Case Summary (G.R. No. 152545)
Petitioner
Bienvenido M. Casiño, Jr. contracted to supply and install narra wood parquet (kiln dried) for a total area of 60,973 sq. ft. and a total price of P1,158,487.00; he admitted execution of the December 22, 1989 contract and receipt of the 40% downpayment.
Respondent
Octagon Realty Development Corporation contracted Casiño to supply and install the parquet for its condominium project, made the 40% downpayment (P463,394.50) and paid the first billing; later sought rescission and damages for petitioner’s alleged breach.
Key Dates
Contract executed: December 22, 1989. Delivery/completion stipulated: May 1990. Complaint filed at RTC (Pasig): October 2, 1991. RTC decision: June 2, 1994. CA decision: January 21, 1997 (initially modifying damages). CA resolution: May 20, 1998 (affirming trial court in toto). Supreme Court disposition: petition denied (reviewed under the 1987 Constitution and Rule 45).
Applicable Law
Primary statutory and doctrinal bases invoked and applied: Article 1191, Civil Code (rescission in reciprocal obligations); Articles 2199 and 2200, Civil Code (actual/compensatory damages and indemnification for loss of profits); Rule 45, Rules of Court (petition for review on certiorari). The Court applied jurisprudential standards regarding the finality of factual findings by lower courts and the limited role of this Court in Rule 45 petitions (only questions of law are reviewable).
Contractual Dispute and Pleadings
Respondent alleged that petitioner delivered only 26,727.02 sq. ft. (respondent’s figure) of the contracted 60,973 sq. ft., thereby failing to complete delivery and installation by May 1990; respondent alleged misrepresentation of qualification and financial inability on petitioner’s part and claimed damages including P912,452.39 (estimated loss on new price, unliquidated damages and cost of money) and reimbursement of P1,198,609.30 (cost paid to a replacement contractor). Petitioner countered that deliveries totaled 29,209.82 sq. ft., blamed respondent’s failure to prepare work premises and to accept deliveries, claimed unpaid billings of P105,425.68, and asserted counterclaims for rescission, payment of P597,392.90 (or in the alternative P105,425.68), various damages, and attorney’s fees.
Trial Court Findings and Judgment
The RTC found that petitioner breached the contract by failing to deliver the full quantity by the stipulated time and by making insufficient progress despite demands, and it credited respondent’s delivery figures. The trial court held that respondent validly rescinded the contract under Article 1191 and awarded actual and compensatory damages in the aggregate amount of P2,111,061.69 and attorney’s fees of P50,000.00.
Court of Appeals Proceedings and Rulings
On appeal the CA initially affirmed liability but modified the damage award (reducing it to P1,662,003.80 with legal interest from finality of judgment). After motions for reconsideration, the CA, by resolution, concluded that an item had been already factored into the trial court’s computation and therefore amended its earlier disposition to affirm the trial court in toto (restoring the P2,111,061.69 award), and imposed costs against petitioner.
Issues Raised in the Supreme Court Petition
Petitioner principally argued that: (1) the rescission declared by respondent was contrary to Article 1191 of the Civil Code; (2) the award of actual and compensatory damages (P1,662,003.80 as initially modified by the CA) was not legally justified or proven with reasonable certainty; and (3) the CA’s rulings involved grave abuse of discretion or were contrary to facts and evidence.
Supreme Court’s Review Standard and Deference to Factual Findings
The Court reiterated that on a Rule 45 petition only questions of law are reviewable; factual findings of the Court of Appeals, particularly when affirming the trial court, are binding on the Supreme Court unless they are not supported by the record or are based on a patent misunderstanding of facts. The Court found no such defect in the factual findings below and therefore declined to disturb the conclusions that petitioner breached his contractual obligations.
Rescission for Non-Performance (Article 1191) — Court’s Analysis
Applying Article 1191, the Court held that in reciprocal obligations the injured party may choose rescission if the other party fails to comply. The remedy is not available for slight or casual breaches but is proper for substantial and fundamental violations that defeat the contract’s object. The Court found petitioner’s failure to deliver and install substantially less than the contracted volume, and to do so within the agreed period despite demands, constituted a substantial breach warranting rescission. The Court also confirmed the principle that an injured party may treat a contract as rescinded extrajudicially and engage a third party to mitigate damages, though such extrajudicial termination proceeds at the party’s own risk and is subject to judicial review if contested.
Damages — Evidence and Legal Standard
The Court applied A
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Procedural History
- Petition for review on certiorari under Rule 45 of the 1997 Rules of Court filed by petitioner Bienvenido M. CasiAo, Jr. seeking annulment and setting aside of Court of Appeals (CA) issuances in CA-G.R. CV No. 47702: Decision dated January 21, 1997 (affirming RTC-Pasig decision) and Resolution dated May 20, 1998 (denying petitioner’s motion for reconsideration).
- Trial court action: Complaint for rescission of contract with damages filed by Octagon Realty Development Corporation (respondent) on October 2, 1991 in the Regional Trial Court at Pasig City.
- Trial court rendered judgment on June 2, 1994, finding petitioner in breach, declaring respondent’s rescission valid, and ordering petitioner to pay P2,111,061.69 as actual and compensatory damages and P50,000.00 as attorney’s fees.
- Petitioner appealed to the Court of Appeals (CA-G.R. CV No. 47702). CA Decision dated January 21, 1997 affirmed the trial court but modified the damages award to P1,662,003.80 with legal interest from finality of judgment.
- Parties filed motions for reconsideration. CA Resolution dated May 20, 1998 denied petitioner’s motion for lack of merit and found respondent’s motion well-grounded; CA amended its original Decision and affirmed the trial court decision in toto, with costs against petitioner.
- Final recourse: Petition to the Supreme Court. Decision of the Supreme Court dated September 16, 2005 denied the petition and affirmed the CA’s Decision and Resolution; costs against petitioner.
Parties, Contract and Core Facts
- Petitioner: Bienvenido M. CasiAo, Jr., owner and proprietor of CasiAo Wood Parquet and Sanding Services.
- Respondent: Octagon Realty Development Corporation, developer of the Manila Luxury Condominium Project.
- Contract: Dated December 22, 1989, for supply and installation by petitioner of narra wood parquet (kiln dried) covering a total area of 60,973 sq. ft., at a total contract price of P1,158,487.00; contract stipulated full delivery of labor and materials by May 1990.
- Payment: Respondent paid P463,394.50 representing 40% downpayment as per contract; respondent also paid the first billing.
- Deliveries: Disputed quantities delivered by petitioner — respondent alleged 26,727.02 sq. ft. delivered; petitioner (answer) claimed delivery of 29,209.82 sq. ft.; trial court noted petitioner insisted on 29,109.82 sq. ft. Court below accepted respondent’s figure, finding petitioner failed to deliver full contracted quantity.
- Respondent’s actions after breach: Due to petitioner’s alleged unlawful and malicious refusal to comply, respondent engaged Hilvano Quality Parquet and Sanding Services to complete the unfinished work and agreed to pay Hilvano P1,198,609.30 to minimize losses.
- Respondent’s claimed damages in complaint: Actual damages of P912,452.39 (estimated loss on new price, unliquidated damages and cost of money), reimbursement of P1,198,609.30 (cost to Hilvano), moral damages of P200,000.00, attorney’s fees of P50,000.00 plus P1,000.00 per appearance and other suit expenses.
- Petitioner’s position and counterclaims: Admitted contract and 40% downpayment; alleged modifications in manner of payment, period of delivery and completion; alleged respondent failed to prepare or make available a suitable area, causing storage problems and exposure of materials; alleged respondent failed to pay second and third billings of P105,425.68; asserted qualifications and experience of at least nine years; pleaded special and affirmative defenses (prematurity, no cause of action, waiver/extinguishment, respondent’s failure to accept deliveries, extrajudicial rescission void, respondent breached entitling petitioner to judicial rescission); counterclaimed rescission and payment of P597,392.90 with legal interest or alternatively P105,425.68 plus interest; actual and compensatory damages of P600,000.00 and P30,000.00, moral damages of P100,000.00, attorney’s fees of P40,000.00, and litigation expenses and costs.
Trial Court Findings and Ruling (RTC-Pasig, June 2, 1994)
- Trial court found petitioner breached the parties’ agreement by failing to effect full delivery by the contractual date (May 1990).
- Trial court relied on evidence: respondent’s demand letters, petitioner’s insufficient mobilization and inadequate workforce leading to slow progress, Engr. Alcain’s letter instructing petitioner to make “full-blast delivery,” and petitioner’s statements of account aligning with respondent’s delivery figures.
- Trial court credited respondent’s delivery figure (26,727.02 sq. ft.) over petitioner’s claims.
- On the strength of Article 1191 of the Civil Code, trial court found respondent had the right to rescind the contract and to contract with a third party to minimize losses.
- Judgment: Rescission of contract valid; petitioner ordered to pay P2,111,061.69 as actual and compensatory damages and P50,000.00 as attorney’s fees. No pronouncement as to costs.
Court of Appeals’ Ruling and Subsequent Resolution (CA Decision Jan. 21, 1997; CA Resolution May 20, 1998)
- CA (Jan. 21, 1997) affirmed trial court but modified the damages award, ordering petitioner to pay respondent P1,662,003.80 as actual and compensatory damages with legal interest from finality of judgment.
- Parties filed motions for reconsideration. In a May 20, 1998 Resolution, CA denied petitioner’s motion for lack of merit and found respondent’s motion well-grounded.
- CA noted that the amount of P97,699.67 had already been factored in the trial court’s computation of P912,452.39; consequently CA amended its original Decision and affirmed the trial court decision in toto (i.e., restored the trial court’s award), with costs against petitioner.
Issues Presented to the Supreme Court
- Whether t