G.R. No. 198849. August 7, 2019.
CAMP JOHN HAY DEVELOPMENT CORPORATION, Petitioner, vs. CHARTER CHEMICAL AND COATING CORPORATION, Respondent.

FACTS

Camp John Hay Development Corporation (petitioner) entered into a Contractor’s Agreement with Charter Chemical and Coating Corporation (respondent) in January 2001 for painting works at Camp John Hay Manor. Part of respondent’s compensation was the offsetting of the contract balance against two studio-type units at Camp John Hay Suites. The agreement did not specify a date for the units’ turnover. Respondent completed the painting works in 2003. In 2005, the parties executed Contracts to Sell for the units, stating delivery would be “within a reasonable period of time from the date of completion of the Unit.” Petitioner failed to deliver the units, citing delays in the construction of Camp John Hay Suites, with completion estimates shifting from 2006 to 2012. Respondent demanded delivery or payment of the units’ value. After petitioner failed to comply, respondent filed a Request for Arbitration with the Construction Industry Arbitration Commission (CIAC). The CIAC awarded respondent the monetary equivalent of the two units (₱5,900,000.00) plus attorney’s fees. The Court of Appeals affirmed the CIAC’s Final Award. Petitioner filed a Petition for Review before the Supreme Court.

ISSUE

Whether the Court of Appeals erred in affirming the CIAC’s award, which granted respondent the monetary equivalent of the two units based on petitioner’s breach, instead of fixing a period for the obligation’s performance under Article 1197 of the Civil Code.

RULING

The Supreme Court denied the petition and affirmed the Court of Appeals’ Decision. The Court held that rescission under Article 1191 of the Civil Code was the proper remedy for petitioner’s breach of its reciprocal obligation. The fixing of a period under Article 1197 is discretionary and requires just cause, which was absent here. The Court found that the parties’ agreements, read together, implied an obligation to deliver the units within a reasonable time. Petitioner’s failure to deliver the units within the timeframe indicated by its own revised project plans with the Bases Conversion and Development Authority (2006, later moved to 2012) constituted an unreasonable delay, amounting to a breach. Respondent’s right to rescind the contract for non-performance was properly exercised. The CIAC had jurisdiction as the dispute arose from the Contractor’s Agreement, which contained an arbitration clause, and the subsequent Contracts to Sell did not supersede this clause. The award of the monetary equivalent of the units and attorney’s fees was upheld. Interest at the rate of six percent (6%) per annum was imposed on the monetary award from the date of extrajudicial demand (August 3, 2007) until finality of judgment, and twelve percent (12%) per annum thereafter until full satisfaction.