Case Summary (G.R. No. 52267)
Factual Background
Pursuant to a written contract dated September 10, 1962, Petitioner agreed to fabricate, furnish and install a central air-conditioning system in private respondent’s building on Buendia Avenue for PHP 210,000.00. Petitioner supplied materials, labor, tools and services, completed the system in 1963, and private respondent accepted the work and paid the contract price in full. Private respondent sold the building to NIDC on September 2, 1965; NIDC occupied the premises until the sale was rescinded and title reconveyed to private respondent, who resumed possession in 1971 and then learned from NIDC employees of alleged defects in the installed air-conditioning system.
Initiation of Suit and Demand
Acting on information concerning the system’s alleged deficiencies, private respondent commissioned Engineer David R. Sapico to make a technical evaluation, which reported numerous defects and concluded the system could not maintain the agreed temperature of 76°F ±2°F. On May 8, 1971 private respondent filed Civil Case No. 14712 in the Court of First Instance of Rizal, seeking PHP 210,000.00 as rectification cost, PHP 100,000.00 as damages and PHP 15,000.00 as attorneys’ fees, alleging noncompliance with the written plans and specifications.
Trial Court Proceedings and Interim Relief
Petitioner moved to dismiss on prescription grounds, invoking Art. 1566, Art. 1567 and Art. 1571 relating to vendor warranty for hidden defects. Private respondent countered that the contract was one for a piece of work under Art. 1713, invoking Art. 1144 for the ten-year prescription on written contracts. The trial court denied the motion to dismiss and granted private respondent’s ex parte motion for preliminary attachment upon bond, issuing a writ of attachment.
Trial Court Findings and Judgment
After trial, the Court of First Instance found that petitioner failed to install specified parts and accessories and deviated from the contract plans and specifications, thereby materially reducing the system’s operational effectiveness and necessitating installation of thirty-five window-type units to attain acceptable temperatures. The trial court concluded these omissions and substitutions constituted breach of the written contract and awarded private respondent the amount necessary to rectify the system, plus damages, attorneys’ fees and costs.
Court of Appeals Disposition
The Court of Appeals affirmed the trial court’s factual findings and judgment in toto, holding that the defects were not apparent upon delivery and acceptance and that private respondent, not being an expert, could not have discovered them by simple inspection. The appellate court adopted the trial court’s rationale that acceptance did not ipso facto relieve petitioner of liability for deviations from the written specifications.
Issues Presented in the Petition
In the petition for certiorari under Rule 45, petitioner advanced three principal contentions: that private respondent’s acceptance and full payment extinguished liability for defects; that the alleged defects were patent or discoverable by simple inspection and therefore could not support relief; and that, assuming hidden defects, the action was barred by the six-month prescriptive period of Art. 1571.
Standard of Review Employed by the Supreme Court
The Supreme Court reiterated that a Rule 45 petition reviews errors of law and will not reexamine factual findings of the trial court and the Court of Appeals unless those findings are unsupported by the record or tainted by grave abuse, conjecture, manifest absurdity, misapprehension of facts, or findings beyond the issues and contrary to admissions. The Court found none of those exceptional circumstances and declined to disturb the concurrent factual findings below regarding acceptance, discoverability and the nature of the defects.
Analysis on the Nature of the Contract
The Supreme Court examined Art. 1713 and related jurisprudence to distinguish a contract for a piece of work from a contract of sale. The Court found that the contract at bar was a contract for a piece of work because petitioner did not manufacture air-conditioning systems for the general market but fabricated and installed systems to the special order, plans and specifications of customers. The Court therefore held the contractual relationship to be governed by the obligations of a contractor under Art. 1714 and Art. 1715.
Warranty, Remedy and Prescription Analysis
The Court reviewed the interplay between the warranty provisions applicable to contractors and the prescription rules. It explained that the provisions on warranty against hidden defects in Arts. 1561 and 1566 apply as referred to by Art. 1714, but that where the action arises from breach of a written contract rather than enforcement of implied warranties, the prescriptive period applicable is that for actions on written contracts under Art. 1144. The Court distinguished cases applying the six-month rule of Art. 1571 to implied warranties and cited authority holding that where express warranties exist the prescriptive period specified in the contract governs, and absent such specification the general four-year rule for rescission under Art. 1389 may apply; nonetheless, the Court determined that the present suit was an actio
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Case Syllabus (G.R. No. 52267)
Parties and Procedural Posture
- Engineering & Machinery Corporation was the petitioner and contractor who fabricated, furnished and installed a central air-conditioning system under a written contract dated September 10, 1962.
- Ponciano L. Almeda was the private respondent and original employer who commissioned, accepted and paid for the air-conditioning system and later sued for deficiencies.
- Court of Appeals was a respondent in the petition because it affirmed the trial court judgment awarding rectification costs, damages, attorneys' fees and costs to the private respondent.
- The petition was brought to the Supreme Court by Engineering & Machinery Corporation by way of a petition for review on certiorari under Rule 45, Rules of Court seeking reversal of the Court of Appeals decision.
- The trial court was the then Court of First Instance of Rizal which rendered the original decision in Civil Case No. 14712 finding breach of contract and awarding relief to Ponciano L. Almeda.
Key Facts
- The parties executed a written contract on September 10, 1962 for the fabrication, furnishing and installation of an air-conditioning system for P. Almeda's building for P210,000.00.
- Engineering & Machinery Corporation completed the system in 1963 and Ponciano L. Almeda accepted the work and paid the contract price in full.
- Ponciano L. Almeda sold the building to NIDC on September 2, 1965, and reacquired ownership and possession circa 1971 after judicial rescission of the sale.
- After reacquiring possession, Ponciano L. Almeda learned from NIDC employees of alleged defects and commissioned Engineer David R. Sapico to evaluate the system.
- Sapico's report enumerated numerous defects and deviations from specifications, concluded the system could not maintain the stipulated room temperature of 76°F ± 2°F, and noted that tenants had installed thirty-five window-type units to obtain acceptable temperatures.
- Ponciano L. Almeda filed suit on May 8, 1971 praying for P210,000.00 as rectification cost, P100,000.00 as damages and P15,000.00 as attorneys' fees.
- The trial court found that Engineering & Machinery Corporation omitted required parts and substituted nonconforming items resulting in diminished operational effectiveness and ordered rectification costs and damages.
Issues Presented
- Whether the contract for fabrication and installation of the air-conditioning system was a contract of sale or a contract for a piece of work under Article 1713, Civil Code.
- Whether the action was barred by prescription under Article 1571 and related provisions governing warranty against hidden defects.
- Whether acceptance of the work and full payment extinguished the contractor's liability for defects.
Contentions
- Engineering & Machinery Corporation contended that the contract was effectively a sale and that the complaint was barred by the six-month prescriptive period of Article 1571, Civil Code, as applied to hidden defects.
- Engineering & Machinery Corporation further contended that acceptan