Case Digest (G.R. No. 159302)
Facts:
R-II Builders, Inc. entered into a R-II BCDA Agreement on September 3, 1997 to construct the Philippine Army Officer’s Quarters Project in Fort Bonifacio, Taguig, for PHP 788,973,413.00. R-II later subcontracted the construction of twenty-eight (28) 4-storey medium-rise buildings to Mivan Builders, Inc. under the formal R-II Mivan Agreement executed on October 3, 1997, with a fixed lump sum of PHP 459,000,000.00, subject to provisions on escalation/adjustments and variations under P.D. No. 1594.Mivan completed the work forty-nine (49) days beyond the original completion date and demanded additional payments for variation, escalation, and disruption/delay claims, plus VAT, totaling PHP 129,522,612.44. R-II admitted only part of the variation cost, and Mivan pursued arbitration before CIAC, resulting in a CIAC Sole Arbitrator’s decision on November 23, 1999 awarding Mivan PHP 50,339,421.16 plus interest. The Court of Appeals affirmed CIAC in CA G.R. SP No. 56142 (Decision dated
Case Digest (G.R. No. 159302)
Facts:
- Formation and scope of the main construction contract between R-II Builders, Inc. and BCDA
- On September 3, 1997, R-II Builders, Inc. (R-II) and the Bases Conversion Development Authority (BCDA) entered into an agreement for the construction, on a 7-hectare area in Fort Bonifacio, Taguig, Metro Manila, of the Philippine Army Officer’s Quarters Project.
- Under the agreement, R-II undertook, for P788,973,413.00 inclusive of taxes and fees, the site planning and development of the property and the design/construction of twenty-eight (28) 4-storey medium-rise buildings.
- The architectural and engineering plans and specifications were prepared by R-II and approved by BCDA.
- Techpil, Inc. (TECHPIL) was appointed by BCDA as project construction manager.
- Sub-contracting arrangement between R-II and Mivan Builders, Inc.
- Even before the contract signing of the R-II-BCDA Agreement, R-II and Mivan Builders, Inc. (Mivan) were already negotiating a sub-contracting arrangement.
- R-II provided Mivan advance copies of the drawing plans submitted to BCDA.
- On August 25, 1997, R-II issued to Mivan the contract drawings and specifications, enabling Mivan to base its September 3, 1997 estimate and tender of the sub-contract price in the amount of P459,000,000.00.
- A “Notice to Proceed” dated September 6, 1997 was issued to Mivan, stipulating a 180-day completion period from September 8, 1997 until March 6, 1998.
- Mivan mobilized and set up its labor camp at the job site.
- By September 26, 1997, Mivan’s formworks had started to arrive in the port of Manila.
- The project proceeded using Mivan’s advanced aluminum framework system, designed to eliminate the use of hollow blocks for the superstructures and to utilize pre-fabricated aluminum formworks into which concrete was poured, supporting multiple re-use and resulting in savings in construction time and costs.
- Execution of the formal sub-contract and its key terms
- On October 3, 1997, R-II and Mivan executed the formal sub-contract agreement (R-II Mivan Agreement).
- Under the sub-contract, R-II agreed to pay Mivan a fixed lump sum amount of P459,000,000.00 plus applicable value added tax (VAT) based on contract drawings issued by R-II on August 25, 1997.
- Mivan’s scope included structural, electrical, and other finishing works necessary to complete the buildings according to R-II’s plans and specifications.
- The twenty-eight (28) buildings were divided into:
- Twenty (20) M120 buildings, each 4-storey with four (4) apartments of 120 square meters per floor.
- Eight (8) M180 buildings, each 4-storey with two (2) apartments of 180 square meters per floor.
- The sub-contract contained provisions on escalation/adjustment of contract price and variations/alteration orders.
- The sub-contract incorporated, by express reference, the provisions of P.D. No. 1594, titled “Prescribing Policies, Guidelines, Rules and Regulations for Government Infrastructure Contracts.”
- The sub-contract contained provisions relating to:
- Clause 7.4 on notice and written request for time extension and cost impact within five (5) days after encountering justifiable delay.
- Paragraph 4.2 stating that no claims for addition or deduction to contract price due to extra work or alteration were valid unless ordered in writing by CONTRACTOR, and that adjustments followed P.D. 1594 provisions on extra work costing.
- Further sub-contracting, deviations, acceleration, and disruption affecting completion
- Despite a comprehensive sub-contracting arrangement, R-II later further sub-contracted part of the subcontracted works: the supply and erection of formworks for the superstructure of buildings #16, 17, and 21 to Rigid Systems, Inc. (RSI).
- RSI failed to perform satisfactorily, requiring Mivan to either rework RSI’s defective accomplishments or complete RSI’s unfinished works.
- R-II, upon BCDA’s request, asked Mivan to fast-track completion of five (5) buildings.
- Although the November 1997 deadline was later moved to January 1998, the project experienced acceleration, workforce additions, acceleration of turn-over, and other deviations from original plans/specifications.
- These deviations distorted construction schedules and increased the overall construction cost.
- Mivan ultimately completed its undertakings, but forty-nine (49) days beyond the original completion date and after incurring additional costs.
- Mivan attributed additional costs to disruptions/delays including variations to contract drawings and other change orders, the requirement for early completion of a number of buildings, the necessity to repair works carried out by others, and the introduction of other formwork systems.
- Monetary claims and partial admission by R-II
- After completion, Mivan demanded additional and/or differential payments itemized as:
- Variation claims: P58,477,320.27
- Escalation claims: P11,027,204.00
- Disruption claims: P48,273,305.22
- Total: P117,747,829.49
- Add: 10% VAT: P11,774,782.95
- Grand total: P129,522,612.44
- R-II admitted liability for variation costs only up to P15,095,597.20 and admitted escalation cost liability of P747,585.82.
- Quantification efforts and TECHPIL’s recommendation
- R-II asserted that the P15,095,597.20 figure resulted after joint quantification and costing of as-built and contract drawings made on December 2 to 4, 1998, upon BCDA’s intercession.
- TECHPIL, in a report dated December 14, 1998 to BCDA, evaluated quantification results based on Mivan’s detailed computation derived from the revised tender cost submitted on September 3, 1997.
- TECHPIL found P40,719,802.41 out of Mivan’s P58.477 million variation claim to be valid and legitimate.
- TECHPIL recommended that R-II be made to pay P40,719,802.41.
- CIAC arbitration and the November 23, 1999 arbitral award
- Because R-II refused to pay beyond its admitted amounts, Mivan pursued its claims before the Construction Industry Arbitration Commission (CIAC) pursuant to par. 14.1, Article XIV of the sub-contract agreement.
- The case was docketed as CIAC Case No. 22-99.
- On November 12, 1999, CIAC-appointed Sole Arbitrator Alfredo F. Tadiar rendered a decision awarding in favor of Mivan:
- P39,000,000.00 for variation claims.
- P3,198,170.00 for increased costs of labor, materials, and equipment arising from accelerated schedule of turn-over of five (5) buildings.
- P3,099,089.76 for reimbursement of the amount overcharged for additional labor force supplied by R-II.
- P747,585.82 for escalation claims.
- P4,294,575.58 as VAT computed at 10% of the amounts awarded except for the reimbursement.
- Total amount due: P50,339,421.16.
- The decision further ordered interest:
- Interest on P46,044,845.58 (excluding VAT) at 6% per annum from the date of the decision.
- After finality, interest at 12% per annum until full payment, described as an interim period constituting a forbearance of credit, citing *Eastern Shipping Lines, Inc. v. Court of Appeals, et al*; *Keng Hua Papers Products Co., Inc. v. Court of Appeals*; and *Crismina Garments, Inc. v. Court of Appeals*.
- Court of Appeals review of CIAC Case No. 22-99 (G.R. No. 152545 record)
- R-II filed a petition for review under Rule 43 to the Court of Appeals, docketed as CA G.R. SP No. 56142, challenging the CIAC decision.
- Mivan also filed a similar recourse but later withdrew it with the Court of Appeals’ approval.
- On October 26, 2001, the Court of Appeals issued a Decision denying and dismissing R-II’s petition, affirming CIAC in toto and denying the application for injunctive relief.
- The Court of Appeals ...(Subscriber-Only)