Case Digest: NHA v. First United Constructors
G.R. No. 176535 : September 7, 2011
NATIONAL HOUSING AUTHORITY,Petitioner,v. FIRST UNITED CONSTRUCTORS CORPORATION,Respondent.
PEREZ,J.:
FACTS:
The FVR Project was a proposed resettlement site for informal settlers of Metro Manila. Conceived in May 1996, it was the subject of a Memorandum of Agreement entered into by and among the Housing & Urban Development Coordinating Council (HUDCC), the Department of Environment & Natural Resources (DENR), the Metro Manila Development Authority (MMDA) and the Marilaque Commission.
The FVR Project sits on a 750-hectare property reserved as a resettlement site for the landless and homeless residents of Metro Manila under Presidential Proclamation No. 799 dated 3 June 1996, situated in Sitio Boso-Boso, Brgy. San Jose, Antipolo City.
Phase I of the FVR Project called for the development of an area of roughly 300 hectares of the resettlement site into 7,500 home lots of 60 to 80 square meters per lot in three (3) residential Clusters, namely: Cluster 1, Cluster 2 and Cluster 3.
FUCC won the public bidding for the works contract of the FVR Project conducted by NHA on 26 February 1998 with a bid price ofP568,595,780.00.
On 10 March 1998, NHA and FUCC entered into a "Contract for Land Development of Freedom Valley Resettlement Project, Phase I, Sitio Boso-Boso, Bgy. San Jose, Antipolo, Rizal"(the "Contract") that covered the terms of the agreement between the parties for the works contract of Phase I of the FVR Project.
FUCC commenced actual contract works on 16 March 1998. Counting 365 days, the original contract expiration date was 15 March 1999.
Unfortunately, the FVR Project suffered various work suspensions and delays, so much so that the project was not completed on 15 March 1999.There were also changes in the scope of work that necessitated the issuance of variation orders, specifically Variation Order No. 1,and Variation Order No. 2,which delayed the completion of the project further.
Variation Order No. 1 reduced the number of home lots to be generated, from 7,500 under the original development plan to only 4,980. Variation Order No. 2 further reduced that number to 4,032. These changes in the scope of work resulted in the reduction of the contract price from the originalP568,595,780.00 toP488,393,466.98.
Because of the delays engendered by the suspension orders and the changes in the scope of the contract works, NHA granted time extensions to FUCC. All told, a total of 679 calendar days were added to the original work duration stipulated in the Contract. From 15 March 1999, the contract completion date was moved, initially, to 19 December 1999, and finally, to 11 November 2001.
In a letter dated 17 October 2001,NHA formally advised FUCC of the termination of the Contract.
NHA terminated the Contract under the "Contractor Not at Fault" clause of the General Conditions of the Contract. At the time the Contract was terminated, FUCC had various claims pending with NHA in connection with the FVR Project.
It appears that over a period of almost five (5) years, FUCC pleaded and negotiated with various NHA officials for the payment of these claims but its pleas fell on deaf ears.
This impelled FUCC to pursue its claims before the CIAC pursuant to Article XVIIof the Contract by filing a Complaintagainst NHA on 17 July 2003.
On 7 January 2004, the CIAC Arbitral Tribunal promulgated its Decision (CIAC Decision) containing findings and rulings on substantially all of the issues presented by the parties, and rendering an award in favor of FUCC.
On 17 August 2006, the CIAC submitted its Complianceto the remand orders of the Court of Appeals, showing the re-computed arbitral award in favor of FUCC.
On 24 August 2006, NHA filed an Omnibus Motion dated 22 August 2006that incorporated its Motion for Reconsideration of the CA Decision dated 1 August 2006 and its Motion to Require the CIAC to Explain and to Hold in Abeyance the Re-Computation of Award.
On 31 January 2007, the Court of Appeals issued a Resolutiondenying petitioners Omnibus Motion that included its Motion for Reconsideration of the CA Decision dated 1 August 2006. The appellate court did not act on the Compliance submitted by the CIAC and on petitioners Motion to Require the CIAC to Explain and to Hold in Abeyance the Re-Computation of Award. With respect to the Urgent Manifestation/Motion for Clarification of Land Bank, the appellate court directed Land Bank to "forthwith release to respondent the garnished fund of petitioner not exceeding P147,894,629.24 in partial satisfaction of [the] Courts decision dated 1 August 2006."
Undaunted, NHA filed the present Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court. Petitioner prays that this Court reverse and set aside the CA Decision dated 1 August 2006 and the Resolution dated 31 January 2007 claiming, in the main, that in promulgating the questioned Decision and Resolution, the Court of Appeals allegedly "egregiously overlooked, ignored or disregarded many discernible, indisputable facts or circumstances of weight and significance" that would allegedly have "logically altered the result of the case" had they "been judiciously considered."
ISSUES:
Whether or not FUCC is entitled to the award?
HELD: Court of Appeals decision is affirmed.
REMEDIAL LAW: cause of action
Cause of actionis defined as an act or omission by which a party violates the right of another. A complaint is deemed to have stated a cause of action provided it has indicated the following: (1) the legal right of the plaintiff, (2) the correlative obligation of the defendant, and (3) the act or the omission of the defendant in violation of the said legal right.
Respondent had the right to be paid its claim for Price Escalation for Progress Billing Nos. 1 to 5 after NHA recognized the validity of the claim and reconciled its computations with FUCC on the correct amount of price escalation to be paid. In fact, NHA had expressed readiness to process the payment of the claim. As regards Progress Billing No. 6, petitioner similarly recognized the validity of this claim. Indeed, petitioner does not contest the right of private respondent to be paid Progress Billing No. 6. What it contests is merely the amount thereof, insisting that FUCC is only entitled to an award ofP6,496,926.29 as against the amount of P7,384,534.22 awarded by the CIAC.
Petitioners subsequent refusal to process and pay these claims despite FUCCs willingness to submit a surety bond to secure the balance of the advance payment still to be recouped by NHA as the parties had agreed upon which bond would be submitted when the check payment for the claim is about to be released, clearly constitutes a violation by NHA of FUCCs right to be paid these acknowledged and recognized claims. Thus, respondent had an accrued cause of action against petitioner for these claims at the time it filed its Complaint, the constitutive elements of which are clearly set forth therein.
There is nothing to support petitioners stance that the "posting of the Payment Guarantee (or Performance) Bond is decidedly a condition precedent" or sine qua non for the payment of FUCCs claims for Progress Billing No. 6 and for Price Escalation for Progress Billing Nos. 1 to 5.The Court notes, upon a close examination of the Contract, that there is no provision therein that requires FUCC to post a Payment Guarantee Bond as an indispensable condition for the recognition of the validity of its claim for price escalation or for the processing and payment of its progress billings. Nor does the Contract refer to any other document from where such a condition may be inferred.
The source of FUCCs obligation to post a surety bond as a substitute for the GSIS-issued Payment Guarantee Bond is not the Contract but the subsequent agreement between the parties, to wit: that FUCC would submit a surety bond from one of the top five private surety companies to secure the balance of the advance payment still to be recouped by NHA, while NHA would process and pay FUCCs claims for Progress Billing No. 6 and for Price Escalation for Progress Billing Nos. 1 to 5. And the timing of the posting of the bond was, as requested by FUCC in the letter dated 4 October 2002,tacitly agreed to by NHA: that FUCC would post the requisite bond only when the check payments for its acknowledged claims are about to be released, with the understanding that NHA will hold on to the checks until it had received and verified the surety bond.
Petitioners reference to Article VII and VIII of the Contract to support its allegation that "(t)he procurement or posting of a Payment Guarantee (or Performance) Bond is a government requirement that cannot be excused under both law and Contract"is misplaced. Article VII refers to the Performance Bond in the amount ofP28,429,789.00 posted by FUCC to guarantee the faithful performance of its scope of work,which is decidedly different from the Payment Guarantee Bond in the amount ofP85.2 Million which NHA required FUCC to procure from GSIS and to post prior to the release of the advance payment in the amount ofP85.2 Million. A reading of Article VIII entitled CONTRACTORS ALL RISKS INSURANCE, on the other hand, readily reveals that it has no relation at all to the Payment Guarantee Bond required by NHA to cover the recoupment of the advance payment to FUCC.
It appears that petitioner pounced upon, and took out of context, the Court of Appeals ruling that "without question, the filing of a bond is a condition for the payment of the foregoing claims of respondent" to argue that since FUCC "failed to comply with a condition precedent or sine qua non for the payment of said claims", FUCC had no cause of action against NHA at the time it filed the Complaint. Read in the proper context, the "payment" spoken of in the CA Decision actually pertains to the physical act of releasing the check payments of FUCCs claims for Progress Billing No. 6 and for Price Escalation for Progress Billings Nos. 1 to 5.
The word "payment" is a noun that is used in two (2) general senses: as "money paid," i.e. an amount of money that is paid or due to be paid; or as the "act of paying," i.e. the act of paying money, or fact of being paid.In the case at bar, the word "payment" was obviously used by the Court of Appeals in the sense of the "act of paying," or more exactly, with respect to the mechanical act of releasing the check payments for FUCCs claims for Progress Billing No. 6 and for Price Escalation for Progress Billing Nos. 1 to 5. The Court of Appeals decreed that NHA may release the "payment" (meaning, the checks processed by NHA for FUCCs claims) provided FUCC would "post the requisite bond in the manner arranged by respondent with petitioner."
The evidence on record indubitably show that even as FUCC was ready to post the requisite bond in the manner agreed upon by the parties, NHA still refused to process and pay FUCCs claims for Progress Billing No. 6 and for Price Escalation for Progress Billing Nos. 1 to 5. In fine, and for emphasis, FUCC had an accrued cause of action to compel NHA to pay these claims at the time it filed its Complaint.
This claim is of course subject to evaluation of its merits, butunder the General Conditions of the contract, the contractor may be entitled to such compensation.
Citing the case of Public Estates Authority vs. Elpidio Uy, et al.,where this Court affirmed the disputed arbitral award of CIAC (a portion of which was for payment of the standby or idle time of equipment), the Court of Appeals sustained the award for Idle Equipment and held that payment for standby time due to prolonged work suspension is legally tenable.
POLITICAL LAW: findings of administrative and quasi-judicial agencies entitled to great weight
This Court cannot but agree with the holding of the Court of Appeals. More so because the CIAC which carefully considered the conflicting claims of the parties and painstakingly scrutinized both the oral and documentary evidence of record possesses the required expertise in the field of construction arbitration, as we had pointed out in the cited case of Elpidio Uy. In that case, as in this case, we find no ground to disturb the arbitral award of the CIAC. Settled is the rule that findings of fact of administrative agencies and quasi-judicial bodies, which have acquired expertise because their jurisdiction is confined to specific matters, are generally accorded not only respect, but finality when affirmed by the Court of Appeals.Whatever questions there may be regarding the legality of an award for "standby time" or Idle Equipment is put to rest by the case of Elpidio Uy.
In the instant petition, NHA reiterates and insists that FUCC does not deserve an award for Idle Equipment because FUCC was "actually and continuously performing contract works" on the FVR Project from 16 March 1999 to 21 November 2001; that its equipment "never went idle"; and that it was paid for its contract works during this period.
As heretofore shown, this stance of NHA was found to be untenable by the CIAC Arbitral Tribunal whose factual findings were affirmed by the Court of Appeals. Further, the argument that FUCC continuously performed contract works on the FVR Project from 16 March 1998 to 21 November 2001 so that its equipment never went idle is flawed because FUCCs claim for Idle Equipment is circumscribed within the period from 10 June 1998 to 15 March 1999 only. Quite obviously, works performed before 16 March 1998 and after 15 March 1999 are of no moment and are totally irrelevant to FUCCs claim for Idle Equipment.
COMMERCIAL LAW: jurisdiction of the CIAC
The nature and bases of the awards for Disengagement Costs consisting of three components, namely: Foregone Equipment Rental, Extended Overhead Costs and Foregone Income; and the awards for Cost of Materials, Equipment and Facilities, and Idle Equipment have been discussed at length. They are either business or opportunity losses or foregone profits that resulted from, or are the necessary consequences of, the termination of the Contract. They arose from and are inextricably linked to the construction dispute between NHA and FUCC that was the subject of arbitration proceedings before the CIAC. We find and so hold that they are arbitrable claims within the ambit of Section 4 of EO 1008, which defines the jurisdiction of the CIAC. Thus:
SECTION 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 disputes arises [sic] 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 provisions; amount of damages and penalties; commencement 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.
Section 4 provides that "(t)he jurisdiction of the CIAC may include but is not limited to," underscoring the expansive character of the CIACs jurisdiction. Very clearly, the CIAC has jurisdiction over a broad range of issues and claims arising from construction disputes, including but not limited to claims for unrealized profits and opportunity or business losses. What EO 1008 emphatically excludes is only disputes arising from employer-employee relationships.
Section 2, Article IV of the previous CIAC Rules of Procedure Governing Construction Arbitration cited by petitioner, which purports to exclude claims for business losses,contravenes EO 1008 and is a patent nullity; it is void ab initio. In legal contemplation, that section of the previous CIAC Rules never acquired force and effect and cannot be applied to this case. What applies is Section 2.1 of the Revised Rules of Procedures Governing Construction Arbitration that was promulgated on 19 November 2005. Indeed, and as pointed out by the Court of Appeals in the Resolution dated 31 January 2007, CIAC Resolution No. 02-2006 ("Defining the Coverage of the Revised Rules of Procedure Governing Construction Arbitration") states that "the Revised Rules shall be applicable to all pending cases upon its effectivity on 15 December 2005 and all cases which are to be filed thereafter."This case was filed on 17 July 2003 and was pending as of 15 December 2005.
But even granting for the moment that Section 2, Article IV of the previous CIAC Rules is a valid provision that may be applied to the case at bar, still the CIAC was eminently correct in ruling that under the first paragraph of Section 2, Article IV, only "opportunity/business losses in addition to liquidated damages" are not arbitrable. When the opportunity/ business losses are sought independently of liquidated damages, as in the instant case, they are perforce arbitrable.This ruling of the CIAC was upheld by the Court of Appeals in the Decision dated 1 August 2006. The Court sees no reason to hold otherwise.
CIVIL LAW: mutuality of contracts
InHome Development Mutual Fund vs. Court of Appeals, G.R. No. 118972, 3 April 1998, the Court held thatrequirements of contracts as tonotice as to thetime of giving, form, andmanner of servicethereof must be strictly observed because in an obligation where a period is designated, it is presumed to have been established for the benefit of both the contracting parties. Thus:
The law mandates that Obligations arising from contracts have the force oflawbetween the contracting parties and should be complied with in good faith.
Did petitioners comply with their contractual obligation in good faith, when they served the requisite written notice to private respondents nine (9)days after the expiration of the Agreement? The answer to this crucial question is in the negative.
The second clause of the contractual provision in dispute is to the effect that written notice of termination should be served at least thirty (30) days in advance. As a rule, themethodof terminating a contract is primarily determined by the stipulation of the parties. Thus, the requirements of contracts as tonotice- as to thetime of giving, form, andmanner of servicethereof - must be strictly observed because in an obligation where a period is designated, it is presumed to have been established for the benefit of both the contracting parties. Thus, the unilateral termination of the contract in question by the herein petitioners is violative of theprinciple of mutuality of contractsordained in Art. 1308 of the New Civil Code. (Emphasis supplied)
Indeed, even if NHA is permitted to invoke Clause 3.04.06 of the General Conditions of the Contract, its own failure to comply with the notice requirement thereof being violative of the principle of mutuality of contracts resulted in the unilateral termination of the Contract.
In any case, and quite importantly, NHA failed to present evidence to buttress its stance that the termination of the Contract was due to factors beyond its control as to justify the application of Clause 3.04.06. On the contrary, the fact that the NHA Board resolved to redraft the FVR Project as a mixed-use development under a joint venture scheme with interested parties shows that NHA had other options at hand and could have chosen to negotiate with FUCC to amend the Contract instead of deciding to terminate the same. The conclusion is ineluctable: the termination of the Contract was well within the control of NHA, as correctly held by the Court of Appeals.
Petitioner posits that the letter of FUCC to NHA dated 27 August 2001reveals that FUCC explicitly, if not expressly, welcomed or accepted the termination of the FVR Project with alacrity.The letter reads thus:
May we formally inform you thatwe have refrained from implementing the works under our FVR contract pursuant to your instructionsthat our contract will be terminated and that project costs should now be contained.
We were advised that NHA has found FVR to be unsuitable for squatter settlement owing to its unfavorable geology and terrain. It is therefore being redrafted for mixed-use development on a joint venture scheme.
This was conveyed to us by the Office of the General Manager and the same was confirmed by the SLB Manager and the FVR Officer-in-Charge.
Indeed, several prospective parties have inspected the site for a possible joint venture engagement with National Housing Authority.
The Court does not agree. We believe that the letter cannot be read in isolation but should be understood in relation to the situation of the parties and juxtaposed against the contemporaneous events then affecting the FVR Project. The records show that at the time the letter was sent, FUCC had pending claims against NHA. It had a pending claim for payment of Idle Equipment in the amount ofP142,780,800.00,and a pending claim for payment of Price Adjustment in the amount ofP15 Million.
According to respondent, NHA wanted FUCC to resume the contract works for the FVR Project full blast but FUCC refused citing as reason NHAs failure to settle its pending claims, particularly its claim for Price Adjustment. During this time, talk was rife that NHA would terminate the contract and redraft the FVR Project as a mixed-use development under a joint venture with interested parties. In late August 2001, FUCC was verbally instructed to refrain from implementing the contract works as the termination of the Contract was imminent. It was at this point that FUCC wrote the letter dated 27 August 2001 advising NHA that it had "refrained from implementing" the contract works "pursuant to your instructions that our contract will be terminated and that project costs should now be contained."
Respondent explains that it wrote the letter to put on record an added justification for its earlier refusal to resume the contract works full blast. Since there was already a verbal instruction to refrain from implementing the contract works as the termination of the Contract was purportedly imminent, it simply did not make sense for FUCC to be spending more for the FVR Project which would only end up as an added claim against NHA, with no clear prospects of being immediately paid.
Viewed in this light, i.e.: that FUCC indeed had pending claims with NHA for the payment of substantial amounts that had remained unpaid despite repeated follow-ups, FUCCs "immediately stopping the contract works even before its receipt of the Notice of Termination" as petitioner puts it does not show tacit consent on the part of FUCC to the termination of the Contract.
DENIED.
NATIONAL HOUSING AUTHORITY,Petitioner,v. FIRST UNITED CONSTRUCTORS CORPORATION,Respondent.
PEREZ,J.:
FACTS:
The FVR Project was a proposed resettlement site for informal settlers of Metro Manila. Conceived in May 1996, it was the subject of a Memorandum of Agreement entered into by and among the Housing & Urban Development Coordinating Council (HUDCC), the Department of Environment & Natural Resources (DENR), the Metro Manila Development Authority (MMDA) and the Marilaque Commission.
The FVR Project sits on a 750-hectare property reserved as a resettlement site for the landless and homeless residents of Metro Manila under Presidential Proclamation No. 799 dated 3 June 1996, situated in Sitio Boso-Boso, Brgy. San Jose, Antipolo City.
Phase I of the FVR Project called for the development of an area of roughly 300 hectares of the resettlement site into 7,500 home lots of 60 to 80 square meters per lot in three (3) residential Clusters, namely: Cluster 1, Cluster 2 and Cluster 3.
FUCC won the public bidding for the works contract of the FVR Project conducted by NHA on 26 February 1998 with a bid price ofP568,595,780.00.
On 10 March 1998, NHA and FUCC entered into a "Contract for Land Development of Freedom Valley Resettlement Project, Phase I, Sitio Boso-Boso, Bgy. San Jose, Antipolo, Rizal"(the "Contract") that covered the terms of the agreement between the parties for the works contract of Phase I of the FVR Project.
FUCC commenced actual contract works on 16 March 1998. Counting 365 days, the original contract expiration date was 15 March 1999.
Unfortunately, the FVR Project suffered various work suspensions and delays, so much so that the project was not completed on 15 March 1999.There were also changes in the scope of work that necessitated the issuance of variation orders, specifically Variation Order No. 1,and Variation Order No. 2,which delayed the completion of the project further.
Variation Order No. 1 reduced the number of home lots to be generated, from 7,500 under the original development plan to only 4,980. Variation Order No. 2 further reduced that number to 4,032. These changes in the scope of work resulted in the reduction of the contract price from the originalP568,595,780.00 toP488,393,466.98.
Because of the delays engendered by the suspension orders and the changes in the scope of the contract works, NHA granted time extensions to FUCC. All told, a total of 679 calendar days were added to the original work duration stipulated in the Contract. From 15 March 1999, the contract completion date was moved, initially, to 19 December 1999, and finally, to 11 November 2001.
In a letter dated 17 October 2001,NHA formally advised FUCC of the termination of the Contract.
NHA terminated the Contract under the "Contractor Not at Fault" clause of the General Conditions of the Contract. At the time the Contract was terminated, FUCC had various claims pending with NHA in connection with the FVR Project.
It appears that over a period of almost five (5) years, FUCC pleaded and negotiated with various NHA officials for the payment of these claims but its pleas fell on deaf ears.
This impelled FUCC to pursue its claims before the CIAC pursuant to Article XVIIof the Contract by filing a Complaintagainst NHA on 17 July 2003.
On 7 January 2004, the CIAC Arbitral Tribunal promulgated its Decision (CIAC Decision) containing findings and rulings on substantially all of the issues presented by the parties, and rendering an award in favor of FUCC.
On 17 August 2006, the CIAC submitted its Complianceto the remand orders of the Court of Appeals, showing the re-computed arbitral award in favor of FUCC.
On 24 August 2006, NHA filed an Omnibus Motion dated 22 August 2006that incorporated its Motion for Reconsideration of the CA Decision dated 1 August 2006 and its Motion to Require the CIAC to Explain and to Hold in Abeyance the Re-Computation of Award.
On 31 January 2007, the Court of Appeals issued a Resolutiondenying petitioners Omnibus Motion that included its Motion for Reconsideration of the CA Decision dated 1 August 2006. The appellate court did not act on the Compliance submitted by the CIAC and on petitioners Motion to Require the CIAC to Explain and to Hold in Abeyance the Re-Computation of Award. With respect to the Urgent Manifestation/Motion for Clarification of Land Bank, the appellate court directed Land Bank to "forthwith release to respondent the garnished fund of petitioner not exceeding P147,894,629.24 in partial satisfaction of [the] Courts decision dated 1 August 2006."
Undaunted, NHA filed the present Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court. Petitioner prays that this Court reverse and set aside the CA Decision dated 1 August 2006 and the Resolution dated 31 January 2007 claiming, in the main, that in promulgating the questioned Decision and Resolution, the Court of Appeals allegedly "egregiously overlooked, ignored or disregarded many discernible, indisputable facts or circumstances of weight and significance" that would allegedly have "logically altered the result of the case" had they "been judiciously considered."
ISSUES:
Whether or not FUCC is entitled to the award?
HELD: Court of Appeals decision is affirmed.
REMEDIAL LAW: cause of action
Cause of actionis defined as an act or omission by which a party violates the right of another. A complaint is deemed to have stated a cause of action provided it has indicated the following: (1) the legal right of the plaintiff, (2) the correlative obligation of the defendant, and (3) the act or the omission of the defendant in violation of the said legal right.
Respondent had the right to be paid its claim for Price Escalation for Progress Billing Nos. 1 to 5 after NHA recognized the validity of the claim and reconciled its computations with FUCC on the correct amount of price escalation to be paid. In fact, NHA had expressed readiness to process the payment of the claim. As regards Progress Billing No. 6, petitioner similarly recognized the validity of this claim. Indeed, petitioner does not contest the right of private respondent to be paid Progress Billing No. 6. What it contests is merely the amount thereof, insisting that FUCC is only entitled to an award ofP6,496,926.29 as against the amount of P7,384,534.22 awarded by the CIAC.
Petitioners subsequent refusal to process and pay these claims despite FUCCs willingness to submit a surety bond to secure the balance of the advance payment still to be recouped by NHA as the parties had agreed upon which bond would be submitted when the check payment for the claim is about to be released, clearly constitutes a violation by NHA of FUCCs right to be paid these acknowledged and recognized claims. Thus, respondent had an accrued cause of action against petitioner for these claims at the time it filed its Complaint, the constitutive elements of which are clearly set forth therein.
There is nothing to support petitioners stance that the "posting of the Payment Guarantee (or Performance) Bond is decidedly a condition precedent" or sine qua non for the payment of FUCCs claims for Progress Billing No. 6 and for Price Escalation for Progress Billing Nos. 1 to 5.The Court notes, upon a close examination of the Contract, that there is no provision therein that requires FUCC to post a Payment Guarantee Bond as an indispensable condition for the recognition of the validity of its claim for price escalation or for the processing and payment of its progress billings. Nor does the Contract refer to any other document from where such a condition may be inferred.
The source of FUCCs obligation to post a surety bond as a substitute for the GSIS-issued Payment Guarantee Bond is not the Contract but the subsequent agreement between the parties, to wit: that FUCC would submit a surety bond from one of the top five private surety companies to secure the balance of the advance payment still to be recouped by NHA, while NHA would process and pay FUCCs claims for Progress Billing No. 6 and for Price Escalation for Progress Billing Nos. 1 to 5. And the timing of the posting of the bond was, as requested by FUCC in the letter dated 4 October 2002,tacitly agreed to by NHA: that FUCC would post the requisite bond only when the check payments for its acknowledged claims are about to be released, with the understanding that NHA will hold on to the checks until it had received and verified the surety bond.
Petitioners reference to Article VII and VIII of the Contract to support its allegation that "(t)he procurement or posting of a Payment Guarantee (or Performance) Bond is a government requirement that cannot be excused under both law and Contract"is misplaced. Article VII refers to the Performance Bond in the amount ofP28,429,789.00 posted by FUCC to guarantee the faithful performance of its scope of work,which is decidedly different from the Payment Guarantee Bond in the amount ofP85.2 Million which NHA required FUCC to procure from GSIS and to post prior to the release of the advance payment in the amount ofP85.2 Million. A reading of Article VIII entitled CONTRACTORS ALL RISKS INSURANCE, on the other hand, readily reveals that it has no relation at all to the Payment Guarantee Bond required by NHA to cover the recoupment of the advance payment to FUCC.
It appears that petitioner pounced upon, and took out of context, the Court of Appeals ruling that "without question, the filing of a bond is a condition for the payment of the foregoing claims of respondent" to argue that since FUCC "failed to comply with a condition precedent or sine qua non for the payment of said claims", FUCC had no cause of action against NHA at the time it filed the Complaint. Read in the proper context, the "payment" spoken of in the CA Decision actually pertains to the physical act of releasing the check payments of FUCCs claims for Progress Billing No. 6 and for Price Escalation for Progress Billings Nos. 1 to 5.
The word "payment" is a noun that is used in two (2) general senses: as "money paid," i.e. an amount of money that is paid or due to be paid; or as the "act of paying," i.e. the act of paying money, or fact of being paid.In the case at bar, the word "payment" was obviously used by the Court of Appeals in the sense of the "act of paying," or more exactly, with respect to the mechanical act of releasing the check payments for FUCCs claims for Progress Billing No. 6 and for Price Escalation for Progress Billing Nos. 1 to 5. The Court of Appeals decreed that NHA may release the "payment" (meaning, the checks processed by NHA for FUCCs claims) provided FUCC would "post the requisite bond in the manner arranged by respondent with petitioner."
The evidence on record indubitably show that even as FUCC was ready to post the requisite bond in the manner agreed upon by the parties, NHA still refused to process and pay FUCCs claims for Progress Billing No. 6 and for Price Escalation for Progress Billing Nos. 1 to 5. In fine, and for emphasis, FUCC had an accrued cause of action to compel NHA to pay these claims at the time it filed its Complaint.
This claim is of course subject to evaluation of its merits, butunder the General Conditions of the contract, the contractor may be entitled to such compensation.
Citing the case of Public Estates Authority vs. Elpidio Uy, et al.,where this Court affirmed the disputed arbitral award of CIAC (a portion of which was for payment of the standby or idle time of equipment), the Court of Appeals sustained the award for Idle Equipment and held that payment for standby time due to prolonged work suspension is legally tenable.
POLITICAL LAW: findings of administrative and quasi-judicial agencies entitled to great weight
This Court cannot but agree with the holding of the Court of Appeals. More so because the CIAC which carefully considered the conflicting claims of the parties and painstakingly scrutinized both the oral and documentary evidence of record possesses the required expertise in the field of construction arbitration, as we had pointed out in the cited case of Elpidio Uy. In that case, as in this case, we find no ground to disturb the arbitral award of the CIAC. Settled is the rule that findings of fact of administrative agencies and quasi-judicial bodies, which have acquired expertise because their jurisdiction is confined to specific matters, are generally accorded not only respect, but finality when affirmed by the Court of Appeals.Whatever questions there may be regarding the legality of an award for "standby time" or Idle Equipment is put to rest by the case of Elpidio Uy.
In the instant petition, NHA reiterates and insists that FUCC does not deserve an award for Idle Equipment because FUCC was "actually and continuously performing contract works" on the FVR Project from 16 March 1999 to 21 November 2001; that its equipment "never went idle"; and that it was paid for its contract works during this period.
As heretofore shown, this stance of NHA was found to be untenable by the CIAC Arbitral Tribunal whose factual findings were affirmed by the Court of Appeals. Further, the argument that FUCC continuously performed contract works on the FVR Project from 16 March 1998 to 21 November 2001 so that its equipment never went idle is flawed because FUCCs claim for Idle Equipment is circumscribed within the period from 10 June 1998 to 15 March 1999 only. Quite obviously, works performed before 16 March 1998 and after 15 March 1999 are of no moment and are totally irrelevant to FUCCs claim for Idle Equipment.
COMMERCIAL LAW: jurisdiction of the CIAC
The nature and bases of the awards for Disengagement Costs consisting of three components, namely: Foregone Equipment Rental, Extended Overhead Costs and Foregone Income; and the awards for Cost of Materials, Equipment and Facilities, and Idle Equipment have been discussed at length. They are either business or opportunity losses or foregone profits that resulted from, or are the necessary consequences of, the termination of the Contract. They arose from and are inextricably linked to the construction dispute between NHA and FUCC that was the subject of arbitration proceedings before the CIAC. We find and so hold that they are arbitrable claims within the ambit of Section 4 of EO 1008, which defines the jurisdiction of the CIAC. Thus:
SECTION 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 disputes arises [sic] 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 provisions; amount of damages and penalties; commencement 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.
Section 4 provides that "(t)he jurisdiction of the CIAC may include but is not limited to," underscoring the expansive character of the CIACs jurisdiction. Very clearly, the CIAC has jurisdiction over a broad range of issues and claims arising from construction disputes, including but not limited to claims for unrealized profits and opportunity or business losses. What EO 1008 emphatically excludes is only disputes arising from employer-employee relationships.
Section 2, Article IV of the previous CIAC Rules of Procedure Governing Construction Arbitration cited by petitioner, which purports to exclude claims for business losses,contravenes EO 1008 and is a patent nullity; it is void ab initio. In legal contemplation, that section of the previous CIAC Rules never acquired force and effect and cannot be applied to this case. What applies is Section 2.1 of the Revised Rules of Procedures Governing Construction Arbitration that was promulgated on 19 November 2005. Indeed, and as pointed out by the Court of Appeals in the Resolution dated 31 January 2007, CIAC Resolution No. 02-2006 ("Defining the Coverage of the Revised Rules of Procedure Governing Construction Arbitration") states that "the Revised Rules shall be applicable to all pending cases upon its effectivity on 15 December 2005 and all cases which are to be filed thereafter."This case was filed on 17 July 2003 and was pending as of 15 December 2005.
But even granting for the moment that Section 2, Article IV of the previous CIAC Rules is a valid provision that may be applied to the case at bar, still the CIAC was eminently correct in ruling that under the first paragraph of Section 2, Article IV, only "opportunity/business losses in addition to liquidated damages" are not arbitrable. When the opportunity/ business losses are sought independently of liquidated damages, as in the instant case, they are perforce arbitrable.This ruling of the CIAC was upheld by the Court of Appeals in the Decision dated 1 August 2006. The Court sees no reason to hold otherwise.
CIVIL LAW: mutuality of contracts
InHome Development Mutual Fund vs. Court of Appeals, G.R. No. 118972, 3 April 1998, the Court held thatrequirements of contracts as tonotice as to thetime of giving, form, andmanner of servicethereof must be strictly observed because in an obligation where a period is designated, it is presumed to have been established for the benefit of both the contracting parties. Thus:
The law mandates that Obligations arising from contracts have the force oflawbetween the contracting parties and should be complied with in good faith.
Did petitioners comply with their contractual obligation in good faith, when they served the requisite written notice to private respondents nine (9)days after the expiration of the Agreement? The answer to this crucial question is in the negative.
The second clause of the contractual provision in dispute is to the effect that written notice of termination should be served at least thirty (30) days in advance. As a rule, themethodof terminating a contract is primarily determined by the stipulation of the parties. Thus, the requirements of contracts as tonotice- as to thetime of giving, form, andmanner of servicethereof - must be strictly observed because in an obligation where a period is designated, it is presumed to have been established for the benefit of both the contracting parties. Thus, the unilateral termination of the contract in question by the herein petitioners is violative of theprinciple of mutuality of contractsordained in Art. 1308 of the New Civil Code. (Emphasis supplied)
Indeed, even if NHA is permitted to invoke Clause 3.04.06 of the General Conditions of the Contract, its own failure to comply with the notice requirement thereof being violative of the principle of mutuality of contracts resulted in the unilateral termination of the Contract.
In any case, and quite importantly, NHA failed to present evidence to buttress its stance that the termination of the Contract was due to factors beyond its control as to justify the application of Clause 3.04.06. On the contrary, the fact that the NHA Board resolved to redraft the FVR Project as a mixed-use development under a joint venture scheme with interested parties shows that NHA had other options at hand and could have chosen to negotiate with FUCC to amend the Contract instead of deciding to terminate the same. The conclusion is ineluctable: the termination of the Contract was well within the control of NHA, as correctly held by the Court of Appeals.
Petitioner posits that the letter of FUCC to NHA dated 27 August 2001reveals that FUCC explicitly, if not expressly, welcomed or accepted the termination of the FVR Project with alacrity.The letter reads thus:
May we formally inform you thatwe have refrained from implementing the works under our FVR contract pursuant to your instructionsthat our contract will be terminated and that project costs should now be contained.
We were advised that NHA has found FVR to be unsuitable for squatter settlement owing to its unfavorable geology and terrain. It is therefore being redrafted for mixed-use development on a joint venture scheme.
This was conveyed to us by the Office of the General Manager and the same was confirmed by the SLB Manager and the FVR Officer-in-Charge.
Indeed, several prospective parties have inspected the site for a possible joint venture engagement with National Housing Authority.
The Court does not agree. We believe that the letter cannot be read in isolation but should be understood in relation to the situation of the parties and juxtaposed against the contemporaneous events then affecting the FVR Project. The records show that at the time the letter was sent, FUCC had pending claims against NHA. It had a pending claim for payment of Idle Equipment in the amount ofP142,780,800.00,and a pending claim for payment of Price Adjustment in the amount ofP15 Million.
According to respondent, NHA wanted FUCC to resume the contract works for the FVR Project full blast but FUCC refused citing as reason NHAs failure to settle its pending claims, particularly its claim for Price Adjustment. During this time, talk was rife that NHA would terminate the contract and redraft the FVR Project as a mixed-use development under a joint venture with interested parties. In late August 2001, FUCC was verbally instructed to refrain from implementing the contract works as the termination of the Contract was imminent. It was at this point that FUCC wrote the letter dated 27 August 2001 advising NHA that it had "refrained from implementing" the contract works "pursuant to your instructions that our contract will be terminated and that project costs should now be contained."
Respondent explains that it wrote the letter to put on record an added justification for its earlier refusal to resume the contract works full blast. Since there was already a verbal instruction to refrain from implementing the contract works as the termination of the Contract was purportedly imminent, it simply did not make sense for FUCC to be spending more for the FVR Project which would only end up as an added claim against NHA, with no clear prospects of being immediately paid.
Viewed in this light, i.e.: that FUCC indeed had pending claims with NHA for the payment of substantial amounts that had remained unpaid despite repeated follow-ups, FUCCs "immediately stopping the contract works even before its receipt of the Notice of Termination" as petitioner puts it does not show tacit consent on the part of FUCC to the termination of the Contract.
DENIED.
