Case Summary (G.R. No. 206987)
Alleged Deviations, Supervision, and Personnel
Trinidad and Cesario Carungay repeatedly reported that Deiparine deviated from the plans and specifications and ordered prior approvals before concrete pouring; these instructions were not followed. Testimony established that Deiparine instructed site personnel to ignore owners’ or Trinidad’s specific orders concerning safety measures (e.g., number of concrete vibrators, capped PVC for embeds, use of 12-mm instead of 10-mm bars, choice of reinforcement, and prior approval before pouring). The contractor lacked professional credentials (not an architect/engineer), and supervisory personnel were inadequately qualified (project supervision by a third-year civil engineering student and other underqualified individuals).
Specifications, Agreement on Tests, and Test Results
Two sets of specifications existed: an initial, general “Specifications” (prepared for loan documentation) and the later, detailed “General Conditions and Specifications” submitted by Trinidad, which required 3,000 psi. Deiparine admitted that the plans/specifications referenced in the contract were to be furnished later and therefore acknowledged that the later General Conditions and Specifications governed. After repeated noncompliance, the parties agreed to testing: cylinder tests were performed first; thereafter the parties agreed to a more reliable core test conducted by Geo-Testing International on 24 core samples. Under a 3,000 psi standard all samples failed; under 2,500 psi only three passed; under 2,000 psi nineteen failed. The core test results indicated structural deficiency.
Procedural History and Relief Granted Below
The Carungays filed for rescission of the contract and damages in the Regional Trial Court. Deiparine moved to dismiss for lack of jurisdiction, invoking PD No. 1746 and the administrative construction board’s authority; the trial court denied the motion. After trial, the trial court rescinded the contract, ordered forfeiture of petitioner’s expenses in the amount of P244,253.70, ordered reimbursement of P15,104.33 for core testing, directed demolition and removal of the defective structure and restoration of the premises (allowing the contractor to reclaim his construction materials), and awarded attorney’s fees (P10,000) and costs. The appellate court affirmed the judgment in full.
Jurisdictional Issue: Scope of PD No. 1746 and Regular Courts’ Authority
Petitioner contended that PD No. 1746 vested exclusive jurisdiction over construction disputes in the administrative construction board. The Court examined Section 6 of PD No. 1746 and emphasized the textual distinction: adjudicatory powers under the implementing body (Philippine Domestic Construction Board) are directed to claims and disputes in the implementation of public construction contracts, whereas for private construction contracts the body is authorized to “formulate and recommend rules and procedures for the adjudication and settlement” of disputes. Thus the administrative body does not exercise exclusive adjudicatory jurisdiction over private construction disputes; regular courts retain cognizance. The trial court therefore properly exercised jurisdiction.
Legal Basis for Rescission: Article 1191 and Reciprocal Obligations
The Court addressed the legal ground for rescission. It distinguished rescission under Article 1385 (which concerns rescissible contracts enumerated in Article 1381 and depends on economic prejudice) from rescission under Article 1191 of the Civil Code, which applies to reciprocal obligations when one obligor fails to comply. A construction contract is a reciprocal obligation (owner pays, contractor builds). Under Article 1191, the injured party may choose fulfillment or rescission if the other party fails in its obligations, and the court may decree rescission with damages. The Court held that Article 1191 was the applicable provision because Deiparine’s failure to observe the agreed plans and specifications constituted a substantial breach of the reciprocal contractual obligations and violated the requisite good faith.
Rejection of Alternate Legal Arguments (Articles 1385 and 1725)
The petitioner argued that Article 1385 or Article 1725 should govern. The Court rejected reliance on Article 1385 because that provision regulates rescission of specifically enumerated rescissible contracts under the law of contracts, not ordinary reciprocal obligations like typical construction agreements. Article 1725 contemplates a voluntary withdrawal by the owner (withdrawal without contractor fault) and requires indemnity to the contractor; it does not apply where the owner seeks rescission because of contractor’s breach. Here, the owners sought judicial rescission due to contractor’s noncompliance and bad faith, not voluntary withdrawal; thus Article 1725 is inapposite.
Ancillary Contractual Duties and Remedies
The Court reiterated contractor obligations under Articles 1714, 1715, and 1727: a contractor must deliver work with agreed qualities and without defects that destroy or lessen fitness for use; he is responsible for persons he employs. Where defects exist, the owner may require correction or have the defect removed at the contractor’s cost. Given the parties’
...continue readingCase Syllabus (G.R. No. 206987)
Procedural Posture and Relief Sought
- Petition to the Supreme Court from the Court of Appeals decision affirming the trial court judgment rescinding a construction contract and awarding damages and other relief to the private respondents, spouses Cesario and Teresita Carungay.
- Trial court (Regional Trial Court of Cebu) rendered judgment rescinding the construction agreement and awarding multiple forms of relief against petitioner Ernesto Deiparine, Jr.; the Court of Appeals affirmed in toto on August 14, 1990.
- Petitioner raised, among others, the questions of: (1) whether regular courts had jurisdiction given P.D. No. 1746 (Creation of CIAP/PDCB/PDCB functions); and (2) whether rescission was proper and which Civil Code provisions applied.
- Supreme Court (Decision penned by Justice Cruz) denied the petition, affirmed lower courts, imposed costs on petitioner, and fined counsel Atty. Gregorio B. Escasinas P 1,000.00 for deliberately altering statutory language in pleadings.
Parties, Contract and Basic Dispute
- Petitioners: Ernesto Deiparine, Jr. (contractor) as petitioner.
- Respondents: The Honorable Court of Appeals (as appellee in certiorari proceeding), spouses Cesario and Teresita Carungay (owners), and Engr. Nicanor Trinidad (owner’s representative).
- Core dispute: whether the subject three-story dormitory constructed in Cebu City was safe and met agreed plans and specifications; whether deviations and deficient concrete strength justified rescission and damages.
Contractual Terms and Parties’ Roles
- Agreement date: August 13, 1982 between the Carungays and Deiparine for construction of a three-story dormitory in Cebu City (Exhibit "A").
- Agreed contract price: P 970,000.00 inclusive of contractor’s fee.
- Contractor obligation: Deiparine bound to erect the building "in strict accordance to (sic) plans and specifications."
- Owner’s representative: Nicanor Trinidad, Jr., civil engineer, designated with powers of inspection and coordination with contractor.
- Two sets of specifications:
- A preliminary "Specifications" labeled as such, prepared by Trinidad prior to contract execution to satisfy loan application requirements (general summary of materials).
- A later, detailed "General Conditions and Specifications" submitted by Trinidad (November 6, 1982) prescribing a 3,000 psi minimum acceptable compressive strength and other detailed requirements (Exhibits "B" and "19").
Construction Timeline and Supervision
- Work commencement: September 1, 1982 (TSN, June 9, 1983, p. 19).
- Trinidad submitted "General Conditions and Specifications" on November 6, 1982 which among other things prescribed 3,000 psi as minimum compressive strength.
- Owner complaints and memoranda:
- Trinidad reported deviations by Deiparine impairing strength and safety.
- September 25, 1982: Cesario Carungay ordered Deiparine to secure approval before pouring cement (Exhibit "D"); this order not heeded.
- Subsequent memorandum from Carungay complained construction was "faulty and done haphazardly ... mainly due to lax supervision coupled with ... inexperienced and unqualified staff" (Exhibits "E" and "E-1"); memorandum ignored.
- Agreement to testing: After conferences, parties agreed to conduct tests. Carungay suggested core testing; Deiparine initially reluctant but eventually agreed and promised to shoulder expenses if tests showed total failure or failure exceeding 10%, otherwise costs to be borne by Carungay.
Qualifications and On-site Personnel
- Contractor’s personal qualifications and staffing:
- Deiparine was not a civil engineer or architect but a master mariner and former ship captain (TSN, August 17, 1984, pp. 4, 47).
- Pio Bonilla, a retainer of Deiparine Construction, was not the supervising architect of the project (TSN, March 17, 1986, pp. 36-40).
- The actual supervisor was Eduardo Logarta, a third-year civil engineering student at the time (TSN, January 16, 1985, p. 13).
- Eduardo Martinez was an understudy who had not yet passed board examinations (TSN, January 16, 1985, pp. 42, 46).
- Nilo Paglinawan, the supposed project engineer, taught full-time and entered the site only after November 4, 1982 although construction had begun two months earlier (TSN, January 16, 1985, pp. 48-51; 104).
- Testimony of contractor’s own project engineer (Eduardo Logarta): Deiparine instructed workers to ignore specific orders or instructions of Carungay or Trinidad relative to construction (TSN, January 16, 1985, pp. 77-87; 93-94).
Specific Instances of Alleged Deviation and Noncompliance
- Orders and safety measures allegedly ignored by petitioner:
- Use of two concrete vibrators in pouring columns, beams and slabs.
- Making PVC pipes well-capped to prevent concrete ingress.
- Use of 12-mm reinforcement bars instead of 10-mm bars.
- Use of mixed concrete reinforcements instead of hollow block reinforcements.
- Securing owner’s or representative’s approval before pouring concrete to verify cement mixture compliance with safety standards.
- Trial and appellate courts found these deviations showed lax supervision and unqualified personnel, and that Deiparine sought to avoid expenses that would reduce profit.
Tests Conducted: Cylinder Testing and Core Testing — Methodology and Results
- Cylinder test:
- Defined (from ASTM 1980 Annual Book): Samples taken from fresh concrete placed in cylinder molds, hardened for up to 28 days, then compressed to determine conformity to standards (TSN, January 3, 1984, p. 21).
- Petitioner relied initially on cylinder tests and argued cylinder tests were conclusive.
- Core test:
- Described as more reliable for existing structures because specimens are extracted from the hardened, standing structure and are less prone to manipulation (TSN, January 3, 1984, pp. 21, 28, 48).
- Carungay requested core testing because cylinder results were inconsistent and could be falsified by replacing samples.
- Core testing results (Geo-Testing International; 24 core samples; Manila-based firm):
- On the basis of 3,000 psi: all samples failed.
- On the basis of 2,500 psi: only three samples passed.
- On the basis of 2,000 psi: nineteen samples failed.
- Trial court and appellate courts treated these results as demonstrating the structure was structurally defective (Exhibits "H" to "H-6").
Trial Court Findings and Relief Granted
- Trial Judge Juanito A. Bernad’s judgment (after trial on the merits) ordered:
- (a) Declaration that the construction agreement was rescinded.
- (b) Forfeiture of petitioner’s expenses in the construction in the sum of P 244,253.70.
- (c) Reimbursement by petitioner to the Carungays of P 15,104.33 for the core testing.
- (d) Deiparine ordered to demolish and remove all existing structures and restore premises to former condition prior to construction, with permission to take back construction materials belonging to him.
- (e) Payment by petitioner of attorney’s