G.R. No. 3387 - Sugo vs. Green

Case Summary (G.R. No. 3387)

Nature of the Contract and Its Main Undertakings

The record disclosed that, on March 16, 1904, the defendants entered into a separate contract with the constructing quartermaster of the United States Army for the erection and construction of sixty-five frame buildings at Fort McKinley. Subsequently, on April 20, 1904, the plaintiffs and defendants executed the subcontract now in issue. Under this subcontract, the plaintiffs undertook to furnish substantially all masonry work, carpentry work, roofing work, and all work incidental to the construction of the fifteen designated buildings, including excavation for uprights and the placing of footings, and to perform all labor “in a good and workmanlike manner.”

The defendants, in turn, were obligated to supply “all materials of whatever kind or nature that might be reasonably necessary” for the erection and construction of the buildings and to deliver the necessary materials at the sites. Time was also essential. The plaintiffs were to complete the buildings within eight months from April 20, 1904. They were allowed to commence on May 1, 1904 and were required to commence no later than May 10, 1904. The subcontract further required a forfeiture of $25 United States currency for each day needed to complete the buildings after the expiration of the eight-month period, but included a proviso that the plaintiffs would not incur forfeiture or liability for delay caused by delay in the transportation of building material. The defendants were obligated to pay the plaintiffs 1,400 pesos (Mexican currency) for the labor performed for each building, with part of that sum payable during the progress of the work.

Events Leading to Impairment of Performance

A critical external event occurred when, due to the defendants’ own noncompliance with their contract with the United States Army, the defendants were prohibited on January 4, 1905 from continuing the Army contract by the commanding general, United States Army, Division of the Philippines. As a consequence, the plaintiffs were also prohibited on the same day from continuing their subcontract performance.

The plaintiffs asserted that if the defendants had furnished the needed materials as they were requested, the plaintiffs could have completed the subcontract within the contract period. The trial evidence, as evaluated by the lower court and accepted on appeal, showed that the plaintiffs were hindered and delayed in performing because the defendants failed to furnish necessary materials when needed. This finding was treated as binding because the appellate court found no evidence manifestly contrary to it.

The text identifies letters signed by the defendants—Green, Brown & Co. and named signatories—stating that because of bad weather, the defendants were unable to supply transportation adequate to meet the subcontractors’ needs, but that additional time would be allowed pending the defendants’ receipt of an answer to their request for an extension from the Government. The plaintiffs claimed these communications were delivered in November 1904, a fact not denied by the defendants. The appellate record also showed that, after the January 5, 1905 takeover by the military department for completion, it became necessary for the military department to furnish large quantities of supplies, supporting the conclusion that the defendants had not supplied materials in time to enable the plaintiffs to finish within the stipulated period.

Trial Court Findings on Responsibility and Entitlement to Recovery

The Court of First Instance made a factual finding that the plaintiffs were unable to comply with their contract with the defendants because of the defendants’ failure to supply transportation of material as required under the subcontract. The appellate court treated this as a factual determination insulated from reversal absent proof of manifest contradiction.

On the merits of damages, the plaintiffs claimed that the defendants’ failure to supply materials caused the noncompletion and, therefore, entitling them to payment under the subcontract. The appellate court accepted the premise that the breach was caused by the defendants and that the evidence showed the plaintiffs made every reasonable effort to comply. On that basis, the appellate court sustained the lower court’s approach: where the breach was attributable to the defendants, the plaintiffs were entitled to recover in damages for the part of the contract actually performed, less the amounts the plaintiffs had already received.

The lower court found that the plaintiffs were to receive 21,000 pesos upon completion of the entire subcontract. It further found that 64 per cent of the specified work had been completed, entitling the plaintiffs to 13,440 pesos. The appellate text states that the evidence showed the plaintiffs had been paid, in various ways, 9,989.25 pesos, leaving a balance due of 3,450.75 pesos at the time the plaintiffs were prohibited from completing the contract.

Dispute Over the Percentage of Work Completed

The litigation did not remain solely on responsibility. It also raised an evidentiary dispute on the percentage of work actually accomplished when the plaintiffs ceased working due to the prohibition in January 1905. The plaintiffs attempted to show that their completion ranged from seventy-five to eighty per cent of the labor contemplated. The defendants countered that a substantially lower percentage had been performed.

The lower court resolved the matter by averaging the percentage completion across each building based on the evidence, and it found that, at the time the plaintiffs ceased work, 64 per cent of the total amount of the work to be performed under the subcontract had been completed. The appellate court held that there was no evidence manifestly contrary to this finding of facts.

Parties’ Procedural Arguments Regarding the Death of a Partner

A further issue arose from the plaintiffs’ partnership structure. The appellate text states that after the commencement of the action in the lower court, one partner died. The defendants contended that the court should not have proceeded until a personal representative of the deceased partner had been appointed and made a party, relying on section 119 of the Code of Procedure in Civil Actions.

The appellate court rejected this contention. It held that section 119 did not apply to actions commenced by a partnership when one partner died during the pendency of the action. The Court reasoned that the surviving partners, as representatives of the partnership, had the right to continue the action to termination without the intervention of the personal representative of the deceased partner. It cited Art. 229 of the Code of Commerce and Wahl vs. Donaldson Sim & Co., as supporting authority.

Additional Claims and Limitations Imposed by the Bill of Exceptions and Failure to Appeal

The appellate record also reflects an argument by the plaintiffs on credits allowed by the judge below. The appellate court noted that the bill of exceptions presented in the case contained no exception by the plaintiffs, and that, moreover, the plaintiffs did not appeal from the judgment. Because of that procedural posture, the appellate court stated that it could not consider the issue, invoking rule 20 of the Supreme Court.

Disposition and Effect of the Appellate Review

The appellate court affirmed the judgment of the lower court with costs. It ordered that, after the expiration of ten days, judgment be entered in accordance with the appellate affirmance, and that ten days thereafter the case be returned to the lower court for proper action. The opinion reflects concurrence by Arellano, C.J., Torres, Mapa, Carson, Willard, and Tracey, JJ.

Legal Basis and Reasoning

The Court’s reasoning rested on the binding force of the lower court’s factual findings on causation and percentage completion, particularly because the appellate court found no evidence manifestly contrary to those findings. It applied the principle that w

Case Syllabus (G.R. No. 3387)

The case arose from an action filed in the Court of First Instance of the city of Manila to recover damages for the breach of contract.
The plaintiffs and appellees were T. Sugo and K. Shibata, acting as partners.
The defendants and appellants were George Green et al..
The Court of First Instance rendered judgment in favor of the plaintiffs, and the defendants appealed.
The Supreme Court affirmed the judgment with costs.

Contractual Background

On March 16, 1904, the defendants entered into a contract with the constructing quartermaster of the United States Army for the erection of sixty-five frame buildings at Fort McKinley, near the city of Manila.
On April 20, 1904, the parties to the present action entered into a subcontract whereby the plaintiffs undertook to furnish the masonry work, carpentry work, roofing work, and incidental work for fifteen of the buildings, identified as lieutenants’ quarters.
The plaintiffs’ scope of work included digging holes for uprights and putting in footings, to be done in a good and workmanlike manner.
The subcontract required the defendants to supply all materials of whatever kind and nature reasonably necessary for the construction.
The subcontract required the defendants to deliver such necessary materials upon the sites of the respective buildings.
The plaintiffs were obligated to complete the buildings within eight months from April 20, 1904.
The contract allowed commencement of work on May 1, 1904 and required commencement not later than May 10, 1904.
The subcontract included a forfeiture clause of $25 (United States currency) for each day needed to complete the buildings after the eight-month period.
The forfeiture clause expressly provided that the plaintiffs would not incur forfeiture, penalty, or liability for delay caused by delay in the transportation of building material.
The subcontract provided that the defendants would pay the plaintiffs for labor on each building at 1,400 pesos (Mexican currency).
The contract also specified that part of the 1,400 pesos would be paid at certain times during the progress of the work.

Alleged Breach and Causation

The defendants failed to comply with their contract with the constructing quartermaster, which led to them being prohibited on January 4, 1905 from continuing the U.S. Army construction contract.
As a consequence of that prohibition, the plaintiffs were likewise prohibited on January 4, 1905 from continuing performance of the subcontract.
The plaintiffs argued that if the defendants had furnished building material as needed and demanded, the plaintiffs could have completed within the contract period.
The Supreme Court treated it as established that the plaintiffs were hindered and delayed by the defendants’ failure to furnish necessary material as needed for performance.
The Court relied on letters signed by the defendants to support the conclusion of causation.
One undated letter informed subcontractors that due to bad weather the defendants had been unable to supply adequate transportation and therefore allowed more time while awaiting an answer from the Government for an extension.
The plaintiffs claimed that the undated letter was delivered in November 1904, and the Court noted that this was not denied.
The plaintiffs’ contract deadline had been on or before December 20, 1904, based on the eight-month period.
The Court further observed that when the military department took over the construction after January 5, 1905, it had to furnish large quantities of supplies, reflecting the defendants’ failure to supply material timely.

Findings of Fact Below

The trial court found as a fact that the plaintiffs were unable to comply with their contract terms due to the defendants’ failu