G.R. No. 187543 - WERR CORPORATION INTERNATIONAL, VS. HIGHLANDS PRIME, INC..

Ruling

WHEREFORE , premises considered, the instant petition for review is PARTLY GRANTED . The assailed Decision dated August 11, 2008 of the Construction Industry Arbitration Commission in CIAC Case No. 09-2008 is hereby MODIFIED as follows: 1) Respondent Werr Corporation International shall pay petitioner Highlands Prime, Inc. liquidated damages in the amount of P8,969,330.70; 2) Petitioner Highlands Prime, Inc. shall return to respondent Werr Corporation International the balance of its retention money in the amount of P10,955,899.80 with the right to offset the award for liquidated damages in the aforesaid amount of P8,969,330.70; and 3) The cost of arbitration shall be shared equally by the parties. The rest of the decision stands. SO ORDERED . [5] Facts Highlands Prime, Inc. (HPI) and Werr Corporation International (Werr) are domestic corporations engaged in property development and construction, respectively. For the construction of 54 residential units contained in three clusters of five-storey condominium structures, known as "The Horizon-Westridge Project," in Tagaytay Midlands Complex, Talisay, Batangas, the project owner, HPI, issued a Notice of Award/Notice to Proceed [6] to its chosen contractor, Werr, on July 22, 2005. Thereafter, the parties executed a General Building Agreement [7] (Agreement) on November 17, 2005. [8] Under the Agreement, Werr had the obligation to complete the project within 210 calendar days from receipt of the Notice of Award/Notice to Proceed on July 22, 2005, or until February 19, 2006. [9] For the completion of the project, HPI undertook to pay Werr a lump sum contract price of P271,797,900.00 inclusive of applicable taxes, supply and transportation of materials, and labor. [10] It was agreed that this contract price shall be subject to the following payment scheme: (1) HPI shall pay 20% of the contract price upon the execution of the agreement and the presentation of the necessary bonds and insurance required under the contract, and shall pay the balance on installments progress billing subject to recoupment of downpayment and retention money; [11] (2) HPI shall retain 10% of the contract price in the form of retention bond provided by Werr; [12] (3) HPI may deduct or set off any sum against monies due Werr, including expenses for the rectification of defects in the construction project; [13] and (4) HPI has the right to liquidated damages in the event of delay in the construction of the project equivalent to 1/10 of 1% of the contract price for every day of delay. [14] Upon HPI's payment of the stipulated 20% downpayment in the amount of P54,359,580.00, Werr commenced with the construction of the project. The contract price was paid and the retention money was deducted, both in the progress billings. The project, however, was not completed on the initial completion date of February 19, 2006, which led HPI to grant several extensions and a final extension until October 15, 2006. On May 8, 2006, Werr sought the