Roblett Industrial Construction Corporation v. Court of Appeals and Contractors Equipment Corporation
REITERATIONFacts
The Antecedents: Respondent Contractors Equipment Corporation (CEC) filed an action for a sum of money against petitioner Roblett Industrial Construction Corporation (RICC), alleging that RICC leased various construction equipment in 1985, resulting in unpaid accounts amounting to P342,909.38. On December 19, 1985, RICC, through its Assistant Vice President for Finance, Candelario S. Aller Jr., executed an Agreement confirming its account. An offsetting arrangement was made where CEC received construction materials worth P115,000.00 from RICC, reducing the balance to P227,909.38. RICC paid P10,000.00 via postdated checks on December 18, 1985, which were dishonored upon deposit, increasing RICC's balance to P237,909.38. CEC sent a letter of demand on July 24, 1986, for the overdue account of P237,909.38, requesting settlement by July 31, 1986. RICC requested thirty (30) days to raise funds for settlement. Procedural History: RICC, through Candelario S. Aller Jr., claimed the Agreement was signed to have proof of payment and that Baltazar Banlot, Vice President for Finance, asserted RICC overpaid by P12,000.00 based on Equipment Daily Time Reports for May 2 to June 14, 1985, indicating an obligation of only P103,000.00. Banlot also claimed the Agreement was not approved by the Board and Aller Jr. was not authorized to sign it. CEC, through Mariano R. Manaligod Jr., presented a statement of account from March 28 to July 12, 1985, totaling P376,350.18, with deductions leaving a balance of P342,909.38. The Regional Trial Court (RTC) ruled in favor of CEC on December 19, 1990, ordering RICC to pay P237,909.38 plus interest, litigation expenses, attorney's fees, and costs. The RTC found the Agreement valid and reflecting the true intention of the parties, noting RICC's answer was not under oath, thus admitting the genuineness and due execution of the Agreement. The RTC also found RICC's claim of full payment by offset baseless, as its evidence (daily time reports) did not cover the entire lease period. The Court of Appeals affirmed the RTC decision on July 29, 1994. The Petition: RICC petitioned the Supreme Court, imputing errors to the Court of Appeals for not holding the Agreement unenforceable due to lack of authority and for not holding that RICC's obligation was fully paid or overpaid. RICC argued the Agreement was unenforceable as it was executed by Aller Jr. without authority. Regarding the amount, RICC insisted its obligation was P103,140.00 based on 191 hours of equipment use, and with the P115,000.00 in construction materials, it resulted in an overpayment.
Issue(s)
Whether the Agreement executed by Candelario S. Aller Jr. is valid and enforceable despite allegations of lack of Board approval and authority. Whether RICC's obligation to CEC had been fully paid, or if RICC had overpaid the amount due.
Ruling
The petition is DENIED. The decision of the Court of Appeals affirming the RTC decision is AFFIRMED.
Ratio Decidendi
On the validity and enforceability of the Agreement: The Court held that the Agreement was valid and reflected the true intention of the parties. It emphasized that RICC could not selectively treat portions of the Agreement as valid (the offset) while deeming other terms onerous or lacking approval. The Court pointed out that RICC's answer was not under oath, which, under Section 8, Rule 8 of the Rules of Court, deemed the genuineness and due execution of the Agreement admitted. This admission, by virtue of the principle of estoppel under Article 1431 of the Civil Code, became conclusive upon RICC. The Court stressed that a contract must be treated as a whole, either valid or void, and cannot be divided to favor one party. Furthermore, Article 1308 of the New Civil Code mandates that contracts must bind both parties and their validity or compliance cannot be left to the will of one. RICC's request for an extension of time to settle its account, without questioning the account or the Agreement's validity at that point, further supported the trial court's finding that the Agreement reflected the true intention of the parties. On the issue of full payment or overpayment: The Court found RICC's contention of full payment by offset to be without basis. RICC's evidence, consisting of daily time reports (Exhibits "2," "2-A" to "2-Z"), only covered 191 hours from May 2 to June 14, 1985, and did not reflect the entire period of the lease agreement. In contrast, CEC's evidence accurately reflected the entire lease period from March 28 to July 12, 1985, stating the amount due as P376,350.18. The Court reiterated that it would not impinge upon factual findings of the lower courts absent a showing that they failed to appreciate facts and circumstances of weight and substance. The doctrine of estoppel in pais was also applied, as RICC received a statement of account for P376,350.18 without protest and subsequently requested time to settle its overdue account of P237,909.38, rather than disputing it. This conduct induced CEC to believe in the validity of the account and the Agreement.
Main Doctrine
A contract must be treated as a whole; its validity or compliance cannot be left to the will of one party. A party who uses a contract as a basis for a claim cannot selectively invalidate portions thereof that are unfavorable to it, especially when the contract was not under oath and the genuineness and due execution are deemed admitted. Furthermore, a party may be estopped from assailing the validity of a contract if it acted in a manner that induced the other party to believe in its validity and relied upon such belief.