Tuesday, February 21, 2012

Benguet Corporation vs. Cabildo [G.R. No. 151402, August 22, 2008]

Facts: Petitioner Benguet Corporation is a mining company with three (3) mining sites: Balatoc, Antamok and Acupan. Cesar Cabildo was a former employee of Benguet Corporation. Thereafter, Cabildo became a service contractor of painting jobs. 

Sometime in February 1983, Cabildo submitted his quotation and bid for the painting of Benguet Corporation's Mill Buildings and Bunkhouses located at Balatoc mining site. He then negotiated with petitioners Reyes and Fider, the recommending approval and approving authority, respectively, of Benguet Corporation, on the scope of work for the Balatoc site painting job. The parties eventually agreed that Benguet Corporation would provide the needed materials for the project. 

On March 9, 1983, Cabildo wrote Reyes requesting the assignment of a representative by Benguet Corporation to closely monitor the daily work accomplishments of Cabildo and his workers. 

Subsequently, on March 23, 1983, Cabildo and Benguet Corporation, formally signed the Contract of Work for the painting of the Mill Buildings and Bunkhouses at the Balatoc mining site. All the stipulations were incorporated therein by Benguet Corporation which solely drafted the contract.

To undertake the project, Cabildo recruited and hired laborers including petitioner Velasco as his general foreman. On May 30, 1983, Velasco left Cabildo as the latter's general foreman and went on his own as contractor, offering his services for painting jobs. 

On June 9, 1983, Reyes recommended approval of the Quotation of Velasco for the painting of the inner mill compound of Balatoc and approved by Fider on June 13, 1983 at a lower price than that of Cabildo. 

Because of these developments, Cabildo enlisted the services of Atty. Galo Reyes, who wrote both Fider and Jaime Ongpin, President of Benguet Corporation, regarding the ostensibly overlapping contracts of Cabildo and Velasco.

On July 2, 1983, Benguet Corporation's Group Manager for Legal and Personnel, Atty. Juanito Mercado, who prepared and notarized the Contract of Work, responded to Cabildo's counsel, declaring that Benguet Corporation's Contract of Work with Cabildo only covered exterior painting of the Mill Buildings and Bunkhouses, whereas the contract with Velasco covered interior painting of the Mill Buildings, although the same was not expressly stated in the Contract. 

Thus, Cabildo filed a complaint for damages against the petitioners and Velasco before the RTC, claiming breach by Benguet Corporation of their Contract of Work. 

The RTC rendered a decision in favor of Cabildo and found the petitioners, as well as Velasco, jointly and severally liable to Cabildo. On appeal, the CA affirmed with modification the RTC's ruling. The appellate court excluded Velasco from liability. 

Issue: Whether or not there is breach of contract as basis for award of damages

Held: We cannot agree with the petitioners. The Contract of Work with Cabildo did not distinguish between the exterior and interior painting of the Mill Buildings. It simply stated that Cabildo "shall paint the Mill Buildings at Balatoc Mill and all the Bunkhouses at Balatoc." Article 1370 of the Civil Code sets forth the first rule in the interpretation of contracts. The article reads: 

Art. 1370. If the terms of a contract are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of its stipulations shall control. 

There is nothing in the contract which will serve as a basis for the petitioners' insistence that Cabildo's scope of work was merely confined to the painting of the exterior part of the Mill Buildings. 

We also note that Benguet Corporation's counsel drafted and prepared the contract. Undoubtedly, the petitioners' claimed ambiguity in the wordings of the contract, if such an ambiguity truly exists, cannot give rise to an interpretation favorable to Benguet Corporation. Article 1377 of the Civil Code provides: 

Art. 1377. The interpretation of obscure words or stipulations in a contract shall not favor the party who caused the obscurity. 

Finally, Article 1371 of the same code states: 

Art. 1371. In order to judge the intention of the contracting parties, their contemporaneous and subsequent acts shall be principally considered.

First, the procedure for work accomplishments followed by the parties required representatives and/or employees of Benguet Corporation to closely monitor Cabildo's performance of the job. If, as the petitioners claim, the intention was only to paint the exterior of the Mill Buildings, then Reyes and Fider, or any of Benguet Corporation's representatives assigned to monitor the work of Cabildo, should have stopped Cabildo from continuing the painting of the interiors.

Moreover, the materials for the painting work were provided by Benguet Corporation. The petitioners had the opportunity to disapprove Cabildo's requests for materials needed to paint the interiors of the Mill Buildings, but they failed to do so. 

From the foregoing, it is crystal clear that the petitioners breached the Contract of Work with Cabildo by awarding Velasco a contract covering the same subject matter, quite understandably, because Velasco offered a price schedule lower than Cabildo's.

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