Hervas v. Court of Appeals
REITERATIONFacts
The Antecedents: On November 26, 1981, Francis Hervas (petitioner) entered into a "Contract Agreement" with Edgardo Domingo (respondent) and Francisco Torno, Jr. for the construction of a residential house for P275,000.00. Torno was later released from the contract, leaving Domingo solely responsible. An Addendum was signed on July 6, 1982, for an additional P10,000.00 to ensure completion. Although the target completion date was June 10, 1982, the house was not turned over until June 28, 1982. On the date of turnover, Hervas signed a Certificate of Completion, and a Certificate of Occupancy was subsequently issued on July 7, 1982. Despite the turnover and occupancy, Hervas failed to pay the remaining balance of P68,750.00, claiming the house was unfinished and the construction was defective. Procedural History: Domingo filed a complaint for a sum of money and damages against Hervas in the Regional Trial Court (RTC) of Caloocan City, Branch 125. The RTC ruled in favor of Domingo, ordering Hervas to pay P66,900.00 with 12% interest and 25% attorney's fees. Hervas appealed to the Court of Appeals (CA), which affirmed the RTC's decision but reduced the attorney's fees to 10% of the total amount due. The Petition: Hervas filed a Petition for Review on Certiorari under Rule 45 before the Supreme Court. He argued that the CA erred in concluding that Domingo was granted an extension to finish the house and in ignoring receipts that allegedly proved full payment. Hervas further contended that the construction was done in a defective manner and that he was entitled to liquidated damages of P1,000.00 per day for the delay in completion, as stipulated in correspondence between the parties' counsels.
Issue(s)
Whether the contractor completed the construction of the house as agreed upon by the parties. Whether the petitioner is liable for the outstanding balance of the contract price. Whether the petitioner is entitled to liquidated damages for the delay in the completion of the construction.
Ruling
The Supreme Court AFFIRMED the decision of the Court of Appeals with the MODIFICATION that respondent Edgardo Domingo is ordered to pay liquidated damages in the amount of P8,000.00 to petitioner Francis Hervas.
Ratio Decidendi
On Issue 1: The Court held that the house was completed and delivered on June 28, 1982. This finding is supported by the Certificate of Completion signed by Hervas and the Certificate of Occupancy issued by the Building Official. Under Article 1167 of the Civil Code, if the construction was truly defective or incomplete, Hervas should have demanded that the contractor undo the poor work rather than signing the completion certificate. By signing the document and occupying the house, Hervas is estopped from claiming that the work was unsatisfactory. The Court emphasized that no man should enrich himself at the expense of others after enjoying the benefits of the construction. On Issue 2: The Court sustained the lower courts' finding that Hervas had an unpaid balance of P66,900.00. The petitioner failed to provide competent proof of full payment, and his claim of forgery regarding the signature on the Certificate of Completion was not proven. The Court noted that several receipts presented by Hervas were already accounted for in Domingo's statement of account or pertained to "additional finishing touches" rather than the main contract balance. As the Supreme Court is not a trier of facts, it declined to disturb the factual findings of the RTC and CA which were supported by the evidence on record. On Issue 3: The Court found that Hervas was entitled to liquidated damages for the delay. Although the penalty was not in the original written contract, respondent Domingo admitted during cross-examination that he was amenable to an extension of time subject to a penalty of P1,000.00 per day of delay. The house was supposed to be finished by June 10, 1982, but was only completed on June 28, 1982. Based on the 8-day delay period identified in the pleadings and the contractor's admission, the Court awarded P8,000.00 in liquidated damages to Hervas, noting that Domingo would not have logically agreed to such a penalty if Hervas had an unfulfilled prior obligation that caused the delay.
Main Doctrine
The principle of estoppel prevents a party from going against their own acts. In construction contracts, the signing of a Certificate of Completion and the subsequent occupancy of the structure constitute an acknowledgment of the contractor's fulfillment of the obligation. Consequently, the owner cannot later refuse payment by alleging defects that should have been raised prior to acceptance. Furthermore, liquidated damages for delay may be enforced if the evidence, including testimonial admissions, establishes a mutual agreement on a per-diem penalty, even if such a provision was absent from the initial written instrument.