Solis v. Salvador
REITERATIONFacts
1. The Antecedents: The petitioner, a partnership engaged in engineering and construction, contracted with the respondents in 1952 to prepare plans, supervise construction, and provide technical expertise for a residential house. The contract stipulated a service fee of 10% of the estimated construction cost, with a portion payable upon plan approval and the remainder as a guarantee against exceeding the estimated cost. The petitioner sought to recover additional sums for alleged extras, including an increased floor area, a terrace, minor additions, and a higher fence than initially specified, as well as fees allegedly advanced for permits. 2. Procedural History: The petitioner filed suit in the Court of First Instance of Manila seeking recovery of P6,751.04. The trial court absolved the respondents, ordering the petitioner to return P2,000.00 paid by the respondents and to pay P5,000.00 in moral damages and attorney's fees. The petitioner appealed to the Court of Appeals, which affirmed the trial court's decision. The case was then brought before the Supreme Court via petition for review. 3. The Petition: The petitioner seeks review of the Court of Appeals' decision, assigning four errors. Primarily, the petitioner argues that the appellate court erred in applying Article 1724 of the Civil Code and Rule 123 of the Rules of Court to disallow claims for extras, and in not awarding a service fee on the cost of certain extras. The petitioner also contests the finding that a P2,000.00 payment was made for settlement of the case and challenges the award of moral damages. The petition raises questions of law regarding the application of legal provisions and the entitlement to service fees, while factual findings of the lower courts are generally considered conclusive.
Issue(s)
Whether Article 1724 of the Civil Code and Section 69(h), Rule 123 of the Rules of Court were correctly applied to disallow the petitioner's claims for extras. Whether the petitioner is entitled to a service fee on the cost of extras found by the Court of Appeals. Whether the P2,000.00 payment made on January 14, 1954, was intended as a settlement for the entire case or only as partial payment for supposed pending accounts. Whether the petitioner is liable to return the P2,000.00 payment and pay moral damages.
Ruling
The judgment of the Court of Appeals is modified. The award of moral damages is eliminated. The petitioner is credited with P89.70 as a service fee, to be deducted from the P2,000.00 that petitioner is ordered to pay. The rest of the decision is affirmed.
Ratio Decidendi
On Issue 1: The Court found that the applicability of Article 1724 of the Civil Code was rendered moot by the appellate court's conclusion that the costs of alleged extras had already been reimbursed to the petitioner. However, the Court also noted that Article 1724 strictly requires written authorization from the proprietor and written determination of the additional price by both parties for any change in plans or specifications to justify increased costs. The Court's interpretation of the contract and the evidence led it to conclude that the petitioner failed to meet these requirements for most of the claimed extras, particularly concerning the fence height and the garage construction, which were either not specified or not properly authorized. On Issue 2: The Court found this assignment of error to be well-taken. Since the appellate court determined that the P897.00 paid by the respondents in excess of the contract price covered the cost of the terrace and additional lights (considered extras), the petitioner was entitled to its contractual service fee of 10% on this amount. This amounted to P89.70, which the Court ordered to be credited to the petitioner. On Issue 3: The Court affirmed the finding of the Court of Appeals that the P2,000.00 payment made on January 14, 1954, was made in consideration of the petitioner's withdrawal of its complaint and final settlement of its claim. The circumstances surrounding this payment, including the presence of Yarisantos and his lawyer at the respondents' house to consider settlement, supported this conclusion. This payment was not merely a partial settlement of supposed pending accounts for additional labor and materials. On Issue 4: As a corollary to the third issue, the Court upheld the order for the petitioner to return the P2,000.00 payment because the petitioner did not cause the dismissal of its complaint as agreed upon, and the respondents had already fully satisfied their obligations under the contract. Regarding the award of moral damages, the Court found no sufficient justification, stating there was no clear showing of malice on the part of the petitioner in filing the action. While the evidence favored the respondents, the petitioner's evidence was not entirely unworthy of credence, and any worry or anxiety suffered by the respondents was considered to be that which usually arises from being a defendant in litigation.
Main Doctrine
The Court reiterated that under Article 1724 of the Civil Code, a contractor undertaking a construction project for a stipulated price cannot demand an increase in price due to higher costs of labor or materials, nor can they withdraw from the contract, unless there has been a written change in the plans and specifications authorized by the proprietor, and the additional price has been determined in writing by both parties. Furthermore, the Court applied the principle of quantum meruit for the recovery of costs for extras where the exact amount could not be precisely determined, and emphasized that the surrender of vouchers without a counter-receipt creates a presumption of payment or reimbursement.