WILSON G. CHUA, DOING BUSINESS UNDER THE NAME AND STYLE WIN MULTIRICH BUILDERS, PLAINTIFF-APPELLANT, VS. SPS. LOWELL TANGI AND ELVIRA TANGI, DEFENDANTS-APPELLEES,

Chua versus Spouses Tangi

The Case

This is a case about a builder who sued his clients for the unpaid balance of a construction project, and lost because he could not produce the one thing the law demands for extra work: a writing. Wilson Chua, doing business under the name Win Multirich Builders, sued Spouses Lowell and Elvira Tangi for a sum of money and damages, claiming that the spouses still owed him a remaining balance on the construction of their residence and on several additional works they had requested. The spouses answered that they had already paid more than the agreed contract price and that the house was never finished. The case matters for two reasons. First, it fixes the burden of proof in an action on a contract squarely on the plaintiff who asserts it. Second, and more importantly for the bar, it applies Article 1724 of the Civil Code strictly: where a contractor undertakes to build for a stipulated price, he cannot recover additional costs for changes in the plans unless the change was authorized by the owner in writing and the additional price was fixed in writing by both parties. No writing, no recovery.

Procedural History

Wilson Chua filed a complaint for sum of money and damages against the Spouses Tangi before the Regional Trial Court of Manila, Branch 20. After trial on the merits, the trial court rendered judgment in favor of the defendants, dismissing the case as well as the defendants' counterclaims. Chua appealed to the Supreme Court, raising as errors the trial court's failure to recognize four separate and distinct contracts between the parties, its failure to consider the obligations arising from those separate contracts, and its application of Article 1724 of the Civil Code. The appeal was resolved by the Supreme Court, which affirmed the trial court in full.

Facts

Sometime in May 2005, the Spouses Tangi engaged the services of Wilson Chua to construct their three-storey residence with a deck on G. Tuazon Street in Sampaloc, Manila. The initial contract price was two million eight hundred fifty thousand pesos, payable through progress billing, with a down payment of thirty percent. Construction was to be completed within one hundred fifty working days, counted from procurement of the necessary government permits.

In July 2006, the spouses requested additional furnishing works for a contract price of one million four hundred seven thousand seven pesos and ten centavos. In August 2006, they requested a ground floor extension for two hundred thirty-one thousand three hundred sixty-four pesos and ninety-five centavos. Chua accommodated these additional works. He sent progress billings, which the spouses paid, except for a remaining bill of seven hundred forty-eight thousand four hundred sixty-six pesos and seventy-six centavos, which they refused and failed to pay despite demand.

In their answer, the spouses disputed the legal personality of Win Multirich Builders, saying Chua never represented himself to them under that trade name. They alleged that work slowed because there were no materials, that they had paid a total of three million two hundred thousand pesos, more than the construction price agreed upon, and that the project was only fifty to sixty percent finished. Because the house was not ninety percent complete, the Pag-IBIG loan balance was not released. They had to hire new workers and sell their house in Antipolo to meet the additional expense. They also said they received no official receipts except a few commercially printed cash vouchers, and no progress billing except one dated October 5, 2006.

Issues

• Whether or not the additional works, namely the roughing-in works, the ground floor extension, and the finishing works, were separate and distinct contracts independent of the original construction contract.
• Whether or not the trial court erred in applying Article 1724 of the Civil Code and in dismissing the complaint.
• Whether or not the plaintiff is entitled to the reliefs prayed for in his complaint.

Applicable Provisions

Article 1724 of the Civil Code provides:

Article 1724. The contractor who undertakes to build a structure or any other work for a stipulated price, in conformity with plans and specifications agreed upon with the landowner, can neither withdraw from the contract nor demand an increase in the price on account of the higher cost of labor or materials, save when there has been a change in the plans and specifications, provided: Such change has been authorized by the proprietor in writing; and The additional price to be paid to the contractor has been determined in writing by both parties.

This is the provision on which the entire case turns, because it makes written authority and a written price agreement conditions precedent to any recovery for additional work.

Ruling

On the first issue, the Court held that there was no showing of any separate and distinct contract for the additional works. The burden of proof in an action on a contract lies with the plaintiff who asserts its existence, captured in the maxim ei incumbit probatio qui dicit, non qui negat, meaning he who asserts, not he who denies, must prove. The defendants were under no obligation to prove their negative averments. The Court found a paucity of evidence of the alleged new contracts, and noted that the record was wanting of any agreement or contract for additional works.

On the second issue, the Court held that the trial court correctly applied Article 1724. Recovery for additional costs is allowed only in two instances: first, when the change has been authorized and the authorization is in writing, and second, when the additional price to be paid has been determined in writing by both parties. The evident purpose of these requirements is to prevent litigation for additional costs incurred by reason of additions or changes in the original plan, and they serve as a safeguard, a substantive condition precedent to recovery. The Court stressed that neither the authority for the changes made nor the additional price to be paid may be proved by any other evidence. It added that mere tolerance, or even the act of the spouses in accepting or paying any amount demanded from them, cannot do away with the application of Article 1724. The Court also found it strange that a builder in the construction business since 1979 would not reduce contracts of such significance to writing.

On the third issue, because the complaint rested on contracts that were never proven and on additional costs that were never authorized in writing, the reliefs prayed for could not be granted.

Doctrine

Three rules a bar candidate should be able to write. First, in an action on a contract, the plaintiff bears the burden of proving the existence and execution of the contract, and the burden of proving an obligation rests on the one who seeks to enforce its performance. Second, under Article 1724 of the Civil Code, a contractor who undertakes to build for a stipulated price cannot demand an increase in price for changes in the plans and specifications unless two conditions concur: the change was authorized by the proprietor in writing, and the additional price was determined in writing by both parties. Third, compliance with both conditions is a condition precedent to recovery, and neither requirement may be proved by any other evidence. Payment or tolerance by the owner does not excuse the absence of the writing.

Disposition

The Supreme Court affirmed the decision of the Regional Trial Court of Manila, Branch 20, in its entirety, dismissing the complaint and the defendants' counterclaims; the Spouses Tangi won.

Remember This

Memorize the line: no written authority and no written agreement on the additional price, no recovery for extra work, because Article 1724 makes both a condition precedent. Examiners like to use this case in civil law questions on contracts for a stipulated price and in remedial law questions on the burden of proof, especially where a contractor claims extra costs on the strength of verbal requests and partial payments.