PKG-GROUP GAME 2

C2F 30 POINTS

DESIGNATED CASE

FACTUAL MILIEU
1. In 1992, GOTTO Group, Inc. (GOTTO for brevity) awarded the
contract for the structural works of its 32-storey Makati
Prime Tower (MPT for brevity) to MALI BOG CYA Construction
and Development Corporation (MBC for brevity).
The

parties

formalized

their

construction

contract

on

February 4, 1993.

2. Upon the completion of MPT's structural works, GOTTO

awarded

the P130,000,000

contract

for

the

tower's

architectural works project to MBC.

Thus,

on

January

31,

1994,

the

parties

executed

supplemental agreement. The salient portions thereof were:

a.

the [project] shall cover the scope of work

of the detailed construction bid plans and
specifications and bid documents dated 28
September 1993, attached and forming an integral
part hereof as Annex A.
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b.

the price for the said works shall be P130

million.

c.

the payment terms shall be full swapping

or full payment in condominium units. The
condominium units earmarked for the [MBC] are
shown in the attached Annex B.

d.

the [MBC] shall transfer and surrender to

[GOTTO] the condominium units abovestated in
accordance with the following schedule:

e.

(d1)

80% of units upon posting and

acceptance by [MBC] of the performance
bond [and]

(d2)

20% or remaining balance upon

completion of the project as provided in the
construction agreement and simultaneous
with the posting by [MBC] of the
reglementary guarantee bond.

the contract period shall be fifteen (15)

months reckoned from the release of the
condominium certificates of title (CCTs for brevity)
covering eighty percent (80%) of the units
transferable to [GOTTO] as aforesaid[.]

3. Significantly, the supplemental agreement adopted those

provisions of the construction contract which it did not
specifically discuss or provide for.
Among those carried over was the designation of GEMM
Construction Corporation (GEMM for brevity) as the project's
construction manager.

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4. MBC started working on the project in February 1994.

5. On June 30, 1994, GOTTO executed a deed of sale (covering

114 condominium units and 20 parking slots of the MPT
collectively valued by the parties atP112,416,716.88 in favor
of MBC pursuant to the full-swapping payment provision of
the supplemental agreement.

6. Shortly thereafter, MBC sold some of its units to third

persons.

7. In September 1995, GOTTO engaged the services of

Integratech, Inc. (ITI for brevity), an engineering consultancy
firm, to evaluate the progress of the project.
In its September 7, 1995 report, ITI informed GOTTO that
MBC, at that point, had only accomplished 31.89% of the
project (or was 11 months and six days behind schedule).
8. Meanwhile, MBC and GOTTO were discussing the possibility
of the latters takeover of the projects supervision.
Despite ongoing negotiations, GOTTO did not obtain MBCs
consent in hiring ITI as the projects construction manager.
Neither did it inform MBC of ITIs September 7, 1995 report.

9. On October 12, 1995, MBC sought to confirm GOTTO's plan

to take over the project.
Its letter stated:

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The mutual agreement arrived at sometime in the

last week of August 1995 for [GOTTO] to take
over the construction supervision of the balance
of the [project] from [MBC's] [e]ngineering staf
and complete [the] same by December 31, 1995
as promised by [MBC's] engineer.
The [MBC's] accomplished works as of this date of
[t]ake over is of acceptable quality in materials
and workmanship.
This mutual agreement on the takeover
should not be misconstrued in any other
way except that the takeover is part of the
long range plan of [GOTTO] that [MBC], in the
spirit of cooperation, agreed to hand over the
construction
supervision
to [respondent]
as
requested. (emphasis supplied)
10.Engineers Antonio Co, general construction manager of
GOTTO, and Luzon Y. Tablante, project manager of MBC,
signed the letter.

11.In its September 7, 1995 report, ITI estimated that MBC

should have accomplished 48.71% of the project as of the
October 12, 1995 takeover date.
MBC repudiated this figure but qualifiedly admitted that it
did not finish the project.
Records showed that GOTTO did not merely take over the
supervision of the project but took full control thereof.

12.

MBC consequently conducted an inventory.

On the basis thereof, MBC demanded from GOTTO the

payment of its balance amounting to P1,779,744.85.
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13.

On February 19, 1996, MBC sent a second letter to

GOTTO demanding P2,023,876.25.

This new figure included the cost of materials (P244,331.40)
MBC advanced from December 5, 1995 to January 26, 1996.

14.

On November 22, 1996, MBC demanded from GOTTO

the delivery of MPT's management certificate and the keys

to the condominium units and the payment of its (GOTTO's)
balance.

15.

Because GOTTO ignored MBC's demand, MBC, on

December

9,

1996,

filed

complaint

for

specific

performance in the Housing and Land Use Regulatory Board

(HLURB).

16.

While the complaint for specific performance was

pending in the HLURB, GOTTO sent a demand letter to MBC

asking it to reimburse the actual costs incurred in finishing
the project (or P69,785,923.47).
In view of the pendency of the HLURB case, MBC did not
heed GOTTO's demands.

17.

On April 29, 1997, the HLURB rendered a decision in

favor of MBC.

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It ruled that the instrument executed on June 30, 1994 was a

deed of absolute sale because the conveyance of the
condominium units and parking slots was not subject to any
condition.
Thus,

it

ordered

GOTTO

to

issue

MPTs

management

certificate and to deliver the keys to the condominium units

to MBC. GOTTO did not appeal this decision.
Consequently, a writ of execution was issued upon its
finality.

18.

Undaunted by the finality of the HLURB decision,

GOTTO filed a complaint for collection of sum of money

against MBC in the Regional Trial Court (RTC) of Makati City,
Branch 58 on July 2, 1997.
It prayed for the reimbursement of the value of the projects
unfinished portion amounting to P66,677,000.

19.

During trial, the RTC found that because GOTTO

modified the MPT's architectural design, MBC had to adjust

the scope of work.
Moreover,

GOTTO

belatedly

informed

MBC

of

those

modifications.
It also failed to deliver the concrete mix and rebars
according to schedule.
For this reason, MBC was not responsible for the project's
delay. The trial court thus allowed MBC to set-of MBC's other
outstanding liabilities with GOTTOs excess payment in the
project.
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It concluded that GOTTO owed MBC P2,023,876.25.

In addition, because GOTTO refused to deliver the keys to
the condominium units and the management certificate to
MBC, the RTC found that MBC lost rental income amounting
to US$1,665,260.
20.

GOTTO appealed the RTC decision to the CA.

The appellate court found that GOTTO fully performed its

obligation when it executed the June 30, 1994 deed of
absolute sale in favor of MBC.
Moreover, ITI's report clearly established that MBC had
completed only 48.71% of the project as of October 12,
1995, the takeover date.
Not only did it incur delay in the performance of its
obligation but MBC also failed to finish the project.
The CA ruled that GOTTO was entitled to recover the value
of the unfinished portion of the project under the principle of
unjust enrichment.

21.

MBC moved for reconsideration but it was denied.

22.

Hence, MBC filed its petition for review on certiorari to

the Honorable Supreme Court.

MBC contends that the CA erred in giving weight to ITI's
report because the project evaluation was commissioned
only by GOTTO, in disregard of industry practice.
Project evaluations are agreed upon by the parties and
conducted by a disinterested third party.

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ISSUES
1. 5 POINTS
WHETHER OR NOT CIVIL ACTION WAS ENUNCIATED
IN THE INSTANT CASE; LEGALLY EXPLAIN AND
DISCUSS;
2. 10 POINTS
WHETHER OR NOT THERE EXISTS CAUSE OF ACTION
IN THE CASE AT BAR; LEGALLY EXPLAIN AND
DISCUSS;
3. 10 POINTS
WHETHER OR NOT AN AWARD OF COMPENSATORY
DAMAGES IS MERITORIOUS UNDER THE PREVAILING
CIRCUMSTANCES; LEGALLY EXPLAIN AND DISCUSS;
and
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4. 5 POINTS
WHETHER OR NOT THE DECISIONS OF THE REGIONAL
TRIAL
COURT
AND
COURT
OF
APPEALS
RESPECTIVELY,
CAN
BE
CONSIDERED
AS
JURISPRUDENCE BASED ON THE FACTUAL MILIEU;
LEGALLY EXPLAIN AND DISCUSS.

RATIO
DECIDENDI

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(adjust more pages for RATIO DECIDENDI

as applicable)

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