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7. Kalalo v. Luz - Case digest
Juris Doctor (University of Makati)
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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
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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.
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