Case Summary (G.R. No. 176535)
Contractual Background and Implementation
FUCC was awarded the contract for Phase I of the FVR Project after winning a public bidding process on February 26, 1998. Initially, the project aimed to develop 300 hectares into residential lots. Various delays and issues arose, including changes in project scope that required multiple variation orders, ultimately reducing the originally planned home lots and leading to several granted time extensions for FUCC’s completion of the contract. Despite these extensions, by March 15, 1999, the original contract duration, the project remained unfinished, prompting the NHA to terminate the contract, citing a reclassification of the project and underlying issues impacting feasibility.
Claims and Arbitration
Following the termination of the contract, FUCC filed a complaint with the Construction Industry Arbitration Commission (CIAC) on July 17, 2003, seeking payment for several claims including accomplished works not yet billed, idle equipment, price escalation, and disengagement costs. The CIAC issued its decision on January 7, 2004, awarded numerous claims to FUCC, and concluded that the NHA was liable for the delays and suspensions caused by its administrative actions.
Procedural Outcomes
The NHA challenged the CIAC’s decision through an appeal to the Court of Appeals (CA). The appellate court affirmed the CIAC's decision with modifications on August 1, 2006, including adjustments to claims and granting of interests. The NHA subsequently sought a higher review before the Supreme Court, arguing that the CA ignored key facts which could have altered the decision.
Legal Analysis of The Issues Raised
Condition Precedent - Payment Guarantee Bond: The court deliberated whether the absence of a performance bond barred FUCC’s claims. The appellate court concluded that while a bond is a requirement,FUCC’s excuse for not posting was valid given the circumstances surrounding bond issuance which NHA tacitly accepted.
Progress Billing Discrepancies: NHA alleged that the award for Progress Billing No. 6 should only reflect an amount of P6,496,926.29, however, the Court upheld CIAC's award of P7,384,534.22 based on the documentation submitted by FUCC demonstrating the comprehensive work accomplished.
Cost of Materials and Facilities: The CA supported FUCC’s claims for unreimbursed costs associated with materials and facilities instigated by the termination of the contract, representing costs that were reasonable under the conditions of the contract.
Idleness of Equipment: The CIAC's ruling acknowledging the costs associated with idle equipment was maintained as the cessation of work was validated by testimony and concurrent documentation affirming that work could not proceed due to administrative decisions.
Disengagement Costs: The awards for foregone profits stemming from the termination of the contract were found to be justifiable and aligned with construction industry norms, as supported by precedential case law affirming claims for business losses resulting from contract termination.
Nature of Contract Termination: The court concluded that the contract was unilaterally terminated by NHA without the involvement or consent of FUCC, thereby solidifying FUCC’s claims due to the nature of the termination which was entirely within NHA's control based on subsequent i
Case Syllabus (G.R. No. 176535)
Background and Parties
- The case involves a petition for review on certiorari filed by the National Housing Authority (NHA) against First United Constructors Corporation (FUCC).
- The subject matter is an arbitral award in favor of FUCC relating to the Freedom Valley Resettlement Project (FVR Project).
- FUCC was the contractor for Phase I of the FVR Project, a resettlement development project for informal settlers of Metro Manila.
- The dispute involves payments, contract termination, and claims arising from delays and suspensions of the contract works.
The Freedom Valley Resettlement Project and Contract Details
- The FVR Project was situated on a 750-hectare property in Sitio Boso-Boso, Brgy. San Jose, Antipolo City, intended as a resettlement site under Presidential Proclamation No. 799.
- Phase I involved developing roughly 300 hectares into 7,500 home lots divided into three residential clusters.
- FUCC won the public bidding with a contract amount of P568,595,780.00.
- The contract duration was 365 days starting 16 March 1998; original completion date was 15 March 1999.
- The contract covered bulk earthworks, infrastructure, survey works, titling, and off-site works.
Work Suspensions, Scope Changes, and Contract Modifications
- The project faced multiple suspensions due to resistance from residents and environmental issues, resulting in delays.
- Variation orders reduced the number of home lots and contract price from P568,595,780.00 to P488,393,466.98.
- NHA granted a total of 679 calendar days of time extensions moving completion to 11 November 2001.
- FUCC submitted five Progress Billings, all paid by NHA during the contract period.
- NHA reclassified the FVR Project on 25 September 2001 and formally terminated the contract by letter dated 17 October 2001.
Arbitration Proceedings and Claims of FUCC
- FUCC filed a complaint with the Construction Industry Arbitration Commission (CIAC) on 17 July 2003 for unpaid claims resulting from the project termination and delays.
- Claims included payment for accomplished works, cost of materials and equipment, price escalation and adjustment, disengagement costs, idle equipment, and interests.
- FUCC sought attorney's fees and 12% interest on the arbitral award.
Trial Proceedings and Evidence
- CIAC appointed a three-member arbitral tribunal to resolve the dispute.
- Both parties presented witnesses and documentary evidence including progress billings, internal memos, contracts, and correspondence.
- FUCC's Project Director testified on project delays and suspensions; NHA's Special Project Director testified on contract management and denials.
CIAC Decision and Award
- The CIAC granted FUCC's claims with modifications, awarding a net amount after recoupment of advance payments and interests.
- Awards included payment for Progress Billing No. 6, cost of materials and equipment, price escalations, disengagement costs, and