PNB VS.
CHEACHEE advice[8] from Philadelphia National Bank that the proceeds of the subject
Factual Antecedents
On November 4, 1992, Ofelia Cheah (Ofelia) and her friend
Adelina Guarin (Adelina) were having a conversation in the latters office
when Adelinas friend, Filipina Tuazon (Filipina), approached her to ask if
she could have Filipinas check cleared and encashed for a service fee of
2.5%. The check is Bank of America Check No. 190[6] under the account
of Alejandria Pineda and Eduardo Rosales and drawn by Atty. Eduardo
Rosales against Bank of America Alhambra Branch in California, USA,
with a face amount of $300,000.00, payable to cash. Because Adelina does
not have a dollar account in which to deposit the check, she asked Ofelia if
she could accommodate Filipinas request since she has a joint dollar
savings account with her Malaysian husband Cheah Chee Chong (Chee
Chong) under Account No. 265-705612-2 with PNB Buendia Branch.
Ofelia agreed.
That same day, Ofelia and Adelina went to PNB Buendia Branch.
They met with Perfecto Mendiola of the Loans Department who referred
them to PNB Division Chief Alberto Garin (Garin). Garin discussed with
them the process of clearing the subject check and they were told that it
[7]
normally takes 15 days. Assured that the deposit and subsequent
clearance of the check is a normal transaction, Ofelia deposited Filipinas
check. PNB then sent it for clearing through its correspondent bank,
Philadelphia National Bank. Five days later, PNB received a credit
check had been temporarily credited to PNBs account as of November 6,
1992. On November 16, 1992, Garin called up Ofelia to inform her that the
check had already been cleared.[9] The following day, PNB Buendia
Branch, after deducting the bank charges, credited $299,248.37 to the
account of the spouses Cheah.[10] Acting on Adelinas instruction to
withdraw the credited amount, Ofelia that day personally withdrew
$180,000.00.[11] Adelina was able to withdraw the remaining amount the
next day after having been authorized by Ofelia.[12]Filipina received all the
proceeds.
In the meantime, the Cable Division of PNB Head Office in
Escolta, Manila received on November 16, 1992 a SWIFT[13] message from
Philadelphia National Bank dated November 13, 1992 with Transaction
Reference Number (TRN) 46506218, informing PNB of the return of the
subject check for insufficient funds.[14] However, the PNB Head Office
could not ascertain to which branch/office it should forward the same for
proper action. Eventually, PNB Head Office sent Philadelphia National
Bank a SWIFT message informing the latter that SWIFT message with
TRN 46506218 has been relayed to PNBs various divisions/departments
but was returned to PNB Head Office as it seemed misrouted. PNB Head
Office thus requested for Philadelphia National Banks advice on said
SWIFT messages proper disposition.[15] After a few days, PNB Head Office
ascertained that the SWIFT message was intended for PNB Buendia
Branch.
 PNB Buendia Branch learned about the bounced check when it
received on November 20, 1992 a debit advice,[16] followed by a letter[17] on
November 24, 1992, from Philadelphia National Bank to which the
November 13, 1992 SWIFT message was attached. Informed about the
bounced check and upon demand by PNB Buendia Branch to return the
money withdrawn, Ofelia immediately contacted Filipina to get the money
back. But the latter told her that all the money had already been given to
several people who asked for the checks encashment. In their effort to
recover the money, spouses Cheah then sought the help of the National
Bureau of Investigation. Said agencys Anti-Fraud and Action Division was
later able to apprehend some of the beneficiaries of the proceeds of the
check and recover from them $20,000.00. Criminal charges were then filed
against these suspect beneficiaries.[18]
Meanwhile, the spouses Cheah have been constantly meeting with
the bank officials to discuss matters regarding the incident and the recovery
of the value of the check while the cases against the alleged perpetrators
remain pending. Chee Chong in the end signed a PNB
[19] [20]
drafted letter which states that the spouses Cheah are offering their
condominium units as collaterals for the amount withdrawn. Under this
setup, the amount withdrawn would be treated as a loan account with
deferred interest while the spouses try to recover the money from those who
defrauded them. Apparently, Chee Chong signed the letter after the Vice
President and Manager of PNB Buendia Branch, Erwin Asperilla
(Asperilla), asked the spouses Cheah to help him and the other bank officers
as they were in danger of losing their jobs because of the incident. Asperilla
likewise assured the spouses Cheah that the letter was a mere formality and
that the mortgage will be disregarded once PNB receives its claim for
indemnity from Philadelphia National Bank.
Although some of the officers of PNB were amenable to the
proposal,[21] the same did not materialize. Subsequently, PNB sent a
demand letter to spouses Cheah for the return of the amount of the check,
[22]
froze their peso and dollar deposits in the amounts of P275,166.80 and
$893.46,[23] and filed a complaint[24] against them for Sum of Money with
Branch 50 of the Regional Trial Court (RTC) of Manila, docketed as Civil
Case No. 94-71022. In said complaint, PNB demanded payment of
around P8,202,220.44, plus interests[25] and attorneys fees, from the spouses
Cheah.
As their main defense, the spouses Cheah claimed that the
proximate cause of PNBs injury was its own negligence of paying a US
dollar denominated check
without waiting for the 15-day clearing period, in violation of its bank
practice as mandated by its own bank circular, i.e., PNB General Circular
No. 52-101/88.[26] Because of this, spouses Cheah averred that PNB is
barred from claiming what it had lost. They further averred that it is unjust
for them to pay back the amount disbursed as they never really benefited
therefrom. As counterclaim, they prayed for the return of their frozen
deposits, the recoupment of P400,000.00 representing the amount they had
so far spent in recovering the value of the check, and payment of moral and
exemplary damages, as well as attorneys fees.

Ruling of the Regional Trial Court
The RTC ruled in PNBs favor. The dispositive portion of its
[27]
Decision dated May 20, 1999 reads:
WHEREFORE, premises considered, judgment is hereby
rendered in favor of the plaintiff Philippine National Bank
[and] against defendants Mr. Cheah Chee Chong and Ms.
Ofelia Camacho Cheah, ordering the latter to pay jointly
and severally the herein plaintiffs bank the amount:
1. of US$298,950.25 or its peso
equivalent based on Central Bank Exchange Rate
prevailing at the time the proceeds of the BA Check No.
190 were withdrawn or the prevailing Central Bank Rate
at the time the amount is to be reimbursed by the
defendants to plaintiff or whatever is lower. This is
without prejudice however, to the rights of the defendants
(accommodating parties) to go against the group of
Adelina Guarin, Atty. Eduardo Rosales, Filipina Tuazon,
etc., (Beneficiaries- accommodated parties) who are privy
to the defendants.
No pronouncement as to costs.
No other award of damages for non[e] has been proven.
SO ORDERED.[28]
The RTC held that spouses Cheah were guilty of contributory negligence.
Because Ofelia trusted a friends friend whom she did not know and
considering the amount of the check made payable to cash, the RTC opined
that Ofelia showed lack of vigilance in her dealings. She should have
exercised due care by investigating the negotiability of the check and the
identity of the drawer. While the court found that the proximate cause of the
wrongful payment of the check was PNBs negligence in not observing the
15-day guarantee period rule, it ruled that spouses Cheah still cannot escape
liability to reimburse PNB the value of the check as an accommodation
party pursuant to Section 29 of the Negotiable Instruments Law.[29] It
likewise applied the principle of solutio indebiti under the Civil Code. With
regard to the award of other forms of damages, the RTC held that each party
must suffer the consequences of their own acts and thus left both parties as
they are.
Unwilling to accept the judgment, the spouses Cheah appealed to
the CA.
Ruling of the Court of Appeals
While the CA recognized the spouses Cheah as victims of a scam
who nevertheless have to suffer the consequences of Ofelias lack of care
and prudence in immediately trusting a stranger, the appellate court did not
hold PNB scot-free. It ruled in its August 22, 2005 Decision,[30] viz:
As both parties were equally negligent, it is but
right and just that both parties should equally suffer and
 shoulder the loss. The scam would not have been possible latter are accommodation parties under the law as the banks own negligence
without the negligence of both parties. As earlier stated,
the complaint of PNB cannot be dismissed because the is the proximate cause of the damage it sustained. Nevertheless, it also
Cheah spouses were negligent and Ms. Cheah took an found Ofelia guilty of contributory negligence. Thus, both parties should be
active part in the deposit of the check and the withdrawal
of the subject amounts. On the other hand, the Cheah made equally responsible for the resulting loss.
spouses cannot entirely bear the loss because PNB
allowed her to withdraw without waiting for the clearance
Both parties filed their respective Motions for
of the check. The remedy of the parties is to go after those
[32] [33]
who perpetrated, and benefited from, the scam. Reconsideration but same were denied in a Resolution dated
WHEREFORE, the May 20, 1999 Decision of December 21, 2005.
the Regional Trial Court, Branch 5, Manila, in Civil Case
No. 94-71022, is hereby REVERSED and SET ASIDE
and another one entered DECLARING both parties Hence, these Petitions for Review on Certiorari.
equally negligent and should suffer and shoulder the loss.

Accordingly, PNB is hereby ordered to credit to the peso Our Ruling

and dollar accounts of the Cheah spouses the amount due
to them.
The petitions for review lack merit. Hence, we affirm the ruling of the CA.
SO ORDERED.[31] PNBs act of releasing
the proceeds of the
check prior to the
lapse of the 15-day
In so ruling, the CA ratiocinated that PNB Buendia Branchs non-receipt of
clearing period was
the SWIFT message from Philadelphia National Bank within the 15-day the proximate cause
clearing period is not an acceptable excuse. Applying the last clear chance of the loss.

doctrine, the CA held that PNB had the last clear opportunity to avoid the
impending loss of the money and yet, it glaringly exhibited its negligence in
allowing the withdrawal of funds without exhausting the 15-day clearing
period which has always been a standard banking practice as testified to by
PNBs own officers, and as provided in its own General Circular No.
52/101/88. To the CA, PNB cannot claim from spouses Cheah even if the
Proximate cause is that cause, which, in natural and continuous
sequence, unbroken by any efficient intervening cause, produces the injury
and without which the result would not have occurred. x x x To determine
the proximate cause of a controversy, the question that needs to be asked is:
If the event did not happen, would the injury have resulted? If the answer is
no, then the event is the proximate cause.[34]
Here, while PNB highlights Ofelias fault in accommodating a
strangers check and depositing it to the bank, it remains mum in its release
of the proceeds thereof without exhausting the 15-day clearing period, an
act which contravened established banking rules and practice.
It is worthy of notice that the 15-day clearing period alluded to is
construed as 15 banking days. As declared by Josephine Estella, the
Administrative Service Officer who was the banks Remittance Examiner,
what was unusual in the processing of the check was that the lapse of 15
[35]
banking days was not observed. Even PNBs agreement with Philadelphia
National Bank[36] regarding the rules on the collection of the proceeds of US
dollar checks refers to business/ banking days. Ofelia deposited the subject
check on November 4, 1992. Hence, the 15th banking day from the date of
said deposit should fall on November 25, 1992. However, what happened
was that PNB Buendia Branch, upon calling up Ofelia that the check had
been cleared, allowed the proceeds thereof to be withdrawn on November
17 and 18, 1992, a week before the lapse of the standard 15-day clearing
period.
This Court already held that the payment of the amounts of checks
without previously clearing them with the drawee bank especially so where
the drawee bank is a foreign bank and the amounts involved were large is
contrary to normal or ordinary banking practice.[37] Also, in Associated
Bank v. Tan,[38] wherein the bank allowed the withdrawal of the value of a
check prior to its clearing, we said that [b]efore the check shall have been
cleared for deposit, the collecting bank can only assume at its own risk x x x
that the check would be cleared and paid out. The delay in the receipt by
PNB Buendia Branch of the November 13, 1992 SWIFT message notifying
it of the dishonor of the subject check is of no moment, because had PNB
Buendia Branch waited for the expiration of the clearing period and had
never released during that time the proceeds of the check, it would have
already been duly notified of its dishonor. Clearly, PNBs disregard of its
preventive and protective measure against the possibility of being
victimized by bad checks had brought upon itself the injury of losing a
significant amount of money.
It bears stressing that the diligence required of banks is more than
that of a Roman pater familias or a good father of a family. The highest
degree of diligence is expected.[39] PNB miserably failed to do its duty of
exercising extraordinary diligence and reasonable business prudence. The
disregard of its own banking policy amounts to gross negligence, which the
law defines as negligence characterized by the want of even slight care,
acting or omitting to act in a situation where there is duty to act, not
inadvertently but wilfully and intentionally with a conscious indifference to
consequences in so far as other persons may be affected. [40] With regard to
collection or encashment of checks, suffice it to say that the law imposes on
the collecting bank the duty to scrutinize diligently the checks deposited
with it for the purpose of determining their genuineness and regularity. The
collecting bank, being primarily engaged in banking, holds itself out to the
public as the expert on this field, and the law thus holds it to a high standard
of conduct.[41] A bank is expected to be an expert in banking procedures and
it has the necessary means to ascertain whether a check, local or foreign, is
sufficiently funded.
Incidentally, PNB obliges the spouses Cheah to return the withdrawn
money under the principle of solutio indebiti, which is laid down in Article
2154 of the Civil Code:[42]
Art. 2154. If something is received when there is
no right to demand it, and it was unduly delivered through
mistake, the obligation to return it arises.
[T]he indispensable requisites of the juridical relation known
as solutio indebiti, are, (a) that he who paid was not under obligation to do
so; and (b) that the payment was made by reason of an essential mistake of
fact.[43]
In the case at bench, PNB cannot recover the proceeds of the check
under the principle it invokes. In the first place, the gross negligence of
PNB, as earlier discussed, can never be equated with a mere mistake of fact,
which must be something excusable and which requires the exercise of
prudence.No recovery is due if the mistake done is one of gross negligence.
The spouses Cheah
are guilty of
contributory
negligence and are
bound to share the
loss with the bank
Contributory negligence is conduct on the part of the injured part
y,
contributing as a legal cause to the harm he has suffered, which falls below
the standard to which he is required to conform for his own protection.[44]
The CA found Ofelias credulousness blameworthy. We
agree. Indeed, Ofelia failed to observe caution in giving her full trust in
accommodating a complete stranger and this led her and her husband to be
swindled. Considering that Filipina was not personally known to her and
the amount of the foreign check to be encashed was $300,000.00, a higher
degree of care is expected of Ofelia which she, however, failed to exercise
under the circumstances. Another circumstance which should have goaded
Ofelia to be more circumspect in her dealings was when a bank officer
called her up to inform that the Bank of America check has already been
cleared way earlier than the 15-day clearing period. The fact that the check
was cleared after only eight banking days from the time it was deposited or
contrary to what Garin told her that clearing takes 15 days should have
already put Ofelia on guard. She should have first verified the regularity of
such hasty clearance considering that if something goes wrong with the
transaction, it is she and her husband who would be put at risk and not the
accommodated party. However, Ofelia chose to ignore the same and instead
actively participated in immediately withdrawing the proceeds of the
check. Thus, we are one with the CA in ruling that Ofelias prior
consultation with PNB officers is not enough to totally absolve her of any
liability. In the first place, she should have shunned any participation in that
palpably shady transaction.
In any case, the complaint against the spouses Cheah could not be
dismissed. As PNBs client, Ofelia was the one who dealt with PNB and
negotiated the check such that its value was credited in her and her
husbands account. Being the ones in privity with PNB, the spouses Cheah
are therefore the persons who should return to PNB the money released to
them.
All told, the Court concurs with the findings of the CA that PNB
and the spouses Cheah are equally negligent and should therefore equally
suffer the loss. The two must both bear the consequences of their mistakes.
WHEREFORE, premises considered, the Petitions for Review
on Certiorari in G.R. No. 170865 and in G.R. No. 170892 are
both DENIED.The assailed August 22, 2005 Decision and December 21,
2005 Resolution of the Court of Appeals in CA-G.R. CV No. 63948 are
hereby AFFIRMEDin toto.
HYATT VS. CATHEDRAL HEIGHTS
The facts of the case are as follows:
On October 1, 1994, petitioner Hyatt Elevators and Escalators
Corporation entered into an Agreement to Service Elevators (Service
Agreement)[4] with respondent Cathedral Heights Building Complex
Association, Inc., where petitioner was contracted to maintain four
passenger elevators installed in respondent's building. Under the
Service Agreement, the duties and obligations of petitioner included
monthly inspection, adjustment and lubrication of machinery,
motors, control parts and accessory equipments, including switches
and electrical wirings.[5] Section D (2) of the Service Agreement
provides that respondent shall pay for the additional charges incurred
in connection with the repair and supply of parts.
Petitioner claims that during the period of April 1997 to July 1998 it
had incurred expenses amounting to Php 1,161,933.47 in the
maintenance and repair of the four elevators as itemized in a
statement of account.[6] Petitioner demanded from respondent the
payment of the aforesaid amount allegedly through a series of
demand letters, the last one sent on July 18, 2000. [7] Respondent,
however, refused to pay the amount.
Petitioner filed with the Regional Trial Court (RTC), Branch 100,
Quezon City, a Complaint for sum of money against respondent. Said
complaint was docketed as Civil Case No. Q-01-43055.
On March 5, 2003, the RTC rendered Judgment [8] ruling in favor of
petitioner, the dispositive portion of which reads:
WHEREFORE, premises considered, JUDGMENT
IS HEREBY RENDERED IN FAVOR OF THE
 PLAINTIFF AND AGAINST THE DEFENDANT
ordering the latter to pay Plaintiff as follows:
1. The sum of P1,161,933.27
representing the costs of the elevator
parts used, and for services and
maintenance, with legal rate of interest
from the filing of the complaint;
2. The sum of P50,000.00 as attorney's
fees;
3. The costs of suit.
SO ORDERED.[9]
The RTC held that based on the sales invoices presented by
petitioner, a contract of sale of goods was entered into between the
parties. Since petitioner was able to fulfill its obligation, the RTC
ruled that it was incumbent on respondent to pay for the services
rendered. The RTC did not give credence to respondent's claim that
the elevator parts were never delivered and that the repairs were
questionable, holding that such defense was a mere afterthought and
was never raised by respondent against petitioner at an earlier time.
Respondent filed a Motion for Reconsideration. [10] On August 17,
2003, the RTC issued a Resolution [11] denying respondent's motion.
Respondent then filed a Notice of Appeal.[12]
On April 20, 2006, the CA rendered a Decision finding merit in
respondent's appeal, the dispositive portion of which reads:
WHEREFORE, premises considered, the instant
appeal is GRANTED. The Judgment of the Regional
Trial Court, Branch 100, Quezon City, dated March
5, 2003, is hereby REVERSED and SET ASIDE.
The complaint below is dismissed.
SO ORDERED.[13]
In reversing the RTC, the CA ruled that respondent did not give its
consent to the purchase of the spare parts allegedly installed in the
defective elevators. Aside from the absence of consent, the CA also
held that there was no perfected contract of sale because there was no
meeting of minds upon the price. On this note, the CA ruled that the
Service Agreement did not give petitioner the unbridled license to
purchase and install any spare parts and demand, after the lapse of a
considerable length of time, payment of these prices from respondent
according to its own dictated price.
Aggrieved, petitioner filed a Motion for Reconsideration, [14] which
was, however, denied by the CA in a Resolution dated July 31, 2006.
Hence, herein petition, with petitioner raising a lone issue for this
Court's resolution, to wit:
WHETHER OR NOT THERE IS A
PERFECTED CONTRACT OF SALE
BETWEEN PETITIONER AND
 RESPONDENT WITH REGARDS TO THE (7) when the findings are contrary to those of the trial court; (8)
SPARE PARTS DELIVERED AND
INSTALLED BY PETITIONER ON THE when the findings are conclusions without citation of specific
FOUR ELEVATORS OF RESPONDENT AT evidence on which they are based; (9) when the facts set forth in the
ITS HOSPITAL UNDER THE AGREEMENT
TO SERVICE ELEVATORS AS TO RENDER petition, as well as in the petitioners main and reply briefs, are not
RESPONDENT LIABLE FOR THEIR disputed by the respondent; and (10) when the findings of fact are
PRICES?[15]
premised on the supposed absence of evidence and contradicted by
the evidence on record.[17]
The present case falls under the 7th exception, as the RTC and the CA
Before anything else, this Court shall address a procedural issue
arrived at conflicting findings of fact.
raised by respondent in its Comment [16] that the petition should be
denied due course for raising questions of fact.
Having resolved the procedural aspect, this Court shall now address
the substantive issue raised by petitioner. Petitioner contends that the
The determination of whether there exists a perfected contract of sale
CA erred when it ruled that there was no perfected contract of sale
is essentially a question of fact. It is already a well-settled rule that
between petitioner and respondent with regard to the spare parts
the jurisdiction of this Court in cases brought before it from the CA
delivered and installed.
by virtue of Rule 45 of the Revised Rules of Court is limited to
reviewing errors of law. Findings of fact of the CA are conclusive It is undisputed that a Service Agreement was entered into by
upon this Court. There are, however, recognized exceptions to the petitioner and respondent where petitioner was commissioned to
foregoing rule, namely: (1) when the findings are grounded entirely maintain respondent's four elevators. Embodied in the Service
on speculation, surmises, or conjectures; (2) Agreement is a stipulation relating to expenses incurred on top of
when the inference made is manifestly mistaken, absurd, or regular maintenance of the elevators, to wit:
impossible; (3) when there is grave abuse of discretion; (4) when the
SERVICE AND INSPECTION FEE:
judgment is based on a misapprehension of facts; (5) when the
findings of fact are conflicting; (6) when, in making its findings, the xxxx
Court of Appeals went beyond the issues of the case, or its findings (2) In addition to the service fee mentioned in the
are contrary to the admissions of both the appellant and the appellee; preceding paragraph under this article, the Customer
 shall pay whatever additional charges in connection
with the repair, supply of parts other than those
specifically mentioned in ARTICLE A.2., or
servicing of the elevator/s subject of this contract. [18]
Petitioner claims that during the period of April 1997 to July 1998, it
had used parts in the maintenance and repair of the four elevators in
the total amount of P1,161,933.47 as itemized in a statement of
[19]
account and supported by sales invoices, delivery receipts, trouble
call reports and maintenance and checking reports. Respondent,
however, refuses to pay the said amount arguing that petitioner had
not complied with the Standard Operating Procedure (SOP)
following a breakdown of an elevator.
As testified to by respondent's witness Celestino Aguilar, the SOP
following an elevator breakdown is as follows: (a) they (respondent)
will notify petitioner's technician; (b) the technician will evaluate the
problem and if the problem is manageable the repair was done right
there and then; (c) if some parts have to be replaced, petitioner will
present the defective parts to the building administrator and a
quotation is made; (d) the quotation is then indorsed to respondent's
Finance Department; and (e) a purchase order is then prepared and
submitted to the Board of Directors for approval. [20]
Based on the foregoing procedure, respondent contends that
petitioner had failed to follow the SOP since no purchase orders from
respondent's Finance Manager, or Board of Directors relating to the
supposed parts used were secured prior to the repairs. Consequently,
since the repairs were not authorized, respondent claims that it has no
way of verifying whether the parts were actually delivered and
installed as alleged by petitioner.
At the outset, this Court observes that the SOP is not embodied in the
Service Agreement nor was a document evidencing the same
presented in the RTC. The SOP appears, however, to be the industry
practice and as such was not contested by petitioner. Nevertheless,
petitioner offers an excuse for non-compliance with the SOP on its
claim that the SOP was not followed upon the behest and request of
respondent.
A perusal of petitioner's petition and evidence in the RTC shows that
the main thrust of its case is premised on the following claims: first,
that the nature and operations of a hospital necessarily dictate that
the elevators are in good running condition at all times; and, second,
that there was a verbal agreement between petitioner's service
manager and respondent's building engineer that the elevators should
be running in good condition at all times and breakdowns should
only last one day.
In order to prove its allegations, petitioner presented Wilson Sua, its
finance manager, as its sole witness. Sua testified to the procedure
followed by petitioner in servicing respondent's elevators, to wit:
Q: Can you tell us Mr. witness, what is the procedure
actually followed whenever there is a need
for trouble call maintenance or repair?
A: The St. Lukes Cathedrals personnel, which
includes the administrative officers,
the guard on duty, or the receptionist, will
call us through the phone if their elevators
brake (sic) down.
Q: Then, what happened?
A: Immediately, we dispatched our technicians to
check the trouble.
Q: And who were these technicians whom you
normally or regularly dispatched to attend to
the trouble of the elevators of the defendant?
A: With regard to this St. Lukes, we dispatched
Sunny Jones and Gilbert Cinamin.
Q: And what happened after dispatching these
technicians?
A: They come back immediately to the office to
request the parts needed for the
troubleshooting of the elevators.
Q: Then what happened?
A: A part will be brought to the project cite and they
will install it and note it in the trouble call
report and have it received properly by the
building guard or the receptionist or by the
building engineers, and they will test it for a
couple of weeks to determine if the parts are
the correct part needed for that elevator
and we will secure their approval,
thereafter we will issue our invoices and
delivery receipts.
Q: This trouble call reports, are these in writing?
A: Yes, sir. These are in writing and these are being
written within that day.
Q: Within the day of?
A: Of the trouble. And have it received by the duly
personnel of St. Lukes Cathedral.
Q: And who prepared this trouble call reports?
A: The technician who actually checked the elevator.
Q: When do the parts being installed?
A: On the same date they brought the parts on the
project cite.
Q: You mentioned sales invoice and delivery
receipts. Who prepared these invoice?
A: Those were prepared by our inventory clerk
under my supervision?
Q: How about the delivery receipts?
A: Just the same.
Q: When would the sales invoice be prepared?
A: After the approval of the building engineer.
Q: But at the time that the sales invoice and delivery
receipts were being prepared after the
approval of the building engineer, what
happened to the parts? Were they already
installed or what?
A: They were already installed.
 Q: Now, why would the parts be installed before
the preparation of the sales invoice and
the delivery receipts?
A: There was an agreement between the building
engineer and our service manager that the
elevator should be running in good
condition at all times, breakdown should
be at least one day only. It cannot stop for
more than a day.[21]
On cross examination, Sua testified that the procedure was followed
on the authority of a verbal agreement between petitioner's service
manager and respondent's engineer, thus:
Q: So, you mean to say that despite the fact that
material are expensive you immediately installed
these equipments without the prior approval of the
board?
A: There is no need for the approval of the board
since there is a verbal agreement between the
building engineer and the Hyatt service manager to
have the elevator run.
Q: Aside from the building engineer, there is a
building administrator?
A: No, ma'am. He is already the building
administrator and the building engineer. That is
engineer Tisor.
Q: And with regard to the fact that the delivery
receipts were acknowledged by the engineer, is that
true?
A: Yes, ma'am.
Q: You also mentioned earlier that aside from the
building engineer, the receptionist and guards are also
authorized. Are you sure that they are authorized to
receive the delivery receipts?
A: Yes, ma'am. It was an instruction given by
Engineer Tisor, the building engineer and also the
building administrator to have it received.
Q: So, all these agreements are only verbally, it is not
in writing?
A: Yes, ma'am.[22]
In its petition, petitioner claims that because of the special
circumstances of the building being a hospital, the procedure actually
followed since October 1, 1994 was as follows:
1. Whenever any of the four elevators broke down,
the administrative officers, security guard or the
receptionist of respondent called petitioner by
telephone;
2. Petitioner dispatched immediately a technician to
the St. Lukes Cathedral Heights Building to check
the trouble;
3. If the breakdown could be repaired without
installation of parts, repair was done on the spot;
4. If the repair needed replacement of damaged parts,
the technician went back to petitioners office to get
the necessary replacement parts;
5. The technician then returned to the St. Lukes
Cathedral Heights Building and installed the
replacement parts and finished the repair;
6. The placement parts, which were installed in the
presence of the security guard, building engineers or
receptionist of respondents whoever was available,
were indicated in the trouble call report or
sometimes in the delivery receipt and copy of the
said trouble call report or delivery receipt was then
given to the blue security guard, building engineers
or receptionist, who duly acknowledged the same;
7. Based on the trouble call report or the delivery
receipts, which already indicated the replacement
parts installed and the services rendered, respondent
should prepare the purchase order, but this step was
never followed by respondent for whatever reason;
8. In the meantime, the elevator was tested for a
couple of weeks to see if the replacement parts were
correct and the approval of the building engineers
was secured;
9. After the building engineers gave their approval
that the replacement parts were correct or after the
lapse of two weeks and nothing was heard or no
complaint was lodged, then the corresponding sales
invoices and delivery receipts, if nothing had been
issued yet, were prepared by petitioner and given to
respondent, thru its receptionists or security guards;
10. For its purposes, respondent should compare the
trouble call reports or delivery receipts which
indicated the replacement parts installed or with the
sales invoices and delivery receipts to confirm the
correctness of the transaction;
11. If respondent had any complaint that the parts
were not actually installed or delivered or did not
agree with the price of the parts indicated in the sales
invoices, then it should bring its complaint or
disagreement to the attention of petitioner. In this
regard, no complaint or disagreement as to the prices
of the spare parts has been lodged by respondent. [23]
In varying language, our Rules of Court, in speaking of burden of
proof in civil cases, states that each party must prove his own
affirmative allegations and that the burden of proof lies on the party
who would be defeated if no evidence were given on either
side. Thus, in civil cases, the burden of proof is generally on the
plaintiff, with respect to his complaint. [24] In the case at bar, it is
petitioner's burden to prove that it is entitled to its claims during the
period in dispute.
After an extensive review of the records and evidence on hand, this
Court rules that petitioner has failed to discharge its burden.
This Court finds that the testimony of Sua alone is insufficient to
prove the existence of the verbal agreement, especially in view of the
fact that respondent insists that the SOP should have been followed.
It is an age-old rule in civil cases that one who alleges a fact has the
burden of proving it and a mere allegation is not evidence. [25]
The testimony of Sua, at best, only alleges but does not prove the
existence of the verbal agreement. It may even be hearsay. It bears
stressing, that the agreement was supposedly entered into by
petitioner's service manager and respondent's building engineer. It
behooves this Court as to why petitioner did not present their service
manager and Engineer Tisor, respondent's building engineer, the two
individuals who were privy to the transactions and who could
ultimately lay the basis for the existence of the alleged verbal
agreement. It should have occurred to petitioner during the course of
the trial that said testimonies would have proved vital and crucial to
its cause. Therefore, absent such testimonies, the existence of the
verbal agreement cannot be sustained by this Court.
Moreover, even assuming arguendo, that this Court were to believe
the procedure outlined by Sua, his testimony[26] clearly mentions that
prior to the preparation of the sales invoices and delivery receipts,
the parts delivered and installed must have been accepted by
respondent's engineer or building administrator. However, again,
petitioner offered no evidence of such acceptance by respondents
engineer prior to the preparation of the sales invoices and delivery
receipts.
This Court is not unmindful of the fact that petitioner also alleges in
its petition that the non-observance of the SOP was the practice way
back in 1994 when petitioner started servicing respondent's elevators.
On this note, petitioner argued in the following manner:
And most importantly, the Court of Appeals failed to
appreciate that the parts being sought to be paid by
petitioner in the Complaint were delivered and
installed during the period from April 1997 to July
1998, which followed the same actual procedure
adopted since October 1, 1994. Based on the same
procedure adopted because of the special
circumstances of St. Luke's Cathedral Heights
Building being a hospital, respondent has paid the
replacement parts installed from October 1994 to
March 1997. Never did respondent question the
adopted actual procedure from October 1994 to
March 1997. x x x[27]
Was the procedure claimed by petitioner the adopted practice since
1994? This Court rules that other than the foregoing allegation,
petitioner has failed to prove the same. A perusal of petitioner's
Formal Offer of Evidence[28] would show that the only documents
presented by it are sales invoices, trouble call reports and delivery
receipts, all relating to the alleged transactions between 1997 to
1998. It is unfortunate that petitioner had failed to present in the RTC
the documents from 1994 to 1996 for it may have proven that the
non-observance of the SOP was the practice since 1994. Such
documents could have shown that respondent had paid petitioner in
the past without objection on similar transactions under similar
billing procedures. The same would have also validated petitioner's
claim that the secretary and security guards were all authorized to
sign the documents. Unfortunately, for petitioner's cause, this Court
has no basis to validate its claim, because other than its bare
allegation in the petition, petitioner offers no proof to substantiate the
same.
By the contract of sale, one of the contracting parties obligates
himself to transfer the ownership of and deliver a determinate thing,
and the other to pay therefor a price certain in money or its
[29]
equivalent. The absence of any of the essential elements will
negate the existence of a perfected contract of sale. In the case at bar,
the CA ruled that there was no perfected contract of sale between
petitioner and respondent, to wit:
Aside from the absence of consent, there was no
perfected contract of sale because there was no
meeting of minds upon the price. As the law
provides, the fixing of the price can never be left to
the discretion of one of the contracting parties. In
this case, the absence of agreement as to the price is
evidenced by the lack of purchase orders issued by
CHBCAI where the quantity, quality and price of the
spare parts needed for the repair of the elevators are
stated. In these purchase orders, it would show that
the quotation of the cost of the spare parts earlier
informed by Hyatt is acceptable to CHBCAI.
However, as revealed by the records, it was only
Hyatt who determined the price, without the
acceptance or conformity of CHBCAI. From the
moment the determination of the price is left to the
judgment of one of the contracting parties, it cannot
be said that there has been an arrangement on the
price since it is not possible for the other contracting
party to agree on something of which he does not
know beforehand.[30]
Based on the evidence presented in the RTC, it is clear to this Court
that petitioner had failed to secure the necessary purchase orders
from respondent's Board of Directors, or Finance Manager, to signify
their assent to the price of the parts to be used in the repair of the
elevators. InBoston Bank of the Philippines v. Manalo, [31] this Court
explained that the fixing of the price can never be left to the decision
of one of the contracting parties, to wit:
A definite agreement as to the price is an essential
element of a binding agreement to sell personal or
real property because it seriously affects the rights
and obligations of the parties. Price is an essential
element in the formation of a binding and
enforceable contract of sale. The fixing of the price
can never be left to the decision of one of the
contracting parties. But a price fixed by one of
the contracting parties, if accepted by the other,
gives rise to a perfected sale.[32]
There would have been a perfected contract of sale had respondent
accepted the price dictated by petitioner even if such assent was
given after the services were rendered. There is, however, no proof of
such acceptance on the part of respondent.

This Court shares the observation of the CA that the signatures
of receipt by the information clerk or the guard on duty on the sales
invoices and delivery receipts merely pertain to the physical receipt
of the papers. It does not indicate that the parts stated were actually
delivered and installed. Moreover, because petitioner failed to prove
the existence of the verbal agreement which allegedly authorized the
aforementioned individuals to sign in respondents behalf, such
signatures cannot be tantamount to an approval or acceptance by
respondent of the parts allegedly used and the price quoted by
petitioner. Furthermore, what makes the claims doubtful and
questionable is that the date of the sales invoice and the date stated in
the corresponding delivery receipt are too far apart as aptly found by
the CA, to wit:
Further, We note that the date stated in the sales
invoice vis-a-vis the date stated in the
corresponding delivery receipt is too far apart. For
instance, Delivery Receipt No. 3492 dated
February 13, 1998 has a corresponding Sales
Invoice No. 7147 dated June 30, 1998. What puts
doubt to this transaction is the fact that the sales
invoice was prepared only after four (4) months
from the delivery. The considerable length of time
that has lapsed from the delivery to the issuance of
the sales invoice is questionable. Further the
delivery receipts were received months after its
preparation. In the case of Delivery Receipt No.
3850 dated November 26, 1997, Gumisad received
this only on July 20, 1998, or after a lapse of eight
(8) months. Such kind of procedure followed by
Hyatt is certainly contrary to usual business
practice, especially since in this case, it involves
considerable amount of money.[33]
Based on the foregoing, the CA was thus correct when it concluded
that the Service Agreement did not give petitioner the unbridled
license to purchase and install any spare parts and demand, after the
lapse of a considerable length of time, payment of these prices from
respondent according to its own dictated price.[34]
Withal, this Court rules that petitioner's claim must fail for the
following reasons: first, petitioner failed to prove the existence of the
verbal agreement that would authorize non-observance of the
SOP; second, petitioner failed to prove that such procedure was the
practice since 1994; and, third, there was no perfected contract of
sale between the parties as there was no meeting of minds upon the
price.
To stress, the burden of proof is on the plaintiff. He must rely on the
strength of his case and not on the weakness of respondent's defense.
Based on the manner by which petitioner had presented its claim, this
Court is of the opinion that petitioner's case leaves too much to be
desired.
WHERFORE, premises considered, the petition is DENIED. The
April 20, 2006 Decision and July 31, 2006 Resolution of the Court of
Appeals, in CA-G.R. CV No. 80427, are AFFIRMED.
Titan-ikeda construction vs primetown
In 1992, respondent Primetown Property Group, Inc. awarded the
contract for the structural works [4] of its 32-storey Makati Prime
Tower (MPT) to petitioner Titan-Ikeda Construction
Development Corporation.[5] The parties formalized their agreement
in a construction contract[6] dated February 4, 1993.[7]
Upon the completion of MPT's structural works, respondent awarded
the P130,000,000 contract for the tower's architectural works [8]
(project) to petitioner. Thus, on January 31, 1994, the parties
executed a supplemental agreement.[9] The salient portions thereof
were:
1. the [project] shall cover the scope of
work of the detailed construction bid plans
and specifications and bid documents dated
28 September 1993, attached and forming an
integral part hereof as Annex A.
2. the contract price for the said works
shall be P130 million.
3. the payment terms shall be full
swapping or full payment in condominium
units. The condominium units earmarked for
the [petitioner] are shown in the attached
Annex B.
4. the [respondent] shall transfer and
surrender to [petitioner] the condominium
units abovestated in accordance with the
following schedule:
and
(a) 80% of units upon posting and
acceptance by [respondent] of the
performance bond [and]
(b) 20% or remaining balance upon
completion of the project as
provided in the construction contract
and simultaneous with the posting
by [petitioner] of the reglementary
guarantee bond.
5. the contract period shall be fifteen (15)
months reckoned from the release of the
condominium certificates of title (CCTs)
covering eighty percent (80%) of the units
transferable to [petitioner] as aforesaid[.]
Significantly, the supplemental agreement adopted those provisions
of the construction contract which it did not specifically discuss or
provide for.[10] Among those carried over was the designation of
GEMM Construction Corporation (GEMM) as the project's
[11]
construction manager.
Petitioner started working on the project in February 1994.
On June 30, 1994, respondent executed a deed of sale [12] (covering
114 condominium units and 20 parking slots of the MPT collectively
valued by the parties at P112,416,716.88)[13] in favor of petitioner
pursuant to the full-swapping payment provision of the supplemental
agreement.
Shortly thereafter, petitioner sold some of its units to third persons. [14]
In September 1995, respondent engaged the services of Integratech,
Inc. (ITI), an engineering consultancy firm, to evaluate the progress
of the project.[15] In its September 7, 1995 report, [16] ITI informed
respondent that petitioner, at that point, had only accomplished
31.89% of the project (or was 11 months and six days behind
schedule).[17]
Meanwhile, petitioner and respondent were discussing the possibility
of the latters take over of the projects supervision. Despite ongoing
negotiations, respondent did not obtain petitioners consent in hiring
ITI as the projects construction manager. Neither did it inform
petitioner of ITIs September 7, 1995 report.
On October 12, 1995, petitioner sought to confirm respondent's plan
to take over the project.[18] Its letter stated:
The mutual agreement arrived at sometime in the
last week of August 1995 for [respondent] to take
over the construction supervision of the balance of
the [project] from [petitioner's] [e]ngineering staff
and complete [the] same by December 31, 1995 as
promised by [petitioner's] engineer.
The [petitioner's] accomplished works as of this
date of [t]ake over is of acceptable quality in
materials and workmanship.
This mutual agreement on the take over should
not be misconstrued in any other way except
that the take over is part of the long range plan
of [respondent] that [petitioner], in the spirit of
cooperation, agreed to hand over the construction
supervision to [respondent] as requested.(emphasis
supplied)[19]
Engineers Antonio Co, general construction manager of respondent,
and Luzon Y. Tablante, project manager of petitioner, signed the
letter.
 On November 22, 1996, petitioner demanded from respondent the

delivery of MPT's management certificate [27] and the keys to the

INTEGRATECHS (ITIS) REPORT
condominium units and the payment of its (respondent's) balance. [28]

In its September 7, 1995 report, ITI estimated that petitioner

Because respondent ignored petitioner's demand, petitioner, on
should have accomplished 48.71% of the project as of the October
December 9, 1996, filed a complaint for specific performance [29] in
[20] [21]
12, 1995 takeover date. Petitioner repudiated this figure but
the Housing and Land Use Regulatory Board (HLURB).
qualifiedly admitted that it did not finish the project. [22] Records

showed that respondent did not merely take over the supervision of While the complaint for specific performance was pending in the

the project but took full control thereof.[23] HLURB, respondent sent a demand letter to petitioner asking it to

reimburse the actual costs incurred in finishing the project

Petitioner consequently conducted an inventory.[24] On the basis
(or P69,785,923.47).[30] In view of the pendency of the HLURB case,
thereof, petitioner demanded from respondent the payment of its
petitioner did not heed respondent's demands.
balance amounting to P1,779,744.85.[25]

On April 29, 1997, the HLURB rendered a decision in favor of

On February 19, 1996, petitioner sent a second letter to respondent
petitioner.[31] It ruled that the instrument executed on June 30, 1994
demanding P2,023,876.25. This new figure included the cost of
was adeed of absolute sale because the conveyance of the
materials (P244,331.40) petitioner advanced from December 5, 1995
condominium units and parking slots was not subject to any
[26]
to January 26, 1996.
condition.[32] Thus, it ordered respondent to issue MPTs management

certificate and to deliver the keys to the condominium units to

petitioner.[33] Respondent did not appeal this decision. Consequently, certificate to petitioner, the RTC found that petitioner lost rental

a writ of execution was issued upon its finality.[34] income amounting to US$1,665,260.[41] The dispositive portion of the

RTC decision stated:

Undaunted by the finality of the HLURB decision,
WHEREFORE, PREMISES CONSIDERED,
respondent filed a complaint for collection of sum of judgment is hereby rendered dismissing
[respondent's] [c]omplaint for lack of merit. On the
money[35] against petitioner in the Regional Trial Court (RTC) of other hand, finding preponderance of evidence to
sustain [petitioner's] counterclaim, judgment is
Makati City, Branch 58 on July 2, 1997. It prayed for the hereby rendered in favor of [petitioner] ordering
[respondent] to pay the former:
reimbursement of the value of the projects unfinished portion
1. The unpaid balance of the consideration
amounting to P66,677,000.[36]
for [petitioner's] services in [the project] in
the amount of P2,023,867.25 with legal
During trial, the RTC found that because respondent modified the interest from the date of demand until fully
paid;
MPT's architectural design, petitioner had to adjust the scope of
2. Compensatory damages in the amount
work.[37]Moreover, respondent belatedly informed petitioner of those of US$1,665,260 or its peso equivalent at
the current foreign exchange rate
modifications. It also failed to deliver the concrete mix and rebars representing lost rental income due only as
of July 1997 and the accrued lost earnings
according to schedule. For this reason, petitioner was not responsible from then on until the date of actual
payment, with legal interest from the date of
for the project's delay.[38] The trial court thus allowed petitioner to demand until fully paid; and

set-off respondent's other outstanding liabilities with respondents 3. Attorney's fees in the amount
of P100,000 as acceptance fee, P1,000
excess payment in the project. [39] It concluded that respondent owed appearance fee per hearing and 25% of the
total amount awarded to [petitioner].
petitionerP2,023,876.25.[40] In addition, because respondent refused
With costs against the [respondent].
to deliver the keys to the condominium units and the management
SO ORDERED.[42]
 Petitioner moved for reconsideration but it was denied. Hence, this
Respondent appealed the RTC decision to the CA. [43] The appellate
petition.
court found that respondent fully performed its obligation when it

executed the June 30, 1994 deed of absolute sale in favor of Petitioner contends that the CA erred in giving weight to ITI's report

petitioner.[44] Moreover, ITI's report clearly established that petitioner because the project evaluation was commissioned only by

had completed only 48.71% of the project as of October 12, 1995, respondent,[47] in disregard of industry practice. Project evaluations

the takeover date. Not only did it incur delay in the performance of are agreed upon by the parties and conducted by a disinterested third

its obligation but petitioner also failed to finish the project. The CA party.[48]

ruled that respondent was entitled to recover the value of the

We grant the petition.
unfinished portion of the project under the principle of unjust

enrichment.[45] Thus:
WHEREFORE, the appealed decision REVIEW
is REVERSED and a new one entered dismissing OF
[petitioner's] counterclaims of P2,023,867.25 CONFLIC
representing unpaid balance for [its] services in [the TING
project]; US$1,665,260 as accrued lost earnings, FACTUAL
and attorney's fees. [Petitioner] is hereby ordered to FINDINGS
return to [respondent] the amount of P66,677,000
representing the value of unfinished [portion of the
project], plus legal interest thereon until fully paid.
Upon payment by [petitioner] of the As a general rule, only questions of law may be raised in a petition
aforementioned amount, [respondent] is hereby
ordered to deliver the keys and [m]anagement for review on certiorari. Factual issues are entertained only in
[c]ertificate of the [Makati Prime Tower] paid to
[petitioner] as consideration for the [project]. [46] exceptional cases such as where the findings of fact of the CA and

the trial court are conflicting.[49]

Here, a glaring contradiction exists between the factual findings of A contract is a meeting of the minds between two persons whereby

the RTC and the CA. The trial court found that respondent one binds himself, with respect to the other, to give something or to

contributed to the project's delay because it belatedly communicated render some service.[50] This case involved two contracts entered into

the modifications and failed to deliver the necessary materials on by the parties with regard to the project.

time. The CA, however, found that petitioner incurred delay in the
The parties first entered into a contract for a piece of work [51] when
performance of its obligation. It relied on ITI's report which stated
they executed the supplemental agreement. Petitioner as contractor
that petitioner had accomplished only 48.71% of the project as of
bound itself to execute the project for respondent, the
October 12, 1995.
owner/developer, in consideration of a price certain (P130,000,000).

The supplemental agreement was reciprocal in nature because the

JAN
UAR obligation of respondent to pay the entire contract price depended on
Y 31,
1994 the obligation of petitioner to complete the project (and vice versa).
SUP
PLE
MEN Thereafter, the parties entered into a second contract. They agreed to
TAL
extinguish the supplemental agreement as evidenced by the October
AGR
EEM 12, 1995 letter-agreement which was duly acknowledged by their
ENT
WAS respective representatives.[52]
EXTI
NGU
ISHE While the October 12, 1995 letter-agreement stated that respondent
D
was to take over merely the supervision of the project, it actually
took over the whole project itself. In fact, respondent subsequently Because petitioner acknowledged that it had been overpaid, it was

hired two contractors in petitioner's stead. [53] Moreover, petitioner's obliged to return the excess to respondent. Embodying the principle

project engineer at site only monitored the progress of architectural ofsolutio indebiti, Article 2154 of the Civil Code provides:

works undertaken in its condominium units. [54] Petitioner never Article 2154. If something is received when there is
no right to demand it and it was unduly delivered
objected to this arrangement; hence, it voluntarily surrendered its through mistake, the obligation to return it arises.
participation in the project. Moreover, it judicially admitted in its

answer that respondent took over the entire project, not merely its
For the extra-contractual obligation of solutio indebiti to
supervision, pursuant to its (respondents) long-range plans. [55]
arise, the following requisites must be proven:
Because the parties agreed to extinguish the supplemental 1. the absence of a right to collect the
excess sums and
agreement, they were no longer required to fully perform their

respective obligations. Petitioner was relieved of its obligation to 2. the payment was made by mistake.[57]

complete the project while respondent was freed of its obligation to

With regard to the first requisite, because the supplemental
pay the entire contract price. However, respondent, by executing the
agreement had been extinguished by the mutual agreement of the
June 30, 1994 deed of absolute sale, was deemed to have
parties, petitioner became entitled only to the cost of services it
paid P112,416,716.88. Nevertheless, because petitioner applied part
actually rendered (i.e., that fraction of the project cost in proportion
[56]
of what it received to respondents outstanding liabilities, it
to the percentage of its actual accomplishment in the project). It was
admitted overpayment.
not entitled to the excess (or extent of overpayment).

On the second requisite, Article 2163 of the Civil Code provides:

 the impairment or loss of the same or its
Article 2163. It is presumed that there was a accessories and accessions insofar as he has
mistake in the payment if something which had thereby been benefited. If he has alienated it, he
never been due or had already been paid was shall return the price or assign the action to
delivered; but, he from whom the return is collect the sum.
claimed may prove that the delivery was made
out of liberality or for any other just
cause. (emphasis supplied)
One who receives payment by mistake in good faith is, as
In this instance, respondent paid part of the contract
a general rule, only liable to return the thing delivered. [59] If he
price under the assumption that petitioner would complete the
benefited therefrom, he is also liable for the impairment or loss
project within the stipulated period. However, after the
of the thing delivered and its accessories and accessions. [60] If he
supplemental agreement was extinguished, petitioner ceased
sold the thing delivered, he should either deliver the proceeds of
working on the project. Therefore, the compensation petitioner
the sale or assign the action to collect to the other party.[61]
received in excess of the cost of its actual accomplishment as of

October 12, 1995 was never due. The condominium units and The situation is, however, complicated by the following facts:

parking slots corresponding to the said excess were mistakenly a) the basis of the valuation (P112,416,716.99) of the

delivered by respondent and were therefore not due to petitioner. condominium units and parking slots covered by the

June 30, 1994 deed of sale is unknown;

Stated simply, respondent erroneously delivered excess units to

petitioner and the latter, pursuant to Article 2154, was obliged to b) the percentage of petitioner's actual accomplishment in

the return them to respondent.[58] Article 2160 of the Civil Code the project has not been determined and

provides:
Article 2160. He who in good faith
accepts an undue payment of a thing certain and
determinate shall only be responsible for
 c) the records of this case do not show the actual number of the value of its actual accomplishment (i.e., the amount due to

of condominium units and parking slots sold by it) as of October 12, 1995. If these properties include units and/or

petitioners. slots already sold to third persons, petitioner shall deliver the

Because this Court is not a trier of facts, the determination of proceeds of the sale thereof or assign the actions for collection to

these matters should be remanded to the RTC for reception of further respondent as required by Article 2160. DELAY IN THE

evidence. COMPLETION OF THE PROJECT

Mora or delay is the failure to perform the obligation in due time

The RTC must first determine the percentage of the project petitioner
because of dolo (malice) or culpa (negligence).[63] A debtor is
[62]
actually completed and its proportionate cost. This will be the
deemed to have violated his obligation to the creditor from the
amount due to petitioner. Thereafter, based on the stipulated
time the latter makes a demand. Once the creditor makes a
valuation in the June 30, 1994 deed of sale, the RTC shall determine
demand, the debtor incursmora or delay.[64]
how many condominium units and parking slots correspond to the

amount due to petitioner. It will only be the management certificate The construction contract[65] provided a procedure for protesting

and the keys to these units that petitioner will be entitled to. The delay:
Article XIV
remaining units, having been mistakenly delivered by DELAYS AND ABANDONMENT

respondent, will therefore be thesubject of solutio indebiti. 15.1. If at any time during the effectivity of this
contract, [PETITIONER] shall incur
unreasonable delay or slippages of more than
What exactly must petitioner give back to respondent? fifteen percent (15%) of the scheduled work
program, [RESPONDENT] should
Under Article 2160 in relation to Article 2154, it should return to notify [PETITIONER] in writing to accelerate
the work and reduce, if not erase, slippage. If
respondent thecondominium units and parking slots in excess
after the lapse of sixty (60) days from receipt of
 such notice, [PETITIONER] fails to rectify the
delay or slippage, [RESPONDENT] shall have the
right to terminate this contract except in cases
where the same was caused by force majeure.
FORCE MAJEURE as contemplated herein, and in
determination of delay includes, but is not limited
to, typhoon, flood, earthquake, coup d'etat,
rebellion, sedition, transport strike, stoppage of
work, mass public action that prevents workers
from reporting for work, and such other causes
beyond [PETITIONER'S] control.[66] (emphasis
supplied)
xxx xxx xxx
Respondent never sent petitioner a written demand asking it to
accelerate work on the project and reduce, if not eliminate, slippage.
If delay had truly been the reason why respondent took over the
project, it would have sent a written demand as required by the
construction contract. Moreover, according to the October 12, 1995
letter-agreement, respondent took over the project for the sole reason
that such move was part of its (respondent's) long-term plan.
Respondent, on the other hand, relied on ITI's September 7, 1995
report. The construction contract named GEMM, not ITI, as
construction manager.[67] Because petitioner did not consent to the
change of the designated construction manager, ITI's September 7,
1995 report could not bind it.
In view of the foregoing, we hold that petitioner did not incur delay
in the performance of its obligation.
RECOVERY
OF
ADDITION
AL COSTS
RESULTIN
G FROM
CHANGES
The supplemental agreement was a contract for a stipulated price.
[68]
In such contracts, the recovery of additional costs (incurred due to
changes in plans or specifications) is governed by Article 1724 of the
Civil Code.
Article 1724. The contractor who undertakes to
build a structure or any other work for a stipulated
price, in conformity with plans and specifications
agreed upon with the landowner, can neither
withdraw from the contract nor demand an increase
in the price on account of higher cost of labor or
materials, save when there has been a change in
plans and specifications, provided:
 1. such change has been authorized by the
proprietor in writing; and Petitioner submitted neither one. In addition, petitioners project

2. the additional price to be paid to the coordinator Estellita Garcia testified that respondent never approved
contractor has been determined in writing by
both parties. any change order.[72] Thus, under Article 1724 and pursuant to our

ruling in Powton Conglomerate, Inc., petitioner cannot recover the

In Powton Conglomerate, Inc. v. Agcolicol, [69] we reiterated that a cost it incurred in effecting the design modifications. A contractor

claim for the cost of additional work arising from changes in the who fails to secure the owner or developer's written authority to

scope of work can only be allowed upon the: changes in the work or written assent to the additional cost to be

1. written authority from the developer/owner incurred cannot invoke the principle of unjust enrichment. [73]
ordering/allowing the changes in work; and RECO
VERY
2. written agreement of parties with regard to the OF
increase in cost (or price) due to the change in COMP
work or design modification. [70] ENSAT
ORY
DAMA
GES
Furthermore:

Compliance with the two requisites of Article

1724, a specific provision governing additional Indemnification for damages comprehends not only the loss suffered
works, is a condition precedent of the recovery.
The absence of one or the other bars the recovery of (actual damages or damnum emergens) but also the claimant's lost
additional costs. Neither the authority for the
profits (compensatory damages or lucrum cessans). For
changes made nor the additional price to be paid
therefor may be proved by any other evidence for compensatory damages to be awarded, it is necessary to prove the
purposes of recovery.[71] (emphasis supplied)
actual amount of the alleged loss by preponderance of evidence. [74]
The RTC awarded compensatory damages based on the rental pool WHEREFORE, the petition is hereby GRANTED.

rates submitted by petitioner[75] and on the premise that all those units
The March 15, 2002 decision and May 29, 2003 resolution of the
would have been leased had respondent only finished the project by
Court of Appeals in CA-G.R. CV No. 61353 and the August 5, 1998
December 31, 1995.[76] However, other than bare assertions,
decision of the Regional Trial Court, Branch 58, Makati City in Civil
petitioner submitted no proof that the rental pool was in fact able to
Case No. 97-1501 are hereby SET ASIDE. New judgment is
lease out the units. We thus hold that the losses sustained by
entered:
petitioner were merely speculative and there was no basis for the

award. 1. ordering petitioner Titan-Ikeda Construction and

Development Corporation to return to respondent Primetown

REMA
ND OF Property Group, Inc. the condominium units and parking
OTHE
R slots corresponding to the payment made in excess of the
CLAI
MS proportionate (project) cost of its actual accomplishment as

of October 12, 1995, subject to its (petitioners) allowable

Since respondent did not repudiate petitioner's other claims stated in claims as stated in the inventory and

the inventory[77] in the RTC and CA, it is estopped from questioning 2. dismissing petitioner Titan-Ikeda Construction and

the validity thereof.[78] However, because some of petitioner's claims Development Corporations claims for the cost of additional

have been disallowed, we remand the records of this case to the RTC work (or change order) and damages.

for the computation of respondent's liability.[79]

The records of this case are remanded to the Regional Trial Court of
SO ORDERED.
Makati City, Branch 58 for:

TITAN-IKEDA VS. PRIMETOWN

1. the reception of additional evidence to G.R No. 158768. February 12, 2008

determine FACTS: The respondent Primetown Property Corporation entered

into contract weith the petitioner Titan-Ikeda Construction
(a) the percentage of the architectural work actually Corporation for the structural works of a 32-storey prime tower.
After the construction of the tower, respondent again awarded to
completed by petitioner Titan-Ikeda the petitioner the amount of P 130,000,000.00 for the towers
architectural design and structure. Howevere, in 1994, the
Construction and Development Corporation respondent entered inot a contract of sale of the tower in favor of
the petitioner in a manner called full-swapping. Since the
as of October 12, 1995 on the Makati Prime respondent had allegedly constructed almost one third of the
project as weel as selling some units to third persons unknown to
Tower and the petitioner. Integrated Inc. took over the project, thus the
petitioner is demanding for the return of its advanced payment in
(b) the number of condominium units and parking the amount of P2, 000,000.00 as weel as the keys of the unit.

slots sold by petitioner Titan-Ikeda ISSUE: Whether or not the petitioner is entitled to damages.

Construction and Development Corporation RULING: No, because in a contract necessarily that there is a
meeting of the minds of the parties in which this will be the
to third persons; binding law upon them. Thus, in a reciprocal obligation. Both
parties are obliged to perform their obligation simultaneously and
in good faith. In this case, petitioner, Titan-Ikeda can not recover
2. the computation of petitioner Titan-Ikeda damages because it was found out there was no solutio indebiti
or mistake in payment in this case since the latter is just entitled
Construction and Development Corporation's actual to the actual services it rendered to the respondent and thus it is
ordered to return the condominium units to the respondent.
liability to respondent Primetown Property Group,

Inc. or vice-versa, and the determination of

imposable interests and/or penalties, if any.