Asian Construction v. Tulabut
REITERATIONFacts
The Antecedents: In January 1998, Asian Construction and Development Corporation (ACDC) was awarded the Philippine Centennial Exposition project. In February 1998, ACDC contracted Noel T. Tulabut (N.T. Tulabut Construction Supply) to supply labor, materials, and supervision for the construction of cafeterias and snack stands for ₱3,414,058.60, payable through progress billing. As of June 8, 1998, ACDC had paid all but ₱3,246.12. Subsequently, ACDC contracted Tulabut again for two additional cafeterias via Purchase Order (P.O.) No. 73-985, costing ₱400,000.75. ACDC issued Land Bank Check No. 0000074516 on July 15, 1998, as partial payment, but it was dishonored for insufficient funds. Tulabut completed the project and turned it over to ACDC. The final billing dated November 26, 1998, amounted to ₱486,409.45. Despite written demands, ACDC failed to settle the balance. Procedural History: Tulabut filed a complaint for collection against ACDC with the RTC of San Fernando, Pampanga. The RTC granted Tulabut's prayer for a writ of preliminary attachment. ACDC, in its answer, claimed the project was not fully completed and that payment was contingent on ACDC receiving payment from the government. Tulabut admitted receiving ₱125,571.81 as partial payment after the complaint was filed. ACDC presented no evidence. The RTC ruled in favor of Tulabut, ordering ACDC to pay the balance of ₱364,083.76 (exclusive of 10% retention), legal interest, attorney's fees (25%), and costs. ACDC appealed to the CA, arguing liability should be reckoned from the lapse of one year after project completion and that no certificate of completion was issued. The CA affirmed the RTC decision with modification, reducing attorney's fees to 10%, holding ACDC estopped from denying liability due to its officers' approval of purchase orders and billings, and finding no proof of industry practice regarding certificates of completion. The Petition: ACDC filed a petition for review on certiorari with the Supreme Court, alleging the CA erred in applying estoppel and presuming project completion, and in finding gross and evident bad faith for awarding attorney's fees.
Issue(s)
Whether the Court of Appeals erred in applying the principle of estoppel and presuming the completion of the project or works undertaken by the respondent. Whether the Court of Appeals erred in finding that petitioner acted in gross and evident bad faith in refusing to satisfy respondent’s claim, thereby awarding attorney’s fees.
Ruling
The petition is denied for lack of merit. The decision of the Court of Appeals is affirmed.
Ratio Decidendi
On the Issue of Estoppel and Project Completion: The Court held that the petitioner, Asian Construction and Development Corporation (ACDC), is estopped from denying its pecuniary obligation. This is because ACDC's officers, who had the authority to act on behalf of the corporation, signed the purchase orders and progress billings. These documents clearly stated the amounts for which ACDC was liable, and their genuineness and due execution were not contested by ACDC. By signing these documents, ACDC manifested its approval of the matters stated therein and is therefore precluded from denying its obligation subsequently. The Court emphasized that when the terms of an agreement are reduced to writing, the written agreement is considered as containing all the terms agreed upon, and there can be no evidence of such terms other than the contents of the written agreement, citing Article 1305 of the Civil Code. The petitioner's assertion that the project was not completed, without presenting any evidence to support this claim, was insufficient to controvert the clear and convincing evidence presented by the respondent, which included the approved purchase orders and progress billings. The Court reiterated that the principle of estoppel, as provided under Rule 131, Section 3(a) of the Rules of Court, prevents a party from falsifying a declaration, act, or omission that intentionally led another to believe a particular thing to be true and to act upon that belief. Furthermore, the petitioner's claim regarding industry practice requiring a certificate of completion was not proven by evidence, and thus could not refute the established obligation under the signed progress billings. On the Issue of Attorney's Fees and Bad Faith: The Court found no error in the award of attorney's fees, concluding that the petitioner was indeed wanting in good faith regarding its obligation. The records showed that ACDC feigned ignorance of the existence of the bounced check it issued and the receipt of the demand letter. Additionally, ACDC did not advise the respondent of the insufficiency of its funds prior to the presentment of the check, nor did it make a prompt commitment to rectify the situation, such as offering to replace the dishonored check or tendering partial payment. These facts, which were not contradicted by the petitioner, demonstrated a lack of good faith in fulfilling its contractual obligations. The Court noted that the respondent, as the plaintiff, had established a prima facie case by presenting testimonial and documentary evidence proving the completion of the projects and ACDC's approval and acceptance thereof, despite demands for payment. The petitioner, as the defendant, failed to adduce any evidence to controvert this prima facie case, thus bearing the consequence of this failure. The Court cited Manongsong v. Estimo for the principle that the burden of proof never parts from the plaintiff, but the burden of evidence shifts to the defendant once a prima facie case is established, and failure to controvert it warrants a verdict in favor of the plaintiff.
Main Doctrine
A party is estopped from denying its pecuniary obligation when its authorized representatives have signed purchase orders and progress billings, affirming the rights and obligations flowing therefrom, and such genuineness and due execution have not been contested. Failure to present evidence to controvert claims, despite a prima facie case established by the opposing party, leads to the consequence of bearing the burden of proof.