G.R. No. 83138 & G.R. No. 85220 , October 17, 1989
AMALIO L. SARMIENTO, doing business under the name of A.L. SARMIENTO CONSTRUCTION, petitioner, vs. HONORABLE COURT OF APPEALS AND HERCON INC., respondents. HERCON INC., petitioner, vs. HON. COURT OF APPEALS and AMALIO L. SARMIENTO, doing business under the name of A.L. SARMIENTO CONSTRUCTION, respondents.

FACTS

Amalio L. Sarmiento, as a representative of the Mass Integrated Group, subcontracted a portion of the Mangahan Floodway Project to Hercon, Inc. Their agreement entitled Hercon to a percentage of collections from the Ministry of Public Works and Highways (MPWH), including a share in any price escalation payments. Hercon ceased work in September 1982, alleging that Sarmiento failed to pay its progress billings and its share of the escalation costs paid by the MPWH. Hercon subsequently filed a complaint to recover these amounts.
Sarmiento countered that Hercon had breached the contract by abandoning the project, that he had paid all valid billings, and that Hercon was not entitled to the entire escalation amount but only a proportionate share with other subcontractors. He also filed a counterclaim for damages, citing the costs of remedying Hercon’s defective work, operational losses due to the abandonment, and moral and exemplary damages from the allegedly baseless suit.

ISSUE

The primary issue was whether Hercon, Inc. sufficiently proved its entitlement to the claimed price escalation payments from Sarmiento. A secondary issue was the propriety of the trial court’s award of actual, moral, and exemplary damages and attorney’s fees to Sarmiento.

RULING

The Supreme Court reversed the Court of Appeals and reinstated the trial court’s decision in favor of Sarmiento. On the main issue, the Court held that Hercon failed to discharge its burden of proof. While it was established that Sarmiento had collected escalation payments from the MPWH, Hercon presented no competent evidence to specify what portion of those total collections pertained specifically to its work. Its claim, based on a self-serving summary (Exhibit Q), was deemed hazy and inconclusive. The Court emphasized that judgments must conform to the evidence presented, and Hercon’s failure to particularize and substantiate its claim was fatal.
Regarding Sarmiento’s counterclaim, the Court found the awards justified. The actual damages for the cost of remedying defective work and incurring operational expenses were supported by evidence. The moral and exemplary damages and attorney’s fees were also upheld, as the Court found that Hercon’s unjustified abandonment of the project and the filing of an unsubstantiated suit caused Sarmiento sleepless nights, reputational harm, and financial strain with banks and fellow contractors. The Supreme Court accorded great weight to the trial court’s factual findings, finding no cogent reason to disturb them, and set aside the appellate court’s modification.