[Link] vs Court of Appeals,G.R. No.

177874 September 29, 2008

FACTS: Under a “car-swapping” scheme, respondent Soledad sold his Mitsubishi GSR sedan 1982 model to petitioner
Ang by Deed of Absolute Sale dated July 28, 1992. Ang later offered the Mitsubishi GSR for sale through Far Eastern
Motors, a second-hand auto display center. The vehicle was eventually sold to a certain Paul Bugash. Before the deed
could be registered in Bugash’s name, however, the vehicle was seized by virtue of a writ of replevin on account of the
alleged failure of Ronaldo Panes, the owner of the vehicle prior to Soledad, to pay the mortgage debt constituted
thereon.

To secure the release of the vehicle, Ang paid BA Finance the amount of P62,038.47. Soledad refused to reimburse the
said amount, despite repeated demands, drawing Ang to charge him for Estafa with abuse of confidence. It was
dismissed later for insufficiency of evidence. Ang filed the first complaint for damages against Soledad. It was dismissed
for failure to submit the controversy to barangay conciliation. Ang thereafter secured a certification to file action and
again filed a complaint for damages which was dismissed on the ground that the amount involved is not within its
jurisdiction.

Ang thereupon filed with the Municipal Trial Court in Cities (MTCC) a complaint the subject of the instant petition. After
trial, the MTCC dismissed the complaint on the ground of prescription pursuant to Article 1571.

Ang appealed to the RTC which affirmed the dismissal of the complaint, albeit it rendered judgment in favor of Ang “for
the sake of justice and equity, and in consonance with the salutary principle of non-enrichment at another’s
expense.” Soledad’s Motion for Reconsideration was denied. He elevated the case to the Court of Appeals. The appellate
court accordingly reversed the RTC decision and denied Ang’s motion for reconsideration.

ISSUE: Whether Ang’s cause of action has prescribed

RULING: 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. Art. 1546 of the Civil Code
defines express warranty. Among the implied warranty provisions of the Civil Code are: as to the seller’s title (Art. 1548),
against hidden defects and encumbrances (Art. 1561), as to fitness or merchantability (Art. 1562), and against eviction
(Art. 1548). The earlier cited ruling in Engineering & Machinery Corp. states that “the prescriptive period for instituting
actions based on a breach of express warranty is that specified in the contract, and in the absence of such period, the
general rule on rescission of contract, which is four years (Article 1389, Civil Code).” 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.

In declaring that he owned and had clean title to the vehicle at the time the Deed of Absolute Sale was
forged, Soledad gave an implied warranty of title. In pledging that he “will defend the same from all claims or any claim
whatsoever [and] will save the vendee from any suit by the government of the Republic of
the Philippines,” Soledad gave a warranty against eviction. Given Ang’s business of buying and selling used vehicles, he
could not have merely relied on Soledad’s affirmation that the car was free from liens and encumbrances. He was
expected to have thoroughly verified the car’s registration and related documents.

Since what Soledad, as seller, gave was an implied warranty, the prescriptive period to file a breach thereof is six months
after the delivery of the vehicle, following Art. 1571. But even if the date of filing of the action is reckoned from the date
petitioner instituted his first complaint for damages on November 9, 1993, and not on July 15, 1996 when he filed the
complaint subject of the present petition, the action just the same had prescribed, it having been filed 16 months after
July 28, 1992, the date of delivery of the vehicle.

5. MOLES v. IAC

FACTS:Jerry Moles(petitioner) bought from Mariano Diolosa owner of Diolosa Publishing House a linotype printing
machine(secondhand machine). Moles promised Diolosa that will pay the full amount after the loan from DBP worth
P50,000.00 will be released. Private respondent on return issued a certification wherein he warranted that the machine
was in A-1 condition, together with other express warranties. After the release of the the money from DBP, Petitioner
required the Respondent to accomplish some of the requirements. On which the defendant complied the requirements
on the same day.

On November 29, 1977, petitioner wrote private respondent that the machine was not functioning properly. The
petitioner found out that the said machine was not in good condition as experts advised and it was worth lesser than the
purchase price. After several telephone calls regarding the defects in the machine, private respondent sent two
technicians to make necessary repairs but they failed to put the machine in running condition and since then the
petitioner wan unable to use the machine anymore.

ISSUE/S:

1. Whether there is an implied warranty of its quality or fitness.

2. Whether the hidden defects in the machine is sufficient to warrant a rescission of the contract between the parties.

HELD:

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

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

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

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

2. We have to consider the rule on redhibitory defects contemplated in Article 1561 of the Civil
Code. A redhibitory defect must be an imperfection or defect of such nature as to engender a certain degree of
importance. An imperfection or defect of little consequence does not come within the category of being redhibitory.

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

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

[Link] vs COMELEC

Facts: On July 10, 2009, COMELEC and Smartmatic-TIM executed the Contract for the Provision of an Automated
Election System for the May 10, 2010 Synchronized National and Local Elections. The 2009 AES Contract pertinently
provides that “in the event that [the] COMELEC exercises its option to purchase [(OTP)] the Goods x x x,”21 until
December 31, 2010: the COMELEC “shall pay [Smartmatic-TIM] an additional amount of [P2,130,635,048.15]”;“a
warranty shall be required in order to assure that: [a] manufacturing defects shall be corrected; and/or [b] replacements
shall be made by [Smartmatic-TIM], for a minimum period of three (3) months, in the case of supplies, and one (1) year,
in the case of equipment, after performance of this Contract”;24 and for the “PCOS, [Smartmatic-TIM] shall warrant the
availability of parts, labor and technical support and maintenance to [the] COMELEC for ten (10) years, if purchased, x x x
beginning May 10, 2010.” The option period was thereafter extended several times. Thus, on March 30, 2012, the
COMELEC and Smartmatic-TIM executed a Deed of Sale31 (2012 Deed of Sale) for the remaining PCOS and CCS machines,
which the COMELEC used during the May 13, 2013 Synchronized National and Local Elections.32 Item 9 of the 2012 Deed
of Sale states that the warranties under Articles 4 and 8 of the 2009 AES Contract are incorporated and that “pursuant to
Article 4.3 of the 2009 AES Contract, the PCOS machines will be covered by a one (1) year warranty commencing from the
acceptance by the [COMELEC] during the [Hardware Acceptance Test (HAT)] for every batch of 20,000 units as evidenced
by the date of the Delivery Receipt; Provided, that no warranty period will expire earlier than 31 May 2013.”33On
November 11, 2013, the COMELEC received from Smartmatic-TIM a proposal letter36 to “extend the warranty” of the
PCOS machines for three (3) years.37 The proposal covered labor, preventive maintenance, diagnostics, repair and/or
replacement of parts from 2014 to 2016. After negotiations by the parties, the contract amount was reduced to
P240,000,000.00, exclusive of VAT, and the scope of work expanded to include all major repairs and replacement of
irreparable units, up to four percent (4%) of all inventoried PCOS [Link] assails the validity of the
Extended Warranty Contract (Program 1) entered into between the COMELEC and Smartmatic-TIM, alleging that the
COMELEC erroneously and invalidly resorted to direct contracting as an alternative method of procurement, thereby
violating the requirements of public and competitive bidding under the GPRA, and that the supposed “tight time
schedule” in the preparation for the May 9, 2016 National and Local Elections is not a ground to dispense with the
conduct of public bidding under the law. For its part, Smartmatic-TIM claims78 that the elements to justify the resort to
alternative modes of procurement stated in Justice Presbitero J. Velasco, Jr.’s Concurring Opinion in Capalla79 are
present, emphasizing that both the hardware and software of the PCOS machines are protected under RA 8293,80or the
Intellectual Property Code of the Philippines.81 It also posits that under the 2009 AES Contract and the 2012 Deed of
Sale, the warranty shall continue for ten (10) years if the COMELEC exercises the OTP and pays for the machines’
maintenance and technical support subject to prevailing prices.82 It further asseverates that there is no direct substitute
for the PCOS machines and that it is the only entity authorized to provide the licensed technology in the Philippines.83

Issue: Smartmatic-TIM’s exclusive engagement cannot be considered as a condition precedent to guarantee the
performance of its warranties under the 2009 AES Contract or the 2012 Deed of Sale.

Ruling: No. There are two warranties under the 2009 AES Contract, which were all explicitly incorporated and made part
of the 2012 Deed of Sale. The first is found in Articles 4.3146and 8.4147 of the 2009 AES Contract, both of which pertain to
a warranty on manufacturing defects of supplies and equipment. To put it simply, these provisions state that
Smartmatic-TIM had warranted that the PCOS machines purchased by the COMELEC are free from manufacturing
defects; otherwise, it will repair or replace, if irreparable, any defective machines at its own expense for as long as: (a)
the defect occurs within the warranty period, i.e., three (3) months, in the case of supplies, and one (1) year, in the case
of equipment, reckoned from March 30, 2012, i.e., the date on which the OTP was exercised and the corresponding
2012 Deed of Sale was executed; and (b) none of the warranty limitations are breached. The foregoing warranty on
manufacturing defects is separate and distinct from the second warranty found in Article 8.8 of the 2009 AES Contract,
Under Article 8.8, Smartmatic-TIM warrants that its parts, labor and technical support and maintenance will be available
to the COMELEC, if it so decides to purchase such parts, labor and technical support and maintenance services, within
the warranty period stated, i.e., ten (10) years for the PCOS, reckoned from May 10, 2010, or until May 10, 2020. Article
8.8 skews from the ordinary concept of warranty since it is a mere warranty on availability, which entails a subsequent
purchase contract,152 founded upon a new consideration, the costs of which (unlike in the first warranty) are still to be
paid. With Article 8.8 in place, the COMELEC is assured that it would always have access to a capable parts/service
provider in Smartmatic-TIM, during the 10-year warranty period therefor, on account of the peculiar nature of the
purchased goods.

However, in no way does Article 8.8 pre-condition the warranty on availability on Smartmatic-TIM’s exclusive
engagement. There are two reasons for this:

First, it cannot be deduced from the deliberate arrangement of the provisions that the warranty limitations under
Article 8.5 (which, in essence, prohibits unauthorized tampering by the COMELEC and/or by a third party) apply to the
subsequently situated Article 8.8 (i.e., warranty on availability of parts, labor and technical support and maintenance).
On the other hand, Article 8.5 logically follows Article 8.4 (i.e., warranty on manufacturing defects), evincing that it
(Article 8.5) constitutes a limitation to the provision preceding it (Article 8.4);

Second, and more substantially, the Court finds no discernible reason to void a warranty on availability on account of
previous tampering. As mentioned, under Article 8.8, the COMELEC would still have to engage Smartmatic-TIM in a
subsequent purchase contract, founded upon a new consideration altogether, and, thus, pay the costs of the parts and
services procured. The fact that the goods had been previously tampered with is immaterial to Smartmatic-TIM’s future
engagement as the warranty would not be voided if a different service contractor has been engaged by the COMELEC to
conduct repair and refurbishment works. On other hand, it is reasonable – as it is usually the case – that a warranty on
manufacturing defects would be voided if the goods had already been tampered with; in such an instance, it is difficult,
if not, improbable, to ascertain the cause of the malfunction, and, hence, determine if the manufacturing defects were
attributable to the seller’s fault. Accordingly, the seller (Smartmatic-TIM) should not repair or replace the defective
goods without the buyer (the COMELEC) shouldering the costs.

Simply put, the variance is that Article 8.8 only warrants access to the purchase of parts and services, whereas Article 8.4
(in relation to Article 4.3) warrants the functionality of the machines themselves. In fact, the direct contracting
arrangement subject of these cases is the very manifestation of Article 8.8’s enforcement: the COMELEC engaged
Smartmatic-TIM for the repair and refurbishment of the PCOS machines and, now, has to pay a distinct purchase price
therefor. In so doing, the records are bereft of any showing that the limitations under Article 8.5 were relevant in
enforcing the warranty found in Article 8.8. The COMELEC could very well enforce – as it did enforce – the warranty on
availability notwithstanding a breach of Article 8.5 as the latter limits only the enforcement of the warranty on
manufacturing defects found in Article 8.4 in relation to Article 4.3, which, however, was stipulated to last only for three
(3) months, in the case of supplies, and one (1) year, in the case of equipment, reckoned from March 30, 2012 (i.e.,
March 30, 2013) and as such, had already lapsed way before Resolution No. 9922 was passed on December 23, 2014.

Hence, with the warranty on manufacturing defects having lost its effect, there is no way that the COMELEC’s
engagement of another service contractor would constitute a breach of that warranty.

That the Extended Warranty Contract (Program 1) excludes from the scope of work those PCOS machines, where
persons or entities other than Smartmatic-TIM authorized representative, performed maintenance or repair services, as
a result of which, further repair or maintenance is required to be done by a Smartmatic-TIM authorized representative
to restore the machines to good working condition155does not call for a different conclusion. Said exclusion was inserted
as part of the Extended Warranty Contract (Program 1) that was agreed upon only after the expiration of the original
warranty on manufacturing defects. In other words, the exclusion was only part of Smartmatic-TIM’s offer for a new
contract, which the COMELEC accepted only after the warranty on manufacturing defects had lapsed.
In fine, the procurement of the repair and refurbishment services from Smartmatic-TIM cannot be deemed as
a condition precedent to hold it to any of its existing warranties as prescribed by Section 50 (b) of the GPRA.

7. G.R. No. 154554: Goodyear Phils., Inc. v. Anthony Sy

Goodyear Philippines was the owner of an Isuzu car which was hijacked in 1986. Goodyear reported it to the police. PNP
issued an alert alarm on the stolen vehicle. Later that year the car was recovered. Goodyear told PNP to lift the alarm
from the recovered [Link] 1996, Goodyear sold the car to Sy. In 1997, Sy sold the car to Jose Lee. Lee tried to register the
car in his name but he was not able to do so because apparently PNP did not lift the alertalarm over the said car. The car
was impounded and PNP sued Lee. Lee told Sy about [Link] then sue Goodyear for breach of warranty. Sy argued that
Goodyear has the duty to conveythe vehicle to Sy free from all liens, encumbrances and legal impediments. The RTC
ruled infavor of Goodyear. CA reversed the RTC decision.

ISSUE:Whether or not there was a breach of warranty.

HELD:No. In a contract of sale, there are implied warranties: first, the vendor has a right to sellthe thing at the time that
its ownership is to pass to the vendee, as a result of which the latter shall from then on have and enjoy the legal and
peaceful possession of the thing; and, second,the thing shall be free from any charge or encumbrance not declared or
known to the [Link] did not break any of those. Certainly, the impoundment of the car was not
Goodyear’sfault and it was not a legal impediment that deprived Sy from ownership of said car. When Sysold the car to
Lee, Sy was already the absolute owner. This is because when Goodyear soldthe car to Sy, Goodyear transferred full
ownership to [Link] was just unfortunate that the PNP did not lift the alert alarm from the said car placed on it
[Link], Goodyear has no control over the PNP and PNP’s inaction is a purelyadministrative and government in
nature. Hence, Goodyear did not breach its obligation as avendor to Sy; neither did it violate Sy’s right for which he
could maintain an action for therecovery of damages. Without this crucial allegation of a breach or violation, no cause of
actionexists.

Warranty defined:A warranty is an affirmation of fact or any promise made by a vendor in relation to the thing [Link]
such, a warranty has a natural tendency to induce the vendee --relying on that affirmation or promise --to purchase the
thing. The vendor impliedly warrants that that which is being sold isfree from any charge or encumbrance not declared
or known to the vendee. The decisive test iswhether the vendor assumes to assert a fact of which the vendee is
ignorant.

Lien defined:A lien is “a legal right or interest that a creditor has in another’s property, lasting usually until adebt or duty
that it secures is satisfied.

Encumbrance defined:An encumbrance is “a claim or liability that is attached to property or some other right and
thatmay lessen its value, such as a lien or mortgage.”** A legal impediment is a legal “hindrance or obstruction.”

8. COCA-COLA BOTTLERS PHILIPPINES, INC. vs. CA and MS. LYDIA GERONIMO

FACTS: Private respondent was the proprietress of Kindergarten Wonderland Canteen in Dagupan City. In August 1989,
some parents of the students complained to her that the Coke and Sprite soft drinks sold by her contained fiber-like
matter and other foreign substances. She brought the said bottles for examination to DOH and it was found out that the
soft drinks “are adulterated.” As a result, her per day sales of soft drinks severely plummeted that she had to close her
shop on 12 December 1989 for losses. She demanded damages from petitioner before the RTC which dismissed the
same on motion by petitioner based on the ground of Prescription. On appeal, the CA annulled the orders of the RTC.

ISSUE: WON the action for damages by the proprietress against the soft drinks manufacturer should be treated as one
for breach of implied warranty under article 1561 of the CC which prescribes after six months from delivery of the thing
sold.
RULING: Petition Denied.
The SC agrees with the CA’s conclusion that the cause of action in the case at bar is found on quasi-delict under Article
1146 of the CC which prescribes in four years and not on breach of warranty under article 1562 of the same code. This is
supported by the allegations in the complaint which makes reference to the reckless and negligent manufacture of
"adulterated food items intended to be sold for public consumption."