G.R. No. 163915 - Asian Construction and Development Corporation vs. COMFAC Corporation

Case Digest (G.R. No. 163915)
Expanded Legal Reasoning Model

Facts:

Background and Contract Award

Petitioner: Asian Construction and Development Corporation (ASIAKONSTRUCT).
Respondent: COMFAC Corporation.
Contracts Awarded:

Raised flooring system for the PNOC-EDC, LGPP HVAC Marshalling Station Building in Ormoc, Leyte costing P1,698,635.
Airconditioning and ventilation system for the PNOC-EDC Marshalling and Relay Building of Leyte HVAC Switchyard Project costing P4,000,000.

Project Turnover:

On November 28, 1996, COMFAC turned over the project to PNOC.
Certificates of Completion were issued and confirmed by Rene T. Soriao, Group Manager of ASIAKONSTRUCT.

Payment Demands and Trial Court Proceedings

On May 5, 8, and 11, 1998, COMFAC sent demand letters for the unpaid balance of P1,969,863.50.
ASIAKONSTRUCT failed to pay, prompting COMFAC to file a complaint for collection in the Regional Trial Court of Makati City.
COMFAC additionally prayed for:

Attorney’s fees equivalent to 20% of the amount demanded plus P2,000 per appearance.
Exemplary damages of P500,000.

ASIAKONSTRUCT’s Defense:

Alleged that COMFAC had no cause of action as the claim was allegedly paid, waived, abandoned, or extinguished.
Asserted that the Certificates of Completion were unauthorized.
Claimed that the projects were not fully completed.
Contended that no proper demand for payment was made.
Argued that the amount claimed was due to charges for labor, materials, tools, equipment, and technical expertise that were not completely provided.
Contended that proper deductions (withholding taxes, material charges, and payments) were not applied.
Disputed the imposition of interests, penalties, attorney’s fees, and court costs.

Trial Court Proceedings:

After COMFAC’s evidence was admitted, ASIAKONSTRUCT’s counsel, Atty. Bernard Dy, abandoned the hearings.
The trial court ruled that ASIAKONSTRUCT waived its right to present its evidence due to the counsel’s absence.
Judgment Rendered:

ASIAKONSTRUCT was ordered to pay COMFAC the actual damages amounting to P1,969,863.50 with interest at 14% per annum and a 25% penalty per annum from January 2, 1998.
An additional award of P50,000 as attorney’s fees and costs and expenses of litigation.

Court of Appeals Decision

ASIAKONSTRUCT Elevated the Case on Grounds Including:

Contesting the proper proof and authentication of exhibits (invoices, Exhibits “K” to “O”).
Questioning the completion of the projects.
Challenging the deduction of the 10% retention and the 1% expanded withholding tax.
Asserting that interest and penalties were not expressly stipulated in writing.
Arguing that the imposition of 14% interest with a 25% penalty was unconscionable.
Disputing the award of attorney’s fees in the absence of demonstrated bad faith.

Findings of the Court of Appeals:

Admissibility of the invoices and documentary evidence was upheld as ASIAKONSTRUCT did not object during trial.
Certificates of Completion were deemed valid as they were confirmed by the project owner’s representative.
COMFAC’s accounting, including deductions for retention and withholding tax, was correct.
Attorney’s fees were upheld; however, the appellate court reduced the proper interest rate to 6% due to the lack of contractual stipulation.

Modifications by the Court of Appeals:

Imposition of a 6% legal interest per annum on the amount of P1,969,863.50 in lieu of the originally imposed 14% interest and 25% penalty.
Deduction of the 1% withholding tax from each contract's balance.

ASIAKONSTRUCT’s Motion for Reconsideration was Denied.

Supreme Court Issues and Final Resolution

Issues Raised on Appeal:

Whether exhibits “K” to “O” were properly authenticated under the Rules of Court.
Whether respondent was able to prove the completion of the projects.
Whether COMFAC was entitled to attorney’s fees.
Whether the 6% legal interest should be computed based on the net amount after deducting the 1% withholding tax.

Evidence and Testimonies:

COMFAC’s witness, Mrs. Erlinda Rolda, testified regarding the checking of invoices.
ASIAKONSTRUCT failed to object timely or present contrary evidence due to its counsel’s nonattendance.

Final Resolution by the Supreme Court:

The evidence (exhibits and Certificates of Completion) was upheld due to waiver by ASIAKONSTRUCT.
Attorney’s fees were deleted from the award due to insufficient proof of bad faith or actual damages justifying such fees.
Computation of Withholding Tax:

First contract: P1,698,635 x 1% = P16,986.35.
Second contract: P4,000,000 x 1% = P40,000.00.
Total withheld: P56,986.35.

ASIAKONSTRUCT was held liable to pay the net balance of P1,912,877.15 (after deducting the 1% withholding tax) with the imposed 6% legal interest.
Additionally, ASIAKONSTRUCT was ordered to furnish COMFAC with the certificate of creditable withholding-tax-at-source.

Issues:

Authentication of Documentary Evidence

Whether the invoices and exhibits “K” to “O” were properly authenticated as required by the Rules of Court.
Implication of ASIAKONSTRUCT’s failure to object to the evidence during trial.

Proof of Project Completion

Whether COMFAC could conclusively prove that the projects were fully completed.
The authenticity and admissibility of the Certificates of Completion.

Award of Attorney’s Fees

Whether COMFAC was entitled to attorney’s fees given the nature and sufficiency of evidence presented.
Consideration of Article 2208 of the Civil Code on the recovery of attorney’s fees and the requisite demonstration of bad faith or specific damages.

Computation of Legal Interest

Whether the computation for legal interest at 6% per annum should be based on the full contractual amount or the net amount after deducting the 1% withholding tax.
The contractual and statutory basis for deducting the withholding tax from the balance payable.

Ruling:

(Subscriber-Only)

Ratio:

(Subscriber-Only)

Doctrine:

(Subscriber-Only)

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Case Digest (G.R. No. 163915) Core Legal Reasoning Model Expanded

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Case Digest (G.R. No. 163915) Expanded Legal Reasoning Model

Facts:

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Doctrine:

Case Digest (G.R. No. 163915)
Core Legal Reasoning Model

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Case Digest (G.R. No. 163915)
Expanded Legal Reasoning Model