Case Summary (G.R. No. 156851-55)
Factual Background
In 1997 and 1998, the petitioner awarded the respondent contracts including services for the metal works of the Filinvest Festival Supermall, valued at P29,000,000.00. Following project completion, the respondent asserted claims against the petitioner for unpaid amounts totaling P1,392,088.68, including a retention fee, damages for an alleged substandard performance, and costs associated with an additional scenic elevator enclosure. The respondent subsequently initiated legal proceedings to recover these amounts in Civil Case No. 68850 in the Regional Trial Court (RTC) of Pasig City.
RTC Ruling
The RTC, in its decision dated August 3, 2010, partially ruled in favor of the respondent by granting a claim for P227,500.00, while denying the remaining claims. The RTC determined that the petitioner was estopped from claiming damages for substandard workmanship, given its issuance of a Certificate of Completion and Acceptance. However, it found that the nature of the contract was a lump sum, thus ruling that the petitioner was not liable for the costs of the scenic elevator enclosure.
CA Ruling
Upon appeal, the Court of Appeals (CA) issued a modified ruling on December 27, 2013, requiring the petitioner to pay the previously denied amounts of P40,880.00 and P1,123,708.68, along with legal interest. The CA concurred with the RTC's estoppel ruling but disagreed on the contract's nature, determining it was not a fixed lump sum contract, which allowed for additional claims for works that had been authorized.
Legal Issue
The primary issue before the Supreme Court was whether the CA correctly ordered the petitioner to pay the amounts of P40,880.00, P227,500.00 relating to substandard work, and P1,123,708.68 for the additional elevator enclosure.
Court’s Ruling
The Supreme Court upheld the CA's decision. It emphasized that a petition under Rule 45 is generally limited to questions of law and not fact, which respect the findings of lower courts unless very clear abuse or disregard of evidence is shown. The Court confirmed that the petitioner was bound by the Certificate of Completion and Acceptance, thus justifying the payment of P40,880.00 and P227,500.00. The intricate analysis of the contract terms led the Court to align with the CA’s finding that the contract's lump-sum nature permits for subsequently agreed additional works, thus enabling the recovery for the scenic elevator enclosure.
Contract Interpretation
Fixed lump sum contracts, regulated under Article 1724 of the Civil Code, dictate that contractors cannot demand payment increases unless changes are authorized in writing. The Court clarified that althou
Case Syllabus (G.R. No. 156851-55)
Case Citation
- G.R. No. 213229
- Date of Decision: December 09, 2015
- First Division
- 775 Phil. 472
Parties Involved
- Petitioner: Filinvest Alabang, Inc.
- Respondent: Century Iron Works, Inc.
Background of the Case
- This case arose from a petition for review on certiorari against the Decision dated December 27, 2013, and the Resolution dated June 25, 2014, of the Court of Appeals (CA), which modified the Regional Trial Court (RTC) ruling dated August 3, 2010.
- The RTC ordered the petitioner to pay the respondent an aggregate amount of P1,392,088.68, with legal interest at twelve percent (12%) per annum from the time of default until full payment.
Facts of the Case
- In 1997 and 1998, the petitioner awarded various contracts to the respondent, including a contract for completing metal works for the Filinvest Festival Supermall, valued at P29,000,000.00.
- After the project completion, the respondent attempted to settle its outstanding credit, but the petitioner withheld payment of P1,392,088.68 without reasonable grounds. This amount included:
- P40,880.00 as the balance of the retention fee.
- P227,500.00 as an additional deduction.
- P1,123,708.68 for the cost of an additional scenic elevator enclosure.
- The respondent filed a case for sum of money with damages against the petitioner before the RTC, designated as Civil Case No. 68850.
Petitioner’s Defense
- The petitioner argued:
- It had the right to withhold P40,880.00 and P227,500.00 due to damages from the respondent's alleged substandard workmanship.
- The contract was a lump sum agreement, thus it could not be liable for additional costs related to the scenic elevator enclosure without prior authorization.
RTC Ruling
- In its August 3, 2010 ruling, the RTC:
- Granted the respondent’s claim for P227,500.00 plus legal interest.
- Denied the remaining claims, finding that th