G.R. No. 162095 ; October 12, 2009
IBEX INTERNATIONAL, INC., Petitioner, vs. GOVERNMENT SERVICE INSURANCE SYSTEM and COURT OF APPEALS, Respondents.

FACTS

Petitioner IBEX International, Inc. entered into a Contract Agreement with respondent Government Service Insurance System (GSIS) on February 23, 1984, to supply and install graphic signage for the GSIS Headquarters Building for ₱11,500,000. The delivery date was set for May 26, 1986. However, on March 24, 1986, GSIS, through its project manager, informed IBEX of the suspension of all construction operations effective April 1, 1986, until further notice. IBEX subsequently sent letters in 1988 and 1991 expressing interest in resuming work. In 1994, GSIS informed IBEX of its intent to hold a new bidding for the signage, which IBEX protested, asserting its contract remained valid. GSIS later took over the project, citing IBEX’s failure to meet requirements for contractors with suspended contracts.
On December 28, 1999, IBEX filed a complaint with the Construction Industry Arbitration Commission (CIAC) for breach of contract, seeking actual damages. The CIAC dismissed the complaint, ruling it was barred by prescription and laches. The Court of Appeals affirmed the CIAC decision, prompting IBEX to elevate the case to the Supreme Court via a petition for review.

ISSUE

Whether the CIAC and the Court of Appeals correctly dismissed IBEX’s complaint on the grounds of prescription and laches.

RULING

The Supreme Court denied the petition and affirmed the lower courts’ decisions. The legal logic centers on the application of the statute of limitations and the doctrine of laches. A cause of action for breach of contract accrues from the time of the breach. Here, IBEX’s cause of action accrued on March 24, 1986, when GSIS suspended the contract indefinitely without legal justification. The prescriptive period for filing such an action is ten years under Article 1144 of the Civil Code. IBEX filed its complaint only on December 28, 1999, over thirteen years later, clearly beyond the prescriptive period.
While a written extrajudicial demand can interrupt the running of prescription, IBEX’s letters in 1988 and 1991 merely expressed interest in resuming work and did not constitute a formal demand for specific performance or payment that would effectively interrupt the prescriptive period. Furthermore, the Court upheld the finding of laches due to IBEX’s unreasonable delay in asserting its rights. Despite GSIS’s clear takeover of the project in 1994, IBEX waited until 1999 to initiate arbitration, an inexcusable neglect that prejudiced GSIS. The factual findings of the CIAC, a specialized quasi-judicial body, on the incomplete status of the project and the validity of the contract termination, are accorded finality and are supported by evidence. Thus, IBEX’s claim was correctly barred.