Implied warranty and prescription

When a buyer purchases an item, the seller is usually required to provide some sort of “warranty” to assure the buyer of the quality and condition of the item being sold.

A warranty is a statement or representation made by the seller of goods, contemporaneously and as part of the contract of sale, having reference to the character, quality, or title of the goods, and by which the seller promises or undertakes to ensure that certain facts are or shall be as represented.

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Despite being provided with warranties, buyers must still exercise due diligence before transacting and ensure that they assert their rights in a timely manner.

The case of Ang v. Court of Appeals and Soledad (G.R. No. 177874, September 29, 2008) is instructive.

On July 28, 1992, Bruno Soledad sold his vehicle, a Mitsubishi GSR sedan, to Jaime Ang, a trader of vehicles, who then sold it to Paul Bugash on August 14, 1992.

Before the deed of sale could be registered to transfer the title of the vehicle to Bugash’s name, the vehicle was seized by virtue of a court order issued on January 26, 1993. This stemmed from a case filed by BA Finance Corp., which claimed to have a mortgage over the vehicle from Ronaldo Panes, the owner prior to Bruno Soledad.

To release the vehicle from the mortgage, Ang paid BA Finance the amount of P62,038.47 and thereafter demanded reimbursement from Soledad. However, Soledad refused, prompting Ang to file a civil case for damages on November 9, 1993.

The court dismissed the case on the ground that Ang’s action had prescribed—meaning it was filed after the time allowed by law. Specifically, Article 1571 of the Civil Code provides that an action to claim a warranty against hidden defects or encumbrances upon the thing sold must be made within six  months from the date of delivery.

Ang, on his part, argued that he had 10 years to file the action, claiming it involved a breach of a written contract.

On appeal to the Supreme Court, it ruled that the resolution of the case hinged on a single issue: whether the complaint had prescribed, which depended on the type of warranty provided in the Deed of Absolute Sale.

Soledad made the following warranty in the Deed of Absolute Sale to Ang:

“x x x x I hereby covenant my absolute ownership [of] the above-described property and [that] the same is free from all liens and encumbrances and I will defend the same from all claims or any claim whatsoever; [I] will save the vendee from any suit by the government of the Republic of the Philippines.”

Significantly, if the warranty is an express warranty, the prescriptive period is four years, unless the contract provides for a different period (Article 1389, Civil Code). On the other hand, if it is an implied warranty, the prescriptive period is six months (Article 1571, Civil Code).

The law distinguishes between express and implied warranties.

Article 1546 of the Civil Code defines an express warranty as “Any affirmation of fact or any promise by the seller relating to the thing is an express warranty if the natural tendency of such affirmation or promise is to induce the buyer to purchase the same, and if the buyer purchases the thing relying thereon. No affirmation of the value of the thing, nor any statement purporting to be a statement of the seller’s opinion only, shall be construed as a warranty, unless the seller made such affirmation or statement as an expert and it was relied upon by the buyer.”

An implied warranty, on the other hand, is one that the law derives by application or inference from the nature of the transaction or the relative circumstances of the parties, regardless of the seller’s intent to create it.

The Supreme Court held that Soledad’s warranty in the Deed of Absolute Sale constituted an implied warranty—specifically, the warranty against hidden defects or encumbrances (Article 1571, Civil Code) and the warranty against eviction (Article 1548, Civil Code). Both must be enforced within six months from delivery.

Warranty as to title

When Soledad declared in the deed that he owned and had clean title to the vehicle, he gave an implied warranty of title or one against encumbrances.

Since Ang was in the business of buying and selling used vehicles, he was expected to have verified the car’s registration and related documents rather than merely relying on Soledad’s affirmation that the vehicle was free from liens and encumbrances.

Moreover, Article 1561 of the Civil Code provides that a seller shall not be liable for this warranty if the buyer is an expert who, by reason of his trade or profession, should have known of the defect.

Warranty against eviction

The Court also found no breach of the implied warranty against eviction, which requires the following elements:

1. The purchaser has been deprived of the whole or part of the thing sold; 2. The eviction is by final judgment; 3. The basis of the judgment is a right prior to the sale made by the seller; and 4. The seller is a co-defendant in the suit for eviction at the instance of the buyer.

In this case, there was no final judgment depriving Ang of the vehicle, and Soledad was not impleaded as a co-defendant in an eviction suit.

Considering that the sale between Ang and Soledad took place on July 28, 1992, and that Ang filed his complaint on November 9, 1993—well beyond the six-month prescriptive period—his action had already prescribed and was therefore barred.

(The author, Atty. John Philip C. Siao, is a practicing lawyer and founding Partner of Tiongco Siao Bello & Associates Law Offices, an Arbitrator of the Construction Industry Arbitration Commission of the Philippines, and teaches law at the De La Salle University Tañada-Diokno School of Law. He may be contacted at [email protected]. The views expressed in this article belong to the author alone.)