Abaño v. Colegio de San Juan de Letran-Calamba
REITERATIONFacts
The Antecedents: Petitioners (Engr. Emelyne P. Cayetano-Abaño, operating as Jacob Joseph Builders & Planners, and Engr. Dario C. Abaño) were commissioned by respondent (Colegio de San Juan de Letran-Calamba) to construct a library and nursing program building for P52,319,927.20. The contract stipulated a 14-month completion period from the signing on November 17, 2003, with a building permit issued on January 27, 2004, setting the completion deadline for March 27, 2005. Respondent made delayed payments for the down payment and progress billings. Petitioners also indicated revised completion dates and failed to make partial turnovers as agreed. After a joint inspection in May 2005, defects and deficiencies were noted, and petitioners were asked to perform corrective works. Petitioners demanded arbitration, while respondent insisted on completion of works. Petitioners did not undertake remedial measures, leading respondent to take over the building on October 19, 2005. Respondent engaged a quantity surveyor (DLSPI) which found the project only 94.12% complete. Procedural History: The Construction Industry Arbitration Commission (CIAC) rendered a Final Award in favor of petitioners, ordering respondent to pay P13,903,722.94, based on the finding that respondent's delayed payments prevented it from demanding timely completion. The Court of Appeals (CA) reversed the CIAC ruling, finding that petitioners breached the contract by failing to complete the project on time and deliver a 100% complete building. The CA ordered petitioners to pay respondent P9,298,631.75. The Petition: Petitioners seek the setting aside of the CA Decision and the reinstatement of the CIAC Final Award.
Issue(s)
Whether or not petitioners were able to complete the project on time. Whether or not petitioners were able to deliver a 100% complete building.
Ruling
The petition is PARTIALLY GRANTED. The Court modified the Court of Appeals' decision, recognizing mutual breaches of contract by both parties. The total award in favor of respondent was P5,318,153.68, representing the net amount after deducting petitioners' awarded claims from respondent's awarded claims.
Ratio Decidendi
On the issue of whether petitioners completed the project on time: The Court found that petitioners failed to complete the project by the stipulated deadline of March 27, 2005. Evidence such as the Second Progress Billing Report indicating an April 2005 move-out date, the Final Billing covering work until April 30, 2005, and the series of communications between the parties after the May 2005 inspection all demonstrated that construction was ongoing beyond the contractual completion date. Furthermore, the building was not ready for use when classes opened in June 2005, and its blessing occurred only in October 2005, after respondent took over. Even petitioner Emelyne Abaño admitted in her affidavit that the building was completed by April 2005, which was still beyond the March 27, 2005 deadline. The CIAC itself acknowledged the delay in its award. Therefore, petitioners breached their contractual obligation to complete the project within the stipulated period. On the issue of whether petitioners delivered a 100% complete building: The Court ruled that petitioners failed to deliver a 100% complete building. The DLSPI report, which the Court found more reliable than the CIAC's assessment, indicated only 94.12% completion. This finding was supported by the DLSPI report's consistent reference to the agreed contract cost and its detailed evaluation of work performed. The CIAC's conclusion that the DLSPI report was flawed was found to be unsubstantiated, as the report clearly considered revised plans, BOQ, and detailed cost estimates. Moreover, the extensive list of defects and unfinished works documented during inspections, including issues with electrical wiring, waterproofing, cracks, improper insulation, leaks, and missing fixtures, demonstrated that the project was far from 100% complete. The items in the punch list were not mere finishing touches but significant defects and omissions that prevented final acceptance. The Court also noted that petitioners failed to correct these defects despite demands, leading to the conclusion that they had abandoned the project.
Main Doctrine
Both parties committed breaches of their contract. The contractor failed to complete the project on time and made unapproved changes, while the owner failed to pay down payments and progress billings on time. The Court modified the awards, recognizing mutual breaches and adjusting claims accordingly.