G.R. No. 149140 ; September 12, 2006
VICTORIA ONG, petitioner, vs. ERNESTO BOGÑALBAL and HON. COURT OF APPEALS, respondents.

FACTS

Petitioner Victoria Ong and respondent Ernesto Bogñalbal, an architect-contractor, entered into an Owner-Contractor Agreement for the construction of a boutique. The contract provided for progress billings certified by the supervising architect. Ong paid the first three billings but refused to pay the fourth, leading to a dispute. Bogñalbal contended Ong refused payment unless a rushed flooring change was completed, which resulted in defective work. Ong countered that the fourth billing exceeded the work’s value and that Bogñalbal had agreed to complete the flooring before payment but instead abandoned the project on April 24, 1995. Bogñalbal filed a sum of money case. The Metropolitan Trial Court ruled in his favor, awarding the fourth billing and a reduced amount for the change order, while denying both parties’ claims for damages. This was affirmed by the Regional Trial Court and the Court of Appeals.

ISSUE

Whether the Court of Appeals erred in affirming the lower courts’ decisions awarding the fourth progress billing to Bogñalbal and denying the claims for damages by both parties.

RULING

The Supreme Court denied the petition and affirmed the Court of Appeals. The legal logic rests on the proper application of contractual stipulations and the principle of concurrent performance of reciprocal obligations. The contract required payment based on progress billings certified by the architect. The fourth billing was duly certified, and Ong’s refusal to pay was unjustified. Her insistence on completing the flooring change as a precondition was a unilateral imposition not stipulated in the agreement. Consequently, Bogñalbal’s suspension of work was a valid response to Ong’s prior breach of non-payment, not an abandonment. Regarding damages, the Court applied Article 1192 of the Civil Code on reciprocal obligations. Both parties committed breaches: Ong by unjustifiably withholding payment, and Bogñalbal by subsequently stopping work. In such a case of mutual breach, the first infractor (Ong) is liable for damages. However, the claims for actual damages by both parties were unsupported by sufficient evidence. Ong failed to substantiate her claimed costs for completing the project, and Bogñalbal did not adequately prove his alleged losses from the work stoppage. Therefore, while Ong was the first infractor, the denial of all damages claims was proper due to lack of proof. The award of the certified billing and the adjusted change order value stood as the correct fulfillment of the contract’s payment mechanism.