Warranties
6) stipulate the period within which, after notice of defect, malfunction
III. Legal Aspects of Consumer Transactions
A. Warranties
Art. 1545. Where the obligation of either party to a contract of sale is subject to any
condition which is not performed, such party may refuse to proceed with the contract
or he may waive performance of the condition. If the other party has promised that the
condition should happen or be performed, such first mentioned party may also treat
the nonperformance of the condition as a breach of warranty.
Where the ownership in the thing has not passed, the buyer may treat the fulfillment
by the seller of his obligation to deliver the same as described and as warranted
expressly or by implication in the contract of sale as a condition of the obligation of the
buyer to perform his promise to accept and pay for the thing.
Art. 1653. The provisions governing warranty contained in the Title on Sales shall be
applicable to the contract of lease.
In the cases where the return of the price is required, reduction shall be made in
proportion to the time during which the lessee enjoyed the thing.
REPUBLIC ACT NO. 7394.
Article 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.
Article 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:
a) Terms of express warranty. – Any seller or manufacturer who gives an
express warranty shall:
1) set forth the terms of warranty in clear and readily understandable
language and clearly identify himself as the warrantor;
2) identify the party to whom the warranty is extended;
3) state the products or parts covered;
4) state what the warrantor will do in the event of a defect, malfunction
of failure to conform to the written warranty and at whose expense;
5) state what the consumer must do to avail of the rights which accrue
to the warranty; and
or failure to conform to the warranty, the warrantor will perform any
obligation under the warranty.
b) Express warranty – operative from moment of sale. – All written warranties
or guarantees issued by a manufacturer, producer, or importer shall be
operative from the moment of sale.
1) Sales Report. – All sales made by distributors of products covered
by this Article shall be reported to the manufacturer, producer, or
importer of the product sold within thirty (30) days from date of
purchase, unless otherwise agreed upon. The report shall contain,
among others, the date of purchase, model of the product bought, its
serial number, name and address of the buyer. The report made in
accordance with this provision shall be equivalent to a warranty
registration with the manufacturer, producer, or importer. Such
registration is sufficient to hold the manufacturer, producer, or
importer liable, in appropriate cases, under its warranty.
2) Failure to make or send report. – Failure of the distributor to make
the report or send them the form required by the manufacturer,
producer, or importer shall relieve the latter of its liability under the
warranty: Provided, however, That the distributor who failed to
comply with its obligation to send the sales reports shall be personally
liable under the warranty. For this purpose, the manufacturer shall
be obligated to make good the warranty at the expense of the
distributor.
3) Retail. – The retailer shall be subsidiarily liable under the warranty
in case of failure of both the manufacturer and distributor to honor
the warranty. In such case, the retailer shall shoulder the expenses
and costs necessary to honor the warranty. Nothing therein shall
prevent the retailer from proceeding against the distributor or
manufacturer.
4) Enforcement of warranty or guarantee. – The warranty rights can
be enforced by presentment of a claim. To this end, the purchaser
needs only to present to the immediate seller either the warranty card
of the official receipt along with the product to be serviced or returned
to the immediate seller. No other documentary requirement shall be
demanded from the purchaser. If the immediate seller is the
manufacturer's factory or showroom, the warranty shall immediately
be honored. If the product was purchased from a distributor, the
distributor shall likewise immediately honor the warranty. In the case
of a retailer other than the distributor, the former shall take
responsibility without cost to the buyer of presenting the warranty
claim to the distributor in the consumer's behalf.
5) Record of purchases. – Distributors and retailers covered by this
Article shall keep a record of all purchases covered by a warranty or
1
Warranties
guarantee for such period of time corresponding to the lifetime of the
product's respective warranties or guarantees.
6) Contrary stipulations – null and void. – All covenants, stipulations
or agreements contrary to the provisions of this Article shall be
without legal effect.
c) Designation of warranties. – A written warranty shall clearly and
conspicuously designate such warranty as:
1) "Full warranty" if the written warranty meets the minimum
requirements set forth in paragraph (d); or
2) "Limited warranty" if the written warranty does not meet such
minimum requirements.
d) Minimum standards for warranties. – For the warrantor of a consumer
product to meet the minimum standards for warranty, he shall:
1) remedy such consumer product within a reasonable time and
without charge in case of a defect, malfunction or failure to conform
to such written warranty;
2) permit the consumer to elect whether to ask for a refund or
replacement without charge of such product or part, as the case may
be, where after reasonable number of attempts to remedy the defect
or malfunction, the product continues to have the defect or to
malfunction.
The warrantor will not be required to perform the above duties if he can show
that the defect, malfunction or failure to conform to a written warranty was
caused by damage due to unreasonable use thereof.
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. – 1) In case of breach of express warranty, the
consumer may elect to have the goods repaired or its purchase price refunded
by the warrantor. In case the repair of the product in whole or in part is elected,
the warranty work must be made to conform to the express warranty within
thirty (30) days by either the warrantor or his representative. The thirty-day
period, however, may be extended by conditions which are beyond the control
of the warrantor or his representative. In case the refund of the purchase price
is elected, the amount directly attributable to the use of the consumer prior to
the discovery of the non-conformity shall be deducted.
2) In case of breach of implied warranty, the consumer may retain in
the goods and recover damages, or reject the goods, cancel and
contract and recover from the seller so much of the purchase price as
has been paid, including damages.
Article 70. Professional Services. – The provision of this Act on warranty shall not
apply to professional services of certified public accountants, architects, engineers,
lawyers, veterinarians, optometrists, pharmacists, nurses, nutritionists, dietitians,
physical therapists, salesmen, medical and dental practitioners and other professionals
engaged in their respective professional endeavors.
Article 169. Prescription. – All actions or claims accruing under the provisions of this
Act and the rules and regulations issued pursuant thereto shall prescribe within two (2)
years from the time the consumer transaction was consummated or the deceptive or
unfair and unconscionable act or practice was committed and in case of hidden defects,
from discovery thereof.
REPUBLIC ACT NO. 10642.
Section 3.
(h) Lemon Law rights period refers to the period ending twelve (12) months after the
date of the original delivery of a brand new motor vehicle to a consumer or the first
twenty thousand (20,000) kilometers of operation after such delivery, whichever comes
first. This shall be the period during which the consumer can report any
nonconformity, as defined in paragraph (k) herein, to the standards and specifications
of the manufacturer, authorized distributor, authorized dealer or retailer, and pursue
any right as provided for under this Act;
(m) Warranty refers to the written assurance, so labeled, of the manufacturer of a
brand new motor vehicle including any term or condition precedent to the enforcement
of obligations under the warranty; and
(n) Warranty rights period refers to the period provided for under the contract of sale
when the manufacturer would guarantee the materials used, the workmanship and the
roadworthiness of a brand new motor vehicle for ordinary use or reasonable intended
purposes.
Section 5. Repair Attempts. – At any time within the Lemon Law rights period, and
after at least four (4) separate repair attempts by the same manufacturer, distributor,
authorized dealer or retailer for the same complaint, and the nonconformity issue
remains unresolved, the consumer may invoke his or her rights under this Act.
The repair may include replacement of parts components, or assemblies.
2
Warranties
Section 6. Notice of Availment of Lemon Law Rights. – Before availing of any remedy arising from the provisions of this Act shall be settled by the DTI in accordance with
under this Act and subject to compliance with the provisions of Section 5 hereof, the the following dispute resolution mechanisms:
consumer shall, in writing, notify the manufacturer, distributor, authorized dealer or
retailer of the unresolved complaint, and the consumer’s intention to invoke his or her
(a) Mediation
rights under this Act within the Lemon Law rights period.

(1) The principles of negotiation, conciliation and mediation towards

The warranty booklet issued by the manufacturer, distributor, authorized dealer or
amicable settlement between the manufacturer, distributor,
retailer shall clearly state the manner and form of such notice to constitute a valid and
authorized dealer or retailer and the consumer shall be strictly
legal notice to the manufacturer, distributor, authorized dealer or retailer. It shall also
observed;
clearly state the responsibility of the consumer under this section.

(2) In the course of its dispute resolution efforts, the DTI shall
Section 7. Availment of Lemon Law Rights. – Subsequent to filing the notice of
endeavor to independently establish the validity of the consumer’s
availment referred to in the preceding section, the consumer shall bring the vehicle to
outstanding complaint. The DTI shall likewise retain the services of
the manufacturer, distributor, authorized dealer or retailer from where the vehicle was
other government agencies or qualified independent private entities
purchased for a final attempt to address the complaint of the consumer to his or her
in the ascertainment of the validity of the consumer’s complaint. Any
satisfaction.
cost incurred in establishing the validity of the consumer’s
complaint shall be bornejointly by the consumer and the
It shall be the duty of the manufacturer, distributor, authorized dealer or retailer, upon manufacturer, distributor, authorized dealer or retailer;
receipt of the motor vehicle and the notice of nonconformity required under Section 6
hereof, to attend to the complaints of the consumer including, as may be necessary,
(3) The complaint shall be deemed valid if it is independently
making the repairs and undertaking such actions to make the vehicle conform to the
established that the motor vehicle does not conform to the standards
standards or specifications of the manufacturer, distributor, authorized dealer or
or specifications set by the manufacturer, distributor, authorized
retailer for such vehicle.
dealer or retailer;

In case the nonconformity issue remains unresolved despite the manufacturer,

(4) Upon failure of the negotiation or mediation between the
distributor, authorized dealer or retailer’s efforts to repair the vehicle, pursuant to the
manufacturer, distributor, authorized, dealer or retailer and the
consumer’s availment of his or her Lemon Law rights, the consumer may file a
consumer, the parties shall execute a certificate attesting to such
complaint before the DTI as provided for under this Act: Provided, however, That if the
failure; and
vehicle is not returned for repair, based on the same complaint, within thirty (30)
calendar days from the date of notice of release of the motor vehicle to the consumer
following this repair attempt within the Lemon Law rights period, the repair is (5) At any time during the dispute resolution period, the
deemedsuccessful: Provided, finally, That, in the event that the nonconformity issue manufacturer, distributor, authorized dealer or retailer and the
still exists or persists after the thirty (30)-day period but still within the Lemon Law consumer shall be encouraged to settle amicably. All disputes that
rights period, the consumer may be allowed to avail of the same remedies under have been submitted for mediation shall be settled not later than ten
Sections 5 and 6 hereof. (10) working days from the date of filing of the complaint with the
DTI.
To compensate for the non-usage of the vehicle while under repair and during the
period of availment of the Lemon Law rights, the consumer shall be provided a (b) Arbitration
reasonable daily transportation allowance, an amount which covers the transportation
of the consumer from his or her residence to his or her regular workplace or
In the event there is a failure to settle the complaint during the mediation
destination and vice versa, equivalent to air-conditioned taxi fare, as evidenced by
proceedings, both parties may voluntarily decide to undertake arbitration
official receipt, or in such amount to be agreed upon by the parties, or a service vehicle
proceedings.
at the option of the manufacturer, distributor, authorized dealer or retailer. Any
disagreement on this matter shall be resolved by the DTI.
(c) Adjudication
Nothing herein shall be construed to limit or impair the rights and remedies of a
consumer under any other law. (1) In the event that both parties do not undertake arbitration
proceedings, at least one of the parties may commence adjudication
proceedings, administered by the DTI. The DTI shall rely on the
Section 8. Remedies for Dispute Resolution. – The DTI shall exercise exclusive and
qualified independent findings as to conformity to standards and
original jurisdiction over disputes arising from the provisions of this Act. All disputes
3
Warranties
specifications established herein. In no case shall adjudication may file a case for certiorari to the Court of Appeals under Section 4, Rule 65 of the
proceedings exceed twenty (20) working days; Revised Rules of Court.

(2) In case a finding of nonconformity is arrived at, the DTI shall rule
in favor of the consumer and direct the manufacturer, distributor,
authorized dealer or retailer to grant either of the following remedies
to the consumer:
(i) Replace the motor vehicle with a similar or comparable
motor vehicle in terms of specifications and values, subject
to availability; or
(ii) Accept the return of the motor vehicle and pay the
consumer the purchase price plus the collateral charges.
1. Express Warranty
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.
2. Implied Warranty

In case the consumer decides to purchase another vehicle with a Art. 1547. In a contract of sale, unless contrary intention appears, there is:
higher value and specifications from the same manufacturer,
distributor, authorized dealer or retailer, the consumer shall pay the
(1) An implied warranty on the part of the seller that he has a right to sell the thing at
difference in cost.
the time when the ownership is to pass, and that the buyer shall from that time have
and enjoy the legal and peaceful possession of the thing;
In both cases of replacement and repurchase, the reasonable
allowance for use, as defined in this Act, shall be deducted in
(2) An implied warranty that the thing shall be free from any hidden faults or defects,
determining the value of the nonconforming motor vehicle; and
or any charge or encumbrance not declared or known to the buyer.

(3) In case a nonconformity of the motor vehicle is not found by the

This article shall now, however, be held to render liable a sheriff, auctioneer,
DTI, it shall rule in favor of the manufacturer, distributor,
mortgagee, pledgee, or other person professing to sell by virtue of authority in fact or
.authorized dealer or retailer, and direct the consumer to reimburse
law, for the sale of a thing in which third person has a legal or equitable interest.
the manufacturer, distributor, authorized dealer or retailer the costs
incurred by the latter in validating the consumer’s complaints.
3. Warranty in case of evicition
An appeal may be taken from a final judgment or order of the
Adjudication Officer which completely disposes of the case within Art. 1548. Eviction shall take place whenever by a final judgment based on a right
fifteen (15) days from receipt thereof.1âwphi1 The appeal shall be prior to the sale or an act imputable to the vendor, the vendee is deprived of the whole
taken by filing a Memorandum of Appeal with the Secretary of the or of a part of the thing purchased.
DTI, with Notice of Appeal to the Adjudication Officer, and with a
copy duly furnished the adverse party or parties on any of the
The vendor shall answer for the eviction even though nothing has been said in the
following grounds:
contract on the subject.

(i) Grave abuse of discretion;

(ii) The decision/order is in excess of jurisdiction or
authority of the Adjudication Officer; and
(iii) The decision/order is not supported by the evidence or
there is serious error in the findings of facts.
The Secretary of the DTI shall decide on the appeal within thirty (30) days from receipt
thereof. A party seeking further appeal from the decision of the Secretary of the DTI
The contracting parties, however, may increase, diminish, or suppress this legal
obligation of the vendor. (1475a)
Art. 1549. The vendee need not appeal from the decision in order that the vendor may
become liable for eviction. (n)
Art. 1550. When adverse possession had been commenced before the sale but the
prescriptive period is completed after the transfer, the vendor shall not be liable for
eviction. (n)
4
Warranties
Art. 1551. If the property is sold for nonpayment of taxes due and not made known to
the vendee before the sale, the vendor is liable for eviction. (n)
Art. 1552. The judgment debtor is also responsible for eviction in judicial sales, unless
it is otherwise decreed in the judgment. (n)
Art. 1553. Any stipulation exempting the vendor from the obligation to answer for
eviction shall be void, if he acted in bad faith. (1476)
Art. 1554. If the vendee has renounced the right to warranty in case of eviction, and
eviction should take place, the vendor shall only pay the value which the thing sold
had at the time of the eviction. Should the vendee have made the waiver with
knowledge of the risks of eviction and assumed its consequences, the vendor shall not
be liable. (1477)
Art. 1555. When the warranty has been agreed upon or nothing has been stipulated on
this point, in case eviction occurs, the vendee shall have the right to demand of the
vendor:
(1) The return of the value which the thing sold had at the time of the eviction, be it
greater or less than the price of the sale;
(2) The income or fruits, if he has been ordered to deliver them to the party who won
the suit against him;
(3) The costs of the suit which caused the eviction, and, in a proper case, those of the
suit brought against the vendor for the warranty;
(4) The expenses of the contract, if the vendee has paid them;
(5) The damages and interests, and ornamental expenses, if the sale was made in bad
faith. (1478)
Art. 1556. Should the vendee lose, by reason of the eviction, a part of the thing sold of
such importance, in relation to the whole, that he would not have bought it without
said part, he may demand the rescission of the contract; but with the obligation to
return the thing without other encumbrances that those which it had when he
acquired it.
He may exercise this right of action, instead of enforcing the vendor's liability for
eviction.
The same rule shall be observed when two or more things have been jointly sold for a
lump sum, or for a separate price for each of them, if it should clearly appear that the
vendee would not have purchased one without the other. (1479a)
Art. 1557. The warranty cannot be enforced until a final judgment has been rendered,
whereby the vendee loses the thing acquired or a part thereof. (1480)
Art. 1558. The vendor shall not be obliged to make good the proper warranty, unless
he is summoned in the suit for eviction at the instance of the vendee. (1481a)
Art. 1559. The defendant vendee shall ask, within the time fixed in the Rules of Court
for answering the complaint, that the vendor be made a co-defendant. (1482a)
4. Warranty against hidden defects or encumbrances upon the thing sold
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. (1484a)
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;
(2) Where the goods are brought by description from a seller who deals in goods of that
description (whether he be the grower or manufacturer or not), there is an implied
warranty that the goods shall be of merchantable quality. (n)
Art. 1563. In the case of contract of sale of a specified article under its patent or other
trade name, there is no warranty as to its fitness for any particular purpose, unless
there is a stipulation to the contrary. (n)
Art. 1564. An implied warranty or condition as to the quality or fitness for a particular
purpose may be annexed by the usage of trade. (n)
Art. 1565. In the case of a contract of sale by sample, if the seller is a dealer in goods of
that kind, there is an implied warranty that the goods shall be free from any defect
rendering them unmerchantable which would not be apparent on reasonable
examination of the sample. (n)
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.
5
Warranties
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. (1485) 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
Art. 1567. In the cases of Articles 1561, 1562, 1564, 1565 and 1566, the vendee may
elect between withdrawing from the contract and demanding a proportionate reduction Sale[1] dated July 28, 1992. For his part, Ang conveyed to Soledad his Mitsubishi Lancer
of the price, with damages in either case. (1486a)
model 1988, also by Deed of Absolute Sale[2] of even date. As Angs car was of a later
Art. 1568. If the thing sold should be lost in consequence of the hidden faults, and the
vendor was aware of them, he shall bear the loss, and shall be obliged to return the model, Soledad paid him an additional P55,000.00.
price and refund the expenses of the contract, with damages. If he was not aware of
them, he shall only return the price and interest thereon, and reimburse the expenses
of the contract which the vendee might have paid. (1487a)
Ang, a buyer and seller of used vehicles, later offered the Mitsubishi GSR for
Art. 1569. If the thing sold had any hidden fault at the time of the sale, and should
sale through Far Eastern Motors, a second-hand auto display center. The vehicle was
thereafter be lost by a fortuitous event or through the fault of the vendee, the latter
may demand of the vendor the price which he paid, less the value which the thing had eventually sold to a certain Paul Bugash (Bugash) for P225,000.00, by Deed of Absolute
when it was lost.
Sale[3] dated August 14, 1992. Before the deed could be registered in Bugashs name,
If the vendor acted in bad faith, he shall pay damages to the vendee. (1488a)
however, the vehicle was seized by virtue of a writ of replevin[4] dated January 26,

Art. 1570. The preceding articles of this Subsection shall be applicable to judicial 1993 issued by the Cebu City Regional Trial Court (RTC), Branch 21 in Civil Case No.
sales, except that the judgment debtor shall not be liable for damages. (1489a)
CEB-13503, BA Finance Corporation vs. Ronaldo and Patricia Panes, on account of the
Art. 1571. Actions arising from the provisions of the preceding ten articles shall be
alleged failure of Ronaldo Panes, the owner of the vehicle prior to Soledad, to pay the
barred after six months, from the delivery of the thing sold. (1490)
mortgage debt[5] constituted thereon.
JAIME D. ANG, G.R. No. 177874
Petitioner,
Present:
To secure the release of the vehicle, Ang paid BA Finance the amount
QUISUMBING, J., Chairperson,
- versus - CARPIO MORALES, of P62,038.47[6] on March 23, 1993. Soledad refused to reimburse the said amount,
TINGA,
VELASCO, JR., and despite repeated demands, drawing Ang to charge him for Estafa with abuse of
BRION, JJ.
COURT OF APPEALS AND BRUNO SOLEDAD, confidence before the Office of the City Prosecutor, Cebu City. By Resolution[7] ofJuly 15,
Respondents. Promulgated:
September 29, 2008 1993, the City Prosecutors Office dismissed the complaint for insufficiency of evidence,

x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x drawing Ang to file on November 9, 1993 the first[8] of three successive complaints for

damages against Soledad before the RTC of Cebu City where it was docketed as Civil

DECISION Case No. Ceb-14883.

Branch 19 of the Cebu City RTC, by Order[9] dated May 4, 1995, dismissed Civil
CARPIO MORALES, J.:
Case No. Ceb-14883 for failure to submit the controversy to barangay conciliation.

6
Warranties
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 Order[11] 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, vz:
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 anothers expense. The RTC ratiocinated:
xxxx
[I]t was error for the Court to rely on Art. 1571 of
the Civil Code to declare the action as having prescribed,
since the action is not one for the enforcement of the
warranty against hidden defects. Moreover, Villostas vs.
Court of Appeals declared that the six-month prescriptive
period for a redhibitory action applies only to implied
warranties. There is here an express warranty. If at all,
what applies is Art. 1144 of the Civil Code, the general
law on prescription, which states, inter alia, that actions
upon a written contract prescribes in ten (10)
years [Engineering & Machinery Corporation vs. Court of
Appeals, G.R. No. 52267, January 24, 1996].
More appropriate to the discussion would be defendants
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.
xxxx
Nonetheless, for the sake of justice and equity, and in
consonance with the salutary principle of non-
enrichment at anothers 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]
Soledads Motion for Reconsideration was denied by Order[16] of December 12, 2002,
hence, he elevated the case to the Court of Appeals, Cebu City.
The appellate court, by the challenged Decision[17] 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
7
Warranties

granting award of damages for breach of warranty against eviction for the simple fact engaged in the business of buying and selling second-hand vehicles and is therefore

that three years and ten months have lapsed from the execution of the deed of sale in expected to be cautious in protecting his rights under the circumstances.

his favor prior to the filing of the instant complaint. It further held:
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
It bears to stress that the deed of absolute
sale was executed on July 28, 1992, and the not be blamed for paying the mortgage debt.
instant complaint dated May 15, 1996 was
received by the MTCC on July 15, 1996.
To Ang, the ruling in Goodyear v. Sy is not applicable to this case, there being
While it is true that someone unjustly
enriched himself at the expense of herein an express warranty in the herein subject Deed of Absolute Sale and, therefore, the
respondent, we agree with petitioner (Soledad) that
it is not he. action based thereon prescribes in ten (10) years following Engineering & Machinery

The appellate court accordingly reversed the RTC decision and denied the Corp. v. CA[20] which held that where there is an express warranty in the contract, the

petition. prescriptive period is the one specified in the contract or, in the absence thereof, the

general rule on rescission of contract.

By Resolution[19] of April 25, 2007, the appellate court denied Angs motion for
Ang likewise maintains that he should not be blamed for paying BA Finance
reconsideration, it further noting that when Ang settled the mortgage debt to BA Finance,
and should thus be entitled to reimbursement and damages for, following Carrascoso,
he did so voluntarily in order to resell the vehicle, hence, Soledad did not benefit from it
Jr. v. Court of Appeals,[21] in case of breach of an express warranty, the seller is liable for
as he was unaware of the mortgage constituted on the vehicle by the previous owner.
damages provided that certain requisites are met which he insists are present in the

case at bar.
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 The resolution of the sole issue of whether the complaint had prescribed hinges

respondent upon the perfection of the contract of sale. And it reiterated its ruling that on a determination of what kind of warranty is provided in the Deed of Absolute Sale

the action, being one arising from breach of warranty, had prescribed, it having been subject of the present case.

filed beyond the 6-month prescriptive period.

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,
The appellate court brushed aside Angs contention that Soledad was the
quality or title of the goods, and by which he promises or undertakes to insure that
proximate cause of the loss due to the latters failure to thoroughly examine and verify
certain facts are or shall be as he then represents them.[22]
the registration and ownership of the previous owner of the vehicle, given that Ang is

8
Warranties

Warranties by the seller may be express or implied. Art. 1546 of the Civil Code As for actions based on breach of implied warranty, the prescriptive period is,

defines express warranty as follows: 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
Art. 1546. Any affirmation of fact or the thing sold.
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 The following provision of the Deed of Absolute Sale reflecting the kind of
affirmation of the value of the thing, nor any
statement purporting to be a statement of the warranty made by Soledad reads:
sellers 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 xxxx
the buyer. (Emphasis and underscoring supplied) 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
On the other hand, an implied warranty is that which the law derives by all claims or any claim whatsoever; will save the
vendee from any suit by the government of the
application or inference from the nature of the transaction or the relative situation or Republic of the Philippines.

circumstances of the parties, irrespective of any intention of the seller to create

x x x x (Emphasis supplied)
it.[23] Among the implied warranty provisions of the Civil Code are: as to the sellers title

(Art. 1548), against hidden defects and encumbrances (Art. 1561), as to fitness or
In declaring that he owned and had clean title to the vehicle at the time the
merchantability (Art. 1562), and against eviction (Art. 1548).
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

The earlier cited ruling in Engineering & Machinery Corp. states that the vendee from any suit by the government of the Republic of the Philippines, Soledad gave

prescriptive period for instituting actions based on a breach of express warranty is that a warranty against eviction.

specified in the contract, and in the absence of such period, the general rule on
Given Angs business of buying and selling used vehicles, he could not have
rescission of contract, which is four years (Article 1389, Civil Code).
merely relied on Soledads affirmation that the car was free from liens and

encumbrances. He was expected to have thoroughly verified the cars 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

9
Warranties

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 that he did pay BA Finance in order to avoid returning the payment made by the ultimate

same had prescribed, it having been filed 16 months after July 28, 1992, the date of buyer Bugash. It need not be stressed that Soledad did not benefit from Angs paying BA

delivery of the vehicle. Finance, he not being the one who mortgaged the vehicle, hence, did not benefit from

the proceeds thereof.

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
WHEREFORE, the petition is, in light of the foregoing disquisition, DENIED.
Deed of Absolute Sale, the following essential requisites for such breach, vz:

A breach of this warranty requires the

concurrence of the following circumstances: SO ORDERED.
CARLOS B. DE GUZMAN, G.R. No. 141480
(1) The purchaser has been deprived of Petitioner,
the whole or part of the thing sold; Present:

(2) This eviction is by a final judgment; PUNO, J., Chairperson,

- versus - SANDOVAL-GUTIERREZ,
(3) The basis thereof is by virtue of a CORONA,
right prior to the sale made by the vendor; and AZCUNA, and
GARCIA, JJ.
(4) The vendor has been summoned and TOYOTA CUBAO, INC.,
made co-defendant in the suit for eviction at Respondent. Promulgated:
the instance of the vendee. November 29, 2006
x ---------------------------------------------------------------------------------------- x
In the absence of these requisites, a
breach of the warranty against eviction under DECISION
Article 1547 cannot be declared. [24] (Emphasis
supplied), AZCUNA, J.:

This is a petition for review on certiorari under Rule 45 of the Rules of Court seeking to
have not been met. For one, there is no judgment which deprived Ang of the vehicle. For
annul the Order,[1] dated September 9, 1999, of the Regional Trial Court of Quezon City
another, there was no suit for eviction in which Soledad as seller was impleaded as co-

defendant at the instance of the vendee. (the RTC), Branch 105, which dismissed the complaint for damages filed by petitioner

Carlos B. De Guzman against respondent Toyota Cubao, Inc.

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
On November 27, 1997, petitioner purchased from respondent a brand new white Toyota
observed, Ang settled the mortgage debt on his own volition under the supposition that
Hi-Lux 2.4 SS double cab motor vehicle, 1996 model, in the amount
he would resell the car. It turned out
of P508,000. Petitioner made a down payment of P152,400, leaving a balance
10
Warranties
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 petitioners 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 respondents motion and
dismissed the complaint, thus:
For the Courts consideration are: (1) defendants Motion to Dismiss;
(2) plaintiffs Opposition thereto; (3) defendants Reply; and (4)
plaintiffs Rejoinder.
The Court agrees with the plaintiffs counsel that the subject pick-up
is a consumer product because it is used for personal, family or
agricultural purposes, contrary to defendant counsels 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 plaintiffs argument that the claim for moral and
exemplary damages and attorneys 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, defendants Motion is granted and the plaintiffs
Complaint is ordered dismissed.
SO ORDERED[3]
On December 21, 1999, the RTC denied petitioners motion for reconsideration, as
follows:
Submitted for resolution are: (1) plaintiffs Motion for
Reconsideration; (2) defendants Opposition; and (3) plaintiffs Reply.
Although plaintiffs 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.
11
Warranties
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 Although petitioner intended his petition, filed on February 2, 2000, to be one
subject sale carried an implied warranty whose prescriptive period
is six (6) months under Art. 1571 of the Civil Code.
filed under Rule 45 and he filed it well within the 15-day reglementary period counted
Accordingly, plaintiffs Motion for Reconsideration is DENIED.
from January 18, 2000, the same was in effect a petition for certiorari under Rule 65,
SO ORDERED.[4]
and is therefore dismissible for violation of the hierarchy of courts under Section 4
Petitioner thereupon filed a petition for review on certiorari with this Court.
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
The petition should be denied.
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
First, on procedural grounds, the petition should forthwith be denied for violation of the
petitioner assails in this action is the RTCs order of dismissal of his complaint for
hierarchy of courts. Petitioner states that the present petition is an appeal
damages on the ground of prescription which was tantamount to an adjudication on the
by certiorari on pure questions of law, from the final Order of Branch 105 of the Regional
merits. Again, petitioner should have resorted to the remedy of appealing the case to the
Trial Court of Quezon City in Civil Case No. Q-99-37381 under Rule 45 of the Rules of
Court of Appeals by filing a notice of appeal with the RTC.
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,

Second, even if the Court were to disregard the procedural infirmity, the petition should
1999. On December 21, 1999, the RTC denied petitioners motion. When petitioner
be denied for lack of merit.
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
In his complaint, petitioner alleged and prayed, thus:
Section 2(a) of Rule 41, from an order of the RTC issued in the exercise of its original
jurisdiction. The RTCs 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.
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 vehicles engine cracked. Although it was previously driven
through a heavy rain, it didnt 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.

12
Warranties
4. As plaintiff knows no reason why the vehicles engine
would crack just like that, the same could only be due to the fact with a new one. In this regard, petitioner cites Article 169 of Republic Act No. 7394 as
that said engine and/or the vehicle itself was defective even from the
time it was bought.
the applicable provision, so as to make his suit come within the purview of the two-year
5. Brought to the attention, defendant refused to answer
for this defect saying it is not covered by the vehicles warranty. It prescriptive period. Tangentially, petitioner also justifies that his cause of action has not
refused to replace the vehicle as plaintiff demanded (or at least its
engine, or even repair the damage). yet prescribed because this present suit, which was an action based on quasi-delict,

6. As a result of defendants actions, plaintiff suffered prescribes in four years.

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. On the other hand, respondent maintains that petitioners cause of action was already

8. Forced to litigate to enforce his rights, plaintiff incurred, barred by the statute of limitations under Article 1571 of the Civil Code for having been
and shall further incur, litigation-related expenses (including those
for his counsels fees) in the total estimated sum of P100,000. filed more than six months from the time the vehicle was purchased and/or

WHEREFORE, it is respectfully prayed that judgment be rendered delivered. Respondent reiterates that Article 169 of Republic Act No. 7394 does not
ordering defendant:

a. to replace the subject vehicle with a brand new one apply.

or at least to replace its engine all at defendants cost;
b. pay the plaintiff:
i. P200,000 moral damages;
ii. P200,000 exemplary damages; Petitioners argument is erroneous. Article 1495 of the Civil Code states that in
iii. P200,000 attorneys fees and litigation expenses;
and a contract of sale, the vendor is bound to transfer the ownership of and to deliver the
iv. the costs of suit.
thing that is the object of sale. Corollarily, the pertinent provisions of the Code set forth
Other reliefs just and equitable are, likewise, prayed for.[6]

the available remedies of a buyer against the seller on the basis of a warranty against

Petitioner contends that the dismissal on the ground of prescription was hidden defects:

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
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.

13
Warranties
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 petitioners 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
xxx
2) In case of breach of implied warranty, the consumer
may retain in the goods and recover damages, or reject the goods,
cancel the contract and recover from the seller so much of the
purchase price as has been paid, including damages. (Emphasis
supplied.)
Consequently, even if the complaint is made to fall under the Republic Act No. 7394, the
same should still be dismissed since the prescriptive period for implied warranty
thereunder, which is one year, had likewise lapsed.
WHEREFORE, the petition is DENIED for being in violation of the hierarchy of
courts, and in any event, for lack of merit.
No costs.
14
Warranties
SO ORDERED.
[G.R. No. 136500. December 3, 1999]
CONRADO R. ISIDRO, petitioner, vs. NISSAN MOTOR PHILIPPINES,
INC., respondent.
DECISION
PARDO, J.:
The case before the Court is an appeal via certiorari from the orders[1] of the
Regional Trial Court, Branch 81, Quezon City[2] dismissing the complaint below on the
ground that the action has prescribed.
The facts are as follows:
On December 21, 1995, petitioner bought from respondent a brand new Nissan
Sentra with an express manufacturer's warranty against hidden defects for a period of
24 months or 50,000 kilometers, whichever comes first.[3]
On August 31, 1998, or two years and nine months after delivery of the car,
petitioner filed with the Regional Trial Court, Quezon City, assigned to Branch 81, a
complaint against respondent for breach of warranty.[4]
On October 7, 1998, respondent filed with the trial court a motion to dismiss the
complaint alleging that petitioner's cause of action is barred by the statute of limitation
under Article 1571 of the Civil Code.[5]
On October 9, 1998, petitioner filed with the trial court an opposition to the motion
to dismiss pointing out that Article 1571 applies only to implied warranties and not to
express warranty.[6]
On November 11, 1998, the trial court issued an order dismissing the complaint
based on the ground that plaintiffs cause of action has prescribed since the complaint
was filed more than two years after delivery of the car which is the period during which
respondent expressly warranted that it would repair/replace defective parts of the car.[7]
On November 20, 1998, petitioner filed with the trial court a motion for
reconsideration of the dismissal stating that the prescribed period of warranty is four
years in case of rescission and ten years in case of specific performance.[8]
On December 2, 1998, respondent filed with the trial court an opposition to the
motion for reconsideration.[9]
On December 9, 1998, the trial court denied the motion for reconsideration.[10]
Hence, this petition.[11]
On February 3, 1999, the Court required respondent to comment on the petition
within ten (10) days from notice.[12]
On March 8, 1999, respondent filed its comment.[13]
On September 6, 1999, we gave due course to the petition.[14]
At issue is whether or not petitioner's action for enforcement of the manufacturer's
express warranty covering the subject motor vehicle has prescribed.
We agree with the trial court that petitioner's action has prescribed.
The manufacturer's warranty covering the subject motor vehicle was for defective
parts over a period of twenty four (24) months or fifty thousand (50,000) kilometers,
whichever comes first.Where there is an express warranty in the contract, as in the case
at bar, the prescriptive period is the one specified in the express warranty, if any.[15]
The action to enforce the warranty was filed two and a half years from the date of
the purchase or delivery of the vehicle subject of the warranty.
Clearly, the action has prescribed. The period of the guarantee under the express
warranty has expired.
WHEREFORE, the Court hereby DENIES the petition for review on certiorari of the
orders of the Regional Trial Court, Quezon City, Branch 81, dated November 11, 1998,
and December 9, 1998, in Civil Case No. Q-98-35408, and AFFIRMS the aforesaid
orders.
No costs.
SO ORDERED.
[G.R. No. L-30965. November 29, 1983.]
G.A MACHINERIES, INC., Petitioner, v. HORACIO YAPTINCHAY, doing business
under the name and style "HI-WAY EXPRESS" and THE COURT OF
APPEALS, Respondents.
Bengzon, Villegas & Zarraga & Jose P. Bengzon Law Office for Petitioner.
Mariano V. Ampil, Jr. for Respondents.
SYLLABUS
1. REMEDIAL LAW; ACTION FOR BREACH OF CONTRACT; DELIVERY OF AN ENGINE
NOT BRAND NEW INSTEAD OF A BRAND NEW ENGINE, A STIPULATED, DIFFERENT
FROM BREACH OF WARRANTY AGAINST HIDDEN DEFECTS; PRESCRIPTIVE PERIOD
UNDER ARTICLE 1571 OF THE CIVIL CODE HELD INAPPLICABLE. — The main
thrust of the complaint is the contention that the Fordson diesel engine delivered by
the petitioner to the respondent was not brand-new contrary to the representations of
the former and the expectations of the latter. The complaint was couched in manner
15
Warranties
which shows that instead of the brand new Fordson diesel engine which was bought by
the respondent from the petitioner, another engine which was not brand new was
delivered resulting in the damages sought to be recovered. It is evident therefore, that
the complaint was for a breach of contract of sale rather than a breach of warranty
against hidden defects. This is so because an action for breach of warranty against
hidden defects presupposes that the thing sold is the same thing delivered but with
hidden defects. Consequently, the six-month prescriptive period under Article 1571 of
the civil Code is not applicable.
2. CIVIL LAW; OBLIGATIONS AND CONTRACTS; MISREPRESENTATION AS TO THE
QUALITY OF THE OBJECT OF THE CONTRACT, AMOUNTS TO FRAUD OR BAD
FAITH; RESTITUTION OF THE PURCHASE PRICE WITH INTEREST; JUSTIFIED. —
The petitioner committed a breach of contract against Respondent. The
misrepresentation of the quality of the subject Fordson diesel engine tantamount to
fraud or bad faith. The return of the P7,590.00 purchase price with legal interest from
the date of purchase and computed pursuant to our ruling in Villoria v. Court of
Appeals (G.R. No. 63398, June 29, 1983) is justified.
3. ID.; ID.; DAMAGES RECOVERABLE IN CASE OF BREACH IF DULY PROVED. —
Article 2200 of the Civil Code entitles the respondent to recover as compensatory
damages not only the value of the loss suffered but also prospective profits while
Article 2201 entitles the respondent to recover all damages which may be attributed to
the non-performance of the obligation. However, in order to recover this kind of
damages, the plaintiff must prove his case.
4. ID.; ID.; AWARD OF ACTUAL DAMAGES NOT WARRANTED BY THE BEST
EVIDENCE ON RECORD. — The next question refers to the award of actual damages
in the amount of P54,000.48. This amount covers the probable income which the
respondent failed to realize because of the breach of contract. Is the award of damages
in the form of lucro cessante justified? The law on the matter is spelled out in Raagas
v. Traya (22 SCRA 839). we find the evidence of the respondent insufficient to be
considered within the purview of "best evidence." The bare assertion of the respondent
that he lost about P54,000.00 and the accompanying documentary evidence presented
to prove the amount lost are inadequate if not speculative. The document itself merely
shows that everytime a truck travels, Mr. Yaptinchay earns P369.88. This amount is
then multiplied by the number of trips which the truck was allegedly unable to make.
The estimates were prepared by a certain Dionisio M. Macasieb whose identity was not
even revealed by the Respondent. Mr. Yaptinchay was in the freight truck business. He
had several freight trucks among them the truck with the subject Forson diesel engine,
covering the route from Manila to Baguio. To prove actual damages, it would have been
easy to present the average actual profits realized by the other freight trucks plying the
Manila-Baguio route. With the presentation of such actual income the court could have
arrived with reasonable certainty at the amount of actual damages suffered by
the Respondent. We rule that the award of actual damages in the amount of
P54,000.48 is not warranted by the evidence on record.
DECISION
GUTIERREZ, JR., J.:
Petitioner G. A. Machineries, Inc. (hereinafter referred to as GAMI) seeks the reversal of
the decision of the Court of First Instance of Rizal, affirmed by the Court of Appeals in
the original case entitled Horacio Yaptinchay, doing business under the name and style
"Hi-Way Express", v. G.A. Machineries Inc. for recovery of damages.
The antecedent facts of the case are not seriously disputed and are summarized by the
Court of Appeals as follows:jgc:chanrobles.com.ph
"Sometime early in January, 1962 appellant GAMI, thru a duly authorized agent,
offered to sell a brand-new Fordson Diesel Engine to appellee Horacio Yaptinchay,
owner of the freight hauling business styled ‘Hi-Way Express’. Relying on the
representations of appellant’s representative that the engine offered for sale was
brandnew, appellee agreed to purchase the same at the price of P7,590.00. Pursuant to
the contract of sale thus entered into, appellant delivered to appellee, on January 27,
1962, one (1) Fordson Diesel Engine assembly, Model 6-D, with Engine Serial No. A-
212193, at 1500 RPM, with fly wheel, fly wheel housing, fuel injection assembly,
exhauster, fuel filter, oil filter, fuel lift pump, plus conversion kit for F-500, subject to
the standard warranties, particularly the representation, relied upon by appellee, that
the same was brandnew. Said engine was installed by appellant in Unit No. 6 of the Hi-
Way Express.
"Within the week after its delivery, however, the engine in question started to have a
series of malfunctions which necessitated successive trips to appellant’s repair shop.
Thus, it first sprang an oil leak such that, on February 6, 1962, it was brought in to ‘1.
Adjust idling of engine and tappete clearance; 2. Inspect and remedy oil leaks of
engine; 3. Replace clutch disc and pressure plate w/original; and 4. Replace release
bearing hub trunion bolt’ (Exhibit C). Thereafter, the malfunctioning persisted and, on
inspection, appellee’s mechanic noticed a worn out screw which made appellee
suspicious about the age of the engine. This prompted appellee, thru his lawyer, to
write appellant a letter, dated February 10, 1962, protesting that the engine was not
brand-new as represented (Exhibit E). Because of the recurring defects, the engine was
again submitted to appellant’s shop to ‘1. Inspect engine oil leaks on cylinder head; 2.
Check up propeller shaft (vibrating at high speed); and 3. Tighten bolts of pump.’
(Exhibit F). All these notwithstanding, the engine could still not be returned into
operation because it continued not to function well. In fact, it was sent back to
appellant’s shop on the same day it was delivered after the last repair work done on it.
Another check up was thereafter required to be made on March 5, 1962 (Exhibit G).
Then again, on March 10, 1962, the engine was back at the repair shop to ‘1. Inspect
leaks on No. 1 & 5 high pressure pipe; and 2. Change engine oil with finishing & oil
element’ (Exhibit H). Still, the oil leaks remained unchecked and, on July 2, 1962, one
last effort to ‘1. Remedy engine oil leaks’ (Exhibit 1) was made, but all to no avail
because, instead of improving, the engine’s condition became worse as it developed
engine knock and appellee had to stop its operation altogether due to its
unserviceability.
"These repeatedly recurring defects and continued failure of appellant to put the engine
in good operating condition only served to firm up in appellee’s mind the suspicion that
the engine sold to him was not brand-new as represented. He then sought the
assistance of the PC Criminal Investigation Service to check on the authenticity of the
serial number of the engine, with due notice to appellant. Scientific examination and
verification tests revealed that the original motor number of the engine aforesaid was
tampered. Further inquiries by appellee from the Manila Trading Company, which also
handles the importation and distribution of similar engines, also disclosed that, unlike
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Warranties
the engine delivered to appellee whose engine body and injection pump were painted
with two different colors, brand-new engines are painted with only one color all over.
"Thus convinced that a fraudulent misrepresentation as to the character of the engine
had been perpetrated upon him, appellee made demands from appellant for
indemnification for damages and eventually instituted the present suit.
"In its defense, appellant interposed prescription of the action, denied the imputation
of misrepresentation, and disputed the propriety and amount of damages claimed.." . .
After trial on the merits, the trial court ruled in favor of plaintiff Yaptinchay as
follows:chanrobles lawlibrary : rednad
"FOR ALL THE FOREGOING CONSIDERATIONS, the Court hereby renders judgment
ordering the defendant, G. A. Machineries, Inc., to pay the plaintiff, Horacio
Yaptinchay, actual damages sustained in the sum of P54,000.48; to reimburse the
purchase price of the Fordson diesel engine in the amount of P7,590.00; and to pay
attorney’s fees to plaintiff’s counsel on the sum of P2,000.00 and costs.
"Plaintiff is, likewise, ordered to return the Fordson diesel engine with serial number A-
21219 to the defendant."cralaw virtua1aw library
Defendant GAMI appealed the decision to the Court of Appeals. As stated earlier, the
decision was affirmed by the Appellate Court. A motion for reconsideration was denied.
Hence, the instant petition.
Petitioner GAMI raises the following alleged errors of judgment of the respondent
court:chanrob1es virtual 1aw library
I A cursory reading of the complaint shows that the petitioner’s arguments are not well-
THE COURT OF APPEALS ERRED IN NOT APPLYING THE PRESCRIPTIVE PERIOD OF
ARTICLE 1571 OF THE CIVIL CODE TO THE CASE AT BAR.
II
THE COURT OF APPEALS ERRED IN APPLYING THE DOCTRINE IN THE CASE OF
ASOCIACION ZANJERA CASILIAN v. CRUZ, 46 O.G. 4813, 4820 REGARDING
ADMISSION BY FAILURE TO REBUT, TO THE ISSUE OF ACTUAL DAMAGES, WHICH
MUST BE PROVED BY THE BEST AND COMPETENT EVIDENCE.
III
THE COURT OF APPEALS ERRED IN AWARDING ACTUAL DAMAGES IN THE FORM
OF UNREALIZED PROFITS (LUCRUM CESSANTE) WHEN THE ISSUE RAISED BY THE
PLEADINGS REFERS ONLY TO ALLEGED ACTUAL DAMAGES IN THE FORM OF
DAMNUM EMERGENTE.
IV
THE COURT OF APPEALS ERRED IN FINDING THAT THE FORDSON DIESEL ENGINE
DELIVERED BY PETITIONER TO RESPONDENT HORACIO YAPTINCHAY WAS NOT
BRAND NEW, REACHING SUCH FINDING BY WAY OF A MANIFESTLY MISTAKEN
INFERENCE AND ON THE BASIS OF A MISAPPREHENSION OF FACTS AND SOLELY
ON THE GROUND OF SPECULATION, SURMISES AND CONJECTURES.
The assignments of errors raise the following issues: 1) whether or not the
respondent’s cause of action against the petitioner had already prescribed at the time
the complaint was filed in the trial court; 2) whether or not the factual findings of both
the trial and appellate courts as regards the subject Fordson diesel engine are
supported by evidence and 3) whether or not the award of damages was justified
considering the evidence on record.
The first issue is premised on the petitioner’s proposition that the respondent’s cause
of action was for breach of warranty against hidden defects as provided under Articles
1561 and 1566 of the Civil Code. Article 1571 of the Civil Code provides for a six-
month prescriptive period from the delivery of the thing sold for the filing of an action
for breach of warranty against hidden defects. According to petitioner GAMI when
respondent Yaptinchay filed the case with the trial court, more than six months had
already lapsed from the time the alleged defective engine was delivered and, therefore,
the action had prescribed.
The petitioner contends that Yaptinchay’s asserted cause of action was premised and
anchored on the delivery by the defendant of a DEFECTIVE ENGINE and that the
allegations in the complaint that the engine was not brand new are clearly mere
specifications of the precise nature of the hidden defects.
taken.
The main thrust of the complaint is the contention that the Fordson diesel engine
delivered by the petitioner to the respondent was not brand-new contrary to the
representations of the former and the expectations of the latter. The complaint was
couched in a manner which shows that instead of the brand-new Fordson diesel
engine which was bought by the respondent from the petitioner, another engine which
was not brand new was delivered resulting in the damages sought to be recovered. It is
evident therefore, that the complaint was for a breach of a contract of sale rather than
a breach of warranty against hidden defects. This is so because an action for breach of
warranty against hidden defects presupposes that the thing sold is the same thing
delivered but with hidden defects. Consequently, the six-month prescriptive period
under Article 1571 of the Civil Code is not applicable.
The petitioner takes exception to the factual findings of the appellate court and argues:
1) the fact that the Fordson diesel engine developed oil leaks does not necessarily imply
that the said engine was not brand new and 2) the testimony of laboratory technician
Captain Garcia of the Philippine Constabulary to the effect that the motor or serial
number of the engine was tampered does not deserve credence.chanrobles virtual
lawlibrary
The first argument is premised on the proposition that even brand-new engines in
many cases develop oil leaks. To support this proposition the petitioner presented
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Warranties
documentary evidence (Exhibits "5", "7", "8", "9", "10", "11", "12", "13", "14", "15", "16"
and "17") consisting of job orders for allegedly brand new engines which developed oil
leaks.
An examination of the documentary evidence shows that the job orders were for twelve
(12) different engines. Moreover, the petitioner’s witness who testified on the said job
orders admitted that some engines were repaired only after a few months. On the other
hand, the subject Fordson diesel engine was repaired on the complaint not only of oil
leaks but also replacement of clutch disc and pressure plate, replacement of release
bearing hub trunion belt, and other defects within a week after it was delivered to the
respondents or on February 6, 1962 (Exhibit "C"). Thereafter it was returned for more
repairs on February 28, 1962 (Exhibit "F"), on March 10, 1962 (Exhibit "H") and on
July 2, 1962 (Exhibit "I"). The documentary evidence of the petitioner consisting of the
job orders of the supposed brand-new engines which also developed oil leaks is no
reason to doubt the trial court’s and appellate court’s factual findings. In fact, the
documentary evidence and the admissions of the petitioner’s witness enhance the
respondent’s allegation that the Fordson diesel engine sold to him was not brand-new.
The second argument questions Captain Garcia’s findings that the original motor
number of the engine was tampered as shown by the presence of fragmentary numbers
which appeared in the engine when he conducted a macro-etching test thereon by
applying acid on the surface of said engine. The petitioner emphasizes Captain Garcia’s
alleged testimony that." . . what he calls fragmentary numeral" is not definitely a
numeral or a fragment of a numeral and states that the same could have been caused
by any molecular pressure applied to the area of the metal where it appeared. In effect,
the petitioner insists that the supposed fragmentary numerals could have been merely
scratches or indentations near the serial number of the motor which might have been
caused by sparks from the welding process.
The arguments are not well-taken. First, the statements attributed to Captain Garcia
are not accurate. An examination of the record shows that Captain Garcia positively
stated the fragmentary numeral to be a numeral or a number but in the absence of key
portions he could not positively identify the exact number or numeral. He discounted
the possibility that such fragmentary numerals could be mere scratches. Second, the
witness did not categorically state that any molecular pressure could have caused the
fragmentary numeral. Hence, Captain Garcia under cross-examination
stated:jgc:chanrobles.com.ph
"Q. This fragmentary numeral could be caused deliberately by tampering with the
engine number or by other factor such as scratches or burning by other foreign
element, is that right?
"A. No, sir, they can be caused by scraping but not by scratching, because by scraping
there is molecular disturbance of metal.
"Q. When you say molecular disturbance does it mean you first apply in the area, or
would it disturb the molecule in or around that area?
"A. Once you stamped the number, you impressed it and there is molecular
disturbance in the structure of the metal.
"Q. If the metal is burned, there is also molecular disturbance in the metal, is that
correct?
"A. The metal will only expand.
"Q. There is no spark of the machine could not cause the molecular disturbance in the
steam, is that right?
"A. It cannot"
(T.S.N., Iluminado C. Palisoc, February 5, 1965, pp. 99-100)
The petitioner’s argument that the Court of Appeals findings are based on manifestly
mistaken inferences, misapprehension of facts, and purely on speculation, surmises,
and conjectures is without merit.
The Fordson diesel engine delivered to the respondent was not brand-new.
We agree with the Court of Appeals that:jgc:chanrobles.com.ph
"Indeed, it would be too much to say that the successive malfunctions of the engine,
the defects and other discrepancies therein that cropped up so soon after its delivery,
the numerous trips it had to appellant’s repair shop, the demonstrable tampering with
its serial number, and its ultimate breakdown despite appellant’s attempts to put it
into good working order could be attributed to mere coincidence. If all these mean
anything at all, it can only be that the engine aforesaid was not really brand new.
The petitioner committed a breach of contract against the Respondent. The
misrepresentation of the quality of the subject Fordson diesel engine is tantamount to
fraud or bad faith. The return of the P7,590.00 purchase price with legal interest from
the date of purchase and computed pursuant to our ruling in Villoria v. Court of
Appeals (G.R. No. 63398, June 29, 1983) is justified. The next question refers to the
award of actual damages in the amount of P54,000.48. This amount covers the
probable income which the respondent failed to realize because of the breach of
contract. Is the award of damages in the form of lucro cessante justified?chanrobles
lawlibrary : rednad
The law on the matter is spelled out in Raagas v. Traya (22 SCRA 839), where we
stated.
". . . In Abubakar Tan v. Tian Ho, L-18820, December 29, 1962 and Lim Giok v.
Bataan Cigar and Cigarette Factory, L-15861, April 16, 1960, we held that even if the
allegations regarding the amount of damages in the complaint are not specifically
denied in the answer, such damages are not deemed admitted. In Tomassi v. Villa-
Abrille, L-7047, August 21, 1958, Suntay Tanjangco v. Jovellanos, et al, L-12332, June
30, 1960, and Delfin v. Court of Agrarian Relations, Et Al., L-23348, March 14, 1967,
1967 A PHILD 453, we declared in no uncertain terms that actual damages must be
proved, and that a court cannot rely on ‘speculation, conjecture or guesswork’ as to the
fact and amount of damages, but must depend on actual proof that damages had been
suffered and on evidence of the actual amount. . . ."cralaw virtua1aw library
The fact that the defendant does not dispute the amount of this kind of damages does
not necessarily imply that the other party outright is entitled to the award of damages.
Article 2200 of the Civil Code entitles the respondent to recover as compensatory
18
Warranties
damages not only the value of the loss suffered but also prospective profits while
Article 2201 entitles the respondent to recover all damages which may be attributed to
the non-performance of the obligation. However, in order to recover this kind of
damages, the plaintiff must prove his case —

"‘When the existence of a loss is established, absolute certainty as to its amount is not
required. The benefit to be derived from a contract which one of the parties has
absolutely failed to perform is of necessity to some extent, a matter of speculation, but
the injured party is not to be denied all remedy for that reason alone. He must produce
the best evidence of which his case is susceptible and if that evidence warrants the
inference that he has been damaged by the loss of profits which he might with
reasonable certainty have anticipated but for the defendant’s wrongful act, he is
entitled to recover." (Cerreno v. Tan Chuco, 28 Phil. 312 quoted in Central Bank of the
Philippines v. Court of Appeals, 63 SCRA 431, 457).

Applying the foregoing test to the instant case, we find the evidence of the respondent
insufficient to be considered within the purview of "best evidence." The bare assertion
of the respondent that he lost about P54,000.00 and the accompanying documentary
evidence presented to prove the amount lost are inadequate if not speculative. The
document itself merely shows that everytime a truck travels, Mr. Yaptinchay earns
P369.88. This amount is then multiplied by the number of trips which the truck was
allegedly unable to make. The estimates were prepared by a certain Dionisio M.
Macasieb whose identity was not even revealed by the Respondent. Mr. Yaptinchay was
in the freight truck business. He had several freight trucks among them the truck with
the subject Fordson diesel engine, covering the route from Manila to Baguio. To prove
actual damages, it would have been easy to present the average actual profits realized
by the other freight trucks plying the Manila-Baguio route. With the presentation of
such actual income the court could have arrived with reasonable certainty at the
amount of actual damages suffered by the Respondent. We rule that the award of
actual damages in the amount of P54,000.08 is not warranted by the evidence on
record.

WHEREFORE, the decision appealed from is hereby modified. The award of actual
damages in the amount of P54,000.48 is deleted. The petitioner shall also pay six (6%)
percent interest per annum on the P7,590.00 purchase price from January 27, 1962 to
July 29, 1974 and twelve (12%) percent interest per annum from July 30, 1974 until
the purchase price is reimbursed. In all other respects, the appealed decision is
affirmed.

SO ORDERED.

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