THIRD DIVISION
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PHILIPPINE
NATIONAL CONSTRUCTION CORPORATION, Petitioner, - versus - THE HON. COURT OF APPEALS and CMS CONSTRUCTION and DEVELOPMENT
CORPORATION, Respondents. |
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G.R.
No. 159417 Present: YNARES-SANTIAGO, J., Chairperson, AUSTRIA-MARTINEZ,
CALLEJO, SR., and CHICO-NAZARIO, JJ. Promulgated: |
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CHICO-NAZARIO, J.:
Before Us is a Petition for Review on Certiorari under Rule 45 of the Rules of Civil Procedure, assailing
the Decision[1] of the
Court of Appeals in CA-G.R. SP No. 66968, dated 26 August 2002, which dismissed Philippine National
Construction Corporation’s (PNCC’s) Petition for
Review of the Decision[2] of
Sole Arbitrator Victor P. Lazatin of the Construction
Industry Arbitration Commission (CIAC) awarding herein respondent CMS
Construction and Development Corporation (CMS) the amount of P1,978,746.90
with interest at the rate of 6% per annum from 7 July 2000 up to the date of
award and thereafter, at an interest rate of 12% per annum until fully paid.
The present case arose when CMS submitted for arbitration
before the CIAC a complaint for sum of money with damages against PNCC in
connection with the relocation of the 450 mm diameter steel pipes along the
East Service Road of the South Luzon Tollway.
On
A Subcontract Agreement was executed between PNCC and CMS on P7,990,172.61, inclusive of taxes, and that the
project was to be completed within seventy-five (75) calendar days from the
signing of the contract. It was further
stipulated therein that the contract price was merely an estimate and that the
final price shall be computed based on the actual accomplishment of the
subcontractor as approved and accepted by PNCC, the Toll Regulatory Board, and
the MWSS.
On
In conformity to the letters sent by PNCC to CMS regarding
the manpower and equipment supplied by the former to ensure the completion of
the project, the following amounts were deducted by petitioner from CMS’s
billings as “accommodations”:
Billing No. 3 …………… P 274,548.87
Billing No. 4 ……………
150,043.12
Billing No. 5 ……………
666, 895.54
TOTAL P1,091,487.53
Thereafter, PNCC and CMS amended the Subcontract Agreement on P8,872,593.74,
inclusive of taxes. It was also agreed
upon by the parties under the Contract Amendment that Appendix “A” thereof
constituted the final Bill of Quantities for scope of works undertaken by the
subcontractor (CMS) and superseded Annex “C” of the 21 October 1997 Agreement
and any bill of quantities earlier agreed upon by the parties in connection
with the project. Furthermore, it was
expressed therein that the said amendment superseded the price stipulated in
the original Subcontract Agreement dated
According to CMS, the amended contract price has not been fully paid by
PNCC since Billing Nos. 3, 4, and 5 were only partially paid because of the
deductions made by the latter in the form of “accommodations,” which CMS
insists must be disallowed.
After the proceedings, Sole Arbitrator Lazatin
issued an Award, the pertinent portions of which read:
Before resolving the specific
issues raised by the parties, it would be helpful to state certain findings
established at the hearings which are pivotal.
Initially, there is no dispute
that the retention money amounts to P887,259.37 which is exactly equal
to ten percent (10%) of the Subcontract Price (TSN,
Secondly, at the initial
hearing, the Claimant no longer insisted on its claim for hydrotesting
works (Issue No. 4) amounting to P563,675.00 due to paragraph 3 of the
Contract Amendment (Exhibit C-2) (TSN, 13 August, p. 3).
Thirdly, some of the important
details of Billing Nos. 3, 4 and 5 are as follows:
a) Billing No. 3 was for P920,601.03. It was received by the Respondent on P274,548.87. The amount paid was P646,052.12 which
was paid in three (3) tranches, to wit:
(i)
P400,000 on
(ii)
P100,000 on
(iii)
P146,000 on
b) Billing No. 4 was for P255,334.13. It was received by the Respondent on P150,043.12. The amount paid was P105,181.00 which
paid on
c) Billing No. 5 was for P1,681,888.21. It was received by the Respondent on
Fourthly, on
(i) To constitute “Appendix A” thereof as the final Bill of
Quantities for scope of works undertaken by the Claimant and
superseded/replaced Annex C of the 21 October 1997 Subcontract Agreement (Exh. C-1).
(ii) P8,872,593.74
as the final Subcontract Price which “supersede(d) the price stipulated in the
original Subcontract Agreement dated 21 October 1997 P7,990,172.61 and any
other commitment or agreement on price pertaining to works covered herein.”
(iii) “no
further adjustment in price shall be effected and that (Claimant) hereby
waived any and all claims for price adjustments and whatsoever in connection
with the work herein covered except as that stated in pa. 3 above of this
Contract Amendment.” (emphasis supplied).
Fifthly, there is no clear
documentation that Respondent sent, and the Claimant received, much more
accepted, the various charges for the accommodations deducted by the
Respondent. The testimony of the
witnesses of both parties are diametrically opposite. Likewise in conflict are the respective
verbal assertion of both sides that manpower, equipment, and/or materials were
actually provided by the Respondent to the Claimant.
Sixth, the documentation of
the Respondent with respect to its invocation of Section 6.2 of the Subcontract
Agreement (Exhibit R-5) is faulty. The
seven (7) day notice was not strictly complied with. There was no specification
of the items and costings of the charges now asserted
in the deductions/accommodations. The
Claimant is likewise remiss in failing to reply to Respondents’ various letters
(Exhibits R-20 to R-40, except for two (2) response) and take issue with the
same. The Respondent could not present
proof that the Claimant received and acknowledged the accommodations, despite
its verbal assertions that the Project Manager of the Claimant did. There is also assertion that Claimant refused
to acknowledge receipt of the accommodations.
Lastly, and more importantly,
the Claimant asserts that when the parties agreed on the Contract Amendment (which
is effectively a compromise agreement) on
x x x x
WHEREFORE, PREMISES
CONSIDERED, an award is hereby rendered ordering the respondent to pay the
Claimant the amount of P1,978,746.90 with interest at the rate of 6% per
annum from
Aggrieved, PNCC sought recourse through a Petition for Review
filed before the Court of Appeals maintaining that there is no basis in fact
nor in law for the findings of the Sole Arbitrator that the deductions for
“accommodations” for Billing Nos. 3, 4, and 5 should be disallowed as they
already formed part of the compromise agreement and that the said
“accommodations” were not properly documented and proved to bind CMS.
On
It must be recalled that the
parties initially agreed to a subcontract price of P7,990,172.61 (par.
3.1 Subcontract Agreement, Exh. “R-3”, p. 80, rollo); however, the same was increased to P8,872,593.74
(par. 9.1. Terms of Reference, p. 58, rollo; Final
Bill of Quantities, p. 65, rollo) subject to
petitioner PNCC’s outright deduction of 10% net which
would answer for any and all defect/s and/or deficiency/ies
in the workmanship. And all the accumulated
retentions shall be released within thirty days from the date of final
acceptance of subcontracted work and which could be attained only after the
lapse of the warranty period stipulated. (pars. 4.4 & 4.5., Subcontract
Agreement, p. 81, rollo; Contract Amendment, Exh. “R-15”, p. 98, rollo). Thus, 10% of the subcontract price of P8,872,593.74
is P887,259.37, which should be automatically deducted, it being part of
the Subcontract Agreement” which to Our
mind should be respected, since the same was not part of the amendment of the
contract. When the terms of an agreement
have been reduced to writing, it is to be considered as containing all the
terms agreed upon and there can be, between the parties and their successors in
interest, no evidence of such terms other than the contents of the written
agreement. (Sec. 9, par. 1, Rule 130
Rules on Evidence) And there being no evidence on record which showed that
petitioner PNCC claimed for any defects on the completed project against
respondent CMS after April 1999, the aforementioned amount of P887,259.37
should now be released/paid to the latter.
Coming now to the resolutions
of whether or not the deductions for accommodations made by petitioner PNCC in
billing nos. 3 to 5 were part of the compromise settlement and whether the same
were properly documented, We opine that the same were part of the compromise
settlement and the same were not properly documented.
Petitioner PNCC contended that
in view of respondent CMS delay in the execution of the project, it supplied
the necessary manpower, equipment and materials in order to assure the
completion of the works; however, the record of the case is bereft of any
evidence which would show that indeed petitioner PNCC had supplied the
necessary manpower, equipment and materials for the project, aside from
petitioner’s letter dated December 5, 1997 which stated that it would supply
the same. (p. 92, rollo).
Petitioner’s reliance on
Article VI, par. 6.2.1 of the Subcontract Agreement which states:
“In the event Subcontractor
fails to comply with the requirement stated therein within seven (7) days from
notice/demand to comply, PNCC shall have the authority to secure the necessary
manpower, equipment from other sources, to assure completion of the works. All costs and expenses, including handling of
charges, transportation, rentals for machinery/equipment and other expenses incidental
thereto shall be for the account of Subcontractor and may be deducted from
whatever amount that may be due or become due to Subcontractor under this or in
any agreement between the parties.
is basically misplaced. While there was petitioner PNCC’s letter dated February 16, 1998 sent to respondent
CMS informing the latter that it had not coped up (sic) with the work schedule
and thus requiring it to submit other requirements such as daily accomplishment
reports and target weekly accomplishments; nevertheless, the same is not
determinant of whether or [not] the seven day notice was strictly complied
with. (Exh. “R-32” p. 95, rollo).
x x x x
In fine, there was no evidence
on record which proved that the aforecited deductions
for accommodations were sent and received by respondent CMS. Neither was there any specification of the
items and costings of the charges now asserted in the
deductions for accommodations.
x x x x
In view of the above
disquisitions, We are inclined to uphold the sole arbitrator’s findings and
conclusions, disallowing the deductions for accommodations made by petitioner
PNCC against respondent CMS. Consequently,
respondent CMS should be paid for the deductions made by petitioner PNCC in the
amount of P1,091,487.53. It is a
hornbook doctrine in our jurisdiction that findings of facts of administrative
bodies charged with their specific field of expertise, are afforded great
weight by the courts, and in the absence of substantial showing that such
findings are made from an erroneous estimation of the evidence presented, they
are conclusive, and in the interest of stability of the government structure,
should not be disturbed. (Ocampo vs. Commission on Elections, 325 SCRA 636). It is likewise not for the reviewing court to
weigh the conflicting evidence, determine the credibility of the witnesses, or
otherwise substitute its own judgment for that of the administrative agency on
the sufficiency of the evidence; that the administrative decision in matters,
within the executive jurisdiction, can only be set aside on proof of grave
abuse of discretion, fraud, or error of law (cited in Lo vs. Court of Appeals, 321 SCRA 190). We hold that the Sole Arbitrator’s findings
and conclusion as aptly ratiocinated in his assailed decision are in accord
with the facts and evidence on record and as such, must be respected.
x x x x
WHEREFORE, premises considered
the PETITION FOR REVIEW is hereby Denied
with modifications. Accordingly, a
Decision is hereby rendered as follows:
1) Ordering petitioner
Philippine National Construction Corporation to pay respondent CMS Construction
and Development Corporation the total amount of P1,978,746.90 plus 6%
interest per annum from date of demand which is from July 7, 2000 until fully
satisfied, but before judgment becomes final.
From the date of finality of the judgment until the obligation is totally
paid. A TWELVE PERCENT (12%) interest,
in lieu of the SIX PERCENT (6%) interest shall be imposed; and
2) Deleting the award for arbitration fees in
favor of the respondent CMS Construction and Development Corporation in the
amount of P29,264.51 for lack of factual and legal basis.[4]
Petitioner’s Motion for Reconsideration having been denied,
PNCC filed the instant petition assailing the Decision of the appellate court
on the sole ground that the Court of Appeals erred in upholding the Sole
Arbitrator’s findings and conclusion disallowing the deductions for
accommodations made by PNCC against CMS.
Before we delve into the substantial issue raised by
petitioner, we shall first address the procedural issue raised by
respondent. According to CMS, the issue
raised by petitioner is not a proper subject of an appeal under Rule 45 of the
Rules of Court. CMS maintains that in
assailing the findings and conclusions of the Sole Arbitrator as affirmed by
the Court of Appeals, petitioner only puts into issue the findings of facts
which are the bases thereof. And this
Court, being not a trier of facts, is not duty-bound
to probe into the accuracy of said factual findings, in the absence of clear
showing that the same were arbitrary and bereft of any rational basis.
On the other hand, PNCC claims that the instant petition
involves a question of law as the main issue herein is the proper
interpretation of the Contract Amendment executed between the parties, and
whether or not deductions for “accommodations” given by PNCC are allowed under
said Contract Amendment.
To be sure,
questions of law are those that involve doubts or controversies on what the law
is on certain state of facts; and questions of fact, on the other hand, are
those in which there is doubt or difference as to the truth or falsehood of the
alleged facts. One test, it has been held, is whether the appellate court can
determine the issue raised without reviewing or evaluating the evidence, in
which case it is a question of law, otherwise it will be a question of fact.[5]
We agree with petitioner that the instant case involves a
question of law. At the heart of this
controversy before us is the issue of whether or not the “accommodations” claimed
by PNCC may be properly deducted from the contract price stipulated under the Subcontract
Agreement as modified by the Contract Amendment. The resolution of said issue, thus, entails
an interpretation of the provisions of both agreements executed by both
parties. And as correctly pointed out by
petitioner, where an interpretation of the true agreement between the parties
is involved in the appeal, the appeal is in effect an inquiry of the “law”
between the parties and their successors in interest, its interpretation
necessarily involves a question of law, properly raised in the certiorari proceedings.[6]
Having resolved the procedural issue raised herein, we now
proceed to determine the singular substantial issue raised in the instant
petition.
PNCC maintains that Sole
Arbitrator Lazatin acted arbitrarily or with grave
abuse of discretion when he denied the deductions being claimed by
petitioner. According to PNCC, the
deductions or “accommodations” made in Billing Nos. 3, 4, and 5 are allowed
under Article VI, Paragraph 6.2.1 of the Subcontract Agreement, which states
that:
6.2.1 In the event
SUBCONTRACTOR fails to comply with the above requirement stated therein within
seven (7) days from notice/demand to comply, PNCC shall have the authority to
secure the necessary manpower, equipment from other sources, to assure
completion of the works. All costs and
expenses, including handling of charges, transportation rentals for machineries/equipment
and other expenses incidental thereto, shall be for the account of
SUBCONTRACTOR and may be deducted from whatever amount that may be due or
become due to SUBCONTRACTOR under this or in any agreement between the parties. In such case, however, PNCC shall exert its
best efforts to minimize the costs.
Thus, PNCC claims that from the abovequoted
provision of the Subcontract Agreement, it is evident that “accommodations” for
additional manpower or equipment supplied by PNCC in the project are deductible
from whatever amount due to CMS as subcontractor.
There is no dispute that under the aforecited
provision, deductions or “accommodations” may be made against the account of
the subcontractor; however, it is pivotal at this point to underscore an
important provision in the Contract Amendment signed by the parties on
It is clear from a reading of said provision of the Contract
Amendment executed after the completion of said project and after PNCC had
determined the alleged deductions it was to charge against CMS’s account that
Annex “A” thereof reflects the scope of work undertaken by CMS. Said Bill of Quantities therefore enumerates
the costs borne by CMS as subcontractor in the accomplishment of the
project.
A careful perusal of Annex “A” of the Contract Amendment will
show that the final Bill of Quantities for the scope of works undertaken by CMS
for the project amounts to P8,872,593.74. There is no mention, either in the body of
said Contract Amendment nor in the annex attached thereto, regarding the
alleged “accommodations” which PNCC shall deduct from the amount payable to
CMS. It would only be logical,
therefore, to conclude that the Contract Amendment and Annex “A” attached
thereto already reflect the actual amount to be paid to CMS for the scope of
work it rendered regarding the relocation of the 450 mm pipe along the East
Service Road of the South Luzon Tollway, said
amendment having been executed after PNCC had already determined the necessary
deductions to be made against the account of CMS.
The agreement or contract between the parties is the formal
expression of the parties’ rights, duties and obligations.[7] It is the best evidence of the intention of
the parties.[8] Thus, when the terms of an agreement have
been reduced to writing, it is considered as containing all the terms agreed
upon and there can be, between the parties and their successors in interest, no
evidence of such terms other than the contents of the written agreement.[9] Furthermore, it is a cardinal rule that if
the terms of a contract are clear and leave no doubt as to the intention of the
contracting parties, the literal meaning of its stipulation shall control.[10]
Petitioner miserably failed to establish that Sole Arbitrator
Lazatin acted arbitrarily or with grave abuse of
discretion when he denied the deductions claimed by petitioner. If ever Sole Arbitrator Lazatin
may have committed any error in his interpretation of the Subcontract Agreement
and the Contract Amendment, such possible error is not tantamount to grave
abuse of discretion, but merely an error of judgment. An error of judgment is one which the court
may commit in the exercise of its jurisdiction, and which error is reviewable only by an appeal.[11] On the other hand, an error of jurisdiction is
one where the act complained of was issued by the court, officer or a quasi-judicial
body without or in excess of jurisdiction, or with grave abuse of discretion
which is tantamount to lack or in excess of jurisdiction.[12] This error is correctable only by the
extraordinary writ of certiorari.[13]
Nonetheless, we see no reason to disregard the determinations
made by Sole Arbitrator Lazatin. As has been discussed above, the contention of
PNCC that it may legally deduct certain accommodations from the contract price
as contained in the Bill of Quantities attached to the Contract Amendment has
no leg to stand on. Furthermore, in the
absence of any showing of grave abuse of discretion, this Court must sustain
the factual findings of the Sole Arbitrator as sustained by the Court of
Appeals, this being in accordance with the established principle that
determination of certain questions of fact falling within the peculiar
technical expertise of an administrative agency, must be accorded great
respect, if not finality by this Court. A
long line of cases establishes the basic rule that the court will not interfere
in matters which are addressed to the sound discretion of government agencies
entrusted with the regulation of activities coming under the special technical
knowledge and training of such agencies.[14] The CIAC, having been duly constituted by law
as the quasi-judicial agency accorded with jurisdiction to resolve disputes
arising from contracts involving construction in the
WHEREFORE, premises considered, the instant
petition is hereby DENIED. The Decision of the Court of Appeals in CA-G.R.
SP No. 66968 dated
SO ORDERED.
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MINITA V. CHICO-NAZARIO Associate Justice |
WE
CONCUR:
CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson
Associate Justice Associate Justice
ATTESTATION
I attest that the
conclusions in the above Decision were reached in consultation before the case
was assigned to the writer of the opinion of the Court’s Division.
CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson, Third
Division
CERTIFICATION
Pursuant
to Section 13, Article VIII of the Constitution, and the Division Chairperson’s
Attestation, it is hereby certified that the conclusions in the above Decision
were reached in consultation before the case was assigned to the writer of the
opinion of the Court’s Division.
REYNATO
S. PUNO
Chief Justice
[1] Penned by Associate Justice Bienvenido L. Reyes with Associate Justices Roberto A. Barrios
and Edgardo F. Sundiam,
concurring. Rollo, pp. 26-44.
[2] CIAC
Case No. 14-2001, promulgated on
[3] CIAC Award, pp. 5-8, 14; rollo, pp. 66-69,
75.
[4] CA Decision pp. 8-10, 16-17; rollo, pp. 33-35,
41-42.
[5] Vda.
de Arroyo v. El Beaterio del Santissimo Rosario de Molo, 132 Phil. 9, 12-13 (1968); Avon
Cosmetics Incorporated v. Luna, G.R. No. 153674, 20 December 2006.
[6] Capco v. Macasaet, G.R. No. 90888,
[7] Gamboa, Rodriguez, Rivera & Co., Inc. v. Court of Appeals, G.R. No.
117456, 6 May 2005, 458 SCRA 68, 73.
[8] Arwood Industries, Inc. v. D.M. Consunji, Inc.,
442 Phil. 203, 212 (2002).
[9] Rules of Court, Rule 130, Section 9.
[10] Olbes v. China Banking Corporation, G.R. No. 152082,
[11] Fernando
v. Vasquez, G.R. No. L-26417,
[12]
[13]
[14] First
Lepanto Ceramics, Inc. v. Court of Appeals, 323 Phil. 657, 664 (1996).
[15] Executive Order No. 1008, Section 4.
Jurisdiction. – The CIAC shall have original and exclusive jurisdiction
over disputes arising from, or connected with, contracts entered into by
parties involved in construction in the Philippines, whether the disputes
arises before or after the completion of the contract, or after the abandonment
or breach thereof. x x x.