Summa Kumagai v. Romago

CHICO-NAZARIO, J.:

This is a Petition for Review under Rule 45, seeking the reversal of (1) the Decision1 dated 22 December 2006 of the Court of Appeals in CA-G.R. SP No. 89959, which modified the Decision dated 3 March 2005 of the Construction Industry Arbitration Commission (CIAC) in CIAC Case No. 28-2004; and (2) the Resolution2 dated 20 March 2007 of the appellate court in the same case which denied the Motion for Reconsideration of petitioner Summa Kumagai, Inc. - Kumagai Gumi Co., Ltd. Joint Venture (SK-KG). The facts of the case are as follows: SK-KG engaged the services of respondent Romago, Incorporated (Romago), under a Sub-Contract Agreement, for electrical works needed in the construction of The New Medical City Superstructure Project, the original date of completion of which was set on 18 September 2003. As the implementation of the contract progressed, SK-KG issued change orders through Project Management Instructions (PMI), Contractor's Instructions and oral instructions.

Romago complied with the specified changes, although they were allegedly outside the scope of the Sub-Contract Agreement. From the early part of the project, SK-KG incurred delays in its payment to Romago. SK-KG also incurred delays in the delivery of equipment to Romago, prompting the latter to do crash programs.

The changes in the specified contracted works led to an extension of 101 days. These complications resulted in additional expenses on the part of Romago. Also according to Romago, it encountered so much difficulty resulting from an alleged extraction of arbitrary back charges and illegal deductions on the part of SK-KG.

Romago eventually completed the contracted works. SK-KG though refused to pay its obligations to Romago, and did not issue a certificate of completion for the works it subcontracted to Romago. After efforts to reach an amicable settlement between SK-KG and Romago failed, Romago filed a complaint with the CIAC on 18 August 2004.

The case was docketed as CIAC Case No. 28-2004. On 20 September 2004, SK-KG filed its Answer with Counterclaim. Romago did not file a Reply.

After the issues were joined, an Arbitration Panel was constituted by the CIAC to hear the case. During the hearings, Romago tried to present evidence to controvert the counterclaims of SK-KG. However, the Arbitration Panel did not allow Romago to do so on the ground that the failure of Romago to file a Reply to the Answer was deemed an admission of the counterclaims of SK-KG.

Romago filed a Motion to Submit Additional Evidence on 21 April 2005, but was denied by the Officer-in-Charge of the CIAC. On 3 March 2005, the CIAC rendered its Decision, the dispositive portion of which reads as follows: WHEREFORE, judgment is hereby rendered and award made on the monetary claims of the parties as FOLLOWS: A. In favor of the [herein respondent]-Sub Contractor ROMAGO, INC., against [herein petitioner] Main Contractor SUMMA KUMAGAI, INC., KUMAGAI GUMI CO., LTD. JOINT VENTURE: ₱2,195,535.18 - as the admitted liability of the [SK-KG] to the [Romago] for the unpaid balance of the PMIs and the CIs.

₱480,538.89 - for the total of Claim Items Nos. 186, 187 and 198 of the unreconciled items on this claim. ₱296,039.37 - representing what [SK-KG] admittedly had mistakenly overcharged [Romago] for its electric power consumption interest at the rate of 6% per annum shall be computed from 29 October 2003 up to the date of payment. ₱263,984.95 - for the installation of the ECB's.

Interest at the rate of 6% per annum shall be computed from 06 September 2003 up to the date of payment. ₱484,883.26 - for the costs of power interconnection to the DDC. Interest at the rate of 6% per annum shall be computed from 14 July 2003 up to the date of payment.

₱553,225.20 - for the installation of extension ring boxes to connect pipes and to complete the rough-in conduit works performed by the previous Electrical Sub-Contractor, Engineering Equipment Incorporated SKI-KG JV. ₱3,568,077.03 - as reimbursement of [Romago's] bid amount based on the OLEX Brand of Fire Rated Cable. ₱157,675.05 - as payment for rectification works due to spatial clashes in the second floor.

₱7,999,958.13 - TOTAL DUE TO [Romago] B. In favor of the [petitioner]-Main Contractor SUMMA KUMAGAI, INC., - KUMAGAI GUMI CO., LTD JOINT VENTURE and against the [respondent]-Sub Contractor ROMAGO, INC. ₱5,351,057.36 - on its counterclaim, for the unrecouped actual cost of Supplemental Manpower; ₱5,575,310.03 - on its counterclaim for the unrecouped actual cost of tools, materials and equipment. ₱25,729,263.86 - as the unrecouped balance of the cash advances given to the [Romago].

₱1,131,244.29 - as the deductions or backcharges admitted by the [respondent] to have been validly made. ₱37,786,875.04 - TOTAL DUE TO [SK-KG] OFFSETTING the foregoing awards respectively made to the parties, there remains a balance of ₱29,786,916.912 in favor of [SK-KG].3 It is hereby DIRECTED that [SK-KG] shall release the sum of ₱7,375,400.39 being the balance of the Retention Sum after the warranty period on 10 June 2005. Romago filed a Petition for Review with the Court of Appeals, which was docketed as CA-G.R. SP No. 89959.

Meanwhile, SK-KG filed with the CIAC a Motion for Execution of the CIAC award. On 30 January 2006, CIAC granted the Motion. On 30 March 2006, CIAC issued a Writ of Execution.

On 12 May 2006, the Court of Appeals issued a Temporary Restraining Order enjoining the CIAC from implementing the appealed Decision. After the Court of Appeals heard the oral arguments of the parties, it issued a Resolution dated 8 June 2006 requiring the CIAC to elevate the entire case records. In a Resolution dated 28 June 2006, the Court of Appeals resolved to issue a Writ of Preliminary Injunction.

On 22 December 2006, the Court of Appeals rendered its assailed Decision, modifying the CIAC Decision, to wit: WHEREFORE, the decision dated March 3, 2005 of the Construction Industry Arbitration Commission in CIAC Case No. 28-2004 is hereby MODIFIED. [Herein petitioner] Summa Kumagai, Inc. - Kumagai Gumi Co., Ltd., Inc. Joint Venture is hereby DIRECTED to pay Romago, Incorporated the following sums: ₱6,103,531.94 - representing the unpaid balance under the original contract; ₱6,251,394.00 - representing additional expenses incurred under Romago's crash program; ₱6,739,737.72 - representing additional manpower and materials under the Extended Preliminaries; ₱2,682,394.41 - for expenses in testing and commissioning electrical equipment; ₱700,000.00 - for improperly deducted savings from the use of local FABRIDUCT materials; ₱914,365.72 - representing price differential for Styline Model Hubbell devices; ₱711,633.51 - cost of supply and installation of extended bus bars; ₱498,813.34 - representing improper deduction for rental of temporary Alimak lifts; ₱262,500.00 - as compensation for As-built Drawings; ₱787,172.62 - representing material escalation; ₱854,923.28 - representing cost of ancilliary fittings for lighting fixtures; ₱7,375,400.39 - representing the balance of retention money due to Romago, Incorporated.