The President of the Church of Jesus Christ of Latter Day Saints v. BTL Construction Corporation G.R. No. 176439, February 26, 2007

FACTS:

1.      COJCOLDS and BTL entered into a Construction Contract for the latter’s construction of the former’s meeting house facility. However, due to bad weather conditions, power failures, and revisions in the construction, the completion date of the Medina Project was extended.

2.      BTL informed COJCOLDS that it suffered financial losses from another project and thereby requested that it be allowed to: (a) bill COJCOLDS based on 95% and 100% completion of the Medina Project; and (b) execute deeds of assignment in favor of its suppliers so that they may collect any eventual payments directly from COJCOLDS. COJCOLDS granted said request which BTL, in turn, acknowledged.

3.      BTL ceased its operations in the Medina Project because of its lack of funds to advance the cost of labor necessary to complete the said project, as well as the supervening increase in the prices of materials and other items for construction. Consequently, COJCOLDS terminated its Contract with BTL on August 17, 2001 and, thereafter, engaged the services of another contractor, Vigor Construction (Vigor), to complete the Medina Project.

4.      BTL filed a complaint against COJCOLDS for damages

ISSUE: What are their liabilities to each other?

HELD:

I. Liabilities of COJCOLDS to BTL.

a. The 10% Retention Money and the Unpaid Balance of the Contract Price: Because the 10% retention money should not be treated as a separate and distinct liability of COJCOLDS to BTL as it merely forms part of the contract price. While COJCOLDS is bound to eventually return to BTL the amount of P1,248,179.87 as retention money, the said amount should be automatically deducted from BTL’s outstanding billings. Ultimately, COJCOLDS’s total liability to BTL should only be pegged at P1,612,017.74, representing the unpaid balance of 98% of the contract price, inclusive of the 10% retention money.

II. Liabilities of BTL to COJCOLDS.

a. Liquidated Damages Due to Delay: BTL’s liability to COJCOLDS for liquidated damages is a result of its delay in the performance of its obligations under the Contract.

b. Cost Overrun: BTL should therefore reimburse COJCOLDS the said cost which the latter incurred essentially because of BTL’s failure to complete the project as agreed upon.

c. Overpayments: Therefore obliged to return the same to COJCOLDS pursuant to Article 2154 of the Civil Code which states that "[i]f something is received when there is no right to demand it, and it was unduly delivered through mistake, the obligation to return it arises."

III. Mutual Liabilities: Attorney’s Fees- NONE , because neither party was shown to have acted in bad faith in pursuing their respective claims against each other. The existence of bad faith is negated by the fact that the CIAC, the CA, and the Court have all found the parties’ original claims to be partially meritorious.