G.R. No. 1490 : April 2, 1904
O. F. CAMPBELL & GO-TAUCO, plaintiffs-appellants, vs. BEHN, MEYER & CO., defendants-appellees.

FACTS:
On July 20, 1901, plaintiffs-appellants O. F. Campbell & Go-Tauco entered into a contract with defendants-appellees Behn, Meyer & Co. to construct a dwelling house in Manila for 15,000 Mexican pesos. During construction, alterations and extra work were agreed upon, increasing the total claimed cost to 22,750.62 pesos. Defendants paid 13,500 pesos, leaving a balance of 9,250.62 pesos, for which plaintiffs filed an action.
Defendants resisted payment, alleging plaintiffs constructed the house defectively and in breach of contract. By way of counterclaim, defendants also alleged that under a separate contract dated June 20, 1901, plaintiffs were to fill a lot with earth and sand at 1.30 pesos per cubic meter. Defendants claimed they paid for 62,090.50 cubic meters but actually received only 31,000 cubic meters, and thus sought to recover 41,197.65 pesos for the undelivered fill.
The Court of First Instance dismissed plaintiffs’ complaint. It held that the damages defendants suffered from the defective construction offset the unpaid balance of 9,250.62 pesos. Furthermore, the trial court found defendants paid for at least 40,000 cubic meters of fill that was not delivered, and ordered plaintiffs to pay defendants 52,000 pesos.

ISSUE:
1. Whether the defendants are entitled to offset the unpaid balance for the construction contract against their claim for damages due to alleged defective workmanship.
2. Whether the defendants can recover payments made for the fill material on the ground of mutual mistake of fact as to the quantity delivered.

RULING:
The Supreme Court reversed the judgment of the Court of First Instance.
1. On the Construction Contract: The Court found that while there were defects in the building, the defendants had engineers supervising the work throughout its progress. There was no evidence that plaintiffs disregarded the engineers’ instructions or committed fraud. The defendants accepted the house by moving into it. Therefore, the defendants’ claim for damages due to defective construction was not sufficiently proven to offset the admitted unpaid balance for the work and extras. Plaintiffs are entitled to recover the sum of 9,250.62 pesos.
2. On the Fill Material Contract: The Court ruled that the defendants could not recover payments for the alleged undelivered fill. The doctrine of estoppel applies. The defendants themselves measured or approved the measurements of the sand and earth as it was delivered, receipted for it, and made weekly payments based on those measurements over a period of many months without complaint. There was no proof of fraud or of a mutual mistake of fact that would warrant the recovery of money paid. The subsequent estimate by experts suggesting a lower volume did not establish a mutual mistake at the time of payment. The claim for the return of 52,000 pesos was disallowed. The plaintiffs’ additional claim for 2,279.55 pesos on the fill contract was also disallowed for lack of satisfactory proof.
DISPOSITIVE PORTION: The judgment of the lower court is reversed. Judgment is ordered in favor of plaintiffs for the sum of 9,250.62 Mexican pesos, with costs in both instances.