SECOND DIVISION
[G.R. No. 205076. March 6, 2013.]
UNION MOTORS CORPORATION, petitioner, vs. RUDY S. LABOS & ASSOCIATES, INC., respondent.
NOTICE
Sirs/Mesdames :
Please take notice that the Court, Second Division, issued a Resolution dated 06 March 2013 which reads as follows:
G.R. No. 205076 (Union Motors Corporation v. Rudy S. Labos & Associates, Inc.)
Before this Court is a Petition for Review on Certiorari assailing the Court of Appeals' Decision 1 dated 16 April 2012 and Resolution 2 dated 6 December 2012. The Court of Appeals affirmed with modification the Regional Trial Court's Decision 3 dated 17 February 2006, and Orders dated 20 March 2006 4 and 03 April 2006. 5 The trial court found the rescission of the contract of sale between the parties in order.
The trial court summarized the facts of the case in the following manner:
On November 13, 2001, [respondent] corporation purchased on installment basis from [petitioner] Union Motors Corporation . . . one (1) unit of Mitsubishi Van L-300 priced at . . . [P517,000.00]. The sum of . . . [P195,893.00] inclusive of the 30% down payment was paid by the [respondent] to [petitioner] . . ., while the rest was financed by the International Exchange Bank, in whose favor [respondent] executed a chattel mortgage and a promissory note for the payment of the amount financed by the [petitioner]. . . . TDCcAE
A week after the subject vehicle was delivered to the [respondent], the latter discovered that the vehicle had defective body and the same was immediately brought to the attention of [petitioner] . . . . [Respondent] demanded for a replacement, however, [petitioner] . . . failed to take action. The inaction of [petitioner] . . . constrained [respondent] to return the subject vehicle and demand for the immediate return of the payment made to [petitioner] . . . Notwithstanding [respondent's] verbal demands for Union Motors to return the initial payments, [petitioner] . . . refused and continuously refused to return the payments and/or replace the returned defective vehicle with a new one.
In its answer, [petitioner] . . . admitted the transaction with the [respondent] but reasoned out that the defective body had been repaired and that said vehicle was ripe for pick up but the [respondent] manifested no intention of getting back the vehicle despite notice. 6
On 17 February 2006, the trial court disposed the case in favor of the respondent. Thus:
Foregoing considered, and evidence having been shown to the satisfaction of the court that [petitioner] Union Motors . . . breached its warranty and obligation, as a seller, to the [respondent,] as a buyer, judgment is hereby rendered:
1. Ordering the rescission of the contract between the [respondent] and [petitioner] Union Motors Corporation;
2. Directing the [petitioner] Union Motor[s] to return to [respondent] the sum of P195,893.00 plus 12% interest per annum computed from December 11, 2001 until the full amount is fully restored to the [respondent];
3. Directing [petitioner] Union Motors Corporation to pay [respondent] Attorney's fees in the sum of P75,000.00 7 on the basis of quantum meruit.
4. To pay the costs of suit. 8 (Italics supplied)
The Court of Appeals affirmed with modification the trial court's decision. The modification reads: CSHcDT
. . . that [petitioner]-appellant Union Motors Corporation is ORDERED to return to [respondent]-appellee Rudy S. Labos & Associates, Inc. the sum of Php195,893.00 with interest at the rate of 6% per annum from 25 March 2002 up to the time this judgment becomes final and executory. Henceforth, the rate of legal interest shall be 12% per annum until the satisfaction of judgment. Costs against [petitioner]-appellant. 9
It also denied the Motion for Reconsideration for lack of merit. 10
The petition lacks merit.
We reject the position of the petitioner that the respondent failed to prove that the vehicle sold to it was defective since "the slight imperfection in the adjustment of wheel alignment . . . is not the hidden defect contemplated in Article 1561 of the Civil Code," 11 which would warrant the rescission of contract provided under Article 1599 of the same Code. 12
The Court of Appeals correctly ratiocinated:
[Petitioner]-appellant's Sales Manager Capistrano unwittingly admitted in his letter dated 13 December 2001 that the supposed brand new Mitsubishi L-300 that was delivered to [respondent]-appellee had defects when he acknowledged the complaint of the latter about the "wheel alignment and off(-)centered steering wheel . . . ." It bears reiteration that [petitioner]-appellant, being the vendor, is responsible for its warranty against hidden defects of the supposed brand new vehicle which diminished the latter's roadworthiness to such an extent that had the vendee, herein [respondent]-appellee, been aware thereof, it would not have acquired the same or would have given a lower price for it.
As aptly found by the trial court:
"No evidence was adduced to controvert [respondent's] allegation that the subject vehicle was defective when delivered to the [respondent]. . . . The warranty of a seller does not only extend on the external appearance of the vehicle, its running condition but also against hidden defects. Thus, if it is eventually discovered that a newly purchased brand new vehicle is suffering from any of those defects, the conclusion is that the warranty was breached. ISTECA
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Definitely, and without question there was breach of warranty from hidden defects and [petitioner] undeniably breached its obligation to the buyer-[respondent], when it delivered a defective motor vehicle to the former. That eventually the defects were repaired and restored to make it appear that it is new even if such defect does not affect the road worthiness (sic) of that vehicle does not justify [petitioner's] action; and it will not erase the fact that the vehicle was defective when delivered. It is understandable that had [respondent] intended to own a vehicle with hidden defects, he should have settled for a 2nd hand car, and there is no room to complaint (sic), if eventually after delivery, it is found to be with defects. A buyer has all the right to demand that what he buys be free of defects and [respondent] precisely expected the qualities of a new (sic) brand (sic) vehicle, a body without hidden defects and everything that is housed in it. On this score, this Court finds for the [respondent].
It is a matter of judicial policy to accord the trial court's findings of facts with the highest respect and not to disturb the same on appeal unless there are strong and impelling reasons to do so. . . . We find no basis to deviate from the foregoing doctrine as the findings of fact and conclusion arrived at by the trial court are supported by evidence. 13 (Emphasis supplied; citations omitted)
As to the amount that may be recovered from the petitioner, we agree with the Court of Appeals that the full amount of P195,893.00 should be returned to respondent plus the payment of interest. Applying Articles 1567 14 and 1599 of the Civil Code, the Court of Appeals well-explained:
It is clear that [respondent]-appellee opted to rescind the contract of sale when it returned the Mitsubishi L-300 to [petitioner]-appellant and demanded for the return of the amount of P195,893.00 which it paid as down payment. (As in this case,) rescission is proper if one of the parties to a contract commits a substantial breach of its provisions. It creates an obligation to return the object of the contract. It can be carried out only when the one who demands rescission can return whatever he may be obliged to restore. Rescission abrogates the contract from its inception and requires a mutual restitution of the benefits received. ([Petitioner]-appellant) is thus mandated by law to give back to ([respondent]-appellee) the (down payment it paid) upon (the) return of the vehicle. As earlier discussed, [respondent]-appellee already returned the Mitsubishi L-300 to [petitioner]-appellant. IEHScT
Thus, the trial court correctly rescinded the contract of sale between the parties and ordered [petitioner]-appellant to refund the 30% down payment of P195,893.00 plus interest. . . . 15
In view of all the foregoing, we DENY this instant petition and AFFIRM the Court of Appeals' Decision dated 16 April 2012 and Resolution dated 6 December 2012 in CA-G.R. CV. No. 90384.
SO ORDERED.
Very truly yours,
(SGD.) MA. LOURDES C. PERFECTODivision Clerk of Court
Footnotes
1.Rollo, pp. 39-58. Penned by Associate Justice Celia C. Librea-Leagogo with Associate Justices Elihu A. Ybañez and Ramon A. Cruz concurring.
2.Id. at 62-63.
3.Id. at 158-162. Penned by Judge Fatima Gonzales-Asdala.
4.Id. at 157.
5.A copy of the Order was not attached to the Petition.
6.Rollo, pp. 158-159. Decision of dated 17 February 2006 in Civil Case No. 02-46475.
7.As amended by Order dated 20 March 2006. Id. at 157.
8.Id. at 161-162.
9.Id. at 57. Decision in CA-G.R. CV. No. 90384.
10.Id. at 62-63. Resolution dated 6 December 2012 in CA-G.R. CV. No. 90384.
11.Id. at 28. Petition.
12."Article 1599. Where there is a breach of warranty by the seller, the buyer may, at his election:
(1) Accept or keep the goods and set up against the seller, the breach of warranty 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.
When the buyer has claimed and been granted a remedy in any one of these ways, no other remedy can thereafter be granted, without prejudice to the provisions of the second paragraph of Article 1191.
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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 offer to return the goods in exchange for repayment of the price.
xxx xxx xxx"
13.Id. at 53-54. Decision in CA-G.R. CV. No. 90384.
14."Article 1567. In the cases of Articles 1561, 1562, 1564, 1565 and 1566, the vendee may elect between withdrawing from the contract and demanding a proportionate reduction of the price, with damages in either case."
15.Rollo, p. 55.