SC upholds refund decision for 2011 Mazda6 owner

Mazda Quezon Avenue ordered to pay back 2011 Mazda6 customer

Here's an interesting case regarding automobile dealers, consumer rights, and vehicles with “product imperfections”.

The Supreme Court (SC) has released a decision written by Associate Justice Marvic M. V. F. Leonen regarding the case of a 2011 Mazda6. On July 31, 2014, the owner of the vehicle, Alexander Caruncho, filed a complaint with the Department of Trade and Industry (DTI) against Mazda Quezon Avenue over a defect with the car; specifically the rack and pinion steering system.

The decision by the SC reaffirms a 2017 order by the Court of Appeals (CA) and a 2014 adjudication by the DTI that the consumer be given a refund. Mazda Quezon Avenue had elevated the matter to the SC over technicalities, but the court still ruled in favor of the consumer.

The price of the Mazda6 in 2011 would have been around PHP 1,680,000. The judiciary also ordered Mazda Quezon Avenue to pay a PHP 25,000 fine plus an additional PHP 1,000 fine per day for every day of delay until the finality of the decision.

The years involved in the case are very noteworthy because (by our understanding) the 2011 model means it pre-dates the Philippine Lemon Law which was passed in July 2013 even though the complaint was filed in 2014. That means the complaint would be covered (again, by our understanding) by the warranty provisions of the Consumer Act (RA 7394) and not the Lemon Law (RA 10642).

The 2011 model year also means that the vehicle was imported from Japan by the previous importer/distributor of Mazda in the country: Ford Philippines. It was in 2013 that Mazda was turned over to the current distributor: Berjaya.

Caruncho bought the Mazda6 from Mazda Quezon Avenue (a part of the larger ANC group of automotive dealers) on January 12, 2011. Within a week he reportedly identified a knocking and rattling sound from the engine bay and brought the vehicle back to the dealership seeking a refund for the brand new midsize sedan.

The dealer instead assured the customer that they will fix the problem, and identified that it was a rack and pinion mechanism issue. But the issue was never fixed; even after being changed 5 times throughout the three-year warranty (3-year or 100,000 kilometers typically) period, the knocking issue remained.

Mazda Quezon Avenue argued that the vehicle's engine and parts were within standard specifications and that the vehicle was in good running condition, and so they honored the provisions of the warranty agreement. They said that the customer's suit has no basis because it was not a defect; the (engine and its) parts were all within Mazda's standard operating specifications. The Court of Appeals observed that the problem should have been fixed but noted that it was a “product imperfection”. Despite the unusual terminology, that doesn't release the dealer from liability in the matter according to the courts.

The dealer also argued that the two-year prescription period under the Consumer Act had already expired. The CA also made the important interpretation that the two-year prescription period should start at the end of the three-year warranty period which would have expired around January 12, 2014. That effectively gave the consumer two more years to file a complaint.

The full document from the Supreme Court can be seen below.