philippines, Vol. V, 1992 ed., 123).

14 TOLENTINO, supra.

15 Article 1171 and 1172, Civil Code.

16 Article 1170, Civil Code.

17 23 SCRA 1117 [1968]. See also Araneta vs. De Joya, 57 SCRA 59 [1974].

18 Citing Cangco vs. Manila Railroad, 38 Phil. 768; Yamada vs. Manila Railroad, 33 Phil. 8; Vasquez vs. Borja, 74 Phil. 560.

19 18 SCRA 155 [1966].

20 PARAS, E.L., Civil Code of the Philippines, Vol. V, 1990 ed., 995-996, citing Air France vs. Carrascoso and Singson vs. Bank of Philippine Islands, supra.

21 63 AM JUR 2d Products Liability, §25.

22 Id., § 91.

23 Id., § 123.

24 Id., §153.

25 Report of the Code Commission on the Proposed Civil Code of the Philippines, 161.

26 Vasquez vs. De Borja, 74 Phil. 560 [1944].

27 Report of the Code Commission on the Proposed Civil Code of the Philippines, 162.

Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

JAIME D. ANG, Petitioner,

- versus -

COURT OF APPEALS AND BRUNO SOLEDAD, Respondents.

G.R. No. 177874

Present:

QUISUMBING, J., Chairperson,

CARPIO MORALES,
TINGA,
VELASCO, JR., and
BRION, JJ.

Promulgated:
September 29, 2008

x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

D E C I S I O N

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 Sale2 of 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.

Branch 19 of the Cebu City RTC, by Order9 dated May 4, 1995, 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,10 docketed 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,12 docketed 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:

x x x x

[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 encumbrances and I will defend the same from all claims or any claim whatsoever…"

Still the Court finds that plaintiff cannot recover under this warranty. There is no showing of compliance with the requisites.

x x x x

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 P62,038.47 which 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 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:

x x x x

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.

CONCHITA CARPIO MORALES
Associate Justice

WE CONCUR:

LEONARDO A. QUISUMBING
Associate Justice
Chairperson

DANTE O. TINGA
Associate Justice

PRESBITERO J. VELASCO, JR.
Associate Justice

ARTURO D. BRION
Associate Justice

A T T E S T A T I O N

I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

LEONARDO A. QUISUMBING
Associate Justice
Chairperson

C E R T I F I C A T I O N

Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairperson’s Attestation, I certify that the conclusions in the above decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

REYNATO S. PUNO
Chief Justice

Foonotes

1 Exhibit "C," records, p. 86.

2 Exhibit "2," id. at 136.

3 Exhibit "D," id. at 87.

4 Exhibit "J," id. at 94.

5 See Chattel Mortgage, Exhibit "E," id. at 88.

6 Exhibit "G," id. at 91.

7 Exhibit "4," id. at 138-141.

8 Annex "A," CA rollo, pp. 38-41.

9 Annex "C", id. at 49; penned by Judge Ramon G. Codilla, Jr.

10 Annex "D," id. at 50-53.

11 Annex "G," id. at 66-67; penned by Judge Renato C. Dacudao.

12 Annex "H," id. at 68-72.

13 Annex "J," id. at 87; penned by Judge Edgemelo C. Rosales

14 Annex "K," id. at 90-91; penned by Judge Simeon Dumdum, Jr.

15 ` Id. at 91-92.

16 Annex "M," id. at 99-100.

17 Id. at 169-177; penned by Associate Justice Marlene Gonzales-Sison, with the concurrence of Associate Justices Arsenio J. Magpale and Agustin S. Dizon.

18 G.R. No. 154554, November 9, 2005, 474 SCRA 427.

19 Annex "C," CA rollo, pp. 206-209. Penned by Associate Justice Stephen C. Cruz and concurred in by Executive Justice Arsenio J. Magpale and Associate Justice Agustin S. Dizon.

20 G.R. No. 52267, January 24, 1996, 252 SCRA 156.

21 G.R. Nos. 123672 & 164489, December 14, 2005, 477 SCRA 666.

22 De Leon, Comments and Cases on Sales 299 (2000).

23 Id. at 304.

24 Power Commercial and Industrial Corp. v. CA, et al., G.R. No. 119745, June 20, 1997, 274 SCRA 597, 600.

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