Case Summary (G.R. No. 71557)
Background of the Case
On September 27, 1960, Cruz entered into a "Contract of Services" with GSIS for the construction of the GSIS Hospital, agreeing to provide various architectural services for a fee based on a percentage of the total cost of the project, initially set at Ten Million Pesos (₱10,000,000.00). The contract stipulated that any adjustments in the construction costs would also necessitate adjustments in the architect's fees. When the project's final cost was approved at Fifteen Million Pesos (₱15,000,000.00) with a specific allocation for equipment, Cruz claimed additional fees, including costs associated with built-in equipment Items “F,” “G,” and “H.”
Claim Reduction and COA Decision
Cruz’s initial claim amounting to ₱232,091.96 for additional architect's fees was reduced by GSIS during an audit to ₱140,737.49. The disapproved amount of ₱91,354.47, corresponding to Items “F,” “G,” and “H,” was deemed non-compensable by COA, which ruled that the costs of these equipment items did not fall within the definition of construction costs integral to computed architect's fees, asserting that such items were not part of the construction materials requiring architectural expertise.
Arguments from Petitioner and Respondent
Cruz argued that Items “F,” “G,” and “H” should be considered part of the total construction cost since their integration was necessary for the hospital's operational functionality. He cited the opinion from the Board of Examiners for Architects and highlighted that contrary to COA's position, he had indeed exercised architectural skill in determining specifications for these items, which were subjected to public bidding. COA maintained that these items were merely additional features and, therefore, outside the purview of construction costs based on a cited U.S. case.
Legal Interpretation and Reasoning
The Court emphasized that in determining whether the items in question should be included in the computation of construction costs, it was essential to interpret the "Contract of Services." The ambiguity of the term “total construction cost” necessitated an exploration of the contracting parties' intentions, bolstered by affidavits from GSIS
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Introduction
- This case involves a petition for review on certiorari filed by Pablo S. Cruz against the Commission on Audit (COA), aiming to annul and set aside COA Decision No. 358 dated 20 May 1985.
- The contention revolves around the denial of Cruz's request to include additional architect's fees based on the cost of specific equipment in the GSIS Hospital construction project.
Background of the Case
- On 27 September 1960, Pablo S. Cruz, a licensed architect, entered into a "Contract of Services" with the Government Service Insurance System (GSIS) for the construction of the GSIS Hospital, also referred to as Hospital ng Bagong Lipunan.
- The contract stipulated a fee of 3.65% of the total construction cost, which was later established at Fifteen Million Pesos (₱15,000,000.00), divided into Thirteen Million Pesos (₱13,000,000.00) for building and Two Million Pesos (₱2,000,000.00) for equipment.
- Cruz filed a claim for an increase in his fees amounting to ₱232,091.96, which was later reduced by the auditor to ₱140,737.49, disallowing ₱91,354.47 corresponding to the costs of Items "F", "G", and "H".
Commission on Audit’s Ruling
- COA ruled that the costs associated with Items "F" (laundry equipment), "G" (x-ray equipment), and "H" (stills, sterilizers, and special lighting equipment) were not part of the construction cost for the