CASE 2017-0010: PHILIPPINE STEEL COATING CORP., VS. EDUARD QUIÑONES, (G.R. No. 194533 19 APRIL 2017, SERENO, CJ:) (SUBJECTS: EXPRESS WARRANTY; NEGLIGENCE; OPTIONS OF A BUYER WHEN WARRANTY IS BREACHED; PRESCRIPTION IN CASE OF WARRANTIES; DILIGENCE OF A GOOD FATHER OF FAMILY DEFINED; ATTORNEY’S FEES CANNOT BE BASED ONLY ON AGREEMENT WITH LAWYER;)  (BRIEF TITLE:: PHILIPPINE STEEL VS. QUIÑONES)

 

DISPOSITIVE:

 

“WHEREFORE, in view of the foregoing, the instant Petition is DENIED. The Court of Appeals Decision dated 17 March 2010 and Resolution dated 19 November 20 l 0 denying petitioner’s Motion for Reconsideration are hereby AFFIRMED, except for the award of attorney’s fees, which is hereby DELETED.

 

SO ORDERED.”

 

SUBJECTS/DOCTRINES/DIGEST:

 

THE BASIC FACTS:

 

RESPONDENT WAS PRODUCING BUSES. PETITIONER WAS SELLING G.I. COATED SHEETS. RESPONDENT WANTED TO BUT G.I. COATED SHEETS FROM PETITIONER. PETITIONER  EXPRESSLY REPRESENTED TO RESPONDENT THAT THE PRIMER-COATED G .I. SHEETS WERE COMPATIBLE WITH THE ACRYLIC PAINT PROCESS USED BY THE LATTER ON HIS BUS UNITS. THIS REPRESENTATION WAS MADE IN THE FACE OF RESPONDENT’S EXPRESS CONCERNS REGARDING INCOMPATIBILITY. RESPONDENT BOUGHT G.I. SHEETS AND MADE THEM INTO BUSES. HOWEVER, THE PAINTS PEELED 0FF AND CUSTOMERS COMPLAINED. RESPONDENT SUED FOR DAMAGES ON THE BASIS OF EXPRESS WARRANTY. RTC AWARDED DAMAGES. C.A. AFFIRMED.

 

WHAT ARE THE REQUISITES TO BE ESTABLISHED IN ORDER TO PROVE THAT THERE IS AN EXPRESS WARRANTY IN A CONTRACT OF SALE?

 

THERE ARE THREE REQUISITES:

 

( 1) THE EXPRESS WARRANTY MUST BE AN AFFIRMATION OF FACT OR ANY PROMISE BY THE SELLER RELATING TO THE SUBJECT MATTER OF THE SALE;

 

(2) THE NATURAL EFFECT OF THE AFFIRMATION OR PROMISE IS TO INDUCE THE BUYER TO PURCHASE THE THING; AND

 

(3) THE BUYER PURCHASES THE THING RELYING ON THAT AFFIRMATION OR PROMISE.

 

PETITIONER ARGUES THAT THE PURPORTED WARRANTIES ARE VAGUE ORAL STATEMENTS AND THEREFORE CANNOT CONSTITUTE AS GROUND FOR DAMAGES. IS THIS CONTENTION CORRECT?

 

 A WARRANTY IS NOT NECESSARILY WRITTEN.

 

IT MAY BE ORAL AS LONG AS IT IS NOT GIVEN AS A MERE OPINION OR JUDGMENT. IT MUST BE A POSITIVE AFFIRMATION OF A FACT THAT BUYERS RELY UPON, AND THAT INFLUENCES OR INDUCES  THEM TO PURCHASE THE PRODUCT.

 

THE  ORAL STATEMENTS OF ANGBENGCO CREATED AN EXPRESS WARRANTY. THEY WERE POSITIVE AFFIRMATIONS OF FACT THAT THE BUYER RELIED ON, AND THAT INDUCED HIM TO BUY PETITIONER’S PRIMER-COATED G .I. SHEETS.

 

IS SELLER’S OPINION A WARRANTY?

 

NO UNLESS THE SELLER MADE SUCH AFFIRMATION OR STATEMENT AS AN EXPERT AND IT WAS RELIED UPON BY THE BUYER.

 

WAS PETITIONER AN EXPERT ON WHAT THEY ADVISE RESPONDENT?

 

YES, TO THE EYES OF RESPONDENT.

 

“Despite its claims to the contrary, petitioner was an expert in the eyes of the buyer Quinones. The latter had asked if the primer-coated G.I. sheets were compatible with Amianan Motors’ acrylic painting process. Petitioner’s former employee, Lopez, testified that he had to refer Quinones to the former’s immediate supervisor, Angbengco, to answer that question. As the sales manager of PhilSteel, Angbengco made repeated assurances and affirmations and even invoked laboratory tests that showed compatibility.13 In the eyes of the buyer Quinones, PhilSteel -through its representative, Angbengco -was an expert whose word could be relied upon.”

 

PETITIONER ARGUED THAT WHAT THEY TOLD RESPONDENT WAS MERE DEALER’S TALK OR EXAGERATION. IS THEIR CONTENTION CORRECT?

 

NO.

 

THE COURT SAID:

 

“Contrary however to petitioner’s position, the so-called dealer’s or trader’s talk cannot be treated as mere exaggeration in trade as defined in A1iicle 1340 of the Civil Code.16 Quinones did not talk to an ordinary sales clerk such as can be found in a department store or even a sari-sari store. If Lopez, a sales agent, had made the assertions of Angbengco without true knowledge about the compatibility or the authority to wanant it, then his would be considered dealer’s talk. But sensing that a person of greater competence and knowledge of the product had to answer Quinones’ concerns, Lopez wisely deferred to his boss, Angbengco.

 

Angbengco undisputedly assured Quinones that laboratory tests had been undertaken, and that those tests showed that the acrylic paint used by Quinones was compatible with the primer-coated G.I. sheets of Philsteel. Thus, Angbengco was no longer giving a mere seller’s opinion or making an exaggeration in trade. Rather, he was making it appear to Quinones that Phil Steel had already subjected the latter’s primed G .I. sheets to product testing. PhilSteel, through its representative, was in effect inducing in the mind of the buyer the belief that the former was an expert on the primed G.I. sheets in question; and that the statements made by petitioner’s representatives, particularly Angbengco (its sales manager), 17 could be relied on. Thus, petitioner did induce the buyer to purchase the former’s G .I. sheets.”

 

RESPONDENT ARGUES THAT THE CASE ALREADY PRESCRIBED. IT IS CONTENTION CORRECT?

 

NO, BECAUSE IT WAS FILED WITHIN THE 4 YEAR PRESCRITION PERIOD.

 

WHAT IS THE PRESCRIPTIVE PERIOD IN CASE OF AN EXPRESS WARRANTY?

 

IT IS THAT SPECIFIED IN THE CONTRACT.

 

IN  ITS ABSENCE, THAT PERIOD SHALL BE BASED ON THE GENERAL RULE ON THE RESCISSION OF CONTRACTS: FOUR YEARS (SEE ARTICLE 1389, CIVIL CODE).

 

WHAT IS NEGLIGENCE?

 

IT IS THE ABSENCE OF REASONABLE CARE AND CAUTION THAT AN ORDINARILY PRUDENT PERSON WOULD HAVE USED IN A GIVEN SITUATION.

 

WHAT IS THE BASIS OF NEGLIGENCE?

 

THAT SPECIFICALLY PROVIDED BY LAW OR THE CONTRACT.

 

IF NOT SPECIFIED BY LAW OR CONTRACT THEN IT IS COMMONLY REFERRED TO AS PATERFAMILIAS  OR  AS BONOS PATERFAMILIAS OR “A GOOD FATHER OF A FAMILY.”

 

A GOOD FATHER OF A FAMILY MEANS A PERSON OF ORDINARY OR AVERAGE DEIGENCE.

 

TO DETERMINE THE PRUDENCE AND DILIGENCE THAT MUST BE REQUIRED OF ALL PERSONS, WE MUST USE AS BASIS THE ABSTRACT AVERAGE STANDARD CORRESPONDING TO A NORMAL ORDERLY PERSON.

 

ANYONE WHO USES DILIGENCE BELOW THIS STANDARD IS GUILTY OF NEGLIGENCE.

 

PETITIONER ACCUSED RESPONDENT OF NEGLIGENCE. IT SHOULD HAVE KNOWN THAT BY APPLYING ACRYLIC OVER EPOXY PRIMER USED ON THE G.I. SHEETS, THE LATTER PRIMER WOULD BE DISSOLVED OR STIPPED OFF. WAS PETITIONER’S CONTENTION CORRECT?

 

NO.

 

THE SUPREME COURT POINTED OUT THAT:

 

“It bears reiteration that Quinones had already raised the compatibility issue at the outset. He relied on the manpower and expertise of PhilSteel, but at the same time reasonably asked for more details regarding the product. It was not an impulsive or rush decision to buy. In fact, it took 4 to 5 meetings to convince him to buy the primed G .I. sheets. And even after making an initial order, he did not make subsequent orders until after a painting test, done upon the instructions of Angbengco proved successful. The test was conducted using their acrylic paint over PhilSteel’s primer-coated G.I. sheets. Only then did Quinones make subsequent orders of the primer-coated product, which was then used in the mass production of bus bodies” by Respondent.

 

WAS NON-PAYMENT OF THE UNPAID PRICE JUSTIFIED?

 

YES BECAUSE AN EXPRESS BREACH OF WARRANTY WAS PROVEN.

 

IN CASE OF BREACH OF WARRANTY BY THE SELLER, WHAT ARE THE OPTIONS OF THE BUYER?

 

( 1) ACCEPT OR KEEP THE GOODS AND SET UP AGAINST THE SELLER, THE BREACH OF WAITANTY BY WAY OF RECOUPMENT IN DIMINUTION OR EXTINCTION OF THE PRICE;

 

(2) ACCEPT OR KEEP THE GOODS AND MAINTAIN AN ACTION AGAINST THE SELLER FOR DAMAGES FOR THE BREACH OF WARRANTY;

 

(3) REFUSE TO ACCEPT THE GOODS, AND MAINTAIN AN ACTION AGAINST THE SELLER FOR DAMAGES FOR THE BREACH OF WARRANTY;

 

( 4) RESCIND THE CONTRACT OF SALE AND REFUSE TO RECEIVE THE GOODS OR IF THE GOODS HAVE ALREADY BEEN RECEIVED, RETURN THEM OR OFFER TO RETURN THEM TO THE SELLER AND RECOVER THE PRICE OR ANY PART THEREOF WHICH HAS BEEN PAID.

 

THE SUPREME COURT AMPLIFIED:

 

“When the buyer has claimed and been granted a remedy in anyone of these ways, no other remedy can thereafter be granted, without prejudice to the provisions of the second paragraph of article 1191.

 

Where the goods have been delivered to the buyer, he cannot rescind the sale if he knew of the breach of waITanty when he accepted the goods without protest, or if he fails to notify the seller within a reasonable time of the election to rescind, or if he fails to return or to offer to return the goods to the seller in substantially as good condition as they were in at the time the ownership was transferred to the buyer. But if deterioration or injury of the goods is due to the breach or warranty, such deterioration or injury shall not prevent the buyer from returning or offering to return the goods to the seller and rescinding the sale.

 

Where the buyer is entitled to rescind the sale and elects to do so, he shall cease to be liable for the price upon returning or offering to return the goods. If the price or any part thereof has already been paid, the seller shall be liable to repay so much thereof as has been paid, concurrently with the return of the goods, or immediately after an offi:r io return the goods in exchange for repayment of the price.

 

Where the buyer is entitled to rescind the sale and elects to do so, if the seller refoscs to accept an offer of the buyer to return the goods, the buyer shall thereafter be deemed to hold the goods as bailee for the seller, but subject to a lien to secure the payment 31 387 Phil. 216 (2000) of any portion of the price which has been paid, and with the remedies for the enforcement of such lien allowed to an unpaid seller by article 1526.

 

In the case of breach of warranty of quality, such loss, in the absence of special circumstances showing proximate damage of a greater amount, is the difference between the value of the goods at the time of delivery to the buyer and the value they would have had if they had answered to the warranty.”

 

THE RTC AND CA AWARDED ATTORNEY’S FEES ON THE GROUND THAT THE AGREEMENT BETWEEN RESPONDENT AND HIS LAWYER SPECIFIED ATTORNEY’S FEES. IT THIS CORRECT?


THE AWARD OF ATTORNEY’S FEES MUST BE DELETED.

 

ATTORNEY’S FEE CANNOT BE BASED ON A MERE ALLEGATION OR TESTIMONY THAT A PARTY HAS AGREED TO PAY A CERTAIN PERCENTAGE FOR ATTORNEY’S FEES.

 

TO READ THE DECISION, JUST CLICK/DOWNLOAD THE FILE BELOW.

 

SCD-2017-0010-PHILIPPINE STEEL COATING CORP. VS. EDUARD QUINONES 

 

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