G.R. No. 200401 - Metro Rail Transit Development Corp. vs. Gammon Philippines, Inc.

Case Summary (G.R. No. 200401)

Key Dates (project and procedural milestones)

Invitation to bid and bidding: April–May 1997; Gammon’s bids: May 30, 1997; Letter of Award / First Notice to Proceed issued by Parsons: August 27, 1997; Gammon’s signed return of the First Notice: September 2, 1997; Gammon’s letter of comfort transmitted: September 3, 1997; MRT’s temporary suspension letter: September 8, 1997; Gammon returned contract documents: September 9, 1997; Second Notice to Proceed (redesigned engineering services): February 18, 1998 (signed by Gammon March 11, 1998); Third and Fourth Notices to Proceed and the Fourth’s express cancellation of earlier notices: April–June 1998; Notice of Claim filed before CIAC: July 1, 1999; CIAC award: March 27, 2007; Court of Appeals decision affirming CIAC: October 14, 2011; Supreme Court resolution denying Rule 45 petition and affirming lower courts: January 17, 2018.

Procedural History

Gammon filed a notice of claim with CIAC (July 1, 1999). CIAC constituted an arbitral tribunal and, after proceedings, issued an award (March 27, 2007) granting Gammon reimbursements for engineering/design and site de-watering/cleanup and awarding lost profits. MRT appealed to the Court of Appeals, which affirmed CIAC. MRT then filed a petition for review under Rule 45 to the Supreme Court, advancing factual and legal challenges to contract perfection, the quantum and proof of damages (including lost profits), and the binding effect of MRT’s statement in its Answer with Compulsory Counterclaim.

Issues Presented to the Court

(1) Whether a perfected contract existed between MRT and Gammon. (2) Whether the doctrine of the law of the case — based on a prior Supreme Court ruling in Gammon v. MRT — barred relitigation of the contract’s existence. (3) Whether MRT is estopped or otherwise bound by the specific monetary allegation in paragraph 77 of its Answer with Compulsory Counterclaim (the stated willingness to pay P5,493,639.27). (4) Whether Gammon sufficiently proved its claims for reimbursements and lost profits.

Applicable Law and Standards

Contract law: Civil Code provisions on consent and perfection of contracts (Arts. 1305, 1315, 1318, 1319, 1320), including that contracts are perfected by mere consent when offer and acceptance concur. Jurisprudence holds that award of a bidding contract and notice of award may perfect a contract even before execution of a formal written contract.
Arbitration and CIAC law: Executive Order No. 1008 (Construction Industry Arbitration Law) and the Construction Industry Arbitration Commission (CIAC) Rules; RA 9285 (ADR Law) incorporates EO No. 1008 for construction disputes. CIAC arbitral awards are final and unappealable except on pure questions of law (Section 19 of the Construction Industry Arbitration Law); Rule 43 of the Rules of Court governs appeals from quasi-judicial agencies to the Court of Appeals, but factual findings of CIAC are generally final.
Judicial admissions: Rule 129, Section 4 of the Revised Rules of Court — admissions made in the course of proceedings do not require proof and are binding unless shown to be made through palpable mistake.
Damages: Articles 2199 and 2200 of the Civil Code govern actual damages and lost profits; actual damages must be proven with reasonable certainty by competent proof or the best evidence obtainable. Arbitration proceedings under CIAC are not strictly bound by technical rules of evidence and may admit invoices, debit notes, and other documentation where appropriate.

Court’s Findings on Contract Perfection

The Court concluded that a binding contract was perfected between MRT and Gammon. Key factual and legal points supporting that conclusion: Parsons issued a Letter of Award / Notice to Proceed on August 27, 1997 that (i) awarded the work to Gammon, (ii) set out the contract sum and scope, and (iii) instructed Gammon to signify concurrence by signing and returning the Notice and contract documents. Gammon returned a countersigned First Notice on September 2, 1997, transmitted the signed letter of comfort on September 3, 1997, and returned the signed contract documents on September 9, 1997. Gammon also mobilized resources and undertook de-watering and engineering activities consistent with having accepted the award. The Court relied on binding precedents (e.g., Valencia; Central Bank decisions cited) establishing that award of a contract to a bidder and notice of award can operate as acceptance that perfects the contract, and that failure to execute formal contracts does not negate obligations arising from an unqualified acceptance of an offer.

Court’s Treatment of the Temporary Suspension and Subsequent Notices

The Court distinguished a temporary suspension from revocation of an offer. MRT’s September 8, 1997 communication — stating that it needed a week or two to analyze foreign exchange and interest rate effects — was characterized as a temporary suspension rather than an unequivocal withdrawal. Parsons’ subsequent facsimiles and communications confirmed that the contract requirements were temporarily suspended except for certain redesign and site de-watering tasks. Later notices (Second, Third, and Fourth Notices to Proceed) modified scope and timing; the Fourth Notice (June 1998) expressly cancelled earlier notices, which the Court treated as the effective cancellation only at that later point. The Court found that the communications and conduct of the parties showed mutual consent and that the contract was at least temporarily suspended rather than terminated at the time Gammon accepted and commenced performance.

Application of the Doctrine of the Law of the Case

The Court held that the doctrine of the law of the case applied. A prior Supreme Court decision in Gammon v. Metro Rail Transit Development Corp. had already addressed CIAC jurisdiction and concluded that the arbitration clause and agreement enabled CIAC to adjudicate the dispute; in reaching that conclusion the prior decision treated the contract and arbitration agreement as existing and concluded redesigns merely modified—rather than extinguished—the contract. Because this legal issue was previously determined on appeal in the same case, it became the law of the case and could not be re-litigated in the present Rule 45 petition. Accordingly, the Supreme Court declined to reopen the question of the contract’s existence.

Judicial Admission; Reimbursements for Engineering and Site Works

The Court found MRT bound by the unqualified judicial admission in paragraph 77 of its Answer with Compulsory Counterclaim, which stated MRT was “willing to pay” P5,493,639.27 for engineering/design and site de-watering/clean-up. Under Rule 129, Section 4, judicial admissions need no proof and are conclusive unless shown to be the result of palpable mistake. MRT neither qualified the admission in that pleading nor amended it; its later contention that the admission was conditional on proof (e.g., official receipts) was rejected because no such qualification was included in the pleading. CIAC and the Court of Appeals thus correctly treated the admission as binding, and the Supreme Court affirmed reimbursement awards within that amount.

Proof of Actual Damages and Lost Profits; Evidentiary Standards in CIAC Proceedings

For actual damages (reimbursements), the Court re

Case Syllabus (G.R. No. 200401)

Procedural Posture

Petition for Review on Certiorari under Rule 45 assailing the Court of Appeals Decision dated October 14, 2011 and Resolution dated January 25, 2012 in CA-GR. SP No. 98569.
The Court of Appeals affirmed the Construction Industry Arbitration Commission (CIAC) Decision of March 27, 2007, which awarded Gammon Philippines, Inc. (Gammon) monetary recovery for lost profits and reimbursements for engineering services, design work, site de-watering and clean-up due to breach of contract.
CIAC Award (promulgated March 27, 2007) awarded:
- P4,821,261.90 for engineering services/design work;
- P672,377.36 for site de-watering and clean-up;
- P53,149,330.35 as reasonably estimated lost profit;
- Total P58,642,969.62.
The Petition to the Supreme Court raised factual and legal challenges to the existence/perfection of the contract, the propriety and sufficiency of proof for lost profits and reimbursements, whether the doctrine of law of the case applied, and whether MRT was bound by its judicial admission in its Answer with Compulsory Counterclaim that it was “willing to pay” P5,493,639.27.
The Supreme Court denied the petition and affirmed the Court of Appeals decision and resolution.

Factual Background — Project, Parties, and Bidding Timeline

Project: MRT-3 North Triangle Development Project covering 54 hectares with 16 hectares for a commercial center; half of the commercial center was intended for a podium structure (Podium) to provide structure for leasable retail development and serve as the rail transit system maintenance depot.
Parsons Interpro JV (Parsons): appointed Management Team authorized to oversee construction execution.
Gammon’s participation:
- April 30, 1997: Parsons invited Gammon to bid for complete concrete works of the Podium (supply of materials, labor, equipment, supervision and services for Levels 1–4).
- May 30, 1997: Gammon submitted three separate bids and requested clarifications on certain provisions of the bid documents.
- Gammon won the bid.
First Notice of Award / Notice to Proceed (First NTP) dated August 27, 1997:
- Awarded the Podium, referring to attached formal contract documents and Gammon’s Lump Sum Bid Breakdown (Exhibit A) amounting to P1,401,672,095.00.
- Stated work divided into Phase I and Phase II due to squatters, but to be treated as one contract for the total price.
- Predicated on commitments in a Letter of Comfort (Exhibit B) from Gammon Construction Ltd. and receipt of the signed letter within seven days.
- Authorized proceeding with Phase I seven days from receipt of the Notice or from de-watering/clean up, whichever was later.
- Requested Gammon to signify concurrence by signing the Notice and accompanying contract documents and returning originals.
Gammon’s responses and mobilization:
- September 2, 1997 (First Letter): Gammon countersigned and returned the First NTP (signed copy), acknowledged ongoing review of contract documents, confirmed mobilisation to site on August 29 to pump out floodwater and other mobilization activities, advised design team relocation and preparation of shop drawings, and indicated preparation of Performance/Advance Payment Bonds.
- September 3, 1997 (Second Letter): Gammon transmitted signed Letter of Comfort.
MRT’s September 8, 1997 Letter to Gammon: MRT advised it needed one or two weeks to estimate effects of foreign exchange and interest rate developments before issuing formal Notice to Proceed.
Parsons’ September 9, 1997 facsimile: directed Gammon to hold further mobilization activities.
Gammon’s September 10, 1997 letter: asserted that a contract exists by virtue of the Notice of Award & Notice to Proceed, discussed mobilization and clean-up understood as under a Change Order, and maintained construction period tied to achievement of clean-up.
September 11–12, 1997 facsimiles: Gammon sought clarification whether requirements were suspended; Parsons confirmed temporary suspension of all contract requirements except redesign of floor slabs and site de-watering/clean up.
Parties revised project scope and phased work:
- MRT downscaled the Podium and proceeded with conceptual redesign; Gammon studied phasing and presented sequencing on November 7, 1997.
- MRT adopted Gammon’s recommendation to construct up to Level 2 only and tasked Gammon with redesigning the Level 2 slab.
Second Notice to Proceed (engineering services) dated February 18, 1998:
- Provided that expenses directly incurred would be reimbursed on actual cost plus a negotiated fee if a lump sum contract was not finalized.
- Gammon signed Second NTP on March 11, 1998 with qualifications acknowledging that the August 27, 1997 Notice remained valid and that this NTP effectively lifted suspension only for specified design activities.
March 3, 1998: Gammon submitted Revised Lump Sum Price Proposal of P1,044,055,102.00 for Podium up to Level 2 (including Level 2 slab redesign).
March 6 & March 11, 1998 correspondence: Gammon sent a breakdown of alleged extra-contract expenses of P17,241,505.16 and a revised Breakdown of Lump Sum Price worth P1,062,986,607.00.
April 2, 1998: Third Notice to Proceed issued in favor of Gammon; Gammon acknowledged receipt April 8, 1998 and requested clarifications.
April 22–May 7, 1998 correspondence: Parsons notified that building revision resulted in structural changes and quantity changes; Parsons later informed Gammon that MRT was temporarily rescinding Third NTP as it remained unaccepted by Gammon.
June 10, 1998: Parsons delivered Amended Notice to Proceed (Fourth NTP) and expressly cancelled the First and Third NTPs.
June 19, 1998: Gammon qualifiedly accepted the Fourth NTP; MRT treated the qualified acceptance as a new offer and, by letter June 22, 1998, rejected Gammon’s qualified acceptance and threatened award to Filsystems if Gammon did not accept within five days.
July–August 1998 correspondence: Gammon’s July 8 letter protested MRT’s intent to grant the Fourth NTP to another party and put MRT on notice of claims for reimbursement and damages; MRT offered in August 1998 to reimburse Gammon for bid participation costs amounting to about 5% of Gammon’s total claim (approximately P121,000,000 as represented in correspondence); Gammon rejected offer as insufficient and supplied further documentation on claims when requested.
July 1, 1999: Gammon filed Notice of Claim before CIAC. CIAC ordered MRT to file an answer and nominate arbitrators. MRT moved to dismiss for lack of CIAC jurisdiction; the motion was denied and CIAC jurisdiction affirmed by this Court in Gammon Philippines, Inc. v. Metro Rail Transit Development Corp., 516 Phil. 561 (2006).
Arbitration: Arbitral Tribunal formed November 2, 2006; terms of reference and schedule set; CIAC issued award March 27, 2007 as set out above.
Court of Appeals affirmed CIAC on October 14, 2011; MRT’s Motion for Reconsideration denied January 25, 2012; MRT elevated matter to Supreme Court.

Issues Presented to the Supreme Court

Whether there was a perfected contract between petitioner Metro Rail Transit Development Corporation (MRT) and respondent Gammon Philippines, Inc. (Gammon).
Whether the doctrine of the law of the case as established in Gammon Philippines, Inc. v. Metro Rail Transit Development Corp., 516 Phil. 561 (2006), applies to preclude relitigation of the contract’s existence in the present appeal.
Whether MRT is bound by its allegation in paragraph 77 of its Answer with Compulsory Counterclaim that it was “willing to pay GAMMON the total amount of P5,493,639.27...” for engineering/design and de-watering/clean-up works.
Whether Gammon’s claims for actual damages (reimbursements) and lost profits were sufficiently proven by competent documentary and testimonial evidence.

Applicable Legal Provisions and Doctrines Cited

Civil Code provisions on contracts and their perfection:
- Article 1305 (meeting of minds; obligations to give or render service).
- Article 1315 (contracts perfected by mere consent).
- Article 1318 (requisites of valid contract: consent, object, cause).
- Article 1319 (consent manifested by meeting of offer and acceptance).
- Articles 1320–1321 (acceptance may be express or implied; manner of acceptance).
Civil Code provisions on damages:
- Article 2199 (actual/compensatory damages to be proved).
- Article 2200 (value of loss suffered and profits failed to obtain).
Construction Industry Arbitration Law (Executive Order No. 1008) and related authorities:
- Section 4 (CIAC original and exclusive jurisdiction over disputes arising from or connected with construction contracts; requirement of agreement to submit to voluntary arbitration).
- Section 19 (Finality of awards: arbitral award binding and final and inappea