Case Summary (G.R. No. 194507)
Petitioners and Respondents
• Petitioner in G.R. No. 194507: Federal Builders, Inc.
• Respondent in G.R. No. 194507: Foundation Specialists, Inc.
• Petitioner in G.R. No. 194621: Foundation Specialists, Inc. (petition later dismissed for lateness)
• Respondent in G.R. No. 194621: Federal Builders, Inc.
Key Dates
• August 20, 1990: Execution of sub-contract for P7,400,000.00.
• January 9, 1992: FSI files complaint for unpaid Billings No. 3 and 4 (P1,635,278.91).
• May 3, 2001: RTC decision awarding FSI P1,504,231.50 (inclusive of various items).
• July 15, 2010 & November 23, 2010: CA Decision and Resolution affirming with modifications.
• September 8, 2014: Supreme Court decision.
Applicable Law
• 1987 Philippine Constitution (post-1990 decision)
• Civil Code Articles on obligations and damages (Arts. 1169, 2209)
• Eastern Shipping Lines v. CA (1994) – guidelines on interest
• Nacar v. Gallery Frames (2013) – updated interest rates
Antecedent Facts
• Under the sub-contract, FBI paid 20% downpayment; balance payable via progress billings every fifteen days.
• FSI completed approximately 97% of its scope but alleged FBI failed to deliver required cement, delaying capping beam work.
• FBI counterclaimed, asserting only 85% completion, defective works, and incurred remedial costs.
Issues
- Whether FBI remained liable to pay Billings 3 and 4 despite alleged defects.
- Proper interest rate on the overdue amount.
- Validity of FBI’s counterclaim for remedial costs.
Ruling on Factual Findings
• RTC and CA found FSI substantially performed its obligations; non-completions and defects were attributable to FBI’s failure to deliver cement and other interferences.
• Federal Builders’ payments of approximately P6 million without objections demonstrated acceptance of FSI’s accomplished works.
• Counterclaim for P8,582,756.29 was dismissed for lack of proof linking remedial costs to FSI’s negligence.
• Supreme Court upheld these factual conclusions, noting no exceptional grounds to overturn them under settled jurisprudence.
Ruling on Interest Rate
• Courts below imposed 12% per annum legal interest from August 30, 1991 (date of extrajudicial demand).
• Supreme Court applied Eastern Shipping Lines and Nacar guidelines: construction contract breach does not
Case Syllabus (G.R. No. 194507)
Facts
- On August 20, 1990, Federal Builders, Inc. (FBI) entered into a subcontract with Foundation Specialists, Inc. (FSI) to construct the diaphragm wall, capping beam, and guide walls of Trafalgar Plaza in Makati City for a total contract price of ₱7,400,000.00.
- Under the agreement, FBI would pay a 20% downpayment and the balance through progress billings every 15 days, payable within one week of presentation.
- FSI alleged completion of 97% of the works but nonpayment of Billings No. 3 and 4 amounting to ₱1,635,278.91 and filed suit for sum of money, accrued interest from August 1, 1991, moral and exemplary damages, and attorney’s fees.
- FBI counterclaimed, asserting FSI completed only 85%, performed out-of-specification work, abandoned the site, caused delay, and sought recovery of remedial costs.
Procedural History
- January 9, 1992: FSI filed a complaint before the RTC of Makati City for nonpayment of Billings 3 and 4.
- May 3, 2001: RTC rendered judgment for FSI, ordering FBI to pay:
• ₱1,024,600.00 (Billings 3 and 4) less ₱33,354.40, plus 12% interest from August 30, 1991
• ₱279,585.00 for undelivered cement
• ₱200,000.00 attorney’s fees
• costs of suit; counterclaim denied - July 15, 2010: Court of Appeals (CA) affirmed with modification: deleted the ₱279,585.00 award and reduced attorney’s fees to ₱50,000.00; upheld 12% interest.
- November 23, 2010: CA denied motions for reconsideration.
- FSI’s Rule 45 petition (G.R. No. 194621) was dismissed as filed late.
- FBI filed a Rule 45 petition (G.R. No. 194507), challenging liability for Billings 3 and 4, interest rate, and denial of counterclaim.
Issues
- Whether FBI was properly held liable for the balance of Billings 3 and 4 despite alleged defective work and out-of-specifications.
- Whether the imposition of 12% legal interest from August 30, 1991 was proper absent stipulation and not involving a loan or forbearance of money