Financial Building Corporation v. Corporation

JR., J.:

The present consolidated petitions for review under Rule 45 assail the Decision1 dated December 12, 2003 of the Court of Appeals (CA) in CA-G.R. CV No. 41224 which affirmed with modification the Decision2 dated January 12, 1993 of the Regional Trial Court (RTC) of Makati City, Branch 65 in Civil Case No. 16266. The Facts Sometime in October 1985, Rudlin International Corporation (Rudlin) invited proposals from several contractors to undertake the construction of a three-storey school building and other appurtenances thereto at Vista Grande, BF Resort Village, Las Piñas, Metro Manila. The contract was eventually awarded to Financial Building Corporation (FBC), with a bid of ₱6,933,268.00 as total project cost.

On November 22, 1985, Rudlin represented by its Chairman of the Board and President Rodolfo J. Lagera, and FBC represented by its Vice-President and Treasurer Jaime B. Lo, executed a Construction Agreement3 which, among others, provided for the total consideration and liability for delay as follows: SECTION FOUR CONTRACT PRICE The OWNER agrees to pay the CONTRACTOR, for the work stated in Section Two hereof, the total price of SIX MILLION NINE HUNDRED THIRTY THREE THOUSAND TWO HUNDRED SIXTY EIGHT PESOS (P6,933,268.00) in accordance with Section five et seq. Payment of this amount is subject to additions or deductions in accordance with the provisions of this Agreement and of the other documents to which this Agreement is made subject to.4 x x x x SECTION TWELVE TIME OF ESSENCE; EXTENSION OF TIME Time is of the essence in this Agreement and any delay not due to force majeure will result in injury and damage to the OWNER in view of which it is hereby stipulated that, in the completion of the work, the CONTRACTOR shall be liable to the OWNER in the sum equivalent to 1/10 of 1% of the total contract price for every calendar day of delay (Sundays and Legal Holidays included).

Any sums accruing in favor of the OWNER under this provision shall be deductible from the stipulated Contract Price or any balance thereof due to the CONTRACTOR.5 The contract also provided for completion date not later than April 30, 1986 unless an extension of time has been "authorized and approved by the OWNER and the ARCHITECT in writing."6 It appears that the construction was not finished on said date as Rudlin wrote FBC to complete the project not later than May 31, 1986, except for the administration wing which Rudlin expected to be turned over to it "100% complete by June 10, 1986."7 On June 5, 1986, Rudlin and FBC made amendments to their Construction Agreement dated November 22, 1985 through a Letter-Agreement8 signed by Rodolfo J. Lagera and Jaime B. Lo, as follows: 1. Financial Building Corporation ("FBC") shall complete and deliver the Project to Rudlin International, Inc. ("RII") on or before 10 June 1986.

2. Payment of the balance due on the contract price shall be made after the parties have reconciled their accounts with regard to the upgrading and downgrading of the work done on the Project, which reconciliation shall be settled not later than 30 June 1986. 3.

RII shall pay FBC the unpaid balance as determined under paragraph 2 hereof, under the following terms and conditions: (a) RII shall pay FBC an additional payment of Two Hundred Fifty Thousand Pesos (P250,000.00) upon signing hereof, receipt of which is hereby acknowledged.

This is in addition to the Two Hundred Fifty Thousand Pesos (P250,000.00) paid on 29 May 1986. (b) The rest of the unpaid balance shall be payable within a period of ninety (90) days from the date the said balance is determined in accordance with paragraph 2 hereof, adequately secured by post dated checks and the same to earn interest at the prevailing bank rates. There shall be a moratorium of thirty (30) days, the payments to be made in accordance with the following schedule: On or before 15 July 1986 - 25% On or before 31 July 1986 - 25% On or before 15 August 1986 - 25% On or before 31 August 1986 - 25%