By: Gregorio M. Batiller, Jr.

Petitioners Spouses D are engaged in the manufacturing and selling of shirts. Respondent S, in turn, is part owner and general manager of a manufacturing corporation.

Petitioners and respondent entered into a contract whereby the latter would manufacture for the petitioners some 20,000 pieces of vinyl frogs and 20,000 pieces of vinyl moose heads which were intended to be attached to the shirts which petitioners would manufacture and sell.

Respondent S delivered in installments the 40,000 vinyl products, the last being made on September 28, 1988. Petitioners fully paid the agreed price. Subsequently, however, petitioners returned to respondent some 29,772 pieces of the vinyl products for failure to comply with the approved samples. The date
of the return of the last batch of rejected items was on January 17, 1989. Petitioners then demanded for a refund amounting to P208, 404.00. Respondent refused. Petitioners sued sometime on July 24, 1989.

The RTC ruled in favor of petitioners and directed respondent to pay to petitioners the sum of P208, 404.00 with legal interest plus P20, 000.00 attorney’s fees. The CA initially affirmed the RTC’s decision.

On Motion for Reconsideration, respondent argued that petitioners’ action for collection of sum of money based on breach of warranty had already prescribed. The CA rendered an Amended Decision and reversed the RTC’s decision. Hence the appeal to the SC.

The SC sustained the CA’s decision holding that what was involved was essentially a contract for a piece of work and that the action filed with the RTC was one for breach of warranty and refund of the purchase price.

“As this Court ruled in Engineering & Machinery
Corporation v. Court of Appeals, et al., 252 SCRA 156
(1996), 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 contract between
the petitioners and respondent stipulated that
respondent would manufacture upon the order of the
petitioners 20,000 pieces of vinyl frogs and 20,000 vinyl
mooseheads according to the samples specified and
approved by the petitioners. Respondent Sio did not
ordinarily manufacture these products, but only upon
order of the petitioners and at the price agreed upon.
Clearly, the contract executed by and between the
petitioners and the respondent was a contract for a
piece of work.”

Applying the provisions on hidden defects, in particular Art. 1571, NCC, the SC held that petitioners had six (6) months from last delivery of the thing sold
within which to file suit. The last delivery of the vinyl products was on September 28, 1988. So the suit was filed out of time on July 24, 1989 or more than nine (9) months from the date of last delivery.

As to respondent’s argument that the defense of prescription was filed for the first time on Motion for Reconsideration before the CA, the SC held:

”In Aldovino, et al. v. Alunan, et al., the Court en
banc reiterated the Garcia v. Mathis doctrine cited in
the Gicano case (157 SCRA 140) that when the plaintiff’s
own complaint shows clearly that the action has
prescribed, the action may be dismissed even if the
defense of prescription was not invoked by the

This Court’s application of the Osorio and Gicano
doctrines to the case at bar is confirmed and now
enshrined in Rule 9, Sec. 1 of the 1997 Rules of Civil
Procedure, viz:

Section 1. Defense and objections not
pleaded. – Defenses and objections not
pleaded whether in a motion to dismiss or in
the answer are deemed waived. However,
when it appears from the pleadings that the
court has no jurisdiction over the subject
matter, that there is another action pending
between the same parties for the same cause,
or that the action is bared by a prior judgment
or by statute of limitations, the court shall
dismiss the claim.” (Emphasis supplied)”

(Inocencia Yu Dino, et al. vs. CA and Roman Sio, etc., GR No. 113564, June 20, 2001).