G.R. No. 5597 - People vs Jeffrey

On June 15, 1999, FAJ Construction & Development Corporation (petitioner) and Susan M. Saulog (respondent) entered into a construction agreement for building a residential structure in San Lorenzo Village, Makati City at a contract price of P12,500,000.00.
The agreement provided for progress billing, with payments made upon inspection of the work by the respondent.

The construction commenced and respondent made payments totaling P10,592,194.80.
For progress billing statements dated October 31 and November 6, 2000 amounting to P851,601.58, respondent refused payment, alleging defects in the work.
After performing additional work, petitioner again requested payment but was met with non-payment, prompting petitioner to terminate the contract under Article 27(b) of the Uniform General Conditions of Contract for Private Construction.

Petitioner's termination of the contract was followed by demand letters sent on November 24, 2000 and September 28, 2001.
Petitioner's complaint (Civil Case No. Q-02-45865) alleged that despite compliance with the construction agreement, respondent’s non-payment forced petitioner's abandonment of the work.
Relief sought included the unpaid progress bill of P851,601.58, retention money of P625,000.00, litigation expenses, attorney’s fees, and costs.

Although payments were made, the work was defective and delayed.
Petitioner's failure to correct defects resulted in rainwater seepage and extensive damage to the unfinished building.
Additional expenses were incurred by her to remedy these defects.

The counterclaim sought actual damages (P3,213,575.91), lost rentals (P5,391,456.00), consequential damages (P1,600,000.00), moral damages (P5,000,000.00), exemplary damages (P5,000,000.00), penalties for delay (totaling P1,387,500.00), attorney’s fees, appearance fees, interest, and costs.

During trial proceedings, petitioner attempted to present its first witness on March 11, 2003; however, due to incomplete documentary evidence the testimony was interrupted.
Repeated requests for continuances were made by petitioner, resulting in multiple postponements.
Petitioner’s counsel and witness repeatedly failed to appear at scheduled hearings (notably on April 29, July 29, and September 4, 2003), leading the trial court to eventually dismiss the case for failure to prosecute.
Petitioner filed several motions for reconsideration regarding the dismissal, but after an unverified motion and subsequent proceedings, these motions were ultimately denied.

Petitioner elevated the case to the Court of Appeals (CA) via a petition for certiorari challenging the trial court’s dismissal and subsequent orders.
On September 30, 2004, the CA dismissed petitioner’s petition for certiorari, affirming the trial court’s dismissal on grounds that petitioner repeatedly delayed the proceedings and that its negligence (or that of its counsel) was responsible.
The CA reiterated that petitioner's inaction amounted to dilatory tactics, wasting judicial time and resources.

The evidence on record included the testimony of Architect Rhodora Calinawan, who conducted two inspections (September and November 2000) and documented defects such as misaligned electrical fixtures, substandard flooring, improper grouting, and other work deficiencies.
Respondent supported her counterclaim with documentary evidence (photographs, receipts, and expense lists) detailing additional repair costs, penalties for delay, and even claims of personal injury (frozen shoulder and trigger finger) substantiated by receipts from an acupuncturist.

The Regional Trial Court rendered a decision on January 30, 2006, awarding respondent damages for defective work, delay (penalties), moral and exemplary damages, attorney’s fees, and interest.
The CA, in its November 29, 2011 Decision and subsequent February 24, 2012 Resolution, modified the trial court’s award by deleting the amounts for lost rentals, moral damages, exemplary damages, and attorney’s fees.
Petitioner then elevated the matter to the Supreme Court via a Petition for Review on Certiorari, challenging the application of res judicata and the imposition of actual damages, delay penalties, and interest.

Whether the dismissal of petitioner’s case for failure to prosecute—attributed to petitioner's repeated delays and counsel’s absence—constitutes an adjudication on the merits subject to res judicata.
Whether petitioner may challenge the dismissal on the ground of its counsel’s negligence.

Whether petitioner is liable for the actual damages arising from defective and incomplete work.
Whether the conventional penalty for delay (as stipulated in the contract) and the corresponding interest are properly imposed.

Whether the evidence presented by respondent sufficiently proves the alleged actual damages, incurred expenses for rectification, and loss of rental income.
Whether the claims for moral and exemplary damages have a factual and legal basis.

Whether the Supreme Court, in reviewing the petition, should reexamine factual determinations made by lower courts regarding the quality of the work and the delays incurred.