G.R. No. L-47851 - Nakpil vs. Court of Appeals

Case Summary (G.R. No. L-47851)

Factual Background

The PBA commissioned architects (NAKPILS) to prepare plans, specifications and design for an office building and engaged UNITED to construct the building on an administration contract. The building was completed in June 1966. A strong earthquake on August 2, 1968 caused major damage: front columns buckled and the structure tilted. UNITED expended P13,661.28 to shore up the building as a temporary remedial measure. Subsequent strong earthquakes on April 7, 9 and 12, 1970 caused further damage and ultimately led to authorization for demolition on April 30, 1970; actual demolition was later undertaken by a purchaser.

Procedural History

PBA sued UNITED and Juan J. Carlos on November 29, 1968 for recovery of damages alleging defective construction. UNITED filed a third-party complaint against NAKPILS alleging defective plans and specifications. The parties agreed to refer technical issues to a court-appointed commissioner, Andres O. Hizon (lawyer and structural engineer), who submitted a report on September 25, 1970 attributing damage to (1) the August 2, 1968 earthquake, (2) defects in the architects’ plans and specifications (NAKPILS), (3) UNITED’s deviations from plans and inadequate workmanship, and (4) PBA’s failure to exercise requisite supervision. The trial court accepted the commissioner’s findings except that it rejected the holding that the owner (PBA) is charged with full-time supervision.

The trial court rendered judgment on September 21, 1971 ordering UNITED and third-party defendants (except Roman Ozaeta) to pay P989,335.68 with interest from filing, dismissing claims against Juan J. Carlos, dismissing the third-party complaint, and awarding costs in equal shares. The Court of Appeals modified the judgment by awarding P200,000.00 in favor of PBA, joint and several liability of UNITED and the third-party defendants (except Ozaeta), and affirmed other aspects.

All parties appealed to the Supreme Court. The Supreme Court rendered a decision (October 3, 1986) substantially in favor of PBA, increasing the monetary indemnity and awarding attorney’s fees; motions for reconsideration and for en banc referral were subsequently filed by UNITED and the NAKPILS.

Commissioner’s and Trial Court Findings Adopted on Appeal

The commissioner found that while the August 2, 1968 earthquake was the immediate cause of damage, defects in the architects’ plans and specifications and UNITED’s construction deficiencies (deviations and workmanship) materially contributed. The trial court agreed with these findings except that it refused to impose upon the owner the duty of full-time supervision. The courts accepted that the damage ultimately culminated in a total loss following the later earthquakes, and that demolition was inevitable and authorized.

Issues Raised in UNITED’s Motion for Reconsideration

UNITED’s motion asserted seven principal grounds: (I) the building did not truly “collapse” so Article 1723 (solidary indemnity) does not apply; (II) PBA had a legal duty to provide full-time, active supervision and its failure should mitigate or shift liability; (III) liability should be apportioned among parties consistent with the commissioner’s detailed findings and the pre-demolition condition of the building; (IV) a finding of bad faith is unsupported; (V) the award of damages is excessive or defective; (VI) the award of P100,000.00 as attorney’s fees is unwarranted; and (VII) imposition of 12% per annum interest on the award contravenes law.

Supreme Court’s Treatment of “Collapse” and Causation

The Court rejected UNITED’s quibble over the term “collapse.” It acknowledged the factual nuance that after the 1968 earthquake the building was partially damaged and could have been repaired at an estimated cost of P900,000.00, but subsequent tremors in April 1970 caused further irreversible damage, leading to total collapse/demolition. The Court observed that demolition carried out pursuant to judicial authorization following progressive deterioration constitutes a form of collapse. On causation, the Court relied on the commissioner’s findings (adopted by the trial court and affirmed by the appellate courts) that negligence in design, specifications and construction materially contributed to the loss; accordingly the proximate responsibility of NAKPILS and UNITED stands notwithstanding the intervening earthquakes. The Court invoked the principle (citing Tucker v. Milan) that one who negligently creates a dangerous condition cannot escape liability because of an intervening act of God if the negligent condition made the injury probable.

Supreme Court’s Analysis of Owner’s Supervisory Duty

UNITED contended that PBA, as owner, had the inherent or customary duty to provide full-time supervision, and its failure should affect liability. The Court found no legal or contractual basis imposing an absolute duty of full-time owner supervision. The ordinary practice is to engage architects and engineers to supervise; indeed the parties selected an administration contract and the services of architects were relied upon. Thus, the trial court correctly rejected the imposition on the owner of a duty of full-time, active supervision absent an agreement or specific legal requirement.

Negligence, Bad Faith and the Characterization of Conduct

Although the commissioner and courts characterized the fault as negligence rather than express bad faith, the Supreme Court held that the “wanton negligence” found in the preparation of plans and in the construction process is tantamount to bad faith in performance for purposes of measuring responsibility. The Court emphasized that these factual findings — made by the commissioner, the trial court and the Court of Appeals — are findings by competent fact-finders and are entitled to respect.

Quantum of Damages, Attorney’s Fees and Computation of Lost Income

UNITED challenged the increase of the monetary award from the earlier sums (the commissioner’s repair estimate of about P1,100,000.00 and the trial court’s award) to the higher indemnity imposed by the Supreme Court. The Court explained that the commissioner’s estimate was limited to restoration after the 1968 partial collapse and did not encompass the costs attendant to total reconstruction after the later quakes. The Supreme Court considered present reconstruction costs (nearly twenty years after events) and concluded the enlarged award was not excessive but rather a conservative estimate of indemnity to cover all damages occasioned by loss of the building, including interest charges and lost rentals. The Court accepted PBA’s contention that unreali

Case Syllabus (G.R. No. L-47851)

Parties

Petitioners: Juan F. Nakpil & Sons and Juan F. Nakpil (collectively, the NAKPILS).
Co-petitioners/Respondents in consolidated matters: United Construction Company, Inc. (UNITED) and Juan J. Carlos.
Plaintiff / Cross-petitioner in related appeals: Philippine Bar Association (PBA).
Additional party named in third-party pleadings: Roman Ozaeta (then President of PBA), included as third‑party defendant by UNITED for alleged wrongful inclusion of Juan J. Carlos as defendant.
Court/Tribunals: Trial court (unnamed lower court), Commissioner appointed by trial court (Andres O. Hizon), Court of Appeals, Supreme Court (Second Division acting on motions and issuing the resolution).

Procedural Posture and Consolidated Cases

The matter arises from earlier trial-court proceedings and subsequent appeals to the Court of Appeals and then to the Supreme Court.
Multiple related petitions and appeals are reflected by G.R. Nos. L-47851 (principal), L-47863, and L-47896, with actions and cross-appeals involving the PBA, UNITED, the NAKPILS, Juan J. Carlos, and the Court of Appeals.
The Supreme Court promulgated a decision on October 3, 1986 (decretal modifications summarized in the later resolution) and later received motions for reconsideration by UNITED (filed Dec. 24, 1986) and by the NAKPILS (filed Jan. 15, 1987), among other pleadings and replies.
The Second Division of the Supreme Court issued a resolution dated April 1, 1987 denying the NAKPILS’ first motion for reconsideration; further motions and comments followed, and the present Resolution (Paras, J.) dated April 15, 1988 addresses UNITED’s motion for reconsideration and the NAKPILS’ motion for leave to file a second motion for reconsideration (En Banc), denying them.

Factual Background

PBA constructed an office building on its 840-square-meter lot at the corner of Aduana and Arzobispo Streets, Intramuros, Manila.
PBA engaged Juan F. Nakpil & Sons and Juan F. Nakpil to prepare the plans, specifications and design for the building.
PBA contracted United Construction Company, Inc. (UNITED) for the construction on an administration basis; the building was completed in June 1966.
On August 2, 1968, a strong earthquake struck Manila and environs; the PBA building sustained major damage: front columns buckled and the building tilted forward dangerously.
UNITED temporarily shored the building at the expense of P13,661.28.
PBA filed suit on November 29, 1968 against UNITED and Juan J. Carlos (as President and General Manager of UNITED), alleging collapse caused by defects in construction.
UNITED filed a third-party complaint against the NAKPILS, alleging collapse due to defects in the architects’ plans, specifications and design.
The parties agreed at pre-trial to refer technical issues to a court-appointed commissioner; Andres O. Hizon (lawyer and structural engineer) was appointed.
PBA moved twice for demolition of the building on safety grounds; defendants opposed; matter referred to the Commissioner.
The building sustained further damage after later earthquakes described as occurring on April 7, 9 and 12, 1970; the source contains two references to the date the trial court authorized demolition — once as April 30, 1979 and elsewhere as April 30, 1970 (both dates appear in the source material).
The building’s actual demolition was undertaken by the buyer of the damaged building.

Commissioner's Findings (September 25, 1970 report)

The Commissioner found that the damage was directly caused by the August 2, 1968 earthquake but that the damage was also caused by:
- Defects in the plans and specifications prepared by the NAKPILS;
- UNITED’s deviations from those plans and specifications and failure to observe requisite workmanship during construction;
- Failure of PBA to exercise the requisite degree of supervision in the construction of the building.
Parties registered objections to the Commissioner’s findings; the Commissioner answered those objections.
The trial court agreed with the Commissioner’s findings except as to the holding that the owner (PBA) is charged with full-time supervision of construction, finding no legal or contractual basis for such a conclusion.

Trial Court Decision (September 21, 1971) — Decretal Portion

The trial court rendered judgment, including:
- Ordering UNITED and third-party defendants (except Roman Ozaeta) to pay P989,335.68 with legal interest from November 29, 1968 until full payment;
- Dismissing the complaint against Juan J. Carlos;
- Dismissing the third-party complaint;
- Dismissing defendants’ and third-party defendants’ counterclaim for lack of merit;
- Ordering UNITED and third-party defendants (except Roman Ozaeta) to pay costs in equal shares.

Court of Appeals Modification (Dispositive Portion quoted)

The Court of Appeals modified the trial-court judgment to include:
- An award of P200,000.00 in favor of PBA, with legal interest from November 29, 1968 until full payment, to be paid jointly and severally by UNITED and third-party defendants (except Roman Ozaeta).
In all other respects, the trial-court judgment as modified in a December 8, 1971 order was affirmed.
Costs to be paid by defendant and third-party defendant (except Roman Ozaeta) in equal shares.

Supreme Court Decision (October 3, 1986) — Quoted Decretal Modifications

The Supreme Court, in its October 3, 1986 decision, further modified the appealed decision and imposed:
- A solidary indemnity (Article 1723, Civil Code referenced) in favor of the Philippine Bar Association in the amount of FIVE MILLION (P5,000,000.00) Pesos to cover all damages occasioned by the loss of the building (explicitly including interest charges and lost rentals), excluding attorney’s fees;
- An additional ONE HUNDRED THOUSAND (P100,000.00) Pesos as and for attorney’s fees;
- The total sum to be payable upon finality of the decision; failure to pay upon finality would result in twelve percent (12%) per annum interest being imposed on the aforementioned amounts from finality until paid;
- Solidary costs against the defendant and third-party defendants (except Roman Ozaeta).
The October 3, 1986 decision thus substantially increased the monetary indemnity awarded to PBA compared to prior judgments.

Issues Raised in UNITED’s Motion for Reconsideration (enumerated in source)

I. Whether the Commissioner's and courts’ findings negate the premise that the building collapsed and thus