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[ G.R. No. 137644. July 19, 1999]

ORIGINAL SYNTHETIC CHEMICAL SUPPLY CO., INC. vs. PHILAND INDUSTRIAL, INC.

SECOND DIVISION

Gentlemen:

Quoted hereunder, for your information, is a resolution of this court dated JUL 19, 1999.

G.R. No. 137644 (Original Synthetic Chemical Supply Co., vs. Philand Industrial, Inc.)

Petitioner was the exclusive distributor in the Philippines of the dyestuff manufactured by Sandoz Chemikalian A.G. of Switzerland, while respondent was a manufacturer of paper products using Sandoz dyestuff as supplied by petitioner for printing blue and red lines on its ruled writing pad, notebooks and record books. In 1993, respondent noticed that the chrome plated rollers used for printing red lines were badly corroded after just two (2) weeks of use while the rollers used for printing blue lines suffered the normal wear and tear. Thinking that the chrome plated rollers were the ones defective, respondent decided to try the state-of-the-art ceramic coated rollers but after two (2) weeks of use, they were also damaged. Respondent then arranged a meeting between the representatives of petitioner and the manufacturer of the rollers for the purpose of determining whether or not the red dyestuff caused the corrosion on the ceramic coated rollers. Samples of the damaged rollers were sent to petitioner with the request that they be sent to Sandoz for analysis but petitioner did not comply with the request. Respondent, therefore, held in abeyance the payment of the last batches of dyestuff delivered by the former valued at P156,000.00.

Petitioner then filed a collection suit against the respondent in the Regional Trial Court of Valenzuela, Metro Manila which at first ruled in favor of petitioner, ordering respondent to pay P278,650.00, for the value of the delivered dyestuff , inclusive of interest and 25% attorney's fees. But, on the motion of respondent, the trial court ordered petitioner to pay respondent the amount of P590,000.00 representing the value of the damaged rollers. Both parties appealed to the Court of Appeals which modified the decision of the trial court by ordering petitioner to pay respondent the amount of P710,927.64 representing the actual value of the damaged rollers, and respondent to pay petitioner the amount of P161,460 after disallowing the award of attorney's fees.

On March 15, 1999, petitioner moved for extension of thirty (30) days from March 15, 1999 up to April 14, 1999 within which to file a petition for review on certiorari in this Court. On March 26, 1999, the instant petition was filed.

Petitioner contends that the Court of Appeals erred in ruling that the red dyestuff caused the corrosion of the rollers, that it is liable for the hidden defect of the dyestuff, and thus, it is liable to pay respondent the net amount of P549,497.64 after offsetting the parties' allowable claim and counterclaim. It also argues that respondent's counterclaim is barred by prescription and that it is entitled to an award of attorney's fees.

After due consideration of the instant petition, the Court RESOLVED to DENY the same for lack of merit.

First. Petitioner principally assails the factual findings of the trial court and the appellate court that the red dyestuff caused the corrosion of the rollers and that it is liable for the hidden defect of the said dyestuff. In appeals by certiorari under Rule 45, �1, only questions of law may be raised (Sarao v. Court of Appeals, 278 SCRA 274 (1997). Findings of fact of the Court of Appeals are deemed conclusive unless it overlooked questions of substance which, if true, would require a reversal of the appealed decision. What petitioner seeks is a reevaluation of the evidence which cannot be done in view of the limited scope of review under Rule 45 and the absence of clear showing that the appellate court overlooked questions of substance.

Second. At any rate, the petition should be denied for lack of showing that the Court of Appeals committed a reversible error.

(1) Petitioner argues that respondent's counterclaim was already barred by prescription as provided by Art. 1571 of the Civil Code considering that the same was filed more than six (6) months from the date of delivery of the dyestuff. Petitioner's argument is correct. However, respondent's remedy, as vendee, against petitioner, as vendor, with respect to warranties against hidden defects of the thing sold is not limited to those prescribed in Art. 1567 of the Civil Code, namely, the withdrawal from the contract or a proportionate reduction of the price, with damages in either case, which must be availed of within six (6) months from the date of delivery of the thing sold. Respondent may also ask for the annulment of the contract within ten (10) years from the time the case of action accrues on the ground of error, bad faith or fraud in which case the ordinary rule on obligations shall be applicable. The trial court and the appellate court found that petitioner was guilty of bad faith in unjustly refusing to conduct an analysis of the dyestuff for corrosive properties despite the promise of Sandoz for the conduct of the same, and for prematurely filing the collection suit against the respondent while the parties were still investigating the matter. In addition, petitioner may likewise be liable for quasi-delict under Art. 2176 since the act which constitutes breach of contract may also constitute quasi-delict (Coca-Cola Bottlers Phils., Inc. v. Court of Appeals, 227 SCRA 292 (1993)). In such case, the action may be filed within four (4) years from the time the cause of action accrues. Considering that the subject batches of dyestuff were delivered from January 12, 1993 to May 27, 1993 and that the counterclaim was asserted on March 23, 1994, after more or less one (1) years from the date of delivery, respondent's cause of action was not yet barred by prescription. Furthermore, petitioner's defense of prescription is considering waived, it appearing that it was raised in the trial court. (Moles v. Intermediate Appellate Court, 169 SCRA 777 (1989)).

(2) The Court of Appeals correctly disallowed the award of attorney's fees in favor of petitioner in the absence of any justification for such an award in the decision of the trial court. It is settled that the propriety of the award of attorney's fees cannot be left to speculation and conjecture (Francel Realty Corporation v. Court of Appeals, 252 SCRA 127 (1996); Valiant Machinery and Metal Corp. v. NLRC, 252 SCRA 369 (1996)).

Very truly yours,

(Sgd.) TOMASITA M. DRIS

Clerk of Court

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