Title
Supreme Court
Filinvest Alabang, Inc. vs. Century Iron Works, Inc.
Case
G.R. No. 213229
Decision Date
Dec 9, 2015
Filinvest withheld payment from Century Iron Works for completed construction, citing substandard work and additional costs. Courts ruled Filinvest estopped due to Certificate of Completion, liable for retention fee, deductions, and additional works under lump sum contract terms.

Case Digest (G.R. No. 213229)
Expanded Legal Reasoning Model

Facts:

  • Contract Award and Subject Matter
    • Sometime in 1997 and 1998, petitioner Filinvest Alabang, Inc. awarded various contracts to respondent Century Iron Works, Inc.
    • One such contract was for the completion of the metal works requirement of Filinvest Festival Supermall, with a fixed lump sum contract price of P29,000,000.00.
    • The contractual documents included an Agreement for Construction (the subject contract) and the General Conditions of Contract, which outlined procedures for variations and extra works.
  • Dispute Over Payment and Withheld Amounts
    • Upon project completion, respondent sought full settlement for its services.
    • Petitioner allegedly withheld a total amount of P1,392,088.68, itemized as:
      • A balance of the retention fee amounting to P40,880.00.
      • An additional deduction of P227,500.00, purportedly due to respondent’s substandard workmanship.
      • The cost for an additional scenic elevator enclosure amounting to P1,123,708.68.
    • Respondent subsequently filed a case for sum of money with damages before the Regional Trial Court (RTC) in Civil Case No. 68850.
  • Proceedings in the Regional Trial Court (RTC)
    • In its Decision dated August 3, 2010, the RTC:
      • Granted respondent’s claim for P227,500.00 plus legal interest.
      • Denied respondent’s claim for the retention fee and the additional scenic elevator enclosure, holding that:
        • Petitioner was estopped from claiming damages due to its earlier issuance of a Certificate of Completion and Acceptance, which signified acceptance of the work.
ii. The subject contract was fixed lump sum in nature, limiting petitioner’s liability to the agreed lump sum price.
  • The case was subsequently appealed by respondent to the Court of Appeals (CA).
  • Proceedings in the Court of Appeals (CA)
    • In its Decision dated December 27, 2013, the CA:
      • Affirmed the RTC ruling regarding the deduction of P227,500.00 but with modifications.
      • Ordered petitioner to also pay:
        • The balance of the retention fee amounting to P40,880.00.
ii. The cost for the additional scenic elevator enclosure of P1,123,708.68.
  • Held that despite the subject contract being fixed lump sum in nature, the contract allowed for additional works when stipulated by written instructions.
  • Petitioner later moved for reconsideration, which was denied by the CA in a Resolution dated June 25, 2014.
  • Petitioner then elevated the matter to the Supreme Court through a petition for review on certiorari.
  • Relevant Contract Provisions and Written Instructions
    • Key provisions of the subject contract:
      • ARTICLE I confirmed the scope, where respondent was to furnish all materials, labor, equipment, and other necessities for the project.
      • ARTICLE II fixed the contract price at P29,000,000.00.
    • The General Conditions included provisions for variation orders:
      • Stipulated that extra work beyond the original scope required an official Site Instruction.
      • Provided for the valuation of such variations using agreed-upon rates or schedules.
    • In this case, petitioner issued two Site Instructions (dated August 1, 1997, and January 23, 1998) authorizing the construction of the additional scenic elevator enclosure.
    • Supporting documents such as the Cost Breakdown for Claim of Change Orders and the Material Quantity Breakdown for Scenic Elevator Enclosure evidenced the extra work and its valuation.

Issues:

  • Whether the Court of Appeals correctly ordered petitioner to pay respondent:
    • The balance of the retention fee amounting to P40,880.00.
    • An additional deduction of P227,500.00 due to respondent's purported substandard workmanship.
    • The cost of an additional scenic elevator enclosure amounting to P1,123,708.68.
  • Whether the subject contract’s nature as a fixed lump sum precluded additional liability for extra works beyond the lump sum price.
  • Whether the issuance of a Certificate of Completion and Acceptance by petitioner estopped it from withholding payments on claims of defective workmanship.

Ruling:

  • (Subscriber-Only)

Ratio:

  • (Subscriber-Only)

Doctrine:

  • (Subscriber-Only)
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