Case Digest (G.R. No. 195372) Core Legal Reasoning Model
Core Legal Reasoning Model
Facts:
The case involves two petitions filed under Rule 45 of the Rules of Court by Philippine Commercial and International Bank (currently Banco De Oro Unibank, Inc., hereinafter "PCIB") and William Golangco Construction Corporation (hereinafter "WGCC"). The events leading to the dispute began on October 20, 1989, when WGCC and PCIB entered into a construction contract for the extension of PCIB Tower II, which included applying a granite wash-out finish on the exterior walls of the building. The project was declared complete, and in a letter dated June 1, 1992, PCIB accepted the turnover of the completed work. To address potential defects arising within a year, WGCC submitted a guarantee bond from Malayan Insurance Company, Inc. on July 1, 1992.In 1993, issues arose when portions of the granite wash-out finish began to peel, prompting PCIB to request repairs, which WGCC attempted but could not satisfactorily complete. By 1994, unable to fulfill the repair obligation, PCIB hired Brai
Case Digest (G.R. No. 195372) Expanded Legal Reasoning Model
Expanded Legal Reasoning Model
Facts:
- Contractual Background and Project Details
- Inception of Contract
- William Golangco Construction Corporation (WGCC) and Philippine Commercial International Bank (PCIB) entered into a construction contract on October 20, 1989 for the extension of PCIB Tower II.
- The project involved, among other things, the application of a granite wash‐out finish on the exterior walls of the building.
- Turnover and Guarantee
- PCIB accepted the turnover of the completed work on June 1, 1992.
- To cover any construction defects arising within one year, WGCC submitted a guarantee bond dated July 1, 1992, issued by Malayan Insurance Company, Inc.
- Emergence of Construction Defects and Subsequent Repairs
- Defects Manifest
- In 1993, portions of the granite wash-out finish began peeling off and falling from the exterior walls, signaling construction defects.
- Initial and Subsequent Remedies
- WGCC performed minor repairs upon PCIB’s request for rectification of the defects.
- In 1994, PCIB entered into another contract with Brains and Brawn Construction and Development Corporation to redo the entire finish, as WGCC indicated it was “not in a position” to undertake the new finishing work, although it was willing to share part of the cost.
- PCIB incurred expenses amounting to ₱11,665,000.00 for the repair work.
- Arbitration Proceedings and CIAC Decision
- Initiation of Arbitration
- PCIB filed a request for arbitration with the Construction Industry Arbitration Commission (CIAC) seeking reimbursement for the expenses it incurred in repairing the defects.
- WGCC interposed a counterclaim for a material cost adjustment amounting to ₱5,777,157.84.
- CIAC Award
- The CIAC Decision of June 21, 1996 awarded PCIB ₱9,741,829.00 for the cost of repairs done by another contractor and simultaneously upheld WGCC’s counterclaim for ₱5,777,157.84.
- The dispositive portion of the CIAC Decision ordered WGCC to pay the net amount, with legal interest of 6% per annum computed from the date of the CIAC Decision until fully paid.
- Supreme Court Review and Partial Reversal
- Appeals Before the Supreme Court
- WGCC challenged the CIAC finding regarding its liability for the construction defects by appealing in G.R. No. 142830. The Supreme Court held WGCC not liable for PCIB’s claim on the construction defects.
- PCIB similarly appealed the portion regarding material cost adjustments in G.R. No. 127275 but was ruled against by the Supreme Court.
- Finality and Execution
- WGCC subsequently filed a motion for execution on January 5, 2007 for the counterclaim awarded by the CIAC, praying for the inclusion of legal interest at 6% per annum computed from June 21, 1996 on the principal ₱5,777,157.84.
- The CIAC initially issued a writ of execution without mentioning the legal interest, which led WGCC to file a motion to amend the writ to include the interest and to clarify party nomenclature for PCIB and its successors.
- Motions, Amendments, and CIAC Orders on Interest Computation
- Motion to Amend and Reconsideration
- On April 3, 2007, PCIB opposed WGCC’s motion to include legal interest, prompting WGCC to file a reply.
- On May 25, 2007, the CIAC granted the motion to amend the writ, including (a) a clarification that any reference to “PCIB” or “CLAIMANT” included their successors, and (b) the inclusion of a 6% legal interest on the principal award computed from June 21, 1996.
- Conflict over the Appropriate Date for Interest Computation
- PCIB later moved for reconsideration, arguing that interest should commence from April 27, 2006—the date the Supreme Court decision in G.R. No. 142830 (which absolved WGCC of construction defects liability) became final—instead of from the CIAC Decision’s issuance on June 21, 1996.
- After opposition by WGCC, the CIAC amended its ruling to state a 12% interest per annum from April 27, 2006, later revising its position in subsequent orders: the July 25, 2008 Order sustained that the interest should accrue from April 27, 2006, but at a reduced rate of 6% per annum.
- Court of Appeals Proceedings and Subsequent Motions
- WGCC’s CA Petition and the Issue of Interest
- WGCC filed a petition before the Court of Appeals (CA), contesting the computation of interest, citing Eastern Shipping Lines v. Court of Appeals as authority for 6% interest from the issuance of the CIAC Decision until April 26, 2006, and a further 12% on the entire award from April 27, 2006 until full payment.
- PCIB contended that the 6% interest applicable in Eastern Shipping was imposed only in cases of breach of obligation not involving a loan or forbearance, and that such interest must be expressly included in the judgment.
- CA’s Decision and its Aftermath
- On December 10, 2009, the CA issued a decision partly granting WGCC’s petition by ordering the inclusion of legal interest at 6% per annum computed from June 21, 1996 until full payment.
- Both PCIB’s motion for reconsideration and WGCC’s motion to clarify (which sought to have the entire award treated as forbearance earning 12% interest beginning April 27, 2006) were denied by the CA in its January 28, 2011 Resolution.
- Execution of the Award and Payment Issues
- Enforcement Proceedings
- On January 23, 2009, WGCC filed a manifestation and motion before the CIAC for the execution of the decision, which led the CIAC on February 9, 2009 to issue a writ directing enforcement of both the principal award (₱5,777,157.84) and 12% interest on the principal computed from April 27, 2006 until full payment, notwithstanding the pending CA Petition.
- Payment by PCIB’s Successor
- On March 10, 2009, Banco De Oro Unibank, Inc. (BDO), as the successor of PCIB, issued two checks—₱5,777,157.84 and ₱1,965,816.45—amounting to ₱7,742,974.29 in total, purportedly in full and final settlement of the principal award and legal interest.
- Consolidation of the Case
- The controversies stemming from the conflicting computations of interest and the subsequent motions culminated in the Petitions for review consolidated under G.R. Nos. 195372 and 195375, leading to the current Supreme Court review.
Issues:
- Whether the Court of Appeals erred in directing PCIB to pay interest on the principal award at the rate of 6% per annum, reckoned from June 21, 1996 (the issuance of the CIAC Decision), until full payment, as opposed to commencing from the date on which the Supreme Court’s decision in G.R. No. 142830 became final.
- Whether WGCC’s prayer to have the entire judgment award treated as a forbearance of money—thereby subject to an interest rate of 12% per annum computed from the finality of the Supreme Court decision on April 27, 2006 until full payment—should have been granted.
Ruling:
- (Subscriber-Only)
Ratio:
- (Subscriber-Only)