Title
National Housing Authority vs. 1st United Constructors Corporation
Case
G.R. No. 176535
Decision Date
Sep 7, 2011
NHA sought to reverse the CA's decision affirming CIAC's award in favor of FUCC for project delays, idle equipment, and costs, but the Supreme Court denied their appeal, ruling the termination was unilateral and upheld the awards.

Case Digest (G.R. No. 176535)
Expanded Legal Reasoning Model

Facts:

  • Parties and Project
    • The petitioner, National Housing Authority (NHA), is the government agency tasked to implement the Freedom Valley Resettlement Project (FVR Project), situated on a 750-hectare property in Sitio Boso-Boso, Brgy. San Jose, Antipolo City.
    • The respondent, First United Constructors Corporation (FUCC), was the contractor who won the public bidding for Phase I of the FVR Project with a contract price of P568,595,780.00.
    • The project involved development of 7,500 home lots initially, slotted into three residential clusters, with works including earthworks, roads, drainage, water supply, sewerage, slope protection, bridges, surveying, titling, and off-site works.
  • Contract Terms and Execution
    • The contract awarded on 10 March 1998 stipulated a 365-day completion period, commencing 16 March 1998 and originally ending 15 March 1999.
    • FUCC faced multiple work suspensions and delays due to resistance from farmers/planters and environmental concerns, leading to issuance of Partial Suspension Order No.1 and subsequent suspensions.
    • There were changes in project scope: Variation Order No. 1 reduced lots from 7,500 to 4,980, and Variation Order No. 2 further reduced to 4,032 lots, reducing contract cost from P568.6 million to P488.4 million.
    • NHA granted FUCC a total time extension of 679 calendar days, moving the completion date to 11 November 2001.
  • Payments and Progress Billings
    • FUCC submitted five Progress Billings totaling significant amounts, all paid by NHA, covering periods from March 1998 to June 2001.
    • FUCC also sought payment for Progress Billing No. 6 (not yet processed).
  • Project Termination
    • On 25 September 2001, NHA Board reclassified the Project from resettlement to a mixed-market site project, terminating the contract.
    • Notice of termination was formally sent to FUCC on 17 October 2001 under the "Contractor Not at Fault" clause.
  • FUCC's Claims and Arbitration
    • FUCC filed a complaint before the Construction Industry Arbitration Commission (CIAC) on 17 July 2003 for unpaid claims amounting to over P300 million, including:
      • Accomplished works not yet billed (Progress Billing No. 6)
      • Cost of materials, equipment, facilities
      • Price escalation and price adjustment
      • Disengagement costs
      • Idle equipment and interest
      • Attorney's fees and interest
    • NHA raised procedural and substantive defenses, arguing claims were premature, some were non-arbitrable, and counterclaimed for balance of advance payment.
  • Arbitral Proceedings and Award
    • CIAC denied NHA's motion to dismiss and proceeded with arbitration.
    • FUCC presented testimony and documentary evidence; NHA presented its defenses also supported by testimony.
    • On 7 January 2004, CIAC rendered a Decision awarding FUCC approximately P261.7 million net after deductions, including unpaid billings, costs, price adjustments, disengagement and idle equipment costs, plus interest, and ordered NHA to pay one-half of arbitration costs.
  • Court of Appeals Proceedings
    • NHA appealed to the CA, which issued a TRO and later a preliminary injunction against execution of the CIAC award.
    • NHA sought to lift garnishments imposed by the CIAC Writ of Execution; these motions were denied.
    • On 1 August 2006, the CA affirmed with modifications the CIAC award, including remanding determinations for disengagement costs and interest computations.
    • CA lifted the preliminary injunction, allowed partial garnishment releases.
    • On 31 January 2007, the CA denied reconsideration motions by NHA and directed the Land Bank to release garnished funds upon bond.
  • Present Petition
    • NHA filed the present petition for review under Rule 45, arguing the CA disregarded key facts and committed errors, notably:
      • Upholding claim payments despite FUCC's failure to post a payment guarantee bond.
      • Awarding amounts beyond FUCC's claimed sums.
      • Illegal awards for idle equipment and business losses.
      • Improper arbitration of non-arbitrable claims.
      • Mischaracterizing contract termination as unilateral despite FUCC's purported consent.

Issues:

  • Whether FUCC's failure to post a Payment Guarantee Bond precludes entitlement to claims for Progress Billing No. 6 and Price Escalation for Progress Billing Nos. 1 to 5.
  • Whether FUCC's claim for Progress Billing No. 6 should be limited to P6,496,926.29 as initially asserted or expanded to P7,384,534.22.
  • Whether NHA is liable for costs of materials, equipment, facilities, and disengagement costs claimed by FUCC.
  • Whether FUCC is entitled to claims for idle equipment and the legal basis for such awards.
  • Whether claims for costs of materials, equipment, disengagement costs, and idle equipment are arbitrable under CIAC jurisdiction and rules.
  • Whether the termination of the FVR Project contract was a unilateral act by NHA and if FUCC consented to it.
  • Whether computational errors exist in the interest awards and calculations of the arbitral award.

Ruling:

  • (Subscriber-Only)

Ratio:

  • (Subscriber-Only)

Doctrine:

  • (Subscriber-Only)

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