GR 187521; (March, 2012) (Digest)
G.R. No. 187521 ; March 14, 2012
F.F. CRUZ & CO., INC., Petitioner, vs. HR CONSTRUCTION CORP., Respondent.
FACTS
Petitioner F.F. Cruz & Co., Inc. (FFCCI) subcontracted a portion of a DPWH project to respondent HR Construction Corporation (HRCC). Their Subcontract Agreement required HRCC to submit monthly progress billings, which FFCCI would pay within 30 days, subject to deductions. The agreement stipulated that payment requests must include progress accomplishments approved by FFCCI and that a joint measurement of completed works with DPWH representatives was necessary to arrive at a common quantity. HRCC submitted several progress billings. FFCCI, however, did not pay the amounts as billed, asserting that payments must be based on joint measurements with the DPWH, which often resulted in lower evaluated amounts. FFCCI made payments based on these joint evaluations. Claiming non-payment of its billings, HRCC eventually stopped work and initiated arbitration before the Construction Industry Arbitration Commission (CIAC).
ISSUE
The core issue is whether FFCCI was justified in withholding payment from HRCC’s progress billings based on its interpretation of the contractual requirement for a joint measurement of accomplishments prior to payment.
RULING
The Supreme Court ruled against FFCCI and affirmed the arbitral award in favor of HRCC. The Court emphasized that the CIAC’s factual findings, especially regarding the valuation of work accomplished, are conclusive and not subject to review. On the contractual interpretation, the Court held that the stipulation for “joint measurement” was not an absolute condition precedent to FFCCI’s obligation to pay. The agreement required HRCC to submit billings with approved accomplishments, which it did. The joint measurement clause was intended merely as a mechanism to verify quantities and resolve disputes, not to suspend payment indefinitely. FFCCI’s unilateral reliance on delayed joint surveys to justify non-payment contravened the contract’s essence, which was to ensure regular payment for work done. By unreasonably delaying payments based on its own interpretation, FFCCI committed a material breach, which justified HRCC’s work stoppage. The Court thus upheld the CIAC’s computation of the unpaid balance due to HRCC, plus legal interest. The arbitration costs, however, were ordered to be shared equally by the parties.