Swire Realty v. Specialty Contracts
REITERATIONFacts
The Antecedents: Swire Realty Development Corporation (petitioner) filed a Complaint for Sum of Money and Damages against Specialty Contracts General and Construction Services, Inc. (respondents) for breach of an Agreement to Undertake Waterproofing Works. The Agreement stipulated that respondents would perform waterproofing works on petitioner's condominium project for Php 2,000,000.00 within 100 calendar days from December 27, 1996, or until April 6, 1997. Payment terms included a 20% down payment and 80% through monthly progress billings, subject to a 10% retention fee and 1% withholding tax. The Agreement also provided for penalties for delay and release of retention fees within 90 days from acceptance. Procedural History: The Regional Trial Court (RTC) ordered respondents to pay petitioner Php 400,000.00 in actual damages, Php 124,931.40 for unfinished works by Esicor, and Php 100,000.00 as attorney's fees. The Court of Appeals (CA) reversed the RTC decision, ordering petitioner to pay respondents Php 157,702.06 with legal interest, finding that additional works were performed by respondents. The CA computed this based on a 90% accomplishment rate, additional works of Php 57,702.06, less advances and billings, and a penalty claim. The Petition: Petitioner filed a petition for review on certiorari, arguing that the CA gravely misappreciated facts by ruling that the waterproofing of the swimming pool constituted additional works, ignored established evidence of actual damages, and disregarded the RTC's findings which were supported by clear and convincing evidence.
Issue(s)
Whether the Supreme Court can review the findings of fact of the Court of Appeals. Whether the waterproofing of the swimming pool constituted additional works for which respondents must be compensated. Whether the respondents are liable for damages and penalties due to breach of contract.
Ruling
The petition is meritorious. The Supreme Court reversed and set aside the Decision and Resolution of the Court of Appeals. Respondents Specialty Contracts General and Construction Services, Inc. and Jose Javellana are ordered to pay petitioner Swire Realty Development Corporation Php 420,000.00 as actual damages, Php 129,931.40 representing the contract price paid by the Petitioner to Esicor, and Php 200,000.00 as penalty or liquidated damages.
Ratio Decidendi
On the issue of reviewing findings of fact: The Supreme Court reiterated that a petition for review on certiorari under Rule 45 generally concerns questions of law. However, it admitted exceptions, including when the CA's conclusion is based on speculation, manifestly mistaken, involves grave abuse of discretion, is a misapprehension of facts, or when the CA's findings conflict with those of the RTC. In this case, the Court found that the CA's conclusion regarding additional works was based on a misapprehension of facts, justifying a review of the factual findings. On whether waterproofing the swimming pool constituted additional works: The Court disagreed with the CA's finding. A plain reading of the Agreement, specifically Article I on Scope of Works, enumerated the Swimming Pool (234.20 sq.m.) as a covered area for waterproofing. The notation "2nd waterproofing after lightweight concrete topping" in a Site Instruction Form did not automatically signify additional work. The Court held that respondents, by entering into the Agreement, undertook all necessary works for the entire swimming pool area. Had they believed it to be additional work, they should have invoked Article VII on Change Orders, which requires written notice and further agreement on unit prices for additive works. On liability for damages and penalties: The Court affirmed the RTC's findings, which were also not contradicted by the CA, that respondents only accomplished 90% of the work and failed to deploy workers despite demands, leading to the expiration of the 100-day period. The claim that the sum pit area was not free from debris was unsubstantiated and did not justify non-performance. The Court agreed with the RTC that respondents were liable for damages. It modified the actual damages award to Php 420,000.00, representing the unearned portion of the contract price considering deductions for retention fees, withholding tax, and unfinished work. The respondents were also liable for the cost of hiring Esicor to complete the unfinished work (Php 129,931.40). Regarding penalties, while the Agreement stipulated Php 10,000.00 per day of delay, the Court, applying Articles 1229 and 2227 of the Civil Code, reduced the Php 3,650,000.00 penalty (for 365 days of delay) to Php 200,000.00 as liquidated damages, considering that 90% of the project was completed and there was no showing of bad faith. The award of attorney's fees by the RTC was deleted for lack of sufficient factual basis, as per jurisprudence requiring clear justification for such awards.
Main Doctrine
The Supreme Court may review findings of fact of the Court of Appeals when there is a misapprehension of facts, conflicting findings between the CA and the RTC, or when the CA's conclusion is based on speculation or is manifestly mistaken. In this case, the Court found that the waterproofing of the swimming pool, despite a notation of '2nd waterproofing', was included in the original scope of works under the Agreement, and thus did not constitute additional work. The Court also modified the awards for actual damages and penalty, deleting attorney's fees for lack of basis.