Engineering and Machinery Corporation v. CA

Facts:

Pursuant to a contract, petitioner undertook to install air conditioning system in private respondent’s building. The building was later sold to the National Investment and Development Corporation which took possession of it. Upon NIDC’s failure to comply with certain conditions, the sale was rescinded. NIDC reported to respondent that there were certain defects in the air conditioning system. Respondent filed a complaint against petitioner for non-compliance with the agreed plans and specifications. Petitioner moved to dismiss the complaint on the ground of the 6-month prescription of warranty against hidden defects. Private respondent averred that the contract was not of sale but for a piece of work, the action for damages of which prescribes after 10 years.

Issue:

Is a contract for the fabrication and installation of a central air-conditioning system in a building, one of "sale" or "for a piece of work"?

Held:

A contract for a piece of work, labor and materials may be distinguished from a contract of sale by the inquiry as to whether the thing transferred is one not in existence and which would never have existed but for the order, of the person desiring it. In such case, the contract is one for a piece of work, not a sale. On the other hand, if the thing subject of the contract would have existed and been the subject of a sale to some other person even if the order had not been given, then the contract is one of sale. The distinction between the two contracts depends on the intention of the parties. Thus, if the parties intended that at some future date an object has to be delivered, without considering the work or labor of the party bound to deliver, the contract is one of sale. But if one of the parties accepts the undertaking on the basis of some plan, taking into account the work he will employ personally or through another, there is a contract for a piece of work.

Clearly, the contract in question is one for a piece of work. It is not petitioner's line of business to manufacture air-conditioning systems to be sold "off-the-shelf." Its business and particular field of expertise is the fabrication and installation of such systems as ordered by customers and in accordance with the particular plans and specifications provided by the customers. Naturally, the price or compensation for the system manufactured and installed will depend greatly on the particular plans and specifications agreed upon with the customers. The remedy against violations of the warranty against hidden defects is either to withdraw from the contract (redhibitory action) or to demand a proportionate reduction of the price (accion quanti manoris), with damages in either case.

While it is true that Article 1571 of the Civil Code provides for a prescriptive period of six months for a redhibitory action, a cursory reading of the ten preceding articles to which it refers will reveal that said rule may be applied only in case of implied warranties; and where there is an express warranty in the contract, as in the case at bench, the prescriptive period is the one specified in the express warranty, and in the absence of such period, "the general rule on rescission of contract, which is four years (Article 1389, Civil Code) shall apply". It would appear that this suit is barred by prescription because the complaint was filed more than four years after the execution of the contract and the completion of the air-conditioning system. However, a close scrutiny of the complaint filed in the trial court reveals that the original action is not really for enforcement of the warranties against hidden defects, but one for breach of the contract itself. The governing law 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 ten (10) years. Since the governing contract was executed on September 10, 1962 and the complaint was filed on May 8, 1971, it is clear that the action has not prescribed. The mere fact that the private respondent accepted the work does not, ipso facto, relieve the petitioner from liability for deviations from and violations of the written contract, as the law gives him ten (10) years within which to file an action based on breach thereof.