Riser Airconditioning Services Corporation v. Confield Construction Development Corporation
REITERATIONFacts
The Antecedents: ABS-CBN Broadcasting Corporation contracted CONFIELD CONSTRUCTION DEVELOPMENT CORPORATION (CONFIELD) for air-conditioning and ventilation systems. CONFIELD entered into a Sub-Contract with RISER AIRCONDITIONING SERVICES CORPORATION (RISER) for the supply and installation of these systems at ABS-CBN's Main Building and Studios 4 and 5, for a total consideration of ₱15,700,000.00. The Sub-Contract stipulated that RISER would work from August 1994 to June 1995, using its own manpower and capital. It also provided for liquidated damages and the right of CONFIELD to take over the work in case of delay or unsatisfactory performance by RISER. Payments were to be based on actual work accomplished, with progress billings every 15th and 30th of the month. Additional works were later contracted for ABS-CBN and other projects in Greenbelt, Makati City. RISER submitted several billings, which CONFIELD paid. Procedural History: On April 6, 1995, CONFIELD sent RISER a letter terminating their contract for the ABS-CBN Studios 2, 3, 6, and 7. RISER questioned this termination. ABS-CBN's Project Manager, DCI, informed CONFIELD of delays and poor workmanship by RISER. CONFIELD, on June 16, 1995, informed RISER of its intention to terminate and take over the ABS-CBN project due to failure to meet the deadline and poor workmanship, giving RISER until June 17, 1995 to "start on full blast." RISER assured completion but CONFIELD still terminated the Sub-Contract. Subsequently, CONFIELD and RISER orally agreed that CONFIELD would issue six checks totaling ₱3,100,000.00 for the ABS-CBN project, excluding the Greenbelt obligation. RISER agreed not to deposit the checks until CONFIELD re-evaluated the work. CONFIELD stopped payment on four checks after re-evaluation indicated work accomplished was not commensurate with the settlement amount. RISER demanded payment of the outstanding settlement amount and the Greenbelt balance. CONFIELD refused. RISER filed a complaint for collection of sum of money with damages. The RTC ruled in favor of RISER. On appeal, the Court of Appeals reversed the RTC decision, dismissing RISER's complaint and ordering RISER to refund CONFIELD for overpayment. RISER's motion for reconsideration was denied. The Petition: RISER filed a petition for review on certiorari with the Supreme Court, assailing the Court of Appeals' Decision and Resolution.
Issue(s)
Whether the Court of Appeals erred in finding that respondent CONFIELD validly terminated its Sub-Contract with petitioner RISER. Whether the Court of Appeals erred in holding that the payment of the settlement amount was subject to respondent CONFIELD's re-evaluation of petitioner RISER's work. Whether the Court of Appeals erred in not finding that petitioner RISER is entitled to recover damages.
Ruling
The petition is DENIED. The assailed Decision dated November 5, 1999 and Resolution dated May 29, 2000 of the Court of Appeals in CA-G.R. CV No. 55731 are hereby AFFIRMED IN TOTO. Costs against petitioner.
Ratio Decidendi
On the validity of the termination of the Sub-Contract: The Supreme Court affirmed the Court of Appeals' finding that CONFIELD validly terminated the Sub-Contract. The Court reiterated the hornbook law that a contract is the law between the parties and that if the terms are clear, their literal meaning shall control. Article V of the Sub-Contract explicitly granted CONFIELD the right to take over the work if, as assessed by CONFIELD, the progress of work was slow, or if RISER would not be able to complete the work within the stipulated time, or if the installations were not in accordance with approved plans and specifications. The Court found that CONFIELD sent letters dated April 6, 1995, and June 16, 1995, informing RISER of its intention to terminate and take over the project due to delays and poor workmanship, which constituted sufficient notice. The Court emphasized that RISER's delay in meeting the schedule and failure to comply with project standards, as reported by DCI, were grounds for termination under Article V. The Court held that RISER, being the party at fault, could not claim damages. On the settlement amount and re-evaluation: The Supreme Court held that the oral compromise agreement did not constitute a novation of the original Sub-Contract. The Court explained that a compromise agreement is a contract whereby the parties, by making reciprocal concessions, avoid litigation or end an existing one. It does not necessarily supersede existing contracts unless expressly agreed upon. The Court found no evidence that the parties intended to abrogate their original Sub-Contract in favor of a new one. The arrangement was merely a settlement to enable RISER to continue work and avoid delay, ensuring no damage to ABS-CBN. The Court also stated that RISER's claim that the settlement amount was commensurate with its 78% work accomplishment was a factual issue beyond the Court's jurisdiction in a petition for review, which is limited to reviewing errors of law. The Court of Appeals' finding that CONFIELD had overpaid RISER, based on its re-evaluation of the work accomplished, was not rebutted by RISER. On the entitlement to damages: The Supreme Court ruled that RISER was not entitled to damages. The Court reiterated that damages are awarded when a party unilaterally terminates a contract without legal justification. In this case, CONFIELD's act of terminating the contract was in accordance with the stipulations in the Sub-Contract, specifically Article V, due to RISER's delay and failure to meet project standards. Therefore, CONFIELD did not violate the agreement. Instead, it was RISER who gave reasons for the termination by failing to complete its work as scheduled and in accordance with the agreed specifications. Consequently, being the party at fault, RISER could not claim damages.
Main Doctrine
A party's delay in meeting the schedule and failure to comply with project standards, as stipulated in a contract, constitute valid grounds for termination by the other party, provided proper notice is given. An oral compromise agreement to settle disputes does not necessarily constitute novation of the original contract unless expressly agreed upon by the parties.