Case Digest (G.R. No. 156251)
Facts:
This case revolves around the legal dispute between Philippine Realty Holdings Corporation (PRHC) and Firematic Philippines, Inc. (Firematic) relating to a construction agreement signed on December 12, 1989, for the installation of a sprinkler system at Tektite Towers located in Mandaluyong, Metro Manila. The project was divided into two phases: Phase I for Tower I and Phase II for Tower II. The construction agreement stipulated the duties of Firematic as the contractor, including the delivery of materials, adherence to technical specifications, and warranties for the work performed.
On December 11, 1990, PRHC informed Firematic of its decision to drop Phase II from the contract, reducing the price for Phase I but later increasing it due to approved change orders. A subsequent agreement was signed on December 13, 1990, for a fire alarm system at Tektite Tower I, incorporating similar terms as the original contract. Negotiations continued concerning material specifications, part
Case Digest (G.R. No. 156251)
Facts:
- Project Formation and Scope of Work
- On December 12, 1989, Philippine Realty and Holdings Corporation (PRHC) executed a Construction Agreement with Firematic Philippines, Inc. for installing a sprinkler system in the proposed Tektite Towers (located at Tektite Road and Pearl Avenue, Mandaluyong).
- The project was divided into two phases (Phase I – Tower I and Phase II – Tower II), with the original contract incorporating detailed plans, specifications, and bid documents (including sprinkler system plans, fire protection specifications, bid proposals, and a letter of intent).
- A second construction agreement, signed on December 13, 1990, required Firematic to supply, deliver, and install a fire alarm system for Phase I under similar terms.
- Contractual Provisions and Performance Requirements
- The contract specified that the contractor must supply all materials, tools, equipment, and labor necessary for the proper installation of the systems, assuring that all work would be performed in a workmanlike manner and conform to the designs prepared by R. Villarosa & Associates.
- Firematic was obliged to:
- Order and check the quality and quantity of materials.
- Refer to all relevant plans (mechanical, plumbing, electrical, structural, and architectural) to prevent any interference or conflict.
- Supply all items—even those not explicitly shown in the drawings—if they were necessary to complete the system.
- Incorporated in the contract were warranties and provisions concerning adjustments of the contract price, change orders, and a one-year warranty on the installations (excluding faults due to ordinary wear and tear or caused by the owner).
- Changes, Payments, and Material Purchases
- On December 11, 1990, PRHC informed Firematic of the deletion of Phase II (Tower II), resulting in a price reduction for Phase I. However, subsequent change orders increased the contract price.
- Firematic later requested financial assistance in March 1992 due to rising costs and tight business credit; as a result, PRHC directly financed purchases of materials, including the approved fire pump model.
- Approvals were secured for the use of 500 GPM Peerless Vertical Turbine Fire Pumps, which were subsequently purchased (via a Purchase Order dated August 6, 1992) and installed by Firematic.
- Disputed Performance and Billing Controversies
- Although the project became operational and documents such as the Certificate of Completion and a Certificate of Occupancy (issued January 12, 1993) were obtained, controversy over the installations soon emerged.
- PRHC disputed Firematic’s final bill, alleging:
- The installed fire sprinkler system and fire alarm system were incomplete, defective, and non-compliant with technical specifications.
- The fire pumps supplied were not genuine “Peerless” products as agreed upon, and the fire alarm panels did not interface with the Building Management System as required.
- Numerous communications, including letters from Connel Bros. and inquiries by Firematic with the Fire Department of Pasig, further complicated the dispute by questioning the authenticity of the pumps and the adequacy of the installations.
- Litigation and Procedural History
- Firematic filed a Complaint for Collection for Sum of Money plus Damages in the Regional Trial Court (RTC) alleging PRHC’s failure to pay the balance of the contract price, including damages and attorney’s fees.
- The RTC ruled in favor of PRHC, dismissing the complaint and ordering Firematic to reimburse costs incurred by PRHC for replacing the allegedly defective fire pumps and fire alarm panels.
- Firematic appealed to the Court of Appeals (CA), challenging the RTC’s findings on several grounds, including non-compliance with the technical specifications and the genuineness of the pumps.
- The CA, after multiple rulings and modifications (including a resolution on November 19, 2002), determined that:
- Firematic was liable for breach of contract in certain respects (particularly in relation to the fire alarm system installation).
- A balance of obligations and counterclaims existed between the parties, ultimately awarding a net sum payable between them.
- Finally, PRHC (now the petitioner) elevated the case to the Supreme Court through a Petition for Review on Certiorari, challenging the CA’s factual inferences and evidentiary conclusions.
- Evidence and Contention Over Material Authenticity
- Central to the dispute was whether the fire pumps installed were genuine “Peerless” pumps. PRHC contended that:
- Firematic failed to prove the authenticity of the pumps.
- Evidence such as letters from Connel Bros. (indicating the pumps were not of "Peerless" origin) and PRHC’s written inquiries should establish fraud.
- Firematic countered that:
- The fire pumps were inspected and approved by PRHC’s technical staff.
- The evidence presented by PRHC was hearsay and lacked corroborative testimony.
- Issues of estoppel by silence were raised by PRHC, alleging that Firematic’s failure to dispute the allegations amounted to an admission, while Firematic showed that it had in fact taken steps (such as consulting the Fire Department) to refute the claims.
Issues:
- Compliance with Contractual Technical Specifications
- Did the fire pumps supplied by Firematic conform to the technical specifications, including the requirement to be “listed” and “approved” by an internationally recognized testing laboratory?
- Were the fire alarm systems, specifically the control panels, installed in accordance with the contract’s technical specifications (notably, the requirement for interfacing with the Building Management System)?
- Authenticity of the Fire Pumps
- Whether the fire pumps delivered and installed by Firematic were indeed genuine “Peerless” products as specified in the contract.
- Whether the evidence (including letters from Connel Bros.) was sufficient to establish that the pumps were counterfeit or “not of Peerless origin.”
- Admissibility and Weight of Evidence
- Whether the hearsay evidence presented by PRHC (such as the letters bearing on the pumps’ authenticity) should be given probative value.
- Whether the failure of Firematic’s respondent to dispute the allegation in a timely and effective manner constitutes an implicit admission of fault.
- Procedural and Substantive Claims Regarding Payment and Damages
- Whether Firematic’s claim for the payment of the balance of the contract price, plus damages for alleged misrepresentations and breaches, is valid in light of competing claims of overpayment and defective installations.
- Whether PRHC’s contention that disputes should have been resolved through arbitration rather than judicial litigation bears on the merits of the claims.
Ruling:
- (Subscriber-Only)
Ratio:
- (Subscriber-Only)
Doctrine:
- (Subscriber-Only)