ADR Cases First Set(1)

8/13/2019 ADR Cases First Set(1)

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ADR CASES - FIRST SET 3

tools, fixtures, refurbishing, furniture, and accessoriesnecessary for the completion of the project.

3. Under Section I.04 of the Supplemental Contract, thetotal amount of procurement and transportation cost[s] andexpenses which may be reimbursed by MCI fromCHATHAM shall not exceed the amount of P75,000,000.00.

4. In the course of the construction, Change Orders No. 1,4, 8A, 11, 12 and 13 were implemented, payment of whichwere recommended by x x x RKDCCI and approved by oneof CHATHAM's Project Managers, Romulo F. Sugay.

5. On 15 September 1995, CHATHAM through its ProjectManager, Romulo F. Sugay, agreed to give P20,000 perfloor for five (5) floors, or a total of P100,000.00 asbonus/incentive pay to MCI's construction workers for thecompletion of each floor on schedule. CHATHAMreimbursed MCI the amount of P60,000.00 corresponding tobonuses advanced to its workers by the latter for the 14th,16th, and 17th floors.

6. CHATHAM's payments to MCI totaled P104,875,792.37,representing payments for portions of MCI's progress

billings and x x x additional charges.

The parties then stipulated on the following issues, again, as set forthin the TOR:

1. Is MCI entitled to its claims for unpaid progress billingsamounting to P21,062,339.76?

2. Were the approved Change Orders 1, 4, 8a, 11, 12 and13 fully paid by CHATHAM? If not, is MCI entitled to itsclaim for the unpaid balance?

3. Is CHATHAM liable for Change Orders 7a, 7b, 10, 14, 15,16, 17, 19 and 20?

4. Were the CHB works from the 8th to the 31st floors partof the original contract or in the nature of extra/additionalworks? Is CHATHAM liable for the same? If so, how much?

5. Is MCI entitled to an additional reimbursement ofP40,000.00 for bonuses granted to workers as an incentivefor the early completion of each floor?

6. Were the deductions in the amount of P1,393,458.84made by CHATHAM in MCI's progress billing reasonable?

7. Is MCI's claim of P1,646,502.00 for labor escalationvalid?

8. Is MCI entitled to payment of attendance fee? To whatextent and how much?

9. Did MCI fail to complete and/or deliver the project withinthe approved completion period? If so, is MCI liable forliquidated damages and how much?

10. Whether or not CHATHAM is entitled to claim x x xactual damages? If so, to what extent and how much?

11. Whether or not CHATHAM is entitled to x x x additionalcounterclaims as follows:

11.1. Core testing expenses and penalty forconcrete strength failure P3,630,587.38.

11.2. Expenses to rectify structural steel works forthe foundation P1,331,139.74.

11.3. Cost of additional materials (concrete &rebars) supplied by CPI P5,761,457.91.

12. Are the parties entitled to their respective claims forattorney's fees and cost of litigation? If so, how much? 3

In the resolution of these issues, the CIAC discovered significantdata, which were not evident or explicit in the documents and recordsbut otherwise revealed or elicited during the hearings, which the CIACdeemed material and relevant to the complete adjudication of thecase. In its decision of 19 October 1998, 4 the CIAC made thefollowing findings and conclusions:

It was established during the hearing that the contract wasawarded to MCI through negotiation as no bidding wasconducted, x x x It was also revealed that two agreementswere entered into, one is labeled Construction Contract for

the total fixed amount of P50,000,000.00 and the other aSupplemental Contract for an amount not to exceedP75,000,000.00. The latter is supposed to cover theprocurement of materials for the project. The ConstructionContract provides for monthly progress billings andpayments based on actual accomplishments of the variousphases of work. The Supplemental Contract provides for;reimbursement of [the] total amount of procurement andtransportation costs and expenses, upon MCI's presentationof suppliers' invoices/receipts.

However, from testimonies of witnesses from both parties, itwas revealed that the two distinct manner(s) of payment toMCI was set aside. The earlier attempt by CHATHAM toprove that MCI was remiss in submitting suppliers' invoices

and/or receipts in support of its billings against theSupplemental Contract was in fact later on abandonedwhen CHATHAM's witness Mercado admitted that thematter of adherence to the payment provision of theSupplemental Contract is a 'non-issue.' This was borne outby the fact that progress billings and payments under bothcontracts were made on the basis of percentage of projectcompletion.

Both documentary and testimonial evidence prove that,effectively, the construction contract and supplementalcontract is but one agreement for a lump sum contractamount of P125,000,000.00.

xxx xxx xxx

There was also the admitted fact that the contract wasnegotiated and awarded in the absence of a completeconstruction plan. In any case, in support of the totalcontract amount of P125 million, is a Cost Breakdown (Exh.17-L), where the estimated quantities of owner furnishedmaterials (OFM) are indicated. It is however, understoodthat these quantities are estimates, based on (an)incomplete set of construction plans. It is likewiseunderstood that except for the OFM, all the other costs inthe Cost Breakdown form the basis for the lump-sumagreement under the contract, subject to adjustment only ifthere are any significant changes in the contract plans.

RKDCCI in its letter to MCI dated 15 Feb. 1995 (Exh. 4),

informed MCI that it was confirming the agreement allegedlyaccepted by Dr. Lai that the Building Committee will takeover the management of the construction operations (of theproject) albeit under certain conditions. Specifically, the takeover was for an interim period and will extend only afterconcreting of up to basement level 5 or up to 30 May 1995whichever is later. The letter also stated that the BuildingCommittee . . . will be responsible for management anddirection including management of MCI engineers at thesite, sequencing of work, additional labor, additionalequipment and management of the yard and staging area.The letter, however, emphasized that the intent is not a takeover of the contract or take over of the entire work and infact, it was mentioned that MCI will still be responsible forearth anchoring and steel fabrication work.

CHATHAM claims that the interim take-over wasnecessitated by MCI's delay in the progress of its work, dueallegedly to MCI's lack of manpower and equipment. Duringthe hearings of this case, this claim of MCI's lack ofmanpower, necessary equipment, qualified engineers andinefficient construction management was testified to by bothMr. Mercado [of CHATHAM] and Engr. Kapunan ofRKDCCI. CHATHAM's witnesses, however, testified that inspite of these alleged deficiencies, MCI was neverthelessallowed to continue to take full control of the operations.When asked why termination of the contract was notresorted to if truly, MCI was not performing its contractedobligations, witnesses Mercado and Kapunan cited "special


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relations" between the owner of MCI (Dr. John Lai) and thepresident of CHATHAM (Mr. Lamberto Ocampo) as thereason.

On the other hand, Dr. Lai contends that, as explained in hisletter to CHATHAM dated 17 February 1995, (Exh. 4-A)MCI's work was on schedule. During the hearings, Dr. Laialso insisted that beginning 15 February 1995, MCI wasrelieved of full control of the construction operations, that itwas relegated to (be) a mere supplier of labor, materialsand equipment, and that the alleged interim takeover

actually extended through the completion of the project. Dr.Lai cited CHATHAM's purchases of materials, fielding laborforce and sub-contracting works allegedly for the projectwithout his knowledge and consent as proof that CHATHAMhad taken full control of the project.

To the above allegation of MCI that CHATHAM went aheadand procured materials, hired labor and entered into sub-contract agreements with the intention of eventuallycharging the costs thereof to MCI, witness Mercadocountered, that CHATHAM has the right to do this under theprovisions of Article 27 of the contract, dealing with'Recision, Cancellation, Termination of Contract.'

By way of responding to the various counterclaims of

CHATHAM, MCI referred to a letter of the former addressedto MCI dated 18 January 1997 (Exhibit E-1) the firstparagraph of which reads as follows:

After evaluating all the documents issued andreceived from both Chatham Properties Inc. andMetro Construction, Inc., the Building Committeeof Chatham Properties, Inc. evaluated them. TheBuilding Committee finds the total receivable ofMetro Construction is in the amount of EIGHTMILLION PESOS (P8,000,000.00) only.

When queried by the Tribunal if the said amount alreadytook into account the costs and expenses, (Chatham)claims to have incurred for the account of MCI, Mr. Mercadoanswered in the affirmative. When queried further how theamount was arrived at, Mr. Mercado replied that it was thesum the Building Committee figured it was willing to payMCI simply to close the issue.

Mr. Mercado even added that while MCI is not actuallyentitled to this amount, it was out of a friendship" thatCHATHAM offered this sum to MCI as final settlementunder the contract.

It is with the above attendant circumstances that thisTribunal will be guided in the resolution of issues broughtbefore it for adjudication. From what this Tribunal finds aspeculiar circumstances surrounding the contracting and

implementation of the CHATHAM House Project. it arrivedat the following fundamental conclusions:

1. That indeed 'special friendly relations' werepresent between the parties in this case, althoughdecisions by either party on any particular issuewere made not purely on the basis of such specialrelations. For example, this Tribunal believes that,contrary to the allegation of (CHATHAM's)witnesses, the decision not to terminate thecontract was not due to the admitted 'specialrelations' only, but also due to the greaterproblems the project would be faced with byterminating the MCI contract and mobilizinganother contractor.

2. That while there was no official termination ofthe contract, the manner by which CHATHAM hadtaken upon themselves the procurement ofmaterials, the fielding of labor, the control overMCI's engineers, and the subcontracting ofvarious phases of work on its own, is consideredby this Tribunal as implied termination of thecontract. The idea of allowing MCI to remain onthe project in spite of what CHATHAM claims. (tobe) MCI's shortcomings, and MCI's agreement tostay on the project under conditions set byCHATHAM, is believed a matter of mutual benefitto both parties.

3. That CHATHAM's invoking its rights under theprovisions of Article 27 of the construction contractis believed out of place, as it failed to observe therequired antecedent acts before it can exercise itsprerogative under the said contract provision.

4. That there is no reason to believe, either partywas in any way guilty of bad faith in acting as it didon certain relevant matters. However, this Tribunalis of the belief that due perhaps to the eagernesson the part particularly of CHATHAM's

representatives to take such steps it considerednecessary to insure completion of the projectwithin the period desired by CHATHAM, itdeviated from some generally acceptedprocedures in the construction industry in dealingwith MCI. One example was not giving MCI theopportunity to rectify some of what CHATHAMconsidered as construction deficiencies andinstead engaging the services of other parties toundertake the corrective works and later oncharging the costs thereof to MCI.

In addition to the above conclusions resulting from what thisTribunal considered peculiar of circumstances surroundingthe implementation of the project that were revealed during

the proceedings of this case, this Tribunal finds thenecessity of establishing a cut-off date with regard to thefiscal liability of one party towards the other.

Mr. Avelino Mercado of CHATHAM presented a list of whathe claims as its Payments to MCI (Exhibit 7) summarized asfollows:

a. Down payment (Paid in two equal trances P 20,000,000.00

b. Cash Advance for Mobilization 800,000.00

c. Payments of Progress Billings up to Billing No. 19 71,081,183.44

d. Other Payments (Mar 1994 to Apr. 1996) 5,474,419.67

e. Advances on MCI Payrolls (April 1996 to March 1997) 8,196,755.51

Total P 104,752,358.42

The records of this case show that the last progresspayment to MCI was in January 1996 representing paymentof Progress Billing No. 19 for the period ending 31December 1995. The percentage of completion claimedthen by MCI was 80.02%, the amount evaluated andeventually paid to MCI was the equivalent of 77.15% workaccomplishment. No further progress payments were madethereafter, other than for advances to cover MCI payrollsfrom April 1996 to March 1997 in the amount ofP8,196,755.51 and for various advances and payments ofapproved change orders in the amount of P5,474,419.67.

In the meantime, up to Billing No. 23 for the period ending30 April 1996, MCI billed CHATHAM a total accomplishment

of 95.29%. This billing was however, evaluated byCHATHAM, and in its letter to MCI dated 27 May 1996(Exhibit E) it confirmed that MCI's remaining balance ofwork stands at P7,374,201.15 as of 23 May 1996. Thisamount, percentage-wise, equals roughly 5.88% of thecontract amount as testified to by Engr. Jose Infante.(Exhibit 22-B). Therefore, what was computed as MCI'swork accomplishment as of 23 May 1996 was 94.12% and itis this evaluation which this Tribunal believes MCI is entitledto as of said date.

Applying this percentage of completion of 94.12% to theP125,000,000.00 contract amount gives a totalaccomplishment equivalent to P117,650,000.00 as of 23May 1996. Add to this amount the sum of P5,353,091.08representing the total of approved Change Orders as of 31December 1995 gives a total MCI accomplishment ofP123,003,091.08, as CHATHAM saw it. Of this amount,CHATHAM admitted having paid MCI the total sum ofP104,752,358.42 only (Exhibit 7) up to March 15, 1997,leaving a balance of P18,250,732.66. It should be notedthat of the total payment of P104,752,358.42, the sum ofP5,750,000.00 was paid after May 1996 so that as of 25May 1996, CHATHAM's total payment to MCI wasP99,002,358.42.

Effectively, therefore, the amount due MCI as of 23 May1996 amounted to P24,005,732.66 computed as follows:


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Total accomplishment as of 23 May 1996 at 94.12% P 117, 655, 000.00

Add approved change orders 5,353,091.08

Total P 123,008,091.08

Less payments up to 23 May 1996 99,002,358.42

Balance due MCI as of 23 May 1996 P 24,005,732.66

Of the above balance of P24,005,732.66 as of 23 May1996, the only payments made by CHATHAM to MCI is thesum of P5,750,000.00 from June 1996 onwards, allegedly

to cover MCI payrolls. It is of course noted that CHATHAM'ssuspension of further payments to MCI was because it hadbeen undertaking on its own, the further procurement ofmaterials and sub-contracting of various phases of works onthe project.

In consideration of the above facts, this Tribunal'sconclusion that there was in fact an implied take over of theproject is further confirmed. Furthermore, this Tribunaladditionally concludes that the cut-off date for purposes ofdelineating the financial obligations of the parties betweenthem should be 23 May 1996, the date when CHATHAMevaluated MCI's accomplishment at 94.10% butnevertheless suspended all further progress payments toMCI.

MCI presented further documentary evidence (Exhibit E-6)the subject of which is a PUNCHLISTING-CIVILSTRUCTURAL." In this particular document which bears thesignatures of representatives of both MCI and RKDCCI,MCI tried to prove that as of 30 August 1996 it had actuallyattained 99.16% work accomplishment. While it may be truethat as of that date the project had reached 99.16%completion, there is no incontrovertible evidence showingthat MCI was responsible for such accomplishment. Thiswas in fact actually testified to by Engr. Alex Bautista ofRKDCCI, when he said that it was an evaluation of theproject's completion stage, not necessarily MCI's workaccomplishment. This Tribunal therefore stands firm on itsconclusion that MCI's accomplishment is only up to the

extent of 94.10%.5

With those findings, the CIAC disposed of the specific money claimsby either granting or reducing them. On Issue No. 9, i.e., whetherCHATHAM failed to complete and/or deliver the project within theapproved completion period and, if so, whether CHATHAM is liablefor liquidated damages and how much, the CIAC ruled in this wise:

This Tribunal holds that the provision of the contract insofaras the Overall Schedule is concerned cannot justifiably beapplied in the instant case in view of the implied take-over ofthe Chatham House project by CHATHAM. Accordingly, thisTribunal finds no necessity to resolve whether or not MCIcomplete[d] and/or deliver[ed] the project within theapproved completion period. In fact, Mr. Mercado testified

that it was CHATHAM who ultimately completed the project,with assistance of the construction managers.

In any case, this Tribunal finds merit in RKDCCI's claim thatMCI was in delay in the concreting milestone and that [it] isliable for liquidated damages therefor. This, notwithstandingMCI's invoking that Chatham is estopped from claimingliquidated damages after it failed to deduct the allegedliquidated damages from MCI's progress billings. ThisTribunal holds that such failure to deduct, which CHATHAMclaims it did in order not to hamper progress of work in theproject, is an option which [it] may or may not exercise.

However, this Tribunal finds that CHATHAM's Exh. 11-Awhere the liquidated damages on delays in concretingmilestone was applied is not consistent with [its] own Exhibit3-I. This Tribunal notes that in Exh. 11-A, CHATHAMincluded a projected delay of 85 days for the HelipadConcreting works, while no such projected delay wasincluded in Exh. 3-I as it should be.

This Tribunal holds that Exh. 3-I showing a delay of 294days in concreting milestones should rightfully be used incomputing liquidated damages. Accordingly, this Tribunalholds that MCI is liable for liquidated damages in theamount of P3,062,498.78 as follows:

1/4 x 1/3[(1/10 x P125,000,000.00) 1%] x 294 =P3,062,498.78.6

The CIAC then decreed:

Accordingly, as presented below, all the amounts due MCIare first listed and added up and the total payment isdeducted therefrom. The admitted total payment figure asreflected in the Terms of Reference is the amount appliedinstead of the total reflected in CHATHAM's Summary ofPayments which incidentally reflected a lesser amount.From the 'Balance Due MCI' the 'Amounts CPI is HeldEntitled To' is deducted and the 'Net Amount Due MCI' isarrived at. (table omitted)

WHEREFORE, judgment is hereby rendered in favor of theClaimant [MCI] directing Respondent [CHATHAM] to payClaimant [MCI] the net sum of SIXTEEN MILLION ONEHUNDRED TWENTY SIX THOUSAND NINE HUNDREDTWENTY TWO & 91/100 (16,126,922.91) PESOS.

SO ORDERED.7

Impugning the decision of the CIAC, CHATHAM instituted a petitionfor review with the Court of Appeals, which was docketed as CA-G.R.

SP No. 49429. In its petition, CHATHAM alleged that:

The Arbitral Tribunal grossly erred in failing to indicatespecific reference to the evidence presented or to thetranscript of stenographic notes in arriving at its questionedDecision, in violation of the cardinal rule under Section 1,Rule 36 of the Revised Rules of Civil Procedure that ajudgment must state clearly and definitely the facts and thelaw on which it is based.

The Tribunal's conclusions are grounded entirely onspeculations, surmises and conjectures.

The Arbitral Tribunal grossly erred in failing to consider the

evidence presented by CHATHAM and the testimony of itswitnesses.

The Arbitral Tribunal gravely abused its discretion inconsidering arbitrarily that there was an implied takeovercontrary to the facts and evidence submitted.

The Arbitral Tribunal committed grave error and grossmisapprehension of facts in holding that CHATHAM is notentitled to liquidated damages despite failure of MCI to meetthe over-all schedule of completion.

The Arbitral Tribunal manifestly erred in holding that MCI isentitled to its claim for unpaid progress billings.

The Arbitral Tribunal committed gross and reversible error inequating the percentage of MCI's work accomplishment withthe entire work in place, despite evidence to the contrary.

The Arbitral Tribunal gravely erred in making 23 May 1996as the cut-off date for purposes of delineating the financialobligations of the parties.

The Arbitral Tribunal erred in denying CHATHAM its claimfor actual damages pursuant to Article 27.8 of theConstruction Contract.

The facts set forth in CHATHAM's Answer with CompulsoryCounterclaim as well as its documentary and testamentaryevidence were not overturned or controverted by anycontrary evidence.8

In its decision of 30 September 1999, 9 the Court of Appealssimplified the assigned errors into one core issue, namely, the"propriety" of the CIAC's factual findings and conclusions. Inupholding the decision of the CIAC, the Court of Appeals confirmedthe jurisprudential principle that absent any showing of arbitrariness,the CIAC's findings as an administrative agency and quasi judicialbody should not only be accorded great respect but also given thestamp of finality. However, the Court of Appeals found exception inthe CIAC's disquisition of Issue No.9on the matter of liquidateddamages.


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The Court of Appeals disagreed with the CIAC's finding that therewas an implied takeover by CHATHAM of the project and that it wasunnecessary for the CIAC to rule on whether MCI completed and/ordelivered the project within the approved completion schedule of theproject since CHATHAM failed to observe the antecedent actsrequired for the termination of the contract, as set forth in theConstruction Agreement.

The Court of Appeals ascertained that the evidence overwhelminglyproved that there was no takeover by CHATHAM and that MCIexercised complete control, authority and responsibility over the

construction. In support of this conclusion, the appellate court pointedto the following evidentiary bases:10

1. Testimony of CHATHAM's Engr. Kapunan that the interimtakeover for the works on the basement was triggered bylack of manpower and delays as early as February 1995, asevidenced by their assessment11and that the interimtakeover was only with respect to the direction ormanagement of the field operations and was limited only toworks on the basement and intended to assist MCI to catchup with the schedule of completion, since at that time theproject was very much delayed; thereafter, the MCI wasback in full control of the project.12

2. Testimony of Engr. Bautista that the takeover was only

partial and temporary and limited to the managementportion on the basement only and that MCI was always incontrol of the project.13

3. Testimony of Engr. Infante that MCI personnel wereconstantly present in the project and the "intervention" (nottakeover) by CHATHAM was justified to ensure completionof the project on time.14

4. Documentary exhibits evincing the nature and extent ofMCI's work during the takeover period which belied itsclaims that it was not in control of the project because of thetakeover thus:

Exhibit "4" Letter dated 15 February 1995 ofEngr. Kapunan of RKDCCI to John Lai of MCIstating that the takeover of directions ormanagement of the field operations is interim, i.e.while the takeover is effective immediately it willextend only after concreting Level B-1 orapproximately until 30 May 1995 which ever islater.

Exhibit "4-A" Letter dated 17 February 1995written by Dr. Lai of MCI to Engr. Kapunan inresponse to the latter's 15 February 1995 letterstating that "[Also we were assured that we will notbe responsible for any errors or accidents thatmay occur during this INTERIM period," indicating

that Dr. Lai was very much aware of the interimperiod.

Exhibit "4-C" Letter dated 18 February 1995written by Engr. Ben C. Ruiz of RKDCCI to Dr. Laicontaining the reasons for the takeover.

Exhibit "8A" Letter dated 5 September 1995written by Dr. E.G. Tabujara to Dr. Lai/RomyLaron (Project Manager of MCI) requesting for anengineer of MCI to accompany the inspector ofRKDCCI to witness batching procedures. By sodoing, Dr. E.G. Tabujara acknowledged that Dr.Lai was in control of the project.

Exhibit "8" Letter dated 4 September 1995 byEngr. Romulo R Sugay to Dr. Lai offering anincentive to the workers of MCI to exert (their) besteffort for topping off by the end of December;another clear indication that Dr. Lai was in controlof the project.

Exhibit "4-D" Letter dated 4 January 1996indicating that Mr. H.T. Go offered Dr Lai anincentive of P1,800,000 on the condition that MCImeets the new schedule/milestones. MCI'sacceptance of the incentive offer likewise showsthat MCI was in control of the Project.

Exhibits "5," "3-1," "3-M," "3-N," "3-W-1," 3-X," "3-Y," and "3-Z" among others containingreminders to MCI of its duties and shortcomings,likewise attest to the fact that MCI was in control(of) and responsible for the Project, althoughmarkedly deficient.

Exhibits "5," "5-A," "5-B," "5-C," "5-D," "5-E," "5-F,""5-O," "C-7," and "E-9" evidencing that MCIcontinued to manage other works on the projecteven during the time of the interim takeover of the

basement works, as seen in the series ofcommunications between CHATHAM or RKDCCIand MCI within the period beginning February1995 to 30 May 1995.

5. Respondent's Request for Adjudication, Annex G,Records, Folder No. 6 which incorporated Change OrderNo. 12, among others, dated 28 August 1995,recommended by the RKDCCI and accepted by Dr. Lai, andwhich request for an extension of 25 days readily showedthat even after 30 May 1995, after the close of thesupposed takeover period, MCI was still the contractor incomplete control of the project for it would not haveotherwise accepted the said change order if it (were) nolonger the Contractor of the project due to the termination of

the Construction agreement as of said date on account ofthe alleged takeover.

6. Exhibits "3-J," "3-M," "3-Q," "3-R," "3-V," "3- W-1," "3-W-2," "5-F," "5-1," "6," "12-II," "12-JJ," "12-MM," and "12-NN" tending to prove that RKDCCI monitored the work fromstart to finish and had zealously pointed out to MCI thedefects or improper execution of the construction works,and gave MCI all the opportunity to rectify the constructiondeficiencies and complete the works of the project.

The Court of Appeals concluded that the interim takeover wasnecessitated by CHATHAM's insistence to meet its own turnoverdates with the buyers of the project's units. Thus, CHATHAM wasconstrained to hire subcontractors with sufficient manpower and

supervision and incur various expenses to facilitate the completion ofthe project and/or assist MCI in making up for its delay.

The Court of Appeals then considered it imperative to determinewhether MCI failed to complete the project on time for which it may beheld liable for liquidated damages based on the delays in the overallschedule of completion pursuant to Art. 13.5 of the ConstructionAgreement, to wit:

13.5. Over-All Schedule For not meeting the finalcompletion date of the PROJECT, the OWNER will deductfrom the Contract Sum or amounts due the CONTRACTOR,the amount equivalent to 1/10 of 1% of the Contract Sum forevery calendar day of delay, provided, however, that themaximum penalty should not exceed 25% of the fee

payable to the CONTRACTOR as stipulated in the Bill ofQuantities. Penalties from concreting milestones shall bededucted from the penalty of Over-All Schedule.15

The Court of Appeals disposed of the controversy in this wise:

As is extant from the records, the completion date of theProject under the Construction Contract or under therevised construction schedule was never met by reason of[MCI's] lack of manpower, necessary equipment, qualifiedengineers and inefficient management of construction workson the Project. Thus, under the Contract (Exhibit '1'), [MCI]had 780 days, or until 22 January 1996, from starting date,or April 12, 1994, to finish the project. The completion date,however, was not followed and was revised as early asDecember 17, 1994, extending the milestone dates up toMarch 15, 1996 (Exhibits '3-G' and '3-H'). As of December25, 1995, the number of days delayed was already 294days. Thus, on February 22, 1996, the contract milestoneswere again revised, inclusive of 53 days extension, to May23, 1996 (Exhibits '3-I' and '3-O'). The May 23, 1996turnover milestone nor the July 22, 1996 turnover of thewhole project were neither met (Exhibits '3-P', '3-R', '3-S'and '3-T' but [CHATHAM] was again constrained to allow[MCI] to continue working on the Project to complete thebalance of the works (Exhibit 'M'). And all throughout theconstruction of the Project, [CHATHAM] had to assist [MCI]


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along the way to expedite the execution and completion ofthe Project (Exhibits '3-K' and '3-V').

From the foregoing disquisitions, it is clear that [MCI] isliable for liquidated damages, as per Article 13.5 of theConstruction Contract, for its failure to complete the projectwithin the period stipulated in the Construction Contract andeven despite an extension of 53 days from the originalschedule or of the overall schedule of completion. [MCI]should therefore pay [CHATHAM] the amount of liquidateddamages equivalent to P24,125,000.00 for 193 days of

delay in the overall schedule of completion counted fromoverall completion date on July 22, 1996 up to the date ofcompletion on February 15, 1997, as stated in theCertificate of Occupancy, computed as follows, to wit:

1/10[1%(P125,000,000.00)] per day x 193 days

= [1/10 (P1,250,000.00)] per day x 193 days

= P125,000.00 per day x 193 days

= P24,125,000.00

IN VIEW OF ALL THE FOREGOING, judgment is herebyrendered partially granting [CHATHAM's] claim forliquidated damages. The Tribunal's Decision dated 19October 1998 is hereby AFFIRMED with the modification on[MCI's] liability for liquidated damages in the amount ofP24,125,000.00. Thus,

A. AMOUNT [MCI] IS ENTITLED TO:

A.1. From the original contract:94.12% of P125,000,000.00

117,650,000.00

A.2 Approved Change Orders 5,353,091.08

A.3 Pending Change Orders 1,648,560.46

A.4 CHB Works 1,248,654.71

A.5 Workers Bonus -0-A.6 Disputed Deductions 909,484.70

A.7 Labor Escalation 076,256.00

A.8 Attendance Fee 508,162.73

Total P128,394,209.68

Less: Total payments-item 11-6 of TOR 104,875,792.37

Balance Due Respondent P23,518,417.31

B. AMOUNTS [CHATHAM] IS ENTITLED TO:

B.1. liquidated Damages P24,125,000.00

B.2. Actual Damages 335,994.50

B.3. Penalties 1,778,285.44

B.4. Cash Payments in behalf of MCI I2,214,715.68

Total Amount Due CPI P28,453,995.62

C. NET AMOUNT DUE [CHATHAM] (B minus A)

Correspondingly, Respondent [MCI] is hereby directed topay the Petitioner [CHATHAM] the net sum of FOURMILLION NINE HUNDRED THIRTY-FIVE THOUSANDFIVE HUNDRED SEVENTY-EIGHT & 31/100(P4,935,578.31) PESOS.

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MCI promptly filed on 25 October 1999 a motion for reconsideration.In its Resolution of 4 February 2000, the Court of Appeals deniedMCI's motion for reconsideration for lack of merit, as well as

CHATHAM's Motion to Lift Garnishment and Levy Pending Appeal,filed on 13 October 1999, for being premature.17

Thus, MCI filed the instant petition for review to challenge thedecision of the Court of Appeals. MCI alleges that the Court ofAppeals erred in reviewing and reversing the CIAC's factual f indings,that there was an implied takeover by CHATHAM of the project, andthat MCI was not in delay in the overall schedule. In so doing, theCourt of Appeals contravened Section 19 of Executive Order (E.O.)No. 1008,18which limits the review of an Arbitral Award to onlyquestions of law, thus:

SECTION 19. Finality of AwardsThe arbitral award shallbe binding upon the parties. It shall be final andinappealable (sic), except on questions of law which shallbe appealable to the Supreme Court.

MCI then asserts that as signatories to the contract, it and CHATHAMcomplied with this legal provision when they included as part of theirTOR the stipulation that "[t]he decision of the Arbitral Tribunal shall befinal and non-appealable except on questions of law." Accordingly,the binding character of this provision upon the parties is conclusiveand final.

MCI also contends that while it may be argued that recent (1)issuances by the Supreme Court, specifically, Circular No. 1-91,which eventually became Revised Administrative Circular No. 1-95;(2) legislation in particular, Republic Act No. 7902, which amendedBatas Pambansa Blg. 129; and (3) amendments to the Rules on CivilProcedure, modifying E.O. No. 1008 in the sense that "questions offacts, of law, or mixed questions of facts and law may be the subjectof an appeal of the CIAC's decision to the Court of Appeals," it is stillE.O. No. 1008 which remains to be the fundamental and substantivelaw that endows parties to an arbitral controversy the right to appeal.Hence, the provisions on appeal of E.O. No. 1008 should becontrolling, i.e., only questions of law should be entertained.Therefore, the only effect of these rules on E.O. No. 1008 is thetransfer of the appeal forum from the Supreme Court to the Court of

Appeals.

MCI further asserts that, even assuming that the CIAC's findings offacts are reviewable on appeal, the Court of Appeals gravely abusedits discretion when it accepted "hook, line and sinker" CHATHAM'scontention that MCI was in delay, and ignored competent, clear andsubstantial evidence that prove the contrary, and that CHATHAM is

not entitled to liquidated damages.

For its part, CHATHAM avers that the evolution on the rulesgoverning appeals from judgments, decisions, resolutions, orders orawards of the CIAC convincingly discloses that E.O. No. 1008 hasalready been superseded. With the power of the Supreme Court topromulgate rules concerning the protection and enforcement ofconstitutional rights, pleadings, practice, and procedure in all courts,

its issuances and amendments to the Rules on Civil Procedure, not tomention R A. No. 7902, as enacted by Congress, effectively modifiedE.O. No. 1008. Accordingly, the judgments, awards, decisions,resolutions, orders or awards of the CIAC are now appealable to theCourt of Appeals on questions of facts, mixed questions of facts andlaw, and questions of law, and no longer with the Supreme Court onexclusively questions of law. Further, the TOR cannot limit theexpanded jurisdiction of the Court of Appeals based on the latestrules. Thus, the Court of Appeals did not err in reviewing the factualfindings of the CIAC.

CHATHAM also contends that, even if the Court of Appeals can onlyreview questions of law, said court did not err in rendering thequestioned decision as the conclusions therein, drawn as they werefrom factual determinations, can be considered questions of law. .

Finally, CHATHAM asseverates that the Court of Appeals did notcommit grave abuse of discretion in reversing the CIAC'sascertainment on the implied take-over and liquidated damages.

This Court shall now resolve the primary issue raised in this case.

EO. No. 1008 vest upon the CIAC original and exclusive jurisdictionover disputes arising from, or connected with, contracts entered intoby parties involved in construction in the Philippines, whether thedispute arises before or after the completion of the contract, or afterthe abandonment or breach thereof.19By express provision of Section19 thereof, the arbitral award of the CIAC is final and unappealable,except on questions of law, which are appealable to the SupremeCourt.

The parties, however, disagree on whether the subsequent SupremeCourt issuances on appellate procedure and R.A. No. 7902 removedfrom the Supreme Court its appellate jurisdiction in Section 19 of E.O.No. 1008 and vested the same in the Court of Appeals, and whetherappeals from CISC awards are no longer confined to questions oflaw.

On 27 February 1991, this Court issued Circular No. 1-91, whichprescribes the Rules Governing Appeals to the Court of Appeals fromFinal Orders or Decisions of the Court of Tax Appeals and Quasi-Judicial Agencies. Pertinent portions thereof read as follows:


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1. Scope. These rules shall apply to appeals from finalorders or decisions of the Court of Tax Appeals. They shallalso apply to appeals from final orders or decisions of anyquasi-judicial agency from which an appeal is now allowedby statute to the Court of Appeals or the Supreme Court.Among these agencies are the Securities and ExchangeCommission, Land Registration Authority, Social SecurityCommission, Civil Aeronautics Board, Bureau of Patents,Trademarks and Technology Transfer, NationalElectrification Administration, Energy Regulatory Board,National Telecommunications Commission, Secretary of

Agrarian Reform and Special Agrarian Courts under RA.No. 6657, Government Service Insurance System,Employees Compensation Commission, AgriculturalInventions Board, Insurance Commission and PhilippineAtomic Energy Commission.

2. Cases not Covered. These rules shall not apply todecisions and interlocutory orders of the National LaborRelations Commission or the Secretary of Labor andEmployment under the Labor Code of the Philippines, theCentral Board of Assessment Appeals, and other quasi-judicial agencies from which no appeal to the courts isprescribed or allowed by statute.

3. Who may appeal and where to appeal. The appeal of

a party affected by a final order, decision, or judgment of theCourt of Tax Appeals or a quasi judicial agency shall betaken to the Court of Appeals within the period and in themanner herein provided, whether the appeal involvesquestions of fact or of law or mixed questions of fact andlaw. From final judgments or decisions of the Court ofAppeals, the aggrieved party may appeal by certiorari to theSupreme Court as provided in Rule 45 of the Rules ofCourt.

Subsequently, on 23 February 1995, RA. No. 7902 was enacted. Itexpanded the jurisdiction of the Court of Appeals and amended forthat purpose Section 9 of B.P. Blg. 129, otherwise known as theJudiciary Reorganization Act of 1980.20

Section 9(3) thereof reads:

SECTION 9. Jurisdiction. The Court of Appeals shallexercise:

xxx xxx xxx

(3) Exclusive appellate jurisdiction over all final judgments,decisions, resolutions, orders or awards of Regional TrialCourts and quasi-judicial agencies, instrumentalities, boardsor commissions, including the Securities and ExchangeCommission, the Social Security Commission, theEmployees Compensation Commission and the CivilService Commission, except those falling within the

appellate jurisdiction of the Supreme Court in accordancewith the Constitution, the Labor Code of the Philippinesunder Presidential Decree No. 442, as amended, theprovisions of this Act, and of subparagraph (1) of the thirdparagraph and subparagraph (4) of the fourth paragraph ofSection 17 of the Judiciary Act of 1948.

The Court of Appeals shall have the power to try cases andconduct hearings, receive evidence and perform any and allacts necessary to resolve factual issues raised in casesfalling within its original and appellate jurisdiction, includingthe power to grant and conduct new trials or furtherproceedings. x x x

Then this Court issued Administrative Circular No. 1-95,21which

revised Circular No. 1-91. Relevant portions of the former reads asfollows:

1. Scope. These rules shall apply to appeals fromjudgments or final orders of the Court of Tax Appeals andfrom awards, judgments, final orders or resolutions of anyquasi-judicial agency from which an appeal is authorized tobe taken to the Court of Appeals or the Supreme Court.Among these agencies are the Securities and ExchangeCommission, Land Registration Authority, Social SecurityCommission, Civil Aeronautics Board, Bureau of Patents,Trademarks and Technology Transfer, NationalElectrification Administration, Energy Regulatory Board,National Telecommunication Commission, Department of

Agrarian Reform under Republic Act No. 6657, GovernmentService Insurance System, Employees CompensationCommission, Agricultural Inventions Board, InsuranceCommission, Philippine Atomic Energy Commission, Boardof Investments, and Construction Industry ArbitrationCommission.

SECTION 2. Cases Not Covered. These rules shall notapply to judgments or final orders issued under the LaborCode of the Philippines, Central Board of AssessmentAppeals, and by other quasi-judicial agencies from which no

appeal to the court is prescribed or allowed.

SECTION 3. Where to Appeal. An appeal under theserules may be taken to the Court of Appeals within the periodand in the manner herein provided, whether the appealinvolves questions of fact, of law, or mixed questions of factand law.

Thereafter, this Court promulgated the 1997 Rules on CivilProcedure. Sections 1, 2 and 3 of Rule 43 thereof provides:

SECTION 1. Scope. This Rule shall apply to appealsfrom judgments or final orders of the Court of Tax Appealsand from awards, judgments, final orders or resolutions of or

authorized by any quasi-judicial agency in the exercise of itsquasi-judicial functions. Among these agencies are the CivilService Commission, Central Board of AssessmentAppeals, Securities and Exchange Commission, Office ofthe President, Land Registration Authority, Social SecurityCommission, Civil Aeronautics Board, Bureau of Patents,Trademarks and Technology Transfer, NationalElectrification Administration, Energy Regulatory Board,National Telecommunications Commission, Department ofAgrarian Reform under Republic Act No. 6657, GovernmentService Insurance System, Employees CompensationCommission, Agricultural Inventions Board, InsuranceCommission, Philippine Atomic Energy Commission, Boardof Investments, Construction Industry ArbitrationCommission, and voluntary arbitrators authorized by law.

SECTION 2. Cases Not Covered. This Rule shall notapply to judgments or final orders issued under the LaborCode of the Philippines.

SECTION 3. Were to Appeal. An appeal under this Rulemay be taken to the Court of Appeals within the period andin the manner herein provided, whether the appeal involvesquestion of fact, of law, or mixed questions of fact and law.

Through Circular No. 1-91, the Supreme Court intended to establish auniform procedure for the review of the final orders or decisions of theCourt of Tax Appeals and other quasi judicial agencies provided thatan appeal therefrom is then allowed under existing statutes to eitherthe Court of Appeals or the Supreme Court. The Circular designated

the Court of Appeals as the reviewing body to resolve questions offact or of law or mixed questions of fact and law.

It is clear that Circular No. 1-91 covers the CIAC. In the first place, itis a quasi judicial agency. A quasi-judicial agency or body has beendefined as an organ of government other than a court and other thana legislature, which affects the rights of private parties through eitheradjudication or rule-making.22The very definition of an administrativeagency includes its being vested with quasi judicial powers. The everincreasing variety of powers and functions given to administrativeagencies recognizes the need for the active intervention ofadministrative agencies in matters calling for technical knowledge andspeed in countless controversies which cannot possibly be handledby regular courts.23 The CIAC's primary function is that of a quasi-judicial agency, which is to adjudicate claims and/or determine rightsin accordance with procedures set forth in E.O. No. 1008.

In the second place, the language of Section 1 of Circular No. 1-91emphasizes the obvious inclusion of the CIAC even if it is not namedin the enumeration of quasi-judicial agencies. The introductory words"[a] among these agencies are" preceding the enumeration of specificquasi-judicial agencies only highlight the fact that the list is notexclusive or conclusive. Further, the overture stresses andacknowledges the existence of other quasi-judicial agencies notincluded in the enumeration but should be deemed included. Inaddition, the CIAC is obviously excluded in the catalogue of cases notcovered by the Circular and mentioned in Section 2 thereof for thereason that at the time the Circular took effect, E.O. No. 1008 allowsappeals to the Supreme Court on questions of law.


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In sum, under Circular No. 1-91, appeals from the arbitral awards ofthe CIAC may be brought to the Court of Appeals, and not to theSupreme Court alone. The grounds for the appeal are likewisebroadened to include appeals on questions of facts and appealsinvolving mixed questions of fact and law.

The jurisdiction of the Court of Appeals over appeals from final ordersor decisions of the CIAC is further fortified by the amendments to B.P.Blg. 129, as introduced by RA. No. 7902. With the amendments, theCourt of Appeals is vested with appellate jurisdiction over all finaljudgments, decisions, resolutions, orders or awards of Regional Trial

Courts and quasi-judicial agencies, instrumentalities, boards orcommissions, except "those within the appellate jurisdiction of theSupreme Court in accordance with the Constitution, the Labor Codeof the Philippines under Presidential Decree No. 442, as amended,the provisions of this Act, and of subparagraph (1) of the thirdparagraph and subparagraph (4) of the fourth paragraph of Section17 of the Judiciary Act of 1948."

While, again, the CIAC was not specifically named in said provision,its inclusion therein is irrefutable. The CIAC was not expresslycovered in the exclusion. Further, it is a quasi-judicial agency orinstrumentality. The decision inLuzon Development Bank v. LuzonDevelopment Bank Employees24sheds light on the matter, thus:

Assuming arguendo that the voluntary arbitrator or the

panel of voluntary arbitrators may not strictly be consideredas a quasi-judicial agency, board or commission, still bothhe and the panel are comprehended within the concept of a'quasi-judicial instrumentality.' It may even be stated that itwas to meet the very situation presented by the quasi-judicial functions of the voluntary arbitrators here, as well asthe subsequent arbitrator/arbitral tribunal operating underthe Construction Industry Arbitration Commission, that thebroader term 'instrumentalities' was purposely included in[Section 9 of B.P. Blg. 129 as amended by RA. No. 7902].

An instrumentality' is anything used as a means or agency.Thus, the terms governmental 'agency' or 'instrumentality'are synonymous in the sense that either of them is a meansby which a government acts, or by which a certain

government act or function is performed. The word'instrumentality,' with respect to a state, contemplates anauthority to which the state delegates governmental powerfor the performance of a state function.

Any remaining doubt on the procedural mutation of the provisions onappeal in E.O. No. 1008, vis-a-vis Circular No. 1-91 and R A. No.7902, was completely removed with the issuance by the SupremeCourt of Revised Administrative Circular No. 1-95 and the 1997 Rulesof Civil Procedure. Both categorically include the CIAC in theenumeration of quasi-judicial agencies comprehended therein.Section 3 of the former and Section 3, Rule 43 of the latter, explicitlyexpand the issues that may be raised in an appeal from quasi judicialagencies or instrumentalities to the Court of Appeals within the periodand in the manner therein provided. Indisputably, the review of the

CIAC award may involve either questions of fact, of law, or of fact andlaw.

In view of all the foregoing, we reject MCI's submission that CircularNo. 1-91, B.P. Blg. 129, as amended by RA. 7902, RevisedAdministrative Circular 1-95, and Rule 43 of the 1997 Rules of CivilProcedure failed to efficaciously modify the provision on appeals inE.O. No. 1008. We further discard MCI's claim that theseamendments have the effect of merely changing the forum for appealfrom the Supreme Court to the Court of Appeals.

There is no controversy on the principle that the right to appeal isstatutory. However, the mode or manner by which this right may beexercised is a question of procedure which may be altered andmodified provided that vested rights are not impaired. The Supreme

Court is bestowed by the Constitution with the power andprerogative, inter alia, to promulgate rules concerning pleadings,practice and procedure in all courts, as well as to review rules ofprocedure of special courts and quasi-judicial bodies, which,however, shall remain in force until disapproved by the SupremeCourt.25This power is constitutionally enshrined to enhance theindependence of the Supreme Court.26

The right to appeal from judgments, awards, or final orders of theCIAC is granted in E.O. No. 1008. The procedure for the exercise orapplication of this right was initially outlined in E.O. No. 1008. WhileR. A. No. 7902 and circulars subsequently issued by the SupremeCourt and its amendments to the 1997 Rules on Procedure effectively

modified the manner by which the right to appeal ought to beexercised, nothing in these changes impaired vested rights. The newrules do not take away the right to appeal allowed in E.O. No. 1008.They only prescribe a new procedure to enforce the right. 27No litiganthas a vested right in a particular remedy, which may be changed bysubstitution without impairing vested rights; hence, he can have nonein rules of procedure which relate to remedy."28

The foregoing discussion renders academic MCI's assertion on thebinding effect of its stipulation with CHATHAM in the TOR that thedecision of the CIAC shall be final and non-appealable except on

questions of law. The agreement merely adopted Section 19 of E.O.No. 1008, which, as shown above, had been modified.

The TOR, any contract or agreement of the parties cannot amend,modify, limit, restrict or circumscribe legal remedies or the jurisdictionof courts. Rules of procedure are matters of public order and interestand unless the rules themselves so allow, they cannot be altered,changed or regulated by agreements between or stipulations of theparties for their singular convenience.

29

Having resolved the existence of the authority of the Court of Appealsto review the decisions, awards, or final orders of the CIAC, the Courtshall now determine whether the Court of Appeals erred in renderingthe questioned decision of30September 1999.

Settled is the general rule that the findings of facts of the Court ofAppeals are binding on us. There are recognized exceptions to therule, such as when the findings are contrary to those of the trial court30 as in this case. Hence, we have to take a closer reexamination ofthis case.

The CIAC is certain that the evidence overwhelmingly tended toprove that the manner by which CHATHAM took charge in theprocurement of materials, fielding of labor, control of MCI engineersand the subcontracting of various phases of the work, constituted animplied takeover of the project. The CIAC then concludes that the cut-off date for delineating the fiscal liabilities of the parties is 23 May1996 when CHATHAM evaluated MCI's work accomplishment at94.12% and then suspended all further progress payments to MCI.For these reasons, the CIAC found it trifling to determine whetherMCI was in delay based on the Overall Schedule. However, the CIACdiscovered that MCI was in delay for 294 days in the concretingmilestone and held the latter liable for liquidated damages in theamount of P3,062,498.78.

The Court of Appeals made a contrary conclusion and declared thatMCI was in delay for 193 days based on the overall schedule ofcompletion of the project and should incur liquidated damages in theamount of P24,125,000.00.

It is undisputed that the CIAC and the Court of Appeals found MCIliable for liquidated damages but on different premises. Based on theCIAC's assessment, MCI's responsibility was anchored on its delay inthe concreting milestone, while the Court of Appeal's evaluation

concentrated on MCI's delay in completing the project based onthe overall schedule of work. The variance in the evaluation spells astaggering difference in the party who should ultimately be held liableand the net amount involved.

A study of the final computation of the net amount due in both thefinal disquisition of the CIAC and the Court of Appeals shows that allthe other figures therein are constant, save for the amount ofliquidated damages for which MCI should be accountable. If thisCourt concurs with the CIAC's conclusions, MCI's responsibility forliquidated damages is, as already stated, P3,062,498.78. Setting thisoff against CHATHAM's overall fiscal accountability would bring thelatter's total liability to MCI to P16,126,922.91. If the Court of Appealsis correct, MCI would be held liable for a much higher P24,125,000liquidated damages. Setting this off against CHATHAM's monetaryresponsibilities, MCI would still have to pay CHATHAMP4,935,578.31.

After painstakingly combing through the voluminous records, weaffirm the findings of the CIAC. The evidence taken as a whole or intheir totality reveals that there was an implied takeover by CHATHAMon the completion of the project. The evidence that appears toaccentuate the Court of Appeals' decision ironically bolstered theCIAC's conclusion. The testimonies of Engr. Kapunan, Engr. Bautista,Dr. Lai, and the letter of Engr. Ruiz, 31acknowledging the "temporarytakeover" by CHATHAM of the project, underscore the palpable factthat there was indeed a takeover. We confer particular credit to Dr.Lai's testimony that as of 15 February 1995, MCI was relieved of fullcontrol of the construction operations, that it was relegated to a mere


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supplier of labor, materials and equipment, and that the allegedinterim takeover actually extended through the completion of theproject. Even CHATHAM admits the takeover but sugarcoated thesame with words like "interim" did "charging the costs to MCI." Withthese glaring admissions, we can even consider that the takeoverwas not implied but blatant.

Exhibits "4," "4-A," "4-C," "8A," "8," "4-D," '43," "3-I," "3-M," "3- N," "3-W-1," "3-X," "3-Y," "3-Z," "5,""5-A," "5-B," "5-C," "5-D," "5-E," "5-F,""5-O," "C-7," "E-9," etc.,32relied upon by the Court of Appeals whenconsidered by themselves and singly, seemingly and initially evince

MCI's control over the project. However, they eventually loseevidentiary puissance to support the Court of Appeals' conclusionwhen reckoned against the totality of the evidence that CHATHAMtook charge of the completion of the project, particularly, the fact thatCHATHAM suspended all progress billing payments to MCI. Thecontinued presence and participation of MCI in the project was, asfound by the CIAC, a matter of mutual benefit to and convenience ofthe parties.

WHEREFORE, IN VIEW OF ALL THE FOREGOING, the assailed 30September 1999 decision of the Court of Appeals in CA-G.R SP No.49429 is hereby PARTIALLY MODIFIED by setting aside the orderdirecting Metro Construction, Inc. to pay Chatham Properties, Inc. theamount of P4,935,578.31. The arbitral award of the ConstructionIndustry Arbitration Commission in CIAC Case 10-98, promulgated on

19 October 1998, directing Chatham Properties, Inc. to pay MetroConstruction, Inc. the sum of SIXTEEN MILLION ONE HUNDREDTWENTY-SIX THOUSAND NINE HUNDRED TWENTY-TWO &91/100 (P16,126,922.91) PESOS, is accordingly REINSTATED.

No pronouncement as to costs.

SO ORDERED.

THIRD DIVISION

G.R. No. 110434 December 13, 1993

HI-PRECISION STEEL CENTER, INC., petitioner,

vs.LIM KIM STEEL BUILDERS, INC., and CONSTRUCTIONINDUSTRY ARBITRATION COMMISSION,respondents.

Felix Q. Vinluan and Siguion Reyna, Montecillo & Ongsiako forpetitioner.

De Castro & Cagampang Law Offices for Lim Kim teel Builders, Inc.

R E S O L U T I O N

FELICIANO, J .:

On 18 June 1993, a "Petition for Extension to File Petition forReview"

1was filed before the Court, petitioner Hi-Precision Steel

Center, Inc. ("Hi-Precision") stating that it intended to file a Petition forReview on Certiorariin respect of the 13 November 1992Award 2and 13 May 1993 Order 3of public respondent ConstructionIndustry Arbitration Commission ("CIAC") in Arbitration Case No. 13-90. The Petition (really a Motion) prayed for an extension of thirty (30)days or until 21 July 1993 within which to file a Petition for Review.

An opposition 4to the Motion was filed by private respondent Lim KimSteel Builders, Inc. ("Steel Builders") on 5 July 1993. On the sameday, however, the Court issued a Resolution 5granting the Motionwith a warning that no further extension would be given.

The Opposition, the subsequent Reply 6of petitioner filed on 20 July

1993 and the Petition for Review 7dated 21 July 1993, were noted bythe Court in its Resolution 8of 28 July 1993. The Court also requiredprivate respondent Steel Builders to file a Comment on the Petitionfor Review and Steel Builders complied.

The Petition prays for issuance of a temporary restraining order 9tostay the execution of the assailed Order and Award in favor of SteelBuilders, which application the Court merely noted, as it didsubsequent Urgent Motions for a temporary restraining order. 10

Petitioner Hi-Precision entered into a contract with private respondentSteel Builders under which the latter as Contractor was to complete aP21 Million construction project owned by the former within a period

of 153 days, i.e.from 8 May 1990 to 8 October 1990. The projectcompletion date was first moved to 4 November 1990. On that date,however, only 75.8674% of the project was actually completed.Petitioner attributed this non-completion to Steel Builders whichallegedly had frequently incurred delays during theoriginal contract period and the extension period. Upon the otherhand, Steel Builders insisted that the delays in the project were eitherexcusable or due to Hi-Precision's own fault and issuance of changeorders. The project was taken over on 7 November 1990, andeventually completed on February 1991, by Hi-Precision.

Steel Builders filed a "Request for Adjudication" with publicrespondent CIAC. In its Complaint filed with the CIAC, Steel Builderssought payment of its unpaid progress buildings, alleged unearnedprofits and other receivables. Hi-Precision, upon the other hand, in itsAnswer and Amended Answer, claimed actual and liquidateddamages, reimbursement of alleged additional costs it had incurred inorder to complete the project and attorney's fees.

The CIAC formed an Arbitral Tribunal with three (3) members, two (2)being appointed upon nomination of Hi-Precision and Steel Builders,respectively; the third member (the Chairman) was appointed by theCIAC as a common nominee of the two (2) parties. On the Chairmanwas a lawyer. After the arbitration proceeding, the Arbitral Tribunalrendered a unanimous Award dated 13 November 1992, thedispositive portion of which reads as follows:

WHEREFORE, premises considered, the Owner[petitioner Hi-Precision] is ordered to pay theContractor [private respondent Steel Builders] theamount of P6,400,717.83 and all other claims ofthe parties against each other are deemedcompensated and offset. No pronouncement as tocosts.

The Parties are enjoined to abide by the award. 11

Upon motions for reconsideration filed, respectively, by Hi-Precision and Steel Builders, the Arbitral Tribunal issued anOrder dated 13 May 1993 which reduced the net amountdue to contractor Steel Builders to P6,115,285.83. 12

In its Award, the Arbitral Tribunal stated that it was guided by Articles1169, 1192 and 2215 of the Civil Code. With such guidance, thearbitrators concluded that (a) both parties were at fault, though theTribunal could not point out which of the parties was the first infractor;and (b) the breaches by one party affected the discharge of thereciprocal obligations of the other party. With mutual fault as aprincipal premise, the Arbitral Tribunal denied (a) petitioner's claimsfor the additional costs allegedly incurred to complete the project; and(b) private respondent's claim for profit it had failed to earn becauseof petitioner's take over of the project.

The Tribunal then proceeded to resolve the remaining specific claimsof the parties. In disposing of these multiple, detailed claims the

Arbitral Tribunal, in respect of one or more of the respective claims ofthe parties: (a) averaged out the conflicting amounts and percentagesclaimed by the parties; 13(b) found neither basis nor justification for aparticular claim; 14(c) found the evidence submitted in support ofparticular claims either weak or non-existent;15(d) took account of theadmissions of liability in respect of particular claims; 16(e) relied on itsown expertise in resolving particular claims; 17and (f) applied a"principle of equity" in requiring each party to bear its own lossresulting or arising from mutual fault or delay (compensationmorae). 18

Petitioner Hi-Precision now asks this Court to set aside the Award,contending basically that it was the contractor Steel Builders who haddefaulted on its contractual undertakings and so could not be theinjured party and should not be allowed to recover any losses it mayhave incurred in the project. Petitioner Hi-Precision insists it is stillentitled to damages, and claims that the Arbitral Tribunal committedgrave abuse of discretion when it allowed certain claims by SteelBuilders and offset them against claims of Hi-Precision.

A preliminary point needs to be made. We note that the ArbitralTribunal has not been impleaded as a respondent in the Petition atbar. The CIAC has indeed been impleaded; however, the ArbitralAward was not rendered by the CIAC, but rather by the ArbitralTribunal. Moreover, under Section 20 of Executive Order No. 1008,dated 4 February 1985, as amended, it is the Arbitral Tribunal, or thesingle Arbitrator, with the concurrence of the CIAC, which issues thewrit of execution requiring any sheriff or other proper officer toexecute the award. We consider that the Arbitral Tribunal which


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rendered the Award sought to be reviewed and set aside, should beimpleaded even though the defense of its Award would presumablyhave to be carried by the prevailing party.

Petitioner Hi-Precision apparently seeks review of both under Rule 45and Rule 65 of the Rules of Court.

19We do not find it necessary to

rule which of the two: a petition for review under Rule 45 or a petitionfor certiorariunder Rule 65 is necessary under Executive OrderNo. 1008, as amended; this issue was, in any case, not squarelyraised by either party and has not been properly and adequatelylitigated.

In its Petition, Hi-Precision purports to raise "legal issues," and inpresenting these issues, prefaced each with a creative formula:

(1)

The public respondent [should be the "ArbitralTribunal'] committed serious error in law, if notgrave abuse of discretion, when it failed to strictlyapply Article 1191, New Civil Code, against thecontractor . . .;

(2)

The public respondent committee serious error inlaw, if not grave abuse of discretion , when it failedto rule in favor of the owner, now petitionerherein, allthe awards it claimed on arbitration, andwhen it nonetheless persisted in its awards ofdamages in favor of therespondent. . . .;

(3)

The public respondent committed serious error inlaw, if not grave abuse of discretion , for its abjectfailure to apply the doctrine of waiver, estoppelagainst the contractor, the private respondent

herein, when it agreed on November 16, 1990 toaward termination of the contract and the owner'stakeover of the project . . .;

(4)

The public respondent committed serious error inlaw, if not grave abuse of discretion, when it didnot enforce the law between the parties, the"technical specification[s]" which is one of thecontract documents, particularly to par. (a), sub-part 3.01, part 3, Sec. 2b, which expresslyrequires that major site work activities likestripping, removal and stockpiling of top soil shallbe done "prior to the start of regular excavation or

backfiling work", the principal issue in arbitrationbeing non-compliance with the contractdocuments;

(5)

The public respondent committed serious error inlaw, if not grave abuse of discretion, when itfound, in the May 13, 1993 Order, the petitioner"guilty of estoppel" although it is claimed that thelegal doctrine of estoppel does not apply withrespect to the required written formalities in theissuance of change order . . .;

(6)

The exceptional circumstances in Remalante vs.Tibe,158 SCRA 138, where the HonorableSupreme Court may review findings of facts, arepresent in the instant case,namely; (a) when theinference made is manifestly absurd, mistaken orimpossible (Luna vs. Linatoc, 74 Phil. 15); (2)when there is grave abuse of discretion in theappreciation of facts (Buyco vs. People, 95 Phil.253); (3) when the judgment is premised on amisapprehension of facts (De la Cruz v. Sosing,94 Phil. 26 and Castillo vs. CA, 124 SCRA 808);(4) when the findings of fact are conflicting (Casica

v. Villaseca, 101 Phil. 1205); (5) when the findingsare contrary to the admissions of the parties(Evangelista v. Alto Surety, 103 Phil. 401), andtherefore, the findings of facts of the publicrespondent in the instant case may be reviewedby the Honorable Supreme Court. 20(Emphasispartly applied and partly in the original)

From the foregoing, petitioner Hi-Precision may be seen to be makingtwo (2) basic arguments:

(a) Petitioner asks this Court to correct legal errorscommitted by the Arbitral Tribunal, which at thesame time constitute grave abuse of discretionamounting to lack of jurisdiction on the part of theArbitral Tribunal; and

(b) Should the supposed errors petitioner asks usto correct be characterized as errors of fact, suchfactual errors should nonetheless be reviewedbecause there was "grave abuse of discretion" inthe misapprehension of facts on the part of theArbitral Tribunal.

Executive Order No. 1008, as amended, provides, in its Section 19,

as follows:

Sec. 19. Finality of Awards. The arbitral awardshall be binding upon the parties. It shall be finaland inappealable except on questions of lawwhich shall be appealable to the Supreme Court.

Section 19 makes it crystal clear that questions of factcannot be raised in proceedings before the Supreme Court which is not a trier of facts in respect of an arbitralaward rendered under the aegis of the CIAC. Considerationof 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 embodiedin Section 19 that the Arbitral Tribunal's findings of fact shall

be final and inappealable.

Voluntary arbitration involves the reference of a dispute to animpartial body, the members of which are chosen by the partiesthemselves, which parties freely consent in advance to abide by thearbitral award issued after proceedings where both parties had theopportunity to be heard. The basic objective is to provide a speedyand inexpensive method of settling disputes by allowing the parties toavoid the formalities, delay, expense and aggravation whichcommonly accompany ordinary litigation, especially litigation whichgoes through the entire hierarchy of courts. Executive Order No. 1008created an arbitration facility to which the construction industry in thePhilippines can have recourse. The Executive Order was enacted toencourage the early and expeditious settlement of disputes in theconstruction industry, a public policy the implementation of which is

necessary and important for the realization of national developmentgoals. 21

Aware of the objective of voluntary arbitration in the labor field, in theconstruction industry, and in any other area for that matter, the Courtwill not assist one or the other or even both parties in any effort tosubvert or defeat that objective for their private purposes. The Courtwill not review the factual findings of an arbitral tribunal upon the artfulallegation that such body had "misapprehended the facts" and will notpass upon issues which are, at bottom, issues of fact, no matter howcleverly disguised they might be as "legal questions." The partieshere 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 factspreviously presented and argued before the Arbitral Tribunal, saveonly where a very clear showing is made that, in reaching its factualconclusions, the Arbitral Tribunal committed an error so egregiousand hurtful to one party as to constitute a grave abuse of discretionresulting in lack or loss of jurisdiction. 22Prototypical examples wouldbe factual conclusions of the Tribunal which resulted in deprivation ofone or the other party of a fair opportunity to present its positionbefore the Arbitral Tribunal, and an award obtained through fraud orthe corruption of arbitrators. 23Any other, more relaxed, rule wouldresult in setting at naught the basic objective of a voluntary arbitrationand would reduce arbitration to a largely inutile institution.

Examination of the Petition at bar reveals that it is essentially anattempt to re-assert and re-litigate before this Court the detailed oritemized factual claims made before the Arbitral Tribunal under a


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general averment that the Arbitral Tribunal had "misapprehended thefacts" submitted to it. In the present Petition, too, Hi-Precision claimsthat the Arbitral Tribunal had committed grave abuse of discretionamounting to lack of jurisdiction in reaching its factual and legalconclusions.

The first "legal issue" submitted by the Petition is the claimedmisapplication by the Arbitral Tribunal of the first and secondparagraphs of Article 1911 of the Civil Code. 24Article 1191 reads:

Art. 1191. The power to rescind obligations isimplied in reciprocal ones, in case one of theobligors should not comply with what is incumbentupon him.

The injured party may choose between thefulfillment and the rescission of the obligation, withthe payment of damages in either case. He mayalso seek rescission, even after he has chosenfulfillment, if the latter should become impossible.

The court shall decree the rescission claimed,unless there be just cause authorizing the fixing ofa period.

This is understood to be without prejudice to therights of third persons who have acquired thething, in accordance with articles 1385 and 1388and the Mortgage Law.

Hi-Precision contends energetically that it is the injured party and thatSteel Builders was the obligor who did not comply with what wasincumbent upon it, such that Steel Builders was the party in defaultand the entity guilty of negligence and delay. As the injured party, Hi-Precision maintains that it may choose between the fulfillment orrescission of the obligation in accordance with Article 1191, and isentitled to damages in either case. Thus, Hi-Precision continues,when the contractor Steel Builders defaulted on the 153rd day of theoriginal contract period, Hi-Precision opted for specific performanceand gave Steel Builders a 30-day extension period with which to

complete the project.

What petitioner Hi-Precision, in its above argument, disregards is thatthe determination of whether Hi-Precision or Steel Builders was the"injured party" is not to be resolved by an application of Article 1191.That determination is eminently a question of fact, for it requiresascertainment and identification of which the two (2) contendingparties had first failed to comply with what is incumbent upon it. Inother words, the supposed misapplication of Article 1191, whileostensibly a "legal issue," is ultimately a question of fact, i.e., thedetermination of the existence or non-existence of a fact or set offacts in respect of which Article 1191 may be properly applied. Thus,to ask this Court to correct a claimed misapplication or non-application of Article 1191 is to compel this Court to determine whichof the two (2) contending parties was the "injured party" or the "first

infractor." As noted earlier, the Arbitral Tribunal after the prolongedarbitration proceeding, was unable to make that factual determinationand instead concluded that both parties had committed breaches oftheir respective obligations. We will not review, and much lessreverse, that basic factual finding of the Arbitral Tribunal.

A second "legal issue" sought to be raised by petitioner Hi -Precisionrelates to the supposed failure of the Arbitral Tribunal to apply thedoctrines of estoppel and waiver as against Steel Builders. 25TheArbitral Tribunal, after declaring that the parties were mutually at fault,proceeded to enumerate the faults of each of the parties. One of thefaults attributed to petitioner Hi-Precision is that it had failed to givethe contractor Steel Builders the required 15-day notice fortermination of the contract. 26This was clearly a finding of fact on thepart of the Tribunal, supported by the circumstance that per therecord, petitioner had offered no proof that it had complied with such15-day notice required under Article 28.01 of the General Conditionsof Contract forming part of the Contract Documents. Petitioner Hi-Precision's argument is that a written Agreement dated 16 November1990 with Steel Builders concerning the take over of the project by Hi-Precision, constituted waiver on the part of the latter of its right to a15-day notice of contract termination. Whether or not that Agreementdated 16 November 1990 (a document not submitted to this Court) isproperly characterized as constituting waiver on the part of SteelBuilders, may be conceded to beprima faciea question of law; but, ifit is, and assuming arguendo that the Arbitral Tribunal had erred inresolving it, that error clearly did notconstitute a grave abuse ofdiscretion resulting in lack or loss of jurisdiction on the part of theTribunal.

A third "legal issue" posed by Hi-Precision relates to the supposedfailure on the part of the Arbitral Tribunal "to uphold the supremacy of'thelaw between the parties' and enforce it against private respondent[Steel Builders]." 27The "law between that parties" here involved isthe "Technical Specifications" forming part of the ContractDocuments. Hi-Precision asserts that the Arbitral Tribunal did notuphold the "law between the parties," but instead substituted thesame with "its [own] absurd inference and 'opinion' on mud." Hereagain, petitioner is merely disguising a factual question as a "legalissue," since petitioner is in reality asking this Court to review the

physical operations relating, e.g., to site preparation carried out by thecontractor Steel Builders and to determine whether such operationswere in accordance with the Technical Specifications of the project.The Arbitral Tribunal resolved Hi-Precision's claim by finding thatSteel Builders had complied substantially with the TechnicalSpecifications. This Court will not pretend that it has the technical andengineering capability to review the resolution of that factual issue bythe Arbitral Tribunal.

Finally, the Petition asks this Court to "review serious errors in thefindings of fact of the [Arbitral Tribunal]." 28In this section of itsPetition,Hi-Precision asks us to examine each item of its own claims whichthe Arbitral Tribunal had rejected in its Award, and each claim of thecontractor Steel Builders which the Tribunal had granted. In respectof each item of the owner's claims and each item of the contractor'sclaims, Hi-Precision sets out its arguments, to all appearances thesame arguments it had raised before the Tribunal. As summarized inthe Arbitral Award, Contractor's Claims were as follows:

12.1. Unpaid Progress Billing 1,812,706.95

12.2. Change Order 1 0.0012.3. -do- 2 10,014.0012.4. -do- 3 320,000.0012.5. -do- 4 112,300.7012.6. -do- 5 398,398.0012.7. -do- 6 353,050.3812.8. -do- 7 503,836.5312.9. -do- 8 216,138.75

12.10. -do- 9 101,621.4012.11. -do- 10 7,200.0012.12. -do- 11 0.0012.13. -do- 12 7,800.0012.14. -do- 13 49,250.0012.15. -do- 14 167,952.0012.16. -do- 15 445,600.0012.17. -do- 16 92,457.3012.18. -do- 17 1,500.0012.19. 20,240.0012.20. 63,518.0012.21. 0.0012.22. 0.0012.23. 0.0012.24. 0.0012.25. 0.00

12.26. 730,201.5712.27. 1,130,722.7012.28. 0.0012.29. 273,991.0012.30. 0.00

12.31. 7,318,499.28 29

=============

Upon the other hand, the petitioner's claims we are asked to reviewand grant are summarized as follows:

1. Actual Damages

Advance Downpayment[at] signing of Contractwhich is subject to 40%deduction every progressbilling (40% of Contract Price) P8,406,000.00

Progress Billings 5,582,585.55

Advances made to Lim Kim


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a) prior to take-over 392,781.45b) after the take-over

Civil Works 1,158,513.88Materials 4,213,318.72Labor 2,155,774.79Equipment Rental 1,448,208.90

P8,974,816.45

Total Amount Paid for Construction 23,650,183.00Less: Contract Price (21,000,000.00)

IA Excess of amount paidover contract price 2,650,163.29

IB Other items due from LimKim Steel Builders

a. Amount not yet deductedfrom Downpayment dueto non-completion of Project

(P24.1326%) 2,027,138.40

b. Due to Huey Commercialused for HSCI Project 51,110.40

IC Additional construction expenses

a. Increases in prices since Oct. 5,272,096.81

b. Cost of money of (a) 873,535.49

ID Installation of machinery

a. Foreign exchange loss 11,565,048.37

b. Cost of money (a) 2,871,987.01

I[E] Raw Materials

a. Foreign exchange loss 4,155,982.18b. Cost of money (a) 821,242.72c. Additional import levy of 5% 886,513.33d. Cost of money (c) 170,284.44e. Cost of money on marginaldeposit on Letter of Credit 561,195.25

IF Cost of money on holding to CRC INTY

3,319,609.63

Total Actual Damages 35,295,927.32

2. Liquidated Damages 2,436,000.00

3. Attorney's Fees 500,000.00

P38,231,927.3230

=============

We consider that in asking this Court to go over each individual claimsubmitted by it and each individual countering claim submitted bySteel Builders to the Arbitral Tribunal, petitioner Hi-Precision is askingthis Court to pass upon claims which are either clearly and directlyfactual in nature or require previous determination of factual issues.This upon the one hand. Upon the other hand, the Court considersthat petitioner Hi-Precision has failed to show any serious errors oflaw amounting to grave abuse of discretion resulting in lack ofjurisdiction on the part of the Arbitral Tribunal, in either the methodsemployed or the results reached by the Arbitral Tribunal, in disposingof the detailed claims of the respective parties.

WHEREFORE, for all the foregoing, the Petition is herebyDISMISSED for lack of merit. Costs against petitioner.

SO ORDERED.

SECOND DIVISION

G.R. No. 187521 March 14, 2012

F.F. CRUZ & CO., INC., Petitioner,

vs.HR CONSTRUCTION CORP.,Respondent.

D E C I S I O N

REYES, J .:

This is a petition for review on certiorariunder Rule 45 of the Rules ofCourt filed by petitioner F.F. Cruz & Co., Inc. (FFCCI) assailing theDecision1dated February 6, 2009 and Resolution2dated April 13,2009 issued by the Court of Appeals (CA) in CA-G.R. SP No. 91860.

The Antecedent Facts

Sometime in 2004, FFCCI entered into a contract with theDepartment of Public Works and Highways (DPWH) for theconstruction of the Magsaysay Viaduct, known as the Lower AgusanDevelopment Project. On August 9, 2004, FFCCI, in turn, entered intoa Subcontract Agreement3with HR Construction Corporation (HRCC)for the supply of materials, labor, equipment, tools and supervision forthe construction of a portion of the said project called the East BankLevee and Cut-Off Channel in accordance with the specifications ofthe main contract.

The subcontract price agreed upon by the parties amountedto P31,293,532.72. Pursuant to the Subcontract Agreement, HRCC

would submit to FFCCI a monthly progress billing which the latterwould then pay, subject to stipulated deductions, within 30 days from

receipt thereof.

The parties agreed that the requests of HRCC for payment shouldinclude progress accomplishment of its completed works as approvedby FFCCI. Additionally, they agreed to conduct a joint measurementof the completed works of HRCC together with the representative ofDPWH and consultants to arrive at a common quantity.

Thereafter, HRCC commenced the construction of the workspursuant to the Subcontract Agreement.

On September 17, 2004, HRCC submitted to FFCCI its first progressbilling in the amount of P2,029,081.59 covering the construction

works it completed from August 16 to September 15,2004.4However, FFCCI asserted that the DPWH was then able to

evaluate the completed works of HRCC only until July 25, 2004.Thus, FFCCI only approved the gross amount of P423,502.88 for

payment. Pursuant to the Subcontract Agreement, FFCCI deductedfrom the said gross amount P42,350.29 for retention and P7,700.05

for expanded withholding tax leaving a net payment in the amountof P373,452.54. This amount was paid by FFCCI to HRCC on

December 3, 2004.5

FFCCI and the DPWH then jointly evaluated the completed works ofHRCC for the period of July 26 to September 25, 2004. FFCCIclaimed that the gross amount due for the completed works duringthe said period wasP2,008,837.52. From the said gross amount due,

FFCCI deducted therefrom P200,883.75 for retention andP36,524.07

for expanded withholding tax leaving amount of P1,771,429.45 as the

approved net payment for the said period. FFCCI paid this amount on

December 21, 2004.6

On October 29, 2004, HRCC submitted to FFCCI its second progressbilling in the amount of P1,587,760.23 covering its completed works

from September 18 to 25, 2004.7FFCCI did not pay the amountstated in the second progress billing, claiming that it had already paidHRCC for the completed works for the period stated therein.

On even date, HRCC submitted its third progress billing in the amountof P2,569,543.57 for its completed works from September 26 to

October 25, 2004.8FFCCI did not immediately pay the amount statedin the third progress billing, claiming that it still had to evaluate theworks accomplished by HRCC.
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On November 25, 2004, HRCC submitted to FFCCI its fourthprogress billing in the amount of P1,527,112.95 for the works it had

completed from October 26 to November 25, 2004.

Subsequently, FFCCI, after it had evaluated the completed works ofHRCC from September 26 to November 25, 2004, approved thepayment of the gross amount of P1,505,570.99 to HRCC. FFCCI

deducted therefromP150,557.10 for retention and P27,374.02 for

expanded withholding tax leaving a net payment of P1,327,639.87,

which amount was paid to HRCC on March 11, 2005.9

Meanwhile, HRCC sent FFCCI a letter10dated December 13, 2004demanding the payment of its progress billings in the total amountof P7,340,046.09, plus interests, within three days from receipt

thereof. Subsequently, HRCC completely halted the construction ofthe subcontracted project after taking its Christmas break onDecember 18, 2004.

On March 7, 2005, HRCC, pursuant to the arbitration clause in theSubcontract Agreement, filed with the Construction IndustryArbitration Commission (CIAC) a Complaint11against FFCCI prayingfor the payment of the following: (1) overdue obligation in the reducedamount of P4,096,656.53 as of December 15, 2004 plus legal

interest; (2) P1,500,000.00 as attorneys fees; (3)P80,000.00 as

acceptance fee and representation expenses; and (4) costs oflitigation.

In its Answer,12FFCCI claimed that it no longer has any liability onthe Subcontract Agreement as the three payments it made to HRCC,which amounted to P3,472,521.86, already represented the amount

due to the latter in view of the works actually completed by HRCC asshown by the survey it conducted jointly with the DPWH. FFCCIfurther asserted that the delay in the payment processing wasprimarily attributable to HRCC inasmuch as it presented unverifiedwork accomplishments contrary to the stipulation in the SubcontractAgreement regarding requests for payment.

Likewise, FFCCI maintained that HRCC failed to comply with thecondition stated under the Subcontract Agreement for the payment ofthe latters progress billings, i.e. joint measurement of the completedworks, and, hence, it was justified in not paying the