Source: http://lawlibrary.chanrobles.com/index.php?option=com_content&view=article&id=82598:gr-176439-2014&catid=1579&Itemid=566
Timestamp: 2019-04-24 15:52:00+00:00

Document:
G.R. No. 176439, January 15, 2014 - THE PRESIDENT OF THE CHURCH OF JESUS CHRIST OF LATTER DAY SAINTS, Petitioner, v. BTL CONSTRUCTION CORPORATION, Respondent.; G.R. No. 176718 - BTL CONSTRUCTION CORPORATION,Petitioner, v. THE PRESIDENT OF THE MANILA MISSION OF THE CHURCH OF JESUS CHRIST OF LATTER DAY SAINTS and BPI-MS INSURANCE CORPORATION, Respondents.
THE PRESIDENT OF THE CHURCH OF JESUS CHRIST OF LATTER DAY SAINTS, Petitioner, v. BTL CONSTRUCTION CORPORATION, Respondent.
BTL CONSTRUCTION CORPORATION,Petitioner, v. THE PRESIDENT OF THE MANILA MISSION OF THE CHURCH OF JESUS CHRIST OF LATTER DAY SAINTS and BPI-MS INSURANCE CORPORATION, Respondents.
Before the Court are consolidated petitions for review on certiorari1 both assailing the Decision2 dated August 15, 2006 and Resolution3 dated January 26, 2007 of the Court of Appeals (CA) in CA-G.R. SP No. 84068 which modified the Decision4 dated April 27, 2004 of the Construction Industry Arbitration Commission (CIAC), awarding the following amounts: (a) P1,248,179.87 as 10% retention money, and P1,612,017.74 as unpaid balance of the original contract price in favor of BTL Construction Corporation (BTL); and (b) P526,400.00 as cost overrun, P300,533.49 as overpayment for the works taken in the change orders subject of these cases, and P1,800,560.00 as liquidated damages in favor of the Church of Jesus Christ of Latter Day Saints5 (COJCOLDS).
On January 10, 2000, COJCOLDS and BTL entered into a Construction Contract6 (Contract) for the latter’s construction of the former’s meetinghouse facility at Barangay Cabug, Medina, Misamis Oriental (Medina Project). The contract price was set at P12,680,000.00 (contract price), and the construction period from January 15 to September 15, 2000.7 However, due to bad weather conditions, power failures, and revisions in the construction plans (as per Change Order Nos. 1 to 12 agreed upon by the parties),8 among others, the completion date of the Medina Project was extended.
During the preliminary conference held on February 10, 2004, the parties agreed to a Terms of Reference (TOR)17 which was later amended on March 4, 2004.18 Under the amended TOR, it was stipulated that the parties’ relationship with respect to the Medina Project is governed by, among others, the Contract,19 and the General Conditions of the Contract20 (General Conditions). They also stipulated that 98% of the said project had been completed.
In a Decision27 dated August 15, 2006, the CA modified the CIAC’s ruling in that it ordered COJCOLDS not only to pay BTL the amount of P1,612,017.74 representing the unpaid portion of 98% of the contract price, but also to return to BTL the 10% retention money in the amount of P1,248,179.87, after deducting the cost overrun of P526,400.00 that BTL was held to shoulder as per Article 3(E) of the Contract28 (under which COJCOLDS was allowed to engage the services of another contractor, i.e., Vigor, to complete the Medina Project using the 10% retention amount).
Finally, the CA deleted the award of attorney’s fees in BTL’s favor as COJCOLDS was not in bad faith in refusing to pay the former’s claims.
The issues raised for the Court’s resolution are as follows: (a) whether or not the 10% retention money that COJCOLDS was ordered to release in favor of BTL is separate and distinct from the unpaid balance of the contract price amounting to P1,612,017.74; (b) whether or not COJCOLDS is liable for the "additional works" performed by BTL, specifically the concrete retaining wall and the works taken under Change Order Nos. 8 to 12; (c) whether or not BTL incurred delay in its obligation to complete the Medina Project and thus, must pay COJCOLDS liquidated damages at the rate of P12,680.00 for every day of delay; (d) whether or not BTL is liable to pay COJCOLDS the value of cost overrun in the amount of P526,400.00; (e) whether or not BTL received overpayments in the change orders from COJCOLDS amounting to P300,533.49 and thus, should be held liable to return the same; and (f ) whether or not the parties are liable to pay each other’s attorney’s fees, arbitration costs, and costs of suit.
COJCOLDS’s petition in G.R. No. 176439 is partly meritorious, while BTL’s petition in G.R. No. 176718 is without merit. The Court shall resolve the above-mentioned issues in the order that they are mentioned.
I. Liabilities of COJCOLDS to BTL.
b. Unpaid Balance of the Contract Price.
The Court agrees with COJCOLDS.
The OWNER shall make payment on account of this Contract based on the value of work accomplished less TEN (10) percent retention and Expanded Withholding Tax (One percent of the amount due), for the duration of the Contract. The percentage value of work to be paid is in order of 15%, 30%, 45%, 60%, 75%, 90% and 100% accomplishments.
A reading of the foregoing contractual provisions would reveal that the nature of the 10% retention money under the parties’ Contract is no different from the description laid down by jurisprudence–that it is a portion of the contract price withheld from the contractor to function as a security for any corrective work to be performed on the infrastructure covered by a construction contract. As such, the 10% retention money should not be treated as a separate and distinct liability of COJCOLDS to BTL as it merely forms part of the contract price. While COJCOLDS is bound to eventually return to BTL the amount of P1,248,179.87 as retention money, the said amount should be automatically deducted from BTL’s outstanding billings. Ultimately, COJCOLDS’s total liability to BTL should only be pegged at P1,612,017.74, representing the unpaid balance of 98% of the contract price, inclusive of the 10% retention money.
Under Change Order Nos. 8 to 12.
In these cases, records reveal that there is neither a written authorization nor agreement covering the additional price to be paid for the concrete retaining wall. This confirms the CA’s finding that the construction of the perimeter wall of the Medina Project, which is included in the original plans and specifications for the same, already subsumes the construction of the concrete retaining wall.43 Accordingly, COJCOLDS should not pay the amount of P804,460.89 claimed by BTL as additional cost for the same.
In similar regard, the COJCOLDS should not be held liable for the costs of the additional works taken under Change Order Nos. 8 to 12 amounting to P344,360.16 as claimed by BTL. As correctly observed by the CA, BTL had, in fact, requested COJCOLDS to make the payments therefor directly to its suppliers in view of its financial losses in another project.44 Hence, considering that COJCOLDS’s payment to BTL’s suppliers already covered the costs of said additional works upon its own request and to its own credit,45 BTL maintains no right to pursue such claim.
With BTL’s claims for the costs of additional works herein denied, COJCOLDS’s total liability to BTL thus stands in the amount of P1,612,017.74, which represents the unpaid balance of 98% of the contract price, inclusive of the 10% retention money, as previously stated.
Having resolved the foregoing issues, the Court now proceeds to determine BTL’s liabilities to COJCOLDS.
II. Liabilities of BTL to COJCOLDS.
a. Liquidated Damages Due to Delay.
BTL’s liability to COJCOLDS for liquidated damages is a result of its delay in the performance of its obligations under the Contract. While the fact of BTL’s delay has not been seriously disputed in these cases, the Court must, however, resolve the extent of such delay in view of the conflicting findings of the CIAC and the CA on the matter.
In these cases, records reveal that BTL sought for a 304-day extension of the original completion deadline of September 15, 2000, broken down as follows: (a) 184 days as per Change Order Nos. 1 to 6;46 and (b) 120 days as per Change Order Nos. 8 to 12.47 However, the architect only recommended that COJCOLDS should only grant BTL extensions of 160 days for the works to be done under Change Order Nos. 1 to 6 and 30 days for Change Order Nos. 8 to 12, or a total of 190 days. Since Article 21.0448 of the General Conditions expressly recognizes that the architect’s recommendations regarding extensions of time should be controlling, the Court upholds the CA’s finding that BTL was only granted a 190-day extension (from the original completion deadline) to finish the Medina Project, or until March 24, 2001. Despite such extension, BTL nevertheless failed to complete the same. In fact, as the parties themselves admitted, the Medina Project was only 98% complete when the Contract was terminated. Based on the foregoing, the Court thus finds that BTL’s delay should be reckoned from March 25, 2001 (or the day after the above-stated 190-day extension) up until August 17, 2001 (or the day when the Contract was terminated), or a total of 146 days (length of delay). Applying Article 3(B)49 of the Contract and Article 29.0450 of the General Conditions, BTL is therefore liable to pay COJCOLDS liquidated damages in the amount of P12,680.00 multiplied by the length of delay, resulting in a total of P1,851,280.00.
Due to BTL’s delay which impelled COJCOLDS to terminate the Contract and subsequently hire the services of another contractor, i.e., Vigor, to finish the Medina Project, the Court equally agrees with the CA’s finding that COJCOLDS incurred a cost overrun of P526,400.00. Conformably with Article 3(E)51 of the Contract and Article 29.0452 of the General Conditions, BTL should therefore reimburse COJCOLDS the said cost which the latter incurred essentially because of BTL’s failure to complete the project as agreed upon.
Based on the records, BTL charged COJCOLDS the amount of P1,014,469.79 for the modifications introduced to the Medina Project as indicated in Change Order Nos. 1 to 12.53 In turn, COJCOLDS paid BTL the amount of P651,727.9154 for the modifications covered by Change Order Nos. 1 to 7 and no longer paid for those covered by Change Order Nos. 8 to 12 because, as discussed earlier, COJCOLDS diverted such payments directly to BTL’s suppliers upon its own request and to its own credit. Accordingly, COJCOLDS paid P663,275.37 to these suppliers, resulting in COJCOLDS actually paying a total of P1,315,003.28 for the works taken under Change Order Nos. 1 to 12.55 This means that BTL was effectively overpaid the amount of P300,533.49, and is therefore obliged to return the same to COJCOLDS pursuant to Article 2154 of the Civil Code which states that "[i]f something is received when there is no right to demand it, and it was unduly delivered through mistake, the obligation to return it arises."
To recapitulate, the Court sustains the following liabilities of BTL to COJCOLDS: (a) P1,851,280.00 as liquidated damages; (b) P526,400.00 as cost overrun; and (c) P300,533.49 as overpayment under Change Order Nos. 1 to 12.
Arbitration Costs, and Costs of Suit.
In these cases, the Court observes that neither party was shown to have acted in bad faith in pursuing their respective claims against each other. The existence of bad faith is negated by the fact that the CIAC, the CA, and the Court have all found the parties’ original claims to be partially meritorious. Thus, absent no cogent reason to hold otherwise, the Court deems it inappropriate to award attorney’s fees in favor of either party.
(b) BTL is ORDERED to pay COJCOLDS the amounts of P1,851,280.00 as liquidated damages, P526,400.00 as cost overrun, and P300,533.49 as reimbursement for the overpayment in the works taken under Change Order Nos. 1 to 12.
(c) Each party shall bear its own costs.
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 Court’s Division.
1 Rollo (G.R. No. 176439), pp. 10-A-41; rollo (G.R. No. 176718), pp. 12-61.
2 Rollo (G.R. No. 176439), pp. 45-64; rollo (G.R. No. 176718), pp. 590-609. Penned by Associate Justice Rosalinda Asuncion-Vicente, with Associate Justices Jose L. Sabio, Jr. and Sesinando E. Villon, concurring.
3 Rollo (G.R. No. 176439), pp. 66-68; rollo (G.R. No. 176718), pp. 698-700.
4 Rollo (G.R. No. 176718), pp. 317-344. Signed by Chairman Joven B. Joaquin and Members Salvador P. Castro, Jr. and Eliseo I. Evangelista.
6 Rollo (G.R. No. 176718), pp. 77-80.
7 Rollo (G.R. No. 176439), pp. 45-46; rollo (G.R. No. 176718), pp. 590-591.
8 Rollo (G.R. No. 176718), pp. 84-96 and 112-117.
9 CA rollo, pp. 259�G-260.
13 Rollo (G.R. No. 176439), pp. 46-47.
14P3,556, 951.85 as cost of foreclosed properties; P163,382.41 as legal fees/litigation expenses; P1,066,697.32 as interest/charges paid to banks; P458, 469.02 as interests paid to suppliers; and P9,085,251.40 as business losses.
15 Rollo (G.R. No. 176439), p. 47; see also rollo (G.R. No. 176718), p. 325.
16 Rollo (G.R. No. 176439), p. 47; see also rollo (G.R. No. 176718), pp. 325-326.
17 Rollo (G.R. No. 176718), pp. 215-222.
20 CA rollo, pp. 107-140.
21 Rollo (G.R. No. 176718), pp. 317-344.
23P804,460.00 in some parts of the record.
24 Rollo (G.R. No. 176718), p. 340.
26 See COJCOLDS’s Petition for Review dated June 4, 2004 in CA-G.R. SP No. 84068, id. at 350-390.
27 Rollo (G.R. No. 176439), pp. 45-64; rollo (G.R. No. 176718), pp. 590-609.
28 Rollo (G.R. No. 176439), p. 59; rollo (G.R. No. 176718), p. 604. See also Article 29.04 of the General Conditions, CA rollo, p. 133.
29 Rollo (G.R. No. 176439), p. 63; rollo (G.R. No. 176718), p. 608.
30 Rollo (G.R. No. 176439), pp. 55-56; rollo (G.R. No. 176718), pp. 600-601.
31 See CA rollo, pp. 259�G-260.
32 Rollo (G.R. No. 176439), pp. 66-68; Rollo (G.R. No. 176718), pp. 698-700.
33 Rollo (G.R. No. 176439), pp. 10�A-41; Rollo (G.R. No. 176718), pp. 12-61.
34 Rollo (G.R. No. 176439), pp. 20-26.
35 466 Phil. 182 (2004).
37 CA rollo, p. 289.
40 Rollo (G.R. No. 176718), p. 46.
42 See Chung v. Ulanday Construction, Inc., G.R. No. 156038, October 11, 2010, 632 SCRA 485, 497-498, citing Titan-Ikeda Construction & Dev�t Corp. v. Primetown Properties Group, Inc., 568 Phil. 432, 453 (2008); Powton Conglomerate, Inc. v. Agcolicol, 448 Phil. 643, 655 (2003).
43 Rollo (G.R. No. 176439), pp. 56-57.
45 CA rollo, pp. 150 and 178.
46 Rollo (G.R. No. 176718), pp. 112-117.
47 CA rollo, p. 366.
A. Should the Contractor be obstructed or delayed in the prosecution or completion of the work by the act, neglect, delay or default of the Owner or any other contractor employed by the Owner on the work; by strikes or lockouts; by an Act of God or Force Majeure as defined in Article 1.26; by delay authorized by the Architect pending arbitration; then the Contractor shall within fifteen (15) days from the occurrence of such delay file the necessary request for extension. The Architect may grant the request for extensions for such period of time as he considers reasonable. However, no such extension of time shall be granted for any alleged failure of the Owner to furnish materials or information unless they be required in the proper prosecution of the work in the order prescribed by the Architect and unless the Contractor shall have made written request for them at least ten (10) days before they are actually needed.
C. If the satisfactory fulfilment of the Contract shall require the performance of work in greater quantities than those set forth in the Contract, the time allowed for performance shall be increased in the same ratio that the total cost of work actually performed against the total cost in the Contract. However, if in the opinion of the Architect, the nature of the increased work is such that the new Contract Time as computed above is unreasonably short, the time allowance for any extension and increases shall be agreed upon in writing.
A. The total daily liquidated damages up to and including the day immediately before the date the Owner effectively takes over the work.
53 Rollo (G.R. No. 176718), pp. 84-94. See also CA rollo, pp. 150 and 178.
55 CA rollo, pp. 150 and 178.
57 Development Bank of the Philippines v. Traverse Development Corporation, G.R. No. 169293, October 5, 2011, 658 SCRA 614, 624, citing ABS-CBN Broadcasting Corp. v. CA, 361 Phil. 499, 529 (1999).
Section 1. Cost ordinarily follow results of suit.–Unless otherwise provided in these rules, cost 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 Philippines unless otherwise provided by law.

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