SECOND DIVISION
JL INVESTMENT AND G.R. No. 148596
DEVELOPMENT, INC.,
Petitioner,
Present:
QUISUMBING,
J.,
Chairperson,
- versus - CARPIO,
CARPIO
MORALES,
TINGA,
and
VELASCO, JR., JJ.
TENDON PHILIPPINES, INC.,
J. STA. MARIA CONSTRUCTION
CORPORATION, and JAIME T. Promulgated:
STA. MARIA,
JR.,
Respondents. January 22, 2007
x ---------------------------------------------------------------------------------------
x
CARPIO, J.:
This
is a petition for review[1]
of the Decision[2] dated 3
May 2001 and the Resolution dated 19 June 2001 of the Court of Appeals holding
petitioner JL Investment and Development, Inc. (petitioner) jointly and
severally liable with respondents J. Sta. Maria Construction Corporation (SMCC)
and Jaime T. Sta. Maria, Jr. (Sta. Maria) in a collection suit filed by
respondent Tendon Philippines, Inc. (TPI).
Petitioner hired respondent SMCC to
undertake the structural and architectural work for the first 12 floors of a
16-floor building (P63,333,085.84 for the project. The Agreement also
required SMCC to submit monthly progress billings to petitioner.[3]
To supply
the concrete piles needed for the structural work, SMCC subcontracted
respondent TPI, a local manufacturer of pre-cast concrete products.
Accordingly, TPI delivered 142 pieces of concrete piles to SMCC worth P4,118,000
payable on installment basis.
By early
August 1996, SMCC, using the concrete piles that TPI supplied, finished the
pile driving work for the first 12 floors of the
On
Claiming that SMCC did not fully pay
for the concrete piles, TPI sought payment of the balance from petitioner. Petitioner
ignored TPI’s demand. Thus, TPI sued SMCC, SMCC’s President, respondent Sta.
Maria, and petitioner (respondents) in
the P1,389,330. TPI prayed
that the trial court hold respondents solidarily liable for the balance with
interest, attorney’s fees, and the costs of suit.
In its Answer, petitioner denied any
liability, alleging that under the Agreement, SMCC is solely liable for any
obligation due to its suppliers. Nevertheless, petitioner filed a cross-claim
against SMCC, praying reimbursement for any amount it may be held liable to
TPI. Petitioner also prayed for the payment of attorney’s fees and litigation
expenses.
In their Answer, SMCC and Sta. Maria
also raised the defense of full payment. Alternatively, SMCC and Sta. Maria
contended that the pile drives TPI delivered did not conform to the agreed
specifications. SMCC and Sta. Maria counterclaimed for damages.
Before trial commenced, TPI submitted
interrogatories to petitioner. In its response, petitioner claimed, for the
first time, that it had made advance payments to SMCC, resulting in an alleged
overpayment.
During the pre-trial, SMCC and Sta.
Maria failed to appear, thus the trial court declared them in default.
The Ruling of the Trial
Court
In its Decision dated P1,389,330 with 12% interest per annum,
computed
from the filing of the complaint, and attorney’s fees equivalent to 10% of the principal
obligation.[4]
The trial court dismissed both TPI’s complaint against petitioner and
petitioner’s cross-claim against SMCC for lack of basis.
In absolving petitioner from any liability, the trial court
held that TPI’s cause of action against petitioner under Article 1729 of the
Civil Code applies only to the amount petitioner owed SMCC for the pile driving
work. Since at the time TPI demanded payment from petitioner on
The liability of the defendant contractor J. Sta. Maria Construction, as well as Jaime T. Sta. Maria Jr., is settled. By preponderance of evidence, plaintiff demonstrates [sic] ineluctably that all the concrete piles ordered by the defendant J. Sta. Maria Construction were delivered and used in the building under construction. The defendant J. Sta. Maria benefited from the materials, as accordingly, it was paid by the defendant-owner of the building.
The claim of plaintiff Tendon
[Philippines, Inc.] against the defendant [JL] Investment is anchored on the
provision of Art. 1729 of the Civil Code of the
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 from the owner.
This article is subject to the provision[s] of special laws. x x x
It is readily apparent from the provision invoked that the owner of the materials has a cause of action against the owner of the building for materials furnished to the contractor only up to the amount owing from the owner to the contractor at the time the claim is made.
Equating the provision of law to the
evidence of the plaintiff, to prove the liability of the defendant-owner of the
building, it is undisputedly clear that at the time the claim or demand was
presented by plaintiff to the defendant JL Investment in December 1996, all the
materials supplied by it and used in the building by the defendant-contractor
had all been paid by the owner of the building JL Investment to the contractor,
J. Sta. Maria Construction. In fact, it
does not appear that the owner of the building is indebted at all to the
defendant-contractor. It is qui[te]
unfair, if not altogether in[i]quitous, for the defendant-owner of the building
to pay twice for the materials used in the building. In the absence of a clear showing that there
is still an amount due from the owner, JL Investment, to the defendant-contractors
representing the value of the materials used, the plaintiff, as owner of the
materials[] used in the building has no cause of action against the owner of
the building JL Investment. The logical
recourse of the owner of the material x x x would be against the contractor,
who in the first place ordered and purchase [sic] the materials. Put otherwise, the privity or tie is between
the owner of the materials and the contractor. But, considering that plaintiff
was compelled to litigate and incurred expenses to protect its interest, an
entitlement to a reasonable attorney’s fees is warranted.[5]
(Emphasis in the original)
TPI appealed to the Court of Appeals,
contending that the trial court erred in not holding petitioner solidarily
liable with SMCC and Sta. Maria.
SMCC and Sta. Maria also appealed.
However, for SMCC and Sta. Maria’s failure to file their appellants’ brief, the
Court of Appeals considered their appeal abandoned and dismissed it in the
Resolution of
The Ruling of the Court of
Appeals
In its Decision
of
Art. 1729 of the Civil Code indeed does not make any distinction whether such amount owing from the owner to the contractor pertains to a specific item of payment or account, particularly whether such amount owing to the contractor was intended for payment of the x x x materials supplied. The clear intendment of the law is to provide protection to the x x x furnisher of materials so that a restrictive interpretation of said provision as what the trial court had done, would undermine such legislative policy and objective.
x x x x
Of course, where the owner of the
building has fully paid the contractor, the former’s liability ceases. In this regard, defendant-appellee’s [JL
Investment] evidence showed that although the pile driving works was [sic] 100%
accomplished or completed, the overall Project accomplishment is [sic] not yet
fully executed as of P11,539,954.00” and by reason of
which, completion date of the Project was extended to January 6, 1997 as
evidenced by the “Addendum to Construction Agreement.” Such “financial assistance”, according to
appellant [TPI], constitutes advance payment to the contractor which under Art.
1729 shall not prejudice the claim of furnisher of materials such as herein
appellant [TPI]. Defendant-appellee JL
Investment & Development Corporation, on the other hand, contends that in
view of the “overpayment” to the
defendant contractor, J. Sta. Maria Construction Corporation, there is
no longer any such amount owing and due to said contractor, and hence,
appellant no longer has any cause of action against the defendant-appellee [JL
Investment], the owner of the building.
And yet, no evidence was presented by defendant-appellee [JL Investment]
showing that such advances or “financial assistance” in the amount stated in
the “Addendum to Construction Agreement” was actually paid by it. Exhibits “5”, “5-A” and “5-B” reflected only
the payment for the 7th Progress Billing on
Petitioner sought reconsideration but
the Court of Appeals denied its motion in the Resolution of
Hence, this petition.
Petitioner insists that it had fully
paid SMCC not only for the pile driving work but also for the entire project,
which SMCC allegedly abandoned “in 1996 or 1997.” Petitioner adds that it had
in fact overpaid SMCC because of advance payments SMCC received in “November
and December 1996.” Petitioner also contests the Court of Appeals’ finding that
it failed to prove its claim of full or over payment to SMCC. Alternatively,
petitioner prays that the Court grant its cross-claim against SMCC so it can
recover reimbursement for any amount it will pay TPI.
The Issues
The petition raises the following
issues:
(1) Whether
the Court of Appeals erred in holding petitioner solidarily liable with SMCC
and Sta. Maria to TPI for the unpaid balance under the contract between SMCC
and TPI, and, if in the negative,
(2) Whether
SMCC is liable to reimburse petitioner under the latter’s cross-claim.
The Ruling
of the Court
The petition is partly meritorious. Although petitioner is solidarily liable with SMCC and Sta. Maria to TPI for the balance under TPI’s contract with SMCC, petitioner has a right to reimbursement under its cross-claim against SMCC.
On the Owner’s Liability to Suppliers under Article 1729
Article 1729 of the Civil Code provides:
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 from the owner.
This article is subject to the provisions of
special laws. (Emphasis supplied)
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.”[7] 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.[8] 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.[9]
Here, petitioner
resists TPI’s suit on the ground that it had fully paid, if not overpaid, SMCC
at the time TPI demanded payment on
Petitioner is Entitled to Reimbursement
from SMCC under its Cross-claim
Petitioner’s solidary liability with
SMCC and Sta. Maria to TPI does not preclude petitioner’s right to demand reimbursement
for whatever amount it will pay TPI. This is only proper since SMCC contracted
TPI to supply the concrete piles. To hold otherwise is to sanction unjust
enrichment by the contractor at the expense of the owner. Although Article 1729
protects suppliers, it is no license to oppress owners. Thus, we grant
petitioner’s prayer for reimbursement under its cross-claim against SMCC.[10]
On the 12% rate of interest the trial court applied on the
principal obligation, this is proper only when the obligation consists of loans
or forbearance of money, in the absence of stipulation to the contrary.[11]
If, as here, the obligation is otherwise, the applicable rate is 6% per annum computed from the time of
extra-judicial or judicial demand. Upon the finality of this ruling, the entire
amount due shall earn interest at 12% per
annum until its satisfaction.[12]
WHEREFORE, we GRANT the petition in part. We AFFIRM the Decision dated
(1) We ORDER petitioner
JL Investment and Development, Inc. and respondents J. Sta. Maria Construction
Corporation and Jaime T. Sta. Maria, Jr. to pay solidarily respondent Tendon
Philippines, Inc. P1,389,330, with interest at 6% per annum computed from the time of the filing of respondent Tendon Philippines, Inc.’s
complaint, and attorney’s fees equivalent to 10% of the principal
obligation. Upon finality of this judgment, the entire obligation shall earn
interest at 12% per annum until its
satisfaction, and
(2) We GRANT
the cross-claim of petitioner
JL Investment and
Development, Inc. against respondent J. Sta. Maria Construction
Corporation. We ORDER
respondent J. Sta. Maria Construction Corporation to reimburse
petitioner JL
Investment and Development, Inc. any amount the latter will pay respondent
Tendon Philippines, Inc. under this judgment.
SO ORDERED.
ANTONIO T. CARPIO
Associate
Justice
WE CONCUR:
LEONARDO A. QUISUMBING
Associate Justice
Chairperson
CONCHITA CARPIO MORALES DANTE O. TINGA
Associate
Justice
Associate Justice
PRESBITERO J. VELASCO, JR.
Associate Justice
ATTESTATION
I attest that the conclusions in the above Decision had
been reached in consultation before the case was assigned to the writer of the
opinion of the Court’s Division.
LEONARDO A. QUISUMBING
Associate Justice
Chairperson
CERTIFICATION
Pursuant
to Section 13, Article VIII of the Constitution, and the Division Chairperson’s
Attestation, I certify that the conclusions in the above Decision had been
reached in consultation before the case was assigned to the writer of the
opinion of the Court’s Division.
REYNATO S. PUNO
Chief Justice
[1] Under Rule 45 of the 1997 Rules of Civil Procedure.
[2] Penned by Associate Justice
Martin S. Villarama, Jr. with Associate Justices Conrado M. Vasquez, Jr. and
Eliezer R. De los
[3] Petitioner and SMCC indicated in
the Agreement the project’s completion date on
[4] Rollo, p. 200. The dispositive portion of the trial court’s ruling provides:
WHEREFORE, judgment is hereby rendered in favor of the plaintiff Tendon Phils., Inc. and against J. Sta. Maria Construction Corporation and Jaime T. Sta. Maria, Jr. ordering the latter, in solidum, to pay the former the following sums of money, namely:
a) The sum of P1,389,330, in addition to 12% interest per annum
from the filing of the complaint until it shall have been fully paid;
b) 10% of the principal obligation, for and as reasonable attorney’s fees; [and]
c) The costs of the suit.
For lack of sufficient factual and legal basis, the complaint against the defendant JL Investment Development[, Inc.] as well as the cross-claim of the latter against the other defendants are all hereby DISMISSED.
[5]
[7]
[8] Velasco v. Court of Appeals, No. L-47544,
[9] See V A. Tolentino,
Commentaries and Jurisprudence on the Civil Code of the
[10] In its cross-claim, petitioner sought reimbursement only from SMCC.
[11] A forbearance, in usury law, is a “contractual
obligation of lender or creditor to refrain, during a given period of time,
from requiring the borrower or debtor to repay a loan or debt then due and
payable.” (Eastern Shipping Lines, Inc.
v. Court of Appeals, G.R. No.
97412, 12 July 1994, 234 SCRA 78, 94).
[12] Eastern Shipping Lines, Inc. v. Court of Appeals, supra.