Case Summary (G.R. No. 161110)
Factual Background
In March 1996, Green Asia formally notified PEZA of its claim for a price escalation amounting to ₱9,860,169.58, invoking Presidential Decree (PD) No. 1594, which governs adjustments in contract prices for government infrastructure projects. PEZA denied this claim, citing the requirement under Section 8 of PD 1594 that the contractor must demonstrate that the price increase in construction materials was due to direct acts of the government. PEZA maintained that Green Asia had failed to provide such proof and continued to reject subsequent claims from 1997 to 2006, despite Green Asia's repeated requests for payment.
Subsequent Developments
In November 2006, Green Asia made a final demand letter to PEZA, which included additional claims and legal interest on previous amounts owed. Following PEZA’s sustained denial, Green Asia appealed to then-President Gloria Macapagal Arroyo in November 2007. The Office of the President (OP) acknowledged this as an appeal, docketed it, and ordered PEZA to submit the necessary documentation.
Office of the President Decision
After conducting summary proceedings, the OP ruled in favor of Green Asia, granting its claim for price escalation and ordering PEZA to pay the adjusted amount, verifying calculations based on the parameters of PD 1594's implementing rules. The OP's rationale was that the law did not necessitate demonstrating that the price increases were due to direct governmental actions.
Court of Appeals Ruling
The Court of Appeals upheld the OP’s decision, asserting that both PD 1594 and PD 454 should be viewed in relation to each other, as they addressed similar subjects within the realm of government contracts. The CA stated that the OP correctly interpreted PD 1594 and validated the principle of price escalation without requiring evidence of direct governmental influence on price fluctuations.
Key Legal Issues
The central legal issue was whether to prove a price increase in construction materials was necessitated by the direct acts of the government to qualify for price escalation under PD 1594. PEZA contended that such evidence was crucial for price adjustments, while Green Asia argued it had demonstrated price increases through official indices systematically.
Court’s Ruling
The Supreme Court affirmed the rulings of the lower courts, endorsing the CA's interpretation that PD 1594 and PD 454 should be construed collectively. The Court affirmed that proof of price increases from fuel and cement a
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Case Information
- Court: Supreme Court of the Philippines
- Division: Second Division
- G.R. No.: 188866
- Date: October 19, 2011
- Petitioner: Philippine Economic Zone Authority (PEZA)
- Respondent: Green Asia Construction & Development Corporation (represented by Mr. Renato P. Legaspi, President/CEO)
Overview of the Case
- The case involves a petition for review on certiorari concerning a contractor's claim for price escalation in a government infrastructure contract.
- The Supreme Court is tasked with determining whether a contractor must prove that price increases in construction materials were due to direct acts of the government to be entitled to price escalation.
Factual Background
- Contract Award: Green Asia was awarded a contract on September 14, 1992, for a road network/storm drainage project at a price of P130,595,337.40.
- Contract Signing: The contract was signed by Tagumpay R. Jardiniano (Administrator of EPZA) and Renato P. Legaspi (President of Green Asia) on September 23, 1992.
- Contract Provisions: The contract included stipulations regarding the contract price, modes of payment (advance and progress payments), and liabilities of EPZA.
- Price Escalation Claim: On March 26, 1996, Green Asia notified PEZA of a claim for price escalation amounting to P9,860,169.58, citing Presidential Decree No. 1594.
- Denial of Claim: PEZA denied the claim on the grounds that Green Asia failed to provide proof that the cost increases were due to direct acts of the government.
Correspondence and Denial Process
- Repeated Denials: Despite multiple follow-ups from Green Asia (1997-2000), PEZA consistently reiterated the denial of the claim.
- Final Demand: In a final demand received on November 29, 2006, Green Asia included additional claims for price escalation from another pr