G.R. No. 208837 - People vs. Rivera y Dumo

Highlands Prime, Inc. (HPI) as project owner and Werr Corporation International (Werr) as contractor entered into a General Building Agreement dated November 17, 2005 for the construction of 54 residential units in the Horizon‑Westridge Project in Tagaytay Midlands Complex.
The Notice of Award/Notice to Proceed was issued on July 22, 2005, and the contract required completion within 210 calendar days, or by February 19, 2006.
The lump sum contract price was P271,797,900.00 inclusive of taxes, materials, transport, and labor.
Payment scheme under the Agreement included: 20% downpayment upon execution (P54,359,580.00); progress billings with recoupment of downpayment and retention; 10% retention in the form of a retention bond; right of HPI to deduct/set off sums for rectification; and liquidated damages of 1/10 of 1% of the contract price per day of delay (clause 41.5).

Werr commenced work after receipt of the downpayment and progress billings reflected payments and retention deductions.
The project was not completed by February 19, 2006; HPI granted several extensions, the last until October 15, 2006.
On May 8, 2006 Werr requested HPI to implement a "Direct Payment Scheme" to pay suppliers totaling P24,503,500.08; HPI approved payments only up to P18,762,541.67 to be charged against retention.
As of the last billing on October 25, 2006, HPI had paid P232,940,265.85 (93.18% accomplishment) and retained P25,738,258.01 as retention bond.
The project was not completed by the last extension; HPI terminated the contract on November 28, 2006, which Werr accepted November 30, 2006; no progress billing was presented for October 28, 2006 to termination.

On October 3, 2007 Werr demanded payment of the balance reflected as a conditional net payable of P36,078,652.90; HPI's records stated the amount due as of December 31, 2006 was P14,834,926.71, which Werr confirmed.
Werr filed a Complaint for arbitration before the CIAC seeking P14,834,926.71 representing the balance of its retention money.
HPI answered that it did not owe Werr because retention covered: (a) P18,762,541.67 direct payments to suppliers under the Direct Payment Scheme; and (b) additional costs P7,548,729.15 composed of P3,336,526.91 unrecouped portion of downpayment, P542,500.00 unpaid advances, P629,702.24 for waterproofing by Dubbel Philippines, and P3,040,000.00 for rectification by A.A. Manahan; HPI asserted a deficiency of P573,012.81 in its favor.
By counterclaim HPI sought liquidated damages of P11,959,107.60 for 44 days of delay (October 15 to November 28, 2006), actual damages P573,012.81, attorney's fees P500,000.00, and litigation expenses P100,000.00.

CIAC rendered Decision dated August 11, 2008 awarding Werr the balance of retention monies of P10,955,899.79 and arbitration costs; it granted liquidated damages to HPI in the amount of P2,535,059.01 for 9.327 days of delay but denied HPI's counterclaim for actual damages and attorneys' fees.
CIAC deducted from retention: P10,903,331.30 as direct payments admitt...(Subscriber-Only)

Whether payments made to suppliers and contractors after termination are chargeable against the retention money.
Whether the construction industry practice that liquidated damages cease upon substantial completion applies to the Agreement, and consequently whether delay should be computed until termination or until substantial completion.
Whether the arbitration costs should be borne jointly by both parties.
Whether HPI is entitled to attorney's fees and litigation expenses.

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