Ong v Bognalbal

Facts:
- Ernesto Bognalbal, an architect-contractor, entered into an Owner-Contractor
Agreement with Victoria Ong for the construction of a boutique. The agreement provides
that in consideration of the sum of P200,000, the contractor agrees to furnish labor,
tools, and equipment to complete the work. Payment to the owner shall be made by
progress billing to be collected every 2 weeks based on the accomplishment of work
value submitted to the owner as certified by the architect on site, Noel Cano.

- Billings 1, 2 and 3 were paid by Ong without any problems. In billing 4, Ong refused to
pay.

- Bognalbal's reason why Ong refused payment: Ong insisted that the flooring be changed
from vinyl tiles to kenzo flooring within 3 days. Bognalbal said the same is impossible in
3 days because the floor needed to be cured first to avoid adverse chemical reactions.
Due to the insistence of Ong, Bognalbal proceeded, but the chemical reaction resulted to
the disappointment of Ong.

- Ong's reason why she refused payment: the fourth billing was allegedly in excess of the
work accomplished. To settle the matter, the parties agreed that the fourth billing would
only be paid after Bognalbal finished the Kenzo flooring. Bognalbal abandoned the
project because of his inability to finish the flooring within the specified days. Ong got a
new contractor.

- Bognalbal filed an action for damages. Ong answered by also asking for damages since
Bognalbal failed to perform and just abandoned the work, resulting in additional
expenses for Ong.

- METC ruled in favor of Bognalbal. RTC ruled in favor of Ong. CA ruled in favor of
Bognalbal.

- Ong's claim: the fourth billing is not yet due and demandable since the work has not yet
been completed for that part. Also, Cano's certification as to the work done cannot be
trusted because of his bias in favor of Bognalbal

Issue:
Who is to blame for the non-completion of the work? Who committed a breach in the obligation?

Held:
Both.
- Article 4.02 of the Agreement provides that Cano has the authorization to certify if the
work has been accomplished for a specific billing
- Article 1730 par. 2 states that "if the work is subject to the approval of a third
person, his decision shall be final, except in the case of fraud or manifest error"
 - Therefore, the existence of fraud or error should be proven by Ong, but this she
did not do.
- it is inappropriate for Ong to say that Cano is biased just because Cano's
architectural firm was recommended by Bognalbal
- Moreover, Ong was not able to demonstrate her repeated claim that the
work for the 4th billing wasn't finished
- Ong's claim that she agreed with Bognalbal that the 4th billing will be paid only after the
kenzo flooring was finished is not supported by evidence
- if the parties indeed had a verbal agreement, there would be a novation of Ong's
obligation to pay by changing the conditions therefor.
- this falls under the first type of novation under Article 1291: "Obligations
may be modified by: (1) Changing their object or principal conditions"
- Novation is never presumed unless it is clearly shown.
- The evidence favors Bognalbal that there had been no novation. At best, what
was proven is Bognalbal continuing to work despite Ong's failure to pay.
- Bognalbal's demand letters for the 4th billing is inconsistent with the
theory that there had been a novation.
- Assumung that there was a novation, such new condition concerning the Kenzo
flooring would, nevertheless, be deemed fulfilled.
- According to Article 1186: "the condition shall be deemed fulfilled when
the obligor voluntarily prevents its fulfillment"
- Ong voluntarily prevented the fulfillment of the condition (kenzo flooring)
when she hired another contractor. Thus, this condition is deemed fulfilled
and her obligation to pay the 4th billing is now immediately demandable
- Even if Bognalbal unjustifiably withdrew from the project, Ong's obligation is
nevertheless demandable due to Cano's certification and the lack of evidence to show a
novation
- However, deciding WoN Bognalbal is justified in abandoning the project is key in
determining if he is also liable for damages.
- According to Tan v CA: "The power to rescind obligations is implied in reciprocal
ones in case on of the obligors should not comply with what is incumbent upon
him. However,......this power must be invoked judicially; it cannot be exercised
soley on a party's own judgement that the other has committed a breach of the
obligation. Where there is nothing in the contract empowering a party to rescind it
without resort to the courts, such party's action in unilaterally terminating the
contract is unjustified."
- In this case, there is nothing in the Agreement that empowers Ong or
Bognalbal to rescind the contract without resort to the courts. Thus,
Bognalbal's abandonment is unjustified.
- Considering that both parties committed a breach in their respective obligations (Ong by
not paying the 4th billing and Bognalbal by abandoning the project without resorting to
the courts first), Article 1192 is applicable
- Article 1192: "In case both parties have committed a breach of the obligation, the
liability of the first infractor shall be equitably tempered by the courts. If it cannot
 be determined which of the parties first violated the contract, the same shall be
deemed extinguished, and each shall bear his own damages."
- Under this Article, the damages for the second breach, which would have
been payable by the second infractor, is compensated instead by the
mitigation of the first infractor's liability
- Considering the finding that there had been no novation, it is clear that it
was Ong who first violated the contract by not paying the 4th billing

*ADDITIONAL INFO*
- Article 1192 presupposes that the contracting parties are in equal footing and there has
been no partial performance
- However, in the case at bar, the partial performance of Bognalbal (with respect to
the original contract and the kenzo flooring) is more than the partial payment of
Ong. Thus, payment and mitigation should be computed properly

- Article 2215: "In contracts......the court may equitably mitigate the damages.....as in the
following instances: (1) That the plaintiff himself has contravened the terms of the
contract"
- At first look, article 2215 doesn't seem to take into consideration who was the first
infractor
- However, the code should be read as a whole and Article 1192 and 2215 can be
harmonious. The plaintiff in 2215 should be deemed to be the second infractor,
while the one whose liability for damages may be mitigated is the first infractor.