THIRD DIVISION
G.R. No. 194507, September 08, 2014
FEDERAL BUILDERS, INC., Petitioner, v. FOUNDATION SPECIALISTS, INC., Respondent.
G.R. NO. 194621
FOUNDATION SPECIALISTS, INC., Petitioner, v. FEDERAL BUILDERS, INC., Respondent.
D E C I S I O N
PERALTA, J.:
WHEREFORE, on the basis of the foregoing, judgment is rendered ordering defendant to pay plaintiff the following:Defendant’s counterclaim is denied for lack of factual and legal basis.
- The sum of P1,024,600.00 representing billings 3 and 4, less the amount of P33,354.40 plus 12% legal interest from August 30, 1991;
- The sum of P279,585.00 representing the cost of undelivered cement;
- The sum of P200,000.00 as attorney’s fees; and
- The cost of suit.
SO ORDERED.11
x x x The rule is well-settled that when an obligation is breached, and it consists in the payment of a sum of money, the interest due shall itself earn legal interest from the time it is judicially demanded (BPI Family Savings Bank, Inc. vs. First Metro Investment Corporation, 429 SCRA 30). When there is no rate of interest stipulated, such as in the present case, the legal rate of interest shall be imposed, pursuant to Article 2209 of the New Civil Code. In the absence of a stipulated interest rate on a loan due, the legal rate of interest shall be 12% per annum.13
I.
THE COURT OF APPEALS COMMITTED A CLEAR, REVERSABLE ERROR WHEN IT AFFIRMED THE TRIAL COURT’S JUDGMENT THAT FEDERAL BUILDERS, INC. WAS LIABLE TO PAY THE BALANCE OF P1,024,600.00 LESS THE AMOUNT OF P33,354.40 NOTWITHSTANDING THAT THE DIAPHRAGM WALL CONSTRUCTED BY FOUNDATION SPECIALIST, INC. WAS CONCEDEDLY DEFECTIVE AND OUT-OF-SPECIFICATIONS AND THAT PETITIONER HAD TO REDO IT AT ITS OWN EXPENSE.II.
THE COURT OF APPEALS COMMITTED SERIOUS, REVERSABLE ERROR WHEN IT IMPOSED THE 12% LEGAL INTEREST FROM AUGUST 30, 1991 ON THE DISPUTED CLAIM OF P1,024,600.00 LESS THE AMOUNT OF P33,354.40 DESPITE THE FACT THAT THERE WAS NO STIPULATION IN THE AGREEMENT OF THE PARTIES WITH REGARD TO INTEREST AND DESPITE THE FACT THAT THEIR AGREEMENT WAS NOT A “LOAN OR FORBEARANCE OF MONEY.”III.
THE COURT OF APPEALS COMMITTED GRAVE AND SERIOUS REVERSABLE ERROR WHEN IT DISMISSED THE COUNTERCLAIM OF PETITIONER NOTWITHSTANDING OVERWHELMING EVIDENCE SUPPORTING ITS CLAIM OF P8,582,756.29 AS ACTUAL DAMAGES.
On March 8, 1991, plaintiff had finished the construction of the guide wall and diaphragm wall (Exh. “R”) but had not yet constructed the capping beam as of April 22, 1991 for defendant’s failure to deliver the needed cement in accordance with their agreement (Exhibit “I”). The diaphragm wall had likewise been concrete tested and was found to have conformed with the required design strength (Exh. “R”).
Subsequently, plaintiff was paid the aggregate amount of P5,814,000.00. But as of May 30, 1991, plaintiff’s billings numbers 3 and 4 had remained unpaid (Exhs. “L”, “M”, and “M-1”).
x x x x
On the misaligned diaphragm wall from top to bottom and in-between panels, plaintiff explained that in the excavation of the soil where the rebar cages are lowered and later poured with concrete cement, the characteristics of the soil is not the same or homogenous all throughout. Because of this property of the soil, in the process of excavation, it may erode in some places that may cause spaces that the cement may fill or occupy which would naturally cause bulges, protrusions and misalignment in the concrete cast into the excavated ground (tsn., June 1, 2000, pp 14-18). This, in fact was anticipated when the agreement was executed and included as provision 6.4 thereof.
The construction of the diaphragm wall panel by panel caused misalignment and the chipping off of the portions misaligned is considered a matter of course. Defendant, as the main contractor of the project, has the responsibility of chopping or chipping off of bulges (tsn., ibid, pp 20-21).
Wrong location of rebar dowels was anticipated by both contractor and subcontractor as the latter submitted a plan called “Detail of Sheer Connectors” (Exh “T”) which was approved. The plan provided two alternatives by which the wrong location of rebar dowels may be remedied. Hence, defendant, aware of the possibility of inaccurate location of these bars, cannot therefore ascribe the same to the plaintiff as defective work.
Construction of the capping beam required the use of cement. Records, however, show that from September 14, 1990 up to May 30, 1991 (Exhs. “B” to “L”), plaintiff had repeatedly requested defendant to deliver cement. Finally, on April 22, 1991, plaintiff notified defendant of its inability to construct the capping beam for the latter’s failure to deliver the cement as provided in their agreement (Exh. “I”). Although records show that there was mention of revision of design, there was no evidence presented to show such revision required less amount of cement than what was agreed on by plaintiff and defendant.
The seventh phase of the construction of the diaphragm wall is the construction of the steel props which could be installed only after the soil has been excavated by the main contractor. When defendant directed plaintiff to install the props, the latter requested for a site inspection to determine if the excavation of the soil was finished up to the 4th level basement. Plaintiff, however, did not receive any response. It later learned that defendant had contracted out that portion of work to another sub-contractor (Exhs. “O” and “P”). Nevertheless, plaintiff informed defendant of its willingness to execute that portion of its work.18
Defendant admitted that it had paid P6 million based on its evaluation of plaintiff’s accomplishments (tsn., Sept. 28, 2000, p. 17) and its payment was made without objection on plaintiff’s works, the majority of which were for the accomplishments in the construction of the diaphragm wall (tsn., ibid, p. 70).
x x x x
While there is no evidence to show the scope of work for these billings, it is safe to assume that these were also works in the construction of the diaphragm wall considering that as of May 16, 1991, plaintiff had only the installation of the steel props and welding works to complete (Exh. “H”). If defendant was able to evaluate the work finished by plaintiff the majority of which was the construction of the diaphragm wall and paid it about P6 million as accomplishment, there was no reason why it could not evaluate plaintiff’s works covered by billings 3 and 4. In other words, defendants did not have to excavate in order to determine and evaluate plaintiff’s works. Hence, defendant’s refusal to pay was not justified and the alleged defects of the diaphragm wall (tsn, Sept. 28, 2000, p. 17) which it claims to have discovered only after January 1992 were mere afterthoughts.19
II. With regard particularly to an award of interest in the concept of actual and compensatory damages, the rate of interest, as well as the accrual thereof, is imposed, as follows:1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or forbearance of money, the interest due should be that which may have been stipulated in writing. Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In the absence of stipulation, the rate of interest shall be 12% per annum to be computed from default, i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil Code.
2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum. No interest, however, shall be adjudged on unliquidated claims or damages except when or until the demand can be established with reasonable certainty. Accordingly, where the demand is established with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so reasonably established at the time the demand is made, the interest shall begin to run only from the date the judgment of the court is made (at which time the quantification of damages may be deemed to have been reasonably ascertained). The actual base for the computation of legal interest shall, in any case, be on the amount finally adjudged.
3. When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 12% per annum from such finality until its satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of credit.21
I. When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts or quasi-delicts is breached, the contravenor can be held liable for damages. The provisions under Title XVIII on "Damages" of the Civil Code govern in determining the measure of recoverable damages.
II. With regard particularly to an award of interest in the concept of actual and compensatory damages, the rate of interest, as well as the accrual thereof, is imposed, as follows:1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or forbearance of money, the interest due should be that which may have been stipulated in writing. Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In the absence of stipulation, the rate of interest shall be 6% per annum to be computed from default, i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil Code.
2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum. No interest, however, shall be adjudged on unliquidated claims or damages, except when or until the demand can be established with reasonable certainty. Accordingly, where the demand is established with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code), but when such certainty cannot be so reasonably established at the time the demand is made, the interest shall begin to run only from the date the judgment of the court is made (at which time the quantification of damages may be deemed to have been reasonably ascertained). The actual base for the computation of legal interest shall, in any case, be on the amount finally adjudged.
3. When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 6% per annum from such finality until its satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of credit.
And, in addition to the above, judgments that have become final and executory prior to July 1, 2013, shall not be disturbed and shall continue to be implemented applying the rate of interest fixed therein.23
As further clarified in the case of Sunga-Chan v. CA, a loan or forbearance of money, goods or credit describes a contractual obligation whereby a lender or creditor has refrained during a given period from requiring the borrower or debtor to repay the loan or debt then due and payable. Thus:
In Reformina v. Tomol, Jr., the Court held that the legal interest at 12% per annum under Central Bank (CB) Circular No. 416 shall be adjudged only in cases involving the loan or forbearance of money. And for transactions involving payment of indemnities in the concept of damages arising from default in the performance of obligations in general and/or for money judgment not involving a loan or forbearance of money, goods, or credit, the governing provision is Art. 2209 of the Civil Code prescribing a yearly 6% interest. Art. 2209 pertinently provides:Art. 2209. If the obligation consists in the payment of a sum of money, and the debtor incurs in delay, the indemnity for damages, there being no stipulation to the contrary, shall be the payment of the interest agreed upon, and in the absence of stipulation, the legal interest, which is six per cent per annum.
The term "forbearance," within the context of usury law, has been described as a contractual obligation of a lender or creditor to refrain, during a given period of time, from requiring the borrower or debtor to repay the loan or debt then due and payable.25
Endnotes:
* Designated Member per Raffle dated September 8, 2014.
1 Penned by Associate Justice Juan Q. Enriquez, Jr., with Associate Justices Ramon M. Bato, Jr. and Florito S. Macalino, concurring; Annex “B” to Petition, rollo (G.R. No. 194507), pp. 60-69.
2 Annex “C” to Petition, id. at 70-72.
3 Penned by Judge Estela Perlas-Bernabe, Annex “D” to Petition, rollo (G.R. No.194621), pp. 69-78.
4 Supra note 1.
5 Supra note 2.
6 Supra note 3.
7Rollo (G.R. No. 194507), p. 62.
8 Id. at 78-82.
9 Id. at 62.
10 Id. at 63.
11Rollo (G.R. No. 194621), p. 78.
12Rollo (G.R. No. 194507), pp. 61-68.
13 Id. at 67. (Italics in the original)
14 Id. at 71-72.
15 Id. at 107-108. See also Entry of Judgment, rollo (G.R. No. 194621), pp. 91-92.
16Malayan Insurance Co., Inc. v. Philippines First Insurance Co., Inc., G.R. No. 184300, July 11, 2012, citing Philippine Health-Care Providers, Inc. (Maxicare) v. Estrada, G.R. No. 171052, January 28, 2008, 542 SCRA 616, 621, citing Ilao-Quianay v. Mapile, 510 Phil. 736, 744-745 (2005); Fuentes v. Court of Appeals, G.R. No. 109849, February 26, 1997, 268 SCRA 703, 709.
17Rollo (G.R. No. 194621), p. 74.
18 Id. at 74-77. (Emphasis ours)
19 Id. (Emphasis ours)
20 G.R. No. 97412, July 12, 1994, 234 SCRA 78.
21Eastern Shipping Lines, Inc. v. Court of Appeals, supra, at 95-97. (Citations omitted; italics in the original)
22 G.R. No. 189871, August 13, 2013.
23Nacar v. Gallery Frames, supra, at 96-97. (Emphasis ours)
24 G.R. No. 183804, September 11, 2013.
25S.C. Megaworld Construction and Development Corporation v. Engr.Parada, supra. (Emphasis ours)
26Estores v. Spouses Supangan, G.R. No. 175139, April 18, 2012, 670 SCRA 95, 105-106.
27 Id. at 106.
28 Hanjin Heavy Industries and Construction Co., Ltd. v. Dynamic Planners and Construction Corp, G.R. Nos. 169408 & 170144, April 30, 2008; J Plus Asia Development Corporation v. Utility Assurance Corporation, G.R. No. 199650, June 26, 2013; Philippine Charter Insurance Corporation v. Central Colleges of the Philippines and Dynamic Planners and Construction Corporation, G.R. Nos. 180631-33, February 22, 2012.
29Radio Communications of the Philippines, Inc. v. Court Of Appeals, G.R. No. 139762, April 26, 2006.
30 San Fernando Regala Trading, Inc. v. Cargill Philippines, Inc., G.R. No. 178008, October 9, 2013.
31Bataan Seedling Association, Inc. v. Republic of the Philippines, G.R. No. 141009, July 2, 2002.
32International Container Terminal Services, Inc. v. FGU Insurance Corporation, G.R. No. 161539, April 24, 2009; Air France Philippines/KLM Air France v. John Anthony De Camilis, G.R. No. 188961, October 13, 2009, 603 SCRA 684; Asian Terminals, Inc. v. Philam Insurance Co., Inc. (Now Chartis Philippines Insurance, Inc.), G.R. No. 181163, July 24, 2013.
33Swift Foods, Inc. v. Spouses Mateo, G.R. No. 170486, September 12, 2011, 657 SCRA 394.
34 Supra note 22.
35Rollo (G.R. No. 194621), pp. 75.