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SECOND DIVISION

ANGEL V. TALAMPAS, JR., G.R. No. 170134

Petitioner,
Present:

CARPIO, J., Chairperson,

BRION,
- versus - DEL CASTILLO,
MENDOZA, and
JARDELEZA,* JJ.

MOLD EX REAL TY, INC., Promulgated:

x----~--------~--~--~----~--~~~~~~~~~~-------~--~-~~~~~~~~~~
DECISION

BRION, J.:

We resolve the petition for review on certiorari 1 assailing the June 27,
2005 decision2 and October 21, 2005 resolution3 of the Court of Appeals
(CA) in CA-G.R. CV No. 64715. The CA dismissed, for lack of cause of
action, the complaint4 for breach of contract and damages filed by Angel V.
Talampas, Jr. (petitioner) against Moldex Realty, Inc. (respondent).

The Facts

The petitioner is the owner and general manager of Angel V.

Talampas, Jr. Construction (AVTJ Construction), a business engaged in
general engineering and building. 5

Designated as Acting Member of the Second Division in lieu of Justice Marvic M.V.F. Leonen,
per Special Order No. 2056 dated June 10, 2015.
1
Under Rule 45 of the Rules of Court.
Rollo, pp. 42-64; penned by Associate Justice Perlita J. Tria Tirona and concurred in by Associate
Justices Delilah Vidallon-Magtolis and Jose C. Reyes, Jr.
3
Id. at 66.
4
Docketed as Civil Case No. Q-93-18183 before the Regional Trial Court (RTC), Branch 96,
Quezon City.
5

~
Id. at 68.
Decision 2 G.R. No. 170134

On December 16, 1992, the petitioner entered into a contract6 with the
respondent to develop a residential subdivision on a land owned by the
latter, located at Km. 41, Aguinaldo Highway, Cavite, and known as the
Metrogate Silang Estates.

The petitioner undertook to perform roadworks, earthworks and site-

grading,7 and to procure materials, labor, equipment, tools and facilities,8 for
the contract price of P10,500,000.00,9 to be paid by the respondent through
progress billings. The respondent made an initial down payment of
P500,000.00 at the start of the contract.10

Construction works on the Metrogate project started on January 14,

11
1993 and was projected to be completed by the petitioner within three
hundred (300) calendar days from this starting date.12

On May 14, 1993, Metrogate’s Project Manager, Engr. Honorio

‘Boidi’ Almeida, asked the petitioner to suspend construction work on the
site for one week due to a change in the project’s subdivision plan.13 The
suspension lasted for more than one week, leaving the petitioner’s personnel
and equipment idle at the site for three weeks. In a letter14 dated June 1,
1993, the petitioner inquired from Engr. Almeida whether the respondent
would still push through with the project.

On June 16, 1993, the petitioner received from the respondent’s Vice
President, Engr. Jose Po, an antedated April 23, 1993 letter15 that contained
the respondent’s decision to terminate the parties’ contract. The April 23,
1993 letter stated:

Gentlemen:

This has reference to our site development contract for METROGATE

SILANG ESTATES dated 16 December 1992.

Please be informed that we have decided to suspend implementation of the

site development works for the subject project. Consequently, we are
constrained to cause the termination of the abovecited contract
effective immediately.

We wish to stress that this development is mainly due to a business

decision. Please rest assured that you shall remain to be a partner in our
endeavors and that once we finally decide to resume development works,
you will be duly notified. (emphasis supplied)

6
Denominated as “Contract for Site Development Works at Metrogate Silang Estates.”
7
Paragraph 1, Contract.
8
Paragraph 2, Contract.
9
Paragraph 3, Contract.
10
Paragraph 4, Contract.
11
Rollo, p. 43.
12
Paragraph 6, Contract.
13
Rollo, p. 48.
14
Exhibit E for the Plaintiff, RTC records.
15
Exhibit G for the Plaintiff, RTC records.
Decision 3 G.R. No. 170134

The letter bore the signature of Engr. Almeida and gave the petitioner the
‘go signal’ to demobilize his equipment from the site.16

In a letter17 dated August 18, 1993, the petitioner demanded from the
respondent the payment of the following amounts: (a) P1,485,000.00 as
equipment rentals incurred from May 14, 1993 to June 16, 1993 the
period of suspension of construction works on the Metrogate project, and (b)
P2,100,000.00 or twenty percent (20%) of the P10,500,000.00 contract price
as cost of opportunity lost due to the respondent’s early termination of their
contract. The respondent received the letter on August 18, 1993,18 but
refused to heed the petitioner’s demands.

On November 5, 1993, the petitioner filed a complaint for breach of

contract and damages against the respondent before the RTC. He alleged
that the respondent committed the following acts: (1) breach of contract for
unilaterally terminating their agreement, and (2) fraud for failing to disclose
the Metrogate project’s lack of a conversion clearance certificate from the
Department of Agrarian Reform (DAR), which he claimed to be the real
reason why the respondent terminated their contract.

In a decision19 dated September 9, 1999, the RTC found the

respondent liable for breach of contract because the respondent’s reason for
termination, i.e., “project redesign,” was not a stipulated ground for the
unilateral termination under the parties’ contract.20 The RTC further found
the respondent liable for fraud for failing to disclose to the petitioner the
lack of a conversion clearance certificate for the Metrogate subdivision. The
RTC considered the conversion clearance to be a material consideration for
the petitioner in entering the contract with the respondent.21
16
Exhibits G-1 and G-2 for the Plaintiff, RTC records.
17
Exhibit I for the Plaintiff, RTC records.
18
Exhibit I-2 for the Plaintiff, RTC records.
19
Penned by Judge Lucas P. Bersamin (now Associate Justice of the Supreme Court); rollo, pp. 68-
84.
20
Paragraph 8.1 of the subject contract provides:

8.1 The OWNER may terminate this CONTRACT upon ten (10) days written notice to
the CONTRACTOR in the event of any default by the CONTRACTOR. It shall be
considered a default by the CONTRACTOR whenever he shall:
a) declare bankruptcy, become insolvent, dissolve the corporation, or assign its assets
for the benefit of his creditors;
b) disregard, violate or not comply with important provisions of the Plans and
Specifications or the OWNER’s instructions, or incur a delay of more than fifteen
percent (15%) in the prosecution of the work as evaluated against the work schedule
to be submitted by the CONTRACTOR; or
c) fail to provide a qualified superintendent, competent workmen, or materials or
equipment meeting the requirements of the Plans and Specifications.
xxxx
21
In finding fraud, the RTC held:

“As the owner/developer of the Silang project, the defendant (referring to the
respondent) was fully aware of the requirement for a conversion clearance from the DAR
on account of the land being tenanted and was obliged to satisfy the requirement prior to
starting the works on the project, or, if the clearance was not yet obtained, to reveal its
lack before contracting with the plaintiff (referring to the petitioner). It cannot be denied
that the conversion clearance was a material consideration for the contractor in land
development. Yet, the defendant did not disclose that lack to him during the negotiations
Decision 4 G.R. No. 170134

Consequently, the RTC ordered the respondent to pay: (a)

P1,485,000.00 as unpaid construction equipment rentals from May 14, 1993
to June 16, 1993; (b) P2,100,000.00 as unrealized profits; (c) P300,000.00 as
moral damages; (d) P150,000.00 as exemplary damages; (e) attorney’s fees
equivalent to ten percent (10%) of the sum total of items (a) and (b); and (f)
double costs of suit.22

On appeal, the CA reversed and set aside the RTC’s ruling and
dismissed the petitioner’s complaint for breach of contract for lack of cause
of action.23 The CA held:

The pieces of evidence presented and offered by the plaintiff-

appellee do not clearly prove that the subject contract was unilaterally
terminated by the defendant-appellant. While the trial court cited the letter
of defendant-appellant dated April 23, 1993 as an evidence of unilateral
rescission, said court however, failed to consider the letter of the plaintiff-
appellee dated June 15, 1993, showing that he agreed to terminate the
contract. Thus:

June 15, 1993.

ENGR. JOSE PO
Vice-President
Moldex Realty, Inc.
West Avenue, Q.C.

Subject: Earthwork and Preparation

Moldex Silang Estates
Silang, Cavite
Sir:

Please be informed that as of this writing, we have

not received your official letter regarding the
untimely termination of our contract with
you, due to reason that stoppage of work is
due to business decision.
In order for us to demobilize our personnel,
construction equipments (sic), we need your
official letter of termination (sic) soonest
possible time.

Thank you.

Very truly yours,

ANGEL V. TALAMPAS, JR.

General Manager

and at the time of the conclusion of the contract. More probably than not, this failure to
reveal was deliberate, with the defendant hoping to resolve the deficit before the
plaintiff’s completion of his contract. The defendant’s concealment unavoidably caused
serious prejudice to the plaintiff, for, in the first place, he would not have entered into the
contract had he known of the lack of clearance before. Thereby, the defendant was guilty
of fraud, because its failure to disclose facts when there is a duty to reveal them constitute
fraud.”21
22
Rollo, p. 84.
23
Supra note 2; Decision dated June 27, 2005.
Decision 5 G.R. No. 170134

This letter of June 15, 1993 of Angel Talampas, Jr. to Engr. Jose
Po, Sr., Vice-President of Moldex Realty, Inc., confirms that previous to
said date or specifically on May 21, 1993, Engr. Jose Po, Sr. met with Jose
Angel Talampas, the Project Manager of the plaintiff-appellee, to discuss
the possibility of either suspending or terminating the contract due to a
redesign of the project necessitated by the acquisition of a larger tract of
land adjacent to the original project. Engr. Talampas opted for the
termination of the contract instead of its suspension.

This letter was never considered by the court a quo.24 (emphasis

supplied)

The CA, likewise, dismissed the petitioner’s allegation of fraud, under

the following reasoning:

The alleged lack of conversion clearance does not in itself amount

to fraud. While the duty to seek conversion clearance from DAR is an
obligation of the defendant-appellant, failure to obtain the same at the time
of the execution of the contract would not convincingly show that the
plaintiff-appellee was defrauded. The omission to obtain conversion
clearance could be in good faith since the records show that it was
eventually obtained. Fraud must be established by clear and convincing
evidence. Mere preponderance of evidence is not enough. Besides, it
cannot be said by the plaintiff-appellee that the alleged lack of conversion
clearance was concealed by defendant-appellant from plaintiff-appellee.
Plaintiff-appellee had every opportunity to verify this before submitting
his bid. Plaintiff-appellee must sufficiently connect that such lack of
conversion clearance was the real reason for the termination of the
contract. Sadly, the records fail to show that he adequately established
that the failure of the defendant-appellant to seek conversion clearance of
the subject property was the real reason for the termination of the contract.
On the contrary, the June 15, 1993 letter of Angel V. Talampas admits that
the reason for the termination was “due to business decision.”25

The petitioner moved to reconsider the CA’s decision, but the

CA denied his motion in a resolution26 dated October 21, 2005. The
denial opened the way for the filing of the present petition for review on
certiorari with this Court.

The Petition

The petitioner raised the following issues:

1. Whether, as found by the trial court, the subject

development contract was unilaterally abrogated by respondent without
justifiable cause, or whether, as opined by the Court of Appeals, the
contract termination was upon the mutual agreement of the parties.

2. Whether, as found by the trial court, the lack of DAR

conversion clearance which was not disclosed to the petitioner prior to the
bidding and execution of the subject contract, was the true reason of the

24
Rollo, pp. 53-55.
25
Id. at 56
26
Supra note 3.
Decision 6 G.R. No. 170134

respondent in ordering stoppage of work and in eventually terminating the

subject contract, or whether, as opined by the Court of Appeals, the reason
for the contract termination was “due to business decision” of the
respondent.

3. Whether or not it was respondent’s responsibility prior to

the bidding or execution of the contract, to disclose to the petitioner, the
lack of conversion clearance certificate from DAR and/or its agrarian
problem; and if in the affirmative, whether such non-disclosure constitutes
bad faith or fraud on the part of respondent.

4. Whether, as concluded by the trial court, the subject

development contract was an integrated whole, not divisible contract, or
whether, as opined by the Court of Appeals, subject contract is a divisible
contract.

5. Whether or not petitioner is entitled to the damages

awarded to him by the trial court for breach of contract by respondent.27

In a resolution28 dated June 28, 2006, this Court gave due course to
the petition and required the parties to submit their respective memoranda.

The Case for the Respondent

The respondent argues that the petitioner is no longer entitled to the

payment of the amounts he demanded because he had already
agreed/consented to terminate their contract;29 that, in a meeting held on
May 21, 1993, the petitioner’s son, Engr. Jose Angel Talampas, the Project
Manager and Vice-President of AVTJ Construction, agreed, even opted, to
terminate their contract.30 The respondent posits that the petitioner’s consent
is confirmed by his request for an official letter of termination from the
respondent, as the petitioner would not have requested for such letter had he
not earlier agreed/consented to the termination.31

Moreover, the respondent argues that the petitioner is estopped to

claim further damages, as he had already been paid the amounts of: (a)
P297,090.43 representing the contractor’s unpaid actual work
accomplishment at the time of termination (paid on August 13, 1993); (b)
P109,551.00 representing unrecouped costs of equipment mobilization and
demobilization, and unrecouped payment of insurance bond (paid on
September 14, 1993); and (c) P209,606.56 representing the release of all
retention fees.32 The respondent contends that the petitioner, by accepting
these payments, ratified, if not consented to, the termination of their
contract.33

27
Rollo, pp. 17-18.
28
Id. at 166-167.
29
Id. at 229-232.
30
Id. at 225-226.
31
Id. at 230-231.
32
Id. at 226-227.
33
Id. at 234.
Decision 7 G.R. No. 170134

The respondent strongly denies the petitioner’s allegation of fraud and

maintains that the real reason for the termination of their contract was the
redesign of the Metrogate Silang Estates project, not the project’s lack of
conversion clearance from the DAR.34

The Court’s Ruling

The petitioner’s issues are largely factual in nature and are therefore
not the proper subjects of a Rule 45 petition.35 Specifically, the
determination of the existence of a breach of contract is a factual matter that
we do not review in a Rule 45 petition.36 But due to the conflicts in the
factual findings of the RTC and the CA, we see the need to re-examine the
facts and the parties’ evidence to fully resolve their present dispute.37

In an April 23, 1993 letter38 addressed to the petitioner, the respondent

declared that it was “constrained to cause the termination of the parties’
contract effective immediately” due to a “business decision,” but the
termination was not immediately implemented.

On May 14, 1993, the respondent, through Engr. Almeida, ordered the
suspension of construction work on the site, instead of terminating the
project in accordance with the respondent’s instructions in its (belatedly
received) April 23, 1993 letter to the petitioner.

34
Rollo, pp. 232-233.
35
Section 1, Rule 45 of the Rules of Court provides:
SECTION 1. Filing of petition with Supreme Court. – A party desiring
to appeal by certiorari from a judgment or final order or resolution of
the Court of Appeals xxx, may file with the Supreme Court a verified
petition for review on certiorari. The petition shall raise only
questions of law which must be distinctly set forth. (emphasis
supplied)
36
Omengan v. Philippine National Bank, G.R. No. 161319, January 23, 2007, 512 SCRA 305, 309.
37
In Development Bank of the Philippines v. Traders Royal Bank (G.R. No. 171982, August 18,
2010, 628 SCRA 404), the Court held:
“The jurisdiction of the Court in cases brought before it from the appellate court is
limited to reviewing errors of law, and findings of fact of the Court of Appeals are
conclusive upon the Court since it is not the Court’s function to analyze and weigh the
evidence all over again. Nevertheless, in several cases, the Court enumerated the
exceptions to the rule that factual findings of the Court of Appeals are binding on the
Court: (1) when the findings are grounded entirely on speculations, 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 that 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; (10) when the findings of fact are premised on the supposed
absence of evidence and contradicted by the evidence on record; or (11) when the Court
of Appeals manifestly overlooked certain relevant facts not disputed by the parties,
which, if properly considered, would justify a different conclusion.” (emphasis supplied)
38
Supra note 15.
Decision 8 G.R. No. 170134

The respondent alleged that, on May 21, 1993, its Vice-President

Engr. Po and Engr. Talampas of AVTJ Construction met to discuss the
possible termination of their contract or the suspension of construction
works on the Metrogate project. In this meeting, Engr. Talampas chose to
terminate their contract.

On June 1, 1993, the petitioner wrote Engr. Almeida to ask for the
confirmation of the Metrogate project’s status.

On June 10, 1993, the petitioner received from the respondent the
amount of P474,679.28 as payment for Progress Billing No. 339 (which
billing the petitioner requested in a letter40 to the respondent dated May 31,
1993).

On June 15, 1993, the petitioner wrote Engr. Po, informing the latter
that he had not yet received from the respondent the letter officially
terminating their contract.

On June 16, 1993, the petitioner received from the respondent a letter
dated April 23, 1993, expressing the respondent’s decision to terminate the
parties’ contract. The petitioner alleged that it was only then (June 16,
1993) that he was formally informed of the respondent’s decision to
terminate their contract.

On August 13, 1993, the petitioner received from the respondent the
amount of P297,090.43 as payment for earthworks and road base
preparations done on the Metrogate subdivision as of July 12, 1993
(Progress Billing No. 4).41

On August 18, 1993, the petitioner sent a demand letter to the

respondent for the payment of P1,485,000.00 for unpaid construction
equipment rentals from May 14, 1993 to June 16, 1993, and P2,100,000.00
as unrealized profits, among others.

Meanwhile, the petitioner received from the respondent the amount of

P209,606.56 for the release of all “retention fees”42 withheld by the
respondent from the petitioner’s billings.43

39
Exhibit 9-b for the Defendant, RTC records.
40
Exhibit 7 for the Defendant, RTC records.
41
Exhibits 9-c and 14 for the Defendant, RTC records.
42
Retention fee is the amount retained by the owner “when[ever] the contractor bills for his
accomplishment [and] xxx is a percentage of his accomplishment that the owner keeps so that the owner
can be protected from whatever damages incurred during the prosecution of the contract. (TSN , July 17,
1997, pp. 22-32)”
43
Exhibit 9-e for the Defendant indicates that the release of all retention fees was paid to the
petitioner on August 27, 1993. The respondent, in its memorandum to this Court, states that said amount
was paid to the petitioner on September 26, 1993. In any case, the payment for the release of all retention
fees was made to the petitioner between August 18, 1993, the date of the petitioner’s formal demand, and
November 5, 1993, the date the petitioner filed the complaint for breach of contract with the RTC.
Decision 9 G.R. No. 170134

On November 5, 1993, the petitioner filed a complaint for breach of

contract against the respondent. This is the root-complaint of the present
case.

The parties’ contract is the law between them

and must be complied with in good faith.

Contracts have the force of law between the parties and must be
complied with in good faith.44 A contracting party’s failure, without
legal reason, to comply with contract stipulations breaches their contract
and can be the basis for the award of damages to the other contracting
party.45

In the present case, we find that the respondent failed to comply

with its contractual stipulations on the unilateral termination when it
terminated their contract due to the redesign of the Metrogate Silang
Estates’ subdivision plan.

Paragraph 8 of the parties’ contract limits the instances when the

respondent (referred to as owner in the contract) or the petitioner (referred to
as contractor in the contract) may unilaterally terminate their agreement.
On the part of the owner, paragraph 8.1 of the contract specifically provides:

8.1. The OWNER may terminate this CONTRACT upon ten (10) days
written notice to the CONTRACTOR in the event of any default by
the CONTRACTOR. It shall be considered a default by the
CONTRACTOR whenever he shall:

a) declare bankruptcy, become insolvent, dissolve the

corporation, or assign its assets for the benefit of his
creditors;

b) disregard, violate or not comply with important

provisions of the Plans and Specifications or the
OWNER’s instructions, or incur a delay of more than
fifteen percent (15%) in the prosecution of the work as
evaluated against the work schedule to be submitted by
the CONTRACTOR; or

44
Panlilio v. Citibank, N.A., G.R. No. 156335, November 28, 2007, 539 SCRA 69, 82-83;
citing CIVIL CODE, Art. 1159.
45
In RCPI v. Verchez, et al., G.R. No. 164349, January 31, 2006, (citing FGU Insurance
Corporation v. G.P. Sarmiento Trucking Corporation, 435 Phil. 333, 341-342 (2002), the Court held:

“In culpa contractual x x x the mere proof of the existence of the contract and the failure
of its compliance justify, prima facie, a corresponding right of relief. The law,
recognizing the obligatory force of contracts, will not permit a party to be set free from
liability for any kind of misperformance of the contractual undertaking or a contravention
of the tenor thereof. A breach upon the contract confers upon the injured party a
valid cause for recovering that which may have been lost or suffered. xxx” (emphasis
supplied).
Decision 10 G.R. No. 170134

c) fail to provide a qualified superintendent, competent

workmen, or materials or equipment meeting the
requirements of the Plans and Specifications.

xxxx

The respondent could not have validly and unilaterally terminated its
contract with the petitioner, as the latter has not committed any of the
stipulated acts of default. In fact, the petitioner at that time was willing and
able to perform his obligations under their contract; he expressed this in his
June 1, 1993 letter to the respondent, which stated:

Dear Sir:

Please be advised that as per last meeting, you made mention that
works at Silang Estates, Cavite will be temporarily stopped for
reason/reasons of redesigning of the subdivision plan. Stoppage will only
be for one week and that we will be informed in writing of your decision.
It has been three weeks now, going a month that we have not received
your decision on the matter. Meantime, our timetable for the completion
of the work is hampered, considering also the good weather condition
prevailing in the area which is also a big factor for our early completion of
our contract with you.

Kindly inform us in writing regarding this matter, so that we can

act accordingly.46

Thus, the respondent’s termination of the subject contract violated the

parties’ agreement as the reason for the termination, i.e., the redesign of the
project’s subdivision plan, was not a stipulated cause for the unilateral
termination under Paragraph 8.1 of their contract.

The respondent failed to prove the petitioner’s consent,

express or implied, to the termination of the subject contract.

The respondent alleged that there had been mutual termination of the
parties’ contract during a meeting held between Engr. Po of Moldex Realty
Inc. and Engr. Talampas of AVTJ Construction on May 21, 1993. However,
this claim is not supported by evidence.

In the first place, the respondent failed to fully establish that a meeting
took place as alleged. Except for the self-serving testimony of Engr. Po
that the May 21, 1993 meeting took place, the respondent presented no other
evidence to prove that Engr. Po and Engr. Talampas met on that date to
discuss the fate of their contract. No document or record the minutes of
their May 21, 1993 meeting appeared to have been made despite the
importance of their alleged discussion. The questions that this evidentiary
gap raised cannot but be resolved against the respondent.

46
Supra note 14.
Decision 11 G.R. No. 170134

Even assuming that the May 21, 1993 meeting between Engr. Po and
Engr. Talampas did indeed take place, we cannot discern from the
developments the petitioner’s claimed agreement or consent to the
termination of the construction contract.

The respondent contended that the petitioner’s request for an official

letter of termination was proof that the latter consented to the termination of
their contract. We disagree with this view. The request for an official letter
of termination does not necessarily mean consent to the termination; by
itself, the request for an official letter of termination does not really signify
an agreement; it was nothing more than a request for a final decision from
the respondent.

A close reading of petitioner’s June 15, 1993 letter shows that the
petitioner’s intent was solely to confirm whether the respondent would still
push through with its decision to terminate the contract. The petitioner’s
June 15, 1993 letter to the respondent stated:

Sir:
Please be informed that as of this writing, we have not received
your official letter regarding the untimely termination of our contract with
you, due to reason that stoppage of work is due to business decision.
In order for us to demobilize our personnel, construction
equipments, we need your official letter of termination soonest possible
time.
Thank you.

To our mind, the petitioner fully disclosed the intent behind his letter and it
was not consent. Thus, we find it erroneous to conclude, based on this letter,
that the petitioner had consented to the termination of the construction
contract.

The respondent also contended that the petitioner ratified the

termination of their contract by accepting payments for progress billings,
costs of equipment mobilization/demobilization, refund of insurance bond
payments, and the release of retention fees. However, we do not see the
petitioner’s receipt of these payments to be acts of ratification or consent to
the contract’s termination.

Consent is manifested by the meeting of the offer and the acceptance

upon the thing and the cause which are to constitute the contract.47 The offer
must be certain, and the acceptance, whether express or implied, must be
absolute.48 An acceptance is considered absolute and unqualified when it is

47
Article 1319, Civil Code.
48
Articles 1319 and 1320, Civil Code.
Decision 12 G.R. No. 170134

identical in all respects with that of the offer so as to produce consent or a

meeting of the minds.49

We find no such meeting of the minds between the parties on the

matter of termination because the petitioner’s acceptance of the
respondent’s offer to terminate was not absolute.

To terminate their contract, the respondent offered to pay the

petitioner billings for accomplished works, unrecouped costs of equipment
mobilization and demobilization, unrecouped payment of insurance bond,
and the release of all retention fees ― payments that the petitioner accepted
or received.

But despite receipt of payments, no absolute acceptance of the

respondent’s offer took place because the petitioner still demanded the
payment of equipment rentals, cost of opportunity lost, among others. In
fact, the payments received were for finished or delivered works and for
expenses incurred for the respondent’s account. By making the additional
demands, the petitioner effectively made a qualified acceptance or a counter-
offer,50 which the respondent did not accept. Under these circumstances,
we see no full consent.

The petitioner is entitled to the payment of:

(a) equipment rentals during the period of work suspension, and
(b) cost of opportunity lost.

A. On equipment rentals incurred during the suspension of construction

works

The respondent does not deny that the petitioner’s equipment was
idled from May 14, 1993 to June 16, 1993, but refused to pay the petitioner
equipment rentals because the idling was allegedly due to the petitioner’s
fault; the respondent posits that the petitioner should have demobilized his
equipment as soon as the latter gave his consent to terminate their contract.
Also, it questioned the petitioner’s use of ACEL51 rates in the computation
of the accrued rent.

49
Traders Royal Bank v. Cuison Lumber Co., Inc., G.R. No. 174286, June 5, 2009, 588 SCRA 690,
701, 703.
50
In Manila Metal Container Corporation v. Philippine National Bank, G.R. No. 166862,
December 20, 2006, 511 SCRA 444, 465-466, the Court ruled:
A qualified acceptance or one that involves a new proposal constitutes a counter-
offer and a rejection of the original offer. A counter-offer is considered in law, a rejection
of the original offer and an attempt to end the negotiation between the parties on a
different basis. Consequently, when something is desired which is not exactly what is
proposed in the offer, such acceptance is not sufficient to guarantee consent because
any modification or variation from the terms of the offer annuls the offer. The
acceptance must be identical in all respects with that of the offer so as to produce consent
or meeting of the minds. (emphasis supplied).
51
The Associated Construction Equipment Lessors, Inc. (ACEL) introduced the system of
equipment leasing which is accepted as the best possible alternative to acquiring heavy equipment for
immediate use, where outright purchase may not be possible because of the huge capital outlay involved.
Decision 13 G.R. No. 170134

The petitioner cannot be faulted for the idling of his equipment on the
project site. First and foremost, the order to suspend the construction work
on May 14, 1993 came from the respondent. Second, the suspension of
construction works was supposedly temporary; thus, the petitioner’s
equipment were placed on standby at the site. Third, it was only on June 16,
1993, that the respondent gave the final word and formal authority for the
demobilization of the petitioner’s equipment.

Hence, even assuming that the petitioner had earlier given his consent,
such consent was for the suspension of the contract, not for its termination.
The petitioner could not have properly demobilized his equipment earlier
than June 16, 1993 without an official and definite letter of termination from
the respondent.

The petitioner undeniably lost expected profits when he placed the

rented equipment on idle since progress billings under the contract were to
be paid by the respondent based on the petitioner’s actual work
accomplished. Due to the uncertainty of the end date of the suspension
(initially represented to be only for one week but which lasted for three
weeks), the petitioner was compelled to keep his personnel and his rented
equipment on standby at the site, and was prevented from renting out his
own equipment to others.

Under these facts, the petitioner should be entitled to the

payment of the rent for his equipment amounting to P1,485,000.00,
incurred from May 14, 1993 to June 16, 1993.

We uphold the amount of rent arrived at by the petitioner as the use of

prevailing ACEL rates in the computation of the rent was reasonable based
on industry standards.

B. On cost of opportunity lost

Article 2200 of the Civil Code provides that indemnification for

damages shall include, not only the value of the loss suffered, but also the
profits that the obligee failed to obtain. On this basis, we find the
petitioner entitled to the payment for the opportunity lost because of the
respondent’s unilateral termination of the parties’ contract.

Significantly, the respondent itself impliedly accepted this legal

consequence by contending that the cost of opportunity lost should not be
based on the total contract price of P10,500,000.00 as the petitioner had
already been compensated for a part of the construction work done.

We find merit in the respondent’s contention that the basis of the cost
of opportunity lost should not be the total contract price, as the ‘cost of

ACEL aimed for the standardization of rental rates covering all ACEL members who have the same
equipment. See http://www.acel.com.ph/Page.aspx?id=71&pid=54, last accessed May 4, 2015.
Decision 14 G.R. No. 170134

opportunity lost’ must represent only the profits that the petitioner failed to
obtain due to the contract’s early termination. Thus, from the total contract
price, the amounts paid to the petitioner for work accomplished must be
subtracted, including the P500,000.00 down payment that the respondent
gave at the start of the contract; the difference would be the basis for
determining the cost of opportunity lost.

On record, the petitioner received the following amounts for work

accomplished: (a) P292,682.90, paid by the respondent on March 10, 1993;
(b) P319,922.32, paid on May 14, 1993; (c) P474,679.28, paid on June 10,
1993; and (d) P297,090.43, paid on August 13, 1993. By subtracting these
amounts and the P500,000.00 down payment from the total contract price of
P10,500,000.00, we arrive at the amount of P8,615,625.07, which represents
the petitioner’s unrealized gross earnings from the contract.

The twenty percent (20%) rate of cost of opportunity lost is, to

our mind, reasonable under the circumstances, considering that one hundred
fifty (150) days had lapsed (out of the three hundred (300) days-completion
period under the contract) at the time the petitioner received the respondent’s
letter confirming the termination of their contract on June 16, 1993.

In these lights, we award the petitioner the amount of

P1,723,125.01 (equivalent of 20% of P8,615,625.07) as cost of opportunity
lost.

Awards of moral and exemplary damages,

and attorney’s fees are unwarranted
due to the absence of fraud and bad faith
on the part of the respondent.

The petitioner alleges that the respondent deliberately failed to inform

him of the Metrogate project’s lack of a conversion clearance from the DAR,
and that the non-disclosure of this fact amounted to fraud: he would not
have contracted with the respondent had he known beforehand of the
project’s lack of a conversion clearance.

The petitioner presented evidence to confirm that the respondent

actually failed to secure a conversion clearance before it entered into a
contract with the petitioner for the development of the Metrogate Silang
Estates. However, nothing in the evidence showed that the respondent was
under any legal or contractual obligation to disclose the project’s conversion
clearance status to the petitioner, or that the presence of a conversion
clearance was a consideration for the petitioner’s entry into the contract
with the respondent.

Article 1339 of the Civil Code provides that “failure to disclose facts,
when there is a duty to reveal them, as when the parties are bound by
confidential relations, constitutes fraud.” Otherwise stated, the innocent
Decision 15 G.R. No. 170134

non-disclosure of facts, when no duty to reveal them exists, does not amount
to fraud.

We cannot award moral and exemplary damages to the petitioner in

the absence of fraud on the respondent’s part. To recover moral damages in
an action for breach of contract, the breach must be palpably wanton,
reckless, malicious, in bad faith, oppressive or abusive.52 In the same
manner, to warrant the award of exemplary damages, the wrongful act must
be accompanied by bad faith, such as when the guilty party acted in a
wanton, fraudulent, reckless or malevolent manner.53

We cannot also award attorney’s fees to the petitioner. Attorney’s fees

are not awarded every time a party wins a suit.54 Attorney’s fees cannot be
awarded even if a claimant is compelled to litigate or to incur expenses to
protect his rights due to the defendant’s act or omission,55 where no
sufficient showing of bad faith exists; a party’s persistence based solely on
its erroneous conviction of the righteousness of his cause, does not
necessarily amount to bad faith.56 In the present case, the respondent was
not shown to have acted in bad faith in appealing and zealously pursuing its
case. Under the circumstances, it was merely protecting its interests.

WHEREFORE, premises considered, we GRANT the appeal and

REVERSE and SET ASIDE the decision dated June 27, 2005, and
resolution dated October 21, 2005, of the Court of Appeals in CA-G.R. CV
No. 64715.

52
Magat v. Court of Appeals, G.R. No. 124221, August 4, 2000; Far East Bank & Trust Company v.
Court of Appeals, 311 Phil. 783 (1995).
53
Cervantes v. Court of Appeals, 304 SCRA 25, 33 (1999).
54
ABS-CBN Broadcasting Corporation v. Court of Appeals, 361 Phil. 499, 529 (1999).
55
Article 2208 of the Civil Code provides:
ART. 2208. In the absence of stipulation, attorney’s fees and expenses of litigation, other
than judicial costs, cannot be recovered, except:
(1) When exemplary damages are awarded;
(2) When the defendant’s act or omission has compelled the plaintiff to
litigate with third persons or to incur expenses to protect his
interest;
(3) In criminal cases of malicious prosecution against the plaintiff;
(4) In case of a clearly unfounded civil action or proceeding against
the plaintiff;
(5) Where the defendant acted in gross and evident bad faith in
refusing to satisfy the plaintiff’s plainly valid, just and demandable
claim;
(6) In actions for legal support;
(7) In actions for the recovery of wages of household helpers,
labourers and skilled workers;
(8) In actions for indemnity under workmen’s compensation and
employer’s liability laws;
(9) In a separate civil action to recover civil liability arising from a
crime;
(10) When at least double judicial costs are awarded;
(11) In any other case where the court deems it just and equitable that
attorney’s fees and expenses of litigation should be recovered.

In all cases, the attorney’s fees and expenses of litigation must

be reasonable. (emphasis supplied)
56
See note 54, citing Gonzales v. National Housing Corp., 92 SCRA 786, 792 (1979); Servicewide
Specialists, Inc. v. Court of Appeals, 256 SCRA 649 (1996).
Decision 16 G.R. No. 170134

Accordingly, we ORDER the respondent to pay the petitioner the

following amounts of: (a) Pl,485,000.00, for the rent of petitioner's
equipment from May 14, 1993 to June 16, 1993, and (b) Pl,723,125.01, as
cost of opportunity lost. The sum of these amounts shall earn legal interest
of six percent (6%) per annum from the finality of this Decision until full
payment.

No pronouncement as to costs.

SO ORDERED.

aMPfifki-
Associate Justice

WE CONCUR:

ANTONIO T. CARPIO
Associate Justice
Chairperson

~~Ro Associate Justice

JOSE CA~"ENDOZA
Ass~i;~J~:tice

Associate Justice

ATTEST A TI ON

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.

ANTONIO T. CARPIO
Associate Justice
Chairperson, Second Division
Decision 17 G.R. No. 170134

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.

MARIA LOURDES P.A. SERENO

Chief Justice