Case Summary (G.R. No. 24804)
Contract and Project Scope
– September 2001 contract for P10,500,000.00, inclusive of materials, labor, bonds, VAT, with no escalation clause.
– Scope: subdivision concrete roads, underground drainage, water distribution, elevated steel water reservoir.
– Work to start within 10 days of notice and permit release; complete within 180 days.
– Actual start: May 21, 2002.
Variation Orders and Additional Works
– HSPCDC performed approved variation orders worth P552,829.75.
– At SDC President’s instruction, HSPCDC built three duplex units (P488,290.00) outside original scope.
– Completion of all roads: March 3, 2003.
Initial Billing and Demand
– Progress billing (Jan 10–Mar 3, 2003): P766,556.46.
– Unpaid; HSPCDC sent letters (Mar 26, 2003; Nov 11, 2003) demanding total due P2,122,704.55 (main contract P1,081,584.80; variations P552,829.75; duplex P488,290.00).
– Filed suit April 4, 2005 for sum of money, interest, attorney’s fees, litigation expenses, exemplary damages.
RTC Decision
– October 29, 2010: Judgment for HSPCDC—P44,270.94 (main contract balance), P552,829.75 (variations), P488,290.00 (duplex), 10% attorney’s fees, 12% annual interest from finality.
– Denied SDC’s counterclaims for expenses, damages, exemplary damages, litigation costs.
– November 18, 2011: RTC denied HSPCDC’s motion for partial reconsideration.
CA Decision
– August 16, 2016: Reversed and set aside RTC; ordered:
- SDC to pay HSPCDC P1,581,584.80 (contract balance) and P488,290.00 (duplex).
- HSPCDC to pay SDC P362,781.72 (well‐drilling), P359,503.80 (elevated water tank), and P1,050,000.00 (delay), with set‐off under Civil Code art. 1278 and 6% interest.
– Excluded variation orders for lack of written authorization; upheld denial of basketball court claim; deleted attorney’s fees for lack of bad faith.
– January 11, 2017: CA denied motions for reconsideration.
Issues on Review
- Whether HSPCDC should pay SDC P362,781.72 (well‐drilling) and P359,503.80 (water tank).
- Whether HSPCDC should pay P1,050,000.00 for delay.
Rule on Supreme Court Review
Under Rule 45 and the 1987 Constitution, the Court resolves questions of law. Factual findings will not be disturbed if supported by substantial evidence and not based on conjecture, misapprehension, or conflict with undisputed facts.
Liability for Well‐Drilling and Water Tank
– Both RTC and CA found HSPCDC failed to finish well‐drilling and steel water tank.
– HSPCDC admitted non‐completion despite contract obligating full performance of “water distribution and elevated steel water reservoir.”
– Pursuant to Civil Code art. 1167, defaulting contractor bears cost of completion by another.
– Substantial evidence (cost estimates, receipts, admissions) supports SDC’s claim.
– Holding
Case Syllabus (G.R. No. 24804)
Parties and Factual Background
- H. S. Pow Construction and Development Corporation (HSPCDC), a building contractor, entered into a written Construction Contract with Shaughnessy Development Corporation (SDC) for P10,500,000.00 to construct subdivision concrete roads, an underground drainage system, a water distribution network, and an elevated steel water reservoir at Summerfield Subdivision in Taytay, Rizal
- The Contract contains no escalation clause; it is inclusive of all materials, labor, overhead, supervision, profit, bonds, insurance coverage, and VAT
- Work was to commence within ten days of notice to proceed and building permit issuance, and to be completed within 180 calendar days
- Construction began on May 21, 2002; during the project, change or variation orders costing ₱552,829.75 were approved by SDC’s president, and SDC instructed HSPCDC to build three duplex units not originally in the scope
- By January 17, 2003, the main entrance and roads 1–2 and part of road 4 were finished; SDC requested completion of road 3 and deferred progress billing until that work was done
- The entire road network was completed on March 3, 2003, and on March 5 HSPCDC submitted progress billing for ₱766,556.46
Complaint and Counterclaim
- On April 4, 2005, HSPCDC filed a Complaint for Sum of Money claiming ₱2,122,704.55 (inclusive of main contract balance ₱1,081,584.80; three duplex units ₱488,290.00; variation orders ₱552,829.75), plus 12% interest from February 20, 2004, attorney’s fees, litigation expenses, and exemplary damages
- SDC’s Answer denied liability on grounds that HSPCDC:
• Delayed performance and abandoned work on the water tank and foundation
• Refused to build a basketball court and sidewalk shown in signed plans
• Failed to issue the performance bond required by the Contract
• Unilaterally claimed variation orders that were unauthorized or already included in the original Contract - SDC counterclaimed for:
• ₱50,000.00 expenses to complete and correct HSPCDC’s unfinished or defective work
• ₱728,067.80 actual damages and penalties
• ₱200,000.00 exemplary damages
• ₱100,000.00 litigation costs
Regional Trial Court Decision
- RTC Branch 223, Quezon City, on October 29