The Supreme Court has affirmed that construction companies cannot deny payment for completed projects when their officers have already approved purchase orders and final billings. This ruling reinforces the principle of estoppel, preventing companies from later disputing facts they previously acknowledged, especially when another party has relied on those acknowledgments to their detriment. Essentially, this means businesses must honor their commitments and approved financial obligations, ensuring fairness and trust within the construction industry.

Signatures and Completion: Does Approval Imply Acceptance of Work Done?

This case arose from a dispute between Asian Construction and Development Corporation (ACDC) and Noel T. Tulabut, a construction supply contractor. ACDC hired Tulabut to construct cafeterias and food stands for the Philippine Centennial Exposition project. While ACDC initially paid for the initial projects, a dispute arose over subsequent construction, specifically concerning two additional cafeterias. Tulabut completed the additional projects and submitted final billings. However, ACDC failed to pay the remaining balance, citing incomplete work and non-receipt of payments from the government. The central legal question was whether ACDC’s approval of purchase orders and final billings constituted acceptance of the completed work, thereby obligating them to pay the outstanding amount.

The trial court ruled in favor of Tulabut, ordering ACDC to pay the balance, interest, attorney’s fees, and litigation costs. The Court of Appeals (CA) affirmed this decision, finding that ACDC was estopped from denying liability due to their officers’ approval of the relevant documents. ACDC then appealed to the Supreme Court, arguing that the approval of purchase orders and billings did not automatically signify project completion, and there was no basis for attorney’s fees. The Supreme Court, however, sided with Tulabut, upholding the CA’s decision.

The Court emphasized that its role is not to re-evaluate factual findings already established by lower courts, unless specific exceptions apply, such as evidence of speculation, grave abuse of discretion, or misapprehension of facts. In this instance, none of those exceptions were present. It was noted that ACDC failed to provide any evidence to contradict Tulabut’s claim that the project had been completed and accepted. Instead, ACDC chose not to present any evidence during the trial.

Furthermore, the Supreme Court supported the CA’s application of estoppel. This legal principle prevents a party from denying a fact that they previously asserted, especially if another party acted on that assertion to their detriment. Here, ACDC’s approval of the purchase orders and billings led Tulabut to believe the work was accepted and payment would follow. Therefore, ACDC was estopped from denying their obligation.

“Whenever a party has, by his own declaration, act or omission, intentionally and deliberately led another to believe a particular thing to be true, and to act upon such belief, he cannot, in any litigation arising out of such declaration, act or omission, be permitted to falsify it.”

The Supreme Court also addressed ACDC’s argument that a certificate of completion was needed, stating that ACDC failed to prove such a requirement. The contract terms, as reflected in the approved purchase orders and progress billings, were deemed binding. It is an established principle that contracts serve as the law between the parties involved. As such, when the terms are clearly understandable, there is no need for interpretation. In the absence of any ambiguity, they must be followed as written.

Lastly, the court agreed with the award of attorney’s fees, pointing to ACDC’s lack of good faith in fulfilling its obligations. The dishonored check, coupled with the absence of communication or efforts to resolve the payment issue, suggested a deliberate attempt to avoid their debt. By affirming the lower court decisions, the Supreme Court has made clear that construction companies cannot evade their responsibilities by disavowing previously approved documents, and that parties are bound by the contracts they enter into. The decision underscores the importance of integrity and good faith in contractual dealings, providing a legal precedent for holding businesses accountable for their commitments.

FAQs

What was the key issue in this case?	The key issue was whether ACDC’s approval of purchase orders and final billings constituted acceptance of the completed work, thereby obligating them to pay the outstanding amount to Tulabut.
What is the principle of estoppel, and how did it apply?	Estoppel prevents a party from denying a fact they previously asserted if another party acted on that assertion to their detriment. ACDC was estopped from denying liability because their officers had approved the purchase orders and billings.
Did ACDC provide any evidence to support their claims of incomplete work?	No, ACDC opted not to adduce any evidence during the trial to support their claims. The absence of any such evidence further cemented the lower courts’ and Supreme Court’s decision.
What was the significance of the purchase orders and billings in this case?	The purchase orders and billings, which had been approved and signed by ACDC’s officers, served as the terms of the contract between ACDC and Tulabut and represented ACDC’s acceptance of the obligations within. The terms of said documents were viewed as binding.
Why was ACDC ordered to pay attorney’s fees?	ACDC was ordered to pay attorney’s fees due to their evident lack of good faith in fulfilling their obligation, including the dishonored check and failure to communicate or resolve the payment issue with Tulabut.
What evidence did Tulabut present?	Tulabut presented testimonial and documentary evidence. Such evidence established that he completed the projects, which was then approved and accepted by ACDC, as well as ACDC’s failure to pay the full balance.
What was the relevance of a certificate of completion in this case?	ACDC claimed a certificate of completion was standard practice, but they failed to prove that the project had to produce a certificate of completion as requirement. The Court ruled that they had to provide evidence that would establish a requirement to do so, and their case failed on this front.
What happens when contract terms are clear and understandable?	When the contract terms are clear, there is no room for construction or interpretation of any of the terms. The contract is considered the law between the parties, and these terms are binding.

In conclusion, this case underscores the importance of honoring contractual commitments and acting in good faith. Businesses operating in the construction industry should ensure transparency and accountability in all dealings, especially when approving project-related documents. The ruling serves as a reminder that the principle of estoppel can prevent companies from avoiding their obligations once they have acknowledged the validity of completed work.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Asian Construction and Development Corporation vs. Noel T. Tulabut, G.R. No. 161904, April 26, 2005