G.R. No. 188027 . August 09, 2017
Swire Realty Development Corporation, Petitioner, v. Specialty Contracts General and Construction Services, Inc. and Jose Javellana, Respondents.

FACTS

Petitioner Swire Realty Development Corporation filed a Complaint for Sum of Money and Damages against respondents Specialty Contracts General and Construction Services, Inc. and its President, Jose Javellana, for alleged breach of an Agreement to Undertake Waterproofing Works dated December 27, 1996. The contract, valued at Php 2,000,000.00, covered waterproofing works for the Garden View Tower condominium project over 100 calendar days. The Regional Trial Court (RTC) ruled in favor of Swire, ordering the respondents to pay actual damages, costs for remedial works, and attorney’s fees. The Court of Appeals (CA) reversed the RTC decision. The CA found that respondents had achieved a 90% accomplishment rate and performed additional works, particularly re-waterproofing a swimming pool due to a design change. Consequently, the CA ordered Swire to pay the respondents the balance of Php 157,702.06 with interest.

ISSUE

The primary issue is whether the Supreme Court can review the factual findings of the CA regarding the classification of the swimming pool waterproofing as “additional works” entitling the respondents to extra compensation.

RULING

The Supreme Court granted the petition, reversed the CA decision, and reinstated the RTC ruling with modifications. The Court held that while a petition for review under Rule 45 generally involves only questions of law, exceptions apply when factual findings of the CA and the RTC are conflicting and the CA’s conclusion is based on a misapprehension of facts. The Court found such exceptions present here.
On the substantive issue, the Court ruled that the swimming pool waterproofing was not additional work but was included in the original contract’s scope. The Agreement explicitly listed “swimming pool” under the “Scope of Works.” The Site Instruction Form cited by the CA to prove a change order merely instructed re-waterproofing due to a depth alteration; it did not constitute a new contract or a valid change order for extra compensation as it lacked the formal requisites of mutual consent and a price agreement. Therefore, the respondents were not entitled to payment for this task as an extra.
Regarding damages, the Court affirmed the award of actual damages (Php 400,000.00 for unapplied advances and Php 124,931.40 paid to a replacement contractor) due to respondents’ failure to complete the contract. However, the Court modified the penalty for delay. Applying Articles 1229 and 2227 of the Civil Code, the Court equitably reduced the 20% penalty stipulated in the contract (Php 400,000.00) to 10% (Php 200,000.00), considering the respondents’ 90% accomplishment. The award for attorney’s fees was deleted for lack of factual and legal justification.