Republic
of the
Supreme Court
SECOND DIVISION
|
F.F. CRUZ & CO., INC., Petitioner,
- versus - HR CONSTRUCTION CORP., Respondent. |
G.R. No. 187521
Present: CARPIO, J., Chairperson, BRION, PEREZ, SERENO,
and REYES,
JJ. Promulgated: March
14, 2012 |
x----------------------------------------------------------------------------------------x
DECISION
REYES, J.:
This is a petition for review on certiorari under Rule 45
of the Rules of Court filed by petitioner F.F. Cruz & Co., Inc. (FFCCI)
assailing the Decision[1] dated February 6, 2009 and Resolution[2] dated April 13, 2009 issued by the Court
of Appeals (CA) in CA-G.R. SP No. 91860.
The Antecedent Facts
Sometime
in 2004, FFCCI entered into a contract with the Department of Public Works and
Highways (DPWH) for the construction of the Magsaysay Viaduct, known as the
Lower Agusan Development Project. On August 9, 2004, FFCCI, in turn, entered
into a Subcontract Agreement[3]
with HR Construction Corporation (HRCC) for the supply of materials, labor,
equipment, tools and supervision for the construction of a portion of the said
project called the East Bank Levee and Cut-Off Channel in accordance with the
specifications of the main contract.
The
subcontract price agreed upon by the parties amounted to P31,293,532.72.
Pursuant to the Subcontract Agreement, HRCC would submit to FFCCI a monthly
progress billing which the latter would then pay, subject to stipulated
deductions, within 30 days from receipt thereof.
The parties agreed that the requests of HRCC for payment should include
progress accomplishment of its completed works as approved by FFCCI.
Additionally, they agreed to conduct a joint measurement of the completed works
of HRCC together with the representative of DPWH and consultants to arrive at a
common quantity.
Thereafter,
HRCC commenced the construction of the works pursuant to the Subcontract
Agreement.
On
September 17, 2004, HRCC submitted to FFCCI its first progress billing in the
amount of P2,029,081.59 covering the construction works it completed
from August 16 to September 15, 2004.[4]
However, FFCCI asserted that the DPWH was then able to evaluate the completed
works of HRCC only until July 25, 2004. Thus, FFCCI only approved the gross
amount of P423,502.88 for payment. Pursuant to the Subcontract Agreement,
FFCCI deducted from the said gross amount P42,350.29 for retention and P7,700.05
for expanded withholding tax leaving a net payment in the amount of P373,452.54.
This amount was paid by FFCCI to HRCC on December 3, 2004.[5]
FFCCI
and the DPWH then jointly evaluated the completed works of HRCC for the period
of July 26 to September 25, 2004. FFCCI claimed that the gross amount due for
the completed works during the said period was P2,008,837.52. From the
said gross amount due, FFCCI deducted therefrom P200,883.75 for
retention and P36,524.07 for expanded withholding tax leaving amount of P1,771,429.45
as the approved net payment for the said period. FFCCI paid this amount on December 21, 2004.[6]
On
October 29, 2004, HRCC submitted to FFCCI its second progress billing in the
amount of P1,587,760.23 covering its completed works from September 18
to 25, 2004.[7]
FFCCI did not pay the amount stated in the second progress billing, claiming
that it had already paid HRCC for the completed works for the period stated
therein.
On
even date, HRCC submitted its third progress billing in the amount of P2,569,543.57
for its completed works from September 26 to October 25, 2004.[8]
FFCCI did not immediately pay the amount stated in the third progress billing,
claiming that it still had to evaluate the works accomplished by HRCC.
On
November 25, 2004, HRCC submitted to FFCCI its fourth progress billing in the
amount of P1,527,112.95 for the works it had completed from October 26
to November 25, 2004.
Subsequently,
FFCCI, after it had evaluated the completed works of HRCC from September 26 to
November 25, 2004, approved the payment of the gross amount of P1,505,570.99
to HRCC. FFCCI deducted therefrom P150,557.10 for retention and P27,374.02
for expanded withholding tax leaving a net payment of P1,327,639.87,
which amount was paid to HRCC on March 11, 2005.[9]
Meanwhile,
HRCC sent FFCCI a letter[10]
dated December 13, 2004 demanding the payment of its progress billings in the
total amount of P7,340,046.09, plus interests, within three days from
receipt thereof. Subsequently, HRCC completely halted the construction of the
subcontracted project after taking its Christmas break on December 18, 2004.
On
March 7, 2005, HRCC, pursuant to the arbitration clause in the Subcontract
Agreement, filed with the Construction Industry Arbitration Commission (CIAC) a
Complaint[11]
against FFCCI praying for the payment of the following: (1) overdue obligation
in the reduced amount of P4,096,656.53 as of December 15, 2004 plus
legal interest; (2) P1,500,000.00 as attorneys fees; (3) P80,000.00
as acceptance fee and representation expenses; and (4) costs of litigation.
In
its Answer,[12]
FFCCI claimed that it no longer has any liability on the Subcontract Agreement
as the three payments it made to HRCC, which amounted to P3,472,521.86,
already represented the amount due to the latter in view of the works actually
completed by HRCC as shown by the survey it conducted jointly with the DPWH.
FFCCI further asserted that the delay in the payment processing was primarily
attributable to HRCC inasmuch as it presented unverified work accomplishments
contrary to the stipulation in the Subcontract Agreement regarding requests for
payment.
Likewise,
FFCCI maintained that HRCC failed to comply with the condition stated under the
Subcontract Agreement for the payment of the latters progress billings, i.e. joint measurement of the completed
works, and, hence, it was justified in not paying the amount stated in HRCCs
progress billings.
On
June 16, 2005, an Arbitral Tribunal was created composed of Engineer Ricardo B.
San Juan, Joven B. Joaquin and Attorney Alfredo F. Tadiar, with the latter
being appointed as the Chairman.
In
a Preliminary Conference held on July 5, 2005, the parties defined the issues
to be resolved in the proceedings before the CIAC as follows:
1.
What
is the correct amount of [HRCCs] unpaid progress billing?
2.
Did
[HRCC] comply with the conditions set forth in subparagraph 4.3 of the Subcontract
Agreement for the submission, evaluation/processing and release of payment of
its progress billings?
3.
Did
[HRCC] stop work on the project?
3.1
If
so, is the work stoppage justified?
3.2
If
so, what was the percentage and value of [HRCCs] work accomplishment at the
time it stopped work on the project?
4.
Who
between the parties should bear the cost of arbitration or in what proportion
should it be shared by the parties?[13]
Likewise,
during the said Preliminary Conference, HRCC further reduced the amount of
overdue obligation it claimed from FFCCI to P2,768,916.66. During the
course of the proceedings before the CIAC, HRCC further reduced the said amount
to P2,635,397.77 the exact difference between the total amount of
HRCCs progress billings (P6,107,919.63) and FFCCIs total payments in
favor of the latter (P3,472,521.86).
The CIAC Decision
On
September 6, 2005, after due proceedings, the CIAC rendered a Decision[14]
in favor of HRCC, the decretal portion of which reads:
WHEREFORE, judgment is hereby rendered in
favor of the Claimant HR CONSTRUCTION
CORPORATION and AWARD made on
its monetary claim against Respondent F.F.
CRUZ & CO., INC., as follows:
[P]2,239,452.63 as the balance of its unpaid billings
and
101,161.57 as
reimbursement of the arbitration costs.
[P]2,340,614.20 Total due the Claimant
Interest on the foregoing amount [P]2,239,452.63
shall be paid at the rate of 6% per
annum from the date of this Decision. After finality of this Decision, interest
at the rate of 12% per annum shall be paid thereon until full payment of the
awarded amount shall have been made x x x.
SO ORDERED.[15]
The
CIAC held that the payment method adopted by FFCCI is actually what is known as
the back-to-back payment scheme which was not agreed upon under the Subcontract
Agreement. As such, the CIAC ruled that FFCCI could not impose upon HRCC its
valuation of the works completed by the latter. The CIAC gave credence to
HRCCs valuation of its completed works as stated in its progress billings.
Thus:
During the trial, [FFCCIs] Aganon admitted
that [HRCCs] accomplishments are included in its own billings to the DPWH
together with a substantial mark-up to cover overhead costs and profit. He
further admitted that it is only when DPWH approves its (Respondents) billings
covering [HRCCs] scope of work and pays for them, that [FFCCI] will in turn
pay [HRCC] for its billings on the sub-contracted works.
On clarificatory questioning by the Tribunal,
[FFCCI] admitted that there is no back-to-back
provision in the sub-contract as basis for this sequential payment arrangement and, therefore, [FFCCIs] imposition
thereof by withholding payment to [HRCC] until it is first paid by the project
owner on the Main Contract, clearly violates said sub-contract. It [is] this unauthorized
implementation of a back-to-back payment scheme that is seen to be the reason
for [FFCCIs] non-payment of the third progress billings.
It is accordingly the holding of this Arbitral Tribunal that [FFCCI] is not justified in
withholding payment of [HRCCs] third progress billing for this scheme that
[HRCC] has not agreed to in the sub-contract agreement x x x.
x x x
The total retention money deducted by [FFCCI]
from [HRCCs] three progress billings, amounts to [P]395,945.14 x x
x. The retention money is part of [HRCCs] progress billings and must,
therefore, be credited to this account. The two amounts (deductions and net
payments) total [P]3,868,467.00 x x x. This represents the total gross
payments that should be credited and deducted from the total gross billings to
arrive at what has not been paid to the [HRCC]. This results in the amount of [P]2,239,452.63 ([P]6,107,919.63
- [P]3,868,467.00) as the correct balance of [HRCCs] unpaid billings.[16]
Further,
the CIAC ruled that FFCCI had already waived its right under the Subcontract
Agreement to require a joint measurement of HRCCs completed works as a
condition precedent to the payment of the latters progress billings. Hence:
[FFCCI] admits that in all three instances
where it paid [HRCC] for its progress billings, it never required compliance
with the aforequoted contractual provision of a prior joint quantification. Such
repeated omission may reasonably be
construed as a waiver by [FFCCI] of
its contractual right to require compliance of said condition and it is now too
late in the day to so impose it. Article 6 of the Civil Code expressly provides
that rights may be waived unless the waiver is contrary to law, public order,
public policy, morals or good customs. The tribunal cannot see any such
violation in this case.
x x x
[FFCCIs] omission to enforce the contractually
required condition of payment, has led [HRCC] to believe it to be true that
indeed [FFCCI] has waived the condition of joint quantification and, therefore,
[FFCCI] may not be permitted to falsify such resulting position.[17]
Likewise,
the CIAC held that FFCCIs non-payment of the progress billings submitted by
HRCC gave the latter the right to rescind the Subcontract Agreement and,
accordingly, HRCCs work stoppage was justified. It further opined that, in
effect, FFCCI had ratified the right of HRCC to stop the construction works as
it did not file any counterclaim against HRCC for liquidated damages arising
therefrom.
FFCCI
then filed a petition for review with CA assailing the foregoing disposition by
the CIAC.
The CA Decision
On
February 6, 2009, the CA rendered the herein assailed Decision[18]
denying the petition for review filed by FFCCI. The
CA agreed with the CIAC that FFCCI had waived its right under the Subcontract
Agreement to require a joint quantification of HRCCs completed works.
The
CA further held that the amount due to HRCC as claimed by FFCCI could not be
given credence since the same was based on a survey of the completed works
conducted without the participation of HRCC. Likewise, being the main
contractor, it ruled that it was the responsibility of FFCCI to include HRCC in
the joint measurement of the completed works. Furthermore, the CA held that
HRCC was justified in stopping its construction works on the project as the
failure of FFCCI to pay its progress billings gave the former the right to
rescind the Subcontract Agreement.
FFCCI
sought a reconsideration[19]
of the said February 6, 2009 Decision but it was denied by the CA in its
Resolution[20] dated
April 13, 2009.
Issues
In the instant petition, FFCCI submits the following issues for
this Courts resolution:
[I.]
x x x First, [d]oes the act of [FFCCI] in conducting a verification
survey of [HRCCs] billings in the latters presence amount to a waiver of the
right of [FFCCI] to verify and approve said billings? What, if any, is the
legal significance of said act?
[II.]
x x x Second, [d]oes the payment of [FFCCI] to [HRCC] based on the
results of the above mentioned verification survey result in the former being
obliged to accept whatever accomplishment was reported by the latter?
[III.]
x x x Third, [d]oes the mere comparison of the payments made by [FFCCI]
with the contested progress billings of [HRCC] amount to an adjudication of the
controversy between the parties?
[IV.]
x x x Fourth, [d]oes the failure of [FFCCI] to interpose a counterclaim
against [HRCC] for liquidated damages due to the latters work stoppage, amount
to a ratification of such work stoppage?
[V.]
x x x Fifth, [d]id the [CA] disregard or overlook significant and
material facts which would affect the result of the litigation?[21]
In sum, the crucial issues for this Courts resolution are: first, what is the effect of FFCCIs
non-compliance with the stipulation in the Subcontract Agreement requiring a
joint quantification of the works completed by HRCC on the payment of the
progress billings submitted by the latter; and second, whether there was a valid rescission of the Subcontract
Agreement by HRCC.
The Courts Ruling
The petition is not meritorious.
Procedural Issue:
Finality and
Conclusiveness of the CIACs Factual Findings
Before we delve into the substantial
issues raised by FFCCI, we shall first address the procedural issue raised by
HRCC. According to HRCC, the instant petition merely assails the factual
findings of the CIAC as affirmed by the CA and, accordingly, not proper
subjects of an appeal under Rule 45 of the Rules of Court. It likewise pointed
out that factual findings of the CIAC, when affirmed by the CA, are final and
conclusive upon this Court.
Generally, the arbitral award
of CIAC is final and may not be appealed except on questions of law.
Executive
Order (E.O.) No. 1008[22]
vests upon the CIAC original and exclusive jurisdiction over disputes arising
from, or connected with, contracts entered into by parties involved in
construction in the
In Hi-Precision
Steel Center, Inc. v. Lim Kim Steel Builders, Inc.,[24]
we explained raison d etre for the
rule on finality of the CIACs arbitral award in this wise:
Voluntary
arbitration involves the reference of a dispute to an impartial body, the
members of which are chosen by the parties themselves, which parties freely
consent in advance to abide by the arbitral award issued after proceedings
where both parties had the opportunity to be heard. The basic objective is to provide
a speedy and inexpensive method of settling disputes by allowing the parties to
avoid the formalities, delay, expense and aggravation which commonly accompany
ordinary litigation, especially litigation which goes through the entire
hierarchy of courts. Executive Order No. 1008 created an arbitration facility
to which the construction industry in the
Aware of
the objective of voluntary arbitration in the labor field, in the construction
industry, and in any other area for that matter, the Court will not assist one
or the other or even both parties in any effort to subvert or defeat that
objective for their private purposes. The Court will not review the factual
findings of an arbitral tribunal upon the artful allegation that such body had
"misapprehended the facts" and will not pass upon issues which are,
at bottom, issues of fact, no matter how cleverly disguised they might be as
"legal questions." The
parties here had recourse to arbitration and chose the arbitrators themselves; they
must have had confidence in such arbitrators. x x x[25] (Citation omitted)
Thus, in cases assailing the arbitral award rendered by the CIAC,
this Court may only pass upon questions of law. Factual findings
of construction arbitrators are final and conclusive and not reviewable by this
Court on appeal. This rule, however, admits of certain exceptions.
In Spouses
David v. Construction Industry and Arbitration Commission,[26]
we laid down the instances when this Court may pass upon the factual findings
of the CIAC, thus:
We reiterate the rule that factual
findings of construction arbitrators are final and conclusive and not
reviewable by this Court on appeal, except when the petitioner proves
affirmatively that: (1) the award was procured by corruption, fraud or other
undue means; (2) there was evident partiality or corruption of the arbitrators
or of any of them; (3) the arbitrators were guilty of misconduct in refusing to
postpone the hearing upon sufficient cause shown, or in refusing to hear
evidence pertinent and material to the controversy; (4) one or more of the
arbitrators were disqualified to act as such under section nine of Republic Act
No. 876 and willfully refrained from disclosing such disqualifications or of
any other misbehavior by which the rights of any party have been materially prejudiced;
or (5) the arbitrators exceeded their powers, or so imperfectly executed them,
that a mutual, final and definite award upon the subject matter submitted to
them was not made. x x x[27] (Citation omitted)
Issues on the proper
interpretation of the terms of the Subcontract Agreement involve questions of
law.
A question of law arises when there
is doubt as to what the law is on a certain state of facts, while there is a
question of fact when the doubt arises as to the truth or falsity of the
alleged facts. For a question to be one of law, the same must not involve
an examination of the probative value of the evidence presented by the
litigants or any of them. The resolution of the issue must rest solely on what
the law provides on the given set of circumstances. Once it is clear that
the issue invites a review of the evidence presented, the question posed is one
of fact.[28]
On the surface, the instant petition appears to merely raise
factual questions as it mainly puts in issue the appropriate amount that is due
to HRCC. However, a more thorough analysis of the issues raised by FFCCI would
show that it actually asserts questions of law.
FFCCI primarily seeks from this Court a determination of whether
amount claimed by HRCC in its progress billing may be enforced against it in
the absence of a joint measurement of the formers completed works. Otherwise
stated, the main question advanced by FFCCI is this: in the absence of the
joint measurement agreed upon in the Subcontract Agreement, how will the completed
works of HRCC be verified and the amount due thereon be computed?
The determination of the foregoing question entails an
interpretation of the terms of the Subcontract Agreement vis--vis the respective rights of the parties herein. On this
point, it should be stressed that where an interpretation of the true agreement
between the parties is involved in an appeal, the appeal is in effect an
inquiry of the law between the parties, its interpretation necessarily involves
a question of law.[29]
Moreover, we are not called upon to examine the probative value of
the evidence presented before the CIAC. Rather, what is actually sought from
this Court is an interpretation of the terms of the Subcontract Agreement as it
relates to the dispute between the parties.
First Substantive Issue:
Effect of Non-compliance with the Joint Quantification Requirement on the Progress
Basically, the instant
issue calls for a determination as to which of the parties respective
valuation of accomplished works should be given credence. FFCCI claims that its
valuation should be upheld since the same was the result of a measurement of
the completed works conducted by it and the DPWH. On the other hand, HRCC
maintains that its valuation should be upheld on account of FFCCIs failure to observe
the joint measurement requirement in ascertaining the extent of its completed
works.
The terms of the Subcontract
Agreement should prevail.
In resolving the dispute as to the proper valuation of the works
accomplished by HRCC, the primordial consideration should be the terms of the
Subcontract Agreement. It is basic that if the terms of a contract are clear
and leave no doubt upon the intention of the contracting parties, the literal
meaning of its stipulations shall control.[30]
In Abad
v. Goldloop Properties, Inc.,[31]
we stressed that:
A courts purpose in examining a contract is
to interpret the intent of the contracting parties, as objectively manifested
by them. The process of interpreting a contract requires the court to make
a preliminary inquiry as to whether the contract before it is ambiguous. A
contract provision is ambiguous if it is susceptible of two reasonable
alternative interpretations. Where the
written terms of the contract are not ambiguous and can only be read one way,
the court will interpret the contract as a matter of law. If the
contract is determined to be ambiguous, then the interpretation of the contract
is left to the court, to resolve the ambiguity in the light of the intrinsic
evidence.[32]
(Emphasis
supplied and citation omitted)
Article
4 of the Subcontract Agreement, in part, contained the following stipulations:
ARTICLE 4
SUBCONTRACT PRICE
4.1 The total SUBCONTRACT
Price shall be THIRTY ONE MILLION
TWO HUNDRED NINETY THREE THOUSAND FIVE HUNDRED THIRTY TWO PESOS &
72/100 ONLY ([P]31,293,532.72) inclusive of Value Added Tax x x x.
x x x
4.3 Terms of Payment
FFCCI shall pay [HRCC] within
thirty (30) days upon receipt of the [HRCCs] Monthly Progress Billings subject to deductions due to ten
percent (10%) retention, and any other sums that may be due and recoverable by
FFCCI from [HRCC] under this SUBCONTRACT. In all cases, however, two percent
(2%) expanded withholding tax on the [HRCCs] income will be deducted from the
monthly payments.
Requests for the payment by the
[HRCC] shall include progress accomplishment of completed works (unit of work accomplished x unit
cost) as approved by [FFCCI].
Cut-off date of monthly billings shall be every 25th of the month and joint measurement shall be conducted
with the DPWHs representative, Consultants, FFCCI and [HRCC] to arrive at a
common/agreed quantity.[33]
(Emphasis supplied)
Pursuant to the terms of payment agreed upon
by the parties, FFCCI obliged itself to pay the monthly progress billings of
HRCC within 30 days from receipt of the same. Additionally, the monthly
progress billings of HRCC should indicate the extent of the works completed by
it, the same being essential to the valuation of the amount that FFCCI would
pay to HRCC.
The parties further agreed that the extent of
HRCCs completed works that would be indicated in the monthly progress billings
should be determined through a joint measurement conducted by FFCCI and HRCC
together with the representative of DPWH and the consultants.
It is the
responsibility of FFCCI to call for the joint measurement of HRCCs completed
works.
It bears stressing that
the joint measurement contemplated under the Subcontract Agreement should be
conducted by the parties herein together with the representative of the DPWH
and the consultants. Indubitably, FFCCI, being the main contractor of DPWH, has
the responsibility to request the representative of DPWH to conduct the said
joint measurement.
On this score, the testimony of Engineer Antonio
M. Aganon, Jr., project manager of FFCCI, during the reception of evidence
before the CIAC is telling, thus:
MR. J. B. JOAQUIN:
Engr. Aganon, earlier there was a stipulation that in all
the four billings, there never was a joint quantification.
PROF. A. F. TADIAR:
He admitted that earlier. Pinabasa ko sa kanya.
ENGR. R. B. SAN JUAN:
The joint quantification was done only between them and
DPWH.
x x x x
ENGR. AGANON:
Puwede ko po bang i-explain sandali lang po regarding
lang po doon sa quantification na iyon? Basically po as main contractor of DPWH, we are the ones who [are] requesting for
joint survey quantification with the owner, DPWH. Ngayon po, although wala
sa papel na nag-witness and [HRCC] still the same po, nandoon din po sila
during that time, kaya lang ho . . .
MR. J. B. JOAQUIN:
Hindi pumirma?
ENGR. AGANON:
Hindi sila puwede pumirma kasi ho kami po ang contractor
ng DPWH hindi sila.[34]
(Emphasis supplied)
FFCCI
had waived its right to demand for a joint measurement of HRCCs completed
works under the Subcontract Agreement.
The CIAC held that FFCCI, on account of its failure to demand the joint
measurement of HRCCs completed works, had effectively waived its right to ask
for the conduct of the same as a condition sine
qua non to HRCCs submission of its monthly progress billings.
We agree.
In People of the Philippines v. Donato,[35]
this Court explained the doctrine of waiver in this wise:
Waiver is defined as
"a voluntary and intentional relinquishment or abandonment of a known
existing legal right, advantage, benefit, claim or privilege, which except for
such waiver the party would have enjoyed; the voluntary abandonment or surrender,
by a capable person, of a right known by him to exist, with the intent that
such right shall be surrendered and such person forever deprived of its
benefit; or such conduct as warrants an
inference of the relinquishment of such right; or the intentional doing of an
act inconsistent with claiming it."
As to what rights and
privileges may be waived, the authority is settled:
x x x the doctrine of waiver extends to rights
and privileges of any character, and, since the word waiver covers every
conceivable right, it is the general
rule that a person may waive any matter which affects his property, and any
alienable right or privilege of which he is the owner or which belongs to him
or to which he is legally entitled, whether secured by contract, conferred
with statute, or guaranteed by constitution, provided such rights and privileges rest in the individual, are
intended for his sole benefit, do not infringe on the rights of others, and
further provided the waiver of the right or privilege is not forbidden by law,
and does not contravene public policy; and the principle is recognized that
everyone has a right to waive, and agree to waive, the advantage of a law or
rule made solely for the benefit and protection of the individual in his
private capacity, if it can be dispensed with and relinquished without infringing
on any public right, and without detriment to the community at large. x x x[36]
(Emphasis supplied and citations omitted)
Here, it is undisputed
that the joint measurement of HRCCs completed works contemplated by the
parties in the Subcontract Agreement never materialized. Indeed, HRCC, on
separate occasions, submitted its monthly progress billings indicating the
extent of the works it had completed sans
prior joint measurement. Thus:
|
Progress Billing |
Period Covered |
Amount |
|
1st Progress Billing dated September 17, 2004[37] |
August 16 to September 15, 2004 |
|
|
2nd Progress Billing dated October 29, 2004[38] |
September 18 to 25, 2004 |
|
|
3rd Progress Billing dated October 29, 2004[39] |
September 26 to October 25, 2004 |
|
|
4th Progress Billing dated November 25, 2004 |
October 26 to November 25, 2004 |
|
FFCCI did not contest the
said progress billings submitted by HRCC despite the lack of a joint
measurement of the latters completed works as required under the Subcontract
Agreement. Instead, FFCCI proceeded to conduct its own verification of the
works actually completed by HRCC and, on separate dates, made the following
payments to HRCC:
|
Date of Payment |
Period Covered |
Amount |
|
December 3, 2004[40] |
April 2 to July 25, 2004 |
|
|
December 21, 2004[41] |
July 26 to September 25, 2004 |
|
|
March 11, 2005[42] |
September 26 to November 25, 2004 |
|
FFCCIs voluntary payment
in favor of HRCC, albeit in amounts substantially different from those claimed
by the latter, is a glaring indication that it had effectively waived its right
to demand for the joint measurement of the completed works. FFCCIs failure to
demand a joint measurement of HRCCs completed works reasonably justified the
inference that it had already relinquished its right to do so. Indeed, not once
did FFCCI insist on the conduct of a joint measurement to verify the extent of
HRCCs completed works despite its receipt of the four monthly progress
billings submitted by the latter.
FFCCI is already barred from
contesting HRCCs valuation of the completed works having waived its right to
demand the joint measurement requirement.
In view of FFCCIs waiver of the joint
measurement requirement, the CA, essentially echoing the CIACs disposition,
found that FFCCI is obliged to pay the amount claimed by HRCC in its monthly
progress billings. The CA reasoned thus:
Verily, the joint measurement that [FFCCI]
claims it conducted without the participation of [HRCC], to which [FFCCI]
anchors its claim of full payment of its obligations to [HRCC], cannot be
applied, nor imposed, on [HRCC]. In other words, [HRCC] cannot be made to
accept a quantification of its works when the said quantification was made
without its participation. As a consequence, [FFCCIs] claim of full payment
cannot be upheld as this is a result of a quantification that was made contrary
to the express provisions of the Subcontract Agreement.
The Court is aware that by ruling so, [FFCCI]
would seem to be placed at a disadvantage because it would result in [FFCCI]
having to pay exactly what [HRCC] was billing the former. If, on the other
hand, the Court were to rule otherwise[,] then [HRCC] would be the one at a
disadvantage because it would be made to accept payment that is less than what
it was billing.
Circumstances considered, however, the Court
deems it proper to rule in favor of [HRCC] because of the explicit provision of
the Subcontract Agreement that requires the participation of the latter in the
joint measurement. If the Court were to rule otherwise, then the Court would,
in effect, be disregarding the explicit agreement of the parties in their
contract.[43]
Essentially, the question
that should be resolved is this: In view of FFCCIs waiver of its right to
demand a joint measurement of HRCCs completed works, is FFCCI now barred from
disputing the claim of HRCC in its monthly progress billings?
We rule in the
affirmative.
As intimated earlier, the
joint measurement requirement is a mechanism essentially granting FFCCI the
opportunity to verify and, if necessary, contest HRCCs valuation of its
completed works prior to the submission of the latters monthly progress
billings.
In the final analysis, the joint measurement
requirement seeks to limit the dispute between the parties with regard to the
valuation of HRCCs completed works. Accordingly, any issue which FFCCI may
have with regard to HRCCs valuation of the works it had completed should be
raised and resolved during the said joint measurement instead of raising the
same after HRCC had submitted its monthly progress billings. Thus, having
relinquished its right to ask for a joint measurement of HRCCs completed
works, FFCCI had necessarily waived its right to dispute HRCCs valuation of
the works it had accomplished.
Second Substantive Issue:
Validity of HRCCs
Rescission of the Subcontract Agreement
Both the CA and the CIAC
held that the work stoppage of HRCC was justified as the same is but an
exercise of its right to rescind the Subcontract Agreement in view of FFCCIs failure
to pay the formers monthly progress billings. Further, the CIAC stated that
FFCCI could no longer assail the work stoppage of HRCC as it failed to file any
counterclaim against HRCC pursuant to the terms of the Subcontract Agreement.
For its part, FFCCI asserted that the work stoppage of HRCC was
not justified and, in any case, its failure to raise a counterclaim against
HRCC for liquidated damages before the CIAC does not amount to a ratification
of the latters work stoppage.
The determination of the
validity of HRCCs work stoppage depends on a determination of the following: first, whether HRCC has the right to
extrajudicially rescind the Subcontract Agreement; and second, whether FFCCI is already barred from disputing the work
stoppage of HRCC.
HRCC had waived its right to
rescind the Subcontract Agreement.
The right of rescission is statutorily
recognized in reciprocal obligations. Article 1191 of the Civil Code
pertinently reads:
Art. 1191. The power
to rescind obligations is implied in reciprocal ones, in case one of the
obligors should not comply with what is incumbent upon him.
The injured party may
choose between the fulfillment and the rescission of the obligation, with the
payment of damages in either case. He may also seek rescission, even after he
has chosen fulfillment, if the latter should become impossible.
The court shall
decree the rescission claimed, unless there be just cause authorizing the
fixing of a period.
This is understood to be without prejudice to the rights of third
persons who have acquired the thing, in accordance with Articles 1385 and 1388
and the Mortgage Law.
The rescission referred
to in this article, more appropriately referred to as resolution is on the
breach of faith by the defendant which is violative of the reciprocity between
the parties.[44] The
right to rescind, however, may be waived, expressly or impliedly.[45]
While the right to
rescind reciprocal obligations is implied, that is, that such right need not be
expressly provided in the contract, nevertheless the contracting parties may
waive the same.[46]
Contrary to the
respective dispositions of the CIAC and the CA, we find that HRCC had no right
to rescind the Subcontract Agreement in the guise of a work stoppage, the
latter having waived such right. Apropos
is Article 11.2 of the Subcontract Agreement, which reads:
11.2
Effects of Disputes and
Continuing Obligations
Notwithstanding any dispute, controversy, differences or arbitration
proceedings relating directly or indirectly to this SUBCONTRACT Agreement and without prejudice to the eventual outcome thereof, [HRCC] shall at all times proceed with the
prompt performance of the Works in accordance with the directives of FFCCI and
this SUBCONTRACT Agreement.[47]
(Emphasis supplied)
Hence, in spite of the existence of dispute
or controversy between the parties during the course of the Subcontract
Agreement, HRCC had agreed to continue the performance of its obligations
pursuant to the Subcontract Agreement. In view of the provision of the
Subcontract Agreement quoted above, HRCC is deemed to have effectively waived
its right to effect extrajudicial rescission of its contract with FFCCI.
Accordingly, HRCC, in the guise of rescinding the Subcontract Agreement, was
not justified in implementing a work stoppage.
The costs of arbitration should
be shared by the parties equally.
Section 1, Rule 142 of the Rules of Court provides:
Section 1. Costs ordinarily follow results of suit.
Unless otherwise provided in
these rules, costs shall be allowed to the prevailing party as a matter of
course, but the court shall have power, for special reasons, to adjudge that
either party shall pay the costs of an action, or that the same be divided, as may be equitable. No costs shall be
allowed against the Republic of the
Although, generally, costs are adjudged against the
losing party, courts nevertheless have discretion, for special reasons, to
decree otherwise.
Here, considering that the work stoppage of HRCC is not justified,
it is only fitting that both parties should share in the burden of the cost of
arbitration equally. HRCC had a valid reason to institute the complaint against
FFCCI in view of the latters failure to pay the full amount of its monthly
progress billings. However, we disagree with the CIAC and the CA that only
FFCCI should shoulder the arbitration costs. The arbitration costs should be
shared equally by FFCCI and HRCC in view of the latters unjustified work
stoppage.
WHEREFORE, in consideration of the
foregoing disquisitions, the Decision dated February 6, 2009 and Resolution
dated April 13, 2009 of the Court of Appeals in CA-G.R. SP No. 91860 are hereby
AFFIRMED with MODIFICATION that the arbitration costs shall be shared equally by the parties herein.
SO ORDERED.
BIENVENIDO L. REYES
Associate
Justice
WE CONCUR:
ANTONIO T.
CARPIO
Associate Justice
|
ARTURO D. BRION Associate Justice |
JOSE Associate Justice |
MARIA
Associate Justice
A T T E S T A
T I O N
I
attest that the conclusions in the above Decision had been reached in
consultation before the case was assigned to the writer of the opinion of the
Courts Division.
ANTONIO T.
CARPIO
Associate Justice
Chairperson, Second Division
C E R T I F I
C A T I O N
Pursuant
to Section 13, Article VIII of the Constitution and the Division Chairperson's
Attestation, I certify that the conclusions in the above Decision had been
reached in consultation before the case was assigned to the writer of the
opinion of the Courts Division.
RENATO C.
CORONA
Chief Justice
[1] Penned by Associate Justice Romeo F. Barza, with Associate Justices Josefina Guevara-Salonga and Arcangelita M. Romilla-Lontok, concurring; rollo, pp. 47-69.
[2]
[3]
[4]
[5]
[6]
[7]
[8]
[9]
[10]
[11]
[12]
[13]
[14]
[15]
[16]
[17]
[18] Supra note 1.
[19] Rollo, pp. 70-77.
[20] Supra note 2.
[21] Rollo,
pp. 21-22.
[22] Creating an Arbitration Machinery in
the Construction Industry of the
[23] SC Circular No. 1-91 and Revised
Administrative Circular No. 1-95 provides that appeal from the arbitral award
of the CIAC must first be brought to the CA on questions of fact, law or mixed
questions of fact and law.
[24] G.R. No. 110434, December 13, 1993,
228 SCRA 397.
[25]
[26] 479 Phil. 578 (2004).
[27]
[28] Vda. De Formoso v. Philippine
National Bank, G.R.
No. 154704, June 1, 2011.
[29] See
Philippine National Construction
Corporation v. Court of Appeals, G.R. No. 159417, January 25, 2007, 512
SCRA 684, 695.
[30] Civil Code of the
[31] G.R. No. 168108, April 13, 2007, 521
SCRA 131.
[32]
[33] Rollo,
p. 87.
[34]
[35] G.R. No. 79269, June 5, 1991, 198
SCRA 130.
[36]
[37] Supra note 4.
[38] Supra note 7.
[39] Supra note 8.
[40] Supra note 5.
[41] Supra note 6.
[42] Supra note 9.
[43] Rollo, pp. 65-66.
[44] Pryce Corp. v. Phil. Amusement and Gaming
Corp., 497 Phil. 490, 505 (2005), citing the Concurring Opinion of Mr.
Justice J.B. L. Reyes in Universal Food
Corp. v. CA, 144 Phil. 1, 21 (1970).
[45] Francisco v. DEAC Construction, Inc.,
G.R. No. 171312, February 4, 2008, 543 SCRA 644, 655.
[46] Tolentino, Commentaries and Jurisprudence on the Civil Code of the
[47] Rollo, p. 91.