JASPER FRANCIS B. CAMBE, PLAINTIFF-APPELLEE, VS. RCL DIRECT MARKETING CORP., REPRESENTED BY AMADO C. PERICON, JR., DEFENDANT-APPELLANT.

This is an appeal from the December 29, 2006 Decision^[1] of the Regional Trial Court Branch 15, Davao City in Civil Case No. 30,333-04 for rescission of sale, damages, attorney’s fees and cost, the fallo of which states:

“WHEREFORE, judgment is hereby rendered as follows:

1. The Deed of Sale of the motorcycle is rescinded;

2. The defendant shall pay the plaintiff the following sums:

1. Fifty-four Thousand Pesos representing the return of the purchase plus legal interest from April 2004 until fully paid;
2. Twenty-thousand Pesos as moral damages plus legal interest from April 2004 until fully paid;
3. Twenty-thousand Pesos as exemplary damages plus legal interest from April 2004 until fully paid;
4. Twenty-thousand Pesos as Attorney’s fees;
5. Ten thousand Pesos as litigation expenses; and
6. Cost of suit.

SO ORDERED.”

The facts of the case are as follows:

On July 29, 2003, herein plaintiff Jasper Cambe bought one (1) unit of Hensim Dragon 150-motorcycle from defendant RCL Direct Marketing for P54,000.00. In the evening of the same date, the unit’s gas tank leaked which prompted the plaintiff to bring back the motorcycle to the defendant the next day. The leak was immediately remedied but a few weeks after, the same problem occurred. The plaintiff again took the unit to the defendant to have the leak fixed for the second time. The leak stopped but it lasted only for a few weeks. Considering the recurring problem on the unit despite the repairs made by the defendant’s mechanic, the plaintiff opted to fix the leak himself. Since then, the leaking stopped.^[2] However, on August 5, 2003, one of the unit’s copper tube broke spilling engine oil and causing the engine to make loud noises. The unit had to be pulled by another motorcycle to a motor shop in Digos. One of the plaintiff’s staff reported the problem to the defendant’s mechanic who merely advised him to fill the motor with a liter of engine oil. The damage was temporarily repaired when the plaintiff’s staff filled the engine with oil and expanded the broken end of the tube.^[3] Thereafter, the plaintiff went to the defendant to have the copper tube checked. The mechanic merely tightened the bolts.^[4] In the same month, aside from the rear wheel bearing making a loud noise which was eventually fixed by the defendant’s mechanic after it was replaced with a new one, the other copper tube also broke. The defendant’s mechanic advised the plaintiff to replace the copper tubes with a heat resistant hose; but since the latter could not find one, he instead decided to buy and install a steel tube which actually fixed the problem.^[5]

Sometime between the first or second month after his purchase, the plaintiff also experienced difficulty in starting the motor’s engine. In one instance, the engine stopped running in the middle of the road and it took approximately 15 minutes for the plaintiff to get it started. The defendant’s mechanic advised the plaintiff to just press the unlock button if it becomes difficult to start the engine but it did not work until the former replaced the current direct ignition (cdi). The plaintiff’s agony did not end there for after four (4) months of using the unit, he noticed the engine produce unusual sounds which he consulted with the defendant’s mechanic who recommended to have the motorcycle tuned up even if it was still below the mileage required for a mandatory tune-up.^[6] Besides the noise, the plaintiff also felt that the engine was not running smoothly and could hardly reach its usual speed. Further, the carburetor was not installed properly but since it was just a minor defect, the plaintiff opted to fix it himself. The headlight bulb also eventually failed to function but was immediately replaced by the defendant. The latest problem incurred by the plaintiff on his motorcycle is its sprocket which he found detached.^[7]

On January 5, 2004, the plaintiff submitted a Complaint/Problem Checklist^[8] to the defendant’s representative followed by a letter to its Manager dated January 12, 2004 where he wrote therein the history of problems he encountered with the subject motorcycle, expressing dissatisfaction on the unit, the customer and maintenance services, as well as fear for his life when riding the defective unit. Thus, the plaintiff asked for a full refund of the price paid and offered to return the unit to avoid further damage thereto, but the defendant refused for lack of space to store the motorcycle.^[9]

On January 14, 2004, the plaintiff delivered the subject motorcycle to the defendant.^[10] On January 19 and 24, 2004, the plaintiff wrote follow-up letters to the defendant’s Manager reiterating his intention to surrender the unit and ask for a full refund.^[11]

The defendant, through its area operations manager Amado Pericon, Jr., made a letter-reply dated January 26, 2004 stating that a warranty claim against the supplier was already made and that the defective parts were already replaced and attached to the subject unit thus, they were asking that the plaintiff first test the present condition of the unit. The defendant likewise reiterated the warranty coverage of 10,000 kilometers or one (1) year whichever comes first, both on parts and on service.^[12] The letter was received by the plaintiff on January 29, 2004.

Meanwhile, receiving no action from the defendant, the plaintiff instituted an action before the Department of Trade and Industry on January 26, 2004. A mediation proceeding was conducted but to naught.

Hence, on April 21, 2004, the plaintiff filed a complaint against the defendant before the court a quo mainly for rescission of sale.^[13]

Defendant RCL, on the other hand, admits that the plaintiff’s motorcycle is in their custody after repairs were made thereon. But they deny that those were factory or hidden defects but rather due to ordinary wear and tear considering the way the plaintiff used the unit recording a mileage of 9,186 km. in only a span of 170 days. RCL also maintains that the defects were only minor which did not render the unit unfit for use and were directly and immediately addressed to by them in accordance with their warranty. Hence, they refused to refund the plaintiff. During the mediation before the DTI, the defendant offered to replace plaintiff’s unit with a new one and even for a better brand but to no avail.^[14]

Pre-trial ensued but on December 9, 2005, the defendant filed a demurrer to evidence contending that the defects on the unit did not impair its use nor diminish its fitness and that the plaintiff’s action has already prescribed.^[15] Per Order dated January 12, 2006, the demurrer was denied.^[16]

During the hearing, aside from the plaintiff, Paul Dayoan, a mechanic by experience for two (2) years, was also presented to corroborate the former’s claims. Paul attested that when he took a look at the plaintiff’s unit, he noticed the leak which was caused by the lack of gasket on the upper block of the vehicle. He also observed that the bolts were not properly tightened and the engine gear and the compression were loose. When he rode on the motorcycle, he felt an air leak and he found the unit noisy.^[17]

For the defendant, their mechanics were presented to show that the defects on the unit were merely minor unless not immediately attended to.^[18] They explained that the noise produced by the unit was due to damaged bearings caused by lack of oil due to its constant running. Nevertheless, the bearings were replaced and greased with oil. They also admitted that the motor’s CDI was replaced to address the problem with starting the engine. The mechanic also clarified that the defect on the headlight was caused by the bulb which life span is generally only for 4-5 months. However, the mechanic could hardly believe that the carburetor was not functioning as such defect would prevent the unit from running. Further, he also finds it improbable that the sprocket would just fall out considering that aside from the lock, there is still another cover that would hold the sprocket from falling.^[19] On his cross-examination, the mechanic admitted that when they tested the motorcycle, they only used a liter of fuel but had they filled the tank, they would have detected if there indeed was a leak thereon. He also admitted that the CDI was a major part of the vehicle. Yet, he insisted that the unit was not defective and that there was no leak but only a loose thread which was probably caused by frequent travels and the road condition. Furthermore, he maintained that the unit sounded the same from the time it was purchased by the plaintiff and that he only replaced its piston and cylinder to satisfy the plaintiff’s requests.

The court a quo rendered the assailed decision in the plaintiff’s favor finding that from the time the plaintiff bought the unit until the first week of August, the vehicle was brought to the defendant to have the gas leak repaired for three (3) times and within four (4) months from purchase, the unit has been subjected to several repairs and replacements of parts and tune ups; that despite the foregoing, the unit remained sub-par in its performance; that the unit is clearly unfit for its purpose and the frequent repairs show that the motorcycle’s quality is below standard; that rescission is allowed in such circumstances; that the defendant acted in wanton and reckless manner in dealing with the plaintiff’s concerns assuring the latter that the defects were merely teething problems; and that the plaintiff had to hire a counsel to enforce and vindicate his rights.

The defendant’s motion for reconsideration was denied.^[20] Adamant, the defendant appeals before Us contending that:

I.

THE LOWER COURT ERRED IN NOT ORDERING THE DISMISSAL OF THE CASE AT BAR ON THE GROUND THAT THE PLAINTIFF-APPELLEE’S CAUSE OF ACTION, IF ANY, HAD ALREADY PRESCRIBED;

II.

THE LOWER COURT ERRED IN HOLDING THAT IN THE CASE AT BAR, THE DEFENDANT-APPELLANT IS LIABLE FOR BREACH OF EXPRESS WARRANTY;

III.

THE LOWER COURT ERRED IN FINDING THAT RESCISSION IS PROPER IN THE CASE AT BAR;

IV.

THE LOWER COURT ERRED IN AWARDING DAMAGES TO THE PLAINTIFF-APPELEE.

The defendant asseverates that the plaintiff-appellee failed to establish that the defect existed at the time the sale was made; that the defects were merely due to ordinary wear and tear which was a necessary consequence taking into account the plaintiff-appellee’s use of the vehicle; that the plaintiff-appellee’s action has already prescribed considering that almost nine (9) months from the date of delivery has lapsed before the case was filed; that the warranty covers only parts and services but not to refund the price paid; that they promptly and satisfactorily replaced the defective parts and rendered free repairs for the plaintiff; that rescission is not apt because there was no breach of contract; that the plaintiff-appellee only notified them of his choice to rescind after 170 days from purchase which is not a reasonable period to elect rescission; that when the unit was returned, it was no longer in good condition as it was at the time it was delivered to the plaintiff-appellee; and that the award of damages and interest has no basis.^[21]

Our Ruling

The appeal is impressed with merit.

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] 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. However, 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.^[23] A warranty 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 is an implied warranty which includes provisions of the Civil Code as to the seller’s title (Art. 1547), against hidden defects and encumbrances (Art. 1561), as to fitness or merchantability (Art. 1562), and against eviction (Art. 1548).^[24]

If the thing sold has defects that would 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, Article 1561 makes the vendor responsible for the warranty unless the defect be apparent or visible or if the vendee is an expert by trade or profession who should have known them. The vendor’s responsibility extends even if he was not aware of the hidden faults or defects in the thing sold except if the contrary has been stipulated.^[25]

In the case at bench, there is no doubt that the defendant-appellant is guilty of breach of their warranty. Within the same date the plaintiff-appellant bought the unit, it already showed defects which were not apparent at the time of the sale. In fact, the very next day, the motorcycle was already subjected to repairs due to its leaking gas tank which persisted despite efforts of the defendant-appellant to fix until the plaintiff-appellee dealt with the problem himself. As aptly observed by the court a quo, within the period of only about four (4) months, the unit had been in and out of the defendant-appellant’s shop for repairs and replacement of parts but their efforts proved futile for the defects kept recurring. This was not denied by the defendant-appellant which appropriately and immediately addressed the plaintiff-appellee’s concerns. However, the fact that the defendant-appellant made the necessary repairs and services would not negate the reality that there was already something wrong with the unit at the time it was sold lest the plaintiff-appellee would not have experienced the afore-mentioned problems.

Highly analogous with the instant case is the case of Supercars Management & Development Corp. v. Flores,^[26] where the respondent therein complained of defects on the vehicle he bought a day before which included the snapping of the fan belt, the hardening of the brakes after several stops, the malfunctioning of the heater plug, the increasing fuel consumption and the difficulty in starting the engine. The vehicle was repaired by the petitioner but the same defects resurfaced after a few days which prompted the respondent to rescind the contract of sale and return the vehicle due to breach of warranty against hidden defects. The Supreme Court ruled for the respondent holding that:

“Respondent’s complaint filed with the RTC seeks to recover from petitioner the money he paid for the vehicle due to the latter’s breach of his warranty against hidden defects under Articles 1547, 1561, and 1566 of the Civil Code. The vehicle, after it was delivered to respondent, malfunctioned despite repeated repairs by petitioner. Obviously, the vehicle has hidden defects. A hidden defect is one which is unknown or could not have been known to the vendee.

The findings of both the RTC and Court of Appeals that petitioner committed a breach of warranty against hidden defects are fully supported by the records. The Appellate Court correctly ruled:

‘The evidence clearly shows that Flores [now respondent] was justified in opting to rescind the sale given the hidden defects of the vehicle, allowance for the repair of which he patiently extended, but which repair did not turn out to be satisfactory…’” (Italics for emphasis)

Accordingly, herein plaintiff-appellee experienced problems with the motorcycle only hours after the sale was consummated. Not only was the defect hidden but it kept resurfacing even after the defendant-appellant already fixed it. Clearly, there was breach by the defendant-appellant of the warranty against hidden defects. Moreover, the testimony of the defendant-appellant’s mechanic as to the loose thread caused by the unit’s frequent travel and road conditions also made it appear that the unit was not fit for its purpose. The plaintiff-appellee bought the motorcycle to serve as his means of transportation especially in going to his work in Digos, hence, it is expected that the unit should frequently travel and if such travels would cause the motor part to loosen, then the unit is therefore not merchantable.

Nevertheless, We find that the plaintiff-appellee’s action has already prescribed.

The prescriptive period for actions based on breach of warranties depends on whether the warranty breached is express or implied. If the warranty is express, the period to institute the action should be within the time specified in the contract and in the absence thereof, the general rule on rescission of contract which is four years. Yet, RA 7394 or the Consumer Act of the Philippines adds that the seller and the consumer may stipulate the period within which the express warranty shall be enforceable. On the other hand, if the warranty is implied, the action should be commenced within six (6) months from the date of the delivery of the thing sold.^[27] However, if the implied warranty on merchantability is accompanied by an express warranty, both will be of equal duration.^[28]

In the case before Us, the plaintiff-appellee’s action is basically based on the defendant-appellant’s breach of the implied warranty against hidden or factory defects hence, his complaint should have been commenced six (6) months from the time the unit was delivered on July 29, 2003 or until January 29, 2004. Article 1571 of the Civil Code is clear on this matter in stating that actions arising from the provisions of the preceding ten articles shall be barred after six months from the delivery of the thing sold. The plaintiff-appellee’s action for rescission was filed before the court a quo only on April 21, 2004, which is beyond the statutory period to bring the action. Hence, it is already time-barred. This is in line with the case of Guzman v. Toyota Cubao,^[29] where the Supreme Court declared:

“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. 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.” (Emphasis supplied)

Although the plaintiff-appellee has expressed his intention of rescinding the contract and asking for a refund of the price as early as January 12, 2004 and has filed a complaint before the DTI on January 26, 2004, We cannot hold that those extrajudicial demands interrupted the period for prescription as the plaintiff-appellee would like to impress upon this Court. True that Article 1155 of the New Civil Code provides that the prescription of actions is interrupted when they are filed before the court, when there is extrajudicial demand by the creditors, and when there is any written acknowledgment of the debt by the debtor. However, such provision is not applicable in the instant case. The case of Miailhe v. CA,^[30] is enlightening on this point and We quote:

“Petitioner asserts that the extrajudical demands pleaded in paragraph 12 of the Complaint legally interrupted prescription in accordance with Article 1155 of the Civil Code, which states:

‘ART. 1155. The prescription of actions is interrupted when they are filed before the court, when there is extrajudicial demand by the creditors, and when there is any written acknowledgment of the debt by the debtor.’

In other words, petitioner claims that because he is covered by the term ‘creditor,’ the above-quoted provision is applicable to him.

We are not persuaded. Petitioner himself avers that ‘the use of the terms ‘creditor’ and/or ‘debtor’ in Article 1155 of the Civil Code must relate to the general definition of obligations.’ He then asserts that ‘an obligation is a juridical relation whereby a person (called the creditor) may demand from another (called the debtor) the observance of a determinate conduct, and in case of breach, may obtain satisfaction from the assets of the latter.’ He also defines “credit” as the right to demand the object of the obligation. From his statements, it is clear that for there to be a creditor and a debtor to speak of, an obligation must first exist.

In the present case, there is as yet no obligation in existence. Respondent has no obligation to reconvey the subject lots because of the existing Contract of Sale. Although allegedly voidable, it is binding unless annulled by a proper action in court. Not being a determinate conduct that can be extrajudically demanded, it cannot be considered as an obligation either. Since Article 1390 of the Civil Code states that voidable ‘contracts are binding, unless they are annulled by a proper action in court,’ it is clear that the defendants were not obligated to accede to any extrajudicial demand to annul the Contract of Sale.

In the absence of an existing obligation, petitioner cannot be considered a creditor, and Article 1155 of the Civil Code cannot be applied to his action. Thus, any extrajudicial demand he made did not, or will not, interrupt the prescription of his action for the annulment of the Contract of Sale.” (Italics ours)

Applying the above ruling of the Supreme Court, herein plaintiff-appellee cannot claim that he is a debtor and the defendant-appellant is a creditor as there is yet no obligation for the latter to give in to the former’s demand. The sale subsists absent the declaration that it be rescinded, which is actually what the plaintiff-appellee prayed for before the court a quo. Thus, there is no obligation for the restoration of the unit by the plaintiff-appellee or the refund of the price by the defendant-appellant because as far as the parties are concerned, they are still bound by the sale. Consequently, the parties cannot be considered as the debtor and creditor referred to under Article 1155.

Further, there was also no breach of an express warranty. Even if the defendant-appellant expressly warranted the repairs and services on the unit within one (1) year from purchase or 10,000 km. mileage, whichever comes first, such warranty was limited only to the repairs and services which the defendant-appellant was able to promptly render, therefore they are not liable for any breach on their express warranty. It was never disproved that the defendant-appellant immediately acted on the plaintiff-appellee’s problems on the motorcycle. They were not remiss in fulfilling the repairs and services expressly guaranteed by them. Therefore, there can be no basis to conclude that the defendant-appellant breached their express warranty.

Accordingly, finding that the plaintiff-appellee’s action based on the defendant-appellant’s breach of implied warranty is already barred by prescription, and sans breach by the defendant-appellant on their express warranty, the award of damages and attorney’s fees in the former’s favor cannot be sustained.

WHEREFORE, the instant appeal is GRANTED. The December 29, 2006 Decision of the Regional Trial Court Branch 15, Davao City in Civil Case No. 30,333-04 is hereby REVERSED and SET ASIDE.

SO ORDERED.

Camello (Chairperson) and Lopez, JJ., concur.

---

^[1] Rollo, pp. 84-87.

^[2] TSN, December 13, 2004, pp. 3-4.

^[3] Records, p. 64.

^[4] TSN, August 3, 2005, p. 13.

^[5] Records, p. 65.

^[6] TSN, August 3, 2005, p. 16.

^[7] Records, p. 66.

^[8] Records, p. 63.

^[9] TSN, August 3, 2005, p. 3.

^[10] Records, p. 68.

^[11] Records, pp. 69-70.

^[12] Records, p. 71.

^[13] Records, pp. 2-5.

^[14] TSN, April 17, 2006, pp. 4, 6 and 7.

^[15] Records, pp. 75-87.

^[16] Records, p. 104.

^[17] TSN, November 24, 2005, pp. 3 and 8.

^[18] TSN, April 18, 2006, p. 17.

^[19] TSN, June 8, 2006, pp. 28-30.

^[20] Records, pp. 169-170.

^[21] Rollo, pp. 61-82.

^[22] Ang v. CA, G.R. No. 177874, September 29, 2008.

^[23] The New Civil Code, Article 1546.

^[24] Supra.

^[25] The New Civil Code, Article 1566.

^[26] G.R. No. 148173, December 10, 2004.

^[27] Supra.

^[28] Consumer Act of the Philippines, Article 68 (e).

^[29] G.R. No. 141480, November 29, 2006.

^[30] G.R. No. 108991, March 20, 2001.