TERESA vs.
TRANSCEPT According to CIAC’s computation, Transcept’s accomplishment amounted to
Facts:
Teresa C. Aguilar entered into an Owner-General Contractor Agreement
(First Contract) with Transcept Construction and Management Professionals,
Inc. for the construction of a two-storey split level vacation in Laurel,
Batangas. Under the First Contract, the Project would cost P3,486,878.64
and was to be completed within 210 working days. Aguilar paid a
downpayment of P1, 632 436.29.
Transcept submitted its first billing to Aguilar for work accomplishments from
start to 15 November 2004, in accordance with the Progressive Billing
payment scheme. Aguilar paid P566,356. Then, Aguilar received the second
billing amounting to P334,488 and informed Aguilar that non-payment would
force them to halt all works on the Project. However, Aguilar questioned the
Second Billing as unusual for being 45 days ahead of actual
accomplishment.
Subsequently, Aguilar hired ASTEC, a duly accredited testing laboratory, to
test Transcept’s quality of work. The test showed substandard works done by
Transcept. The latter outlined its program to reinforce or redo the
substandard works discovered by ASTEC. ASTEC, through Engr. Jaime E.
Rioflorido sent Aguilar an Evaluation of Contractor’s Performance which
showed that aside from the substandard workmanship and use of
substandard materials, Transcept was unreasonably and fraudulently billing
Aguilar.
Transcept and Aguilar entered into a Construction Contract (Second
Contract) to extend the date of completion from 7 June 2005 to 29 July 2005
and to use up the P1.6 million downpayment. Aguilar hired the services of
Engr. Edgardo Anonuevo to ensure that the works would comply with the
plans in the Second Contract.
Transcept failed to finish the Project, alleging that the delay was due to
additional works ordered by Aguilar.
Aguilar sent a demand letter to Transcept asking for payment of P581,844.54
for refund and damages. Transcept ignored the demand letter resulting the
filing of a complaint before the CIAC.
CIAC- assessed the work accomplished with the corresponding costs, as
against the downpayment ofP1,632,436.29 which was the contract price in
the Second Contract.
98.16% of the contract price. It is beyond the 95% required under CIAP
Document No. 102 and is considered a substantial completion of the Project
and Aguilar did not submit any evidence on indirect costs and her counsel
did not cross-examine Transcept’s witnesses on the matter.
The CIAC also found that Aguilar demanded extra works which entailed
additional working days. The CIAC computed that the additional works
performed over and above the Second Contract amounted to P189,909.91.
It ordered:
1. Respondent [Transcept] shall pay Claimant [Aguilar] the amount of
P30,076.72, representing the unaccomplished works in the contract, plus 6%
interests from the date of the promulgation of this case, until fully paid.
2. Respondent shall pay Claimant the amount of P75,000.00, representing
the cost of Consultancy Services, plus 6% interests from the date of the
promulgation of this case, until fully paid.
3. Claimant shall pay Respondent the amount of P189,909.91, representing
the cost of work performed over & above the scope of work in the contract.
4. The cost for liquidated damages and cost representing interests of
construction bond, prayed for the Claimant, are denied for being without
merit.
5. Attorney’s fees prayed for by both parties are denied for being without
merit.
6. Cost of Arbitration shall be shared equally by the parties.
MAIN ISSUE: WON respondent contractor’s counterclaim amounting to
P189,909.91 for additional structural works should be granted.
HELD: (CA LANG ITO dahil ito lang ang assignment, pero may SC
decision din ito)
Negative. Section 2.c of CIAC Resolution No. 01-2005 (March 3, 2005)
Amendments to CIAC Resolution No. 06-2004 provides:
“2.c. If the respondent-contractor has neither a valid contractor’s
license at the time of filing the case nor has filed any application for
the same, he shall be allowed to file his answer, interpose
 counterclaims and pray for affirmative relief, PROVIDED, however,
that he files an application for contractor’s license with the PCAB
within a period of thirty (30) days from the date of filing his answer
with the CIAC and shows proof of such filing to the Commission.
In the event that the Respondent-contractor fails to comply herewith,
his answer will be admitted for the purpose of defending himself but
his counterclaims, if there be any, shall not be given due course, nor
shall he be entitled to pray for affirmative relief.”
In granting respondent contractor’s counterclaim for additional Structural
Works such as the Balcony, lifting of Roof Beams, and extra fast walls, the
CIAC cited several laws explaining the different functions of the different
agencies like the Philippine Contractors Accreditation Board (PCAB) as one
of the three implementing agencies of the Construction Industry Authority of
the Philippines (CIAP), the CIAC, but not as one of the implementing
agencies of the CIAP but rather as one under the latter’s administrative
supervision. In this regard, the Sole Arbitrator explained that the CIAC has no
power to accredit or license a contractor.
It is a well-entrenched rule that where the language of the law is clear and
unambiguous, it admits no room for interpretation, but simply application
according to its express terms, interpretation being called for only when such
literal application is impossible. Where a requirement or condition is made in
explicit and unambiguous terms, no discretion is left to the judiciary. It must
see to it that its mandate is obeyed.
In the above cited section of the CIAC Resolution, it is very clear that it is the
PCAB that has the power to accredit a contractor and the CIAC only requires
proof of such filing with the PCAB for the purpose of interposing
counterclaims and praying for affirmative reliefs. The CIAC does not arrogate
unto itself by such provision the power to accredit or license a contractor, as
the Sole Arbitrator seemed to suggest. The provision merely states a positive
requirement which respondent contractor clearly failed to comply with.
The Court of Appeals agreed with the CIAC that Aguilar did not allege in her
complaint the amount corresponding to the indirect costs for General
Requirements. However, the Court of Appeals made a recomputation of the
indirect costs for General Requirements based on P1,632,436.29 and found
out that Aguilar is entitled toP198,916.05 instead of P30,076.72 as directed
by CIAC.
Moreover, in its assailed decision the CIAC contended that Article 1234 of
the Civil Code has become the basis of the construction industry practice in
determining the time when a contractor has substantially performed the work.
It also cited Clause 52.1 of the Construction Industry Authority of the
Philippines (CIAP) Document No. 101 for Government Contracts, and Article
No. 20.11 A of CIAP Document No. 102 for Private Contracts, which consider
the contractor to have substantially completed the works when the
accomplishment is not less than 95%. The CIAC further stated that the
consequence of achieving substantial completion is that no liquidated
damages will accrue after such event occurs (Article 20.11 D of CIAP Doc.
102).
Such being the case, evidence clearly shows that there was failure on the
part of respondent to achieve substantial completion of the project under the
second contract, thus, entitling petitioner to liquidated damages equivalent to
10% of the contract price or a total of P163,243.6
The Court of Appeals further ruled that Transcept was not entitled to
payment for additional works because they were in fact only rectifications of
the works poorly done by Transcept. Finally, the Court of Appeals ruled that
Aguilar was able to prove that she paid P135,000 for consultancy services.
Regarding the issue as to whether the CIAC erred in holding that respondent
is entitled to the payment of P189,909.91 for additional works.
_____________________________________________________________
SC Ruling
- Affirmed regarding the main issue and all other matters
(except on the liquidated damages, it should only be actual
damages) there being a substantial completion of the Project, Aguilar
is not entitled to liquidated damages but only to actual damages
of P30,076.72, representing the unaccomplished works in the
Second Contract as found by the CIAC, which is the difference
between the contract price of P1,632,436.29 and the
accomplishment of P1,602,359.97.