SECOND DIVISION Construction Manager, and Ryder Hunt Loacor, Inc.

as
Quantity Surveyor.6
[G.R. NO. 154885 : March 24, 2008]
Under the Agreement, the Project prosecution proper
was to start on August 2, 1999, to run for a period of
DIESEL CONSTRUCTION CO.,
90 days or until November 8, 1999. The parties later
INC., Petitioner, v. UPSI PROPERTY HOLDINGS,
agreed to move the commencement date to August
INC., Respondent.
21, 1999, a development necessitating the
corresponding movement of the completion date to
[G.R. NO. 154937] November 20, 1999.

UPSI PROPERTY HOLDINGS, Of particular relevance to this case is the section

INC., Petitioner, v. DIESEL CONSTRUCTION CO., obliging the contractor, in case of unjustifiable delay,
INC. and FGU INSURANCE CORP., Respondents. to pay the owner liquidated damages in the amount
equivalent to one-fifth (1/5) of one (1) percent of the
DECISION total Project cost for each calendar day of delay.7

VELASCO, JR., J.: In the course of the Project implementation, change

orders were effected and extensions sought. At one
time or another, Diesel requested for extension owing
The Case to the following causes or delaying factors: (1) manual
hauling of materials from the 14th to 16th floors; (2)
Before the Court are these petitions for review under delayed supply of marble; (3) various change orders;
Rule 45 separately interposed by Diesel Construction and (4) delay in the installation of shower assembly.8
Co., Inc. (Diesel) and UPSI Property Holdings, Inc.
(UPSI) to set aside the Decision1 dated April 16, 2002 UPSI, it would appear, disapproved the desired
as partly modified in a Resolution2 of August 21, 2002, extensions on the basis of the foregoing causes, thus
both rendered by the Court of Appeals (CA) in CA-G.R. putting Diesel in a state of default for a given contract
SP No. 68340, entitled UPSI Property Holdings, Inc. v. work. And for every default situation, UPSI assessed
Diesel Construction Co., Inc., and FGU Insurance Diesel for liquidated damages in the form of
Corporation. The CA Decision modified the Decision deductions from Diesel's progress payments, as
dated December 14, 2001 of the Arbitral Tribunal of stipulated in the Agreement.9
the Construction Industry Arbitration Commission
(CIAC) in CIAC Case No. 18-2001, while the CA
Resolution granted in part the motion of Diesel for Apparently irked by and excepting from the actions
reconsideration and denied a similar motion of UPSI. taken by UPSI, Diesel, thru its Project manager, sent,
on March 16, 2000, a letter notice to UPSI stating that
the Project has been completed as of that date. UPSI,
The Facts however, disregarded the notice, and refused to
accept delivery of the contracted premises, claiming
The facts, as found in the CA Decision under review, that Diesel had abandoned the Project unfinished.
are as follows: Apart therefrom, UPSI withheld Diesel's 10%
"retention money" and refused to pay the unpaid
balance of the contract price.10
On August 26, 1995, Diesel, as Contractor, and UPSI,
as Owner, entered into a Construction
Agreement3 (Agreement) for the interior architectural It is upon the foregoing factual backdrop that Diesel
construction works for the 14th to 16th floors of the filed a complaint before the CIAC, praying that UPSI
UPSI Building 3 Meditel/Condotel Project (Project) be compelled to pay the unpaid balance of the contract
located on Gen. Luna St., Ermita, Manila. Under the price, plus damages and attorney's fees. In an answer
Agreement, as amended, Diesel, for PhP 12,739,099, with counterclaim, UPSI denied liability, accused
agreed to undertake the Project, payable by progress Diesel of abandoning a project yet to be finished, and
billing.4 As stipulated, Diesel posted, through FGU prayed for repayment of expenses it allegedly incurred
Insurance Corp. (FGU), a performance bond in favor for completing the Project and for a declaration that
of UPSI.5 the deductions it made for liquidated damages were
proper. UPSI also sought payment of attorney's fees.11
Inter alia, the Agreement contained provisions on
contract works and Project completion, extensions of After due hearing following a protracted legal
contract period, change/extra works orders, delays, sparring, the Arbitral Tribunal of the CIAC, on
and damages for negative slippage. December 14, 2001, in CIAC Case No. 18-2001,
rendered judgment for Diesel, albeit for an amount
lesser than its original demand. To be precise, the
Tasked to oversee Diesel's work progress were: Grace CIAC ordered UPSI to pay Diesel the total amount of
S. Reyes Designs, Inc. for interior design and PhP 4,027,861.60, broken down as follows: PhP
architecture, D.L. Varias and Associates as 3,661,692.60, representing the unpaid balance of the
contract price; and PhP 366,169 as attorney's fees. In [UPSI] is liable to [Diesel] for the total amount of
the same decision, the CIAC dismissed UPSI's P3,661,692.64, representing the unpaid balance of
counterclaim12 and assessed it for arbitration costs in the contract price plus the ten-percent retention, from
the amount of PhP 298,406.03.13 which the liquidated damages, must, of course, be
deducted. Thus, in sum, as amended, We hold that
petitioner is still liable to respondent Diesel in the
In time, UPSI went to the CA on a Petition for Review,
amount of P2,515,173.64, with legal interest until the
docketed as CA-G.R. SP No. 68340. Eventually, the
same is fully paid.
appellate court rendered its assailed Decision dated
April 16, 2002, modifying that of the CIAC, thus:
The main opinion, in all other respects, STANDS.
WHEREFORE, premises considered, the petition is
GRANTED and the questioned Decision is MODIFIED in SO ORDERED.15
this wise:
Hence, these separate petitions are before us.
A. The claim of [UPSI] for liquidated damages is
GRANTED to the extent of PESOS: ONE MILLION
Per its Resolution of March 17, 2003, the Court
THREE HUNDRED NINE THOUSAND AND FIVE
ordered the consolidation of the petitions.
HUNDRED (P1,309,500.00) representing forty-five
(45) days of delay at P29,100 per diem;
The Issues
b. We hold that [Diesel] substantially complied with
the Construction Contract and is therefore entitled to In its petition in G.R. No. 154885, Diesel raises the
one hundred percent (100%) payment of the contract following issues:
price. Therefore, the claim of [Diesel] for an unpaid
balance of PESOS: TWO MILLION FOUR HUNDRED 1. Whether or not the [CA] has the discretion, indeed
FORTY-ONE THOUSAND FOUR HUNDRED EIGHTY the jurisdiction, to pass upon the qualifications of the
TWO and SIXTY FOUR centavos (P2,441,482.64), individual members of the CIAC Arbitral Tribunal and
which amount already includes the retention on the declare them to be non-technocrats and not
additional works or Change Orders, is GRANTED, exceptionally well-versed in the construction industry
minus liquidated damages. In sum, [UPSI] is held warranting reversal and nullification of the tribunal's
liable to [Diesel] in the amount of PESOS: ONE findings.
MILLION ONE HUNDRED THIRTY ONE THOUSAND
NINE HUNDRED EIGHTY TWO and sixty four centavos
(P1,131,982.64), with legal interest until the same is 2. Whether or not the [CA] may intervene to annul the
fully paid; findings of a highly specialized agency, like the CIAC,
on the ground that essentially the question to be
resolved goes to the very heart of the substantiality of
c. The parties are liable equally for the payment of evidence, when in so doing, [CA] merely substituted
arbitration costs; its own conjectural opinion to that of the CIAC Arbitral
Tribunal's well-supported findings and award.
d. All claims for attorney's fees are DISMISSED;
andcralawlibrary 3. Whether or not the [CA] erred in its findings, which
are contrary to the findings of the CIAC Arbitral
e. Since there is still due and owing from UPSI an Tribunal.16
amount of money in favor of Diesel, respondent FGU
is DISCHARGED as surety for Diesel. On the other hand, in G.R. No. 154937, UPSI presents
the following issues:
Costs de officio.
I
SO ORDERED.14
Whether or not portion of the Decision dated April 16,
Therefrom, Diesel and UPSI each sought 2002 of the Honorable [CA] denying additional
reconsideration. On August 21, 2002, the CA issued expenses to complete the unfinished and abandoned
its equally assailed Resolution denying work of [Diesel], is null and void for being contrary to
reconsideration to UPSI, but partially granting Diesel's clean and convincing evidence on record.
motion, disposing as follows:
II
WHEREFORE, the Motion for Reconsideration of
[Diesel] is partially GRANTED. The liquidated damages Whether or not portion of the Decision x x x of the
are hereby reduced to P1,146,519.00 (45 days [CA] finding delay of only forty five (45) days is null
multiplied by P25,478.20 per diem). However, in and void for being not in accord with contractual
accordance with the main opinion, We hold that stipulations upon which the controversy arise.
III magistrate, is a member of the Bar. Doubtless, these
two are preeminent in their fields, and their
competence and proficiency in their chosen
Whether or not the resolution of the Honorable Court
professions are unimpeachable. However, when it
of Appeals denying the herein petitioner's motion for
comes to determining findings of fact with respect to
reconsideration and partially granting the
the matter before Us, the said panel which they partly
respondent's motion for reconsideration is likewise
comprise cannot claim to have any special advantage
null and void as it does not serve its purpose for being
over the members of this Court.19
more on expounding than rectifying errors.17

The question of whether or not the findings of fact of

The issues shall be discussed in seriatim.
the CIAC are supported by substantial evidence has
no causal connection to the personal qualifications of
The Court's Ruling the members of the arbitration panel. Surely, a
person's undergraduate or postgraduate degrees, as
We resolve to modify the assailed CA Decision. the case may be, can hardly be invoked as the sole,
fool proof basis to determine that person's
qualification to hold a certain position. One's work
First Issue experiences and attendance in relevant seminars and
trainings would perhaps be the more important factors
Diesel maintains that the CA erred in its declaration in gauging a person's fitness to a certain undertaking.
that it may review the CIAC's decision considering the
doctrine on the binding effect of conclusions of fact of Correlatively, Diesel, obviously having in mind the
highly specialized agencies, such as the CIAC, when disputable presumption of regularity, correctly argues
supported by substantial evidence. that highly specialized agencies are presumed to have
the necessary technical expertise in their line of
The above contention is erroneous and, as couched, authority. In other words, the members of the Arbitral
misleading. Tribunal of the CIAC have in their favor the
presumption of possessing the necessary
qualifications and competence exacted by law. A party
As is noted, the CA, in its assailed resolution, in whose favor the legal presumption exists may rely
dismissed as untenable Diesel's position that the on and invoke such legal presumption to establish a
factual findings of the CIAC are binding on and fact in issue. One need not introduce evidence to
concludes the appellate court. The CA went to clarify, prove that the fact for a presumption is prima
however, that the general rule is that factual facie proof of the fact presumed.20
conclusions of highly specialized bodies are given
great weight and even finality when supported by
substantial evidence. Given this perspective, the CA To set the records straight, however, the CA did not
was correct in holding that it may validly review and cast aspersion on the competence let alone the bona
even overturn such conclusion of facts when the fides of the members of the Arbitral Tribunal to
matter of its being adequately supported by arbitrate. In context, what the appellate court said in
substantial evidence duly adduced on record comes to reaction to Diesel's negative commentary about the
the fore and is raised as an issue. CA's expertise on construction mattersis that the said
members do not really enjoy a special advantage over
the members of the CA in terms of fleshing out the
Well-established jurisprudence has it that "[t]he facts from the evidence on record.
consequent policy and practice underlying our
Administrative Law is that courts of justice should
respect the findings of fact of said administrative In any event, the fact remains that the CA stands
agencies, unless there is absolutely no evidence in justified in reviewing the CIAC decision.
support thereof or such evidence is clearly, manifestly
and patently insubstantial."18 Second and Third Issues

There can be no serious dispute about the correctness The next two issues, being interrelated, shall be
of the CA's above posture. However, what the discussed jointly.
appellate court stated later to belabor its point strikes
the Court as specious and uncalled for. Wrote the CA:
Diesel submits that the CA, in reaching its decision,
substituted its own conjectural opinion to that of the
This dictum finds greater application in the case of the CIAC's well-grounded findings and award.
CIAC because x x x as pointed out by petitioner in its
Comment, the doctrine of primary jurisdiction relied
upon by [Diesel] is diluted by the indubitable fact that Even as Diesel's submission has little to commend
the CIAC panel x x x is not at all composed of itself, we deem it prudent to address its concern by
technocrats, or persons exceptionally well-versed in reviewing the incongruent determinations of the CIAC
the construction industry. For instance, its chair x x x and CA and the factual premises holding such
is a statistician; another member, x x x a former determinations together.
As it were, the CA reduced the award for unpaid 2.3.b Civil disturbance, such as riots, revolutions,
balance of the contract cost from PhP 3,661,692.60, insurrection.
as earlier fixed by the CIAC, to PhP 2,441,482.64,
although it would consider the reduction and revert to
2.3.c Any government acts, decrees, general orders
the original CIAC figure. Unlike the CIAC which found
or regulations limiting the performance of the work.
the award of liquidated damages to be without basis,
the CA was of a different disposition and awarded
UPSI PhP 1,309,500, only to reduce the same to PhP 2.3.d Wars (declared or not).
1,146,519 in its assailed resolution. Also, the CA
struck out the CIAC award of PhP 366,169 to Diesel 2.3.e Any delays initiated by the Owner or his
for attorney's fees. Additionally, the CIAC's ruling personnel which are clearly outside the control of the
making UPSI alone liable for the costs of arbitration Contractor.
was modified by the CA, which directed UPSI and
Diesel to equally share the burden.
2.3.1 Delays caused by the foregoing shall be
excusable. A new schedule or adjustments in contract
The CIAC found Diesel not to have incurred delay, thus time shall be negotiated with the Owner. As time is of
negating UPSI's entitlement to liquidated damages. the essence of this agreement, all other delays shall
The CA, on the other hand, found Diesel to have been not be excusable.21
in delay for 45 days.

As may be noted, a common thread runs among the

In determining whether or not Diesel was in delay, the events listed above, that is, the delaying event is
CIAC and CA first turned on the question of Diesel's unforeseeable and/or its occurrence is beyond the
claimed entitlement to have the Project period control of Diesel as contractor. Here, the lack of a
extended, an excusable delay being chargeable location to establish Diesel's own hoisting machine can
against the threshold 90-day completion period. Both hardly be tagged as a foreseeable event. As the CA
were one in saying that occurrence of certain events aptly observed:
gave Diesel the right to an extension, but differed on
the matter of length of the extension, and on the
nature of the delay, that is, whether the delay is [U]nder the terms of the contract, it is Diesel that
excusable or not. The CA deemed the delay, and the would formulate the schedule to be followed in the
resulting extension of 14 days, arising from the completion of the works; therefore, it was encumbent
manual hauling of materials, as undeserved. But the upon Diesel to take into account all factors that would
CIAC saw it otherwise for the reason that Frederick W. come into play in the course of the project. From the
Crespillo, the witness UPSI presented to refute the records it appears that the General Contractor x x x
allegation of Diesel's entitlement to time extension for had been in the premises ahead of Diesel; hence it
the manual hauling of materials, was incompetent to would have been a simple matter for Diesel to have
testify on the issue. As CIAC observed, Crespillo conferred with the former's officer if the use of its
lacked personal knowledge of the real situation at the equipment would be viable. Likewise, it would not
worksite. have been too much trouble for Diesel to have made
a prior request from UPSI for the use of its freight
elevator - in the face of the denial thereof, it could
The CIAC's reasoning, however, is flawed, assuming have made the necessary remedial measures x x x. In
that the onus rested on UPSI, instead of on Diesel, to other words, those delays were foreseeable on the
prove that the delay in the execution of the Project part of Diesel, with the application of even ordinary
was excusable. Diesel explained that there was no diligence. But Diesel did all of those when construction
place for its own hoisting machine at the Project site was about to commence. Therefore, We hold that the
as the assigned location was being used by the delays occasioned by Diesel's inability to install its
General Contractor, while the alternative location was hoisting machine x x x [were] attributable solely to
not feasible due to power constraint. Moreover, Diesel Diesel, and thus the resultant delay cannot be charged
could not use the site elevator of the General against the ninety-day period for the termination of
Contractor as its personnel were only permitted to use the construction.22
the same for one hour every day at PhP 600 per hour.

There can be no quibbling that the delay caused by

The provisions in the Agreement on excusable delays the manual hauling of materials is not excusable and,
read: hence, cannot validly be set up as ground for an
extension. Thus, the CA excluded the delay caused
2.3 Excusable delays: The Contractor shall inform the thereby and only allowed Diesel a total extension
owner in a timely manner, of any delay caused by the period of 85 days. Such extension, according to that
following: court, effectively translated to a delay of 45 days in
the completion of the project. The CA, in its assailed
decision, explained why:
2.3.a Acts of God, such as storm, floods or
earthquakes.
7. All told, We find, and so hold, that [Diesel] has
incurred in delay. x x x However, under the
circumstances wherein UPSI was responsible for some
of the delay, it would be most unfair to charge Diesel erroneous. The CA completely failed to factor in the
with two hundred and forty (240) days of delay, so change orders of UPSI to Diesel the directives
much so that it would still owe UPSI, even after effectively extending the Project completion time at
liquidated damages have eaten up the retention and the behest of UPSI.
unpaid balance, the amount of [P4,340,000.00].
Thus, based on Our own calculations, We deem it
Section V of the Agreement on the subject Change
more in accord with the spirit of the contract, as
Orders reads:
amended, x x x to assess Diesel with an unjustifiable
delay of forty-five (45) days only; hence, at the rate
of 1/5 of one percent as stated in the contract, [or at V. CHANGES IN SCOPE OF WORK AND EXTRA WORK
P1,309,500.00], which should be deducted from the
total unpaid balance of [P2,441,482.64], which Any changes or extra work in the SCOPE OF WORK
amount already includes the retention on the recommended by the INTERIOR
additional works or Change Orders.23 DESIGNER/ARCHITECT or directed and approved by
the OWNER shall be presented to the CONTRACTOR.
The CA, in its questioned resolution, expounded on Within the shortest time possible, the CONTRACTOR x
how it arrived at the figure of 45-day delay in this x x shall also inform the OWNER if such changes shall
wise: require a new schedule and/or revised completion
date.
7. x x x We likewise cannot give Our assent to the
asseveration of [Diesel] that Our calculations as to the The Parties shall then negotiate mutually agreeable
number of days of delay have no basis. For indeed, terms x x x. The CONTRACTOR shall not perform any
the same was arrived at after taking a holistic view of change order or extra work until the covering terms
the entire circumstances attendant to the instant are agreed upon [in writing and signed by the
case. x x x parties].25

But prescinding from the above, the basis for Our Pursuant thereto, UPSI issued Change Order (CO)
ruling should not be hard to discern. To disabuse the Nos. 1 to 4 on February 3, 2, 8, and 9, 2000
mind of [Diesel] that the forty-five day delay was respectively. Thereafter, Diesel submitted a Schedule
plucked from out of the blue, allow Us to let the of Completion of Additional Works26 under which
records speak. The records will show that while the Diesel committed to undertake CO No. 1 for 30 days
original target date for the completion x x x was 19 from February 10, 2000; CO No. 2 for 21 days from
November 1999 x x x, there is a total of eighty-five January 6, 2000; CO No. 3 for 15 days, subject to
(85) days of extension which are justifiable and UPSI's acceptance of Diesel's proposal; and CO No. 4
sanctioned by [UPSI], to wit: thirty (30) days as for 10 days after the receipt of the items from UPSI.
authorized on 27 January 2000 by UPSI's Construction
Manager x x x; thirty (30) days as again consented to The CIAC found that the COs were actually
by the same Construction Manager on 24 February implemented on the following dates:
2000 x x x; and twenty-five (25) days on 16 March
2000 by Rider Hunt and Liacom x x x. The rest of the
days claimed by Diesel were, of course, found by Us CO No. 1 - February 9 to March 3, 2000
to be unjustified in the main opinion. Hence, the
project should have been finished by February 12, CO No. 3 - February 24 to March 10, 2000
2000. However, by 22 March 2000, as certified to by
Grace S. Reyes Designs, Inc. the project was only
97.56% finished, meaning while it was substantially CO No. 4 - March 16 to April 7, 200027
finished, it was not wholly finished. By 25 March 2000,
the same consultant conditionally accepted some Hence, as correctly held by the CIAC, UPSI, no less,
floors but were still punch listed, so that from 12 effectively moved the completion date, through the
February 2000 to 25 March 2000 was a period of forty- various COs, to April 7, 2000.
one (41) days. Allowing four (4) more days for the
punch listed items to be accomplished, and for the
Moreover, as evidenced by UPSI's Progress Report No.
"general cleaning" mentioned by Grace S. Reyes
19 for the period ending March 22, 2000, Diesel's
Designs, Inc., to be done, which to Us is a reasonable
scope of work, as of that date, was already 97.56%
length of time, equals forty-five (45) days.
complete.28 Such level of work accomplishment
would, by any rational norm, be considered as
This is why We find the [conclusion] made by the substantial to warrant full payment of the contract
CIAC, x x x that there was no delay whatsoever in the amount, less actual damages suffered by UPSI. Article
work done by [Diesel], too patently absurd for Us to 1234 of the Civil Code says as much, "If the obligation
offer Our unconditional assent.24 had been substantially performed in good faith, the
obligor may recover as though there had been a strict
Aside from the fact that the CA seemingly assumed and complete fulfillment, less damages suffered by
contradictory positions in the span of two paragraphs, the obligee."
its holding immediately adverted to above is patently
The fact that the laborers of Diesel were still at the The Court cannot accord the desired review. It is
work site as of March 22, 2000 is a reflection of its settled rule that the Court, not being a trier of facts,
honest intention to keep its part of the bargain and is under no obligation to examine, winnow, and weigh
complete the Project. Thus, when Diesel attempted to anew evidence adduced below. This general rule is, of
turn over the premises to UPSI, claiming it had course, not absolute. In Superlines Transportation
completed the Project on March 15, 2000, Diesel could Company, Inc. v. Philippine National Construction
no longer be considered to be in delay. Likewise, the Company, the Court enumerated the recognized
CIAC cited the Uniform General Conditions of Contract exceptions to be:
for Private Construction (CIAP Document 102),
wherein it is stated that no liquidated damages for
x x x (1) when the findings are grounded entirely on
delay beyond the completion time shall accrue after
speculation, surmises or conjectures; (2) when the
the date of substantial completion of the work.29
inference made is manifestly mistaken, absurd or
impossible; (3) when there is grave abuse of
In all, Diesel cannot be considered as in delay and, discretion; (4) when the judgment is based on a
hence, is not amenable under the Agreement for misapprehension of facts; (5) when the findings of
liquidated damages. facts are conflicting; (6) when in making its findings
the [CA] went beyond the issues of the case, or its
findings are contrary to the admissions of both the
As to the issue of attorney's fees, Diesel insists that
appellant and the appellee; (7) when the findings are
bad faith tainted UPSI's act of imposing liquidated
contrary to the trial court; (8) when the findings are
damages on account of its (Diesel's) alleged delay.
conclusions without citation of specific evidence on
And, this prompted Diesel to file its petition for
which they are based; (9) when the facts set forth in
arbitration. Thus, the CIAC granted Diesel an award of
the petition as well as in the petitioner's main and
PhP 366,169 as attorney's fees. However, the CA
reply briefs are not disputed by the respondent; (10)
reversed the CIAC on the award, it being its finding
when the findings of fact are premised on the
that Diesel was in delay.
supposed absence of evidence and contradicted by the
evidence on record; and (11) when the Court of
The Court resolves to reinstate the CIAC's award of Appeals manifestly overlooked certain relevant
attorney's fees, there being sufficient justification for facts not disputed by the parties, which, if
this kind of disposition. As earlier discussed, Diesel properly considered, would justify a different
was not strictly in delay in the completion of the conclusion.30 (Emphasis supplied.)
Project. No valid reason, therefore, obtains for UPSI
to withhold the retention money or to refuse to pay
In the instant case, the factual findings of the CIAC
the unpaid balance of the contract price. Indeed, the
and CA, with regard to the completion of the Project
retention and nonpayment were, to us, as was to the
and UPSI's entitlement to recover expenses allegedly
CIAC, resorted to by UPSI out of whim, thus forcing
incurred to finish the Project, do not fall under any one
the hand of Diesel to sue to recover what is rightfully
of these exceptions. As things stand, the factual
due. Thus, the grant of attorney's fees would be
findings of the CIAC and CA are supported by evidence
justifiable under Art. 2208 of the Civil Code, thus:
presented during the hearing before the Arbitral
Tribunal. Consider what the CIAC wrote:
Article 2208. In the absence of stipulation, attorney's
fees and expenses of litigation x x x cannot be
This Tribunal finds overwhelming evidence to prove
recovered, except:
that accomplishment as of the alleged "period of
takeover" was 95.87% as of March 3, 2000 and
xxx increased to 97.56% on March 15, 2000 based on
Progress Report # 18. x x x This is supported by the
(5) Where the defendant acted in gross and evident statement of [UPSI's] witness, Mr. Crespillo x x x
bad faith in refusing to satisfy the plaintiff's plainly where he conceded that such admissions and
valid, just and demandable claim. statements bound [UPSI, the Owner]. By that time,
[Diesel] had substantially completed the project and
only needed to correct the items included in the
And for the same reason justifying the award of punchlist.31
attorney's fees, arbitration costs ought to be charged
against UPSI, too.
The CA seconded what the CIAC said, thus:

Fourth Issue
6. Neither are We prepared to sustain UPSI's
argument that Diesel left the work unfinished and
UPSI urges a review of the factual basis for the parallel pulled-out all of its workmen from the project. This
denial by the CIAC and CA of its claim for additional claim is belied by the assessment of its own
expenses to complete the Project. UPSI states that the Construction Manager in Progress Report No. 19 for
reality of Diesel having abandoned the Project before the period "ending 22 March 2000," wherein it was
its agreed completion is supported by clear and plaintly stated that as of that period, with respect to
convincing evidence. Diesel, there were still twenty-three laborers on site
with the project "97.56%" complete x x x. This
indicates that the contracted works of Diesel were In summary, the aggregate award to Diesel shall be
substantially completed with only minor corrections x PhP 3,717,027.64. From this amount shall be
x x, thus contradicting the avowal of UPSI that the deducted the award of actual damages of PhP
work was abandoned in such a state that necessitated 310,834.01 to UPSI which shall pay the costs of
the engagement of another contractor for the project arbitration in the amount of PhP 298,406.03.
to be finished. It was therefore not right for UPSI to
have declined the turn-over and refused the full
FGU is released from liability for the performance bond
payment of the contract price, x x x.32
that it issued in favor of Diesel.

Given the 97.56% work accomplishment tendered by

No costs.
Diesel, UPSI's theory of abandonment and of its
having spent a sum to complete the work must fall on
its face. We can concede hypothetically that UPSI SO ORDERED.
undertook what it characterized as "additional or
rectification" works on the Project. But as both the Endnotes:
CIAC and CA held, UPSI failed to show that such
"additional or rectification" works, if there be any,
were the necessary result of the faulty workmanship
of Diesel.
*
Additional member as per Special Order No. 494
The Court perceives of no reason to doubt, much less dated March 3, 2008.
disturb, the coinciding findings of the CIAC and CA on
the matter. 1
Rollo (G.R. No. 154885), pp. 62-75. Penned by
Associate Justice Romeo A. Brawner (Chairperson)
The foregoing notwithstanding and considering that and concurred in by Associate Justices Jose L. Sabio,
Diesel may only be credited for 97.56% work Jr. and Sergio L. Pestaño.
accomplishment, UPSI ought to be compensated, by
way of damages, in the amount corresponding to the 2
Id. at 51-60.
value of the 2.44% unfinished portion (100% -
97.56% = 2.44%). In absolute terms, 2.44% of the
total Project cost translates to PhP 310,834.01. This
3
Id. at 98-125.
disposition is no more than adhering to the command
of Art. 1234 of the Civil Code. 4
Id. at 100.

The fifth and sixth issues have already been discussed 5

Id. at 77.
earlier and need not detain us any longer.
6
Id. at 64.
WHEREFORE, Diesel's petition
is PARTIALLY GRANTED and UPSI's Petition 7
Id. at 99-100.
is DENIED with qualification. The assailed Decision
dated April 16, 2002 and Resolution dated August 21,
2002 of the CA are MODIFIED, as follows: 8
Id. at 85-89.

(1) The award for liquidated damages is DELETED; 9

Id. at 64-65.

(2) The award to Diesel for the unpaid balance of the 10

Id. at 65.
contract price of PhP 3,661,692.64 is AFFIRMED;
11
Id. at 77.
(3) UPSI shall pay the costs of arbitration before the
CIAC in the amount of PhP 298,406.03; 12
Id. at 96.

(4) Diesel is awarded attorney's fees in the amount of 13

Id. at 97.
PhP 366,169; andcralawlibrary
14
Supra note 1, at 73-74.
(5) UPSI is awarded damages in the amount of PhP
310,834.01, the same to be deducted from the
retention money, if there still be any, and, if
15
Supra note 2, at 59.
necessary, from the amount referred to in item (2)
immediately above. 16
Rollo (G.R. No. 154885), p. 24.

17
Rollo (G.R. No. 154937), pp. 63-64.
18
Blue Bar Coconut Philippines v. Tantuico, No. L-
47051, July 29, 1988, 163 SCRA 716, 729; citations
omitted.

19
Supra note 2, at 56.

20
Tison v. Court of Appeals, G.R. No. 121027, July 31,
1997, 276 SCRA 582, 593.

21
Supra note 3, at 99.

22
Supra note 1, at 66.

23
Supra note 1, at 71-72.

24
Supra note 2, at 57-59.

25
Supra note 3, at 104.

26
Rollo (G.R. No. 154885), p. 165.

27
Id. at 94.

28
Id. at 71.

29
Id. at 94.

30
G.R. No. 169596, March 28, 2007, 519 SCRA 432,
441; citations omitted.

31
Rollo (G.R. No. 154885), p. 91.

32
Supra note 1, at 71.