G.R. No. L-30965. November 29, 1983.
G.A. MACHINERIES, INC., Petitioner, v. HORACIO YAPTINCHAY, doing business under the name and style “HI-WAY EXPRESS” and THE COURT OF APPEALS, Respondents.

FACTS

Petitioner G.A. Machineries, Inc. (GAMI) sold a Fordson Diesel Engine to respondent Horacio Yaptinchay, expressly representing it as brand-new. Relying on this representation, Yaptinchay purchased the engine for P7,590.00 and installed it in his freight truck. Almost immediately, the engine manifested serious and recurring defects, including persistent oil leaks, necessitating repeated repairs. Yaptinchay’s suspicion that the engine was not new was confirmed upon investigation by the PC Criminal Investigation Service, which found the engine’s serial number had been tampered with. Further inquiry revealed that brand-new engines were uniformly painted, whereas the delivered engine had components painted in two different colors.
Yaptinchay filed an action for damages against GAMI. The trial court ruled in his favor, ordering GAMI to reimburse the purchase price, pay actual damages of P54,000.48 for lost profits, and return the engine. The Court of Appeals affirmed the decision. GAMI appealed to the Supreme Court, raising issues of prescription, the nature of evidence for damages, and the finding of fraud.

ISSUE

The primary issues were: (1) whether the action had prescribed; (2) whether the engine was fraudulently misrepresented as brand-new; and (3) whether the award of actual damages for lost profits was sufficiently proven.

RULING

The Supreme Court modified the appealed decision. On prescription, the Court ruled the action had not prescribed. An action based on fraud prescribes in four years from its discovery. Yaptinchay discovered the fraud in 1962 upon the investigative findings and filed the case in 1963, well within the prescriptive period.
On the issue of fraud, the Court affirmed the findings of the lower courts. GAMI’s failure to rebut the positive evidence of tampering and the disparate paint colors, coupled with the engine’s immediate and persistent malfunctions, conclusively established that GAMI fraudulently misrepresented a used engine as brand-new. This constituted a breach of warranty and a fraudulent act (dolo) under the Civil Code, entitling Yaptinchay to rescind the contract and recover the purchase price.
However, the Court deleted the award of P54,000.48 as actual damages for lost profits (lucrum cessans). While Article 2200 of the Civil Code allows recovery of compensatory damages including prospective profits, such claims must be proven by the best evidence obtainable. Yaptinchay’s evidence, consisting of a bare estimate of earnings per trip prepared by an unidentified person, was deemed speculative and insufficient. The Court held he should have presented comparative data, such as the actual average profits of his other trucks on the same route, to establish the alleged lost income with reasonable certainty. The purchase price reimbursement and award of attorney’s fees were sustained. Interest was imposed on the purchase price to be refunded.