Case Digest (G.R. No. 142525)
Facts:
In the case of Federal Builders, Inc. vs. Daiichi Properties and Development, Inc., G.R. No. 142525, adjudicated on February 13, 2009, the dispute arose from a Construction Agreement executed on December 29, 1995, between Federal Builders, Inc. (Petitioner) and Daiichi Properties and Development, Inc. (Respondent). The contract pertained to the general construction of the Orient Plaza, a high-rise building project. Under the agreement, Daiichi was to supply cement and steel bars, specifically 834,273 bags of cement and 9,262,334.45 kilograms of steel bars, while Federal was responsible for labor and other materials, with a fixed price of P212,000,000.00 allocated for those supplies. The contract allowed for Daiichi to revise construction plans, and during the project, Daiichi modified the concrete strength specifications, prompting changes in material requirements and labor costs.
The parties agreed to a reduction in the overall project price, but conflicted over the methodolog
Case Digest (G.R. No. 142525)
Facts:
- Background and Parties
- Federal Builders, Inc. (Federal) was the winning bidder for the construction of Daiichi Properties and Development, Inc.'s (Daiichi) high-rise building project known as "Orient Plaza."
- The underlying dispute arose from a Construction Agreement executed on December 29, 1995, which clearly delineated the responsibilities of the parties, with Daiichi supplying cement and steel bars and Federal providing labor and other materials.
- Terms of the Construction Agreement
- The contract specified guaranteed maximum quantities for materials, namely 834,273 bags of cement and 9,262,334.45 kilograms of steel bars, while the labor and other materials were set at a fixed price of P212,000,000.00.
- The agreement provided for possible revisions of the construction plans, including provisions for change orders and alterations by the owner at any stage of the work.
- Changes in the Construction Plans
- During the construction process, Daiichi revised the plans by reducing the concrete strength from 8,000 to 6,000 pounds per square inch.
- This reduction led to decreased required quantities of cement, steel bars, and other materials, as well as diminished labor costs, prompting an adjustment in the contract price.
- Dispute Over Deductive Cost Computation
- The parties agreed that deductions from the contract price should correspond to the decreased material and labor requirements resulting from the revised plans.
- Two different methodologies emerged:
- Daiichi’s approach computed the deductive cost by determining the difference between the quantities (or peso value) necessary under the original plan versus the revised plan.
- Federal’s method compared the quantities (or peso value) specified in the construction agreement (i.e., the guaranteed maximum) with those required under the revised plan, resulting in a significantly lower deductive cost.
- An independent quantity surveyor engaged by Daiichi, Davis Langdo and Seah Philippines, Inc. (DLS), produced an estimate (P68,441,415.58) closer to Daiichi’s computation.
- Arbitration Proceedings and Tribunal’s Actions
- Dissatisfied with the differing formulas for deductive costs, Daiichi initiated arbitration by filing a petition with the Construction Industry Arbitration Commission (CIAC) on November 9, 1998.
- During the arbitration hearing, Daiichi filed a motion on June 2, 1999, to commission an independent quantity surveyor in order to ascertain the actual quantities required under both the original and revised plans.
- The Arbitral Tribunal denied the motion on June 29, 1999, ruling that an independent survey was only necessary if both parties agreed, a motion which was later reconsidered and again denied on July 13, 1999.
- Intervention by the Court of Appeals
- Daiichi challenged the Arbitral Tribunal’s orders before the Court of Appeals, which, on November 9, 1999, set aside the tribunal’s orders and mandated the commissioning of an independent quantity surveyor.
- Further, Federal’s subsequent motion for reconsideration of the Court of Appeals’ decision was denied as reflected in the Resolution dated February 23, 2000.
- Procedural Issues and Final Developments
- Federal’s petition before the Supreme Court was filed as a Petition for Review on Certiorari under Rule 65 rather than the appropriate remedy under Rule 45 for reviewing decisions of the Court of Appeals.
- The Supreme Court noted that the petition was discounted not only due to the improper remedy but also, even on a merits basis, because the Court of Appeals did not abuse its discretion in ordering the independent survey.
Issues:
- Proper Remedy for Review
- Whether Federal correctly availed itself of a Petition for Review on Certiorari under Rule 65 instead of pursuing the appropriate remedy under Rule 45 for challenging a Court of Appeals decision.
- Scope of Judicial Review in Certiorari Proceedings
- Whether the Supreme Court, in reviewing the Case of Appeals' decision, is limited to examining jurisdictional issues and grave abuse of discretion rather than re-assessing the merits of the Arbitral Tribunal’s decision.
- Necessity of Commissioning an Independent Quantity Surveyor
- Whether the Arbitral Tribunal committed a grave abuse of discretion by denying the motion to commission an independent quantity surveyor, thereby preventing a complete and objective determination of the deductive cost.
Ruling:
- (Subscriber-Only)
Ratio:
- (Subscriber-Only)
Doctrine:
- (Subscriber-Only)