Motor Vehicle Warranty Regulation and Dealer Financial Responsibility

Puerto Rico Law Controversies

Motor Vehicle Warranty Regulation Requires Dealer to Bear Full Financial Responsibility When Contract Is Rescinded for Unremedied Defect

Prepared March 15, 2026

Court: Tribunal de Apelaciones de Puerto Rico

Date: February 27, 2026

Citation: Ruiz Valle v. Ebenezer Auto, LLC; Popular Auto, LLC, 2026 WL 710265 (TCA)

Summary of Relevant Facts

On August 4, 2023, Rosa E. Ruiz Valle purchased a used 2022 Mitsubishi vehicle with 13,800 miles from Ebenezer Auto, LLC. The vehicle was financed through Popular Auto, LLC, with Banco Popular de Puerto Rico (BPPR) as the financing entity. Shortly after purchase, the vehicle developed a noise in the left side panel. Ruiz Valle contacted Ebenezer regarding the defect, but the dealer disclaimed responsibility. She took the vehicle to Caribbean Auto for evaluation. An inspection on August 12, 2024, confirmed the vehicle had traveled 19,702 miles and showed multiple defects.

Procedural Background

In December 2023, Ruiz Valle filed a complaint with DACO alleging breach of warranty and improper disclosure of the defect. DACO issued a resolution declaring the complaint valid and ordering contract resolution and return of payments. However, BPPR was not properly included in the proceedings. The dealer appealed.

Main Controversies

The main controversies were: (1) whether DACO erred in issuing a resolution that did not address all parties' rights, particularly the financing entity BPPR, which was not properly joined as an indispensable party; (2) whether the dealer had a reasonable opportunity to repair the defect before contract rescission was warranted; and (3) how financial responsibility should be distributed among the dealer, the financing entity, and the consumer when a financed vehicle purchase is rescinded under Puerto Rico's Motor Vehicle Warranty Regulation (Regulation No. 7159).

Position of the Parties

Ebenezer Auto argued that DACO's resolution was procedurally deficient for failing to include the financing entity and that the financial distribution was erroneous. Ruiz Valle argued the defect was never remedied despite notice, warranting full contract rescission and return of all payments.

Holding or Decision

The Tribunal de Apelaciones modified the DACO resolution. It held Ebenezer Auto responsible for returning all financing payments to Ruiz Valle and for releasing the outstanding loan balance with BPPR. BPPR was held responsible for returning the monthly financing payments already collected from Ruiz Valle.

Reasons for the Decision

The court emphasized that appellate courts give broad deference to administrative agency decisions, limited to situations where the agency acted arbitrarily, irrationally, or illegally, or where decisions lack substantial evidence. The court found that DACO incorrectly applied the principle of solidaridad (joint liability) to bind BPPR without properly including it in the proceedings. Under the Motor Vehicle Warranty Regulation (Regulation No. 7159), the vendor must provide warranty coverage for vehicles up to certain mileage thresholds, and when the vendor cannot or will not correct the defect, contract rescission is appropriate. The court modified the financial obligation distribution to ensure each party bore appropriate responsibility, distinguishing between the dealer's obligation to make the consumer whole and the financing entity's obligation to return payments already collected.