Coca-Cola Bottlers Philippines, Inc. vs. Court of Appeals

An action for damages predicated on the negligent or reckless manufacture of adulterated food products constitutes a quasi-delict under Article 2176 of the Civil Code, prescribing in four years pursuant to Article 1146, and the existence of a contractual relationship between the parties does not preclude such an action, the act that breaches the contract may also be a quasi-delict.

Lydia L. Geronimo was the proprietress of Kindergarten Wonderland Canteen in Dagupan City, an enterprise engaged in the sale of soft drinks — including Coke and Sprite — and other goods to students and the public. Coca-Cola Bottlers Philippines, Inc. was the manufacturer and supplier of those soft drinks. The dispute arose from the discovery of foreign substances in certain beverages sold by Geronimo, which caused a severe drop in sales and the eventual closure of her canteen, prompting her to file a complaint for damages against the manufacturer.

Lydia L. Geronimo was the proprietress of Kindergarten Wonderland Canteen, located in Dagupan City, an enterprise engaged in the sale of soft drinks — including Coke and Sprite — and other goods to the students of Kindergarten Wonderland and to the public. On or about August 12, 1989, some parents of the students complained to her that the Coke and Sprite soft drinks she sold contained fiber-like matter and other foreign substances. Geronimo then inspected her stock and discovered fiber-like substances in the contents of some unopened Coke bottles and a plastic matter in the contents of an unopened Sprite bottle. She brought the bottles to the Regional Health Office of the Department of Health at San Fernando, La Union, for examination, and subsequently received a letter from the Department of Health informing her that the samples she submitted were "adulterated."

As a consequence of the discovery of the foreign substances in the beverages, her sales of soft drinks severely plummeted from the usual ten cases per day to as low as two to three cases per day, resulting in losses of from P200.00 to P300.00 per day. Not long after, she had to close shop on December 12, 1989, becoming jobless and destitute. She demanded from petitioner the payment of damages but was rebuffed.

On May 7, 1990, Geronimo filed a complaint for damages against petitioner with the RTC of Dagupan City, docketed as Civil Case No. D-9629, praying for actual damages of P5,000.00, compensatory damages of P72,000.00, moral damages of P500,000.00, exemplary damages of P10,000.00, attorney's fees equal to 30% of the damages awarded, and costs. Petitioner moved to dismiss on the grounds of failure to exhaust administrative remedies and prescription, arguing that the complaint was for breach of warranty under Article 1561 of the Civil Code and should have been filed within six months from delivery of the thing sold pursuant to Article 1571. The RTC granted the motion to dismiss on January 23, 1991, ruling that the complaint was based on a contract, not quasi-delict, as there existed a pre-existing contractual relation between the parties, and that under Article 1571 in relation to Article 1562, the complaint should have been filed within six months from delivery. The RTC denied Geronimo's motion for reconsideration on April 17, 1991.

Geronimo elevated the matter to the Supreme Court via a petition for review on certiorari, which was referred to the Court of Appeals. The Court of Appeals annulled the RTC orders and directed further proceedings, holding that the complaint was one for quasi-delict and that the applicable prescriptive period was four years. Petitioner's motion for reconsideration was denied, prompting the filing of the present petition under Rule 45.

• Nature of the Action: Petitioner insisted that a cursory reading of the complaint revealed that the primary legal basis for private respondent's cause of action was not Article 2176 on quasi-delict — as the complaint did not ascribe any tortious or wrongful conduct on its part — but Articles 1561 and 1562 on breach of a seller's implied warranties under the law on sales.
• Bar of Quasi-delict by Contract: Petitioner contended that the existence of a contractual relation between the parties, arising from the contract of sale, barred the application of the law on quasi-delicts.
• Prescription: Petitioner argued that since private respondent's cause of action arose from breach of implied warranties, the complaint should have been filed within six months from delivery of the soft drinks pursuant to Article 1571 of the Civil Code, and that the filing on May 7, 1990 was therefore barred by prescription.

• Nature of the Action: Private respondent argued that in case of breach of the seller's implied warranties, the vendee may, under Article 1567, elect between withdrawing from the contract or demanding a proportionate reduction of the price, with damages in either case; she asserted that Civil Case No. D-9629 was neither an action for rescission nor for proportionate reduction of the price, but for damages arising from a quasi-delict.
• Contract Does Not Preclude Quasi-delict: Private respondent maintained that the public respondent was correct in ruling that the existence of a contract did not preclude the action for quasi-delict.
• Prescription: Private respondent insisted that since her cause of action was based on quasi-delict, the prescriptive period was four years in accordance with Article 1146 of the Civil Code, and the filing of the complaint was well within that period.

• Nature of the Action: Whether private respondent's complaint for damages against the soft drink manufacturer should be treated as an action for breach of implied warranty against hidden defects or merchantability under Articles 1561 and 1562 of the Civil Code, or as an action for quasi-delict under Article 2176.
• Effect of Contractual Relation on Quasi-delict: Whether the existence of a pre-existing contractual relation between the parties bars the application of the law on quasi-delict.
• Prescription: Whether the complaint was filed within the applicable prescriptive period.

• Nature of the Action: Yes, the complaint states a cause of action for quasi-delict. The allegations in the complaint, particularly paragraph 12, which references the reckless and negligent manufacture of "adulterated food items intended to be sold for public consumption," characterize the action as one under Article 2176.
• Effect of Contractual Relation on Quasi-delict: No, a pre-existing contract does not bar an action for quasi-delict. The act that breaches a contract may also be a quasi-delict, and liability for quasi-delict may still exist despite the presence of contractual relations.
• Prescription: No, the complaint was not barred by prescription. The action being one for quasi-delict, the applicable prescriptive period is four years pursuant to Article 1146, and the complaint filed on May 7, 1990 was well within that period from the discovery of the adulterated products in August 1989.

• Nature of the Action: The nature of an action is determined by the facts alleged in the complaint and those averred as a defense in the defendant's answer. The complaint's allegations, particularly paragraph 12, made reference to the reckless and negligent manufacture of "adulterated food items intended to be sold for public consumption." These allegations squarely placed the action within the scope of Article 2176 of the Civil Code on quasi-delict. The vendee's remedies against a vendor with respect to warranties against hidden defects are not limited to those prescribed in Article 1567 (withdrawal from the contract or proportionate reduction of price with damages); the vendee may also ask for annulment upon proof of error or fraud, under the ordinary rules on obligations. Under the law on obligations, responsibility arising from fraud is demandable in all obligations, and responsibility arising from negligence is likewise demandable. Those guilty of fraud, negligence, or delay in the performance of their obligations, or who contravene the tenor thereof, are liable for damages under Article 1170. The vendor could likewise be liable for quasi-delict under Article 2176, and an action based thereon may be brought by the vendee.

• Effect of Contractual Relation on Quasi-delict: While it may be true that a pre-existing contract between the parties may, as a general rule, bar the applicability of the law on quasi-delict, the liability may itself be deemed to arise from quasi-delict — that is, the act which breaks the contract may also be a quasi-delict. In Singson vs. Bank of the Philippine Islands, the Court stated that the existence of a contract between the parties does not bar the commission of a tort by one against the other and the consequent recovery of damages therefor. This view was reiterated in Air France vs. Carrascoso, where an airplane passenger who was illegally ousted from his first-class accommodation was held entitled to recover damages from the air-carrier on the ground of tort, even though the relation between passenger and carrier was "contractual both in origin and nature." Under American law, the liabilities of a manufacturer or seller of injury-causing products may be based on negligence, breach of warranty, tort, or other grounds such as fraud, deceit, or misrepresentation, and the availability of an action for breach of warranty does not bar an action for torts in a sale of defective goods.

• Prescription: Since the cause of action was founded on quasi-delict under Article 2176, the prescriptive period was four years pursuant to Article 1146 of the Civil Code. The complaint was filed on May 7, 1990, well within four years of the discovery of the adulterated products on or about August 12, 1989. The six-month prescriptive period under Article 1571, applicable to actions for breach of warranty under the law on sales, did not apply because the action was not one for breach of implied warranty.

• Quasi-delict and Contractual Relations — The existence of a contract between the parties does not bar the commission of a tort by one against the other and the consequent recovery of damages therefor. The act that breaks the contract may also be a tort or quasi-delict. Liability for quasi-delict may still exist despite the presence of contractual relations. This doctrine was established in Singson vs. Bank of the Philippine Islands and reiterated in Air France vs. Carrascoso, and applied in this case to hold that a vendee may bring an action for quasi-delict against a vendor for negligent manufacture of adulterated products, notwithstanding the contract of sale between them.

• Determination of the Nature of an Action — What determines the nature of an action are the facts alleged in the complaint and those averred as a defense in the defendant's answer. The Court applied this principle to hold that the complaint's allegations of reckless and negligent manufacture of adulterated food items characterized the action as one for quasi-delict, not breach of warranty.

• "While it may be true that the pre-existing contract between the parties may, as a general rule, bar the applicability of the law on quasi-delict, the liability may itself be deemed to arise from quasi-delict, i.e., the acts which breaks the contract may also be a quasi-delict." — This passage articulates the ratio decidendi that contractual relations do not preclude quasi-delict liability, the core holding of the case.

• "We have repeatedly held, however, that the existence of a contract between the parties does not bar the commission of a tort by the one against the other and the consequent recovery of damages therefor." — This quotation from Singson vs. Bank of the Philippine Islands, adopted by the Court, is the canonical formulation of the doctrine that tort may coexist with contractual relations.

• "Otherwise put, liability for quasi-delict may still exist despite the presence of contractual relations." — A concise restatement of the controlling principle, frequently cited in subsequent jurisprudence on the interplay between contractual and quasi-delictual liability.

• Singson vs. Bank of the Philippine Islands, 23 SCRA 1117 (1968) — Controlling precedent followed; held that the existence of a contract between the parties does not bar the commission of a tort by one against the other and the consequent recovery of damages. The Court relied on this case to reject petitioner's argument that the contractual relation barred quasi-delict.

• Air France vs. Carrascoso, 18 SCRA 155 (1966) — Followed; held that although the relation between a passenger and a carrier is contractual in origin and nature, the act that breaks the contract may also be a tort. The Court used this to illustrate that quasi-delict liability may coexist with contractual relations.

• Cangco vs. Manila Railroad, 38 Phil. 768 — Cited within Singson as supporting authority for the proposition that contractual relations do not bar tort actions.

• Vasquez vs. De Borja, 74 Phil. 560 (1944) — Cited for the proposition that quasi-delict under Article 2176 is homologous but not identical to tort under common law.

• Article 2176, Civil Code of the Philippines — Defines quasi-delict as the principle that whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the damage done. Applied as the legal basis for private respondent's action, the complaint's allegations of reckless and negligent manufacture of adulterated food items falling squarely within its scope.

• Article 1146, Civil Code of the Philippines — Provides that actions upon a quasi-delict must be brought within four years. Applied as the prescriptive period for the complaint, the filing on May 7, 1990 being well within four years of the discovery of the adulterated products in August 1989.

• Article 1571, Civil Code of the Philippines — Provides that an action arising from redhibitory defects or encumbrances must be brought within six months from delivery of the thing sold. Petitioner invoked this provision, but the Court held it inapplicable because the action was one for quasi-delict, not breach of warranty.

• Articles 1561 and 1562, Civil Code of the Philippines — Govern the seller's implied warranties against hidden defects and merchantability. Petitioner argued these provisions governed the action; the Court rejected this characterization based on the complaint's allegations.

• Article 1567, Civil Code of the Philippines — Provides that in cases of breach of implied warranty, the vendee may elect between withdrawing from the contract and demanding a proportionate reduction of the price, with damages in either case. The Court noted that the vendee's remedies are not limited to those prescribed in this article.

• Article 1170, Civil Code of the Philippines — Provides that those guilty of fraud, negligence, or delay in the performance of their obligations, and those who in any manner contravene the tenor thereof, are liable for damages. Cited to show that liability for negligence in the performance of obligations is demandable under the law on obligations.

• Articles 1171 and 1172, Civil Code of the Philippines — Provide that responsibility arising from fraud is demandable in all obligations, and responsibility arising from negligence is likewise demandable, though such liability may be regulated by the courts. Cited to demonstrate that the vendee's remedies extend beyond Article 1567.

Justices Cruz, Bellosillo, and Quiason concurred. Justice Griño-Aquino was on leave.