Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 176535

September 7, 2011

NATIONAL HOUSING AUTHORITY, Petitioner,

vs.
FIRST UNITED CONSTRUCTORS CORPORATION, Respondent.
DECISION
PEREZ, J.:
Before this Court is a petition for review on certiorari under Rule 45 of the Revised Rules of Court
filed by petitioner National Housing Authority (NHA), seeking to reverse and set aside the 1 August
2006 Decision1 of the Court of Appeals (CA) and its Resolution dated 31 January 2007 2 in CA-G.R.
SP No. 81635.
In the questioned Decision, the appellate court affirmed with modification the Decision promulgated
on 7 January 20043 by the Construction Industry Arbitration Commission (CIAC), thru a three
member Arbitral Tribunal4 in CIAC Case No. 14-2003 entitled "First United Constructors Corporation
v. National Housing Authority," that granted an arbitral award in favor of respondent First United
Constructors Corporation (FUCC); and in its assailed Resolution, refused to reconsider its Decision.
The Facts
From the Petition,5 the Comment6 thereon of respondent, petitioners Reply,7 and their respective
Annexes,8particularly the Complaint9 of respondent, petitioners Answer10 and the Joint
Stipulations11 of the parties incorporated as Admitted Facts in the Supplemental Terms of
Reference,12 all filed with the CIAC, and from the CA Decision and the CIAC Decision, the Court
gathers the following relevant facts and antecedents:
Respondent FUCC was the contractor of Phase I of the Freedom Valley Resettlement Project (the
FVR Project or the Project) of petitioner NHA.13
The FVR Project was a proposed resettlement site for informal settlers of Metro Manila. Conceived
in May 1996, it was the subject of a Memorandum of Agreement entered into by and among the
Housing & Urban Development Coordinating Council (HUDCC), the Department of Environment &
Natural Resources (DENR), the Metro Manila Development Authority (MMDA) and the Marilaque
Commission.14
The FVR Project sits on a 750-hectare property reserved as a resettlement site for the landless and
homeless residents of Metro Manila under Presidential Proclamation No. 799 dated 3 June 1996,
situated in Sitio Boso-Boso, Brgy. San Jose, Antipolo City.15

Phase I of the FVR Project called for the development of an area of roughly 300 hectares of the
resettlement site into 7,500 home lots of 60 to 80 square meters per lot in three (3) residential
Clusters, namely: Cluster 1, Cluster 2 and Cluster 3. 16
FUCC won the public bidding for the works contract of the FVR Project conducted by NHA on 26
February 1998 with a bid price of P568,595,780.00.17
The work consisted principally of bulk earthworks and the construction of roads, drainage, water
supply and sewerage systems, slope protection and bridge structures, as well as survey works,
titling of the lots and other off-site works.18
On 2 March 1998, NHA issued a Notice of Award19 for Phase I of the FVR Project to FUCC.
On 10 March 1998, NHA and FUCC entered into a "Contract for Land Development of Freedom
Valley Resettlement Project, Phase I, Sitio Boso-Boso, Bgy. San Jose, Antipolo, Rizal" 20 (the
"Contract") that covered the terms of the agreement between the parties for the works contract of
Phase I of the FVR Project.
The work duration stipulated in the Contract was three hundred sixty five (365) days. The contract
amount was the bid price of FUCC, or P568,595,780.00.21
FUCC commenced actual contract works on 16 March 1998. Counting 365 days, the original
contract expiration date was 15 March 1999.22
Unfortunately, the FVR Project suffered various work suspensions and delays, so much so that the
project was not completed on 15 March 1999.23 There were also changes in the scope of work that
necessitated the issuance of variation orders, specifically Variation Order No. 1, 24 and Variation
Order No. 2,25 which delayed the completion of the project further.
Variation Order No. 1 reduced the number of home lots to be generated, from 7,500 under the
original development plan to only 4,980. Variation Order No. 2 further reduced that number to
4,032. These changes in the scope of work resulted in the reduction of the contract price from the
original P568,595,780.00 toP488,393,466.98.26
Because of the delays engendered by the suspension orders and the changes in the scope of the
contract works, NHA granted time extensions to FUCC, to wit: an additional 279 calendar days under
Time Extension No. 1;27another extension of 200 calendar days in conjunction with the issuance of
Variation Order No. 2;28 and finally, 200 more calendar days under Resumption Order No. 2. 29 All told,
a total of 679 calendar days were added to the original work duration stipulated in the Contract.
From 15 March 1999, the contract completion date was moved, initially, to 19 December 1999, and
finally, to 11 November 2001.30
1avvphi1

In the course of the contract works, FUCC submitted five (5) Progress Billings, all of which were paid
by NHA, to wit: Progress Billing No. 131 in the amount of P52,707,464.21, for the period 16 March to
30 June 1998; Progress Billing No. 232 in the amount of P14,343,039.55, for the period 1 July to 31
December 1998; Progress Billing No. 333 in the amount of P47,329,827.89, for the period 1 January
to 15 October 1999; Progress Billing No. 434 in the amount of P114,494,481.30, for the period 16
October 1999 to 31 January 2001; and Progress Billing No. 5 35 in the amount of P42,333,109.23, for
the period 31 January to 30 June 2001.

The FVR Project was never completed as envisioned and planned because NHA abandoned the
original concept of the Project. In a Resolution passed on 25 September 2001, 36 the Board of
Directors of NHA reclassified the FVR Project from a resettlement site of informal settlers into a
mixed-market site and services type of project, and terminated the Contract. 37
In a letter dated 17 October 2001,38 NHA formally advised FUCC of the termination of the Contract.
NHA terminated the Contract under the "Contractor Not at Fault" clause of the General Conditions of
the Contract.39
At the time the Contract was terminated, FUCC had various claims pending with NHA in connection
with the FVR Project.
It appears that over a period of almost five (5) years, FUCC pleaded and negotiated with various
NHA officials for the payment of these claims but its pleas fell on deaf ears.40
This impelled FUCC to pursue its claims before the CIAC pursuant to Article XVII 41 of the Contract by
filing a Complaint42 against NHA on 17 July 2003. The case was docketed as CIAC Case No.14-2003
entitled "First United Constructors Corporation vs. National Housing Authority."
In its Complaint, FUCC prayed thus:
WHEREFORE, it is respectfully prayed that after proper arbitration proceedings, claimant be
adjudged entitled to the payment of its claims, as follows:
1) Payment for Accomplished Works Not Yet Billed in the amount of P9,672,784.98;
2) Payment for the Cost of Materials, Equipment, Facilities, etc. Included for the Project in
the amount ofP4,801,992.82;
3) Payment for Price Escalation in the amount of P27,794,126.25;
4) Payment for Price Adjustment in the amount of P14,768,770.22;
5) Payment for Disengagement Costs in the amount of P83,242,365.73;
6) Payment for Idle Equipment in the amount of P142,780,800.00;
7) Payment for Interest on Idle Equipment in the amount of P44,262,048.00;
8) Payment for Attorneys Fees equivalent to Ten Percent (10%) of the total of the foregoing
claims; and
9) Payment of Twelve Percent (12%) interest on the total arbitration award from the date of
promulgation of judgment until fully paid.
Other reliefs just and equitable are likewise prayed for.43
The CIAC appointed a 3-member Arbitral Tribunal (CIAC Arbitral Tribunal) to adjudicate FUCCs
claims.

NHA initially filed a Motion to Dismiss,44 claiming that FUCC had failed to exhaust all administrative
remedies, which was opposed by FUCC. In an Order dated 8 September 2003, the CIAC Arbitral
Tribunal denied the motion and ordered NHA to file its answer to FUCCs Complaint. 45
In its Answer,46 NHA raised the following defenses, viz: FUCC had no right of action since its
recourse to arbitration was premature; there was no actual suspension of contract works
notwithstanding the suspension orders issued by NHA; the Contract was not unilaterally terminated
by NHA; FUCCs Progress Billing No. 6 should only be for the amount of P6,496,926.29; FUCCs
claim for Price Escalation for Progress Billings Nos. 1 to 5 came too late in the day, and that the
amount that should be paid is only P26,297,951.62 and payable only after FUCC procured the
required surety bond; and the claims for Payment for Cost of Materials, Equipment and Facilities,
Disengagement Cost, Cost of Idle Equipment and interests thereon, are non-arbitrable issues. By
way of counter-claim, NHA prayed that it be allowed to recover from FUCC the amount of P38
Million, which represents the remaining balance or unliquidated portion of the P85.2 Million that NHA
had advanced to FUCC at the start of the FVR Project.
The issues having been joined, the CIAC Arbitral Tribunal called the parties to a Preliminary
Conference. The parties subsequently agreed upon a Terms of Reference 47 and a Supplemental
Terms of Reference48 to guide the CIAC Arbitral Tribunal in the arbitration process and in the
resolution of the case. The parties also submitted to the CIAC Arbitral Tribunal their "Joint
Stipulations,"49 which were incorporated in the Supplemental Terms of Reference as "Admitted
Facts."50
Under the Terms of Reference and the Supplemental Terms of Reference, the CIAC Arbitral Tribunal
was called upon to resolve the following issues to determine the validity of FUCCs claims against
NHA, to wit:
1. Did Claimant exhaust all administrative remedies before filing this arbitration case?
1.1 Is claimants recourse to arbitration premature?
2. Is claimant entitled to its claims for:
2.1 payment for accomplished works not yet billed (Progress Billing No. 6)? If so,
how much?
2.1.1 Is the submission by the Claimant of the files and folders covering the
unpaid claims of the planters/farmers necessary for the processing of its
claim for accomplished works not yet billed (Progress Billing No. 6)?
2.2 payment for cost of materials, equipment, pro-rated cost of facilities constructed
for the project, etc.? If so, how much?
2.2.1 Whether or not these claims are arbitrable or not [sic]
2.3 Price Escalation? If so, how much?
2.4 Price Adjustment? If so, how much?
2.5 Disengagement Costs? If so, how much?

2.5.1 Whether or not this claim is arbitrable or not [sic]

2.6 Idle Equipment? If so, how much?
2.6.1 Whether or not this claim is arbitrable or not [sic]
2.6.2 Was there actual or physical suspension of the works for the period
covered by the suspension orders?
2.7 Interest on Idle Equipment? If so, how much?
3. Is Respondent entitled to the recoupment of the remaining portion of the advance
payment made for the Project?
4. Are the parties entitled to their respective claims for interest on the total arbitration amount
that would be adjudged in their own favor?
4.1 If so at what rate and from what period?
5. Who between the parties is liable for the cost of arbitration?
6. Whether or not the termination of the Contract is unilateral
6.1 Whether or not the Claimant opposed, contested or protested the termination
7. Who caused the alleged delays in the processing or payment of Claimant FUCCs claims,
if any?
8. Did Claimant FUCC procure a Payment Guarantee Bond (Surety Bond) from either the
GSIS or any bona fide private surety company?
9. Was the procurement by Claimant FUCC of the Payment Guarantee Bond (Surety Bond)
a condition for the payment of its claims for Progress Billing No. 6 and Price Escalation for
Progress Billing Nos. 1 to 5?51
To prove its claims, FUCC presented one witness in the person of Engr. Ben S. Dumaliang (Engr.
Dumaliang), the Project Director of FUCC for the FVR Project, and submitted his Affidavit in
Question-and-Answer Form dated 4 November 2003, 52 which served as the witness direct testimony.
On the basis of said affidavit, Engr. Dumaliang was cross-examined by NHAs counsel. 53
FUCC adopted and marked Annexes "A" to "GGGGGG" of its Complaint as Exhibits "A" to
"GGGGGG" and submitted the same as part of its documentary evidence. FUCC likewise marked
the documents attached to the Affidavit in Question-and-Answer Form of Engr. Dumaliang as
Exhibits "HHHHHH" to "RRRRRR" and likewise submitted the same as part of its documentary
evidence.54 FUCC thereafter rested its case.
To prove its defenses and counter-claim, NHA likewise presented only one witness in the person of
Engr. Mariano E. Raner III (Engr. Raner), the Special Project Director of the FVR Project, and
submitted his Affidavit dated 2 December 200355 in lieu of his direct testimony. Engr. Raner was
cross-examined by FUCCs counsel on the basis of said Affidavit. 56

NHA marked 21 pieces of documentary evidence and submitted the same as Exhibits "1" to
"21,"57 and thereafter rested its case.
On 7 January 2004, the CIAC Arbitral Tribunal promulgated its Decision58 (CIAC Decision) containing
findings and rulings on substantially all of the issues presented by the parties, and rendering an
award in favor of FUCC, as follows:
AWARD
WHEREFORE, on the basis of the foregoing findings and rulings, an award is hereby rendered in
favor of Claimant, FIRST UNITED CONSTRUCTORS CORPORATION, and against the
Respondent, NATIONAL HOUSING AUTHORITY ordering the latter to pay the former the total of the
following amounts, less the amount for recoupment of the balance of the advance payment including
the interest viz;
1) Php 7,384,534.22 representing payment for Billing No. 6;
2) Php 989,325.27 representing interest of No. 1 above;
3) P4,677,680.00 representing payment for cost of materials, equipment, facilities;
4) P415,993.13 representing interest of No. 3 above;
5) P26,297,951.62 representing payment for Price Escalation of PB Nos. 1-5;
6) P1,863,191.86 representing interest of No. 5 above;
7) P14,768,770.22 representing payment for Price Adjustment of PB Nos. 5 & 6;
8) P1,847,512.46 representing interest of No. 7 above;
9) P65,842,309.72 representing payment for Disengagement Costs;
10) P7,468,141.43 representing interest of No. 9 above;
11) P131,948,674.56 representing payment of Idle Equipment;
12) P36,634,736.09 representing interest of No. 11 above.
P300,138,820.59 gross total award in favor of Claimant
13)P * * * * * * * * representing12% interest of the gross total award of P300,138,820.59, from
the date of promulgation of this decision, and until it is fully paid.
Note: * * * * * * * *is to be determined upon execution of judgment.
Award to Respondents counter-claim:
1)

P37,951,201.14 representing the recoupment of the balance of Advance payment made to

the Claimant.
2)

P455,414.41 representing interest of No. 1 above.

P38,406,615.55 balance of recoupment plus interest.

Net Award to be paid by Respondent to the Claimant;

P300,138,820.59 Gross Award of Claimants Claims
Less P 38,406,615.55 Balance of recoupment plus interest
P261,732,205.04 Net Award to be paid by Respondent to Claimant.
Finally, the Respondent is hereby ordered to pay Claimant, one-half of the cost of arbitration
in the amount of P768,219.76, as its share in the arbitration cost, which was advanced by
the Claimant during the pendency of this case.59
On 30 January 2004, NHA appealed the CIAC Decision to the Court of Appeals by filing a
Petition for Review Under Rule 43 (With Prayer for Restraining Order & Injunctive
Writ),60 which was docketed thereat as CA-G.R. SP No. 81635. 61
NHAs prayer for a Temporary Restraining Order (TRO) to prevent the execution of the CIAC
Decision was granted by the Court of Appeals in a Resolution dated 14 April 2004. 62
Upon the lapse of the TRO, NHA filed an Urgent Motion for Early Resolution of its application
for the issuance of a Writ of Preliminary Injunction, which was similarly granted by the Court
of Appeals in a Resolution dated 8 July 2004.63 The Writ of Preliminary Injunction issued by
the appellate court enjoined "respondent and the agency a quo from executing the disputed
decision during the pendency of [the] petition or until further order of the Court." 64
On 26 February 2004, or prior to the issuance of the TRO, the CIAC issued in favor of FUCC
a Writ of Execution of the arbitral award. Accordingly, Mr. Cristobal Florendo, Sheriff IV of the
Office of the Clerk of Court and Ex-Officio Sheriff of the Regional Trial Court in Quezon City,
who was appointed as the Implementing Sheriff, issued and served Notices of Garnishment
on the Land Bank of the Philippines (Land Bank), the Development Bank of the Philippines
(DBP), the Philippine National Bank (PNB), the Veterans Bank of the Philippines (Veterans
Bank), the Bureau of Treasury, and on the Government Security and Insurance Service
Savings Bank. The Implementing Sheriff later served Orders of Delivery of Money on the
Land Bank, DBP, and the Bureau of Treasury.65
Petitioner filed a Motion to Lift Garnishment and for the Issuance of Writ of Preliminary
Mandatory Injunction on the ground that the service of the Notices of Garnishment violated
the Resolution dated 14 April 2004 (directing the issuance of a TRO) and the Resolution
dated 8 July 2004 (granting the issuance of a Writ of Preliminary Injunction) to enjoin the
execution of the arbitral award. This motion was denied by the Court of Appeals in a
Resolution dated 13 December 2004.66
Petitioner subsequently filed a Very Urgent Motion to Lift Writ of Garnishment citing
essentially the same grounds as the previous motion. 67

Instead of merely acting upon the Very Urgent Motion to Lift Writ of Garnishment, the Court
of Appeals resolved the main petition and promulgated the Decision dated 1 August
200668 that affirmed with modification the CIAC Decision.69 The appellate court denied
petitioners Very Urgent Motion to Lift Writ of Garnishment permanently70 and lifted the Writ of
Preliminary Injunction it had earlier issued. The decretal portion of the CA Decision reads,
thus:
WHEREFORE, under the premises, we hereby dispose of this case as follows:
1. The following portions of the arbitral award are hereby AFFIRMED, thus:
WHEREFORE, on the basis of the foregoing findings and rulings, an award is hereby
rendered in favor of Claimant, FIRST UNITED CONSTRUCTORS CORPORATION,
and against the Respondent, NATIONAL HOUSING AUTHORITY ordering the latter
to pay the former the total of the following amounts, less the amount for recoupment
of the balance of the advance payment including the interest, viz:
1) P7,384,534.22 representing payment for Billing No. 6;
2) P989,325.27 representing interest (on) No. 1 above;
3) P4,667,680.00 representing payment for cost of materials, equipment,
facilities;
4) P415,993.00 representing interest (on) No. 3 above;
5) P26,297,951.62 representing payment for Price Escalation of PB Nos. 1-5;
6) P1,863,191.86 representing interest (on) No. 5 above;
7) P14,768,770.22 representing payment for Price Adjustment of PB Nos. 5 &
6;
8) P1,847,512.46 representing interest (on) No. 7 above;
9) P131,948,674.56 representing payment for Idle Equipment; and
10) P36,634,736.09 representing interest on No. 11 above
xxx

xxx

xxx

Award to Respondents (herein petitioners) counter-claim:

1)

P37,951,201.14 representing the recoupment

of the balance of advance
payment made to the
claimant

2)

P455,414.41 representing interest on No.1

above

P38,406,615.55 balance of recoupment

plus interest
xxx

xxx

xxx

Finally, the Respondent (herein petitioner) is hereby ordered to pay to Claimant (herein
respondent) one-half of the cost of arbitration the amount of P768,219.76, as its share in the
arbitration cost, which was advanced by the claimant during the pendency of this case.
2. Determination of the correct amount to be paid by petitioner as disengagement costs and
the interest due thereon is hereby REMANDED to the CIAC.
3. Computation of the total award in favor of respondent and the 12% interest due thereon is
also REMANDED to the CIAC, with instruction that said 12% interest be computed from
finality of this decision.
4. Computation of the net award which petitioner must pay respondent by deducting the
gross total award for petitioner from the gross total award for petitioner [sic] from the gross
total award with interest for respondent is also REMANDED to the CIAC.
Accordingly, with the foregoing disposition, the Writ of Preliminary Injunction earlier issued against
respondent herein is hereby LIFTED.
On 17 August 2006, the CIAC submitted its Compliance71 to the remand orders of the Court of
Appeals, showing the re-computed arbitral award in favor of FUCC.72
On 24 August 2006, NHA filed an Omnibus Motion dated 22 August 200673 that incorporated its
Motion for Reconsideration of the CA Decision dated 1 August 2006 and its Motion to Require the
CIAC to Explain and to Hold in Abeyance the Re-Computation of Award.
FUCC, on the other hand, filed a Motion to Act on the Compliance submitted by the CIAC, while the
Land Bank filed an Urgent Manifestation/ Motion for Clarification for the appellate court to determine
whether the bank could legally release the frozen funds of NHA.74
The Court of Appeals directed the parties to file their respective comment to the cross-motions and
to the manifestation of Land Bank, and thereafter considered the issues submitted for resolution. 75
On 31 January 2007, the Court of Appeals issued a Resolution 76 denying petitioners Omnibus
Motion that included its Motion for Reconsideration of the CA Decision dated 1 August 2006. The
appellate court did not act on the Compliance submitted by the CIAC and on petitioners Motion to
Require the CIAC to Explain and to Hold in Abeyance the Re-Computation of Award. With respect to
the Urgent Manifestation/Motion for Clarification of Land Bank, the appellate court directed Land
Bank to "forthwith release to respondent the garnished fund of petitioner not
exceeding P147,894,629.24 in partial satisfaction of [the] Courts decision dated 1 August
2006."77The dispositive portion of the Resolution reads thus:
WHEREFORE, for lack of merit, petitioners Omnibus Motion is DENIED. Respondents Motion to
Act on the Compliance submitted by CIAC Ex Abundante Cautelam and petitioners Urgent Motion
for Issuance of Temporary Restraining or Preliminary Injunctive Writ are merely NOTED.

With respect to its Urgent Manifestation/ Motion for Clarification, the Land Bank of the Philippines is
DIRECTED to forthwith release to respondent the garnished fund of petitioner not
exceeding P147,894,629.24 in partial satisfaction of this Courts decision dated August 1, 2006,
upon filing of a good and sufficient bond by respondent in the sum of P150,000,000.00 to answer for
the restitution of the former amount and reparation of damages to petitioner should said decision be
reversed, whether totally or partially.78
Undaunted, NHA filed the present Petition for Review on Certiorari under Rule 45 of the Revised
Rules of Court. Petitioner prays that this Court reverse and set aside the CA Decision dated 1
August 2006 and the Resolution dated 31 January 2007 claiming, in the main, that in promulgating
the questioned Decision and Resolution, the Court of Appeals allegedly "egregiously overlooked,
ignored or disregarded many discernible, indisputable facts or circumstances of weight and
significance" that would allegedly have "logically altered the result of the case" had they "been
judiciously considered."79
The Issues
According to petitioner, instead of those alleged "indisputable facts or circumstances," the appellate
courts findings were "premised merely on manifestly wrong presumptions, surmises, mistaken or
improbable inferences and misapprehension of facts."80 Specifically, petitioner claims that the Court
of Appeals committed a grave and substantial error of judgment:
I
WHEN IT AFFIRMED THE AWARD FOR PROGRESS BILLING NO. 6 AND PRICE
ESCALATION FOR PROGRESS BILLING NOS. 1 TO 5 DESPITE THE INDISPUTABLE OR
ADMITTED FACT THAT RESPONDENT FUCC DID NOT POST ANY PERFORMANCE
BOND, WHICH IS DECIDEDLY A CONDITION PRECEDENT FOR THE PAYMENT OF
THESE CLAIMS.
II
WHEN IT AFFIRMED THE AWARD FOR PROGRESS BILLING NO. 6 IN THE AMOUNT
OF P7,384,534.22 DESPITE THE MANIFEST OR CLEAR FACT THAT RESPONDENT
FUCCS CLAIM FOR SAID BILLING WAS ONLY P6,496,926.29.
III
WHEN IT AFFIRMED THE AWARD FOR COST OF MATERIALS, EQUIPMENT AND
FACILITIES IN THE AMOUNT OF P4,677,680.00 AND DISENGAGEMENT COST ON THE
BASIS OF AN OBVIOUSLY ILLOGICAL AND ERRONEOUS INTERPRETATION OF
EXHIBIT "19."
IV
WHEN IT AFFIRMED THE AWARD FOR IDLE EQUIPMENT IN THE AMOUNT
OF P131,948,674.56 NOTWITHSTANDING THE CLEAR AND PATENT FACT THAT
RESPONDENT FUCCS EQUIPMENT NEVER WENT IDLE.
V

WHEN IT AFFIRMED THE AWARD FOR COST OF MATERIALS, EQUIPMENT AND

FACILITIES, DISENGAGEMENT COST AND IDLE EQUIPMENT DESPITE THE CLEAR OR
MANIFEST FACT THAT THESE CLAIMS WERE NON-ARBITRABLE AT THE TIME THE
COMPLAINT WAS FILED ON 17 JULY 2003.
VI
WHEN IT RULED THAT RESPONDENT FUCC DID NOT CONSENT TO THE
TERMINATION OF THE PROJECT NOTWITHSTANDING THE GLARING FACT THAT
RESPONDENT FUCC DID NOT PROTEST THE TERMINATION AND HAD EVEN
STOPPED IMPLEMENTING THE WORKS ON ITS OWN VOLITION EVEN BEFORE ITS
RECEIPT OF THE NOTICE OF TERMINATION.81
The Ruling of the Court
We deny the petition for lack merit.
I. Re: Payment Guarantee Bond as Condition Precedent for Payment of Progress Billing No. 6 and
Price Escalation for Progress Billings Nos. 1 to 5
Petitioner questions the award for Progress Billing No. 6 in the amount of P7,384,534.22 and for
Price Escalation for Progress Billings Nos. 1 to 5 in the amount of P26,297,951.62.
In sustaining these items of award granted by the CIAC to FUCC, the Court of Appeals ratiocinated
as follows:
Petitioners sole objection to the award of P7,384,534.22 as payment for Progress Billing No. 6
andP26,297,951.62 as payment of price escalation for Progress Billing Nos. 1-5 is that these claims
did not become ripe for adjudication for failure of respondent to fulfill a condition sine qua non, which
is the filing of a payment guarantee bond. Without this bond, respondent had no right of action
against petitioner at the time of filing of the complaint in arbitration. x x x
Without question, the filing of a bond is a condition for the payment of the foregoing claims of
respondent. We do not accept the reasoning of the CIAC that this requirement was rendered moot
and academic by its granting of said claim; that sort of reasoning begs the question. However, we
agree with CIAC that respondents omission to file bond was excusable. On October 4, 2002,
respondent proposed an arrangement under which it would submit its bond only when petitioner is
about to release the check but that petitioner will hold on to it until respondents bond is received and
verified. Respondent was prompted to make this request in view of its unfavorable cash flow
position, a dire situation it found itself in when the project was pre-terminated. x x x As found by
CIAC, petitioner never responded to this request, giving rise to the presumption that it had not
denied it. x x x. This presumption holds considering that, even at this stage, petitioner never
explained its inaction.
Thus, we sustain the award of P7,384,534.22 as payment for Progress Billing No. 6
and P26,297,951.62 as payment of price escalation for Progress Billing Nos. 1-5. However,
consistent with the provisions of the Contract, we require the latter to post the requisite bond in the
manner arranged by respondent with petitioner.82
Petitioner assails what it sees as a "flip-flopping" of the Court of Appeals, i.e. for ruling in one breath
that "(w)ithout question, the filing of a bond is a condition for the payment of the foregoing claims of

respondent," but pronouncing in another that "we agree with CIAC that respondents omission to file
bond was excusable," only to qualify in the third breath that "consistent with the provisions of the
Contract, we require the latter to post the requisite bond in the manner arranged by respondent with
petitioner,"83 and asserts that the posting of the bond is a government requirement that cannot be
excused under both the law and the Contract (citing Articles VII and VIII thereof), and is simply
indispensable.84 In fact, according to petitioner, it is a condition precedent for the payment of FUCCs
claims for Progress Billing No. 6 and for Price Escalation for Progress Billings Nos. 1 to 5. And since
FUCC allegedly failed to comply with this condition precedent, it had no existing or accrued cause of
action to compel NHA to pay the two (2) claims.85
Respondent counters that the Payment Guarantee Bond was required by NHA at the inception of the
Project as a condition for the release of the advance payment to FUCC in the amount P85.2
Million,86 and not as a requirement for the processing or release of FUCCs Progress Billings; 87 that
the Payment Guarantee Bond expired without the entire advance payment being recouped by NHA
because of the many work suspensions and delays suffered by the FVR Project; and that FUCC
tried to renew the bond but the GSIS refused because the Contract for the FVR Project had already
been terminated as of 16 October 2001.88 It is respondents submission that since its inability to
submit a renewed Payment Guarantee Bond from the GSIS was NHAs very own act of terminating
the Contract, NHA cannot use the same as reason not to process and pay FUCCs claims for
Progress Billing No. 6 and for Price Escalation for Progress Billing Nos. 1 to 5. 89
We have meticulously examined the record vis--vis the submissions of the parties and find no
reason to disturb the ruling of the Court of Appeals.
The record shows that at the start of the FVR Project, FUCC received from NHA an advance
payment for mobilization in the amount of P85.2 Million, or fifteen percent (15%) of the contract
cost.90 There is no dispute that this advance payment was to be recouped by NHA from FUCC by
taking partial amounts from the progress payments to FUCC. There is likewise no dispute that to
secure the recoupment of this advance payment, NHA required FUCC to post a Payment Guarantee
Bond in the amount of P85.2 Million issued by GSIS prior to the release of the advance payment. 91
It appears that before NHA could recoup from FUCC the entire advance payment, the Payment
Guarantee Bond expired. This, at a time when NHA had yet to recover some P38 Million out of
the P85.2 Million advance payment.92
FUCC tried to renew and pay for the extension of the bond but GSIS refused because the Contract
for the FVR Project had already been terminated as of 16 October 2001. 93
Because of the inability of FUCC to submit a renewed Payment Guarantee Bond from GSIS, NHA
refused to process and pay FUCCs claims for Progress Billing No. 6 and for Price Escalation for
Progress Billings Nos. 1 to 5.94
In two letters, one dated 23 May 2002,95 the other dated 6 June 2002,96 both addressed to the NHA
General Manager, FUCC appealed for help in the payment of these claims and proposed to procure
an alternative surety bond from a private surety firm accredited by the Insurance Commission to
secure the balance of the advance payment still to be recouped by NHA. 97
As both letters drew no response from NHA, FUCC wrote a third letter dated 13 June
200298 reiterating its proposal to submit a bond from a private surety company instead of a renewed
Payment Guarantee Bond from the GSIS. It wrote thus:

The unexpected termination of the contract has already caused untold injury to the contractor. May
we request NHA not to add insult to the injury by allowing the private surety bond and by
subsequently releasing our claim for price escalation. 99
NHA finally replied100 and acceded to FUCCs proposal provided that the private surety company was
among the top five (5) firms as endorsed by the Insurance Commission.101
FUCC immediately wrote back102 and provided NHA with a list of the top five non-life insurance
companies as endorsed by the Insurance Commission, and sought approval to procure a surety
bond from any one of the firms, but preferably from Malayan Insurance Company, Inc. 103
The foregoing evidence of record indisputably establish that FUCC made the offer to submit a surety
bond from a private surety company instead of a renewed Payment Guarantee Bond issued by the
GSIS just so NHA would process and pay FUCCs claims for Progress Billing No. 6 and for Price
Escalation for Progress Billing Nos. 1 to 5. This offer was contained in three (3) successive letters:
the first dated 23 May 2002,104 the second dated 6 June 2002,105 and the third dated 13 June 2002.106
When NHA acceded to FUCCs proposal in the letter dated 24 June 2002, 107 it accepted FUCCs
offer but qualified its acceptance by imposing the condition that the surety firm be among the top five
surety firms as endorsed by the Insurance Commission. This qualified acceptance constituted a
counter-offer108 which FUCC immediately accepted by way of the letter dated 3 July 2002. 109 In that
letter, FUCC submitted to NHA the names of the top five surety companies from where it intended to
obtain the surety bond. Thus, a perfected agreement was reached between the parties, to wit: that
FUCC would submit a surety bond from one of the top five private surety companies to secure the
balance of the advance payment still to be recouped by NHA, while NHA would process and pay
FUCCs claims for Progress Billing No. 6 and for Price Escalation for Progress Billing Nos. 1 to 5.
There was a perfected agreement because the contractual elements of consent, object certain and
cause had concurred.110
The evidence on record further show that the parties subsequently reconciled their computations
and agreed on the amount of P26,297,951.62 as payment for Price Escalation for Progress Billing
Nos. 1 to 5.111 In fact, in the letter dated 2 October 2002,112 NHA advised FUCC that it would "proceed
with the processing of the escalation payment subject to the submission [of] the Surety Bond
covering the balance for the recoupment of the advanced payment for mobilization." 113 In response,
FUCC wrote NHA a letter dated 4 October 2002114 requesting that it be allowed to submit the surety
bond "immediately before [the] release by NHA of the check for the price escalation," with the
understanding that "until the bond is released and verified, NHA will hold the check," "owing to the
unfavorable cash flow position of the project brought about by the untimely termination of the
contract."115Since NHA did not respond to FUCCs request nor object thereto, respondent assumed
that NHA had tacitly accepted the same,116 a stance supported by the CIAC and affirmed by the
Court of Appeals in this wise:
As found by CIAC, petitioner never responded to this request, giving rise to the presumption that it
had not denied it. x x x This presumption holds considering that, even at this stage, petitioner never
explained its inaction.117
Indeed, petitioner has not explained its inaction even in the instant petition. It merely posits that "its
silence cannot give rise to the presumption that it had accepted the counter-proposal" of
FUCC118 (referring to the request contained in the letter of FUCC dated 4 October 2002), 119 which it
claims to be "a counter-proposal to the counter-proposal of petitioner NHA" (referring to the letter
dated 24 June 2002).120

But this stance is untenable. As discussed above, the letter of NHA dated 24 June 2002, containing
a qualified acceptance of FUCCs offer to submit a surety bond from a private surety company,
constituted a counter-offer or a "counter-proposal," if you will, which was already accepted by FUCC
in the letter dated 3 July 2002.121 Thus, when FUCC wrote NHA the letter dated 4 October
2002,122 there was no more "counter-proposal" on the table to speak of. FUCC wrote that letter in
response to the letter of NHA dated 2 October 2002123 to make a reasonable request on a mere
matter of procedure: that it be allowed to submit the surety bond only when the check payment for its
claim for price escalation is about to be released, with the understanding that NHA will hold on to the
check until it had received and verified the surety bond.
The intended purpose of the surety bond is self-evident: to ensure that NHA would be able to
recover the unrecouped balance of the advance payment in the still substantial sum of P38 Million.
Understandably, NHA wanted the surety bond posted before releasing further payments to FUCC.
Clearly, therefore, for as long as the surety bond was to be posted and properly verified before any
check payment to FUCC could be released, the bond would have served its purpose. This was
precisely the arrangement sought by FUCC. Thus, NHA had no reason to refuse FUCCs request
contained in the letter dated 4 October 2002,124 which is presumably the reason why it remained
silent and gave no response, giving rise to the correct presumption that it had tacitly agreed to
FUCCs request.
Based on the foregoing disquisition, the Court cannot subscribe to the asseveration of petitioner that
FUCC had no existing or accrued cause of action to compel NHA to pay its claims for payment of
Progress Billing No. 6 and for Price Escalation for Progress Billing Nos. 1 to 5 at the time it filed its
Complaint since FUCC allegedly failed to comply with a condition precedent or sine qua non for the
payment of said claims the posting of the Payment Guarantee (or Performance) Bond. 125
Cause of action is defined as an act or omission by which a party violates the right of another. A
complaint is deemed to have stated a cause of action provided it has indicated the following: (1) the
legal right of the plaintiff, (2) the correlative obligation of the defendant, and (3) the act or the
omission of the defendant in violation of the said legal right.126
Respondent had the right to be paid its claim for Price Escalation for Progress Billing Nos. 1 to 5
after NHA recognized the validity of the claim and reconciled its computations with FUCC on the
correct amount of price escalation to be paid. In fact, NHA had expressed readiness to process the
payment of the claim. As regards Progress Billing No. 6, petitioner similarly recognized the validity of
this claim. Indeed, petitioner does not contest the right of private respondent to be paid Progress
Billing No. 6. What it contests is merely the amount thereof, insisting that FUCC is only entitled to an
award of P6,496,926.29 as against the amount of P7,384,534.22 awarded by the CIAC.127
Petitioners subsequent refusal to process and pay these claims despite FUCCs willingness to
submit a surety bond to secure the balance of the advance payment still to be recouped by NHA
as the parties had agreed upon which bond would be submitted when the check payment for the
claim is about to be released, clearly constitutes a violation by NHA of FUCCs right to be paid these
acknowledged and recognized claims. Thus, respondent had an accrued cause of action against
petitioner for these claims at the time it filed its Complaint, the constitutive elements of which are
clearly set forth therein.
There is nothing to support petitioners stance that the "posting of the Payment Guarantee (or
Performance) Bond is decidedly a condition precedent" or sine qua non for the payment of FUCCs
claims for Progress Billing No. 6 and for Price Escalation for Progress Billing Nos. 1 to 5. 128 The
Court notes, upon a close examination of the Contract, that there is no provision therein that requires
FUCC to post a Payment Guarantee Bond as an indispensable condition for the recognition of the

validity of its claim for price escalation or for the processing and payment of its progress billings. Nor
does the Contract refer to any other document from where such a condition may be inferred.
The source of FUCCs obligation to post a surety bond as a substitute for the GSIS-issued Payment
Guarantee Bond is not the Contract but the subsequent agreement between the parties, to wit: that
FUCC would submit a surety bond from one of the top five private surety companies to secure the
balance of the advance payment still to be recouped by NHA, while NHA would process and pay
FUCCs claims for Progress Billing No. 6 and for Price Escalation for Progress Billing Nos. 1 to 5.
And the timing of the posting of the bond was, as requested by FUCC in the letter dated 4 October
2002,129 tacitly agreed to by NHA: that FUCC would post the requisite bond only when the check
payments for its acknowledged claims are about to be released, with the understanding that NHA will
hold on to the checks until it had received and verified the surety bond.
Petitioners reference to Article VII and VIII of the Contract to support its allegation that "(t)he
procurement or posting of a Payment Guarantee (or Performance) Bond is a government
requirement that cannot be excused under both law and Contract" 130 is misplaced. Article VII refers to
the Performance Bond in the amount ofP28,429,789.00 posted by FUCC to guarantee the faithful
performance of its scope of work,131 which is decidedly different from the Payment Guarantee Bond
in the amount of P85.2 Million which NHA required FUCC to procure from GSIS and to post prior to
the release of the advance payment in the amount of P85.2 Million. A reading of Article VIII entitled
CONTRACTORS ALL RISKS INSURANCE, on the other hand, readily reveals that it has no relation
at all to the Payment Guarantee Bond required by NHA to cover the recoupment of the advance
payment to FUCC.132
It appears that petitioner pounced upon, and took out of context, the Court of Appeals ruling that
"(w)ithout question, the filing of a bond is a condition for the payment of the foregoing claims of
respondent" to argue that since FUCC "failed to comply with a condition precedent or sine qua non
for the payment of said claims", FUCC had no cause of action against NHA at the time it filed the
Complaint. Read in the proper context, the "payment" spoken of in the CA Decision actually pertains
to the physical act of releasing the check payments of FUCCs claims for Progress Billing No. 6 and
for Price Escalation for Progress Billings Nos. 1 to 5.
The word "payment" is a noun that is used in two (2) general senses: as "money paid," i.e. an
amount of money that is paid or due to be paid; or as the "act of paying," i.e. the act of paying
money, or fact of being paid.133 In the case at bar, the word "payment" was obviously used by the
Court of Appeals in the sense of the "act of paying," or more exactly, with respect to the mechanical
act of releasing the check payments for FUCCs claims for Progress Billing No. 6 and for Price
Escalation for Progress Billing Nos. 1 to 5. The Court of Appeals decreed that NHA may release the
"payment" (meaning, the checks processed by NHA for FUCCs claims) provided FUCC would "post
the requisite bond in the manner arranged by respondent with petitioner." 134
The evidence on record indubitably show that even as FUCC was ready to post the requisite bond in
the manner agreed upon by the parties, NHA still refused to process and pay FUCCs claims for
Progress Billing No. 6 and for Price Escalation for Progress Billing Nos. 1 to 5. In fine, and for
emphasis, FUCC had an accrued cause of action to compel NHA to pay these claims at the time it
filed its Complaint.
II. Re: Amount of FUCCs Claim for Progress Billing No. 6
Petitioner ascribes grave error to the Court of Appeals for affirming the award made by CIAC for
Progress Billing No. 6 in the amount of P7,384,534.22 when FUCCs claim for said billing was
allegedly only P6,496,926.29.

Anent this alleged error by the appellate court, it appears that FUCC originally submitted to NHA an
Abstract of Physical Accomplishment in support of Progress Billing No. 6, showing that its physical
accomplishments during the period 1 July 2001 to 21 November 2001, amounted
to P6,496,926.29.135 However, what FUCC attached to its Complaint136 was a different Abstract of
Physical Accomplishment showing that its accomplished works under Progress Billing No. 6
totalled P7,384,534.22.137
According to petitioner, "(i)f ever [it] is legally liable to pay respondent FUCC for Progress Billing No.
6, it should pay only the amount of P6,496,926.29, and not P7,384,534.22,"138 as the Abstract of
Physical Accomplishments marked and offered as Exhibit "15" was submitted by FUCC itself,
through its then authorized representative, Engineer Edgardo S. De la Cruz, who had affixed his
conformity thereon, to support its claim for payments for the said accomplishments. 139 Petitioner also
cites the direct testimony of its sole witness, Engr. Raner, to the effect that "(t)he only Abstract of
Physical Accomplishment for Progress Billing No. 6 that was signed by FUCC and NHA is Exhibit
15, in which the amount agreed by both parties was P6,496,926.29." According to Engr. Raner,
"(t)he alleged new Abstract of Physical Accomplishment for Progress Billing No. 6 could only be a
fabricated document."140
The Court notes that a perusal of the Abstract of Physical Accomplishments offered in evidence by
FUCC as Exhibit "IIII" reveals that it was also signed by both parties, just like the Abstract of Physical
Accomplishments offered in evidence by NHA as Exhibit "15." In his testimony, FUCCs sole witness,
Engr. Dumaliang, explained that many Abstracts for Physical Accomplishments were caused to be
prepared by NHA with different reduced amounts reflected thereon, which explains the apparently
oscillating figures for Progress Billing No. 6. Engr. Dumaliang admitted that FUCC might have indeed
also signed Exhibit "15."141 In short, FUCC does not disown Exhibit "15." It is FUCCs stance that
both Exhibit "IIII" and Exhibit "15" are duly executed documents but Exhibit "IIII," which it alleges was
submitted later, supersedes Exhibit "15" and contains the correct amount of FUCCs accomplished
works under Progress Billing No. 6.142
These conflicting claims between the parties as to the correct amount that petitioner is legally
liable to pay respondent for Progress Billing No. 6 was resolved by the CIAC in favor of FUCC. The
CIAC found that "the amount of P7,384,534.22 governs over the claim of NHA in its Exhibit "15" for
the amount of P6,496,926.29." According to the CIAC, both Exhibit "IIII" and Exhibit "15" were signed
by the representatives of FUCC and NHA. However, below the signatures in Exhibit "15" are
handwritten notations saying that "such document is not final but conditional." The pertinent portion
of the CIAC Decision reads thus:
The Arbitral Tribunal finds the abstract of Physical Accomplishment for Progress Billing No. 6 in
Exhibit "IIII" submitted by FUCC in the amount of P7,384,534.22 governs over the claim of NHA in its
Exhibit "15" for the amount of P6,496,926.29 (see Stipulated Facts No. 25.1.2).
The Arbitral Tribunals finding is based on the signature by a representative of FUCC in Exhibit "IIII"
together with that of NHA representative (Mr. Borlagdan, Head Tech. Staff of FVRP), while in Exhibit
"15" the signatures of both the NHA and FUCC representatives had handwritten notations below
their respective signatures, both signifying that such document is not final but conditional. Exhibit
"15" therefore is not controlling because of the signatures therein with handwritten conditions
signifying further claims. 143
As this finding of fact by the CIAC was affirmed by the Court of Appeals, and it being apparent that
the CIAC arrived at said finding after a thorough consideration of the evidence presented by both
parties, the same may no longer be reviewed by this Court. The all too-familiar rule is that the Court
will not, in a petition for review on certiorari, entertain matters factual in nature, save for the most

compelling and cogent reasons, like when such factual findings were drawn from a vacuum or
arbitrarily reached, or are grounded entirely on speculation or conjectures, are conflicting or are
premised on the supposed evidence and contradicted by the evidence on record or when the
inference made is manifestly mistaken or absurd.144 This conclusion is made more compelling by the
fact that the CIAC is a quasi-judicial body whose jurisdiction is confined to construction
disputes.145 Indeed, settled is the rule that findings of fact of administrative agencies and quasijudicial bodies, which have acquired expertise because their jurisdiction is confined to specific
matters, are generally accorded not only respect, but finality when affirmed by the Court of
Appeals.146
III. Re: Award for Cost of Materials, Equipment and Facilities
Petitioner questions the propriety of the award for Cost of Materials, Equipment and Facilities in the
amount ofP4,677,680.00.
This award has two components: (1) an award in the amount of P132,470.00 representing the cost
of materials delivered by FUCC to the project site but were not utilized due to the termination of the
Contract; and (2) an award in the amount of P4,545,182.82 representing the pro-rated cost of the
facilities constructed by FUCC to support field operations for the FVR Project. 147
Central to the resolution of the question raised by petitioner is Exhibit "19," 148 an NHA Internal
Routing Slip dated 17 November 1997 transmitted by the Manager of the Southern Luzon and Bicol
(SLB) Region to the Chairman of NHAs PBAC, which reads as follows:
"INTERNAL ROUTING SLIP
SUBJECT: MINIMUM REQUIRED OWNED EQUIPMENT AND KEY STAFF
RE: LAND DEVELOPMENT OF FREEDOM VALLEY
RESETTLEMENT PROJECT (PHASE 1), SITIO BOSO-BOSO, BGY.
SAN JOSE, ANTIPOLO, RIZAL

FOR/TO : FROM : DATE : SIGNATURE

The Chairman : The Manager : 17 November :
PBAC : SLB : 1997 : NEOFITO A. HERNANDEZ

Submitted herewith is a listing of the minimum required owned equipment and key staff for the Land
Development of Freedom Valley Resettlement Project (Phase I) located at Sitio Boso-Boso, Bgy.
San Jose, Antipolo, Rizal.
A. EQUIPMENT

NO. OF EQUIPMENTS

1. Tractors,crawler-type with dozer

2. Loaders, crawler-type

3. Grader, motorized

4. Road Roller, vibratory, smooth drum

5. Plate Compactor, vibratory

6. Backhoe, hydraulic, crawler-mounted

7. Slipform Concrete Paver

8. Wet-mix Concrete Batching Plant

9. Concrete Vibrator

10. Dump Trucks

11. Air compressor, portable

12. Pneumatic Breakers, hand held

13. Water Pump

14. Generator Sets, 500 KVA, total

15. Welding Machines

16. Water Trucks

17. Chain Saw

18. Concrete Cutter

19. Concrete Mixer, one bagger

20. Service Vehicles

21. Cranes

22. Transit Mixers

23. Total Stations

TOTAL

75
B. KEY STAFF

NO. OF MANPOWER

1. Project Manager

2. Project Engineers

3. Field Engineers

10

4. Sanitary Engineer

5. Electrical Engineer

6. Mechanical Engineer

7. Geodetic Engineer

8. Architects

9. Draftsmen

10. Foremen

11. Administrative Officer

12. Finance Officer

13. Liaison Officer

14. Purchasing Officer

15. Warehouseman

16. Clerk Typist

17. Drivers

18. Heavy Equipment Operators

25

19. Utilitymen

20. Heavy Equipment Mechanics

21. Instrument Men

22. Survey Aides

TOTAL
According to the Court of Appeals, this Internal Memo shows that NHA itself "determined the
minimum equipment and key staff to be mobilized for the project," and since "the project was preterminated, respondent is justified in seeking recovery of a portion of the costs already incurred."
Thus:
x x x. Petitioners own Exh.19 shows that it determined the minimum equipment and key staff to be
mobilized for the project x x x. It is implicit in these requirements that the infrastructure to house such
equipment and personnel (including NHA personnel) and facilitate their mobilization within the
project site were also expected to be provided by respondent. Hence, when respondent invested into
such infrastructure, it did so with the expectation to recover such costs at the end of the project. As
the project was pre-terminated, respondent is justified in seeking recovery of a portion of the costs
already incurred.149
The appellate court thus affirmed the award made by the CIAC to FUCC in the amount
of P4,545,182.82 representing the pro-rated cost of the facilities constructed by FUCC to support its
field operations for the FVR Project (i.e.; the second component under the award for Cost of
Materials, Equipment and Facilities, and for Disengagement Costs). The appellate court also
affirmed the award in the amount of P132,470.00 representing cost of materials delivered by FUCC
to the project site but were not utilized due to the termination of the Contract (i.e.; the first
component under the award for Cost of Materials, Equipment and Facilities, and for Disengagement
Costs), upon the finding that NHA was solely to be blamed for the lack of inventory of the unutilized
materials.150
Petitioner disputes the holding of the Court of Appeals and maintains in the instant petition that it is
not legally liable to pay FUCC for Cost of Materials, Equipment and Facilities, and for
Disengagement Costs because NHA could not have dictated upon FUCC what equipment and key
staff to mobilize in the FVR Project, as it was FUCC, logically being the contractor, which determined
the kind and number of equipment that should be deployed for the Project. 151 According to petitioner,

81"

Exhibit "19" was transmitted by the Manager of the SLB Region to the PBAC Chairman in
preparation for the public bidding of the FVR Project. The SLB Manager listed "the minimum
required equipment and key staff that a participating contractor should own (as contradistinguished
from mobilize)" to insure that no "fly-by-night" or puny contractor would participate in the bidding, as
"(t)he capability of the contractor to build the Project is known by the equipment he owns." 152
In short, it is petitioners submission that Exhibit "19" was not meant to dictate and could not have
dictated the kind and number of equipment and key staff that FUCC should mobilize and/or
actually mobilized for the FVR Project. It was issued by the Manager of the SLB Region to the PBAC
Chairman merely to serve as a checklist on the minimum required number of equipment and key
staff that a would-be contractor for the Project should own. Petitioner claims that there is a "whale of
difference" between "owning" and "mobilizing," and that this difference "completely escaped" the
Court of Appeals when it scrutinized Exhibit "19."153 Since NHA had allegedly nothing to do with the
deployment of FUCCs equipment and machineries for the FVR Project, it should not be made
accountable for the dire consequences, if any, of FUCCs business decision or judgment in
procuring, maintaining, constructing or dismantling these equipment and facilities, etc. 154
Petitioners arguments fail to persuade. The Court subscribes to the view expressed by private
respondent that in a government infrastructure project, the department or agency that owns the
project dictates not only what facilities, equipment and key technical staff the contractor should
mobilize, it dictates as well the financial resources the contractor should muster for the project, the
bonds, guarantees and sureties it should put up, the plans, specifications, schedule, and the manner
by which it should prosecute the contract works, how it should bill for completed works, how it should
document and claim variation orders, etc.155
Indeed, this appears to be so in the case of the FVR Project. The very Contract entered into by the
parties (which appears to be a standard form contract with the blank spaces appropriately filled up)
specifies the duration of the contract works and the bonds, guarantees and sureties to be put up by
FUCC,156 and expressly states that, among other documents, the following shall form part of the
Contract, to wit: plans, specifications, certificate of availability of funds, concurrence of lending
institutions, duly approved program of work and cost estimates, PERT/CPM or equivalent schedule
of work, etc.,157 all of which demonstrate that NHA, as the owner of the FVR Project, had full control
over its implementation. This would certainly have included dictating or imposing, as it were, the
minimum equipment and key staff that had to be mobilized by FUCC to undertake the contract
works. Otherwise, NHA would have been remiss in its duty to ensure that the Project would be
implemented properly and the peoples money spent wisely. Indeed, there are rules and guidelines
for the implementation of government contracts158 that procuring entities must follow to promote
transparency and ensure that all contracts are performed strictly according to specifications. 159
Be that as it may, even if Exhibit "19" was indeed issued merely to serve as a checklist on the
minimum required number of equipment and key staff that a would-be contractor for the FVR Project
should own, the document indubitably establishes that FUCC which was awarded the Contract for
the Project could not have but assembled and mobilized a huge complement of men, materials
and equipment to be able to undertake the FVR Project consisting, at the very least, of the
equipment and key staff listed in said Exhibit "19," which were the "minimum required" by NHA.
Whether FUCC owned the equipment or merely rented them does not alter the fact that it had to
provide the infrastructure to house such equipment and key personnel within the project site to
support its field operations. FUCC undoubtedly poured in money to put up such infrastructure, with
the expectation that it would be able to recover the costs thereof at the end of the Project. Thus,
when the FVR Project was terminated due to no fault of FUCC, respondent was eminently "justified
in seeking recovery of a portion of the costs already incurred" 160 for such infrastructure, as correctly
held by the Court of Appeals.

The Court notes that in ruling as it did, the Court of Appeals merely affirmed the finding of the CIAC
that "(w)hen the whole amount of the contract for facilities is not paid due to the termination of said
contract which is caused not at contractors fault, the Contractor should be paid the pro-rated
balance having prepared the facilities for the whole project." 161 The Court further notes that the
amount of this award for the pro-rated cost of the facilities constructed by FUCC to support its field
operations for the FVR Project P4,545,182.82; as well as the amount of the award for the cost of
the unutilized materials delivered by FUCC to the project site P132,470.00, were not plucked out of
thin of air. They were meticulously derived by the CIAC based on the evidence submitted to the
Arbitral Tribunal, as is readily apparent from the following pertinent portion of the CIAC Decision:
The work item in the contract for facilities had the corresponding amount. When the whole amount of
the contract for facilities is not paid due to the termination of said contract which is caused not at
contractors fault, the Contractor should be paid the pro-rated balance having prepared the facilities
for the whole project. These are consequences made in good faith and for usage in the project.
The construction facilities to support field operations are mandatory and necessary in the
implementation of the project where the contract usually provides in a form of mobilization at the
project start, and those needed during the full operation stage, e.g. laboratory, etc., and
demobilization at the close of the project.
In the claim of FUCC, it included the Land Development of Heavy Equipment Yard, Office and Model
Houses, Container Vans, Warehouse, Barracks, Shops, Working Areas, Water Supply and Electrical
Works. This involves the total amount of P12,297,722.46.
The FUCC is asking the pro-rated amount of this P12,297,722.46 computed as follows:
Balance of Works, divided by the cost of the whole works, multiplied by the cost of facilities, thus;
P568,595,780.00 less P358,445,341.30
x

P12,296,722.46

P568,595,780.00
This will result to P4,545,182.82 which the Arbitral Tribunal supports as the valid claim of FUCC for
component b) of its claim, or for facilities.
For the two components a) and b) for materials and facilities, NHA should pay FUCC the total
of P132,498.00 plusP4,545,182.82 or the total of P4,677,680.00 and not P4,801,992.82 as
previously claimed by FUCC.162
It must be pointed out that nowhere in the instant petition does petitioner contest the foregoing
formula and the figures used by the CIAC or the amounts of the awards derived therefrom. Petitioner
merely proffers the argument that NHA had nothing to do with the deployment of equipment and
machineries and, hence, should not be made accountable for the consequences of FUCCs
business judgment or decisions as regards their procurement, mobilization or maintenance. But both
the CIAC and the Court of Appeals have spoken. And the CIACs factual finding that FUCC ought to
be paid the total amount of P4,677,680.00 for the Cost of Materials, Equipment and Facilities
remains uncontested. This factual finding, which was affirmed by the Court of Appeals, must be
accorded respect and finality by this Court, consistent with the settled rule that findings of fact of
administrative agencies and quasi-judicial bodies, which have acquired expertise because their
jurisdiction is confined to specific matters, are generally accorded not only respect, but finality when
affirmed by the Court of Appeals.163

IV. Re: Award for Idle Equipment

Petitioner asseverates that the award for Idle Equipment in the amount of P131,948,674.56 "is not
legally owing" to FUCC and will "unjustly enrich FUCC at the expense of petitioner NHA" because no
"perdition [was] suffered by respondent FUCC from idle equipment," as there was allegedly "no
actual or physical suspension of the contract works that occurred." 164
Verily, the determination of whether or not FUCC is entitled to an award for Idle Equipment hinges on
a factual issue: whether or not there was actual or physical suspension of the contract works at the
FVR Project.
The CIAC Arbitral Tribunal found that there was such actual or physical suspension of the contract
works a finding not disturbed by the Court of Appeals. This Court could very well just simply say
that there is no cause to review, must less overturn this finding of fact, invoking the established rule
that in petitions for review on certiorari, this Court is limited to reviewing only errors of law, not of
fact, unless the factual findings complained of are devoid of support by the evidence on record, or
the assailed judgment is based on a misapprehension of facts.165
But considering that the award for Idle Equipment involves a substantial sum P131,948,674.56
and if only to ascertain that the factual findings of the CIAC are indeed not devoid of support by the
evidence on record, the Court shall examine at length the nature of this award and the bases of the
findings of the CIAC Arbitral Tribunal and the judgment of the Court of Appeals.
First, it must be emphasized that FUCCs claim for Idle Equipment is limited to the period from 10
June 1998, when NHA issued Partial Suspension Order No. 1, up to 15 March 1999, the original
expiration date of the Contract. This time frame is clearly defined in FUCCs Complaint. 166 The same
time frame is also acknowledged by the CIAC as the period circumscribed by FUCCs claim for Idle
Equipment.167
To support its claim for Idle Equipment, FUCC attached to its Complaint a Summary (marked and
offered in evidence as Exhibit "QQQQQ") showing the equipment that were rendered idle and
unproductive during the period 10 June 1998 to 15 March 1999, the duration of their idleness, their
rates per hour, and the cost of idleness per kind of equipment. The cost of idle equipment added up
to a total of P142,780,800.00.168
In its Answer, NHA sought to defeat FUCCs claim by interposing the defense that there is no basis
for the award of Idle Equipment because there was no actual or physical suspension of the contract
works as shown allegedly by the Abstracts of Physical Accomplishment for Progress Billings Nos. 1,
2, 3, 4 and 5 of FUCC.169
During the presentation of evidence, FUCCs sole witness, Engr. Ben S. Dumaliang testified that
Partial Suspension Order No. 1was never lifted because NHA was not able to fully address the
farmers/planters demands and/or contain their resistance; and that although Partial Suspension
Order No. 1 mentions only the suspension of works at Cluster 2, it effectively stopped all contract
works in both Clusters 1 and 2, allowing FUCC to prosecute the FVR Project only in Cluster 3.
According to Engr. Dumaliang, he "saw with [his] own two eyes in [his] thrice a week visits to the
project site that there was practically no contract works going on in Clusters 1 and 2." 170 Thus:
"Q : The parties have stipulated that all works at Cluster 2 were suspended effective 10 June 1998
due to the continued resistance of farmers/planters and other residents within the area to the FVR
Project, under Partial Suspension Order No. 1. When was this suspension lifted?

A : It was never lifted because the NHA was never able to fully address the demands and/or contain
the resistance of the farmers/planters and other residents within the area.
Q : What contract works were affected by this suspension?
A : Although Partial Suspension Order No. 1 only mentions the suspension of works at Cluster 2, it
effectively stopped all contract works in both Clusters 1 and 2, allowing FUCC to prosecute the FVR
Project only in Cluster 3.
Q : According to the NHA, even with the issuance of Partial Suspension Order No. 1, there was no
actual or physical suspension of the contract works, particularly in Clusters 2 and 3. What can you
say about this?
A : That is not true. There was actual suspension of contract works in Clusters 1 and 2. I know this of
my own personal knowledge being the Project Director of FUCC for the FVR Project. As I said
earlier, FUCC was able to prosecute the project only in Cluster 3. I saw with my own two eyes in my
thrice a week visits to the project site that there was no [sic] practically no contract works going on in
Clusters 1 and 2.
Q : But FUCC collected from and was paid the amount of P52.2 M for works done during the period
supposedly covered by Partial Suspension Order No. 1. According to the NHA, this shows that there
was no actual or physical suspension of the works. What can you say about this claim?
A : This P52.2 M was payment made by NHA to FUCC under Progress Billing No. 1 for works
actually accomplished during the period 16 March up to 30 June 1998. Partial Suspension Order No.
1 became effective only on 10 June 1998. By that time, FUCC had been working for almost three (3)
months and had accomplished a lot. Hence, the fact that it was paid P52.2M under Progress Billing
No. 1 does not prove that there was no actual or physical suspension of the contract works because
of Partial Suspension Order No. 1."171
NHAs sole witness, Engr. Mariano E. Raner III, on the other hand, testified that Partial Suspension
Order No. 1 was lifted on 13 June 1999.172 Engr. Raner reiterated NHAs stance that there was no
actual or physical suspension of the contract works as shown by the Abstracts of Physical
Accomplishment submitted by FUCC in support of its Progress Billings Nos. 1, 2, 3 and 4. 173
The CIAC Arbitral Tribunal found for FUCC and in the Decision dated 7 January 2004 rendered an
award for Idle Equipment in the amount of P131,948,674.56.
The CIAC Arbitral Tribunal debunked NHAs proposition that the Abstracts of Physical
Accomplishments and the payments made to FUCC under the Progress Billings show that there was
no actual or physical suspension of the contract works by pointing out: (1) that the work
accomplishments under Progress Billing No. 1 were done during the first three (3) months of the
Contract (i.e. from 16 March 1998 up to June 1998) or before the issuance of Partial Suspension
Order No. 1 on 10 June 1998; (2) that the work items covered by Progress Billing No. 2 were mostly
for slope protection, which were also partially done before the issuance of Partial Suspension Order
No. 1; and (3) that the accomplishments under Progress Billing No. 3 also consisted of slope
protection and other items of work that did not involve the use of the equipment that went idle. The
CIAC Arbitral Tribunal also gave credence to the testimony of Engr. Dumaliang that he saw with his
own eyes that there was no equipment activity for the period 10 June 1998 to 15 March 1999. 174 The
pertinent portions of the CIAC Decision dated 7 January 2004 are reproduced hereunder as follows:

NHA on the other hand contested the claim for payment of Idle Equipment with the principal reason
that there was no actual or physical suspension of the contract works during the Partial Suspension
Order No.1, which was proven by the payments of Progress Billings Nos. 1, 2, 3, 4, and 5, showing
the items of works done in the Abstract of Accomplishment, supporting the said Billings. x x x
In the Affidavit of the NHAs lone witness, Mr. Raner III, it stated that the alleged 25 February 1999
meeting was "a blatant lie," because there was never a meeting on such date, more so that there
was no agreement to pay the Idle Equipment claims. This allegations of the lone witness for NHA
had been addressed and countered in the various letters that were never denied by the various
officials of NHA who received the letters without any question, x x x except by the lone witness who
only call it a blatant lie during the pendency of this case.
Upon perusal of the records in this case, it showed that in Admitted Fact No. 21, the period[s] for
each billings [sic], are as follows;
Billing No. 1 16 March 1998 to 30 June 1998
Billing No. 2 01 July 1998 to 31 December 1998
Billing No. 3 01 January 1999 to 15 October 1999
Billing No. 4 16 October 1999 to 31 January 2001
Billing No. 5 31 January 2001 to 31 June 2001
Gleaned from this data, only Billings [sic] Nos. 1, 2, and 3 are affected in the claims for payment of
Idle Equipment. However, in Billing No. 1, the period from 16 March 1998 to June 1998 is not
affected in the claim for payment of Idle Equipments. Likewise, in Billing No. 3, the period from 15
March 1999 (original contract expiry date) to 15 October 1999 is also not affected in the claim for
payment of Idle Equipment. This is because the claims for payment of Idle Equipment is from 10
June 1998 to 15 March 1999.
It was alleged by NHAs lone witness, that there were works in Billings [sic] Nos. 1 to 5 described in
the Abstract of Accomplishments attached therein, showing activities during the Partial Suspension
period of 10 June 1998 to 15 March 1999.
This allegation of NHA was countered by the lone witness of FUCC that the Billing No. 1 were [sic]
accomplishments for the first three years of the contract, done long before the issuance of Partial
Suspension order No. 1. And that Billing No. 2 were [sic] composed of work items for slope
protections, also partially done before the issuance of Partial Suspension No. 1. For Billing No. 3, the
accomplishments, as records will bear, are mostly slope protections and other work items not
involving the use of equipments.
Further, the lone witness for the FUCC testified categorically that he had visited the project thrice a
week for the whole contract duration, and saw from [sic] his own eyes that there was no equipment
activity for the period 10 June 1998 to 15 March 1999.
The above facts had been addressed in sufficient details regarding the issue as to whether there
was actual or physical suspension of works for the period covered by the Partial Work Suspension
Order No. 1. To discuss activities within the other Suspension Orders is immaterial to the issue. 175

After ruling that there was actual or physical suspension of contract works in the FVR Project that left
idle the large complement of hardware, machinery, tools and equipment mobilized by FUCC, the
CIAC Arbitral Tribunal then proceeded to derive the value of the award for Idle Equipment in this
wise:
It is noted that the period from 10 June 1998 when Suspension Order No. 1 was in effect, to 15
March 1999 when the original contract expired, is 278 days that FUCC claimed for payment of the
Idle Equipment.
In the claim of payment for Idle Equipment for the 278 day period, FUCC listed 12-Bulldozers, 6Backhoes, 2-Payloaders, 3-Graders, 3-Roadrollers, 4-Dump Trucks, 1-Water Truck, 1-Conc.
Batching Plant, and 3-Transit Mixers, all working at the average of 2.224 hours per day for 278 days.
The respective modified ACEL rates in Exhibit "TTTTT" was [sic] applied for the corresponding
equipment, such that the total claims amounted toP142,780,800.00 (Exhibit "QQQQQ").176
xxx
Perusal of the records in this case showed that the listed equipment and number of units in the claim
for payment of Idle Equipment, are far below the "Minimum Required Owned Equipment x x x", as
listed during the bidding, except that of the Bulldozers. Instead of only six (6) bulldozers required, the
claim for payment of Idle Equipment had twelve (12) bulldozers (see Exhibit "19").
The Arbitral Tribunal concluded that the claim for payment of Idle Equipment by FUCC is meritorious,
except the 12 bulldozers which should be reduced to 6 bulldozers in the computations of the
payment. This is because the increase of bulldozers from 6 to 12 is a business discretion of FUCC,
decided at the start of the project, which does not bind the Owner, especially that it resulted to nonuse for almost one year.
The corresponding amount for the excess six bulldozers to be deducted is equal to 6 bulldozers
multiplied by 298 days and by the rental rate of P2920.00 per hour, further multiplied by 2.224 hours
per day will result toP10,832,125.44. This should be deducted from the claimed total
of P142,780,800.00 and will result toP131,948,674.56.177
It cannot be gainsaid that the CIAC Arbitral Tribunal sifted through the evidence presented by both
parties before making the finding of fact that there was actual or physical suspension of the contract
works that rendered the huge complement of FUCCs machineries and equipment idle and
unproductive during the period 10 June 1998 up to 15 March 1999. Further, the CIAC Arbitral
Tribunal painstakingly scrutinized the documents submitted by FUCC to support its claim for Idle
Equipment before arriving at the amount of P131,948,674.56 as its award for Idle Equipment, which
is less than FUCCs claim of P142,780,800.00. Clearly, the factual findings of the CIAC are based on
substantial evidence on record, which are referred to in the CIAC Decision.
For example, the CIAC refers to the testimony of FUCCs sole witness, Engr. Dumaliang, to support
its finding that the physical accomplishments subject of Progress Billing No. 1 were actually done
during the first 3 months of the works contract (from March to June 1998), or before the issuance of
Partial Suspension Order No. 1 on 10 June 1998, 178 which testimony is unrebutted.
Reference is also made to the following testimony of Engr. Dumaliang, which is similarly unrebutted,
pertaining to the physical accomplishments under Progress Billing Nos. 2 and 3, which belies the
stance of NHA that there was no actual or physical suspension of the contract works, to wit:

"Q: Again, the NHA claims that even with the issuance of Suspension Order No. 1 due to the CDO
issued by the DENR, no actual or physical suspension of works was implemented. In fact, according
to the NHA, FUCC collected and was paid P16.1 M under Progress Billing No. 2 for the period 01
July to 31 December 1998 and P57 M under Progress Billing No. 3 for the period 01 January to 15
October 1999, or during the supposed period of the suspension order. What is your reaction to this?
A : For a period of almost one year, or from 31 July 1998 up to 15 June 1999, all of the contract
works were actually and physically suspended because of Suspension Order No. 1. However, FUCC
was allowed to do mitigating slope protection and drainage works in Cluster 3. The amount of P16.1
M paid to FUCC under Progress Billing No. 2 was payment for: (1) works accomplished before the
suspension which were not paid under Progress Billing No. 1; and (2) for slope protection and
drainage works which were allowed by the CDO issued by the DENR. Upon the other hand, the
amount of P57 M paid to FUCC under Progress Billing No. 3 was payment for: (1) slope excavation
and drainage works done before the suspension but which were not paid because the covering
variation order (Variation Order No.1) had not yet been issued then; and (2) for slope protection
works, consisting of gabions and riprap, which were necessary to prevent further damage to the
project while the suspension was in effect. Verily, these payments do not prove that there was no
actual or physical suspension of the contract works because of Suspension Order No. 1." 179
It thus comes as no surprise that the Court of Appeals affirmed the award of the CIAC for Idle
Equipment in its Decision dated 1 August 2006,180 where the appellate court additionally pointed out
that petitioner had in fact acknowledged its liability to FUCC for standby cost. Thus:
Petitioner further disclaims liability for the amount of P131,948,674.56 awarded to respondent as
payment for idle equipment. It argues that there is nothing in the contract or in PD 1594 and its
implementing rules which allows such award.
We are inclined, however, to agree with respondent that petitioner had acknowledged its liability for
standby cost. Its officer-in-charge Engr. Raner wrote in his 8 June 1999 Memorandum regarding the
fact-finding being conducted by the Office of Ombudsman, thus:
There is another compelling reason for the expeditious resumption of the works. The contractor is
claiming compensation for the large fleet of equipment, plant and facilities rendered idle and
unproductive due to suspension. The contractor has billed us some P142 M for the period June 1998
to March 1999.
This claim is of course subject to evaluation of its merits, but under the General Conditions of the
contract, the contractor may be entitled to such compensation. x x x
Engr. Raner affirmed the foregoing statement when he testified on 9 December 2003. 181 x x x
The Court notes that Engr. Raner did affirm the recommendation contained in his Compliance
Report to the Ombudsman182 when he testified on cross-examination during the hearing before the
CIAC Arbitral Tribunal held on 9 December 2003. Thus:
"ATTY. ALMADRO:
You recall, Mr. Witness, that the Ombudsman fact-finding report focused on the fact that there was a
delay in the project and that the Ombudsman wanted it immediately [resumed] because the FVR
Project was a funded project of the government and the Ombudsman felt that every day of delay
was causing so much cost to the government and reflecting a poor administration of a project and

in your report, one of your recommendations was, in fact, to make sure that works would actually
resume immediately, is that correct?
ENGR. RANER III:
Yes.
ATTY. ALMADRO:
In fact, in Item 1 again of this report, there is a paragraph here and I would like to quote for the
record, "there is another compelling reason for the expeditious resumption of the works. The
contractor is claiming compensation for the large fleet of equipment, plant and facilities rendered idle
unproductive due to suspension. The contractor has billed us P142 M for the period June 1998 to
March 1999. This claim is of course subject to evaluation of its merits, but under the general
conditions of the contract, the contractor may be entitled to such compensation." So you were well
aware that there was a claim amounting to P142 Million as of June 1999 in connection with the idle
equipment of the contractor?
ENGR. RANER III:
The claim that was expressed, we were informed at that time verbally.
ATTY. ALMADRO:
So you became aware at that time that is why it is your sentiments
ENGR. RANER III:
Yes.
ATTY. ALMADRO:
And you stated here that the contractor may be entitled to such compensation, at that time you felt
there was a basis for this claim.
ENGR. RANER III:
Yes. At that time, I felt there was a need to address the claim but as far as my level of position in the
project is concerned, my authority is but to recommend. If there will be recommendations that Ill be
submitting, of course, that will be subject to evaluation by management." 183
Citing the case of Public Estates Authority vs. Elpidio Uy, et al., 184 where this Court affirmed the
disputed arbitral award of CIAC (a portion of which was for payment of the standby or idle time of
equipment), the Court of Appeals sustained the award for Idle Equipment and held that payment for
standby time due to prolonged work suspension is legally tenable.
This Court cannot but agree with the holding of the Court of Appeals. More so because the CIAC
which carefully considered the conflicting claims of the parties and painstakingly scrutinized both the
oral and documentary evidence of record possesses the required expertise in the field of
construction arbitration, as we had pointed out in the cited case of Elpidio Uy. In that case, as in this
case, we find no ground to disturb the arbitral award of the CIAC. Settled is the rule that findings of

fact of administrative agencies and quasi-judicial bodies, which have acquired expertise because
their jurisdiction is confined to specific matters, are generally accorded not only respect, but finality
when affirmed by the Court of Appeals.185 Whatever questions there may be regarding the legality of
an award for "standby time" or Idle Equipment is put to rest by the case of Elpidio Uy.
In the instant petition, NHA reiterates and insists that FUCC does not deserve an award for Idle
Equipment because FUCC was "actually and continuously performing contract works" on the FVR
Project from 16 March 1999 to 21 November 2001; that its equipment "never went idle"; and that it
was paid for its contract works during this period. 186
As heretofore shown, this stance of NHA was found to be untenable by the CIAC Arbitral Tribunal
whose factual findings were affirmed by the Court of Appeals. Further, the argument that FUCC
continuously performed contract works on the FVR Project from 16 March 1998 to 21 November
2001 so that its equipment never went idle is flawed because FUCCs claim for Idle Equipment is
circumscribed within the period from 10 June 1998 to 15 March 1999 only. Quite obviously, works
performed before 16 March 1998 and after 15 March 1999 are of no moment and are totally
irrelevant to FUCCs claim for Idle Equipment.
Petitioner dwells at length on the Batching Plant of FUCC to show that FUCCs machineries and
equipment never went idle.187 But this is woefully misplaced because, and this bears repeating:
FUCCs claim for Idle Equipment is only for the period 10 June 1998, when the contract works were
first suspended by Partial Suspension Order No. 1, up to 15 March 1999, the original expiry date of
the Contract, and not from 16 March 1998 to 21 November 2001, as petitioner adamantly insists in
the present petition. Therefore, and as correctly pointed out by respondent, even if FUCC had in fact
used its machinery and equipment after 15 March 1999 for other endeavors, it would not in any way
affect the validity of FUCCs claim for Idle Equipment.
V. Re: Whether or Not Claims for Cost of Materials, Equipment and Facilities, Disengagement Costs
and Idle Equipment are Arbitrable by the CIAC
The CIAC granted an award to FUCC for Disengagement Costs in the total amount
of P65,842,309.72. This award has 3 components, to wit:
(1) Foregone Equipment Rental

P34,216,692.90

(2) Extended Overhead Costs

10,541,872.27

(3) Foregone Income

21,083,744.55

TOTAL

P65,842,309.72

Foregone Equipment Rental was derived by the CIAC by multiplying the equipment hours and rate
of rental per hour, and further multiplying by the number of equipment for each respective type of
equipment mobilized by FUCC for FVR Project, as presented in Exhibit "NNNNN." 189 The equipment
hours is an estimate of the number of hours each of the equipment would still be used to construct
the remaining works of the Project had the Contract not been terminated. Thus, the reckoning point
of Foregone Equipment Rental is the date of termination of the Contract, or as of 17 October 2001.
For had the Contract not been terminated, FUCC would have used the equipment listed in Exhibit
"NNNNN" to complete the Project and would have been paid therefor. Gone therefore was that
payment which should have been income for FUCC.

188

As explained by respondent, Foregone Equipment Rental is different from the award for Idle
Equipment, which pertains to the recovery of the huge loss incurred by FUCC when a large part of
its complement of machinery and equipment were rendered idle during the period from 10 June
1998, when the contract works were first suspended, up to 15 March 1999, the original expiry date of
the contract. The two items of award Idle Equipment and Foregone Equipment Rental are not
only of different natures, their reckoning periods are not the same. Hence, they cannot overlap. 190
FUCC sought to be paid P47,400,000.00 for Foregone Equipment Rental, but after assessment and
appraisal, the CIAC Arbitral Tribunal awarded only the amount of P34,216,692.90 for this claim.191
With regard to Extended Overhead Costs, the CIAC awarded to FUCC the amount
of P10,541,872.27, which it derived by multiplying the value of the remaining contract works for the
FVR Project (which the CIAC determined to be P210,837,445.49) by 5%, the standard rate of
overhead used in the industry. Thus: P210,837,445.49 x .05 = P10,541,872.27.192
Extended Overhead Costs cover costs and expenses for manpower, utilities, and other similar
services or resources that were already committed, delivered, paid for or expended for the totality of
the FVR Project, but which can no longer be recovered because of the termination of the
Contract.193 It is different from the Cost of Facilities and Equipment, which pertains to the prorated
cost of the facilities FUCC constructed to support the field operations for the entire FVR Project (i.e.;
the heavy equipment yard, office and model houses, container vans/warehouses, shops, kitchen and
other working areas, etc.) that it also expected to recover at the end of the project, but which
similarly can no longer be recovered because of the termination of the Contract. 194
For the award of Foregone Income, the CIAC multiplied the value of the remaining contract works
(P210,837,445.49) by 10%, instead of using the usual rate of profit in the industry, which is 12% for
contracts not exceeding P100,000,000.00. The CIAC justified the applied 10% rate of profit since it is
also an industry practice that a lesser percentage of profit is allowed for bigger projects. Under the
circumstances this is fair enough. Thus:P210,837,445.49 x .10 = P21,083,744.55.195 Foregone
Income represents the profit that FUCC would still have earned had the FVR Project been
completed now gone.196
In the Decision dated 1 August 2006, the Court of Appeals affirmed the CIACs award for Foregone
Income, but remanded to the CIAC for re-computation the awards for Foregone Equipment Rental
and Extended Overhead Costs.197 It remanded the award for Foregone Equipment Rental because "it
is not shown how CIAC or respondent arrived at the correct number of hours each type of equipment
is still subject to rent." Also, the appellate court wanted to make sure that the period subject to
Foregone Equipment Rental "already excluded the period subject to standby cost" 198 or, in short, that
the award for Idle Equipment and the award for Foregone Equipment Rental did not overlap.
In the Compliance dated 17 August 2006,199 the CIAC emphasized that NHA never disputed FUCCs
claim for Foregone Equipment Rental200 and disclosed that "(i)n preparation of the CIACs decision,
the members of the arbitral tribunal lengthily deliberated the disengagement issue, more importantly
in the correct number of hourseach type of equipment which [sic] is still subject to rental, and
the possibility of overlapping the dates of the rental claimed for idle period with the claim for the
period in the foregone equipment rental."201 According to the CIAC, "it was well noted at the outset,
that the claim for rental of idle equipment for the period 10 June 1998 to 15 March 1999 x x x could
never overlap with the claim for foregone rental of equipment in the claim for disengagement costs,
which period will be reckoned starting from the date of contract termination x x x until the project
should have been completed, if not terminated."202 The CIAC then proceeded to show exactly how it
computed and arrived at P34,216,692.90 as the correct amount of the award for Foregone
Equipment Rental.

As regards the award for Extended Overhead Costs, the Court of Appeals ordered a remand for
itemization and re-computation to "guard against a possible double claim," referring to cost of
facilities and equipment which, according to the appellate court, "does not seem to be any different
from respondents claim for extended overhead costs."203
In the Compliance dated 17 August 2006,204 the CIAC explained that "(i)n the construction industry
practice, overhead cost is 5% of the project cost."205 Since the final contract amount for the FVR
Project wasP488,393,466.98 and the amount already paid by NHA to FUCC was P271,207,922.18,
then the balance of the contract works still to be done to complete the Project at the time of
termination, according to the CIAC, wasP217,185,544.80. Therefore, the Extended Overhead Costs
should be 5% of P217,185,544.80, orP10,859,274.24,206 which is slightly different from the original
figure of P10,541,872.27, owing to the re-computed value of the remaining contract works, which
became P217,185,544.80 instead of P210,837,445.49.
The Court of Appeals did not order the remand and re-computation of the third component,
Foregone Income, but since the value of the remaining contract works was re-computed by CIAC to
be P217,185,544.80 instead ofP210,837,445.49, then Foregone Income, which was derived by the
CIAC by multiplying the value of the remaining contract works by 10%, should be: P217,185,544.80
x .10 = P21,718,554.48.
In this regard, we note that the CIAC as pointed out by respondent indeed committed a glaring
typographical error in the Compliance dated 17 August 2006 when it wrote that the award for
Foregone Income isP25,300,493.46.207 This is a wrong figure. The correct figure for Foregone
Income should be P21,718,554.48.
Therefore, as re-computed by the CIAC pursuant to the remand orders contained in the Decision of
the Court of Appeals dated 1 August 2006, and taking note that the correct figure for Foregone
Income is P21,718,554.48, notP25,300,493.46, the total amount of the award to FUCC for
Disengagement Costs is P66,794,521.62, itemized as follows:
(4) Foregone Equipment Rental

P34,216,692.90

(5) Extended Overhead Costs

10,859,274.24

(6) Foregone Income

21,718,554.48

TOTAL

P66,794,521.62

The record shows that after the CIAC submitted its Compliance on 17 August 2006, NHA filed an
Omnibus Motion dated 22 August 2006208 that incorporated its Motion for Reconsideration of the
Decision dated 1 August 2006, and its Motion to Require the CIAC to Explain and to Hold in
Abeyance the Re-Computation of Award.
The Court examined the record and notes that petitioner had not, either in its petition with the Court
of Appeals, or in the Omnibus Motion, or in the instant petition, assailed the correctness of the
amounts of the award for the three components of the Disengagement Costs derived by CIAC. As
the CIAC itself emphasized, NHA never disputed FUCCs claim for Foregone Equipment Rental and
the amount of award thus reached by the CIAC.
What petitioner questioned before the Court of Appeals in its Omnibus Motion was merely the
legal basis of the award for Disengagement Costs, reiterating the argument that NHA could not have
dictated what equipment and key staff to mobilize for the FVR Project, as it was FUCC alone which

determined the kind and number of equipment to be deployed for the Project. 209 But the Omnibus
Motion was denied by the Court of Appeals in the Resolution dated 31 January 2007. 210
1avvphi1

This Court, therefore, finds no cogent reason to disturb the total amount of the award for
Disengagement Costs derived and re-computed by the CIAC, as summarized and shown above.
The Court is aware that in the Resolution dated 31 January 2007, the Court of Appeals did not act
upon the Compliance submitted by the CIAC on 17 August 2006 as it "was made by only two
arbitrators." According to the Court of Appeals, it "cannot be considered an award of the Arbitral
Tribunal," citing Section 16.2 of the Revised Rules of Procedure Governing Construction Arbitration
(the "Revised CIAC Rules"), in relation to Section 10.4 thereof. 211
We do not agree with the Court of Appeals in this regard. The Compliance is not an award, let alone
the "Final award" spoken of in Section 16.2 of the Revised CIAC Rules. The CIAC Arbitral Tribunal
already rendered a "Final award" in the Decision dated 7 January 2004. The Compliance merely
clarifies and presents a re-computation of some items of the "Final award." It does not alter or
supersede the "Final award" nor purport to be a new award. Further, Section 10.4 of the Revised
CIAC Rules states that in case any Arbitrator should resign, etc., the "CIACmay, within five days
from the occurrence of a vacancy x x x, appoint a substitute(s) to be chosen." The use of the
permissive "may," rather than the mandatory "shall" indicates that the appointment of a third member
of the CIAC Arbitral Tribunal is not indispensable for the tribunal to discharge its functions. The
records show that a vacancy in the Arbitral Tribunal occurred with the demise of Lauro M. Cruz.
Nothing in the Revised CIAC Rules prevents the remaining two members who constitute a majority
from complying with the remand orders of the Court of Appeals. The Court thus gives imprimatur
and deems as approved the Compliance submitted by the CIAC. We find that it sufficiently complies
with the remand orders contained in the CA Decision dated 1 August 2006 and presents a correct
method of computation of the arbitral award.
In the present petition, the sole issue presented by petitioner against the award for Disengagement
Costs is that Disengagement Costs, like the Cost of Materials, Equipment and Facilities, and Idle
Equipment are business losses which were non-arbitrable under the CIAC Rules of Procedure
Governing Construction Arbitration, which was in place at the time FUCC filed its Complaint on 17
July 2003. According to petitioner, the Court of Appeals gravely erred when it sustained the CIAC
(which ruled that there is no basis to exclude claims for business losses), and held in the Decision
dated 1 August 2006 as follows:
We agree with CIAC. In fact, we need not indulge in hair-splitting anymore. In Gammon Philippines,
Inc. versus Metro Rail Transit (G.R. No. 144792, January 31, 2006), the Supreme Court held that
there is no basis for the exclusion of claims for business losses from the jurisdiction of CIAC. It
explained:
Relevantly, while the above-quoted provision of the Rules of Procedure Governing Construction
Arbitration lists as non-arbitrable issues claims for opportunity/business losses and attorneys fees,
this provision was not carried over to the Revised Rules of Procedure Governing Construction
Arbitration which was approved on November 19, 2005. Such omission is not without good reason.
EO 1008 itself excludes from the coverage of the law only those disputes arising from employeremployee relationships which are covered by the Labor Code, conveying an intention to encompass
a broad range of arbitrable issues within the jurisdiction of CIAC. (Emphasis added)
Moreover, as pointed out by respondent, the second paragraph of Sec. 2 allows claims for
unrealized expected profits and those arising from the rescission or termination of a contract. x x x
(pp. 1576-1577, Rollo) Certainly, the claims sought to be satisfied in this case arose from the early

termination of the Contract which deprived respondent of the prospect to make profit out of the
investment it had already poured into the venture. It makes sense that respondent should be allowed
to recover what opportunity it may have lost, especially when it was not to blame for the aborted
contract.212
We need not belabor this issue any further. As the appellate court correctly points out, we have
already categorically ruled in Gammon Philippines, Inc. vs. Metro Rail Transit, 213 that there is no
basis for the exclusion of claims for business losses from the jurisdiction of CIAC because Executive
Order No. 1008 (EO 1008), the law that created the CIAC, "excludes from the coverage of the law
only those disputes arising from employer-employee relationships which are covered by the Labor
Code, conveying an intention to encompass a broad range of arbitrable issues within the jurisdiction
of CIAC."
The nature and bases of the awards for Disengagement Costs consisting of three components,
namely: Foregone Equipment Rental, Extended Overhead Costs and Foregone Income; and the
awards for Cost of Materials, Equipment and Facilities, and Idle Equipment have been discussed at
length. They are either business or opportunity losses or foregone profits that resulted from, or are
the necessary consequences of, the termination of the Contract. They arose from and are
inextricably linked to the construction dispute between NHA and FUCC that was the subject of
arbitration proceedings before the CIAC. We find and so hold that they are arbitrable claims within
the ambit of Section 4 of EO 1008, which defines the jurisdiction of the CIAC. Thus:
SECTION 4. Jurisdiction.The CIAC shall have original and exclusive jurisdiction over disputes
arising from, or connected with, contracts entered into by parties involved in construction in the
Philippines, whether the disputes arises [sic] before or after the completion of the contract, or after
the abandonment or breach thereof. These disputes may involve government or private contracts.
For the Board to acquire jurisdiction, the parties to a dispute must agree to submit the same to
voluntary arbitration.
The jurisdiction of the CIAC may include but is not limited to violation of specifications for materials
and workmanship; violation of the terms of agreement; interpretation and/or application of
contractual provisions; amount of damages and penalties; commencement time and delays;
maintenance and defects; payment default of employer or contractor and changes in contract cost.
Excluded from the coverage of this law are disputes arising from employer-employee relationships
which shall continue to be covered by the Labor Code of the Philippines.
Section 4 provides that "(t)he jurisdiction of the CIAC may include but is not limited to x x x,"
underscoring the expansive character of the CIACs jurisdiction. Very clearly, the CIAC has
jurisdiction over a broad range of issues and claims arising from construction disputes, including but
not limited to claims for unrealized profits and opportunity or business losses. What EO 1008
emphatically excludes is only disputes arising from employer-employee relationships.
Section 2, Article IV of the previous CIAC Rules of Procedure Governing Construction Arbitration
cited by petitioner, which purports to exclude claims for business losses, 214 contravenes EO 1008
and is a patent nullity; it is void ab initio. In legal contemplation, that section of the previous CIAC
Rules never acquired force and effect and cannot be applied to this case. What applies is Section
2.1 of the Revised Rules of Procedures Governing Construction Arbitration that was promulgated on
19 November 2005. Indeed, and as pointed out by the Court of Appeals in the Resolution dated 31
January 2007, CIAC Resolution No. 02-2006 ("Defining the Coverage of the Revised Rules of
Procedure Governing Construction Arbitration") states that "the Revised Rules shall be applicable to

all pending cases upon its effectivity on 15 December 2005 and all cases which are to be filed
thereafter."215 This case was filed on 17 July 2003 and was pending as of 15 December 2005.
But even granting for the moment that Section 2, Article IV of the previous CIAC Rules is a valid
provision that may be applied to the case at bar, still the CIAC was eminently correct in ruling that
under the first paragraph of Section 2, Article IV, only "opportunity/business losses in addition to
liquidated damages" are not arbitrable. When the opportunity/ business losses are sought
independently of liquidated damages, as in the instant case, they are perforce arbitrable. 216 This
ruling of the CIAC was upheld by the Court of Appeals in the Decision dated 1 August 2006. The
Court sees no reason to hold otherwise.
VI. Re: Whether or Not the Termination of Contract for FVR Project was Unilateral
Was the termination of the Contract for the FVR Project a unilateral act of NHA?
"Without doubt", said the Court of Appeals, thusly:
"This brings us to the next assigned error. Petitioner insists that it should not be made to bear all the
consequence of the termination of the project for respondent consented to it. It gave its tacit consent
by not protesting the termination. x x x Moreover, even if it were true that the termination was
unilateral on the part of petitioner, the latter is excused from any liability because the termination was
due to reasons beyond its control. x x x.
Such argument is futile. Respondent could not have consented, tacitly or otherwise, to the
termination of the project because that decision was made entirely by petitioners board of directors.
Its September 25, 2001 Resolution No. 4450, reclassifying the project into a mixed-market site and
services project, is clear evidence that respondent had no participation whatsoever in the formulation
of the decision. Without doubt, the termination of the project was unilateral.
It was also due to factors well within the control of petitioner. While geological or geophysical
conditions in the project site rendered work difficult, the Mines and Geosciences Bureau (MGB)
investigated landslides in the area merely for revision of the design plan of the project. x x x
Petitioner, however, did not act on this recommendation despite repeated requests by respondent." 217
We find no cogent reason to disturb this finding of the Court of Appeals. The evidence on record
plainly reveals that the decision to terminate the Contract and to redraft the FVR Project as a mixeduse development under a joint venture scheme with interested parties was made by NHAs Board of
Directors alone. There is no showing and petitioner does not allege that FUCCs consent was
sought by the Board of Directors directly or indirectly, through responsible officers of NHA, before
Resolution No. 4450218 was passed. Neither is there any showing and petitioner does not allege
that NHA made formal representations with FUCC to negotiate the termination of the Contract for the
FVR Project.
What the records reveal, according to the CIAC, is that "(i)n a letter dated 16 October 2001, a
Memorandum by the OIC of the FVR Project, recommended for the termination of the Contract. The
approval of this Memorandum was recommended by Neofito A. Hernandez, NHA Manager for
Southern Luzon/Bicol, and was approved by Edgardo D. Pamintuan, NHA General Manager (Exhibit
"1"). The following day, 17 October 2001, the NHA General Manager advised FUCC of the
termination of the Contract, citing among others that FUCC should x x x immediately stop the
ongoing works and avoid further expenses including the provision of vehicles and other services for
the NHA Project Team."219

The foregoing findings of the CIAC support the stance of respondent that NHA unilaterally
terminated the Contract; that FUCC was presented with a fait accompli, and there was nothing more
that it could do to stop the unilateral termination of the Contract.220
Moreover, as aptly held by the Court of Appeals, the termination was "due to factors well within the
control of petitioner."221 Hence, NHA cannot invoke Clause 3.04.06 of the General Conditions of the
Contract, which provides that "(t)he Authority may terminate the Contract upon (10) days written
notice to the Contractor, if it is found that reasons beyond the control of either the Authority or
Contractor make it impossible or against the Authoritys interest to complete the work." 222
Petitioner argues in the instant petition that "(t)he geological or geographical make up of the Project
site is one reason that made it physically difficult if not impossible to pursue the FVR Project,"
and that "(i)t was precisely for this reason that the Project was re-classified from a resettlement to a
mixed-used [sic] project."223
But as correctly observed by respondent, NHA, as Project owner, was supposed to have known the
geological or geographical make-up and the potential hazards of the project site, and should have
taken these into account in the original development plan for the FVR Project. It appears that NHA
failed to conduct a complete feasibility study and comprehensive technical evaluation of the FVR
Project before embarking thereon. Thus, it had to suspend the project and revise the development
plans in the middle of the contract works to avert a tragedy, in light of the findings of the MGB, and
eventually had to abandon the project.224
Further, while petitioner now claims that the geological or geographical make up of the Project site
made it physically difficult if not impossible to pursue the FVR Project, which reason is allegedly
beyond its control, this reason was never articulated in the letter dated 17 October 2001. In that
letter, the NHA General Manager simply advised FUCC of the termination of the Contract and
directed that FUCC should immediately stop the ongoing works and avoid further expenses.
It would appear to the Court that this pretended reason was belatedly and purposely foisted to place
the termination within the ambit of the cited Clause 3.04.06. But not only is the reason unavailing, it
is utterly misplaced because the letter dated 17 October 2001 does not comply with the 10 day
written notice to the contractor required by the very Clause 3.04.06 that petitioner invokes. This
letter-notice of NHA imposes an immediate termination with its stern admonition that FUCC should
"immediately stop the ongoing works and avoid further expenses including the provision of vehicles
and other services for the NHA Project Team."
In Home Development Mutual Fund vs. Court of Appeals, G.R. No. 118972, 3 April 1998, the
Court held that requirements of contracts as to notice as to the time of giving, form, and manner
of service thereof must be strictly observed because in an obligation where a period is designated,
it is presumed to have been established for the benefit of both the contracting parties. Thus:
The law mandates that Obligations arising from contracts have the force of law between the
contracting parties and should be complied with in good faith.
Did petitioners comply with their contractual obligation in good faith, when they served the requisite
written notice to private respondents nine (9) days after the expiration of the Agreement? The
answer to this crucial question is in the negative.
The second clause of the contractual provision in dispute is to the effect that written notice of
termination should be served at least thirty (30) days in advance. As a rule, the method of
terminating a contract is primarily determined by the stipulation of the parties. Thus, the

requirements of contracts as to notice - as to the time of giving, form, and manner of service thereof
- must be strictly observed because in an obligation where a period is designated, it is presumed to
have been established for the benefit of both the contracting parties. Thus, the unilateral termination
of the contract in question by the herein petitioners is violative of the principle of mutuality of
contracts ordained in Art. 1308 of the New Civil Code. (Emphasis supplied)
Indeed, even if NHA is permitted to invoke Clause 3.04.06 of the General Conditions of the Contract,
its own failure to comply with the notice requirement thereof being violative of the principle of
mutuality of contracts resulted in the unilateral termination of the Contract.
In any case, and quite importantly, NHA failed to present evidence to buttress its stance that the
termination of the Contract was due to factors beyond its control as to justify the application of
Clause 3.04.06. On the contrary, the fact that the NHA Board resolved to redraft the FVR Project as
a mixed-use development under a joint venture scheme with interested parties shows that NHA had
other options at hand and could have chosen to negotiate with FUCC to amend the Contract instead
of deciding to terminate the same. The conclusion is ineluctable: the termination of the Contract was
well within the control of NHA, as correctly held by the Court of Appeals.
Petitioner posits that the letter of FUCC to NHA dated 27 August 2001225 reveals that FUCC explicitly,
if not expressly, welcomed or accepted the termination of the FVR Project with alacrity.226 The letter
reads thus:
May we formally inform you that we have refrained from implementing the works under our FVR
contract pursuant to your instructions that our contract will be terminated and that project costs
should now be contained.
We were advised that NHA has found FVR to be unsuitable for squatter settlement owing to its
unfavorable geology and terrain. It is therefore being redrafted for mixed-use development on a joint
venture scheme.
This was conveyed to us by the Office of the General Manager and the same was confirmed by the
SLB Manager and the FVR Officer-in-Charge.
Indeed, several prospective parties have inspected the site for a possible joint venture engagement
with National Housing Authority.227
The Court does not agree. We believe that the letter cannot be read in isolation but should be
understood in relation to the situation of the parties and juxtaposed against the contemporaneous
events then affecting the FVR Project. The records show that at the time the letter was sent, FUCC
had pending claims against NHA. It had a pending claim for payment of Idle Equipment in the
amount of P142,780,800.00,228 and a pending claim for payment of Price Adjustment in the amount
of P15 Million.229
According to respondent, NHA wanted FUCC to resume the contract works for the FVR Project full
blast but FUCC refused citing as reason NHAs failure to settle its pending claims, particularly its
claim for Price Adjustment. During this time, talk was rife that NHA would terminate the contract and
redraft the FVR Project as a mixed-use development under a joint venture with interested parties. In
late August 2001, FUCC was verbally instructed to refrain from implementing the contract works as
the termination of the Contract was imminent. It was at this point that FUCC wrote the letter dated 27
August 2001 advising NHA that it had "refrained from implementing" the contract works "pursuant to
your instructions that our contract will be terminated and that project costs should now be
contained."230

Respondent explains that it wrote the letter to put on record an added justification for its earlier
refusal to resume the contract works full blast. Since there was already a verbal instruction to refrain
from implementing the contract works as the termination of the Contract was purportedly imminent, it
simply did not make sense for FUCC to be spending more for the FVR Project which would only end
up as an added claim against NHA, with no clear prospects of being immediately paid. 231
Viewed in this light, i.e.: that FUCC indeed had pending claims with NHA for the payment of
substantial amounts that had remained unpaid despite repeated follow-ups, FUCCs "immediately
stopping the contract works even before its receipt of the Notice of Termination" 232 as petitioner
puts it does not show tacit consent on the part of FUCC to the termination of the Contract.
VII. Re: Errors in Computation
In its Comment, respondent pointed out that errors were committed by the CIAC when it complied
with the remand orders of the Court of Appeals in the Decision dated 1 August 2006. One such error,
as earlier noted, is the amount of the award for Foregone Income. Instead of the correct amount
of P21,718,554.48, what appears in the Compliance is the wrong figure of P25,300,493.46. This
error appears to be purely typographical.
Respondent identified another error: an error of omission relating to the computation of interest on
the other items of award granted to FUCC. The Compliance shows that the CIAC Arbitral Tribunal
correctly re-computed the 6% interest on Foregone Equipment Rental using as reckoning dates: (1)
9 January 2002, the date of demand by FUCC against NHA for the claim, as the beginning date; and
(2) 1 August 2006, or the day of the promulgation of the Decision of the Court of Appeals, as the final
date, as this was the day the final arbitral award in favour of FUCC became executory.233
But the CIAC Arbitral Tribunal inadvertently omitted to re-compute the 6% interest on each of the
other awards using the same final date of 1 August 2006. We refer specifically to: (1) the 6% interest
on the award for Progress Billing No. 6; (2) the 6% interest on the award for Cost of Materials,
Equipment, Facilities, etc.; (3) the 6% interest on the award for Price Escalation; 4) the 6% interest
on the award for Price Adjustment; and (5) the 6% interest on the award for Idle Equipment.
As reflected in the CIAC Decision dated 7 January 2004, the 6% interest on each of these awards
was reckoned by the CIAC from the date of demand up to 1 December 2003 only.234 In light of the CA
Decision dated 1 August 2006, the CIAC should have re-computed the 6% interest on each of these
awards from the date of demand up to 1 August 2006. In short, the CIAC inadvertently omitted to
account for the 6% interest accruing from an additional period of 973 days (i.e.; there are 973 days
from 1 December 2003 up to 1 August 2006) for each of these awards.
The Court takes judicial notice that Mathematics is an exact science.235 As the aforesaid error of
omission is susceptible of correction using a straightforward mathematical formula already laid down
by the CIAC in its Decision,236 which formula has never been questioned by petitioner, and
considering further that petitioner has not interposed any objection to the proposition of respondent
that the oversight committed by the CIAC in the Compliance ought to be corrected, the Court shall
no longer remand this case to the CIAC for re-computation but shall proceed to re-compute the
same. Needless to state, such a remand would not serve any useful purpose but will only delay the
final disposition of this case.
Based on the mathematical formula already laid down by the CIAC:
(1) the 6% interest on the award for Progress Billing No. 6 is re-computed as follows: 237

815 + 973
365 x P7,384,534.22 x .06 = P2,170,446.11
(2) the 6% interest on the award for Cost of Materials, Equipment, Facilities, etc. is recomputed as follows:238
541+ 973
x

P4,677,680.00 x .06

P1,164,165.62

365
(3) the 6% interest on the award for Price Escalation is re-computed as follows: 239
431+ 973
x

P26,297,951.62 x .06

P6,069,423.14

365
(4) the 6% interest on the award for Price Adjustment is re-computed as follows: 240
761 + 973
x

P14,768,770.22 x .06

P4,209,706.45

365
(5) the 6% interest on the award for Idle Equipment is re-computed as follows 241 :
1689 + 973
x

P131,948,674.56 x .06

P57,739,293.97

365
WHEREFORE, the petition is DENIED for lack of merit. The Decision of the Court of Appeals dated 1
August 2006, which upheld with modification the Decision of the Construction Industry Arbitration
Commission in CIAC Case No. 14-2003, and the Resolution dated 31 January 2007, as modified
with the pronouncement that the Compliance submitted by the CIAC on 17 August 2006 is deemed
approved, are AFFIRMED. The final arbitral award in favour of FUCC as re-computed and corrected
in accordance with the remand orders of the Court of Appeals, to summarized hereunder, to wit:
(1) Award for Progress Billing No. 6, P7,384,534.22;
(2) 6% Interest on Award for Progress Billing No. 6, P2,170,446.11;
(3) Award for Cost of Materials, Equipment, Facilities, etc. P4,677,680.00;
(4) 6% Interest on Award for Cost of Materials, Equipment, Facilities, etc., P1,164,165.62;
(5) Award for Price Escalation, P26,297,951.62;
(6) 6% Interest on Award for Price Escalation, P6,069,423.14;

(7) Award for Price Adjustment, P14,768,770.22;

(8) 6 % Interest on Award for Price Adjustment, P4,209,706.45;
(9) Award for Idle Equipment, P131,948,674.56;
(10) 6% Interest on Award for Idle Equipment, P57,739,293.97;
(11) Award for Disengagement Costs, P70,376,467.60;242
(12) 6% Interest on Award for Foregone Equipment Rental, P19,238,797.99243
With costs against petitioner.
SO ORDERED.
JOSE PORTUGAL PEREZ
Associate Justice
WE CONCUR: