WERR CORPORATION INTERNATIONAL, Petitioner, Vs. HIGHLANDS PRIME, INC., Respondent. / HIGHLANDS PRIME, INC., Petitioner, Vs. WERR CORPORATION INTERNATIONAL, Respondent.
G.R. No. 187543 / G.R. No. 187580
February 8, 2017
Facts:
Highlands Prime, Inc. (HPI) and W err Corporation International(Werr) are domestic corporations engaged in property development and construction, respectively. For the construction of 54 residential units contained in three clusters of five-storey condominium structures, known as "The Horizon-Westridge Project," in Tagaytay Midlands Complex, Talisay, Batangas, the project owner, HPI, issued a Notice of Award/Notice to Proceed to its chosen contractor, Werr, on July 22, 2005. Thereafter, the parties executed a General Building Agreement (Agreement) on November 17, 2005. Under the Agreement, Werr had the obligation to complete the project within 210 calendar days from receipt of the Notice of Award/Notice to Proceed on July 22, 2005, or until February 19, 2006. For the completion of the project, HPI undertook to pay Werr a lump sum contract price of P271,797,900.00 inclusive of applicable taxes, supply and transportation of materials, and labor. It was agreed that this contract price shall be subject to the following payment scheme: ( 1) HPI shall pay 20% of the contract price upon the execution of the agreement and the presentation of the necessary bonds and insurance required under the contract, and shall pay the balance on installments progress billing subject to recoupment of downpayment and retention money; (2) HPI shall retain 10% of the contract price in the form of retention bond provided by Werr; (3) HPI may deduct or set off any sum against monies due Werr, including expenses for the rectification of defects in the construction project; and (4) HPI has the right to liquidated damages in the event of delay in the construction of the project equivalent to 1/10 of 1 o/o of the contract price for every day of delay.
Upon HPI's payment of the stipulated 20% downpayment in the amount of P54,359,580.00, Werr commenced with the construction of the project. The contract price was paid and the retention money was deducted, both in the progress billings. The project, however, was not completed on the initial completion date of February 19, 2006, which led HPI to grant several extensions and a final extension until October 15, 2006. On May 8, 2006, W err sought the assistance of HPI to pay its obligations with its suppliers under a "Direct Payment Scheme" totaling P24,503,500.08, which the latter approved only up to the amount of P18,762,541.67. The amount is to be charged against the accumulated retention money. As of the last billing on October 25, 2006, HPI had already paid the amount of P232,940,265.85 corresponding to 93.18% accomplishment rate of the project and retained the amount of P25,738,258.01 as retention bond. The project was not completed on the last extension given. Thus, HPI terminated its contract with Werr on November 28, 2006, which the latter accepted on November 30, 2006. No progress billing was adduced for the period October 28, 2006 until the termination of the contract.
On October 3, 2007, Werr demanded from HPI payment of the balance of the contract price as reflected in its financial status report which showed a conditional net payable amount of P36,078,652.90. On January 24, 2007, HPI informed Werr that based on their records, the amount due to the latter as of December 31, 2006 is Pl 4,834,926. 71. This amount was confirmed by Werr. Not having received any payment, Werr filed a Complaint for arbitration against HPI before the CIAC to recover the P14,834,926.71 representing the balance of its retention money.
In its Answer, HPI countered that it does not owe Werr because the balance of the retention money answered for the payments made to suppliers and for the additional costs and expenses incurred after termination of the contract. From the retention money of P25,738,258.0l, it deducted (1) Pl8,762,541.67 as payment to the suppliers under the Direct Payment Scheme, and (2) P7,548, 729.15 as additional costs and expenses further broken down as follows: (a) P3,336,526.91 representing the unrecouped portion of the 20% downpayment; (b) P542,500.00 representing the remainder of Werr's unpaid advances; (c) P629,702.24 for the waterproofing works done by Dubbel Philippines; and ( d) P3,040,000.00 for the rectification works performed by A.A. Manahan Construction after the termination of the contract. Deducting the foregoing from the accumulated retention money resulted in a deficiency of P573,012.81 in its favor. By way of counterclaim, HPI prayed for the payment of liquidated damages in the amount of Pl 1,959,107.60 for the 44-day delay in the completion of the project reckoned from October 15, 2006 up to the termination of the Agreement on November 28, 2006; for actual damages in the sum of P573,012.81; and for attorney's fees of P500,000.00 and litigation expenses Pl00,000.00. CIAC's Ruling, After due proceedings, the CIAC rendered its Decision on August 11, 2008 where it granted Werr's claim for the balance of the retention money in the amount of Pl0,955,899.79 and arbitration costs. It also granted HPI's claim for liquidated damages in the amount of P2,535,059.0l equivalent to 9.327 days of delay, but denied its counterclaim for damages, attorney's fees, and litigation expenses.
What was admitted as accomplishment at the last billing is 93.18%. For this reason, even if we adopt the rule that no liquidated damages shall run after the date of substantial completion of the project, Werr cannot claim benefit for it failed to meet the condition precedent, the contractor has successfully proven that it actually achieved 95% completion rate.
Thereafter, HPI filed its petition for review under Rule 43 with the CA on August 28, 2008. CA's Ruling, The CA rendered the assailed decision, affirming the CIAC's findings on the allowable charges against the retention money, and on the attorney's fees and litigation expenses. It, however, disagreed with the CIAC decision as to the amount of liquidated damages and arbitration costs. According to the CA, delay should be computed from October 27, 2006 until termination of the contract on November 28, 2006, or 33 days, since the contract prevails over the industry practice. Thus, the total liquidated damages is P8,969,330.70. As to the arbitration costs, it ruled that it is more equitable that it be borne equally by the parties since the claims of both were considered and partially granted. Hence, these consolidated petitions.
Issues:
I. Whether the payments made to suppliers and contractors after the termination of the contract are chargeable against the retention money.
II. Whether the industry practice of computing liquidated damages only up to substantial completion of the project applies in the computation of liquidated damages. Consequently, whether delay should be computed until termination of the contract or until substantial completion of the project.
III. Whether the cost of arbitration should be shouldered by both parties.
Held:
I
Yes, the payments made to suppliers and contractors after the termination of the contract are chargeable against the retention money. Under Ibex International, Inc. v. Government Service Insurance System, G.R. No. 162095, October 12, 2009, 603 SCRA 306, 314, we are bound by the findings of fact of the CIAC especially when affirmed by the CA.
II
Yes, delay should be computed until termination of the contract. Under Rollo (G.R. No. 187543), p. 65, Here, there is no completed 95% of the project before or at the time of the termination of the contract.
III
Yes, the cost of arbitration should be shouldered by both parties. Under Rollo (G.R. No. 187543), pp. 15; 66-67, We also do not find the need to disturb the findings as to attorney's fees and expenses of litigation, both the CIAC and the CA having found that there is no basis for the award of attorney's fees and litigation expenses.
WHEREFORE, the petitions are DENIED. The Court of Appeals' February 9, 2009 Decision and April 16, 2009 Resolution are AFFIRMED. The net award in favor of Werr Corporation International shall earn interest at the rate of 6% per annum from date of demand on October 3, 2007 until finality of this Decision. Thereafter, the total amount shall earn interest from finality of this Decision until fully paid.SO ORDERED.
No comments:
Post a Comment