CARLOS B. DE GUZMAN, PETITIONER,VS. TOYOTA CUBAO, INC., RESPONDENT.

De Guzman versus Toyota Cubao

The Case

This is a petition for review on certiorari brought by Carlos B. De Guzman against Toyota Cubao, Inc., seeking to annul the order of the Regional Trial Court of Quezon City, Branch 105, which dismissed his complaint for damages. The buyer of a brand new Toyota Hi-Lux double cab claimed that the engine cracked after only about twelve thousand kilometers of use, and he demanded that the seller replace the vehicle or its engine. The seller refused, invoking warranty limits. The case matters because it fixes the boundary between the Civil Code's action for hidden defects and the Consumer Act's warranty provisions, and because it teaches the prescriptive periods a buyer must watch.

Procedural History

De Guzman filed a complaint for damages with the Regional Trial Court of Quezon City. Toyota Cubao moved to dismiss on the ground that, under Article 1571 of the Civil Code, the cause of action had prescribed because the complaint was filed more than six months from the sale and delivery of the vehicle. The trial court granted the motion and dismissed the complaint. It reasoned that the sale carried an implied warranty against hidden faults, that the prescriptive period was six months under the Civil Code, and that even under the Consumer Act the implied warranty endures not less than sixty days nor more than one year following the sale of new consumer products. De Guzman moved for reconsideration. The trial court denied the motion, clarifying that its reference to the Consumer Act may have been misplaced, but that the six-month period under Article 1571 of the Civil Code still governed. De Guzman then went directly to the Supreme Court by petition for review on certiorari under Rule 45, instead of appealing to the Court of Appeals.

Facts

On November 27, 1997, De Guzman purchased from Toyota Cubao a brand new white Toyota Hi-Lux 2.4 SS double cab motor vehicle, 1996 model, for 508,000 pesos. He made a down payment of 152,400 pesos, leaving a balance of 355,600 pesos payable in thirty-six months with fifty-four percent interest. The vehicle was delivered to him two days later, on November 29, 1997.

On October 18, 1998, after only about twelve thousand kilometers of use, the vehicle's engine cracked. De Guzman had driven through Marcos Highway during a heavy rain, but he insisted the vehicle did not pass through flooded streets high enough to stop sturdy vehicles, and that vehicles of this class are advertised as capable of being driven on flooded areas or rugged terrain. He demanded that Toyota Cubao replace the engine with a new one based on an implied warranty. Toyota Cubao countered that the damage was not covered by a warranty.

On April 20, 1999, De Guzman filed a complaint for damages, praying that Toyota Cubao be ordered to replace the vehicle or at least its engine at its cost, and to pay moral damages, exemplary damages, attorney's fees and litigation expenses. Toyota Cubao moved to dismiss, arguing that under Article 1571 of the Civil Code the action had prescribed because it was filed more than six months from the sale and delivery.

Issues

• Whether or not the petition for review on certiorari filed directly with the Supreme Court, instead of a notice of appeal to the Court of Appeals, violates the hierarchy of courts and should be denied on procedural grounds.
• Whether or not the buyer's cause of action is one for breach of an implied warranty against hidden defects under the Civil Code, such that it prescribes in six months from delivery under Article 1571.
• Whether or not the Consumer Act of the Philippines, Republic Act Number 7394, supplies the governing prescriptive period, and if so, whether the action was nonetheless filed too late.

Applicable Provisions

Article 1561 of the Civil Code provides:

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.

This provision anchors the buyer's remedy on the seller's warranty against hidden defects, which the Court found to be the true basis of the complaint.

Article 1566 of the Civil Code provides:

Art. 1566. The vendor is responsible to the vendee for any hidden faults or defects in the thing sold, even though he was not aware thereof. This provision shall not apply if the contrary has been stipulated and the vendor was not aware of the hidden faults or defects in the thing sold.

This confirms that the seller answers for hidden faults even without knowledge, absent a valid stipulation to the contrary.

Article 1571 of the Civil Code provides:

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.

This is the six-month prescriptive period the Court applied, counted from the delivery of the vehicle.

Article 67 of Republic Act Number 7394 provides:

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.

This shows that the Consumer Act does not displace the Civil Code on warranties but builds upon it.

Article 68 of Republic Act Number 7394 provides:

Art. 68. Additional Provisions on Warranties. — In addition to the Civil Code provisions on sale with warranties, the following provisions shall govern the sale of consumer products with warranty: e) Duration of warranty. The seller and the consumer may stipulate the period within which the express warranty shall be enforceable. If the implied warranty on merchantability accompanies an express warranty, both will be of equal duration. Any other implied warranty shall endure not less than sixty (60) days nor more than one (1) year following the sale of new consumer products. f) Breach of warranties — xxxx x x 2) In case of breach of implied warranty, the consumer may retain in the goods and recover damages, or reject the goods, cancel the contract and recover from the seller so much of the purchase price as has been paid, including damages.

This fixes the outer limit of one year for an implied warranty standing alone, which the Court found had likewise lapsed.

Ruling

On the first issue, the Court denied the petition on procedural grounds for violation of the hierarchy of courts. The trial court's orders of September 9, 1999 and December 21, 1999 were a final disposition of the case. The proper remedy was a notice of appeal to the Court of Appeals under Section 2(a) of Rule 41, not a petition for review on certiorari directly with the Supreme Court. Although the petition was filed within the fifteen-day reglementary period, it was in effect a petition for certiorari under Rule 65, dismissible for violation of the hierarchy of courts under Section 4 thereof, and De Guzman showed no special and important reasons to justify direct filing. The Court added that the argument of pure questions of law did not help, because the order of dismissal on the ground of prescription was tantamount to an adjudication on the merits.

On the second issue, the Court held that the complaint was anchored on an implied warranty against hidden defects. In the absence of an express warranty, the allegations were that the engine sold was defective, and the buyer sought to hold the seller responsible for breach of that implied warranty. Under Article 1599 of the Civil Code, once an express warranty is breached the buyer may keep the goods and sue for damages, but here there was no express warranty. The Court quoted the governing text:

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.

Since the complaint was filed on April 20, 1999, more than nineteen months from the delivery on November 29, 1997, the cause of action was time-barred.

On the third issue, the Court held that even if the complaint were brought under the Consumer Act, it would still be dismissed. The implied warranty under that law endures not less than sixty days nor more than one year following the sale of new consumer products, and that period had likewise lapsed. The Court also rejected the suggestion that the action was one based on quasi-delict with a longer period, because the claim for damages was merely ancillary to the main cause of action on the warranty.

Doctrine

A buyer's action against a seller for a defective thing, absent an express warranty, is an action for breach of an implied warranty against hidden defects under the Civil Code, and it prescribes in six months from the delivery of the thing sold under Article 1571. The Consumer Act does not extend that period for a standalone implied warranty: under Article 68, an implied warranty endures not less than sixty days nor more than one year following the sale of new consumer products, and only when the implied warranty of merchantability accompanies an express warranty are both of equal duration. A claim for moral and exemplary damages and attorney's fees is merely ancillary to the main cause of action on the warranty and cannot stand alone. Finally, a final order of the Regional Trial Court dismissing a complaint on the ground of prescription must be appealed to the Court of Appeals by notice of appeal, not brought directly to the Supreme Court, on pain of violating the hierarchy of courts.

Disposition

The Supreme Court denied the petition for violating the hierarchy of courts and, in any event, for lack of merit, without costs.

Remember This

Memorize the line that an action for breach of an implied warranty against hidden defects prescribes in six months from delivery under Article 1571 of the Civil Code, and that the Consumer Act's one-year limit for a standalone implied warranty does not save a late complaint. Examiners use this case to test prescription on warranty actions, the interplay of the Civil Code and the Consumer Act, and the hierarchy of courts.