GR 159417; (January, 2007) (Digest)
G.R. No. 159417; January 25, 2007
PHILIPPINE NATIONAL CONSTRUCTION CORPORATION, Petitioner, vs. THE HON. COURT OF APPEALS and CMS CONSTRUCTION and DEVELOPMENT CORPORATION, Respondents.
FACTS
Petitioner PNCC subcontracted to respondent CMS the relocation of steel pipes for the South Luzon Tollway. A Subcontract Agreement was executed on October 21, 1997, with an estimated price and a 75-day completion period. CMS commenced work even before the contract signing. Due to project delays, PNCC, through letters in December 1997, provided its own equipment and manpower to CMS, stating the costs would be charged to CMS. The project was completed in April 1999. The parties later executed a Contract Amendment on November 23, 1999, setting a final contract price of P8,872,593.74 and stating it superseded all prior agreements on price.
PNCC subsequently deducted a total of P1,091,487.53 from CMS’s billings as charges for the aforementioned “accommodations.” CMS disputed these deductions and filed a complaint for sum of money with the Construction Industry Arbitration Commission (CIAC).
ISSUE
Whether the CIAC correctly disallowed PNCC’s deductions from CMS’s billings for the cost of equipment and manpower supplied by PNCC.
RULING
Yes. The Supreme Court affirmed the rulings of the CIAC and the Court of Appeals, which ordered PNCC to pay CMS the deducted amount plus interest. The legal logic rests on the principle of novation and the parol evidence rule. The Contract Amendment of November 23, 1999, which established a final, all-inclusive subcontract price and expressly superseded the original agreement and any other prior commitments on price, constituted a novation. This final price subsumed all costs, including any potential charges for PNCC’s earlier assistance.
PNCC’s attempt to justify the deductions relied on its letters from December 1997. However, introducing these letters to vary or add to the terms of the subsequent, integrated Contract Amendment is barred by the parol evidence rule. The amendment was clear and complete, leaving no room for additional terms from prior correspondence. Furthermore, the CIAC’s factual finding that PNCC failed to prove the deductions were valid charges or that CMS agreed to them is conclusive. The Court emphasized that factual findings of quasi-judicial agencies like the CIAC, when supported by evidence, are accorded respect and finality. Thus, PNCC’s deductions were improperly made, and CMS is entitled to the awarded sum.