Toyota Motors Philippines Corporation vs. Esmeralda M. Aguilar and Toyota Fairview, Inc.

A product imperfection that remains unresolved for more than thirty days renders the product unfit or inadequate, making the supplier and dealer solidarily liable under Article 100(a) of the Consumer Act; administrative due process in DTI proceedings is not violated when the Adjudication Division decides without awaiting a position paper because technical rules are not strictly applied and the parties were given equal opportunity to present their sides in amicable settlement.

TMP was the supplier of the Toyota Wigo involved, while TFI was the distributor/dealer that sold the vehicle to Aguilar on installment. The dispute is governed by the Consumer Act, particularly Article 100 on liability for product and service imperfections, and the DTI’s implementing rules defining product imperfection. The DTI Adjudication Division adjudicates complaints for product and service imperfections under that statutory framework.

Esmeralda M. Aguilar purchased on an installment basis a Toyota Wigo with Conduction Sticker No. VB4772 from Toyota Fairview, Inc. (TFI). Barely two weeks after the car was released to her, it acted erratically as the steering wheel malfunctioned and became difficult to turn, and she complained of a loud and annoying noise coming from underneath the brake and accelerator pads.

On May 23, 2016, the vehicle underwent the 1,000-km maintenance check, and Aguilar caused the installation of the car’s alarm system at the accessories department of TFI. From then on, the car underwent several repairs for the same problem on June 2 and 27, 2016; July 4 and 7, 2016; August 20 and 25, 2016; and September 2, 2016. Aguilar alleged that for all those repairs, TFI never issued any repair order. She therefore filed a complaint with the Department of Trade and Industry (DTI) Adjudication Division for Product and Service Imperfections under the Consumer Act.

The DTI Adjudication Division found that TMP had not submitted substantial evidence to disprove or rebut Aguilar’s allegations. It observed that although the vehicle was subjected to a series of repairs, no service report or repair order was issued to her. The steering wheel being difficult to turn or rotate amounted to a genuine safety concern that should have been properly addressed by TMP during the repairs, but the problem persisted despite repair. The imperfection was discovered barely two months from the date of purchase, within the period covered by the warranty.

TMP, for its part, maintained that the vehicle did not suffer any quality imperfection when it was released to Aguilar on April 23, 2016. According to TMP, the steering-wheel problem arose only on May 23, 2016, when Aguilar caused the installation of an unauthorized additional alarm system; had she not tampered with the electrical system, the engine control units (ECU) would not have malfunctioned and ceased supplying electricity from the electric power steering system (EPS) to operate the power-steering feature. TMP also claimed that the difficulty in maneuvering the steering wheel did not remain uncorrected and was successfully repaired on September 28, 2016, and that its technical personnel’s sworn testimony and photographs outweighed Aguilar’s self-serving statements.

• Due Process and Position Paper: TMP argued that the CA erroneously equated a mediation conference with the filing of a position paper. It maintained that because DAO No. 07-06 does not provide the manner for filing and serving pleadings in the DTI Adjudication Division, the Rules of Court apply suppletorily; registered mail is an acceptable mode of filing, and the date of mailing shown by the post office stamp or registry receipt is the date of filing. Its position paper was mailed on October 21, 2016, the fifth working day from receipt of summons, and the DTI should have held the decision in abeyance to allow reasonable time for it to arrive.
• Substantial Evidence and Repair: TMP submitted that there is no substantial evidence that the imperfections persisted because the steering-wheel difficulty did not remain uncorrected and was successfully repaired on September 28, 2016. It argued that its technical personnel’s sworn testimony and photographs outweighed Aguilar’s self-serving statements.
• Causation and Unauthorized Accessory: TMP insisted that the vehicle did not suffer any quality imperfection when it was released on April 23, 2016. The steering-wheel problem arose only on May 23, 2016, when Aguilar caused the installation of an unauthorized additional alarm system. Had she not tampered with the electrical system, the ECU would not have malfunctioned and ceased supplying electricity from the EPS to operate the power-steering feature; the defect was caused by an unauthorized after-market accessory, not a quality imperfection.

• Distributor/Dealer Liability: TFI maintained that it was merely a distributor/dealer, not the manufacturer of the car, and therefore could not be held liable for the imperfections.

• Due Process: Whether TMP was denied its right to due process when the DTI Adjudication Division did not wait for its position paper before rendering its decision.
• Liability under the Consumer Act: Whether TMP and TFI are liable for violation of the Consumer Act.

• Due Process: No. TMP was not denied due process; the parties were given equal opportunity to present their sides in an amicable settlement proceeding, and technical rules of procedure and evidence are not strictly applied in administrative proceedings.
• Liability under the Consumer Act: Yes. TMP and TFI are solidarily liable under Article 100(a) of the Consumer Act because the steering-wheel issue remained unresolved for more than 30 days, rendering the vehicle unfit or inadequate for its intended purpose; replacement and the P240,000 fine were affirmed.

• Due Process: The CA’s explanation was adopted: TMP was not denied due process even if the DTI Adjudication Division did not wait for its position paper because the parties were given equal opportunity to present their respective sides in an amicable settlement proceeding. In administrative proceedings, technical rules of procedure and evidence are not strictly applied, and administrative due process cannot be fully equated with due process in its strict judicial sense. Thus, the DTI Adjudication Division’s failure to await the position paper did not amount to grave abuse of discretion or reversible error. The DTI’s special knowledge and expertise over matters falling under its jurisdiction also placed it in a better position to pass judgment, and its findings of fact, especially when affirmed by the CA, are generally accorded respect, if not finality.
• Liability under the Consumer Act: Article 100(a) provides that suppliers of durable or non-durable consumer products are jointly liable for imperfections in quality that render the products unfit or inadequate for consumption for which they are designed or decrease their value, and for those resulting from inconsistency with information provided on the container, packaging, labels or publicity messages/advertisement, with due regard to variations resulting from their nature; if the imperfection is not corrected within thirty (30) days, the consumer may alternatively demand at his option the replacement of the product by another of the same kind, in a perfect state of use. Section 2, Rule III, Chapter V, DTI Administrative Order No. 2, series of 1993 (Implementing Rules and Regulations of R.A. 7394) defines product imperfection as those that render products unfit or inadequate for the purpose, use or consumption for which they are designed or intended, or those that jeopardize the quality and characteristics of the product resulting in a decrease in its value. The steering-wheel issue remained unresolved for more than 30 days and rendered the vehicle unfit or inadequate; because the repairs were completed more than 30 days from the time Aguilar complained about the defective vehicle, she could demand, at her option, the replacement of the product by another of the same kind, in a perfect state of use. TFI could not escape liability by claiming that it was merely a distributor/dealer, not the manufacturer; it is solidarily liable with TMP for imperfections in quality that rendered the product unfit or inadequate for the use intended. TMP’s claim that the unauthorized after-market accessory caused the steering malfunction had already been passed upon by the CA; TMP’s technical personnel’s explanation was self-serving and did not deserve credence. It remained undisputed that Aguilar availed the service of a concessionaire introduced by TFI and installed the accessory at the dealer’s place of business, giving the impression that the accessory was authorized by TMP and would not aggravate the steering-wheel issue.

• Administrative Due Process in DTI Proceedings — In administrative proceedings, technical rules of procedure and evidence are not strictly applied, and administrative due process cannot be fully equated with due process in its strict judicial sense. The Court applied this to hold that TMP was not denied due process when the DTI Adjudication Division rendered its decision without waiting for TMP’s position paper, because the parties were given equal opportunity to present their sides in an amicable settlement proceeding.
• Liability for Product and Service Imperfection under Article 100(a), Consumer Act — Suppliers of durable or non-durable consumer products are jointly liable for imperfections in quality that render the products unfit or inadequate for consumption for which they are designed or decrease their value, and for those resulting from inconsistency with information provided on the container, packaging, labels, or publicity messages/advertisement, with due regard to variations resulting from their nature. If the imperfection is not corrected within thirty (30) days, the consumer may alternatively demand at his option the replacement of the product by another of the same kind, in a perfect state of use. The Court applied this because the steering-wheel issue remained unresolved for more than 30 days.
• Product Imperfection under DTI IRR — Under Section 2, Rule III, Chapter V, DTI Administrative Order No. 2, series of 1993 (Implementing Rules and Regulations of R.A. 7394), product imperfection consists of those that render products unfit or inadequate for the purpose, use or consumption for which they are designed or intended, or those that jeopardize the quality and characteristics of the product resulting in a decrease in its value. The Court applied this definition to the unresolved steering-wheel problem.
• Solidary Liability of Dealer/Distributor — A dealer or distributor cannot escape liability by claiming that it is merely a distributor/dealer and not the manufacturer of the product. It is solidarily liable with the supplier/manufacturer for imperfections in quality that render the product unfit or inadequate for the use intended. The Court applied this to TFI.
• Deference to DTI Findings — By reason of the special knowledge and expertise of the DTI over matters falling under its jurisdiction, it is in a better position to pass judgment on the issues; its findings of fact, especially when affirmed by the CA, are generally accorded respect, if not finality, by the Supreme Court. The Court applied this to uphold the DTI and CA findings.
• Self-Serving Evidence — A party’s technical personnel’s explanation that an unauthorized accessory caused the defect was self-serving and did not deserve credence, especially where it remained undisputed that the accessory was installed by a concessionaire introduced by the dealer at the dealer’s place of business. This supported the finding that the steering-wheel issue was a product imperfection attributable to the supplier and dealer.

• "Besides, in administrative proceedings, technical rules of procedure and evidence are not strictly applied and administrative due process cannot be fully equated with due process in its strict judicial sense." — This states the standard for administrative due process applied to reject TMP’s claim that it was denied due process when the DTI Adjudication Division did not await its position paper.
• "Here, the steering wheel issue that remained unresolved for more than 30 days rendered the vehicle unfit or inadequate for the purpose intended. Since the repairs of the subject car were completed more than 30 days from the time Aguilar complained about the defective vehicle, she can demand, at her option, the replacement of the product by another of the same kind, in a perfect state of use." — This is the ratio decidendi on product imperfection and the consumer’s right to replacement under Article 100(a).
• "TFI cannot escape from liability by claiming that it is merely a distributor/dealer, and not the manufacturer of the car. TFI is solidarily liable with TMP for the imperfections in quality that rendered the product unfit or inadequate for the use intended." — This establishes the solidary liability of a dealer/distributor with the supplier for product imperfections.
• "TMP's technical personnel expectedly reasoned that the vehicle's ECU would not have malfunctioned and ceased supplying the electricity from the EPS to operate its \"power-steering\" feature because of the unauthorized installation of the accessory. This is a self-serving statement and does not deserve credence." — This explains why TMP’s causation defense was rejected and why the finding of product imperfection stood.

• Autozentrum Alabang, Inc. vs. Spouses Bernardo, 786 Phil. 851, 863 (2016) — Cited by the Court for the principle that, by reason of the DTI’s special knowledge and expertise over matters falling under its jurisdiction, the DTI is in a better position to pass judgment on the issues, and its findings of fact, especially when affirmed by the CA, are generally accorded respect, if not finality. The Court relied on this to uphold the DTI and CA findings against TMP.

• Article 100, Consumer Act — Quoted by the Court. It provides that suppliers of durable or non-durable consumer products are jointly liable for imperfections in quality that render the products unfit or inadequate for consumption for which they are designed or decrease their value, and for those resulting from inconsistency with information provided on the container, packaging, labels or publicity messages/advertisement, with due regard to variations resulting from their nature, the consumer being able to demand replacement to the imperfect parts. If the imperfection is not corrected within thirty (30) days, the consumer may alternatively demand at his option the replacement of the product by another of the same kind, in a perfect state of use. The Court applied it to hold TMP and TFI solidarily liable.
• Section 2, Rule III, Chapter V, DTI Administrative Order No. 2, series of 1993 (Implementing Rules and Regulations of R.A. 7394) — Quoted by the Court. It defines product imperfection as those that render products unfit or inadequate for the purpose, use or consumption for which they are designed or intended, or those that jeopardize the quality and characteristics of the product resulting in a decrease in its value. The Court applied this definition to the unresolved steering-wheel issue.
• DAO 6:2007 in relation to E.O. 913 — The DTI Adjudication Division imposed the P240,000 administrative fine pursuant to the stipulated table of fines under this issuance; the DTI Secretary and the Supreme Court affirmed the fine.
• Rule 45, Rules of Court — The petition was filed under Rule 45; the Supreme Court denied it for failure to sufficiently show reversible error in the CA’s assailed Decision and Resolution.

Leonen, Zalameda, Rosario, and Dimaampao, JJ., concur. Dimaampao, J., was designated as additional Member per Special Order No. 2839 dated September 16, 2021.