Title
Summa Kumagai, Inc.-Kumagai Gumi Co., Ltd. Joint Venture vs. Romago, Inc.
Case
G.R. No. 177210
Decision Date
Apr 7, 2009
Romago, subcontracted by SK-KG for electrical works, faced delays, unpaid claims, and arbitrary deductions. CIAC ruled in SK-KG's favor, but the Court of Appeals reversed, awarding Romago P33.8M, citing due process violations and evidence-based rulings. Supreme Court affirmed, prioritizing substantial justice.

Case Digest (G.R. No. 177210)

Facts:

  • Background of the Dispute
    • SK-KG, the Summa Kumagai, Inc. – Kumagai Gumi Co., Ltd. Joint Venture (petitioner), entered into a Sub-Contract Agreement with Romago, Incorporated (respondent) for electrical works in the construction of The New Medical City Superstructure Project.
    • The original date of completion for the project was set on 18 September 2003.
  • Contract Performance and Alterations
    • As the project progressed, SK-KG issued several change orders through Project Management Instructions (PMI), Contractor’s Instructions, and even oral directions, altering the originally specified works.
    • Although Romago complied with these changes—even though many were allegedly outside the original scope—SK-KG delayed its payments and also delayed the delivery of equipment, prompting Romago to undertake crash programs.
    • The numerous changes resulted in an extension of 101 days and incurred additional expenses on Romago’s part, including claims of arbitrary back charges and illegal deductions by SK-KG.
  • Initiation of Arbitration Proceedings
    • After efforts to settle the dispute amicably failed, Romago filed a complaint with the Construction Industry Arbitration Commission (CIAC) on 18 August 2004 (docketed as CIAC Case No. 28-2004).
    • SK-KG responded on 20 September 2004 by filing an Answer with Counterclaim, while Romago did not file a Reply.
    • The CIAC constituting panel held hearings where Romago attempted to present additional evidence to contradict SK-KG’s counterclaims, but the panel refused on the ground that Romago’s failure to file a Reply was deemed an admission of the counterclaims.
  • CIAC and Court of Appeals Decisions
    • On 3 March 2005, the CIAC rendered its Decision which:
      • Awarded Romago various monetary sums for unpaid balances, additional expenses (including crash program costs, installation costs, and other charges), and costs related to power interconnection.
      • Recognized counterclaims by SK-KG for supplemental manpower, tools and materials, cash advances, and valid deductions, though these counterclaims were contested.
    • Subsequently, Romago filed a Petition for Review with the Court of Appeals (CA-G.R. SP No. 89959).
    • Between January 2006 and June 2006, various motions and resolutions were issued, including:
      • A Motion for Execution granted by the CIAC.
      • A Temporary Restraining Order by the Court of Appeals on 12 May 2006.
      • A resolution for a Writ of Preliminary Injunction.
    • On 22 December 2006, the Court of Appeals modified the CIAC’s Decision by:
      • Affirming certain awards to Romago.
      • Nullifying and setting aside all awards in favor of SK-KG derived from its counterclaims.
      • Awarding attorney’s fees to Romago and ordering the return of CIAC records.
    • SK-KG subsequently filed motions for reconsideration and an extension to file a Petition for Review on Certiorari, with its counsel citing stress and fatigue as causes for miscalculating reglementary periods.
    • After reinstating SK-KG’s Petition on 19 September 2007, the matter proceeded to the merit stage.
  • Allegations of Due Process Violation and Procedural Irregularities
    • SK-KG contended that CIAC’s refusal to allow Romago to present evidence against its counterclaims did not amount to a violation of due process, arguing that administrative hearings need only afford an opportunity to be heard.
    • Romago argued that such a refusal, particularly its characterization of the failure to file a Reply as an admission of the counterclaims, deprived it of the chance to rebut and thus violated its due process rights.
    • The debate extended into whether the Court of Appeals could review or reverse a CIAC ruling, especially when the evidence on record, admissions, and undisputed facts were in question.

Issues:

  • Whether or not Romago’s due process rights were violated by CIAC in denying it the opportunity to present evidence against SK-KG’s counterclaims by deeming its failure to file a Reply as an admission.
  • Whether the Court of Appeals possess the authority to review and reverse a ruling by CIAC—a quasi-judicial body with specialized expertise in construction-related disputes—especially when its findings seem contrary to the evidence and admissions on record.
  • Whether monetary awards can be based on documents or evidence that were not part of the original record before CIAC but were belatedly submitted by Romago, potentially violating SK-KG’s right to due process.
  • Whether the Court of Appeals can grant monetary awards for relief that was not prayed for or raised as an issue in Romago’s CIAC petition and was not among the established claims within the arbitration proceedings.
  • Whether the monetary awards were based on speculation, surmise, or conjecture in a manner that contradicts admissions and established legal principles regarding the award of damages, including moral damages.
  • Whether the finality of the Court of Appeals’ decision should be disregarded due to an alleged error in computing the reglementary period for filing the petition on certiorari—a matter compounded by claims of stress and fatigue on SK-KG’s part—and whether the petition has enough merit to set aside such finality.

Ruling:

  • (Subscriber-Only)

Ratio:

  • (Subscriber-Only)

Doctrine:

  • (Subscriber-Only)

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