G.R. No. 21106 - Tiu Siuco vs. Habana

On October 6, 1920, the plaintiff (a contractor and builder at Iloilo) entered into a written contract with Simeon Habana for the construction of a building on a lot in the cadaster of Jaro.
The contract was detailed and specific, enumerating the plans, specifications, and materials to be used. It included provisions for:

The demolition of “the house of strong materials now existing on said lot” at the contractor’s expense.
Reusing the salvageable materials from the demolished house for the new construction, excluding any rotten or deteriorated materials.

The contract stipulated a total contract price of P54,000, payable in installments, with a deadline of 8 months for construction and a penalty of P10 per day for any delay.
It granted the owner the right to employ an inspector throughout the construction process.

The defendant repeatedly requested modifications, changes, and alterations to the building.
Some parts of the building, already completed under the original specifications, were ordered to be torn down and reconstructed using different materials, at the defendant’s behest.

The defendant’s instruction “pase cuenta” (bring in your bill) was made before the performance of these modifications, indicating an expectation that any changes would be separately billed.
Despite the modifications, the building was substantially completed, and the defendant took possession soon after its completion.

It is acknowledged that the defendant paid the original contract price of P54,000 and an additional sum of P4,000.
The plaintiff, however, claimed an extra amount (P67,000 over the P58,000 then paid) based on a quantum meruit theory, alleging that the extensive modifications effectively altered the original contract.
The case was framed on the proposition that the numerous changes and alterations might amount to a novation, thereby releasing the parties from the original contract obligations.
In the course of the litigation, the real party in interest was substituted from Simeon Habana to Federico Montinola.
The amended pleadings revealed that:

While the defendant admitted to the changes and alterations, they maintained that these were to be compensated for separately.
The defendant also asserted that delays and alleged extra liabilities (including a loan of P4,404 and daily penalties for delay) should be offset against any additional payment due to the plaintiff.

The trial court found that there were twelve changes, alterations, or modifications during construction—eleven of which were deemed material and substantial.
Although the plaintiff’s claim was anchored in the theory of novation (the idea that the original contract was annulled by the parties’ conduct), there was no direct evidence of a specific act or clear intent to rescind the contract.
The evidence showed that the defendant’s statement “pase cuenta” was made in the context of ordering changes and was not an indication to terminate or rescind the entire original contract.
Ultimately, the plaintiff pursued recovery on a quantum meruit basis for the additional work and modifications performed under the existing contract framework.

The trial court rendered a judgment in favor of the plaintiff, awarding P53,600 over and above the previously paid amounts.
The judgment was based on the assessment that, even though numerous alterations were made, they did not amount to a complete novation of the original contract.
In his appeal, the defendant raised multiple issues challenging:

The valuation basis (using an estimated value of P82,000 for the house instead of the base P54,000 contract price).
The award for extra work and the additional amounts due for changes, alterations, and contractor’s percentage.
The acceptance value of the old house and claims derived from counterclaims and alleged loans.

Whether the numerous changes, alterations, and modifications effected during construction resulted in a novation that annulled the original contractual obligation.

Did the plaintiff establish that the actions and conduct of both parties, particularly the defendant’s instructions, amounted to a complete substitution of the original contract?

How to construe the defendant’s statement “pase cuenta” in the context of the modifications.

Was this statement intended to signify a novation or merely an invitation for the plaintiff to invoice for extra work?

Whether the plaintiff was entitled to recover additional sums on a quantum meruit basis beyond the stipulated contract price of P54,000.

What is the just and reasonable value of the extra work and materials resulting from the changes and alterations requested by the defendant?

The adequacy and weight of the evidence proving material changes versus slight modifications, and if said evidence supports the award granted by the trial court.

Accepting a valuation for added work that conflicted with conflicting testimonies.
Misinterpreting the contractual terms regarding modifications and the consequent remuneration.
Dismissing the defendant’s counterclaims and demands for set-offs, including the alleged loan and delay penalties.