Case Digest (G.R. No. 190517)
Facts:
In 1988 and 1989, Philippine Realty and Holdings Corporation (PRHC), as owner, and Ley Construction and Development Corporation (LCDC), as contractor, executed four notarized fixed‐price construction agreements for the Alexandra Clusters C, B, E and the Tektite Tower Phase I, expressly prohibiting escalation of the contract price except for approved work additions or official wage increases. Engineer Dennis Abcede and VP‐Operations Joselito Santos represented PRHC, while Manuel Ley signed for LCDC. During the Tektite Tower project, LCDC faced sharp increases in cement and material costs and negotiated with Abcede for a P 36 million escalation. On 9 August 1991, Abcede signed a letter‐agreement confirming this amount would be reimbursed when work reached 95% completion, but the printed “Approved & Accepted: Phil. Realty & Holdings Corp.” line remained unsigned. Relying on the letter, LCDC directly paid suppliers P 38.25 million from August to December 1991. PRHC never objected unCase Digest (G.R. No. 190517)
Facts:
- Parties and Contracts
- Ley Construction and Development Corporation (LCDC) was contracted by Philippine Realty & Holdings Corporation (PRHC) to build four projects:
- All agreements provided a fixed contract price (no material escalation), allowed time extensions for specified causes, and required a performance bond before mobilization.
- Subsequent Agreements and Cash Infusions
- Letter-agreement dated 9 August 1991: LCDC to infuse P36 million to complete Tektite; PRHC (through Construction Manager Dennis Abcede) to grant an equal price escalation when 95% complete. The document was signed by Abcede and LCDC but left unsigned under PRHC’s name.
- From August to December 1991, LCDC advanced P38,248,463.92 directly to suppliers. Monthly reports were sent to PRHC; PRHC never objected.
- PRHC’s 7 December 1992 letter (signed by Abcede and approved by Vice-President Joselito Santos) proposed to apply the P36 million against alleged liquidated damages of P39,326,817.15, waiving the P3,326,817.15 difference.
- Procedural History
- On 2 February 1996, LCDC filed suit in RTC Makati (Civil Case No. 96-160) for various claims: P36 million escalation, over-infusion, unpaid balances for Projects 1–3, concreting works, driver’s quarters, plus damages and attorney’s fees.
- The RTC (31 January 2001; amended 7 May 2001) awarded LCDC P61, (approx.) plus P7,112,738.82 for concreting works, P750,000 attorney’s fees, expenses, and costs.
- The Court of Appeals (30 September 2004) reversed, holding mutual liabilities and set-off: net P3,747,793.50 due PRHC; denied escalation, denied LCDC’s unpaid concreting balance, struck attorney’s fees.
- SC consolidated PRHC’s petition (G.R. No. 165548) and LCDC’s petition (G.R. No. 167879) and granted review.
Issues:
- Whether a valid P36 million escalation agreement (superseding the fixed-price prohibition) was formed.
- Whether LCDC is liable for liquidated damages for delays in Projects 1–3 and Tektite under Article VII.
- Whether the CA properly awarded balances for Project 3, its driver’s quarters, and concreting works omitted in the stipulation of facts.
- Whether LCDC is liable for P2,006,000 in corrective waterproofing works in Project 2.
- Whether LCDC is entitled to attorney’s fees, expenses of litigation, and costs.
Ruling:
- (Subscriber-Only)
Ratio:
- (Subscriber-Only)
Doctrine:
- (Subscriber-Only)