Construction v. Shaughnessy Development Corporation

INTING, J.:

Before the Court is a Petition for Review on Certiorari1 filed under Rule 45 of the Rules of Court seeking the modification of the Decision2 dated August 16, 2016 and the Resolution3 dated January 11, 2017 of the Court of Appeals (CA) in CA-G.R. CV No. 98277. The CA reversed and set aside the Decision4 dated October 29, 2010 and the Order5 dated November 18, 2011 of Branch 223, Regional Trial Court (RTC), Quezon City in Civil Case No. Q-05-55081. The Antecedents H.S. Pow Construction and Development Corporation (HSPCDC) is a corporation engaged in the business of constructing buildings and houses and supplying labor and materials for construction.6 On April 4, 2005, HSPCDC filed a Complaint7 for Sum of Money alleging that in September 2001, Shaughnessy Development Corporation (SDC) engaged its Services for the construction of subdivision concrete roads, underground drainage system, water distribution, and elevated water reservoir for SDC's Summerfield Subdivision in Taytay, Rizal.8 Based on the Construction Contract9 (Contract), HSPCDC shall undertake the project for P10,500,000.00 with no escalation clause, inclusive of all materials, labor, shop facilities, overhead, supervision, profit, workers insurance coverage, performance and warrant bonds, and value added tax.

The Contract further provided that work should commence not later than 10 calendar days from receipt of the notice to proceed and upon actual release of the building permit and should be completed within 180 days therefrom.10 Construction started on May 21, 2002.11 According to HSPCDC, changes or variation orders12 costing P552,829.7513 were undertaken in the course of the project which was approved by SDC President, Timothy Ang (Ang). SDC also instructed HSPCDC to construct three duplex units in the subdivision site which was not part of the scope of its work under the Contract. On January 17, 2003, HSPCDC completed the main entrance roadway and the main subdivision road (Roads 1 and 2, and a significant portion of Road 4).

However, SDC requested HSPCDC to proceed with the completion of work on Road 3 and to defer the submission of progress billing until the entire portion of Road 3 is concreted. On March 3, 2003, the entire road network of the project was completed.14 On March 5, 2003,15 HSPCDC submitted its Progress Billing to SDC requesting for the release of P766,556.46, representing the value of work accomplishment covering the period of January 10 to March 3, 2003.16 Seeing that no payment was forthcoming, HSPCDC wrote another Letter dated March 26, 2003 seeking to clarify matters relative to the project and stating that due to SDC's non-payment of the progress billing, it incurred negative cash position and the remaining works had to be deferred.17 Still, SDC gave no response. Thus, on November 11, 2003, HSPCDC sent another Letter with a Summary of Account18 and listing the principal balance due on the Contract in the amount of P2,122,704.55 itemized as follows: SUMMARY ACCOUNT Main Contract P 1,081,584.80 3-Duplex Residential Houses 488,290.00 Variation Orders 552,829.75