Case Digest (G.R. No. 88435)
Facts:
On July 20, 1901, O.F. Campbell and Go-Tauco (the plaintiffs and appellants) entered into a contract with Behn, Meyer & Co. (the defendants and appellees) for the construction of a dwelling house on a lot in San Miguel, Manila, for the total amount of 15,000 Mexican pesos. The payment was structured in installments due at various stages of construction. The contract specified that 4,000 pesos were to be paid when the materials were on-site and work commenced, another 4,000 pesos upon completion of the house's exterior (walls and roof), and the remaining 5,000 pesos upon total completion. Furthermore, there were contractual agreements for additional works, which totaled to 22,750.62 pesos, of which only 13,500 pesos were paid, leaving an outstanding balance of 9,250.62 pesos. The defendants contested the plaintiffs' liability for the unpaid balance due to alleged defects in the construction.
In addition to the construction contract, the plaintiffs also contracted on
Case Digest (G.R. No. 88435)
Facts:
- Contractual Agreements
- Building Contract
- On July 20, 1901, the plaintiffs (O.F. Campbell and Go-Tauco) entered into a contract with the defendants (Behn, Meyer & Co.) to construct a residential dwelling on a lot in Manila.
- The agreed sum was 13,000 Mexican pesos for the building work, paid in installments: 4,000 pesos upon commencement (with necessary materials on site), 4,000 pesos when the structure’s walls and roof were finished, and 5,000 pesos on completion within three months.
- An additional 500 pesos was to cover the installation of city water and necessary piping, and 1,500 pesos for the construction of a stable, bringing the total to 15,000 Mexican pesos.
- Filling Contract
- Also on June 20, 1901, the parties entered into a separate contract for filling a lot on the bank of the Pasig River with earth and sand at the rate of 1.30 pesos per cubic meter.
- The contract specified an amount “over 15,000 cubic meters,” with delivery to be made at 5,000 cubic meters monthly, subject to possible delays from unforeseen causes such as storms.
- Detailed receipts, daily issuance, and weekly duplicate bills governed the delivery and payment process.
- Specifications and Work Details
- Building Specifications
- The plans and specifications for the house were brief and provided only basic dimensions: 24 yards in width, 20 yards deep, and 7½ yards high.
- Materials were specified, including:
- Foundations of ordinary Guadalupe stone with specified dimensions.
- Use of apitong, macasin, or amoguis wood for uprights, framework, and partitions.
- Designated materials for finishes such as oil paint for the exterior and water paint for the interior with varnished doors.
- The plans allowed for certain variations and left detailed construction decisions largely to the supervising engineer or architect.
- Alterations and Additional Work
- During construction, both parties agreed to modifications and additional work.
- The extra work and alterations amounted to 7,750 pesos, raising the total contract price to 22,750.62 pesos.
- Payments made by the defendants amounted to 13,500 pesos, leaving an unpaid balance of 9,250.62 pesos claimed by the plaintiffs.
- Performance and Supervision
- Execution of Work
- The building was constructed with adherence to the plans and specifications, albeit with modifications that benefited the owner.
- The supervising engineers (initially Mr. Duff, later Mr. Cook) monitored the work, ensuring that alterations were made with the knowledge and consent of the defendants.
- Defects and Controversies
- Noted defects included concerns with:
- Foundations not suitable for soft, spongy ground.
- Improper placement of pillars and inferior grade of wood leading to structural imperfections, such as settling, shrinking floor boards, and sloping veranda floors.
- Expert witnesses testified on the nature of the defects, alternating between attributing the issues to the inherent quality of materials provided by the owner versus any negligence on the part of the contractors.
- Acceptance of the work by the defendants in May 1902, evidenced by their move into the house, added complexity to the claim of defective performance.
- Sand and Earth Delivery Dispute
- Measurement and Payment
- Under the filling contract, sand and earth were delivered between July 1901 and April 1902.
- The measurement was conducted by the defendants’ representatives using the “bancas” system, with daily receipts and weekly bills ensuring continuous record-keeping.
- Dispute on Quantity Delivered
- The defendants alleged that although about 62,690.50 cubic meters of sand and earth were paid for, only a lesser quantity was actually deposited.
- Their counterclaim sought recovery of 52,000 pesos based on the assertion that overpayments were made for sand and earth that was not used for filling.
- Plaintiffs countered this by asserting delivery of 64,444 cubic meters and, in their reply, claimed a slight under-measurement of 1,753.50 cubic meters amounting to 2,279.55 pesos.
- Expert Testimonies and Evidence
- Defendants’ experts estimated the filling based on modern surveys, post-delivery measurements, and allowances for settlement (approximately 15%).
- Plaintiffs’ experts argued that a higher settlement allowance (31% to 38%) was more appropriate and that the original measurements taken through the defendants’ agents were accurate.
- The credibility of the measurement process was bolstered by the continuous and authorized record-keeping during delivery.
- Post-Performance and Judicial Proceedings
- Acceptance and Equitable Adjustments
- The defendants’ acceptance and occupation of the house in May 1902 indicated substantial compliance with the contractual obligations.
- Despite the noted construction defects, the alterations and approvals by the supervising engineer helped mitigate claims of unworkmanlike performance.
- Court Findings and Lower Court Decision
- The Court of First Instance initially found that the plaintiffs should receive no further compensation beyond what had been paid, due to a breach in the construction leading to damages.
- This included a determination that the defendants were entitled to an offset for the defective workmanship.
- Appeals and Motion for New Trial
- The plaintiffs excepted and moved for a new trial after the lower court’s decision.
- Key issues on measurement discrepancies and the application of the doctrine of estoppel became central to the appellate review.
Issues:
- Entitlement to Payment for Construction Work
- Whether, notwithstanding minor defects in construction, the plaintiffs were entitled to recover the unpaid balance of 9,250.62 pesos for the building contract.
- Whether the alleged deviations or defects in construction (e.g., substandard foundation work and material quality) constitute grounds to withhold payment or claim damages against the plaintiffs.
- Whether accepting the house by the defendants in May 1902 constitutes acceptance of substantial performance despite the apparent imperfections.
- Dispute Regarding Sand and Earth Delivery
- Whether the measurement and delivery of sand and earth were correctly performed in accordance with the contract.
- Whether the defendants’ subsequent claim for a refund of overpaid amounts (52,000 pesos) is justified based on alleged under-delivery and measurement errors.
- Whether the doctrines of mutual mistake or estoppel apply in resolving the discrepancies between the original delivery measurements and later expert estimates.
- Proper Measure of Damages
- What is the appropriate method for computing damages for alleged defective construction – specifically, whether damages should be based on the cost to demolish and rebuild or on the remaining unpaid contract sum.
- Whether the lower court’s approach in calculating damages by estimating demolition and reconstruction costs deviates from established principles of substantial performance.
Ruling:
- (Subscriber-Only)
Ratio:
- (Subscriber-Only)