Source: http://lawlibrary.chanrobles.com/index.php?option=com_content&view=article&id=83386:57483&catid=1587&Itemid=566
Timestamp: 2019-04-23 04:20:05+00:00

Document:
G.R. No. 194507, September 08, 2014 - FEDERAL BUILDERS, INC., Petitioner, v. FOUNDATION SPECIALISTS, INC., Respondent.; G.R. NO. 194621 - FOUNDATION SPECIALISTS, INC., Petitioner, v. FEDERAL BUILDERS, INC., Respondent.
FEDERAL BUILDERS, INC., Petitioner, v. FOUNDATION SPECIALISTS, INC., Respondent.
FOUNDATION SPECIALISTS, INC., Petitioner, v. FEDERAL BUILDERS, INC., Respondent.
Before the Court are two consolidated cases, namely: (1) Petition for review on certiorari under Rule 45 of the Rules of Court, docketed as G.R. No. 194507, filed by Federal Builders, Inc., assailing the Decision1 and Resolution,2 dated July 15, 2010 and November 23, 2010, respectively, of the Court of Appeals (CA) in CA-G.R. CV No. 70849, which affirmed with modification the Decision3 dated May 3, 2001 of the Regional Trial Court (RTC) in Civil Case No. 92-075; and (2) Petition for review on certiorari under Rule 45 of the Rules of Court, docketed as G.R. No. 194621, filed by Foundation Specialists, Inc., assailing the same Decision4 and Resolution,5 dated July 15, 2010 and November 23, 2010, respectively, of the CA in CA- G.R. CV No. 70849, which affirmed with modification the Decision6 dated May 3, 2001 of the RTC in Civil Case No. 92-075.
On August 20, 1990, Federal Builders, Inc. (FBI) entered into an agreement with Foundation Specialists, Inc. (FSI) whereby the latter, as sub-contractor, undertook the construction of the diaphragm wall, capping beam, and guide walls of the Trafalgar Plaza located at Salcedo Village, Makati City (the Project), for a total contract price of Seven Million Four Hundred Thousand Pesos (P7,400,000.00).7 Under the agreement,8 FBI was to pay a downpayment equivalent to twenty percent (20%) of the contract price and the balance, through a progress billing every fifteen (15) days, payable not later than one (1) week from presentation of the billing.
On January 9, 1992, FSI filed a complaint for Sum of Money against FBI before the RTC of Makati City seeking to collect the amount of One Million Six Hundred Thirty-Five Thousand Two Hundred Seventy-Eight Pesos and Ninety-One Centavos (P1,635,278.91), representing Billings No. 3 and 4, with accrued interest from August 1, 1991 plus moral and exemplary damages with attorney’s fees.9 In its complaint, FSI alleged that FBI refused to pay said amount despite demand and its completion of ninety-seven percent (97%) of the contracted works.
In its Answer with Counterclaim, FBI claimed that FSI completed only eighty-five percent (85%) of the contracted works, failing to finish the diaphragm wall and component works in accordance with the plans and specifications and abandoning the jobsite. FBI maintains that because of FSI’s inadequacy, its schedule in finishing the Project has been delayed resulting in the Project owner’s deferment of its own progress billings.10 It further interposed counterclaims for amounts it spent for the remedial works on the alleged defects in FSI’s work.
Defendant’s counterclaim is denied for lack of factual and legal basis.
On appeal, the CA affirmed the Decision of the lower court, but deleted the sum of P279,585.00 representing the cost of undelivered cement and reduced the award of attorney’s fees to P50,000.00. In its Decision12 dated July 15, 2010, the CA explained that FSI failed to substantiate how and in what manner it incurred the cost of cement by stressing that its claim was not supported by actual receipts. Also, it found that while the trial court did not err in awarding attorney’s fees, the same should be reduced for being unconscionable and excessive.
Both parties filed separate Motions for Reconsideration assailing different portions of the CA Decision, but to no avail.14 Undaunted, they subsequently elevated their claims with this Court via petitions for review on certiorari.
On the one hand, FSI asserted that the CA should not have deleted the sum of P279,585.00 representing the cost of undelivered cement and reduced the award of attorney’s fees to P50,000.00, since it was an undisputed fact that FBI failed to deliver the agreed quantity of cement. On the other hand, FBI faulted the CA for affirming the decision of the lower court insofar as the award of the sum representing Billings 3 and 4, the interest imposed thereon, and the rejection of his counterclaim were concerned. In a Resolution15 dated February 21, 2011, however, this Court denied, with finality, the petition filed by FSI in G.R. No. 194621 for having been filed late.
THE COURT OF APPEALS COMMITTED A CLEAR, REVERSABLE ERROR WHEN IT AFFIRMED THE TRIAL COURT’S JUDGMENT THAT FEDERAL BUILDERS, INC. WAS LIABLE TO PAY THE BALANCE OF P1,024,600.00 LESS THE AMOUNT OF P33,354.40 NOTWITHSTANDING THAT THE DIAPHRAGM WALL CONSTRUCTED BY FOUNDATION SPECIALIST, INC. WAS CONCEDEDLY DEFECTIVE AND OUT-OF-SPECIFICATIONS AND THAT PETITIONER HAD TO REDO IT AT ITS OWN EXPENSE.
THE COURT OF APPEALS COMMITTED GRAVE AND SERIOUS REVERSABLE ERROR WHEN IT DISMISSED THE COUNTERCLAIM OF PETITIONER NOTWITHSTANDING OVERWHELMING EVIDENCE SUPPORTING ITS CLAIM OF P8,582,756.29 AS ACTUAL DAMAGES.
None of the aforementioned exceptions are present herein. In the assailed Decision, the RTC meticulously discussed the obligations of each party, the degree of their compliance therewith, as well as their respective shortcomings, all of which were properly substantiated with the corresponding documentary and testimonial evidence.
On March 8, 1991, plaintiff had finished the construction of the guide wall and diaphragm wall (Exh. “R”) but had not yet constructed the capping beam as of April 22, 1991 for defendant’s failure to deliver the needed cement in accordance with their agreement (Exhibit “I”). The diaphragm wall had likewise been concrete tested and was found to have conformed with the required design strength (Exh. “R”).
Subsequently, plaintiff was paid the aggregate amount of P5,814,000.00. But as of May 30, 1991, plaintiff’s billings numbers 3 and 4 had remained unpaid (Exhs. “L”, “M”, and “M-1”).
On the misaligned diaphragm wall from top to bottom and in-between panels, plaintiff explained that in the excavation of the soil where the rebar cages are lowered and later poured with concrete cement, the characteristics of the soil is not the same or homogenous all throughout. Because of this property of the soil, in the process of excavation, it may erode in some places that may cause spaces that the cement may fill or occupy which would naturally cause bulges, protrusions and misalignment in the concrete cast into the excavated ground (tsn., June 1, 2000, pp 14-18). This, in fact was anticipated when the agreement was executed and included as provision 6.4 thereof.
The construction of the diaphragm wall panel by panel caused misalignment and the chipping off of the portions misaligned is considered a matter of course. Defendant, as the main contractor of the project, has the responsibility of chopping or chipping off of bulges (tsn., ibid, pp 20-21).
Wrong location of rebar dowels was anticipated by both contractor and subcontractor as the latter submitted a plan called “Detail of Sheer Connectors” (Exh “T”) which was approved. The plan provided two alternatives by which the wrong location of rebar dowels may be remedied. Hence, defendant, aware of the possibility of inaccurate location of these bars, cannot therefore ascribe the same to the plaintiff as defective work.
Construction of the capping beam required the use of cement. Records, however, show that from September 14, 1990 up to May 30, 1991 (Exhs. “B” to “L”), plaintiff had repeatedly requested defendant to deliver cement. Finally, on April 22, 1991, plaintiff notified defendant of its inability to construct the capping beam for the latter’s failure to deliver the cement as provided in their agreement (Exh. “I”). Although records show that there was mention of revision of design, there was no evidence presented to show such revision required less amount of cement than what was agreed on by plaintiff and defendant.
It is clear from the foregoing that contrary to the allegations of FBI, FSI had indeed completed its assigned obligations, with the exception of certain assigned tasks, which was due to the failure of FBI to fulfil its end of the bargain.
Defendant admitted that it had paid P6 million based on its evaluation of plaintiff’s accomplishments (tsn., Sept. 28, 2000, p. 17) and its payment was made without objection on plaintiff’s works, the majority of which were for the accomplishments in the construction of the diaphragm wall (tsn., ibid, p. 70).
Thus, in the absence of any record to otherwise prove FSI’s neglect in the fulfilment of its obligations under the contract, this Court shall refrain from reversing the findings of the courts below, which are fully supported by and deducible from, the evidence on record. Indeed, FBI failed to present any evidence to justify its refusal to pay FSI for the works it was contracted to perform. As such, We do not see any reason to deviate from the assailed rulings.
2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum. No interest, however, shall be adjudged on unliquidated claims or damages, except when or until the demand can be established with reasonable certainty. Accordingly, where the demand is established with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code), but when such certainty cannot be so reasonably established at the time the demand is made, the interest shall begin to run only from the date the judgment of the court is made (at which time the quantification of damages may be deemed to have been reasonably ascertained). The actual base for the computation of legal interest shall, in any case, be on the amount finally adjudged.
It should be noted, however, that the new rate could only be applied prospectively and not retroactively. Consequently, the twelve percent (12%) per annum legal interest shall apply only until June 30, 2013. Come July 1, 2013, the new rate of six percent (6%) per annum shall be the prevailing rate of interest when applicable. Thus, the need to determine whether the obligation involved herein is a loan and forbearance of money nonetheless exists.
This case, however, does not involve an acquiescence to the temporary use of a party’s money but a performance of a particular service, specifically the construction of the diaphragm wall, capping beam, and guide walls of the Trafalgar Plaza.
A review of similar jurisprudence would tell us that this Court had repeatedly recognized this distinction and awarded interest at a rate of 6% on actual or compensatory damages arising from a breach not only of construction contracts,28 such as the one subject of this case, but also of contracts wherein one of the parties reneged on its obligation to perform messengerial services,29 deliver certain quantities of molasses,30 undertake the reforestation of a denuded forest land,31 as well as breaches of contracts of carriage,32 and trucking agreements.33 We have explained therein that the reason behind such is that said contracts do not partake of loans or forbearance of money but are more in the nature of contracts of service.
Thus, in the absence of any stipulation as to interest in the agreement between the parties herein, the matter of interest award arising from the dispute in this case would actually fall under the second paragraph of the above-quoted guidelines in the landmark case of Eastern Shipping Lines, which necessitates the imposition of interest at the rate of 6%, instead of the 12% imposed by the courts below.
In view of the foregoing, therefore, We find no compelling reason to disturb the factual findings of the RTC and the CA, which are fully supported by and deducible from, the evidence on record, insofar as the sum representing Billings 3 and 4 is concerned. As to the rate of interest due thereon, however, We note that the same should be reduced to 6% per annum considering the fact that the obligation involved herein does not partake of a loan or forbearance of money.
WHEREFORE, premises considered, the instant petition is DENIED. The Decision and Resolution, dated July 15, 2010 and November 23, 2010, respectively, of the Court of Appeals in CA-G.R. CV No. 70849 are hereby AFFIRMED with MODIFICATION. Federal Builders, Inc. is ORDERED to pay Foundation Specialists, Inc. the sum of P1,024,600.00 representing billings 3 and 4, less the amount of P33,354.40, plus interest at six percent (6%) per annum reckoned from August 30, 1991 until full payment thereof.
Peralta, (Acting Chairperson), Villarama, Jr., Reyes, Leonen,* and Jardeleza, JJ., concur.
* Designated Member per Raffle dated September 8, 2014.
1 Penned by Associate Justice Juan Q. Enriquez, Jr., with Associate Justices Ramon M. Bato, Jr. and Florito S. Macalino, concurring; Annex “B” to Petition, rollo (G.R. No. 194507), pp. 60-69.
2 Annex “C” to Petition, id. at 70-72.
3 Penned by Judge Estela Perlas-Bernabe, Annex “D” to Petition, rollo (G.R. No.194621), pp. 69-78.
7Rollo (G.R. No. 194507), p. 62.
11Rollo (G.R. No. 194621), p. 78.
12Rollo (G.R. No. 194507), pp. 61-68.
15 Id. at 107-108. See also Entry of Judgment, rollo (G.R. No. 194621), pp. 91-92.
16Malayan Insurance Co., Inc. v. Philippines First Insurance Co., Inc., G.R. No. 184300, July 11, 2012, citing Philippine Health-Care Providers, Inc. (Maxicare) v. Estrada, G.R. No. 171052, January 28, 2008, 542 SCRA 616, 621, citing Ilao-Quianay v. Mapile, 510 Phil. 736, 744-745 (2005); Fuentes v. Court of Appeals, G.R. No. 109849, February 26, 1997, 268 SCRA 703, 709.
17Rollo (G.R. No. 194621), p. 74.
20 G.R. No. 97412, July 12, 1994, 234 SCRA 78.
22 G.R. No. 189871, August 13, 2013.
24 G.R. No. 183804, September 11, 2013.
26Estores v. Spouses Supangan, G.R. No. 175139, April 18, 2012, 670 SCRA 95, 105-106.
28 Hanjin Heavy Industries and Construction Co., Ltd. v. Dynamic Planners and Construction Corp, G.R. Nos. 169408 & 170144, April 30, 2008; J Plus Asia Development Corporation v. Utility Assurance Corporation, G.R. No. 199650, June 26, 2013; Philippine Charter Insurance Corporation v. Central Colleges of the Philippines and Dynamic Planners and Construction Corporation, G.R. Nos. 180631-33, February 22, 2012.
29Radio Communications of the Philippines, Inc. v. Court Of Appeals, G.R. No. 139762, April 26, 2006.
30 San Fernando Regala Trading, Inc. v. Cargill Philippines, Inc., G.R. No. 178008, October 9, 2013.
31Bataan Seedling Association, Inc. v. Republic of the Philippines, G.R. No. 141009, July 2, 2002.
32International Container Terminal Services, Inc. v. FGU Insurance Corporation, G.R. No. 161539, April 24, 2009; Air France Philippines/KLM Air France v. John Anthony De Camilis, G.R. No. 188961, October 13, 2009, 603 SCRA 684; Asian Terminals, Inc. v. Philam Insurance Co., Inc. (Now Chartis Philippines Insurance, Inc.), G.R. No. 181163, July 24, 2013.
33Swift Foods, Inc. v. Spouses Mateo, G.R. No. 170486, September 12, 2011, 657 SCRA 394.
35Rollo (G.R. No. 194621), pp. 75.

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