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 stipulated that Hercon would receive a percentage of collections from the Ministry of Public Works and Highways (MPWH), including a share in any price escalation payments. Hercon performed work and submitted billings, which Sarmiento paid based on MPWH disbursements, excluding escalation claims. In September 1982, Hercon ceased work, alleging non-payment of progress billings and its share of price escalation costs paid by the MPWH to Sarmiento. Hercon subsequently filed a complaint to recover these alleged unpaid amounts.
Sarmiento countered that Hercon had breached the contract by abandoning the project, that all proper billings had been paid, and that Hercon was not entitled to the entire escalation amount but only a proportionate share among 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. presented sufficient evidence to substantiate its claim for a share in the price escalation payments collected by Sarmiento from the MPWH.

RULING

The Supreme Court reversed the Court of Appeals and reinstated the trial court’s decision in favor of Sarmiento. The legal logic centered on the burden of proof and the respect accorded to factual findings of the trial court. The Court held that Hercon failed to discharge its burden of proof regarding the escalation claim. While evidence showed Sarmiento collected escalation payments from the MPWH, Hercon did not present clear, specific, and conclusive evidence to segregate and particularize what portion of those total collections pertained specifically to its work. Its claim was based primarily on a self-serving summary (Exhibit Q-1) without adequate foundational documentation or computation linking the claimed amount to its actual accomplishments.
The Supreme Court emphasized that judgments must conform to the evidence presented. Since Hercon’s evidence was deemed “hazy, self-serving and inconclusive” by the trial court—a finding adopted by the Court of Appeals in part—there was no factual basis for the appellate court’s subsequent award of escalation costs. Furthermore, the Court affirmed the trial court’s award of actual damages to Sarmiento for the cost of correcting Hercon’s defective work, as this was supported by evidence. The awards for moral and exemplary damages and attorney’s fees were also reinstated, as the trial court found the filing of the unfounded suit to be in bad faith, causing Sarmiento reputational and financial injury. The decision underscores the principle that factual findings of the trial court, when supported by evidence, are accorded great weight and respect on appeal.