Case Summary (G.R. No. 195372)
Facts of the Case
The conflict began when portions of the granite wash-out finish on the building's exterior started peeling off, prompting PCIB to request repairs from WGCC. Minor repairs were performed, but when WGCC indicated it could not redo the work entirely, PCIB hired another contractor for the repairs, incurring costs of approximately PHP 11,665,000. Following this, PCIB filed for arbitration with the Construction Industry Arbitration Commission (CIAC) seeking reimbursement for repair costs. The CIAC ruled in favor of PCIB awarding PHP 9,741,829 for the repairs, but also awarded WGCC a counterclaim of PHP 5,777,157.84 for material cost adjustments.
Procedural History
The CIAC's decision led to appeals by both parties to the Supreme Court, wherein WGCC was absolved of payment for construction defects while PCIB's appeal regarding material adjustments was denied. Subsequently, WGCC sought a Motion for Execution of the CIAC decision, which sought legal interest on the awarded amount. The CIAC issued a writ of execution, first without interest, but later adjusted its decision to include legal interest from the date of the Supreme Court's ruling.
Issues Presented
The issues to be resolved include whether the Court of Appeals (CA) erred in directing PCIB to pay interest on the principal award at 6% per annum from the date of the CIAC decision and whether WGCC's request to treat the entire award as subject to 12% interest from the finality of the Supreme Court decision was properly denied.
Court’s Ruling
The Supreme Court affirmed the decision of the CA, clarifying the distinction between monetary interest and compensatory interest. Under the Civil Code, distinct provisions apply to each type of interest. The Court recognized that the damages awarded to WGCC were a result of PCIB’s breach of contract, thus qualifying for compensatory interest.
Distinction Between Monetary and Compensatory Interest
The Court emphasized that monetary interest requires explicit stipulation in writing, whereas compensatory interest can be applied to damages awarded in breach of contract cases. The CIAC’s decision, while silent on WGCC's entitlement to interest, inadvertently imposed a form of compensatory interest due to PCIB's liability for the material cost adjustment.
Computation of Interest
WGCC is awarded 6% interest from the date of the CIAC decision (June 21, 1996) until June 30, 2013, after which the applicable interest rate dr
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Case Overview
- This case involves two petitions for review on certiorari filed under Rule 45 of the Rules of Court, concerning the legal obligations of Philippine Commercial and International Bank (PCIB) and William Golangco Construction Corporation (WGCC).
- The petitions were consolidated as they both stem from the same underlying dispute and involve decisions made by the Court of Appeals (CA).
- The main issue revolves around the determination of interest rates applicable to monetary awards following a construction contract dispute.
Background Facts
- WGCC and PCIB entered into a construction contract on October 20, 1989, for the extension of PCIB Tower II, which included a granite wash-out finish on the building's exterior.
- PCIB accepted the completed work on June 1, 1992, and WGCC provided a guarantee bond to cover defects for one year.
- Issues arose in 1993 when the granite finish began to peel, leading WGCC to perform minor repairs upon PCIB's request.
- In 1994, PCIB contracted another company to redo the granite finish due to WGCC's inability to complete the repairs, incurring costs of approximately ₱11,665,000.
- PCIB sought arbitration with the Construction Industry Arbitration Commission (CIAC) for reimbursement.
- CIAC's decision on June 21, 1996, awarded PCIB ₱9,741,829 for repairs and accepted WGCC's counterclaim for ₱5,777,157.84.
- Several subsequent motions and appeals re