Consolidated Industrial Case 2

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CONSOLIDATED INDUSTRIAL GASES, INC.,Petitioner, vs. ALABANG MEDICALCENTER,Respondent.G.R. No. 181983, November 13, 2013REYES, J.:

!"#$%CIGI, as contractor and AMC, as owner, entered into a contract whereby theformer bound itself to provide labor and materials for the installation of a medical gaspipeline system for the first, second and third floors Phase ! installation pro"ect# of thehospital for the contract price of P$,%&',()&.!% which AMC duly paid in full.

*he herein legal controversy arose after the parties entered into another agreement onthis time for the continuation of the centrali+ed medical oygen and vacuum pipelinesystem in the hospital-s fourth fifth floors Phase ) installation pro"ect# at the cost ofP),)'(,/00.0). *his second contract followed the same terms and conditions of thecontract for the Phase ! installation pro"ect.

CIGI claimed that AMC-s obligation to pay the outstanding balance of the contract pricefor the Phase ) installation pro"ect is already due and demandable pursuant to Article II,page 0 of the contract stating that the pro"ect shall be paid through progress billingwithin !& days from the date of receipt of original invoice.

AMC averred that its obligation to pay the balance of the contract price has notyet accrued because CIGI still has not turned over a complete and functional medicaloygen and vacuum pipeline system. AMC alleged that CIGI has not yet tested Phases! and ) which constitute one centrali+ed medical oygen and vacuum pipeline systemof the hospital despite substantial payments already made.

AMC filed a Motion for 1eave of Court to Admit Amended Answer with Counterclaimssee2ing, in addition, the rescission of the sub"ect contracts, return of its paymentof P!3,%&',333.33 for an unfinished pro"ect. *he R*C denied the motion. AMCappealed to the CA, where it granted the appeal and reversed the R*C "udgment.

AMC moved for partial reconsideration raising the propriety of its counterclaim for therefund of theP!3,%&',()&.!% paid to CIGI since the pro"ect never became operational.

In its Comment/!and own Motion for Reconsideration/),CIGI countered that a refundwill amount to rescission, an issue which was denied deliberation by the R*C. As such,the same cannot be raised and threshed out for the first time on appeal. CIGI shifted theblame to AMC and claims that it could have easily conducted a test run on the system ifthe latter supplied the electricity needed in accordance with the contract. Anent thealleged defective parts, CIGI asserted that it is highly suspect for AMC to raise the samefour years after the filing of the complaint. CIGI also stated that being idle and eposedto various elements, the condition of certain parts of the system will definitelydeteriorate.

*he CA issued an Amended 4ecision. It too2 into consideration AMC-s manifestationthat it is willing to pay the balance of P!,)'(,/00.0) on the condition that CIGI will turnover a fully functional centrali+ed medical oygen and vacuum pipeline system. /0*heCA found that CIGI reneged on its obligation under the contract when it failed to test runthe installed system. *hus, the dispositive portion of the 4ecision stated that, upon56ailure of CIGI to turn over a fully functional centrali+ed medical oygen and vacuumpipeline system will result to the rescission of the contract.7

I$$&e% 8hether or not the breach committed by CIGI "ustify the rescission of theinstallation contracts.

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R&'()*% 9o, AMC has no legal basis to demand the rescission of the installationcontracts. :;R