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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 20072 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, petitioner’s Reply,7 and their respective Annexes,8
particularly the Complaint9 of respondent, petitioner’s 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 ₱568,595,780.00.17

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 ₱568,595,780.00.21

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 ₱568,595,780.00 to
₱488,393,466.98.26

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;27
another 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 ₱52,707,464.21, for the period 16 March to 30 June 1998; Progress Billing
No. 232 in the amount of ₱14,343,039.55, for the period 1 July to 31 December 1998; Progress Billing No. 333 in the
amount of ₱47,329,827.89, for the period 1 January to 15 October 1999; Progress Billing No. 434 in the amount of
₱114,494,481.30, for the period 16 October 1999 to 31 January 2001; and Progress Billing No. 535 in the amount of
₱42,333,109.23, 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 XVII41 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 ₱9,672,784.98;

2) Payment for the Cost of Materials, Equipment, Facilities, etc. Included for the Project in the amount of
₱4,801,992.82;

3) Payment for Price Escalation in the amount of ₱27,794,126.25;

4) Payment for Price Adjustment in the amount of ₱14,768,770.22;

5) Payment for Disengagement Costs in the amount of ₱83,242,365.73;

6) Payment for Idle Equipment in the amount of ₱142,780,800.00;

7) Payment for Interest on Idle Equipment in the amount of ₱44,262,048.00;

8) Payment for Attorney’s 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 FUCC’s 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 FUCC’s 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; FUCC’s Progress Billing No. 6 should only be for the
amount of ₱6,496,926.29; FUCC’s 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 ₱26,297,951.62 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 ₱38 Million, which represents the remaining balance or
unliquidated portion of the ₱85.2 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 Reference47 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 FUCC’s claims against NHA, to wit:

1. Did Claimant exhaust all administrative remedies before filing this arbitration case?

1.1 Is claimant’s 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 FUCC’s 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 NHA’s 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 FUCC’s 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) ₱hp 7,384,534.22 representing payment for Billing No. 6;

2) ₱hp 989,325.27 representing interest of No. 1 above;

3) ₱4,677,680.00 representing payment for cost of materials, equipment, facilities;

4) ₱415,993.13 representing interest of No. 3 above;

5) ₱26,297,951.62 representing payment for Price Escalation of PB Nos. 1-5;

6) ₱1,863,191.86 representing interest of No. 5 above;

7) ₱14,768,770.22 representing payment for Price Adjustment of PB Nos. 5 & 6;

8) ₱1,847,512.46 representing interest of No. 7 above;

9) ₱65,842,309.72 representing payment for Disengagement Costs;

10) ₱7,468,141.43 representing interest of No. 9 above;

11) ₱131,948,674.56 representing payment of Idle Equipment;

12) ₱36,634,736.09 representing interest of No. 11 above.

₱300,138,820.59 gross total award in favor of Claimant

13)₱ * * * * * * * * representing12% interest of the gross total award of ₱300,138,820.59, 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 Respondent’s counter-claim:

1) ₱37,951,201.14 representing the recoupment of the balance of Advance payment made to the
Claimant.

2) ₱455,414.41 representing interest of No. 1 above.

₱38,406,615.55 balance of recoupment plus interest.

Net Award to be paid by Respondent to the Claimant;

₱300,138,820.59 Gross Award of Claimant’s Claims

Less ₱ 38,406,615.55 Balance of recoupment plus interest

₱261,732,205.04 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
₱768,219.76, 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

NHA’s 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 petitioner’s 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) ₱7,384,534.22 representing payment for Billing No. 6;

2) ₱989,325.27 representing interest (on) No. 1 above;

3) ₱4,667,680.00 representing payment for cost of materials, equipment, facilities;

4) ₱415,993.00 representing interest (on) No. 3 above;

5) ₱26,297,951.62 representing payment for Price Escalation of PB Nos. 1-5;

6) ₱1,863,191.86 representing interest (on) No. 5 above;

7) ₱14,768,770.22 representing payment for Price Adjustment of PB Nos. 5 & 6;

8) ₱1,847,512.46 representing interest (on) No. 7 above;

9) ₱131,948,674.56 representing payment for Idle Equipment; and

10) ₱36,634,736.09 representing interest on No. 11 above

xxx xxx xxx

Award to Respondent’s (herein petitioner’s) counter-claim:

1) ₱37,951,201.14 representing the recoupment

of the balance of advance
/
 payment made to the
claimant
2) ₱455,414.41 representing interest on No.1
above

₱38,406,615.55 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 ₱768,219.76, 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 Resolution76 denying petitioner’s 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 petitioner’s 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 ₱147,894,629.24 in partial satisfaction of [the] Court’s decision dated 1 August 2006."77 The dispositive
portion of the Resolution reads thus:

WHEREFORE, for lack of merit, petitioner’s Omnibus Motion is DENIED. Respondent’s Motion to Act on the
Compliance submitted by CIAC Ex Abundante Cautelam and petitioner’s 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 ₱147,894,629.24 in partial
satisfaction of this Court’s decision dated August 1, 2006, upon filing of a good and sufficient bond by respondent in
the sum of ₱150,000,000.00 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 court’s 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:

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 ₱7,384,534.22
DESPITE THE MANIFEST OR CLEAR FACT THAT RESPONDENT FUCC’S CLAIM FOR SAID BILLING
WAS ONLY ₱6,496,926.29.

III

WHEN IT AFFIRMED THE AWARD FOR COST OF MATERIALS, EQUIPMENT AND FACILITIES IN THE
AMOUNT OF ₱4,677,680.00 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 ₱131,948,674.56
NOTWITHSTANDING THE CLEAR AND PATENT FACT THAT RESPONDENT FUCC’S EQUIPMENT
NEVER WENT IDLE.

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 ₱7,384,534.22 and for Price Escalation for
Progress Billings Nos. 1 to 5 in the amount of ₱26,297,951.62.

In sustaining these items of award granted by the CIAC to FUCC, the Court of Appeals ratiocinated as follows:
/
Petitioner’s sole objection to the award of ₱7,384,534.22 as payment for Progress Billing No. 6 and ₱26,297,951.62
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 respondent’s 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 respondent’s 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 ₱7,384,534.22 as payment for Progress Billing No. 6 and ₱26,297,951.62 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 respondent’s 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 FUCC’s 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 ₱85.2 Million,86 and not as a requirement
for the processing or release of FUCC’s 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 respondent’s submission that since its inability to submit
a renewed Payment Guarantee Bond from the GSIS was NHA’s very own act of terminating the Contract, NHA
cannot use the same as reason not to process and pay FUCC’s 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-à-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 ₱85.2 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 ₱85.2 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 ₱38 Million out of the ₱85.2 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 FUCC’s 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 FUCC’s 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 FUCC’s 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 FUCC’s proposal in the letter dated 24 June 2002,107 it accepted FUCC’s 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 FUCC’s 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 ₱26,297,951.62 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."115 Since NHA did not respond
to FUCC’s 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 FUCC’s 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 ₱38 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 FUCC’s 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 FUCC’s
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 ₱6,496,926.29 as against the amount of ₱7,384,534.22 awarded
by the CIAC.127

Petitioner’s subsequent refusal to process and pay these claims despite FUCC’s 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 FUCC’s 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 petitioner’s stance that the "posting of the Payment Guarantee (or Performance) Bond is
decidedly a condition precedent" or sine qua non for the payment of FUCC’s 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 FUCC’s 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 FUCC’s 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.

Petitioner’s 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 of ₱28,429,789.00
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 ₱85.2 Million which NHA required FUCC to procure from GSIS and to
post prior to the release of the advance payment in the amount of ₱85.2 Million. A reading of Article VIII entitled
CONTRACTOR’S 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
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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 FUCC’s 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 FUCC’s 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 FUCC’s 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 FUCC’s 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 FUCC’s 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 ₱7,384,534.22 when FUCC’s claim for said billing was allegedly only ₱6,496,926.29.

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 ₱6,496,926.29.135 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 ₱7,384,534.22.137

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 ₱6,496,926.29, and not ₱7,384,534.22,"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 ₱6,496,926.29." 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, FUCC’s 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 FUCC’s 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 FUCC’s 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 ₱7,384,534.22 governs over the claim of NHA in its Exhibit "15" for the amount of ₱6,496,926.29."
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 ₱7,384,534.22 governs over the claim of NHA in its Exhibit "15" for the amount
of ₱6,496,926.29 (see Stipulated Facts No. 25.1.2).

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The Arbitral Tribunal’s 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 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.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 of
₱4,677,680.00.

This award has two components: (1) an award in the amount of ₱132,470.00 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 ₱4,545,182.82 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
NHA’s 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 6

2. Loaders, crawler-type 3

3. Grader, motorized 6

4. Road Roller, vibratory, smooth drum 6

5. Plate Compactor, vibratory 3

6. Backhoe, hydraulic, crawler-mounted 6

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7. Slipform Concrete Paver 1

8. Wet-mix Concrete Batching Plant 1

9. Concrete Vibrator 6
10. Dump Trucks 8

11. Air compressor, portable 1

12. Pneumatic Breakers, hand held 2

13. Water Pump 3

14. Generator Sets, 500 KVA, total 1

15. Welding Machines 2

16. Water Trucks 3

17. Chain Saw 2

18. Concrete Cutter 1

19. Concrete Mixer, one bagger 1

20. Service Vehicles 4

21. Cranes 4
22. Transit Mixers 4

23. Total Stations 1

TOTAL 75

NO. OF MANPOWER
B. KEY STAFF

1. Project Manager 1

2. Project Engineers 3
3. Field Engineers 10

4. Sanitary Engineer 1

5. Electrical Engineer 1
6. Mechanical Engineer 1

7. Geodetic Engineer 1

8. Architects 2
9. Draftsmen 2

10. Foremen 6

11. Administrative Officer 1

12. Finance Officer 1

13. Liaison Officer 1

14. Purchasing Officer 1

15. Warehouseman 1

16. Clerk Typist 1 /

 17. Drivers 4
18. Heavy Equipment Operators 25

19. Utilitymen 2

20. Heavy Equipment Mechanics 4

21. Instrument Men 3

22. Survey Aides 9

TOTAL 81"

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 pre-terminated, respondent is justified in
seeking recovery of a portion of the costs already incurred." Thus:

x x x. Petitioner’s 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 ₱4,545,182.82
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 ₱132,470.00 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, 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 petitioner’s 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 FUCC’s equipment and machineries for the FVR Project, it should not be made
accountable for the dire consequences, if any, of FUCC’s business decision or judgment in procuring, maintaining,
constructing or dismantling these equipment and facilities, etc.154

Petitioner’s 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 people’s 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
contractor’s 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 – ₱4,545,182.82; as well as the amount of the award for
the cost of the unutilized materials delivered by FUCC to the project site – ₱132,470.00, 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 contractor’s 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 ₱12,297,722.46.

The FUCC is asking the pro-rated amount of this ₱12,297,722.46 computed as follows:

Balance of Works, divided by the cost of the whole works, multiplied by the cost of facilities, thus;

₱568,595,780.00 less ₱358,445,341.30

x ₱12,296,722.46
₱568,595,780.00

This will result to ₱4,545,182.82 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 ₱132,498.00 plus
₱4,545,182.82 or the total of ₱4,677,680.00 and not ₱4,801,992.82 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 FUCC’s business judgment or decisions as regards their procurement,
mobilization or maintenance. But both the CIAC and the Court of Appeals have spoken. And the CIAC’s factual
finding that FUCC ought to be paid the total amount of ₱4,677,680.00 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 ₱131,948,674.56 "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 – ₱131,948,674.56 – 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 FUCC’s 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 FUCC’s Complaint.166 The same time frame is also acknowledged by the CIAC as
the period circumscribed by FUCC’s 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 ₱142,780,800.00.168

In its Answer, NHA sought to defeat FUCC’s 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, FUCC’s 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.

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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 ₱52.2 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 ₱52.2 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 ₱52.2M 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

NHA’s 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 NHA’s 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 ₱131,948,674.56.

The CIAC Arbitral Tribunal debunked NHA’s 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 NHA’s 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
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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 NHA’s 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, 6-Backhoes, 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 to
₱142,780,800.00 (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 non-use 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 ₱2920.00 per hour, further multiplied by 2.224 hours per day will result to
₱10,832,125.44. This should be deducted from the claimed total of ₱142,780,800.00 and will result to
₱131,948,674.56.177

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 FUCC’s 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 ₱131,948,674.56 as its award for Idle
Equipment, which is less than FUCC’s claim of ₱142,780,800.00. 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 FUCC’s 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.
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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 ₱16.1 M under Progress Billing No. 2 for the period 01 July to 31 December 1998 and ₱57 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 ₱16.1 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 ₱57 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 ₱131,948,674.56 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 ₱142 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
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billed us ₱142 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 ₱142 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 I’ll 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 FUCC’s 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 FUCC’s claim for Idle Equipment.

Petitioner dwells at length on the Batching Plant of FUCC to show that FUCC’s machineries and equipment never
went idle.187 But this is woefully misplaced because, and this bears repeating: FUCC’s 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 FUCC’s 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
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The CIAC granted an award to FUCC for Disengagement Costs in the total amount of ₱65,842,309.72. This
award has 3 components, to wit:

(1) Foregone Equipment Rental ₱34,216,692.90

(2) Extended Overhead Costs 10,541,872.27

(3) Foregone Income 21,083,744.55

TOTAL ₱65,842,309.72 188

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.

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 ₱47,400,000.00 for Foregone Equipment Rental, but after assessment and appraisal, the
CIAC Arbitral Tribunal awarded only the amount of ₱34,216,692.90 for this claim.191

With regard to Extended Overhead Costs, the CIAC awarded to FUCC the amount of ₱10,541,872.27, which it
derived by multiplying the value of the remaining contract works for the FVR Project (which the CIAC determined to
be ₱210,837,445.49) by 5%, the standard rate of overhead used in the industry. Thus: ₱210,837,445.49 x .05 =
₱10,541,872.27.192

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
(₱210,837,445.49) by 10%, instead of using the usual rate of profit in the industry, which is 12% for contracts not
exceeding ₱100,000,000.00. 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:
₱210,837,445.49 x .10 = ₱21,083,744.55.195 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 CIAC’s 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 FUCC’s claim for
Foregone Equipment Rental200 and disclosed that "(i)n preparation of the CIAC’s decision, the members of the
arbitral tribunal lengthily deliberated the disengagement issue, more importantly in the correct number of hours each
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
₱34,216,692.90 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 respondent’s 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 was
₱488,393,466.98 and the amount already paid by NHA to FUCC was ₱271,207,922.18, then the balance of the
contract works still to be done to complete the Project at the time of termination, according to the CIAC, was
₱217,185,544.80. Therefore, the Extended Overhead Costs should be 5% of ₱217,185,544.80, or
₱10,859,274.24,206 which is slightly different from the original figure of ₱10,541,872.27, owing to the re-computed
value of the remaining contract works, which became ₱217,185,544.80 instead of ₱210,837,445.49.

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 ₱217,185,544.80 instead of
₱210,837,445.49, then Foregone Income, which was derived by the CIAC by multiplying the value of the remaining
contract works by 10%, should be: ₱217,185,544.80 x .10 = ₱21,718,554.48.

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 is
₱25,300,493.46.207 This is a wrong figure. The correct figure for Foregone Income should be ₱21,718,554.48.

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 ₱21,718,554.48, not
₱25,300,493.46, the total amount of the award to FUCC for Disengagement Costs is ₱66,794,521.62, itemized as
follows:

(4) Foregone Equipment Rental ₱34,216,692.90

(5) Extended Overhead Costs 10,859,274.24

(6) Foregone Income 21,718,554.48

TOTAL ₱66,794,521.62

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
FUCC’s 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
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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 "CIAC
may, 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 attorney’s 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 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. (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 CIAC’s 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 petitioner’s 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 mixed-use development under a joint
venture scheme with interested parties was made by NHA’s Board of Directors – alone. There is no showing – and
petitioner does not allege – that FUCC’s 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 Authority’s 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 ₱142,780,800.00,228 and a pending claim for payment of
Price Adjustment in the amount of ₱15 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 NHA’s 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, FUCC’s "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 ₱21,718,554.48, what appears in the
Compliance is the wrong figure of ₱25,300,493.46. 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 ₱7,384,534.22 x .06 = ₱2,170,446.11

(2) the 6% interest on the award for Cost of Materials, Equipment, Facilities, etc. is re-computed as
follows:238

541+ 973
x ₱4,677,680.00 x .06 = ₱1,164,165.62
365

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

431+ 973
x ₱26,297,951.62 x .06 = ₱6,069,423.14
365

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

761 + 973
x ₱14,768,770.22 x .06 = ₱4,209,706.45
365

(5) the 6% interest on the award for Idle Equipment is re-computed as follows241 :

1689 + 973
x ₱131,948,674.56 x .06 = ₱57,739,293.97
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, ₱7,384,534.22;

(2) 6% Interest on Award for Progress Billing No. 6, ₱2,170,446.11;

(3) Award for Cost of Materials, Equipment, Facilities, etc. ₱4,677,680.00;

(4) 6% Interest on Award for Cost of Materials, Equipment, Facilities, etc., ₱1,164,165.62;

(5) Award for Price Escalation, ₱26,297,951.62;

(6) 6% Interest on Award for Price Escalation, ₱6,069,423.14;

(7) Award for Price Adjustment, ₱14,768,770.22;

(8) 6 % Interest on Award for Price Adjustment, ₱4,209,706.45;

(9) Award for Idle Equipment, ₱131,948,674.56;

(10) 6% Interest on Award for Idle Equipment, ₱57,739,293.97;

(11) Award for Disengagement Costs, ₱70,376,467.60;242

(12) 6% Interest on Award for Foregone Equipment Rental, ₱19,238,797.99243

With costs against petitioner.

SO ORDERED.

JOSE PORTUGAL PEREZ

Associate Justice

WE CONCUR:

ANTONIO T. CARPIO
Associate Justice
Chairperson

ARTURO D. BRION DIOSDADO M. PERALTA*

Associate Justice Associate Justice

LUCAS P. BERSAMIN**
Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision were reached in consultation before the case was assigned to the
writer of the opinion of the Court’s Division.

ANTONIO T. CARPIO
Associate Justice
Chairperson, Second Division

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution and the Division Chairperson’s Attestation, I certify that the
conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of
the opinion of the Court’s Division.

RENATO C. CORONA
Chief Justice

Footnotes

/
*
Associate Justice Diosdado M. Peralta is designated Additional Member as per Special Order No. 1074
dated 6 September 2011.
**
Associate Justice Lucas P. Bersamin is designated Additional Member as per Special Order No. 1066-A
dated 23 August 2011.

1 Penned by Associate Justice Godardo A. Jacinto with Associate Justices Edgardo P. Cruz and Jose Catral
Mendoza (now a member of this Court), concurring; rollo, pp. 85-109.
2 Penned by Associate Justice Edgardo P. Cruz with Associate Justices Jose C. Mendoza (now a member of
this Court) and Myrna Dimaranan Vidal, concurring; Annex "B" of Petition; id. at 110-116.

3 Id. at 944-979, Annex "X" of Petition. Records, Folder no. 2, Expanding Envelope no. 3.

4 Id., Composed of Atty. Jacinto M. Butalid, Chairman, and Ms. Felicitas A. Pio Roda and Mr. Lauro M. Cruz,
Members.

5 Id. at 16-77.

6 Id. at 1195-1285.

7 Id., Vol II, pp. 2-23.

8 Id., Vol. I, pp. 84-1179; 1287-1360, Annexes "A" to "EE" of Petition and Annexes "1" to "13" of Comment.

9 Annex "Q" of Petition, id. at 428-510.

10 Annex "S" of Petition, id. at 518-686.

11 Annex "C" of Petition, id. at 117-142.

12 Annex "E" of Petition, id. at 149-152.

13 Annex "F" of Petition, id. at 153.

14 Annex "C" of Petition, id. at 118.

15 Id.

16 Id. at 118-119.

17 Id. at 119, Item 3.1 of the Joint Stipulations, presents a summary of the bids, as follows:

FUCC ₱ 568,595,780.00

New San Jose Builders ₱ 569,234,466.00

Atlantic Erectors/ Consuelo/ Linear ₱ 612,933,834.26

R-II Builders ₱ 619,934,334.00

FF Cruz & Co. ₱ 699,888,000.00

18 Annex "C" of Petition, id. at 119.

19 Annex "G" of Petition, id. at 157-159.

20 Annex "F" of Petition, id. at 153-156.

21 Article III of Contract, id at 154.

22 Annex "C" of Petition, id. at 120.

/
23 The CIAC record shows that NHA issued Partial Suspension Order No. 1 dated 23 June 1998 (Cf.
Expanding Envelope no. 1, 2nd folder of 4 Annex "K" of Complaint); Suspension Order No. 1 dated 31 July
1998 (Cf. Annex "O" of Complaint); and Suspension Order No. 2 dated 13 October 1999 (Cf. Annex "V" of
Complaint).

Partial Suspension Order No. 1 was issued due to the continued resistance of farmers/planters and
other residents in the area of the FVR Project (See also Item No. 12.1.1 of Joint Stipulations, rollo, Vol.
I, pp. 122-123).

Suspension Order No. 1 came after the DENR issued a cease and desist order effective until an
Environmental Compliance Certificate for the Project could be secured by NHA (See also Items Nos.
12.2.1 and 12.2.2 of Joint Stipulations, rollo, Vol. I, p. 123).

Suspension Order No. 2 was issued to stop the works and development of Cluster 3 until revisions of
the plans could be made to avoid the occurrence of an incident similar to the Cherry Hills landslide, in
light of the report submitted by the Geohazard Assessment Team of the Mines and Geosciences
Bureau (MGB) after heavy rains triggered landslides at Cluster 3 (See also Items Nos. 12.3.1, 12.3.2
and 12.3.3 of Joint Stipulations, rollo, Vol. I, pp. 124 and 126).
24 Rollo, Vol. I, issued on 15 September 1999; Annex "I" of Petition, pp. 163-171.

25 Issued on 4 December 2000; Annex "I-1" of Petition, id. at 172-176.

26 Annex "I-1" of Petition, id. at 174.

27 Annex "H" of Petition, id. at 160.

28 Annex "H-1" of Petition, id. at 161.

29 Annex "H-2" of Petition, id. at 162.

30 Annex "H-2" of Petition, id. at 162.

31 Annex "K" of Petition, id. at 180.

32 Annex "K-1" of Petition, id. at 197.

33 Annex "K-2" of Petition, id. at 213.

34 Annex "K-3" of Petition, id. at 233.

35 Annex "K-4" of Petition, id. at 244.

36 Records, Annex "ZZZ" of Complaint, 3rd folder of four, Expanding Envelope No. 1, Resolution No. 4450.

37 Rollo. See Letter of NHA dated 17 October 2001, Annex "L" of Petition, p. 256.

38 Id.

39 Id. Clause 3.04.06 of the General Conditions covering Termination of Contract by the Authority (Contractor
not at fault) provides: "The Authority may terminate the Contract upon ten (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 Authority’s interest to complete the work."

40 See paragraph 1.2 of FUCC’s Complaint, id. at 433.

41 Records, 1st Expanding Envelope, Folder no. 2, Article XVII provides thus: "Should there be any dispute or
controversy in connection with this Contract or difference between the parties arising from the interpretation of
this Contract, the Parties hereto shall, as far as practicable, settle the same amicably. In the event that such
dispute or disagreement be not resolved to their mutual satisfaction, the matter shall be submitted to the
Construction Industry Arbitration Commission (CIAC) created by Executive Order No. 1008, implementing
Presidential Decree No. 1746 and R.A. 876, as amended, however (sic), that the arbitration proceedings shall
/
be without prejudice to the right of the AUTHORITY to rescind, or terminate this Contract in accordance with
provisions of the following paragraph."

42 Rollo, pp. 428-509.

43 See Prayer, Complaint in Arbitration, id. at 507-509.

44 Annex "R" of Petition, id. at 512-516.

45 CA rollo, Vol. II, pp 729-730. Records, Expanding Envelope no. 3, Folder no. 1.

46 Rollo, pp. 556-561.

47 Annex "D" of Petition, id. at 143.

48 Annex "E" of Petition, id. at 149-152.

49 Annex "C" of Petition, id. at 117-142.

50 See p. 1 of Supplemental Terms of reference, id. at 149.

51 Pages 2 to 3 of Terms of Reference and p. 1 of Supplemental Terms of Reference, id. at 144-145 and 149.

52 Annex "U" of Petition, id. at 692-805.

53 See p. 19 of Petition, id. at 34.

54 Id.

55 Annex "V" of Petition, id. at 806-819.

56 See p. 20 of Petition, id. at 35.

57 Annexes "W" to "W-20" of Petition, id. at 820-943.

58 Id. at 945-979.

59 See pp. 36 to 37 of CIAC Decision dated 7 January 2004, id. at 978-979.

60 Annex "Y" of Petition, id. at 980-1024.

61 See p. 22 of Petition, id. at 37.

62 CA rollo, Vol II, pp. 1355-1366.

63 Rollo, Annex "Z" of Petition, pp. 1026-1033.

64 Id.

65 See pp. 8 to 9 of CA Decision, id. at 92-93.

66 CA rollo, Vol. IV, pp. 2449-2452.

67 Rollo, p. 94.

68 Id. at 85-109.

69 Id. at 945-979.

70 See p. 10 of CA Decision, id. at 94.

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71 Annex "BB" of Petition, id. at 1034-1041.

72 Page 25 of Petition and p. 85 of Comment, id. at 40 and1279.

73 Annex "CC" of Petition, id. at 1056-1087.

74 See p. 26 of Petition, id. at 41.

75 Id.

76 Id. at 111-116.

77 See p. 6 of CA Resolution, id. at 116.

78 Id.

79 See p. 27 of Petition, id. at 42.

80 See pp. 27-28 of Petition, id. at 42-43.

81 See pp. 28-29 of Petition, id. at 43-44.

82 Pages 14-15 of CA Decision, id. at 98-99.

83 See pp. 29-30 of Petition, id. at 44-45.

84 See p. 32 of Petition, id. at 47.

85 See p. 30 of Petition, id. at 45.

86 See Paragraph 16.1 of Comment, id. at 1208.

87 See Paragraph 16.3 of Comment, id. at 1209-1210.

88 See Paragraph 16.2 of Comment, id. at 1209.

89 See Paragraph 16.3 of Comment, id. at 1209-1210.

90 See Paragraph 16.1 of Comment; and p. 34 of Petition, id. at 49 and 1208.

91 In Paragraph 16.1 of its Comment, respondent alleges as follows: The bond spoken of in the questioned
Decision of the Court of Appeals is the Payment Guarantee Bond which the NHA required FUCC to post at
the inception of the FVR Project to secure the liquidation or recoupment of the advance payment for
mobilization in the amount of ₱85.2 Million (equivalent to 15 % of the contract cost) that FUCC received from
the NHA. The bond was a condition for the release of the advance payment to FUCC. As agreed upon
between the parties, the advance payment was to be recouped by taking partial amounts from the progress
payments to FUCC. But nowhere in the contract documents does it state that the Payment Guarantee Bond is
a requirement for the processing or release of FUCC’s Progress Billings, id. at 1208.

The following allegation appears in page 33-34 of NHA’s Petition; id. at 48-49: "x x x As earlier stated,
the procurement or posting of a Payment Guarantee (or Performance) Bond is both a legal and
contractual requirement that cannot be excused nor waived, least of all by an entity – like petitioner
NHA – performing a vital governmental mandate or function and publicly accountable for every single
cent spent in its operations. Such bond, to put it curtly, is a safety net mechanism to ensure recovery of
NHA’s ₱38 Million claim for recoupment, which represents the remaining portion of the ₱85.2 Million
(equivalent to 15% of the contract cost) advance payment for mobilization that it still had to recover
from or apply to the project billings (See Par. 54 of Affidavit dated 2 December 2003 of Engr. Mariano
E. Raner III, id. at 816.

92 See page 34 of Petition, id. at 49.

93 See Paragraph 16.2 of Comment, id. at 1209.

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94 See Paragraph 16.3 of Comment, id. at 1209-1210.

95 Annex "1" of Comment; (Note: The existence and/or due execution and authenticity of this letter is
admitted by the NHA [Cf. Paragraph 31 of the Joint Stipulations] and NHA’s receipt thereof was duly
established by the testimony of Engr. Dumaliang), id. at 1287.

96 Annex "2" of Comment; (Note: The existence and/or due execution and authenticity of this letter is likewise
admitted by the NHA [Cf. Paragraph 31 of the Joint Stipulations] and NHA’s receipt thereof was duly
established by the testimony of Engr. Dumaliang), id. at 1288.
97 See Paragraphs 16.4 and 16.5 of Comment, id. at 1210-1211.

98 Annex "3" of Comment; (Note: The existence and/or due execution and authenticity of this letter is also
admitted by the NHA [Cf. Paragraph 31 of the Joint Stipulations] and NHA’s receipt thereof was duly
established by the testimony of Engr. Dumaliang), id. at 1289.

99 See Paragraph 16.6 of Comment, id. at 1211-1212.

100 See Letter of NHA GM dated 24 June 2002, Annex "M" of Petition, id. at 257.

101 See Paragraph 16.6 of Comment, id. at 1211-1212.

102 See FUCC’s letter to NHA dated 03 July 2002, Annex "4" of Comment; (Note: The existence and/or due
execution and authenticity of this letter and NHA’s receipt thereof was duly established by the testimony of
Engr. Dumaliang), id. at 1290.

103 See Paragraph 16.6 of Comment, id. at 1211-1212.

104 Id. at 1287.

105 Id. at 1288.

106 Id. at 1289.

107 Id. at 257.

108 See Art. 1319 of the Civil Code, which provides as follows: "Consent is manifested by the meeting of the
offer and the acceptance upon the thing and the cause which are to constitute the contract. The offer must be
certain and the acceptance absolute. A qualified acceptance constitutes a counter-offer."

109 Rollo, p. 1290.

110 Pursuant to Article 1318 of the Civil Code which provides thus:

"Art. 1318 There is no contract unless the following requisites concur:

(1) Consent of the contracting parties;

(2) Object certain which is the subject matter of the contract;

(3) Cause of the obligation which is established."

111 Rollo. See Letter of FUCC to NHA dated 25 September 2002, Annex "6" of Comment, and letter of NHA to
FUCC dated 2 October 2002, Annex "7" of Comment, confirming that the computations for FUCC’s claim for
Price Escalation had already been completed and resulted to the gross amount of ₱26,297,951.62. See also
Paragraph 19 of Comment, pp. 1292-1293 and 1222-1223.

112 Annex "N" of Petition, id. at 258.

113 Id.

114 Annex "DD" of Petition, id. at 1178.

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115 See Paragraph 21 of Comment, id. at 1223.

116 See p. 94 of the Affidavit in Question-and-Answer Form of Engr. Ben S. Dumaliang, id. at 783.

117 See p. 14 of the CA Decision, id. at 98.

118 See p. 35 of Petition, id. at 50.

119 Id. at 1178.

120 Id. at 257.

121 Id. at 1290.

122 Id. at 1178.

123 Id. at 258.

124 Id. at 1178.

125 See p. 30 of Petition, id. at 45.

126 Philrock, Inc. v. Construction Industry Arbitration Commission, 412 Phil. 236, 247 (2001).

127 Rollo. See p. 36 of Petition, p. 51.

128 See p. 30 of Petition, id. at 45.

129 Id. at 1178.

130 See p. 32 of Petition, id. at 47.

131 See Article VII of Contract, id. at 154.

132 See Article VIII of Contract, id. at 155.

133 Microsoft Encarta Dictionary, 2006 Edition.

134 Rollo, vol. I, Annex "A" of Petition, CA Decision, pp. 98-99.

135 Exhibit "15" of NHA attached as Annex "W-14" of Petition, id. at 917-925.

136 As Annex "IIII" of the Complaint. Annex "IIII" was later marked and offered as Exhibit "IIII" for FUCC, id. at
1294-1303.

137 Id., Exhibit "IIII" of FUCC attached as Annex "8" of Comment.

138 See p. 36 of Petition, id. at 51.

139 Id.

140 See p. 11 of Affidavit of Engr. Mariano E. Raner III dated 2 December 2003, id. at 816.

141 See pp. 82 to 83 of the Affidavit in Question-and-Answer Form of Engr. Ben S. Dumaliang, id. at 772-773.

142 See p. 38 of Comment, id. at 1232.

143 See p. 18 of CIAC Decision dated 7 January 2004, id. at 962.

144 R-II Builders, Inc. v. Construction Industry Arbitration Commission, 511 Phil. 523, 534 (2005) citing
Sunshine Finance and Investment Corp. v. IAC, G.R. Nos. 74070-71, 28 October 1991, 203 SCRA 210 and
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Go v. Court of Appeals and Moldex Products, G.R. No. 158922, 28 May 2004, 430 SCRA 358.

145 See Section 4 of E.O. No. 1008, dated 4 February 1985.

146 Public Estates Authority v. Elpidio Uy, 423 Phil. 407, 416 (2001) citing Cagayan Robina Sugar Milling Co
v. Court of Appeals, 396 Phil. 830, 840 (2000).
147 Rollo, Vol. I. See p. 15 of CA Decision, p. 99.

148 Annex "W-18" of Petition, id. at 940-941.

149 See p. 16 of CA Decision dated 1 August 2006, id. at 100.

150 Id. at 99

151 See p. 40 of Petition, id. at 55.

152 See p. 39 of Petition, id. at 54.

153 See p. 39 to 40 of Petition, id. at 54-55.

154 See p. 41 of Petition, id. at 56.

155 See pp. 43 to 44 of Comment, id. at 1237-1238.

156 Refer to Articles VII, VIII and IX of the Contract, id. at 154-155.

157 Refer to Article XI of the Contract, id. at 155.

158 See Section 42 of Republic Act No. 9184, otherwise known as the "Government Procurement Reform
Act," and the Implementing Rules and Regulations promulgated pursuant to Section 75 of said Republic Act
No. 9184.
159 See Section 3 (a) and (e) of the Implementing Rules and Regulations of RA 9184.

160 See p. 16 of CA Decision dated 1 August 2006, Annex "A" of Petition, rollo, Vol. I, p. 100.

161 Rollo. See p. 21 of CIAC Decision dated 7 January 2004, p. 965.

162 Id.

163 Public Estates Authority v. Elpidio Uy, Supra note 146.

164 Rollo. See p. 41 of Petition, p. 56.

165 Calang v. People, G.R. 190696, 3 August 2010, 626 SCRA 679, 682-683.

166 Rollo, pp. 498-499 and 501. See Paragraph 4.35 of Complaint, which contains the following allegation:
"As heretofore shown, the FVR Project was subjected to work suspensions and suffered various delays all
traceable to the faults and/or acts or omissions of the NHA, to the gross negligence, plain incompetence or
simple lack of concern of its officials, and to the abject refusal of its technical team to cooperate with FUCC on
the field. Because of these work suspensions and delays, a large part of FUCC’s huge assembly of plant,
equipment, tools, materials and manpower were rendered idle and unproductive since 10 June 1998. FUCC
incurred a huge cost for its idle equipment which, as of 15 March 1999 – the original expiry date of the
contract – amounted to ₱142,780,800.00 x x x."

See also Paragraph 4.40 that alleges as follows: "In the meantime, the original contract period for the
FVR Project expired on 15 March 1999. On 12 April 1999, FUCC wrote the NHA a letter and appended
thereto a summary of the cost of its idle equipment from 10 June 1998, when Partial Suspension Order
No. 1 was issued, suspending all works at Cluster 2, up to 15 March 1999, the expiry date of the
original contract period. The total cost of idle equipment as of 15 March 1999 amounted to
₱142,780,800.00. x x x." /
167 Records. See p. 28 of CIAC Decision dated 7 January 2004, Folder no. 2, Expanding Envelope no. 3,
where the following appears: "The claims of FUCC for payment of idle equipment pertains to the equipments
rendered idle due to the Partial Suspension Order No. 1, effective 10 June 1998 and until the original contract
time expiration on 15 March 1999. x x x The total claim by FUCC for payment of Idle Equipment was
₱142,780,800.00."

168 Rollo. See Paragraph 4.35 of Complaint, pp. 498-499.

169 See Paragraph 96 of Answer, id. at 550.

170 Id. at 696.

171 See p. 4 of Affidavit in Question-and-Answer Form of Engr. Ben S. Dumaliang dated 4 November 2003,
id. at 696.

172 See paragraph 16, p. 3 of Affidavit of Engr. Mariano E. Raner III dated 2 December 2003, id. at 808.

173 See paragraph 59, p. 12 of Affidavit of Engr. Mariano E. Raner III dated 2 December 2003, id. at 817.

174 Records. See pp. 29 to 30 of CIAC Decision dated 7 January 2004, Expanding Envelope no. 3, Folder no.
2.

175 Id. at 30.

176 See p. 28 of CIAC Decision, dated 7 January 2004, Expanding Envelope No. 3, Folder no. 2, id.

177 Rollo. See p. 30 of CIAC Decision dated 7 January 2004, p. 972.

178 See p. 4 of Affidavit in Question-and-Answer Form of Engr. Ben S. Dumaliang dated 4 November 2003,
id. at 696.

179 See p. 6 of Affidavit in Question-and-Answer Form of Engr. Ben S. Dumaliang dated 4 November 2003,
id. at 698.

180 Id. at 85-109.

181 See pp. 16 to 17 of CA Decision dated 1 August 2006, id. at 100-101.

182 See Exhibit "HHHHHH," Annex "9" of Comment, id. at 1304-1308.

183 See pp. 11 to 12 of TSN of the hearing held on 9 December 2003 attached as Annex "10" of Comment, id.
at 1319-1320.

184 Supra note 146.

185 Id.

186 Rollo. Annexes "K", "K-1", "K-2", "K-3" and "K-4" thereof, pp. 56-58; 180; 197; 213; and 244.

187 See pp. 43 to 51 of Petition, id. at 58-66.

188 See p. 27 of CIAC Decision dated 7 January 2004, id. at 971.

189 See p. 26 of CIAC Decision dated 7 January 2004, id. at 970.

190 See pp. 66 to 67 of Comment, id. at 1260-1261.

191 See p. 26 of CIAC Decision dated 7 January 2004, id. at 970.

192 See p. 27 of CIAC Decision dated 7 January 2004, id. at 971.

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193 See p. 65 to 66 of Comment, id. at 1259-1260.

194 Id.

195 See p. 27 of CIAC Decision dated 7 January 2004, id. at 971.

196 See p. 66 of Comment, id. at 1260.

197 See dispositive portion of CA Decision dated 1 August 2006, id. at 107-108.

198 See p. 19 of CA Decision dated 1 August 2006, id. at 103.

199 Id. at 1034.

200 See p. 5 of Compliance dated 17 August 2006, id. at 1038.

201 See p. 3 of Compliance dated 17 August 2006, id. at 1036.

202 Id.

203 See p. 20 of CA Decision dated 1 August 2006, id. at 104.

204 Id. at 1034.

205 See p. 5 of Compliance dated 17 August 2006, id. at 1038.

206 Id.

207 Id.

208 Id. at 1056.

209 See pp. 26 to 27 of Omnibus Motion dated 22 August 2006, id. at 1080-1081.

210 Id. at 111-116.

211 See p. 4 of Resolution dated 31 January 2007, id. at 114.

Section 16.2 of the Revised Rules of Procedure Governing Construction Arbitration provides as follows:

"SECTION 16.2. Form of Award – The Final Award shall be in writing and signed by the Arbitral
Tribunal. A dissent from the decision of the majority or a portion thereof shall be in writing and signed
by the dissenting member."

Section 10.4 reads thus:

"SECTION 10.4. Vacancies – If any Arbitrator should resign, be incapacitated, refuse or be unable, or
be disqualified for any reason to perform the duties of his office, CIAC may, within five (5) days from the
occurrence of a vacancy or refusal/inability to accept appointment, appoint a substitute(s) to be
chosen."
212 See pp. 12 to 13 of CA Decision dated 1 August 2006, id. at 96-97.

213 G.R. No. 144792, 31 January 2006, 481 SCRA 209, 224.

214 Section 2 of the previous CIAC Rules of Procedure Governing Construction Arbitration provides as
follows:

"Sec. 2. Non-arbitrable Issues – Pursuant to Section 4 of Executive Order no. 1008, claims for moral
damages, exemplary damages, opportunity / business losses in addition to liquidated damages and
attorney’s fees are not abitrable except when the parties acquiesce or mutually agree to submit the
same for arbitration and to abide by the decision of the arbitrator thereon.
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 Claims for unrealized expected profits (built-in in the contract price) and issues on rescission or
termination of a contract, however, are arbitrable."

215 Rollo. See p. 2 of Resolution dated 31 January 2007, p. 112.

216 See p. 20 of CIAC Decision dated 7 January 2004, id. at 964.

217 CA Decision, pp. 20-21 dated 1 August 2006, id. at 104-105.

218 Supra note 28.

219 Rollo. See pp. 33 to 34 of CIAC Decision dated 7 January 2004, pp. 975-976.

220 See Affidavit in Question-and-Answer Form of Engr. Ben S. Dumaliang dated 4 November 2003, id. at
692-805.

221 See p. 20 of CA Decision dated 1 August 2006, id. at 104.

222 See p. 34 of CIAC Decision dated 7 January 2004, id. at 976.

223 See p. 59 of Petition, id. at 74.

224 See pp. 83 to 84 of Comment, id. at 1277-1278.

225 Annex "EE" of Petition, id. at 1179.

226 See p. 57 of Petition, id. at 72.

227 Id.

228 The record shows that as early as 19 June 1998, FUCC already advised NHA that its bulldozers and
other equipment had been rendered idle because of the suspension of the contract works. On 3 March 1999,
FUCC requested a partial payment by way of compensation for its idle resources. On 12 April 1999, FUCC
wrote NHA a letter with a summary of the cost of its idle equipment in the amount of ₱142,780,800.00 as of
15 March 1999. On 28 April 1999, FUCC wrote another letter following up its claim for Idle Equipment. This
was followed by the letter dated 3 August 1999, and then another letter dated 28 October 1999 (See pp. 68 to
72 of Complaint), id. at 499-503.

229 The record shows that on 13 June 2000, FUCC requested NHA for the adjustment of contract prices
which was later formalized in a letter dated 11 August 2000. In a Memorandum dated 22 February 2001,
Engr. Raner recommended the approval of the claim but the recommendation was not acted upon. FUCC
followed up this claim for Price Adjustment in the letters dated 17 April 2001, 23 May 2001 and 22 June 2001
(See pp. 45 to 48 of Complaint), id. at 476-479.

230 See pp. 76 to 77 of Comment, id. at 1270-1271.

231 See p. 77 of Comment, id. at 1271.

232 See p. 57 of Petition, id. at 72.

233 See p. 6 of Compliance dated 17 August 2006, id. at 1039.

234 See pp. 19, 22-23, 25 and 31 of CIAC Decision dated 7 January 2004, id. at 963; 966-967; 969 and 973.

235 The Supreme Court held that things of common knowledge, of which courts take judicial notice of, are
matters coming to the knowledge of men generally in the course of the ordinary experiences of life, or matters
which are generally accepted by mankind as true and are capable of ready and unquestioned demonstration.
[See Expert Travel & Tours, Inc. v. Court of Appeals, 498 Phil. 191, 206 (2005)].

236 Rollo. A common formula was used by the CIAC in computing the interest on the various awards as may
be gleaned from the computation shown on pp. 19, 22-23, 25 and 31 of CIAC Decision dated 7 January 2004,
pp. 963; 966-967; 969 and 973. /
 237 Compare to the computation on p. 19 of CIAC Decision dated 7 January 2004, id. at 963.

238 Compare to the computation on p. 22 of CIAC Decision dated 7 January 2004, id. at 966.

239 Compare to the computation on p. 23 of CIAC Decision dated 7 January 2004, id. at 967.

240 Compare to the computation on p. 25 of CIAC Decision dated 7 January 2004, id. at 969.

241 Compare to the computation on p. 31 of CIAC Decision dated 7 January 2004, id. at 973.

242 Please refer to pp. 5-6 of Compliance dated 17 August 2006, id. at 1038-1039.

243 Please refer to p. 7 of Compliance dated 17 August 2006, id. at 1040.

65 to 66 of Comment, id. at 1259-1260.

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