210841-2017-Department of Public Works and Highways V.20220205-11-1oo5z1p

THIRD DIVISION
[G.R. No. 179732. September 13, 2017.]
DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS , petitioner,

vs. CMC/MONARK/PACIFIC/HI-TRI JOINT VENTURE ,
respondent.
DECISION
LEONEN, J : p
As the administrative agency tasked with resolving issues pertaining to

the construction industry, the Construction Industry Arbitration Commission
enjoys a wide latitude in recognition of its technical expertise and
experience. Its factual findings are, thus, accorded respect and even finality,
particularly when they are affirmed by an appellate court. HTcADC
This is a Petition for Review on Certiorari 1 assailing the Court of

Appeals Decision 2 dated September 20, 2007 in CA-G.R. SP Nos. 88953 and
88911, which affirmed the March 1, 2005 Award of the Construction Industry
Arbitration Commission (CIAC).
On April 29, 1999, Republic of the Philippines, through the Department
of Public Works and Highways (DPWH), and CMC/Monark/Pacific/Hi-Tri J.V.
(the Joint Venture) executed "Contract Agreement for the Construction of
Contract Package 6MI-9, Pagadian-Buug Section, Zamboanga del Sur, Sixth
Road Project, Road Improvement Component Loan No. 1473-PHI" 3
(Contract) for a total contract amount of P713,330,885.28. 4
Parts I (General Conditions with forms of tender + agreement) and II
(Conditions of Particular Application + Guidelines for Preparation of Part II
Clauses) of the "Conditions of Contract for Works of Civil Engineering
Construction of the Federation International Des Ingenieurs — Conseils"
(Conditions of Contract) formed part of the Contract. 5 DPWH hired BCEOM
French Engineering Consultants to oversee the project. 6
On October 23, 2002, or while the project was ongoing, the Joint
Venture's truck and equipment were set on fire. On March 11, 2003, a bomb
exploded at Joint Venture's batching plant located at Brgy. West Boyogan,
Kumalarang, Zamboanga del Sur. According to reports, the bombing incident
was caused by members of the Moro Islamic Liberation Front. 7
The Joint Venture made several written demands for extension and
payment of the foreign component of the Contract. There were efforts
between the parties to settle the unpaid Payment Certificates amounting to
P26,737,029.49. Thus, only the foreign component of US$358,227.95 was up
for negotiations subject to further reduction of the amount on account of
payments subsequently received by the Joint Venture from DPWH. 8
CD Technologies Asia, Inc. © 2022 cdasiaonline.com
In a letter dated September 18, 2003, BCEOM French Engineering
Consultants recommended that DPWH promptly pay the outstanding monies
due the Joint Venture. 9 The letter also stated that the actual volume of the
Joint Venture's accomplishment was "2,732m 2 of hardrock and 4,444m3 of
rippable rock," making the project 80% complete when it was halted. 10
On March 3, 2004, the Joint Venture filed a Complaint 11 against DPWH
before CIAC. Joint Venture's claims, which amounted to P77,206,047.88,
were as follows:
CLAIMANT'S CLAIM
Foreign component of the project of Php12,502,155.46
(US$358,227.95 @Php34.90)
Interest as of December 3, 2003
(Computation for the damages & Php14,418,603.47

losses incurred: Php10,297,090.42
+ (US$118,094.93 @34.90)
Equipment and financial losses 5,080,000.00
Additional costs in the contract 20,311,072.66

price under Clause 69.4
Adjustment in the contract price 18,626,805.81

under Presidential Decree No. 1594
(9,313,402.91 in pesos and
266,859.68 in dollar)
Effect of the bombing incident 6,267,410.48
TOTAL CLAIMS Php77,206,047.88

12
Meanwhile, on July 8, 2004, the Joint Venture sent a "Notice of Mutual

Termination of Contract" 13 to DPWH requesting for a mutual termination of
the contract subject of the arbitration case. This is due to its diminished
financial capability due to DPWH's late payments, changes in the project
involving payment terms, peace and order problems, and previous
agreement by the parties.
On July 16, 2004, then DPWH Acting Secretary Florante Soriquez
accepted the Joint Venture's request for mutual termination of the contract.
14
After hearing and submission of the parties' respective memoranda, 15

CIAC promulgated an Award 16 on March 1, 2005, directing DPWH to pay the
Joint Venture its money claims plus legal interest. CIAC, however, denied the
Joint Venture's claim for price adjustment due to the delay in the issuance of
a Notice to Proceed under Presidential Decree No. 1594 or the "Policies,
Guidelines, Rules and Regulations for Government Infrastructure Contracts."
17 The dispositive portion of the Award read: aScITE
WHEREFORE, premises considered and in view of the resolution

of the issues presented, an Award is hereby rendered ordering the
Respondent DPWH to pay the Claimant the following:
1. Foreign Component of US$358,227.95 plus legal interest
of US$18,313.79;
2. Equipment and Plant Losses of P5,080,000, plus legal
interest of P464,298.08;
3. Additional Costs resulting from the Bombing of
P6,267,410.48 plus legal interest of P320,410.63, and
4. Additional Costs in the contract price under Clause 69.4
of P20,311,072.66 plus legal interest of [P]1,038,368.78. The claim of
Claimant for adjustment under [Presidential Decree No.] 1594 of
P18,626,805.81 is hereby denied.
Pursuant to the case of Eastern Shipping Lines vs. Court of
Appeals, 234 SCRA 78, the foregoing monetary awards shall earn
interest at the rate of 12% per annum from the date the Award
becomes final and executor until its satisfaction.
SO ORDERED. 18
DPWH and the Joint Venture filed their respective petitions for review
before the Court of Appeals. 19
The Court of Appeals in its Decision 20 dated September 20, 2007,
sustained CIAC's Award with certain modifications and remanded the case to
CIAC for the determination of the number of days' extension that the Joint
Venture is entitled to and "the conversion rate in pesos of the awarded
foreign exchange payments stated." 21
The Court of Appeals held that CIAC did not commit reversible error in
not awarding the price adjustment sought by the Joint Venture under
Presidential Decree No. 1594 since it was the Asian Development Bank's
Guidelines on procurement that was applicable and not Presidential Decree
No. 1594. 22
The Court of Appeals also held that CIAC did not err in not awarding
actual damages in the form of interest at the rate of 24% since there was no
provision for such interest payment in the Contract. However, the Court of
Appeals ruled that CIAC was correct when it awarded legal interest. 23
The Court of Appeals sustained the Joint Venture's argument on the
non-inclusion of a clear finding of its entitlement to time extensions in the
dispositive portion of the CIAC Award. 24 The Court of Appeals held that CIAC
did not clearly dispose of the matter:
Yet, a close scrutiny of the foregoing disposition shows that it does
not refer to the 133 days as per Variation Order No. 2 since CIAC
made mention that the project is already terminated and the entire
volume under said Order "will not be consumed." Whether or not the
Claimant then deserves to get the full 133 calendar days is a matter
that has to be clearly resolved. On this, We hold that this Court is not
prepared to engage into a technical bout that only the expertise of
the CIAC can pass upon. 25
On the other hand, the Court of Appeals did not accept DPWH's
argument that the case was already moot and academic. According to the
Court of Appeals, when the Joint Venture requested for the mutual
termination of the Contract on July 8, 2004, it did not waive its right to be
paid the amounts due to it. 26
The Court of Appeals, however, raised a concern with regard to CIAC's
order for DPWH to pay its liabilities in US dollars. It held that the parties have
agreed that "all payments for works carried out after 31 May 2003 and
related price escalation claims and retention releases in the contract will be
in pesos only, therefore no foreign exchange payments." This was never
contested by the Joint Venture; hence, it may be presumed that it
acquiesced to the request of the DPWH. 27
The dispositive portion of the Court of Appeals Decision read:
WHEREFORE, premises considered, the assailed Decision is
hereby AFFIRMED with MODIFICATION to include the award to the
Claimant of time extensions per: 1) delay in payment at One Hundred
Eight (108) days, and 2) extension Twenty-Nine (29) days due to
peace and order situation.
Re 1) the award of time extension per Variation Order No. 2 —
as stated earlier elsewhere in the Decision, the CIAC must make a
vivid presentation of the number of calendar days the Claimant is
entitled to, and 2) the conversion rate in pesos of the awarded foreign
exchange payments states, supra, in the assailed Decision, these
matters are hereby REMANDED to the CIAC for proper disposition.
Accordingly, the rest of the challenged Decision STANDS. HEITAD
SO ORDERED. 28 (Emphasis in the original)

Petitioner DPWH filed the present Petition for Review 29 assailing the
Court of Appeals Decision. In a Resolution 30 dated January 28, 2008, this
Court required respondent Joint Venture to file its Comment.
On March 27, 2008, respondent filed its comment/opposition. 31
Petitioner thereafter filed its Reply 32 on September 3, 2008.
The issues for resolution in this case are:
First, whether or not the case has become moot and academic due to
the parties' mutual termination of the Construction Contract;
Second, whether or not the case is premature due to Joint Venture's
non-compliance with the doctrine of exhaustion of administrative remedies;
Third, whether or not the Joint Venture is entitled to the foreign
component of the Project in the amount of US$358,227.95;
Fourth, whether or not the Joint Venture is entitled to time extensions
due to Variation Order No. 2, peace and order problems, and delay in
payment;
Fifth, whether or not the Joint Venture is entitled to a price adjustment
due to the delay of the issuance of the Notice of the Proceed;
Sixth, whether or not the Asian Development Bank Guidelines on
Procurement or Presidential Decree 1594 applies with regard to price
adjustments due to the delay of the issuance of the Notice to Proceed;
Seventh, whether or not the Joint Venture is entitled to its claim for
equipment and financial losses due to peace and order situation (additional
costs);
Eighth, whether or not the Joint Venture is entitled to actual damages
and interest on its claims; and
Finally, whether or not the Joint Venture should be paid in local
currency or in U.S. dollars.
According to respondent Joint Venture, the Petition suffers from a fatal

defect in its certification against non-forum shopping. The verification and
certification against non-forum shopping was signed only by petitioner's
counsel, Atty. Mary Jean D. Valderama, from the Office of the Solicitor
General. 33
This Court has long enforced the strict procedural requirement of
verification and certification against non-forum shopping. 34 It is settled that
certification against forum shopping must be executed by the party or
principal and not by counsel. 35 In Anderson v. Ho, 36 this Court explained
that it is the party who is in the best position to know whether he or she has
filed a case before any courts. 37 It is clear in this case that counsel for
petitioner, Atty. Valderama, was not clothed with authority to sign on
petitioner's behalf.
In Resolution 38 dated December 10, 2007, this Court noted petitioner's
Manifestation that after the petition was posted, the verification page signed
by DPWH Secretary Hermogenes E. Ebdane was submitted to the Office of
the Solicitor General. In the same Resolution, this Court granted the Office of
the Solicitor General's motion to admit the attached verification and to
substitute and attach it to the petition.
This Court ruled before that: "the lack of a certification against forum
shopping, unlike that of verification, is generally not cured by its submission
after the filing of the petition." 39 Nevertheless, exceptions 40 exist, as in the
case at bar, and it is more prudent to resolve the case on its merits than
dismiss it on purely technical grounds. 41
II
In the assailed Decision, the Court of Appeals held that the mutual
termination of the Contract by the parties did not render the case moot and
academic. 42 Accordingly, when respondent requested for the mutual
termination of the Contract, it did not waive its right to be paid the amounts
due to it as shown in its letter:
In view of the above considerations, we hereby respectfully
request for MUTUAL TERMINATION of our Contract. Our availment of
this remedy does not mean though that we are waiving our rights (1)
to be paid for any and all monetary benefits due and owing to us
under the contract such as but not limited to payments for works
already done, materials delivered on site which are intended solely
for the construction and completion of the project, price escalation,
etc., (2) and without prejudice to our outstanding claims and
entitlements that are lawfully due to us. 43 (Emphasis supplied) ATICcS
Petitioner argues that the Court of Appeals erred in rendering the

assailed Decision, considering that the case is already moot and academic.
Petitioner insists that "the parties' mutual termination of their contract prior
to the adjudication of this case by the CIAC on March 1, 2005, rendered the
proceedings before CIAC moot and academic." 44
According to petitioner, the principle of unjust enrichment does not
apply in this case "because respondent has incurred negative slippage/delay
in carrying out their contractual obligations due to reasons attributable to it.
Moreover, the parties' mutual termination of the contract rendered the
proceedings before the CIAC moot because there was no more contract to be
enforced." 45
Petitioner's argument is untenable.
Indeed, the rule is that courts will not rule on moot cases. 46 However,
the moot and academic principle is "not a magical formula that can
automatically dissuade the courts in resolving a case." 47 Exceptions exist
that would not prevent a court from taking cognizance of cases seemingly
moot and academic. 48
In Carpio v. Court of Appeals, 49 this Court held that a case could not be
deemed moot and academic when there remains an unresolved justiciable
controversy. In that case, this Court affirmed the Court of Appeals' assailed
resolutions, which denied petitioner's prayer for dismissal based on the
argument that the Sheriff's execution pending appeal of the trial court's
decision rendered the case moot and academic. This Court held that:
[I]t is obvious that there remains an unresolved justiciable
controversy in the appealed case for accion publiciana. In particular,
did respondent-spouses Oria really encroach on the land of
petitioner? If they did, does he have the right to recover possession of
the property? Furthermore, without preempting the disposition of the
case for accion publiciana pending before the CA, we note that if
respondents built structures on the subject land, and if they were
builders in good faith, they would be entitled to appropriate rights
under the Civil Code. This Court merely points out that there are still
issues that the CA needs to resolve in the appealed case before it.
Moreover, there are also the questions of whether respondents
should be made to pay back monthly rentals for the alleged
encroachment; and whether the reward of attorney's fees, which are
also being questioned, was proper. The pronouncements of the CA on
these issues would certainly be of practical value to the parties. After
all, should it find that there was no encroachment, for instance,
respondents would be entitled to substantial relief. In view of all
these considerations, it cannot be said that the main case has
become moot and academic. 50 (Emphasis supplied.)
In this case, issues arising from the mutually terminated Contract are
not moot and academic. As the Court of Appeals found, there are actual
substantial reliefs that respondent is entitled to. There is a practical use or
value to decide on the issues raised by the parties despite the mutual
termination of the Contract between them. These issues include the
determination of amounts payable to respondent by virtue of the time
extensions, respondent's entitlement to price adjustments due to the delay
of the issuance of the Notice to Proceed, additional costs, actual damages,
and interest on its claims. The agreement to mutually terminate the Contract
did not wipe out petitioner's obligation to pay respondent on works done
before the Contract's termination on October 27, 2004.
III
According to petitioner, the filing of the claim before CIAC was

premature, since under CIAC rules, there must be an exhaustion of
administrative remedies first before government contracts are brought to it
for arbitration. 51
Respondent, on the other hand, denies violating the rule on exhaustion
of administrative remedies. It claims that it sent at least 17 demand letters
to petitioner, four (4) of which were sent to the DPWH Secretary directly. 52
Petitioner's argument fails to convince.
The case is not premature. The pertinent provision on available
administrative remedies can be found in Sub-Clause 67.1 of the Conditions
of Contract:
Settlement of Disputes
Engineer's Decision 67.1 If a dispute of any kind whatsoever arises
between the Employer and the Contractor in connection with, or
arising out of, the Contract or the execution of the Works, whether
during the execution of the Works or after their completion and
whether before or after repudiation or other termination of the
Contract, including any dispute as to any opinion, instruction,
determination, certificate or valuation of the Engineer, the matter in
dispute shall, in the first place, be referred in writing to the Engineer,
with a copy to the other party . Such reference shall state that it is
made pursuant to this Clause. No later than the eighty-fourth day
after the day on which he received such reference the Engineer shall
give notice of his decision to the Employer and the Contractor. Such
decision shall state that it is made pursuant to this Clause.
Unless the Contract has already been repudiated or terminated, the
Contractor shall, in every case, continue to proceed with the Works
with all due diligence and the Contractor and the Employer shall give
effect forthwith to every such decision of the Engineer unless and
until the same shall be revised, as hereinafter provided, in an
amicable settlement or an arbitral award.
If either the Employer or the Contractor be dissatisfied with any
decision of the Engineer, or if the Engineer fails to give notice of his
decision on or before the eighty-fourth day after the day on which he
received the reference, then either the Employer or the Contractor
may, on or before the seventieth day after the day on which he
received notice of such decision, or on or before the seventieth day
after the day on which the said period of 84 days expired, as the case
may be, give notice to the other party, with a copy for information to
the Engineer, of his intention to commence arbitration, as hereinafter
provided, as to the matter in dispute. Such notice shall establish the
entitlement of the party giving the same to commence arbitration, as
hereinafter provided, as to such dispute and, subject to Sub-Clause
67.4, no arbitration in respect thereof may be commenced unless
such notice is given. TIADCc
If the Engineer has given notice of his decision as to a matter in

dispute to the Employer and the Contractor and no notice of intention
to commence arbitration as to such dispute has been given by either
the Employer or the Contractor on or before the seventieth day after
the day on which the parties received notice as to such decision from
the Engineer, the said decision shall become final and binding upon
the Employer and the Contractor. 53 (Emphasis supplied)
Under the doctrine of exhaustion of administrative remedies, the
concerned administrative agency must be given the opportunity to decide a
matter within its jurisdiction before an action is brought before the courts,
otherwise, the action will be declared premature. 54
In this case, CIAC found and correctly ruled that respondent had duly
complied with the contractual obligation to exhaust administrative remedies
provided for under sub-clause 67.1 of the Conditions of Contract before it
brought the case before the tribunal:
The Claimant further alleged that, despite of such knowledge,
no relief from the Secretary was forthcoming. It would therefore be an
exercise in futility if Claimant, after it had sent respondent the
seventeen (17) demand letters and despite the unequivocal
admission by Respondent's foreign consultant in charge of the project
of respondent's liability and failure to pay (Annex C of the Complaint),
will further be required to undergo another series of presentation and
exchange of documentation. Moreover, Respondent has not indicated
any practical benefit of resending the demand to the Secretary nor
any prejudice for not doing so.
In this particular contract project, the procedural requirements
governing the Settlement of Disputes is specifically provided under
Clause 67 of the Conditions of the Contract which Claimant has
complied with pursuant to the first paragraph of its letter dated
September 10, 2004 (annex R) pertinent provisions thereof is read,
as follows:
"Pursuant to the provision of Clause 67.1 of the
conditions of contracts, we are formally referring to your
good office several office several [sic] points of
disagreement between the position you have taken and
the position we have argued for. These were already the
subject of voluminous correspondence between your
good self and our company but no clear-cut resolution of
the issues raised was ever made."
In the last paragraph of the letter on September 10, 2004
(Annex "R"), Claimant has requested Respondent for a definitive
ruling on the disputes which were enumerated therein so that
Claimant could avail of the remedies given to it by the aforesaid
Clause 67.1. In spite of Claimant's request, respondent DPWH did not
act on the same.
The evidence also disclosed that as far as delayed payments
are concerned, Claimant made various verbal and written demands
for payment as evidenced by Exhibits "E" to "E-16" or starting
December 5, 2000. The demands were not heeded. 55
A total of 17 demand letters were sent to petitioner to no avail. To
require respondent to wait for the DPWH Secretary's response while
respondent continued to suffer financially would be to condone petitioner's
avoidance of its obligations to respondent. Hence, even assuming that sub-
clause 67.1 was not applicable, the case would still fall within the exceptions
to the doctrine of exhaustion of administrative remedies 56 since strict
application of the doctrine will be set aside when requiring it would only be
unreasonable under the circumstances. 57
IV
Petitioner avers that the Court of Appeals gravely erred in rendering

the assailed decision because it completely ignored, overlooked, or
misappreciated facts of substance, which, if duly considered, would
materially affect the outcome of the case. Petitioner argues that the present
case is an exception to the rule that only questions of law may be raised in a
Petition for Review under Rule 45 of the Rules of Court. 58
Before delving into the issues raised, it is imperative to understand
CIAC's role as the arbitral tribunal at the center of this dispute.
CIAC was created under Executive Order No. 1008, or the "Construction
Industry Arbitration Law." It was originally under the administrative
supervision of the Philippine Domestic Construction Board 59 which, in turn,
was an implementing agency of the Construction Industry Authority of the
Philippines. 60 The Construction Industry Authority of the Philippines is
presently a part of the Department of Trade and Industry as an attached
agency. 61
CIAC's specific purpose is the "early and expeditious settlement of
disputes" 62 in the construction industry as a recognition of the industry's
role in "the furtherance of national development goals." 63
Section 4 of the Construction Industry Arbitration Law lays out CIAC's
jurisdiction:
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 dispute arises before or after the completion
of the contract, or after the abandonment or breach thereof. These
disputes may involve government or private contracts. For the Board
to acquire jurisdiction, the parties to a dispute must agree to submit
the same to voluntary arbitration.
The jurisdiction of the CIAC may include but is not limited to
violation of specifications for materials and workmanship; violation of
the terms of agreement; interpretation and/or application of
contractual time and delays; maintenance and defects; payment,
default of employer or contractor and changes in contract cost. AIDSTE
Excluded from the coverage of this law are disputes arising

from employer-employee relationships which shall continue to be
covered by the Labor Code of the Philippines.
Republic Act No. 9184 or the "Government Procurement Reform Act,"
recognized CIAC's competence in arbitrating over contractual disputes within
the construction industry:
Section 59. Arbitration. — Any and all disputes arising from the
implementation of a contract covered by this Act shall be submitted
to arbitration in the Philippines according to the provisions of Republic
Act No. 876, otherwise known as the "Arbitration Law". Provided,
however, That, disputes that are within the competence of the
Construction Industry Arbitration Commission to resolve shall be
referred thereto. The process of arbitration shall be incorporated as a
provision in the contract that will be executed pursuant to the
provisions of this Act: Provided, That by mutual agreement, the
parties may agree in writing to resort to alternative modes of dispute
resolution. (Emphasis supplied)
CIAC's authority to arbitrate construction disputes was then
incorporated into the general statutory framework on alternative dispute
resolution through Republic Act No. 9285, the "Alternative Dispute
Resolution Act of 2004." Section 34 of Republic Act No. 9285 specifically
referred to the Construction Industry Arbitration Law, while Section 35
confirmed CIAC's jurisdiction:
CHAPTER 6 — ARBITRATION OF CONSTRUCTION DISPUTES
Section 34. Arbitration of Construction Disputes: Governing Law.
— The arbitration of construction disputes shall be governed by
Executive Order No. 1008, otherwise known as the Constitution
Industry Arbitration Law.
Section 35. Coverage of the Law. — Construction disputes which
fall within the original and exclusive jurisdiction of the Construction
Industry Arbitration Commission (the "Commission") shall include
those between or among parties to, or who are otherwise bound by,
an arbitration agreement, directly or by reference whether such
parties are project owner, contractor, subcontractor, quantity
surveyor, bondsman or issuer of an insurance policy in a construction
project.
The Commission shall continue to exercise original and
exclusive jurisdiction over construction disputes although the
arbitration is "commercial" pursuant to Section 21 of this Act.
As a general rule, findings of fact of CIAC, a quasi-judicial tribunal
which has expertise on matters regarding the construction industry, should
be respected and upheld. In National Housing Authority v. First United
Constructors Corp., 64 this Court held that CIAC's factual findings, as affirmed
by the Court of Appeals, will not be overturned except as to the most
compelling of reasons:
As this finding of fact by the CIAC was affirmed by the Court of
Appeals, and it being apparent that the CIAC arrived at said finding
after a thorough consideration of the evidence presented by both
parties, the same may no longer be reviewed by this Court. The all
too-familiar rule is that the Court will not, in a petition for review on
certiorari, entertain matters factual in nature, save for the most
compelling and cogent reasons, like when such factual findings were
drawn from a vacuum or arbitrarily reached, or are grounded entirely
on speculation or conjectures, are conflicting or are premised on the
supposed evidence and contradicted by the evidence on record or
when the inference made is manifestly mistaken or absurd. This
conclusion is made more compelling by the fact that the CIAC is a
quasi-judicial body whose jurisdiction is confined to construction
disputes. Indeed, settled is the rule that findings of fact of
administrative agencies and quasi-judicial bodies, which have
acquired expertise because their jurisdiction is confined to specific
matters, are generally accorded not only respect, but finality when
affirmed by the Court of Appeals. 65 (Emphasis supplied)
In distinguishing between commercial arbitration, voluntary arbitration
under Article 219 (14) of the Labor Code, 66 and construction arbitration,
Freuhauf Electronics Philippines Corporation v. Technology Electronics
Assembly and Management Pacific 67 ruled that commercial arbitral tribunals
are purely ad hoc bodies operating through contractual consent, hence, they
are not quasi-judicial agencies. In contrast, voluntary arbitration under the
Labor Code and construction arbitration derive their authority from statute in
recognition of the public interest inherent in their respective spheres.
Furthermore, voluntary arbitration under the Labor Code and construction
arbitration exist independently of the will of the contracting parties:
Voluntary Arbitrators resolve labor disputes and grievances
arising from the interpretation of Collective Bargaining Agreements.
These disputes were specifically excluded from the coverage of both
the Arbitration Law and the ADR Law.
Unlike purely commercial relationships, the relationship
between capital and labor are heavily impressed with public interest.
Because of this, Voluntary Arbitrators authorized to resolve labor
disputes have been clothed with quasi-judicial authority.
On the other hand, commercial relationships covered by our
commercial arbitration laws are purely private and contractual in
nature. Unlike labor relationships, they do not possess the same
compelling state interest that would justify state interference into the
autonomy of contracts. Hence, commercial arbitration is a purely
private system of adjudication facilitated by private citizens instead
of government instrumentalities wielding quasi-judicial powers. AaCTcI
Moreover, judicial or quasi-judicial jurisdiction cannot be

conferred upon a tribunal by the parties alone. The Labor Code itself
confers subject-matter jurisdiction to Voluntary Arbitrators.
Notably, the other arbitration body listed in Rule 43 — the
Construction Industry Arbitration Commission (CIAC) — is also a
government agency attached to the Department of Trade and
Industry. Its jurisdiction is likewise conferred by statute. By contrast,
the subject-matter jurisdiction of commercial arbitrators is stipulated
by the parties. 68 (Emphasis supplied)
Petitioner argues that respondent is not entitled to US$358,227.95, as

the foreign component of the Contract, because it is not yet legally
demandable. 69 In declaring that petitioner should pay the amount as the
foreign component of the project, CIAC held that petitioner did not deny said
amount in its answer and that respondent's failure to renew its Letter of
Credit does not justify petitioner's act in withholding the dollar component of
the project. 70
Petitioner maintains that the delay in payment was due to the negative
slippage incurred by respondent and its failure to renew its Letter of Credit.
Petitioner argues that under Clause 60.11 of the Conditions of the Contract,
Part II, an irrevocable standby letter of credit is required before petitioner
can release the advance payment. 71 Petitioner states:
In this case, respondent does not deny that its LC No. OIDS-
00022-00027-0 issued by the United Coconut Planters Bank
(UCPB) expired on October 15, 2003. Petitioner reminded
respondent several times on the imperative need for the renewal of
its LC to avoid delay in the processing of its billing. The purpose of
said LC is to guarantee the return of the advance payment by
petitioner to respondent. 72
Hence, petitioner claims that respondent cannot compel the payment
of the foreign component of the Contract because it did not comply with the
letter of credit requirement. Moreover, petitioner asserts that "In directing
petitioner to pay the said award to respondent without the latter posting the
said letter of credit, the CIAC and the Court of Appeals effectively amended
the stipulation thereon in the contract which is legally impermissible." 73
For respondent's part, it argues that it was impossible to renew the
Letter of Credit. It explained that banks refused the renewal of the Letter of
Credit since the original contract period had already expired and petitioner
did not act on respondent's requests for extension. 74 In addition, evidence
shows that "the main reason of the non-payment of dollar component was
due to unresolved issues, the right of way acquisition problem between ADB
and the [government], wherein ADB was forced to suspend the loan
disbursement for the entire 6th Road Improvement Project effective 01 June
2003 due to this conflict." 75 Nevertheless, respondent admitted that the
mutual termination of the Contract rendered the requirement of a Letter of
Credit for the release of the $358,227.95 moot and academic. 76
This Court affirms the findings of CIAC and the Court of Appeals that
respondent is entitled to the foreign component of the Contract.
CIAC found that petitioner was not justified in withholding the payment
for the dollar component of the Contract. 77 Further, it found that respondent
was justified and not at fault for not reviewing the Letter of Credit. It held
that:
The Arbitral Tribunal is persuaded that the main reason for the
non-payment of the dollar component was due to the unresolved
issues (right of way acquisition) between the ADB and the
Government of the Philippines where the Loan Disbursement was
suspended by ADB for the 6th Road Improvement Project effective 01
June 2003 . . . The foreign Consultant even admonished Respondent
DPWH and reiterated that it should take prompt action to effect
payment of outstanding monies due, and nothing was ever mentioned
of the failure to renew the Letter of Credit. (paragraph 3.2 of affidavit
by Ferdinand Mariano)
Moreover, Claimant explained to the Respondent why the Letter
of credit could not be renewed in its letter of 01 and 15 March 2004
(Exh. "C-16" and "C-17"). It appears that one of the bank's
requirements for issuance of the Letter of Credit was the approved
time extension and the extension of the contract, but Respondent
refused to issue any document extending the contract.
On the other hand, the Respondent's justification was only
based on its accounting requirement. It asserted that the LC
guaranteed the advance payment as well as the work completion. It
further stated that the LC was a requirement by the funding bank (By
Subair S. Diron, paragraph 3.1.1 of Joint Affidavit by Heinz Reister,
Diron and Pandapatan) 78 (Emphasis supplied)
In National Housing Authority v. First United Constructors Corp., 79 this
Court held that the respondent contractor was entitled to the payment of its
claims, as the non-posting of the required Payment Guarantee Bond was due
to the inaction of petitioner National Housing Authority: EcTCAD
Petitioner's subsequent refusal to process and pay these claims

despite FUCC's willingness to submit a surety bond to secure the
balance of the advance payment still to be recouped by NHA — as the
parties had agreed upon — which bond would be submitted when the
check payment for the claim is about to be released, clearly
constitutes a violation by NHA of FUCC's right to be paid these
acknowledged and recognized claims. Thus, respondent had an
accrued cause of action against petitioner for these claims at the time
it filed its Complaint, the constitutive elements of which are clearly
set forth therein. 80 (Emphasis supplied)
In the present case, the renewal of the Letter of Credit hinged on the
extension of the contract period. Despite notice by respondent of the bank's
requirement for the renewal of the Letter of Credit, petitioner chose to ignore
respondent's requests for time extensions. Therefore, petitioner cannot shift
the blame to respondent and claim that the Letter of Credit was a condition
sine qua non for the payment of the dollar component of the project.
VI
Petitioner also assails the findings of the Court of Appeals with regard
to the time extensions respondent is entitled to. Petitioner argues that both
the CIAC and the Court of Appeals failed to consider the subsequent
payments made to respondent after the conclusion of the arbitration
hearings. Thus, the tribunal's finding that petitioner still owes respondent
US$358,227.95 is factually erroneous.
Petitioner claims that "respondent failed to prove that it is entitled to
the time extensions of: (1) 133-calendar days in addition to the 144-calendar
days previously agreed by the parties and (2) 108-calendar days due to
delayed payments." 81
On the other hand, respondent argues that it is entitled to time
extensions in addition to the 144 calendar days granted to it under Variation
Order No. 2. 82 Respondent claims it is entitled to a total of 277 calendar
days based on the approved revised Project Evaluation Review Tracking-
Critical Path Method (PERT-CPM) diagram and S-Curve. 83 As explained by
witness Engr. Reyes, rock excavation requires special skills, equipment, and
explosives. These factors were not considered when the original contract
schedule was prepared. 84
Respondent further claims that it is entitled to another time extension
due to the delay in payment. Respondent maintains that it infused more
than double the 10% credit line amounting to P157,747,945.00. 85
Respondent also claims that it had already mobilized working and state-of-
the-art equipment. 86
The DPWH Bureau of Construction evaluated respondent's request for
time extension and recommended its approval to the Secretary. 87 However,
the recommendation was withdrawn "on the pretext that said DPWH
guidelines for computation of time extension due to delayed payments
[were] revised and modified." 88
Respondent points out that petitioner, through Engr. Pierre Castelli,
had acknowledged that the delayed payment had greatly affected
respondent's cash flow. 89
Respondent likewise asserts that it is entitled to a time extension due
to peace and order problems. Petitioner did not object to respondent's
entitlement to an extension due to the peace and order situation. Hence, the
only thing required is to determine the number of calendar days' extension
respondent is entitled to based on the circumstances. 90
Chief Resident Engineer Andre Drockur of BCEOM French Engineering
Consultant recommended a time extension of 29 calendar days due to the
peace and order situation. While respondent did not agree with the
consultant's recommendation, it still adopted such recommendation to
expedite the computation of time extension due to peace and order
problems. 91
According to CIAC, respondent was entitled to time extensions in
addition to the 144-calendar day extension agreed upon by the parties, as
per Variation Order No. 2:
The Arbitral tribunal finds that the computation presented by
the Claimant based n form the approved revised PERT/CPM and S-
Curve is acceptable and the 277 calendar days should have been
granted by the Respondent or an additional of 133 calendar days.
However, the project is now terminated. The actual accomplishment
as per letter of [Chief Resident Engineer] to DPWH dated September
18, 2003 shows that the actual volume of accomplishment was only
2,732 m2 of hardrock and 4,444 m3 of rippable rock. Thus, the entire
volume under Change Order #2 [or Variation Order No. 2] will not be
consumed as the work is now 80% complete[.] 92 HSAcaE
The Court of Appeals affirmed that respondent was entitled to a 133-

day time extension in addition to the 144 calendar days under Variation
Order No. 2. 93 However, the Court of Appeals noted that CIAC did not
specify whether respondent was entitled to the full 133 days' extension,
considering that it found that the entire volume in Variation Order No. 2 will
not be fully used up due to respondent's 80% accomplishment. 94
CIAC also held that respondent was entitled to a time extension of 108
calendar days due to petitioner's delayed payments 95 and another time
extension of 29 calendar days due to the peace and order situation in the
project area. 96
This Court sees no reason to deviate from the findings of both CIAC and
the Court of Appeals with regard to respondent's entitlement to time
extensions: 1) under Variation Order No. 2; 2) due to the delay in payment;
and 3) due to the peace and order situation, since these are supported by
the evidence on record.
To reiterate, findings of fact of administrative agencies and quasi-
judicial bodies are entitled to great respect and even finality when affirmed
by the appellate court. 97 In this case, the Court of Appeals found that
respondent was entitled to the time extensions as evaluated by CIAC, the
agency tasked to resolve issues regarding the construction industry. Both
tribunals found that respondent was entitled to the extensions due to
petitioner's delayed payments, peace and order situation, and Variation
Order No. 2. These findings are clearly supported by the facts on record.
However, in light of the mutual termination of the Contract, the remand
of the case to CIAC will serve no practical purpose and is, therefore,
unnecessary.
VII
According to respondent, the delay in the issuance of the Notice to

Proceed entitles it to a price adjustment under Presidential Decree No. 1594.
Bidding was conducted in January 1998 and respondent was declared the
winning bidder. The Contract was signed on April 29, 1999. However, the
Notice to Proceed was issued on May 5, 1999, or after a delay of more than
120 days from the bidding date, which entitles the bidder to an adjustment
in the contract unit price under Presidential Decree No. 1594. 98
On the other hand, petitioner claims that respondent did not question
the findings of the Court of Appeals regarding price adjustment and claim for
actual damages. Hence, it should not be allowed to assail the Court of
Appeals' ruling on this issue before this Court. 99
Both CIAC and the Court of Appeals found that respondent was not
entitled to a price adjustment:
As to the first issue raised by the Claimant, this Court finds that
the CIAC committed no reversible error in not awarding the price
adjustment being sought by the Claimant under P.D. 1594, finding as
flawed its claim based on the alleged DPWH's delay in the issuance of
the notice to proceed.
We quote with approval the pertinent ratiocination of the CIAC
on this point, thus:
xxx xxx xxx
However, the Claimant is not entitled to a price
adjustment under P.D. 1594 because it is the ADB
Guideline[s] on Procurement which should be followed,
and not the provisions on P.D. 1594. In fact the bid of the
Contractor was awarded despite its being above the
approved Agency Estimates (AAE), based on the ADB
guidelines, and against the provisions of P.D. 1594
(paragraph 7.2 of Joint Affidavit by Heinz Reister, Diron
and Pandapatan).
The Arbitral Tribunal finds that the Guidelines of the
Asian Development Bank govern this subject Project.
Moreover, P.D. 1594 honors the treaties and international
or executive agreements to which the Philippine
Government is a signatory. Loan agreements such as
those entered into with international funding institutions
like ADB are considered to be within the ambit of DOJ
Opinion No. 46, S. 1987 and are therefore exempt from
the application of P.D. No. 1594 as amended (Paragraph
7.1.1 of Joint Affidavit by Heinz Reister, Diron and
Pandapatan). HESIcT
xxx xxx xxx

If the Claimant's bid was awarded despite its being above the
approved Agency Estimates based on the ADB guidelines, and against
the provisions of P.D. 1594, We cannot see the rationale on why the
Claimant now refuses to abide by the ADB guidelines on
procurement. After the claimant was benefited by the approved bid at
the inception of the project, We hold that it is unjustified for the
Claimant not to be bound by the ADB/guidelines under the pretext
that it fails to get the supposed price adjustment. 100 (Emphasis
supplied)
While respondent did not appeal the Court of Appeals' ruling with
regard to its entitlement to a price adjustment under Presidential Decree No.
1594, for purposes of clarity and to finally settle the matter, this Court
affirms the findings of CIAC and the Court of Appeals.
This Court has held that a foreign loan agreement with international
financial institutions, such as a multilateral lending agency organized by
governments like the Asian Development Bank, is an executive or
international agreement contemplated by our government procurement
system. 101
I n Abaya v. Ebdane, Jr., 102 this Court upheld the applicability of the
Japan Bank for International Cooperation's Procurement Guidelines to the
implementation of the projects to be undertaken pursuant to the loan
agreement between the Republic of the Philippines and Japan Bank for
International Cooperation. 103
While the Implementing Rules and Regulations 104 of Presidential
Decree No. 1594 provide the formula for price adjustment in case of delay in
the issuance of a notice to proceed, the law does not proscribe parties from
making certain contractual stipulations. In this case, the Construction
Contract is clear that in case of price adjustments, Clause 70 of the
Conditions of Contract will apply:
3. That computation and payment of contract prices adjustment
will be applied in accordance with Clause 70 of the Conditions of
Contract; 105
It is unclear from the records, however, whether the Asian
Development Bank Guidelines was substantially the same as Clause 70 of
the Conditions of Contract. Nevertheless, as in the Abaya case, it should be
the guidelines that the parties have agreed upon, i.e., the Asian
Development Bank Guidelines, that should govern in case of issues arising
from the contract. Respondent failed to proffer evidence on what the Asian
Development Bank Guidelines provide, if any, in the event of a delay in the
issuance of a Notice to Proceed.
VIII
Petitioner argues that "CIAC and the Court of Appeals grossly erred in
awarding P5,080,000.00, plus legal interest of P464,298.08 for the alleged
equipment and financial losses; and additional cost resulting from the
alleged bombing incident of P6,267,410.48, plus legal interest of
P320,410.63." 106
Furthermore, petitioner asserts that "the award to respondent of
additional costs in the contract price under Clause 69.4 of the General
Conditions of the Contract in the amount of P20,311,072.66, plus legal
interest of P1,038,368.78 is improper." 107 Petitioner maintains that the
award to respondent of additional costs in the contract price under Clause
69.4 of the General Conditions of Contract was baseless, since the Engineer
had not yet consulted with the parties to determine the amount of additional
costs. 108
In contrast, respondent claims that it is entitled to equipment and
financial losses due to the peace and order situation. 109
Petitioner's arguments are untenable.
It has been sufficiently established that a peace and order problem
arose at the project site:
The Arbitral Tribunal was persuaded by the fact that six (6)
named persons and four (4) John Does were accused of Destructive
Arson in the Municipal Circuit Trial Court of Dumalinao Zamboanga
del Sur for feloniously setting on fire simultaneously one (1) unit of
Kumatsu Payloader amounting to Php3,000,000.00 and one (1) unit
Isuzu 10 Wheeler Dump Truck amounting to Php800,000.00, both
belonging to the Claimant. The accused are believed NPA's n with
motives of hatred due to vain collection of revolutionary taxes from
Claimant (Exh. "C-5").
The burning of the Payloader and Dump Truck, subject of the
criminal case (Exh. "C-5") was corroborated in its entirety by the
testimony of Pedrito G. Palancos, operator of the burnt Payloader in
his affidavit, paragraph 6.6 to 6.9, part of the records of this case.
caITAC
The Chief of Police of Kumalarang, Zamboanga del Sur

submitted a Special Written Report to the PNP Provincial Director,
regarding the bombing at Claimant's batching plant in Boyugan,
Kumalarang, del Sur on 11 March 2003.
The bombing incident revealed that it resulted in conflagration
causing damage to the Generator Set, Caterpillar Brand KVA 180-180
and the Conveyor, with total estimated cost of Php7,300,000.00.
Intelligence Action Agent gathered information that MILF
Members, all armed with undetermined numbers, but believed to be
under Commander Susob Edris, were sighted by the barangay
officials and the neighbor of the Plant location, when the incident
occurred. (Exh. "C-9").
The two incidents described above, one costing approximately
Php3,800,000.00 and the other costing approximately
Php7,300,000.00, will have a total of approximately
Php11,100,000.00 or Php11,347,410.48 to be exact. This is the
amount that Claimant is entitled due to the peace and order situation
at the Project site. 110
This Court finds that CIAC and the Court of Appeals did not err when
they found that respondent was entitled to its claim for equipment and
financial losses. The situation was an assumed risk of petitioner as employer
and is, thus, compensable under Clause 20.4 of the Conditions of Contract,
which lists the Employer's risks as:
(a) war, hostilities (whether war be declared or not), invasion, act
of foreign enemies,
(b) rebellion, revolution, insurrection, or military or usurped
power, or civil war,
(c) ionising radiations, or contamination by radio-activity from any
nuclear fuel, or from any nuclear waste from the combustion of
nuclear fuel, radio-active toxic explosive, or other hazardous
properties of any explosive nuclear assembly or nuclear component
thereof,
(d) pressure waves caused by aircraft or other aerial devices
travelling at sonic or supersonic speeds,
(e) riot, commotion or disorder, unless solely restricted to
employees of the Contractor or of his Subcontractors and arising from
the conduct of the Works,
(f) loss or damage due to the use or occupation by the Employer
of any Section or part of the Permanent Works, except as may be
provided for in the Contract,
(g) loss or damage to the extent that it is due to the design of the
Works, other any part of the design provided by the Contractor or for
which the Contractor is responsible,
(h) any operation of the forces of nature against which an
experienced contractor could not reasonably have been expected to
take precautions. 111 (Emphasis supplied)
It is clear from the above provision that the assumed risks of the
employer under Clause 20.4 of the Conditions of Contract include rebellion,
revolution, insurrection, or military or usurped power, or civil war.
Petitioner further insists that respondent is not yet entitled to the claim
because there is no determination by the Engineer of the costs incurred, as
required under Clause 69.4 of the Conditions of Contract. 112
In its Answer before CIAC, petitioner denied respondent's claims for
additional costs under Clause 69.4. Petitioner stated that its denial will be
explained more specifically in its Affirmative Defenses:
6. DENIES the allegations in paragraphs 12, 13, 14, 15 and 16 of
the complaint for being preposterous, misleading and patently
without legal and factual basis, the truth being that as per the
Conditions of Contract, complainant is not entitled to the payment of
additional cost on slowdown or suspension of work on the project,
reimbursement for alleged equipment losses and additional time
extensions to complete the project specifically stated/discussed in
the Affirmative Defenses hereof. 113 (Emphasis supplied)
However, a perusal of petitioner's Affirmative Defenses reveals that no
such qualification was made. ICHDca
Under Rule 8, Section 10 of the Rules of Court, the "defendant must

specify each material allegation of fact the truth of which he does not admit
and, whenever practicable, shall set forth the substance of the matters upon
which he relies to support his denial." There are three (3) modes of specific
denial provided for under the Rules:
(1) by specifying each material allegation of the fact in the
complaint, the truth of which the defendant does not admit, and
whenever practicable, setting forth the substance of the matters
which he will rely upon to support his denial; (2) by specifying so
much of an averment in the complaint as is true and material and
denying only the remainder; (3) by stating that the defendant is
without knowledge or information sufficient to form a belief as to the
truth of a material averment in the complaint, which has the effect of
a denial. 114
I n Aquintey v. Spouses Tibong , 115 this Court held that using
"specifically" in a general denial does not automatically convert that general
denial to a specific one. The denial in the answer must be definite as to what
is admitted and what is denied, such that the adverse party will not have to
resort to guesswork over "what is admitted, what is denied, and what is
covered by denials of knowledge as sufficient to form a belief." 116
The petitioner only tackled the issue on the claim for additional costs in
the Joint Affidavit of petitioner's witnesses Heinz Reister, Subair S. Diron, and
Abdulfatak A. Pandapatan:
Issue No. 9. Is claimant entitled to additional cost under Clause 69.4 of the
General Conditions of Contract? If so, how much?
Subair S. Diron and Abdulfatak A. Pandapatan testifying:
9.1 Q: Is claimant entitled to additional cost/charges under Clause 69.4
of the General Conditions of Contract?
A: Not yet, the claimant should establish that it is allowed. 117
This Court finds that petitioner failed to specifically deny the claims of
respondent and had, therefore, admitted such claims. This Court agrees that
respondent was able to establish its claims before the CIAC. This Court notes
that the project was in Mindanao, and mobilization of workers and
equipment is not an easy feat and not without cost. Respondent believed
that the suspension would only be temporary and work could resume at any
time once petitioner settled its obligation. Petitioner must compensate
respondent for the costs it incurred without any fault on respondent's part.
IX
During the arbitration hearing before the CIAC, respondent itself

admitted that there was no provision in the Conditions of Contract for
interest at the rate of 24% per annum on delayed payments. 118
Respondent tries to excuse the lack of contractual stipulations by
claiming that the amount of 24% interest is payment for actual damages and
not stipulated interest. 119
Respondent claims that petitioner is liable for the amounts respondent
owes its creditors in the total amounts of P10,297,090.42 and
USD$118,094.93. In addition, respondent avers that petitioner should pay it
6% interest per annum computed from the receipt of the first demand letter
for payment sent by respondent, as a result of delay in the payment for work
accomplished. 120
The Court is not convinced.

It is fundamental that a contract is the law between the parties and,
absent any showing that its provisions are wholly or in part contrary to law,
morals, good customs, public order, or public policy, it shall be enforced to
the letter by the courts. 121
Respondent was not able to establish the basis of its claim that it is
entitled to an award of 24% interest. Moreover, as found by the Court of
Appeals and CIAC, the parties had agreed to delete the provision on interest
on delayed payments, since the project was funded by the Asian
Development Bank. 122
There is also no basis to award respondent 24% interest as actual
damages for the additional expenses it incurred due to petitioner's delayed
payments.
Before actual damages may be awarded, it is imperative that the
claimant proves its claims first. The issue on the amount of actual or
compensatory damages is a question of fact, 123 and except as provided by
law or by stipulation, one is entitled to adequate compensation only for
pecuniary loss duly proven. 124
In this case, respondent has not sufficiently shown how awarding it
24% interest per annum on delayed payments corresponds to the actual
damages it allegedly suffered. Respondent failed to show a causal relation
between the alleged losses and the injury it suffered from petitioner's
actions. TCAScE
Respondent claims that it should be paid in U.S. dollars as specified in

the Contract. 125 It argues that the present case is an exception to the
general rule that obligations should be paid in Philippine currency. 126
The Court of Appeals held that the parties subsequently agreed that
payments made after March 31, 2003 shall be in pesos only:
However, one aspect in the CIAC decision is shrouded with cloud. This
concerns CIAC's order to DPWH to pay its alleged liability to the
Claimant in US dollars. It is worthy to note that aside from the
agreement of the parties — particularly in paragraph 5 of the
contract, supra, to fix the exchange rate at P34.9 for every US$1.00,
the Claimant itself has acknowledged in its request that it was
advised by the DPWH per its letter dated 13 August 2003 that all
payments for works earned out after 31 March 2003 and related price
escalation claims and retention releases in the contract will be in
pesos only, therefore no foreign exchange payments. This fact was
never contested by the Claimant thereby creating a presumption that
it has acquiesced to the request of the DPWH. Thus, we cannot see
Our way through on why the CIAC has still to make a ruling on the
Interest Computation of Delayed Payment at 6% Per Annum at
US$45,206.14 as well as the Foreign Component of US$358,227.95
plus legal interest at US$18,313.79 citing the exemption of
transactions where the funds involved are the proceeds of loans or
investments made through bona fide intermediaries or agents, by
foreign government and banking institutions such as the Asian
Development Bank (ADB) from the coverage of Republic Act 529
otherwise known a[s] "An Act to Assure Uniform Value to Philippine
Coin and Currency." Worse, there was no mention about the
subsequent notice by the DPWH to the Claimant, supra about their
subsequent understanding on "no foreign exchange payments." This
is indeed one dubious area that needs to be clarified by no less than
the CIAC itself. 127 (Emphasis supplied)
Again, considering that respondent did not appeal the Court of Appeals
decision, the appellate court's ruling on this issue is deemed final as to
respondent, and there is no steed to remand this issue to the CIAC. Issues
not raised on appeal are already final and cannot be disturbed. 128
XI
CIAC imposed legal interest in its Award as follows:

In view of the foregoing, the Claimant is entitled to payment of
legal interest of 6% per annum from the receipt of its extrajudicial
demand.
Thus, under Issue No. 3 where the Claimant was awarded
US$358,227.95, the Claimant is entitled to legal interest of 6% per
annum commencing from 2 March 2004 up to this date (or 311 days)
in the amount of US$18,313.79.
Under Issue No. 8 where the Claimant was awarded
P11,347,410.48, the Claimant is entitled to legal interest of 6% per
annum for the Equipment and Plant of P5,080,000.00 commencing
from 1 July 2003 (or 556 days) in the amount of P464,298.08 and for
the resulting Additional Expenses of P6,267,410.48 commencing from
2 March 2004 (or 311 days) in the amount of P320,410.63.
Under Issue No. 9 where the Claimant was awarded
P20,311,072.66, the Claimant is entitled to legal interest of 6% per
annum for Additional Cost under 69.4 of the Conditions of Contract
commencing from 2 March 2004 (or 311 days) in the amount of
P1,038,368.78.
Under Issue No. 10 with respect to the delayed payment of
billings for various amounts and on various dates, the Claimant is
entitled to legal interest of 6% per annum as detailed in Attachment
1, in the amount of US$45,206.14 and P2,175,516.63.
However, pursuant to the Eastern Shipping Lines vs. Court of
Appeals, 234 SCRA 78 (1994), a monetary award shall earn interest at
the rate of 12% per annum from the date when the award becomes
final and executory until its satisfaction. 129
On May 16, 2013, the Monetary Board of the Bangko Sentral ng
Pilipinas issued Resolution No. 796, which revised the interest rate to be
imposed on the loan or forbearance of any money, goods, or credits. This
was implemented in Bangko Sentral ng Pilipinas Circular No. 799 130 Series
of 2013, which reads: cTDaEH
The Monetary Board, in its Resolution No. 796 dated 16 May

2013, approved the following revisions governing the rate of interest
in the absence of stipulation in loan contracts, thereby amending
Section 2 of Circular No. 905, Series of 1982:
Section 1. The rate of interest for the loan or
forbearance of any money, goods or credits and the rate
allowed in judgments, in the absence of an express
contract as to such rate of interest, shall be six percent
(6%) per annum.
Section 2. In view of the above, Subsection X305.1 of
the Manual of Regulations for Banks and Sections
4305Q.1, 4305S.3 and 4303P.1 of the Manual of
Regulations for Non-Bank Financial Institutions are hereby
amended accordingly.
This Circular shall take effect on 1 July 2013.
Nacar v. Gallery Frames 131 then laid down the guidelines for the
imposition of legal interest:
To recapitulate and for future guidance, the guidelines laid
down in the case of Eastern Shipping Lines are accordingly modified
to embody BSP-MB Circular No. 799, as follows:
I. When an obligation, regardless of its source, i.e., law, contracts,
quasi-contracts, delicts or quasi-delicts is breached, the contravenor
can be held liable for damages. The provisions under Title XVIII on
"Damages" of the Civil Code govern in determining the measure of
recoverable damages.
II. With regard particularly to an award of interest in the concept
of actual and compensatory damages, the rate of interest, as well as
the accrual thereof, is imposed, as follows:
1. When the obligation is breached, and it consists in the payment
of a sum of money, i.e., a loan or forbearance of money, the
interest due should be that which may have been stipulated in
writing. Furthermore, the interest due shall itself earn legal
interest from the time it is judicially demanded. In the absence of
stipulation, the rate of interest shall be 6% per annum to be
computed from default, i.e., from judicial or extrajudicial demand
under and subject to the provisions of Article 1169 of the Civil
Code.
2. When an obligation, not constituting a loan or forbearance of
money, is breached, an interest on the amount of damages
awarded may be imposed at the discretion of the court at the
rate of 6% per annum . No interest, however, shall be adjudged
on unliquidated claims or damages, except when or until the
demand can be established with reasonable certainty.
Accordingly, where the demand is established with reasonable
certainty, the interest shall begin to run from the time the claim
is made judicially or extrajudicially (Art. 1169, Civil Code), but
when such certainty cannot be so reasonably established at the
time the demand is made, the interest shall begin to run only
from the date the judgment of the court is made (at which time
the quantification of damages may be deemed to have been
reasonably ascertained). The actual base for the computation of
legal interest shall, in any case, be on the amount finally
adjudged.
3. When the judgment of the court awarding a sum of money
becomes final and executory, the rate of legal interest, whether
the case falls under paragraph 1 or paragraph 2, above, shall be
6% per annum from such finality until its satisfaction, this interim
period being deemed to be by then an equivalent to a
forbearance of credit.
And, in addition to the above, judgments that have become
final and executory prior to July 1, 2013, shall not be disturbed and
shall continue to be implemented applying the rate of interest fixed
therein. 132
B e f o r e Nacar and Bangko Sentral ng Pilipinas Monetary Board
Resolution No. 796 dated May 16, 2013, the rate of legal interest was
pegged at 12% per annum from finality of judgment until its satisfaction,
"this interim period being deemed to be by then an equivalent to a
forbearance of credit." 133
With this Court's pronouncement in Nacar, the rate of interest imposed
should be modified. The monetary awards, as computed by the CIAC, should
earn legal interest at the rate of 12% per annum until June 30, 2013, after
which, it shall earn legal interest at the rate of 6% per annum until full
satisfaction.
The other issues raised by the parties were no longer discussed due to
the mutual termination of the Contract by parties, which rendered them
moot and academic. cSaATC
WHEREFORE, the Petition is DENIED. The Court of Appeals Decision

dated September 20, 2007 in CA-G.R. SP Nos. 88953 and 88911 is
AFFIRMED with MODIFICATION as follows: (1) that the order remanding
the case to the Construction Industry Arbitration Commission for proper
disposition is REVERSED for being moot and academic; and (2) that the
legal interest rate is pegged at twelve percent (12%) per annum until June
30, 2013, and then at six percent (6%) per annum until full satisfaction.
SO ORDERED.
Velasco, Jr., Bersamin, Martires and Gesmundo, JJ., concur.
Footnotes
1. Rollo , pp. 398-463.

2. Id. at 464-480. The Decision was penned by Associate Justice Myrna Dimaranan
Vidal and concurred in by Associate Justices Jose C. Reyes, Jr. and Japar B.
Dimaampao of the Special Eighth Division, Court of Appeals, Manila.
3. Id. at 481-485.
4. Id. at 482.
5. Id. at 401. The "Conditions of Contract for Works of Civil Engineering
Construction" is a standard contract form prepared by the Federation
International Des Ingenieurs — Conseils (FIDIC). The standard contract is
recommended for general use for the purpose of construction of such works
where tenders are invited on an international basis. The Conditions of
Contract are also equally suitable for use on domestic contracts. It is
commonly referred to as the Red Book in the construction industry. Available
at <http://fidic.org/bookshop/about-bookshop/which-fidic-contract-should-i-
use> (last accessed on September 4, 2017)
6. Id.
7. Id. at 491-492, Joint Venture's Complaint before the CIAC and pp. 742-744, CIAC
Award.
8. Id. at 728, CIAC Award.
9. Id.
10. Id. at 740.
11. Id. at 486-500.
13. Id. at 553-555.

14. Id. at 338-339.
16. Id. at 726-751.

17. Id. at 741-742 (CIAC Award).
18. Id. at 750-751.
19. Id. at 78-79.

20. Id. at 464-480.
21. Id. at 480.
22. Id. at 473-474.

23. Id. at 474-475.
24. Id. at 475-476.
25. Id. at 477.
26. Id. at 477-478.

27. Id. at 479.
28. Id. at 479-480.
29. Id. at 398-463.

30. Id. at 779.
31. Id. at 785-815.
32. Id. at 823-852.
33. Id. at 461.
34. Anderson v. Ho , 701 Phil. 6, 13-15 (2013) [Per J. Del Castillo, Second Division];
Clavecilla v. Quitain , 518 Phil. 53, 62-64 (2006) [Per J. Austria-Martinez, First
Division].
3 5 . Agustin v. Cruz-Herrera , 726 Phil. 533, 542-543 (2014) [Per J. Reyes, First
Division], Mariveles Shipyard Corp. v. Court of Appeals , 461 Phil. 249, 263
(2003) [Per J. Quisumbing, Second Division].
36. 701 Phil. 6 (2013) [Per J. Del Castillo, Second Division].
37. Id. at 14.
38. Id. at 396-A.

3 9 . Clavecilla v. Quitain , 518 Phil. 53, 63 (2006) [Per J. Austria-Martinez, First
Division]
40. Donato v. Court of Appeals , 462 Phil. 676, 690 (2003) [Per J. Austria-Martinez,
Second Division]; Spouses Wee v. Galvez , 479 Phil. 737, 749 (2004) [Per J.
Quisumbing, First Division].
41. See Diamond Taxi v. Llamas, Jr. , 729 Phil. 364, 379 (2014) [Per J. Brion, Second
Division].
42. Rollo , pp. 477-478.

43. Id. at 555.
44. Id. at 426.
45. Id. at 414.

4 6 . Pasig Printing Corp. v. Rockland Construction Co., Inc. , 726 Phil. 256, 265
(2014) [Per J. Mendoza, Third Division].
4 7 . David v. Macapagal-Arroyo , 522 Phil. 705, 754 (2006) [Per J. Sandoval-
Gutierrez, En Banc].
48. Id. at 754.
49. 705 Phil. 153 (2013) [Per C.J. Sereno, First Division].
50. Id. at 164.
51. Rollo , pp. 426-427.
52. Id. at 793-794.

5 3 . http://www.quantumconsult.org/wp-content/uploads/2012/01/2927771-FIDIC-
for-civil-engineeing-construction-1987.pdf (Accessed on September 4, 2017).
54. See University of Santo Tomas v. Sanchez, 640 Phil. 189, 194-195 (2010) [Per J.
Del Castillo, First Division].
55. Rollo , p. 735.
56. Paat v. Court of Appeals , 334 Phil. 146, 153 (1997) [Per J. Torres, Jr., Second
Division].
57. Information Technology Foundation of the Phils. v. Commission on Elections ,
464 Phil. 173, 207 (2004) [Per J. Panganiban, En Banc].
58. Rollo , pp. 430-431.

59. Exec. Order No. 1008, sec. 3.
60. Exec. Order No. 1008, 4th Whereas Clause.
61. http://www.dti.gov.ph/about/the-organization/attached-agencies
62. Exec. Order No. 1008, Sec. 2.

63. Exec. Order No. 1008, 3rd Whereas Clause.
64. 672 Phil. 621 (2011) [Per J. Perez, Second Division].
65. Id. at 658.

66. LABOR CODE, art. 212 (14) provides:
Article 212. Definitions. —
xxx xxx xxx
14. "Voluntary Arbitrator" means any person accredited by the Board as such
or any person named or designated in the Collective Bargaining Agreement
by the parties to act as their Voluntary Arbitrator, or one chosen with or
without the assistance of the National Conciliation and Mediation Board,
pursuant to a selection procedure agreed upon in the Collective Bargaining
Agreement, or any official that may be authorized by the Secretary of Labor
and Employment to act as Voluntary Arbitrator upon the written request and
agreement of the parties to a labor dispute.
6 7 . G.R. No. 204197, November 23, 2016,
<http://sc.judiciary.gov.ph/pdf/web/viewer.html?
file=/jurisprudence/2016/november2016/204197.pdf> [Per J. Brion, Second
Division].
68. Id. at 15-16.

69. Id. at 431-435.
70. Id. at 738-739.
71. Id. at 432-433.

72. Id. at 433-434.
73. Id. at 434.
74. Id. at 798.
75. Id.
76. Id. at 798-799.
77. Id. at 738.
78. Id. at 739.

79. 672 Phil. 621 (2011) [Per J. Perez, Second Division].
80. Id. at 653.
81. Id. at 435.

82. Id. at 799-801.
83. Id. at 800.
84. Id.
85. Id. at 801.

86. Id. at 802.
87. Id. at 802.
88. Id.
89. Id. at 803.
90. Id. at 803-805.
91. Id. at 805.

92. Id. at 740.
93. Id. at 477.
94. Id. at 476-477.
95. Id. at 740-741.

96. Id. at 741.
97. See Keppel Cebu Shipyard, Inc. v. Pioneer Insurance and Surety Corp. , 695 Phil.
169, 194 (2012) [Per J. Mendoza, En Banc].
98. Rollo , pp. 806-807.

99. Id. at 845-848.
100. Id. at 473-474.
101. Department of Budget and Management Procurement Service (DBM-PS) v.

Kolonwel Trading , 551 Phil. 1030, 1049 (2007) [Per J. Garcia, En Banc] This
case applied the provisions of Rep. Act No. 9184 or the Government
Procurement Reform Act which came into effect in 2003.
102. 544 Phil. 645 (2007) [Per J. Callejo, Sr., Third Division].
103. Id. at 687.
104. IB 10.10 — ISSUANCE OF NOTICE TO PROCEED
1. The concerned government office/agency/corporation should issue the

Notice to Proceed (NTP) to the successful bidder not later than fifteen (15)
calendar days from the date of approval of the contract by the
concerned/authorized government official. The effectivity date of the NTP
shall be specified by the agency concerned.
2. For projects whereby the Notice to Proceed (NTP) is issued after 120
calendar days from the bidding date, the awarded bidder may request for a
contract unit price adjustment using the parametric formulae updated to the
month of the NTP. Computation of the unit price adjustment shall be the
original contract unit price multiplied by the fluctuation factor K without
deducting the 5%. Such updated unit prices shall be used as basis for
computing the regular progress billings, and price escalation for work
accomplishment shall be calculated using the parametric formulae herein
prescribed as applied to the updated unit prices reckoned from the month of
the NTP. Adjustment of unit prices shall be made within fourteen (14)
calendar days from the date the required indices are available/issued by the
appropriate government agency.
105. Rollo , p. 482.
106. Id. at 442.
107. Id. at 447.

108. Id. at 449-450.
109. Id. at 807.
110. Id. at 742-743.

1 1 1 . Id. at 530. See <http://www.quantumconsult.org/wp-
content/uploads/2012/01/2927771-FIDIC-for-civil-engineeing-construction-
1987.pdf> (last accessed on September 4, 2017).
112. Id. at 449-450.
113. Id. at 503.
114. Philippine Bank of Communications v. Spouses Go, 658 Phil. 43, 57 (2011)
[Per J. Mendoza, Second Division].
115. 540 Phil. 422 (2006) [Per J. Callejo, Sr., First Division].
116. Id. at 441.
117. Rollo , p. 579.

118. Id. at 747.
119. Id. at 813.
120. Id.
121. Stronghold Insurance Co., Inc. v. Interpacific Container Services , 762 Phil.
483, 491 (2015) [Per J. Perez, First Division].
122. Rollo , pp. 474-475.
123. City of Dagupan v. Maramba , 738 Phil. 71, 96 (2014) [Per J. Leonen, Third
Division].

124. CIVIL CODE, art. 2199.
125. Id. at 813-814.
126. Id. at 814.
127. Id. at 478-479 (Court of Appeals Decision).

128. See A.C. Ransom Labor Union-CCLU v. National Labor Relations Commission ,
226 Phil. 199, 204 (1986) [Per J. Melencio-Herrera, First Division].
129. Rollo , p. 749.
130. The subject of Bangko Sentral ng Pilipinas Circular No. 799 dated June 21,
2013 is the "[r]ate of interest in the absence of stipulation."
131. Nacar v. Gallery Frames, 716 Phil. 267 (2013) [Per J. Peralta, En Banc].
132. Id. at 281-283.
133. See Eastern Shipping Lines, Inc. v. Court of Appeals , 304 Phil. 236, 254 (1994)
[Per J. Vitug, En Banc].
n Note from the Publisher: Written as "form" in the official document.

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THIRD DIVISION

[G.R. No. 179732. September 13, 2017.]

DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS , petitioner,

As the administrative agency tasked with resolving issues pertaining to

This is a Petition for Review on Certiorari 1 assailing the Court of

Foreign component of the project of Php12,502,155.46

Interest as of December 3, 2003

(Computation for the damages & Php14,418,603.47

Equipment and financial losses 5,080,000.00

Additional costs in the contract 20,311,072.66

Adjustment in the contract price 18,626,805.81

Effect of the bombing incident 6,267,410.48

TOTAL CLAIMS Php77,206,047.88

Meanwhile, on July 8, 2004, the Joint Venture sent a "Notice of Mutual

After hearing and submission of the parties' respective memoranda, 15

WHEREFORE, premises considered and in view of the resolution

SO ORDERED. 28 (Emphasis in the original)

According to respondent Joint Venture, the Petition suﬀers from a fatal

Petitioner argues that the Court of Appeals erred in rendering the

According to petitioner, the ﬁling of the claim before CIAC was

If the Engineer has given notice of his decision as to a matter in

Petitioner avers that the Court of Appeals gravely erred in rendering

Excluded from the coverage of this law are disputes arising

Moreover, judicial or quasi-judicial jurisdiction cannot be

Petitioner argues that respondent is not entitled to US$358,227.95, as

Petitioner's subsequent refusal to process and pay these claims

The Court of Appeals aﬃrmed that respondent was entitled to a 133-

According to respondent, the delay in the issuance of the Notice to

xxx xxx xxx

The Chief of Police of Kumalarang, Zamboanga del Sur

Under Rule 8, Section 10 of the Rules of Court, the "defendant must

During the arbitration hearing before the CIAC, respondent itself

The Court is not convinced.

Respondent claims that it should be paid in U.S. dollars as speciﬁed in

CIAC imposed legal interest in its Award as follows:

The Monetary Board, in its Resolution No. 796 dated 16 May

WHEREFORE, the Petition is DENIED. The Court of Appeals Decision

1. Rollo , pp. 398-463.

13. Id. at 553-555.

16. Id. at 726-751.

19. Id. at 78-79.

22. Id. at 473-474.

26. Id. at 477-478.

29. Id. at 398-463.

38. Id. at 396-A.

42. Rollo , pp. 477-478.

45. Id. at 414.

52. Id. at 793-794.

58. Rollo , pp. 430-431.

62. Exec. Order No. 1008, Sec. 2.

65. Id. at 658.

xxx xxx xxx

68. Id. at 15-16.

71. Id. at 432-433.

78. Id. at 739.

81. Id. at 435.

85. Id. at 801.

91. Id. at 805.

95. Id. at 740-741.