Case Summary (G.R. No. 198849)
Petitioner and Respondent
• Petitioner: Camp John Hay Development Corporation
• Respondent: Charter Chemical and Coating Corporation
Key Dates
• January 2001 – Contractor’s Agreement executed
• 2003 – Completion of painting works by respondent
• May 30, 2005 – Issuance of Final Inspection and Acceptance Certificate
• June 12, 2008 – Request for arbitration filed with Construction Industry Arbitration Commission (CIAC)
• March 30, 2009 – CIAC Final Award
• May 13, 2011 – Court of Appeals Decision affirming CIAC award
• September 30, 2011 – CA Resolution denying motion for reconsideration
• November 23, 2011 – Supreme Court Petition filed
• August 7, 2019 – Supreme Court promulgation
Applicable Law
• 1987 Philippine Constitution (case decided post-1990)
• Article 1191 (rescission of reciprocal obligations) and Article 1197 (fixing of period) of the Civil Code
• Executive Order No. 1008 (Construction Industry Arbitration Law) as integrated into Republic Act No. 9285 (Alternative Dispute Resolution Act of 2004)
• Article 2208 (attorney’s fees) of the Civil Code
Contract Formation and Terms
Under the Contractor’s Agreement, respondent would perform painting works for a total contract price of ₱15,500,000, inclusive of two studio-type units as partial payment. The agreement allowed respondent to select the units and offset their value against the contract price but did not specify a turnover date.
Offsetting Scheme and Unit Selection
Respondent chose Units 102 and 104 in the second phase of Camp John Hay Suites. The contract price was subsequently reduced to ₱13,239,734.16; petitioner paid ₱7,339,734.16 in cash, leaving a balance of ₱5,900,000 to be settled by transfer of the two units.
Construction and Payment History
Respondent completed painting in 2003. Petitioner belatedly issued a Final Inspection and Acceptance Certificate on May 30, 2005. Respondent repeatedly demanded execution of deeds of sale and delivery of titles in September 2004 and April 2005.
Delays in Completion
Despite pro-forma contracts to sell executed in June 2005 promising delivery “within a reasonable period,” the overall Camp John Hay Suites project was delayed by force majeure, mutual delays with the Bases Conversion and Development Authority (BCDA), and successive amendments to the project timeline (2003, 2008), pushing completion beyond 2012.
Demand for Transfer and Arbitration Filing
In August 2007, respondent demanded unit transfer or payment of ₱6,996,517.48. Upon receiving no satisfactory response, it filed a Request for Arbitration before the CIAC on June 12, 2008, invoking the arbitration clause in the Contractor’s Agreement.
CIAC Final Award
On March 30, 2009, the CIAC ordered petitioner to pay respondent:
- ₱5,900,000 (monetary equivalent of the two units);
- ₱590,000 (attorney’s fees, 10% of unit value).
It declined to fix a delivery period under Article 1197, noting the reciprocal nature of the contract.
Court of Appeals Decision
The Court of Appeals, in its May 13, 2011 Decision, affirmed the CIAC award, holding that:
• The arbitration clause remained binding despite subsequent contracts to sell.
• A definite completion timeline could be inferred from the 2003 BCDA memorandum.
• Petitioner was already in delay when respondent demanded transfer in August 2007.
Issues in the Supreme Court Petition
- Whether the CIAC had jurisdiction despite a dispute resolution clause in the contracts to sell.
- Whether rescission under Article 1191 was proper, or whether a period should have been fixed under Article 1197.
- Whether the award of attorney’s fees was proper.
Jurisdiction of the CIAC
The Supreme Court held that under Executive Order No. 1008 and the Alternative Dispute Resolution Act, the mere existence of an arbitration clause in a construction contract confers original and exclusive jurisdiction on the CIAC. The pro-forma contracts to sell did not supersede the primary Contractor’s Agreement or remove the dispute from CIAC’s ambit.
Rescission under Article 1191
Because petitioner failed to deliver the agreed units after respondent fully performed in 2003, the reciprocal obligation was breached. Article 1191 grants the injured party the choice of rescission or specific performance; here, rescission was warranted in the absence of just cause to fix a compliance period.
Fixing of the Period under Article 1197
Article 1197 allows courts to fix a period only if it can be inferred that the parties intended one. Given the years of delay predating and postdating the Contractor’s Agreement, no reasonable justif
Case Syllabus (G.R. No. 198849)
Facts
- In January 2001, Camp John Hay Development Corporation (“Camp John Hay”) engaged Charter Chemical and Coating Corporation (“Charter Chemical”) under a Contractor’s Agreement to perform interior and exterior painting of Unit 2E, Camp John Hay Manor, for a contract price of ₱15,500,000, inclusive of two studio‐type units at Camp John Hay Suites as part of an offsetting scheme.
- Charter Chemical selected Studio Units 102 and 104 in the second phase of Camp John Hay Suites; actual construction of the Suites had yet to commence in 2001.
- The contract price was later reduced to ₱13,239,734.16. Camp John Hay paid ₱7,339,734.16 in cash; the remaining ₱5,900,000 was to be settled by transferring the two units.
- Charter Chemical completed the painting works in 2003; Camp John Hay belatedly issued the Final Inspection and Acceptance Certificate on May 30, 2005.
- Charter Chemical demanded transfer of titles in September 2004 and April 2005. In June 2005, both parties executed standard contracts to sell, providing for delivery within a “reasonable period” after completion or upon Notice of Completion or Limited Warranty Deed.
- In August 2005, Camp John Hay certified the two units as fully paid, but delivery was delayed because the Suites were unfinished.
- A Lease Agreement with the Bases Conversion and Development Authority (BCDA) in October 1996 envisaged completion in 3½ years; multiple MOA amendments (July 18, 2003 and July 1, 2008) pushed the target completion to 2006, then to 2012.
- Charter Chemical demanded unit transfer or payment of ₱6,996,517.48; on June 12, 2008 it filed for arbitration before the Construction Industry Arbitration Commission (“CIAC”) under the Contractor’s Agreement’s arbitration clause.
- CIAC’s Final Award (March 30, 2009) granted Charter Chemical:
- ₱5,900,000 as monetary equivalent of the two units;
- ₱590,000 attorney’s fees (10% of ₱5,900,000);
- denied exemplary damages;
- declined to fix a delivery period under Article 1197, holding the contract itself provided the period.
- Camp John Hay petitioned the Court of Appeals (“CA”) under Rule 43, contesting CIAC’s jurisdiction, the