Case Digest: DEL MONTE PHILIPPINES, INC. vs. NAPOLEON N. ARAGONES

DEL MONTE PHILIPPINES, INC. vs. NAPOLEON N. ARAGONES

461 SCRA 139 (2005)

A contract for the delivery at a certain price of an article which the vendor in the ordinary course of his business manufactures or procures for the general market, whether the same is on hand at the time or not, is a contract of sale, but if the goods are to be manufactured specially for the customer and upon his special order, and not for the general market, it is a contract for a piece of work.

Del Monte Philippines Inc. (DMPI) entered into an agreement with Mega-Engineering Services in joint venture with WAFF Construction System Corporation (MEGA-WAFF) represented by Edilberto Garcia (Garcia), wherein Garcia will supply the installation of modular pavement in DMPI‘s warehouse. In this regard, Garcia as a contractor entered into a supply agreement with Dynablock Enterprises represented by respondent Aragones, to supply labor, materials, equipment and the like.

Thereafter, Argones started to do his obligation. The deadline however was not met. After the installation, Aragones failed to collect the payment from Garcia. Then, Aragones sent a letter to DMPI saying that instead of paying Garcia, DMPI should directly pay him. But this did not happen. Hence Aragones filed a complaint for sum of money with damages against Garcia and DMPI before RTC.

RTC ruled in favor of Aragones, it held that DMPI and Garcia are jointly and severally liable. DMPI appealed to Court of Appeal (CA). However at CA, the court affirmed RTC‘s decision. Hence, DMPI filed this petition. It contends that the supply agreement between Garcia and Aragones is a contract of sale to which DMPI was not privy, hence DMPI cannot be held liable.

ISSUE:

Whether or not Supply Agreement between Aragones and Garcia is a contract of sale

HELD:

Contrary to DMPI‘s claim that ―save for the shape, there was no consideration of any special needs or requirements of DMPI taken into account in the design or manufacture of the concrete paving blocks,‖ the ―Supply Agreement‖ is replete with specifications, terms or conditions showing that it was one for a piece of work.

As reflected in the highlighted and underscored above-quoted provisions of the ―Supply Agreement,‖ as well as other evidence on record, the machines Aragones was obliged to fabricate were those for casting the concrete blocks specified by Garcia. Aragones did not have those kind of machines in his usual business, hence, the special order.

Under Article 1467 then of the Civil Code, a contract for the delivery at a certain price of an article which the vendor in the ordinary course of his business manufactures or procures for the general market, whether the same is on hand at the time or not, is a contract of sale, but if the goods are to be manufactured specially for the customer and upon his special order, and not for the general market, it is a contract for a piece of work. The ―Supply Agreement‖ was decidedly a contract for a piece of work.

Following Art. 1729 of the Civil Code which provides that those who put their labor upon or furnish materials for a piece of work undertaken by the contractor have an action against the owner up to the amount owing from the latter to the contractor at the time the claim is made.

Aragones having specially fabricated three casting machines and furnished some materials for the production of the concrete blocks specially ordered and specified by MEGA-WAFF which were to be and indeed they were for the exclusive use of MEGA-WAFF, he has a cause of action upon DMPI up to the amount it owed MEGA-WAFF at the time Aragones made his claim to DMPI.