December 2010 - Philippine Supreme Court Decisions/Resolutions
Philippine Supreme Court Jurisprudence
SECOND DIVISION
G.R. No. 177556 : December 8, 2010
TRANSCEPT CONSTRUCTION AND MANAGEMENT PROFESSIONALS, INC., Petitioner, v. TERESA C. AGUILAR, Respondent.
D E C I S I O N
CARPIO, J.:
The Case
Before the Court is a petition for review assailing the 24 January 2007 Decision1cralawand the 20 April 2007 Resolution2cralawof the Court of Appeals in CA-G.R. SP No. 93021.
The Antecedent Facts
From the decisions of the Court of Appeals and the Construction Industry Arbitration Commission (CIAC), we gathered the following facts:chanroblesvirtuallawlibrary
On
18 August 2004, Teresa C. Aguilar (Aguilar) entered into an Owner-General
Contractor Agreement (First Contract) with Transcept Construction and
Management Professionals, Inc. (Transcept) for the construction of a two-storey
split level vacation house (the Project) located at Phase 3, Block 3, Lot 7,
Canyon Woods, Laurel, Batangas. Under
the First Contract, the Project would cost P3,486,878.64 and was to be
completed within 2103cralawworking days from the date of the First Contract or on 7 June 2005. Aguilar paid a downpayment of P1
million on 27 August 2004.
On
30 November 2004, Transcept submitted its First Billing to Aguilar for work
accomplishments from start to 15 November 2004, in accordance with the
Progressive Billing payment scheme. Aguilar paid P566,356.
On
1 February 2005, Aguilar received the Second Billing amounting to P334,488
for the period of 16 November 2004 to 15 December 2004. Transcept informed Aguilar that non-payment
would force them to halt all works on the Project. Aguilar questioned the Second Billing as
unusual for being 45 days ahead of actual accomplishment. Aguilar did not pay and on 2 February 2005,
Transcept stopped working on the Project.
Thereafter,
Aguilar hired ASTEC, a duly accredited testing laboratory, to test Transcept�s
quality of work. The test showed
substandard works done by Transcept. In
a letter dated 7 March 2005, Transcept outlined its program to reinforce or
redo the substandard works discovered by ASTEC. On 28 March 2005, ASTEC, through Engr. Jaime E. Rioflorido (Engr.
Rioflorido), sent Aguilar an Evaluation of Contractor�s Performance which
showed that aside from the substandard workmanship and use of substandard
materials, Transcept was unreasonably and fraudulently billing Aguilar. Of the downpayment amounting to P1,632,436.29,
Engr. Rioflorido�s reasonable assessment
of Transcept�s accomplishment amounted only to P527,875.94. Engr. Rioflorido recommended the partial
demolition of Transcept�s work.
On
30 May 2005, Transcept and Aguilar entered into a Construction Contract (Second
Contract) to extend the date of completion from 7 June 2005 to 29 July 2005 and
to use up the P1.6 million downpayment paid by Aguilar. Aguilar hired the services of Engr. Edgardo
Anonuevo (Engr. Anonuevo) to ensure that the works would comply with the plans
in the Second Contract.
Transcept
failed to finish the Project on 29 July 2005, alleging that the delay was due
to additional works ordered by Aguilar. Transcept also asked for payment of the additional amount of P290,824.96. Aguilar countered that the Second Contract
did not provide for additional works.
On
2 September 2005, Aguilar sent a demand letter to Transcept asking for payment
of P581,844.54 for refund and damages. Transcept ignored the demand letter. On 6 September 2005, Aguilar filed a complaint against Transcept before
CIAC.
The Decision of the CIAC
CIAC
assessed the work accomplished with the corresponding costs, as against the
downpayment of P1,632,436.29 which was the contract price in the Second
Contract. On 16 January 2006, the CIAC
promulgated its Decision.4cralaw
For Labor and Materials of the Scope of Work, the
CIAC credited the accomplishment to be P1,110,440.13 representing
Aguilar�s estimate which was reassessed by the CIAC after the ocular
inspection conducted by the parties. For
indirect costs for General Requirements of the Scope of Work, the CIAC�s
computation was P275,355.50. The
CIAC noted that Aguilar did not submit any evidence on indirect costs and her
counsel did not cross-examine Transcept�s witnesses on the matter. For the Septic Tank, which the CIAC found to
be part of the Second Contract, the CIAC assessed the accomplishment to amount
to P7,300. The CIAC added 5%
Contingencies and 10% Contractor�s Profit which are the minimum factors in
making estimates practiced in the construction industry. The CIAC thus estimated that the total
accomplishment amounted to P1,602,359.97 which was P30,076.72 below the contract price of
P1,632,436.29. The tabulated
amount shows:chanroblesvirtuallawlibrary
Direct Costs for Labor and Materials
P1,110,440.13Indirect Costs for General Requirements 275,355.50
Septic Tank 7,300.00
Sub-Total
P1,393,095.63Plus 5% Contingencies 69,654.78
Add 10% of Sub-Total for Contractor�s Profit 139,309.56
Total
P1,602,359.97
The
CIAC ruled that the accomplishment of P1,602,359.97 was 98.16% of P1,632,436.29,
which was way above 95% and should therefore be considered as substantial
completion of the Project. As such, the
CIAC ruled that liquidated damages could not be awarded to Aguilar. The CIAC, however, ruled that Aguilar was
entitled to P75,000 as Consultancy Expenses.
The
CIAC also found that Aguilar demanded extra works which entailed additional
working days. The CIAC computed that the
additional works performed over and above the Second Contract amounted to P189,909.91.
The dispositive portion of the CIAC�s decision reads:chanroblesvirtuallawlibrary
In view of all the foregoing, it is hereby ordered that:chanroblesvirtuallawlibrary
1. Respondent [Transcept] shall pay Claimant [Aguilar] the amount of
P30,076.72, representing the unaccomplished works in the contract, plus 6% interests from the date of the promulgation of this case, until fully paid.2. Respondent shall pay Claimant the amount of
P75,000.00, representing the cost of Consultancy Services, plus 6% interests from the date of the promulgation of this case, until fully paid.3. Claimant shall pay Respondent the amount of
P189,909.91, representing the cost of work performed over & above the scope of work in the contract.4. The cost for liquidated damages and cost representing interests of construction bond, prayed for the Claimant, are denied for being without merit.
5. Attorney�s fees prayed for by both parties are denied for being without merit.
6. Cost of Arbitration shall be shared equally by the parties.
SO ORDERED.5cralaw
Aguilar assailed the CIAC�s decision before the Court of Appeals.
The Decision of the Court of Appeals
In its 24 January 2007 Decision, the Court of Appeals reversed the CIAC�s decision.
The Court of Appeals agreed with the CIAC that Aguilar did
not allege in her complaint the amount corresponding to the indirect costs
for General Requirements. However, the Court of Appeals made a
recomputation of the indirect costs for General Requirements based on P1,632,436.29 and made the following
findings:chanroblesvirtuallawlibrary
Direct Costs for Labor and Materials
P1,110,440.13Indirect Costs for General Requirements 128,799.22
Septic Tank 7,300.00
Sub-Total
P1,246,539.35Plus 5% Contingencies 62,326.96
Add 10% of Sub-Total for Contractor�s Profit 124,653.93
Total
P1,433,520.24
The Court of Appeals then
deducted P1,433,520.24 from P1,632,436.29 and concluded that
Aguilar is entitled to P198,916.05 instead of P30,076.72.
From the above computation, the Court of Appeals ruled that
Transcept only accomplished 87.81% of the contract price thus entitling Aguilar
to liquidated damages equivalent to 10% of P1,632,436.29 or P163,243.63.
The Court of Appeals further ruled that Transcept was not
entitled to payment for additional works because they were in fact only rectifications
of the works poorly done by Transcept. Finally, the Court of Appeals ruled that Aguilar was able to prove that
she paid P135,000 for consultancy services.
The dispositive portion of the Court of Appeals� decision reads:chanroblesvirtuallawlibrary
WHEREFORE, the foregoing considered, the instant petition is hereby GRANTED and the assailed decision REVERSED AND SET ASIDE. Accordingly, a new one is entered ordering respondent to pay petitioner the following:chanroblesvirtuallawlibrary
1)
P198,916.02 for unaccomplished works in the second contract, plus 6% interest from the date of the filing of the case, until fully paid;2)
P135,000.00, representing the cost of consultancy services, plus 6% interest from the filing of the case, until fully paid; and3)
P163,243.63 as and by way of liquidated damages.The award of
P189,909.91 in favor of Aguilar for additional works is hereby deleted.No costs.
SO ORDERED.6cralaw
Transcept filed a motion for reconsideration. In its 20 April 2007 Resolution, the Court of Appeals denied the motion.
Hence, the petition before this Court.
The Issues
The issues in this case are the following:chanroblesvirtuallawlibrary
1. Whether the Court of Appeals erred in holding that Aguilar is entitled to
P198,916.02 instead ofP30,076.72 for unaccomplished works;2. Whether the Court of Appeals erred in awarding Aguilar liquidated damages;
3. Whether the Court of Appeals erred in deleting the CIAC�s award of
P189,909.91 to Transcept representing additional works done under the Second Contract; and4. Whether the Court of Appeals erred in awarding Aguilar the amount of
P135,000 for consultancy services.
The Ruling of this Court
The petition is partly meritorious.
Refund for Unaccomplished Works
The Court of Appeals ruled that CIAC erred in adopting
Transcept�s computation of unaccomplished works. The Court of Appeals agreed with Aguilar that
the CIAC�s computation was based on what Transcept submitted which was based on
the original contract price of P3,486,878.64 instead of the contract
price of P1,632,436.29 under the Second Contract.
However, the Court of Appeals failed to consider the CIAC�s as well as its own finding that Aguilar did not present any evidence on indirect costs for General Requirements. In addition, Aguilar�s counsel did not cross-examine Transcept�s witnesses. In short, Aguilar did not dispute but merely accepted Transcept�s computation on indirect expenses. Aguilar did not interpose any objection to the computation until after the CIAC ruled that Transcept substantially complied with the Project. We also note Transcept�s explanation, as well as the CIAC�s finding, that General Requirements refer to mobilization, overhead, insurance, hoarding and protection, temporary facilities, equipment, materials testing, line set out, as-built drawings, and clean out. They had been used up at the start of the Project. Hence, costs for General Requirements are not dependent on the amount of the contract because they were incurred at the beginning of the Project. We should therefore revert to the computation made by the CIAC, as follows:chanroblesvirtuallawlibrary
Direct Costs for Labor and Materials
P1,110,440.13Indirect Costs for General Requirements 275,355.50
Septic Tank 7,300.00
Sub-Total
P1,393,095.63Plus 5% Contingencies 69,654.78
Add 10% of Sub-Total for Contractor�s Profit 139,309.56
Total
P1,602,359.97
Liquidated Damages
Section 20.11(A)(a) of the Construction Industry Authority of the Philippines (CIAP) Document No. 102 provides that �[t]here is substantial completion when the Contractor completes 95% of the Work, provided that the remaining work and the performance of the work necessary to complete the Work shall not prevent the normal use of the completed portion.�
According to CIAC�s computation, Transcept�s accomplishment amounted to 98.16% of the contract price. It is beyond the 95% required under CIAP Document No. 102 and is considered a substantial completion of the Project. We thus agree with CIAC�s application of Article 1234 of the Civil Code, which provides that �[i]f the obligation had been substantially performed in good faith, the obligor may recover as though there had been a strict and complete fulfillment, less damages suffered by the obligee.�7cralaw
There being a substantial completion of the Project, Aguilar
is not entitled to liquidated damages but only to actual damages of P30,076.72,
representing the unaccomplished works in the Second Contract as found by the
CIAC, which is the difference between the contract price of P1,632,436.29
and the accomplishment of P1,602,359.97.
Additional Works
The Second Contract excluded the construction of the following works:chanroblesvirtuallawlibrary
1. Architectural Works - - Roofing System
2. Interior Fit-Out Works/Glass/Windows/CAB/CARP
3. Truss System
4. Supply and Installation of Plumbing Fixtures and Bathroom Accessories
5. Supply and Installation of Downspout System
6. Electrical Roughing-in and Wiring Works
7. Supply and Installation of Wiring Devices
8. Supply and Installation of Circuit Breakers
9. Testing and Commissioning.8cralaw
The CIAC found that Aguilar demanded additional works from Transcept. The CIAC found that the additional works include the balcony, lifting of roof beams, and extra fast walls which are not covered by the Second Contract. However, we agree with the Court of Appeals that the works done were just for correction of the substandard works done under the First Contract. During the ocular inspection, Aguilar pointed out that the lifting of the roof beam was done because the construction was three meters short of that specified in the First Contact.9cralawHence, while the roofing system is excluded from the Second Contract, it could not be said that the lifting of the roof beam is an additional work on the part of Transcept.
The Court notes that the Second Contract was entered into by the parties precisely to correct the substandard works discovered by ASTEC. Hence, Aguilar should not be made to pay for works done to correct these substandard works.
Consultancy Services
The Court of Appeals correctly awarded Aguilar the cost of
consultancy services amounting to P135,000. While Engr. Rioflorido was not presented as a
witness, it was established that Aguilar hired ASTEC, a duly accredited testing
laboratory, to test Transcept�s quality of work, and that Engr. Rioflorido
represented ASTEC. As found by the Court
of Appeals, Aguilar paid Engr. Rioflorido the amount of P65,000 for the
services, which should be added to the P75,000 consultancy services
awarded to Aguilar.10cralaw
WHEREFORE, we AFFIRM the 24 January 2007 Decision
and the 20 April 2007 Resolution of the Court of Appeals in CA-G.R. SP No.
93021, with the MODIFICATION that the award of P198,916.02 for
unaccomplished works is reduced to P30,076.72, and the award of P163,243.63
for liquidated damages is deleted.
SO ORDERED.
ANTONIO T. CARPIO
Associate Justice
WE CONCUR:
RENATO C. CORONA*
Chief
Justice
ANTONIO
EDUARDO B. NACHURA
Associate Justice
ROBERTO A. ABAD
Associate Justice
JOSE C.
MENDOZA
Associate Justice
ATTESTATION
I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court�s Division.
ANTONIO T. CARPIO
Associate Justice
Chairperson
CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairperson�s Attestation, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court�s Division.
RENATO C. CORONA
Chief Justice
cralaw Endnotes:
* Designated additional member per Raffle dated 8 December 2010.
1cralawRollo, pp. 61-74. Penned by Associate Justice Josefina Guevara-Salonga with Associate Justices Vicente Q. Roxas and Ramon R. Garcia, concurring.
2cralawId. at 76-77.
3cralaw120 days in the Decision of the Court of Appeals.
4cralawRollo, pp. 107-123. Penned by Sole Arbitrator Jacinto M. Butalid.
5cralawId. at 123.
6cralawId. at 73-74.
7cralawSee Diesel Construction Co., Inc. v. UPSI Property Holdings, Inc., G.R. No. 154885, 24 March 2008, 549 SCRA 12.
8cralawRollo, pp. 111-112.
9cralawTranscript of the Ocular Inspection, pp. 28-29.
10cralawCA rollo, p. 292.
