Century Iron Works, Inc. v. Far Eastern University

FIRST DIVISION

[G.R. No. 217329. April 1, 2019.]

CENTURY IRON WORKS, INC., petitioner, vs.FAR EASTERN UNIVERSITY, PABLO R. ANTONIO, JR. DESIGN & CONSULTANCY, INC., respondents.

NOTICE

Sirs/Mesdames :

Please take notice that the Court, First Division, issued a Resolution dated April 1, 2019 which reads as follows:

"G.R. No. 217329 (CENTURY IRON WORKS, INC., Petitioner, v. FAR EASTERN UNIVERSITY, PABLO R. ANTONIO, JR. DESIGN & CONSULTANCY, INC., Respondents) — The petitioner appeals from the decision 1 and resolution 2 promulgated by the Court of Appeals (CA) on September 23, 2014 and March 4, 2015, respectively, whereby the CA affirmed the order 3 of the Regional Trial Court (RTC), Branch 126, Caloocan City, granting the demurrer to evidence filed by the respondent Pablo R. Antonio, Jr., Design and Consultancy, Inc.'s (PRAJDC) and the motion for summary judgment of respondent Far Eastern University's (FEU), thus, effectively dismissing the complaint for sum of money filed by the petitioner.

The Antecedents

The CA summarized the facts of the case as follows:

On April 3, 2001, Far Eastern University ("appellee FEU") entered into a contract with L & M Maxco ("appellee L & M Maxco") for the construction of the FEU Project ("project"). DG Jones ("appellee DG Jones") acted as the project manager while appellee Pablo R. Antonio, Jr. Consultancy ("appellee Antonio Consultancy") provided architectural services.

Subsequently, appellee L & M Maxco subcontracted to appellant CIWI the supply of labor, materials, tools and equipment to facilitate the fabrication and installation of the project's structural steel frame and steel decking.

Appellant CIWI alleged that as the work progressed, several change orders were issued by appellees L & M Maxco, DG Jones and Antonio Consultancy. Appellant CIWI, after having been assured by appellees that it would be paid, did the work. Furthermore, the change orders were fully conformed to by appellee L & M Maxco. Hence, all the change orders were undertaken and timely completed, to the satisfaction of and without any complaints from all the appellees. There was even one (1) time when appellee FEU directly paid appellant CIWI the amount of P886,829.12.

Meanwhile, with all the lifting requirements done and settled, appellant CIWI decided to demobilize its tower crane. Soon thereafter, appellant CIWI received a letter of instruction from appellee Antonio Consultancy, ordering it to remobilize the crane. Appellant CIWI informed appellee Antonio Consultancy that this would entail additional expenses since crane remobilization is expensive. Despite that, appellee Antonio Consultancy insisted on the remobilization. Accordingly, the crane was used from May 30, 2001 to June 7, 2001. CAIHTE

Thereafter, appellant CIWI sent appellee Antonio Consultancy a billing in the sum of P135,000.00 for the use and rental of the tower crane. It likewise sent appellee L & M Maxco progress billings for the completion of the change orders.

Subsequently, appellee L & M Maxco admitted liability and settled some billings however, many were left unpaid. This prompted appellant CIWI to send demand letters, to appellees, FEU, DG Jones and Antonio Consultancy, seeking payment of the unpaid obligation totalling to P1,861,267.00. There being no favorable reply from the latter, appellant CIWI filed a complaint for sum of money against appellees L & M Maxco, FEU, DG Jones and Antonio Consultancy.

Appellee FEU denied liability. There is no contractual relationship between appellee FEU and appellant CIWI. Appellee FEU entered into a contract only with co-appellees L & M Maxco and DG Jones and is not a part of the sub-contracting agreement appellee L & M Maxco executed with appellant CIWI. The fact that appellee FEU made a single payment, directly to appellant CIWI, does not create any privity between them. It was an isolated transaction that was made upon the request of appellee L & M Maxco. Appellee L & M Maxco eventually reneged on its contract with appellee FEU resulting to the termination of its services. The latter does not owe appellee L & M Maxco a single centavo. In fact, appellee Maxco should be liable for liquidated damages for its failure to complete the project on time. Hence, the provision of Article 1729 of the Civil Code does not find any application in the case at bar because the owner does not owe the general contractor, appellee L & M Maxco, any amount.

Appellee Antonio Consultancy, likewise denied liability. It claimed that the only party it entered a contract with is appellee FEU. The transaction subject of the instant complaint is a contract between appellant CIWI and appellee L & M Maxco, to which appellee Antonio Consultancy is not privy to. Appellee Antonio Consultancy has never issued any orders or instructions to appellant CIWI. The work done by appellant CIWI on the mini-rib framing and the remobilization of the lower crane were part of the project hence, the cost should be borne by the entity that contracted its services, appellee L & M Maxco.

Appellee L & M Maxco, on the other hand, argued that the billing of appellant CIWI had already been fully settled with appellee FEU's direct payment to the latter of the amount of P886,829.12, which is in fact in excess of the amount evaluated and approved by appellee L & M Maxco as the amount due to appellant CIWI. Moreover, contrary to appellant CIWI's claim, there was no proper turn-over and acceptance of the work done by the former to appellee L & M Maxco. To this date, no certificate of final acceptance and completion has been issued. Appellee L & M Maxco is not a party to the remobilization of the tower crane and the change orders and has not admitted any liability.

Soon after appellant CIWI rested its case, appellate FEU filed a Motion for Summary Judgment while appellee Antonio Consultancy filed a Demurrer to Evidence. 4

RTC Ruling

On August 26, 2010, the RTC issued an order granting FEU's motion for summary judgment and PRAJDC's demurrer to evidence, disposing as follows:

WHEREFORE, premises considered, both Motion to Dismiss by way of Demurrer to Evidence filed by defendant PADCI and Motion for Summary Judgment filed by defendant FEU are granted, thus, the Complaint against defendant FEU and defendant PADCI are dismissed. Let defense presentation of evidence with respect to defendant L & M Maxco be set on November 24, 2010 at 8:30 in the morning. Defendant FEU and PADCI are directed to make manifestation if they are still interested to pursue their counterclaim.

SO ORDERED. 5

The RTC ruled that insofar as FEU's motion for summary judgment is concerned, there is no contractual relationship between the petitioner and respondent FEU, hence, there can be no contractual breach. As for PRAJDC's demurrer to evidence, the RTC held that PRAJDC only acted as an agent of its co-respondent FEU. DETACa

CA Ruling

In the now assailed decision, the CA held that Article 1729 of the Civil Code will only apply upon proof that FEU owed money to the contractor, (L & M Maxco); 6 that the petitioner failed to allege, much less, prove that FEU was indeed indebted to L & M Maxco; that the dismissal of the complaint as against L & M Maxco was fatal to the petitioner's case considering that the former was an indispensable party. 7

The petitioner now maintains that the lower courts erred in ordering the dismissal of the complaints against herein respondents; that Article 1729 of the Civil Code applies in the petitioner's favor because it has proved that it furnished materials and labor to respondent FEU, the non-payment of which would give rise to a cause of action against the contractor (L & M Maxco) and the owner (FEU); that the dismissal of the complaint as against L & M Maxco did not prejudice the petitioner's claim against herein respondents considering their solidary liability.

Does Article 1729 of the Civil Code apply to authorize the petitioner to go against the respondents? Is L & M Maxco an indispensable party in this case?

Our Ruling

The petition is partly meritorious.

At the center of the controversy is Article 1729 of the Civil Code, which provides that:

Article 1729. Those who put their labor upon or furnish materials for a piece of work undertaken by the contractor have an action against the owner up to the amount owing from the latter to the contractor at the time the claim is made. However, the following shall not prejudice the laborers, employees and furnishers of materials:

(1) Payments made by the owner to the contractor before they are due;

(2) Renunciation by the contractor of any amount due him from the owner.

This article is subject to the provisions of special laws.

The Court in JL Investment and Development, Inc. v. Tendon Philippines, Inc., 8 discussed the application of this Article, thus:

This provision imposes a direct liability on an owner of a piece of work in favor of suppliers of materials (and laborers) hired by the contractor "up to the amount owing from the [owner] to the contractor at the time the claim is made." Thus, to this extent, the owner's liability is solidary with the contractor, if both are sued together. By creating a constructive vinculum between suppliers of materials (and laborers), on the one hand, and the owner of a piece of work, on the other hand, as an exception to the rule on privity of contracts, Article 1729 protects suppliers of materials (and laborers) from unscrupulous contractors and possible connivance between owners and contractors. As the Court of Appeals correctly ruled, the supplier's cause of action under this provision, reckoned from the time of judicial or extra-judicial demand, subsists so long as any amount remains owing from the owner to the contractor. Only full payment of the agreed contract price serves as a defense against the supplier's claim. [Emphasis Supplied]

With the coverage of Article 1729 cleared, the Court finds as proper the dismissal of the case against respondent PRAJDC considering that the petitioner did not have a cause of action. The contractor mentioned in Article 1729 refers to the entity contracted with the service provider and not the respondent PRADJC. To be sure, respondent PRADJC's contract was with its co-respondent FEU and not with the petitioner. Hence, the RTC correctly pointed out that all acts pertaining to the respondent PRAJDC were within the scope of authority provided by its principal — its co-respondent FEU. As such, any liability incurred by PRAJDC may be attributable to FEU. Therefore, the lower courts did not err in ordering the dismissal of the case against respondent PRAJDC. aDSIHc

The conclusion of the Court, however, insofar as FEU is concerned would be different. Following JL Investment and Development, Inc. v. Tendon Philippines, Inc., supra, Article 1729 may be applied upon proof by the petitioner that it furnished services and/or materials to the contractor and the same had not yet been paid. The supplier, in this case, the petitioner, did not carry the burden to show that the owner of the work was indebted to the contractor, but rather that the owner must show that it had fully paid the contract price agreed upon. The supplier cannot be in the position to know whether or not the full contract price has been fully paid for by the owner.

Here, while L & M Maxco had alleged that it paid the contract price stipulated in the sub-contracting agreement, there were certain claims that remained unaccounted for, including the cost of crane mobilization. Further, evidence was insufficient to establish that respondent FEU had already fully paid the contract price for the entire project. As such, respondent FEU cannot be insulated from a supplier's claim under Article 1729. Accordingly, we find as improper the dismissal of the claim against respondent FEU.

Also, the mere fact that respondent FEU did not enter into a contract with the petitioner did not free the former from any obligations resulting from the project. The relationship and the obligations of the parties, the owner and the supplier, arise from law and not from any contract. JL Investment and Development, Inc. v. Tendon Philippines, Inc., serves as an exception to the rule on privity of contracts.

As regards the status of L & M Maxco, the Court rules that it was not an indispensable party. 9 As such, its inclusion and eventual release was not fatal to the petitioner's case against FEU. Here, Article 1729 imposed a solidary liability, thus, any of the solidary debtors can answer the whole debt and the absence of one shall not affect the case. In view of L & M Maxco's participation, it cannot be an indispensable party since the petitioner can go after either the contractor or the owner.

While respondent FEU may be liable under Article 1729, the exact amount of liability eludes this Court. Considering that the Court is not a trier of facts, We find a remand of the case as proper to determine the total amount of claim the petitioner may have against respondent FEU.

WHEREFORE, the Court PARTIALLY GRANTS the petition; REINSTATES Civil Case No. C-20209 as against respondent Far Eastern University; and REMANDS the case to the Regional Trial Court of Caloocan, Branch 126 for the determination of the amount of liability of respondent Far Eastern University against the petitioner and for further proceedings. ETHIDa

SO ORDERED." Jardeleza, J., on official leave.

Very truly yours,

(SGD.) LIBRADA C. BUENADivision Clerk of Court

 

Footnotes

1.Rollo, pp. 21-29; penned by Associate Justice Danton Q. Bueser, with the concurrence of Associate Justice Remedios Salazar-Fernando and Associate Justice Ramon R. Garcia.

2.Id. at 38-39.

3.Id. at 178-189; dated August 26, 2010.

4.Id. at 22-24.

5.Id. at 189.

6.Id. at 26-27.

7.Id. at 28.

8. G.R. No. 148596, January 22, 2007, 512 SCRA 84, 93-94.

9. An indispensable party is a party-in-interest without whom no final determination can be had of an action, and who shall be joined mandatorily either as plaintiffs or defendants. The presence of indispensable parties is necessary to vest the court with jurisdiction, thus, without their presence to a suit or proceeding, the judgment of a court cannot attain real finality. The absence of an indispensable party renders all subsequent actions of the court null and void for want of authority to act, not only as to the absent parties but even as to those present (Living @ Sense, Inc. v. Malayan Insurance, Inc., G.R. No. 193753, September 26, 2012, 682 SCRA 59, 64).