FACTS:

The case involves Lydia Geronimo, the proprietress of a school canteen, who had to close down her business due to a significant decrease in sales of soft drinks. The decline in sales was caused by the discovery of foreign substances in some beverages sold by Geronimo's canteen. Geronimo filed a complaint for damages against the soft drinks manufacturer, alleging that the Coke and Sprite soft drinks sold by her contained fiber-like matter and other foreign substances or particles. She discovered the presence of these substances in some unopened bottles and brought them for examination at the Department of Health. The Department of Health confirmed that the samples were adulterated. As a result, her sales of soft drinks drastically plummeted, leading to financial losses and the closure of her canteen. Geronimo demanded payment of damages from the soft drinks manufacturer, who refused to comply. Geronimo prayed for judgment ordering the petitioner to pay her actual damages, compensatory damages, moral damages, exemplary damages, attorney's fees, and costs. The soft drinks manufacturer argued that the complaint should have been brought within six months from the delivery of the goods under Article 1571 of the Civil Code. The trial court agreed with the soft drinks manufacturer and granted the motion to dismiss the complaint. Geronimo filed a motion for reconsideration, which was denied by the trial court. She then appealed to the Court of Appeals, which annulled the trial court's orders and directed further proceedings in the case. The Court of Appeals held that the complaint is one for quasi-delict and not for breach of warranty, and therefore the four-year prescriptive period under Article 1146 of the Civil Code applies.

ISSUES:

1. Whether the subsequent action for damages by the proprietress against the soft drinks manufacturer should be treated as one for breach of implied warranty against hidden defects or merchantability or as one for quasi-delict.

2. What is the applicable prescriptive period for the action.

RULING:

1. The public respondent ruled that the action should be treated as one for quasi-delict and not for breach of warranty. It held that the allegations in the complaint show that it is an action for damages arising from the manufacturer's act of "recklessly and negligently manufacturing adulterated food items intended to be sold for public consumption." The nature of an action is determined by the facts alleged in the complaint and not those averred as a defense in the defendant's answer. Furthermore, the existence of contractual relations between the parties does not preclude an action for quasi-delict arising from negligence in the performance of a contract.

2. The applicable prescriptive period for the action is four years.

PRINCIPLES:

• The nature of an action is determined by the facts alleged in the complaint, not those averred as a defense in the defendant's answer.

• The existence of contractual relations between parties does not preclude an action for quasi-delict arising from negligence in the performance of a contract.

• The prescriptive period for an action for quasi-delict is four years.