G.R. No. 96643. April 23, 1993.
ERNESTO DEIPARINE, JR., petitioner, vs. THE HON. COURT OF APPEALS, CESARIO CARUNGAY and ENGR. NICANOR TRINIDAD, respondents.

FACTS

The spouses Cesario and Teresita Carungay entered into a construction agreement with Ernesto Deiparine, Jr. on August 13, 1982, for the building of a three-story dormitory in Cebu City for P970,000.00. Deiparine bound himself to erect the building “in strict accordance to plans and specifications.” Nicanor Trinidad, Jr., a civil engineer, was designated as the Carungays’ representative with powers of inspection. During construction, Trinidad reported that Deiparine was deviating from the plans and specifications, impairing the building’s strength and safety. Despite memoranda from Carungay to secure approval before pouring cement and complaints about faulty work, Deiparine continued. The parties later agreed to conduct core tests. The tests, conducted by Geo-Testing International, showed that on the basis of the required 3,000 psi compressive strength, all samples failed; on 2,500 psi, only three passed; and on 2,000 psi, nineteen failed, indicating the building was structurally defective. Consequently, the Carungays filed a complaint in the Regional Trial Court of Cebu for rescission of the contract and damages. Deiparine moved to dismiss for lack of jurisdiction, alleging that under Presidential Decree No. 1746, the Philippine Domestic Construction Board (PDCB) had jurisdiction. The motion was denied. After trial, the court declared the contract rescinded, ordered Deiparine to forfeit his construction expenses, reimburse the cost of core testing, demolish the structures, and pay attorney’s fees. The Court of Appeals affirmed the decision.

ISSUE

1. Whether the Regional Trial Court had jurisdiction over the case for rescission of a private construction contract, or if jurisdiction vested in the Philippine Domestic Construction Board under P.D. No. 1746.
2. Whether the trial court correctly ordered the rescission of the construction contract under Article 1191 of the Civil Code due to Deiparine’s breach.

RULING

1. On Jurisdiction: The Supreme Court held that the Regional Trial Court had jurisdiction. P.D. No. 1746 grants the Philippine Domestic Construction Board (PDCB) adjudicatory powers only over “public construction contracts” under Section 6(b), paragraph 3. For private construction contracts, under paragraph 5, the PDCB’s power is limited to “formulate and recommend rules and procedures for the adjudication and settlement of disputes.” Therefore, disputes from private construction contracts, like the one at bar, remain cognizable by the regular courts. The Court found that Deiparine’s counsel deliberately misquoted the decree by substituting “the” for “public” in paragraph 3 and placed wrong emphasis in paragraph 5, and was fined for contempt.
2. On Rescission: The Supreme Court affirmed the rescission under Article 1191 of the Civil Code. The Court clarified that rescission under Article 1191, based on breach of faith violating reciprocity, applied, not rescission under Article 1385 for rescissible contracts. Deiparine’s failure to follow the stipulated plans and specifications, resulting in a structurally defective building as proven by core tests, constituted a breach that entitled the Carungays to rescind. Articles 1714, 1715, and 1727 of the Civil Code, governing the contractor’s duty to execute work with proper materials and according to specifications, were applicable. The agreement to conduct core tests was a subsequent mutual agreement to determine compliance. Deiparine’s actions violated the principles of justice, good faith, and compliance with obligations under Articles 19 and 1159.
The petition was denied, and the appealed decision was affirmed. Atty. Gregorio B. Escasinas was fined for contempt.