FINAL ARBITRATION AWARD

Sitting as Arbitrators:
Sarah Jane Ciantar
Michelle Y. Libres
Goldy Jane A. Pusa

In the Matter of Arbitration Between:

SPOUSES JOHN AND JANE DOE,

Represented by:
Rejoice Epelipcia
Jai Noreena Balili
Caryl Vivien Tomanda
- Claimant

and

ABC CONSTRUCTION
Represented by:
Ma Trisky R. Aguilar
Bendever Gerona
Maria Gina Montederamos
- Respondent

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I. Factual Background

On January 15, 2018, spouses John and Jane Doe,

hereinafter referred to as the OWNERS entered into a
Construction Agreement with ABC Corporation, a single-
proprietorship construction enterprise duly organized and
existing under the laws of the Philippines and represented
by Juan Dela Cruz, hereinafter referred to as the
CONTRACTOR.

In the Construction Agreement, it was stated that

the owners shall construct a two-storey residential building
with roof deck and penthouse located at Basak, Rizal,
Maasin City, Southern, Leyte, the same to be funded by a
construction or housing loan from a reputable bank. In the
same agreement, the contractor presented and warranted to
the owners that it is capable, competent and a duly
registered construction enterprise licensed and authorized
by law to construct and complete the aforementioned
residential building in accordance with the plans and
specifications thereto.

On January 22, 2018, the parties agreed on the “AS-

STAKED PLAN” which is hereinafter referred to as the
Original Structural Plan for the residential building.

On July 31, 2019, ABC Construction turned over to

the spouses Doe the constructed residential building.
Allegedly, days after the turnover spouses Doe noticed that
the ceiling of the ground floor was slightly damaged and

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 that if not repaired will eventually collapsed. Consequently,
the collapsed happened on August 16, 2019.

The spouses alleged that the non-compliance of

ABC Construction of the Change Order or the Revised
Structural Plan resulted in many problems including the
collapse of the ground floor ceiling, hence demand for
specific performance on repairing the damaged.

The ABC Construction, rejected the claim and

denied the contents of the Change Order or Revised
Structural Plan thus, it has no liability against the spouses.

II. THE PROCEEDINGS

Before submitting the request for Arbitration, the

claimant sent a letter of Demand for Specific Performance on
August 19, 2019, August 26, 2019 and September 2, 2019
respectively. The letters were left unanswered by ABC
Construction.

On September 9, 2019, the claimant sent a letter to

the Construction Industry Arbitration Commission, in which
the Commission was requested to “Initiate Arbitration
Proceedings concerning the dispute over the non-
compliance of agreed design specifications of ABC
Corporation based on the Construction Agreement and
Change Order.

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 An Arbitration Tribunal was selected as the mode
of arbitration and the appointed Arbitrators are Sarah Jane
Ciantar, Michelle Libres and Goldy Jane Pusa.

The Tribunal issued its first procedural order on

September 18, 2019, inviting the claimant to present a
Statement of Claim. The Claimant submitted a Statement of
Claim dated September 25, 2019. In the Statement of Claim,
the claimant two prayers were listed, first the fulfillment of
ABC Construction’s obligation to repair and replace the
damage part of the residential building and second the
payment of P 200,000 as damages.

On October 2, 2019, the Tribunal invited the

respondent ABC Construction to present it a Statement of
Defense. The respondent deny liability and alleged that the
agreed design specifications were faithfully followed. The
respondent vehemently denies the existence of a Revised
Structural Plan and Change Order.

On October 9, 2019, a preparatory meeting was held

and the tribunal requested both parties to submit their
respective Judicial Affidavits of the witnesses as well as the
corresponding evidence. The Claimant submitted the
requested documents on October 23, 2019 while the
respondent submitted theirs a week later on October 30,
2019. In the said preparatory meeting, a final hearing was set
on October 13, 2019.

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 A final hearing took place and the following
persons were heard: (1) for the claimant: Mrs. Jane Doe,
Engr. Jose Josephy and Cassie Mondregun, and (2) for
respondent: Engr. Juan Dela Cruz, Engr. Julia Barretto and
Brgy. Captain Isabel Rule.

Before the final hearing was closed, a final

statement from the both parties were presented.

III. THE CLAIMS

The Claimant, as they finally presented their claims,

requested the Tribunal:

(i) to order the respondent ABC Corporation to fulfill its

obligation to remove and replace materials to comply
with the agreed specifications based on Article 6,
paragraph 3 and 4 of the Construction Agreement; and

(ii) to order the respondent to pay the Claimant the

amount of P200, 000 as damages.

The respondent has rejected the claims and declared

no amount can be admitted as reasonable.

The parties are at a dispute of whether or not ABC

Construction is liable for its nonconformity with the
Construction Agreement and Change Order.

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IV. STATEMENT BY THE PARTIES

The Claimant

The Construction Agreement was signed on January

15, 2019. In the said agreement, Article 6 paragraphs 3 and 4
provides that:
If the work or any part thereof shall be found to be not in
conformity with the agreed specifications, the CONTRACTOR shall
forthwith remove and replace such materials to comply with the
agreed specifications.
All materials and workmanship are guaranteed by
the CONTRACTOR for a period of six (6) months from the date
of the turn-over of the construction.

The claimant based their claims on the

aforementioned provision of the Construction Agreement.

At the hearing, Mrs. Jane Doe stated that on

September 9, 2018, they executed together with Engr. Dela Cruz
a Change Order on the proposed Revised Structural Plan. That
on September 13, 2019, they have agreed on the Revised
Structural Plan which is referred hereinto as “AS STAKED
PLAN”.

Mrs. Jane Doe further stated that the Change Order

was brought about by the nature of their family business which
is chain of food restaurants and they wanted to make the 2 nd
floor as extra storage and other supplies and also not to forego
with the planned penthouse at the 3rd floor.

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 The Change Order dated September 9, 2018 and the
Revised Structural Plan dated September 13, 2018 have Engr.
Dela Cruz’ signature. Likewise, in the same documents, there is
a signature of Engr. Gerald Anderson, identified as the Project
Engineer from ABC Construction who headed the construction
of the residential building.

Mrs. Doe also mentioned that there was a collapse

days after the turnover and upon seeing the damage, she
immediately called Engr. Anderson. Since it was provided in
the Construction Agreement, and within the 6-month warranty
period, the contractor is still liable to remove and replace if
damages.

Engr. Joseph Josephy, the company engineer of

Doe’s family was also presented and he stated that he acted as
inspectorate while the project was going on. He testified that he
was present when the Revised Structural Plan was executed
and stated that the Change Order indicated that the
concrete slab of the ground floor ceiling has been modified to
withstand the load capacity of the equipment as well as the
supplies to be stored in the upper floor. He also identified,
Engr. Gerald Anderson as the Project Engineer of the
residential building construction.

Consequently, the day after the spouses notice a

defect on the ground floor Engr. Joseph Josephy and advised
the spouses that the defect be rectified as soon as possible
because it might eventually collapse. Unfortunately, the

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 collapsed indeed happened, according to Engr. Josephy he
immediately inspected the building. Proof of the collapsed such
as photos taken by his assistant were shown in the hearing.

The family secretary of the Doe’s. Cassie

Mondragun presented proof of subsequent meetings between
the parties, photos were taken on the said meeting. She testified
that Engr. Gerald Anderson had a meeting with the spouses to agree
on the changes as well as the signing of the Change Order.
Furthermore, she stated that she was with Mrs. Doe when on
August 16, 2019 when the collapsed took place and
photographs of the same were shown.

In their closing statement, the claimant emphasized

five (5) points: (1) that they have just cause to demand for
damages, (2) they were able to lay down the series of events, (3)
proven the authenticity of the Change Order, (4) the actual date
of turnover was July 31, 2019 and not September and (5) they
have paid faithfully the contractor with the amount agreed
upon. Thus, ABC Corporation is liable.

The Respondent

The respondent fervently denied and rejected the

allegation of the claimant based on the contents of the Change
Order dated September 9, 2018 and the Revised Structural Plan
dated September 13, 2018.

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 In the statement of Engr. Juan dela Cruz, he
admitted that he is the engineer handling the project and that
he has personal knowledge on the Construction Agreement
entered with the Spouses Doe. He further stated that the
turn-over was on September 9, 2018 and that Engr.
Barreto who is a third party engineer was also present in the
turn-over of the residential building. Finally, he stated that
the project was based on the agreed specifications based on the
original structural plan. Engr. Dela Cruz denied the contents of
the Change Order as well as the role of Engr. Gerald
Anderson on the project. Likewise, Engr. Dela Cruz
vouched only for the Original Structural Plan.

Engr. Dela Cruz admitted further that he had

personal knowledge on the collapse and contacted Engr. Julia
Barreto to conduct an inspection. Subsequently, he informed
Mr. John Doe of the recommendation on the need to retro fit the
upper ground floor however, no agreement was reached since
it would cost more or less P100, 000 and allegedly, Mr. Doe
insisted that it is still covered by the six-month warranty
period.

Engr. Julia Barreto, a third party engineer hired by

ABC Construction was said to have inspected the residential
building on May 10, 2019. She noticed that the roof deck was
converted into a cold storage. She further stated that she has
personal knowledge that the cause of the cracks on the roof
deck was the heavy appliances and supplies thereto.

A document, hereinafter referred to as Memorandum of

Turnover dated September 9, 2018 was presented by Engr. Dela

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 Cruz. Allegedly, the said document has the signature of
spouses Doe and Engr. Josephy. In relation to the said
Memorandum of Turnover, Isabel Rule, the Barangay
Captain of Basak Rizal, Maasin City averred that she witnessed
together with the whole Barangay Council the turnover
ceremony dated September 9, 2018. She also testified that
she had personal knowledge on the signed Memorandum of
Turnover, she signed the said document as witness
thereto together with Kagawad Baby Pueblas.

In their closing statement, the respondent

emphasized that the claims have no merit and that (1) the
building was constructed following the Original Structural
Plan, (2) the turnover was dated September 8, 2018 as
evidenced by the Memorandum of Turnover and (3) the
probable cause of the collapse was the overload of appliances
and supplies.

V. REASOND FOR THE AWARD

The controversy pivots on provisions in the

Construction Agreement entered into by the parties, which
states that:

Article 6 DEFECTIVE WORKD AND MATERIALS

If the work or any part thereof shall be

found to be not in conformity with the agreed
specifications, the CONTRACTOR shall forthwith
remove and replace such materials to comply with
the agreed specifications.

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 All materials and workmanship are
guaranteed by the CONTRACTOR for a period of
six (6) months from the date of the turn-over of
the construction.

It is also provided under Article 8 of the said

Construction Agreement that:

ARTICLE 8. CHANGES AND ADDITIONS

In the event additional or revised works not

shown or indicated in the approved Design and
Contact Documents are or ordered by the OWNERS,
such additional or revised works required or ordered
by the OWNERS shall communicate in writing by
the OWNERS to the CONTRACTOR through
written change orders or memoranda for mutual
discussion, approval and documentation and signing
thereof by the parties to this Agreement.

In the cross examination, Engr. Juan de la Cruz

vouched that there is only one original Structural Plan and
denied the contents of the Change Order and Revised
Structural Plan.

However, the spouses Doe was able to produce the

documents in original copy bearing Engr. Dela Cruz’ signature.
The falsity of such documents was never raised in the hearing.
The respondent neither refuted the falsity of the signatures nor
presented evidence to counter the contents of the same.

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 The Supreme Court's ruling in Lorenzana v. Lelina, G.R.
No. 187850, August 17, 2016, is instructive:

Nevertheless, evidence not objected to is deemed

admitted and may be validly considered by the court in
arriving at its judgment.

In line with the above-mentioned jurisprudence, this

Tribunal upholds the claim of the spouses Doe the existence of
the Change Order and Revised Structural Plan.

Respondent posits that their obligation ended six months

after the date of turn-over. However, this Tribunal beg to
differ. With the existence of the Change Order and Revised
Structural Plan, the date in the Memorandum of Turn-Over had
been moot and academic.

Thus, the date on which the six (6) month period based
should on the reckon from the date after the building was
modified/completed according to the Change Order and
Revised Structural Plan.

Considering that despite existence of the Change Order

and Revised Structural Plan, there is an inaction on the part of
the respondents which resulted to the collapse of the building.
Hence, we find the respondents liable.

In relation to who bears the costs of the repairs, in the

case of Swire Realty Development Corporation vs Specialty

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Contracts General and Construction Services, Inc and Jose
Javellana, G.R. No. 188027, August 09, 2017, the Supreme Court
held:

Evident from the foregoing facts, there being a

clear breach of contract on the part of the respondents
when they failed to fully comply with their obligation
under the contract, having accomplished only 90% of the
waterproofing works within the time agreed upon, and
failing to perform the necessary repairs,

In consonance with Article 1167 of the New

Civil Code, which provides:

Article 1167. If a person obliged to do

something fails to do it, the same shall be executed at
his cost.

This same rule shall be observed if he does it

in contravention of the tenor of the obligation.
Furthermore, it may be decreed that what has been
poorly done be undone.

The Claimant was able to establish through

documentary evidence the following:

(1) they were able to lay down the series of events; and
(2) proven the authenticity of the Change Order.

Hence, the non-compliance of ABC Construction of

the Change Order or the Revised Structural Plan resulted in

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 many problems including the collapse of the ground floor
ceiling, hence the demand for specific performance on
repairing the damaged is proper.

However, this Tribunal rejects the claim for

damages and deem it proper not to award the amount of P
200,000. The claimant failed to adduce concrete proof for the
claim of damages. No documentary and parole evidence
were presented to substantiate the claim for damages.

VI. THE AWARD

Wherefore, the award is hereby rendered:

1. ABC Construction at its own costs shall fulfill its

obligation to remove and replace materials to comply
with the agreed specifications based on Article 6,
paragraph 3 and 4 of the Construction Agreement;

2. No damages shall be awarded as no concrete proof was

adduced thereof;

3. Spouses Doe and ABC Construction shall bear own

litigation costs; and

4. Spouses Doe and ABC Construction shall pay P50, 000 as

arbitration costs.

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 ________________ _________________
Sarah Jane Ciantar Michelle Libres

____________________
Goldy Jane Pusa

Copy furnished:

1. Spouses John and Jane Doe, Claimant.

2. ABC Construction, Respondent.

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