G.R. No. 147614 ; January 29, 2004
H.L. CARLOS CONSTRUCTION, INC., Petitioner, vs. MARINA PROPERTIES CORPORATION, JESUS K. TYPOCO SR. and TAN YU, Respondents.

FACTS

Petitioner H.L. Carlos Construction, Inc. (HLC) entered into a Construction Contract with respondent Marina Properties Corporation (MPC) to build Phase III of a condominium project for a lump sum of ₱38,580,609.00. The completion date was extended to October 31, 1989, with a grace period until November 30, 1989. HLC filed a complaint against MPC and its alleged officers, Jesus K. Typoco Sr. and Tan Yu, seeking payment for labor and material cost escalations, change orders, retention money, and the value of detained construction materials, totaling approximately ₱14 million. MPC counterclaimed for actual and liquidated damages, alleging HLC abandoned the project.
The trial court ruled in favor of HLC, ordering respondents to pay the claimed amounts. The Court of Appeals reversed this decision, dismissing HLC’s complaint and holding HLC liable to MPC for actual and liquidated damages. The CA found the contract was for a lump sum, disallowing cost escalations, and that HLC failed to prove its claims for extra work. It also ruled HLC was not entitled to the retention fee due to non-completion and absolved the individual respondents from personal liability.

ISSUE

The core issue is whether HLC is entitled to payment for increased labor costs, material price escalations, and extra work, and conversely, whether MPC is entitled to liquidated and actual damages from HLC for project abandonment and delay.

RULING

The Supreme Court granted the petition in part. It held that while a lump-sum contract generally fixes the price, claims for cost increases or extra work may be allowed if there is unjust enrichment. The Court found that HLC validly incurred increased labor costs due to a government-mandated wage order, and MPC, through its project manager’s approval of progress billings that included these costs, gave implied consent. To deny payment would unjustly enrich MPC at HLC’s expense. However, HLC’s claims for material price escalation and specific extra work were denied for lack of sufficient proof.
Regarding MPC’s counterclaim, the Court affirmed the award of liquidated damages. The contract stipulated liquidated damages for delay, and HLC failed to complete the project by the agreed-upon date. However, the Court deleted the award for actual damages. MPC’s claim for costs to complete the project with a new contractor was not adequately proven, as the evidence did not conclusively show these costs were solely for completing HLC’s remaining work versus performing new or different work. The individual respondents, Typoco and Tan Yu, were correctly absolved from personal liability as they were not parties to the contract and MPC’s corporate personality remained intact.