VIL-REY PLANNERS& BUILDERS VS. LEXBER, INC. G.R.

189401, June 15, 2016

NATURE OF THE CASE: PETITION FOR REVIEW UNDER RULE 45

CAUSE OF ACTION: COMLAINT FOR DAMAGES FOR BREACH OF CONTRACT BY

VIL-REY Cabanatuan City to be completed in 60 days.

FACTS:

ON APRIL 17, 1996, Vil-Rey and Lexber entered into a construction contract, for Vil-rey
to work on, as first contract, the compacted backfill of the 56,565-sq. meter property in
Brgy Bangad. Bangad in Cabanatuan City. Stronghold insurance was contracted as
surety as surety; Vilrey agreed that it will pay the indemnity Stronghold for whatever
amount the latter might be adjudged to pay Lexber under the surety bond. Both parties
mutually terminated the first contract, and then entered into a second one on July 1,
1996 to cover the remaining work, under revised terms and conditions, to be completed
in 60 days.

Another contract, a third, was executed by same parties on Dec.23, 1996, with a
payment for 50% balance upon completion on Jan.15, 1997, with Lexber to pay 50%
down payment and surety bond from Stronghold.

On 21 Jan 1997, Vil-rey asked for 15-day extension and was granted by Lexber. Yet
despite that and another 5 days extension, Vil-rey failed to finish. Lexber wrote
Stronghold to collect on the two surety bonds. Such negotiations failed, making Lexber
file a complaint against Vil-rey and the surety before RTC, Br.93 Quezon City

ISSUES:

W/n breach of contract by vilrey

W/n the extension of the third project extinguished the second surety bond.

W/n attorney’s fees may be awarded to lexber.

RULING:

Vil-rey is liable for breach of contract. In resisting the ruling of the CA, Vil-rey alleges
that Lexber had a balance on the third contract payment more than enough to offset
what LEXBER INCURRED to pay another contractor. Vi-lrey’s argument misses the
point.

Breach of contract is the failure of a party, without legal reason, to comply with the
terms of the contract or perform any promise that forms either a part or the whole of it.
The failure is admitted by its managing partner Vallarta. Aside from this testimony, no
proof was presented to show that Vil-rey was able to accomplish 95% of the works
under the third contract. Nevertheless, it still falls short of the obligation to finish 100%
of the works.

Lexber is entitled to reduced attorney’s fees. Attorney’s fees as provided in the

contracts are in the nature of liquidated damages .In this case the failure of Vilrey to
fulfil its obligations compelled Lexber to seek judicial intervention. LIQUIDATED
damages may be reduced equitably by the couts.Lexber was also guilty of delay with
regard to its reciprocal obligation to make a downpament of 50@ of the amount of the
third contract.

WHEREFORE, the Court modifies the CA decision and resolution: Vilrey and
Stronghold are ordered jointly and severally to pay Lexber the amount it paid another
contractor with interest from 17 Feb 1997 until full payment;atty’s fees of such amount;
Vilrey is ordered to pay Stronghold for the amount it will pay Lexber; Lexber to pay the
amount deducted from the balance less the amount paid by surety bond or P84,364
with interest at 6% per annum. Lexber and Vilrey shall be allowed to compensate the
amounts due to the extent of their respective obligations.