Local Water Utilities Administration v. R.D. Policarpio & Co.

Summary

LWUA challenged the CIAC and CA rulings holding it solidarily liable with BCWD to pay RDPCI PHP84,439,378.18 for completed construction work. LWUA argued it was merely BCWD's agent and not a party to the construction contract. The Supreme Court denied the petition, finding that LWUA became a party to the contract through its approval requirement and extensive participation throughout the project. The Court applied Article 1207 of the Civil Code, ruling that the nature of the obligation required solidarity because: (1) LWUA maintained control over project funds and was obligated to pay the contractor directly; (2) the obligation was indivisible with intertwined responsibilities; and (3) subsequent acts of the parties demonstrated their true intention of shared liability. The decision affirmed the award of attorney's fees and arbitration costs, emphasizing that RDPCI was compelled to litigate due to the parties' failure to settle legitimate claims despite years of project completion and operational use.