Sei sulla pagina 1di 11

SECOND DIVISION [G.R. No. 154885. March 24, 2008.] DIESEL CONSTRUCTION CO., INC., petitioner, vs.

UPSI PROPERTY HOLDINGS, INC., respondent. [G.R. No. 154937. March 24, 2008.] UPSI PROPERTY HOLDINGS, INC., petitioner, vs. DIESEL CONSTRUCTION CO., INC. and FGU INSURANCE CORP.,respondents.

Inter alia, the Agreement contained provisions on contract works and Project completion, extensions of contract period, change/extra works orders, delays, and damages for negative slippage. Tasked to oversee Diesel's work progress were: Grace S. Reyes Designs, Inc. for interior design and architecture, D.L. Varias and Associates as Construction Manager, and Ryder Hunt Loacor, Inc. as Quantity Surveyor. 6 Under the Agreement, the Project prosecution proper was to start on August 2, 1999, to run for a period of 90 days or until November 8, 1999. The parties later agreed to move the commencement date to August 21, 1999, a development necessitating the corresponding movement of the completion date to November 20, 1999. Of particular relevance to this case is the section obliging the contractor, in case of unjustifiable delay, to pay the owner liquidated damages in the amount equivalent to one-fifth (1/5) of one (1) percent of the total Project cost for each calendar day of delay. 7 In the course of the Project implementation, change orders were effected and extensions sought. At one time or another, Diesel requested for extension owing to the following causes or delaying factors: (1) manual hauling of materials from the 14th to 16th floors; (2) delayed supply of marble; (3) various change orders; and (4) delay in the installation of shower assembly. 8 UPSI, it would appear, disapproved the desired extensions on the basis of the foregoing causes, thus putting Diesel in a state of default for a given contract work. And for every default situation, UPSI assessed Diesel for liquidated damages in the form of deductions from Diesel's progress payments, as stipulated in the Agreement. 9 Apparently irked by and excepting from the actions taken by UPSI, Diesel, thru its Project manager, sent, on March 16, 2000, a letter notice to UPSI stating that the Project has been completed as of that date. UPSI, however, disregarded the notice, and refused to accept delivery of the contracted premises, claiming that Diesel had abandoned the Project unfinished. Apart therefrom, UPSI withheld Diesel's 10% "retention money" and refused to pay the unpaid balance of the contract price. 10 It is upon the foregoing factual backdrop that Diesel filed a complaint before the CIAC, praying that UPSI be compelled to pay the unpaid balance of the contract price, plus damages and attorney's fees. In an answer with counterclaim, UPSI denied liability, accused Diesel of abandoning a project yet to be finished, and prayed for repayment of expenses it allegedly incurred for completing the Project and for a declaration that the deductions it made for liquidated damages were proper. UPSI also sought payment of attorney's fees. 11 After due hearing following a protracted legal sparring, the Arbitral Tribunal of the CIAC, on December 14, 2001, in CIAC Case No. 18-2001, rendered judgment for Diesel, albeit for an amount lesser than its original demand. To be precise, the CIAC ordered UPSI to pay Diesel the total amount of PhP4,027,861.60, broken down as follows: PhP3,661,692.60, representing the

DECISION

VELASCO, JR., J p: The Case Before the Court are these petitions for review under Rule 45 separately interposed by Diesel Construction Co., Inc. (Diesel) and UPSI Property Holdings, Inc. (UPSI) to set aside the Decision 1 dated April 16, 2002 as partly modified in a Resolution 2 of August 21, 2002, both rendered by the Court of Appeals (CA) in CA-G.R. SP No. 68340, entitled UPSI Property Holdings, Inc. v. Diesel Construction Co., Inc., and FGU Insurance Corporation. The CA Decision modified the Decision dated December 14, 2001 of the Arbitral Tribunal of the Construction Industry Arbitration Commission (CIAC) in CIAC Case No. 18-2001, while the CA Resolution granted in part the motion of Diesel for reconsideration and denied a similar motion of UPSI. The Facts The facts, as found in the CA Decision under review, are as follows: On August 26, 1995, Diesel, as Contractor, and UPSI, as Owner, entered into a Construction Agreement 3 (Agreement) for the interior architectural construction works for the 14th to 16th floors of the UPSI Building 3 Meditel/Condotel Project (Project) located on Gen. Luna St., Ermita, Manila. Under the Agreement, as amended, Diesel, for PhP12,739,099, agreed to undertake the Project, payable by progress billing. 4 As stipulated, Diesel posted, through FGU Insurance Corp. (FGU), a performance bond in favor of UPSI. 5

unpaid balance of the contract price; and PhP366,169 as attorney's fees. In the same decision, the CIAC dismissed UPSI's counterclaim 12 and assessed it for arbitration costs in the amount of PhP298,406.03. 13 In time, UPSI went to the CA on a petition for review, docketed as CA-G.R. SP No. 68340. Eventually, the appellate court rendered its assailed Decision dated April 16, 2002, modifying that of the CIAC, thus: WHEREFORE, premises considered, the petition is GRANTED and the questioned Decision is MODIFIED in this wise: a.The claim of [UPSI] for liquidated damages is GRANTED to the extent of PESOS: ONE MILLION THREE HUNDRED NINE THOUSAND AND FIVE HUNDRED (P1,309,500.00) representing forty-five (45) days of delay at P29,100 per diem; b.We hold that [Diesel] substantially complied with the Construction Contract and is therefore entitled to one hundred percent (100%) payment of the contract price. Therefore, the claim of [Diesel] for an unpaid balance of PESOS: TWO MILLION FOUR HUNDRED FORTY-ONE THOUSAND FOUR HUNDRED EIGHTY TWO and SIXTY FOUR centavos (P2,441,482.64), which amount already includes the retention on the additional works or Change Orders, is GRANTED, minus liquidated damages. In sum, [UPSI] is held liable to [Diesel] in the amount of PESOS: ONE MILLION ONE HUNDRED THIRTY ONE THOUSAND NINE HUNDRED EIGHTY TWO and sixty four centavos (P1,131,982.64), with legal interest until the same is fully paid; c.The parties are liable equally for the payment of arbitration costs; d.All claims for attorney's fees are DISMISSED; and e.Since there is still due and owing from UPSI an amount of money in favor of Diesel, respondent FGU is DISCHARGED as surety for Diesel. Costs de officio. SO ORDERED. 14 Therefrom, Diesel and UPSI each sought reconsideration. On August 21, 2002, the CA issued its equally assailed Resolution denying reconsideration to UPSI, but partially granting Diesel's motion, disposing as follows:

WHEREFORE, the Motion for Reconsideration of [Diesel] is partially GRANTED. The liquidated damages are hereby reduced to P1,146,519.00 (45 days multiplied by P25,478.20 per diem). However, in accordance with the main opinion, We hold that [UPSI] is liable to [Diesel] for the total amount of P3,661,692.64, representing the unpaid balance of the contract price plus the ten-percent retention, from which the liquidated damages, must, of course, be deducted. Thus, in sum, as amended, We hold that petitioner is still liable to respondent Diesel in the amount of P2,515,173.64, with legal interest until the same is fully paid. The main opinion, in all other respects, STANDS. SO ORDERED. 15 Hence, these separate petitions are before us. Per its Resolution of March 17, 2003, the Court ordered the consolidation of the petitions. The Issues In its petition in G.R. No. 154885, Diesel raises the following issues: 1.Whether or not the [CA] has the discretion, indeed the jurisdiction, to pass upon the qualifications of the individual members of the CIAC Arbitral Tribunal and declare them to be non-technocrats and not exceptionally well-versed in the construction industry warranting reversal and nullification of the tribunal's findings. 2.Whether or not the [CA] may intervene to annul the findings of a highly specialized agency, like the CIAC, on the ground that essentially the question to be resolved goes to the very heart of the substantiality of evidence, when in so doing, [CA] merely substituted its own conjectural opinion to that of the CIAC Arbitral Tribunal's well-supported findings and award. 3.Whether or not the [CA] erred in its findings, which are contrary to the findings of the CIAC Arbitral Tribunal. 16 On the other hand, in G.R. No. 154937, UPSI presents the following issues: I Whether or not portion of the Decision dated April 16, 2002 of the Honorable [CA] denying additional expenses to complete the unfinished

and abandoned work of [Diesel], is null and void for being contrary to clean and convincing evidence on record. II Whether or not portion of the Decision . . . of the [CA] finding delay of only forty five (45) days is null and void for being not in accord with contractual stipulations upon which the controversy arise. III Whether or not the resolution of the Honorable Court of Appeals denying the herein petitioner's motion for reconsideration and partially granting the respondent's motion for reconsideration is likewise null and void as it does not serve its purpose for being more on expounding than rectifying errors. 17 The issues shall be discussed in seriatim. The Court's Ruling We resolve to modify the assailed CA Decision. First Issue Diesel maintains that the CA erred in its declaration that it may review the CIAC's decision considering the doctrine on the binding effect of conclusions of fact of highly specialized agencies, such as the CIAC, when supported by substantial evidence. The above contention is erroneous and, as couched, misleading. As is noted, the CA, in its assailed resolution, dismissed as untenable Diesel's position that the factual findings of the CIAC are binding on and concludes the appellate court. The CA went to clarify, however, that the general rule is that factual conclusions of highly specialized bodies are given great weight and even finality when supported by substantial evidence. Given this perspective, the CA was correct in holding that it may validly review and even overturn such conclusion of facts when the matter of its being adequately supported by substantial evidence duly adduced on record comes to the fore and is raised as an issue.

administrative agencies, unless there is absolutely no evidence in support thereof or such evidence is clearly, manifestly and patently insubstantial." 18 There can be no serious dispute about the correctness of the CA's above posture. However, what the appellate court stated later to belabor its point strikes the Court as specious and uncalled for. Wrote the CA: This dictum finds greater application in the case of the CIAC because . . . as pointed out by petitioner in its Comment, the doctrine of primary jurisdiction relied upon by [Diesel] is diluted by the indubitable fact that the CIAC panel . . . is not at all composed of technocrats, or persons exceptionally well-versed in the construction industry. For instance, its chair . . . is a statistician; another member, . . . a former magistrate, is a member of the Bar. Doubtless, these two are preeminent in their fields, and their competence and proficiency in their chosen professions are unimpeachable. However, when it comes to determining findings of fact with respect to the matter before Us, the said panel which they partly comprise cannot claim to have any special advantage over the members of this Court. 19 The question of whether or not the findings of fact of the CIAC are supported by substantial evidence has no causal connection to the personal qualifications of the members of the arbitration panel. Surely, a person's undergraduate or postgraduate degrees, as the case may be, can hardly be invoked as the sole, fool proof basis to determine that person's qualification to hold a certain position. One's work experiences and attendance in relevant seminars and trainings would perhaps be the more important factors in gauging a person's fitness to a certain undertaking. Correlatively, Diesel, obviously having in mind the disputable presumption of regularity, correctly argues that highly specialized agencies are presumed to have the necessary technical expertise in their line of authority. In other words, the members of the Arbitral Tribunal of the CIAC have in their favor the presumption of possessing the necessary qualifications and competence exacted by law. A party in whose favor the legal presumption exists may rely on and invoke such legal presumption to establish a fact in issue. One need not introduce evidence to prove that the fact for a presumption is prima facie proof of the fact presumed. 20 To set the records straight, however, the CA did not cast aspersion on the competence let alone the bona fides of the members of the Arbitral Tribunal to arbitrate. In context, what the appellate court said in reaction to Diesel's negative commentary about the CA's expertise on construction matters is that the said members do not really enjoy a special advantage over the members of the CA in terms of fleshing out the facts from the evidence on record. In any event, the fact remains that the CA stands justified in reviewing the CIAC decision. Second and Third Issues

Well-established jurisprudence has it that "[t]he consequent policy and practice underlying our Administrative Law is that courts of justice should respect the findings of fact of said

The next two issues, being interrelated, shall be discussed jointly. Diesel submits that the CA, in reaching its decision, substituted its own conjectural opinion to that of the CIAC's well-grounded findings and award. Even as Diesel's submission has little to commend itself, we deem it prudent to address its concern by reviewing the incongruent determinations of the CIAC and CA and the factual premises holding such determinations together. As it were, the CA reduced the award for unpaid balance of the contract cost from PhP3,661,692.60, as earlier fixed by the CIAC, to PhP2,441,482.64, although it would consider the reduction and revert to the original CIAC figure. Unlike the CIAC which found the award of liquidated damages to be without basis, the CA was of a different disposition and awarded UPSI PhP1,309,500, only to reduce the same to PhP1,146,519 in its assailed resolution. Also, the CA struck out the CIAC award of PhP366,169 to Diesel for attorney's fees. Additionally, the CIAC's ruling making UPSI alone liable for the costs of arbitration was modified by the CA, which directed UPSI and Diesel to equally share the burden. The CIAC found Diesel not to have incurred delay, thus negating UPSI's entitlement to liquidated damages. The CA, on the other hand, found Diesel to have been in delay for 45 days. In determining whether or not Diesel was in delay, the CIAC and CA first turned on the question of Diesel's claimed entitlement to have the Project period extended, an excusable delay being chargeable against the threshold 90-day completion period. Both were one in saying that occurrence of certain events gave Diesel the right to an extension, but differed on the matter of length of the extension, and on the nature of the delay, that is, whether the delay is excusable or not. The CA deemed the delay, and the resulting extension of 14 days, arising from the manual hauling of materials, as undeserved. But the CIAC saw it otherwise for the reason that Frederick W. Crespillo, the witness UPSI presented to refute the allegation of Diesel's entitlement to time extension for the manual hauling of materials, was incompetent to testify on the issue. As CIAC observed, Crespillo lacked personal knowledge of the real situation at the worksite. The CIAC's reasoning, however, is flawed, assuming that the onus rested on UPSI, instead of on Diesel, to prove that the delay in the execution of the Project was excusable. Diesel explained that there was no place for its own hoisting machine at the Project site as the assigned location was being used by the General Contractor, while the alternative location was not feasible due to power constraint. Moreover, Diesel could not use the site elevator of the General Contractor as its personnel were only permitted to use the same for one hour every day at PhP600 per hour. The provisions in the Agreement on excusable delays read: 2.3Excusable delays: The Contractor shall inform the owner in a timely manner, of any delay caused by the following: 2.3.aActs of God, such as storm, floods or earthquakes.

2.3.bCivil disturbance, such as riots, revolutions, insurrection. 2.3.cAny government acts, decrees, general orders or regulations limiting the performance of the work. 2.3.dWars (declared or not). 2.3.eAny delays initiated by the Owner or his personnel which are clearly outside the control of the Contractor. 2.3.1Delays caused by the foregoing shall be excusable. A new schedule or adjustments in contract time shall be negotiated with the Owner. As time is of the essence of this agreement, all other delays shall not be excusable. 21 As may be noted, a common thread runs among the events listed above, that is, the delaying event is unforeseeable and/or its occurrence is beyond the control of Diesel as contractor. Here, the lack of a location to establish Diesel's own hoisting machine can hardly be tagged as a foreseeable event. As the CA aptly observed: [U]nder the terms of the contract, it is Diesel that would formulate the schedule to be followed in the completion of the works; therefore, it was encumbent upon Diesel to take into account all factors that would come into play in the course of the project. From the records it appears that the General Contractor . . . had been in the premises ahead of Diesel; hence it would have been a simple matter for Diesel to have conferred with the former's officer if the use of its equipment would be viable. Likewise, it would not have been too much trouble for Diesel to have made a prior request from UPSI for the use of its freight elevator in the face of the denial thereof, it could have made the necessary remedial measures . . . . In other words, those delays were foreseeable on the part of Diesel, with the application of even ordinary diligence. But Diesel did all of those when construction was about to commence. Therefore, We hold that the delays occasioned by Diesel's inability to install its hoisting machine . . . [were] attributable solely to Diesel, and thus the resultant delay cannot be charged against the ninety-day period for the termination of the construction. 22 There can be no quibbling that the delay caused by the manual hauling of materials is not excusable and, hence, cannot validly be set up as ground for an extension. Thus, the CA excluded the delay caused thereby and only allowed Diesel a total extension period of 85 days. Such extension, according to that court, effectively translated to a delay of 45 days in the completion of the project. The CA, in its assailed decision, explained why:

7.All told, We find, and so hold, that [Diesel] has incurred in delay. . . . However, under the circumstances wherein UPSI was responsible for some of the delay, it would be most unfair to charge Diesel with two hundred and forty (240) days of delay, so much so that it would still owe UPSI, even after liquidated damages have eaten up the retention and unpaid balance, the amount of [P4,340,000.00]. Thus, based on Our own calculations, We deem it more in accord with the spirit of the contract, as amended, . . . to assess Diesel with an unjustifiable delay of forty-five (45) days only; hence, at the rate of 1/5 of one percent as stated in the contract, [or at P1,309,500.00], which should be deducted from the total unpaid balance of [P2,441,482.64], which amount already includes the retention on the additional works or Change Orders. 23 The CA, in its questioned resolution, expounded on how it arrived at the figure of 45-day delay in this wise: 7.. . . We likewise cannot give Our assent to the asseveration of [Diesel] that Our calculations as to the number of days of delay have no basis. For indeed, the same was arrived at after taking a holistic view of the entire circumstances attendant to the instant case. . . .

This is why We find the [conclusion] made by the CIAC, . . . that there was no delay whatsoever in the work done by [Diesel], too patently absurd for Us to offer Our unconditional assent. 24 Aside from the fact that the CA seemingly assumed contradictory positions in the span of two paragraphs, its holding immediately adverted to above is patently erroneous. The CA completely failed to factor in the change orders of UPSI to Diesel the directives effectively extending the Project completion time at the behest of UPSI. Section V of the Agreement on the subject Change Orders reads: V.CHANGES IN SCOPE OF WORK AND EXTRA WORK Any changes or extra work in the SCOPE OF WORK recommended by the INTERIOR DESIGNER/ARCHITECT or directed and approved by the OWNER shall be presented to the CONTRACTOR. Within the shortest time possible, the CONTRACTOR . . . shall also inform the OWNER if such changes shall require a new schedule and/or revised completion date. The Parties shall then negotiate mutually agreeable terms . . . . The CONTRACTOR shall not perform any change order or extra work until the covering terms are agreed upon [in writing and signed by the parties]. 25 Pursuant thereto, UPSI issued Change Order (CO) Nos. 1 to 4 on February 3, 2, 8, and 9, 2000 respectively. Thereafter, Diesel submitted a Schedule of Completion of Additional Works 26 under which Diesel committed to undertake CO No. 1 for 30 days from February 10, 2000; CO No. 2 for 21 days from January 6, 2000; CO No. 3 for 15 days, subject to UPSI's acceptance of Diesel's proposal; and CO No. 4 for 10 days after the receipt of the items from UPSI. The CIAC found that the COs were actually implemented on the following dates: CO No. 1 February 9 to March 3, 2000 CO No. 3 February 24 to March 10, 2000 CO No. 4 March 16 to April 7, 2000 27 Hence, as correctly held by the CIAC, UPSI, no less, effectively moved the completion date, through the various COs, to April 7, 2000. Moreover, as evidenced by UPSI's Progress Report No. 19 for the period ending March 22, 2000, Diesel's scope of work, as of that date, was already 97.56% complete. 28 Such level of work accomplishment would, by any rational norm, be considered as substantial to warrant full payment of the contract amount, less actual damages suffered by UPSI. Article 1234 of the Civil

But prescinding from the above, the basis for Our ruling should not be hard to discern. To disabuse the mind of [Diesel] that the forty-five day delay was plucked from out of the blue, allow Us to let the records speak. The records will show that while the original target date for the completion . . . was 19 November 1999 . . ., there is a total of eighty-five (85) days of extension which are justifiable and sanctioned by [UPSI], to wit: thirty (30) days as authorized on 27 January 2000 by UPSI's Construction Manager . . .; thirty (30) days as again consented to by the same Construction Manager on 24 February 2000 . . .; and twenty-five (25) days on 16 March 2000 by Rider Hunt and Liacom . . . . The rest of the days claimed by Diesel were, of course, found by Us to be unjustified in the main opinion. Hence, the project should have been finished by February 12, 2000. However, by 22 March 2000, as certified to by Grace S. Reyes Designs, Inc. the project was only 97.56% finished, meaning while it was substantially finished, it was not wholly finished. By 25 March 2000, the same consultant conditionally accepted some floors but were still punch listed, so that from 12 February 2000 to 25 March 2000 was a period of forty-one (41) days. Allowing four (4) more days for the punch listed items to be accomplished, and for the "general cleaning" mentioned by Grace S. Reyes Designs, Inc., to be done, which to Us is a reasonable length of time, equals forty-five (45) days.

Code says as much, "If the obligation had been substantially performed in good faith, the obligor may recover as though there had been a strict and complete fulfillment, less damages suffered by the obligee." The fact that the laborers of Diesel were still at the work site as of March 22, 2000 is a reflection of its honest intention to keep its part of the bargain and complete the Project. Thus, when Diesel attempted to turn over the premises to UPSI, claiming it had completed the Project on March 15, 2000, Diesel could no longer be considered to be in delay. Likewise, the CIAC cited the Uniform General Conditions of Contract for Private Construction (CIAP Document 102), wherein it is stated that no liquidated damages for delay beyond the completion time shall accrue after the date of substantial completion of the work. 29 In all, Diesel cannot be considered as in delay and, hence, is not amenable under the Agreement for liquidated damages. As to the issue of attorney's fees, Diesel insists that bad faith tainted UPSI's act of imposing liquidated damages on account of its (Diesel's) alleged delay. And, this prompted Diesel to file its petition for arbitration. Thus, the CIAC granted Diesel an award of PhP366,169 as attorney's fees. However, the CA reversed the CIAC on the award, it being its finding that Diesel was in delay. The Court resolves to reinstate the CIAC's award of attorney's fees, there being sufficient justification for this kind of disposition. As earlier discussed, Diesel was not strictly in delay in the completion of the Project. No valid reason, therefore, obtains for UPSI to withhold the retention money or to refuse to pay the unpaid balance of the contract price. Indeed, the retention and nonpayment were, to us, as was to the CIAC, resorted to by UPSI out of whim, thus forcing the hand of Diesel to sue to recover what is rightfully due. Thus, the grant of attorney's fees would be justifiable under Art. 2208 of the Civil Code, thus: Article 2208. In the absence of stipulation, attorney's fees and expenses of litigation . . . cannot be recovered, except: xxx xxx xxx (5)Where the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiff's plainly valid, just and demandable claim. And for the same reason justifying the award of attorney's fees, arbitration costs ought to be charged against UPSI, too. Fourth Issue UPSI urges a review of the factual basis for the parallel denial by the CIAC and CA of its claim for additional expenses to complete the Project. UPSI states that the reality of Diesel having

abandoned the Project before its agreed completion is supported by clear and convincing evidence. The Court cannot accord the desired review. It is settled rule that the Court, not being a trier of facts, is under no obligation to examine, winnow, and weigh anew evidence adduced below. This general rule is, of course, not absolute. In Superlines Transportation Company, Inc. v. Philippine National Construction Company, the Court enumerated the recognized exceptions to be: . . . (1) when the findings are grounded entirely on speculation, surmises or conjectures; (2) when the inference made is manifestly mistaken, absurd or impossible; (3) when there is grave abuse of discretion; (4) when the judgment is based on a misapprehension of facts; (5) when the findings of facts are conflicting; (6) when in making its findings the [CA] went beyond the issues of the case, or its findings are contrary to the admissions of both the appellant and the appellee; (7) when the findings are contrary to the trial court; (8) when the findings are conclusions without citation of specific evidence on which they are based; (9) when the facts set forth in the petition as well as in the petitioner's main and reply briefs are not disputed by the respondent; (10) when the findings of fact are premised on the supposed absence of evidence and contradicted by the evidence on record; and (11) when the Court of Appeals manifestly overlooked certain relevant facts not disputed by the parties, which, if properly considered, would justify a different conclusion. 30 (Emphasis supplied.) In the instant case, the factual findings of the CIAC and CA, with regard to the completion of the Project and UPSI's entitlement to recover expenses allegedly incurred to finish the Project, do not fall under any one of these exceptions. As things stand, the factual findings of the CIAC and CA are supported by evidence presented during the hearing before the Arbitral Tribunal. Consider what the CIAC wrote: This Tribunal finds overwhelming evidence to prove that accomplishment as of the alleged "period of takeover" was 95.87% as of March 3, 2000 and increased to 97.56% on March 15, 2000 based on Progress Report # 18. . . . This is supported by the statement of [UPSI's] witness, Mr. Crespillo . . . where he conceded that such admissions and statements bound [UPSI, the Owner]. By that time, [Diesel] had substantially completed the project and only needed to correct the items included in the punchlist. 31 The CA seconded what the CIAC said, thus: 6.Neither are We prepared to sustain UPSI's argument that Diesel left the work unfinished and pulled-out all of its workmen from the project. This claim is belied by the assessment of its own Construction Manager in Progress Report No. 19 for the period "ending 22 March 2000," wherein it

was plaintly stated that as of that period, with respect to Diesel, there were still twenty-three laborers on site with the project "97.56%" complete . . . . This indicates that the contracted works of Diesel were substantially completed with only minor corrections . . ., thus contradicting the avowal of UPSI that the work was abandoned in such a state that necessitated the engagement of another contractor for the project to be finished. It was therefore not right for UPSI to have declined the turn-over and refused the full payment of the contract price, . . . . 32 Given the 97.56% work accomplishment tendered by Diesel, UPSI's theory of abandonment and of its having spent a sum to complete the work must fall on its face. We can concede hypothetically that UPSI undertook what it characterized as "additional or rectification" works on the Project. But as both the CIAC and CA held, UPSI failed to show that such "additional or rectification" works, if there be any, were the necessary result of the faulty workmanship of Diesel.

(5)UPSI is awarded damages in the amount of PhP310,834.01, the same to be deducted from the retention money, if there still be any, and, if necessary, from the amount referred to in item (2) immediately above. In summary, the aggregate award to Diesel shall be PhP3,717,027.64. From this amount shall be deducted the award of actual damages of PhP310,834.01 to UPSI which shall pay the costs of arbitration in the amount of PhP298,406.03. FGU is released from liability for the performance bond that it issued in favor of Diesel. No costs. SO ORDERED. Quisumbing, Carpio-Morales, Tinga and Chico-Nazario, * JJ., concur.

The Court perceives of no reason to doubt, much less disturb, the coinciding findings of the CIAC and CA on the matter. SECOND DIVISION The foregoing notwithstanding and considering that Diesel may only be credited for 97.56% work accomplishment, UPSI ought to be compensated, by way of damages, in the amount corresponding to the value of the 2.44% unfinished portion (100% - 97.56% = 2.44%). In absolute terms, 2.44% of the total Project cost translates to PhP310,834.01. This disposition is no more than adhering to the command of Art. 1234 of the Civil Code. The fifth and sixth issues have already been discussed earlier and need not detain us any longer. WHEREFORE, Diesel's petition is PARTIALLY GRANTED and UPSI's Petition is DENIED with qualification. The assailed Decision dated April 16, 2002 and Resolution dated August 21, 2002 of the CA are MODIFIED, as follows: (1)The award for liquidated damages is DELETED; (2)The award to Diesel for the unpaid balance of the contract price of PhP3,661,692.64 is AFFIRMED; (3)UPSI shall pay the costs of arbitration before the CIAC in the amount of PhP298,406.03; (4)Diesel is awarded attorney's fees in the amount of PhP366,169; and TINGA, J p: The petitioner, lawyer Polo Pantaleon, his wife Julialinda, daughter Anna Regina and son Adrian Roberto, joined an escorted tour of Western Europe organized by Trafalgar Tours of Europe, Ltd., in October of 1991. The tour group arrived in Amsterdam in the afternoon of 25 October 1991, the second to the last day of the tour. As the group had arrived late in the city, they failed to engage in any sight-seeing. Instead, it was agreed upon that they would start early the next day to see the entire city before ending the tour. The following day, the last day of the tour, the group arrived at the Coster Diamond House in Amsterdam around 10 minutes before 9:00 a.m. The group had agreed that the visit to Coster should end by 9:30 a.m. to allow enough time to take in a guided city tour of Amsterdam. The DECISION [G.R. No. 174269. May 8, 2009.] POLO S. PANTALEON, petitioner, vs. AMERICAN EXPRESS INTERNATIONAL, INC., respondent.

group was ushered into Coster shortly before 9:00 a.m., and listened to a lecture on the art of diamond polishing that lasted for around ten minutes. 1Afterwards, the group was led to the store's showroom to allow them to select items for purchase. Mrs. Pantaleon had already planned to purchase even before the tour began a 2.5 karat diamond brilliant cut, and she found a diamond close enough in approximation that she decided to buy. 2 Mrs. Pantaleon also selected for purchase a pendant and a chain, 3 all of which totaled U.S. $13,826.00. To pay for these purchases, Pantaleon presented his American Express credit card together with his passport to the Coster sales clerk. This occurred at around 9:15 a.m., or 15 minutes before the tour group was slated to depart from the store. The sales clerk took the card's imprint, and asked Pantaleon to sign the charge slip. The charge purchase was then referred electronically to respondent's Amsterdam office at 9:20 a.m. Ten minutes later, the store clerk informed Pantaleon that his AmexCard had not yet been approved. His son, who had already boarded the tour bus, soon returned to Coster and informed the other members of the Pantaleon family that the entire tour group was waiting for them. As it was already 9:40 a.m., and he was already worried about further inconveniencing the tour group, Pantaleon asked the store clerk to cancel the sale. The store manager though asked plaintiff to wait a few more minutes. After 15 minutes, the store manager informed Pantaleon that respondent had demanded bank references. Pantaleon supplied the names of his depositary banks, then instructed his daughter to return to the bus and apologize to the tour group for the delay. CAIaDT At around 10:00 a.m., or around 45 minutes after Pantaleon had presented his AmexCard, and 30 minutes after the tour group was supposed to have left the store, Coster decided to release the items even without respondent's approval of the purchase. The spouses Pantaleon returned to the bus. It is alleged that their offers of apology were met by their tourmates with stony silence. 4 The tour group's visible irritation was aggravated when the tour guide announced that the city tour of Amsterdam was to be canceled due to lack of remaining time, as they had to catch a 3:00 p.m. ferry at Calais, Belgium to London. 5 Mrs. Pantaleon ended up weeping, while her husband had to take a tranquilizer to calm his nerves. It later emerged that Pantaleon's purchase was first transmitted for approval to respondent's Amsterdam office at 9:20 a.m., Amsterdam time, then referred to respondent's Manila office at 9:33 a.m., then finally approved at 10:19 a.m., Amsterdam time. 6 The Approval Code was transmitted to respondent's Amsterdam office at 10:38 a.m., several minutes after petitioner had already left Coster, and 78 minutes from the time the purchases were electronically transmitted by the jewelry store to respondent's Amsterdam office. After the star-crossed tour had ended, the Pantaleon family proceeded to the United States before returning to Manila on 12 November 1992. While in the United States, Pantaleon continued to use his AmEx card, several times without hassle or delay, but with two other incidents similar to the Amsterdam brouhaha. On 30 October 1991, Pantaleon purchased golf equipment amounting to US $1,475.00 using his AmEx card, but he cancelled his credit card purchase and borrowed money instead from a friend, after more than 30 minutes had transpired

without the purchase having been approved. On 3 November 1991, Pantaleon used the card to purchase children's shoes worth $87.00 at a store in Boston, and it took 20 minutes before this transaction was approved by respondent. On 4 March 1992, after coming back to Manila, Pantaleon sent a letter 7 through counsel to the respondent, demanding an apology for the "inconvenience, humiliation and embarrassment he and his family thereby suffered" for respondent's refusal to provide credit authorization for the aforementioned purchases. 8 In response, respondent sent a letter dated 24 March 1992, 9 stating among others that the delay in authorizing the purchase from Coster was attributable to the circumstance that the charged purchase of US $13,826.00 "was out of the usual charge purchase pattern established". 10 Since respondent refused to accede to Pantaleon's demand for an apology, the aggrieved cardholder instituted an action for damages with the Regional Trial Court (RTC) of Makati City, Branch 145. 11 Pantaleon prayed that he be awarded P2,000,000.00, as moral damages; P500,000.00, as exemplary damages; P100,000.00, as attorney's fees; and P50,000.00 as litigation expenses. 12 On 5 August 1996, the Makati City RTC rendered a decision 13 in favor of Pantaleon, awarding him P500,000.00 as moral damages, P300,000.00 as exemplary damages, P100,000.00 as attorney's fees, and P85,233.01 as expenses of litigation. Respondent filed a Notice of Appeal, while Pantaleon moved for partial reconsideration, praying that the trial court award the increased amount of moral and exemplary damages he had prayed for. 14 The RTC denied Pantaleon's motion for partial reconsideration, and thereafter gave due course to respondent's Notice of Appeal. 15 On 18 August 2006, the Court of Appeals rendered a decision 16 reversing the award of damages in favor of Pantaleon, holding that respondent had not breached its obligations to petitioner. Hence, this petition. The key question is whether respondent, in connection with the aforementioned transactions, had committed a breach of its obligations to Pantaleon. In addition, Pantaleon submits that even assuming that respondent had not been in breach of its obligations, it still remained liable for damages under Article 21 of the Civil Code. The RTC had concluded, based on the testimonial representations of Pantaleon and respondent's credit authorizer, Edgardo Jaurigue, that the normal approval time for purchases was "a matter of seconds". Based on that standard, respondent had been in clear delay with respect to the three subject transactions. As it appears, the Court of Appeals conceded that there had been delay on the part of respondent in approving the purchases. However, it made two critical conclusions in favor of respondent. First, the appellate court ruled that the delay was not attended by bad faith, malice, or gross negligence. Second, it ruled that respondent "had exercised diligent efforts to effect the approval" of the purchases, which were "not in accordance with the charge pattern" petitioner had established for himself, as exemplified by the fact that at Coster, he was "making his very first single charge purchase of US$13,826", and "the record of [petitioner]'s past spending with [respondent] at the time does not favorably support his ability to pay for such purchase." 17 SHaIDE

On the premise that there was an obligation on the part of respondent "to approve or disapprove with dispatch the charge purchase", petitioner argues that the failure to timely approve or disapprove the purchase constituted mora solvendi on the part of respondent in the performance of its obligation. For its part, respondent characterizes the depiction by petitioner of its obligation to him as "to approve purchases instantaneously or in a matter of seconds." Petitioner correctly cites that under mora solvendi, the three requisites for a finding of default are that the obligation is demandable and liquidated; the debtor delays performance; and the creditor judicially or extrajudicially requires the debtor's performance. 18 Petitioner asserts that the Court of Appeals had wrongly applied the principle of mora accipiendi, which relates to delay on the part of the obligee in accepting the performance of the obligation by the obligor. The requisites of mora accipiendi are: an offer of performance by the debtor who has the required capacity; the offer must be to comply with the prestation as it should be performed; and the creditor refuses the performance without just cause. 19 The error of the appellate court, argues petitioner, is in relying on the invocation by respondent of "just cause" for the delay, since while just cause is determinative ofmora accipiendi, it is not so with the case of mora solvendi. We can see the possible source of confusion as to which type of mora to appreciate. Generally, the relationship between a credit card provider and its card holders is that of creditordebtor, 20 with the card company as the creditor extending loans and credit to the card holder, who as debtor is obliged to repay the creditor. This relationship already takes exception to the general rule that as between a bank and its depositors, the bank is deemed as the debtor while the depositor is considered as the creditor. 21 Petitioner is asking us, not baselessly, to again shift perspectives and again see the credit card company as the debtor/obligor, insofar as it has the obligation to the customer as creditor/obligee to act promptly on its purchases on credit.

complying with its obligation to act promptly on its customer's purchase request, whether such action be favorable or unfavorable. We quote the trial court, thus: As to the first issue, both parties have testified that normal approval time for purchases was a matter of seconds. Plaintiff testified that his personal experience with the use of the card was that except for the three charge purchases subject of this case, approvals of his charge purchases were always obtained in a matter of seconds. cDCIHT Defendant's credit authorizer Edgardo Jaurique likewise testified: Q.You also testified that on normal occasions, the normal approval time for charges would be 3 to 4 seconds? A.Yes, Ma'am. Both parties likewise presented evidence that the processing and approval of plaintiff's charge purchase at the Coster Diamond House was way beyond the normal approval time of a "matter of seconds". Plaintiff testified that he presented his AmexCard to the sales clerk at Coster, at 9:15 a.m. and by the time he had to leave the store at 10:05 a.m., no approval had yet been received. In fact, the Credit Authorization System (CAS) record of defendant at Phoenix Amex shows that defendant's Amsterdam office received the request to approve plaintiff's charge purchase at 9:20 a.m., Amsterdam time or 01:20, Phoenix time, and that the defendant relayed its approval to Coster at 10:38 a.m., Amsterdam time, or 2:38, Phoenix time, or a total time lapse of one hour and [18] minutes. And even then, the approval was conditional as it directed in computerese [sic] "Positive Identification of Card holder necessary further charges require bank information due to high exposure. By Jack Manila". The delay in the processing is apparent to be undue as shown from the frantic successive queries of Amexco Amsterdam which reads: "US$13,826. Cardmember buying jewels. ID seen. Advise how long will this take?" They were sent at 01:33, 01:37, 01:40, 01:45, 01:52 and 02:08, all times Phoenix. Manila Amexco could be unaware of the need for speed in resolving the charge purchase referred to it, yet it sat on its hand, unconcerned. xxx xxx xxx

Ultimately, petitioner's perspective appears more sensible than if we were to still regard respondent as the creditor in the context of this cause of action. If there was delay on the part of respondent in its normal role as creditor to the cardholder, such delay would not have been in the acceptance of the performance of the debtor's obligation (i.e., the repayment of the debt), but it would be delay in the extension of the credit in the first place. Such delay would not fall under mora accipiendi, which contemplates that the obligation of the debtor, such as the actual purchases on credit, has already been constituted. Herein, the establishment of the debt itself (purchases on credit of the jewelry) had not yet been perfected, as it remained pending the approval or consent of the respondent credit card company. Still, in order for us to appreciate that respondent was in mora solvendi, we will have to first recognize that there was indeed an obligation on the part of respondent to act on petitioner's purchases with "timely dispatch", or for the purposes of this case, within a period significantly less than the one hour it apparently took before the purchase at Coster was finally approved. The findings of the trial court, to our mind, amply established that the tardiness on the part of respondent in acting on petitioner's purchase at Coster did constitute culpable delay on its part in

To repeat, the Credit Authorization System (CAS) record on the Amsterdam transaction shows how Amexco Netherlands viewed the delay as unusually frustrating. In sequence expressed in Phoenix time from 01:20 when the charge purchased was referred for authorization, defendants own record shows: 01:22 the authorization is referred to Manila Amexco 01:32 Netherlands gives information that the identification of the cardmember has been presented and he is buying jewelries worth US $13,826. 01:33 Netherlands asks "How long will this take?" 02:08 Netherlands is still asking "How long will this take?" The Court is convinced that defendants delay constitute[s] breach of its contractual obligation to act on his use of the card abroad "with special handling". 22 (Citations omitted) xxx xxx xxx Notwithstanding the popular notion that credit card purchases are approved "within seconds", there really is no strict, legally determinative point of demarcation on how long must it take for a credit card company to approve or disapprove a customer's purchase, much less one specifically contracted upon by the parties. Yet this is one of those instances when "you'd know it when you'd see it", and one hour appears to be an awfully long, patently unreasonable length of time to approve or disapprove a credit card purchase. It is long enough time for the customer to walk to a bank a kilometer away, withdraw money over the counter, and return to the store. cIaHDA Notably, petitioner frames the obligation of respondent as "to approve or disapprove" the purchase "in timely dispatch", and not "to approve the purchase instantaneously or within seconds". Certainly, had respondent disapproved petitioner's purchase "within seconds" or within a timely manner, this particular action would have never seen the light of day. Petitioner and his family would have returned to the bus without delay internally humiliated perhaps over the rejection of his card yet spared the shame of being held accountable by newly-made friends for making them miss the chance to tour the city of Amsterdam. We do not wish do * dispute that respondent has the right, if not the obligation, to verify whether the credit it is extending upon on a particular purchase was indeed contracted by the cardholder, and that the cardholder is within his means to make such transaction. The culpable failure of respondent herein is not the failure to timely approve petitioner's purchase, but the more elemental failure to timely act on the same, whether favorably or unfavorably. Even assuming that respondent's credit authorizers did not have sufficient basis on hand to make a judgment, we see no reason why respondent could not have promptly informed petitioner the reason for the

delay, and duly advised him that resolving the same could take some time. In that way, petitioner would have had informed basis on whether or not to pursue the transaction at Coster, given the attending circumstances. Instead, petitioner was left uncomfortably dangling in the chilly autumn winds in a foreign land and soon forced to confront the wrath of foreign folk. Moral damages avail in cases of breach of contract where the defendant acted fraudulently or in bad faith, and the court should find that under the circumstances, such damages are due. The findings of the trial court are ample in establishing the bad faith and unjustified neglect of respondent, attributable in particular to the "dilly-dallying" of respondent's Manila credit authorizer, Edgardo Jaurique. 23 Wrote the trial court: While it is true that the Cardmembership Agreement, which defendant prepared, is silent as to the amount of time it should take defendant to grant authorization for a charge purchase, defendant acknowledged that the normal time for approval should only be three to four seconds. Specially so with cards used abroad which requires "special handling", meaning with priority. Otherwise, the object of credit or charge cards would be lost; it would be so inconvenient to use that buyers and consumers would be better off carrying bundles of currency or traveller's checks, which can be delivered and accepted quickly. Such right was not accorded to plaintiff in the instances complained off * for reasons known only to defendant at that time. This, to the Court's mind, amounts to a wanton and deliberate refusal to comply with its contractual obligations, or at least abuse of its rights, under the contract. 24 xxx xxx xxx The delay committed by defendant was clearly attended by unjustified neglect and bad faith, since it alleges to have consumed more than one hour to simply go over plaintiff's past credit history with defendant, his payment record and his credit and bank references, when all such data are already stored and readily available from its computer. This Court also takes note of the fact that there is nothing in plaintiff's billing history that would warrant the imprudent suspension of action by defendant in processing the purchase. Defendant's witness Jaurique admits: Q.But did you discover that he did not have any outstanding account? A.Nothing in arrears at that time. Q.You were well aware of this fact on this very date? A.Yes, sir. HaTISE

Mr. Jaurique further testified that there were no "delinquencies" in plaintiff's account. 25 It should be emphasized that the reason why petitioner is entitled to damages is not simply because respondent incurred delay, but because the delay, for which culpability lies under Article 1170, led to the particular injuries under Article 2217 of the Civil Code for which moral damages are remunerative. 26 Moral damages do not avail to soothe the plaints of the simply impatient, so this decision should not be cause for relief for those who time the length of their credit card transactions with a stopwatch. The somewhat unusual attending circumstances to the purchase at Coster that there was a deadline for the completion of that purchase by petitioner before any delay would redound to the injury of his several traveling companions gave rise to the moral shock, mental anguish, serious anxiety, wounded feelings and social humiliation sustained by the petitioner, as concluded by the RTC. 27 Those circumstances are fairly unusual, and should not give rise to a general entitlement for damages under a more mundane set of facts.

We sustain the amount of moral damages awarded to petitioner by the RTC. There is no hardand-fast rule in determining what would be a fair and reasonable amount of moral damages, since each case must be governed by its own peculiar facts, however, it must be commensurate to the loss or injury suffered. 28 Petitioner's original prayer for P5,000,000.00 for moral damages is excessive under the circumstances, and the amount awarded by the trial court of P500,000.00 in moral damages more seemly. Likewise, we deem exemplary damages available under the circumstances, and the amount of P300,000.00 appropriate. There is similarly no cause though to disturb the determined award of P100,000.00 as attorney's fees, and P85,233.01 as expenses of litigation. WHEREFORE, the petition is GRANTED. The assailed Decision of the Court of Appeals is REVERSED and SET ASIDE. The Decision of the Regional Trial Court of Makati, Branch 145 in Civil Case No. 92-1665 is hereby REINSTATED. Costs against respondent. TCIDSa SO ORDERED. Carpio Morales, Velasco, Jr., Leonardo-de Castro * and Brion, JJ., concur.