G.R. No. 214122 - Autozentrum Alabang, Inc. vs. Spouses Bernardo

Title: Autozentrum Alabang, Inc. vs. Spouses Bernardo

Case: G.R. No. 214122

Decision Date: Jun 8, 2016

Spouses Bernardo purchased a "brand new" BMW from Autozentrum, later discovering it was certified pre-owned with recurring defects. Autozentrum misrepresented the car's condition, violating the Consumer Act, and was ordered to refund the purchase price with interest and pay fines.

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Case Digest (G.R. No. 214122)
Legal Reasoning Model

Facts:

Transaction and Sale of the Vehicle

On November 12, 2008, respondents Spouses Miamar A. Bernardo and Genaro F. Bernardo, Jr. purchased a 2008 BMW 320i sports car for ₱2,990,000 from petitioner Autozentrum Alabang, Inc., an authorized local dealer of BMW vehicles.

Autozentrum represented that the vehicle was brand new, although it was meant to be delivered as such by an authorized dealer.

Early Malfunctions and Service Incidents

On October 12, 2009, Spouses Bernardo initially sought repair at BMW Autohaus (the service center of Asian Carmakers Corporation or ACC) due to malfunction in the ABS brake system and steering column.

Six days later, on October 26, 2009, the car was returned because of further malfunctions in the electric warning and door lock systems.

In March 2010, the vehicle was again brought in for malfunctioning of the air conditioning unit, which was repaired under warranty.

In September 2010, while making an insurance claim for damaged front wheels, the service center discovered that one of the rear tires lacked Running Flat Technology (RFT) – contrary to the requirement that all tires should have RFT. Autozentrum subsequently replaced the tire with an RFT-equipped one.

Additional Defects and Consumer Demands

On January 13, 2011, the car experienced a leaking fuel tank, prompting Spouses Bernardo to have the part replaced by ACC at no cost.

On January 17 and January 26, 2011, Spouses Bernardo sent letters to Autozentrum demanding either a replacement of the vehicle or a refund of the purchase price.

Autozentrum’s Aftersales Manager, Ron T. Campilan, in his January 29, 2011 response, stated that the vehicle was “certified pre-owned” or used and indicated that the legal department was reviewing their demand.

Filing of the Complaint and Subsequent Developments

On February 24, 2011, Spouses Bernardo filed a complaint with the Department of Trade and Industry (DTI) for refund or replacement of the defective car, alleging violations of Articles 50(b) and (c) in relation to Article 97 of the Consumer Act of the Philippines (RA 7394).

A Supplemental Complaint dated September 23, 2011 further alleged malfunctioning of the electrical system on June 4, 2011 and engine issues (smoke emanation) on August 8, 2011; Autozentrum has maintained custody of the vehicle during these proceedings.

DTI Proceedings and Rulings

On April 30, 2012, DTI Hearing Officer Maria Fatima B. Pacampara ruled that Autozentrum had committed violations of the Consumer Act by selling a defective car and engaging in deceptive sales practices.

The ruling imposed an administrative fine (₱160,000 plus ₱1,000 for each day of continuing violation) and ordered the refund of the vehicle’s purchase price, though modified later to account for depreciation based on a two-year period of beneficial use.

A subsequent Resolution by the DTI Appeals Committee on September 14, 2012, modified the refund amount by subtracting depreciation calculated under COA Circular No. 2003-07.

Court of Appeals (CA) Decision

On June 30, 2014, the CA affirmed the findings of defectiveness and deceptive sales, rejecting the deduction of depreciation since Autozentrum did not submit evidence thereof, and ordered the refund of the full purchase price of ₱2,990,000.

The CA’s decision explicitly held Autozentrum liable under Article 1561 in relation to Article 1567 of the Civil Code, as well as for deceptive sales under RA 7394.

A subsequent CA Resolution dated September 4, 2014 denied Autozentrum’s motion for reconsideration.

Petition for Review and Issues Raised by Autozentrum

Autozentrum elevated the case to the Supreme Court, contending errors in the application of the Consumer Act by the lower tribunals.

The petition questioned whether the evidence supported that it had violated Article 97 and Article 50 of RA 7394 and objected to the imposition of full refund and associated penalties.

Issue:

Whether the adjudicating officer abused her discretion and/or exceeded her authority in ruling that Autozentrum violated Article 97 of the Consumer Act of the Philippines despite evidence suggesting otherwise.

Whether there was an abuse of discretion in ruling that Autozentrum had violated Article 50 (prohibiting deceptive sales acts) when the facts, notably regarding the car’s condition and its representation, did not conclusively support such a violation.

Whether the adjudicating officer erred by ordering Autozentrum solely to refund the entire purchase price without substantiating the elements necessary for such a remedy.

Whether, assuming Autozentrum did indeed commit the alleged violations, the penalties imposed—including the amount of refund and administrative fines—were excessive and constituted an abuse of discretion.

Whether the Office of the DTI Secretary, through its Appeals Committee, and the Court of Appeals erred in affirming with modification the resolution/decision of the DTI, and in denying Autozentrum’s motion for reconsideration.

Ruling:

(Subscriber-Only)

Ratio:

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Doctrine:

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