Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 159417 January 25, 2007
PHILIPPINE NATIONAL CONSTRUCTION CORPORATION, Petitioner,
vs.
THE HON. COURT OF APPEALS and CMS CONSTRUCTION and DEVELOPMENT CORPORATION, Respondents.
D E C I S I O N
CHICO-NAZARIO, J.:
Before Us is a Petition for Review on Certiorari under Rule 45 of the Rules of Civil Procedure, assailing the Decision1 of the Court of Appeals in CA-G.R. SP No. 66968, dated 26 August 2002, which dismissed Philippine National Construction Corporation’s (PNCC’s) Petition for Review of the Decision2 of Sole Arbitrator Victor P. Lazatin of the Construction Industry Arbitration Commission (CIAC) awarding herein respondent CMS Construction and Development Corporation (CMS) the amount of P1,978,746.90 with interest at the rate of 6% per annum from 7 July 2000 up to the date of award and thereafter, at an interest rate of 12% per annum until fully paid.
The present case arose when CMS submitted for arbitration before the CIAC a complaint for sum of money with damages against PNCC in connection with the relocation of the 450 mm diameter steel pipes along the East Service Road of the South Luzon Tollway.
On 26 July 1996, PNCC entered into a Memorandum of Agreement with the Toll Regulatory Board, Citra Metro Manila Tollways Corporation and Metropolitan Waterworks Sewerage System (MWSS) involving the task of relocating MWSS utilities along the South Superhighway affected by the construction of the Manila South Skyway Project. In undertaking said task, PNCC subcontracted the relocation of the 450 mm diameter steel pipes to CMS as the winning bidder. On 13 October 1997, even before the signing of a contract, CMS proceeded to carry out the project upon request of PNCC.
A Subcontract Agreement was executed between PNCC and CMS on 21 October 1997. It was stated therein that the estimated contract price was P7,990,172.61, inclusive of taxes, and that the project was to be completed within seventy-five (75) calendar days from the signing of the contract. It was further stipulated therein that the contract price was merely an estimate and that the final price shall be computed based on the actual accomplishment of the subcontractor as approved and accepted by PNCC, the Toll Regulatory Board, and the MWSS.
On 5 December 1997, PNCC informed CMS that it would provide the necessary equipment, manpower, and materials to assure the completion of the project and that all costs pertaining thereto would be charged to the latter’s account. In another letter dated 19 December 1997, PNCC again reiterated that it would provide manpower and equipment to CMS in order that the stated schedule for the completion of the project shall be met. On 7 January 1998, petitioner informed CMS that the seventy-five (75) days period for the relocation of the steel pipes had already elapsed; however, the said project was still far from completion. It was only sometime in April 1999 that the project was finally completed.
In conformity to the letters sent by PNCC to CMS regarding the manpower and equipment supplied by the former to ensure the completion of the project, the following amounts were deducted by petitioner from CMS’s billings as "accommodations":
Billing No. 3 …………… P 274,548.87
Billing No. 4 …………… 150,043.12
Billing No. 5 …………… 666, 895.54
TOTAL P1,091,487.53
Thereafter, PNCC and CMS amended the Subcontract Agreement on 23 November 1999, stating therein the final contract price in the amount of P8,872,593.74, inclusive of taxes. It was also agreed upon by the parties under the Contract Amendment that Appendix "A" thereof constituted the final Bill of Quantities for scope of works undertaken by the subcontractor (CMS) and superseded Annex "C" of the 21 October 1997 Agreement and any bill of quantities earlier agreed upon by the parties in connection with the project. Furthermore, it was expressed therein that the said amendment superseded the price stipulated in the original Subcontract Agreement dated 21 October 1997 and any other commitment or agreement on price pertaining to works covered therein.
According to CMS, the amended contract price has not been fully paid by PNCC since Billing Nos. 3, 4, and 5 were only partially paid because of the deductions made by the latter in the form of "accommodations," which CMS insists must be disallowed.
After the proceedings, Sole Arbitrator Lazatin issued an Award, the pertinent portions of which read:
Before resolving the specific issues raised by the parties, it would be helpful to state certain findings established at the hearings which are pivotal.
Initially, there is no dispute that the retention money amounts to P887,259.37 which is exactly equal to ten percent (10%) of the Subcontract Price (TSN, 13 August 2001, pp. 7-8). Both parties confirmed that no claim for defects was made by the Respondent or the Owner/Client after April 19, 1999 to rectify what was completed by the Claimant. (TSN, 13 August 2001, p. 10).
Secondly, at the initial hearing, the Claimant no longer insisted on its claim for hydrotesting works (Issue No. 4) amounting to P563,675.00 due to paragraph 3 of the Contract Amendment (Exhibit C-2) (TSN, 13 August, p. 3).
Thirdly, some of the important details of Billing Nos. 3, 4 and 5 are as follows:
a) Billing No. 3 was for P920,601.03. It was received by the Respondent on June 1, 1998 and approved on September 25, 1998. The deductions for asserted accommodations amounted to P274,548.87. The amount paid was P646,052.12 which was paid in three (3) tranches, to wit:
(i) P400,000 on January 21, 1999
(ii) P100,000 on April 11, 2000
(iii) P146,000 on February 8, 2001
b) Billing No. 4 was for P255,334.13. It was received by the Respondent on March 15, 1999 and approved on May 31, 1999. The deductions for asserted accommodations amounted to P150,043.12. The amount paid was P105,181.00 which paid on February 10, 2000.
c) Billing No. 5 was for P1,681,888.21. It was received by the Respondent on December 3, 1999 and approved on August 4, 2000. The deductions for asserted accommodations amounted to P666,895.54. The amount paid was P921,706.79 which was paid on June 7, 2001.
Fourthly, on 23 November 1999 (after the Project was completed), the parties executed the Contract Amendment wherein the parties agreed, among others, to wit:
(i) To constitute "Appendix A" thereof as the final Bill of Quantities for scope of works undertaken by the Claimant and superseded/replaced Annex C of the 21 October 1997 Subcontract Agreement (Exh. C-1).
(ii) P8,872,593.74 as the final Subcontract Price which "supersede(d) the price stipulated in the original Subcontract Agreement dated 21 October 1997 P7,990,172.61 and any other commitment or agreement on price pertaining to works covered herein."
(iii) "no further adjustment in price shall be effected and that (Claimant) hereby waived any and all claims for price adjustments and whatsoever in connection with the work herein covered except as that stated in pa. 3 above of this Contract Amendment." (emphasis supplied).
Fifthly, there is no clear documentation that Respondent sent, and the Claimant received, much more accepted, the various charges for the accommodations deducted by the Respondent. The testimony of the witnesses of both parties are diametrically opposite. Likewise in conflict are the respective verbal assertion of both sides that manpower, equipment, and/or materials were actually provided by the Respondent to the Claimant.
Sixth, the documentation of the Respondent with respect to its invocation of Section 6.2 of the Subcontract Agreement (Exhibit R-5) is faulty. The seven (7) day notice was not strictly complied with. There was no specification of the items and costings of the charges now asserted in the deductions/accommodations. The Claimant is likewise remiss in failing to reply to Respondents’ various letters (Exhibits R-20 to R-40, except for two (2) response) and take issue with the same. The Respondent could not present proof that the Claimant received and acknowledged the accommodations, despite its verbal assertions that the Project Manager of the Claimant did. There is also assertion that Claimant refused to acknowledge receipt of the accommodations.
Lastly, and more importantly, the Claimant asserts that when the parties agreed on the Contract Amendment (which is effectively a compromise agreement) on 23 November 1999, Respondent’s claims for deductions of the accommodations were deemed included in the compromise. The Contract Amendment states that it "accordingly supersedes the price stipulated x x x and any other commitment or agreement on price pertaining to works covered herein" and "no further adjustment in price shall be effected." It should be pointed out that on 23 November 1999, respondent had already approved Billing No. 3 (on September 25, 1998) and Billing No. 4 (on May 31, 1999) and asserted the deductions of the accommodations. Moreover, all the claim for accommodations were already in existence on 23 November 1999. x x x.
x x x x
WHEREFORE, PREMISES CONSIDERED, an award is hereby rendered ordering the respondent to pay the Claimant the amount of P1,978,746.90 with interest at the rate of 6% per annum from 7 July 2000 up to the date of this Award. Thereafter, the Award shall earn interest at the rate of 12% per annum until fully paid.3
Aggrieved, PNCC sought recourse through a Petition for Review filed before the Court of Appeals maintaining that there is no basis in fact nor in law for the findings of the Sole Arbitrator that the deductions for "accommodations" for Billing Nos. 3, 4, and 5 should be disallowed as they already formed part of the compromise agreement and that the said "accommodations" were not properly documented and proved to bind CMS.
On 26 August 2002, the appellate court rendered a Decision affirming the findings of Sole Arbitrator Lazatin. According to the Court of Appeals:
It must be recalled that the parties initially agreed to a subcontract price of P7,990,172.61 (par. 3.1 Subcontract Agreement, Exh. "R-3", p. 80, rollo); however, the same was increased to P8,872,593.74 (par. 9.1. Terms of Reference, p. 58, rollo; Final Bill of Quantities, p. 65, rollo) subject to petitioner PNCC’s outright deduction of 10% net which would answer for any and all defect/s and/or deficiency/ies in the workmanship. And all the accumulated retentions shall be released within thirty days from the date of final acceptance of subcontracted work and which could be attained only after the lapse of the warranty period stipulated. (pars. 4.4 & 4.5., Subcontract Agreement, p. 81, rollo; Contract Amendment, Exh. "R-15", p. 98, rollo). Thus, 10% of the subcontract price of P8,872,593.74 is P887,259.37, which should be automatically deducted, it being part of the Subcontract Agreement" which to Our mind should be respected, since the same was not part of the amendment of the contract. When the terms of an agreement have been reduced to writing, it is to be considered as containing all the terms agreed upon and there can be, between the parties and their successors in interest, no evidence of such terms other than the contents of the written agreement. (Sec. 9, par. 1, Rule 130 Rules on Evidence) And there being no evidence on record which showed that petitioner PNCC claimed for any defects on the completed project against respondent CMS after April 1999, the aforementioned amount of P887,259.37 should now be released/paid to the latter.
Coming now to the resolutions of whether or not the deductions for accommodations made by petitioner PNCC in billing nos. 3 to 5 were part of the compromise settlement and whether the same were properly documented, We opine that the same were part of the compromise settlement and the same were not properly documented.
Petitioner PNCC contended that in view of respondent CMS delay in the execution of the project, it supplied the necessary manpower, equipment and materials in order to assure the completion of the works; however, the record of the case is bereft of any evidence which would show that indeed petitioner PNCC had supplied the necessary manpower, equipment and materials for the project, aside from petitioner’s letter dated December 5, 1997 which stated that it would supply the same. (p. 92, rollo).
Petitioner’s reliance on Article VI, par. 6.2.1 of the Subcontract Agreement which states:
"In the event Subcontractor fails to comply with the requirement stated therein within seven (7) days from notice/demand to comply, PNCC shall have the authority to secure the necessary manpower, equipment from other sources, to assure completion of the works. All costs and expenses, including handling of charges, transportation, rentals for machinery/equipment and other expenses incidental thereto shall be for the account of Subcontractor and may be deducted from whatever amount that may be due or become due to Subcontractor under this or in any agreement between the parties.
is basically misplaced. While there was petitioner PNCC’s letter dated February 16, 1998 sent to respondent CMS informing the latter that it had not coped up (sic) with the work schedule and thus requiring it to submit other requirements such as daily accomplishment reports and target weekly accomplishments; nevertheless, the same is not determinant of whether or [not] the seven day notice was strictly complied with. (Exh. "R-32" p. 95, rollo).
x x x x
In fine, there was no evidence on record which proved that the aforecited deductions for accommodations were sent and received by respondent CMS. Neither was there any specification of the items and costings of the charges now asserted in the deductions for accommodations.
x x x x
In view of the above disquisitions, We are inclined to uphold the sole arbitrator’s findings and conclusions, disallowing the deductions for accommodations made by petitioner PNCC against respondent CMS. Consequently, respondent CMS should be paid for the deductions made by petitioner PNCC in the amount of P1,091,487.53. It is a hornbook doctrine in our jurisdiction that findings of facts of administrative bodies charged with their specific field of expertise, are afforded great weight by the courts, and in the absence of substantial showing that such findings are made from an erroneous estimation of the evidence presented, they are conclusive, and in the interest of stability of the government structure, should not be disturbed. (Ocampo vs. Commission on Elections, 325 SCRA 636). It is likewise not for the reviewing court to weigh the conflicting evidence, determine the credibility of the witnesses, or otherwise substitute its own judgment for that of the administrative agency on the sufficiency of the evidence; that the administrative decision in matters, within the executive jurisdiction, can only be set aside on proof of grave abuse of discretion, fraud, or error of law (cited in Lo vs. Court of Appeals, 321 SCRA 190). We hold that the Sole Arbitrator’s findings and conclusion as aptly ratiocinated in his assailed decision are in accord with the facts and evidence on record and as such, must be respected.
x x x x
WHEREFORE, premises considered the PETITION FOR REVIEW is hereby Denied with modifications. Accordingly, a Decision is hereby rendered as follows:
1) Ordering petitioner Philippine National Construction Corporation to pay respondent CMS Construction and Development Corporation the total amount of P1,978,746.90 plus 6% interest per annum from date of demand which is from July 7, 2000 until fully satisfied, but before judgment becomes final. From the date of finality of the judgment until the obligation is totally paid. A TWELVE PERCENT (12%) interest, in lieu of the SIX PERCENT (6%) interest shall be imposed; and
2) Deleting the award for arbitration fees in favor of the respondent CMS Construction and Development Corporation in the amount of P29,264.51 for lack of factual and legal basis.4
Petitioner’s Motion for Reconsideration having been denied, PNCC filed the instant petition assailing the Decision of the appellate court on the sole ground that the Court of Appeals erred in upholding the Sole Arbitrator’s findings and conclusion disallowing the deductions for accommodations made by PNCC against CMS.
Before we delve into the substantial issue raised by petitioner, we shall first address the procedural issue raised by respondent. According to CMS, the issue raised by petitioner is not a proper subject of an appeal under Rule 45 of the Rules of Court. CMS maintains that in assailing the findings and conclusions of the Sole Arbitrator as affirmed by the Court of Appeals, petitioner only puts into issue the findings of facts which are the bases thereof. And this Court, being not a trier of facts, is not duty-bound to probe into the accuracy of said factual findings, in the absence of clear showing that the same were arbitrary and bereft of any rational basis.
On the other hand, PNCC claims that the instant petition involves a question of law as the main issue herein is the proper interpretation of the Contract Amendment executed between the parties, and whether or not deductions for "accommodations" given by PNCC are allowed under said Contract Amendment.
To be sure, questions of law are those that involve doubts or controversies on what the law is on certain state of facts; and questions of fact, on the other hand, are those in which there is doubt or difference as to the truth or falsehood of the alleged facts. One test, it has been held, is whether the appellate court can determine the issue raised without reviewing or evaluating the evidence, in which case it is a question of law, otherwise it will be a question of fact.5
We agree with petitioner that the instant case involves a question of law. At the heart of this controversy before us is the issue of whether or not the "accommodations" claimed by PNCC may be properly deducted from the contract price stipulated under the Subcontract Agreement as modified by the Contract Amendment. The resolution of said issue, thus, entails an interpretation of the provisions of both agreements executed by both parties. And as correctly pointed out by petitioner, where an interpretation of the true agreement between the parties is involved in the appeal, the appeal is in effect an inquiry of the "law" between the parties and their successors in interest, its interpretation necessarily involves a question of law, properly raised in the certiorari proceedings.6
Having resolved the procedural issue raised herein, we now proceed to determine the singular substantial issue raised in the instant petition.
PNCC maintains that Sole Arbitrator Lazatin acted arbitrarily or with grave abuse of discretion when he denied the deductions being claimed by petitioner. According to PNCC, the deductions or "accommodations" made in Billing Nos. 3, 4, and 5 are allowed under Article VI, Paragraph 6.2.1 of the Subcontract Agreement, which states that:
6.2.1 In the event SUBCONTRACTOR fails to comply with the above requirement stated therein within seven (7) days from notice/demand to comply, PNCC shall have the authority to secure the necessary manpower, equipment from other sources, to assure completion of the works. All costs and expenses, including handling of charges, transportation rentals for machineries/equipment and other expenses incidental thereto, shall be for the account of SUBCONTRACTOR and may be deducted from whatever amount that may be due or become due to SUBCONTRACTOR under this or in any agreement between the parties. In such case, however, PNCC shall exert its best efforts to minimize the costs.
Thus, PNCC claims that from the abovequoted provision of the Subcontract Agreement, it is evident that "accommodations" for additional manpower or equipment supplied by PNCC in the project are deductible from whatever amount due to CMS as subcontractor.
There is no dispute that under the aforecited provision, deductions or "accommodations" may be made against the account of the subcontractor; however, it is pivotal at this point to underscore an important provision in the Contract Amendment signed by the parties on 23 November 1999. According to said amendment to the Subcontract Agreement, Appendix "A" thereof constitutes the final Bill of Quantities for scope of works undertaken by the subcontractor (CMS) and supersedes Annex "C" of the 21 October 1997 Agreement and any bill of quantities earlier agreed upon by the parties in connection with the project.1avvphi1.net
It is clear from a reading of said provision of the Contract Amendment executed after the completion of said project and after PNCC had determined the alleged deductions it was to charge against CMS’s account that Annex "A" thereof reflects the scope of work undertaken by CMS. Said Bill of Quantities therefore enumerates the costs borne by CMS as subcontractor in the accomplishment of the project.
A careful perusal of Annex "A" of the Contract Amendment will show that the final Bill of Quantities for the scope of works undertaken by CMS for the project amounts to P8,872,593.74. There is no mention, either in the body of said Contract Amendment nor in the annex attached thereto, regarding the alleged "accommodations" which PNCC shall deduct from the amount payable to CMS. It would only be logical, therefore, to conclude that the Contract Amendment and Annex "A" attached thereto already reflect the actual amount to be paid to CMS for the scope of work it rendered regarding the relocation of the 450 mm pipe along the East Service Road of the South Luzon Tollway, said amendment having been executed after PNCC had already determined the necessary deductions to be made against the account of CMS.
The agreement or contract between the parties is the formal expression of the parties’ rights, duties and obligations.7 It is the best evidence of the intention of the parties.8 Thus, when the terms of an agreement have been reduced to writing, it is considered as containing all the terms agreed upon and there can be, between the parties and their successors in interest, no evidence of such terms other than the contents of the written agreement.9 Furthermore, it is a cardinal rule that if the terms of a contract are clear and leave no doubt as to the intention of the contracting parties, the literal meaning of its stipulation shall control.10
Petitioner miserably failed to establish that Sole Arbitrator Lazatin acted arbitrarily or with grave abuse of discretion when he denied the deductions claimed by petitioner. If ever Sole Arbitrator Lazatin may have committed any error in his interpretation of the Subcontract Agreement and the Contract Amendment, such possible error is not tantamount to grave abuse of discretion, but merely an error of judgment. An error of judgment is one which the court may commit in the exercise of its jurisdiction, and which error is reviewable only by an appeal.11 On the other hand, an error of jurisdiction is one where the act complained of was issued by the court, officer or a quasi-judicial body without or in excess of jurisdiction, or with grave abuse of discretion which is tantamount to lack or in excess of jurisdiction.12 This error is correctable only by the extraordinary writ of certiorari.13
Nonetheless, we see no reason to disregard the determinations made by Sole Arbitrator Lazatin. As has been discussed above, the contention of PNCC that it may legally deduct certain accommodations from the contract price as contained in the Bill of Quantities attached to the Contract Amendment has no leg to stand on. Furthermore, in the absence of any showing of grave abuse of discretion, this Court must sustain the factual findings of the Sole Arbitrator as sustained by the Court of Appeals, this being in accordance with the established principle that determination of certain questions of fact falling within the peculiar technical expertise of an administrative agency, must be accorded great respect, if not finality by this Court. A long line of cases establishes the basic rule that the court will not interfere in matters which are addressed to the sound discretion of government agencies entrusted with the regulation of activities coming under the special technical knowledge and training of such agencies.14 The CIAC, having been duly constituted by law as the quasi-judicial agency accorded with jurisdiction to resolve disputes arising from contracts involving construction in the Philippines,15 this Court must confer finality to its findings as they are supported by the evidence in this case.
WHEREFORE, premises considered, the instant petition is hereby DENIED. The Decision of the Court of Appeals in CA-G.R. SP No. 66968 dated 26 August 2002 is hereby AFFIRMED. Costs against petitioner.
SO ORDERED.
MINITA V. CHICO-NAZARIO
Associate Justice
WE CONCUR:
CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson
MA. ALICIA AUSTRIA-MARTINEZ
Associate Justice |
ROMEO J. CALLEJO, SR.
Asscociate Justice |
A T T E S T A T I O N
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.
CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson, Third Division
C E R T I F I C A T I O N
Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairperson’s Attestation, it is hereby certified 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.
REYNATO S. PUNO
Chief Justice
Footnotes
1 Penned by Associate Justice Bienvenido L. Reyes with Associate Justices Roberto A. Barrios and Edgardo F. Sundiam, concurring. Rollo, pp. 26-44.
2 CIAC Case No. 14-2001, promulgated on 14 September 2001. Rollo, pp. 62-75.
3 CIAC Award, pp. 5-8, 14; rollo, pp. 66-69, 75.
4 CA Decision pp. 8-10, 16-17; rollo, pp. 33-35, 41-42.
5 Vda. de Arroyo v. El Beaterio del Santissimo Rosario de Molo, 132 Phil. 9, 12-13 (1968); Avon Cosmetics Incorporated v. Luna, G.R. No. 153674, 20 December 2006.
6 Capco v. Macasaet, G.R. No. 90888, 13 September 1990, 189 SCRA 561.
7 Gamboa, Rodriguez, Rivera & Co., Inc. v. Court of Appeals, G.R. No. 117456, 6 May 2005, 458 SCRA 68, 73.
8 Arwood Industries, Inc. v. D.M. Consunji, Inc., 442 Phil. 203, 212 (2002).
9 Rules of Court, Rule 130, Section 9.
10 Olbes v. China Banking Corporation, G.R. No. 152082, 10 March 2006, 484 SCRA 330, 336.
11 Fernando v. Vasquez, G.R. No. L-26417, 30 January 1970, 31 SCRA 288, 292.
12 Id.; Revised Rules of Court, Rule 65, Section 1.
13 Id.
14 First Lepanto Ceramics, Inc. v. Court of Appeals, 323 Phil. 657, 664 (1996).
15 Executive Order No. 1008, 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 before or after the completion of the contract, or after the abandonment or breach thereof. x x x.
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