G.R. No. 172454 ; August 17, 2007
UNIWIDE SALES, INC., Petitioner, vs. MIRAFUENTE & NG, INC., Respondent.

FACTS

Petitioner Uniwide Sales, Inc. engaged respondent Mirafuente & Ng, Inc., an architectural firm, under a Design Services Agreement dated December 13, 1993, for the planning and design of a proposed mall. The contract stipulated a fee of ₱2,500,000, payable in phases: 10% upon signing, 15% for Schematic Design, 35% for Design Development, 35% for Construction Document Phase, and 5% for the Construction Phase. Article 5 provided that if work is suspended or abandoned due to causes not attributable to the architect, the architect shall be paid fees due on the stage of suspension. The agreement did not specify a period for completion.
On August 16, 1995, respondent submitted master plans and a complete package of architectural drawings, referencing a prior submission on August 9, 1995, to cover a Change Order. However, on August 22, 1995, petitioner, through its consultant, terminated respondent’s services effective immediately, citing a decision to stop all works. Respondent subsequently demanded payment of ₱437,500 for the Construction Document Phase and ₱400,000 for the Change Order. Petitioner replied it was reconciling records and requested supporting documents but ultimately did not pay.

ISSUE

Whether petitioner is liable to pay respondent the claimed fees for the Construction Document Phase and the Change Order despite the termination of the contract.

RULING

Yes, petitioner is liable. The Supreme Court affirmed the Court of Appeals’ decision. The legal logic rests on the principle that obligations arising from contracts have the force of law and must be complied with in good faith under Article 1159 of the Civil Code. The Court found that respondent had substantially performed its contractual obligations prior to termination. The submission of the complete architectural plans and working drawings on August 9, 1995, which petitioner’s own project manager admitted were used as the basis for the commenced substructure works, demonstrated that the Construction Document Phase was completed. Since the contract deemed work 95% complete upon submission of complete working drawings, respondent was entitled to the corresponding fee for that phase.
Regarding the Change Order, the contract under Article 5 expressly entitled respondent to additional compensation for changes requested by the owner. Respondent’s submission of revised plans incorporating agreed changes constituted a valid demand for this fee. Petitioner’s unilateral termination, after respondent’s performance and without attributing any fault to respondent, did not extinguish the obligation to pay for services already rendered. The termination fell under the contract’s scenario of suspension/abandonment not due to the architect’s fault, triggering the payment clause. Petitioner’s failure to pay despite demand constituted a breach of contract.