Santos Company v. Belle
REITERATIONFacts
The Antecedents: Belle Corporation (Belle) and R.V. Santos Company, Inc. (RVSCI) entered into a Construction Contract for an underground electrical network for Belle's condominium project. Belle advanced P11,000,000.00. The project was to be completed within 180 days. Belle allegedly set April 21, 1998, as a target completion date, which RVSCI failed to meet. Belle issued additional work orders, with estimates from RVSCI. Belle approved estimates for Additional Order Nos. 1 and 2 but disputed No. 3. RVSCI implemented Nos. 1 and 3, while Belle handled No. 2. RVSCI submitted Progress Billing No. 1 on August 10, 1998, claiming 53.3% accomplishment and billing P5,347,608.03 after deducting the advance payment. Belle's assessment found the work worth only P4,676,724.64. On September 30, 1998, RVSCI allegedly abandoned the project. Belle sent a memorandum expressing disappointment. In January 1999, RVSCI stated it would not return until paid. Belle made an additional payment of P476,503.30 on January 22, 1999. Belle engaged R.A. Mojica and Partners to audit the work, which reported the main project work amounted to P4,868,443.59. Belle computed an overpayment of P4,940,108.15. Procedural History: Belle filed a Request for Adjudication with the Construction Industry Arbitration Commission (CIAC), praying for the refund of P4,940,108.15 and liquidated damages. RVSCI counterclaimed for unpaid billings (P4,312,170.95), moral damages, and attorney's fees. The CIAC ordered RVSCI to refund P4,940,108.58 to Belle, denied Belle's claim for liquidated damages and RVSCI's counterclaims. Both parties appealed to the Court of Appeals (CA). The CA affirmed the CIAC Decision. RVSCI filed a Petition for Review on Certiorari with the Supreme Court. The Petition: RVSCI assailed the CA's ruling, arguing that the audit report was incompetent and biased, that Belle could not withdraw its approval of the progress billing, and that RVSCI was entitled to damages.
Issue(s)
Whether the appellate court gravely erred in ruling that the surveyor's electrical work audit was competent and must be given weight. Whether the appellate court gravely erred in ruling that Belle may withdraw its approval of the progress billing pursuant to Articles VI(2)(c) and XIII(4) of the Contract. Whether the appellate court gravely erred in ruling that RVSCI is not entitled to an award for damages.
Ruling
The Supreme Court denied the petition for review on certiorari and affirmed the Decision of the Court of Appeals, upholding the CIAC's ruling that RVSCI must refund P4,940,108.58 to Belle for overpayment. Belle's claim for liquidated damages and RVSCI's counterclaims were denied.
Ratio Decidendi
On the admissibility and weight of the third-party audit report: The Court held that the CIAC and Court of Appeals did not err in allowing the third-party audit report by R.A. Mojica. While the contract did not expressly authorize Belle to conduct such an audit, it also did not prohibit it. The Court found no obligation for Belle to inform RVSCI or secure its participation in the audit. Furthermore, Article XIII, Section 13.4 of the contract allowed Belle to unilaterally evaluate the work's value in case of termination due to default, a principle the Court saw no reason not to apply to other work cessation scenarios. The Court also stated that bias cannot be presumed and that a long-standing business relationship between Belle and R.A. Mojica does not automatically render the report biased, especially in the absence of evidence of inaccuracy. RVSCI had the opportunity to cross-examine Engr. Mojica and could have presented its own expert witness or rebuttal evidence, which it failed to do effectively. On whether Belle's approval of the Progress Billing is final and binding: The Court agreed with the CIAC and CA that the owner's approval of a progress billing is merely provisional. Article VI, Section 6.2(c) of the Construction Contract explicitly states that acceptance of work from time to time for progress payment is not final acceptance. This provision is consistent with industry practice as reflected in CIAP Document 102, which allows the owner to estimate the value of work accomplished and verify actual work accomplishment prior to payment. Therefore, the owner is not estopped from questioning a prior evaluation and downgrading the contractor's accomplishment after re-evaluation. On RVSCI's claim for damages: The Court found no merit in RVSCI's claim for damages. The Court upheld the CIAC's factual finding that the value of RVSCI's work was P4,868,443.59 for the main project and P1,768,000.00 plus P22,442.27 for additional work, totaling P6,658,885.86. Belle had paid P11,598,994.44, indicating an overpayment to RVSCI. In light of this overpayment, RVSCI's claim for damages due to Belle's refusal to pay its allegedly excessive and inaccurate Progress Billing was deemed specious. The Court applied the principle of unjust enrichment under Article 22 of the Civil Code, holding that RVSCI was liable to return the amount received in excess of the actual value of its work. RVSCI's claim for materials and equipment left at the site was also denied as it was not included in the Terms of Reference.
Main Doctrine
The approval of a progress billing by the owner is merely provisional and subject to final review and acceptance of the completed work. The owner has the right to re-evaluate the contractor's work accomplishment, and if an overpayment is found, the contractor is liable to return the excess amount based on the principle of unjust enrichment.