Contributor: Ron Christian T.

Eupena

Case Title: Vil-Rey Planners and Builders Vs. Lexber, Inc., G.R. No. 189401 June 15, 2016;
Stronghold Insurance Company, Inc. Vs. Lexber, Inc., G.R. No. 189447

Bar Q:
V and L entered into a Construction Contract whereby the former undertook to work on the
latter’s property. The contract will be secured by security bond issued by S. Under the
contract a consideration of P1,168,728.37 shall be paid on the following basis: “50%
downpayment to be secured by a surety bond in the same amount issued by S upon approval
of the work order and 50% balance upon completion of the works.” V acquired a surety bond
from S equivalent to 50% of the contract price of P1,168,728.37 upon L's downpayment of
the same amount. Accordingly, V secured the surety bond in the amount of P584,364.19
however, on the same day, L made a downpayment of only P500,000. L did not pay the full
50% of the contract price for downpayment. Subsequently, V failed to complete the works
even after the grant of the extended period, or even after L gave it another five days to finish
the works. L sued V on the ground of breach of contract. V denied that it was guilty of breach
of contract and insisted that it was L that owed him because L did not pay him of the balance.
Is V correct?

Suggested Answer:
No, he is not correct. The parties took on reciprocal obligations. These are obligations that
arise from the same cause, such that the obligation of one is dependent upon that of the other.
The reciprocal obligation in this case was L's payment of the 50% balance upon V's
completion of the works. However, despite the grant of extension, and even after the lapse of
another five-day grace period, V failed to finish the work. It is clear that the next payment for
V would have fallen due upon completion of the works. Thus, it cannot put up the defense
that its failure to comply with its obligation was because it was not paid. The law, according
to civil code article 1167, provides that the obligation of a person who fails to fulfill it shall
be executed at that person's cost.