EUGENIO JUAN GONZALES, PETITIONER, VS. THE HONORABLE COURT OF APPEALS AND ENDEL ENTERPRISES CORPORATION, RESPONDENTS.

Sought to be reversed in this Petition for Review on Certiorari
are respondent Appellate Court’s Decision, promulgated on September
29, 1980, as well as
its Resolution of January 6, 1981 denying reconsideration thereof in CA-G.R.
No. 64123-R, entitled “Endel Enterprises Corporation vs. Eugenio Juan Gon­zales.”

The center of controversy
revolves around a letter agreement, dated January 28, 1972, entered into by petitioner Eugenio Juan GONZALES, an architect and contractor, and
respondent ENDEL Enterprises Corporation for the construction of a condominium
building on the latter’s lot at Legaspi Village, Makati.  In said agreement, GONZALES agreed to
undertake the preparation of plans for said building as well as the supervision
of its construction.  The pertinent
portions of the agreement are quoted hereunder:

“We agreed on the following:

1. That, our services shall include the
preparation of the plans and supervision of the construction of the said
building and that the construction shall be done ‘by contract’.

2.  That,
for these services our fees shall be five (5%) per cent of the final and total
cost of the construction of the building.

3.  That,
pending the bidding, when full knowledge of the final and total cost of this
project may be ascertained, these fees shall be assumed to be One Hundred
Thousand (P100,000.00) Pesos.

4.  That,
50% shall be for the Plans and Specifications
and 50% shall be for Supervision.

5.  That,
the manner of payment shall be as follows:

For Plans:

a.)  Upon
our being commissioned as your Architects, 10% or. . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
P10,000.00

b.)  Upon
the approval of the plans preparatory to its conversion to working drawings, by
the Engineering Department of the Ayala Securities Corporation. . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20,000.00

c.)  Upon
delivery to you of the working drawings and Specifications. . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.20,000.00

For Supervision:

The 50% for supervision shall
be paid during the constructions at
monthly intervals to be agreed upon then.

We further agreed that
another method of construction
may be adopted such as by
‘Administration’, in which case a new
contract shall be drawn up between us.”^[1]

It should be noted that the aforequoted agreement contained no
time frame within which the plans; working drawings and specifications had to
be submitted to ENDEL under item 5 (c). 
But ENDEL contends that said
plans and working drawings had to be finished within three (3) months from the
date of agreement, or by April 30, 1972.

On February 23, 1972,
the plans mentioned in item 5 (b) of said agreement were approved by the
Engineering Department of Ayala Securities Corporation.

On April 5, 1972,
GONZALES acknowledged payment of the amount of P20,000.00 under item 5 (b).^[2]
By then, he had received from ENDEL the total amount of P30,000.00 as even
before the execution of said agreement he had received the amount of P10,000.00
specified in item 5 (a).

In early May, 1972, ENDEL, through its President Enrique Galan,
allegedly expressed verbally its desire not to proceed with the construction of
the condominium considering that the working drawings had not yet been
completed within the period promised.^[3]

On August 8, 1972,
or seven (7) months from the date of the agreement, GONZALES delivered the
working drawings and specifications to ENDEL^[4]
pursuant to item 5 (c).

In December 1972,
GONZALES demanded from ENDEL the payment of P20,000.00 under item 5 (c), which
was rejected by the latter.

On March 2,
1973, ENDEL sued for
rescission or cancellation of its contract with GONZALES before the then Court
of First Instance of Rizal, Branch VI (CC No. 17441).  ENDEL essentially averred that GONZALES’
neglect and delay in completing the drawings and specifications within three
(3) months, or by April 30, 1972, conformably with the practice of architects,
to enable ENDEL to complete plans for its financing and make public
announcements of said project resulted in great damage and prejudice to it as
to warrant rescission and cancellation of the contract.  To further justify cancellation, ENDEL
further alleged that at the time the working drawings and specifications were
delivered to it, big disastrous floods had already wrought considerable damage
in Manila and that the declaration of Martial Law in
September of 1972 resulted in certain restrictions on non-governmental
projects.  ENDEL thus prayed for
rescission of the contract; the return to it of the amount of
P30,000.00 with interest; damages in the amount of P100,000.00 representing
unrealized rentals; and reasonable attorney’s fees and costs.^[5]

Traversing the Complaint,
GONZALES, as defendant below, alleged that 1) he was neither negligent nor in
delay nor aware of any practice that plans and working drawings should be
submitted within three (3) months from the agreement; 2) assuming that
there was delay, the same was due to ENDEL’s refusal to discuss with him the
preparation of said drawings and specifications; 3) that at no time prior to
the demand made by him of the balance from ENDEL did the latter inform him of
its desire to abandon the construction of the proposed building and that had he
been so informed, he would not have incurred expenses in preparing the working
drawings and specifications, which portion of the agreement entailed the
greatest expense.  GONZALES then prayed
for the dismissal of the Complaint and counterclaimed for payment of the
balance of P20,000.00; moral damages in the amount of P20,000.00; attorney’s
fees and other equitable remedy.^[6]

On May 10,
1978, the Trial
Court rendered a Decision holding that “neither plaintiff (Endel) nor
defendant (Gonzales) should be faulted for the situation in which they find
themselves” and dismissed both the Complaint and Counterclaim.

In reaching said
conclusion, the Trial Court declared that while there was delay in the delivery
of the plans and specifications by GONZALES thus
warranting rescission and restitution, equity demanded that he should be
compensated for the time, effort and expense in the execution of the plans and
specifications.^[7]

Dissatisfied with the
Decision, ENDEL appealed to respondent Appellate Court.  GONZALES did not appeal even in respect of
the denial of his counterclaim.

On September 29, 1980,
respondent Appellate Court rendered its Decision affirming rescission of the
contract but reversing the dismissal of the complaint and holding GONZALES
obligated to return to ENDEL the amount of P20,000.00, thus:

“WHEREFORE, judgment is hereby rendered affirming the decision
of the lower court dated May 10, 1978 only in regard
to the finding for rescission of the contract but reversing its dismis­sal of
the complaint.  Appellee Eugenio Juan
Gonzales is hereby held liable to appellant Endel Enterprises Corporation in
the amount of P20,000.00 representing the amount paid by appellant to appellee
Gonzales for the preparation of the plans, with legal interest, from the filing
of the complaint and ten per cent (10%) of said amount as attorney’s fees.  Costs against defendant-appellee.”

In support of the
Decision, respondent Appellate Court observed:

 “We are, therefore, constrained to
agree with appellant Endel that, on the basis of Art. 1385 of the Civil Code,
appellee Gonzales was obligated, and the lower court should have adjudged him
legally bound to return to appellant Endel the amount of P20,000.00 with legal
interests, that appellant had paid to appellee corresponding to the plans
submitted by the latter but appellant found no further use for it due to the
attendant delay.  x x x A cursory reading
of the contract will reveal that plaintiff-appellee is entitled to the amount
of P10,000.00 as his retainer’s fees
upon his commission to undertake the work for appellant Endel.  This amount should not be returned to the
latter.  We also agree with appellant
that, considering the existence of legal provisions directly applicable to the
question, Articles 1191 and 1385 of the Civil Code, there is no justification
for applying the principles of equity invoked by appellee Gonzales in arguing
for his retention of the payments made to him under his contract with appellant
Endel.x  x x “

In its Resolution, dated January
6, 1981, respondent
Court denied GONZALES’ Motion for Reconsideration for lack of merit.

Hence, the instant
recourse by GONZALES predicated on the issue of his liability to ENDEL for the
return of the amount of P20,000.00 and
for the payment of attorney’s
fees.

It is fundamental that
contracts are to be interpreted according to their literal meaning when the
terms and conditions are clear and leave no doubt as to the intention of the contracting parties.^[8] An examination of the contract reveals that
the compensation of GONZALES was apportioned in accordance with the stage of
services to be rendered.

Upon his being
commissioned, GONZALES received P10,000.00 under item 5 (a) of the contract. 
And under item 5 (b) he was paid P20,000.00 upon approval of the plans
by the Engineering Department of Ayala Securities Corporation.  GONZALES is entitled to those payments by the
very terms of the contract.  He had performed the services required
and had earned his fees.  The fact that
the condominium project was later abandoned should not result in the forfeiture
by GONZALES of those payments.  Nor the
fact that the contract has been rescinded and would ordinarily create the
obligation to return the things which were the object of the contract, and the
price with its interest.^[9]
Upon a showing that an architect has fully performed services relating to the
completion of specification and general working drawings, he is entitled to recover payments specified for such services
even though the project is thereafter abandoned so as to prevent performance of
other services for which additional compensation has been provided.^[10]

While it may be true that
GONZALES incurred in delay, as found by both the Trial and Appellate Courts, which
finding is binding on us, that delay was only with respect to the submission of working drawings and specifications
as provided in item 5 (c) of the letter agreement.  By reason of that delay GONZALES is not entitled to the compensation provided
therefor, or P20,000.00, even though he may have already submitted those
drawings and specifications to ENDEL. 
Besides, the delay in the presentation of those working drawings are not
the only cause for the failure of the contract. 
ENDEL itself had decided to abandon the project for other reasons.  If time were, indeed, of the essence of the
contract, as ENDEL alleges, it could have cancelled it in April, 1972 and it
should not have allowed GONZALES to con­tinue working further on the drawings and specifications under item 5
(c) of the agreement.

Neither do we deem it just and equitable that ENDEL should
recover attorney’s fees (Article 2208, Civil Code).

WHEREFORE, the judgment under review is hereby modified in
that petitioner, Eugenio Juan Gonzales, is relieved from any liability to
return the amount of P20,000.00 to private respondent, Endel Enterprises Corporation, and to pay the latter
attorney’s fees.  In other respects, the
judgment is affirmed.

No costs.

SO ORDERED.

Plana, Relova, and
Gutierrez, Jr., JJ., concur.

Teehankee, (Chairman), J., see concurring
opinion.

^[1]
Exhibit “A-2”, p. 43, Folder of Exhibits.

^[2]
Exhibit “3”, p. 11, ibid.

^[3]
T.s.n., August 8, 1973, p. 13.

^[4]
Exhibit “4”, p. 19, Folder of Exhibits.

^[5]
pp. 5-13, Record on Appeal, CA Rollo.

^[6]
pp. 12-25, ibid.

^[7]
pp. 46-47, SC Rollo.

^[8]
Article 1370, Civil Code.

^[9]
Article 1385, Civil Code.

^[10]
6 CJS 498, citing Board of Commissioner’s of Kingfisher County v.
Vahlberg, 180 P. 2d. 144, 198
Okl. 527.

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