FACTS:

Respondent Viking Metal Industries, Incorporated (VMI) entered into a contract with Techno Development & Chemical Corporation (Techno) for the fabrication of steel items for the PNOC-EDC First 40 MW Mindanao-Gcothermal Project. VMI subcontracted the painting work to PNOC-EDC. However, the fabricated items were found to have premature rusting of the coated surfaces, causing delays in the project. VMI incurred delays and committed miscalculations in the delivery of structural supports. PNOC-EDC executed a Fabrication Contract with VMI but reduced the contract price due to deficiencies and non-conformance of the fabricated items. VMI filed a Complaint for Sum of Money and Damages against PNOC-EDC and Techno, seeking the release of withheld amount and damages for the cost of rectification. The trial court ruled in favor of VMI, ordering PNOC-EDC to pay the withheld amount and Techno to pay for the cost of rectification. Techno appealed the decision, arguing that it had no obligation to pay for the rectification and that VMI had an unpaid obligation to Techno. The Court of Appeals ruled that VMI failed to prove its actual expenditure for the rectification and thus its claim for damages failed.

Viking Metal Industries, Inc. (VMI) entered into a contract with Techno Construction Corporation (Techno) for the fabrication of steel items for the 1200MW Geothermal Plant (MakBan Project). VMI subcontracted the painting work to PNOC-Energy Development Corporation (PNOC-EDC). Disputes arose regarding the quality of the painting work done by PNOC-EDC, with VMI claiming damages amounting to Php550,000. VMI failed to provide sufficient evidence to support its claim of actual damages. The Regional Trial Court (RTC) awarded VMI the unpaid balance of the Contract Price against PNOC-EDC but reduced the amount and deducted penalty charges. The RTC also awarded attorney's fees. PNOC-EDC appealed the decision, arguing that the award of actual damages and attorney's fees was not justified.

ISSUES:

1. Whether the Court of Appeals erred in omitting to consider the counterclaim of Techno against Viking Metal Industries (VMI) for unpaid purchases of paint products.

2. Whether Techno is entitled to its counterclaim against VMI.

3. Whether the Court of Appeals erred in not addressing Techno's counterclaim against VMI.

4. Whether Techno has established its counterclaim by preponderance of evidence.

5. Whether the lower courts erred in failing to pass upon Techno's counterclaim for the payment of the unpaid paint products.

6. Whether Techno is entitled to the payment of the unpaid paint products.

7. Whether or not the imposition of interest on the sum of money owed is proper.

RULING:

1. The Court of Appeals erred in omitting and failing to consider the counterclaim of Techno against VMI. Techno established by a preponderance of evidence that VMI failed to pay for Techno's products in the amount of Php 166,750.00. The appellate court's decision mentioned the counterclaim but failed to resolve it without providing any explanation or legal basis for the omission. Techno presented evidence such as a statement of account, invoices and delivery receipts, and testimony from its chief accountant and president to prove VMI's unpaid obligation. VMI's president even admitted knowledge of the unpaid obligation. VMI failed to present rebuttal evidence and ultimately withdrew its attempted rebuttal evidence. Therefore, Techno is entitled to its counterclaim.

2. The Court ruled in favor of Techno.

3. The Court finds that the lower courts failed to definitively deny Techno's counterclaim for the payment of the unpaid paint products. Therefore, the Court reverses the implicit denials and grants Techno's counterclaim.

4. Techno is entitled to the payment of the unpaid paint products purchased by VMI.

5. The Supreme Court ruled that the imposition of interest on the sum of money owed is proper. The bank is entitled to an interest rate of 12% per annum to be computed from the date of default. Additionally, interest at the rate of 6% per annum is to be imposed from the date of promulgation of the Decision until full payment.

PRINCIPLES:

• A court must consider and resolve all issues raised by the parties.

• A party claiming a right must prove it by a preponderance of evidence.

• Failure to present rebuttal evidence may be construed as an admission of the opposing party's claim.

• The Court's jurisdiction is limited to reviewing errors of law, and findings of fact of the Court of Appeals are conclusive upon the Court, unless certain exceptions are present.

• Preponderance of evidence refers to the comparative weight of the evidence presented by the opposing parties and is synonymous with greater weight of the evidence or greater weight of the credible evidence.

• For a counterclaim to be valid, it must be supported by evidence and not refuted by the opposing party.

• Failure to pass upon a claim in the absence of any showing that the court took into consideration the allegations and evidence presented to support it does not definitively deny the claim (Notwithstanding the implied denial by the lower courts, the court may still reverse and grant the counterclaim if the evidence supports it).

• Unjust enrichment due to the failure to make remuneration for property or benefits received cannot be countenanced and must be corrected by the court.

• To justify an award for exemplary damages, the wrongful act must be accompanied by bad faith and the guilty party must have acted in a wanton, fraudulent, reckless, or malevolent manner.

• Attorney's fees must be computed based on the stipulation in the contract, if applicable.

• Interest must be charged at the rate agreed upon in the contract or in accordance with the provisions of the Civil Code.

• Banks are entitled to an interest rate on loans or debts owed to them.

• The interest rate may be computed from the date of default or from the date of promulgation of the court's decision.

• The interest rate to be imposed may vary depending on the circumstances of the case.