Filing a Case Against a Contractor for an Unfinished House in the Philippines
(A practitioner-oriented guide as of 26 May 2025)
1. Core Legal Framework
| Source | Key Provisions | Practical Effect |
|---|---|---|
| Civil Code of the Philippines (Arts. 1713 – 1723 on “Contract for Piece of Work”) | - Contractor must finish the work in the manner, time, & quality agreed. - Owner may withdraw the work or terminate if the contractor delays or does poor work (Art. 1718, 1720). - Structural-defect liability: contractor (& architect/engineer) answer for 15 years if the building collapse is due to defects (Art. 1723). |
Forms the backbone of any civil complaint for specific performance, rescission with damages, or liquidated damages. |
| RA 4566 (Contractor’s License Law) + PCAB Rules | All contractors taking on ≥ ₱50,000 in construction work must be PCAB-licensed. | Working without a license is an administrative offense and a strong bargaining chip in negotiations or suit. |
| PD 1096 (National Building Code) & local building ordinances | Require building/occupancy permits and compliance with plans. | Non-compliance is evidence of negligence and may trigger municipal sanctions. |
| Republic Act 9285 (ADR Act) & CIAC Rules | Construction disputes can be arbitrated by the Construction Industry Arbitration Commission (CIAC). | Even without an express arbitration clause, a written construction contract often implies CIAC jurisdiction. |
| Revised Penal Code Art. 315(1)(b) (Estafa) | Misappropriating construction funds or accepting payment with intent not to build can be prosecuted criminally. | Opens the door to a criminal complaint & restitution, but requires proof of deceit or fraudulent intent. |
2. Common Breaches & Typical Causes of Action
Abandonment – contractor ceases work before completion. Civil remedy: rescission + reimbursement of payments + cost to hire a replacement. Criminal angle: estafa if payments were diverted.
Inordinate Delay – timeline overruns with no just cause. Civil remedy: specific performance + liquidated damages (if stipulated) or actual damages.
Defective / Non-conforming Work – substandard materials, deviation from plans. Civil remedy: either compel correction or rescind; claim cost of repair; invoke Art. 1723 if structural.
Unlicensed Contracting – contractor has no PCAB license. Administrative remedy: complaint before PCAB to suspend/revoke license and blacklist; civil action for refund of all payments under RA 4566 jurisprudence (work deemed void).
3. Pre-Litigation Steps
| Step | Why It Matters | Tips |
|---|---|---|
| Contract & Document Review | Establish scope, specs, milestones, liquidated-damage clause. | Gather plans, blueprints, permits, progress billing, receipts. |
| Put the Contractor in Default | Art. 1169 requires written demand before you can claim delay damages unless time is “of the essence.” | Send a notarized demand letter with a clear deadline. |
| Barangay (Katarungang Pambarangay) Mediation | Mandatory for disputes ≤ ₱400,000 between individuals in the same city/municipality. | Bring photos, affidavits, and the contract. Secure a Certificate to File Action on impasse. |
| Consider CIAC Mediation/Arbitration | Usually faster (6-9 months to award) and handled by technical arbiters. | File Request for Arbitration + pay filing fee (≈ 0.10 % of claim, min ₱10,000). |
| Expert Inspection | Independent engineer’s report quantifies % completion, defects, cost to finish. | Courts/arbitrators give great weight to technical findings. |
4. Choosing the Proper Forum
| Forum | When to Use | Filing Essentials |
|---|---|---|
| CIAC Arbitration | Any written construction contract (or its amendments) referring disputes to CIAC directly or by Republic Act 9285’s opt-in. | - Request for Arbitration (verified) - Contract + Statement of Claims - Filing fee (scaled) |
| Regular Civil Court | No arbitration clause or either party refuses CIAC. Jurisdiction: • MTC: claims ≤ ₱2 million (outside Metro Manila) / ≤ ₱400k (MM). • RTC: > those amounts. |
- Verified Complaint + cert. of non-forum shopping - Notarized documents - Docket fees (≈ 1 % of claim) |
| Small Claims Court | Pure money claims ≤ ₱1 million, no attorney needed. | Statement of Claim (SC-2), evidence attachments, ₱1,000 fee. |
| Criminal (Prosecutor’s Office) | Evidence of deceitful acceptance of payment or misappropriation. | Sworn complaint-affidavit, witnesses, receipts. |
| Administrative (PCAB) | Violations of RA 4566, defective/unsafe work, overcharging, etc. | Complaint Form, proof of violations, filing fee (₱5,000). |
5. Anatomy of a Civil Suit
- Complaint Filing → pay docket fees, clerk raffles case.
- Summons & Answer → contractor has 30 days to answer.
- Pre-Trial & Judicial Dispute Resolution (JDR) → mandatory settlement talks.
- Trial → present documentary, testimonial, and expert evidence; court-commissioned ocular inspection is common.
- Decision
- Appeal → RTC decisions to CA (15 days); CIAC awards to CA via Rule 43 petition (15 days).
- Execution → levy on contractor’s assets, garnish retention money, or enforce performance bond.
Average durations (absent settlement):
- CIAC: 6–9 months to award
- Regular Trial Court: 2–5 years to judgment (+ appeals)
6. Remedies & Damages Checklist
| Remedy | Statutory Basis | Proof Needed |
|---|---|---|
| Specific Performance | Art. 1165 CC | Contract + evidence of contractor’s capability to finish |
| Rescission & Restitution | Arts. 1191, 1385 CC | Material breach; payments made; cost to restore site |
| Actual Damages | Art. 2199 CC | Receipts of payments, cost-to-complete estimate |
| Liquidated Damages | Art. 2226 CC | Clause fixing per-day penalty; show delay |
| Moral & Exemplary Damages | Arts. 2217, 2232 CC | Bad-faith abandonment, mental anguish |
| Attorney’s Fees & Costs | Art. 2208 CC | Prove contractor’s obstinacy/bad faith |
| Retention Money | Usually 10 % withheld until completion; may be offset against owner’s losses. |
7. Criminal Estafa Primer (Art. 315 par. 1 (b))
| Element | What to Show |
|---|---|
| 1. Receipt of money/property by contractor | Official receipts, bank transfers |
| 2. Obligation to apply to the specific house project | Construction contract, scope of work |
| 3. Misappropriation or conversion | Stopped work despite full payment; diverted materials; refusal to return money |
| 4. Damage to the owner | Unfinished house, additional costs |
Penalty: Prision correccional to prision mayor (2 years-11 months + 1 day – 20 years) depending on amount. Prescriptive period: 15 years.
8. Administrative Levers
- PCAB Complaint – suspension/revocation of license; issuance of a Cease & Desist Order; blacklisting.
- DHSUD/HLURB (if part of a subdivision or condo project) – order to complete or refund; fines.
- Local Building Official – stop-work or demolition order for unsafe or non-compliant construction.
9. Evidence Package for a Solid Case
- Written Contract & Amendments
- Bills of Quantities, BOQ Progress Certifications
- Receipts / Bank Proof of Payment
- Construction Photos & Time-stamped Videos
- Expert Engineer’s Report (percentage accomplished, defects, cost-to-complete)
- Permits & Inspection Logs
- Correspondence (texts, emails, Viber chats)
- Demand Letters & Proof of Service
10. Prescription & Deadlines
| Cause of Action | Period to File | Anchor Point |
|---|---|---|
| Breach of written construction contract | 10 years | From date contractor defaulted or abandoned |
| Oral construction agreement | 6 years | Same |
| Quasi-delict (tort) | 4 years | When damage discovered |
| Criminal Estafa | 15 years | From commission/ last overt act |
| Administrative (PCAB) | None fixed, but file promptly while evidence fresh |
11. Practical Tips to Strengthen Your Position
- Stage Payments: tie disbursements to verifiable milestones, retaining at least 10 % until final punch-list sign-off.
- Performance Bond: request a surety (usually 15 % of contract price).
- Clear Variation-Order Process: put all change orders in writing with cost/time impact.
- Regular Site Diaries & Photo Logs: simple daily WhatsApp photos can win cases.
- Arbitration Clause: insert CIAC arbitration to avoid multi-year court dockets.
- Verify PCAB License: use the CIAP online portal or SMS-verify before signing.
12. Flowchart Snapshot
- Contract signed →
- Progress slows/halts →
- Demand letter (put in default) →
- Mediation (Barangay / CIAC) → • If settlement: close file. • If impasse:
- Choose forum (CIAC vs Court; Estafa complaint optional) →
- Present evidence & expert report →
- Decision / Award →
- Execution (levy, garnish, call bond)
Conclusion
Under Philippine law, an owner faced with an unfinished house is far from powerless. A layered toolkit—civil, criminal, and administrative—exists to compel completion, recover losses, or both. Start with meticulous documentation and a firm demand; escalate through mediation or CIAC arbitration where possible for speed; and be ready to prosecute in court or before PCAB if the contractor remains recalcitrant. By grounding your strategy in the Civil Code, RA 4566, and the Revised Penal Code, and by leveraging expert evidence, you can convert a stalled build into either a finished home or a compensatory judgment you can enforce.