498 Phil. 90
CHICO-NAZARIO, J.:
Also in the aforementioned agreement, the subcontractor's obligations are defined in its Article II, to wit:ARTICLE I
DOCUMENTS COMPRISING THE CONTRACT
The following documents are hereby incorporated and made part of this Contract as though fully written out and set forth herein insofar as they are not inconsistent with the terms thereof:The documents mentioned above shall collectively be referred to as "Contract Documents."[3]
- National Power Corporation's Specification No. Sp80DLc – 502
- Any and all plans, drawings, and schedules prepared by National Power Corporation.
- SUB-CONTRACTOR'S proposal dated March 8, 1982.
SUB-CONTRACTOR shall, in accordance with the provisions of this Contract and Contract Documents, fully and faithfully furnish all labor, tools, equipment and necessary materials (except NPC supplied) and proceed to completely perform the Erection and Installation of the 69 KV, 3 Phases Transmission Lines (Schedule II) under the 7th Power Loan.In the course of the construction, the NPC granted ROMAGO a Contract Price Adjustment (CPA) amounting to P250,778.65.
SUB-CONTRACTOR shall commence the work starting March 23, 1982 and shall complete the same within two hundred forty (240) calendar days plus any extension of time duly granted by National Power Corporation under the provisions of the Contract Documents.
Except as otherwise provided for herein, all provisions of the National Power Corporation's Specifications No. Sp80DLc-502, with reference to obligations, responsibilities of Contractor thereunder are hereby made applicable to the SUB-CONTRACTOR under this Contract.[4]
GP-08 CONTRACT PRICE ADJUSTMENTWhen the project was completed, there appeared to be an outstanding balance due to BICC Construction from ROMAGO, part of which was the former's share in the CPA amounting to 70% of the NPC-ROMAGO contract or P175,545.05.
Adjustment of contract prices will be made should any or both of the following conditions occur as embodied in P.D. No. 454 as amended by PD No. 459.
(a) If during the effectivity of the contract, the cost of labor, materials, equipment rentals and supplies for construction should increase or decrease due to the direct acts of the Philippine Government. The increase of prices of gasoline and other fuel oils, and of cement shall be considered as direct acts of the Philippine Government.
(b) If during the effectivity of the contract, the costs of labor, equipment rentals, construction materials and supplies used in the project should cause the sum total of the prices of bid items to increase or decrease by more than five percent (5%) compared with the total contract price.
The increased amount in the contract price shall be determined by application of appropriate official indices, complied and issued by the Central Bank of the Philippines.
The additive or deductive adjustment shall be added or deducted from the unit prices every six (6) months beginning from the date of bidding.[6]
1. Whether or not plaintiffs, as sub-contractors of the projects mentioned in Exhibit C (i.e., NPC-ROMAGO contract)are entitled to the price cost adjustment under said contract obtained by the defendant from the NPC; andOn 29 June 1990, the trial court rendered its decision, the dispositive portion of which reads:
2. Whether or not all obligations and/or indebtedness of the defendant to the plaintiffs were already paid and/or released upon the execution of Mariano Cac of the defendant's Exh. A" (sic; it should be Exh. 4).
WHEREFORE, in view of the foregoing considerations, judgment is hereby rendered:From the foregoing decision, defendant Romago filed a notice of appeal[8] on 26 July 1990.Costs further taxed against the defendant.[7]
- Declaring that the venue of this case could be before this Court at the option of the plaintiffs;
- Declaring that all contract price adjustments (CPA) under contract No. Sp 80DLc-502-(b) of the NPC inured to the benefit of the plaintiffs and not to the defendant;
- Ordering the defendant to pay the plaintiffs said CPA in the amount of P250,778.65 excluding therefrom any tax lawfully paid by the defendant to the Philippine Government supported by authentic official receipts;
- Ordering the defendant to pay interest on said amount at the legal rate from August 12, 1983 until fully paid; and
- Ordering the defendant to pay the plaintiffs the sum of P10,000.00 as attorney's fees.
WHEREFORE, with the modification that appellant is hereby ordered to pay the appellees the sum of P175,545.05 representing 70% of the total contract price adjustment of P250,778.65, with interest thereon at the legal rate from August 12, 1983 until fully paid but deducting therefrom any lawful tax appellant may have paid the government, the decision appealed from is hereby AFFIRMED in all other respects and the instant appeal DISMISSED.The Issues
With costs against appellant.[10]
The Court's RulingI.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN ITS INTERPRETATION OF THE SUB-CONTRACT IN RELATION TO NATIONAL POWER CORPORATION'S (NPC) "PLANS AND SPECIFICATION" . . . BY FINDING THAT THE CONTRACT PRICE ADJUSTMENT (CPA) OBTAINED BY PETITIONER INURES TO THE BENEFIT OF PRIVATE RESPONDENTS;II.
WHETHER OR NOT THE HONORABLE COURT ERRED WHEN IT APPLIED THE PRINCIPLE OF EQUITY TO JUSTIFY PAYMENT TO PRIVATE RESPONDENTS OF THE CONTRACT PRICE ADJUSTMENT (CPA) WHEN THE CLEAR TERMS OF THE SUBCONTRACT AND THE LAW PRECLUDES (SIC) SUCH APPLICATION;III.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED WHEN IT INTERPRETED THAT THE PARTICULARS OF PETITIONER'S CASH DISBURSEMENT VOUCHER NO. 23162 WHICH STATES "FULL PAYMENT OF ACCOUNTS INCLUDING RETENTION FOR VARIOUS WORKS AT NPC-ISABELA AS ATTACHED PHP37,712.70" SIGNED BY PRIVATE RESPONDENT'S AUTHORIZED REPRESENTATIVE / AGENT ACKNOWLEDGING RECEIPT OF SAID AMOUNT DID NOT EXTINGUISH, RELIEVE, RELEASE ANY AND ALL CLAIMS INCLUDING CONTRACT PRICE ADJUSTMENT (CPA) WHICH PRIVATE RESPONDENTS MAY HAVE AGAINST PETITIONER ON THE SUBCONTRACT;IV.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED WHEN IT HELD THAT MARIANO CAC WAS NOT CLOTHED WITH AUTHORITY BY PRIVATE RESPONDENTS TO RENOUNCE OR WAIVE WHATEVER CLAIMS INCLUDING CPA THAT PRIVATE RESPONDENTS MAY HAVE AGAINST PETITIONER;V.
WHETHER OR NOT, GRANTING GRATIS ARGUENDO THAT PRIVATE RESPONDENTS ARE ENTITLED TO SHARE IN THE CONTRACT PRICE ADJUSTMENT (CPA) GRANTED BY NPC TO PETITIONER THE HONORABLE COURT OF APPEALS ERRED IN AWARDING PHP175,545.05 THEREOF, TO PRIVATE RESPONDENTS SINCE IT HAS NO BASIS AND CONTRARY TO EVIDENCE OF PRIVATE RESPONDENTS WHICH ONLY CLAIM AN AMOUNT OF PHP134,755.10 MINUS WHATEVER LEGAL DEDUCTIONS, IF ANY.[11]
As propitiously pointed out by the Court of Appeals, the NPC prepared a document entitled, "Plans and Specifications," paragraph GP-O8 of which deals with contract price adjustment:ARTICLE I
DOCUMENTS COMPRISING THE CONTRACT
The following documents are hereby incorporated and made part of this Contract as though fully written out and set forth herein insofar as they are not inconsistent with the terms thereof:
- National Power Corporation's Specification No. Sp80DLc – 502
- Any and all plans, drawings, and schedules prepared by National Power Corporation.
- SUB-CONTRACTOR'S proposal dated March 8, 1982.
The documents mentioned above shall collectively be referred to as "Contract Documents."[20] [Emphasis supplied.]
It must be stressed herein that among the documents which were incorporated into and made part of the ROMAGO-BICC contract (Exh. "D") "as though fully written out and set forth" therein are "[A]ny and all plans, drawings, and schedules prepared by the National Power Corporation." Relative thereto, appellant makes no denial of the fact that in connection with the project in question, there was prepared by the NPC a document entitled "Plans and Specifications" (Exhs. "E" to "E-5"), paragraph GP-O8 of which deals on contract price adjustment, thus:And assuming for the sake of argument that the qualifying phrase "obligations and responsibilities" applies to the other Contract Documents, upon closer inspection of the provisions granting the CPA, it is quite evident that said provision consequently requires an obligation or responsibility on the part of the petitioner that in the event of a decrease in the cost of labor, materials, equipment rentals and supplies for construction, etc., the reduction of the contract price will be for the account of the petitioner. The provision respecting the grant of CPA does not merely provide for the probability of receipt of additional payment, but it also involves an obligation on the part of the petitioner and the private respondents to return any excess payment received from the NPC in the event of any decrease in the cost of labor, materials, equipment rentals and supplies for the construction of said transmission lines."GP-O8 CONTRACT PRICE ADJUSTMENT
Adjustment of contract prices will be made should any or both of the following conditions occur as embodied in PD No. 454 as amended by PD No. 459:
(a) If during the effectivity of the contract, the cost of labor, materials, equipment rentals and supplies for construction should increase or decrease due to the direct acts of the Philippine Government. The increase of prices of gasoline and other fuel oils, and of cement shall be considered as direct acts of the Philippine Government. (b) If during the effectivity of the contract, the costs of labor, equipment rentals, construction materials and supplies used in the project should cause the sum total of the prices of bid items to increase or decrease by more than five percent (5%) compared with the total contract price." (Exh. "E-5-A).[21]
In a subcontract transaction, the benefit of a main contractor is not unjust even if it does less work, and earns more profit, than the subcontractor. The subcontractor should be satisfied with its own profit, even though less than the main contractor's, because that is what it bargained for and contracted with the main contractor. Article 22 of the Civil Code is not intended to insure that every party to a commercial transaction receives a profit corresponding to its effort and contribution. If a subcontractor knowingly agrees to receive a profit less than its proportionate contribution, that is its own lookout. The fact that a subcontractor accepts less does not make it dumb for that may be the only way to beat its competitors. The winning subcontractor cannot be allowed to later on demand a higher price after bagging the contract and beating competitors who asked for higher prices. Even if the subcontractor incurs a loss because of its low price, it cannot invoke Article 22 of the Civil Code to save it from financial loss. Article 22 is not a safety net against bad or overly bold business decisions.[23]Its reliance is misplaced. Upon a thorough review of the facts of the above-quoted case, it is quite evident that its particulars are not on all fours with the circumstances of the case at bar.
. . . The price increase could not have been based on a true valuation because no true valuation was ever made as required by the main contract and subcontract. There is no substantial evidence to support respondent Gerent's assertion that the price increase was based on a second estimate that Gerent allegedly supplied petitioner.[25]In the case at bar, though, the provisions pertaining to the CPA are quite clear the adjustment in the contract price, i.e., increase or decrease, is dependent on the application of appropriate official indices, as compiled and issued by the Central Bank of the Philippines, and not on the acts of any of the parties to the contract or subcontract. In fact, there is no issue as to the occurrence of any of the scenarios envisioned under the provisions of GP-08 that necessitated the increase as stated in the contract as well as in the subcontract.
RE: BICC CONSTRUCTION | |||
Total Actual Billing of BICC to Romago -- --- | P1,355,713.22 | ||
| |||
Less: | |||
(1) Withholding tax .0045% | - P 6,100.70 | | |
(2) Total payments made | - 1,143,387.76 | | |
(3) Material Accountability | - 8,076.61 | | |
(4) NPC Material Acct. | |||
Local | -P14,631.75 | | |
Foreign | - 64,373.79 | | |
Surcharge fee | - 16,093.44 | 95,098.98 | |
| | | |
Penalty for 33 days | 64,337.46 | (P1,317,000.55) | |
Total Balance Due BICC including Retention - | P 38,712.71 | ||
| =========== | ||
(Paid per CDV #23162 ) – 10-3-83.[26] | |
RE: BICC CONSTRUCTION | |||
Total Actual Billing of BICC to Romago - - - - | P1,355,713.22 | ||
| |||
Less: | |||
(1) Withholding tax .0045% | - P 6,100.70 | | |
(2) Total payments made | - 1,143,387.76 | | |
(3) Material Accountability | - 8,076.61 | | |
(4) NPC Material Acct. | |||
Local | -P14,631.75 | | |
Foreign | - 64,373.79 | | |
Surcharge fee | - 16,093.44 | 95,098.98 | |
| | | |
Penalty for 33 days | 64,337.46 | (P1,317,000.55) | |
Total Balance Due BICC including Retention -- | P 38,712.71 | ||
| =========== | ||
(Paid per CDV #23162 ) – 10-3-83.[27] | |