Alcatel Phil., Inc. v. I.M. Bongcar & Co.

G.R. No. 182946 (October 5, 2011)

Alcatel won attorney’s fees; SC ruled Bongar's contract breach warranted it, dismissed other claims.

Facts:

Philippine Long Distance Telephone Company (PLDT) engaged Alcatel Philippines, Inc. (Alcatel) to perform civil works for its Fast Track Project in North Parañaque. On June 20, 1991, Alcatel entered into a subcontract with I.M. Bongar & Co., Inc. (Bongar) for the construction of manholes and conduits, with a total contract price of P12,047,407.00. Alcatel made a down payment of 20% of the contract price, amounting to P2,409,481.40.

As part of their agreement, Bongar was required to post a performance bond equivalent to 25% of the total contract value and an advance payment bond guarantee. On June 27, 1991, Bongar and Stronghold Insurance Co., Inc. (SIC) executed a Surety Bond and a Performance Bond, binding them to pay Alcatel P2,409,481.40 and P3,011,851.75, respectively, in case of Bongar's failure to fulfill its contractual obligations.

The contract commenced on July 29, 1991, with a completion deadline of October 29, 1991. However, Alcatel observed that Bongar was falling behind schedule and received complaints regarding the quality of work. Bongar failed to complete the project by the deadline and, after several meetings, submitted an adjusted work schedule proposing a new completion date of May 31, 1992. Ultimately, Bongar ceased construction activities on April 20, 1992, prompting Alcatel to take over the project.

On June 1, 1992, Alcatel formally canceled Bongar's contract and demanded the return of uninstalled materials. Bongar did not comply, leading Alcatel to send another demand letter on August 7, 1992, which was also ignored. Consequently, Alcatel filed a lawsuit for damages against Bongar and SIC in the Makati Regional Trial Court (RTC).

On September 24, 2001, the RTC ruled in favor of Alcatel, ordering Bongar and SIC to pay the value of uninstalled materials worth P919,471.10 and awarding attorney's fees and costs of P500,000.00. However, the RTC denied Alcatel's claims for overpayment and additional costs due to lack of evidence. Alcatel appealed to the Court of Appeals (CA).

Legal Issues:

  1. Did the CA err in ruling that Alcatel was not entitled to an award of attorney's fees?
  2. Was Alcatel entitled to a refund of overpayment?
  3. Was Alcatel entitled to payment of additional costs for completion?

Arguments:

  • Petitioner (Alcatel): Alcatel argued that the RTC's award of attorney's fees was justified due to Bongar's persistent violation of the contract and refusal to return uninstalled materials, which compelled Alcatel to litigate to protect its interests. Alcatel contended that the CA's deletion of the attorney's fees award was erroneous since the RTC's findings supported such an award. Additionally, Alcatel maintained that Bongar's failure to specifically deny its claims for overpayment and additional costs should be construed as an admission.

  • Respondents (Bongar and SIC): Bongar and SIC contended that the RTC's award of attorney's fees was improperly included in the dispositive portion without sufficient discussion in the body of the decision. They argued that the absence of a clear basis for the award rendered it invalid. Furthermore, they disputed Alcatel's claims for overpayment and additional costs, asserting that Alcatel had not provided adequate evidence to substantiate these claims.

Court's Decision and Legal Reasoning:

The Supreme Court partly granted Alcatel's petition, reinstating the RTC's decision regarding the award of attorney's fees. The Court emphasized that while attorney's fees are generally not awarded without a stipulation, they may be granted when a defendant's actions compel a plaintiff to incur expenses to protect their interests or when the defendant acts in bad faith. The Court noted that the RTC's findings of fact supported the award of attorney's fees, as Bongar had clearly violated the contract and refused to return materials, forcing Alcatel to litigate.

However, the Court upheld the CA's ruling regarding Alcatel's claims for overpayment and additional costs, agreeing that Alcatel had failed to provide sufficient evidence to support these claims. The Court reiterated that mere assertions without proper documentation do not suffice to establish a claim.

Significant Legal Principles Established:

  1. The award of attorney's fees lies within the discretion of the court and must be supported by factual, legal, and equitable bases.
  2. Attorney's fees may be awarded when a defendant's actions compel a plaintiff to litigate or incur expenses to protect their interests.
  3. Claims for overpayment and additional costs must be substantiated with adequate evidence; mere assertions are insufficient.