Title
Casino Jr. vs. Court of Appeals
Case
G.R. No. 133803
Decision Date
Sep 16, 2005
Contractor failed to deliver full wood parquet quantity, breaching agreement; rescission upheld, damages awarded for losses incurred.
rescission of contract
compensatory damages
factual findings
A

Case Summary (G.R. No. 133803)

Factual Background

On December 22, 1989, the parties executed a contract for the supply and installation of narra wood parquet covering a total area of 60,973 sq. ft. for the Manila Luxury Condominium Project at a total price of P1,158,487.00. The contract stipulated full delivery of labor and materials in May, 1990. Respondent paid petitioner a downpayment of P463,394.50, representing forty percent of the contract price, and paid the first billing. Petitioner delivered only a portion of the parquet, the parties differing on the precise quantity; respondent alleged delivery of 26,727.02 sq. ft., while petitioner asserted delivery of 29,209.82 sq. ft. Petitioner thereafter failed to complete delivery and installation within the agreed time.

Parties' Allegations and Defenses

In its complaint for rescission of contract with damages, respondent alleged petitioner misrepresented his qualifications, lacked funds to perform, and maliciously refused to comply, causing respondent to engage a substitute contractor, Hilvano Quality Parquet and Sanding Services, at a cost of P1,198,609.30 and to suffer other losses estimated at P912,452.39. Respondent prayed for rescission, actual damages, reimbursement, moral damages, and attorney's fees. Petitioner admitted the contract and the downpayment but pleaded that respondent modified payment and delivery terms, failed to prepare and make available suitable work areas, failed to pay subsequent billings totaling P105,425.68, and thereby prevented timely completion. Petitioner set up affirmative defenses including waiver, extinguishment, and argued that respondent's extrajudicial rescission was void.

Pleadings of Counterclaims

Petitioner filed counterclaims seeking rescission and payment by respondent of P597,392.90 with interest or, alternatively, payment of P105,425.68, plus claims for actual and compensatory damages of P600,000.00 and P30,000.00 respectively, moral damages of P100,000.00, attorney's fees of P40,000.00, and litigation expenses.

Trial Court Proceedings and Judgment

After trial, the Regional Trial Court found that petitioner breached the contract. The trial court found that by January 30, 1991 no complete deliveries had been made despite demand, that petitioner’s mobilization was inadequate, and that petitioner had delivered substantially less than the contracted volume. Relying on Art. 1191, Civil Code, the trial court held respondent entitled to rescind the contract and to damages. The trial court rendered judgment on June 2, 1994 ordering petitioner to pay respondent P2,111,061.69 as actual and compensatory damages and P50,000.00 as attorney's fees.

Court of Appeals Decision and Subsequent Resolution

Petitioner appealed to the Court of Appeals in CA-G.R. CV No. 47702. In its Decision dated January 21, 1997, the Court of Appeals affirmed the trial court but modified the damages award, fixing actual and compensatory damages at P1,662,003.80 with legal interest from the finality of the judgment. Both parties filed motions for reconsideration. In its Resolution dated May 20, 1998, the Court of Appeals denied petitioner’s motion and found respondent’s motion well grounded, stating that an amount of P97,699.67 had already been factored into the computation of respondent’s claimed losses. The Court of Appeals amended its earlier disposition to affirm the trial court in toto and ordered costs against petitioner.

Issues Presented in the Petition for Review

In his petition under Rule 45, Rules of Court, petitioner principally contended that the courts below erred in declaring valid respondent’s rescission of the contract in violation of Art. 1191, Civil Code, that the award of actual and compensatory damages of P1,662,003.80 was not legally justified or proven with reasonable certainty, and that the issuances below were tainted with grave abuse of discretion amounting to lack or excess of jurisdiction or were contrary to the facts and the law.

Standard of Review and Treatment of Factual Findings

The Supreme Court emphasized that under appeals by certiorari pursuant to Rule 45, only questions of law may be raised. The Court reiterated the settled rule that factual findings of the Court of Appeals, particularly when they affirm those of the trial court, are binding upon the Supreme Court unless plainly unsupported by the record or founded upon a patent misunderstanding of facts. The Court found no basis to disturb the concurrent factual findings that petitioner failed to deliver and install the remaining parquet within the stipulated time despite respondent’s demands.

Supreme Court's Analysis on Breach and Rescission

The Supreme Court held that respondent was entitled to rescind the contract under Art. 1191, Civil Code, which implies the power to rescind in reciprocal obligations when one obligor fails to comply. The Court explained that rescission is not available for slight or casual breaches but is proper for substantial violations that defeat the very object of the agreement. The Court agreed with the courts below that petitioner’s failure to deliver less than half of the contracted volume by the agreed date and the consequent need for respondent to contract another firm to complete the work evidenced a substantial breach. The Court also rejected petitioner’s claim that respondent was not ready to accept deliveries for lack of suitable space, observing th

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