Macasaet & Associates, Inc. v. Commission on Audit
REITERATIONFacts
The Antecedents: Petitioner, Flavio K. Macasaet & Associates, Inc., entered into a Contract with the Philippine Tourism Authority (PTA) for Project Design and Management Services for the Zamboanga Golf and Country Club. The contract stipulated a professional fee of seven percent (7%) of the actual construction cost. Periodic payments were based on estimated construction costs, with the balance to be computed on the "final actual project cost" upon completion and acceptance. Procedural History: After the project's completion, PTA paid petitioner what it believed to be the balance. Subsequently, PTA paid the main contractor, Supra Construction Company, an additional P3,148,198.26 for price escalation due to increased construction material costs. Petitioner then requested an additional professional fee of P219,302.47 (7% of the escalation cost). PTA denied this, stating the escalation did not entail additional work for petitioner. Reconsiderations and appeals to the Commission on Audit (COA) were denied, with COA opining that allowing the claim would result in overpayment. The Petition: Petitioner filed a Petition for Certiorari with the Supreme Court, seeking to overturn the COA ruling and praying for the payment of the additional professional fees.
Issue(s)
Whether the price escalation cost should be included in the "final actual project cost" for the computation of petitioner's professional fees. Whether petitioner is entitled to additional professional fees based on the price escalation.
Ruling
The ruling of the Commission on Audit is SET ASIDE. The Philippine Tourism Authority is ordered to pay petitioner the additional amount of P219,302.47 to complete the payment of its professional fee under their Contract for Project Design and Management Services.
Ratio Decidendi
On the inclusion of price escalation in "final actual project cost": The Supreme Court held that the terms "actual construction cost" and "final actual project cost" in the contract are significant. Paragraph 5 of Article V explicitly states that the balance of the professional fee was to be computed on the "final actual project cost." This term signifies the totality of all costs as actually and finally determined, logically including escalation costs. The Court emphasized that the contract allowed for flexibility based on actuality and equity, recognizing that the final actual project cost might not tally with the initially estimated construction cost. Therefore, the price escalation must be deemed included in the "final actual project cost." On entitlement to additional professional fees: The Court ruled that petitioner is entitled to the additional professional fees. It clarified that the claim was not for additional compensation under Article VI (Change of Orders), which pertains to major changes in planning and engineering requiring extra work. Instead, the claim was for the balance of the professional fees based on the "final actual project cost" as defined in the contract. The fact that the price escalation did not entail additional work for petitioner, nor for the main contractor, was deemed irrelevant. The increased cost of materials was not the fault of either party, and the contract's wording supported basing fees on the ultimate project cost, including such escalations. The Court underscored that obligations arising from contracts have the force of law between the parties and must be complied with in good faith, as mandated by Article 1159 of the Civil Code.
Main Doctrine
The term "final actual project cost" in a contract for professional services includes price escalation costs, entitling the service provider to additional professional fees based on the percentage stipulated in the contract, even if no additional work was performed by the service provider.