Powton Conglomerate, Inc. v. Agcolicol
REITERATIONFacts
The Antecedents: Respondent Johnny Agcolicol, proprietor of Japerson Engineering, entered into an "Electrical Installation Contract" with petitioner Powton Conglomerate, Inc. (Powton), represented by its President and Chairman of the Board, Philip C. Chien. The contract price was P5,300,000.00 for electrical works at Powton's Ciano Plaza Building. In August 1992, the electrical installations were certified to be in good condition. Procedural History: On December 16, 1994, respondent filed a complaint for sum of money, alleging that Powton paid P5,031,860.40, leaving a balance of P268,139.80. Respondent also claimed P722,730.38 for additional electrical works due to revisions in the structural design. Petitioners contended that the installations were defective and delayed, and that they never authorized the additional works. The parties stipulated the unpaid balance at P268,139.60 and the cost of additional work at P722,730.38. The Regional Trial Court (RTC) of Pasay City, Branch 115, awarded respondent P990,867.38. The Court of Appeals (CA) affirmed the RTC decision, and a motion for reconsideration was denied. The Petition: Petitioners seek review of the CA decision, questioning their liability for the balance and the increase in costs for additional electrical works.
Issue(s)
Whether petitioners are liable to pay the balance of the contract price. Whether petitioners are liable for the costs of additional electrical works necessitated by revisions in the structural design. Whether petitioner Philip C. Chien can be held personally and solidarily liable with Powton Conglomerate, Inc.
Ruling
The petition is partly meritorious. The Court ordered Powton Conglomerate, Inc. to pay Johnny Agcolicol the sum of P268,139.60 representing the unpaid balance. Petitioner Philip C. Chien was absolved from personal liability. The CA decision was modified accordingly.
Ratio Decidendi
On whether petitioners are liable to pay the balance of the contract price: The Court affirmed the findings of the RTC and CA that petitioners failed to prove that the installations were defective or completed beyond the agreed period. Petitioner Chien's testimony regarding an alleged certification by an independent engineer was unsubstantiated, as no such engineer or competent witness was presented. The bare assertion of unsatisfactory and delayed installation, without sufficient proof, does not justify non-payment of the balance. Therefore, petitioners are liable to pay the balance of P268,139.80. On whether petitioners are liable for the costs of additional electrical works: The Court ruled that petitioners are not liable for the additional costs. Article 1724 of the Civil Code requires that any change in plans and specifications must be authorized in writing by the proprietor, and the additional price must be determined in writing by both parties. The contract between the parties also stipulated that any addition or reduction in cost shall be mutually agreed upon in writing before execution. While revisions were made to the structural design, there was no written agreement between the parties for the increased costs of the electrical works. The respondent completed the installation without securing prior written consent for the increased costs, thus failing to comply with the mandatory requirements of Article 1724 and their contract. The principle of unjust enrichment cannot be invoked by the respondent who assumed the risk by not securing prior written authorization. On whether petitioner Philip C. Chien can be held personally and solidarily liable with Powton Conglomerate, Inc.: The Court held that petitioner Philip C. Chien cannot be held personally liable. A corporation has a personality separate and distinct from its officers. Personal liability of a corporate officer attaches only in specific instances, such as assenting to unlawful acts, bad faith, gross negligence, or agreeing to hold himself personally liable. None of these exceptions were established in this case. Chien entered into the contract in his capacity as President and Chairman of the Board of Powton, and there was no basis to hold him solidarily liable with the corporation.
Main Doctrine
A contractor cannot demand an increase in the contract price for higher costs of labor or materials unless there has been a written authorization for a change in plans and specifications and a written agreement on the additional price. A corporate officer is generally not personally liable for corporate contracts unless exceptions apply.