jG.R. No.

170865               April 25, 2012 On November 4, 1992, Ofelia Cheah (Ofelia) and her friend Adelina Guarin
(Adelina) were having a conversation in the latter’s office when Adelina’s friend,
PHILIPPINE NATIONAL BANK, Petitioner, Filipina Tuazon (Filipina), approached her to ask if she could have Filipina’s
vs. check cleared and encashed for a service fee of 2.5%. The check is Bank of
SPOUSES CHEAH CHEE CHONG and OFELIA CAMACHO America Check No. 1906 under the account of Alejandria Pineda and Eduardo
CHEAH, Respondents. 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.
x-----------------------x
Because Adelina does not have a dollar account in which to deposit the check,
G.R. No. 170892 she asked Ofelia if she could accommodate Filipina’s request since she has a
joint dollar savings account with her Malaysian husband Cheah Chee Chong
SPOUSES CHEAH CHEE CHONG and OFELIA CAMACHO (Chee Chong) under Account No. 265-705612-2 with PNB Buendia Branch.
CHEAH, Petitioners,
vs. Ofelia agreed.
PHILIPPINE NATIONAL BANK, Respondent.
That same day, Ofelia and Adelina went to PNB Buendia Branch. They met with
DECISION Perfecto Mendiola of the Loans Department who referred them to PNB Division
Chief Alberto Garin (Garin). Garin discussed with them the process of clearing
DEL CASTILLO, J.: the subject check and they were told that it normally takes 15 days. 7 Assured
that the deposit and subsequent clearance of the check is a normal transaction,
Law favoreth diligence, and therefore, hateth folly and negligence.—Wingate’s
Ofelia deposited Filipina’s check. PNB then sent it for clearing through its
Maxim.
correspondent bank, Philadelphia National Bank. Five days later, PNB received a
In doing a friend a favor to help the latter’s friend collect the proceeds of a foreign credit advice8 from Philadelphia National Bank that the proceeds of the subject
check, a woman deposited the check in her and her husband’s dollar account. check had been temporarily credited to PNB’s account as of November 6, 1992.
The local bank accepted the check for collection and immediately credited the On November 16, 1992, Garin called up Ofelia to inform her that the check had
proceeds thereof to said spouses’ account even before the lapse of the clearing already been cleared.9 The following day, PNB Buendia Branch, after deducting
period. And just when the money had been withdrawn and distributed among the bank charges, credited $299,248.37 to the account of the spouses
different beneficiaries, it was discovered that all along, to the horror of the woman Cheah.10 Acting on Adelina’s instruction to withdraw the credited amount, Ofelia
whose intention to accommodate a friend’s friend backfired, she and her 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
bank had dealt with a rubber check. received all the proceeds.

These consolidated1 Petitions for Review on Certiorari  filed by the Philippine
National Bank (PNB)2 and by the spouses Cheah Chee Chong and Ofelia
Camacho Cheah (spouses Cheah)3 both assail the August 22, 2005
Decision4 and December 21, 2005 Resolution5 of the Court of Appeals (CA) in
CA-G.R. CV No. 63948 which declared both parties equally negligent and, hence,
should equally suffer the resulting loss. For its part, PNB questions why it was
declared blameworthy together with its depositors, spouses Cheah, for the
amount wrongfully paid the latter, while the spouses Cheah plead that they be
declared entirely faultless.
Factual Antecedents
In the meantime, the Cable Division of PNB Head Office in Escolta, Manila
received on November 16, 1992 a SWIFT13 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 PNB’s
various divisions/departments but was returned to PNB Head Office as it
seemed misrouted. PNB Head Office thus requested for Philadelphia National
Bank’s advice on said SWIFT message’s 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 letter17 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 check’s
encashment. In their effort to recover the money, spouses Cheah then sought the
help of the National Bureau of Investigation. Said agency’s 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 drafted19 letter20 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.
21 
Although some of the officers of PNB were amenable to the proposal, 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 ₱275,166.80 and $893.46,23 and filed a complaint24 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 ₱8,202,220.44, plus interests25 and attorney’s fees, from the
spouses Cheah.
As their main defense, the spouses Cheah claimed that the proximate cause of
PNB’s 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 ₱400,000.00 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
attorney’s fees.
Ruling of the Regional Trial Court
The RTC ruled in PNB’s favor. The dispositive portion of its Decision27 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 friend’s 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 PNB’s 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 Ofelia’s 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 without the negligence of both parties. As earlier stated, the complaint of
PNB cannot be dismissed because the Cheah spouses were negligent and Ms.
Cheah took an active part in the deposit of the check and the withdrawal of the
subject amounts. On the other hand, the Cheah spouses cannot entirely bear
the loss because PNB allowed her to withdraw without waiting for the clearance
of the check. The remedy of the parties is to go after those who perpetrated, and
benefited from, the scam.
WHEREFORE, the May 20, 1999 Decision of 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 equally negligent and should
suffer and shoulder the loss.
Accordingly, PNB is hereby ordered to credit to the peso and dollar accounts of
the Cheah spouses the amount due to them.
SO ORDERED.31
In so ruling, the CA ratiocinated that PNB Buendia Branch’s non-receipt of the
SWIFT message from Philadelphia National Bank within the 15-day clearing
period is not an acceptable excuse. Applying the last clear chance 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 PNB’s 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 latter are accommodation parties under the law as the
bank’s own negligence is the proximate cause of the damage it sustained.
Nevertheless, it also found Ofelia guilty of contributory negligence. Thus, both
parties should be made equally responsible for the resulting loss.
Both parties filed their respective Motions for Reconsideration 32 but same were
denied in a Resolution33 dated December 21, 2005.
Hence, these Petitions for Review on Certiorari.
Our Ruling
The petitions for review lack merit. Hence, we affirm the ruling of the CA.
PNB’s act of releasing the proceeds of the check prior to the lapse of the 15-day
clearing period was the proximate cause of the loss.1âwphi1
"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 Ofelia’s fault in accommodating a stranger’s 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 bank’s Remittance Examiner, what was unusual in the
processing of the check was that the "lapse of 15 banking days was not
observed."35 Even PNB’s agreement with Philadelphia National Bank36 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, PNB’s
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 party,
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 Ofelia’s 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 Ofelia’s 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 PNB’s client, Ofelia was the one who dealt with PNB and negotiated the check
such that its value was credited in her and her husband’s 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 AFFIRMED in toto.
SO ORDERED.
G.R. No. 173881               December 1, 2010
HYATT ELEVATORS and ESCALATORS CORPORATION, Petitioner,
vs.
CATHEDRAL HEIGHTS BUILDING COMPLEX ASSOCIATION,
INC., Respondent.
DECISION
PERALTA, J.:
Before this Court is a petition for review on certiorari,1 under Rule 45 of the
Rules of Court, seeking to set aside the April 20, 2006 Decision 2 and July 31,
2006 Resolution3 of the Court of Appeals (CA), in CA-G.R. CV No. 80427.
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 ₱1,161,933.27 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 ₱50,000.00 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 Resolution11 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 SPARE
PARTS DELIVERED AND INSTALLED BY PETITIONER ON THE FOUR
ELEVATORS OF RESPONDENT AT ITS HOSPITAL UNDER THE AGREEMENT
TO SERVICE ELEVATORS AS TO RENDER RESPONDENT LIABLE FOR THEIR
PRICES?15
Before anything else, this Court shall address a procedural issue raised by
respondent in its Comment16 that the petition should be denied due course for
raising questions of fact.
The determination of whether there exists a perfected contract of sale is
essentially a question of fact. It is already a well-settled rule that the jurisdiction
of this Court in cases brought before it from the CA 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 upon this Court. There are, however, recognized exceptions to
the foregoing rule, namely: (1) when the findings are grounded entirely on
speculation, surmises, or conjectures; (2) when the inference made is manifestly
mistaken, absurd, or impossible; (3) when there is grave abuse of discretion; (4)
when the judgment is based on a misapprehension of facts; (5) when the findings
of fact are conflicting; (6) when, in making its findings, the Court of Appeals went
beyond the issues of the case, or its findings are contrary to the admissions of
both the appellant and the appellee; (7) when the findings are contrary to those of
the trial court; (8) when the findings are conclusions without citation of specific
evidence on which they are based; (9) when the facts set forth in the petition, as
well as in the petitioner’s main and reply briefs, are not disputed by the
respondent; and (10) when the findings of fact are 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 arrived at
conflicting findings of fact.
Having resolved the procedural aspect, this Court shall now address the
substantive issue raised by petitioner. Petitioner contends that the CA erred
when it ruled that there was no perfected contract of sale between petitioner and
respondent with regard to the spare parts delivered and installed.
It is undisputed that a Service Agreement was entered into by petitioner and
respondent where petitioner was commissioned to maintain respondent's four
elevators. Embodied in the Service Agreement is a stipulation relating to
expenses incurred on top of regular maintenance of the elevators, to wit:
SERVICE AND INSPECTION FEE:
xxxx
(2) In addition to the service fee mentioned in the 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
₱1,161,933.47 as itemized in a statement of account 19 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.
Q: Within the day of?
A: Of the trouble. And have it received by the duly personnel of St. Luke’s
Cathedral.
Q: And who prepared this trouble call reports?
A: The technician who actually checked the elevator.

In order to prove its allegations, petitioner presented Wilson Sua, its finance Q: When do the parts being installed?
manager, as its sole witness. Sua testified to the procedure followed by petitioner
in servicing respondent's elevators, to wit: A: On the same date they brought the parts on the project cite.

Q: Can you tell us Mr. witness, what is the procedure actually followed whenever Q: You mentioned sales invoice and delivery receipts. Who prepared these
there is a need for trouble call maintenance or repair? invoice?

A: The St. Luke’s Cathedral’s personnel, which includes the administrative A: Those were prepared by our inventory clerk under my supervision?
officers, the guard on duty, or the receptionist, will call us through the phone if
Q: How about the delivery receipts?
their elevators brake (sic) down.
A: Just the same.
Q: Then, what happened?
Q: When would the sales invoice be prepared?
A: Immediately, we dispatched our technicians to check the trouble.
A: After the approval of the building engineer.
Q: And who were these technicians whom you normally or regularly dispatched
to attend to the trouble of the elevators of the defendant? 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
A: With regard to this St. Luke’s, we dispatched Sunny Jones and Gilbert
parts? Were they already installed or what?
Cinamin.
A: They were already installed.
Q: And what happened after dispatching these technicians?
Q: Now, why would the parts be installed before the preparation of the sales
A: They come back immediately to the office to request the parts needed for the
invoice and the delivery receipts?
troubleshooting of the elevators.
A: There was an agreement between the building engineer and our service
Q: Then what happened?
manager that the elevator should be running in good condition at all times,
A: A part will be brought to the project cite and they will install it and note it in breakdown should be at least one day only. It cannot stop for more than a
the trouble call report and have it received properly by the building guard or the day.21
receptionist or by the building engineers, and they will test it for a couple of
On cross examination, Sua testified that the procedure was followed on the
weeks to determine if the parts are the correct part needed for that elevator
authority of a verbal agreement between petitioner's service manager and
and we will secure their approval, thereafter we will issue our invoices and
respondent's engineer, thus:
delivery receipts.
Q: So, you mean to say that despite the fact that material are expensive you
Q: This trouble call reports, are these in writing?
immediately installed these equipments without the prior approval of the board?
A: Yes, sir. These are in writing and these are being written within that day.
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. Luke’s 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 petitioner’s office to get the necessary replacement parts;
5. The technician then returned to the St. Luke’s 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.1avvphi1 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 testimony26 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 respondent’s 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 x27
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 equivalent.29 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. In Boston 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 To stress, the burden of proof is on the plaintiff. He must rely on the strength of
price dictated by petitioner even if such assent was given after the services were his case and not on the weakness of respondent's defense. Based on the manner
rendered. There is, however, no proof of such acceptance on the part of by which petitioner had presented its claim, this Court is of the opinion that
respondent. petitioner's case leaves too much to be desired.

This Court shares the observation of the CA that the signatures of receipt by the WHERFORE, premises considered, the petition is DENIED. The April 20, 2006
information clerk or the guard on duty on the sales invoices and delivery receipts Decision and July 31, 2006 Resolution of the Court of Appeals, in CA-G.R. CV
merely pertain to the physical receipt of the papers. It does not indicate that the No. 80427, are AFFIRMED.
parts stated were actually delivered and installed. Moreover, because petitioner
failed to prove the existence of the verbal agreement which allegedly authorized SO ORDERED.
the aforementioned individuals to sign in respondent’s 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.
 G.R. No. 158768             February 12, 2008
TITAN-IKEDA CONSTRUCTION & DEVELOPMENT
CORPORATION, petitioner,
vs.
PRIMETOWN PROPERTY GROUP, INC., respondent.
DECISION
CORONA, J.:
1
This petition for review on certiorari  seeks to set aside the decision of the Court
of Appeals (CA) in CA-G.R. CV No. 61353 2 and its resolution3 denying
reconsideration.
In 1992, respondent Primetown Property Group, Inc. awarded the contract for
the structural works4 of its 32-storey Makati Prime Tower (MPT) to petitioner
Titan-Ikeda Construction and Development Corporation.5 The parties formalized
their agreement in a construction contract6 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 works8 (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:
(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 construction manager.11
Petitioner started working on the project in February 1994.
On June 30, 1994, respondent executed a deed of sale12 (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
latter’s take over of the project’s supervision. Despite ongoing negotiations,
respondent did not obtain petitioner’s consent in hiring ITI as the project’s
construction manager. Neither did it inform petitioner of ITI’s 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.
Integratech’s (ITI’s) Report
In its September 7, 1995 report, ITI estimated that petitioner should have
accomplished 48.71% of the project as of the October 12, 1995 takeover
date.20 Petitioner repudiated this figure21 but qualifiedly admitted that it did not
finish the project.22 Records showed that respondent did not merely take over the
supervision of the project but took full control thereof.23
Petitioner consequently conducted an inventory.24 On the basis thereof,
petitioner demanded from respondent the payment of its balance amounting
to P1,779,744.85.25
On February 19, 1996, petitioner sent a second letter to respondent
demanding P2,023,876.25. This new figure included the cost of materials
(P244,331.40) petitioner advanced from December 5, 1995 to January 26,
1996.26
On November 22, 1996, petitioner demanded from respondent the delivery of
MPT's management certificate27 and the keys to the condominium units and the
payment of its (respondent's) balance.28
Because respondent ignored petitioner's demand, petitioner, on December 9,
1996, filed a complaint for specific performance29 in the Housing and Land Use
Regulatory Board (HLURB).
While the complaint for specific performance was pending in the HLURB,
respondent sent a demand letter to petitioner asking it to reimburse the actual
costs incurred in finishing the project (or P69,785,923.47).30 In view of the
pendency of the HLURB case, petitioner did not heed respondent's demands.
On April 29, 1997, the HLURB rendered a decision in favor of petitioner. 31 It
ruled that the instrument executed on June 30, 1994 was a  deed of absolute
sale because the conveyance of the condominium units and parking slots was
not subject to any condition. 32 Thus, it ordered respondent to issue MPT’s
management certificate and to deliver the keys to the condominium units to
petitioner.33 Respondent did not appeal this decision. Consequently, a writ of
execution was issued upon its finality.34
Undaunted by the finality of the HLURB decision, respondent filed a complaint
for collection of sum of money35 against petitioner in the Regional Trial Court
(RTC) of Makati City, Branch 58 on July 2, 1997. It prayed for the
reimbursement of the value of the project’s unfinished portion amounting
to P66,677,000.36
During trial, the RTC found that because respondent modified the MPT's
architectural design, petitioner had to adjust the scope of work. 37 Moreover,
respondent belatedly informed petitioner of those modifications. It also failed to
deliver the concrete mix and rebars according to schedule. For this reason,
petitioner was not responsible for the project's delay. 38 The trial court thus
allowed petitioner to set-off respondent's other outstanding liabilities with
respondent’s excess payment in the project.39 It concluded that respondent owed
petitioner P2,023,876.25.40 In addition, because respondent refused to deliver
the keys to the condominium units and the management certificate to petitioner,
the RTC found that petitioner lost rental income amounting to
US$1,665,260.41 The dispositive portion of the RTC decision stated:
WHEREFORE, PREMISES CONSIDERED, judgment is hereby rendered
dismissing [respondent's] [c]omplaint for lack of merit. On the other hand, finding
preponderance of evidence to sustain [petitioner's] counterclaim, judgment is
hereby rendered in favor of [petitioner] ordering [respondent] to pay the former:
1. The unpaid balance of the consideration for [petitioner's] services in [the
project] in the amount of P2,023,867.25 with legal interest from the date of
demand until fully paid;
2. Compensatory damages in the amount of US$1,665,260 or its peso equivalent
at the current foreign exchange rate representing lost rental income due only as
of July 1997 and the accrued lost earnings from then on until the date of actual
payment, with legal interest from the date of demand until fully paid; and
3. Attorney's fees in the amount of P100,000 as acceptance fee, P1,000
appearance fee per hearing and 25% of the total amount awarded to [petitioner].
With costs against the [respondent].
SO ORDERED.42
Respondent appealed the RTC decision to the CA.43 The appellate court found
that respondent fully performed its obligation when it executed the June 30,
1994 deed of absolute sale in favor of petitioner. 44 Moreover, ITI's report clearly
established that petitioner had completed only 48.71% of the project as of
October 12, 1995, the takeover date. Not only did it incur delay in the
performance of its obligation but petitioner also failed to finish the project. The
CA ruled that respondent was entitled to recover the value of the unfinished
portion of the project under the principle of unjust enrichment.45 Thus:
WHEREFORE, the appealed decision is REVERSED and a new one entered
dismissing [petitioner's] counterclaims of P2,023,867.25 representing unpaid
balance for [its] services in [the project]; US$1,665,260 as accrued lost earnings,
and attorney's fees. [Petitioner] is hereby ordered to 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 aforementioned amount, [respondent] is hereby ordered to deliver the keys
and [m]anagement [c]ertificate of the [Makati Prime Tower] paid to [petitioner] as
consideration for the [project].46
Petitioner moved for reconsideration but it was denied. Hence, this petition.
Petitioner contends that the CA erred in giving weight to ITI's report because the
project evaluation was commissioned only by respondent,47 in disregard of
industry practice. Project evaluations are agreed upon by the parties and
conducted by a disinterested third party.48
We grant the petition.
Review of Conflicting Factual Findings
As a general rule, only questions of law may be raised in a petition for review on
certiorari. Factual issues are entertained only in 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 the RTC and
the CA. The trial court found that respondent contributed to the project's delay
because it belatedly communicated the modifications and failed to deliver the
necessary materials on time. The CA, however, found that petitioner incurred
delay in the performance of its obligation. It relied on ITI's report which stated
that petitioner had accomplished only 48.71% of the project as of October 12,
1995.
January 31, 1994 Supplemental Agreement Was Extinguished
A contract is a meeting of the minds between two persons whereby one binds
himself, with respect to the other, to give something or to render some
service.50 This case involved two contracts entered into by the parties with regard
to the project.
The parties first entered into a contract for a piece of work51 when they executed
the supplemental agreement. Petitioner as contractor bound itself to execute the
project for respondent, the owner/developer, in consideration of a price certain
(P130,000,000). The supplemental agreement was reciprocal in nature because
the obligation of respondent to pay the entire contract price depended on the
obligation of petitioner to complete the project (and vice versa).
Thereafter, the parties entered into a second contract. They agreed to extinguish
the supplemental agreement as evidenced by the October 12, 1995 letter-
agreement which was duly acknowledged by their respective representatives.52
While the October 12, 1995 letter-agreement stated that respondent was to take
over merely the supervision of the project, it actually took over the whole project
itself. In fact, respondent subsequently hired two contractors in petitioner's
stead.53 Moreover, petitioner's project engineer at site only monitored the
progress of architectural works undertaken in its condominium
units.54 Petitioner never objected to this arrangement; hence, it voluntarily
surrendered its participation in the project. Moreover, it judicially admitted in its
answer that respondent took over the entire project, not merely its supervision,
pursuant to its (respondent’s) long-range plans.55
Because the parties agreed to extinguish the supplemental agreement, they were
no longer required to fully perform their respective obligations. Petitioner was
relieved of its obligation to complete the project while respondent was freed of its
obligation to pay the entire contract price. However, respondent, by executing the
June 30, 1994 deed of absolute sale, was deemed to have
paid P112,416,716.88. Nevertheless, because petitioner applied part of what it
received to respondent’s outstanding liabilities,56 it admitted overpayment.
Because petitioner acknowledged that it had been overpaid, it was obliged to
return the excess to respondent. Embodying the principle of solutio
indebiti, Article 2154 of the Civil Code provides:
Article 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.
For the extra-contractual obligation of solutio indebiti to arise, the following
requisites must be proven:
1. the absence of a right to collect the excess sums and
2. the payment was made by mistake.57
With regard to the first requisite, because the supplemental agreement had been
extinguished by the mutual agreement of the parties, petitioner became entitled
only to the cost of services it actually rendered (i.e., that fraction of the project
cost in proportion to the percentage of its actual accomplishment in the project).
It was not entitled to the excess (or extent of overpayment).
On the second requisite, Article 2163 of the Civil Code provides:
Article 2163. It is presumed that there was a mistake in the payment if
something which had never been due or had already been paid was
delivered; but, he from whom the return is claimed may prove that the delivery
was made out of liberality or for any other just cause. (emphasis supplied)
In this instance, respondent paid part of the contract price under the assumption
that petitioner would complete the project within the stipulated period. However,
after the supplemental agreement was extinguished, petitioner ceased working
on the project. Therefore, the compensation petitioner received in excess of the
cost of its actual accomplishment as of October 12, 1995 was never due. The
condominium units and parking slots corresponding to the said excess were
mistakenly delivered by respondent and were therefore not due to petitioner.
Stated simply, respondent erroneously delivered excess units to petitioner and
the latter, pursuant to Article 2154, was obliged to the return them to
respondent.58 Article 2160 of the Civil Code provides:
Article 2160. He who in good faith accepts an undue payment of a thing certain
and determinate shall only be responsible for the impairment or loss of the same
or its accessories and accessions insofar as he has thereby been benefited. If he
has alienated it, he shall return the price or assign the action to collect the sum.
One who receives payment by mistake in good faith is, as a general rule, only
liable to return the thing delivered.59 If he benefited therefrom, he is also liable for
the impairment or loss of the thing delivered and its accessories and
accessions.60 If he sold the thing delivered, he should either deliver the proceeds
of the sale or assign the action to collect to the other party.61
The situation is, however, complicated by the following facts:
a) the basis of the valuation (P112,416,716.99) of the condominium units and
parking slots covered by the June 30, 1994 deed of sale is unknown;
b) the percentage of petitioner's actual accomplishment in the project has not
been determined and
c) the records of this case do not show the actual number of condominium units
and parking slots sold by petitioners.
Because this Court is not a trier of facts, the determination of these matters
should be remanded to the RTC for reception of further evidence.
The RTC must first determine the percentage of the project petitioner actually
completed and its proportionate cost.62 This will be the amount due to petitioner.
Thereafter, based on the stipulated valuation in the June 30, 1994 deed of sale,
the RTC shall determine how many condominium units and parking slots
correspond to the amount due to petitioner. It will only be the management
certificate and the keys to these units that petitioner will be entitled to. The
remaining units, having been mistakenly delivered by respondent, will therefore
be the subject of solutio indebiti.
What exactly must petitioner give back to respondent? Under Article 2160 in
relation to Article 2154, it should return to respondent the condominium units
and parking slots in excess of the value of its actual accomplishment (i.e., the
amount due to it) as of October 12, 1995. If these properties include units and/or
slots already sold to third persons, petitioner shall deliver the proceeds of the sale
thereof or assign the actions for collection to respondent as required by Article
2160.
Delay In The Completion Of The Project
Mora or delay is the failure to perform the obligation in due time because
of dolo  (malice) or culpa (negligence).63 A debtor is deemed to have violated his
obligation to the creditor from the time the latter makes a demand. Once the
creditor makes a demand, the debtor incurs mora  or delay.64
The construction contract65 provided a procedure for protesting delay:
Article XIV
DELAYS AND ABANDONMENT
15.1. If at any time during the effectivity of this contract,
[PETITIONER] shall incur unreasonable delay or slippages of more than
fifteen percent (15%) of the scheduled work program,
[RESPONDENT] should notify [PETITIONER] in writing to accelerate the
work and reduce, if not erase, slippage. If 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 Additional Costs Resulting 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
2. the additional price to be paid to the contractor has been determined in writing
by both parties.
69
In Powton Conglomerate, Inc. v. Agcolicol,  we reiterated that a claim for the cost
of additional work arising from changes in the scope of work can only be allowed
upon the:
1. written authority from the developer/owner ordering/allowing the changes in
work; and
2. written agreement of parties with regard to the increase in cost (or price) due to
the change in work or design modification. 70
Furthermore:
Compliance with the two requisites of Article 1724, a specific provision
governing additional works, is a condition precedent of the recovery. The
absence of one or the other bars the recovery of additional costs. Neither the
authority for the changes made nor the additional price to be paid therefor may
be proved by any other evidence for purposes of recovery.71 (emphasis supplied)
Petitioner submitted neither one. In addition, petitioner’s project coordinator
Estellita Garcia testified that respondent never approved any change
order.72 Thus, under Article 1724 and pursuant to our ruling in Powton
Conglomerate, Inc., petitioner cannot recover the cost it incurred in effecting the
design modifications. A contractor who fails to secure the owner or developer's
written authority to changes in the work or written assent to the additional cost
to be incurred cannot invoke the principle of unjust enrichment.73
Recovery Of Compensatory Damages
Indemnification for damages comprehends not only the loss suffered (actual
damages or damnum emergens) but also the claimant's lost profits
(compensatory damages or lucrum cessans). For compensatory damages to be
awarded, it is necessary to prove the actual amount of the alleged loss by
preponderance of evidence.74
The RTC awarded compensatory damages based on the rental pool rates
submitted by petitioner75 and on the premise that all those units would have
been leased had respondent only finished the project by December 31,
1995.76 However, other than bare assertions, petitioner submitted no proof that
the rental pool was in fact able to lease out the units. We thus hold that the
"losses" sustained by petitioner were merely speculative and there was no basis
for the award.
Remand Of Other Claims
Since respondent did not repudiate petitioner's other claims stated in the
inventory77 in the RTC and CA, it is estopped from questioning the validity
thereof.78 However, because some of petitioner's claims have been disallowed, we
remand the records of this case to the RTC for the computation of respondent's
liability.79
WHEREFORE, the petition is hereby GRANTED.
The March 15, 2002 decision and May 29, 2003 resolution of the Court of
Appeals in CA-G.R. CV No. 61353 and the August 5, 1998 decision of the
Regional Trial Court, Branch 58, Makati City in Civil Case No. 97-1501 are
hereby SET ASIDE. New judgment is entered:
1. ordering petitioner Titan-Ikeda Construction and Development Corporation to
return to respondent Primetown Property Group, Inc. the condominium units
and parking slots corresponding to the payment made in excess of the
proportionate (project) cost of its actual accomplishment as of October 12, 1995,
subject to its (petitioner’s) allowable claims as stated in the inventory and

2. dismissing petitioner Titan-Ikeda Construction and Development

Corporation’s claims for the cost of additional work (or change order) and
damages.

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

1. the reception of additional evidence to determine

(a) the percentage of the architectural work actually completed by petitioner

Titan-Ikeda Construction and Development Corporation as of October 12, 1995
on the Makati Prime Tower and

(b) the number of condominium units and parking slots sold by petitioner Titan-
Ikeda Construction and Development Corporation to third persons;

2. the computation of petitioner Titan-Ikeda Construction and Development

Corporation's actual liability to respondent Primetown Property Group, Inc. or
vice-versa, and the determination of imposable interests and/or penalties, if any.

SO ORDERED.