Filinvest Land v. Hon. Court of Appeals

Summary

Filinvest Land, Inc. contracted Pacific Equipment Corporation to develop residential subdivisions for P12,470,000.00 with liquidated damages of P15,000.00 per day for delay. Despite three extensions, Pacific failed to complete by the final deadline of October 15, 1979. Filinvest took over the 94.53% completed project and sued for P3,990,000.00 in liquidated damages. A court commissioner found Pacific owed P1,881,867.66 for unpaid work. The trial court deemed the full penalty excessive and offset it against amounts due Pacific. The Court of Appeals and Supreme Court affirmed, applying Civil Code Article 1229 to equitably reduce the unconscionable penalty given substantial completion. The Supreme Court emphasized that courts have discretion to reduce penalties when there is partial compliance, particularly where the penalty appears disproportionate to the remaining uncompleted work and the contractor acted in good faith.