lOMoARcPSD|16274775 7. Kalalo v. Luz - Case digest Juris Doctor (University of Makati) Studocu is not sponsored or endorsed by any college or university Downloaded by Faith Bal (frbalaga@gmail.com) lOMoARcPSD|16274775 OCTAVIO A. KALALO, plaintiff-appellee, vs. ALFREDO J. LUZ, defendant-appellant. Facts In 1959,. Kalalo (appellee), a licensed civil engineer doing business under O. A. Kalalo and Associates, entered into an agreement with Luz (appellant), a licensed architect, doing business under A. J. Luz and Associates, whereby the former was to render engineering design services to the latter for fees, as stipulated in the agreement. Issue I. WON Kalalo is in estoppel due to his letter and SOA and him being bound by said The services included design computation and sketches, contract drawing representation, and technical specifications of all engineering phases of the project designed by O. A. Kalalo and Associates bill of quantities and cost estimate, and consultation and advice during construction relative to the work. The fees agreed upon were percentages of the architect's fee. In 1961, Kalalo sent to Luz a statement of account to which was attached an itemized statement of Luz9s account (Total engineering fee = P116,565 minus previous payments of P57,000 = a balance of P59,565. Luz sent Kalalo a resume of fees, amounted to P10,861.08. Luz sent appellee a check for said amount, which appellee refused to accept as full payment of the balance of the fees due him. Kalalo filed a complaint against Luz, containing 4 causes of action. (1) Kalalo alleged that for services rendered in connection with different projects there was due him fees in sum consisting of $28,000 (U.S.) and P100,204.46, excluding interests, of which sums only P69,323.21 had been paid, leaving unpaid $28,000 and the balance of P30,881.25. (2) Kalalo claimed P17,000 as consequential and moral damages; (3) Claimed P55,000 as moral damages, attorney's fees and expenses of litigation; and (4) Claimed P25,000 as actual damages, and also for attorney's fees and expenses of litigation. Luz admitted that Kalalo rendered engineering services but averred that some of Kalalo9s services were not in accordance with agreement and his claims were not justified by services actually rendered, and that aggregate amount actually due to Kalalo was only P80,336.29, of which P69,475.21 had already been paid, leaving a balance of only P10,861.08. Ruling 1. NO. The statement of accounts could not estop Kalalo, because Luz did not rely thereon as found by Commissioner. The finding of the Commissioner, not disputed by Luz, was adopted by the RTC in its decision. Under Article 1431 of CC, in order that estoppel may apply the person, to whom representations have been made and who claims the estoppel in his favor must have relied or acted on such representations. An essential element of estoppel is that person invoking it has been influenced and has relied on representations or conduct of person sought to be estopped, and this element is wanting here. The essential elements of estoppel in pais may be considered in relation to party sought to be estopped, and in relation to party invoking estoppel in his favor. Essential Elements: As related to the party to be estopped. (1) conduct amounting to false rep or concealment of material facts or at least calculated to convey impression that facts are otherwise than, and inconsistent with, those which party subsequently attempts to assert; (2) intent, or at least expectation that his conduct shall be acted upon by, or at least influence, other party; and (3) knowledge, actual or constructive, of the real facts. As related to the party claiming the estoppel, (1) lack of knowledge and of the means of knowledge of the truth as the facts in questions; (2) reliance, in good faith, upon conduct or statements of the party to be estopped; (3) action or inaction based thereon of such character as to change position or status of party claiming the estoppel, to his injury, detriment or prejudice. It is established that Exhibit 1-A was written by Kalalo through ignorance or mistake 3 it has been held that if an act, conduct or misrepresentation of the party sough to be estopped is due to ignorance founded on innocent mistake, estoppel will not arise. All requisites are not present. (1) Conduct&..In the report, Kalalo testified that he had not yet consulted services of his counsel and it was only upon its advise that the terms of the contract were interpreted to him resulting in his subsequent letters to the defendant demanding payments of his fees pursuant to the contract. (2) Intent, or at least expectation that this conduct shall be acted upon by, or at least influence, that other part 3 Luz didn9t rely on representations in Exhibit 1-A and denied the information in accounts stated. (3) knowledge, actual or constructive, of real facts 3 Luz did not act on the basis of the representations in Exhibit 1-A and there was no change in his position to his own injury or prejudice. Although the practical construction of contract by one party, evidenced by his words or acts, can be used against him, yet, if one of the parties carelessly makes a wrong interpretation of words of his contract, or performs more than contract requires (as reasonably interpreted independently of his Downloaded by Faith Bal (frbalaga@gmail.com) lOMoARcPSD|16274775 Luz also set up affirmative and special defenses: no cause of action; in estoppel because of certain acts, representations, admissions and/or silence, which led appellant to believe certain facts to exist and to act upon said facts; claim regarding Menzi project was premature because appellant had not yet been paid for said project; and appellee's services were not complete or were performed in violation of agreement and/or otherwise unsatisfactory. Counterclaim for actual and moral damages and for attorney's fees of P10,000. performance), as happened in the instant case, he should be entitled to a restitutionary remedy, instead of being bound to continue to his erroneous interpretation or his erroneous performance and "the other party should not be permitted to profit by such mistake unless he can establish an estoppel by proving a material change of position made in good faith. The rule as to practical construction does not nullify the equitable rules with respect to performance by mistake." Even if said Exhibit 1-A be considered as practical construction of contract by appellee, he cannot be bound by such erroneous interpretation. If by mistake the parties followed a practice in violation of the terms of the agreement, the court should not perpetuate the error. Since no issue that Kalalo is entitiled to certain fees, the only question being assessment of proper fees and balance due to appellee after II. WON the deducting admitted payments made by appellant, RTC, upon agreement exchange rate to be used is at of parties, authorized the case to be heard before a Commissioner. the time of judgment. Commissioner Report: The amount due to appellee was $28,000 (U.S.) as his fee in International Research Institute Project which was 20% of $140,000 that was paid to appellant, and P51,539.91 for other projects, less sum of P69,475.46 which was already paid by Luz. Commissioner also recommended payment of the sum of P5,000 as attorney's fees. 2. Yes. Two rates of exchange when the obligation to pay the fees were due: P2.00 to $1.00 and the free market rate. The court held that the trial court correctly used the free market rate. The amount of $140,000 received by Luz for the IRRI project is not within the scope of sub-paragraph (a) of Paragraph No. 1 of Circular 121. (a) Luz has not shown that 25% of said amount had to be surrendered to the CB at the preferred rate because it was either export proceeds, or US Govt expenditures, or invisibles not included in sub-paragraph (b). Court held that it is hard to believe that a person possessing dollars would exchange his dollars at the preferred rate of P2.00 to $1.00 when he is not obligated to do so, rather than at the free market rate which is much higher. A person is presumed to take ordinary care of his concerns and that the ordinary course of business has been followed. In the commissioner9s report, it is not shown that the peso equivalent of the $28,000 has been fixed or agreed upon by the parties. It also shows that Kalalo had not been paid for the account of the $28,000 which represents the fees of Luz equal to 20% of the $140,000. At the hearing on Report of Commissioner, respective counsel of parties manifested that they had no objection to findings of fact of Commissioner contained in Report, and they agreed that said Report posed only two legal issues, namely: (1) whether under the facts stated in the Report, the doctrine of estoppel would apply; and (2) whether the recommendation in the Report that the payment of the amount due to the plaintiff in dollars was legally permissible, and if not, at what rate of exchange it should be paid in pesos. After the parties had submitted their respective memorandum on said issues, the trial court rendered its decision dated February 10, 1967, in favor of plaintiff. In the case, obligation of appellant to pay appellee the 20% of $140,000, or sum of $28,000, accrued on August 25, 1961, or after the enactment of RA 529. It follows that the provision of RA 529 which requires payment at the prevailing rate of exchange when the obligation was incurred cannot be applied. RA 529 does not provide for the rate of exchange for the payment of obligation incurred after the enactment of said Act. The logical Conclusion, therefore, is that the rate of exchange should be that prevailing at the time of payment 3. NO. What Luz submitted to RTC for resolution did not include question of correctness or propriety III. WON the of the amounts due to Kalalo in connection with the different projects for which Luz had rendered aggregate engineering services. It is too late to raise this. From the decision, this appeal was brought, directly to this Court, raising amount of only questions of law. balance is only 4. Yes. RTC had adopted the report of the Commissioner and in adopting the report the RTC is P15,792.05. deemed to have adopted reasons given by the Commissioner in awarding attorney9s fee at P8,000. It During the pendency of this appeal, Kalalo filed a petition for issuance of is within RTC9s authority to increase recommendations by virtue of Sec 11 Rule 33 of ROC. The a writ of attachment since Luz is is presently residing in Canada as a IV. WON award estimate made by Commissioner was an expression of belief, or an opinion. An opinion is different permanent resident thereof. SC resolved, upon appellee's posting a bond for damages is from a fact. The generally recognized distinction between a statement of "fact" and an expression of of P10,000, to issue the writ of attachment, and ordered Provincial Sheriff proper "opinion" is that whatever is susceptible of exact knowledge is a matter of fact, while that not of Rizal to attach the estate, real and personal, of appellant Alfredo J. Luz susceptible of exact knowledge is generally regarded as an expression of opinion. It has also been within the province, to the value of not less than P140,000. said that word "fact," as employed in the legal sense includes "those conclusions reached by the trior from shifting testimony, weighing evidence, and passing on the credit of the witnesses, and it does not denote those inferences drawn by the trial court from the facts ascertained and settled by it. Downloaded by Faith Bal (frbalaga@gmail.com)