G.R. No. 168074 - Empire East Land Holdings Inc. v. Capitol Industrial Construction Groups, Inc
G.R. No. 168074 - Empire East Land Holdings Inc. v. Capitol Industrial Construction Groups, Inc
THIRD DIVISION
DECISION
NACHURA, J.:
On February 12, 1997, petitioner Empire East Land Holdings, Inc. and
respondent Capitol Industrial Corporation Groups, Inc. entered into a
Construction Agreement4 whereby the latter bound itself to undertake the
complete supply and installation of "the building shell wet construction" of
the former's building known as Gilmore Heights Phase I, located at Gilmore
cor. Castilla St., San Juan, Metro Manila.5 The pertinent portion of the
aforesaid agreement is quoted hereunder for easy reference:
2.1. The CONTRACTOR shall complete the civil/structural and masonry works
of the building based on the works (sic) items covered by the
CONTRACTOR's Proposal of Complete Supply and Installation of Building
Shell Wet Construction Works as indicated in the plans and specifications at
the Contract Price and within the Contract time herein stipulated and in
accordance with the plans and specifications. The CONTRACTOR shall
furnish and supply all necessary labor, equipment and tools, supervision and
other facilities needed and shall perform everything necessary for the
complete and successful masonry works of the building described hereof,
provided that it pertains to or is part of the above mentioned work or items
covered by the Contract documents.
2.2. The scope of works as stated hereunder but not limited to the following:
f) MISCELLANEOUS WORKS
i) Garbage Chutes
2.3. The work of the CONTRACTOR shall include but not be limited to,
preparing the bill of materials, canvassing of prices, requisition of materials
for purchase by OWNER, following up of orders, checking the quality and
quantity of the materials within the premises of the construction site and
returning defective materials.6
Sixth, the parties agreed: that the items of work or any part thereof not
completed by the respondent as of February 28, 1999 should be deleted
from its contract, except demobilization; the punch list items under
respondent's scope of responsibility not yet made good/corrected as of
the same period shall be done by others at a fixed cost to be agreed upon
by all concerned; and respondent should be compensated for the cost of
utilities it installed but were still needed by other contractors to complete
their work.14
After the completion of the side trimmings and excavation of the building's
foundation, respondent demanded the payment of P2,248,507.70 and
P1,805,225.90, respectively. Instead of paying the amount, petitioner agreed
with the respondent on a negotiated amount of P900,000.00 for side
trimmings.17 However, respondent's claim for foundation excavation was not
acted upon.18 During the construction period, petitioner granted, on
separate occasions, respondent's requests for payroll and material
accommodations.19
Other reliefs equitable under the premises are also prayed for.22
On May 16, 2000, the CIAC rendered a decision23 in favor of the respondent,
disposing, as follows:
OFFSETTING the lesser amount due from Claimant with the bigger amount
from the Respondent, EMPIRE EAST LAND HOLDINGS, INC. is hereby
ordered to pay CAPITOL INDUSTRIAL CONSTRUCTION GROUPS, INC. the
net amount of SEVEN MILLION SEVEN HUNDRED SIXTY-FIVE THOUSAND
SIX HUNDRED THIRTY-ONE AND 81/100 (P7,765,631.81) with 6% legal
interest from the time the request for adjudication was filed with the CIAC on
September 14, 1999 up to the time this Decision becomes final and
executory.
Thereafter, interest at the rate of 12% per annum shall accrue on the final
judgment until it is fully paid.
The arbitration fees and expenses shall be paid on a pro rata basis as initially
shared by the parties.
SO ORDERED.24
Aggrieved, petitioner elevated the matter to the CA via a Petition for Review
under Rule 43 of the Rules of Court. On November 3, 2004, the CA affirmed
the CIAC's findings of fact and conclusions of law with a slight modification,
and ruled:
SO ORDERED.28
In deleting respondent's claim for labor cost escalation and reducing its
claim for the cost of the excavation of foundation, the appellate court said
that respondent failed to show that it in fact paid said wage increase
pursuant to the New Wage Order,29 while the reduction of the cost of
foundation excavation was the result of the reduction of its cost per cubic
meter.30
I.
WHETHER OR NOT THE COURT OF APPEALS COMMITTED REVERSIBLE
ERROR WHEN IT ORDERED THE RELEASE OF RETENTION MONEY IN
FAVOR OF CICG.
II.
III.
IV.
Petitioner contends that both the CIAC and the CA erred in ordering the
release of the retention money despite respondent's failure to comply with
the conditions for its release as set forth in the contract.
The construction contract gave petitioner the right to retain 10% of each
progress payment until completion and acceptance of all works.33
Undoubtedly, as will be discussed hereunder, respondent complied fully with
its obligations, save only those items of work which were mutually deleted by
the parties from its scope of work. However, apart from the completion and
acceptance of all works, the following requisites were set as pre-conditions
for the release of the retention money:
a) Contractor's Sworn Statement showing that all taxes due from the
CONTRACTOR, and all obligations on materials used and labor employed
in connection with this contract have been duly paid;
c) Original and signed and sealed Three (3) sets of prints of "As Built"
drawings.34
The CA affirmed the CIAC's decision to order the release of the retention
money despite respondent's failure to establish the fulfillment of the
aforementioned conditions, as both tribunals merely focused on the non-
issuance of the certificate of completion, which, according to respondent,
was a pre-requisite to the issuance of a guarantee bond. The CA concluded
that the conditions were deemed fulfilled because the creditor voluntarily
prevented their fulfillment.
The record of the case is bereft of any evidence to show that conditions (a)
and (c) were complied with. Petitioner categorically stated in all its pleadings
that they were not. Surprisingly, respondent did not squarely argue this
point. It relied solely on petitioner's failure to issue the certificate of
completion, which prevented the acquisition of a guarantee bond and thus
resulted in the non-release of the retention money. While it is true that
respondent was entitled to a certificate of completion as the issuance
thereof was just a ministerial duty of petitioner considering that the project
had already been completed, the certificate was not the only condition for
said release. It was simply a pre-requisite for the issuance of the guarantee
bond. And there was no showing that the absence of the certificate of
completion was the only reason why no guarantee bond was issued.
If we were to apply the civil law rule of constructive fulfillment - the condition
shall be deemed fulfilled if the creditor voluntarily prevented its fulfillment -
then the submission of a guarantee bond may be deemed to have been
complied with. But we cannot apply the rule to conditions (a) and (c), which
remain as unfulfilled conditions-precedent. Since no proof was adduced that
these two conditions were complied with, petitioner's obligation to release
the retention money had not, as yet, arisen. We would like to emphasize,
though, that this is without prejudice to respondent's compliance with the
unfulfilled conditions, after which, release of the retention money must,
perforce, follow.
We beg to differ.
It is undisputed that the only piece of evidence presented by respondent in
support of its claim for additional overhead cost was its own computation of
the said expenses. It failed to adduce actual receipts, invoices, contracts and
similar documents. To be sure, respondent's claim for overhead cost may be
classified as a claim for actual damages. Actual damages are those damages
which the injured party is entitled to recover for the wrong done and injuries
received when none were intended. They indicate such losses as are actually
sustained and are susceptible of measurement. As such, they must be
proven with a reasonable degree of certainty.35
This is not the first time that a contractor's claim for additional overhead
costs was denied because of insufficiency or absence of evidence to
support the same. In Filipinas (Pre Fab Bldg.) Systems, Inc. v. MRT
Development Corporation,36 we denied FSI's claim because only
"summaries," and not actual receipts, were presented during the hearing.
Similarly, in the instant case, respondent, by presenting only its own
computation to substantiate its claim, is not entitled even to the reduced
amount of P1,397,642.70 which is 10% of its original claim. Instead, we
altogether deny its prayer for additional overhead costs.
The additional works having been undertaken by respondent, and the fact of
non-payment thereof having been established, we find no reason to disturb
the CIAC's conclusion that respondent is entitled to its claim for the cost of
excavation of foundation. As to the propriety of the award, both the CIAC and
the CA were in a better position to compute the same considering that said
issue is factual in nature. Significantly, jurisprudence teaches that
mathematical computations, as well as the propriety of arbitral awards, are
factual determinations39 which are better examined by the lower courts as
trier of facts. Thus, we affirm the award of P980,376.34 for foundation
excavation.
During the construction period, the parties mutually agreed that some items
of work be deleted from respondent's scope of work. Specifically, as claimed
by respondent, the following were deleted: a) masonry works and all related
items from the 6th floor to the roof deck; b) all exterior masonry works from
the 4th floor to the roof deck; and c) the garbage chute. This deletion was,
however, denied by petitioner. It, instead, claimed that the only modification
it approved was the reduction by three floors of the total number of floors to
be constructed by respondent.40
In addition to its claim for the cost of masonry and other works, petitioner
demanded the payment of liquidated damages on the ground that
respondent was in default in the performance of its obligation.
Liquidated damages are those that the parties agree to be paid in case of a
breach. As worded, the amount agreed upon answers for damages suffered
by the owner due to delays in the completion of the project. Under Philippine
laws, they are in the nature of penalties. They are attached to the obligation
in order to ensure performance.45 As a pre-condition to such award,
however, there must be proof of the fact of delay in the performance of the
obligation.
Thus, the resolution of the issue of petitioner's entitlement to liquidated
damages hinges on whether respondent was in default in the performance
of its obligation.
The completion date of the construction project was initially fixed on January
21, 1998. However, due to causes beyond the control of respondent, the
latter failed to perform its obligation as scheduled. The CIAC46 and the CA
enumerated the causes of the delay, viz., the delayed issuance of building
permit;47 additional work undertaken by respondent, i.e., bulk excavation
and side trimmings;48 delayed payment of progress billings;49 delayed
delivery of owner-supplied construction materials;50 and limitation of
monthly accomplishment.51 All these causes of respondent's failure to
complete the project on time were attributable to petitioner's fault.
Still, petitioner contends that even at the start and for the entire duration of
the construction, respondent was guilty of delay due to insufficient
manpower and lack of technical know-how.52 Yet, petitioner allowed
respondent to proceed with the project; thus, petitioner cannot now be
permitted to raise anew respondent's alleged delay. More importantly,
respondent is not guilty of breach of the obligation; hence, it cannot be held
liable for liquidated damages.
As can be gleaned from the appealed CA decision, the appellate court had
reviewed the case based on the petition and annexes, and weighed them
against the Comment of respondent and the decision of the arbitral tribunal
to arrive at the conclusion that the latter decision was based on substantial
evidence. In administrative or quasi-judicial bodies like the CIAC, a fact may
be established if supported by substantial evidence, or that amount of
relevant evidence which a reasonable mind might accept as adequate to
justify a conclusion.54
It is well established that under Rule 45 of the Rules of Court, only questions
of law, not of fact, may be raised before the Supreme Court. It must be
stressed that this Court is not a trier of facts and it is not its function to re-
examine and weigh anew the respective evidence of the parties.55 To be
sure, findings of fact of lower courts are deemed conclusive and binding
upon the Supreme Court, save only in clear exceptional cases.56
In view of the foregoing, after deducting from the final contract price the
retention money (that is yet to be released), the payments as well as the
payroll and material accommodations made by the petitioner, there was an
overpayment to respondent in the total amount of P1,607,627.65. From said
amount shall be deducted P980,376.34 due the respondent for the cost of
foundation excavation. On the other hand, as held by the CIAC and affirmed
by the CA, petitioner is entitled to its claim for punch list items amounting to
P248,350.00.
Considering that the conditions set forth in the contract have not yet been
complied with, the release of the retention money shall be held in abeyance.
Thus, respondent is liable to petitioner for the payment of P875,601.31,
which is the difference between the overpayment and the cost of foundation
excavation, plus the cost of punch list items.
SO ORDERED.
Endnotes:
3 Id. at 797-817.
4 Id. at 109-124.
5 Id. at 109.
6 Id. at 111.
7 Id. at 68.
8 Id.
9 Id. at 69.
10 Id. at 68-69.
11 Id. at 70-71.
12 Id. at 71-72.
13 Id. at 809.
14 Id. at 72-73.
15 Id. at 73.
16 Id. at 71.
17 Id. at 810.
18 Id. at 69-70.
19 Id. at 809.
20 Id. at 73-74.
21 Id. at 101-108.
22 Id. at 107.
23 Id. at 797-817.
24 Id. at 816-817.
25 Id. at 814-815.
26 Id. at 815-816.
27 Id. at 815.
28 Id. at 93.
29 Id. at 85-90.
30 Id. at 83.
31 Id. at 990.
33 Rollo, p. 112.
37 Rollo, p. 136.
38 Id. at 137.
39 Hanjin Heavy Industries and Construction Co., Ltd. v. Dynamic
Planners and Construction Corporation, G.R. NOS. 169408 & 170144,
April 30, 2008.
40 Rollo, p. 803.
41 Id. at 156.
42 Id. at 153.
43 Art. 1235. When the obligee accepts the performance, knowing its
incompleteness or irregularity, and without expressing any protest or
objection, the obligation is deemed fully complied with.
52 Rollo, p. 1016.
53 Id. at 92-93.