G.R. No. 196383 - Pascua vs. G and G Realty Corp.

Case Summary (G.R. No. 196383)

Key Dates

Contract executed: October 15, 1999. Trial court judgment: January 31, 2007. Court of Appeals first decision: May 11, 2009 (affirming RTC with modification). Court of Appeals amended decision: March 15, 2010 (vacating its May 11, 2009 decision). Supreme Court decision date: 2012 (petition resolved under the 1987 Constitution and Rule 45).

Applicable Law and Authorities

Constitutional basis: 1987 Philippine Constitution (as the decision postdates 1990). Procedural basis: Rule 45, Rules of Court (petition for review on certiorari). Relevant jurisprudence cited by the Court: Liberty Construction & Development Corp. v. Court of Appeals; Dieparine, Jr. v. Court of Appeals; Heirs of Ramon Gaite v. The Plaza, Inc. Contract law principles including reciprocal obligations in construction contracts and the equitable doctrine of quantum meruit are applied.

Factual Background

Parties entered into an agreement for the construction of a four-storey commercial building and a two-storey kitchen/dining hall for P11,100,000. Petitioner agreed to provide materials, labor, technical expertise, and supervision; respondent agreed to pay the contract price. During construction respondent required additional works and change orders not covered by the original contract. Petitioner prioritized these additional works, which interrupted and delayed construction. Petitioner completed the project in 2000 but behind schedule; after punch-list repairs were completed, respondent refused to pay outstanding obligations.

Trial Court Ruling

The RTC found for petitioner. It concluded the delay was reasonable and attributable to respondent’s additional works and change orders; respondent did not deny the existence of those works. The RTC held petitioner had completed punch-list repairs and that respondent should have identified remaining defects upon receipt of the repair list. The RTC ordered respondent to pay the remaining balance of the contract price (less government permits and taxes shouldered by respondent, subject to proof), awarded P50,000 as attorney’s fees, and imposed costs of suit.

Court of Appeals — First Decision (May 11, 2009)

The Court of Appeals initially affirmed the trial court’s judgment with modification: it ordered respondent to pay the remaining balance of the contract price but deducted penalties and incidental expenses related to violations cited by the Bureau of Fire Protection (BFP) and Maynilad, and costs of government permits and taxes shouldered by respondent. The CA deleted the RTC’s award of attorney’s fees for lack of basis.

Court of Appeals — Amended Decision (March 15, 2010)

On reconsideration the Court of Appeals vacated its May 11, 2009 decision and set aside the RTC judgment. The CA’s Amended Decision found petitioner liable and ordered petitioner to pay respondent amounts representing penalties/expenses (P160,107.07) and a refundable balance (P177,360.10), plus costs. The CA concluded that petitioner’s acceptance of two new contracts for repair works caused the delay, not respondent’s change orders.

Issues Raised in the Petition for Review

Petitioner assailed the CA’s Amended Decision on multiple grounds including: (1) the CA reversed itself without justification and disregarded overwhelming proof supporting petitioner’s claim for unpaid contract balance; (2) misappreciation and misconstruction of evidence; (3) the CA’s finding that petitioner caused the delay contradicts trial court findings supported by evidence; (4) admission of hearsay by the CA; (5) alleged lack of respondent’s authority to appeal; and (6) procedural defects in awarding BFP and Maynilad penalties due to lack of filing fee payment for permissive counterclaims.

Legal Issue Presented

Whether petitioner is entitled to the unpaid balance of the contract price given the delays claimed by respondent and the evidentiary record establishing causes of delay.

Standard of Review Employed

The Supreme Court emphasized that factual findings of trial courts deserve great weight and respect on appeal when supported by unrebutted testimonial and documentary evidence. The Court cautioned against undue departure from such findings absent clear justification, and against piecemeal reassessment that relies on hearsay or unsupported inferences.

Findings on Cause of Delay

The Supreme Court agreed with the RTC’s factual determination that respondent’s additional works and change orders—ordered through respondent’s representative (Dra. Germar) and including roof deck construction, installation of aluminum windows, insulation, narra parquet, additional lighting, doors, comfort rooms, air-conditioning units, etc.—caused the delay. Those works were outside the original agreement and, because petitioner was instructed to prioritize them (including access constraints such as a 1.5-meter roof-deck access that impeded material passage), petitioner had to stop work on the original building. The Court found these facts were established by testimonial and documentary evidence (Exhs. Aja to Aqa) and were unrebutted.

Reasoning on Appellate Court’s Error

The Supreme Court concluded

Case Syllabus (G.R. No. 196383)

Case Citation and Procedural Posture

Reported at 697 Phil. 483, Third Division, G.R. No. 196383, decided October 15, 2012.
Petition for Review on Certiorari filed by petitioner pursuant to Rule 45 of the Rules of Court, assailing the Court of Appeals’ Amended Decision dated March 15, 2010 in CA-G.R. CV No. 89480.
Appeal arises from a Complaint for Sum of Money with Damages filed by petitioner before the Regional Trial Court (RTC) of Pasig City, Branch 67, following respondent’s refusal to pay the outstanding contract balance after completion and punch-listing of the project.

Parties and Contract

Petitioner: Robert Pascua, doing business under the name and style TRI-WEB CONSTRUCTION.
Respondent: G & G Realty Corporation.
Original Agreement dated October 15, 1999 for construction of a four-storey commercial building and two-storey kitchen with dining hall.
Contract price: Eleven Million One Hundred Thousand Pesos (P11,100,000.00).
Petitioner’s undertaking: provide all materials and adequate labor, technical expertise and supervision.
Respondent’s undertaking: pay the contract price.

Factual Background and Course of Construction

During construction, respondent required petitioner to undertake several additional works and change order works not covered by the original agreement.
Respondent, through Dra. Germar, ordered works including construction of a roof deck, installation of aluminum windows, insulation, narra parquet, additional lights, doors, comfort rooms and air conditioning units (documentary exhibits Exhs. aJa to aQa).
These additional works were performed in the same area covered by the Agreement.
Because respondent instructed petitioner to prioritize the change order and additional works, petitioner temporarily halted construction of the four-storey building to accommodate the prioritized tasks.
Specific logistical issue cited: access to the roof deck was only 1.5 meters, necessitating stoppage of the building construction to allow materials to pass through.
Petitioner completed the four-storey building and two-storey kitchen with dining hall sometime in 2000, albeit beyond the scheduled turnover date.
Parties proceeded to punch-list minor repair works; petitioner completed the punch-list repairs as shown by testimonial and documentary evidence.
After completion and completion of punch-list items, respondent refused to settle outstanding obligations to petitioner.

Trial Court Findings and Relief (RTC, January 31, 2007)

The trial court ruled in favor of petitioner, finding the delay in completion reasonable and attributable to respondent’s additional works and change orders; respondent did not deny the existence of such additional works.
Trial court found petitioner had sufficiently explained delays and could not be faulted for any shortage in labor, since additional works were not contemplated in the original agreement.
Trial court found that punch-listed repairs had been completed as proven by testimonial and documentary evidence; if defects remained respondent should have pointed them out when it received proof of the accomplished repairs.
Judgment ordered respondent to pay petitioner:
- The remaining balance of the contract price, less the cost of government permits and taxes which may have been shouldered by respondent, subject to documentary proof;
- Php50,000.00 by way of attorney’s fees;
- Costs of suit.

Court of Appeals — Original Decision (May 11, 2009)

The Court of Appeals affirmed the trial court’s ruling with modification:
- Ordered G & G Realty Corporation to pay plaintiff-appellee Robert Pascua:
  1. The remaining balance of the contract price, less the penalty and other incidental expenses spent vis-à-vis the violations cited by BFP and Maynilad, as well as the cost of government permits and taxes which may have been shouldered by G & G in relation to said violations;
  2. Costs of suit.
- The appellate court deleted the award of attorney’s fees for lack of basis.

Court of Appeals — Amended Decision on Reconsideration (March 15, 2010)

Upon respondent’s motion for reconsideration, the Court of Appeals reconsidered and vacated its original May 11, 2009 Decision.
The Amended Decision ruled in favor of respondent and set aside the RTC judgment.
Dispositive orders in the Amended Decision:
- Directed plaintiff-appellee Robert Pascua to pay defendant-appellant G & G Realty Corporation:
  - The amount of P160,107.07 as penalty and other in
  ...continue reading