G.R. No. 69492 - People vs. Velasco

The case involves a contract entered on January 30, 1920, between H. O'LEARY (plaintiff/appellee), a resident of Manila, and MACONDRAY & CO., INC. (defendant/appellant), a domestic corporation.
The contract pertained to the construction of a building in Pasay, under the supervision of an architect.
The agreed terms specified that the work was to be completed “in accordance with the plans and instructions” of the architect, for the amount of the actual cost plus a twelve and one-half per cent (12.5%) markup.
Payment was to be made on a monthly basis upon submission of statements supported by vouchers approved and certified by the architect.
A clause in the contract stipulated that “time is an important provision,” and that materials for the work were to be purchased “in such quantities and at such times as may appear to be to your best interest,” leaving significant discretion to the plaintiff.

Plaintiff commenced and nearly completed the construction work, complying with the contract’s terms.
Plaintiff incurred expenses amounting to P20,287.03 for labor and materials, which was established as the actual cost.
Based on the contract, plaintiff claimed an additional sum of P2,535.83 (representing 12.5% of the actual cost), totaling a claim of P22,822.86 for his services and superintendence.
Defendant, while admitting the existence of the contract, raised a special defense alleging that plaintiff’s alleged negligence in construction and the purchase of materials resulted in damages amounting to P32,624.25, as detailed in seven different counterclaims.

Defendant additionally asserted that the plaintiff was indebted to third parties (Luneta Motor Company for P702.49 and Insular Lumber Company for P9,766.23), with these claims assigned to the defendant, cumulatively praying for a judgment against the plaintiff of P43,092.97.
The parties, however, entered into a stipulation regarding certain exhibits which eventually led the trial court to render judgment in favor of the plaintiff for P12,201.99, with legal interest from the filing of the complaint and costs.
On appeal, the defendant challenged several aspects of the trial court’s decision including the starting point for interest accrual, the computation of the additional 12.5% charge (notably, a clerical error in deducting the proper amount), the inadmissibility of evidence regarding the rental value of the house, and the failure to establish that delays were due to the plaintiff's negligence.

Was the contract, which was loosely drawn without a specified completion date yet emphasizing that “time is an important provision,” enforceable as to its intended terms?
Does the discretionary language regarding the purchase of materials and employment of labor absolve the plaintiff from liability for errors or judgment mistakes?

Is the plaintiff liable for alleged errors committed in the employment of labor and the purchase of materials, particularly when such actions were taken in accordance with the contractual discretion provided?
Can fluctuations in the cost of labor and materials, arising from honest errors or market changes, constitute a breach of contract?

Should interest on the plaintiff’s claim accrue from the filing of the complaint or from the date of the lower court’s judgment?
How should the clerical error in computing 12.5% on an amount of P1,772.14 (with the proper deduction being P221.52 rather than P22.15) affect the final judgment?

Was the trial court correct in refusing to admit evidence regarding the rental value of the house?
Did the trial court err in failing to make special findings regarding the plaintiff’s alleged negligence that purportedly caused delays and increased costs?