III.
Legal Aspects of Consumer Transactions manufacturer, producer, or importer liable, in
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.
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. (1553)
Arts. 67, 68, 70, 169, RA 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
6) stipulate the period within which, after notice
of defect, malfunction 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
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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 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.
Sec. 3, pars. (m), (n), (h), Secs. 5-8, RA 10642
(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.
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;
1. Express warranty
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Art. 1546, Civil Code
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 purchase 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. (n)
2. Implied warranty
Arts. 1547, Civil Code
Art. 1547. In a contract of sale, unless a contrary intention appears,
there is:
(1) An implied warranty on the part of the seller that he has
a right to sell the thing at 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;
(2) An implied warranty that the thing shall be free from
any hidden faults or defects, or any charge or encumbrance
not declared or known to the buyer.
This Article shall not, however, be held to render liable a sheriff,
auctioneer, mortgagee, pledgee, or other person professing to sell by
virtue of authority in fact or law, for the sale of a thing in which a third
person has a legal or equitable interest. (n)
3. Warranty in case of eviction
Arts. 1548 – 1559, Civil Code
SUBSECTION 1. - Warranty in Case of Eviction
Art. 1548. Eviction shall take place whenever by a final judgment
based on a right prior to the sale or an act imputable to the vendor,
the vendee is deprived of the whole or of a part of the thing purchased.
The vendor shall answer for the eviction even though nothing has been
said in the contract on the subject.
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)
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 (2) Where the goods are brought by description from a
time of the eviction, be it greater or less than the price of the seller who deals in goods of that description (whether he be
sale; the grower or manufacturer or not), there is an implied
warranty that the goods shall be of merchantable quality.
(n)
(2) The income or fruits, if he has been ordered to deliver
them to the party who won the suit against him;
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
(3) The costs of the suit which caused the eviction, and, in a
any particular purpose, unless there is a stipulation to the contrary.
proper case, those of the suit brought against the vendor for
(n)
the warranty;

Art. 1564. An implied warranty or condition as to the quality or fitness

(4) The expenses of the contract, if the vendee has paid
for a particular purpose may be annexed by the usage of trade. (n)
them;

Art. 1565. In the case of a contract of sale by sample, if the seller is a

(5) The damages and interests, and ornamental expenses, if
dealer in goods of that kind, there is an implied warranty that the
the sale was made in bad faith. (1478)
goods shall be free from any defect rendering them unmerchantable
which would not be apparent on reasonable examination of the
Art. 1556. Should the vendee lose, by reason of the eviction, a part of sample. (n)
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
Art. 1566. The vendor is responsible to the vendee for any hidden
rescission of the contract; but with the obligation to return the thing
faults or defects in the thing sold, even though he was not aware
without other encumbrances that those which it had when he acquired
thereof.
it.

This provision shall not apply if the contrary has been stipulated, and
He may exercise this right of action, instead of enforcing the vendor's
the vendor was not aware of the hidden faults or defects in the thing
liability for eviction.
sold. (1485)

The same rule shall be observed when two or more things have been
Art. 1567. In the cases of Articles 1561, 1562, 1564, 1565 and 1566, the
jointly sold for a lump sum, or for a separate price for each of them, if
vendee may elect between withdrawing from the contract and
it should clearly appear that the vendee would not have purchased one
demanding a proportionate reduction of the price, with damages in
without the other. (1479a)
either case. (1486a)

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)
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 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)
Art. 1569. If the thing sold had any hidden fault at the time of the sale,
and should 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 when it was lost.

If the vendor acted in bad faith, he shall pay damages to the vendee.
4. Warranty against hidden defects or (1488a)
encumbrances upon the thing sold
Arts. 1561 – 1571, Civil Code
Art. 1570. The preceding articles of this Subsection shall be applicable
SUBSECTION 2. - Warranty Against Hidden Defects to judicial sales, except that the judgment debtor shall not be liable for
of orEncumbrances Upon the Thing Sold damages. (1489a)

Art. 1561. The vendor shall be responsible for warranty against the Art. 1571. Actions arising from the provisions of the preceding ten
hidden defects which the thing sold may have, should they render it articles shall be barred after six months, from the delivery of the thing
unfit for the use for which it is intended, or should they diminish its sold. (1490)
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
Cases:
vendee is an expert who, by reason of his trade or profession, should
Ang v. Court of Appeals
have known them. (1484a)
G.R. No. 177874, September 29, 2008

Art. 1562. In a sale of goods, there is an implied warranty or condition De Guzman v. Toyota Cubao, Inc.
as to the quality or fitness of the goods, as follows: G.R. No. 141480, November 29, 2006

Isidro v. Nissan Motor Phils.

(1) Where the buyer, expressly or by implication, makes G.R. No. 136500, December 3, 1999
known to the seller the particular purpose for which the
goods are acquired, and it appears that the buyer relies on G.A. Machineries, Inc. v. Yaptinchay
the seller's skill or judgment (whether he be the grower or G.R. No. L-30965, November 29, 1983
manufacturer or not), there is an implied warranty that the
goods shall be reasonably fit for such purpose;

3|Page
 JAIME D. ANG, G.R. No. 177874 It appearing that the Deed of Sale to plaintiff o[f] subject
Petitioner, vehicle was dated and executed on 28 July 1992, the complaint before
Present: the Barangay terminated 21 September 1995 per Certification to File
Action attached to the Complaint, and this case eventually was filed
QUISUMBING, J., Chairperson, with this Court on 15 July 1996, this action has already
- versus - CARPIO MORALES, been barred since more than six (6) months elapsed from the
TINGA, delivery of the subject vehicle to the plaintiff buyer to the filing
VELASCO, JR., and of this action, pursuant to the aforequoted Article
BRION, JJ. 1571.[13] (Emphasis and underscoring supplied)
COURT OF APPEALS AND BRUNO SOLEDAD,
Respondents. Promulgated: His motion for reconsideration having been denied, Ang appealed to the RTC, Branch 7 of which
September 29, 2008 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
x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x expense. The RTC ratiocinated:

xxxx

DECISION [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
CARPIO MORALES, J.: defects. Moreover, Villostas vs. Court of Appeals declared that the
six-month prescriptive period for a redhibitory action applies only to
Under a car-swapping scheme, respondent Bruno Soledad (Soledad) sold his Mitsubishi implied warranties. There is here an express warranty. If at all,
GSR sedan 1982 model to petitioner Jaime Ang (Ang) by Deed of Absolute Sale[1] dated July 28, what applies is Art. 1144 of the Civil Code, the general law on
1992. For his part, Ang conveyed to Soledad his Mitsubishi Lancer model 1988, also by Deed of prescription, which states, inter alia, that actions upon a written
Absolute Sale[2] of even date. As Angs car was of a later model, Soledad paid him an contract prescribes in ten (10) years [Engineering & Machinery
additional P55,000.00. Corporation vs. Court of Appeals, G.R. No. 52267, January 24,
1996].
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 More appropriate to the discussion would be defendants warranty
Paul Bugash (Bugash) for P225,000.00, by Deed of Absolute Sale[3] dated August 14, 1992. Before the against eviction, which he explicitly made in the Deed of Absolute
deed could be registered in Bugashs name, however, the vehicle was seized by virtue of a writ of Sale: I hereby covenant my absolute ownership to (sic) the above-
replevin[4] dated January 26, 1993 issued by the Cebu City Regional Trial Court (RTC), Branch 21 described property and the same is free from all liens and
in Civil Case No. CEB-13503, BA Finance Corporation vs. Ronaldo and Patricia Panes, on account encumbrances and I will defend the same from all claims or any claim
of the alleged failure of Ronaldo Panes, the owner of the vehicle prior to Soledad, to pay the mortgage whatsoever
debt[5] constituted thereon.
Still the Court finds that plaintiff cannot recover under this
To secure the release of the vehicle, Ang paid BA Finance the amount warranty. There is no showing of compliance with the requisites.
of P62,038.47[6] 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 xxxx
Prosecutor, Cebu City. By Resolution[7] of July 15, 1993, the City Prosecutors Office dismissed the
complaint for insufficiency of evidence, drawing Ang to file on November 9, 1993 the first[8] of three Nonetheless, for the sake of justice and equity, and in consonance
successive complaints for damages against Soledad before the RTC of Cebu City where it was docketed with the salutary principle of non-enrichment at anothers
as Civil Case No. Ceb-14883. expense, defendant should reimburse plaintiff
theP62,038.47 which on March 23, 1993 he paid BA Finance
Branch 19 of the Cebu City RTC, by Order[9] dated May 4, 1995, dismissed Civil Case No. Corporation to release the mortgage on the car. (Emphasis and
Ceb-14883 for failure to submit the controversy to barangay conciliation. underscoring supplied)[14]

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 The RTC thus disposed as follows:
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. Wherefore, judgment is rendered directing defendant to pay
plaintiff P62,038.47, the amount the latter paid BA Finance
After trial, the MTCC dismissed the complaint on the ground of prescription, vz: Corporation to release the mortgage on the vehicle, with interestat the
legal rate computed from March 23, 1993. Except for this, the

4|Page
 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 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 Resolution[19] of April 25, 2007, the appellate court denied Angs 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 Angs contention that Soledad was the proximate cause of
the loss due to the latters 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. CA[20] 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.
5|Page
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 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 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 sellers title (Art. 1548), against hidden defects and encumbrances (Art. 1561),
as to fitness or merchantability (Art. 1562), and against eviction (Art. 1548).
The earlier cited ruling in Engineering & Machinery Corp. states that the prescriptive period
for instituting actions based on a breach of express warranty is that specified in the contract, and in the
absence of such period, the general rule on rescission of contract, which is four years (Article 1389,
Civil Code).
As for actions based on breach of implied warranty, the prescriptive period is, under Art.
1571 (warranty against hidden defects of or encumbrances upon the thing sold) and Art. 1548
(warranty against eviction), six months from the date of delivery of the thing sold.
The following provision of the Deed of Absolute Sale reflecting the kind of warranty made
by Soledad reads:
xxxx
I hereby covenant my absolute ownership to
(sic) the above-described property and the same is free
from all liens and encumbrances and I will defend the
same from all claims or any claim whatsoever; will
save the vendee from any suit by the government of the
Republic of the Philippines.
x x x x (Emphasis supplied)
In declaring that he owned and had clean title to the vehicle at the time the Deed of Absolute
Sale was forged, Soledad gave an implied warranty of title. In pledging that he will defend the same
from all claims or any claim whatsoever [and] will save the vendee from any suit by the government of
the Republic of the Philippines, Soledad gave a warranty against eviction.
 Given Angs business of buying and selling used vehicles, he could not have 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 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.
DECISION
AZCUNA, J.:
This is a petition for review on certiorari under Rule 45 of the Rules of Court seeking to annul
the Order,1 dated September 9, 1999, of the Regional Trial Court of Quezon City (the RTC),
Branch 105, which dismissed the complaint for damages filed by petitioner Carlos B. De
Guzman against respondent Toyota Cubao, Inc.

On 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 On November 27, 1997, petitioner purchased from respondent a brand new white Toyota Hi-
following essential requisites for such breach, vz: Lux 2.4 SS double cab motor vehicle, 1996 model, in the amount of ₱508,000. Petitioner
made a down payment of ₱152,400, leaving a balance of ₱355,600 which was payable in 36
A breach of this warranty requires the months with 54% interest. The vehicle was delivered to petitioner two days later. On October
concurrence of the following circumstances: 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
(1) The purchaser has been deprived of the that respondent should replace the engine with a new one based on an implied warranty.
whole or part of the thing sold; Respondent countered that the alleged damage on the engine was not covered by a warranty.

(2) This eviction is by a final judgment; On April 20, 1999, petitioner filed a complaint for damages2 against respondent with the RTC.
Respondent moved to dismiss the case on the ground that under Article 1571 of the Civil
(3) The basis thereof is by virtue of a right Code, the petitioner’s cause of action had prescribed as the case was filed more than six
prior to the sale made by the vendor; and months from the date the vehicle was sold and/or delivered.

(4) The vendor has been summoned and

made co-defendant in the suit for eviction at the In an Order dated September 9, 1999, the RTC granted respondent’s motion and dismissed
instance of the vendee. the complaint, thus:

In the absence of these requisites, a breach of For the Court’s consideration are: (1) defendant’s Motion to Dismiss; (2) plaintiff’s Opposition
the warranty against eviction under Article 1547 cannot thereto; (3) defendant’s Reply; and (4) plaintiff’s Rejoinder.
be declared. [24] (Emphasis supplied),

have not been met. For one, there is no judgment which deprived Ang of the vehicle. For another, there The Court agrees with the plaintiff’s counsel that the subject pick-up is a consumer product
was no suit for eviction in which Soledad as seller was impleaded as co-defendant at the instance of the because it is used for personal, family or agricultural purposes, contrary to defendant
vendee. 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
Finally, even under the principle of solutio indebiti which the RTC applied, Ang cannot the subject pick-up carried an implied warranty that it was free from any hidden faults or
recover from Soledad the amount he paid BA Finance. For, as the appellate court observed, Ang settled defects, or any charge or encumbrance not declared or known to the buyer. The prescriptive
the mortgage debt on his own volition under the supposition that he would resell the car. It turned out period thereof is six (6) months under the Civil Code (Art. 1571).

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 Angs 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.
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.

G.R. No. 141480 November 29, 2006 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
CARLOS B. DE GUZMAN, Petitioner, action prescribes in four (4) years. Under RA No. 7394, the implied warranty cannot be more
vs. than one (1) year; however, the implied warranty can only be of equal duration to that an
TOYOTA CUBAO, INC., Respondent. 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

6|Page
 not cover an implied warranty, which is not accompanied by an express warranty. It is
applicable to cases where there is an express warranty in the sale of the consumer product.
Relative to plaintiff’s argument that the claim for moral and exemplary damages and attorney’s
fees is based on quasi-delict or breach of contract, such are merely ancillary to the main cause
of action which is based on warranty against hidden defects. Without the latter, the former
cannot stand alone.
Based on the record, the subject vehicle was purchased on 27 November 1997 and delivered
on 29 November 1997. This case was filed only on 20 April 1999 or almost nineteen (19)
months from [the] sale and/or delivery. Applying Art. 1571 of Civil Code, the action is barred
by prescription because the complaint was filed more than six (6) months after the sale and/or
delivery of the vehicle. In addition, the duration of the implied warranty of not more than one
(1) year under Art. 68, par (e) of RA No. 7394 has already elapsed.
Accordingly, defendant’s Motion is granted and the plaintiff’s Complaint is ordered dismissed.
SO ORDERED3
On December 21, 1999, the RTC denied petitioner’s motion for reconsideration, as follows:
Submitted for resolution are: (1) plaintiff’s Motion for Reconsideration; (2) defendant’s
Opposition; and (3) plaintiff’s Reply.
Although plaintiff’s motion was filed beyond the ten-day period, the Court is convinced that it
was not for the purpose of delay; hence, it cannot be considered as a mere scrap of paper.
After a thorough study, the Court resolves that while reference to Art. 68, par. (e) of RA No.
7394 may have been misplaced, yet the subject sale carried an implied warranty whose
prescriptive period is six (6) months under Art. 1571 of the Civil Code.
Accordingly, plaintiff’s Motion for Reconsideration is DENIED.
SO ORDERED.4
Petitioner thereupon filed a petition for review on certiorari with this Court.
The petition should be denied.
First, on procedural grounds, the petition should forthwith be denied for violation of the
hierarchy of courts. Petitioner states that the present petition is an "appeal by certiorari on
pure questions of law, from the final Order of Branch 105 of the Regional Trial Court of Quezon
City in Civil Case No. Q-99-37381 … under Rule 45 of the Rules of Court." Upon receipt of
the Order of the RTC, dated September 9, 1999, on September 21, 1999, petitioner filed a
motion for reconsideration on September 28, 1999. On December 21, 1999, the RTC denied
petitioner’s motion. When petitioner received a copy of the said order on January 18, 2000,
he had fifteen (15) days from receipt within which to appeal to the Court of Appeals by filing a
notice of appeal under Section 2(a) of Rule 41, from an order of the RTC issued in the exercise
of its original jurisdiction. The RTC’s order dated September 9, 1999 and its subsequent order
dated December 21, 1999 partake of the nature of a final disposition of the case. Hence, the
7|Page
appropriate remedy petitioner should have taken was to file a notice of appeal from the RTC
to the Court of Appeals, not a petition for review on certiorari directly with this Court.
Although petitioner intended his petition, filed on February 2, 2000, to be one filed under Rule
45 and he filed it well within the 15-day reglementary period counted from January 18, 2000,
the same was in effect a petition for certiorariunder Rule 65, and is therefore dismissible for
violation of the hierarchy of courts under Section 4 thereof. Petitioner failed to show that
special and important reasons or exceptional and compelling circumstances exist to justify a
direct filing of the petition with this Court instead of first taking an appeal to the Court of
Appeals.5 Likewise, petitioner cannot find refuge in the argument that he was raising pure
questions of law. The sole matter petitioner assails in this action is the RTC’s order of
dismissal of his complaint for damages on the ground of prescription which was tantamount
to an adjudication on the merits. Again, petitioner should have resorted to the remedy of
appealing the case to the Court of Appeals by filing a notice of appeal with the RTC.
Second, even if the Court were to disregard the procedural infirmity, the petition should be
denied for lack of merit.
In his complaint, petitioner alleged and prayed, thus:
2. Last 27 November 1997, the plaintiff purchased from the defendant a brand new
Toyota Hilux 2.4 motor vehicle with [E]ngine [N]o. 2-L-9514743. It was delivered to
the plaintiff on 29 November 1997. Copies of the Vehicle Sales Invoice and Vehicle
Delivery Note issued by the defendant are hereto attached as Annexes "A" and "B,"
respectively.
3. Last 18 October 1998, after only 12,000 kilometers of use, the vehicle’s engine
cracked. Although it was previously driven through a heavy rain, it didn’t pass
through flooded streets high enough to stop sturdy and resistant vehicles. Besides,
vehicles of this class are advertised as being capable of being driven on flooded
areas or rugged terrain.
4. As plaintiff knows no reason why the vehicle’s engine would crack just like that,
the same could only be due to the fact that said engine and/or the vehicle itself was
defective even from the time it was bought.
5. Brought to the attention, defendant refused to answer for this defect saying it is
not covered by the vehicle’s warranty. It refused to replace the vehicle as plaintiff
demanded (or at least its engine, or even repair the damage).
6. As a result of defendant’s actions, plaintiff suffered mental anxiety and sleepless
nights for which he demands an award of ₱200,000.00 moral damages.
7. By way of example for the public good, plaintiff should also be awarded
exemplary damages in the amount of ₱200,000.00.
8. Forced to litigate to enforce his rights, plaintiff incurred, and shall further incur,
litigation-related expenses (including those for his counsel’s fees) in the total
estimated sum of ₱100,000.
WHEREFORE, it is respectfully prayed that judgment be rendered ordering defendant:
 a. to replace the subject vehicle with a brand new one or at least to replace its
engine all at defendant’s cost;
b. pay the plaintiff:
i. ₱200,000 – moral damages;
ii. ₱200,000 – exemplary damages;
iii. ₱200,000 – attorney’s fees and litigation expenses; and
iv. the costs of suit.
Other reliefs just and equitable are, likewise, prayed for.6
Petitioner contends that the dismissal on the ground of prescription was erroneous because the
applicable provision is Article 169 of Republic Act No. 7394 (otherwise known as "The Consumer Act of
the Philippines" which was approved on April 13, 1992), and not Article 1571 of the Civil Code. Petitioner
specifies that in his complaint, he neither asked for a rescission of the contract of sale nor did he pray
for a proportionate reduction of the purchase price. What petitioner claims is the enforcement of the
contract, that is, that respondent should replace either the vehicle or its engine with a new one. In this
regard, petitioner cites Article 169 of Republic Act No. 7394 as the applicable provision, 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.
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
This provision shall not apply if the contrary has been stipulated and the vendor was not aware
year, had likewise lapsed.
of the hidden faults or defects in the thing sold.
8|Page
Art. 1571. Actions arising from the provisions of the preceding ten articles shall be barred after
six months from the delivery of the thing sold.
(Emphasis supplied)
Under Article 1599 of the Civil Code, once an express warranty is breached, the buyer can
accept or keep the goods and maintain an action against the seller for damages. In the
absence of an existing express warranty on the part of the respondent, as in this case, the
allegations in petitioner’s complaint for damages were clearly anchored on the enforcement
of an implied warranty against hidden defects, i.e., that the engine of the vehicle which
respondent had sold to him was not defective. By filing this case, petitioner wants to hold
respondent responsible for breach of implied warranty for having sold a vehicle with defective
engine. Such being the case, petitioner should have exercised this right within six months
from the delivery of the thing sold.7 Since petitioner filed the complaint on April 20, 1999, or
more than nineteen months counted from November 29, 1997 (the date of the delivery of the
motor vehicle), his cause of action had become time-barred.
Petitioner contends that the subject motor vehicle comes within the context of Republic Act
No. 7394. Thus, petitioner relies on Article 68 (f) (2) in relation to Article 169 of Republic Act
No. 7394. Article 4 (q) of the said law defines "consumer products and services" as goods,
services and credits, debts or obligations which are primarily for personal, family, household
or agricultural purposes, which shall include, but not limited to, food, drugs, cosmetics, and
devices. The following provisions of Republic Act No. 7394 state:
Art. 67. Applicable Law on Warranties. — The provisions of the Civil Code on conditions and
warranties shall govern all contracts of sale with conditions and warranties.
Art. 68. Additional Provisions on Warranties. — In addition to the Civil Code provisions on sale
with warranties, the following provisions shall govern the sale of consumer products with
warranty:
e) Duration of warranty. The seller and the consumer may stipulate the period within which
the express warranty shall be enforceable. If the implied warranty on merchantability
accompanies an express warranty, both will be of equal duration.1âwphi1
Any other implied warranty shall endure not less than sixty (60) days nor more than one (1)
year following the sale of new consumer products.
f) Breach of warranties — xxx
xxx
2) In case of breach of implied warranty, the consumer may retain in the goods and recover
damages, or reject the goods, cancel the contract and recover from the seller so much of the
purchase price as has been paid, including damages. (Emphasis supplied.)
 WHEREFORE, the petition is DENIED for being in violation of the hierarchy of courts, and in
any event, for lack of merit.
No costs.
SO ORDERED.
G.R. No. 136500. December 3, 1999]
CONRADO R. ISIDRO, petitioner, vs. NISSAN MOTOR PHILIPPINES, INC., respondent.
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]
9|Page
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 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.
10 | P a g e
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 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 THE COURT OF APPEALS ERRED IN FINDING THAT THE FORDSON DIESEL ENGINE
engine had been perpetrated upon him, appellee made demands from appellant DELIVERED BY PETITIONER TO RESPONDENT HORACIO YAPTINCHAY WAS NOT
for indemnification for damages and eventually instituted the present suit. BRAND NEW, REACHING SUCH FINDING BY WAY OF A MANIFESTLY MISTAKEN
INFERENCE AND ON THE BASIS OF A MISAPPREHENSION OF FACTS AND SOLELY
"In its defense, appellant interposed prescription of the action, denied the ON THE GROUND OF SPECULATION, SURMISES AND CONJECTURES.
imputation of misrepresentation, and disputed the propriety and amount of
damages claimed.." . . 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
After trial on the merits, the trial court ruled in favor of plaintiff Yaptinchay as time the complaint was filed in the trial court; 2) whether or not the factual
follows:chanrobles lawlibrary : rednad 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
"FOR ALL THE FOREGOING CONSIDERATIONS, the Court hereby renders was justified considering the evidence on record.
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 The first issue is premised on the petitioner’s proposition that the respondent’s
reimburse the purchase price of the Fordson diesel engine in the amount of cause of action was for breach of warranty against hidden defects as provided
P7,590.00; and to pay attorney’s fees to plaintiff’s counsel on the sum of under Articles 1561 and 1566 of the Civil Code. Article 1571 of the Civil Code
P2,000.00 and costs. 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
"Plaintiff is, likewise, ordered to return the Fordson diesel engine with serial petitioner GAMI when respondent Yaptinchay filed the case with the trial court,
number A-21219 to the defendant."cralaw virtua1aw library more than six months had already lapsed from the time the alleged defective
engine was delivered and, therefore, the action had prescribed.
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 The petitioner contends that Yaptinchay’s asserted cause of action was premised
was denied. Hence, the instant petition. 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
Petitioner GAMI raises the following alleged errors of judgment of the respondent mere specifications of the precise nature of the hidden defects.
court:chanrob1es virtual 1aw library
A cursory reading of the complaint shows that the petitioner’s arguments are not
I well-taken.

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.
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.

III 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
THE COURT OF APPEALS ERRED IN AWARDING ACTUAL DAMAGES IN THE FORM laboratory technician Captain Garcia of the Philippine Constabulary to the effect
OF UNREALIZED PROFITS (LUCRUM CESSANTE) WHEN THE ISSUE RAISED BY that the motor or serial number of the engine was tampered does not deserve
THE PLEADINGS REFERS ONLY TO ALLEGED ACTUAL DAMAGES IN THE FORM OF credence.chanrobles virtual lawlibrary
DAMNUM EMERGENTE.
The first argument is premised on the proposition that even brand-new engines
IV in many cases develop oil leaks. To support this proposition the petitioner
presented documentary evidence (Exhibits "5", "7", "8", "9", "10", "11", "12",
"13", "14", "15", "16" and "17") consisting of job orders for allegedly brand new

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 engines which developed oil leaks. "A. The metal will only expand.

An examination of the documentary evidence shows that the job orders were for "Q. There is no spark of the machine could not cause the molecular disturbance
twelve (12) different engines. Moreover, the petitioner’s witness who testified on in the steam, is that right?
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 "A. It cannot"
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 (T.S.N., Iluminado C. Palisoc, February 5, 1965, pp. 99-100)
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 The petitioner’s argument that the Court of Appeals findings are based on
"F"), on March 10, 1962 (Exhibit "H") and on July 2, 1962 (Exhibit "I"). The manifestly mistaken inferences, misapprehension of facts, and purely on
documentary evidence of the petitioner consisting of the job orders of the speculation, surmises, and conjectures is without merit.
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 The Fordson diesel engine delivered to the respondent was not brand-new.
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. We agree with the Court of Appeals that:jgc:chanrobles.com.ph

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
"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.

"Q. This fragmentary numeral could be caused deliberately by tampering with the ". . . In Abubakar Tan v. Tian Ho, L-18820, December 29, 1962 and Lim Giok v.
engine number or by other factor such as scratches or burning by other foreign Bataan Cigar and Cigarette Factory, L-15861, April 16, 1960, we held that even if
element, is that right? the allegations regarding the amount of damages in the complaint are not
specifically denied in the answer, such damages are not deemed admitted. In
"A. No, sir, they can be caused by scraping but not by scratching, because by Tomassi v. Villa-Abrille, L-7047, August 21, 1958, Suntay Tanjangco v.
scraping there is molecular disturbance of metal. 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
"Q. When you say molecular disturbance does it mean you first apply in the area, uncertain terms that actual damages must be proved, and that a court cannot rely
or would it disturb the molecule in or around that area? 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
"A. Once you stamped the number, you impressed it and there is molecular of the actual amount. . . ."cralaw virtua1aw library
disturbance in the structure of the metal.
The fact that the defendant does not dispute the amount of this kind of damages
"Q. If the metal is burned, there is also molecular disturbance in the metal, is that does not necessarily imply that the other party outright is entitled to the award of
correct? damages.

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 Article 2200 of the Civil Code entitles the respondent to recover as compensatory
damages not only the value of the loss suffered but also prospective profits while
Article 2201 entitles the respondent to recover all damages which may be
attributed to the non-performance of the obligation. However, in order to recover
this kind of damages, the plaintiff must prove his case —

"‘When the existence of a loss is established, absolute certainty as to its amount

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

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

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

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