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PHILIPPINE REALTY AND HOLDINGS CORPORATION,

CONSTRUCTION AND DEVELOPMENT CORPORATION,


Respondent, G. R. No. 165548

Petitioner,

versus

LEY

LEY CONSTRUCTION AND DEVELOPMENT CORPORATION, Petitioner, versus PHILIPPINE


REALTY AND HOLDINGS CORPORATION, Respondent, G. R. No. 167879
June 13, 2011

These are consolidated petitions for review under Rule 45 of the New Rules of Civil
Procedure filed by both parties from a Court of Appeals (CA) Decision in CA-GR No. 71293
dated 30 September 2004. This Decision reversed a Decision of the Regional Trial Court (RTC),
National Capital Judicial Region (NCJR), Branch 135 in Makati City dated 31 January 2001 in
Civil Case No. 96-160.
The foregoing are the facts culled from the record, and from the findings of the CA and
the RTC.
Ley Construction and Development Corporation (LCDC) was the project contractor for
the construction of several buildings for Philippine Realty & Holdings Corporation (PRHC), the
project owner. Engineer Dennis Abcede (Abcede) was the project construction manager of
PRHC, while Joselito Santos (Santos) was its general manager and vice-president for
operations.
Sometime between April 1988 and October 1989, the two corporations entered into four
major construction projects, as evidenced by four duly notarized construction agreements.
LCDC committed itself to the construction of the buildings needed by PRHC, which in turn
committed itself to pay the contract price agreed upon. These were the four construction
projects the parties entered into involving a Project 1, Project 2, Project 3 (all of which involve
the Alexandra buildings) and a Tektite Building:
1.

Construction Agreement dated 25 April 1988 Alexandra-Cluster C


involving the construction of two units of seven-storey buildings with
basement at a contract price of P 68,000,000 (Project 1);

2.

Construction Agreement dated 25 July 1988 Alexandra-Cluster B


involving the construction of an eleven-storey twin-tower building with a
common basement at a contract price of P 140,500,000 (Project 2);

3.

Construction Agreement dated 23 November 1988 Alexandra-Cluster E


involving the construction of an eleven-storey twin-tower building with
common basement at a contract price of P140,500,000 (Project 3); and

4.

Construction Agreement dated 10 October 1989 Tektite Towers Phase I


involving the construction of Tektite Tower Building I at Tektite Road at a
contract price of P 729,138,964 (Tektite Building).

The agreement covering the construction of the Tektite Building was signed by a Mr.
Campos under the words Phil. Realty & Holdings Corp. and by Santos as a witness. Manuel
Ley, the president of LCDC, signed under the words Ley Const. & Dev. Corp.
The terms embodied in the afore-listed construction agreements were almost identical.
Each agreement provided for a fixed price to be paid by PRHC for every project.
Sometime after the execution of these agreements, two more were entered into by the
parties:
1.

Letter-agreement dated 24 August 1989 Project 3 for the construction of


the drivers quarters in Project 3; and

2.

Agreement dated 7 January 1993 Tektite Towers for the concreting


works on GL, 5, 9, & A (ground floor to the 5th floor) of the Tektite Towers.

It is raised to court because, PRHC searched for liquidated damages for the delay to
finish the work. LCDC didnt deliver the project on time. They reasoned out the escalation of

construction materials during that time. LCDC requested for an extension and PRHC agreed
upon through its project manager Abcede. However, when LCDC demand the amount for the
remaining balance including the extension, PRHC denied liability and said that they doesnt
have any signatures on the request letter hence, the project manager is the one who only
signed. After, showing evidences from both party the court decides.
Wherefore, the Decision of the Supreme Court is as follows:
I.

They find Philippine Realty and Holdings Corporation (PRHC) LIABLE to Ley
Construction Development Corporation (LCDC) in the amount of P 64,029,710.22,
detailed as follows because they have truly informed PRHC and have agreed upon it.
They have showed supporting documents why the project is extended due to escalation:
1. P 13,251,152.61 as balance yet unpaid by PRHC for Project 2;
2.

P 1,703,955.07 as balance yet unpaid by PRHC for Project 1;

3.

P 5,529,495.76 as balance yet unpaid by PRHC for Project 3;

4.

P 232,367.96 as balance yet unpaid by PRHC for the drivers quarters for Project 3;

5.

P 36,000,000.00 as agreed upon in the escalation agreement entered into by


PRHCs representatives and LCDC for the Tektite Building;

6.

P 7,112,738.82 as balance yet unpaid by PRHC for the concreting works from the
ground floor to the fifth floor of the Tektite Building;

7.

II.

P 200,000.00 as LCDCs reduced attorneys fees.

Further, they find LCDC LIABLE to PRHC in the amount of P 6,652,947.75 detailed as
follows:
1. P 4,646,947.75 for the overpayment made by PRHC for the Tektite Building;
2.

P 2,006,000.00 for the expenses incurred by PRHC for corrective works to


redo/repair the allegedly defective waterproofing construction work done by LCDC in
Project 2.

Reaction:
1. No project can be truly constructed perfectly because we can contain some factors
including escalation of prices and bad weather conditions. Good thing that LCDC have
compiled all the needed documents to show that there is valid reason for extension and
they have informed very well the owner. One lesson that is to be picked up upon this
case is to foresee that possible delaying factors and include allowance to your
estimation and as well as to construct a contract that is ready and adaptable to future
delays.
THE PRESIDENT OF THE CHURCH OF JESUS CHRIST OF LATTER DAY
SAINTS, Petitioner, vs. BTL CONSTRUCTION CORPORATION, Respondent, G.R. No.
176439.
BTL CONSTRUCTION CORPORATION, Petitioner, vs. THE PRESIDENT OF THE MANILA
MISSION OF THE CHURCH OF JESUS CHRIST OF LATTER DAY SAINTS and BPI-MS
INSURANCE CORPORATION, Respondents, G.R. No. 176718
January 15, 2014
On January 10, 2000, COJCOLDS and BTL entered into a Construction
Contract (Contract) for the latters construction of the formers meetinghouse facility at Barangay
Cabug, Medina, Misamis Oriental (Medina Project). The contract price was set
at P12,680,000.00 (contract price), and the construction period from January 15 to September
15, 2000.7 However, due to bad weather conditions, power failures, and revisions in the
construction plans (as per Change Order Nos. 1 to 12 agreed upon by the parties), 8 among
others, the completion date of the Medina Project was extended.

On May 18, 2001, BTL informed COJCOLDS that it suffered financial losses from
another project (i.e., the Pelaez Arcade II Project) and thereby requested that it be allowed to:
(a) bill COJCOLDS based on 95% and 100% completion of the Medina Project; and (b) execute
deeds of assignment in favor of its suppliers so that they may collect any eventual payments
directly from COJCOLDS.9 COJCOLDS granted said request which BTL, in turn, acknowledged.
On August 13, 2001, BTL ceased its operations in the Medina Project because of its lack
of funds to advance the cost of labor necessary to complete the said project, as well as the
supervening increase in the prices of materials and other items for construction. Consequently,
COJCOLDS terminated its Contract with BTL on August 17, 2001 and, thereafter, engaged the
services of another contractor, Vigor Construction (Vigor), to complete the Medina Project.
On November 12, 2003, BTL filed a complaint against COJCOLDS before the CIAC,
claiming a total amount ofP28,716,775.40 broken down as follows: (a) P12,464,005.11 as cost
of labor, materials, equipment, overhead expenses, lost profits and interests; (b) P1,248,179.87
as the 10% retention money stipulated in the contract; (c)P373,838.42 as interest on said
retention money; (d ) P14,330,752.00 as actual damages; (e) P300,000.00 as attorneys fees;
(f ) moral and exemplary damages; and (g) costs of arbitration.
For its part, COJCOLDS filed its answer with compulsory counterclaim, praying for the
award of P4,134,693.49 which consists of: (a) P2,307,760.00 as liquidated damages in view of
BTLs delay in completing the pending project; (b) P300,533.49 as reimbursement of the
payments it directly made to BTLs suppliers as per the latters request; (c) P526,400.00 as cost
overrun; and (d) P1,000,000.00 as attorneys fees.
During the preliminary conference held on February 10, 2004, the parties agreed to a
Terms of Reference (TOR) which was later amended on March 4, 2004.Under the amended
TOR, it was stipulated that the parties relationship with respect to the Medina Project is
governed by, among others, the Contract, and the General Conditions of the Contract(General
Conditions). They also stipulated that 98% of the said project had been completed.
In a Decision dated August 15, 2006, the CA modified the CIACs ruling in that it ordered
COJCOLDS not only to pay BTL the amount of P1,612,017.74 representing the unpaid portion
of 98% of the contract price, but also to return to BTL the 10% retention money in the amount
of P1,248,179.87, after deducting the cost overrun ofP526,400.00 that BTL was held to shoulder
as per Article 3(E) of the Contract (under which COJCOLDS was allowed to engage the
services of another contractor, i.e., Vigor, to complete the Medina Project using the 10%
retention amount).
Meanwhile, the CA ordered BTL to return to COJCOLDS the amount of P300,533.49
which was found to be an overpayment made by the latter pursuant to the change orders.
The CA also increased the award of liquidated damages in COJCOLDSs favor
from P1,191,920.00 toP1,800,560.00 since BTL was actually in delay for 142 days (and not 94
days as found by the CIAC). The CA clarified that pursuant to Article 21.04(A) of the General
Conditions as well as the practice in the construction industry, the architects recommendation
regarding the grant of extensions should be controlling and thus BTL was only given an
extension of 190 days (and not 238 days as found by the CIAC).
Further, the CA deleted the awards for the additional works (i.e., P804,460.89 for the
concrete retaining wall, andP344,360.16 for the unpaid balances from the works taken under
Change Order Nos. 8 to 12) adjudged by the CIAC in favor of COJCOLDS because: (a) the
retaining wall should be properly deemed as part of the original works, considering that it was
not covered by any change order, unlike the other additional works performed on the Medina
Project; and (b) there is no basis in saying that COJCOLDS failed to pay the balance for the
works taken under Change Order Nos. 8 to 12, considering that COJCOLDS paid such balance
directly to BTLs suppliers, pursuant to BTLs May 18, 2001 request to COJCOLDS.
Finally, the CA deleted the award of attorneys fees in BTLs favor as COJCOLDS was
not in bad faith in refusing to pay the formers claims.
Reaction:

The contractor have the right to be paid even though their work is not delivered on time because
of a valid reason such bad weather and power failure. The contractor has the right as long as it
present proper documentation and reason however they should pay the liquidated damages.
One good lesson that can be picked up upon this case is that to ensure proper settlement of
contract and make sure that all sections and part of the paper is read and understood.

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