Uy Vs Public Estates

CASES
REPORTED

SUPREME COURT REPORTS

____________________

G.R. Nos. 147925-26. June 8, 2009.*

ELPIDIO S. UY, doing business under the name and style EDISON DEVELOPMENT &
CONSTRUCTION, petitioner, vs. PUBLIC ESTATES AUTHORITY and the HONORABLE COURT OF
APPEALS, respondents.
Construction Industry; Alternative Dispute Resolution; Arbitration; Construction Industry
Arbitration Commission (CIAC); Appeals; Appeals from judgment of the Construction Industry
Arbitration Commission (CIAC) shall be taken to the Court of Appeals (CA) by filing a petition for
review within fifteen (15) days from the receipt of the notice of award, judgment, final order or
resolution, or from the date of its last publication if publication is required by law for its
effectivity, or of the denial of petitioner’s motion for new trial or reconsideration.—Appeals
from judgment of the CIAC shall be taken

_______________

* THIRD DIVISION.

1

2

2

SUPREME COURT REPORTS ANNOTATED

Uy vs. Public Estates Authority

to the CA by filing a petition for review within fifteen (15) days from the receipt of the notice of
award, judgment, final order or resolution, or from the date of its last publication if publication
is required by law for its effectivity, or of the denial of petitioner’s motion for new trial or
reconsideration duly filed in accordance with the governing law of the court or agency a quo.

Same; Contracts; A written authorization from the owner is required before the contractor can
validly recover his claim for added costs incurred by reason of additions or changes in the
original plan.—Article 1724 of the Civil Code provides: ART. 1724. The contractor who
undertakes to build a structure or any other work for a stipulated price, in conformity with
plans and specifications agreed upon with the land-owner, can neither withdraw from the
contract nor demand an increase in the price on account of the higher cost of labor or
materials, save when there has been a change in the plans and specifications, provided: 1) Such
change has been authorized by the proprietor in writing; and (2) The additional price to be paid
to the contractor has been determined in writing by both parties. By this article, a written
authorization from the owner is required before the contractor can validly recover his claim.
The evident purpose of the provision is to avoid litigation for added costs incurred by reason of
additions or changes in the original plan. Undoubtedly, it was adopted to serve as a safeguard
or a substantive condition precedent to recovery.

Same; Unjust Enrichment; Solutio Indebiti; The principle of unjust enrichment cannot be validly
invoked by a contractor who, through his own act or omission, took the risk of being denied
payment for additional costs by not giving the owner prior notice of such costs and/or by not
securing the latter’s written consent thereto, as required by law and their contract.—Neither
can we hold PEA liable based on solutio indebiti, the legal maxim that no one should enrich
itself at the expense of another. As we explained in Powton Conglomerate, Inc. v. Agcolicol (400
SCRA 523 [2003]) the principle of unjust enrichment cannot be validly invoked by the
respondent who, through his own act or omission, took the risk of being denied payment for
additional costs by not giving the petitioners prior notice of such costs and/or by not securing
their written consent thereto, as required by law and their contract. Uy cannot, therefore, claim
from PEA the costs of the additional hauling distance of topsoil, and of the mobilization of
water trucks.
3

VOL. 589, JUNE 8, 2009

3


Attorney’s Fees; The amount of attorney’s fees may be reduced if found to be iniquitous or
unconscionable, and in this case the petitioner’s claim for attorney’s fees equivalent to 20% of
whatever amount is due and payable is exorbitant.—The cited provision cannot support Uy’s
insistence. Paragraph 24.4 on stipulated attorney’s fees is applicable only in complaints filed by
PEA against the contractor. The provision is silent on the amount of attorney’s fees that can be
recovered from PEA. Besides, even assuming that Paragraph 24.4 is applicable, the amount of
attorney’s fees may be reduced if found to be iniquitous or unconscionable. Thus: Articles 1229
and 2227 of the Civil Code empower the courts to reduce the penalty if it is iniquitous or
unconscionable. The determination of whether the penalty is iniquitous or unconscionable is
addressed to the sound discretion of the court and depends on several factors such as the type,
extent, and purpose of the penalty, the nature of the obligation, the mode of breach and its
consequences. The Court finds Uy’s claim for attorney's fees equivalent to 20% of whatever
amount is due and payable to be exorbitant. The CIAC and the CA, therefore, correctly awarded
10% of the total amount due and payable as reasonable attorney’s fees.

Grave Abuse of Discretion; Words and Phrases; By grave abuse of discretion is meant such
capricious and whimsical exercise of judgment equivalent to lack of jurisdiction—mere abuse of
discretion is not enough.—Uy asserts that the CA acted without or in excess of jurisdiction
when it enjoined the proceedings in CIAC Case No. 03-2001, despite the fact that the said case
is totally different from the instant case. By grave abuse of discretion is meant such capricious
and whimsical exercise of judgment equivalent to lack of jurisdiction. Mere abuse of discretion
is not enough. It must be grave, as when it is exercised arbitrarily or despotically by reason of
passion or personal hostility; and such abuse must be so patent and so gross as to amount to an
evasion of a positive duty or to a virtual refusal to perform the duty enjoined or to act at all in
contemplation of law.

PETITION for review on certiorari of the joint decision and joint resolution of the Court of
Appeals.

The facts are stated in the opinion of the Court.

Lucas C. Carpio, Jr. and Villaraza & Angangco Law Office for petitioner.
4

4



The Government Corporate Counsel for respondent.

NACHURA, J.:

Petitioner Elpidio S. Uy (Uy) appeals by certiorari the Joint Decision1 dated September 25, 2000
and the Joint Resolution2 dated April 25, 2001 of the Court of Appeals (CA) in the consolidated
cases CA-G.R. SP Nos. 59308 and 59849.

Respondent Public Estates Authority (PEA) was designated as project manager by the Bases
Conversion Development Authority (BCDA), primarily tasked to develop its 105-hectare
demilitarized lot in Fort Bonifacio, Taguig City into a first-class memorial park to be known as
Heritage Park. PEA then engaged the services of Makati Development Corporation (MDC) to
undertake the horizontal works on the project; and Uy, doing business under the name and
style Edison Development and Construction (EDC), to do the landscaping.

For a contract price of Three Hundred Fifty-Five Million Eighty Thousand One Hundred Forty-
One and 15/100 Pesos (P355,080,141.15), PEA and EDC signed the Landscaping and
Construction Agreement3 on November 20, 1996. EDC undertook to complete the landscaping
works in four hundred fifty (450) days commencing on the date of receipt of the notice to
proceed.

EDC received the notice to proceed on December 3, 1996;4 and three (3) days after, or on
December 6, 1996,5 it commenced the mobilization of the equipment and manpower needed
for the project. PEA, however, could not deliver any work area to EDC because the horizontal
works of MDC were

_______________

1 Penned by Associate Justice Martin S. Villarama, Jr., with Associate Justices Romeo J. Callejo,
Sr. (a retired member of this Court) and Juan Q. Enriquez, Jr., concurring; Rollo, pp. 101-112.

2 Id., at pp. 114-117.

3 Rollo, pp. 132-154.

4 See Terms of Reference, id., at p. 252.

5 Rollo, p. 155.

5

VOL. 589, JUNE 8, 2009

5


still ongoing. EDC commenced the landscaping works only on January 7, 1997 when PEA finally
made an initial delivery of a work area.

PEA continuously incurred delay in the turnover of work areas. Resultantly, the contract period
of 450 days was extended to 693 days. PEA also failed to turn over the entire 105-hectare work
area due to the presence of squatters. Thus, on March 15, 1999, the PEA Project Management
Office (PEA-PMO) issued Change Order No. 2-LC,6 excluding from the contract the 45-square-
meter portion of the park occupied by squatters.

In view of the delay in the delivery of work area, EDC claimed additional cost from the PEA-
PMO amounting to P181,338,056.30. Specifically, Uy alleged that he incurred additional rental
costs for the equipment, which were kept on standby, and labor costs for the idle manpower.
He added that the delay by PEA caused the topsoil at the original supplier to be depleted; thus,
he was compelled to obtain the topsoil from a farther source, thereby incurring extra costs. He
also claims that he had to mobilize water trucks for the plants and trees which had already
been delivered to the site. Furthermore, it became necessary to construct a nursery shade to
protect and preserve the young plants and trees prior to actual transplanting to the landscaped
area. The PEA-PMO evaluated the EDC’s claim and arrived at a lesser amount of P146,484,910.7
The evaluation of PEA-PMO was then referred to the Heritage Park Executive Committee
(ExCom) for approval.

On November 12, 1999, the Performance Audit Committee (PAC) reviewed the progress report
submitted by the works engineer and noted that the EDC’s landscaping works were behind
schedule by twenty percent (20%). The PAC considered this delay unreasonable and intolerable,
and immediately recommended to BCDA the termination of the landscap-

_______________

6 Exhibit “E-8,” Folder No. # 6, CIAC Records.

7 Rollo, p. 337.

6

6



ing contract.8 The BCDA adopted PAC’s recommendation and demanded from PEA the
termination of the contract with EDC. In compliance, PEA terminated the agreement on
November 29, 1999.

PEA fully paid all the progress billings up to August 26, 1999, but it did not heed EDC’s
additional claims. Consequently, Uy filed a Complaint9 with the Construction Industry
Arbitration Commission (CIAC), docketed as CIAC Case No. 02-2000.

On May 16, 2000, the CIAC rendered a Decision,10 the dispositive portion of which reads:

“WHEREFORE, Judgment is hereby rendered in favor of the [Petitioner] Contractor ELPIDIO S.
UY and Award is hereby made on its monetary claims as follows:

Respondent PUBLIC ESTATES AUTHORITY is directed to pay the [petitioner] the following
amounts:

P19,604,132.06 --- for the cost of idle time of equipment.

2,275,721.00 --- for the cost of idled manpower.

6,050,165.05 --- for the construction of the nursery shade net area.

605,016.50 --- for attorney’s fees.

Interest on the amount of P6,050,165.05 as cost for the construction of the nursery shade net
area shall be paid at the rate of 6% per annum from the date the Complaint was filed on 12
January 2000. Interest on the total amount of P21,879,853.06 for the cost of idled manpower
and equipment shall be paid at the same rate of 6% per annum from the date this Decision is
promulgated. After finality of this Decision, interest at the rate of 12% per annum shall be paid
on the total of these 3 awards amounting to P27,930,018.11 until full payment of the awarded
amount shall have been made, “this interim period being deemed to be at that time already a
forbearance

_______________

8 Annex 3, Respondent’s Formal Offer of Evidence, Folder No. # 5, CIAC Records.

9 Rollo, pp. 118-131.

10 Id., at pp. 263-318.

7

VOL. 589, JUNE 8, 2009

7


of credit” (Eastern Shipping Lines, Inc. v. Court of Appeals, et al., 243 SCRA 78 [1994]; Keng Hua
Paper Products Co., Inc. v. Court of Appeals, 286 SCRA 257 [1998]; Crismina Garments, Inc. v.
Court of Appeals, G.R. No. 128721, March 9, 1999).

SO ORDERED.”11

Uy received the CIAC decision on June 7, 2000. On June 16, 2000, Uy filed a motion for
correction of computation,12 followed by an amended motion for correction of
computation,13 on July 21, 2000. The CIAC, however, failed to resolve Uy’s motion and
amended motion within the 30-day period as provided in its rules, and Uy considered it as
denial of the motion.

Hence, on July 24, 2000, Uy filed a petition for review14 with the CA, docketed as CA-G.R. SP
No. 59849. Uy’s petition was consolidated with CA-G.R. SP No. 59308, the earlier petition filed
by PEA, assailing the same CIAC decision.

On August 1, 2000, the CIAC issued an Order15 denying Uy’s motion for correction of
computation.

On September 25, 2000, the CA rendered the now assailed Joint Decision dismissing both
petitions on both technical and substantive grounds. PEA’s petition was dismissed because the
verification thereof was defective. Uy’s petition, on the other hand, was dismissed upon a
finding that it was belatedly filed. Further, the CA found no sufficient basis to warrant the
reversal of the CIAC ruling, which it held is based on clear provisions of the contract, the
evidence on record and relevant law and jurisprudence.

The CA disposed thus:

_______________

11 Id., at pp. 317-318.

12 Id., at pp. 319-332.

13 CIAC Document Folder # 2, Document No. 9.

14 Rollo, pp. 355-401.

15 Id., at pp. 402-404.

8

8



“WHEREFORE, premises considered, the petitions in CA-G.R. SP No. 59308, entitled “Public
Estates Authority v. Elpidio S. Uy, doing business under the name and style of Edison
[D]evelopment & Construction,” and CA-G.R. SP No. 59849, “Elpidio S. Uy, doing business under
the name and style of Edison [D]evelopment & Construction v. Public Estates Authority,” are
both hereby DENIED DUE COURSE and accordingly DISMISSED, for lack of merit.

Consequently, the Award/Decision issued by the Construction Industry Arbitration Commission
on May 16, 2000 in CIAC Case No. 02-2000, entitled “Elpidio S. Uy, doing business under the
name and style of Edison [D]evelopment & Construction v. Public Estates Authority,” is hereby
AFFIRMED in toto.

No pronouncement as to costs.

SO ORDERED.”16

PEA and Uy filed motions for reconsideration. Subsequently, PEA filed with the CA an Urgent
Motion for Issuance of a Temporary Restraining Order and/or Writ of Preliminary Injunction,17
seeking to enjoin the CIAC from proceeding with CIAC Case No. 03-2001, which Uy had
subsequently filed. PEA alleged that the case involved claims arising from the same Landscaping
and Construction Agreement, subject of the cases pending with the CA.

On April 25, 2001, the CA issued the assailed Joint Resolution, thus:

“WHEREFORE, the present Motion/s for Reconsideration in CA-G.R. SP No. 59308 and CA-G.R.
SP No. 59849 are hereby both DENIED, for lack of merit.

Accordingly, let an injunction issue permanently enjoining the Construction Industry Arbitration
Commission from proceeding with CIAC CASE NO. 03-2001, entitled ELPIDIO S. UY, doing
business under the name and style of EDISON DEVELOPMENT &

_______________

16 Id., at pp. 111-112.

17 CA Rollo, pp. 532-539.

9

VOL. 589, JUNE 8, 2009

9


CONSTRUCTION v. PUBLIC ESTATES AUTHORITY and/or HONORABLE CARLOS P. DOBLE.

SO ORDERED.”18

PEA and Uy then came to us with their respective petitions for review assailing the CA ruling.
PEA’s petition was docketed as G.R. Nos. 147933-34, while that of Uy was docketed as G.R. Nos.
147925-26. The petitions, however, were not consolidated.

On December 12, 2001, this Court resolved G.R. Nos. 147933-34 in this wise:

“WHEREFORE, in view of the foregoing, the petition for review is DENIED. The Motion to
Consolidate this petition with G.R. No. 147925-26 is also DENIED.

SO ORDERED.”19

Thus, what remains for us to resolve is Uy’s petition, raising the following issues:

I

WHETHER OR NOT RESPONDENT COURT OF APPEALS HAS DEPARTED FROM THE ACCEPTED
AND USUAL COURSE OF JUDICIAL PROCEEDINGS IN DISMISSING PETITIONER UY’S PETITION IN
CA-G.R. SP NO. 59849 ON THE ALLEGED GROUND OF NON-COMPLIANCE WITH THE
REGLEMENTARY PERIOD IN FILING AN APPEAL

II

WHETHER OR NOT THE RESPONDENT COURT OF APPEALS, IN AFFIRMING THE DECISION OF THE
CIAC ARBITRAL TRIBUNAL INSOFAR AS IT DENIED CERTAIN CLAIMS OF PETITIONER UY, HAS
DECIDED A QUESTION OF SUBSTANCE NOT

_______________

18 Rollo, p. 117.

19 Public Estates Authority v. Uy, 423 Phil. 407, 419; 372 SCRA 180, 192 (2001).

10

10



IN ACCORDANCE WITH LAW AND THE APPLICABLE DECISIONS OF THE HONORABLE COURT

III

WHETHER OR NOT THE RESPONDENT COURT OF APPEALS ACTED WITHOUT OR IN EXCESS OF
ITS JURISDICTION OR WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF
JURISDICTION WHEN IT ENJOINED THE PROCEEDINGS IN CIAC CASE NO. 03-2001 IN ITS JOINT
RESOLUTION DATED 25 APRIL 2000, WHICH CASE IS TOTALLY DIFFERENT FROM THE CASE A
QUO20

We will deal first with the procedural issue.

Appeals from judgment of the CIAC shall be taken to the CA by filing a petition for review within
fifteen (15) days from the receipt of the notice of award, judgment, final order or resolution, or
from the date of its last publication if publication is required by law for its effectivity, or of the
denial of petitioner’s motion for new trial or reconsideration duly filed in accordance with the
governing law of the court or agency a quo.21

Admittedly, Uy received the CIAC decision on June 7, 2000; that instead of filing a verified
petition for review with

_______________

20 Rollo, pp. 781-782.

21 SEC. 4. Period of appeal.—The appeal shall be taken within fifteen (15) days from notice of
the award, judgment, final order or resolution, or from the date of its last publication, if
publication is required by law for its effectivity, or of the denial of petitioner’s motion for new
trial or reconsideration duly filed in accordance with the governing law of the court or agency a
quo. Only one (1) motion for reconsideration shall be allowed. Upon proper motion and the
payment of the full amount of the docket fee before the expiration of the reglementary period,
the Court of Appeals may grant an additional period of fifteen (15) days only within which to file
the petition for review. No further extension shall be granted except for the most compelling
reason and in no case to exceed fifteen (15) days. (Rule 43, Revised Rules of Civil Procedure.)

11

VOL. 589, JUNE 8, 2009

11


the CA, Uy filed a motion for correction of computation on June 16, 2000, pursuant to Section
9, Article XV of the Rules of Procedure Governing Construction Arbitration:

“Section 9. Motion for Reconsideration.—As a matter of policy, no motion for
reconsideration shall be allowed. Any of the parties may, however, file a motion for correction
within fifteen (15) days from receipt of the award upon any of the following grounds:

a. An evident miscalculation of figures, a typographical or arithmetical error;

b. An evident mistake in the description of any party, person, date, amount, thing or property
referred to in the award.

The filing of the motion for correction shall interrupt the running of the period for appeal.”

With the filing of the motion for correction, the running of the period to appeal was effectively
interrupted.

CIAC was supposed to resolve the motion for correction of computation within 30 days from
the time the comment or opposition thereto was submitted. In Uy’s case, no resolution was
issued despite the lapse of the 30-day period, and Uy considered it as a denial of his motion.
Accordingly, he elevated his case to the CA on July 24, 2000. But not long thereafter, or on
August 1, 2000, the CIAC issued an Order22 denying the motion for correction of computation.

Obviously, when Uy filed his petition for review with the CA, the period to appeal had not yet
lapsed; it was interrupted by the pendency of his motion for computation. There is no basis,
therefore, to conclude that the petition was belatedly filed.

The foregoing notwithstanding, inasmuch as the CA resolved the petition on the merits, we
now confront the substantive issue—the propriety of the CA’s affirmance of the CIAC decision.

_______________

22 Rollo, pp. 402-404.

12

12



Uy cries foul on the award granted by CIAC, and affirmed by the CA. He posits that PEA already
admitted its liability, pegged at P146,484,910.10, in its memorandum dated January 6, 2000.
Thus, he faults the CA for awarding a lesser amount.

We meticulously reviewed the records before us and failed to discern any admission of liability
on the part of PEA.

The PEA-PMO evaluation dated January 6, 2000,23 where PEA allegedly admitted its liability,
reads in full:

MEMORANDUM

For : Mr. Jaime R. Millan
Project Manager
Heritage Park Project

Subject : EDC’s Various Claim
Landscape Development Works

Revision shall be made on our evaluation dated 28 December 1999 concerning various claims of
contractor EDC-Landscape Development Works (Package IV), particularly on the claim on
Project Equipment on Standby (item a of the earlier evaluation).

Reference to item 4 of the Terms and Conditions of 1998 ACEL Rate Equipment Guidebook, the
CMO inadvertently did not consider are the wages and salaries of standby operator/driver
corresponding to the equipment standby being claimed.

Thus, the corresponding gross amount to be incorporated shall be P4,925,600.00 computed
based on the total man-months of each standby equipment being claimed.

A tabulation of the claims is shown hereinbelow:

Nature of Claim EDC Claim Works
Engineer Evaluation PMO
Evaluation
a. Project Equipment

_______________

23 Id., at p. 545.

13

VOL. 589, JUNE 8, 2009

13


on Standby P95,740,834.30 67,422,840.40 81,851,396.08
Equipment Operator/
Driver 4,925,600.00
b. Manpower on Standby 28,165,022.00 2,275,721.00 2,275,721.00
c. Topsoil Add’l Hauling
Distance 37,780,200.00 37,780,200.00 37,780,200.00
d. Water Truck Operating Cost 19,652,000.00 15,467,800.00
19,652,000.00
--------------------------------------------------------------------------------------------
Total P181,338,056.30 122,946,561.40 146,484,917.[08]

Further, it is being specified that the PMO maintains the earlier notes of the CMO in its memo
of 18 October 1999 and that legal interpretations on each item of claims is likewise enjoined.
Attached are pertinent documents for your review and reference

(Sgd.) (Sgd.)

ROGELIO H. IGNACIO FLORO C. URCIA

PMO-B Asst. Project Manager

By no stretch of the imagination can we consider this memorandum an admission of liability on
the part of PEA. First, nowhere in the memorandum does it say that PEA is admitting its liability.
The evaluation contained in the above memorandum is merely a verification of the accuracy of
EDC’s claims. As a matter of fact, the evaluation is still subject for review by the project
manager, whose decision on the matter requires the approval of the Heritage Park ExCom.
Second, Messrs. Ignacio and Urcia had no legal authority to make admissions on behalf of PEA.
Thus, even assuming that the evaluation contained in the memorandum was in the nature of an
admission, the same cannot bind PEA. Third, Uy filed his complaint with the CIAC because PEA
did not act on EDC’s various claims. This supports our conclusion that PEA
14

14



never admitted, but on the contrary denied, whatever additional liabilities were claimed by Uy
under the landscaping contract.

Neither do we find any admission of liability on the part of PEA during the proceedings before
the CIAC. What was admitted by PEA was that PMO evaluated the claim at the lesser amount of
P146,484,910 (Exh. “S”).24 The admission of the evaluation made by PEA cannot translate to an
admission of liability. There is simply no basis for Uy to claim that PEA had admitted its liability.

This issue disposed of, we now resolve Uy’s claims on the basis of the evidence presented.

Uy claims P95,740,834.30 as the standby equipment cost. CIAC, however, did not agree and
granted only P19,604,132.06 as the cost of standby equipment using its so-called equitable
method:

“[Uy] had mobilized manpower and equipment sufficient to do the landscaping works for the
entire 105 hectares. The unilateral reduction in scope of work made by [PEA] thus laid idle the
men and equipment of [Uy] in direct proportion to said reduction. In effect, therefore, Uy had
on hand manpower and equipment amounting to 42.85% in excess of that necessary to
perform the landscaping works for the reduced scope of work. [Uy] thus suffered costs in terms
of excess manpower and equipment in proportion to the reduced scope of work.

x x x x

The total contract period—original extensions—to complete the landscaping works for the
entire 105 hectares is 693 days. The reduction in scope of work 42.85% laid idle his equipment
by the same percentage of 42.85[%] or 296.95 days. Since [Uy] calculated his claim for idled
equipment on a per month basis, it is necessary to convert this into months. 296.95 days is
equivalent of 9.89 months. Multiplied by the rate of P1,982,217.60 per month of delay, this

_______________

24 See Terms of Reference, id., at p. 253.

15

VOL. 589, JUNE 8, 2009

15


would translate to P19,604,132.06 as the cost of idle time for equipment by reason of the
[delay].”25

Upon review of the records before us, we find a need to modify, by increasing, the award for
standby equipment cost.

CIAC found that PEA incurred delays in the turnover of work areas:

“The first delay was the turn-over of a portion of Area 1 A that was made on 17 April 1997. The
start of work on that area was scheduled for March, 1997. There was, therefore, a delay of
about one month. The second delay was the turn-over of a portion of Area 2 A that was made
on 20 October 1997. The start of work on that area was scheduled for May, 1997. There was,
therefore, a delay of about five months. The third delay was the turn-over of a portion of Area 2
B that was made on 05 March 1998. The start of work on that area was scheduled for mid-
February 1997. There was, therefore, a delay of more than one (1) year. Altogether, the several
periods of delayed turn-over of work areas total one year and six months or 546 days.”26

Surely, on the days that EDC was waiting for the turn over of additional work areas, it was
paying rentals for the equipment on standby. Yet, CIAC completely ignored these delays in
determining the cost of equipment on standby, reasoning that:

“It must be pointed out, however, that the division of the vast area to be landscaped into
distinct work areas with different start of work schedules under the PERT-CPM, [Uy] could
easily have shifted his equipment from an area where the delivery was delayed to the area
where there was an advanced turn-over.”27

This is wrong.

Records establish that EDC promptly commenced the landscaping work on every area that was
turned over. EDC, in

_______________

25 Rollo, pp. 281-283.

26 Id., at pp. 279-280.

27 Id., at p. 280.

16

16



fact, shifted its equipment where there was an advance delivery, if only to minimize the
additional expenses incurred by reason of the long delays in the turnover of the other work
areas. Thus, in addition to the award of P19,604,132.06 for cost of idle time for equipment by
reason of the reduction of scope of work, Uy is entitled to the cost of idle time for equipment
by reason of the delay incurred in the delivery of work areas.

The period of owner-caused delay was 546 days or 18.2 months. The rate given by the
Association of Carriers and Equipment Lessors (ACEL), Inc., and which was also used as basis by
CIAC in granting the costs for equipment on standby, was P1,982,271.60 per month of delay.
Considering that PEA was in delay for 564 days or 18.2 months, Uy is entitled to an additional
award of P36,076,360.32. Accordingly, he is entitled to an aggregate amount of P55,680,492.38
for the equipment rentals on standby.

As to the awards of P2,275,721.00, for the cost of idle manpower, and P6,050,165.05, for the
construction of the nursery shade net area, we find no reason to disturb the same, as Uy never
raised this issue in his petition.

Next, we resolve Uy’s claims for costs for additional hauling distance of topsoil and for
mobilization of water truck.

The approved hauling cost of topsoil was only P12.00/kilo-meter or P120.00 for the 10 kms
original source. Uy, however, claims that due to the delay in delivery of work areas, the original
source became depleted; hence, he was constrained to haul topsoil from another source
located at a much farther distance of 40 kms. Uy insists that the exhaustion of topsoil at the
original source was solely attributable to the delay in the turnover of the project site. Thus, he
claims from PEA the increased cost of topsoil amounting to P37,780,200.00.

Article 1724 of the Civil Code provides:

“ART. 1724. The contractor who undertakes to build a structure or any other work for a
stipulated price, in conformity with
17

VOL. 589, JUNE 8, 2009

17


plans and specifications agreed upon with the land-owner, can neither withdraw from the
contract nor demand an increase in the price on account of the higher cost of labor or
materials, save when there has been a change in the plans and specifications, provided:

(1) Such change has been authorized by the proprietor in writing; and

(2) The additional price to be paid to the contractor has been determined in writing by both
parties.”

By this article, a written authorization from the owner is required before the contractor can
validly recover his claim. The evident purpose of the provision is to avoid litigation for added
costs incurred by reason of additions or changes in the original plan. Undoubtedly, it was
adopted to serve as a safeguard or a substantive condition precedent to recovery.28

This provision is echoed in the Landscaping Contract, viz.:

ARTICLE IX
CHANGE OF WORK

x x x x

9.3. Under no circumstances shall PEA be held liable for the payment of change of work
undertaken without the written approval of the PEA General Manager x x x.

ARTICLE X
EXTRA WORK

x x x x

10.3. Under no circumstances shall PEA be held liable for the payment of extra work
undertaken without the written approval of the PEA General Manager to perform the said
work.29

Admittedly, EDC did not secure the required written approval of PEA’s general manager before
obtaining the topsoil from a farther source. As pointed out by the CIAC:

_______________

28 Powton Conglomerate, Inc. v. Agcolicol, 448 Phil. 643, 652; 400 SCRA 523, 528 (2003).

29 Rollo, pp. 141-142.

18

18



“There is no change order authorizing payment for the increased cost upon which this claim is
based. There is, therefore, no legal right based upon contract (the landscaping agreement or a
change order) that would impose such a liability upon [PEA]. In a lump sum contract, as that
entered into by the parties, the matter of how the contractor had made [a] computation to
arrive at [a] bid that he submits is completely irrelevant. The contract amount of delivered
topsoil is P780.00 per truckload of 5.5 cubic meters sourced from a distance of [10] km. or 100
[meters]. There is nothing in Exhibit “L” or in the landscaping contract (Exhibit “A”) that would
indicate an agreement of [PEA] to pay for the increase in hauling cost if the source of topsoil
exceeds 10 kilometers. Corollarily, there is also nothing therein to show that [PEA] would also
be entitled to decrease said costs by paying less if the distance would have been less than 10
kilometers. Had there been such a counterpart provision, there might have been more arguable
claim for [Uy]. Unfortunately, no such provision exists.”30

In Powton Conglomerate, Inc. v. Agcolicol,31 we emphasized:

“The written consent of the owner to the increased costs sought by the respondent is not a
mere formal requisite, but a vital precondition to the validity of a subsequent contract
authorizing a higher or additional contract price. Moreover, the safeguards enshrined in the
provisions of Article 1724 are not only intended to obviate future misunderstandings but also to
give the parties a chance to decide whether to bind one’s self to or withdraw from a contract.”

By proceeding to obtain topsoil up to a 40-kilometer radius without written approval from the
PEA general manager, Uy cannot claim the additional cost he incurred.

Uy further claims P19,625,000.00 for cost of mobilization of water trucks. He asserts that PEA
completely failed to provide the generator sets necessary to undertake the watering and/or
irrigation works for the landscaping and construction activities.32

_______________

30 Id., at p. 285.

31 Supra note 28, at p. 655; p. 531.

32 Rollo, p. 816.

19

VOL. 589, JUNE 8, 2009

19


Uy, however, admitted that MDC had already installed a deep well in the project site, and EDC
used it in its landscaping and construction activities.33 Under the contract, the operational
costs of the deep well and its appurtenant accessories, including the generator sets, shall be
borne by EDC:

“The CONTRACTOR shall shoulder all cost of electricity, maintenance, repairs, replacement of
parts, when needed, and all costs of operation of the deepwell/s, and its appurtenant
accessories, i.e. generator sets, etc. (which are already existing at the project site, constructed
by another Contractor) while such deepwell/s are being used by CONTRACTOR herein for its
landscaping and construction activities. These [deepwells] shall be turned over to PEA by
CONTRACTOR in good operating/usable condition as when it was first used by
CONTRACTOR.”34

Thus, Uy cannot claim additional cost for providing generator sets.

Uy also attempts to justify his claim for cost of mobilization of water trucks by alleging that the
water from the deep well provided by MDC and PEA was grossly insufficient to undertake the
watering works for the project; hence, he was constrained to mobilize water trucks to save the
plants from dying.

Indisputably, Uy mobilized water trucks for the landscaping projects and, certainly, incurred
additional costs. But like his claim for additional cost of topsoil, such additional expenses were
incurred without prior written approval of PEA’s general manager. Thus, he cannot claim
payment for such cost from PEA.

As aptly said by the CIAC:

“Since [Uy] had presumably intended all along to charge [PEA] for the water truck operating
costs, considering the very substantial amount of his claim, the prudence that he presumably
has, as an

_______________

33 TSN, March 25, 2000, p. 67.

34 Landscaping Agreement, Art. XXII, Sec. 21.11, Rollo, p. 150.

20

20



experienced general contractor of the highest triple A category, should have dictated that he
negotiate with the [PEA] for a change order or an extra work order before continuing to spend
the huge amounts that he claims to have spent. [Uy] did just that in relation to his much smaller
claim for the construction of the nursery shade x x x. He, however, made no effort to negotiate
with the PEA for a similar change order or extra work order to safeguard his even bigger
additional costs to operate the water trucks. No explanation was offered for such a mystifying
differential treatment. He cannot, therefore, pass on without any contractual basis, such
additional costs to the [PEA].”

Neither can we hold PEA liable based on solutio indebiti, the legal maxim that no one should
enrich itself at the expense of another. As we explained in Powton Conglomerate, Inc. v.
Agcolicol,35

“the principle of unjust enrichment cannot be validly invoked by the respondent who, through
his own act or omission, took the risk of being denied payment for additional costs by not giving
the petitioners prior notice of such costs and/or by not securing their written consent thereto,
as required by law and their contract.”

Uy cannot, therefore, claim from PEA the costs of the additional hauling distance of topsoil, and
of the mobilization of water trucks.

Uy also assails the grant of attorney’s fees equivalent to 10% of the total amount due. Citing
paragraph 24.4 of the Landscaping and Construction Agreement, Uy asserts entitlement to
attorney’s fees of twenty percent (20%) of the total amount claimed. He ascribes error to the
CIAC and the CA for reducing the stipulated attorney’s fees from 20% to 10% of the total
amount due.

Paragraph 24.4 of the agreement provides:

“Should the PEA be constrained to resort to judicial or quasi-judicial relief to enforce or
safeguard its rights and interests under

_______________

35 Supra note 28, at pp. 655-656; p. 531.

21

VOL. 589, JUNE 8, 2009

21


this Agreement, the CONTRACTOR if found by the court or [the] quasi-judicial body, as the case
[may be], to have been at fault, shall be liable to PEA for attorney’s fees in an amount
equivalent to twenty percent (20%) of the total [amount] claimed in the complaint, exclusive of
[any] damages and costs of suit.”36

Clearly, the cited provision cannot support Uy’s insistence. Paragraph 24.4 on stipulated
attorney’s fees is applicable only in complaints filed by PEA against the contractor. The
provision is silent on the amount of attorney’s fees that can be recovered from PEA.

Besides, even assuming that Paragraph 24.4 is applicable, the amount of attorney’s fees may be
reduced if found to be iniquitous or unconscionable. Thus:

“Articles 1229 and 2227 of the Civil Code empower the courts to reduce the penalty if it is
iniquitous or unconscionable. The determination of whether the penalty is iniquitous or
unconscionable is addressed to the sound discretion of the court and depends on several
factors such as the type, extent, and purpose of the penalty, the nature of the obligation, the
mode of breach and its consequences.”37

The Court finds Uy’s claim for attorney’s fees equivalent to 20% of whatever amount is due and
payable to be exorbitant. The CIAC and the CA, therefore, correctly awarded 10% of the total
amount due and payable as reasonable attorney’s fees.

Finally, on the propriety of the writ of injunction.

Uy asserts that the CA acted without or in excess of jurisdiction when it enjoined the
proceedings in CIAC Case No. 03-2001, despite the fact that the said case is totally different
from the instant case.

_______________

36 Rollo, p. 152.

37 Titan Construction Corporation v. Uni-Field Enterprises, Inc., G.R. No. 153874, March 1,
2007, 517 SCRA 180, 190.

22

22



By grave abuse of discretion is meant such capricious and whimsical exercise of judgment
equivalent to lack of jurisdiction. Mere abuse of discretion is not enough. It must be grave, as
when it is exercised arbitrarily or despotically by reason of passion or personal hostility; and
such abuse must be so patent and so gross as to amount to an evasion of a positive duty or to a
virtual refusal to perform the duty enjoined or to act at all in contemplation of law.38

The CA granted PEA’s prayer for the injunctive writ not without reason. We quote its Joint
Resolution, viz.:

“[T]here is no question that Elpidio S. Uy’s amended complaint is based on the same
Landscaping and Construction Agreement, as he himself admits. The claims pertinent thereto
had already been arbitrated and passed upon in CIAC CASE NO. 02-2000 and the decision
therein was already elevated to Us for review and, in view of Our joint decision in the instant
petitions, a reconsideration thereof.

Based on the foregoing, We are inclined to grant the prayer of PEA to enjoin the CIAC from
further proceeding with CIAC CASE NO. 03-2001, considering that the allegations therein
constrain Us to apply the doctrine of litis pendentia, which has for its requisites: (a) identity of
parties, or at least such parties who represent the same interests in both actions; (b) identity of
rights asserted and relief prayed for, the relief being founded on the same facts; and (c) the
identity with respect to the two preceding particulars in the two (2) cases is such that any
judgment that may be rendered in the pending case, regardless of which party is successful,
would amount to res judicata in the other case. Forum shopping exists where the elements of
litis pendentia are present or where a final judgment in one case will amount to res judicata in
the other. The principle of bar by prior judgment raised by the PEA, i.e., res judicata, finds
application only upon a showing of a final judgment as one of its requisites, which is not yet
present under the present circumstances.

At this juncture, it bears stressing that the essence of forum shopping is the filing of multiple
suits involving the same parties for the same cause of action, either simultaneously or
successively, for the

_______________

38 Eastern Assurance & Surety Co. v. LTFRB, 459 Phil. 395, 412; 413 SCRA 75, 88 (2003).

23

VOL. 589, JUNE 8, 2009

23


purpose of obtaining a favorable judgment. Accordingly, based on Our holding that the final
resolution of the instant petitions takes precedence as it is the appropriate vehicle for litigating
the issues between the parties, now that the instant petitions before Us have come full circle
with this joint resolution and, if the parties herein so choose, may seek further relief to the High
Tribunal afterwards. We cannot allow CIAC CASE NO. 03-2001 to proceed because to do so
would render inutile the proscriptions against forum shopping which is frowned upon in Our
jurisdiction. Hence, the grant of injunctive relief. This must be done, or else a travesty of the
efficient administration of justice would lamentably result.”39

Indeed, the assailed resolution shows no patent or gross error amounting to grave abuse of
discretion. Neither does it show an arbitrary or despotic exercise of power arising from passion
or hostility.

At this point, it should be stated that the Court is not convinced by Uy’s argument that the
claims under CIAC Case No. 03-2001 are different from his claims in CIAC Case No. 02-2000.
There is only one cause of action running through Uy’s litigious undertakings—his alleged right
under the Landscaping and Construction Agreement. Therefore, the landscaping agreement is
indispensable in prosecuting his claims in both CIAC Cases Nos. 02-2000 and 03-2001.

As we held in Villanueva v. Court of Appeals:40

“A party, by varying the form or action or by bringing forward in a second case additional
parties or arguments, cannot escape the effects of the principle of res judicata when the facts
remain the same at least where such new parties or matter could have been impleaded or
pleaded in the prior action.”

WHEREFORE, the petition is PARTIALLY GRANTED. The assailed Joint Decision and Joint
Resolution of the Court of Appeals in CA-G.R. SP Nos. 59308 and 59849 are AF-

_______________

39 Rollo, pp. 116-117. (Citations omitted.)

40 G.R. No. 110921, January 28, 1998, 285 SCRA 180, 192-193.

24

24



FIRMED with MODIFICATIONS. Respondent Public Estates Authority is ordered to pay Elpidio S.
Uy, doing business under the name and style Edison Development and Construction,
P55,680,492.38 for equipment rentals on standby; P2,275,721.00 for the cost of idle
manpower; and P6,050,165.05 for the construction of the nursery shade net area; plus interest
at 6% per annum to be computed from the date of the filing of the complaint until finality of
this Decision and 12% per annum thereafter until full payment. Respondent PEA is further
ordered to pay petitioner Uy 10% of the total award as attorney’s fees.

SO ORDERED.

Ynares-Santiago (Chairperson), Corona,** Velasco, Jr.*** and Peralta, JJ., concur.

Petition partially granted, assailed joint decision and joint resolution affirmed with
modifications.

Notes.—E.O. No. 1008 vests on the Construction Industry Arbitration Commission (CIAC)
original and exclusive jurisdiction over disputes arising from or connected with construction
contracts entered into by the parties who have agreed to submit their case to voluntary
arbitration. (David vs. Construction Industry and Arbitration Commission, 435 SCRA 654 [2004])

A level of work accomplishment of 97.56% complete would, by any rational norm, be
considered as substantial to warrant full payment of the contract amount, less actual damages
suffered by the principal. (Diesel Construction Co., Inc. vs. UPSI Property Holdings, Inc., 549
SCRA 12 [2008])

——o0o——

Uy vs. Public Estates Authority , 589 SCRA 1, G.R. Nos. 147925-26 June 8, 2009

Uy Vs Public Estates

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Uy Vs Public Estates

Uploaded by

Copyright:

Available Formats

CASES

You might also like