Kalalo vs.

Luz 34 SCRA 377 ZALDIVAR, J / kmedl

SUBJECT MATTER: Extinguish of Obligations > Payment or Performance > What is to be paid Identity
CASE SUMMARY: Kalalo sued Luz for the latter firms inability to pay in full the fees that were due for the
engineering services rendered by the former. SC upheld RTC decision ordering Luz to pay Kalalo.

DOCTRINES: Art 1431 Through estoppel an admission or representation is rendered conclusive upon the person
making it, and cannot be denied or disproved as against the person relying thereon.
Elements of Estopel: (1) conduct amounting to false representation or concealment of material facts, or at least
calculated to convey the impression that the facts are otherwise than, and inconsistent with, those which the party
subsequently attempts to assert, (2) intent, or at least expectation that this conduct shall be acted upon by, or at least
influence, that other part, (3) knowledge, actual or constructive, of the real facts

FACTS:
Octavio Kalalo, a licensed civil engineer doing business under the firm name of O. A. Kalalo and Associates
entered into an agreement with Alfredo Luz, a licensed architect, under firm name of A. J. Luz and Associates,
whereby the former was to render engineering design services to the latter for fees. The services include design
computation and sketches, contract drawing and technical specifications of all engineering phases of the project
designed by O. A. Kalalo, bill of quantities and cost estimate, and consultation and advice during construction
relative to the work. The fees were percentages of the architects fee: structural engineering, 12-14%, electrical
engineering, 2-1 %. It was supplemented by a clarification to letter-proposal providing that the schedule of
engineering fees does not cover: D. Foundation soil exploration, testing and evaluation; E. Projects that are
principally engineering works such as industrial plants, and O. A. Kalalo reserve the right to increase fees on
projects which cost less than P100,000. Appellee rendered engineering services to appellant in several projects.
(see page 341 for list of 10 projs)
Kalalo sent to Luz a statement of account and an itemized statement (Exhibit 1-A) of Luz account where the total
engineering fee amounted to P 116,565 deducting P 57,000 from previous payments leaving a balance due of
P59,565.
Luz sent to Kalalo a resume of fees due amounting to 10,861.08 instead of the amount claimed by Luz. Luz sent
a check which Kalalo refused to accept as full payment of the balance of the fees.
Kalalo filed a complaint against Luz with 4 causes of action.
1. Kalalo alleged that for services rendered in connection with the listed projects, the due fees were: $20,000 and
P100,204.46 excluding interests, of which only P69,323.21 had been paid, leaving $28,000 and P30,881.25
2. Kalalo claimed P17,000 as consequential and moral damages
3. Kalalo claimed P55,000 as moral damages, attorneys fees and expenses of litigation
4. Kalalo claimed P25,000 as actual damages, and also for attorneys fees and expenses of litigation
Luz answered that Kalalo rendered engineering services alleged in the first cause, but also averred that some of
the services were not in accordance with the agreement and Kalalos claims were not justified by the services
they rendered and that the aggregate amount should only be P80, 336.29 of which P69,475.21 had already been
paid, leaving only a balance of P10,861.08. Luz denied liability for any damage claimed by Kalalo in claims, 2,3
and 4.
Luz argued that Kalalo has no cause of action due to estoppel, regarding the claim for the Menzi project was
premature because Luz has not yet been paid for it and that the services of Kalalo were not complete or were
performed in violation of the agreement and/or were unsatisfactory. Luz also set up counterclaim for actual and
mroal damages.
RTC authorized the case to be heard by a Commissioner, who then rendered a report that the amount due to Kalalo
was $28,000, 20% of the $140,000 and P51,539.91 for other projects less P69,475.46 and attorneys fees. Two
issues at the trial court: WON under the facts stated in the Report, the doctrine of estoppel would apply and WON
the recommendation in the Report that the payment of the amount due to the plaintiff in dollars was legally
permissible
Court rendered in favor of Kalalo. An appeal was brought to SC raising questions of law. During pendency of
case, Kalalo file a petition for the issuance of a write of attachment under Sec 1 (f) of Rule 57 of ROC upon the
ground that Luz is presently residing in Canada as a permanent resident. Court resolved, upon posting of P10,000
bond, to issue writ of attachment and ordered Provincial Sheriff of Rizal to attach estate, real, and personal of Luz
to the value not less than P140,000.
ISSUE/S:
1. WON the lower court in not declaring and holding Kalalos letter and the statement of account had the effect,
cumulatively or alternatively, of placing Kalalos in estoppel from modifying representations made in said
exhibits, or of making Kalalo otherwise bound by said representations, or of being of decisive weight in
determining the true intent of the parties as to the nature and extent of the engineering services rendered
and/or the amount of fees due - NO
2. WON the lower court erred in declaring and holding that the balance owing from Luz to Kalalo on the IRRI
Project should be paid on the basis of the rate of exchange of the USD to PHP at the time of payment of
judgment - NO
3. WON the lower court erred in not declaring and holding that the aggregate amount of the balance due from
Luz to Kalalo is only P15,792.05 - NO
4. WON lower court erred in awarding attorneys fees in the sum of P8,000 despite the commissioners finding,
which Kalalo has accepted and has not questioned that said fee P5,000 - NO
5. WON lower court erred in not granting Luz relief on his counter-claim - NO

HOLDING:
1. NO. Under Art 1431: Through estoppel an admission or representation is rendered conclusive upon the person
making it, and cannot be denied or disproved as against the person relying thereon. Meaning, in order that estoppel
may apply to the person, to whom representations have been made and who claims the estoppel in his favor, he
must have been influenced or relied or acted on such representations. It is established that Exhibit 1-A was written
by Kalalo through ignorance or mistake 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.
The elements of estoppel are:
Not present - (1) conduct amounting to false representation or concealment of material facts, or at least calculated
to convey the impression that the facts are otherwise than, and inconsistent with, those which the party
subsequently attempts to assert in the report, Luz testified that he had not yet consulted the 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.
Not present - (2) intent, or at least expectation that this conduct shall be acted upon by, or at least influence, that
other part Luz didnt rely on the representations in Exhibit 1-A and denied the information in the accounts stated.
Not present - (3) knowledge, actual or constructive, of the real facts 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.
2. NO. 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 121.1 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 commissioners
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.
3. NO. What Luz submitted to the RTC for resolution did not include the question of correctness or propriety of the
amounts due to Kalalo in connection with the different projects for which Luz had rendered engineering services.
It is too late to raise this.
4. NO. RTC had adopted the report of the Commissioner and in adopting the report the RTC is deemed to have
adopted reasons given by the Commissioner in awarding attorneys fee at P8,000. It is within RTCs authority to
increase recommendations by virtue of Sec 11 Rule 33 of ROC. 2
5. NO. SC finds it unnecessary to dwell further on this last assignment of error, given that the other four were not
upheld.

Decision affirmed.

1
In Circular No. 121 of the CBP (March 2, 1961), amending an earlier Circular No. 117 (in force until Jan 21, 1962)
when it was amended by Circular No. 133
2
The court may adopt, modify, or reject the report of the commissioner, in whole or in part