Case Summary (G.R. No. 208984)
Facts: formation and performance of additional works
WTCI was the winning bidder for Phase I (substructure) and later Phase II (adjacent works) of the CICC project. As Phase II neared completion, the Province directed WTCI to perform additional works—site development and additional structural, architectural, electrical, and plumbing works—without separate public bidding. WTCI completed those additional works in November 2006 and submitted billings on February 8 and February 12, 2007 (and a Final Billing dated February 21, 2007). WTCI repeatedly demanded payment; the Province refused, prompting WTCI to file a collection complaint in the RTC on January 22, 2008.
Contractual contention and valuation
The Province admitted the existence of the additional works but asserted there was no contract for them and that the works did not undergo the public bidding required by RA 9184. The parties jointly verified the value of the additional works; the RTC initially found the value to be P263,263,261.41, while the Province contested and later admitted liability in the amount of P257,413,911.73, which the RTC ultimately used following recalculation by referenced cost standards.
RTC judgment and awards
By Judgment dated May 20, 2009, the RTC ruled in favor of WTCI and ordered the Province to pay P263,263,261.41 with legal interest at 12% per annum from filing of the complaint, plus P50,000 attorney’s fees and costs. Upon the Province’s motion for reconsideration, the RTC in an Order dated September 22, 2009 reduced the principal award to P257,413,911.73 (aligning with cost standards) but otherwise sustained awards of interest (12% from filing), attorney’s fees, and costs.
Court of Appeals ruling
The Court of Appeals affirmed the RTC’s findings but reduced the legal interest rate from 12% to 6% per annum, reasoning that the liability arose from unpaid services rather than a loan or forbearance of money. The CA found the issue of existence of a contract immaterial given the Province’s admission of liability for P257,413,911.73; it also affirmed attorney’s fees and costs based on a finding that the Province acted maliciously and in bad faith in refusing payment.
Issues presented to the Supreme Court
The consolidated petitions presented two principal legal questions: (a) whether the Province’s liability was in the nature of a loan or forbearance of money (which would affect the applicable legal interest rate); and (b) whether interest should run from the date of filing the complaint (January 22, 2008) or from the date of extrajudicial demand (the February 2007 billings).
Supreme Court analysis on factual findings and scope of review
The Supreme Court emphasized its limited role under Rule 45: questions of fact resolved by the RTC and affirmed by the CA are generally final and conclusive and beyond the scope of a certiorari petition, absent applicable exceptions that were not present here. Accordingly, the Court accepted the established liability of the Province to WTCI for P257,413,911.73 as the value of the additional works.
Nature of the liability: service contract, not forbearance
Applying established jurisprudence (Sunga-Chan; Estores; Federal Builders), the Court held that the dispute involved performance of services (construction and related works) rather than an acquiescence to temporary use of money, goods, or credit. Forbearance involves arrangements akin to lending or temporary use of funds where compensation by way of legal interest is appropriate; by contrast, liabilities arising from construction contracts are characterized as contracts of service. Therefore, the liability was not a loan or forbearance of money.
Applicable interest rate under precedent and BSP guidance
Pursuant to Eastern Shipping Lines’ framework and as clarified in Nacar (applying BSP Circular No. 799), the Court confirmed that obligations not constituting loans or forbearance attract judicial discretion to award interest at 6% per annum. The Court thus sustained the CA’s reduction of interest to 6% per annum for this non-forbearance obligation. The Court also confirmed that when a judgment becomes final and executory the interim period assumes the nature of forbearance of credit and shall be subject to lega
...continue readingCase Syllabus (G.R. No. 208984)
Procedural Posture and Relief Sought
- Consolidated petitions for review on certiorari were filed before the Supreme Court (G.R. Nos. 208984 and 209245) assailing the Court of Appeals (CA) Decision dated December 19, 2012 and the CA Resolution dated August 8, 2013 in CA‑G.R. CEB‑CV No. 03791.
- The CA had affirmed the Regional Trial Court (RTC) Order dated September 22, 2009 in Civil Case No. CEB‑34012, which found the Province of Cebu liable to WT Construction, Inc. (WTCI) and awarded monetary recovery, but reduced the legal interest rate from 12% to 6% per annum.
- WTCI filed its petition for review on certiorari on November 13, 2013 (docketed G.R. No. 208984) contesting, among other things, the reduction of legal interest and the reckoning date for interest.
- The Province of Cebu filed its petition for review on certiorari on November 13, 2013 (docketed G.R. No. 209245) raising, inter alia, the absence of a perfected contract and the alleged invalidity of any contract for lack of public bidding under RA 9184.
- The Supreme Court consolidated the petitions in a Resolution dated December 4, 2013.
Facts (core chronological facts as found in the source)
- In 2005 the Province of Cebu was designated to host the 12th ASEAN Summit scheduled for December 10, 2006, prompting construction of the Cebu International Convention Center (CICC) at the New Mandaue Reclamation Area, Mandaue City.
- The Province conducted public bidding; on February 22, 2006 WTCI was the winning bidder for Phase I (the substructure) and, after completing Phase I and receiving payment, WTCI again won the bidding for Phase II on July 26, 2006.
- As Phase II neared completion, the Province caused WTCI to perform further additional works (site development; additional structural, architectural, electrical, and plumbing works) without public bidding; WTCI agreed to perform these additional works based on repeated assurances of prompt payment and cognizant of the need to complete the project in time for the ASEAN Summit.
- WTCI completed the project, including the additional works, in November 2006 and demanded payment thereafter.
- WTCI sent a billing letter dated February 8, 2007 for P175,951,478.69 (site development and extended structural/architectural works) and a separate billing letter dated February 12, 2007 for P85,266,407.97 (electrical and plumbing works).
- By Final Billing dated February 21, 2007 WTCI demanded aggregate payment of P261,217,886.66; subsequent demand letters were sent on March 20, 2007 and September 11, 2007.
- The Province refused to pay, prompting WTCI to file a complaint for collection of sum of money on January 22, 2008, docketed as Civil Case No. CEB‑34012.
- Upon joint verification by the parties the value of the additional works was pegged at P263,263,261.41 (later contested by the Province as P257,413,911.73).
RTC Proceedings and Rulings
- RTC Judgment dated May 20, 2009:
- Ruled in favor of WTCI and ordered payment by the Province of Cebu of P263,263,261.41 for the additional works, with legal interest at 12% per annum from filing of the complaint (January 22, 2008) until fully paid.
- Awarded P50,000.00 as attorney's fees and costs of suit.
- Found a perfected oral contract for the additional works and applied quantum meruit to prevent unjust enrichment of the Province.
- Province filed a motion for reconsideration arguing valuation was P257,413,911.73 and that no interest was due because WTCI performed works at its own risk due to lack of public bidding.
- WTCI did not appeal or seek reconsideration of the May 20, 2009 Judgment.
- RTC Order dated September 22, 2009 (granting in part the Province's motion for reconsideration):
- Reduced the amount of actual damages from P263,263,261.41 to P257,413,911.73 in accordance with applicable 2006 cost standards (COA, NSO, DTI, and the Province itself).
- Sustained all other aspects of its earlier ruling, including award of legal interest at 12% per annum from filing of complaint, attorney's fees, and costs of suit.
Court of Appeals Ruling
- CA Decision dated December 19, 2012:
- Affirmed the RTC Order dated September 22, 2009 as to liability in the amount fixed by the RTC (P257,413,911.73).
- Reduced the legal interest rate from 12% to 6% per annum.
- Noted that whether a contract existed became immaterial because the Province admitted liability for P257,413,911.73 and had paid the same; thus only interest, attorney's fees, and costs remained at issue.
- Justified the reduction of interest rate to 6% because the liability did not arise from a loan or forbearance of money but from nonpayment for services rendered.
- Affirmed award of attorney's fees and costs of suit after finding the Province acted maliciously and in bad faith when it refused to pay.
- The Province's motion for reconsideration before the CA (filed January 24, 2013) was denied in a Resolution dated August 8, 2013.
Issues Presented to the Supreme Court
- Whether the