G.R. No. 200401 January 17, 2018
METRO RAIL TRANSIT DEVELOPMENT CORPORATION, Petitioner, vs. GAMMON PHILIPPINES, INC., Respondent.

FACTS

Petitioner Metro Rail Transit Development Corporation (MRT) invited respondent Gammon Philippines, Inc. to bid for the concrete works of a Podium structure for the MRT-3 North Triangle Development Project. Gammon won the bid, and on August 27, 1997, Parsons Interpro JV, the authorized Management Team, issued a Letter of Award and Notice to Proceed (First NTP) to Gammon. The First NTP, accompanied by formal contract documents, stated the award was predicated on a comfort letter from Gammon’s overseas associate and instructed Gammon to proceed with Phase I of the work. Gammon signed and returned the First NTP on September 2, 1997, confirming mobilization, but separately noted it was still reviewing the contract documents.
Subsequently, MRT itself informed Gammon it needed one to two weeks before issuing a “Formal Notice to Proceed.” MRT later terminated the project and awarded it to another contractor. Gammon filed a complaint for breach of contract before the Construction Industry Arbitration Commission (CIAC), which ruled in its favor, awarding claims for lost profits and reimbursements for services and site works. The Court of Appeals affirmed the CIAC Decision. MRT elevated the case via a Petition for Review on Certiorari.

ISSUE

Whether the CIAC validly acquired jurisdiction over the dispute and whether it correctly ruled that MRT breached its contract with Gammon, justifying the monetary award.

RULING

The Supreme Court denied the petition and affirmed the lower rulings. On jurisdiction, the Court held that the CIAC properly acquired jurisdiction. The existence of a construction contract or an arbitration agreement is a jurisdictional fact. The First NTP, which Gammon signed and returned, constituted a perfected contract. MRT’s subsequent unilateral act of withholding a so-called “Formal Notice to Proceed” and later terminating the project did not negate the perfection of the contract arising from the bid award and Gammon’s acceptance via the signed NTP. The contract contained an arbitration clause, and the claims for damages arising from the breach fell squarely within the CIAC’s authority.
On the merits, the Court found MRT liable for breach of contract. By awarding the project to another contractor without lawful cause, MRT reneged on its contractual obligations under the perfected contract evidenced by the First NTP. The CIAC’s factual findings on the existence of the contract, the breach, and the computation of damages are conclusive upon the Supreme Court, especially as the CIAC is a specialized body with technical expertise. The award for lost profits was proper as it represented gains prevented by MRT’s breach, and the reimbursements for engineering, design, and site works were for expenses incurred by Gammon in good faith pursuant to the First NTP’s instruction to mobilize and proceed. No reversible error was committed by the CIAC or the Court of Appeals.