G.R. No. 176439 - President of Church of Jesus Christ of Latter Day Saints vs. BTL Construction Corp.

On January 10, 2000, COJCOLDS (the Church of Jesus Christ of Latter Day Saints) and BTL Construction Corporation (BTL) entered into a construction contract for the building of a meetinghouse facility at Barangay Cabug, Medina, Misamis Oriental (the Medina Project).
The agreed contract price was P12,680,000.00 with an original construction period from January 15 to September 15, 2000.
Due to adverse weather conditions, power failures, and revisions in the construction plans (implemented through Change Order Nos. 1 to 12), the project’s completion date was extended.

On May 18, 2001, facing financial losses from another project (the Pelaez Arcade II Project), BTL requested permission from COJCOLDS to bill based on 95% and 100% completion of the Medina Project and to execute deeds of assignment in favor of its suppliers so that payments could be collected directly from COJCOLDS.
COJCOLDS granted the request, and BTL acknowledged it.
On August 13, 2001, BTL ceased operations on the Medina Project due to insufficient funds to cover labor costs and the supervening increase in the prices of construction materials.
Consequently, COJCOLDS terminated the contract with BTL on August 17, 2001 and engaged Vigor Construction to complete the project.

BTL filed a complaint before the Construction Industry Arbitration Commission (CIAC) on November 12, 2003, demanding P28,716,775.40 which included claims for labor, materials, equipment, lost profits, retention money, damages, attorney’s fees, moral and exemplary damages, and arbitration costs.
Separately, COJCOLDS filed an answer with a compulsory counterclaim seeking a total of P4,134,693.49 for liquidated damages (based on BTL’s delay), reimbursement of payments made directly to suppliers, cost overrun, and attorney’s fees.
During a preliminary conference on February 10, 2004, the parties agreed to a Terms of Reference (TOR), which was later amended on March 4, 2004, stipulating that the relationship under the Medina Project would be governed by the original contract and its General Conditions, including an acknowledgment that 98% of the project was complete.

In its Decision dated April 27, 2004, the CIAC partially upheld the claims of both parties by ordering:

COJCOLDS to pay BTL the unpaid balance of the contract price (P1,612,017.74) plus claimed additional works and attorney’s fees.
BTL to pay COJCOLDS liquidated damages (P1,191,920.00) and reimbursement for payments made to its suppliers (P300,533.49).

Ordering COJCOLDS not only to pay the outstanding balance of 98% of the contract price (P1,612,017.74) but also to return the 10% retention money (P1,248,179.87) less a cost overrun of P526,400.00.
Ordering BTL to return an overpayment of P300,533.49.
Increasing the liquidated damages award to P1,800,560.00 based on the actual delay period determined by the controlling architect’s recommendation regarding extensions (granting only a 190-day extension instead of the full 238 days claimed).
Deleting awards for additional works (the concrete retaining wall and change order items) as there was no contractual basis for them and eliminating BTL’s attorney’s fees.

Motions for reconsideration by both parties were denied in a Resolution dated January 26, 2007, which eventually led to the petitions for review before the Supreme Court.

Whether the 10% retention money withheld by COJCOLDS is to be treated as a separate and distinct liability from the unpaid balance of the contract price, or whether it forms part of the contract price and should be automatically deducted from outstanding billings.

Whether COJCOLDS is liable to pay for the additional works claimed by BTL, specifically for the construction of a concrete retaining wall and the works performed under Change Order Nos. 8 to 12.
Whether the absence of written authority or agreement for the changes affects the recovery of additional costs in a fixed lump-sum contract.

Whether BTL is liable for liquidated damages based on its delay in completing the Medina Project.
What is the proper duration of the delay to be considered, given the conflicting findings (CIAC’s 94-day delay versus the CA’s extension based on the architect’s recommendation resulting in a longer delay period).

Whether BTL should reimburse COJCOLDS for the cost overrun (P526,400.00) incurred as a result of BTL’s delay which led COJCOLDS to engage another contractor (Vigor).

Whether BTL was overpaid under the change orders and if it is obligated to return the overpayment amount (P300,533.49) received from COJCOLDS.

Whether the parties should be held liable to pay each other’s attorney’s fees, arbitration costs, and costs of suit given that neither party was found to have acted in bad faith.