G.R. No. 182967 - Philippine National Railways vs. Kanlaon Construction Enterprises Co., Inc.

Philippine National Railways (PNR) is the petitioner, while Kanlaon Construction Enterprises Co., Inc. (Kanlaon) is the respondent.
The dispute arises from contracts executed for repair works on three PNR station buildings and passenger shelters.

In July 1990, PNR and Kanlaon entered into three separate contracts to repair the following stations:

On 30 June 1994, Kanlaon sent a demand letter to PNR requesting the release of the retention money amounting to ₱333,894.07.
PNR, in its letter dated 12 July 1994, denied the demand, citing the issuance of the 24 January 1994 COA Notices of Suspension.
On 8 November 1994, Kanlaon filed a complaint for collection of money plus damages, seeking:

The trial court (Regional Trial Court of Quezon City, Branch 221) ruled in favor of Kanlaon in its 12 December 2000 Decision, declaring:

PNR liable to pay the unreleased retention money plus interest at 12% per annum from the date of Kanlaon’s first written demand.
PNR liable to pay the unpaid contract price for the completed projects plus interest at 12% per annum from the same date.
Both PNR and COA to be jointly responsible for reasonable attorney’s fees and cost of suit.

On 22 February 2001, the trial court modified its interest rate from 12% to 6% per annum.
COA appealed the decision on 28 December 2000, and PNR later filed its motion for reconsideration.

On 26 February 2008, the Court of Appeals affirmed the trial court’s Decision as modified by the 22 February 2001 Order.
PNR’s motion for reconsideration was denied on 26 May 2008, with the appellate court sustaining the ruling that:

The preponderance of evidence demonstrated that Kanlaon had completed its projects.
The only reason for PNR’s non-payment was the COA’s Notices of Suspension, not any alleged non-completion by Kanlaon.

PNR contended that Kanlaon failed to comply with certain contractual conditions and that the completion of the projects was not substantiated by credible evidence.
A central issue became the absence of a Certificate of Availability of Funds – a requirement under Sections 85 and 86 of Presidential Decree No. 1445, and later under the Administrative Code of 1987.
The COA had issued the Notices of Suspension partly because the contracts lacked the necessary certification confirming fund appropriation and availability.

Whether the Court of Appeals erred in finding that the projects were completed in light of PNR’s allegations and the evidence presented.
Whether the Court of Appeals was incorrect in affirming the trial court’s 12 December 2000 Decision, as modified by the 22 February 2001 Order, particularly regarding the computation of interest from the date of Kanlaon’s first written demand.
Whether the refusal of PNR to pay Kanlaon was justified on the basis that the retention money was withheld due to COA’s Notices of Suspension, despite Kanlaon’s contention that it had fully complied with the contractual requirements.