G.R. No. 125678 - Philamcare Health Systems, Inc. vs. Court of Appeals

El Dorado Consulting Realty and Development Group Corporation (El Dorado) entered into a construction contract with ASPF Construction and Development, Inc. for building a seven‐storey condominium hotel known as “The Ritz” in Pampanga.
The contract price was set at PHP 170,000,000.00, with a provision for performance guarantees through Performance Bonds issued by Pacific Union Insurance Company (PUIC).

Initially, on July 10, 2014, ASPF Construction secured a Performance Bond from PUIC amounting to PHP 19,641,807.80.
The Owner-Contractor Agreement was later amended to increase the Performance Bond to PHP 98,209,039.00 (covering Phase 1 of the project), prompting PUIC to issue another Performance Bond of PHP 78,567,231.20.

During construction, El Dorado issued several notices to ASPF Construction concerning delays, site safety violations, defects, and non-compliance with contractual obligations.
On February 5, 2015, ASPF Construction requested a revision of the payment schedule due to liquidity concerns, asking for cash payments instead of payment by condominium units. El Dorado refused since the agreed mode was a major contractual consideration.

On April 30, 2015, El Dorado sent a Notice of Default, termination of the Agreement, denial of payment billings, and demand for the return of the down payment.
On May 6, 2015, El Dorado submitted claims under the Performance Bonds amounting to a total of PHP 98,209,039.20, alleging substantial delays and defaults by ASPF Construction.
On June 25, 2015, PUIC informed El Dorado that the Performance Bonds were cancelled due to non-payment of premiums.

Following the cancellation of the Performance Bonds, on July 13, 2016, El Dorado filed a Request for Arbitration before the Construction Industry Arbitration Commission (CIAC), seeking relief for:

PUIC raised an Answer with Compulsory Counterclaim, questioning the CIAC’s jurisdiction by asserting that, as a non-signatory to the Owner-Contractor Agreement containing the arbitration clause, it should not be subject to CIAC’s proceedings. PUIC further sought recovery for exemplary damages and attorney’s fees.

It maintained its jurisdiction by linking the disputes arising from or connected with the Owner-Contractor Agreement.
Found that El Dorado had overpaid a PHP 17,000,000.00 down payment relative to actual work accomplished, noting a remaining balance due to ASPF Construction.
Awarded only PHP 1,700,000.00 in liquidated damages to El Dorado, while denying claims for retrofitting costs and offsetting issues.

Affirmed with modification the CIAC’s ruling by deleting the award for liquidated damages.
Ruled against El Dorado’s claims for unliquidated damages, retrofitting costs, and interest/arbitration costs citing lack of proof and inherent contractual defaults on El Dorado’s part.
Upheld that both parties were at fault in terms of timely payments and performance, thereby negating the basis for delay damages.

El Dorado’s subsequent motion for partial reconsideration was denied in the Consolidated Resolution dated February 28, 2019.

El Dorado filed the petition reiterating its demands, while PUIC, in its comment, supported the CA’s deletion of the liquidated damages award.
The central contention now is to determine whether the CA correctly affirmed with modification the CIAC’s ruling.

Whether the CIAC properly took cognizance of the case despite PUIC not being a party to the Owner-Contractor Agreement containing the arbitration clause.
Whether PUIC, as a non-signatory to the main construction contract, could be compelled to arbitrate disputes arising under the Performance Bonds.

Whether El Dorado is entitled to recover the claims advanced, including the down payment, liquidated damages, and additional costs related to delay or default.
Whether the evidentiary basis presented supports the claim of delay on ASPF Construction’s part, especially in light of El Dorado’s own breaches.

Whether the arbitration clause, being an integral part of the Owner-Contractor Agreement signed only by El Dorado and ASPF Construction, extends to cover disputes with PUIC.
The effect of contractual stipulations governing the integration (or lack thereof) of the Performance Bonds into the primary construction agreement.