Case Summary (G.R. No. 213229)
Factual Background
In 1997 and 1998, Filinvest Alabang, Inc. engaged Century Iron Works, Inc. under a written Agreement for Construction to supply and install metal works at Filinvest Festival Supermall for a lump sum contract price of P29,000,000.00. After completion, Century Iron Works, Inc. sought full payment but alleged that Filinvest Alabang, Inc. withheld P1,392,088.68 composed of: (a) a balance of the retention fee of P40,880.00; (b) an additional deduction of P227,500.00 claimed as damages for allegedly substandard workmanship; and (c) P1,123,708.68 representing the cost of an additional scenic elevator enclosure. Respondent submitted a Certificate of Completion and Acceptance and documentary evidence of two Site Instructions and cost breakdowns relating to the elevator enclosure.
The Parties' Contentions
Century Iron Works, Inc. claimed entitlement to all withheld amounts and damages, arguing the withholdings were unwarranted and that the additional scenic elevator enclosure constituted extra work for which it had written instructions and valuation. Filinvest Alabang, Inc. defended by asserting a right to retain sums for damages attributable to substandard workmanship and by contending that the agreement was a fixed lump sum contract, such that respondent could not claim additional compensation absent an instruction authorizing the extra work.
Trial Court Proceedings
The RTC granted respondent recovery of P227,500.00 plus legal interest but denied the other claims. The RTC found that issuance of a Certificate of Completion and Acceptance estopped petitioner from asserting defects to justify the withheld retention and that the contract was fixed lump sum, thereby precluding recovery for the additional scenic elevator enclosure because the liability of the project owner was limited to the stipulated P29,000,000.00.
Court of Appeals Ruling
On appeal, the CA affirmed the RTC in part and modified in part. The CA agreed that the Certificate of Completion and Acceptance estopped petitioner from withholding sums for alleged defective work, and therefore ordered payment of P227,500.00 and the P40,880.00 retention balance, both with twelve percent annual interest from default. Contrary to the RTC, the CA concluded that the contract was not strictly a fixed lump sum contract for purposes of precluding extra work claims, found that petitioner issued two Site Instructions authorizing the scenic elevator enclosure, and determined that the valuation of the extra work was substantiated by written cost breakdowns, thus awarding respondent P1,123,708.68 for the elevator enclosure.
Issues Presented to the Supreme Court
The Supreme Court framed the dispositive issue as whether the CA correctly ordered petitioner to pay respondent the cumulative amounts withheld, specifically (a) P40,880.00 as balance of retention, (b) P227,500.00 as additional deduction for alleged substandard work, and (c) P1,123,708.68 as cost of an additional scenic elevator enclosure. The Court also considered whether the CA and RTC factual findings conflicted such that the Court should review facts under the exceptions to Rule 45.
Scope of Review and Applicable Doctrines
The Court reiterated that review under Rule 45 is generally limited to questions of law and that findings of fact of the trial court, when affirmed by the CA, are binding absent clear showing of arbitrariness or one of the established exceptions. The Court explained that the existence of conflicting factual findings between the trial court and the CA warranted examination of the factual question whether the subject contract was a fixed lump sum contract and whether the extras were properly authorized and valued. The Court relied on Article 1724 of the Civil Code to define the nature and consequences of fixed lump sum contracts and on prevailing jurisprudence for the requisites to recover for extra work under such contracts.
Supreme Court's Analysis and Legal Reasoning
The Court accepted the factual finding shared by the RTC and the CA that petitioner issued a Certificate of Completion and Acceptance. The Court held that this act estopped petitioner from asserting defective workmanship to justify withholding payment, invoking the rule that one who by declaration or conduct leads another to act thereon cannot later contradict that representation. Consequently, petitioner was required to remit the P40,880.00 retention balance and the P227,500.00 deduction.
On the extra work claim, the Court examined the written contract and General Conditions. It observed that the Agreement expressly described the works and stipulated a "Lump Sum Contract Price of PESOS: TWENTY NINE MILLION AND 00/100 (P29,000,000.00)," thereby evidencing a fixed lump sum contract. The Court clarified that while fixed lump sum contracts ordinarily limit the owner's liability to the stipulated price under Article 1724, the provision does not preclude recovery for additional works when two conditions are satisfied: (a) written authorization by the owner for the changes; and (b) a written agreement on the additional price. The Court found that the General Conditions required official Site Instructions for variation orders and that any valuation of variations was to be made in writing. Here, petitioner issued two Site Instructions dated August 1, 1997 and January 23, 1998 authorizing the scenic elevator enclosure, and respondent submitted a Bill of Quantities, Cost Breakdown for Claim of Change Orders, and Material Quantity Breakdown for the scenic elevator enclosure. Those documents evidenced both written authority and written valuation. The Court therefore concluded that the extra work was validly ordered and properly valued, entitling respond
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Case Syllabus (G.R. No. 213229)
Parties and Procedural Posture
- Filinvest Alabang, Inc. was the petitioner before the Supreme Court and the project owner in the underlying contract dispute.
- Century Iron Works, Inc. was the respondent and the contractor who performed metal works for Filinvest Festival Supermall.
- The Regional Trial Court, Branch 264, City of San Juan, rendered the initial Decision in Civil Case No. 68850 that granted part of the contractor's monetary claim.
- The Court of Appeals affirmed with modification the RTC Decision in CA-G.R. CV No. 97025 and ordered additional monetary awards to the contractor.
- The petitioner filed a petition for review under Rule 45, Rules of Court assailing the CA Decision and the CA Resolution denying reconsideration.
Key Factual Allegations
- The parties entered into an Agreement for Construction under which the contractor agreed to complete metal works for a lump sum price of P29,000,000.00.
- After project completion, Century Iron Works, Inc. demanded payment of P1,392,088.68 allegedly withheld by Filinvest Alabang, Inc. for various items.
- The withheld amounts were itemized as P40,880.00 for balance of retention, P227,500.00 as additional deduction for alleged defective work, and P1,123,708.68 for an additional scenic elevator enclosure.
- Filinvest Alabang, Inc. issued a Certificate of Completion and Acceptance acknowledging acceptance of respondent's work.
Trial Court Ruling
- The RTC awarded Century Iron Works, Inc. P227,500.00 plus legal interest and denied the remainder of the contractor's claims.
- The RTC found that Filinvest Alabang, Inc. was estopped from asserting defective workmanship due to issuance of the Certificate of Completion and Acceptance.
- The RTC held that the subject contract was fixed lump sum in nature and therefore excluded liability for the additional scenic elevator enclosure cost of P1,123,708.68.
Court of Appeals Ruling
- The CA affirmed the estoppel finding and held that Filinvest Alabang, Inc. must remit both P227,500.00 and the P40,880.00 retention balance to the contractor.
- The CA concluded that the subject contract was not fixed lump sum in nature for purposes of excluding extra works and thus awarded P1,123,708.68 for the additional scenic elevator enclosure.
- The CA imposed legal interest at twelve percent (12%) per annum from time of default until full payment.
Issue Presented
- The dispositive issue was whether the CA correctly ordered Filinvest Alabang, Inc. to pay Century Iron Works, Inc. the amounts of P40,880.00, P227,500.00, and P1,123,708.68.
Supreme Court Ruling and Disposition
- The petition for review under Rule 45, Rules of Court was denied and the CA Decision and Resolution were affirmed with modification.
- The Supreme Court ordered Filinvest Alabang, Inc. to pay