THIRD DIVISION back to Manila.
back to Manila.[8] Notwithstanding this instruction, all
G.R. No. 167022, April 04, 2011
LICOMCEN INCORPORATED, PETITIONER,
VS. FOUNDATION SPECIALISTS, INC.,
RESPONDENT.
[G.R. NO. 169678]
FOUNDATION SPECIALISTS, INC.,
PETITIONER, VS. LICOMCEN
INCORPORATED, RESPONDENT.
DECISION
BRION, J.:
THE FACTS
The petitioner, LICOMCEN Incorporated
(LICOMCEN), is a domestic corporation engaged in
the business of operating shopping malls in the country.
In March 1997, the City Government of Legaspi
awarded to LICOMCEN, after a public bidding, a lease
contract over a lot located in the central business district
of the city. Under the contract, LICOMCEN was
obliged to finance the construction of a commercial
complex/mall to be known as the LCC Citimall
(Citimall). It was also granted the right to operate and
manage Citimall for 50 years, and was, thereafter,
required to turn over the ownership and operation to
the City Government.[1]
For the Citimall project, LICOMCEN hired E.S. de
Castro and Associates (ESCA) to act as its engineering
consultant. Since the Citimall was envisioned to be a
high-rise structure, LICOMCEN contracted respondent
Foundation Specialists, Inc. (FSI) to do initial
construction works, specifically, the construction and
installation of bored piles foundation. [2] LICOMCEN
and FSI signed the Construction Agreement,[3] and the
accompanying Bid Documents[4] and General
Conditions of Contract[5] (GCC) on September 1, 1997.
Immediately thereafter, FSI purchased the materials
needed for the Citimall[6] project and began working in
order to meet the 90-day deadline set by LICOMCEN.
On December 16, 1997, LICOMCEN sent word to FSI
that it was considering major design revisions and the
suspension of work on the Citimall project. FSI replied
on December 18, 1997, expressing concern over the
revisions and the suspension, as it had fully mobilized
its manpower and equipment, and had ordered the
delivery of steel bars. FSI also asked for the payment of
accomplished work amounting to P3,627,818.00.[7] A
series of correspondence between LICOMCEN and
FSI then followed.
ESCA wrote FSI on January 6, 1998, stating that the
revised design necessitated a change in the bored piles
requirement and a substantial reduction in the number
of piles. Thus, ESCA proposed to FSI that only 50% of
the steel bars be delivered to the jobsite and the rest be shipped
FSI and LICOMCEN then proceeded to draft the
the ordered steel bars arrived in Legaspi City on January
14, 1998.[9]
On January 15, 1998, LICOMCEN instructed FSI to
"hold all construction activities on the project,"[10] in
view of a pending administrative case against the
officials of the City Government of Legaspi and
LICOMCEN filed before the Ombudsman (OMB-
ADM-1-97-0622).[11] On January 19, 1998, ESCA
formalized the suspension of construction activities and
ordered the construction's demobilization until the case
was resolved.[12] In response, FSI sent ESCA a letter,
dated February 3, 1998, requesting payment of costs
incurred on account of the suspension which totaled
P22,667,026.97.[13] FSI repeated its demand for
payment on March 3, 1998.[14]
ESCA replied to FSI's demands for payment on
March 24, 1998, objecting to some of the
claims.[15] It denied the claim for the cost of the steel
bars that were delivered, since the delivery was done in
complete disregard of its instructions. It further
disclaimed liability for the other FSI claims based on the
suspension, as its cause was not due to LICOMCEN's
fault. FSI rejected ESCA's evaluation of its claims
in its April 15, 1998 letter.[16]
On March 14, 2001, FSI sent a final demand letter
to LICOMCEN for payment of
P29,232,672.83.[17] Since LICOMCEN took no
positive action on FSI's demand for payment, [18] FSI
filed a petition for arbitration with the Construction
Industry Arbitration Commission (CIAC) on October
2, 2002, docketed as CIAC Case No. 37-2002.[19] In the
arbitration petition, FSI demanded payment of the
following amounts:
a. Unpaid accomplished work
P 1,264,404.12
billings................
b. Material costs at
15,143,638.51
site...................................
c. Equipment and labor standby
3,058,984.34
costs.................
d. Unrealized gross
9,023,575.29
profit................................
e. Attorney's
300,000.00
fees.........................................
f. Interest expenses equivalent to 15% of
................................. the total claim
LICOMCEN again denied liability for the amounts
claimed by FSI. It justified its decision to indefinitely
suspend the Citimall project due to the cases filed
against it involving its Lease Contract with the City
Government of Legaspi. LICOMCEN also assailed the
CIAC's jurisdiction, contending that FSI's claims were
matters not subject to arbitration under GC-61 of the
GCC, but one that should have been filed before the
regular courts of Legaspi City pursuant to GC-05.[20]
During the preliminary conference of January 28, 2003,
LICOMCEN reiterated its objections to the CIAC's
jurisdiction, which the arbitrators simply noted. Both
Engineer and Contractor.
Terms of Reference.[21]
On February 4, 2003, LICOMCEN, through a
collaborating counsel, filed its Ex Abundati Ad Cautela
Omnibus Motion, insisting that FSI's petition before the
CIAC should be dismissed for lack of jurisdiction; thus,
it prayed for the suspension of the arbitration
proceedings until the issue of jurisdiction was finally
settled. The CIAC denied LICOMCEN's motion in its
February 20, 2003 order,[22] finding that the question of
jurisdiction depends on certain factual conditions that
have yet to be established by ample evidence. As the
CIAC's February 20, 2003 order stood uncontested, the
arbitration proceedings continued, with both parties
actively participating.
The CIAC issued its decision on July 7, 2003,[23] ruling
in favor of FSI and awarding the following amounts:
a. Unpaid accomplished work P
billings................ 1,264,404.12
b. Material costs at
14,643,638.51
site.................................
c. Equipment and labor standby
2,957,989.94
costs...............
d. Unrealized gross
5,120,000.00
profit..............................
LICOMCEN was also required to bear the costs of
arbitration in the total amount of P474,407.95.
LICOMCEN appealed the CIAC's decision before the
Court of Appeals (CA). On November 23, 2004, the
CA upheld the CIAC's decision, modifying only the
amounts awarded by (a) reducing LICOMCEN's
liability for material costs at site to P5,694,939.87, and
(b) deleting its liability for equipment and labor standby
costs and unrealized gross profit; all the other awards
were affirmed.[24] Both parties moved for the
reconsideration of the CA's Decision; LICOMCEN's
motion was denied in the CA's February 4, 2005
Resolution, while FSI's motion was denied in the CA's
September 13, 2005 Resolution. Hence, the parties filed
their own petition for review on certiorari before the
Court.[25]
LICOMCEN's Arguments
LICOMCEM principally raises the question of the
CIAC's jurisdiction, insisting that FSI's claims are non-
arbitrable. In support of its position, LICOMCEN cites
GC-61 of the GCC:
GC-61. DISPUTES AND ARBITRATION
Should any dispute of any kind arise between the
LICOMCEN INCORPORATED and the Contractor
[referring to FSI] or the Engineer [referring to ESCA]
and the Contractor in connection with, or arising out
of the execution of the Works, such dispute shall first
be referred to and settled by the LICOMCEN,
INCORPORATED who shall within a period of thirty
(30) days after being formally requested by either party
to resolve the dispute, issue a written decision to the
Such decision shall be final and binding upon the parties
and the Contractor shall proceed with the execution of
the Works with due diligence notwithstanding any
Contractor's objection to the decision of the Engineer.
If within a period of thirty (30) days from receipt of the
LICOMCEN, INCORPORATED's decision on the
dispute, either party does not officially give notice to
contest such decision through arbitration, the said
decision shall remain final and binding. However,
should any party, within thirty (30) days from receipt of
the LICOMCEN, INCORPORATED's decision,
contest said decision, the dispute shall be submitted for
arbitration under the Construction Industry Arbitration
Law, Executive Order 1008. The arbitrators appointed
under said rules and regulations shall have full power to
open up, revise and review any decision, opinion,
direction, certificate or valuation of the LICOMCEN,
INCORPORATED. Neither party shall be limited to
the evidence or arguments put before the LICOMCEN,
INCORPORATED for the purpose of obtaining his
said decision. No decision given by the LICOMCEN,
INCORPORATED shall disqualify him from being
called as a witness and giving evidence in the arbitration.
It is understood that the obligations of the
LICOMCEN, INCORPORATED, the Engineer and
the Contractor shall not be altered by reason of the
arbitration being conducted during the progress of the
Works.[26]
LICOMCEN posits that only disputes "in connection
with or arising out of the execution of the Works" are
subject to arbitration. LICOMCEN construes the
phrase "execution of the Works" as referring to the
physical construction activities, since "Works" under the
GCC specifically refer to the "structures and facilities"
required to be constructed and completed for the
Citimall project.[27] It considers FSI's claims as mere
contractual monetary claims that should be litigated
before the courts of Legaspi City, as provided in GC-05
of the GCC:
GC-05. JURISDICTION
Any question between the contracting parties that
may arise out of or in connection with the Contract,
or breach thereof, shall be litigated in the courts of
Legaspi City except where otherwise specifically stated
or except when such question is submitted for
settlement thru arbitration as provided herein.[28]
LICOMCEN also contends that FSI failed to comply
with the condition precedent for arbitration laid down
in GC-61 of the GCC. An arbitrable dispute under GC-
61 must first be referred to and settled by LICOMCEN,
which has 30 days to resolve it. If within a period of 30
days from receipt of LICOMCEN's decision on the
dispute, either party does not officially give notice to
contest such decision through arbitration, the said
decision shall remain final and binding. However,
should any party, within 30 days from receipt of
LICOMCEN's decision, contest said decision, the
dispute shall be submitted for arbitration under the
Construction Industry Arbitration Law.
LICOMCEN considers its March 24, 1998 letter as its
final decision on FSI's claims, but declares that FSI's
reply letter of April 15, 1998 is not the "notice to
contest" required by GC-61 that authorizes resort to
arbitration before the CIAC. It posits that nothing in
FSI's April 15, 1998 letter states that FSI will avail of
arbitration as a mode to settle its dispute with
LICOMCEN. While FSI's final demand letter of March
14, 2001 mentioned its intention to refer the matter to
arbitration, LICOMCEN declares that the letter was
made three years after its March 24, 1998 letter, hence,
long after the 30-day period provided in GC-
61. Indeed, FSI filed the petition for arbitration with
the CIAC only on October 2, 2002.[29] Considering
FSI's delays in asserting its claims, LICOMCEN also
contends that FSI's action is barred by laches.
With respect to the monetary claims of FSI,
LICOMCEM alleges that the CA erred in upholding its
liability for material costs at site for the reinforcing steel
bars in the amount of P5,694,939.87, computed as
follows[30]:
2nd initial rebar requirements purchased
from Pag-Asa Steel Works,
Inc......................................
Reinforcing steel bars purchased from
ARCA Industrial Sales (total net weight of
744,197.66 kilograms) - 50% of net 5,395,433.0
amount due................... 4 Proof of damage to FSI is not required for
Subtotal.................................................. 6,194,939.8
..
Less
Purchase cost of steel bars by Ramon
Quinquileria............................................
TOTAL LIABILITY OF LICOMCEN
5,694,939.8
TO FSI FOR MATERIAL COSTS AT
7 an arbitral machinery that would expeditiously settle
SITE..................
Citing GC-42(2) of the GCC, LICOMCEN says it shall
be liable to pay FSI "[t]he cost of materials or goods
reasonably ordered for the Permanent or
Temporary Works which have been delivered to the
Contractor but not yet used, and which delivery has
been certified by the Engineer."[31] None of these
requisites were allegedly complied with. It contends
that FSI failed to establish that the steel bars delivered
in Legaspi City, on January 14, 1998, were for the
Citimall project. In fact, the steel bars were delivered
not at the site of the Citimall project, but at FSI's
batching plant called Tuanzon compound, a few
hundred meters from the site. Even if delivery to
Tuanzon was allowed, the delivery was done in violation
of ESCA's instruction to ship only 50% of the
materials. Advised as early as December 1997 to
suspend the works, FSI proceeded with the delivery of
the steel bars in January 1998. LICOMCEN declared
that it should not be made to pay for costs that FSI
willingly incurred for itself.[32]
Assuming that LICOMCEN is liable for the costs of the
steel bars, it argues that its liability should be minimized
by the fact that FSI incurred no actual damage from the
purchase and delivery of the steel bars. During the
suspension of the works, FSI sold 125,000 kg of steel
bars for P500,000.00 to a third person (a certain Ramon
Quinquileria). LICOMCEN alleges that FSI sold the
steel bars for a ridiculously low price of P 4.00/kilo,
when the prevailing rate was P20.00/kilo. The sale
could have garnered a higher price that would offset
LICOMCEN's liability. LICOMCEN also wants FSI to
account for and deliver to it the remaining 744 metric
tons of steel bars not sold. Otherwise, FSI would be
unjustly enriched at LICOMCEN's expense, receiving
payment for materials not delivered to LICOMCEN.[33]
LICOMCEN also disagrees with the CA ruling that
declared it solely liable to pay the costs of
arbitration. The ruling was apparently based on the
finding that LICOMCEN's "failure or refusal to meet its
obligations, legal, financial, and moral, caused FSI to
bring the dispute to arbitration."[34] LICOMCEN
asserts that it was FSI's decision to proceed with the
delivery of the steel bars that actually caused the
dispute; it insists that it is not the party at fault which
should bear the arbitration costs.[35]
FSI's Arguments
P
FSI takes exception to the CA ruling that modified the
799,506.83
amount for material costs at site, and deleted the awards
for equipment and labor standby costs and unrealized
profits.
LICOMCEN to be liable for the material costs of the
7 steel bars. Under GC-42, it is enough that the materials
were delivered to the contractor, although not used. FSI
said that the 744 metric tons of steel bars were ordered
and paid for by it for the Citimall project as early as
November 1997. If LICOMCEN contends that these
were procured for other projects FSI also had in
(500,000.00)
Legaspi City, it should have presented proof of this
claim, but it failed to do so.[36]
ESCA's January 6, 1998 letter simply suggested that only
50% of the steel bars be shipped to Legaspi City; it was
not a clear and specific directive. Even if it was, the
steel bars were ordered and paid for long before the
notice to suspend was given; by then, it was too late to
stop the delivery. FSI also claims that since it believed
in good faith that the Citimall project was simply
suspended, it expected work to resume soon after and
decided to proceed with the shipment.[37]
Contrary to LICOMCEN's arguments, GC-42 of the
GCC does not require delivery of the materials at the site
of the Citimall project; it only requires delivery to the
contractor, which is FSI. Moreover, the Tuanzon
compound, where the steel bars were actually delivered,
is very close to the Citimall project site. FSI contends
that it is a normal construction practice for contractors
to set up a "staging site," to prepare the materials and
equipment to be used, rather than stock them in the
crowded job/project site. FSI also asserts that it was
useless to have the delivery certified by ESCA because
by then the Citimall project had been suspended. It
would be unfair to demand FSI to perform an act that
ESCA and LICOMCEN themselves had prevented
from happening.[38]
The CA deleted the awards for equipment and labor
standby costs on the ground that FSI's documentary
evidence was inadequate. FSI finds the ruling
erroneous, since LICOMCEN never questioned the list
of employees and equipments employed and rented by
FSI for the duration of the suspension.[39]
FSI also alleges that LICOMCEN maliciously and
unlawfully suspended the Citimall project. While
LICOMCEN cited several other cases in its petition for
review on certiorari as grounds for suspending the works,
its letters/notices of suspension only referred to one
case, OMB-ADM-1-97-0622, an administrative case
before the Ombudsman that was dismissed as early as
October 12, 1998. LICOMCEN never notified FSI of
the dismissal of this case. More importantly, no
restraining order or injunction was issued in any of
these cases to justify the suspension of the Citimall
project.[40] FSI posits that LICOMCEN's true intent was
to terminate its contract with it, but, to avoid paying
damages for breach of contract, simply declared it as
"indefinitely suspended." That LICOMCEN conducted
another public bidding for the "new designs" is a telling
indication of LICOMCEN's intent to ease out FSI.[41]
Thus, FSI states that LICOMCEN's bad faith in
indefinitely suspending the Citimall project entitles it to
claim unrealized profit. The restriction under GC-41
that "[t]he contractor shall have no claim for anticipated
profits on the work thus terminated,"[42] will not apply
because the stipulation refers to a contract lawfully and
properly terminated. FSI seeks to recover unrealized
profits under Articles 1170 and 2201 of the Civil Code
THE COURT'S RULING
The jurisdiction of the CIAC
The CIAC was created through Executive Order No.
1008 (E.O. 1008), in recognition of the need to establish
construction industry disputes. The prompt resolution
of problems arising from or connected with the
construction industry was considered of necessary and
vital for the fulfillment of national development goals,
as the construction industry provides employment to a
large segment of the national labor force and is a leading
contributor to the gross national product.[43] Section 4
of E.O. 1008 states:
Sec. 4. Jurisdiction. The CIAC shall have original and
exclusive jurisdiction over disputes arising from, or
connected with, contracts entered into by parties
involved in construction in the Philippines, whether
the dispute arises before or after the completion of
the contract, or after the abandonment or breach
thereof. These disputes may involve government or
private contracts. For the Board to acquire jurisdiction,
the parties to a dispute must agree to submit the same
to voluntary arbitration.
The jurisdiction of the CIAC may include but is not
limited to violation of specifications for materials and
workmanship; violation of the terms of agreement;
interpretation and/or application of contractual time
and delays; maintenance and defects; payment, default
of employer or contractor and changes in contract cost.
Excluded from the coverage of this law are disputes
arising from employer-employee relationships which
shall continue to be covered by the Labor Code of the
Philippines.
The jurisdiction of courts and quasi-judicial bodies is
determined by the Constitution and the law.[44] It
cannot be fixed by the will of the parties to a dispute; [45]
the parties can neither expand nor diminish a tribunal's
jurisdiction by stipulation or agreement. The text of
Section 4 of E.O. 1008 is broad enough to cover any
dispute arising from, or connected with construction contracts,
whether these involve mere contractual money claims or
execution of the works.[46] Considering the intent
behind the law and the broad language adopted,
LICOMCEN erred in insisting on its restrictive
interpretation of GC-61. The CIAC's jurisdiction cannot
be limited by the parties' stipulation that only disputes in
connection with or arising out of the physical
construction activities (execution of the works) are
arbitrable before it.
In fact, all that is required for the CIAC to acquire
jurisdiction is for the parties to a construction
contract to agree to submit their dispute to
arbitration. Section 1, Article III of the 1988 CIAC
Rules of Procedure (as amended by CIAC Resolution
Nos. 2-91 and 3-93) states:
Section 1. Submission to CIAC Jurisdiction. - An
arbitration clause in a construction contract or a
submission to arbitration of a construction dispute shall
be deemed an agreement to submit an existing or
future controversy to CIAC jurisdiction,
notwithstanding the reference to a different
arbitration institution or arbitral body in such
contract or submission. When a contract contains a
clause for the submission of a future controversy to
arbitration, it is not necessary for the parties to enter
into a submission agreement before the claimant may
invoke the jurisdiction of CIAC.
An arbitration agreement or a submission to arbitration
shall be in writing, but it need not be signed by the
parties, as long as the intent is clear that the parties
agree to submit a present or future controversy arising
from a construction contract to arbitration.
In HUTAMA-RSEA Joint Operations, Inc. v. Citra Metro
Manila Tollways Corporation,[47] the Court declared that
"the bare fact that the parties x x x incorporated an
arbitration clause in [their contract] is sufficient to vest
the CIAC with jurisdiction over any construction
controversy or claim between the parties. The
arbitration clause in the construction contract ipso
facto vested the CIAC with jurisdiction."
Under GC-61 and GC-05 of the GCC, read singly and
in relation with one another, the Court sees no intent to
limit resort to arbitration only to disputes relating to the
physical construction activities.
First, consistent with the intent of the law, an arbitration
clause pursuant to E.O. 1008 should be interpreted at
its widest signification. Under GC-61, the voluntary
arbitration clause covers any dispute of any kind, not only
arising of out the execution of the works but also in
connection therewith. The payments, demand and disputed
issues in this case - namely, work billings, material costs,
equipment and labor standby costs, unrealized profits -
all arose because of the construction activities and/or
are connected or related to these activities. In other
words, they are there because of the construction
activities. Attorney's fees and interests payment, on the
other hand, are costs directly incidental to the
dispute. Hence, the scope of the arbitration clause, as
worded, covers all the disputed items.
Second and more importantly, in insisting that contractual
money claims can be resolved only through court
action, LICOMCEN deliberately ignores one of the
exceptions to the general rule stated in GC-05:
GC-05. JURISDICTION
Any question between the contracting parties that may
arise out of or in connection with the Contract, or
breach thereof, shall be litigated in the courts of Legaspi
City except where otherwise specifically stated or
except when such question is submitted for
settlement thru arbitration as provided herein.
The second exception clause authorizes the submission
to arbitration of any dispute between LICOMCEM and
FSI, even if the dispute does not directly involve the
execution of physical construction works. This was
precisely the avenue taken by FSI when it filed its
petition for arbitration with the CIAC.
If the CIAC's jurisdiction can neither be enlarged nor
diminished by the parties, it also cannot be subjected to
a condition precedent. GC-61 requires a party
disagreeing with LICOMCEN's decision to "officially
give notice to contest such decision through
arbitration" within 30 days from receipt of the
decision. However, FSI's April 15, 1998 letter is not the
notice contemplated by GC-61; it never mentioned
FSI's plan to submit the dispute to arbitration and
instead requested LICOMCEN to reevaluate its
claims. Notwithstanding FSI's failure to make a proper
and timely notice, LICOMCEN's decision (embodied in
its March 24, 1998 letter) cannot become "final and
binding" so as to preclude resort to the CIAC
arbitration. To reiterate, all that is required for the CIAC
to acquire jurisdiction is for the parties to agree to
submit their dispute to voluntary arbitration:
[T]he mere existence of an arbitration clause in the
construction contract is considered by law as an
agreement by the parties to submit existing or
future controversies between them to CIAC
jurisdiction, without any qualification or condition
precedent. To affirm a condition precedent in the
construction contract, which would effectively suspend
the jurisdiction of the CIAC until compliance therewith,
would be in conflict with the recognized intention of
the law and rules to automatically vest CIAC with
jurisdiction over a dispute should the construction
contract contain an arbitration clause.[48]
The CIAC is given the original and exclusive
jurisdiction over disputes arising from, or connected
with, contracts entered into by parties involved in
construction in the Philippines.[49] This jurisdiction
cannot be altered by stipulations restricting the nature
of construction disputes, appointing another arbitral
body, or making that body's decision final and binding.
The jurisdiction of the CIAC to resolve the dispute
between LICOMCEN and FSI is, therefore, affirmed.
The validity of the indefinite
suspension of the works on the
Citimall project
Before the Court rules on each of FSI's contractual
monetary claims, we deem it important to discuss the
validity of LICOMCEN's indefinite suspension of the
works on the Citimall project. We quote below two
contractual stipulations relevant to this issue:
GC-38. SUSPENSION OF WORKS
The Engineer [ESCA] through the LICOMCEN,
INCORPORATED shall have the authority to
suspend the Works wholly or partly by written order
for such period as may be deemed necessary, due
to unfavorable weather or other conditions considered
unfavorable for the prosecution of the Works, or for
failure on the part of the Contractor to correct work
conditions which are unsafe for workers or the general
public, or failure or refusal to carry out valid orders, or
due to change of plans to suit field conditions as found
necessary during construction, or to other factors or
causes which, in the opinion of the Engineer, is
necessary in the interest of the Works and to the
LICOMCEN, INCORPORATED. The Contractor
[FSI] shall immediately comply with such order to
suspend the work wholly or partly directed.
In case of total suspension or suspension of activities
along the critical path of the approved PERT/CPM
network and the cause of which is not due to any fault
of the Contractor, the elapsed time between the
effective order for suspending work and the order
to resume work shall be allowed the Contractor by
adjusting the time allowed for his execution of the
Contract Works.
The Engineer through LICOMCEN,
INCORPORATED shall issue the order lifting the
suspension of work when conditions to resume work
shall have become favorable or the reasons for the
suspension have been duly corrected.[50]
GC-41 LICOMCEN, INCORPORATED's RIGHT
TO SUSPEND WORK OR TERMINATE THE
CONTRACT
xxxx
2. For Convenience of LICOMCEN,
INCORPORATED
If any time before completion of work under the
Contract it shall be found by the LICOMCEN,
INCORPORATED that reasons beyond the
control of the parties render it impossible or against
the interest of the LICOMCEN,
INCORPORATED to complete the work, the
LICOMCEN, INCORPORATED at any time, by
written notice to the Contractor, may discontinue
the work and terminate the Contract in whole or in
part. Upon the issuance of such notice of termination,
the Contractor shall discontinue to work in such
manner, sequence and at such time as the LICOMCEN,
INCORPORATED/Engineer may direct, continuing
and doing after said notice only such work and only
until such time or times as the LICOMCEN,
INCORPORATED/Engineer may direct.[51]
Under these stipulations, we consider LICOMCEN's
initial suspension of the works valid. GC-38
authorizes the suspension of the works for factors or
causes which ESCA deems necessary in the interests of
the works and LICOMCEN. The factors or causes of
suspension may pertain to a change or revision of
works, as cited in the December 16, 1997 and January 6,
1998 letters of ESCA, or to the pendency of a case
before the Ombudsman (OMB-ADM-1-97-0622), as
cited in LICOMCEN's January 15, 1998 letter and
ESCA's January 19, 1998 and February 17, 1998
letters. It was not necessary for ESCA/LICOMCEN to
wait for a restraining or injunctive order to be issued in
any of the cases filed against LICOMCEN before it can
suspend the works. The language of GC-38 gives
ESCA/LICOMCEN sufficient discretion to determine
whether the existence of a particular situation or
condition necessitates the suspension of the works and
serves the interests of LICOMCEN.
Although we consider the initial suspension of the
works as valid, we find that LICOMCEN
wrongfully prolonged the suspension of the works
(or "indefinite suspension" as LICOMCEN calls
it). GC-38 requires ESCA/LICOMCEN to "issue an
order lifting the suspension of work when conditions to
resume work shall have become favorable or the
reasons for the suspension have been duly
corrected." The Ombudsman case (OMB-ADM-1-97-
0622), which ESCA and LICOMCEN cited in their
letters to FSI as a ground for the suspension, was
dismissed as early as October 12, 1998, but neither
ESCA nor LICOMCEN informed FSI of this
development. The pendency of the other cases[52] may
justify the continued suspension of the works, but
LICOMCEN never bothered to inform FSI of the
existence of these cases until the arbitration proceedings
commenced. By May 28, 2002, the City Government of
Legaspi sent LICOMCEN a notice instructing it to
proceed with the Citimall project;[53] again,
LICOMCEN failed to relay this information to
FSI. Instead, LICOMCEN conducted a rebidding of
the Citimall project based on the new
design.[54] LICOMCEN's claim that the rebidding was
conducted merely to get cost estimates for the new
design goes against the established practice in the
construction industry. We find the CIAC's discussion
on this matter relevant:
But what is more appalling and disgusting is the
allegation x x x that the x x x invitation to bid was
issued x x x solely to gather cost estimates on the
redesigned [Citimall project] x x x. This Arbitral
Tribunal finds said act of asking for bids, without any
intention of awarding the project to the lowest and
qualified bidder, if true, to be extremely
irresponsible and highly unprofessional. It might
even be branded as fraudulent x x x [since] the invited
bidders [were required] to pay P2,000.00 each for a set
of the new plans, which amount was non-
refundable. The presence of x x x deceit makes the
whole story repugnant and unacceptable.[55]
LICOMCEN's omissions and the imprudent
rebidding of the Citimall project are telling
indications of LICOMCEN's intent to ease out FSI
and terminate their contract. As with GC-31, GC-
42(2) grants LICOMCEN ample discretion to
determine what reasons render it against its interest to
complete the work - in this case, the pendency of the
other cases and the revised designs for the Citimall
project. Given this authority, the Court fails to the see
the logic why LICOMCEN had to resort to an
"indefinite suspension" of the works, instead of
outrightly terminating the contract in exercise of its
rights under GC-42(2).
We now proceed to discuss the effects of these findings
with regard to FSI's monetary claims against
LICOMCEN.
The claim for material costs at site
GC-42 of the GCC states:
GC-42 PAYMENT FOR TERMINATED
CONTRACT
If the Contract is terminated as aforesaid, the
Contractor will be paid for all items of work executed,
satisfactorily completed and accepted by the
LICOMCEN, INCORPORATED up to the date of
termination, at the rates and prices provided for in the
Contract and in addition:
1. The cost of partially accomplished items
of additional or extra work agreed upon by
the LICOMCEN, INCORPORATED and
the Contractor.
2. The cost of materials or goods
reasonably ordered for the Permanent
or Temporary Works which have been
delivered to the Contractor but not yet
used and which delivery has been
certified by the Engineer.
3. The reasonable cost of demobilization
For any payment due the Contractor under the above
conditions, the LICOMCEN, INCORPORATED,
however, shall deduct any outstanding balance due from
the Contractor for advances in respect to mobilization
and materials, and any other sum the LICOMCEN,
INCORPORATED is entitled to be credited.[56]
For LICOMCEN to be liable for the cost of materials
or goods, item two of GC-42 requires that
 a. the materials or goods were reasonably
ordered for the Permanent or Temporary
Works;
b. the materials or goods were delivered to
the Contractor but not yet used; and
c. the delivery was certified by the Engineer.
Both the CIAC and the CA agreed that these requisites
were met by FSI to make LICOMCEN liable for the
cost of the steel bars ordered for the Citimall project;
the two tribunals differed only to the extent of
LICOMCEN's liability because the CA opined that it
should be limited only to 50% of the cost of the steel
bars. A review of the records compels us to uphold the
CA's finding.
Prior to the delivery of the steel bars, ESCA informed
FSI of the suspension of the works; ESCA's January 6,
1998 letter reads:
As per our information to you on December 16,
1997, a major revision in the design of the Legaspi
Citimall necessitated a change in the bored piles
requirement of the project. The change involved a
substantial reduction in the number and length of
piles.
We expected that you would have suspended the
deliveries of the steel bars until the new design has
been approved.
According to you[,] the steel bars had already been
paid and loaded and out of Manila on said date.
In order to avoid double handling, storage, security
problems, we suggest that only 50% of the total
requirement of steel bars be delivered at
jobsite. The balance should be returned to Manila
where storage and security is better.
In order for us to consider additional cost due
to the shipping of the excess steel bars, we need to
know the actual dates of purchase, payments and
loading of the steel bars. Obviously, we cannot consider
the additional cost if you have had the chance to delay
the shipping of the steel bars.[57]
From the above, it appears that FSI was informed of
the necessity of suspending the works as early as
December 16, 1997. Pursuant to GC-38 of the GCC,
FSI was expected to immediately comply with the order to
suspend the work.[58] Though ESCA's December 16,
1997 notice may not have been categorical in ordering
the suspension of the works, FSI's reply letter of
December 18, 1997 indicated that it actually complied
with the notice to suspend, as it said, "We hope for the
early resolution of the new foundation plan and the
resumption of work."[59] Despite the suspension, FSI
claimed that it could not stop the delivery of the steel
bars (nor found the need to do so) because (a) the steel
bars were ordered as early as November 1997 and were
already loaded in Manila and expected to arrive in
Legaspi City by December 23, 1997, and (b) it expected
immediate resumption of work to meet the 90-day
deadline.[60]
Records, however, disclose that these claims are not
entirely accurate. The memorandum of agreement and
sale covering the steel bars specifically stated that these
would be withdrawn from the Cagayan de Oro depot,
not Manila[61]; indeed, the bill of lading stated that the
steel bars were loaded in Cagayan de Oro on January 11,
1998, and arrived in Legaspi City within three days, on
January 14, 1998.[62] The loading and delivery of the
steel bar thus happened after FSI received ESCA's
December 16, 1997 and January 6, 1998 letters - days
after the instruction to suspend the works. Also, the
same stipulation that authorizes LICOMCEN to
suspend the works allows the extension of the period to
complete the works. The relevant portion of
GC-38 states:
In case of total suspension x x x and the cause of which
is not due to any fault of the Contractor [FSI], the
elapsed time between the effective order for
suspending work and the order to resume work
shall be allowed the Contractor by adjusting the
time allowed for his execution of the Contract
Works.[63]
The above stipulation, coupled with the short
period it took to ship the steel bars from
Cagayan de Oro to Legaspi City, thus negates both
FSI's
argument and the CIAC's ruling[64] that there was no
necessity to stop the shipment so as to meet the 90-day
deadline. These circumstances prove that FSI acted
imprudently in proceeding with the delivery, contrary to
LICOMCEN's instructions. The CA was correct in
holding LICOMCEN liable for only 50% of the costs
of the steel bars delivered.
The claim for equipment and
labor standby costs
The Court upholds the CA's ruling deleting the award
for equipment and labor standby costs. We quote in
agreement pertinent portions of the CA decision:
The CIAC relied solely on the list of 37 pieces of
equipment respondent allegedly rented and maintained
at the construction site during the suspension of the
project with the prorated rentals incurred x x x. To the
mind of this Court, these lists are not sufficient to
establish the fact that indeed [FSI] incurred the
said expenses. Reliance on said lists is purely
speculative x x x the list of equipments is a mere
index or catalog of the equipments, which may be
utilized at the construction site. It is not the best
evidence to prove that said equipment were in fact
rented and maintained at the construction site during
the suspension of the work. x x x [FSI] should have
presented the lease contracts or any similar
documents such as receipts of payments x x x.
Likewise, the list of employees does not in anyway
prove that those employees in the list were indeed at
the construction site or were required to be on call
should their services be needed and were being paid
their salaries during the suspension of the
project. Thus, in the absence of sufficient
evidence, We deny the claim for equipment and
labor standby costs.[65]
The claim for unrealized profit
FSI contends that it is not barred from recovering
unrealized profit under GC-41(2), which states:
GC-41. LICOMCEN, INCORPORATED's RIGHT
TO SUSPEND WORK OR TERMINATE THE
CONTRACT
xxxx
2. For Convenience of the LICOMCEN,
INCORPORATED
x x x. The Contractor [FSI] shall not claim
damages for such discontinuance or termination of
the Contract, but the Contractor shall receive
compensation for reasonable expenses incurred in good
faith for the performance of the Contract and for
reasonable expenses associated with termination of the
Contract. The LICOMCEN, INCORPORATED will
determine the reasonableness of such expenses. The
Contractor [FSI] shall have no claim for anticipated
profits on the work thus terminated, nor any other
claim, except for the work actually performed at the
time of complete discontinuance, including any
variations authorized by the LICOMCEN,
INCORPORATED/Engineer to be done.
The prohibition, FSI posits, applies only where the
contract was properly and lawfully terminated, which
was not the case at bar. FSI also took pains in
differentiating its claim for "unrealized profit" from the
prohibited claim for "anticipated profits"; supposedly,
unrealized profit is "one that is built-in in the contract
price, while anticipated profit is not." We fail to see the
distinction, considering that the contract itself neither
defined nor differentiated the two terms. [A] contract
must be interpreted from the language of the contract
itself, according to its plain and ordinary meaning." [66] If
the terms of a contract are clear and leave no doubt
upon the intention of the contracting parties, the literal
meaning of the stipulations shall control.[67]
Nonetheless, on account of our earlier discussion of
LICOMCEN's failure to observe the proper procedure
in terminating the contract by declaring that it was
merely indefinitely suspended, we deem that FSI is
entitled to the payment of nominal damages. Nominal
damages may be awarded to a plaintiff whose right has
been violated or invaded by the defendant, for the
purpose of vindicating or recognizing that right, and not
for indemnifying the plaintiff for any loss suffered by
him.[68] Its award is, thus, not for the purpose of
indemnification for a loss but for the recognition and
vindication of a right. A violation of the plaintiff's right,
even if only technical, is sufficient to support an award
of nominal damages.[69] FSI is entitled to recover the
amount of P100,000.00 as nominal damages.
The liability for costs of arbitration
Under the parties' Terms of Reference, executed before
the CIAC, the costs of arbitration shall be equally
divided between them, subject to the CIAC's
determination of which of the parties shall eventually
shoulder the amount.[70] The CIAC eventually ruled
that since LICOMCEN was the party at fault, it should
bear the costs. As the CA did, we agree with this
finding. Ultimately, it was LICOMCEN's imprudent
declaration of indefinitely suspending the works that
caused the dispute between it and FSI. LICOMCEN
should bear the costs of arbitration.
WHEREFORE, premises considered, the petition for
review on certiorari of LICOMCEN
INCORPORATED, docketed as G.R. No. 167022, and
the petition for review on certiorari of FOUNDATION
SPECIALISTS, INC., docketed as G.R. No. 169678, are
DENIED. The November 23, 2004 Decision of the
Court of Appeals in CA-G.R. SP No. 78218 is
MODIFIED to include the award of nominal
damages in favor of FOUNDATION SPECIALISTS,
INC. Thus, LICOMCEN INCORPORATED is
ordered to pay FOUNDATION SPECIALISTS, INC.
the following amounts:
a. P1,264,404.12 for unpaid balance on
FOUNDATION SPECIALISTS, INC.
billings;
b. P5,694,939.87 for material costs at site;
and
c. P100,000.00 for nominal damages.
LICOMCEN INCORPORATED is also ordered to pay
the costs of arbitration. No costs.
SO ORDERED.
FIRST DIVISION
G.R. Nos. 159561-62, October 03, 2012
R.V. SANTOS COMPANY, INC., PETITIONER,
VS. BELLE CORPORATION, RESPONDENT.
DECISION
LEONARDO-DE CASTRO, J.:
For disposition of the Court is a Petition for Review on
Certiorari, assailing the Court of Appeals’ Decision [1]
dated March 7, 2003 and Resolution[2] dated August 20,
2003 in the consolidated cases docketed as CA-G.R. SP
Nos. 60217 and 60224. In its Decision dated March 7,
2003, the Court of Appeals affirmed the July 28, 2000
Decision[3] in CIAC Case No. 45-99 of the Construction
Industry Arbitration Commission (CIAC), which,
among others, (a) ordered RV Santos Company, Inc.
(RVSCI) to refund the amount of P4,940,108.58 to
Belle Corporation (Belle), and (b) denied Belle’s claim
for liquidated damages and RVSCI’s counterclaims for
unpaid billings and attorney’s fees. In the assailed
August 20, 2003 Resolution, the Court of Appeals
denied the parties’ respective motions for
reconsideration of its March 7, 2003 Decision.
The present controversy arose from a Request for
Adjudication[4] filed by Belle with the CIAC on
November 3, 1999. According to the Complaint[5]
attached to said Request, Belle and RVSCI entered into
a Construction Contract on July 14, 1997. As stipulated
therein, RVSCI undertook to construct a detailed
underground electrical network for Belle’s Tagaytay
Woodlands Condominium Project located in Tagaytay
City[6] with a project cost that shall not be more than
Twenty-Two Million Pesos (P22,000,000.00), inclusive
of all taxes, government fees and the service fee under
the Contract.[7] Likewise under said contract, Belle
advanced to RVSCI fifty percent (50%) of the contract
price in the amount of Eleven Million Pesos
(P11,000,000.00)[8] for which RVSCI issued to Belle an
official receipt[9] dated August 8, 1997.
Some time thereafter, RVSCI commenced work on the
project. Under Article VII(A) of the Construction
Contract, the project was supposed to be completed and
ready for operation within 180 calendar days from
receipt by RVSCI of the notice to commence from
Belle, provided that all civil related works necessary for
the execution of the project works were in place.
However, the project was allegedly not completed
within the stipulated time frame.
On March 17, 1998, Belle’s Woodlands General
Committee supposedly set April 21, 1998 as the target
date for completion of the Log Home Units in
Woodlands. In a Memorandum[10] dated April 14, 1998,
Belle purportedly informed RVSCI of the target date
and urged the latter to complete the project on or
before said deadline. Still the project was not
completed on April 21, 1998.
Subsequently, in June 1998, Belle placed additional work
orders with RVSCI, who in turn made the following
cost estimates for the additional work:
Additional Order No.
1 P3,854,400
.00
Installation of 7 units of Load break
switch, 102 units of kw-hrs. meters
and fabrication of 21 sets of Bus ducts
Additional Order No.
2 541,528.
54
Supply and installation of one (1) unit
MDP-DTIA
Additional Order No.
3 158,612
.00
Various work orders issued to
[RVSCI] --------------------
P4,554,540.54[11]
Belle admittedly approved RVSCI’s cost estimates for
Additional Order Nos. 1 and 2 but the former allegedly
did not approve the cost estimate for Additional Order
No. 3 which Belle estimated should only cost
P22,442.47. Nonetheless, RVSCI proceeded to
implement Additional Order Nos. 1 and 3 while Belle
itself accomplished Additional Order No. 2.
On August 10, 1998, RVSCI submitted its Progress
Billing[12] to Belle, claiming 53.3% accomplishment of
the project, including the work done for Additional
Order No. 1, as set forth above. RVSCI claimed that
the value of the work accomplished under the August
10, 1998 Progress Billing was P7,159,216.63 on the
main project and P1,768,000.00 on the additional work
order. After deducting 50% of the Progress Billing on
the main project, the total amount billed by RVSCI was
P5,347,608.03. Purportedly relying on RVSCI’s
representations, Belle’s project engineer recommended
approval of the Progress Billing.
Subsequently, however, Belle reputedly made its own
assessment of the work accomplished by RVSCI and
determined that it was only worth P4,676,724.64. Belle
supposedly relayed its findings to RVSCI.[13]
On September 30, 1998, while negotiations were
allegedly on-going between the parties regarding the
payment of the Progress Billing, Belle claimed that
RVSCI unceremoniously abandoned the project without
prior notice and forced Belle to take over the
construction work therein. Belle purportedly sent a
Memorandum[14] dated December 15, 1998 to RVSCI to
convey its “extreme disappointment” over the latter’s
abandonment of the project.
On January 11, 1999, the parties’ representatives met
and during that meeting RVSCI allegedly advised Belle
that it will not return to the site until the outstanding
balance due to it is paid.[15]
Meanwhile, on January 22, 1999, Belle made an
additional payment for electrical works to RVSCI in the
amount of P476,503.30. This payment was evidenced
by an official receipt[16] issued by RVSCI. Belle likewise
remitted the amount of P122,491.14 to the Bureau of
Internal Revenue representing the withholding tax due
from RVSCI.
In February 1999, Belle engaged the services of an
assessor, R.A. Mojica and Partners (R.A. Mojica), to
determine the value of the work done by RVSCI. After
it conducted an electrical works audit, R.A. Mojica
reported to Belle that the work accomplished by RVSCI
on the main project only amounted to P4,868,443.59
and not P7,159,216.05 as billed by RVSCI.[17]
In Belle’s view, it had overpaid RVSCI, based on the
following computation:
Downpayment
P11,000,000.00
Withholding Tax
Payable 122,491
.14
Additional Payment for electrical works
(Billing
#01)
476,503.33
------------------------
P11,598,994.44
LESS:
Actual Value of Work
Accomplished 4,868,443.59
Approved Change of Specifications and
Additional Work
Orders 1,790,44
2.70
-------------------------
NET DUE TO
[BELLE] P respective claims. According to the Terms of
4,940,108.15[18]
RVSCI allegedly refused to return the excess payment
despite repeated demands. Thus, relying on the
arbitration clause in the Construction Contract, Belle
brought the matter before the CIAC and prayed that
RVSCI be directed to (a) reimburse Belle the amount of
P4,940,108.15, and (b) pay Belle the amount of
P2,200,000.00 as liquidated damages.[19]
By way of defense, RVSCI claimed that its August 10,
1998 Progress Billing was a result of a “bilateral
assessment” by the representatives of both parties and
was, in fact, approved/recommended for payment by
Belle’s representatives. RVSCI complained that Belle
segregated the project into two phases (Phase 1 and
Phase 2) with Phase 1 comprising the area already
worked on by RVSCI and Phase 2 comprising the
“unworked” area. It was Belle which advised RVSCI in
a meeting on January 11, 1999 that the former was
suspending Phase 2 of the project due to economic
difficulties. RVSCI allegedly made several demands for
payment of its Progress Billing but Belle ignored said
demands. Thus, in view of Belle’s suspension of the
work and the nonpayment of the progress billing,
RVSCI was purportedly forced to stop work on the
project, despite being fully prepared to comply with its
obligations under the contract. RVSCI further asserted
that it was not notified of, nor made privy to, the audit
work conducted by R.A. Mojica and therefore RVSCI
was not bound by such audit. Insisting on the accuracy
of its Progress Billing, RVSCI interposed a counterclaim
against Belle for the payment of the amount of
P4,312,170.95, computed thus:
Progress
Billing P 7,159,216
.05
Remaining MDPs for delivery
Under original contract (11 sets @
P327,128.54) P 3,
598,413.94
Approved Change of
Specifications and Additional
Work Order/s (dated August 10, 1998
and September 30,
1998) P 4,554,540.95
Total P
15,312,170.95
Less: Advance Payment P
11,000,000.00
Net Due to
[RVSCI] P 4,312,170.9
5[20]
RVSCI prayed for the dismissal of the Complaint and
for the CIAC to order Belle to pay the following
amounts: (a) P4,312,170.95 as balance of RVSCI’s
progress billing(s), (b) P500,000.00 as moral damages,
and (c) P500,000.00 as attorney’s fees and costs of
suit.[21]
At the preliminary conference, the parties agreed on the
Terms of Reference for the arbitration of their
Reference, the admitted facts and the issues to be
resolved by the arbitration panel were as follows:
II. ADMITTED FACTS
The parties admit the following:
1. Their respective identity/juridical existence
and circumstances.
2. The genuineness and due execution of the
Contract (attached as Annex A of the
Complaint) for the construction of a
detailed underground electrical network
for the Tagaytay Woodlands
Condominium Project in Tagaytay City
entered into by the parties on 14 July 1997
for a contract price of P22,000,000.00.
3. Article IV, Section 4.2 of the Construction
Contract which provide (sic) that the
“Contractor [RVSCI] guarantees and
warrants that the total project cost shall
not be more than P22,000,000.00,
inclusive of all taxes and government fees
and the service fee under the Contract.”
4. Sec. 6.2(a), Art. VI of the Construction
Contract which provides that: “Owner
[Belle] shall advance to Contractor an
amount equivalent to 50% of the Contract
Price or the amount of P11,000,000.00, as
down payment for the construction, upon
execution of the Contract, receipt of which
is hereby acknowledged by Contractor.
Progress payments to be made by Owner
to Contractor, proportionate to the
percentage of accomplishment of the
Project, shall be deducted from the
balance of the Contract Price. The same
proportion of the down payment shall also
be deducted from billing progress
payments.”
5. The payment made by Claimant to
Respondent in the amount of
P11,000,000.00 as acknowledged to have
been received under Official Receipt No.
0706 issued by the latter on 8 August 1997
(attached as Annex B of the Complaint).
 6. The following proposed cost estimate of
the Respondent on Claimant’s additional
work orders in June 1998:
AdditionalInstallation of 7 units of
Order Load break switch, 102 units
No. 1 of kw-hrs. meters and
fabrication of 21 sets of Bus
ducts. P3,854,400.00
AdditionalSupply and installation of
Order one (1) unit MDP-DTIA
No. 2 541,528.54
AdditionalVarious work orders issued
Order to [RVSCI]
No. 3 158,612.00
--------------------
P4,554,540.54
7. Claimant approved Respondent’s
proposed estimates on Additional Orders
Nos. 1 and 2, but disputed the cost
estimate of Additional Order No. 3.
Thereafter, Respondent proceeded to
implement additional Orders Nos. 1 and 3.
8. Progress Billing No. 1 (attached as Annex
D of the Complaint) which Claimant
received on 10 August 1998.
9. On 11 January 1999, the parties’
representatives met to discuss the reasons
for Respondent’s failure/refusal to return
to the Site. These representatives were
Fernando R. Santico, Edgardo F. Villarino
& Rudy P. Aninipot, for the Claimant, and
Renato V. Santos & Joey C. Caldeo, for
the Respondent.
10. Claimant made additional payment to
Respondent for electrical works on 22
January 1999 amounting to P476,503.30 as
per Official Receipt No. 0717 issued by
Respondent (attached as Annex G of the
Complaint).Existence of Respondent’s
letter to Claimant dated 4 May 1999 re:
Underground Electrical Utilities (attached
as Annex A of the Reply).
xxxx
IV. ISSUES TO BE DETERMINED
1. Is Claimant entitled to its claims for
overpayment? If so, how much should be
returned to the Claimant?
1.1How much was the work accomplished by
Respondent in the project?
1.2Whether or not Respondent has
manufactured/produced and/or installed 11 sets of
Main Distribution Panels? If so, is Claimant liable
and for how much should it be liable to pay
Respondent for their cost/value?
1.3Whether or not Respondent is entitled to its claim
for unpaid billings?
2. Is Claimant entitled to its claim for
liquidated damages? If so, how much by
way of liquidated damages should be
awarded to it?
2.1 Was Respondent justified in
suspending its work?
2.2 Is Respondent justified in declining to
return to work?
3. Is Respondent entitled to its counterclaim
for attorney’s fees? If so, how much is
Claimant liable to Respondent for such
claim?[22]
The Terms of Reference further indicated the parties’
agreement that the presentation of their testimonial
evidence shall be by way of affidavits of
witnesses. Hearings were held on March 24 and 28,
2000. Thereafter, the parties submitted their draft
Decisions to the arbitral tribunal.
In a Decision dated July 28, 2000, the CIAC found that,
under the Construction Contract[23] and industry
practice, Belle had the right to the true value of the
work performed by RVSCI upon termination. Further,
the CIAC ruled that according to the Uniform General
Conditions of Contract for Private Construction (CIAP
Document 102), approval of a progress billing is
provisional[24] and is subject to final review and approval
before acceptance of the completed work and prior to
final payment.[25] Hence, Belle was within its rights to
make a reevaluation of the work accomplishment of
RVSCI. Finding that Engr. Raladin A. Mojica qualified
as an expert witness, the CIAC gave weight to the
results of the re-survey done by R.A. Mojica and held
that Belle indeed made an overpayment to
RVSCI. Since the date when RVSCI commenced work
on the Project and the supposed completion date
cannot be determined, the CIAC found no basis to
award liquidated damages in favor of Belle. The arbitral
tribunal likewise denied RVSCI’s counterclaims. Thus,
the dispositive portion of the CIAC Decision reads:
WHEREFORE, award is hereby made as follows:
1. Claimant’s [Belle’s] claim for refund of P4,940,108.58,
representing overpayment to the Respondent is hereby
granted. Respondent is, therefore, ordered to pay this
amount to Claimant with interest at the rate of 6% per
annum from the date of this Award.
2. Claimant’s claim for liquidated damages and
Respondent’s counterclaims for an alleged balance due
and unpaid on progress billings and for attorney’s fees
are denied.
3. Arbitration fees and expenses shall be shared by the
parties pro rata on the basis of the amount of their
claims and counterclaims.
4. The amount of P4,940,108.58 found in paragraph 1
of this Award to be due the Claimant plus interest at 6%
per annum shall further earn interest at the rate of 12%
per annum from the time this decision becomes final
and executory and the total amount found to be due
remains unpaid.[26]
Both Belle and RVSCI filed petitions for review under
Rule 43 of the Rules of Court to assail the foregoing
CIAC Decision with the Court of Appeals, which were
docketed as CA-G.R. SP No. 60217 and CA-G.R. SP
No. 60224, respectively. Upon motion by the parties,
the cases were consolidated and after due proceedings,
the Court of Appeals issued a Decision dated March 7,
2003, dismissing the petitions and affirming the CIAC
Decision. The separate motions for reconsideration of
the parties were likewise denied by the Court of Appeals
in a Resolution dated August 20, 2003.
RVSCI elevated the matter to this Court and questioned
the Court of Appeals’ March 7, 2003 Decision and
August 20, 2003 Resolution through the present
petition for review on certiorari under Rule 45. The
grounds relied upon by RVSCI were:
I. THE APPELLATE COURT GRAVELY
ERRED IN RULING THAT THE
SURVEYOR’S ELECTRICAL WORK
AUDIT WAS COMPETENT AND
MUST BE GIVEN WEIGHT.
II. THE APPELLATE COURT GRAVELY
ERRED IN RULING THAT BELLE
MAY WITHDRAW ITS APPROVAL OF
THE PROGRESS BILLING
PURSUANT TO ARTICLES VI(2)(C)
AND XIII(4) OF THE CONTRACT.
III. THE APPELLATE COURT GRAVELY
ERRED IN RULING THAT [RVSCI] IS
NOT ENTITLED TO AN AWARD
FOR DAMAGES.[27]
Anent the first ground, RVSCI argued that R.A.
Mojica’s electrical work audit that was unilaterally
commissioned by Belle was not binding on the former
since (a) it was not authorized by the Contract and was
done without the consent or participation of RVSCI; (b)
assuming that the Contract allowed Belle to commission
such audit, it was incomplete as it failed to cover the
entire work performed by RVSCI as shown by its
Progress Billing and Bill of Quantities, allegedly
approved by Belle; and (c) the audit was tainted by
obvious partiality since R.A. Mojica was a regular
contractor of Belle and a competitor of RVSCI.
With respect to the second ground, it is RVSCI’s
contention that Article VI, Section 6.2(c) of the
Construction Contract merely differentiate acceptance
by Belle of RVSCI’s work accomplishment from time to
time from Belle’s final acceptance of work upon
completion of the entire project. Also RVSCI claims
that Article XIII, Section 13.4 only allows Belle to
determine the true value of the works in cases of
termination of the Contract upon occurrence of any of
the events of default enumerated under Article XIII,
Section 13.1 and said provision has no application in
instances of justified suspension of works due to Belle’s
breach of the Contract. In any event, it is RVSCI’s view
that neither Article VI, Section 6.2(c) nor Article XIII,
Section 13.4 allows Belle to withdraw its previous
approval of RVSCI’s Progress Billing, contrary to the
rulings of both the CIAC and the Court of
Appeals. Assuming without conceding that Article
XIII, Section 13.4 of the Contract applies in this
instance, RVSCI believes that the final determination of
the value of the works should be made by (a) both
parties or (b) an independent third party mutually
commissioned by them.
As for the last ground, RVSCI asserts that the CIAC
and the Court of Appeals erred in denying RVSCI’s
claim for damages in view of Belle’s breach of the
Contract by its unjustified refusal or failure to pay the
Progress Billing.
On the other hand, Belle claims that the Petition should
be dismissed for raising questions of fact, which are
improper in a petition under Rule 45 of the Rules of
Court, without showing that this case fell under the
recognized exceptions under jurisprudence. On the
merits of the Petition, Belle argued that it had the right
to determine the true value of work done and nothing
in the Contract limited that right. According to Belle,
the CIAC and the Court of Appeals properly relied on
Article VI, Section 6.2(c) and Article XIII, 13.4 of the
Contract and on industry practice in upholding Belle’s
right for a re-evaluation of RVSCI’s actual work
accomplishment. Thus, the CIAC and the appellate
court allegedly were correct in giving weight to the
electrical audit report made by R.A. Mojica. Belle
further propounds that the lower tribunals correctly did
not grant RVSCI any award for damages considering
that RVSCI did not prove such damages as it had, in
fact, been overpaid. As for RVSCI’s claim for the value
of materials and equipment purportedly left at the site,
the same was not included in the Terms of Reference
and RVSCI was not allowed by the CIAC to present
evidence on the same. Thus, this matter cannot be
raised for the first time on appeal.
After a thorough review of the issues raised by the
parties, the Court finds no merit in the Petition.
On the procedural issue:
It must be stressed that in petitions for review under
Rule 45 only questions of law may be raised, unless the
petitioner shows that the case falls under the recognized
exceptions. In Makati Sports Club, Inc. v. Cheng,[28] we
explained, thus:
At the outset, we note that this recourse is a petition for
review on certiorari under Rule 45 of the Rules of Court.
Under Section 1 of the Rule, such a petition shall
raise only questions of law which must be distinctly
alleged in the appropriate pleading. In a case involving a
question of law, the resolution of the issue must rest
solely on what the law provides for a given set of facts
drawn from the evidence presented. Stated differently,
there should be nothing in dispute as to the state of
facts; the issue to be resolved is merely the correctness
of the conclusion drawn from the said facts. Once it is
clear that the issue invites a review of the probative
value of the evidence presented, the question posed is
one of fact. If the query requires a reevaluation of
the credibility of witnesses, or the existence or
relevance of surrounding circumstances and their
relation to each other, then the issue is necessarily
factual.[29] (Emphases supplied, citation omitted.)
In cases decided by the CIAC, the above rule finds even
more stringent application. As we previously observed
in one case:
Executive Order No. 1008, as amended, provides, in its
Section 19, as follows:
“Sec. 19. Finality of Awards. — The arbitral award shall
be binding upon the parties. It shall be final and
inappealable except on questions of law which shall be
appealable to the Supreme Court.”
Section 19 makes it crystal clear that questions of fact
cannot be raised in proceedings before the Supreme
Court - which is not a trier of facts - in respect of an
arbitral award rendered under the aegis of the CIAC.
Consideration of the animating purpose of voluntary
arbitration in general, and arbitration under the aegis of
the CIAC in particular, requires us to apply rigorously
the above principle embodied in Section 19 that the
Arbitral Tribunal’s findings of fact shall be final and
[u]nappealable.
xxxx
Aware of the objective of voluntary arbitration in the
labor field, in the construction industry, and in any
other area for that matter, the Court will not assist one
or the other or even both parties in any effort to subvert
or defeat that objective for their private purposes. The
Court will not review the factual findings of an
arbitral tribunal upon the artful allegation that such
body had “misapprehended the facts” and will not
pass upon issues which are, at bottom, issues of
fact, no matter how cleverly disguised they might
be as “legal questions.” The parties here had recourse
to arbitration and chose the arbitrators themselves; they
must have had confidence in such arbitrators. The
Court will not, therefore, permit the parties to relitigate
before it the issues of facts previously presented and
argued before the Arbitral Tribunal, save only where a
very clear showing is made that, in reaching its factual
conclusions, the Arbitral Tribunal committed an error
so egregious and hurtful to one party as to constitute a
grave abuse of discretion resulting in lack or loss of
jurisdiction. Prototypical examples would be factual
conclusions of the Tribunal which resulted in
deprivation of one or the other party of a fair
opportunity to present its position before the Arbitral
Tribunal, and an award obtained through fraud or the
corruption of arbitrators. Any other, more relaxed, rule
would result in setting at naught the basic objective of a
voluntary arbitration and would reduce arbitration to a
largely inutile institution.[30] (Emphasis supplied,
citations omitted.)
In another case, we have also held that:
It is settled that findings of fact of quasi-judicial bodies,
which have acquired expertise because their jurisdiction
is confined to specific matters, are generally accorded
not only respect, but also finality, especially when
affirmed by the Court of Appeals. In particular, factual
findings of construction arbitrators are final and
conclusive and not reviewable by this Court on appeal.
This rule, however, admits of certain exceptions. In
Uniwide Sales Realty and Resources Corporation v. Titan-Ikeda
Construction and Development Corporation, we said:
In David v. Construction Industry and Arbitration Commission,
we ruled that, as exceptions, factual findings of
construction arbitrators may be reviewed by this Court
when the petitioner proves affirmatively that: (1) the
award was procured by corruption, fraud or other
undue means; (2) there was evident partiality or
corruption of the arbitrators or any of them; (3) the
arbitrators were guilty of misconduct in refusing to hear
evidence pertinent and material to the controversy; (4)
one or more of the arbitrators were disqualified to act as
such under Section nine of Republic Act No. 876 and
willfully refrained from disclosing such disqualifications
or of any other misbehavior by which the rights of any
party have been materially prejudiced; or (5) the
arbitrators exceeded their powers, or so imperfectly
executed them, that a mutual, final and definite award
upon the subject matter submitted to them was not
made.
Other recognized exceptions are as follows: (1) when
there is a very clear showing of grave abuse of
discretion resulting in lack or loss of jurisdiction as
when a party was deprived of a fair opportunity to
present its position before the Arbitral Tribunal or
when an award is obtained through fraud or the
corruption of arbitrators, (2) when the findings of the
Court of Appeals are contrary to those of the CIAC,
and (3) when a party is deprived of administrative due
process.[31] (Citations omitted.)
In the case at bar, petitioner indeed raises factual
matters in the present controversy which this Court may
not look into under a petition for review on
certiorari. We likewise find that this case is not among
the exceptions to this settled rule. Nevertheless, even if
we were to excuse this procedural infirmity of the
petition, we are still not inclined to reverse the lower
tribunals’ findings on the merits of the case.
On the substantive matters:
Whether the third party audit report commissioned
by Belle is admissible and may be given weight
To recapitulate, petitioner assailed R.A. Mojica’s audit
report on the following grounds: (a) that there was no
provision in the Construction Contract allowing Belle to
unilaterally conduct an audit of petitioner’s work; (b)
assuming the Contract allows such an audit, it
nonetheless failed to include all the work done by
petitioner; and (c) it was tainted by bias and partiality
since R.A. Mojica was a regular, long time contractor of
Belle.
On this issue, we uphold the CIAC and the Court of
Appeals in their allowance of the third party audit
report done by R.A. Mojica.
First, while there was no provision in the Construction
Contract expressly authorizing Belle to secure the
services of a third party auditor to determine the value
of the work accomplished by petitioner RVSCI, there is
likewise no provision prohibiting the same. Certainly,
RVSCI failed to point to any contractual stipulation
preventing RVSCI to seek expert opinion regarding the
value of RVSCI’s accomplishment or the accuracy of
the Progress Billing, whether prior or subsequent to the
approval of such billing.
Second, the mere fact that the audit was unilateral, or
was not participated in by petitioner, did not render the
same objectionable. There is nothing in the
Construction Contract which obligates Belle to inform
RVSCI or to secure the latter’s participation should the
former decide to commission an audit of the work
accomplished. On the contrary, in case of termination
due to default of the contractor, Article XIII, Section
13.4 of the Construction Contract explicitly allows Belle
to unilaterally evaluate the value of the work and the
only condition is that it be done in good faith. Even
assuming arguendo we accept RVSCI’s contentions that it
justifiably suspended work and that Article XIII,
Section 13.4 merely covers instances of default and not
situations of justified suspension of works, we see no
reason why the procedure for cessation of work due to
default cannot be applied to other instances of cessation
of work, particularly in the absence of a contractual
provision governing termination or suspension of works
in situations not involving a default.
Verily, the fact that the parties agreed to a unilateral
valuation of the work by the owner in the event of a
termination of the contract due to default signifies that
the parties, including RVSCI, did not find anything
abhorrent in a one-sided valuation at the time of the
execution of the contract. If RVSCI believed that this
was unfair or that its participation should be required in
a review or audit of its work, then it should not have
acquiesced to such a provision in the first place and
instead insisted on a stipulation prohibiting a unilateral
audit of its work.
Third, bias on the part of a witness cannot be
presumed. It is a basic rule that good faith is always
presumed and bad faith must be proved.[32] In a
previous case, we have held that the witness’
employment relationship with, or financial dependence
on, the party presenting his testimony would not be
sufficient reason to discredit said witness and label his
testimony as biased and unworthy of
credence.[33] Analogously, that Belle and R.A. Mojica
had a long standing business relationship does not
necessarily mean that the latter’s report was tainted with
irregularity, especially in the absence of evidence that
the audit report was indeed inaccurate or erroneous. It
must be emphasized as well that RVSCI had ample
opportunity to cross-examine Engr. Mojica with respect
to the particulars of his company’s audit report.
To be sure, RVSCI is not precluded from proffering
evidence to rebut the findings of R.A.
Mojica. However, RVSCI did not present or point to
documents, invoices, and receipts to show that the
amounts and quantities in the audit report were not
correct, nor did RVSCI convincingly substantiate its
assertion that it had completed work in other areas of
the project that was not included in said report. RVSCI
merely relied on its own Progress Billing as supposedly
signed by Belle’s representatives. However, it is that
Progress Billing which was later questioned by Belle on
the suspicion that the same was bloated and
inaccurate. Thus, Belle had a third party conduct an
audit of RVSCI’s actual work accomplishment. As the
CIAC noted, there was nothing to prevent RVSCI to
secure the services of its own expert witness to contest
the findings of R.A. Mojica and buttress the accuracy of
its Progress Billing with supporting documents other
than such billing but RVSCI did not.
Hence, we find no error on the part of the CIAC and
the Court of Appeals in relying on the third party audit
report and giving it due weight in the resolution of the
present case.
Whether Belle’s approval of the Progress Billing is
final and binding and may no longer be withdrawn
After careful consideration of the contentions of the
parties, we agree with the CIAC’s finding, as affirmed
by the Court of Appeals, that the owner’s approval of
progress billing is merely provisional. This much can be
gleaned from Article VI, Section 6.2(c) of the
Construction Contract which states that “[t]he
acceptance of work from time to time for the purpose
of making progress payment shall not be considered as
final acceptance of the work under the
Contract.” There can be no other interpretation of the
said provision but that progress billings are but
preliminary estimates of the value of the periodic
accomplishments of the contractor. Otherwise, there
would be no need to include Article VI, Section 6.2(c)
in the Contract since final acceptance of the contractor’s
work would come as a matter of course if progress
billings were, as RVSCI contends, final and binding
upon the owner. On the contrary, progress billings and
final acceptance of the work were clearly still subject to
review by the owner.
Moreover, we see no reason to disturb the CIAC ruling
that the foregoing contractual provision is consistent
with industry practice, as can be deduced from Articles
22.02, 22.04 and 22.09 of CIAP Document 102 which
pertinently state:
22.02 REQUESTS FOR PAYMENT: The
Contractor may submit periodically but not
more than once each month a Request for
Payment for work done. The Contractor shall
furnish the Owner all reasonable facilities
required for obtaining the necessary
information relative to the progress and
execution of the Work. x x x.
xxxx
22.04 CONDITIONS RELATIVE TO
PAYMENTS: The Owner shall estimate the
value of work accomplished by the Contractor
using as basis the schedule stipulated in the
Breakdown of Work and Corresponding Value.
Such estimate of the Owner of the amount of
work performed shall be taken as the basis for
the compensation to be received by the
Contractor. While such preliminary estimates of
amount and quantity shall not be required to be
made by strict measurement or with exactness,
they must be made as close as possible to the
actual percentage of work accomplishment.
xxxx
22.09 ACCEPTANCE AND FINAL PAYMENT:
 Whenever the Contractor notifies the Owner
that the Work under the Contract has been
completely performed by the Contractor, the
Owner shall proceed to verify the work, shall
make the final estimates, certify to the
completion of the work, and accept the same.
From the above-quoted provisions, it is readily apparent
that, whether in the case of progress billings or of turn-
over of completed work, the owner has the right to
verify the contractor’s actual work accomplishment
prior to payment.
In all, we approve the CIAC’s pronouncement that
“[t]he owner is, therefore, not estopped [from
questioning] a prior evaluation of the percentage of
accomplishment of the contractor and to downgrade
such accomplishment after re-evaluation. It is the right
of every owner to re-evaluate or re-measure the work of
its contractor during the progress of the work.”[34]
Whether Belle should be made
liable to RVSCI for damages
Anent the third issue, it is apropos to state here that the
rationale underlying the owner’s right to seek an
evaluation of the contractor’s work is the right to pay
only the true value of the work as may be reasonably
determined under the circumstances.
This is consistent with the law against unjust
enrichment under Article 22 of the Civil Code which
states that “[e]very person who through an act of
performance by another, or any other means, acquires
or comes into possession of something at the expense
of the latter without just or legal ground, shall return the
same to him.” Expounding on this provision in a
recent case, we have held that “[t]he principle of unjust
enrichment essentially contemplates payment when
there is no duty to pay, and the person who receives the
payment has no right to receive it.”[35]
In the case at bar, we uphold the CIAC’s factual finding
that the value of the total work accomplished by RVSCI
on the main project was P4,868,443.59 while the cost of
the additional work amounted to P1,768,000.00 plus
P22,442.27, for a total of P6,658,885.86. On the other
hand, Belle had made payments in the total amount of
P11,598,994.44.[36] It is thus undeniable that RVSCI
had received payments from Belle in excess of the value
of its work accomplishment. In light of this
overpayment, it seems specious for RVSCI to claim that
it has suffered damages from Belle’s refusal to pay its
Progress Billing, which had been proven to be excessive
and inaccurate. Bearing in mind the law and
jurisprudence on unjust enrichment, we hold that
RVSCI is indeed liable to return what it had received
beyond the actual value of the work it had done for
Belle.
On a related note, this Court cannot grant RVSCI’s
claim for the value of materials and equipment allegedly
left at the site. As observed by the CIAC, this particular
claim was not included in the Terms of Reference and,
hence, could not be litigated upon or proved during the
CIAC proceedings.
In conclusion, the CIAC rightly dismissed RVSCI’s
counterclaims for lack of merit.
WHEREFORE, the instant petition for review is
DENIED. The Decision dated March 7, 2003 and the
Resolution dated August 20, 2003 of the Court of
Appeals in CA-G.R. SP Nos. 60244 and 60217 are
AFFIRMED.
SO ORDERED.
SECOND DIVISION
G.R. No. 172525, October 20, 2010
SHINRYO (PHILIPPINES) COMPANY, INC.,
PETITIONER, VS. RRN INCORPORATED,*
RESPONDENT.
DECISION
PERALTA, J.:
This resolves the Petition for Review on Certiorari under
Rule 45 of the Rules of Court, praying that the
Decision[1] of the Court of Appeals (CA) dated February
22, 2006, affirming the Decision of the Construction
Industry Arbitration Commission (CIAC), and the CA
Resolution[2] dated April 26, 2006, denying herein
petitioner's motion for reconsideration, be reversed and
set aside.
The facts, as accurately narrated in the CA Decision, are
as follows.
Petitioner Shinryo (Philippines) Company, Inc.
(hereinafter petitioner) is a domestic corporation
organized under Philippine laws. Private respondent
RRN Incorporated (hereinafter respondent) is likewise a
domestic corporation organized under Philippine laws.
Respondent filed a claim for arbitration against
petitioner before CIAC for recovery of unpaid account
which consists of unpaid portions of the sub-contract,
variations and unused materials in the total sum of
P5,275,184.17 and legal interest in the amount of
P442,014.73. Petitioner filed a counterclaim for
overpayment in the amount of P2,512,997.96.
The parties admitted several facts before the CIAC. It
was shown that petitioner and respondent executed an
Agreement and Conditions of Sub-contract (hereafter
Agreement signed on June 11, 1996 and June 14, 1996,
respectively. Respondent signified its willingness to
accept and perform for petitioner in any of its projects,
a part or the whole of the works more particularly
described in Conditions of Sub-Contract and other Sub-
contract documents.
On June 11, 2002, the parties executed a "Supply of
Manpower, Tools/Equipment, Consumables for the
Electrical Works-Power and Equipment Supply, Bus
Duct Installation" for the Phillip Morris Greenfield
Project (hereafter Project) covered by Purchase Order
Nos. 4501200300-000274 and 4501200300-000275
amounting to P15,724,000.00 and P9,276,000.00
respectively, or a total amount of P25,000,000.00. The
parties also agreed that respondent will perform
variation orders in the Project. In connection with the
Project, petitioner supplied manpower chargeable
against respondent.
Respondent was not able to finish the entire works with
petitioner due to financial difficulties. Petitioner paid
respondent a total amount of P26,547,624.76. On June
25, 2005 [should read 2003], respondent, through its
former counsel sent a letter to petitioner demanding for
the payment of its unpaid balance amounting to
P5,275,184.17. Petitioner claimed material back
charges in the amount of P4,063,633.43. On September
26, 2003, respondent only acknowledged P2,371,895.33
as material back charges. Thereafter, on October 16,
2003, respondent sent another letter to petitioner for
them to meet and settle their dispute.
On January 8, 2004, respondent sent another letter to
petitioner regarding the cost of equipment rental and
the use of scaffolding. Thereafter, on August 12, 2004,
petitioner sent a letter to respondent denying any
unpaid account and the failure in their negotiations for
amicable settlement.
On September 3, 2004, respondent, through its new
counsel, advised petitioner of their intention to submit
the matter to arbitration. Thereafter, their dispute was
submitted to arbitration. During the preliminary
conference, the parties agreed in their Terms of
Reference to resolve eight issues, to wit:
1. What should be the basis in evaluating the variation
cost?
1.1 How much is the variation cost?
2. Is the Respondent (petitioner in the instant case)
justified in charging claimant (herein respondent) the
equipment rental fee and for the use of the scaffoldings?
If so, how much should be charged to Claimant?
3. What should be the basis in evaluating the total cost
of materials supplied by Respondent to the Project
which is chargeable to Claimant?
3.1 How much is the total cost of materials supply
chargeable to Claimant?
4. How much is the value of the remaining works left
undone by the Claimant in the project?
5. Is the Claimant's claim for inventory of excess
materials valid? If so, how much is the value thereof?
6. Is the Respondent entitled to its claim for an
overpayment in the amount of P2,512,997.96?
7. Is Claimant entitled to its claim for interest? If so,
how much?
8. Who between the parties shall bear the cost of
Arbitration?
The CIAC rendered the assailed decision after the
presentation of the parties' evidence. [The dispositive
portion of said decision reads as follows:
WHEREFORE, judgment is hereby rendered in favor
of the claimant and respondent is ordered to pay
claimant its unpaid account in the sum of P3,728,960.54
plus legal interest of 6% reckoned from June 25, 2003
up to the filing of the case on October 11, 2004 and
12% of P3,728,960.54 from the finality of the judgment
until fully paid and arbitration cost of P104,333.82
representing claimant's share of the arbitration cost
which respondent should reimburse.
SO ORDERED.]
Petitioner accepts the ruling of the CIAC only in Issue
No. 1 and Sub-Issue No. 1.1 and in Issue No. 2 in so
far as the amount of P440,000.00 awarded as back
charges for the use of scaffoldings. x x x[3]
On February 22, 2006, the CA promulgated the assailed
Decision affirming the decision of the CIAC. The CA
upheld the CIAC ruling that petitioner failed to adduce
sufficient proof that the parties had an agreement
regarding charges for respondent's use of the
manlift. As to the other charges for materials, the CA
held that the evidence on record amply supports the
CIAC findings. Petitioner moved for reconsideration of
said ruling, but the same was denied per Resolution
dated April 26, 2006.
Hence, this petition where it is alleged that:
I. THE HONORABLE COURT OF APPEALS
COMMITTED GRAVE REVERSIBLE ERROR
WHEN IT DENIED PETITIONER'S CLAIM FOR
MANLIFT EQUIPMENT RENTAL IN THE
AMOUNT OF P511,000.00 DESPITE EVIDENCE
ON RECORD THAT RESPONDENT RRN
ACTUALLY USED AND BENEFITED FROM THE
MANLIFT EQUIPMENT.
II. IN RENDERING THE QUESTIONED
DECISION AND QUESTIONED RESOLUTION,
THE HONORABLE COURT OF APPEALS HAS
DECIDED A QUESTION OF SUBSTANCE NOT
IN ACCORD WITH LAW AND/OR WITH THE
APPLICABLE DECISIONS OF THE HONORABLE
SUPREME COURT.
III. THE COURT OF APPEALS COMMITTED A
GRAVE REVERSIBLE ERROR IN AFFIRMING
THE CIAC AWARD FOR THE VALUE OF
INVENTORIED MATERIALS CONSIDERING
THAT:
A. RESPONDENT RRN ADMITTED THE
VALIDITY OF THE DEDUCTIONS ON
ACCOUNT OF MATERIAL SUPPLY, WHICH
INCLUDED THE INVENTORIED MATERIALS.

B. RESPONDENT RRN HAS NO BASIS TO
CLAIM BECAUSE ENGR. BONIFACIO
ADMITTED THAT RESPONDENT RRN FAILED
TO ESTABLISH WHETHER THE MATERIALS
CAME FROM RESPONDENT RRN OR FROM
PETITIONER AND THAT IT WAS PETITIONER
THAT ACTUALLY INSTALLED THE SAID
MATERIALS AS PART OF REMAINING WORKS
THAT PETITIONER TOOK OVER FROM
RESPONDENT RRN.
C. THE CLAIM FOR THE VALUE OF
INVENTORIED MATERIALS IS A DOUBLE
CLAIM OR DOUBLE ENTRY BECAUSE IN THE
COMPUTATION OF THE FINAL ACCOUNT,
RESPONDENT RRN WAS CREDITED THE FULL
CONTRACT PRICE AND THE COST OF
VARIATIONS, WHICH INCLUDED THE
INVENTORIED MATERIALS.
IV. IN RENDERING THE QUESTIONED
DECISION AND QUESTIONED RESOLUTION,
THE COURT OF APPEALS COMMITTED A
GRAVE REVERSIBLE ERROR IN THAT IT
COMPLETELY DISREGARDED THE
PROVISION OF THE SUBCONTRACT, WHICH
ALLOWED PAYMENT OF ACTUAL COST
INCURRED BY PETITIONER IN COMPLETING
THE REMAINING WORKS THAT PRIVATE
RESPONDENT ADMITTEDLY FAILED TO
COMPLETE.
V. THE COURT OF APPEALS COMMITTED A
GRAVE REVERSIBLE ERROR WHEN IT
COMPLETELY DISREGARDED THE EVIDENCE
ON ACTUAL COST INCURRED BY PETITIONER
IN COMPLETING THE REMAINING WORKS.
VI. THE COURT OF APPEALS COMMITTED
GRAVE REVERSIBLE ERROR WHEN IT
AFFIRMED THE CIAC AWARD FOR INTERESTS
AND ARBITRATION COSTS IN FAVOR OF
RESPONDENT RRN.[4]
The petition is bereft of merit.
Despite petitioner's attempts to make it appear that it is
advancing questions of law, it is quite clear that what
petitioner seeks is for this Court to recalibrate the
evidence it has presented before the CIAC. It insists
that its evidence sufficiently proves that it is entitled to
payment for respondent's use of its manlift equipment,
and even absent proof of the supposed agreement on
the charges petitioner may impose on respondent for
the use of said equipment, respondent should be made
to pay based on the principle of unjust
enrichment. Petitioner also questions the amounts
awarded by the CIAC for inventoried materials, and
costs incurred by petitioner for completing the work left
unfinished by respondent.
As reiterated by the Court in IBEX International, Inc. v.
Government Service Insurance System,[5] to wit:
It is settled that findings of fact of quasi-judicial
bodies, which have acquired expertise because
their jurisdiction is confined to specific matters, are
generally accorded not only respect, but also
finality, especially when affirmed by the Court of
Appeals. In particular, factual findings of
construction arbitrators are final and conclusive
and not reviewable by this Court on appeal.
This rule, however, admits of certain exceptions. In
Uniwide Sales Realty and Resources Corporation v. Titan-Ikeda
Construction and Development Corporation, we said:
In David v. Construction Industry and Arbitration Commission,
we ruled that, as exceptions, factual findings of
construction arbitrators may be reviewed by this Court
when the petitioner proves affirmatively that: (1) the
award was procured by corruption, fraud or other
undue means; (2) there was evident partiality or
corruption of the arbitrators or any of them; (3) the
arbitrators were guilty of misconduct in refusing to hear
evidence pertinent and material to the controversy; (4)
one or more of the arbitrators were disqualified to act as
such under Section nine of Republic Act No. 876 and
willfully refrained from disclosing such disqualifications
or of any other misbehavior by which the rights of any
party have been materially prejudiced; or (5) the
arbitrators exceeded their powers, or so imperfectly
executed them, that a mutual, final and definite award
upon the subject matter submitted to them was not
made.
Other recognized exceptions are as follows: (1) when
there is a very clear showing of grave abuse of
discretion resulting in lack or loss of jurisdiction as
when a party was deprived of a fair opportunity to
present its position before the Arbitral Tribunal or
when an award is obtained through fraud or the
corruption of arbitrators, (2) when the findings of the
Court of Appeals are contrary to those of the CIAC,
and (3) when a party is deprived of administrative due
process.[6]
A perusal of the records would reveal that none of the
aforementioned circumstances, which would justify
exemption of this case from the general rule, are present
here. Such being the case, the Court, not being a trier
of facts, is not duty-bound to examine, appraise and
analyze anew the evidence presented before the
arbitration body.[7]
Petitioner's reliance on the principle of unjust
enrichment is likewise misplaced. The ruling of the
Court in University of the Philippines v. Philab Industries,
Inc.[8] is highly instructive, thus:
Unjust enrichment claims do not lie simply because one
party benefits from the efforts or obligations of others,
but instead it must be shown that a party was unjustly
enriched in the sense that the term unjustly could mean
illegally or unlawfully.
Moreover, to substantiate a claim for unjust enrichment,
the claimant must unequivocally prove that another
party knowingly received something of value to which
he was not entitled and that the state of affairs are such
that it would be unjust for the person to keep the
benefit. Unjust enrichment is a term used to depict
result or effect of failure to make remuneration of or for
property or benefits received under circumstances that
give rise to legal or equitable obligation to account for
them; to be entitled to remuneration, one must confer
benefit by mistake, fraud, coercion, or request. Unjust
enrichment is not itself a theory of reconvey. Rather, it
is a prerequisite for the enforcement of the doctrine of
restitution.
Article 22 of the New Civil Code reads:
Every person who, through an act of performance by
another, or any other means, acquires or comes into
possession of something at the expense of the latter
without just or legal ground, shall return the same to
him.
In order that accion in rem verso may prosper, the essential
elements must be present: (1) that the defendant has
been enriched, (2) that the plaintiff has suffered a loss,
(3) that the enrichment of the defendant is without just
or legal ground, and (4) that the plaintiff has no other
action based on contract, quasi-contract, crime or
quasi-delict.
An accion in rem verso is considered merely an auxiliary
action, available only when there is no other remedy on
contract, quasi-contract, crime, and quasi-delict. If
there is an obtainable action under any other institution
of positive law, that action must be resorted to, and the
principle of accion in rem verso will not lie.[9]
As found by both the CIAC and affirmed by the CA,
petitioner failed to prove that respondent's free use of
the manlift was without legal ground based on the
provisions of their contract. Thus, the third requisite,
i.e., that the enrichment of respondent is without just or
legal ground, is missing. In addition, petitioner's claim
is based on contract, hence, the fourth requisite − that
the plaintiff has no other action based on contract,
quasi-contract, crime or quasi-delict − is also
absent. Clearly, the principle of unjust enrichment is
not applicable in this case.
The other issues raised by petitioner all boil down to
whether the CIAC or the CA erred in rejecting its
claims for costs of some materials.
Again, these issues are purely factual and cannot be
properly addressed in this petition for review on
certiorari. In Hanjin Heavy Industries and Construction Co.,
Ltd. v. Dynamic Planners and Construction Corp.,[10] it was
emphasized that mathematical computations, the
propriety of arbitral awards, claims for "other costs" and
"abandonment" are factual questions. Since the
discussions of the CIAC and the CA in their respective
Decisions show that its factual findings are supported
by substantial evidence, there is no reason why this
Court should not accord finality to said findings. Verily,
to accede to petitioner's request for a recalibration of its
evidence, which had been thoroughly studied by both
the CIAC and the CA would result in negating the
objective of Executive Order No. 1008, which created
an arbitration body to ensure the prompt and efficient
settlement of disputes in the construction
industry. Thus, the Court held in Uniwide Sales Realty
and Resources Corporation v. Titan-Ikeda Construction and
Development Corporation,[11] that:
x x x The Court will not review the factual findings of
an arbitral tribunal upon the artful allegation that such
body had "misapprehended facts" and will not pass
upon issues which are, at bottom, issues of fact, no
matter how cleverly disguised they might be as "legal
questions." The parties here had recourse to arbitration
and chose the arbitrators themselves; they must have
had confidence in such arbitrators. The Court will not,
therefore, permit the parties to relitigate before it the
issues of facts previously presented and argued before
the Arbitral Tribunal, save only where a clear showing is
made that, in reaching its factual conclusions, the
Arbitral Tribunal committed an error so egregious and
hurtful to one party as to constitute a grave abuse of
discretion resulting in lack or loss of jurisdiction.[12]
As discussed above, there is nothing in the records that
point to any grave abuse of discretion committed by the
CIAC.
The awards for interests and arbitration costs are,
likewise, correct as they are in keeping with prevailing
jurisprudence.[13]
IN VIEW OF THE FOREGOING, the Petition is
DENIED. The Decision of the Court of Appeals
dated February 22, 2006 and its Resolution dated April
26, 2006 are AFFIRMED.
SO ORDERED.
SECOND DIVISION
G.R. No. 179628, January 16, 2013
THE MANILA INSURANCE COMPANY, INC.,
PETITIONER. VS. SPOUSES ROBERTO AND
AIDA AMURAO, RESPONDENTS.
DECISION
DEL CASTILLO, J.:
The jurisdiction of the Construction Industry
Arbitration Commission (CIAC) is conferred by law.
Section 4[1] of Executive Order (E.O.) No. I 008,
otherwise known as the Construction Industry
Arbitration Law, "is broad enough to cover any dispute
arising from, or connected with construction contracts,
whether these involve mere contractual money claims or
execution of the works."[2]
This Petition for Review on Certiorari[3] under Rule 45 of
the Rules of Court assails the Decision[4] dated June 7,
2007 and the Resolution[5] dated September 7, 2007 of
the Court of Appeals (CA) in CA-G.R. SP No. 96815.
Factual Antecedents
On March 7, 2000, respondent-spouses Roberto and
Aida Amurao entered into a Construction Contract
Agreement (CCA)[6] with Aegean Construction and
Development Corporation (Aegean) for the
construction of a six-storey commercial building in
Tomas Morato corner E. Rodriguez Avenue, Quezon
City.[7] To guarantee its full and faithful compliance with
the terms and conditions of the CCA, Aegean posted
performance bonds secured by petitioner The Manila
Insurance Company, Inc.[8] (petitioner) and Intra Strata
Assurance Corporation (Intra Strata).[9]
On November 15, 2001, due to the failure of Aegean to
complete the project, respondent spouses filed with the
Regional Trial Court (RTC) of Quezon City, Branch
217, a Complaint,[10] docketed as Civil Case No. Q-01-
45573, against petitioner and Intra Strata to collect on
the performance bonds they issued in the amounts of
P2,760,000.00 and P4,440,000.00, respectively.[11]
Intra Strata, for its part, filed an Answer[12] and later, a
Motion to Admit Third Party Complaint,[13] with
attached Third Party Complaint[14] against Aegean,
Ronald D. Nicdao, and Arnel A. Mariano.
Petitioner, on the other hand, filed a Motion to
Dismiss[15] on the grounds that the Complaint states no
cause of action[16] and that the filing of the Complaint is
premature due to the failure of respondent-spouses to
implead the principal contractor, Aegean.[17] The RTC,
however, denied the motion in an Order [18] dated May 8,
2002. Thus, petitioner filed an Answer with
Counterclaim and Cross-claim,[19] followed by a Third
Party Complaint[20] against Aegean and spouses Ronald
and Susana Nicdao.
During the pre-trial, petitioner and Intra Strata
discovered that the CCA entered into by respondent-
spouses and Aegean contained an arbitration
clause.[21] Hence, they filed separate Motions to
Dismiss[22] on the grounds of lack of cause of action and
lack of jurisdiction.
Ruling of the Regional Trial Court
On May 5, 2006, the RTC denied both motions.[23]
Petitioner and Intra Strata separately moved for
reconsideration but their motions were denied by the
RTC in its subsequent Order[24] dated September 11,
2006.
Aggrieved, petitioner elevated the case to the CA by
way of special civil action for certiorari.[25]
Ruling of the Court of Appeals
On June 7, 2007, the CA rendered a Decision[26]
dismissing the petition. The CA ruled that the presence
of an arbitration clause in the CCA does not merit a
dismissal of the case because under the CCA, it is only
when there are differences in the interpretation of
Article I of the construction agreement that the parties
can resort to arbitration.[27] The CA also found no grave
abuse of discretion on the part of the RTC when it
disregarded the fact that the CCA was not yet signed at
the time petitioner issued the performance bond on
February 29, 2000.[28] The CA explained that the
performance bond was intended to be coterminous with
the construction of the building.[29] It pointed out that
“if the delivery of the original contract is
contemporaneous with the delivery of the surety’s
obligation, each contract becomes completed at the
same time, and the consideration which supports the
principal contract likewise supports the subsidiary
one.”[30] The CA likewise said that, although the
contract of surety is only an accessory to the principal
contract, the surety’s liability is direct, primary and
absolute.[31] Thus:
WHEREFORE, we resolve to DISMISS the petition as
we find that no grave abuse of discretion attended the
issuance of the order of the public respondent denying
the petitioner’s motion to dismiss.
IT IS SO ORDERED.[32]
Petitioner moved for reconsideration but the CA denied
the same in a Resolution[33] dated September 7, 2007.
Issues
Hence, this petition raising the following issues:
A.
THE HONORABLE [CA] ERRED WHEN IT HELD
THAT IT IS ONLY WHEN THERE ARE
DIFFERENCES IN THE INTERPRETATION OF
ARTICLE I OF THE CONSTRUCTION
AGREEMENT THAT THE PARTIES MAY
RESORT TO ARBITRATION BY THE CIAC.
B.
THE HONORABLE [CA] ERRED IN TREATING
[PETITIONER] AS A SOLIDARY DEBTOR
INSTEAD OF A SOLIDARY GUARANTOR.
C.
THE HONORABLE [CA] OVERLOOKED AND
FAILED TO CONSIDER THE FACT THAT
THERE WAS NO ACTUAL AND EXISTING
CONSTRUCTION AGREEMENT AT THE TIME
THE MANILA INSURANCE BOND NO. G (13)
2082 WAS ISSUED ON FEBRUARY 29, 2000.[34]
Petitioner’s Arguments
Petitioner contends that the CA erred in ruling that the
parties may resort to arbitration only when there is
difference in the interpretation of the contract
documents stated in Article I of the CCA.[35] Petitioner
insists that under Section 4 of E.O. No. 1008, it is the
CIAC that has original and exclusive jurisdiction over
construction disputes, such as the instant case.[36]
Petitioner likewise imputes error on the part of the CA
in treating petitioner as a solidary debtor instead of a
solidary guarantor.[37] Petitioner argues that while a
surety is bound solidarily with the obligor, this does not
make the surety a solidary co-debtor.[38] A surety or
guarantor is liable only if the debtor is himself liable. [39]
In this case, since respondent-spouses and Aegean
agreed to submit any dispute for arbitration before the
CIAC, it is imperative that the dispute between
respondent- spouses and Aegean must first be referred
to arbitration in order to establish the liability of
Aegean.[40] In other words, unless the liability of Aegean
is determined, the filing of the instant case is
premature.[41]
Finally, petitioner puts in issue the fact that the
performance bond was issued prior to the execution of
the CCA.[42] Petitioner claims that since there was no
existing contract at the time the performance bond was
executed, respondent- spouses have no cause of action
against petitioner.[43] Thus, the complaint should be
dismissed.[44]
Respondent spouses’ Arguments
Respondent-spouses, on the other hand, maintain that
the CIAC has no jurisdiction over the case because
there is no ambiguity in the provisions of the CCA. [45]
Besides, petitioner is not a party to the CCA.[46] Hence,
it cannot invoke Article XVII of the CCA, which
provides for arbitration proceedings.[47]
Respondent-spouses also insist that petitioner as a
surety is directly and equally bound with the principal. [48]
The fact that the performance bond was issued prior to
the execution of the CCA also does not affect the
latter’s validity because the performance bond is
coterminous with the construction of the building. [49]
Our Ruling
The petition has merit.
Nature of the liability of the surety
A contract of suretyship is defined as “an agreement
whereby a party, called the surety, guarantees the
performance by another party, called the principal or
obligor, of an obligation or undertaking in favor of a
third party, called the obligee. It includes official
recognizances, stipulations, bonds or undertakings
issued by any company by virtue of and under the
provisions of Act No. 536, as amended by Act No.
2206.”[50] We have consistently held that a surety’s
liability is joint and several, limited to the amount of the
bond, and determined strictly by the terms of contract
of suretyship in relation to the principal contract
between the obligor and the obligee.[51] It bears
stressing, however, that although the contract of
suretyship is secondary to the principal contract, the
surety’s liability to the obligee is nevertheless direct,
primary, and absolute.[52]
In this case, respondent-spouses (obligee) filed with the
RTC a Complaint against petitioner (surety) to collect
on the performance bond it issued. Petitioner, however,
seeks the dismissal of the Complaint on the grounds of
lack of cause of action and lack of jurisdiction.
The respondent-spouses have cause of action
against the petitioner; the performance bond
is coterminous with the CCA
Petitioner claims that respondent-spouses have no cause
of action against it because at the time it issued the
performance bond, the CCA was not yet signed by
respondent-spouses and Aegean.
We do not agree.
A careful reading of the Performance Bond reveals that
the “bond is coterminous with the final acceptance of
the project.”[53] Thus, the fact that it was issued prior to
the execution of the CCA does not affect its validity or
effectivity.
But while there is a cause of action against petitioner,
the complaint must still be dismissed for lack of
jurisdiction.
The CIAC has jurisdiction over the case
Section 4 of E.O. No. 1008 provides that:
SEC. 4. Jurisdiction. – The CIAC shall have original and
exclusive jurisdiction over disputes arising from, or
connected with, contracts entered into by parties
involved in construction in the Philippines, whether the
dispute arises before or after the completion of the
contract, or after the abandonment or breach thereof.
These disputes may involve government or private
contracts. For the Board to acquire jurisdiction, the
parties to a dispute must agree to submit the same to
voluntary arbitration.
The jurisdiction of the CIAC may include but is not
limited to violation of specifications for materials and
workmanship, violation of the terms of agreement,
interpretation and/or application of contractual time
and delays, maintenance and defects, payment, default
of employer or contractor, and changes in contract cost.
Excluded from the coverage of the law are disputes
arising from employer-employee relationships which
shall continue to be covered by the Labor Code of the
Philippines.
Based on the foregoing, in order for the CIAC to
acquire jurisdiction two requisites must concur: “first,
the dispute must be somehow connected to a
construction contract; and second, the parties must
have agreed to submit the dispute to arbitration
proceedings.”[54]
In this case, both requisites are present.
The parties agreed to submit to arbitration proceedings
“[a]ny dispute arising in the course of the execution and
performance of [the CCA] by reason of difference in
interpretation of the Contract Documents x x x which
[the parties] are unable to resolve amicably between
themselves.”[55] Article XVII of the CCA reads:
ARTICLE XVII – ARBITRATION
17.1 Any dispute arising in the course of the execution
and performance of this Agreement by reason of
difference in interpretation of the Contract Documents
set forth in Article I which the OWNER and the
CONTRACTOR are unable to resolve amicably
between themselves shall be submitted by either party
to a board of arbitrators composed of Three (3)
members chosen as follows: One (1) member shall be
chosen by the CONTRACTOR AND One (1) member
shall be chosen by the OWNER. The said Two (2)
members, in turn, shall select a third member acceptable
to both of them. The decision of the Board of
Arbitrators shall be rendered within Ten (10) days from
the first meeting of the board, which decision when
reached through the affirmative vote of at least Two (2)
members of the board shall be final and binding upon
the OWNER and CONTRACTOR.
17.2 Matters not otherwise provided for in this Contract
or by Special Agreement of the parties shall be
governed by the provisions of the Arbitration Law,
Executive Order No. 1008.[56]
In William Golangco Construction Corporation v. Ray Burton
Development Corporation,[57] we declared that monetary
claims under a construction contract are disputes arising
from “differences in interpretation of the contract”
because “the matter of ascertaining the duties and
obligations of the parties under their contract all involve
interpretation of the provisions of the contract.”[58]
Following our reasoning in that case, we find that the
issue of whether respondent-spouses are entitled to
collect on the performance bond issued by petitioner is
a “dispute arising in the course of the execution and
performance of [the CCA] by reason of difference in
the interpretation of the contract documents.”
The fact that petitioner is not a party to the CCA cannot
remove the dispute from the jurisdiction of the CIAC
because the issue of whether respondent- spouses are
entitled to collect on the performance bond, as we have
said, is a dispute arising from or connected to the CCA.
In fact, in Prudential Guarantee and Assurance, Inc. v. Anscor
Land, lnc.,[59] we rejected the argument that the
jurisdiction of CIAC is limited to the construction
industry, and thus, cannot extend to surety contracts. In
that case, we declared that "[a]lthough not the
construction contract itself, the performance bond is
deemed as an associate of the main construction
contract that it cannot be separated or severed fi·om its
principal. The Performance Bond is significantly and
substantially connected to the construction contract that
there can be no doubt it is the CIAC, under Section 4 of
E.O. No. 1008, which has jurisdiction over any dispute
arising from or connected with it."[60]
In view of the foregoing, we agree with the petitioner
that jurisdiction over the instant case lies with the
CIAC, and not with the RTC. Thus, the Complaint filed
by respondent-spouses with the RTC must be
dismissed.
WHEREFORE, the petition is hereby GRANTED.
The Decision dated June 7, 2007 and the Resolution
dated September 7, 2007 of the Court of Appeals in
CA-G.R. SP No. 96815 are hereby ANNULLED and
SET ASIDE. The Presiding Judge of the Regional Trial
Court of Quezon City, Branch 217 ts DIRECTED to
dismiss Civil Case No. Q-01-45573 for lack of
jurisdiction.
SO ORDERED.
THIRD DIVISION
G.R. NOS. 147925-26, June 08, 2009
ELPIDIO S. UY, DOING BUSINESS UNDER
THE NAME AND STYLE EDISON
DEVELOPMENT & CONSTRUCTION,
PETITIONER, VS. PUBLIC ESTATES
AUTHORITY AND THE HONORABLE
COURT OF APPEALS, RESPONDENTS.
DECISION
NACHURA, J.:
Petitioner Elpidio S. Uy (Uy) appeals by certiorari the
Joint Decision[1] dated September 25, 2000 and the Joint
Resolution[2] dated April 25, 2001 of the Court of
Appeals (CA) in the consolidated cases CA-G.R. SP
Nos. 59308 and 59849.
Respondent Public Estates Authority (PEA) was
designated as project manager by the Bases Conversion
Development Authority (BCDA), primarily tasked to
develop its 105-hectare demilitarized lot in Fort
Bonifacio, Taguig City into a first-class memorial park
to be known as Heritage Park. PEA then engaged the
services of Makati Development Corporation (MDC) to
undertake the horizontal works on the project; and Uy,
doing business under the name and style Edison
Development and Construction (EDC), to do the
landscaping.
For a contract price of Three Hundred Fifty-Five
Million Eighty Thousand One Hundred Forty-One and
15/100 Pesos (P355,080,141.15), PEA and EDC signed
the Landscaping and Construction Agreement[3] on
November 20, 1996. EDC undertook to complete the
landscaping works in four hundred fifty (450) days
commencing on the date of receipt of the notice to
proceed.
EDC received the notice to proceed on December 3,
1996;[4] and three (3) days after, or on December 6,
1996,[5] it commenced the mobilization of the
equipment and manpower needed for the project. PEA,
however, could not deliver any work area to EDC
because the horizontal works of MDC were still
ongoing. EDC commenced the landscaping works only
on January 7, 1997 when PEA finally made an initial
delivery of a work area.
PEA continuously incurred delay in the turnover of
work areas. Resultantly, the contract period of 450 days
was extended to 693 days. PEA also failed to turn over
the entire 105-hectare work area due to the presence of
squatters. Thus, on March 15, 1999, the PEA Project
Management Office (PEA-PMO) issued Change Order
No. 2-LC,[6] excluding from the contract the 45-square-
meter portion of the park occupied by squatters.
In view of the delay in the delivery of work area, EDC
claimed additional cost from the PEA-PMO amounting
to P181,338,056.30. Specifically, Uy alleged that he
incurred additional rental costs for the equipment,
which were kept on standby, and labor costs for the idle
manpower. He added that the delay by PEA caused the
topsoil at the original supplier to be depleted; thus, he
was compelled to obtain the topsoil from a farther
source, thereby incurring extra costs. He also claims that
he had to mobilize water trucks for the plants and trees
which had already been delivered to the site.
Furthermore, it became necessary to construct a nursery
shade to protect and preserve the young plants and trees
prior to actual transplanting to the landscaped area. The
PEA-PMO evaluated the EDC's claim and arrived at a
lesser amount of P146,484,910.[7] The evaluation of
PEA-PMO was then referred to the Heritage Park
Executive Committee (ExCom) for approval.
On November 12, 1999, the Performance Audit
Committee (PAC) reviewed the progress report
submitted by the works engineer and noted that the
EDC's landscaping works were behind schedule by
twenty percent (20%). The PAC considered this delay
unreasonable and intolerable, and immediately
recommended to BCDA the termination of the
landscaping contract.[8] The BCDA adopted PAC's
recommendation and demanded from PEA the
termination of the contract with EDC. In compliance,
PEA terminated the agreement on November 29, 1999.
PEA fully paid all the progress billings up to August 26,
1999, but it did not heed EDC's additional claims.
Consequently, Uy filed a Complaint[9] with the
Construction Industry Arbitration Commission (CIAC),
docketed as CIAC Case No. 02-2000.
On May 16, 2000, the CIAC rendered a Decision,[10] the
dispositive portion of which reads:
WHEREFORE, Judgment is hereby rendered in favor
of the [Petitioner] Contractor ELPIDIO S. UY and
Award is hereby made on its monetary claims as
follows:
Respondent PUBLIC ESTATES AUTHORITY is
directed to pay the [petitioner] the following amounts:
P 19,604,132.06 --- for the cost of idle time of
equipment.
2,275,721.00 --- for the cost of idled manpower.
6,050,165.05 --- for the construction of the nursery
shade net area.
605,016.50 --- for attorney's fees.
Interest on the amount of P6,050,165.05 as cost for the
construction of the nursery shade net area shall be paid
at the rate of 6% per annum from the date the
Complaint was filed on 12 January 2000. Interest on the
total amount of P21,879,853.06 for the cost of idled
manpower and equipment shall be paid at the same rate
of 6% per annum from the date this Decision is
promulgated. After finality of this Decision, interest at
the rate of 12% per annum shall be paid on the total of
these 3 awards amounting to P27,930,018.11 until full
payment of the awarded amount shall have been made,
"this interim period being deemed to be at that time already a
forbearance of credit" (Eastern Shipping Lines, Inc. v. Court of
Appeals, et al., 243 SCRA 78 [1994]; Keng Hua Paper
Products Co., Inc. v. Court of Appeals, 286 SCRA 257
[1998]; Crismina Garments, Inc. v. Court of Appeals, G.R.
No. 128721, March 9, 1999).
SO ORDERED.[11]
Uy received the CIAC decision on June 7, 2000. On
June 16, 2000, Uy filed a motion for correction of
computation,[12] followed by an amended motion for
correction of computation,[13] on July 21, 2000. The
CIAC, however, failed to resolve Uy's motion and
amended motion within the 30-day period as provided
in its rules, and Uy considered it as denial of the motion.
Hence, on July 24, 2000, Uy filed a petition for review[14]
with the CA, docketed as CA-G.R. SP No. 59849. Uy's
petition was consolidated with CA-G.R. SP No. 59308,
the earlier petition filed by PEA, assailing the same
CIAC decision.
On August 1, 2000, the CIAC issued an Order[15]
denying Uy's motion for correction of computation.
On September 25, 2000, the CA rendered the now
assailed Joint Decision dismissing both petitions on
both technical and substantive grounds. PEA's petition
was dismissed because the verification thereof was
defective. Uy's petition, on the other hand, was
dismissed upon a finding that it was belatedly filed.
Further, the CA found no sufficient basis to warrant the
reversal of the CIAC ruling, which it held is based on
clear provisions of the contract, the evidence on record
and relevant law and jurisprudence.
The CA disposed thus:
WHEREFORE, premises considered, the petitions in
CA-G.R. SP No. 59308, entitled "Public Estates
Authority v. Elpidio S. Uy, doing business under
the name and style of Edison [D]evelopment &
Construction," and CA-G.R. SP No. 59849, "Elpidio
S. Uy, doing business under the name and style of
Edison [D]evelopment & Construction v. Public
Estates Authority," are both hereby DENIED DUE
COURSE and accordingly DISMISSED, for lack of
merit.
Consequently, the Award/Decision issued by the
Construction Industry Arbitration Commission on May
16, 2000 in CIAC Case No. 02-2000, entitled "Elpidio
S. Uy, doing business under the name and style of
Edison [D]evelopment & Construction v. Public
Estates Authority," is hereby AFFIRMED in toto.
No pronouncement as to costs.
SO ORDERED.[16]
PEA and Uy filed motions for reconsideration.
Subsequently, PEA filed with the CA an Urgent Motion
for Issuance of a Temporary Restraining Order and/or
Writ of Preliminary Injunction,[17] seeking to enjoin the
CIAC from proceeding with CIAC Case No. 03-2001,
which Uy had subsequently filed. PEA alleged that the
case involved claims arising from the same Landscaping
and Construction Agreement, subject of the cases
pending with the CA.
On April 25, 2001, the CA issued the assailed Joint
Resolution, thus:
WHEREFORE, the present Motion/s for
Reconsideration in CA-G.R. SP No. 59308 and CA-
G.R. SP No. 59849 are hereby both DENIED, for lack
of merit.
Accordingly, let an injunction issue permanently
enjoining the Construction Industry Arbitration
Commission from proceeding with CIAC CASE NO.
03-2001, entitled ELPIDIO S. UY, doing business
under the name and style of EDISON
DEVELOPMENT &
CONSTRUCTION v. PUBLIC ESTATES
AUTHORITY and/or HONORABLE CARLOS P.
DOBLE.
SO ORDERED.[18]
PEA and Uy then came to us with their respective
petitions for review assailing the CA ruling. PEA's
petition was docketed as G.R. Nos. 147933-34, while
that of Uy was docketed as G.R. Nos. 147925-26. The
petitions, however, were not consolidated.
On December 12, 2001, this Court resolved G.R. Nos.
147933-34 in this wise:
WHEREFORE, in view of the foregoing, the petition
for review is DENIED. The Motion to Consolidate this
petition with G.R. No. 147925-26 is also DENIED.
SO ORDERED.[19]
Thus, what remains for us to resolve is Uy's petition,
raising the following issues:
I Uy had on hand manpower and equipment amounting
WHETHER OR NOT RESPONDENT COURT OF
APPEALS HAS DEPARTED FROM THE
ACCEPTED AND USUAL COURSE OF JUDICIAL
PROCEEDINGS IN DISMISSING PETITIONER
UY'S PETITION IN CA-G.R. SP NO. 59849 ON
THE ALLEGED GROUND OF NON-
COMPLIANCE WITH THE REGLEMENTARY
PERIOD IN FILING AN APPEAL
II
WHETHER OR NOT THE RESPONDENT
COURT OF APPEALS, IN AFFIRMING THE
DECISION OF THE CIAC ARBITRAL TRIBUNAL
INSOFAR AS IT DENIED CERTAIN CLAIMS OF
PETITIONER UY, HAS DECIDED A QUESTION
OF SUBSTANCE NOT IN ACCORDANCE WITH
LAW AND THE APPLICABLE DECISIONS OF
THE HONORABLE COURT
III
WHETHER OR NOT THE RESPONDENT
COURT OF APPEALS ACTED WITHOUT OR IN
EXCESS OF ITS JURISDICTION OR WITH
GRAVE ABUSE OF DISCRETION AMOUNTING
TO LACK OR EXCESS OF JURISDICTION WHEN
IT ENJOINED THE PROCEEDINGS IN CIAC
CASE NO. 03-2001 IN ITS JOINT RESOLUTION
DATED 25 APRIL 2000, WHICH CASE IS
TOTALLY DIFFERENT FROM THE CASE A
QUO[20]
We will deal first with the procedural issue.
Appeals from judgment of the CIAC shall be taken to
the CA by filing a petition for review within fifteen (15)
days from the receipt of the notice of award, judgment,
final order or resolution, or from the date of its last
publication if publication is required by law for its
effectivity, or of the denial of petitioner's motion for
new trial or reconsideration duly filed in accordance
with the governing law of the court or agency a quo.[21]
Admittedly, Uy received the CIAC decision on June 7,
2000; that instead of filing a verified petition for review
with the CA, Uy filed a motion for correction of
computation on June 16, 2000, pursuant to Section 9,
Article XV of the Rules of Procedure Governing
Construction Arbitration:
Section 9. Motion for Reconsideration. - As a matter of
policy, no motion for reconsideration shall be allowed.
Any of the parties may, however, file a motion for
correction within fifteen (15) days from receipt of the
award upon any of the following grounds:
A. An evident miscalculation of figures, a
typographical or arithmetical error;
B. An evident mistake in the description of
any party, person, date, amount, thing or
property referred to in the award.
The filing of the motion for correction shall interrupt
the running of the period for appeal.
With the filing of the motion for correction, the running
of the period to appeal was effectively interrupted.
CIAC was supposed to resolve the motion for
correction of computation within 30 days from the time
the comment or opposition thereto was submitted. In
Uy's case, no resolution was issued despite the lapse of
the 30-day period, and Uy considered it as a denial of
his motion. Accordingly, he elevated his case to the CA
on July 24, 2000. But not long thereafter, or on August
1, 2000, the CIAC issued an Order[22] denying the
motion for correction of computation.
Obviously, when Uy filed his petition for review with
the CA, the period to appeal had not yet lapsed; it was
interrupted by the pendency of his motion for
computation. There is no basis, therefore, to conclude
that the petition was belatedly filed.
The foregoing notwithstanding, inasmuch as the CA
resolved the petition on the merits, we now confront
the substantive issue - the propriety of the CA's
affirmance of the CIAC decision.
Uy cries foul on the award granted by CIAC, and
affirmed by the CA. He posits that PEA already
admitted its liability, pegged at P146,484,910.10, in its
memorandum dated January 6, 2000. Thus, he faults the
CA for awarding a lesser amount.
We meticulously reviewed the records before us and
failed to discern any admission of liability on the part of that PEA is admitting its liability. The evaluation
PEA. contained in the above memorandum is merely a
verification of the accuracy of EDC's claims. As a
The PEA-PMO evaluation dated January 6, 2000,[23] matter of fact, the evaluation is still subject for review
where PEA allegedly admitted its liability, reads in full: by the project manager, whose decision on the matter
MEMORANDUM requires the approval of the Heritage Park ExCom.
Second, Messrs. Ignacio and Urcia had no legal authority
For : Mr. Jaime R. Millan to make admissions on behalf of PEA. Thus, even
Project Manager assuming that the evaluation contained in the
Heritage Park Project memorandum was in the nature of an admission, the
Subject: EDC's Various Claim same cannot bind PEA. Third, Uy filed his complaint
Landscape Development Works with the CIAC because PEA did not act on EDC's
Revision shall be made on our evaluation dated 28 various claims. This supports our conclusion that PEA
December 1999 concerning various claims of contractor never admitted, but on the contrary denied, whatever
EDC-Landscape Development Works (Package IV), additional liabilities were claimed by Uy under the
particularly on the claim on Project Equipment on landscaping contract.
Standby (item a of the earlier evaluation).
Neither do we find any admission of liability on the part
Reference to item 4 of the Terms and Conditions of of PEA during the proceedings before the CIAC. What
1998 ACEL Rate Equipment Guidebook, the CMO was admitted by PEA was that PMO evaluated the claim at
inadvertently did not consider are the wages and salaries the lesser amount of P146,484,910 (Exh. "S").[24] The
of standby operator/driver corresponding to the admission of the evaluation made by PEA cannot
equipment standby being claimed. translate to an admission of liability. There is simply no
basis for Uy to claim that PEA had admitted its liability.
Thus, the corresponding gross amount to be
incorporated shall be P4,925,600.00 computed based on This issue disposed of, we now resolve Uy's claims on
the total man-months of each standby equipment being the basis of the evidence presented.
claimed.
Uy claims P95,740,834.30 as the standby equipment
cost. CIAC, however, did not agree and granted only
A tabulation of the claims is shown hereinbelow:
P19,604,132.06 as the cost of standby equipment using
its so-called equitable method:
Works
Nature of PMO [Uy] had mobilized manpower and equipment sufficient
EDC Claim Engineer
Claim Evaluation to do the landscaping works for the entire 105 hectares.
Evaluation
The unilateral reduction in scope of work made by
a.Project P95,740,834. 67,422,840.4 81,851,396.08
[PEA] thus laid idle the men and equipment of [Uy] in
Equipment 30 0
direct proportion to said reduction. In effect, therefore,
on Standby
Equipment 4,925,600.00
to 42.85% in excess of that necessary to perform the
Operator/Dri
landscaping works for the reduced scope of work. [Uy]
ver
thus suffered costs in terms of excess manpower and
b Manpower on 28,165,022.00 2,275,721.00 2,275,721.00
equipment in proportion to the reduced scope of work.
. Standby
c Topsoil Add'l 37,780,200.00 37,780,200.0 37,780,200.00
xxxx
. Hauling 0
Distance
The total contract period - original extensions - to
d Water Truck 19,652,000.00 15,467,800.0 19,652,000.00
complete the landscaping works for the entire 105
. Operating 0
hectares is 693 days. The reduction in scope of work
Cost
42.85% laid idle his equipment by the same percentage
---------------------------------------------------------------------
of 42.85[%] or 296.95 days. Since [Uy] calculated his
---------------------------------------
claim for idled equipment on a per month basis, it is
Total P181,338,056 122,946,561. 146,484,917.[
necessary to convert this into months. 296.95 days is
.30 40 08]
equivalent of 9.89 months. Multiplied by the rate of
P1,982,217.60 per month of delay, this would translate
Further, it is being specified that the PMO maintains
to P19,604,132.06 as the cost of idle time for equipment
the earlier notes of the CMO in its memo of 18 October
by reason of the [delay].[25]
1999 and that legal interpretations on each item of
Upon review of the records before us, we find a need to
claims is likewise enjoined.
modify, by increasing, the award for standby equipment
cost.
Attached are pertinent documents for your review and
reference
CIAC found that PEA incurred delays in the turnover
of work areas:
(Sgd.) (Sgd.) The first delay was the turn-over of a portion of Area 1
ROGELIO H. IGNACIO FLORO C. URCIA A that was made on 17 April 1997. The start of work on
PMO-B Asst. Project Manager that area was scheduled for March, 1997. There was,
By no stretch of the imagination can we consider this therefore, a delay of about one month. The second delay
memorandum an admission of liability on the part of was the turn-over of a portion of Area 2 A that was
PEA. First, nowhere in the memorandum does it say made on 20 October 1997. The start of work on that
area was scheduled for May, 1997. There was, therefore,
a delay of about five months. The third delay was the turn-
over of a portion of Area 2 B that was made on 05
March 1998. The start of work on that area was
scheduled for mid-February 1997. There was, therefore,
a delay of more than one (1) year. Altogether,
the several periods of delayed turn-over of work areas total one
year and six months or 546 days.[26]
Surely, on the days that EDC was waiting for the turn
over of additional work areas, it was paying rentals for
the equipment on standby. Yet, CIAC completely
ignored these delays in determining the cost of
equipment on standby, reasoning that:
It must be pointed out, however, that the division of the
vast area to be landscaped into distinct work areas with
different start of work schedules under the PERT-CPM,
[Uy] could easily have shifted his equipment from an
area where the delivery was delayed to the area where
there was an advanced turn-over.[27]
This is wrong.
Records establish that EDC promptly commenced the
landscaping work on every area that was turned over.
EDC, in fact, shifted its equipment where there was an
advance delivery, if only to minimize the additional
expenses incurred by reason of the long delays in the
turnover of the other work areas. Thus, in addition to
the award of P19,604,132.06 for cost of idle time for
equipment by reason of the reduction of scope of work,
Uy is entitled to the cost of idle time for equipment by
reason of the delay incurred in the delivery of work
areas.
The period of owner-caused delay was 546 days or 18.2
months. The rate given by the Association of Carriers
and Equipment Lessors (ACEL), Inc., and which was
also used as basis by CIAC in granting the costs for
equipment on standby, was P1,982,271.60 per month of
delay. Considering that PEA was in delay for 564 days
or 18.2 months, Uy is entitled to an additional award of
P36,076,360.32. Accordingly, he is entitled to an
aggregate amount of P55,680,492.38 for the equipment
rentals on standby.
As to the awards of P2,275,721.00, for the cost of idle
manpower, and P6,050,165.05, for the construction of
the nursery shade net area, we find no reason to disturb
the same, as Uy never raised this issue in his petition.
Next, we resolve Uy's claims for costs for additional
hauling distance of topsoil and for mobilization of water
truck.
The approved hauling cost of topsoil was only
P12.00/kilometer or P120.00 for the 10 kms original
source. Uy, however, claims that due to the delay in
delivery of work areas, the original source became
depleted; hence, he was constrained to haul topsoil
from another source located at a much farther distance
of 40 kms. Uy insists that the exhaustion of topsoil at
the original source was solely attributable to the delay in
the turnover of the project site. Thus, he claims from
PEA the increased cost of topsoil amounting to
P37,780,200.00.
Article 1724 of the Civil Code provides:
ART. 1724. The contractor who undertakes to build a
structure or any other work for a stipulated price, in
conformity with plans and specifications agreed upon
with the land-owner, can neither withdraw from the
contract nor demand an increase in the price on account
of the higher cost of labor or materials, save when there
has been a change in the plans and specifications,
provided:
(1) Such change has been authorized by the proprietor
in writing; and
(2) The additional price to be paid to the contractor has
been determined in writing by both parties.
By this article, a written authorization from the owner is
required before the contractor can validly recover his
claim. The evident purpose of the provision is to avoid
litigation for added costs incurred by reason of
additions or changes in the original plan. Undoubtedly,
it was adopted to serve as a safeguard or a substantive
condition precedent to recovery.[28]
This provision is echoed in the Landscaping Contract,
viz.:
ARTICLE IX
CHANGE OF WORK
xxxx
9.3. Under no circumstances shall PEA be held liable
for the payment of change of work undertaken without
the written approval of the PEA General Manager x x x.
ARTICLE X
EXTRA WORK
xxxx
10.3. Under no circumstances shall PEA be held liable
for the payment of extra work undertaken without the
written approval of the PEA General Manager to
perform the said work.[29]
Admittedly, EDC did not secure the required written
approval of PEA's general manager before obtaining the
topsoil from a farther source. As pointed out by the
CIAC:
There is no change order authorizing payment for the
increased cost upon which this claim is based. There is,
therefore, no legal right based upon contract (the
landscaping agreement or a change order) that would
impose such a liability upon [PEA]. In a lump sum
contract, as that entered into by the parties, the matter
of how the contractor had made [a] computation to
arrive at [a] bid that he submits is completely irrelevant.
The contract amount of delivered topsoil is P780.00 per
truckload of 5.5 cubic meters sourced from a distance
of [10] km. or 100 [meters]. There is nothing in Exhibit
"L" or in the landscaping contract (Exhibit "A") that
would indicate an agreement of [PEA] to pay for the
increase in hauling cost if the source of topsoil exceeds
10 kilometers. Corollarily, there is also nothing therein
to show that [PEA] would also be entitled to decrease
said costs by paying less if the distance would have been
less than 10 kilometers. Had there been such a
counterpart provision, there might have been more
arguable claim for [Uy]. Unfortunately, no such
provision exists.[30]
In Powton Conglomerate, Inc. v. Agcolicol,[31] we emphasized:
The written consent of the owner to the increased costs
sought by the respondent is not a mere formal requisite,
but a vital precondition to the validity of a subsequent
contract authorizing a higher or additional contract
price. Moreover, the safeguards enshrined in the
provisions of Article 1724 are not only intended to
obviate future misunderstandings but also to give the
parties a chance to decide whether to bind one's self to
or withdraw from a contract.
By proceeding to obtain topsoil up to a 40-kilometer
radius without written approval from the PEA general
manager, Uy cannot claim the additional cost he
incurred.
Uy further claims P19,625,000.00 for cost of
mobilization of water trucks. He asserts that PEA
completely failed to provide the generator sets necessary
to undertake the watering and/or irrigation works for
the landscaping and construction activities.[32]
Uy, however, admitted that MDC had already installed a
deep well in the project site, and EDC used it in its
landscaping and construction activities.[33] Under the
contract, the operational costs of the deep well and its
appurtenant accessories, including the generator sets,
shall be borne by EDC:
The CONTRACTOR shall shoulder all cost of
electricity, maintenance, repairs, replacement of parts,
when needed, and all costs of operation of the
deepwell/s, and its appurtenant accessories, i.e.
generator sets, etc. (which are already existing at the
project site, constructed by another Contractor) while
such deepwell/s are being used by CONTRACTOR
herein for its landscaping and construction activities.
These [deepwells] shall be turned over to PEA by
CONTRACTOR in good operating/usable condition as
when it was first used by CONTRACTOR.[34]
Thus, Uy cannot claim additional cost for providing
generator sets.
Uy also attempts to justify his claim for cost of
mobilization of water trucks by alleging that the water
from the deep well provided by MDC and PEA was
grossly insufficient to undertake the watering works for
the project; hence, he was constrained to mobilize water
trucks to save the plants from dying.
Indisputably, Uy mobilized water trucks for the
landscaping projects and, certainly, incurred additional
costs. But like his claim for additional cost of topsoil,
such additional expenses were incurred without prior
written approval of PEA's general manager. Thus, he
cannot claim payment for such cost from PEA.
As aptly said by the CIAC:
Since [Uy] had presumably intended all along to charge
[PEA] for the water truck operating costs, considering
the very substantial amount of his claim, the prudence
that he presumably has, as an experienced general
contractor of the highest triple A category, should have
dictated that he negotiate with the [PEA] for a change
order or an extra work order before continuing to spend
the huge amounts that he claims to have spent. [Uy] did
just that in relation to his much smaller claim for the
construction of the nursery shade x x x. He, however,
made no effort to negotiate with the PEA for a similar
change order or extra work order to safeguard his even
bigger additional costs to operate the water trucks. No
explanation was offered for such a mystifying
differential treatment. He cannot, therefore, pass on
without any contractual basis, such additional costs to
the [PEA].
Neither can we hold PEA liable based on solutio indebiti,
the legal maxim that no one should enrich itself at the
expense of another. As we explained in Powton
Conglomerate, Inc. v. Agcolicol,[35]
the principle of unjust enrichment cannot be validly
invoked by the respondent who, through his own act or
omission, took the risk of being denied payment for
additional costs by not giving the petitioners prior
notice of such costs and/or by not securing their
written consent thereto, as required by law and their
contract.
Uy cannot, therefore, claim from PEA the costs of the
additional hauling distance of topsoil, and of the
mobilization of water trucks.
Uy also assails the grant of attorney's fees equivalent to
10% of the total amount due. Citing paragraph 24.4 of
the Landscaping and Construction Agreement, Uy
asserts entitlement to attorney's fees of twenty percent
(20%) of the total amount claimed. He ascribes error to
the CIAC and the CA for reducing the stipulated
attorney's fees from 20% to 10% of the total amount
due.
Paragraph 24.4 of the agreement provides:
Should the PEA be constrained to resort to judicial or
quasi-judicial relief to enforce or safeguard its rights and
interests under this Agreement, the CONTRACTOR if
found by the court or [the] quasi-judicial body, as the
case [may be], to have been at fault, shall be liable to
PEA for attorney's fees in an amount equivalent to
twenty percent (20%) of the total [amount] claimed in
the complaint, exclusive of [any] damages and costs of
suit.[36]
Clearly, the cited provision cannot support Uy's
insistence. Paragraph 24.4 on stipulated attorney's fees is
applicable only in complaints filed by PEA against the
contractor. The provision is silent on the amount of
attorney's fees that can be recovered from PEA.
Besides, even assuming that Paragraph 24.4 is
applicable, the amount of attorney's fees may be
reduced if found to be iniquitous or unconscionable.
Thus:
Articles 1229 and 2227 of the Civil Code empower the
courts to reduce the penalty if it is iniquitous or
unconscionable. The determination of whether the
penalty is iniquitous or unconscionable is addressed to
the sound discretion of the court and depends on
several factors such as the type, extent, and purpose of
the penalty, the nature of the obligation, the mode of
breach and its consequences.[37]
The Court finds Uy's claim for attorney's fees equivalent
to 20% of whatever amount is due and payable to be
exorbitant. The CIAC and the CA, therefore, correctly
awarded 10% of the total amount due and payable as
reasonable attorney's fees.
Finally, on the propriety of the writ of injunction.
Uy asserts that the CA acted without or in excess of
jurisdiction when it enjoined the proceedings in CIAC
Case No. 03-2001, despite the fact that the said case is
totally different from the instant case.
By grave abuse of discretion is meant such capricious
and whimsical exercise of judgment equivalent to lack
of jurisdiction. Mere abuse of discretion is not enough.
It must be grave, as when it is exercised arbitrarily or
despotically by reason of passion or personal hostility;
and such abuse must be so patent and so gross as to
amount to an evasion of a positive duty or to a virtual
refusal to perform the duty enjoined or to act at all in
contemplation of law.[38]
The CA granted PEA's prayer for the injunctive writ
not without reason. We quote its Joint Resolution, viz.:
[T]here is no question that Elpidio S. Uy's amended
complaint is based on the same Landscaping and
Construction Agreement, as he himself admits. The claims
pertinent thereto had already been arbitrated and passed
upon in CIAC CASE NO. 02-2000 and the decision
therein was already elevated to Us for review and, in
view of Our joint decision in the instant petitions, a
reconsideration thereof.
Based on the foregoing, We are inclined to grant the
prayer of PEA to enjoin the CIAC from further
proceeding with CIAC CASE NO. 03-2001, considering
that the allegations therein constrain Us to apply the
doctrine of litis pendentia, which has for its requisites: (a)
identity of parties, or at least such parties who represent
the same interests in both actions; (b) identity of rights
asserted and relief prayed for, the relief being founded
on the same facts; and (c) the identity with respect to
the two preceding particulars in the two (2) cases is such
that any judgment that may be rendered in the pending
case, regardless of which party is successful, would
amount to res judicata in the other case. Forum shopping
exists where the elements of litis pendentia are present or
where a final judgment in one case will amount to res
judicata in the other. The principle of bar by prior
judgment raised by the PEA, i.e., res judicata, finds
application only upon a showing of a final judgment as
one of its requisites, which is not yet present under the
present circumstances.
CIAC Case No. 02-2000. There is only one cause of
action running through Uy's litigious undertakings - his
alleged right under the Landscaping and Construction
Agreement. Therefore, the landscaping agreement is
indispensable in prosecuting his claims in both CIAC
Cases Nos. 02-2000 and 03-2001.
As we held in Villanueva v. Court of Appeals:[40]
A party, by varying the form or action or by bringing
forward in a second case additional parties or
arguments, cannot escape the effects of the principle of
res judicata when the facts remain the same at least where
such new parties or matter could have been impleaded
or pleaded in the prior action.
WHEREFORE, the petition is PARTIALLY
GRANTED. The assailed Joint Decision and Joint
Resolution of the Court of Appeals in CA-G.R. SP Nos.
59308 and 59849 are AFFIRMED with
MODIFICATIONS. Respondent Public Estates
Authority is ordered to pay Elpidio S. Uy, doing
business under the name and style Edison Development
and Construction, P55,680,492.38 for equipment rentals
on standby; P2,275,721.00 for the cost of idle
manpower; and P6,050,165.05 for the construction of
the nursery shade net area; plus interest at 6% per
annum to be computed from the date of the filing of
the complaint until finality of this Decision and 12% per
annum thereafter until full payment. Respondent PEA
is further ordered to pay petitioner Uy 10% of the total
award as attorney's fees.
SO ORDERED.

At this juncture, it bears stressing that the essence of forum

shopping is the filing of multiple suits involving the same parties
for the same cause of action, either simultaneously or successively,
for the purpose of obtaining a favorable judgment. Accordingly,
based on Our holding that the final resolution of the
instant petitions takes precedence as it is the appropriate
vehicle for litigating the issues between the parties, now that the
instant petitions before Us have come full circle with
this joint resolution and, if the parties herein so choose,
may seek further relief to the High Tribunal afterwards.
We cannot allow CIAC CASE NO. 03-2001 to proceed
because to do so would render inutile the proscriptions
against forum shopping which is frowned upon in Our
jurisdiction. Hence, the grant of injunctive relief. This
must be done, or else a travesty of the efficient
administration of justice would lamentably result.[39]
Indeed, the assailed resolution shows no patent or gross
error amounting to grave abuse of discretion. Neither
does it show an arbitrary or despotic exercise of power
arising from passion or hostility.

At this point, it should be stated that the Court is not

convinced by Uy's argument that the claims under
CIAC Case No. 03-2001 are different from his claims in