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672 Phil. 621
SECOND DIVISION
[ G.R. No. 176535, September 07, 2011 ]
NATIONAL HOUSING AUTHORITY, PETITIONER, VS. FIRST UNITED CONSTRUCTORS CORPORATION, RESPONDENT.
D E C I S I O N
PEREZ, J.:
Before this Court is a petition for review on
certiorari
under Rule 45 of the Revised Rules of Court filed by petitioner National Housing Authority (NHA), seeking to reverse and set aside the 1 August 2006 Decision
of the Court of Appeals (CA) and its Resolution dated 31 January 2007
in CA-G.R. SP No. 81635.
In the questioned Decision, the appellate court affirmed with modification the Decision promulgated on 7 January 2004
by the Construction Industry Arbitration Commission (CIAC), thru a three member Arbitral Tribunal
in CIAC Case No. 14-2003 entitled "
First United Constructors Corporation v. National Housing Authority,
" that granted an arbitral award in favor of respondent First United Constructors Corporation (FUCC); and in its assailed Resolution, refused to reconsider its Decision.
The Facts
From the Petition,
the Comment
thereon of respondent, petitioner's Reply,
and their respective Annexes,
particularly the Complaint
of respondent, petitioner's Answer
[10]
and the Joint Stipulations
[11]
of the parties incorporated as Admitted Facts in the Supplemental Terms of Reference,
[12]
all filed with the CIAC, and from the CA Decision and the CIAC Decision, the Court gathers the following relevant facts and antecedents:
Respondent FUCC was the contractor of Phase I of the Freedom Valley Resettlement Project (the FVR Project or the Project) of petitioner NHA.
[13]
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.
[14]
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.
[15]
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.
[16]
FUCC won the public bidding for the works contract of the FVR Project conducted by NHA on 26 February 1998 with a bid price of P568,595,780.00.
[17]
The work consisted principally of bulk earthworks and the construction of roads, drainage, water supply and sewerage systems, slope protection and bridge structures, as well as survey works, titling of the lots and other off-site works.
[18]
On 2 March 1998, NHA issued a Notice of Award
[19]
for Phase I of the FVR Project to FUCC.
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
[20]
(the "Contract") that covered the terms of the agreement between the parties for the works contract of Phase I of the FVR Project.
The work duration stipulated in the Contract was three hundred sixty five (365) days. The contract amount was the bid price of FUCC, or P568,595,780.00.
[21]
FUCC commenced actual contract works on 16 March 1998. Counting 365 days, the original contract expiration date was 15 March 1999.
[22]
Unfortunately, the FVR Project suffered various work suspensions and delays, so much so that the project was not completed on 15 March 1999.
[23]
There were also changes in the scope of work that necessitated the issuance of variation orders, specifically
Variation Order No. 1
[24]
and
Variation Order No. 2
[25]
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 original P568,595,780.00 to P488,393,466.98.
[26]
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, to wit: an additional 279 calendar days under
Time Extension No. 1
[27]
another extension of 200 calendar days in conjunction with the issuance of
Variation Order No. 2
[28]
and finally, 200 more calendar days under
Resumption Order No. 2.
[29]
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.
[30]
In the course of the contract works, FUCC submitted five (5) Progress Billings, all of which were paid by NHA, to wit: Progress Billing No. 1
[31]
in the amount of P52,707,464.21, for the period 16 March to 30 June 1998; Progress Billing No. 2
[32]
in the amount of P14,343,039.55, for the period 1 July to 31 December 1998; Progress Billing No. 3
[33]
in the amount of P47,329,827.89, for the period 1 January to 15 October 1999; Progress Billing No. 4
[34]
in the amount of P114,494,481.30, for the period 16 October 1999 to 31 January 2001; and Progress Billing No. 5
[35]
in the amount of P42,333,109.23, for the period 31 January to 30 June 2001.
The FVR Project was never completed as envisioned and planned because NHA abandoned the original concept of the Project. In a Resolution passed on 25 September 2001,
[36]
the Board of Directors of NHA reclassified the FVR Project from a resettlement site of informal settlers into a mixed-market site and services type of project, and terminated the Contract.
[37]
In a letter dated 17 October 2001,
[38]
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.
[39]
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.
[40]
This impelled FUCC to pursue its claims before the CIAC pursuant to Article XVII
[41]
of the Contract by filing a Complaint
[42]
against NHA on 17 July 2003. The case was docketed as CIAC Case No.14-2003 entitled "
First United Constructors Corporation vs. National Housing Authority.
In its Complaint, FUCC prayed thus:
WHEREFORE
, it is respectfully prayed that after proper arbitration proceedings, claimant be adjudged entitled to the payment of its claims, as follows:
1)
Payment for Accomplished Works Not Yet Billed in the amount of P9,672,784.98;
2)
Payment for the Cost of Materials, Equipment, Facilities, etc. Included for the Project in the amount of P4,801,992.82;
3)
Payment for Price Escalation in the amount of P27,794,126.25;
4)
Payment for Price Adjustment in the amount of P14,768,770.22;
5)
Payment for Disengagement Costs in the amount of P83,242,365.73;
6)
Payment for Idle Equipment in the amount of P142,780,800.00;
7)
Payment for Interest on Idle Equipment in the amount of P44,262,048.00;
8)
Payment for Attorney's Fees equivalent to Ten Percent (10%) of the total of the foregoing claims; and
9)
Payment of Twelve Percent (12%) interest on the total arbitration award from the date of promulgation of judgment until fully paid.
Other reliefs just and equitable are likewise prayed for.
[43]
The CIAC appointed a 3-member Arbitral Tribunal (CIAC Arbitral Tribunal) to adjudicate FUCC's claims.
NHA initially filed a Motion to Dismiss,
[44]
claiming that FUCC had failed to exhaust all administrative remedies, which was opposed by FUCC. In an Order dated 8 September 2003, the CIAC Arbitral Tribunal denied the motion and ordered NHA to file its answer to FUCC's Complaint.
[45]
In its Answer,
[46]
NHA raised the following defenses,
viz
: FUCC had no right of action since its recourse to arbitration was premature; there was no actual suspension of contract works notwithstanding the suspension orders issued by NHA; the Contract was not unilaterally terminated by NHA; FUCC's Progress Billing No. 6 should only be for the amount of P6,496,926.29; FUCC's claim for Price Escalation for Progress Billings Nos. 1 to 5 came too late in the day, and that the amount that should be paid is only P26,297,951.62 and payable only after FUCC procured the required surety bond; and the claims for Payment for Cost of Materials, Equipment and Facilities, Disengagement Cost, Cost of Idle Equipment and interests thereon, are non-arbitrable issues. By way of counter-claim, NHA prayed that it be allowed to recover from FUCC the amount of P38 Million, which represents the remaining balance or unliquidated portion of the P85.2 Million that NHA had advanced to FUCC at the start of the FVR Project.
The issues having been joined, the CIAC Arbitral Tribunal called the parties to a Preliminary Conference. The parties subsequently agreed upon a Terms of Reference
[47]
and a Supplemental Terms of Reference
[48]
to guide the CIAC Arbitral Tribunal in the arbitration process and in the resolution of the case. The parties also submitted to the CIAC Arbitral Tribunal their "Joint Stipulations,"
[49]
which were incorporated in the Supplemental Terms of Reference as "Admitted Facts."
[50]
Under the Terms of Reference and the Supplemental Terms of Reference, the CIAC Arbitral Tribunal was called upon to resolve the following issues to determine the validity of FUCC's claims against NHA, to wit:
Did Claimant exhaust all administrative remedies before filing this arbitration case?
1.1 Is claimant's recourse to arbitration premature?
Is claimant entitled to its claims for:
2.1 payment for accomplished works not yet billed (Progress Billing No. 6)? If so, how much?
2.1.1 Is the submission by the Claimant of the files and folders covering the unpaid claims of the planters/farmers necessary for the processing of its claim for accomplished works not yet billed (Progress Billing No. 6)?
2.2 payment for cost of materials, equipment, pro-rated cost of facilities constructed for the project, etc.? If so, how much?
2.2.1 Whether or not these claims are arbitrable or not [sic]
2.3 Price Escalation? If so, how much?
2.4 Price Adjustment? If so, how much?
2.5 Disengagement Costs? If so, how much?
2.5.1 Whether or not this claim is arbitrable or not [sic]
2.6 Idle Equipment? If so, how much?
2.6.1 Whether or not this claim is arbitrable or not [sic]
2.6.2 Was there actual or physical suspension of the works for the period covered by the suspension orders?
2.7 Interest on Idle Equipment? If so, how much?
Is Respondent entitled to the recoupment of the remaining portion of the advance payment made for the Project?
Are the parties entitled to their respective claims for interest on the total arbitration amount that would be adjudged in their own favor?
4.1 If so at what rate and from what period?
Who between the parties is liable for the cost of arbitration?
Whether or not the termination of the Contract is unilateral
6.1 Whether or not the Claimant opposed, contested or protested the termination
Who caused the alleged delays in the processing or payment of Claimant FUCC's claims, if any?
Did Claimant FUCC procure a Payment Guarantee Bond (Surety Bond) from either the GSIS or any bona fide private surety company?
Was the procurement by Claimant FUCC of the Payment Guarantee Bond (Surety Bond) a condition for the payment of its claims for Progress Billing No. 6 and Price Escalation for Progress Billing Nos. 1 to 5?
[51]
To prove its claims, FUCC presented one witness in the person of Engr. Ben S. Dumaliang (Engr. Dumaliang), the Project Director of FUCC for the FVR Project, and submitted his Affidavit in Question-and-Answer Form dated 4 November 2003,
[52]
which served as the witness' direct testimony. On the basis of said affidavit, Engr. Dumaliang was cross-examined by NHA's counsel.
[53]
FUCC adopted and marked Annexes "A" to "GGGGGG" of its Complaint as Exhibits "A" to "GGGGGG" and submitted the same as part of its documentary evidence. FUCC likewise marked the documents attached to the Affidavit in Question-and-Answer Form of Engr. Dumaliang as Exhibits "HHHHHH" to "RRRRRR" and likewise submitted the same as part of its documentary evidence.
[54]
FUCC thereafter rested its case.
To prove its defenses and counter-claim, NHA likewise presented only one witness in the person of Engr. Mariano E. Raner III (Engr. Raner), the Special Project Director of the FVR Project, and submitted his Affidavit dated 2 December 2003
[55]
in lieu of his direct testimony. Engr. Raner was cross-examined by FUCC's counsel on the basis of said Affidavit.
[56]
NHA marked 21 pieces of documentary evidence and submitted the same as Exhibits "1" to "21,"
[57]
and thereafter rested its case.
On 7 January 2004, the CIAC Arbitral Tribunal promulgated its Decision
[58]
(CIAC Decision) containing findings and rulings on substantially all of the issues presented by the parties, and rendering an award in favor of FUCC, as follows:
AWARD
WHEREFORE, on the basis of the foregoing findings and rulings, an award is hereby rendered in favor of Claimant, FIRST UNITED CONSTRUCTORS CORPORATION, and against the Respondent, NATIONAL HOUSING AUTHORITY ordering the latter to pay the former the total of the following amounts, less the amount for recoupment of the balance of the advance payment including the interest viz;
1) Php 7,384,534.22 representing payment for Billing No. 6;
2) Php 989,325.27 representing interest of No. 1 above;
3) P4,677,680.00 representing payment for cost of materials, equipment, facilities;
4) P415,993.13 representing interest of No. 3 above;
5) P26,297,951.62 representing payment for Price Escalation of PB Nos. 1-5;
6) P1,863,191.86 representing interest of No. 5 above;
7) P14,768,770.22 representing payment for Price Adjustment of PB Nos. 5 & 6;
8) P1,847,512.46 representing interest of No. 7 above;
9) P65,842,309.72 representing payment for Disengagement Costs;
10) P7,468,141.43 representing interest of No. 9 above;
11) P131,948,674.56 representing payment of Idle Equipment;
12) P36,634,736.09 representing interest of No. 11 above.
P300,138,820.59 gross total award in favor of Claimant
13) P
representing12% interest of the gross total award of P300,138,820.59, from the date of promulgation of this decision, and until it is fully paid.
Note: * * * * * * * *is to be determined upon execution of judgment.
Award to Respondent's counter-claim:
1) P37,951,201.14 representing the recoupment of the balance of Advance payment made to the Claimant.
2) P455,414.41 representing interest of No. 1 above.
P
38,406,615.55
balance of recoupment plus interest.
Net Award to be paid by Respondent to the Claimant
P300,138,820.59 Gross Award of Claimant's Claims
Less
P 38,406,615.55
Balance of recoupment plus interest
P
261,732,205.04
Net Award to be paid by Respondent to Claimant.
Finally, the Respondent is hereby ordered to pay Claimant, one-half of the cost of arbitration in the amount of P768,219.76, as its share in the arbitration cost, which was advanced by the Claimant during the pendency of this case.
[59]
On 30 January 2004, NHA appealed the CIAC Decision to the Court of Appeals by filing a Petition for Review Under Rule 43 (With Prayer for Restraining Order & Injunctive Writ),
[60]
which was docketed thereat as CA-G.R. SP No. 81635.
[61]
NHA's prayer for a Temporary Restraining Order (TRO) to prevent the execution of the CIAC Decision was granted by the Court of Appeals in a Resolution dated 14 April 2004.
[62]
Upon the lapse of the TRO, NHA filed an Urgent Motion for Early Resolution of its application for the issuance of a Writ of Preliminary Injunction, which was similarly granted by the Court of Appeals in a Resolution dated 8 July 2004.
[63]
The Writ of Preliminary Injunction issued by the appellate court enjoined "respondent and the agency
a quo
from executing
the disputed decision during the pendency of [the] petition or until further order of the Court."
[64]
On 26 February 2004, or prior to the issuance of the TRO, the CIAC issued in favor of FUCC a Writ of Execution of the arbitral award. Accordingly, Mr. Cristobal Florendo, Sheriff IV of the Office of the Clerk of Court and
Ex-Officio
Sheriff of the Regional Trial Court in Quezon City, who was appointed as the Implementing Sheriff, issued and served Notices of Garnishment on the Land Bank of the Philippines (Land Bank), the Development Bank of the Philippines (DBP), the Philippine National Bank (PNB), the Veterans Bank of the Philippines (Veterans Bank), the Bureau of Treasury, and on the Government Security and Insurance Service Savings Bank. The Implementing Sheriff later served Orders of Delivery of Money on the Land Bank, DBP, and the Bureau of Treasury.
[65]
Petitioner filed a Motion to Lift Garnishment and for the Issuance of Writ of Preliminary Mandatory Injunction on the ground that the service of the Notices of Garnishment violated the Resolution dated 14 April 2004 (directing the issuance of a TRO) and the Resolution dated 8 July 2004 (granting the issuance of a Writ of Preliminary Injunction) to enjoin the execution of the arbitral award. This motion was denied by the Court of Appeals in a Resolution dated 13 December 2004.
[66]
Petitioner subsequently filed a Very Urgent Motion to Lift Writ of Garnishment citing essentially the same grounds as the previous motion.
[67]
Instead of merely acting upon the Very Urgent Motion to Lift Writ of Garnishment, the Court of Appeals resolved the main petition and promulgated the Decision dated 1 August 2006
[68]
that affirmed with modification the CIAC Decision.
[69]
The appellate court denied petitioner's Very Urgent Motion to Lift Writ of Garnishment permanently
[70]
and lifted the Writ of Preliminary Injunction it had earlier issued. The decretal portion of the CA Decision reads, thus:
WHEREFORE, under the premises, we hereby dispose of this case as follows:
1. The following portions of the arbitral award are hereby AFFIRMED, thus:
WHEREFORE, on the basis of the foregoing findings and rulings, an award is hereby rendered in favor of Claimant, FIRST UNITED CONSTRUCTORS CORPORATION, and against the Respondent, NATIONAL HOUSING AUTHORITY ordering the latter to pay the former the total of the following amounts, less the amount for recoupment of the balance of the advance payment including the interest, viz:
1) P7,384,534.22 representing payment for Billing No. 6;
2) P989,325.27 representing interest (on) No. 1 above;
3) P4,667,680.00 representing payment for cost of materials, equipment, facilities;
4) P415,993.00 representing interest (on) No. 3 above;
5) P26,297,951.62 representing payment for Price Escalation of PB Nos. 1-5;
6) P1,863,191.86 representing interest (on) No. 5 above;
7) P14,768,770.22 representing payment for Price Adjustment of PB Nos. 5 & 6;
8) P1,847,512.46 representing interest (on) No. 7 above;
9) P131,948,674.56 representing payment for Idle Equipment; and
10) P36,634,736.09 representing interest on No. 11 above
xx xx xx
Award to Respondent's (herein petitioner's) counter-claim:
1) P37,951,201.14 representing the recoupment
of the balance of advance
payment made to the
claimant
2) P455,414.41 representing interest on No.1 above
P38,406,615.55 balance of recoupment plus interest
xx xx xx
Finally, the Respondent (herein petitioner) is hereby ordered to pay to Claimant (herein respondent) one-half of the cost of arbitration the amount of P768,219.76, as its share in the arbitration cost, which was advanced by the claimant during the pendency of this case.
2. Determination of the correct amount to be paid by petitioner as disengagement costs and the interest due thereon is hereby
REMANDED
to the CIAC.
3. Computation of the total award in favor of respondent and the 12% interest due thereon is also
REMANDED
to the CIAC, with instruction that said 12% interest be computed from finality of this decision.
4. Computation of the net award which petitioner must pay respondent by deducting the gross total award for petitioner from the gross total award for petitioner [sic] from the gross total award with interest for respondent is also REMANDED to the CIAC.
Accordingly, with the foregoing disposition, the Writ of Preliminary Injunction earlier issued against respondent herein is hereby LIFTED.
On 17 August 2006, the CIAC submitted its Compliance
[71]
to the remand orders of the Court of Appeals, showing the re-computed arbitral award in favor of FUCC.
[72]
On 24 August 2006, NHA filed an Omnibus Motion dated 22 August 2006
[73]
that 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.
FUCC, on the other hand, filed a Motion to Act on the Compliance submitted by the CIAC, while the Land Bank filed an Urgent Manifestation/ Motion for Clarification for the appellate court to determine whether the bank could legally release the frozen funds of NHA.
[74]
The Court of Appeals directed the parties to file their respective comment to the cross-motions and to the manifestation of Land Bank, and thereafter considered the issues submitted for resolution.
[75]
On 31 January 2007, the Court of Appeals issued a Resolution
[76]
denying petitioner's 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 petitioner's 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] Court's decision dated 1 August 2006."
[77]
The dispositive portion of the Resolution reads thus:
WHEREFORE
, for lack of merit, petitioner's Omnibus Motion is
DENIED
. Respondent's Motion to Act on the Compliance submitted by CIAC
Ex Abundante Cautelam
and petitioner's Urgent Motion for Issuance of Temporary Restraining or Preliminary Injunctive Writ are merely
NOTED
With respect to its Urgent Manifestation/ Motion for Clarification, the Land Bank of the Philippines is
DIRECTED
to forthwith release to respondent the garnished fund of petitioner not exceeding P147,894,629.24 in partial satisfaction of this Court's decision dated August 1, 2006, upon filing of a good and sufficient bond by respondent in the sum of P150,000,000.00 to answer for the restitution of the former amount and reparation of damages to petitioner should said decision be reversed, whether totally or partially.
[78]
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."
[79]
The Issues
According to petitioner, instead of those alleged "indisputable facts or circumstances," the appellate court's findings were "premised merely on manifestly wrong presumptions, surmises, mistaken or improbable inferences and misapprehension of facts."
[80]
Specifically, petitioner claims that the Court of Appeals committed a grave and substantial error of judgment:
I
WHEN IT AFFIRMED THE AWARD FOR PROGRESS BILLING NO. 6 AND PRICE ESCALATION FOR PROGRESS BILLING NOS. 1 TO 5 DESPITE THE INDISPUTABLE OR ADMITTED FACT THAT RESPONDENT FUCC DID NOT POST ANY PERFORMANCE BOND, WHICH IS DECIDEDLY A CONDITION PRECEDENT FOR THE PAYMENT OF THESE CLAIMS.
II
WHEN IT AFFIRMED THE AWARD FOR PROGRESS BILLING NO. 6 IN THE AMOUNT OF P7,384,534.22 DESPITE THE MANIFEST OR CLEAR FACT THAT RESPONDENT FUCC'S CLAIM FOR SAID BILLING WAS ONLY P6,496,926.29.
III
WHEN IT AFFIRMED THE AWARD FOR COST OF MATERIALS, EQUIPMENT AND FACILITIES IN THE AMOUNT OF P4,677,680.00 AND DISENGAGEMENT COST ON THE BASIS OF AN OBVIOUSLY ILLOGICAL AND ERRONEOUS INTERPRETATION OF EXHIBIT "19."
IV
WHEN IT AFFIRMED THE AWARD FOR IDLE EQUIPMENT IN THE AMOUNT OF P131,948,674.56 NOTWITHSTANDING THE CLEAR AND PATENT FACT THAT RESPONDENT FUCC'S EQUIPMENT NEVER WENT IDLE.
V
WHEN IT AFFIRMED THE AWARD FOR COST OF MATERIALS, EQUIPMENT AND FACILITIES, DISENGAGEMENT COST AND IDLE EQUIPMENT DESPITE THE CLEAR OR MANIFEST FACT THAT THESE CLAIMS WERE NON-ARBITRABLE AT THE TIME THE COMPLAINT WAS FILED ON 17 JULY 2003.
VI
WHEN IT RULED THAT RESPONDENT FUCC DID NOT CONSENT TO THE TERMINATION OF THE PROJECT NOTWITHSTANDING THE GLARING FACT THAT RESPONDENT FUCC DID NOT PROTEST THE TERMINATION AND HAD EVEN STOPPED IMPLEMENTING THE WORKS ON ITS OWN VOLITION EVEN BEFORE ITS RECEIPT OF THE NOTICE OF TERMINATION.
[81]
The Ruling of the Court
We deny the petition for lack merit.
I.
Re: Payment Guarantee Bond as Condition
Precedent for Payment of Progress Billing No. 6
and Price Escalation for Progress Billings Nos. 1 to 5
Petitioner questions the award for Progress Billing No. 6 in the amount of P7,384,534.22 and for Price Escalation for Progress Billings Nos. 1 to 5 in the amount of P26,297,951.62.
In sustaining these items of award granted by the CIAC to FUCC, the Court of Appeals ratiocinated as follows:
Petitioner's sole objection to the award of P7,384,534.22 as payment for Progress Billing No. 6 and P26,297,951.62 as payment of price escalation for Progress Billing Nos. 1-5 is that these claims did not become ripe for adjudication for failure of respondent to fulfill a condition
sine qua non
, which is the filing of a payment guarantee bond. Without this bond, respondent had no right of action against petitioner at the time of filing of the complaint in arbitration. x x x
Without question, the filing of a bond is a condition for the payment of the foregoing claims of respondent. We do not accept the reasoning of the CIAC that this requirement was rendered moot and academic by its granting of said claim; that sort of reasoning begs the question. However, we agree with CIAC that respondent's omission to file bond was excusable. On October 4, 2002, respondent proposed an arrangement under which it would submit its bond only when petitioner is about to release the check but that petitioner will hold on to it until respondent's bond is received and verified. Respondent was prompted to make this request in view of its unfavorable cash flow position, a dire situation it found itself in when the project was pre-terminated. x x x As found by CIAC, petitioner never responded to this request, giving rise to the presumption that it had not denied it. x x x. This presumption holds considering that, even at this stage, petitioner never explained its inaction.
Thus, we sustain the award of P7,384,534.22 as payment for Progress Billing No. 6 and P26,297,951.62 as payment of price escalation for Progress Billing Nos. 1-5. However, consistent with the provisions of the Contract, we require the latter to post the requisite bond in the manner arranged by respondent with petitioner.
[82]
Petitioner assails what it sees as a "flip-flopping" of the Court of Appeals,
i.e.
for ruling in one breath that "(w)ithout question, the filing of a bond is a condition for the payment of the foregoing claims of respondent," but pronouncing in another that "we agree with CIAC that respondent's omission to file bond was excusable," only to qualify in the third breath that "consistent with the provisions of the Contract, we require the latter to post the requisite bond in the manner arranged by respondent with petitioner,"
[83]
and asserts that the posting of the bond is a government requirement that cannot be excused under both the law and the Contract (citing Articles VII and VIII thereof), and is simply indispensable.
[84]
In fact, according to petitioner, it is a condition precedent for the payment of FUCC's claims for Progress Billing No. 6 and for Price Escalation for Progress Billings Nos. 1 to 5. And since FUCC allegedly failed to comply with this condition precedent, it had no existing or accrued cause of action to compel NHA to pay the two (2) claims.
[85]
Respondent counters that the Payment Guarantee Bond was required by NHA at the inception of the Project as a condition for the release of the advance payment to FUCC in the amount P85.2 Million,
[86]
and not as a requirement for the processing or release of FUCC's Progress Billings;
[87]
that the Payment Guarantee Bond expired without the entire advance payment being recouped by NHA because of the many work suspensions and delays suffered by the FVR Project; and that FUCC tried to renew the bond but the GSIS refused because the Contract for the FVR Project had already been terminated as of 16 October 2001.
[88]
It is respondent's submission that since its inability to submit a renewed Payment Guarantee Bond from the GSIS was NHA's very own act of terminating the Contract, NHA cannot use the same as reason not to process and pay FUCC's claims for Progress Billing No. 6 and for Price Escalation for Progress Billing Nos. 1 to 5.
[89]
We have meticulously examined the record
vis-à-vis
the submissions of the parties and find no reason to disturb the ruling of the Court of Appeals.
The record shows that at the start of the FVR Project, FUCC received from NHA an advance payment for mobilization in the amount of P85.2 Million, or fifteen percent (15%) of the contract cost.
[90]
There is no dispute that this advance payment was to be recouped by NHA from FUCC by taking partial amounts from the progress payments to FUCC. There is likewise no dispute that to secure the recoupment of this advance payment, NHA required FUCC to post a Payment Guarantee Bond in the amount of P85.2 Million issued by GSIS prior to the release of the advance payment.
[91]
It appears that before NHA could recoup from FUCC the entire advance payment, the Payment Guarantee Bond expired. This, at a time when NHA had yet to recover some P38 Million out of the P85.2 Million advance payment.
[92]
FUCC tried to renew and pay for the extension of the bond but GSIS refused because the Contract for the FVR Project had already been terminated as of 16 October 2001.
[93]
Because of the inability of FUCC to submit a renewed Payment Guarantee Bond from GSIS, NHA refused to process and pay FUCC's claims for Progress Billing No. 6 and for Price Escalation for Progress Billings Nos. 1 to 5.
[94]
In two letters, one dated 23 May 2002,
[95]
the other dated 6 June 2002,
[96]
both addressed to the NHA General Manager, FUCC appealed for help in the payment of these claims and proposed to procure an alternative surety bond from a private surety firm accredited by the Insurance Commission to secure the balance of the advance payment still to be recouped by NHA.
[97]
As both letters drew no response from NHA, FUCC wrote a third letter dated 13 June 2002
[98]
reiterating its proposal to submit a bond from a private surety company instead of a renewed Payment Guarantee Bond from the GSIS. It wrote thus:
The unexpected termination of the contract has already caused untold injury to the contractor. May we request NHA not to add insult to the injury by allowing the private surety bond and by subsequently releasing our claim for price escalation.
[99]
NHA finally replied
[100]
and acceded to FUCC's proposal provided that the private surety company was among the top five (5) firms as endorsed by the Insurance Commission.
[101]
FUCC immediately wrote back
[102]
and provided NHA with a list of the top five non-life insurance companies as endorsed by the Insurance Commission, and sought approval to procure a surety bond from any one of the firms, but preferably from Malayan Insurance Company, Inc.
[103]
The foregoing evidence of record indisputably establish that FUCC made the offer to submit a surety bond from a private surety company instead of a renewed Payment Guarantee Bond issued by the GSIS just so NHA would process and pay FUCC's claims for Progress Billing No. 6 and for Price Escalation for Progress Billing Nos. 1 to 5. This offer was contained in three (3) successive letters: the first dated 23 May 2002,
[104]
the second dated 6 June 2002,
[105]
and the third dated 13 June 2002.
[106]
When NHA acceded to FUCC's proposal in the letter dated 24 June 2002,
[107]
it accepted FUCC's offer but qualified its acceptance by imposing the condition that the surety firm be among the top five surety firms as endorsed by the Insurance Commission. This qualified acceptance constituted a counter-offer
[108]
which FUCC immediately accepted by way of the letter dated 3 July 2002.
[109]
In that letter, FUCC submitted to NHA the names of the top five surety companies from where it intended to obtain the surety bond. Thus, a perfected agreement was reached 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 FUCC's claims for Progress Billing No. 6 and for Price Escalation for Progress Billing Nos. 1 to 5. There was a perfected agreement because the contractual elements of consent, object certain and cause had concurred.
[110]
The evidence on record further show that the parties subsequently reconciled their computations and agreed on the amount of P26,297,951.62 as payment for Price Escalation for Progress Billing Nos. 1 to 5.
[111]
In fact, in the letter dated 2 October 2002,
[112]
NHA advised FUCC that it would "proceed with the processing of the escalation payment subject to the submission [of] the Surety Bond covering the balance for the recoupment of the advanced payment for mobilization."
[113]
In response, FUCC wrote NHA a letter dated 4 October 2002
[114]
requesting that it be allowed to submit the surety bond "immediately before [the] release by NHA of the check for the price escalation," with the understanding that "until the bond is released and verified, NHA will hold the check," "owing to the unfavorable cash flow position of the project brought about by the untimely termination of the contract."
[115]
Since NHA did not respond to FUCC's request nor object thereto, respondent assumed that NHA had tacitly accepted the same,
[116]
a stance supported by the CIAC and affirmed by the Court of Appeals in this wise:
As found by CIAC, petitioner never responded to this request, giving rise to the presumption that it had not denied it. x x x This presumption holds considering that, even at this stage, petitioner never explained its inaction.
[117]
Indeed, petitioner has not explained its inaction even in the instant petition. It merely posits that "its silence cannot give rise to the presumption that it had accepted the counter-proposal" of FUCC
[118]
(referring to the request contained in the letter of FUCC dated 4 October 2002),
[119]
which it claims to be "a counter-proposal to the counter-proposal of petitioner NHA" (referring to the letter dated 24 June 2002).
[120]
But this stance is untenable. As discussed above, the letter of NHA dated 24 June 2002, containing a qualified acceptance of FUCC's offer to submit a surety bond from a private surety company, constituted a counter-offer or a "counter-proposal," if you will, which was already accepted by FUCC in the letter dated 3 July 2002.
[121]
Thus, when FUCC wrote NHA the letter dated 4 October 2002,
[122]
there was no more "counter-proposal" on the table to speak of. FUCC wrote that letter in response to the letter of NHA dated 2 October 2002
[123]
to make a reasonable request on a mere matter of procedure: that it be allowed to submit the surety bond only when the check payment for its claim for price escalation is about to be released, with the understanding that NHA will hold on to the check until it had received and verified the surety bond.
The intended purpose of the surety bond is self-evident: to ensure that NHA would be able to recover the unrecouped balance of the advance payment in the still substantial sum of P38 Million. Understandably, NHA wanted the surety bond posted before releasing further payments to FUCC. Clearly, therefore, for as long as the surety bond was to be posted and properly verified before any check payment to FUCC could be released, the bond would have served its purpose. This was precisely the arrangement sought by FUCC. Thus, NHA had no reason to refuse FUCC's request contained in the letter dated 4 October 2002,
[124]
which is presumably the reason why it remained silent and gave no response, giving rise to the correct presumption that it had tacitly agreed to FUCC's request.
Based on the foregoing disquisition, the Court cannot subscribe to the asseveration of petitioner that FUCC had no existing or accrued cause of action to compel NHA to pay its claims for payment of Progress Billing No. 6 and for Price Escalation for Progress Billing Nos. 1 to 5 at the time it filed its Complaint since FUCC allegedly failed to comply with a condition precedent or
sine qua non
for the payment of said claims - the posting of the Payment Guarantee (or Performance) Bond.
[125]
Cause of action
is 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.
[126]
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 of P6,496,926.29 as against the amount of P7,384,534.22 awarded by the CIAC.
[127]
Petitioner's subsequent refusal to process and pay these claims despite FUCC's 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 FUCC's 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 petitioner's stance that the "posting of the Payment Guarantee (or Performance) Bond is decidedly a condition precedent" or
sine qua non
for the payment of FUCC's claims for Progress Billing No. 6 and for Price Escalation for Progress Billing Nos. 1 to 5.
[128]
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 FUCC's 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 FUCC's 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,
[129]
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.
Petitioner's 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"
[130]
is misplaced. Article VII refers to the Performance Bond in the amount of P28,429,789.00 posted by FUCC to guarantee the faithful performance of its scope of work,
[131]
which is decidedly different from the Payment Guarantee Bond in the amount of P85.2 Million which NHA required FUCC to procure from GSIS and to post prior to the release of the advance payment in the amount of P85.2 Million. A reading of Article VIII entitled CONTRACTOR'S 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.
[132]
It appears that petitioner pounced upon, and took out of context, the Court of Appeals ruling that "(w)ithout 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 FUCC's 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
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.
[133]
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 FUCC's 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 FUCC's claims) provided FUCC would "post the requisite bond in the manner arranged by respondent with petitioner."
[134]
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 FUCC's 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.
II.
Re: Amount of FUCC's Claim for Progress Billing No. 6
Petitioner ascribes grave error to the Court of Appeals for affirming the award made by CIAC for Progress Billing No. 6 in the amount of P7,384,534.22 when FUCC's claim for said billing was allegedly only P6,496,926.29.
Anent this alleged error by the appellate court, it appears that FUCC originally submitted to NHA an Abstract of Physical Accomplishment in support of Progress Billing No. 6, showing that its physical accomplishments during the period 1 July 2001 to 21 November 2001, amounted to P6,496,926.29.
[135]
However, what FUCC attached to its Complaint
[136]
was a different Abstract of Physical Accomplishment showing that its accomplished works under Progress Billing No. 6 totalled P7,384,534.22.
[137]
According to petitioner, "(i)f ever [it] is legally liable to pay respondent FUCC for Progress Billing No. 6, it should pay only the amount of P6,496,926.29, and not P7,384,534.22,"
[138]
as the Abstract of Physical Accomplishments marked and offered as Exhibit "15" was submitted by FUCC itself, through its then authorized representative, Engineer Edgardo S. De la Cruz, who had affixed his conformity thereon, to support its claim for payments for the said accomplishments.
[139]
Petitioner also cites the direct testimony of its sole witness, Engr. Raner, to the effect that "(t)he only Abstract of Physical Accomplishment for Progress Billing No. 6 that was signed by FUCC and NHA is Exhibit `15,' in which the amount agreed by both parties was P6,496,926.29." According to Engr. Raner, "(t)he alleged `new Abstract of Physical Accomplishment for Progress Billing No. 6 could only be a fabricated document."
[140]
The Court notes that a perusal of the Abstract of Physical Accomplishments offered in evidence by FUCC as Exhibit "IIII" reveals that it was also signed by both parties, just like the Abstract of Physical Accomplishments offered in evidence by NHA as Exhibit "15." In his testimony, FUCC's sole witness, Engr. Dumaliang, explained that many Abstracts for Physical Accomplishments were caused to be prepared by NHA with different reduced amounts reflected thereon, which explains the apparently oscillating figures for Progress Billing No. 6. Engr. Dumaliang admitted that FUCC might have indeed also signed Exhibit "15."
[141]
In short, FUCC does not disown Exhibit "15." It is FUCC's stance that both Exhibit "IIII" and Exhibit "15" are duly executed documents but Exhibit "IIII," which it alleges was submitted later, supersedes Exhibit "15" and contains the correct amount of FUCC's accomplished works under Progress Billing No. 6.
[142]
These conflicting claims between the parties - as to the correct amount that petitioner is legally liable to pay respondent for Progress Billing No. 6 - was resolved by the CIAC in favor of FUCC. The CIAC found that "the amount of P7,384,534.22 governs over the claim of NHA in its Exhibit "15" for the amount of P6,496,926.29." According to the CIAC, both Exhibit "IIII" and Exhibit "15" were signed by the representatives of FUCC and NHA. However, below the signatures in Exhibit "15" are handwritten notations saying that "such document is not final but conditional." The pertinent portion of the CIAC Decision reads thus:
The Arbitral Tribunal finds the abstract of Physical Accomplishment for Progress Billing No. 6 in Exhibit "IIII" submitted by FUCC in the amount of P7,384,534.22 governs over the claim of NHA in its Exhibit "15" for the amount of P6,496,926.29 (see Stipulated Facts No. 25.1.2).
The Arbitral Tribunal's finding is based on the signature by a representative of FUCC in Exhibit "IIII" together with that of NHA representative (Mr. Borlagdan, Head Tech. Staff of FVRP), while in Exhibit "15" the signatures of both the NHA and FUCC representatives had handwritten notations below their respective signatures, both signifying that such document is not final but conditional. Exhibit "15" therefore is not controlling because of the signatures therein with handwritten conditions signifying further claims.
[143]
As this finding of fact by the CIAC was affirmed by the Court of Appeals, and it being apparent that the CIAC arrived at said finding after a thorough consideration of the evidence presented by both parties, the same may no longer be reviewed by this Court. The all too-familiar rule is that the Court will not, in a petition for review on
certiorari
, entertain matters factual in nature, save for the most compelling and cogent reasons, like when such factual findings were drawn from a vacuum or arbitrarily reached, or are grounded entirely on speculation or conjectures, are conflicting or are premised on the supposed evidence and contradicted by the evidence on record or when the inference made is manifestly mistaken or absurd.
[144]
This conclusion is made more compelling by the fact that the CIAC is a quasi-judicial body whose jurisdiction is confined to construction disputes.
[145]
Indeed, 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.
[146]
III.
Re: Award for Cost of Materials, Equipment and Facilities
Petitioner questions the propriety of the award for Cost of Materials, Equipment and Facilities in the amount of P4,677,680.00.
This award has two components: (1) an award in the amount of P132,470.00 representing the cost of materials delivered by FUCC to the project site but were not utilized due to the termination of the Contract; and (2) an award in the amount of P4,545,182.82 representing the pro-rated cost of the facilities constructed by FUCC to support field operations for the FVR Project.
[147]
Central to the resolution of the question raised by petitioner is Exhibit "19,"
[148]
an NHA `Internal Routing Slip' dated 17 November 1997 transmitted by the Manager of the Southern Luzon and Bicol (SLB) Region to the Chairman of NHA's PBAC, which reads as follows:
"INTERNAL ROUTING SLIP
SUBJECT: MINIMUM REQUIRED OWNED EQUIPMENT AND KEY STAFF
RE: LAND DEVELOPMENT OF FREEDOM VALLEY
RESETTLEMENT PROJECT (PHASE 1), SITIO BOSO-BOSO, BGY.
SAN JOSE, ANTIPOLO, RIZAL
_________________________________________________________________________________________________________________________
FOR/TO
FROM
DATE
SIGNATURE
_________________________________________________________________________________________________________________________
The Chairman
The Manager
17 November
PBAC
SLB
1997
NEOFITO A. HERNANDEZ
_________________________________________________________________________________________________________________________
Submitted herewith is a listing of the minimum required owned equipment and key staff for the Land Development of Freedom Valley Resettlement Project (Phase I) located at Sitio Boso-Boso, Bgy. San Jose, Antipolo, Rizal.
A.
EQUIPMENT
NO. OF EQUIPMENTS
1. Tractors,crawler-type with dozer
2. Loaders, crawler-type
3. Grader, motorized
4. Road Roller, vibratory, smooth drum
5. Plate Compactor, vibratory
6. Backhoe, hydraulic, crawler-mounted
7. Slipform Concrete Paver
8. Wet-mix Concrete Batching Plant
9. Concrete Vibrator
10. Dump Trucks
11. Air compressor, portable
12. Pneumatic Breakers, hand held
13. Water Pump
14. Generator Sets, 500 KVA, total
15. Welding Machines
16. Water Trucks
17. Chain Saw
18. Concrete Cutter
19. Concrete Mixer, one bagger
20. Service Vehicles
21. Cranes
22. Transit Mixers
23. Total Stations
TOTAL
B.
KEY STAFF
NO. OF MANPOWER
1. Project Manager
2. Project Engineers
3. Field Engineers
4. Sanitary Engineer
5. Electrical Engineer
6. Mechanical Engineer
7. Geodetic Engineer
8. Architects
9. Draftsmen
10. Foremen
11. Administrative Officer
12. Finance Officer
13. Liaison Officer
14. Purchasing Officer
15. Warehouseman
16. Clerk Typist
17. Drivers
18. Heavy Equipment Operators
19. Utilitymen
20. Heavy Equipment Mechanics
21. Instrument Men
22. Survey Aides
TOTAL
81"
According to the Court of Appeals, this Internal Memo shows that NHA itself "determined the minimum equipment and key staff to be mobilized for the project," and since "the project was pre-terminated, respondent is justified in seeking recovery of a portion of the costs already incurred." Thus:
x x x. Petitioner's own Exh.`19' shows that it determined the minimum equipment and key staff to be mobilized for the project x x x. It is implicit in these requirements that the infrastructure to house such equipment and personnel (including NHA personnel) and facilitate their mobilization within the project site were also expected to be provided by respondent. Hence, when respondent invested into such infrastructure, it did so with the expectation to recover such costs at the end of the project. As the project was pre-terminated, respondent is justified in seeking recovery of a portion of the costs already incurred.
[149]
The appellate court thus affirmed the award made by the CIAC to FUCC in the amount of P4,545,182.82 representing the pro-rated cost of the facilities constructed by FUCC to support its field operations for the FVR Project (i.e.; the second component under the award for Cost of Materials, Equipment and Facilities, and for Disengagement Costs). The appellate court also affirmed the award in the amount of P132,470.00 representing cost of materials delivered by FUCC to the project site but were not utilized due to the termination of the Contract (i.e.; the first component under the award for Cost of Materials, Equipment and Facilities, and for Disengagement Costs), upon the finding that NHA was solely to be blamed for the lack of inventory of the unutilized materials.
[150]
Petitioner disputes the holding of the Court of Appeals and maintains in the instant petition that it is not legally liable to pay FUCC for Cost of Materials, Equipment and Facilities, and for Disengagement Costs because NHA could not have dictated upon FUCC what equipment and key staff to mobilize in the FVR Project, as it was FUCC, logically being the contractor, which determined the kind and number of equipment that should be deployed for the Project.
[151]
According to petitioner, Exhibit "19" was transmitted by the Manager of the SLB Region to the PBAC Chairman in preparation for the public bidding of the FVR Project. The SLB Manager listed "the minimum required equipment and key staff that a participating contractor should own (as contradistinguished from `mobilize')" to insure that no "fly-by-night" or puny contractor would participate in the bidding, as "(t)he capability of the contractor to build the Project is known by the equipment he owns."
[152]
In short, it is petitioner's submission that Exhibit "19" was not meant to dictate - and could not have dictated - the kind and number of equipment and key staff that FUCC should mobilize and/or actually mobilized for the FVR Project. It was issued by the Manager of the SLB Region to the PBAC Chairman merely to serve as a checklist on the minimum required number of equipment and key staff that a would-be contractor for the Project should own. Petitioner claims that there is a "whale of difference" between "owning" and "mobilizing," and that this difference "completely escaped" the Court of Appeals when it scrutinized Exhibit "19."
[153]
Since NHA had allegedly nothing to do with the deployment of FUCC's equipment and machineries for the FVR Project, it should not be made accountable for the dire consequences, if any, of FUCC's business decision or judgment in procuring, maintaining, constructing or dismantling these equipment and facilities, etc.
[154]
Petitioner's arguments fail to persuade. The Court subscribes to the view expressed by private respondent that in a government infrastructure project, the department or agency that owns the project dictates not only what facilities, equipment and key technical staff the contractor should mobilize, it dictates as well the financial resources the contractor should muster for the project, the bonds, guarantees and sureties it should put up, the plans, specifications, schedule, and the manner by which it should prosecute the contract works, how it should bill for completed works, how it should document and claim variation orders, etc.
[155]
Indeed, this appears to be so in the case of the FVR Project. The very Contract entered into by the parties (which appears to be a standard form contract with the blank spaces appropriately filled up) specifies the duration of the contract works and the bonds, guarantees and sureties to be put up by FUCC,
[156]
and expressly states that, among other documents, the following shall form part of the Contract, to wit: plans, specifications, certificate of availability of funds, concurrence of lending institutions, duly approved program of work and cost estimates, PERT/CPM or equivalent schedule of work, etc.,
[157]
all of which demonstrate that NHA, as the owner of the FVR Project, had full control over its implementation. This would certainly have included dictating or imposing, as it were, the minimum equipment and key staff that had to be mobilized by FUCC to undertake the contract works. Otherwise, NHA would have been remiss in its duty to ensure that the Project would be implemented properly and the people's money spent wisely. Indeed, there are rules and guidelines for the implementation of government contracts
[158]
that procuring entities must follow to promote transparency and ensure that all contracts are performed strictly according to specifications.
[159]
Be that as it may, even if Exhibit "19" was indeed issued merely to serve as a checklist on the minimum required number of equipment and key staff that a would-be contractor for the FVR Project should own, the document indubitably establishes that FUCC - which was awarded the Contract for the Project - could not have but assembled and mobilized a huge complement of men, materials and equipment to be able to undertake the FVR Project consisting, at the very least, of the equipment and key staff listed in said Exhibit "19," which were the "minimum required" by NHA. Whether FUCC owned the equipment or merely rented them does not alter the fact that it had to provide the infrastructure to house such equipment and key personnel within the project site to support its field operations. FUCC undoubtedly poured in money to put up such infrastructure, with the expectation that it would be able to recover the costs thereof at the end of the Project. Thus, when the FVR Project was terminated due to no fault of FUCC, respondent was eminently "justified in seeking recovery of a portion of the costs already incurred"
[160]
for such infrastructure, as correctly held by the Court of Appeals.
The Court notes that in ruling as it did, the Court of Appeals merely affirmed the finding of the CIAC that "(w)hen the whole amount of the contract for facilities is not paid due to the termination of said contract which is caused not at contractor's fault, the Contractor should be paid the pro-rated balance having prepared the facilities for the whole project."
[161]
The Court further notes that the amount of this award for the pro-rated cost of the facilities constructed by FUCC to support its field operations for the FVR Project - P4,545,182.82; as well as the amount of the award for the cost of the unutilized materials delivered by FUCC to the project site - P132,470.00, were not plucked out of thin of air. They were meticulously derived by the CIAC based on the evidence submitted to the Arbitral Tribunal, as is readily apparent from the following pertinent portion of the CIAC Decision:
The work item in the contract for facilities had the corresponding amount. When the whole amount of the contract for facilities is not paid due to the termination of said contract which is caused
not at contractor's fault,
the Contractor should be paid the pro-rated balance having prepared the facilities for the whole project. These are consequences made in good faith and for usage in the project.
The construction facilities to support field operations are mandatory and necessary in the implementation of the project where the contract usually provides in a form of mobilization at the project start, and those needed during the full operation stage, e.g. laboratory, etc., and demobilization at the close of the project.
In the claim of FUCC, it included the Land Development of Heavy Equipment Yard, Office and Model Houses, Container Vans, Warehouse, Barracks, Shops, Working Areas, Water Supply and Electrical Works. This involves the total amount of P12,297,722.46.
The FUCC is asking the pro-rated amount of this P12,297,722.46 computed as follows:
Balance of Works, divided by the cost of the whole works, multiplied by the cost of facilities, thus;
P568,595,780.00 less P358,445,341.30
x P12,296,722.46
P568,595,780.00
This will result to P4,545,182.82 which the Arbitral Tribunal supports as the valid claim of FUCC for component b) of its claim, or for facilities.
For the two components a) and b) for materials and facilities, NHA should pay FUCC the total of P132,498.00 plus P4,545,182.82 or the total of P4,677,680.00 and not P4,801,992.82 as previously claimed by FUCC.
[162]
It must be pointed out that nowhere in the instant petition does petitioner contest the foregoing formula and the figures used by the CIAC or the amounts of the awards derived therefrom. Petitioner merely proffers the argument that NHA had nothing to do with the deployment of equipment and machineries and, hence, should not be made accountable for the consequences of FUCC's business judgment or decisions as regards their procurement, mobilization or maintenance. But both the CIAC and the Court of Appeals have spoken. And the CIAC's factual finding that FUCC ought to be paid the total amount of P4,677,680.00 for the Cost of Materials, Equipment and Facilities remains uncontested. This factual finding, which was affirmed by the Court of Appeals, must be accorded respect and finality by this Court, consistent with the settled 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.
[163]
IV.
Re: Award for Idle Equipment
Petitioner asseverates that the award for Idle Equipment in the amount of P131,948,674.56 "is not legally owing" to FUCC and will "unjustly enrich FUCC at the expense of petitioner NHA" because no "perdition [was] suffered by respondent FUCC from idle equipment," as there was allegedly "no actual or physical suspension of the contract works that occurred."
[164]
Verily, the determination of whether or not FUCC is entitled to an award for Idle Equipment hinges on a factual issue: whether or not there was actual or physical suspension of the contract works at the FVR Project.
The CIAC Arbitral Tribunal found that there was such actual or physical suspension of the contract works - a finding not disturbed by the Court of Appeals. This Court could very well just simply say that there is no cause to review, must less overturn this finding of fact, invoking the established rule that in petitions for review on
certiorari
, this Court is limited to reviewing only errors of law, not of fact, unless the factual findings complained of are devoid of support by the evidence on record, or the assailed judgment is based on a misapprehension of facts.
[165]
But considering that the award for Idle Equipment involves a substantial sum - P131,948,674.56 - and if only to ascertain that the factual findings of the CIAC are indeed not devoid of support by the evidence on record, the Court shall examine at length the nature of this award and the bases of the findings of the CIAC Arbitral Tribunal and the judgment of the Court of Appeals.
First, it must be emphasized that FUCC's claim for Idle Equipment is limited to the period from 10 June 1998, when NHA issued
Partial Suspension Order No. 1,
up to 15 March 1999, the original expiration date of the Contract. This time frame is clearly defined in FUCC's Complaint.
[166]
The same time frame is also acknowledged by the CIAC as the period circumscribed by FUCC's claim for Idle Equipment.
[167]
To support its claim for Idle Equipment, FUCC attached to its Complaint a Summary (marked and offered in evidence as Exhibit "QQQQQ") showing the equipment that were rendered idle and unproductive during the period 10 June 1998 to 15 March 1999, the duration of their idleness, their rates per hour, and the cost of idleness per kind of equipment. The cost of idle equipment added up to a total of P142,780,800.00.
[168]
In its Answer, NHA sought to defeat FUCC's claim by interposing the defense that there is no basis for the award of Idle Equipment because there was no actual or physical suspension of the contract works as shown allegedly by the Abstracts of Physical Accomplishment for Progress Billings Nos. 1, 2, 3, 4 and 5 of FUCC.
[169]
During the presentation of evidence, FUCC's sole witness, Engr. Ben S. Dumaliang testified that
Partial Suspension Order No. 1
was never lifted because NHA was not able to fully address the farmers'/planters' demands and/or contain their resistance; and that although
Partial Suspension Order No. 1
mentions only the suspension of works at Cluster 2, it effectively stopped all contract works in both Clusters 1 and 2, allowing FUCC to prosecute the FVR Project only in Cluster 3. According to Engr. Dumaliang, he "saw with [his] own two eyes in [his] thrice a week visits to the project site that there was practically no contract works going on in Clusters 1 and 2."
[170]
Thus:
"Q : The parties have stipulated that all works at Cluster 2 were suspended effective 10 June 1998 due to the continued resistance of farmers/planters and other residents within the area to the FVR Project, under Partial Suspension Order No. 1. When was this suspension lifted?
A : It was never lifted because the NHA was never able to fully address the demands and/or contain the resistance of the farmers/planters and other residents within the area.
Q : What contract works were affected by this suspension?
A : Although Partial Suspension Order No. 1 only mentions the suspension of works at Cluster 2, it effectively stopped all contract works in both Clusters 1 and 2, allowing FUCC to prosecute the FVR Project only in Cluster 3.
Q : According to the NHA, even with the issuance of Partial Suspension Order No. 1, there was no actual or physical suspension of the contract works, particularly in Clusters 2 and 3. What can you say about this?
A : That is not true. There was actual suspension of contract works in Clusters 1 and 2. I know this of my own personal knowledge being the Project Director of FUCC for the FVR Project. As I said earlier, FUCC was able to prosecute the project only in Cluster 3. I saw with my own two eyes in my thrice a week visits to the project site that there was no [sic] practically no contract works going on in Clusters 1 and 2.
Q : But FUCC collected from and was paid the amount of P52.2 M for works done during the period supposedly covered by Partial Suspension Order No. 1. According to the NHA, this shows that there was no actual or physical suspension of the works. What can you say about this claim?
A : This P52.2 M was payment made by NHA to FUCC under Progress Billing No. 1 for works actually accomplished during the period 16 March up to 30 June 1998. Partial Suspension Order No. 1 became effective only on 10 June 1998. By that time, FUCC had been working for almost three (3) months and had accomplished a lot. Hence, the fact that it was paid P52.2M under Progress Billing No. 1 does not prove that there was no actual or physical suspension of the contract works because of Partial Suspension Order No. 1."
[171]
NHA's sole witness, Engr. Mariano E. Raner III, on the other hand, testified that
Partial Suspension Order No. 1
was lifted on 13 June 1999.
[172]
Engr. Raner reiterated NHA's stance that there was no actual or physical suspension of the contract works as shown by the Abstracts of Physical Accomplishment submitted by FUCC in support of its Progress Billings Nos. 1, 2, 3 and 4.
[173]
The CIAC Arbitral Tribunal found for FUCC and in the Decision dated 7 January 2004 rendered an award for Idle Equipment in the amount of P131,948,674.56.
The CIAC Arbitral Tribunal debunked NHA's proposition that the Abstracts of Physical Accomplishments and the payments made to FUCC under the Progress Billings show that there was no actual or physical suspension of the contract works by pointing out: (1) that the work accomplishments under Progress Billing No. 1 were done during the first three (3) months of the Contract (i.e. from 16 March 1998 up to June 1998) or before the issuance of
Partial Suspension Order No. 1
on 10 June 1998; (2) that the work items covered by Progress Billing No. 2 were mostly for slope protection, which were also partially done before the issuance of
Partial Suspension Order No. 1;
and (3) that the accomplishments under Progress Billing No. 3 also consisted of slope protection and other items of work that did not involve the use of the equipment that went idle. The CIAC Arbitral Tribunal also gave credence to the testimony of Engr. Dumaliang that he saw with his own eyes that there was no equipment activity for the period 10 June 1998 to 15 March 1999.
[174]
The pertinent portions of the CIAC Decision dated 7 January 2004 are reproduced hereunder as follows:
NHA on the other hand contested the claim for payment of Idle Equipment with the principal reason that there was no actual or physical suspension of the contract works during the Partial Suspension Order No.1, which was proven by the payments of Progress Billings Nos. 1, 2, 3, 4, and 5, showing the items of works done in the Abstract of Accomplishment, supporting the said Billings. x x x
In the Affidavit of the NHA's lone witness, Mr. Raner III, it stated that the alleged 25 February 1999 meeting was "a blatant lie," because there was never a meeting on such date, more so that there was no agreement to pay the Idle Equipment claims. This allegations of the lone witness for NHA had been addressed and countered in the various letters that were never denied by the various officials of NHA who received the letters without any question, x x x except by the lone witness who only call it a blatant lie during the pendency of this case.
Upon perusal of the records in this case, it showed that in Admitted Fact No. 21, the period[s] for each billings [sic], are as follows;
Billing No. 1 - 16 March 1998 to 30 June 1998
Billing No. 2 - 01 July 1998 to 31 December 1998
Billing No. 3 - 01 January 1999 to 15 October 1999
Billing No. 4 - 16 October 1999 to 31 January 2001
Billing No. 5 - 31 January 2001 to 31 June 2001
Gleaned from this data, only Billings [sic] Nos. 1, 2, and 3 are affected in the claims for payment of Idle Equipment. However, in Billing No. 1, the period from 16 March 1998 to June 1998 is not affected in the claim for payment of Idle Equipments. Likewise, in Billing No. 3, the period from 15 March 1999 (original contract expiry date) to 15 October 1999 is also not affected in the claim for payment of Idle Equipment. This is because the claims for payment of Idle Equipment is from 10 June 1998 to 15 March 1999.
It was alleged by NHA's lone witness, that there were works in Billings [sic] Nos. 1 to 5 described in the Abstract of Accomplishments attached therein, showing activities during the Partial Suspension period of 10 June 1998 to 15 March 1999.
This allegation of NHA was countered by the lone witness of FUCC that the Billing No. 1 were [sic] accomplishments for the first three years of the contract, done long before the issuance of Partial Suspension order No. 1. And that Billing No. 2 were [sic] composed of work items for slope protections, also partially done before the issuance of Partial Suspension No. 1. For Billing No. 3, the accomplishments, as records will bear, are mostly slope protections and other work items not involving the use of equipments.
Further, the lone witness for the FUCC testified categorically that he had visited the project thrice a week for the whole contract duration, and saw from [sic] his own eyes that there was no equipment activity for the period 10 June 1998 to 15 March 1999.
The above facts had been addressed in sufficient details regarding the issue as to whether there was actual or physical suspension of works for the period covered by the Partial Work Suspension Order No. 1. To discuss activities within the other Suspension Orders is immaterial to the issue.
[175]
After ruling that there was actual or physical suspension of contract works in the FVR Project that left idle the large complement of hardware, machinery, tools and equipment mobilized by FUCC, the CIAC Arbitral Tribunal then proceeded to derive the value of the award for Idle Equipment in this wise:
It is noted that the period from 10 June 1998 when Suspension Order No. 1 was in effect, to 15 March 1999 when the original contract expired, is 278 days that FUCC claimed for payment of the Idle Equipment.
In the claim of payment for Idle Equipment for the 278 day period, FUCC listed 12-Bulldozers, 6-Backhoes, 2-Payloaders, 3-Graders, 3-Roadrollers, 4-Dump Trucks, 1-Water Truck, 1-Conc. Batching Plant, and 3-Transit Mixers, all working at the average of 2.224 hours per day for 278 days. The respective modified ACEL rates in Exhibit "TTTTT" was [sic] applied for the corresponding equipment, such that the total claims amounted to P142,780,800.00 (Exhibit "QQQQQ").
[176]
Perusal of the records in this case showed that the listed equipment and number of units in the claim for payment of Idle Equipment, are far below the "Minimum Required Owned Equipment x x x", as listed during the bidding, except that of the Bulldozers. Instead of only six (6) bulldozers required, the claim for payment of Idle Equipment had twelve (12) bulldozers (see Exhibit "19").
The Arbitral Tribunal concluded that the claim for payment of Idle Equipment by FUCC is meritorious, except the 12 bulldozers which should be reduced to 6 bulldozers in the computations of the payment. This is because the increase of bulldozers from 6 to 12 is a business discretion of FUCC, decided at the start of the project, which does not bind the Owner, especially that it resulted to non-use for almost one year.
The corresponding amount for the excess six bulldozers to be deducted is equal to 6 bulldozers multiplied by 298 days and by the rental rate of P2920.00 per hour, further multiplied by 2.224 hours per day will result to P10,832,125.44. This should be deducted from the claimed total of P142,780,800.00 and will result to
P131,948,674.56
[177]
It cannot be gainsaid that the CIAC Arbitral Tribunal sifted through the evidence presented by both parties before making the finding of fact that there was actual or physical suspension of the contract works that rendered the huge complement of FUCC's machineries and equipment idle and unproductive during the period 10 June 1998 up to 15 March 1999. Further, the CIAC Arbitral Tribunal painstakingly scrutinized the documents submitted by FUCC to support its claim for Idle Equipment before arriving at the amount of P131,948,674.56 as its award for Idle Equipment, which is less than FUCC's claim of P142,780,800.00. Clearly, the factual findings of the CIAC are based on substantial evidence on record, which are referred to in the CIAC Decision.
For example, the CIAC refers to the testimony of FUCC's sole witness, Engr. Dumaliang, to support its finding that the physical accomplishments subject of Progress Billing No. 1 were actually done during the first 3 months of the works contract (from March to June 1998), or before the issuance of Partial Suspension Order No. 1 on 10 June 1998,
[178]
which testimony is unrebutted.
Reference is also made to the following testimony of Engr. Dumaliang, which is similarly unrebutted, pertaining to the physical accomplishments under Progress Billing Nos. 2 and 3, which belies the stance of NHA that there was no actual or physical suspension of the contract works, to wit:
"Q: Again, the NHA claims that even with the issuance of Suspension Order No. 1 due to the CDO issued by the DENR, no actual or physical suspension of works was implemented. In fact, according to the NHA, FUCC collected and was paid P16.1 M under Progress Billing No. 2 for the period 01 July to 31 December 1998 and P57 M under Progress Billing No. 3 for the period 01 January to 15 October 1999, or during the supposed period of the suspension order. What is your reaction to this?
A : For a period of almost one year, or from 31 July 1998 up to 15 June 1999, all of the contract works were actually and physically suspended because of Suspension Order No. 1. However, FUCC was allowed to do mitigating slope protection and drainage works in Cluster 3. The amount of P16.1 M paid to FUCC under Progress Billing No. 2 was payment for: (1) works accomplished before the suspension which were not paid under Progress Billing No. 1; and (2) for slope protection and drainage works which were allowed by the CDO issued by the DENR. Upon the other hand, the amount of P57 M paid to FUCC under Progress Billing No. 3 was payment for: (1) slope excavation and drainage works done before the suspension but which were not paid because the covering variation order (Variation Order No.1) had not yet been issued then; and (2) for slope protection works, consisting of gabions and riprap, which were necessary to prevent further damage to the project while the suspension was in effect. Verily, these payments do not prove that there was no actual or physical suspension of the contract works because of Suspension Order No. 1."
[179]
It thus comes as no surprise that the Court of Appeals affirmed the award of the CIAC for Idle Equipment in its Decision dated 1 August 2006,
[180]
where the appellate court additionally pointed out that petitioner had in fact acknowledged its liability to FUCC for standby cost. Thus:
Petitioner further disclaims liability for the amount of P131,948,674.56 awarded to respondent as payment for idle equipment. It argues that there is nothing in the contract or in PD 1594 and its implementing rules which allows such award.
We are inclined, however, to agree with respondent that petitioner had acknowledged its liability for standby cost. Its officer-in-charge Engr. Raner wrote in his 8 June 1999 Memorandum regarding the fact-finding being conducted by the Office of Ombudsman, thus:
There is another compelling reason for the expeditious resumption of the works. The contractor is claiming compensation for the large fleet of equipment, plant and facilities rendered idle and unproductive due to suspension. The contractor has billed us some P142 M for the period June 1998 to March 1999.
This claim is of course subject to evaluation of its merits, but
under the General Cond