G.R. No. 161904 - Asian Construction and Development Corp. vs. Tulabut

In January 1998, the petitioner, Asian Construction and Development Corporation (ACDC), was awarded the development of the Philippine Centennial Exposition (Theme Park Project) located at Clarkfield, Pampanga.
In February 1998, ACDC contracted the respondent, Noel T. Tulabut (doing business under the name and style of N.T. Tulabut Construction Supply), to supply labor, materials, tools, equipment, and supervision for the construction of various facilities at the project site.
The contract specifically involved the construction of two cafeterias, two fast food take-out stands, and one snack stand at the Food Plaza, all to be developed under a fixed price arrangement of ₱3,414,058.60 through a progress billing scheme.

The petitioner undertook to pay in installments as progress payments, and by June 8, 1998, had nearly settled its contractual obligation, leaving a minor balance of ₱3,246.12.
Later in 1998, the petitioner entered into an additional contract with the respondent for the construction of two more cafeterias via Purchase Order (P.O.) No. 73-985 at a net cost of ₱400,000.75.
A Land Bank check (No. 0000074516) was drawn and delivered on July 15, 1998 as partial payment; however, the check was dishonored due to insufficient funds.

Despite the payment issues, the respondent managed to complete the contracted projects and formally turned over the works to the petitioner.
The final billing, dated November 26, 1998, amounted to a total of ₱486,409.45, which remained unpaid despite the respondent’s written demand for payment.

The respondent filed a complaint for collection with the Regional Trial Court (RTC) of San Fernando, Pampanga, alleging that the petitioner’s account had grown to ₱900,000.00 (exclusive of damages and attorney’s fees) as of May 29, 1998.
The RTC, after receiving the respondent’s testimonial and documentary evidence, granted a writ of preliminary attachment upon the posting of a bond of ₱1,400,000.00 and an additional ₱500,000.00 bond to cover a third-party claimant.
In its answer with counterclaim, the petitioner denied the completion of the projects and contended that payment was contingent upon receipt of government funds, alleging it had settled amounts corresponding to the actual work accomplished.

The trial court ruled in favor of the respondent, ordering the petitioner to pay ₱364,083.76 (exclusive of a 10% retention), legal interest from April 5, 1999, 25% of the same amount as attorney’s fees, and additional litigation costs.
On appeal, the petitioner argued that the project’s completion should be recognized only after a certificate of completion was issued and that there was no basis for awarding attorney’s fees.
The Court of Appeals (CA) dismissed the petitioner’s appeal, upholding the trial court’s findings with a modification that reduced the attorney’s fees award to 10% of the amount due.

The petitioner challenged the CA’s application of the principle of estoppel, arguing that its officers’ approval of the purchase orders and progress billings did not constitute proof of the project’s completion.
The petitioner contended that there was no legal or factual justification for awarding attorney’s fees based on its alleged failure to honor the payment obligation, particularly in light of the dishonored check.
The petitioner maintained that the disputed issues were factual in nature, whereas Rule 45 of the Rules of Court limits the review to questions of law.

Whether the Court of Appeals erred in applying the principle of estoppel by presuming the completion and acceptance of the project based solely on the petitioner’s officers’ approval of the purchase orders and progress billings.
Whether the award of attorney’s fees was proper, particularly given the petitioner’s contention that its failure to fund the check did not amount to gross and evident bad faith.
Whether the petitioner was rightly held accountable for the payment obligations, based on the clear and unassailable evidence presented by the respondent.