Pow Construction v. Shaughnessy Development
REITERATIONFacts
The Antecedents: H.S. Pow Construction and Development Corporation (HSPCDC) was engaged by Shaughnessy Development Corporation (SDC) for the construction of subdivision roads, drainage system, water distribution, and an elevated water reservoir for SDC's Summerfield Subdivision. The contract price was P10,500,000.00, with a completion period of 180 days from commencement. Construction began on May 21, 2002. HSPCDC claimed to have undertaken variation orders amounting to P552,829.75, approved by SDC, and also constructed three duplex units not part of the original scope. The main road network was completed on March 3, 2003. HSPCDC submitted a progress billing for P766,556.46, which remained unpaid. HSPCDC later sent a summary of account stating a total due of P2,122,704.55, itemized as main contract balance, duplex houses, and variation orders. Procedural History: HSPCDC filed a collection suit for P2,122,704.55 plus interest and attorney's fees. SDC denied liability, alleging HSPCDC incurred delay, abandoned work, and failed to comply with contractual obligations like issuing a performance bond. SDC also denied liability for variation works and counterclaimed for damages. The Regional Trial Court (RTC) ruled in favor of HSPCDC, ordering SDC to pay P44,270.94 for the main contract, P552,829.75 for variation works, P488,290.00 for duplex buildings, and attorney's fees. Both parties appealed. The Court of Appeals (CA) reversed the RTC decision, ordering SDC to pay HSPCDC P1,581,584.80 for the contract balance and P488,290.00 for duplex houses, but ordering HSPCDC to pay SDC P362,781.72 for well-drilling, P359,503.80 for the water tank, and P1,050,000.00 for delay. Both parties moved for reconsideration, which were denied. The Petition: HSPCDC filed a Petition for Review on Certiorari, assailing the CA's order for it to pay SDC for well-drilling, the water tank, and for delay. HSPCDC argued that SDC's failure to secure permits and sign agreements caused the issues in well-drilling, and that payments for the water tank were not sufficiently proven. It also contended that SDC's continuous changes in plans caused any delay, not HSPCDC.
Issue(s)
Whether the Court of Appeals erred in holding petitioner H.S. Pow Construction and Development Corporation liable to pay respondent Shaughnessy Development Corporation P362,781.72 for well-drilling and P359,503.80 for the elevated water steel tank. Whether the Court of Appeals erred in holding petitioner H.S. Pow Construction and Development Corporation liable to pay respondent Shaughnessy Development Corporation P1,050,000.00 for delay.
Ruling
The Court partially granted the petition. It affirmed the Court of Appeals' ruling that HSPCDC is liable for the well-drilling and the elevated water steel tank. However, it deleted the portion of the CA decision ordering HSPCDC to pay SDC P1,050,000.00 for delay. The dispositive portion of the CA decision was modified accordingly.
Ratio Decidendi
On the liability for well-drilling and elevated water steel tank: The Court affirmed the findings of both the RTC and the CA that HSPCDC is liable for the unfinished well-drilling and elevated water steel tank. The Contract explicitly included "WATER DISTRIBUTION AND ELEVATED STEEL WATER RESERVOIR" within the scope of work. HSPCDC's reasons for non-completion, such as the owner's failure to secure permits or insufficient power, did not excuse its contractual obligation. Pursuant to Article 1167 of the Civil Code, if a person obliged to do something fails to do it, the same shall be executed at his cost. This provision makes a contractor liable for the costs incurred by the developer in hiring other subcontractors to complete the unfinished work. The costs incurred by SDC for these works were duly supported by receipts and were given weight by the lower courts. The Court reiterated the rule that it will not review factual findings of the CA, especially when they coincide with those of the RTC, as these are considered final and binding when supported by substantial evidence. On the liability for delay: The Court reversed the CA's finding of delay and affirmed the RTC's conclusion that HSPCDC was not liable for delay. While the CA relied on the contractual completion date and the number of days of delay, the RTC gave weight to the testimonial evidence of HSPCDC's witness, Engr. Bernal. This testimony indicated that the delay was caused by several changes made during construction upon SDC's instructions, requiring different working drawings and affecting the engineering design. Furthermore, SDC admitted that the construction of three duplex houses, which were not part of the original contract, was done upon its instruction. The Court emphasized that it gives high respect to the RTC's evaluation of witness testimony due to its direct observation of demeanor. The Court concluded that since the respondent-developer contributed to the petitioner-contractor's delay through modifications and changes in plans, the CA's award of liquidated damages for delay was without basis.
Main Doctrine
A contractor is liable for the costs incurred by the developer in hiring other subcontractors to complete unfinished work, pursuant to Article 1167 of the Civil Code. However, a contractor is not liable for delay if the delay is attributable to the developer's own actions, such as continuous changes in plans and instructions.