THIRD DIVISION
G.R. No. 232688, April 26, 2021
MAZDA QUEZON AVENUE, Petitioner, v. ALEXANDER CARUNCHO, Respondents.
D E C I S I O N
LEONEN, J.:
A supplier is liable for product imperfections that it cannot resolve within the warranty period. Moreover, the two-year prescriptive period for actions arising from the Consumer Act only runs from the expiration of the warranty period agreed upon by the parties.
This is a Petition for Review1 seeking to set aside the Court of Appeals' Decision2 and Resolution3 dismissing the Petition for Certiorari filed by Mazda Quezon Avenue (Mazda). Mazda sought to annul the Department of Trade and Industry Appeals Committee's (Appeals Committee) Decision,4 which affirmed the Department of Trade and Industry Adjudication Officer's (Adjudication Officer) Decision5 finding Mazda liable for violating Republic Act No. 7394, otherwise known as Consumer Act of the Philippines (Consumer Act).
On January 12, 2011,6 Alexander Caruncho (Caruncho) bought a brand-new, luxury, mid-sized, top-of-the-line 2011 Mazda 6 sedan from Mazda. However, after only a week from his purchase, Caruncho noticed a strange knocking and rattling sound from under the vehicle's hood. He brought it immediately to Mazda and requested an immediate refund.7
Mazda's General Manager refused the refund and instead guaranteed to fix the problem. After road tests, Mazda's technicians found that the vehicle's rack and pinion mechanism was defective. Mazda assured the replacement of the vehicle after its first 1,000-kilometer check-up. Despite this assurance, the knocking and rattling sound persisted. Mazda replaced the defective part five times during the vehicle's three-year warranty period.8
On February 19, 2014, Mazda's service manager and mechanic conducted a vehicle test drive. They confirmed that the knocking and rattling sound persisted. Because the issue remained unresolved, Caruncho requested a full refund of the purchase price and also demanded compensation for consequential damages he incurred.9 Thus, on July 31, 2014, he filed a Complaint against Mazda before the Department of Trade and Industry Consumer Assistance and Protection Division, Office of the Legal Affairs.10
In its Answer,11 Mazda said that although Caruncho complained of the knocking and rattling sound, he could still use the vehicle for three years with a mileage of 30,000 kilometers. It also argued that the knocking and rattling sound did not automatically warrant a replacement of the entire unit, but only an application of the provisions in the Warranty Information and Maintenance Record, which states:chanroblesvirtualawlibrary
During this coverage period, authorized MAZDA dealers will repair, replace, or adjust all parts of your vehicle that are defective in factory-supplied materials or workmanship under normal use, except those items listed under "What is not covered?"12chanRoblesvirtualLawlibraryDuring the thorough technical inspection pursuant to the Warranty and Maintenance Record, Mazda confirmed that the engine and the parts were all within the standard operating specifications and were in good running condition. Mazda said that Caruncho's demand was out of place and without a legal basis since there was no factory defect. It complied with the warranty provisions that only covered servicing the vehicle without charge.13
WHEREFORE, IN VIEW OF THE FOREGOING, this office hereby finds Respondent to have violated the provisions of the Consumer Act of the Philippines and hereby ordered to:Mazda appealed to the Appeals Committee, which dismissed the appeal and sustained the Adjudication Officer's Decision.15
1) Replace the car of another brand new unit or of higher brand with the price difference, if there will be any, to be paid by Complainant; or 2) Reimburse the total purchase amount, in case Complainant decide (sic) to avail of it, less the three (3) year beneficial use of the subject car for reason (sic) of equity; 3) Pay an administrative fine in the amount of Php25,000.00 to be paid at the DTI Cashier's Office, 4th Floor, DTI Building, 361 Sec Gil J. Puyat Avenue, Makati City; and 4) Pay an additional administrative fine of One (1) Thousand (Php1,000.00) Pesos for every day of delay upon the finality of the subject DECISION.
SO ORDERED.14chanRoblesvirtualLawlibrary
WHEREFORE, premises considered, the Petition for Certiorari is DISMISSED.chanroblesvirtualawlibraryMazda moved for reconsideration, but the Court of Appeals denied this in its Resolution.18]
SO ORDERED.17chanRoblesvirtualLawlibrary
ARTICLE 100. Liability for Product and Service Imperfection. The suppliers of durable or non-durable consumer products are jointly liable for imperfections in quality that render the products unfit or inadequate for consumption for which they are designed or decrease their value, and for those resulting from inconsistency with the information provided on the container, packaging, labels or publicity messages/advertisement, with due regard to the variations resulting from their nature, the consumer being able to demand replacement to the imperfect parts.Department Administrative Order No. 2, series of 1993, or the Implementing Rules and Regulations for the Consumer Act of the Philippines, Chapter V, Rule III, Section 2, Paragraph 2.1 defines what a product imperfection is:chanroblesvirtualawlibrary
If the imperfection is not corrected within thirty (30) days, the consumer may alternatively demand at his [or her] option:
a) the replacement of the product by another of the same kind, in a perfect state of use; b) the immediate reimbursement of the amount paid, with monetary updating, without prejudice to any losses and damages; c) a proportionate price reduction.
The parties may agree to reduce or increase the term specified in the immediately preceding paragraph; but such shall not be less than seven (7) nor more than one hundred and eighty (180) days.
The consumer may make immediate use of the alternatives under the second paragraph of this Article when by virtue of the extent of the imperfection, the replacement of the imperfect parts may jeopardize the product quality or characteristics, thus decreasing its value.
If the consumer opts for the alternative under sub-paragraph (a) of the second paragraph of this Article, and replacement of the product is not possible, it may be replaced by another of a different kind, mark or model: Provided, That any difference in price may result thereof shall be supplemented or reimbursed by the party which caused the damage, without prejudice to the provisions of the second, third and fourth paragraphs of this Article.
The Court of Appeals correctly sustained Appeals Committee's conclusion that, based on substantial evidence, the defect was a product imperfection. The Vehicle Service History and the Technical Report show that petitioner confirmed that the vehicle had a defective rack and pinion mechanism. Petitioner replaced this part five times, but the problem remained unresolved. The rack and pinion mechanism is an integral part of the vehicle and is used for maneuvering; its defect affected the vehicle's roadworthiness, making it unfit for its intended use. As observed by the Appeals Committee, the five replacements would have resolved the problem had it not been a product imperfection.33 It also did not find proof other than petitioner's bare allegations that the problem did not warrant a refund or replacement of the entire unit.34CHAPTER V
Liability for Products and Services
....
RULE III
Liability for Product Quality Imperfection
....
SECTION 2. When is There Product Imperfection. - With due regard to variations resulting from their nature, the following shall constitute product imperfection:
2.1. Those that render the products unfit or inadequate for the purpose, use or consumption for which they are designed or intended[.]32chanRoblesvirtualLawlibrary
SECTION 3. Remedies of the Consumer. - Should the supplier fail to correct the imperfection of a consumer product within the period or time provided in these Rules, the consumer may alternatively demand for any of the following remedies:Thus, considering the vehicle's imperfection, respondent was well within his right to demand the reimbursement of the purchase price. The Consumer Act's provisions and the remedies it affords consumers are deemed written into contracts without the need for express reference.37
3.1. The replacement of the product by another of the same kind and which shall be in a similar state of use. Such "similar state of use" shall be deemed to mean the status of use of the product when the same was first purchased by the consumer, whether brand-new, second-hand or deteriorated or scrap;
3.2. The immediate reimbursement of the amount paid, with monetary updating and without prejudice to any losses and damages:
3.2.1. The consumer shall allege and prove the actual loss and damage caused to him by the failure of the supplier to comply with his obligation as stated under this Rule;
3.2.2. The supplier may deduct any amount reflective of the depreciation value of the product as has been used from the amount paid by the consumer. The depreciation value of the product shall be reasonable and with the agreement of the consumer.
3.3. A proportionate reduction in the price of the product in which case, the consumer shall retain ownership and possession of the product.36chanRoblesvirtualLawlibrary
ARTICLE 169. Prescription. - All actions or claims accruing under the provisions of this Act and the rules and regulations issued pursuant thereto shall prescribe within two (2) years from the time the consumer transaction was consummated or the deceptive or unfair and unconscionable act or practice was committed and in case of hidden defects, from discovery thereof.As noted by the Court of Appeals, the vehicle purchase on January 12, 2011 was covered by a three-year warranty, as stated in the Warranty Information and Maintenance Record.39 When respondent discovered the knocking and rattling sound after only a week from the purchase, he immediately complained to petitioner and asked for a refund. Petitioner declined the request and instead assured respondent that the problem would be fixed free of charge.
Endnotes:
1Rollo, pp. 11-19.
2 Id. at 24-34. The Decision in CA-G.R. SP No. 141371 dated April 3, 2017 was penned by Associate Justice Victoria Isabel A. Paredes, and concurred in by Associate Justices Fernanda Lampas Peralta (Chair) and Jane Aurora C. Lantion of the Fifth Division, Court of Appeals, Manila.
3 Id. at 35-36. The Resolution in CA-G.R. SP No. 141371 dated July 6, 2017 was penned by Associate Justice Victoria Isabel A. Paredes, and concurred in by Associate Justices Fernanda Lampas Peralta (Chair) and Jane Aurora C. Lantion of the Fifth Division, Court of Appeals, Manila.
4 Id. at 69-75. The Decision in Appeal Case No. 015-02 dated January 8, 2015 was penned by Atty. Walfredo C. Bayhon (Chair) and concurred in by Attys. Raul V. Angeles and Ann Claire C. Cabochan of the Department of Trade and Industry Appeals Committee, Makati.
5 Id. at 87-93. The Decision in ADM. Case No. CRM14-66296 dated December 1, 2014 was penned by Adjudication Officer Rodolfo B. Gilbang of the Department of Trade and Industry, Makati.
6 At the time of the transaction, the applicable law was the Consumer Act of the Philippines. The Philippine Lemon Law, or Republic Act No. 10642, only took effect in 2014.
7Rollo, p. 25.
8 Id.
9 Id.
10 Id.
11 Id. at 128-133.
12 Id. at 25-26.
13 Id. at 26.
14 Id. at 26-27.
15 Id. at 27.
16 Id. at 29 and 31.
17 Id. at 34.
18 Id. at 35-36.
19 Id. 15.
20 Id.
21 Id. at 18-18-A.
22 Id. at 154-165.
23 NEW CIVIL CODE, art. 1561 provides:
ARTICLE 1561. The vendor shall be responsible for warranty against the hidden defects which the thing sold may have, should they render it unfit for the use for which it is intended, or should they diminish its fitness for such use to such an extent that, had the vendee been aware thereof, he would not have acquired it or would have given a lower price for it; but said vendor shall not be answerable for patent defects or those which may be visible, or for those which are not visible if the vendee is an expert who, by reason of his trade or profession, should have known them.
24Rollo, pp. 159-162.
25 Id. at 162.
26 Id. at 163.
27 Id. at 209-211.
28 Id. at 209.
29 Id.
30 Id. at 209-210.
31 Id. at 210.
32 Department of Trade and Industry Administrative Order No. 2 (1993), chapter 5, rule III, sec. 2, par. 2.1.
33Rollo, p. 29.
34 Id.
35 Republic Act No. 7394 (1992), art. 100.
36 Department of Trade and Industry Administrative Order No. 2 (1993), chapter 5, rule III, sec. 3.
37 See NEW CIVIL CODE, art. 1306, and Heirs of San Miguel v. Court of Appeals, 416 Phil. 943, 954 (2001) [Per J. Pardo, First Division].
38 Republic Act No. 7394 (1992), art. 169 provides:
ARTICLE 169. Prescription. - All actions or claims accruing under the provisions of this Act and the rules and regulations issued pursuant thereto shall prescribe within two (2) years from the time the consumer transaction was consummated or the deceptive or unfair and unconscionable act or practice was committed and in case of hidden defects, from discovery thereof.
39Rollo, p. 32.
40 Id. at 25.
41 Id. at 32-33.
42 Id. at 33.
43 Id.cralawredlibrary