G.R. No. 194960 - Pro Builders, Inc. vs. TG Universal Business Ventures, Inc.

Case Summary (G.R. No. 194960)

Factual Background

TG and Pro Builders executed the Owner-Contractor Agreement on 29 May 2007, with TG obligated to pay the 30% down payment. Upon signing, Pro Builders posted a performance bond obtained from Prudential Guarantee and Assurance, Inc. and the Notice of Award was issued on 15 May 2007. The project site was turned over to Pro Builders on 22 May 2007, and construction was set to begin on 1 June 2007.

Pro Builders received the first down payment only on 19 June 2007, amounting to P21,000,000.00. The project did not progress satisfactorily. TG then took over the project, hired another contractor to finish the work, and demanded the balance of what TG treated as an overpayment. When the parties failed to settle, TG filed a Request for Arbitration with the CIAC seeking payment of the cost to complete the project, which TG computed at P13,489,807.48. The claimed excess was broken down into an unconsumed down payment component, additional expenses incurred by engaging another contractor, and miscellaneous expenses. TG further claimed litigation expenses and attorney’s fees in its bond-related claim.

In response, Pro Builders denied TG’s theory of entitlement and asserted that TG caused delay by late delivery of owner-supplied materials, especially rebars, and by delayed release of down payment. Pro Builders also insisted that TG’s performance evaluation should be reckoned within seven days upon receipt of the down payment. Pro Builders counterclaimed for unpaid accomplishment, various compensatory and exemplary damages, rental deposit for forms and scaffoldings, surety and insurance costs, and litigation expenses and attorney’s fees, among others.

Arbitration Issues and the Arbitral Tribunal’s Decision

The Arbitral Tribunal limited the issues to determining which party failed to comply with the contract terms; whether Pro Builders was in delay and whether TG itself was in delay in releasing down payment and delivering owner-supplied materials; whether TG was entitled to various components of its claims, including the unliquidated down payment, cost to complete, and miscellaneous expenses; whether Pro Builders was entitled to its counterclaims; and whether the surety company was solidarily liable, together with issues on possible expiration, waiver, or legal obligations of third-party respondents to indemnify the surety if liability were imposed.

On 1 October 2008, the Arbitral Tribunal ruled in favor of Pro Builders to a limited extent. It ordered TG to pay Pro Builders P2,104,642.11 for unpaid accomplishment and awarded Pro Builders P58,333.34 as reimbursement for the staging area rental paid by TG in advance. After offsetting these amounts, the Arbitral Tribunal ordered that TG pay Pro Builders P2,046,308.77. It denied TG’s claims for the unliquidated down payment balance, cost to complete, most miscellaneous expenses, exemplary damages, litigation expenses, and attorney’s fees for lack of merit. It also denied Pro Builders’ counterclaims for damages, rental deposit, costs of bonds, litigation expenses, exemplary damages, and attorney’s fees.

The Arbitral Tribunal’s factual findings were that both parties failed to comply with their respective obligations. It held that Pro Builders failed to meet milestones due to inability to deploy required manpower and equipment and committed violations of concrete protocol. For TG’s part, it found that TG made the down payment only on 19 June 2007 rather than upon execution of the agreement, did not pay progress billings and change orders, and caused delay in delivering owner-supplied rebars. On TG’s claim for cost to complete, the Arbitral Tribunal reasoned that the value could only be determined after completion of the project. It also denied Pro Builders’ claim for unprovisioned items and held no contractual basis for reimbursement of bonding costs.

Proceedings Before the Court of Appeals

Pro Builders challenged only portions of the Arbitral Tribunal’s decision. The Court of Appeals, in a Decision dated 13 October 2010, granted TG’s petition in part and modified the CIAC ruling. It ordered Pro Builders to pay TG the balance of the unspent down payment (P5,582,921.10), TG’s cost to complete (P7,771,553.04), additional miscellaneous expenses (P77,200.00), and attorney’s fees and litigation expenses (P500,000.00), while declaring TG not entitled to cost of rectification and exemplary damages. It also deleted the Arbitral Tribunal award of P2,104,642.11 to Pro Builders. In all other respects, it affirmed the CIAC decision. The Court of Appeals denied Pro Builders’ reconsideration in a Resolution dated 16 December 2010.

The Court of Appeals held that inadequate performance was attributable to Pro Builders alone. It found that TG did not delay the release of the P21,000,000.00 down payment, reasoning that its release on 19 June 2007 coincided with Pro Builders’ posting of the surety bond. It sustained TG’s claim for P5,582,921.10 by subtracting Pro Builders’ accomplishments valued at P15,417,078.90 from the down payment. It credited TG’s documentary support for that accomplishment value, including its evaluation materials and related documentation, and held that TG’s receipt of Pro Builders’ progress billings did not estop TG from disputing the real amount of Pro Builders’ undertakings.

On TG’s cost-to-complete claim, the Court of Appeals ruled that TG was entitled to P7,771,553.04 based on supporting documents allegedly disregarded by the Arbitral Tribunal. It also awarded additional miscellaneous expenses and attorney’s fees because it found TG was compelled to initiate the proceedings before the Arbitral Tribunal.

Petition to the Supreme Court and the Procedural Issue

Pro Builders initially invoked the Court’s power to delve into facts, arguing that the Court of Appeals and the Arbitral Tribunal produced conflicting findings. Pro Builders contended that the Court of Appeals erred in determining that its accomplishments were worth only P15,417,078.90. It argued that the joint evaluation used by the Court of Appeals was allegedly one-sided because it was prepared solely by TG’s project manager and submitted long after the contract termination. Pro Builders also relied on the Arbitral Tribunal’s preference for its progress billings as more accurate and reliable.

Pro Builders further argued that the cost overrun could not be computed because the project had not been finished when submitted to the Arbitral Tribunal, and it challenged the award of attorney’s fees and litigation expenses. It also asserted that TG availed of the wrong remedy by filing a petition for partial review before the Court of Appeals, reasoning that the CIAC award should be appealable on questions of law to the Supreme Court.

The Supreme Court first addressed the procedural question concerning the proper forum and mode of review. It explained that Executive Order No. 1008 vested in CIAC original and exclusive jurisdiction over disputes arising from or connected with construction contracts in the Philippines, and that Section 19 of E.O. No. 1008 declared CIAC awards final and unappealable except on questions of law, appealable to the Supreme Court. However, the Court recognized that amendments introduced by R.A. No. 7902 and the effect of the 1997 Rules of Civil Procedure as amended brought the CIAC within the enumeration of quasi-judicial agencies whose decisions or awards may be appealed to the Court of Appeals via a Rule 43 petition for review, with review potentially involving questions of fact, law, or both. It also noted the CIAC Revised Rules of Procedure on petitions for review and held that, applying these rules, the Court of Appeals correctly took cognizance of TG’s appeal.

Substantive Issues and Standards for Review

On the merits, the Supreme Court treated the issues raised by Pro Builders as questions of fact. It reiterated that a question of fact exists when the issue pertains to the truth or falsity of alleged facts and that re-evaluation of credibility and surrounding circumstances are factual matters. It further acknowledged the general rule that the Court of Appeals’ factual findings are conclusive, but it enumerated recognized exceptions, including when the findings of the Court of Appeals and the court or tribunal below are contradictory, when the findings are conflicting, when conclusions are made without specific evidentiary citation, or when findings are premised on misapprehension of facts.

Given that the Court of Appeals’ factual findings conflicted with those of the Arbitral Tribunal, the Supreme Court proceeded to review the evidence on record.

Valuation of Pro Builders’ Accomplished Works

The principal controversy centered on the monetary value of Pro Builders’ accomplished works. Pro Builders computed its accomplishments based on its progress billings, arriving at P22,482,934.34 broken down by billing periods and including a change order, for a total of P23,104,642.11. By deducting TG’s P21,000,000.00 down payment and adding the change order amount of P621,598.77, Pro Builders claimed an additional collectible amount of P2,104,642.11.

TG computed Pro Builders’ accomplishment at P15,417,078.90, allegedly supported by documentation such as a “joint evaluation,” photographs showing suspended slabs at the second floor, a letter recognizing a joint inspection, a summary of additive and deductive works, and Pro Builders’ own written computation. TG then argued that Pro Builders must return the excess portion of P5,582,921.10 from the down payment.

The Supreme Court held that Pro Builders’ valuation of accomplished works was more accurate. It reasoned that a joint evaluation had been agreed upon by the parties and that Pro Builders had initially demanded a joint assessment, while TG responded as amenable and claimed that a joint assessment had already been completed. The Court, however, agreed with the Arbitral Tribunal’s conclusion that the alle

Case Syllabus (G.R. No. 194960)

Pro Builders, Inc. and TG Universal Business Ventures, Inc. executed an Owner-Contractor Agreement for the construction of a fifteen-storey building at Asiatown I.T. Park, Lahug, Cebu City.
The dispute arose from alleged delays, disputed accomplished works, and the resulting excess cost to complete after TG took over the project.
TG initiated arbitration before the Construction Industry Arbitration Commission (CIAC) through an Arbitral Tribunal.
The Arbitral Tribunal partially ruled for Pro Builders and denied most of TG’s claims.
The Court of Appeals modified the CIAC ruling and substantially favored TG.
Pro Builders then sought review before the Supreme Court, contending that the Court of Appeals wrongly reweighed facts and credibility-based evidence.
The Supreme Court ultimately reinstated the CIAC Decision in full.

Parties and Procedural Posture

TG Universal Business Ventures, Inc. (TG) acted as Owner, while Pro Builders, Inc. (Pro Builders) acted as Contractor under the construction contract.
TG filed a Request for Arbitration with the CIAC, which was resolved by an Arbitral Tribunal.
The Arbitral Tribunal rendered a Decision on 1 October 2008.
TG challenged the Arbitral Tribunal’s Decision by petition for review before the Court of Appeals, docketed as CA-G.R. SP No. 106407.
The Court of Appeals rendered a Decision on 13 October 2010 and denied reconsideration in a Resolution dated 16 December 2010.
Pro Builders sought review on certiorari before the Supreme Court, asserting procedural error and factual misapprehension by the Court of Appeals.
The Supreme Court treated the appeal as involving issues properly cognizable within the scope of the reviewing court’s powers over CIAC awards.

Key Factual Allegations

On 29 May 2007, TG and Pro Builders entered into an Owner-Contractor Agreement with a contract price of P70,000,000.00.
Under the agreement, TG was to pay a down payment equal to 30% of the contract, totaling P21,000,000.00, and Pro Builders was to provide labor, materials, equipment, and complete all structural works.
The project completion target was 31 May 2008, subject to extension upon request by Pro Builders for force majeure, fortuitous events, additional work approved by TG, or other special circumstances determined by TG.
Pro Builders posted a performance bond obtained from Prudential Guarantee and Assurance, Inc., and a Notice of Award was issued on 15 May 2007.
The project site was turned over to Pro Builders on 22 May 2007, and construction was set to officially begin on 1 June 2007.
Pro Builders received the 30% down payment on 19 June 2007, and TG later became dissatisfied with progress, took over the project, hired another contractor, and demanded payment of the overpayment-related excess cost to complete.
TG claimed unliquidated down payment, cost to complete, and miscellaneous expenses, later asserting a computation of P13,489,807.48 (and a related surety bond claim summary including additional items).
Pro Builders denied TG’s allegations, asserted that TG caused delay through late release of rebars and down payment, and counterclaimed for unpaid accomplishment, damages, bond costs, litigation expenses, exemplary damages, and attorney’s fees.
An Arbitral Tribunal limited the issues to allocation of responsibility for breach and delay, valuation of completed works and cost-to-complete, entitlement to various expense categories, and surety-related liability questions.
The Arbitral Tribunal found both parties were in breach of their obligations under the Agreement.

Construction Contract Framework

The Owner-Contractor Agreement governed milestones, progress billing, evaluation, and payment processing through the Project Manager.
Article 10.02 of the Agreement was implicated in the contractual timeline framework, and the contract’s implementation required compliance with payment and start obligations.
Pro Builders was instructed in the Notice of Award “to mobilize within 7 days upon receipt of the 30% down payment.”
The Agreement scheduled progress milestones and linked progress verification to the Project Manager’s processing and certification.
Article 5.03 required the Contractor to submit progress billings based on actual accomplishment, and required the Project Manager to process, certify correctness, and recommend payment within fifteen (15) calendar days from receipt of complete billing documents.
Final payment was to be made pursuant to Article 17 of the Agreement.
Article 9 of the Agreement—Option to Complete Work Takeover—formed the contractual basis for TG’s takeover after Pro Builders’ performance allegedly became dismal.

CIAC Proceedings and Arbitral Findings

The Arbitral Tribunal created to hear the dispute included Jacinto M. Butalid as Chairman, with members Guadalupe O. Mansueto and Kian Hun T. Tiu.
The Arbitral Tribunal ruled that Pro Builders failed to meet targets due to inability to deploy required manpower and equipment and due to violations of concrete protocols.
The Arbitral Tribunal also ruled that TG committed breach by making the down payment only on 19 June 2007 rather than upon execution, failing to pay progress billings, not paying change orders, and incurring delay through delivery issues concerning owner-supplied rebars.
On valuation, the Arbitral Tribunal denied TG’s claim of P5,582,921.10 representing unliquidated down payment, and instead accepted Pro Builders’ billed value of completed works totaling P23,104,642.11.
The Arbitral Tribunal rejected TG’s proposed cost-to-complete of P7,771,553.04, holding that such value could only be determined after full project completion.
The Arbitral Tribunal awarded TG’s claim for P58,333.34 pertaining to advanced rental for a staging area adjacent to the project site after finding TG had paid such rental in advance.
The Arbitral Tribunal denied both parties’ requests for litigation and compensatory damages, exemplary damages, and other expense items for lack of merit.
On offsets, the Arbitral Tribunal ordered TG to pay Pro Builders unpaid accomplishment of P2,104,642.11 and required Pro Builders to pay TG miscellaneous expenses of P58,333.34, resulting in an offset net amount of P2,046,308.77.
Regarding bond costs and surety issues, the Arbitral Tribunal held there was no contractual or policy basis for bond cost reimbursement but declared Prudential and Pro Builders solidarity liable on the performance and surety bonds up to their total amounts, with third-party respondents obligated to reimburse the bonding company if Prudential paid.

Court of Appeals Disposition

The Court of Appeals granted TG’s petition in part and modified the CIAC Decision.
The Court of Appeals ordered Pro Builders to pay TG:
- P5,582,921.10 as balance of unspent 30% down payment,
- P7,771,553.04 as TG’s cost in completing the construction,
- P77,200.00 as additional miscellaneous expenses,
- and P500,000.00 as attorney’s fees and expenses of litigation.
The Court of Appeals declared TG not entitled to cost of rectification and exemplary damages, and deleted the P2,104,642.11 award in favor of Pro Builders.
The Court of Appeals attributed inadequate performance to Pro Builders and found no delay in the down payment because the down payment coincided with posting of the surety bond.
The Court of Appeals sustained TG’s down payment balance claim by subtracting Pro Builders’ assessed accomplishments worth P15,417,078.90 from the down payment.
The Court of Appeals reasoned that TG’s receipt of Pro Builders’ progress billings did not estop TG from disputing the true amount of the contractor’s undertakings.
The Court of Appeals held that TG was entitled to P7,771,553.04 for cost to complete based on documentary support it found the Arbitral Tribunal had disregarded.
The Court of Appeals awarded P77,200.00 as the total cost of damages Pro Builders allegedly caused on properties of Asiatown I.T. Park.
The Court of Appeals awarded attorney’s fees and litigation expenses because it found TG compelled to initiate proceedings before the CIAC.
The Court of Appeals denied Pro Builders’ motion for reconsideration.

Issues Raised on Supreme Court Review

Pro Builders argued that the Court of Appeals committed errors warranting factual review despite the general rule against Supreme Court reweighing of facts.
Pro Builders asserted that the Court of Appeals wrongly declared its accomplishments worth only P15,417,078.90, instead of using its own progress-billing-based valuation.
Pro Builders contended that the Court of Appeals’ favored valuation stemmed from a joint evaluation allegedly performed solely by Project Manager, Prime Edifice, Inc., without participation from Pro Builders’ engineers, and that it was submitted on 11 January 2008 after contract termination.
Pro Builders argued that the Arbitral Tribunal correctly relied on Pro Builders’ progress billings as more accurate and reliable than TG’s valuation.
Pro Builders maintained that if its collectible was P2,104,642.11, the rental of the staging