Title
Public Estates Authority vs. Uy
Case
G.R. No. 147933-34
Decision Date
Dec 12, 2001
PEA, a government agency, was held liable for project delays, causing damages to contractor Elpidio Uy. CIAC's awards upheld; PEA's counterclaims dismissed due to lack of evidence and procedural defects.
damages
rental costs
topsoil hauling

Case Summary (G.R. No. 147933-34)

Parties and Contractual Setting

On November 20, 1996, Public Estates Authority executed with Elpidio S. Uy a Landscaping and Construction Agreement. Under the contract, respondent undertook to perform all landscaping works on the 105-hectare Heritage Park. The parties stipulated that completion was within 450 days, commencing within 14 days after respondent’s receipt from petitioner of a written notice to proceed. Due to delays, the period was later extended to 693 days. Petitioner attributed part of the delay to its inability to deliver to respondent 45 hectares of the property for landscaping because of the presence of squatters and a public cemetery.

CIAC Proceedings and the Monetary Award

As a consequence of the delay in the full delivery of the property for landscaping, respondent instituted with the CIAC an action docketed as CIAC Case No. 02-2000. Respondent sought to collect from petitioner damages arising from the delay, alleging multiple forms of additional and idle expenses. The claimed damages included additional rental costs for equipment kept on standby and labor costs for idle manpower. Respondent also alleged that delay depleted the topsoil at the original supplier, forcing him to obtain topsoil from a farther source at added cost. Further, respondent claimed it became necessary to mobilize water trucks for plants and trees already delivered at the site. Lastly, respondent alleged the need to construct a nursery shade to protect and preserve young plants and trees prior to transplanting to the landscaped area.

On May 16, 2000, the CIAC rendered a decision favorable to respondent. The dispositive portion directed petitioner to pay: P19,604,132.06 for the cost of idle time of equipment; P2,275,721.00 for the cost of idled manpower; P6,050,165.05 for the construction of the nursery shade net area; and P605,016.50 for attorney’s fees. The CIAC also provided for 6% per annum interest on the nursery shade amount from January 12, 2000, and on the combined amount of idled manpower and equipment from the date the CIAC decision was promulgated. After finality, the CIAC ordered 12% per annum interest on the total of these awards until full payment, characterizing the “interim period” as forbearance of credit, referencing Eastern Shipping Lines, Inc. v. Court of Appeals and related cases.

Appeals before the Court of Appeals

Both parties sought review before the Court of Appeals. In CA-G.R. SP No. 59308, petitioner challenged the monetary awards granted by the CIAC. In CA-G.R. SP No. 59849, respondent argued that the CIAC erred in awarding a reduced amount for equipment stand-by costs and in denying claims for additional costs related to topsoil hauling and water truck operating costs. The Court of Appeals issued a Joint Decision dated September 25, 2000 dismissing both petitions for lack of merit and affirming the CIAC award “in toto.”

The parties separately filed motions for reconsideration. Petitioner then filed with the Court of Appeals an Urgent Motion for Issuance of a Temporary Restraining Order and/or Writ of Preliminary Injunction to enjoin the CIAC from proceeding with CIAC Case No. 03-2001, which respondent had allegedly filed based on claims arising from the same landscaping and construction agreement. Petitioner contended that the new case involved matters connected to the same contract already under consideration in the pending appeals. On April 25, 2001, the Court of Appeals issued the assailed Joint Resolution, denying both motions for reconsideration and issuing a permanent injunction enjoining the CIAC from proceeding with CIAC Case No. 03-2001.

Issues Raised in the Supreme Court Petition

Dissatisfied, petitioner elevated the case to the Supreme Court through a petition for review. Petitioner argued primarily that the Court of Appeals erred in denying due course to its petition under Rule 43 and in rejecting its motion for reconsideration. It further contended that due process required a merits-based resolution rather than dismissal on alleged technical grounds. Substantively, petitioner challenged several CIAC determinations and related rulings affirmed by the Court of Appeals: its claimed entitlement to an unrecouped balance on a fifteen percent advance payment, an alleged unrecouped balance on prepaid materials, and supposed overpayment based on actual payments as against physical accomplishments; the CIAC’s award of attorney’s fees to respondent and the denial of petitioner’s own counterclaim for attorney’s fees; and petitioner’s assertion that its obligation, if any, had been extinguished. Petitioner also sought reimbursement of P345,583.20 representing fees it paid to the CIAC.

After respondent filed its comment, the Supreme Court required petitioner to submit a reply. Despite receipt of the directive, petitioner did not file a reply. The Court therefore resolved the petition on the pleadings already on record.

Supreme Court’s Treatment of the Procedural Defect (Due Course and Verification)

In addressing petitioner’s procedural attack, the Supreme Court focused on the Court of Appeals’ ruling that the petition failed a mandatory requirement because the verification and certification of non-forum shopping were signed by petitioner’s Officer-in-Charge whose authority to represent the corporation allegedly was not shown. The Court held that as a government-owned and controlled corporation, petitioner could act only through duly authorized representatives. It relied on the principle articulated in Premium Marble Resources, Inc. v. Court of Appeals, emphasizing that without authority from the board of directors, no person, even corporate officers, could validly bind the corporation.

The Court further invoked Rule 43, Section 7 of the 1997 Rules of Civil Procedure, which provides that failure to comply with requirements regarding, among others, the petition’s contents and accompanying documents is sufficient ground for dismissal. The Court also rejected petitioner’s claim that its petition was already given due course in an earlier appellate resolution, explaining that the internal raffling process of the Court of Appeals involves multiple raffles for completion of records and for study and report. Accordingly, the later division that decided the case could still dismiss the petition on procedural and substantive grounds.

The Court underscored that the Court of Appeals’ dismissal rested not only on procedural defect but also on lack of substantive merit, particularly the failure to show that the CIAC committed gross abuse of discretion, fraud, or error of law warranting reversal of factual findings.

Deference to CIAC Findings and Review Standard

Proceeding to the merits, the Supreme Court stated that it carefully reviewed the CIAC decision and found that it contained an exhaustive discussion of all claims and counterclaims of both parties. The Court held that CIAC findings were supported by evidence appearing in the record. It stressed that CIAC, as a specialized quasi-judicial body with expertise in construction arbitration, is entitled to respect and, when its findings are affirmed by the Court of Appeals, they generally acquire finality. The Court therefore affirmed the CIAC’s factual findings and conclusions as to the arbitral awards in favor of respondent, characterizing them as supported by substantial evidence.

Resolution of Petitioner’s Counterclaims

On petitioner’s counterclaims, the Supreme Court recognized that the CIAC had carefully examined them despite an initial observation that petitioner allegedly failed to substantiate the same with arguments. On the counterclaim for unrecouped balance on prepaid materials, the Supreme Court quoted and adopted the CIAC’s findings that the evidence presented was insufficient. The CIAC described that petitioner’s supporting affidavits were conclusory and failed to provide adequate elaboration. It noted that a single page computation did not amount to a full evidentiary basis because the relevant billings themselves were not introduced in evidence and no testimonial evidence was offered to explain how the computations were made. The CIAC further stated that it was not its duty to search through data to support unsubstantiated counterclaims.

As to petitioner’s counterclaim for the unrecouped balance on advance payment, the Supreme Court agreed that the CIAC properly deferred determination. The CIAC explained that resolution would require deduction from respondent’s progress billing a proportionate amount based on the percentage of work accomplished. The CIAC found that this proportionate computation could not be made because petitioner had terminated the construction contract and, at the time the CIAC rendered its decision, the validity of that termination was still pending before the Regional Trial Court of Paranaque. The Supreme Court held that petitioner still failed to show that its termination was upheld as valid.

Attorney’s Fees and Nature of Proof Required

With respect to attorney’s fees, the Supreme Court held that petitioner failed to prove them with convincing evidence. It characterized attorney’s fees as in the nature of actual damages that must be duly proved. The Court added that petitioner was represented by the Government Corporate Counsel in CIAC proceedings, but representation alone did not suffice to establish the actual incurrence of attorney’s fees.

Alleged Extinguishment by Novation and Lack of Consent

Petitioner also argued that its liability was extinguished by novation when it assigned and turned over the contracted works at the Heritage Park to the Heritage Park Management Corporation. The Supreme Court rejected this contention for lack of bindi

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