The Supreme Court ruled that a contractor’s unauthorized deviations from approved building plans and failure to secure necessary permits constitute a breach of contract, justifying partial rescission. This decision reinforces the importance of contractors adhering strictly to agreed-upon plans and legal requirements, safeguarding homeowners’ rights to receive the construction they contracted for. It clarifies that homeowners can seek legal remedies, including rescission, when contractors violate these obligations, even if the construction is partially completed.
When Forged Signatures and Faulty Foundations Undermine a Dream Home
Spouses Lino and Guia Francisco contracted DEAC Construction, Inc. to build a three-story residential building. A dispute arose when DEAC commenced construction without securing the necessary building permit and deviated from the approved building plans without the Spouses Francisco’s authorization. These deviations included closing the required open space, reducing the setback from the property line, and other violations of the National Building Code. The Spouses Francisco filed a case for rescission of contract and damages, leading to conflicting decisions between the trial court and the Court of Appeals regarding the authorization of these deviations.
The trial court initially ruled in favor of the Spouses Francisco, ordering partial rescission of the construction contract due to DEAC’s breach of obligations. The court found that DEAC had constructed the building without the necessary permits and made unauthorized deviations from the approved plans. Conversely, the Court of Appeals reversed this decision, stating that the Spouses Francisco had initiated and requested the deviations, thus finding DEAC in full compliance with the contract. This conflict in findings necessitated the Supreme Court’s intervention to determine the facts accurately and apply the correct legal principles.
The Supreme Court emphasized the contractor’s responsibility to secure necessary permits and adhere to approved plans. It pointed out that DEAC’s failure to obtain a building permit before starting construction exposed Lino Francisco to criminal prosecution. Further, the Court highlighted DEAC’s act of forging Guia Francisco’s signature to expedite the approval of amended plans as a serious breach of trust and a violation of the contract’s terms. These actions underscored a pattern of negligence and disregard for legal and contractual obligations on the part of the contractor. This also emphasized the importance of good faith and fair dealing, which DEAC failed to uphold when it did not inform the Spouses Francisco about the absence of a building permit, especially after receiving substantial payments and starting construction.
The Supreme Court referenced Article 1191 of the Civil Code, which provides the power to rescind obligations implied in reciprocal ones if one party does not comply with their responsibilities. In this case, the contractor’s unauthorized deviations and failure to secure permits constituted a clear breach of faith. The Court stated that rescission is warranted not only when there is injury to economic interests but also when there is a violation of the reciprocity between parties. The actions of the Spouses Francisco, which include sending a demand letter, filing a criminal case against Dadula, and initiating a civil case for rescission, demonstrated their unwavering protection of their rights.
Considering the extent of completion of the project at 75%, the Supreme Court upheld the trial court’s decision to order only a partial rescission. This approach balances the equities between the parties, allowing for the unfinished portion of the contract to be rescinded while recognizing the value of the completed construction. The principle of equitable considerations justifies rescission of the undelivered portion of the contract. By ordering only a partial rescission, the Court aimed to achieve a fair resolution that addresses the contractor’s breaches while preventing undue hardship to either party, a move towards the most suitable result to the circumstances.
FAQs
| What was the key issue in this case? | The central issue was whether the contractor’s unauthorized deviations from approved building plans and failure to secure the necessary building permit justified rescission of the construction contract. |
| Did the contractor obtain the necessary building permit before starting construction? | No, DEAC Construction started the project without securing the required building permit, exposing the homeowner, Lino Francisco, to criminal prosecution for illegal construction. |
| Were there any unauthorized deviations from the approved building plans? | Yes, DEAC Construction made several unauthorized changes, including closing the required open space and reducing the setback from the property line, in violation of the National Building Code. |
| Did the homeowner authorize these deviations? | No, the Supreme Court found that the Spouses Francisco did not authorize the changes. They proved that the closure of the open space was completed to increase the space of the building without their approval. |
| What is the legal basis for rescinding the construction contract? | Article 1191 of the Civil Code provides the legal basis, allowing rescission of reciprocal obligations when one party fails to comply with their contractual duties. |
| What does partial rescission mean in this case? | Partial rescission means that only the undelivered or unfinished portion of the construction contract was rescinded, given that the building was already 75% complete. |
| What was the Court of Appeals’ ruling in this case? | The Court of Appeals reversed the trial court’s decision, ruling that the homeowners authorized the deviations and that the contractor had fulfilled the contract. The Supreme Court reversed the CA’s ruling and reinstated the trial court’s decision. |
| Why did the Supreme Court reverse the Court of Appeals’ decision? | The Supreme Court reversed the Court of Appeals because the contractor did not secure a building permit before starting construction and the contractor’s deviations from the approved plans were not authorized by the homeowners. |
This Supreme Court decision underscores the critical importance of adhering to construction contracts and legal requirements. Contractors must ensure they secure all necessary permits and follow approved building plans. Unauthorized deviations can lead to legal consequences, including rescission of the contract, reinforcing the need for transparency and adherence to contractual obligations in the construction industry.
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: SPS. LINO FRANCISCO & GUIA FRANCISCO vs. DEAC CONSTRUCTION, INC. and GEOMAR A. DADULA, G.R. No. 171312, February 04, 2008
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