Kabisig v. Young Builders
REITERATIONFacts
The Antecedents: Sometime in April 2001, Kabisig Real Wealth Dev., Inc. (Kabisig), through Fernando C. Tio (Tio), contracted the services of Young Builders Corporation (Young Builders) for the renovation of its building. Young Builders completed the work in September 2001 and billed Kabisig P4,123,320.95. Kabisig failed to pay, contending no written contract existed and it was unaware of the estimated cost. Procedural History: Young Builders filed an action for Collection of Sum of Money. The RTC of Cebu City ruled in favor of Young Builders, ordering Kabisig and Tio to pay P4,123,320.95 as actual damages plus 12% per annum interest from September 11, 2001. The Court of Appeals (CA) affirmed the RTC Decision with modification, deleting the award for actual damages and ordering Kabisig and Tio to jointly pay P2,400,000.00 as temperate damages, with 12% per annum interest from September 11, 2001. Both parties moved for reconsideration, which were denied. The Petition: Kabisig filed a Petition for Review assailing the CA Decision and Resolution.
Issue(s)
Whether Kabisig is liable to Young Builders for the damages claimed, and whether a contract existed between the parties. Whether the award of actual damages by the RTC was proper. Whether the CA correctly modified the award to temperate damages. Whether the principle of quantum meruit is applicable. Whether the rate of interest awarded is correct.
Ruling
The Supreme Court dismissed the petition for lack of merit and affirmed the CA Decision and Resolution with modification as to the interest rate. Kabisig and Tio are ordered to jointly pay Young Builders P2,400,000.00 as temperate damages, with 12% per annum interest from September 11, 2001, to June 30, 2013, and 6% per annum from July 1, 2013, until full satisfaction.
Ratio Decidendi
On the liability of Kabisig and the existence of a contract: The Court held that a contract is perfected by the meeting of the minds of the parties on the object and the cause, as provided by Article 1318 of the Civil Code. The testimonies of witnesses and the fact that official receipts for the project were under Kabisig's and Tio's names established that Tio commissioned Young Builders for the renovation. The absence of a written contract does not invalidate the agreement, as contracts are generally binding in whatever form they may have been entered into, provided the essential requisites for validity are present, pursuant to Article 1356 of the Civil Code. Kabisig's failure to object to the renovation work until it was time to settle the bill further supported the existence of a contract. On the award of actual damages: The Court affirmed the CA's deletion of actual damages, citing Article 2199 of the Civil Code. For actual damages to be recovered, the injured party must prove the actual amount of loss with reasonable certainty and by competent proof. Young Builders failed to submit competent proof, such as documents bearing Kabisig's or Tio's conformity or signature, or indicating that the amounts reflected referred to the renovation project. Damages cannot be presumed and must be based on specific facts, not speculation or conjecture. On the award of temperate damages: The Court upheld the CA's award of temperate damages, recognizing that these may be recovered when some pecuniary loss has been suffered but its amount cannot be proved with certainty. Temperate damages are more than nominal but less than compensatory damages, serving to recompense the injured party for a loss that is difficult to quantify precisely. The CA's award of P2,400,000.00 was deemed reasonable under the circumstances. On the application of quantum meruit: The Court applied the principle of quantum meruit, which allows a contractor to recover the reasonable value of services rendered despite the lack of a written contract. This principle prevents unjust enrichment. Given that the renovation was completed and there was an inability to agree on fees, quantum meruit was the appropriate basis to determine the compensation due to Young Builders. The CA's award of P2,400,000.00 was considered a reasonable compensation under this principle. On the rate of interest: The Court modified the interest rate. For the period from the time of demand (September 11, 2001) until June 30, 2013, the interest rate is 12% per annum. From July 1, 2013, until full satisfaction, the interest rate is 6% per annum, in accordance with Bangko Sentral ng Pilipinas Circular No. 799. This rate applies to legal interest on sums of money awarded in judgments.
Main Doctrine
A contract is perfected by the meeting of the minds of the parties on the object and the cause. In the absence of a written contract or sufficient proof of actual damages, temperate damages may be awarded, and the principle of quantum meruit applies to determine the reasonable value of services rendered.