Title
Atienza vs. Golden Ram Engineering Supplies and Equipment Corporation
Case
G.R. No. 205405
Decision Date
Jun 28, 2021
Atienza purchased defective engines from GRESEC; warranty claim denied despite inherent defect. SC held GRESEC and Torres solidarily liable for damages due to bad faith and breach of warranty.
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Case Digest (G.R. No. 205405)

Facts:

Background of the Parties

  • Petitioner: Eduardo Atienza, engaged in operating the passenger vessel MV Ace I, which plied the Batangas-Mindoro route.
  • Respondents: Golden Ram Engineering Supplies and Equipment Corporation (GRESEC), a dealer and distributor of engines and heavy equipment, and its President and Manager, Bartolome Torres.

Transaction and Warranty

  • Atienza purchased two MAN Diesel Engines from GRESEC for P3.5 million, to be installed in MV Ace I.
  • The engines were covered by a warranty period of 12 months from commissioning, not exceeding 18 months from delivery, and limited to 2,000 hours of operation.
  • Atienza paid P2.5 million upfront, and the engines were delivered and commissioned in March 1994.

Engine Malfunction

  • On September 26, 1994, the starboard (right) engine suffered a major dysfunction due to a split connecting rod, rendering it inoperable.
  • GRESEC’s engineer, R.R. Torres, inspected the engine and confirmed the defect was inherent and attributable to a factory defect.
  • MAN Diesel, the foreign supplier, promised to replace the engine under warranty, but no replacement was made despite Atienza’s repeated pleas.

Demand and Complaint

  • Atienza sent a demand letter to GRESEC on October 28, 1994, offering two options: replace the engine or refund the cost plus losses incurred.
  • GRESEC ignored the demand, prompting Atienza to file a complaint for damages.

Defenses Raised by Respondents

  • GRESEC and Torres admitted the engine breakdown but denied that the defect was inherent. They claimed the damage was due to improper maintenance by Atienza.
  • They argued that MAN Diesel was solely responsible for warranty claims and that Atienza failed to comply with maintenance instructions, voiding the warranty.

Evidence Presented

  • Atienza presented testimonies and evidence showing that GRESEC and Torres were responsible for maintaining the engines and that the starboard engine had underperformed since commissioning.
  • GRESEC failed to substantiate its claim that Atienza was negligent in maintaining the engines.

Issue:

  1. Whether GRESEC and Bartolome Torres acted in bad faith in denying Atienza’s warranty claim.
  2. Whether Bartolome Torres should be held solidarily liable with GRESEC for damages.
  3. Whether Atienza is entitled to moral damages, attorney’s fees, and costs of suit.

Ruling:

  • (Subscriber-Only)

Ratio:

  • (Subscriber-Only)

Conclusion:

The Supreme Court reinstated the RTC’s decision, holding GRESEC and Bartolome Torres solidarily liable for damages due to breach of warranty and bad faith. The Court emphasized that corporate officers can be held personally liable for bad faith or gross negligence, and Atienza was entitled to compensatory damages, moral damages, and attorney’s fees.


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