October 2006 - Philippine Supreme Court Decisions/Resolutions

Philippine Supreme Court Jurisprudence

G.R. No. 163915 - ASIAN CONSTRUCTION AND DEVELOPMENT CORPORATION v. COMFAC CORPORATION

THIRD DIVISION

[G.R. NO. 163915 : October 12, 2006]

ASIAN CONSTRUCTION AND DEVELOPMENT CORPORATION, Petitioner, v. COMFAC CORPORATION, Respondent.

D E C I S I O N

QUISUMBING, J.:

This Petition for Review assails the Decision¹ dated March 12, 2003 and the Resolution dated June 2, 2004 of the Court of Appeals in CA-G.R. CV No. 69123, which affirmed with modification the trial court's decision and denied the motion for reconsideration, respectively.

The antecedent facts of the case are as follows:

Petitioner Asian Construction and Development Corporation (AsiaKonstruct) awarded respondent Comfac Corporation a contract for raised flooring system for the PNOC-EDC, LGPP HVAC Marshalling Station Building, in Ormoc, Leyte, and another contract for airconditioning and ventilation system for the PNOC-EDC Marshalling and Relay Building of Leyte HVAC Switchyard Project, costing P1,698,635 and P4,000,000, respectively. On November 28, 1996, Comfac turned over the project to PNOC, and issued the Certificates of Completion, which were confirmed by Rene T. Soriao, Group Manager of ASIAKONSTRUCT.

On May 5, 8, and 11, 1998, Comfac sent AsiaKonstruct demand letters for the unpaid balance of P1,969,863.50. But, AsiaKonstruct failed to pay the amount, prompting Comfac to file a complaint for collection with the Regional Trial Court of Makati City. It also prayed for attorney's fees equivalent to 20% of the amount demanded, plus P2,000 attorney's fee per appearance, and exemplary damages of P500,000.

In its defense, AsiaKonstruct alleged that Comfac had no cause of action; Comfac's claim had been paid, waived, abandoned and/or extinguished; the Certificates of Completion were unauthorized; the projects were not completed; no demand for payment was made; the amount claimed was not yet due; the amount claimed was bloated because ASIAKONSTRUCT did not receive all the labor, materials, tools, equipment, and the technical expertise that were being charged; Comfac did not deduct the withholding taxes, material charges and the payments made; and it did not agree to pay interests, penalty, attorney's fees and court costs.

After the admission of Comfac's evidence, the trial court, in an order dated November 23, 1999, deemed AsiaKonstruct to have waived its right to present its evidence due to its counsel's continued absence during trial despite notice. Thereafter, judgment was rendered as follows:

Wherefore, in view of the foregoing, judgment is hereby rendered in favor of the plaintiff and against the defendant, ordering the latter to pay plaintiff as follows:

1. the amount of P1,969,863.[50] as actual damages plus interest at fourteen percent (14%) per annum and penalty at twenty-five [percent] (25%) per annum from January 2, 1998, date of the final statement of account, until fully paid;

2. the amount of P50,000.00 as attorney's fees; andcralawlibrary

3. costs and expenses of litigation.

SO ORDERED.²

AsiaKonstruct elevated the case to the Court of Appeals on the following grounds: (a) the invoices, Exhibits "K" to "O", and other documentary exhibits were not properly proved and authenticated; (b) the full completion of the works on the project was not proven; (c) the 10% retention and 1% expanded withholding tax was not deducted from the alleged balance of P 1,969,863.50; (d) the parties did not expressly stipulate in writing the interest and penalties; (e) the imposition of the 14% interest plus 25% penalty was unconscionable; and (f) the award of attorney's fees was not proper in the absence of proof of bad faith.³

The Court of Appeals upheld the admissibility of the invoices, Exhibits "K" to "O", as these were properly presented by Comfac during the trial and not objected to by AsiaKonstruct. Moreover, the appellate court held that it was enough that the invoices were identified during the trial since the subject of the inquiry was not their contents but a fact to which these were merely collateral or incidental. The appellate court also upheld (1) the validity of the Certificates of Completion as these were confirmed and signed by the representative of the project owner; (2) the correctness of Comfac's accounting with respect to the deduction of the 10% retention money and withholding tax; and (3) the award of attorney's fees. The appellate court ruled, however, that in the absence of stipulation, the proper interest payable should only be 6%. The decretal portion of the decision reads:

WHEREFORE, IN VIEW OF THE FOREGOING, the decision appealed from is hereby AFFIRMED, with the following modifications:

a) a six percent (6%) legal interest per annum on the amount of P1,969,863.50 as damages is imposed in lieu of the 14% interest and penalty of 25%; andcralawlibrary

b) the 1% withholding tax should be deducted from the balance of each of the contracts.

SO ORDERED.⁴

AsiaKonstruct moved for reconsideration but it was denied. Now before us, it challenges the conclusion reached by the Court of Appeals and raises the following issues for resolution:

I. WHETHER OR NOT EXHIBITS "K" TO "O" WERE PROPERLY AUTHENTICATED IN ACCORDANCE WITH THE RULES OF COURT;

II. WHETHER OR NOT RESPONDENT WAS ABLE TO PROVE COMPLETION OF THE PROJECT;

III. WHETHER OR NOT RESPONDENT IS ENTITLED TO ATTORNEY'S FEES; AND

IV. WHETHER OR NOT THE 6% - INTEREST SHOULD BE BASED ON THE BALANCE AFTER DEDUCTING THE 1% - WITHHOLDING TAX.⁵

We will discuss the first two issues jointly.

AsiaKonstruct maintains that the invoices were not properly authenticated as Comfac's witness, Mrs. Erlinda Rolda, merely testified on checking the invoices and did not identify the signatories to these. It reiterates its assertion that the project was not yet complete and that the Certificates of Completion were unauthorized.

On the other hand, Comfac contends that the invoices were deemed admitted as AsiaKonstruct did not object to them. It also argues that its witnesses duly testified to the completion of the projects.

The rule is that failure to object to the offered evidence renders it admissible,⁶ and the court cannot, on its own, disregard such evidence. We note that AsiaKonstruct's counsel of record before the trial court, Atty. Bernard Dy, who actively participated in the initial stages of the case stopped attending the hearings when Comfac was about to end its presentation. Thus, AsiaKonstruct could not object to Comfac's offer of evidence nor present evidence in its defense; ASIAKONSTRUCT was deemed by the trial court to have waived its chance to do so.

Note also that when a party desires the court to reject the evidence offered, it must so state in the form of a timely objection and it cannot raise the objection to the evidence for the first time on appeal.⁷ Because of a party's failure to timely object, the evidence becomes part of the evidence in the case. Thereafter, all the parties are considered bound by any outcome arising from the offer of evidence properly presented.⁸

ASIAKONSTRUCT also questions the authenticity of the Certificates of Completion. However, it has been uniformly held that findings of facts by the trial court, particularly when affirmed by the Court of Appeals, are binding upon this Court.⁹ The appellate court's conclusion on the authenticity of the Certificates of Completion binds us now.

On the issue of attorney's fees, AsiaKonstruct contends that attorney's fees, being in the nature of actual damages, must be proved by sufficient evidence. It argues that since Comfac failed to present proof of actual damage, there is no factual justification for the award. Comfac, on the other hand, counters that if AsiaKonstruct had paid its claim, it would have not resorted to litigation, hence the award is justified.

We agree with AsiaKonstruct on the matter of attorney's fees. Attorney's fees are not to be awarded every time a party wins a suit.¹⁰ Article 2208¹¹ of the Civil Code demands factual, legal and equitable justifications for the award of attorney's fees and its basis cannot be left to speculation and conjecture.¹² Attorney's fee is allowed when a claimant is compelled to litigate with third persons or incur expenses to protect his interest by reason of an unjustified act or omission on the part of the party from whom it is sought. Indeed, Comfac was forced to litigate to collect payments, but due to lack of findings on the amount to be awarded, and since there is no sufficient showing of bad faith in AsiaKonstruct's refusal to pay, other than an erroneous assertion of the righteousness of its cause, the attorney's fee cannot be awarded against it.¹³

Anent the legal interest, AsiaKonstruct claims that the 6% legal interest should be based on the net amount after deducting the 1% withholding tax since the amount withheld is not due to Comfac. It submits that only P1,912,877.15, not P1,969,863.50, is subject to the 6% legal interest.

In its Brief filed with the Court of Appeals, Comfac alleged that the 1% withholding tax was not deducted from the payments of AsiaKonstruct because the latter had not presented the certificate of creditable withholding-tax-at-source required by the Bureau of Internal Revenue (BIR). Although this may be so, it does not mean that the withholding tax could not be deducted properly. The deduction of the 1% withholding tax from the balance payable is without qualification in the parties' contract.¹⁴ AsiaKonstruct is correct that it is only liable to pay the balance of P1,912,877.15, not the full amount of P1,969,863.50, and to remit to the BIR the P56,986.35 it had withheld, the computation of which is shown below.

First contract:	P1,698,635 x 1% withholding tax	=	P 16,986.35
Second contract:	P4,000,000 x 1% withholding tax	=	P 40,000.00
Total amount withheld		=	P 56,986.35

Thereafter, ASIAKONSTRUCT should provide Comfac with the certificate of creditable withholding-tax-at-source. Conformably, the 6% legal interest should be based on the balance payable under the contracts which is P1,912,877.15.

WHEREFORE, the petition is PARTIALLY GRANTED. The Decision dated March 12, 2003 and the Resolution dated June 2, 2004 of the Court of Appeals in CA-G.R. CV No. 69123 are MODIFIED as follows:

1. Asian Construction and Development Corporation (ASIAKONSTRUCT) is ordered to PAY Comfac Corporation the amount of P1,912,877.15 as the balance payable under the contracts with legal interest of 6% per annum from January 2, 1998, the date of the final statement of account, until fully paid;

2. Asian Construction and Development Corporation (ASIAKONSTRUCT) is further ordered to FURNISH COMFAC Corporation with the certificate of creditable withholding-tax-at-source for the amount of P56,986.35; andcralawlibrary

3. The award of attorney's fees and the costs of litigation is DELETED.

SO ORDERED.

Carpio, Carpio Morales, Tinga, and Velasco, Jr., JJ., concur.

Endnotes:

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¹ Rollo, pp 24-38.

² Records, p. 255.

³ Rollo, pp. 72-84.

⁴ Id. at 38.

⁵ Id. at 13.

⁶ Tison v. Court of Appeals, G.R. No. 121027, July 31, 1997, 276 SCRA 582, 596-597.

⁷ Arwood Industries, Inc. v. D.M. Consunji, Inc., G.R. No. 142277, December 11, 2002, 394 SCRA 11, 18.

⁸ Id. at 19.

⁹ Lamis v. Ong, G.R. No. 148923, August 11, 2005, 466 SCRA 510, 517.

¹⁰ Pajuyo v. Court of Appeals, G.R. No. 146364, June 3, 2004, 430 SCRA 492, 524.

¹¹ 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, laborers 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.

¹² Pimentel v. Court of Appeals, G.R. No. 117422, May 12, 1999, 307 SCRA 38, 45.

¹³ Servicewide Specialist, Inc. v. Court of Appeals, G.R. No. 110597, May 8, 1996, 256 SCRA 649, 655.

¹⁴ Records, p. 18.

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