G.R. No. 204423 , September 14, 2016
PHILIPPINE SCIENCE HIGH SCHOOL-CAGAYAN VALLEY CAMPUS, PETITIONER, VS. PIRRA CONSTRUCTION ENTERPRISES, RESPONDENT.

FACTS

PIRRA Construction Enterprises (PIRRA) entered into two construction contracts with Philippine Science High School-Cagayan Valley Campus (PSHS). For Project A, PIRRA achieved 94.09% completion. PSHS withheld payment for Partial Billing No. 5, citing pending corrections and a Commission on Audit (COA) inspection that noted defects and disallowed certain costs, including for uninstalled power distribution lines. PSHS eventually took over Project A, deducting these costs from PIRRA’s final billing. For Project C, PSHS suspended the project due to PIRRA’s alleged failure to comply with a work suspension order and subsequently terminated the contract. PIRRA filed a complaint for damages with the Construction Industry Arbitration Commission (CIAC).
The CIAC ruled largely in favor of PIRRA, awarding claims for unpaid billings and lost income, while allowing PSHS certain deductions for corrective work. Both parties appealed to the Court of Appeals (CA). The CA modified the CIAC award, disallowing PIRRA’s claim for unrealized profit on Project C due to the lawful termination but affirming most other awards. PSHS elevated the case to the Supreme Court via a Petition for Review on Certiorari.

ISSUE

The core issue is whether the CA correctly affirmed the CIAC’s factual findings and modified awards, particularly regarding the validity of contract termination, the propriety of claimed damages, and the application of the “finality-of-findings” rule on CIAC arbitral awards.

RULING

The Supreme Court denied the petition and affirmed the CA’s modified decision. The Court emphasized that factual findings of quasi-judicial agencies like the CIAC, when affirmed by the CA, are generally conclusive and binding. It found no compelling reason to deviate from this rule, as PSHS failed to prove that the CIAC and CA committed grave abuse of discretion or that their decisions were based on a misapprehension of facts.
On the merits, the Court upheld the CA’s ruling that PSHS lawfully terminated the contract for Project C due to PIRRA’s violation of the work suspension order. Consequently, PIRRA was not entitled to unrealized profits for that project. However, the Court sustained the awards for PIRRA’s legitimate accomplishments. For Project A, the disallowance for the power distribution lines was upheld as the item was not installed within the contract period, and no time extension was granted. The takeover by PSHS was deemed justified under the contract terms to remedy defects. The Court also modified the award to impose legal interest at 6% per annum on the monetary awards from finality until full satisfaction, in line with established jurisprudence. The decision reinforces the limited scope of judicial review over arbitral awards and the binding nature of contractual provisions on both government and private contractors.