Nature Of Owner’s Liability To Suppliers

In JL Investment & Dev. Corp., v. Tendon Phils., Inc., et al., G.R. No. 148596, January 22, 2007, the SC had the occasion to rule on nature of the liability of owners to suppliers of materials. It held that:

“Those who put their labor upon or furnish materials for a price 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. However, the following shall not prejudice the laborers, employees and furnishers of materials:

1.    Payments made by the owner to the contractor before they are due;
2.    Renunciation by the contractor of any amount due from the owner.

This article is subject to the provisions of special laws. (Art. 1729, NCC).

This provision imposes a direct liability on an owner of a piece of work in favor of suppliers of materials (and laborers) hired by the contractor “up to the amount owing from the [owner] to the contractor at the time the claim is made.” (Flores v. Ruelo, No. 13905-R, September 29, 1955, 52 O.G. No. 2, 850). Thus, to this extent, the owner’s liability is solidary with the contractor, if both are sued together. By creating a constructive vinculum between suppliers of materials (and laborers), on the one hand, and the owner of a piece of work, on the other hand, as an exception to the rule on privity of contracts, Article 1729 protects suppliers of materials (and laborers) from unscrupulous contractors and possible connivance between owners and contractors. (Velasco v. CA, L-47544, January 28, 1980, 95 SCRA 616). The supplier’s cause of action under this provision, reckoned from the time of judicial or extra-judicial demand, subsists so long as any amount remains owing from the owner to the contractor. Only full payment of the agreed contract price serves as a defense against the supplier’s claim. (JL Investment & Dev. Corp. v. Tendon Phils. Inc., et al., G.R. No. 148596, January 22, 2007).