National Housing Authority v. First United Constructors Corp.
REITERATIONFacts
The Antecedents: Respondent First United Constructors Corporation (FUCC) was the contractor for Phase I of the National Housing Authority's (NHA) Freedom Valley Resettlement Project (FVR Project). The contract, signed on March 10, 1998, stipulated a 365-day work duration and an original bid price of ₱568,595,780.00. The project involved bulk earthworks, construction of roads, drainage, water supply, sewerage systems, slope protection, and bridge structures. Actual work commenced on March 16, 1998, with an original completion date of March 15, 1999. The project experienced work suspensions and delays, necessitating variation orders that reduced the number of home lots and the contract price. NHA granted several time extensions, totaling 679 calendar days, moving the final completion date to November 11, 2001. FUCC submitted five progress billings, all paid by NHA. However, NHA reclassified the FVR Project and terminated the Contract on September 25, 2001, citing the "Contractor Not at Fault" clause. At the time of termination, FUCC had pending claims with NHA, which remained unheeded for almost five years. Procedural History: FUCC filed a complaint with the Construction Industry Arbitration Commission (CIAC) on July 17, 2003, seeking payment for various claims, including accomplished works not yet billed, cost of materials and equipment, price escalation, price adjustment, disengagement costs, idle equipment, and attorney's fees. NHA moved to dismiss, arguing FUCC failed to exhaust administrative remedies, but the CIAC denied this. NHA filed an Answer, raising defenses such as premature recourse to arbitration, no actual suspension of works, and non-arbitrability of certain claims. NHA also filed a counterclaim for ₱38 Million representing unliquidated advance payments. The parties submitted Joint Stipulations and agreed on Terms of Reference and Supplemental Terms of Reference, outlining the issues for arbitration. FUCC presented one witness, Engr. Ben S. Dumaliang, and NHA presented Engr. Mariano E. Raner III. On January 7, 2004, the CIAC Arbitral Tribunal rendered a decision awarding FUCC ₱300,138,820.59, less NHA's counterclaim of ₱38,406,615.55. The Court of Appeals (CA) affirmed this award with modification on August 1, 2006, and denied reconsideration on January 31, 2007. The Petition: Petitioner National Housing Authority (NHA) filed a petition for review on certiorari under Rule 45 of the Revised Rules of Court, seeking to reverse and set aside the CA's decision and resolution.
Issue(s)
Whether the CIAC Arbitral Tribunal committed grave abuse of discretion in affirming the arbitral award in favor of FUCC. Whether FUCC exhausted all administrative remedies before filing its arbitration case, and whether FUCC's recourse to arbitration was premature. Whether FUCC is entitled to its claims for payment for accomplished works not yet billed (Progress Billing No. 6). Whether FUCC is entitled to payment for the cost of materials, equipment, and facilities. Whether FUCC is entitled to Price Escalation and Price Adjustment. Whether FUCC is entitled to Disengagement Costs. Whether FUCC is entitled to payment for Idle Equipment and interest thereon. Whether NHA is entitled to recoupment of the remaining portion of the advance payment made to FUCC. Whether the termination of the Contract by NHA was unilateral. Whether FUCC procured a Payment Guarantee Bond (Surety Bond) as a condition for payment of its claims.
Ruling
The Supreme Court denied the petition for review on certiorari and affirmed the Decision of the Court of Appeals dated August 1, 2006, and its Resolution dated January 31, 2007, in CA-G.R. SP No. 81635. The arbitral award in favor of respondent First United Constructors Corporation (FUCC) was upheld, subject to the recoupment of advance payments and interests by the National Housing Authority (NHA).
Ratio Decidendi
On the alleged grave abuse of discretion: The Court found no grave abuse of discretion on the part of the CA in affirming the CIAC's decision. The CIAC, as a specialized arbitral body, is presumed to have acted regularly and within its jurisdiction. Its findings of fact, when affirmed by the CA, are generally binding on the Supreme Court, absent any showing of grave abuse of discretion, fraud, or violation of law. The NHA failed to sufficiently demonstrate any such vitiating circumstances in the arbitral proceedings or the CA's affirmation thereof. The issues raised by NHA pertained to factual findings and the interpretation of the contract, which fall within the competence of the CIAC and the CA. On exhaustion of administrative remedies and prematurity of arbitration: The Court noted that the parties, through their Joint Stipulations and Terms of Reference, agreed to submit the issues to arbitration. This agreement effectively waived any objection regarding the exhaustion of administrative remedies or the prematurity of the arbitration. Furthermore, the protracted period of FUCC's attempts to negotiate its claims with NHA, which fell on deaf ears for almost five years, demonstrated that administrative remedies, if any, had been effectively exhausted or were futile to pursue. The CIAC's denial of NHA's motion to dismiss on these grounds was therefore proper. On FUCC's claims (accomplished works): The CIAC Arbitral Tribunal, after considering the evidence presented by both parties, made specific findings regarding the validity and amounts of FUCC's claims. These findings were based on the contract provisions, variation orders, suspension orders, and the parties' admissions. The CA, in turn, reviewed these findings and found no reversible error. The Court reiterated that the determination of the amounts due under a construction contract, including claims for work done is a factual matter best resolved by the arbitral tribunal and affirmed by the appellate court. The NHA did not present sufficient evidence to overturn these factual determinations. On FUCC's claims (materials): The CIAC Arbitral Tribunal, after considering the evidence presented by both parties, made specific findings regarding the validity and amounts of FUCC's claims. These findings were based on the contract provisions, variation orders, suspension orders, and the parties' admissions. The CA, in turn, reviewed these findings and found no reversible error. The Court reiterated that the determination of the amounts due under a construction contract, including claims for materials is a factual matter best resolved by the arbitral tribunal and affirmed by the appellate court. The NHA did not present sufficient evidence to overturn these factual determinations. On FUCC's claims (price escalation and price adjustment): The CIAC Arbitral Tribunal, after considering the evidence presented by both parties, made specific findings regarding the validity and amounts of FUCC's claims. These findings were based on the contract provisions, variation orders, suspension orders, and the parties' admissions. The CA, in turn, reviewed these findings and found no reversible error. The Court reiterated that the determination of the amounts due under a construction contract, including claims for escalation is a factual matter best resolved by the arbitral tribunal and affirmed by the appellate court. The NHA did not present sufficient evidence to overturn these factual determinations. On FUCC's claims (disengagement costs): The CIAC Arbitral Tribunal, after considering the evidence presented by both parties, made specific findings regarding the validity and amounts of FUCC's claims. These findings were based on the contract provisions, variation orders, suspension orders, and the parties' admissions. The CA, in turn, reviewed these findings and found no reversible error. The Court reiterated that the determination of the amounts due under a construction contract, including claims for costs arising from delays or suspensions, is a factual matter best resolved by the arbitral tribunal and affirmed by the appellate court. The NHA did not present sufficient evidence to overturn these factual determinations. On FUCC's claims (idle equipment and interests): The CIAC Arbitral Tribunal, after considering the evidence presented by both parties, made specific findings regarding the validity and amounts of FUCC's claims. These findings were based on the contract provisions, variation orders, suspension orders, and the parties' admissions. The CA, in turn, reviewed these findings and found no reversible error. The Court reiterated that the determination of the amounts due under a construction contract, including claims for costs arising from delays or suspensions, is a factual matter best resolved by the arbitral tribunal and affirmed by the appellate court. The NHA did not present sufficient evidence to overturn these factual determinations. On NHA's counterclaim for recoupment of advance payment: The CIAC Arbitral Tribunal also considered NHA's counterclaim for the recoupment of advance payments. The award explicitly deducted the amount awarded to FUCC by the amount of NHA's counterclaim plus interest. This demonstrates that the arbitral tribunal considered all claims and counterclaims presented by the parties, ensuring a comprehensive resolution of the dispute. The CA's affirmation of this aspect of the award further validated the balanced approach taken by the CIAC. On the termination of the contract: The CIAC found that NHA terminated the contract under the "Contractor Not at Fault" clause, which implies that FUCC was not the party at fault for the termination. The arbitral tribunal's findings on these matters, as affirmed by the CA, were based on the evidence and contract stipulations, and the NHA failed to show any error in these conclusions. On the surety bond: The issue of whether FUCC procured a Payment Guarantee Bond was also addressed by the CIAC, which determined its necessity and impact on the payment of certain claims. The arbitral tribunal's findings on these matters, as affirmed by the CA, were based on the evidence and contract stipulations, and the NHA failed to show any error in these conclusions.
Main Doctrine
The Supreme Court affirmed the Court of Appeals' decision, which upheld the arbitral award granted by the Construction Industry Arbitration Commission (CIAC) in favor of First United Constructors Corporation (FUCC) against the National Housing Authority (NHA). The award covered various claims including accomplished works, materials, price escalation, price adjustment, disengagement costs, and idle equipment, less the recoupment of advance payments and interests. The Court found no grave abuse of discretion in the CIAC's findings and rulings.