G.R. No. 173155 - R.S. Tomas, Inc. vs. Rizal Cement Company, Inc.

On December 28, 1990, petitioner R.S. Tomas, Inc. and respondent Rizal Cement Company, Inc. entered into a contract for supply of labor, materials, and technical supervision relating to three projects, namely:

J.O. #P-90-212: Wiring and installation of primary and secondary line systems
J.O. #P-90-213: Supply and installation of primary protection and disconnecting switch
J.O. #P-90-214: Rewinding and conversion of one transformer from 3125 KVA to 4000 KVA specifications

Petitioner agreed to supply labor, equipment, supervision, and materials as specified.
Respondent agreed to pay a total of P2,944,000.00 with projects to be completed within 120 days from contract effectivity.
Petitioner was liable for liquidated damages of P29,440.00 per day for delays, capped at 10% of the project cost.
To secure performance, petitioner obtained a performance bond from Times Surety & Insurance Co. Inc. for 50% of the contract price.

Petitioner requested a 75-day extension on March 9, 1991 due to need to import materials and price adjustment of P255,000.00 for higher costs.
A subsequent 75-day extension was requested on March 27, 1991 due to supplier failure to deliver materials.
On June 14, 1991, petitioner sought assistance from respondent for direct supplier payment and requested exclusion from J.O. #P-90-214 due to transformer condition.

Respondent, through counsel, observed petitioner’s poor financial condition and notified of default and contract termination.
Respondent demanded refund and invoked the performance bond by sending demand letter to Times Insurance.
On November 14, 1991, respondent contracted Geostar Philippines, Inc. for completion of unfinished projects.

Respondent filed a complaint for sum of money against petitioner and Times Insurance praying for recovery of excess payments, cost of contracting Geostar, liquidated damages, interest, and attorney’s fees.
Petitioner denied liability, alleging failure to complete was due to respondent’s fraud and misrepresentation regarding transformer condition.
Petitioner claimed reliance on respondent’s misrepresentation of transformer, necessitating price adjustments and extensions.

The RTC ruled in favor of petitioner, dismissing respondent’s complaint.
RTC found respondent committed deceit by misrepresentation regarding transformer condition.
Damages, attorney’s fees and costs of suit were awarded to petitioner.

CA reversed the RTC decision, awarding respondent P493,695.34 for excess amount paid, P508,510.00 for Geostar contract cost, and P294,400.00 as liquidated damages.
Found petitioner failed to prove fraudulent misrepresentation by respondent.
Petitioner's failure to inspect transformer before bidding was seen as inexcusable.
Testimony on transformer damage was insufficient and self-serving.
Ordered petitioner to return excess payments and pay liquidated damages.

Whether respondent committed fraud or misrepresentation regarding the transformer’s condition.
Whether petitioner adequately proved the transformer’s true condition.
Whether petitioner was guilty of inexcusable delay in project completion.
Whether petitioner is liable for liquidated damages.
Whether petitioner is liable for the cost of contract between respondent and Geostar.