G.R. No.

L-36627 October 20, 1977

SEVERO J. SANTIAGO v. EUGENIO JUAN GONZALEZ

Article: 1170
Those who in the performance of their obligation are guilty of fraud, negligence, or delay and
those who in any manner contravene the tenor thereof, are liable for damages.

FACTS:

1. On March 15, 1963, petitioner Severo J. Santiago and respondent Eugenio Juan
Gonzalez entered into an agreement whereby Gonzalez under-took to construct for a
certain amount a residential house for Santiago at White Plains Subdivision, Quezon
City.

2. Before the termination of the construction, a controversy arose between the parties, it
being alleged by Gonzalez that he had not been paid on time.

3. Gonzalez stopped the construction on October 11, 1963, and he notified Santiago. To
resolve the contro-versy between them,

4. Santiago and Gonzalez entered into an agree-ment on December 28, 1963, to submit
their dispute to arbitration.

ISSUE:

1. Whether or not is the firm liable for the damages?

TRIAL COURT RULING

After considering the numerous documents presented by both parties, the trial court
confirmed the award made by the Arbitration Board in a decision dated January 11, 1965, the
dispositive portion of which reads:

"WHEREFORE,
the award made by the Board of Arbitrators declaring that the balance due to Eugenio Juan
Gonzalez from the petitioner Severo J. Santiago to be P49,594.63 is hereby confirmed and
judgment is hereby rendered in favor of Eugenio Juan Gonzalez and against the peti-tioner
Severo J. Santiago for the amount of P49,594.63. Without pro-nouncement as to costs.

*The petitioner-appellant, in his brief filed with the Court of appeals fifteen (15) errors allegedly
committed by the lower court. However, the Principal issue to be resolved in this appeal is
whether or not the court a quo acted correctly in confirming the arbitration award and deciding
the case without receiving additional evidence in a hearing before it.

*The petitioner-appellant herein also assails the decision rendered by the court a quo on the
ground that it did not find the appellee to be without any right to stop the construction in
violation of the law, particularly Articles 1721, 1725 and 1726 of the Civil Code of the
Philippines.
 CA RULING

The Court does not find any sufficient reason, fact, or circumstance which will justify the
setting aside of the award made by the Board.

The lower court denied the motion for reconsideration filed by petitioner.

While it is true that the appellee had stopped the construction by notifying the
appellant owner on grounds of delay of the agreed payments of the work done as
embodied in their contract, the records clearly show that the appellant, in a reply
letter, dated October 12, 1963, advised the appellee that the building contract
executed by and between them is rescinded upon receipt thereof. The records
likewise reveal that it was the appellant was continued the construction of his house
since then. The submission or contract to arbitrate agreed upon by the parties was
the outcome of such rescission of the contract by the appellant. The appellant's
intention to withdraw from the building contract is clear from the following portions of his
letter to the appellee.

The lower court did not commit any reversible error.

WHEREFORE, the appealed decision of the Manila Court of First Instance is hereby
affirmed, without pronouncement as to costs.

HELD:
In connection to Article 1170, The firm is not guilty or liable of fraud, negligence, or delay, for
after all, the adverse party had already informed the firm of the former’s intention to cancel or
rescind the contract.

This case has been found having similar General Register No. L-36627 with the other case.

https://lawphil.net/judjuris/juri1977/oct1977/gr_36627_1977.html
https://lawphil.net/judjuris/juri1932/nov1932/gr_l-36627_1932.html