Licomcen, Inc. v. Abainza
REITERATIONFacts
The Antecedents: Respondent Engr. Salvador Abainza filed an action for sum of money and damages against Liberty Commercial Center, Inc. (Liberty) for unpaid balance on projects involving supply, fabrication, and installation of air-conditioning ductworks at LCC Central Mall, Naga City. Respondent alleged completion of the project, including changes and revisions at Liberty's behest, but failure to pay the remaining balance of P1,777,202.80. Procedural History: Liberty denied the allegations and questioned the real party-in-interest. Respondent amended the complaint to include petitioner LICOMCEN, Inc. (LICOMCEN), a sister company of Liberty with the same incorporators and directors. The Regional Trial Court (RTC) found LICOMCEN liable for the unpaid balance of P1,777,202.80 plus interest and attorney's fees, dismissing the case against Liberty. The Court of Appeals (CA) affirmed the RTC's decision. The Petition: LICOMCEN appealed to the Supreme Court, invoking Article 1724 of the Civil Code, arguing that respondent cannot recover additional costs as the changes in plans and specifications, and their pricing, were not in writing.
Issue(s)
Whether petitioner LICOMCEN, Inc. is liable for the additional costs incurred for labor, materials, and equipment on the revised project. Whether Article 1724 of the Civil Code is applicable to the case.
Ruling
The petition is denied. The Supreme Court affirmed the decision of the Court of Appeals, holding petitioner LICOMCEN, Inc. liable for the additional costs incurred for labor, materials, and equipment on the revised project.
Ratio Decidendi
On the issue of liability for additional costs: The Supreme Court found the petition without merit, holding petitioner liable for additional costs. The records showed that the original contract agreement was never signed due to substantial changes imposed by petitioner. Petitioner admitted paying P1,400,000 more than the unsigned agreement, indicating additional costs were incurred. The Court emphasized that petitioner ordered and approved the revisions, which were monitored and supervised by its engineering consultant and representatives. The changes entailed additional labor, materials, and equipment, which were documented and approved by petitioner's representatives. On the issue of the applicability of Article 1724 of the Civil Code: The Court found Article 1724 of the Civil Code inapplicable to the case. Petitioner only belatedly asserted this defense in its Memorandum before the trial court, not in its Answer or Pre-trial Brief. Under Section 1, Rule 9 of the Rules of Court, defenses not pleaded are deemed waived. Allowing this belated defense would place the adverse party at a disadvantage, as they would be deprived of the opportunity to present rebuttal evidence.
Main Doctrine
A contractor is entitled to recover additional costs for changes in plans and specifications if such changes were authorized in writing by the proprietor and the additional price was determined in writing by both parties, as provided under Article 1724 of the Civil Code. However, this provision is not applicable if the original contract was never signed due to substantial changes and the proprietor approved and supervised the revised work, making them liable for the incurred additional costs.