HARRISON MOTORS CORPORATION vs. RACHEL A.

NAVARRO
FACTS: Sometime in June of 1987 Harrison Motors Corporation through its president, Renato
Claros, sold 2 Isuzu Elf trucks to Rachel Navarro, owner of RN Freight Lines. Prior to the sale,
Renato Claros represented to Navarro that all the BIR taxes and customs duties for the parts
used on the two 2 trucks had been paid for.
On 10 September 1987 the Bureau of Internal Revenue (BIR) and the Land Transportation
Office (LTO) entered into a Memorandum of Agreement (MOA) which provided that prior to
registration in the LTO of any assembled or re-assembled motor vehicle which used imported
parts, a Certificate of Payment should first be obtained from the BIR to prove payment of all
taxes required under existing laws.
On 16 June 1988 the BIR, BOC and LTO entered into a tripartite MOA which provided that
prior to the registration in the LTO of any locally assembled motor vehicle using imported
component parts, a Certificate of Payment should first be obtained from the BIR and the BOC
to prove that all existing taxes and customs duties have been paid.
In December of 1988 government agents seized and detained the two (2) Elf trucks of
Navarro after discovering that there were still unpaid BIR taxes and customs duties thereon.
The BIR and the BOC ordered NAvarro to pay the proper assessments or her trucks would be
impounded. Navarro went to Claros to ask for the receipts evidencing payment of BIR taxes
and customs duties; however, Claros refused to comply. Navarro then demanded from Claros
but her demands were again ignored.
But wanting to secure the immediate release of the trucks to comply with her business
commitments, Navarro paid the assessed BIR taxes and customs duties amounting to
P32,943.00. Consequently, she returned to Harrisons office to ask for reimbursement, but it
again refused, prompting her to send a demand letter through her lawyer. When Harrison still
ignored her letter, she filed a complaint for a sum of money on 24 September 1990 with the
Regional Trial Court of Makati.
On 5 March 1992 the trial court rendered a decision ordering Harrison to reimburse private
respondent in the amount of P32,943.00 for the customs duties and internal revenue taxes
the latter had to pay to discharge her 2 Elf trucks from government custody.
Harrison argues that it was no longer obliged to pay for the additional taxes and customs
duties imposed on the imported component parts by the Memorandum Orders and the two (2)
Memoranda of Agreement based on non-impairment clause of the Constitution but also the
principle of non-retroactivity of laws provided in Art. 4 of the Civil Code.
The records however reveal that the Memorandum Orders and Memoranda of Agreement do
not impose any additional BIR taxes or customs duties. The MOA mandated that prior to
registration in the LTO of any assembled automobile using imported parts, a Certificate of
Payment should first be obtained from the BIR which would then transmit the Certificate to the
LTO to prove that all the BIR taxes required under existing laws have been paid.
The MOA provided that prior to registration with the LTO of any assembled motor vehicle
using imported component parts, a Certificate of Payment should first be secured from the
BIR or the BOC which should then be duly forwarded to LTO. The Certificate would serve as
proof that all taxes and customs duties required under existing laws, rules and regulations
had already been settled.
ISSUE: Who should pay the BIR taxes and customs duties which the administrative
regulations sought to enforce?
HELD: Harrison contends that Navarro should be the one to pay the internal revenue taxes
and customs duties. It claims that at the time the Memorandum Orders and the two (2)
Memoranda of Agreement took effect the two (2) Elf trucks were already sold to Navarro,
thus, it no longer owned the vehicles.
Thus, although the Whereas clause in the MOA provides that private respondent is the one

required by the administrative regulations to secure the Certificate of Payment for the purpose
of registration, petitioner as the importer and the assembler/manufacturer of the two (2) Elf
trucks is still the one liable for payment of revenue taxes and customs duties. Harrisons
obligation to pay does not arise from the administrative regulations but from the tax laws
existing at the time of importation. Hence, even if Navarro already owned the two (2) trucks
when the Memorandum Orders and Memoranda of Agreement took effect, the fact remains
that Harrison was still the one duty-bound to pay for the BIR taxes and customs duties.
It is also quite obvious that as between Harrison, who is the importerassembler/manufacturer, and Navarro, who is merely the buyer, it is petitioner which has the
obligation to pay taxes to the BIR and the BOC. Harrison would be unjustly enriched if private
respondent should be denied reimbursement.
Besides, Harrisons allegation that it already paid the BIR taxes and customs duties is highly
doubtful. This entire controversy would have been avoided had Harrison simply furnished
private respondent with the receipts evidencing payment of BIR taxes and customs duties. If
only Navarro had the receipts to prove payment of such assessments then she would have
easily secured the release of her two (2) Elf trucks. But Harrison arbitrarily and unjustly
denied Navarros demands. Instead, Harrison obstinately insisted that it was no longer
concerned with the problem involving the two (2) trucks since it no longer owned the vehicles
after the consummation of the sale.
It is true that the ownership of the trucks shifted to private respondent after the sale. But
petitioner must remember that prior to its consummation it expressly intimated to her that it
had already paid the taxes and customs duties. Such representation shall be considered as a
sellers express warranty under Art. 1546 of the Civil Code which covers any affirmation of
fact or any promise by the seller which induces the buyer to purchase the thing and actually
purchases it relying on such affirmation or promise.[26] It includes all warranties which are
derived from express language, whether the language is in the form of a promise or
representation. Presumably, therefore, private respondent would not have purchased the two
(2) Elf trucks were it not for petitioners assertion and assurance that all taxes on its imported
parts were already settled.
This express warranty was breached the moment petitioner refused to furnish private
respondent with the corresponding receipts since such documents were the best evidence
she could present to the government to prove that all BIR taxes and customs duties on the
imported component parts were fully paid. Without evidence of payment, she was powerless
to prevent the trucks from being impounded.
Under Art. 1599 of the Civil Code, once an express warranty is breached the buyer can
accept or keep the goods and maintain an action against the seller for damages. This was
what private respondent did. She opted to keep the two (2) trucks which she apparently
needed for her business and filed a complaint for damages, particularly seeking the
reimbursement of the amount she paid to secure the release of her vehicles.
MOLES vs IAC
FACTS: In 1977, petitioner needed a linotype printing machine for his printing business, The
LM Press at Bacolod City, and applied for an industrial loan with the Development Bank of the
Philippines. (DBP) for the purchase thereof. An agent of Smith, Bell and Co. who is a friend of
petitioner introduced the latter to private respondent, owner of the Diolosa Publishing House
in Iloilo City, who had two available machines. Thereafter, petitioner went to Iloilo City to
inspect the two machines offered for sale and was informed that the same were secondhand
but functional.
Sometime between April and May, 1977, the machine was delivered to petitioner's publishing
house where it was installed by an employee of Diolosa. Prior to the release of the loan, a
representative from the DBP, Bacolod, supposedly inspected the machine but he merely
looked at it to see that it was there . The inspector's recommendation was favorable and,
thereafter, petitioner's loan of P50,000.00 was granted and released.

But on November 29, 1977, petitioner wrote private respondent that the machine was not
functioning properly as it needed a new distributor bar. Private respondent made no reply to
said letter, so petitioner engaged the services of other technicians. Later, after several
telephone calls regarding the defects in the machine, private respondent sent two technicians
to make the necessary repairs but they failed to put the machine in running condition. In fact,
since then petitioner was never able to use the machine. Petitioner again wrote private
respondent, this time with the warning that he would be forced to seek legal remedies to
protect his interest.
Obviously in response to the foregoing letter, private respondent decided to purchase a new
distributor bar and private respondent delivered this spare part to petitioner. However, when
thereafter petitioner asked private respondent to pay for the price of the distributor bar, the
latter asked petitioner to share the cost with him. Petitioner thus finally decided to indorse the
matter to his lawyer.
An expert witness for the petitioner declared that he inspected the linotype machine involved
in this case at the instance of petitioner. In his inspection thereof, he found several defects.
ISSUE/S: W/N private respondent is bound by an express warranty.
W/N private respondents express warrantly was a mere dealers talk.
W/N hidden defects in the machine is sufficient to warrant a rescission of the contract
between the parties.
HELD: Private respondent is bound by the express warranty which he executed in
favor of the petitioners.
When an article is sold as a secondhand item, a question arises as to whether there is an
implied warranty of its quality or fitness. 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 a 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.
In a line of decisions rendered by the United States Supreme Court, it had theretofore been
held that there is no implied warranty as to the condition, adaptation, fitness, or suitability for
the purpose for which made, or the quality, of an article sold as and for a secondhand article.
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:
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;
To repeat, in the case before Us, a certification to the effect that the linotype machine bought
by petitioner was in A-1 condition was issued by private respondent in favor of the former.
This cannot but be considered as an express warranty. However, it is private respondent's
submission, that the same is not binding on him, not being a part of the contract of sale
between them.
It must be remembered that the certification was a condition sine qua non for the release of
petitioner's loan which was to be used as payment for the purchase price of the machine.
Private respondent failed to refute this material fact. Neither does he explain why he made
that express warranty on the condition of the machine if he had not intended to be bound by
it. In fact, the respondent court, in declaring that petitioner should have availed of the remedy

of requiring repairs as provided for in said certification, thereby considered the same as part
and parcel of the verbal contract between the parties.
Private respondents express warranty as to the A-1 condition of the machine was not
merely dealer's talk.
Private respondent was not a dealer of printing or linotype machines to whom could be
ascribed the supposed resort to the usual exaggerations of trade in said items. His
certification as to the condition of the machine was not made to induce petitioner to purchase
it but to confirm in writing for purposes of the financing aspect of the transaction his
representations thereon. Ordinarily, what does not appear on the face of the written
instrument should be regarded as dealer's or trader's talk conversely, what is specifically
represented as true in said document, as in the instant case, cannot be considered as mere
dealer's talk.
On the question as to whether the hidden defects in the machine is sufficient to warrant a
rescission of the contract between the parties, 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 and express
warranty. Consequently, the general rule on rescission of contract, which is four years 27 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.