Case Summary (G.R. No. 126619)
Agreements for Projects 1–3
Project 1 (May 1991): Written contract for a Warehouse Club and Administration Building in Libis, Quezon City; contract price ₱120,936,591.50; completion stipulated by November 30, 1991; actual turnover February 15, 1992.
Project 2 (July 1992): Oral agreement to add a floor and renovate a warehouse at EDSA Central Market, Mandaluyong; based on cost estimate ₱21,301,075.77 (including 20% mark-up); ₱15,000,000 received; turnover October 1992.
Project 3 (May 1992): Written contract for Sales Department Store in Kalookan City; contract price ₱118,000,000; completion by February 28, 1993; actual turnover June 1993.
Arbitral Proceedings
• CIAC Reference (1994): Titan re-filed its claim under Executive Order No. 1008 after RTC suspension.
• Uniwide’s defenses and counterclaims: overpayment refunds, VAT non-liability, liquidated damages, defective construction.
• Tribunal process: Terms of Reference signed, ocular inspection, affidavits, hearings, memoranda.
• CIAC Decision (April 17, 1995):
– Project 1: Uniwide absolved of liability.
– Project 2: Uniwide pays unpaid balance ₱6,301,075.77 with 12% p.a. interest; absolved of defective construction and VAT liability.
– Project 3: Uniwide pays unpaid balance ₱5,158,364.63 with 12% p.a. interest; Uniwide liable for VAT.
Court of Appeals Modification (February 21, 1996)
• VAT on Project 3 may be passed to Titan.
• Liquidated-damages denial without prejudice.
• Interest rate on unpaid balances reduced from 12% to 6% p.a.
• Other CIAC findings affirmed.
Standard of Review and Applicable Law
• Arbitration awards are final on facts, subject to narrow exceptions (fraud, partiality, misconduct, excess of powers, grave abuse of discretion, conflicting findings).
• Factual issues may be reviewed where CIAC and CA findings diverge.
• Governing laws: New Civil Code (Arts. 1423, 1723, 1724, 2154, 2156), National Internal Revenue Code (Secs. 99, 102), CIAC Rules, Rules of Court (Rule 45, Civil Code provisions), National Building Code (PD 1096).
Issue 1: Reimbursement for Unauthorized Additional Works (Project 1)
Uniwide contended payments (₱5,823,481.75) were made by mistake for works not authorized in writing. CIAC and CA: absence of proof of mistake; Section 3(f), Rule 131 presumes paid sums were due; Art. 1724 does not itself grant reimbursement right once payment is made; solutio indebiti (Arts. 2154, 2156) requires proof of debtor’s mistake or doubt. Neither tribunal found evidence Uniwide paid under mistake.
Issue 2: VAT Liability (Project 1)
Contract silent on VAT; Uniwide argued VAT included in contract price. CIAC and CA relied on Titan’s October 7, 1992 Order of Payment billing ₱2,400,000 as 4% VAT on ₱60,000,000, approved by Uniwide president and identifying Project 1. CIAC held parties agreed to pass VAT on but limited to ₱60 million base; balance VAT remains Titan’s obligation.
Issue 3: Liquidated Damages (Projects 1 and 3)
Uniwide claimed liquidated damages for delays. CIAC refused to resolve because claim was not raised in CIAC’s Terms of Reference or amended therein; Rule 10, Sec. 5 of Rules of Court not applicable to CIAC’s voluntary arbitration process. CA agreed claim was too belated and unformulated for Titan or tribunal to address. Evidence on completion dates did not alo
Case Syllabus (G.R. No. 126619)
Citation and Procedural Posture
- G.R. No. 126619, December 20, 2006; 540 Phil. 350 (Third Division, Decision by Justice Tinga)
- Petition for Review on Certiorari under Rule 45 seeking partial reversal of Court of Appeals’ 21 February 1996 Decision in CA-G.R. SP No. 37957
- CA decision modified the 17 April 1995 Construction Industry Arbitration Commission (CIAC) award in CIAC Case No. 13-94
- RTC Branch 119, Pasay City Civil Case No. 94-0814 initially filed by Titan-Ikeda against Uniwide for unpaid claims, suspended for arbitration
Parties and Nature of Dispute
- Petitioner: Uniwide Sales Realty and Resources Corporation (Owner)
- Respondent: Titan-Ikeda Construction and Development Corporation (Contractor)
- Core dispute: Uniwide’s non-payment of billed claims for three construction projects and Uniwide’s various counterclaims including overpayments, VAT liability, liquidated damages, and defective work
Facts and Contracts
- Project 1 (Libis Warehouse Club & Administration Building)
• May 1991 written contract at P120,936,591.50, completion by 30 November 1991 – actually finished 15 February 1992
• Monthly progress billings certified by Uniwide’s representative - Project 2 (EDSA Central Market Area Renovation)
• July 1992 agreement without a formal written contract
• Cost estimate P21,301,075.77 inclusive of 20% mark-up; Titan received P15,000,000.00
• Completed October 1992 and turned over - Project 3 (Kalookan Department Store Building)
• May 1992 written contract at P118,000,000.00, completion by 28 February 1993 – finished June 1993
• Progress billings certified by Uniwide’s representative
Arbitration Proceedings and CIAC Award
- Parties agreed to arbitrate pursuant to Executive Order No. 1008
- Arbitral Tribunal: chairman and two members; preliminary conference; signed Terms of Reference; ocular inspection; affidavits and cross-examination; memoranda
- 17 April 1995 CIAC Decision on projects:
• Project 1 – Uniwide absolved of all liability
• Project 2 – Uniwide absolved of VAT liability; Titan absolved on defective construction; Uniwide pays P6,301,075.77 plus 12% interest from 19 December 1992
• Project 3 – Uniwide pays P5,158,364.63 plus 12% interest from 8 September 1993; Uniwide pays VAT directly to BIR; Titan exempted
Court of Appeals Modification (21 February 1996)
- Modified CIAC award in part:
• VAT on Project 3 may be passed to Titan subject to defenses
• Denial of liquidated damages without prejudice
• Reduced interest from 12% to 6% per annum on unpaid balances - Motion for reconsideration denied 30 September 1996
Issues on Review
- Whether Uniwide may recover P5,823,481.75 paid by mistake for unauthorized additional works on Project 1
- Whether Uniwide is liable for VAT on Project 1
- Whether Uniwide is entitled to liquidated damages for delays in Projects 1 and 3
- Whether Uniwide is liable for de