Engineering and Machinery Corp. v. CA [G.R. No. 52267. January 24, 1996.]
business in Manila. The tria lcourt granted the motion and, upon Almeda’s Almeda’s posting of a bond of P50,000.00, ordered the i ssuance of a writ of
Third Division, Panganiban (J): 3 concur
attachment. In due course, and on 15 April 1974, the trial court rendered
Facts:
a decision, which ordered the Corporation to pay Almeda the amount
Pursuant to the contract dated 10 September 1962 between the Engineerin
installed by the Corporation in Almeda’s building, plus damages, attorney’s
g and MachineryCorporation (the Corporation) and Almeda, the former
fees and costs). Petitioner appealed to the Court of Appeals, which affirmed
undertook to fabricate, furnish and install the air-conditioning system in the
on 28 November 1978 the decision of the trial court. Hence, it instituted a
latter’s building along Buendia Avenue, Makati in consideration of
petition for review on certiorari under Rule 45 of the Rules of Court. The
P12,000.00.The Corporation was to furnish the materials, labor, tools and all
Supreme Court denied the petition and affirmed the decision assailed;
services required in order to so fabricate and install said system. The system
without costs.
needed to rectify the faults and deficiencies of the air-conditioning system
was completed in 1963 and accepted by Almeda, who paid in full the contractprice. On 2 September 1965, Almeda sold the building to the Nation al Investment and DevelopmentCorporation (NIDC). The latter took possession of the building but on account of NIDC’s noncompliance with the terms and conditions of the deed of sale, Almeda was able to secure judicial rescission thereof. The ownership of the bui lding having been decreed back to Almeda, he re-acquired possession sometime in 1971.It was then that he learned from some NIDC employees of the defects of the air-conditioning system of the building. Acting on this information, Almeda commissioned
Contract of a piece of work defined Article 1713 of the Civil Code defines a contract for a piece of work as “by the contract for a piece of work the contractor binds himself to execute a piece of work for the employer, in consideration of a certain price or compensation. The contractor may either employ only his labor or skill, or also furnish furnish the material.” Contract for a piece of wo rk distinguished from a contract of sale
Engineer David R. Sapico to render a technical evaluation of the system in relation to the contract with the Corporation. In his report, Sapico enumerated the defects of the system and concluded that it was “not capable of maintaining the desired room temperature of76ºF — 2ºF.”On the basis of this report, Almeda file d on 8 May 1971 an action for damages against the Corporation with the then CFI Ri zal (Civil Case 14712). The complaint alleged that the air-conditioning system installed by the Corporation did not comply with the agreed plans and specifications, hence, Almeda prayed for the amount ofP210,000.00 representing the rectification cost, P100,000.00 as damages and P15,000.00 as attorney’s fees.
A contract for a piece of work, labor and materials may be distinguished from a contract of sale by thei nquiry as to whether the thing transferred is one not in existence and which would never have existed but forthe order of the person desiring it . In such case, the contract is one for a piece of work, not a sale. On theother hand, if the thing subject of the contract would have existed and been the subject of a sale to some otherperson even if the order had not been given, then the contract is one of sale.“A contract for the delivery at a certain price of an article which the vendor in the ordinary course ofhis business manufactures or procures for t he general market whether the same is on hand at the time or not isa contract of sale,
The Corporation moved to dismissed the case, alleging prescription, but
but if the goods are to be manufactured specially for the customer and
which was denied by the Court. Thereafter, Almeda filed an ex-parte motion
upon his specialorder, and not for the general market, it is a contract for a
for preliminary attachment on the strength of the Corporation’s own
piece of work (Art. 1467, Civil Code). The merefact alone that certain articles
statement to the effect that it had sold its business and was no longer doing
are made upon previous orders o f customers will not argue against
theimposition of the sales tax if such articles are ordinarily manufactured by
defect or execute another work. If thecontractor fails or refuses to comply
the taxpayer for sale to the public.”
with this obligation, the employer may have the defect removed oranother work executed, at the contractor’s cost.”
(Celestino Co. vs. Collector, 99 Phil. 8411). Provisions on warranty against hidden defects To Tolentino, the distinction between the two contracts depends on the intention of the parties. Thus,if the parties intended that at some future
The provisions on warranty against hidden def ects, referred to in Article
date an object has to be delivered, without considering the work orlabor of
1714, are found in Articles1561 and 1566. Article 1561 provides that “the
the party bound to deliver, the contract is one of sale. But if one of the
vendor shall be responsible for warranty against the hidden defects which
parties accepts the undertakingon the basis of some plan, taking into
the thing sold may have, should they render it unfit for the use for which it
account the work he will employ personally or through another, there isa
is intended, or should they dim inish its fitness for such use to such an extent
contract for a piece of work.
that, had the vendee been aware thereof, he would not have acquired it or would have given a lower price for it; but said vendor shall not be
Contract in question is one for a piece of work
answerable for patent defects or t hose which may be visible, or for those
The contract in question is one for a piece of work. It is no t the
which are not visible if the vendee is an expert who, by reason of his trade
Corporation’s line of business tomanufacture air -conditioning systems to be
or profession, should have known them.” Article 1566 provides that “the
sold “off -the-shelf.” Its business and particular field of expertiseis the
vendor is responsible to the vendee for any hidden faults or defects in the
fabrication and installation of such systems as ordered by customers and in
thing sold, even though he was not aware thereof,” and provides further
accordance with theparticular plans and specifications provided by the
that the provision “shall not apply if the contrary has been stipulated, and
customers. Naturally, the price or compensation for thesystem
the vendor was not aware of the hidden faults or defects in the thing sold.”
manufactured and installed will depend greatly on the particular plans and
Remedy against violation of the warranty against hidden defects
specifications agreed uponwith the customers. The remedy against violations of the warranty against hidden defects is Obligations of a contractor for a piece of work
either to withdraw from the contract (rehibitory action) or to demand a
The obligations of a contractor for a piece of work are set forth in Articles
proportionate reduction of the price (accion quanti minoris), with damages
1714 and 1715 of the CivilCode. Article 1714 provides that “if the contractor
in either case.
agrees to produce the work from material furnished byhim, he shall deliver the thing produced to the employer and transfer dominion over the thing. — Thiscontract shall be governed by the following articles as well as by the pertinent provisions on warranty of titleand against hidden defects and the
Prescriptive period as specified in express warranty, or in the absence of which, 4 years; Prescriptive period of 6 m onths for rehibitory action is applicable only in implied warranties
payment of price in a contract of sale.” Article 1715 provides that
While it is true that Article 1571 of the Civil Code provides for a prescriptive
“thecontractor shall execute the work in such a manner that it has the
period of six months for a rehibitory action, a cursory reading of the ten
qualities agreed upon and has no defectswhich destroy or lessen its value or
preceding articles to which it refers will reveal that said rule may be applied
fitness for its ordinary or stipulated use. Should the work be not of
only in case of impli ed warranties; and where there is an express warranty
suchquality, the employer may require that the contractor remove the
in the contract, the prescriptive period is the one specified in the express
warranty, and in the absence of such period, the general rule on rescission
putting into the air-conditioning system parts and accessories not in
of contract, which is four years (Article 1389, Civil Code) shall apply.
accordance with the contract specifications, it is evi dent that the defect in the installation was not apparent at the time of the delivery and acceptance
(Villostas v. CA)
of the work, considering further that Almeda is not an expert to recognize
Original complaint is one for arising from breach of a written contact and
the same. From the very nature of things, it is impossible to determine by
not a suit to enforce warranty against hidden defects; Article 1715
the simple inspection of air conditioning system installed in an 8-floor
in relation to Article 1144 apply, prescription in 10 years; Action not
building whether it has been furnished and installed as per agreed
prescribed
specifications.”
The lower courts opined and so held that the failure of the defendant to follow the contract specifications and said omissions and deviations having resulted in the operational ineffectiveness of the system installed makes the defendant liable to the plaintiff in the amount necessary to rectify to put the air conditioning system in its proper operational condition to make it serve the purpose for which the plaintiff entered into the contract with the defendant. Thus, having concluded that the original complaint is one for damages arising from breach of a written contract, and not a suit to enforce warranties a gainst hidden defects, the governing law therefore is Article 1715. However, inasmuch as this provision does not contain a specific prescriptive period, the general law on prescription, which is Article 1144 of the Civil Code, will apply. Said provision states, inter alia, that actions “upon a written contract” prescribe in 10 years. Since the governing contract was executed on 10 September 1962 and the complaint was filed on 8 May 1971, it is clear that the action has not prescribed. Acceptance of the work by the employer does not relieve the contractor of liability for any defect in the work The mere fact that Almeda accepted the work does not, ipso facto, relieve the Corporation from liability for deviations from and violations of the written contract, as the law gives him 10 years within which to file an action based on breach thereof. As held by the Court of Appeals, “as the breach of contract consisted in appellant’s omission to install the equipment [sic], parts and accessories not in accordance with the plan and specifications provided for in the contract and the deviations made in
