SECOND DIVISION

[G.R. No. 187521. March 14, 2012.]

F.F. CRUZ & CO., INC. , petitioner, vs . HR CONSTRUCTION CORP. ,

respondent.

DECISION

REYES , J : p

This is a petition for review on certiorari under Rule 45 of the Rules of Court filed by
petitioner F.F. Cruz & Co., Inc. (FFCCI) assailing the Decision 1 dated February 6, 2009 and
Resolution 2 dated April 13, 2009 issued by the Court of Appeals (CA) in CA-G.R. SP No.
91860. HDAECI

The Antecedent Facts

Sometime in 2004, FFCCI entered into a contract with the Department of Public Works and
Highways (DPWH) for the construction of the Magsaysay Viaduct, known as the Lower
Agusan Development Project. On August 9, 2004, FFCCI, in turn, entered into a Subcontract
Agreement 3 with HR Construction Corporation (HRCC) for the supply of materials, labor,
equipment, tools and supervision for the construction of a portion of the said project
called the East Bank Levee and Cut-Off Channel in accordance with the speci cations of
the main contract.
The subcontract price agreed upon by the parties amounted to P31,293,532.72. Pursuant
to the Subcontract Agreement, HRCC would submit to FFCCI a monthly progress billing
which the latter would then pay, subject to stipulated deductions, within 30 days from
receipt thereof.
The parties agreed that the requests of HRCC for payment should include progress
accomplishment of its completed works as approved by FFCCI. Additionally, they agreed
to conduct a joint measurement of the completed works of HRCC together with the
representative of DPWH and consultants to arrive at a common quantity.
Thereafter, HRCC commenced the construction of the works pursuant to the Subcontract
Agreement.
On September 17, 2004, HRCC submitted to FFCCI its rst progress billing in the amount
of P2,029,081.59 covering the construction works it completed from August 16 to
September 15, 2004. 4 However, FFCCI asserted that the DPWH was then able to evaluate
the completed works of HRCC only until July 25, 2004. Thus, FFCCI only approved the
gross amount of P423,502.88 for payment. Pursuant to the Subcontract Agreement,
FFCCI deducted from the said gross amount P42,350.29 for retention and P7,700.05 for
expanded withholding tax leaving a net payment in the amount of P373,452.54. This
amount was paid by FFCCI to HRCC on December 3, 2004. 5
FFCCI and the DPWH then jointly evaluated the completed works of HRCC for the period of
July 26 to September 25, 2004. FFCCI claimed that the gross amount due for the
completed works during the said period was P2,008,837.52. From the said gross amount
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 due, FFCCI deducted therefrom P200,883.75 for retention and P36,524.07 for expanded
withholding tax leaving amount of P1,771,429.45 as the approved net payment for the said
period. FFCCI paid this amount on December 21, 2004. 6 SEIaHT

On October 29, 2004, HRCC submitted to FFCCI its second progress billing in the amount
of P1,587,760.23 covering its completed works from September 18 to 25, 2004. 7 FFCCI
did not pay the amount stated in the second progress billing, claiming that it had already
paid HRCC for the completed works for the period stated therein.
On even date, HRCC submitted its third progress billing in the amount of P2,569,543.57 for
its completed works from September 26 to October 25, 2004. 8 FFCCI did not
immediately pay the amount stated in the third progress billing, claiming that it still had to
evaluate the works accomplished by HRCC.
On November 25, 2004, HRCC submitted to FFCCI its fourth progress billing in the amount
of P1,527,112.95 for the works it had completed from October 26 to November 25, 2004.
Subsequently, FFCCI, after it had evaluated the completed works of HRCC from September
26 to November 25, 2004, approved the payment of the gross amount of P1,505,570.99 to
HRCC. FFCCI deducted therefrom P150,557.10 for retention and P27,374.02 for expanded
withholding tax leaving a net payment of P1,327,639.87, which amount was paid to HRCC
on March 11, 2005. 9
Meanwhile, HRCC sent FFCCI a letter 1 0 dated December 13, 2004 demanding the payment
of its progress billings in the total amount of P7,340,046.09, plus interests, within three
days from receipt thereof. Subsequently, HRCC completely halted the construction of the
subcontracted project after taking its Christmas break on December 18, 2004.
On March 7, 2005, HRCC, pursuant to the arbitration clause in the Subcontract Agreement,
led with the Construction Industry Arbitration Commission (CIAC) a Complaint 1 1 against
FFCCI praying for the payment of the following: (1) overdue obligation in the reduced
amount of P4,096,656.53 as of December 15, 2004 plus legal interest; (2) P1,500,000.00
as attorney's fees; (3) P80,000.00 as acceptance fee and representation expenses; and (4)
costs of litigation.
In its Answer, 1 2 FFCCI claimed that it no longer has any liability on the Subcontract
Agreement as the three payments it made to HRCC, which amounted to P3,472,521.86,
already represented the amount due to the latter in view of the works actually completed
by HRCC as shown by the survey it conducted jointly with the DPWH. FFCCI further
asserted that the delay in the payment processing was primarily attributable to HRCC
inasmuch as it presented unveri ed work accomplishments contrary to the stipulation in
the Subcontract Agreement regarding requests for payment. HCEISc

Likewise, FFCCI maintained that HRCC failed to comply with the condition stated under the
Subcontract Agreement for the payment of the latter's progress billings, i.e., joint
measurement of the completed works, and, hence, it was justified in not paying the amount
stated in HRCC's progress billings.
On June 16, 2005, an Arbitral Tribunal was created composed of Engineer Ricardo B. San
Juan, Joven B. Joaquin and Attorney Alfredo F. Tadiar, with the latter being appointed as
the Chairman.
In a Preliminary Conference held on July 5, 2005, the parties de ned the issues to be
resolved in the proceedings before the CIAC as follows:
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 1. What is the correct amount of [HRCC's] unpaid progress billing?
2. Did [HRCC] comply with the conditions set forth in subparagraph 4.3
of the Subcontract Agreement for the submission,
evaluation/processing and release of payment of its progress
billings?
3. Did [HRCC] stop work on the project?
3.1 If so, is the work stoppage justified?
3.2 If so, what was the percentage and value of [HRCC's] work
accomplishment at the time it stopped work on the project?
4. Who between the parties should bear the cost of arbitration or in what
proportion should it be shared by the parties? 1 3
Likewise, during the said Preliminary Conference, HRCC further reduced the amount of
overdue obligation it claimed from FFCCI to P2,768,916.66. During the course of the
proceedings before the CIAC, HRCC further reduced the said amount to P2,635,397.77 —
the exact difference between the total amount of HRCC's progress billings
(P6,107,919.63) and FFCCI's total payments in favor of the latter (P3,472,521.86).
The CIAC Decision
On September 6, 2005, after due proceedings, the CIAC rendered a Decision 1 4 in favor of
HRCC, the decretal portion of which reads:
WHEREFORE , judgment is hereby rendered in favor of the Claimant HR
CONSTRUCTION CORPORATION and AWARD made on its monetary claim
against Respondent F.F. CRUZ & CO., INC ., as follows: HSIDTE

[P]2,239,452.63 as the balance of its unpaid billings and

101,161.57 as reimbursement of the arbitration costs.
[P]2,340,614.20 Total due the Claimant

Interest on the foregoing amount [P]2,239,452.63 shall be paid at the rate of 6%

per annum from the date of this Decision. After nality of this Decision, interest at
the rate of 12% per annum shall be paid thereon until full payment of the awarded
amount shall have been made . . . .
SO ORDERED. 1 5

The CIAC held that the payment method adopted by FFCCI is actually what is known as the
"back-to-back payment scheme" which was not agreed upon under the Subcontract
Agreement. As such, the CIAC ruled that FFCCI could not impose upon HRCC its valuation
of the works completed by the latter. The CIAC gave credence to HRCC's valuation of its
completed works as stated in its progress billings. Thus:
During the trial, [FFCCI's] Aganon admitted that [HRCC's] accomplishments are
included in its own billings to the DPWH together with a substantial mark-up to
cover overhead costs and pro t. He further admitted that it is only when DPWH
approves its (Respondent's) billings covering [HRCC's] scope of work and pays for
them, that [FFCCI] will in turn pay [HRCC] for its billings on the sub-contracted
works.
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 On clari catory questioning by the Tribunal, [FFCCI] admitted that there is no
"back-to-back " provision in the sub-contract as basis for this sequential
payment arrangement and, therefore, [FFCCI's] imposition thereof by
withholding payment to [HRCC] until it is rst paid by the project owner on the
Main Contract, clearly violates said sub-contract. It [is] this unauthorized
implementation of a back-to-back payment scheme that is seen to be the reason
for [FFCCI's] non-payment of the third progress billings.
It is accordingly the holding of this Arbitral Tribunal that [FFCCI] is not justi ed in
withholding payment of [HRCC's] third progress billing for this scheme that
[HRCC] has not agreed to in the sub-contract agreement . . . .
xxx xxx xxx

The total retention money deducted by [FFCCI] from [HRCC's] three progress
billings, amounts to [P]395,945.14 . . . . The retention money is part of [HRCC's]
progress billings and must, therefore, be credited to this account. The two
amounts (deductions and net payments) total [P]3,868,467.00 . . . . This
represents the total gross payments that should be credited and deducted from
the total gross billings to arrive at what has not been paid to the [HRCC]. This
results in the amount of [P]2,239,452.63 ([P]6,107,919.63 — [P]3,868,467.00) as
the correct balance of [HRCC's] unpaid billings. 1 6 CHIaTc

Further, the CIAC ruled that FFCCI had already waived its right under the Subcontract
Agreement to require a joint measurement of HRCC's completed works as a condition
precedent to the payment of the latter's progress billings. Hence:
[FFCCI] admits that in all three instances where it paid [HRCC] for its progress
billings, it never required compliance with the aforequoted contractual provision
of a prior joint quanti cation. Such repeated omission may reasonably be
construed as a waiver by [FFCCI] of its contractual right to require compliance of
said condition and it is now too late in the day to so impose it. Article 6 of the Civil
Code expressly provides that "rights may be waived unless the waiver is contrary
to law, public order, public policy, morals or good customs". The tribunal cannot
see any such violation in this case.
xxx xxx xxx

[FFCCI's] omission to enforce the contractually required condition of payment, has

led [HRCC] to believe it to be true that indeed [FFCCI] has waived the condition of
joint quantification and, therefore, [FFCCI] may not be permitted to falsify such
resulting position. 1 7

Likewise, the CIAC held that FFCCI's non-payment of the progress billings submitted by
HRCC gave the latter the right to rescind the Subcontract Agreement and, accordingly,
HRCC's work stoppage was justified. It further opined that, in effect, FFCCI had ratified the
right of HRCC to stop the construction works as it did not file any counterclaim against
HRCC for liquidated damages arising therefrom.
FFCCI then filed a petition for review with CA assailing the foregoing disposition by the
CIAC.
The CA Decision
On February 6, 2009, the CA rendered the herein assailed Decision 1 8 denying the petition
for review filed by FFCCI. The CA agreed with the CIAC that FFCCI had waived its right
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 under the Subcontract Agreement to require a joint quantification of HRCC's completed
works.
The CA further held that the amount due to HRCC as claimed by FFCCI could not be given
credence since the same was based on a survey of the completed works conducted
without the participation of HRCC. Likewise, being the main contractor, it ruled that it was
the responsibility of FFCCI to include HRCC in the joint measurement of the completed
works. Furthermore, the CA held that HRCC was justified in stopping its construction
works on the project as the failure of FFCCI to pay its progress billings gave the former the
right to rescind the Subcontract Agreement.
FFCCI sought a reconsideration 1 9 of the said February 6, 2009 Decision but it was denied
by the CA in its Resolution 2 0 dated April 13, 2009.
Issues
In the instant petition, FFCCI submits the following issues for this Court's resolution: TaSEHC

[I.]

. . . First, [d]oes the act of [FFCCI] in conducting a verification survey of [HRCC's]

billings in the latter's presence amount to a waiver of the right of [FFCCI] to verify
and approve said billings? What, if any, is the legal significance of said act?
[II.]
. . . Second, [d]oes the payment of [FFCCI] to [HRCC] based on the results of the
above mentioned verification survey result in the former being obliged to accept
whatever accomplishment was reported by the latter?

[III.]
. . . Third, [d]oes the mere comparison of the payments made by [FFCCI] with the
contested progress billings of [HRCC] amount to an adjudication of the
controversy between the parties?
[IV.]

. . . Fourth, [d]oes the failure of [FFCCI] to interpose a counterclaim against [HRCC]

for liquidated damages due to the latter's work stoppage, amount to a ratification
of such work stoppage?
[V.]

. . . Fifth, [d]id the [CA] disregard or overlook significant and material facts which
would affect the result of the litigation? 2 1

In sum, the crucial issues for this Court's resolution are: first, what is the effect of FFCCI's
non-compliance with the stipulation in the Subcontract Agreement requiring a joint
quanti cation of the works completed by HRCC on the payment of the progress billings
submitted by the latter; and second, whether there was a valid rescission of the
Subcontract Agreement by HRCC.
The Court's Ruling
The petition is not meritorious.
Procedural Issue:
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 Finality and Conclusiveness of the CIAC's Factual Findings
Before we delve into the substantial issues raised by FFCCI, we shall rst address the
procedural issue raised by HRCC. According to HRCC, the instant petition merely assails
the factual ndings of the CIAC as af rmed by the CA and, accordingly, not proper
subjects of an appeal under Rule 45 of the Rules of Court. It likewise pointed out that
factual ndings of the CIAC, when af rmed by the CA, are nal and conclusive upon this
Court. cSCADE

Generally, the arbitral award of

CIAC is final and may not be
appealed except on questions of
law.
Executive Order (E.O.) No. 1008 2 2 vests upon the CIAC original and exclusive jurisdiction
over disputes arising from, or connected with, contracts entered into by parties involved in
construction in the Philippines. Under Section 19 of E.O. No. 1008, the arbitral award of
CIAC "shall be nal and inappealable except on questions of law which shall be appealable
to the Supreme Court." 2 3
In Hi-Precision Steel Center, Inc. v. Lim Kim Steel Builders, Inc. , 2 4 we explained raison d'
etre for the rule on finality of the CIAC's arbitral award in this wise:
Voluntary arbitration involves the reference of a dispute to an impartial body, the
members of which are chosen by the parties themselves, which parties freely
consent in advance to abide by the arbitral award issued after proceedings where
both parties had the opportunity to be heard. The basic objective is to provide a
speedy and inexpensive method of settling disputes by allowing the parties to
avoid the formalities, delay, expense and aggravation which commonly
accompany ordinary litigation, especially litigation which goes through the entire
hierarchy of courts. Executive Order No. 1008 created an arbitration facility to
which the construction industry in the Philippines can have recourse. The
Executive Order was enacted to encourage the early and expeditious settlement of
disputes in the construction industry, a public policy the implementation of which
is necessary and important for the realization of national development goals.
Aware of the objective of voluntary arbitration in the labor eld, in the
construction industry, and in any other area for that matter, the Court will not
assist one or the other or even both parties in any effort to subvert or defeat that
objective for their private purposes. The Court will not review the factual ndings
of an arbitral tribunal upon the artful allegation that such body had
"misapprehended the facts" and will not pass upon issues which are, at bottom,
issues of fact, no matter how cleverly disguised they might be as "legal
questions." The parties here had recourse to arbitration and chose the arbitrators
themselves; they must have had con dence in such arbitrators. . . . 2 5 (Citation
omitted)

Thus, in cases assailing the arbitral award rendered by the CIAC, this Court may only pass
upon questions of law. Factual ndings of construction arbitrators are nal and conclusive
and not reviewable by this Court on appeal. This rule, however, admits of certain
exceptions.
I n Spouses David v. Construction Industry and Arbitration Commission , 2 6 we laid down
the instances when this Court may pass upon the factual findings of the CIAC, thus:
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 We reiterate the rule that factual ndings of construction arbitrators are nal and
conclusive and not reviewable by this Court on appeal, except when the petitioner
proves af rmatively that: (1) the award was procured by corruption, fraud or other
undue means; (2) there was evident partiality or corruption of the arbitrators or of
any of them; (3) the arbitrators were guilty of misconduct in refusing to postpone
the hearing upon suf cient cause shown, or in refusing to hear evidence pertinent
and material to the controversy; (4) one or more of the arbitrators were
disquali ed to act as such under section nine of Republic Act No. 876 and
willfully refrained from disclosing such disquali cations or of any other
misbehavior by which the rights of any party have been materially prejudiced; or
(5) the arbitrators exceeded their powers, or so imperfectly executed them, that a
mutual, nal and de nite award upon the subject matter submitted to them was
not made. . . . 2 7 (Citation omitted)
acIHDA

Issues on the proper interpretation

of the terms of the Subcontract
Agreement involve questions of law.
A question of law arises when there is doubt as to what the law is on a certain state of
facts, while there is a question of fact when the doubt arises as to the truth or falsity of the
alleged facts. For a question to be one of law, the same must not involve an examination of
the probative value of the evidence presented by the litigants or any of them. The
resolution of the issue must rest solely on what the law provides on the given set of
circumstances. Once it is clear that the issue invites a review of the evidence presented,
the question posed is one of fact. 2 8
On the surface, the instant petition appears to merely raise factual questions as it mainly
puts in issue the appropriate amount that is due to HRCC. However, a more thorough
analysis of the issues raised by FFCCI would show that it actually asserts questions of law.
FFCCI primarily seeks from this Court a determination of whether amount claimed by
HRCC in its progress billing may be enforced against it in the absence of a joint
measurement of the former's completed works. Otherwise stated, the main question
advanced by FFCCI is this: in the absence of the joint measurement agreed upon in the
Subcontract Agreement, how will the completed works of HRCC be veri ed and the
amount due thereon be computed?
The determination of the foregoing question entails an interpretation of the terms of the
Subcontract Agreement vis-à-vis the respective rights of the parties herein. On this point, it
should be stressed that where an interpretation of the true agreement between the parties
is involved in an appeal, the appeal is in effect an inquiry of the law between the parties, its
interpretation necessarily involves a question of law. 2 9
Moreover, we are not called upon to examine the probative value of the evidence presented
before the CIAC. Rather, what is actually sought from this Court is an interpretation of the
terms of the Subcontract Agreement as it relates to the dispute between the parties.
First Substantive Issue: Effect of Non-compliance with the Joint
Quantification Requirement on the Progress Billings of HRCC
Basically, the instant issue calls for a determination as to which of the parties' respective
valuation of accomplished works should be given credence. FFCCI claims that its valuation
should be upheld since the same was the result of a measurement of the completed works
conducted by it and the DPWH. On the other hand, HRCC maintains that its valuation
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 should be upheld on account of FFCCI's failure to observe the joint measurement
requirement in ascertaining the extent of its completed works.
The terms of the Subcontract
Agreement should prevail.
In resolving the dispute as to the proper valuation of the works accomplished by HRCC, the
primordial consideration should be the terms of the Subcontract Agreement. It is basic
that if the terms of a contract are clear and leave no doubt upon the intention of the
contracting parties, the literal meaning of its stipulations shall control. 3 0
In Abad v. Goldloop Properties, Inc., 3 1 we stressed that:
A court's purpose in examining a contract is to interpret the intent of the
contracting parties, as objectively manifested by them . The process of
interpreting a contract requires the court to make a preliminary inquiry as to
whether the contract before it is ambiguous. A contract provision is ambiguous if
it is susceptible of two reasonable alternative interpretations. Where the written
terms of the contract are not ambiguous and can only be read one way,
the court will interpret the contract as a matter of law . If the contract is
determined to be ambiguous, then the interpretation of the contract is left to the
court, to resolve the ambiguity in the light of the intrinsic evidence. 3 2 (Emphasis
supplied and citation omitted) IDaEHC

Article 4 of the Subcontract Agreement, in part, contained the following stipulations:

ARTICLE 4
SUBCONTRACT PRICE
4.1 The total SUBCONTRACT Price shall be THIRTY ONE MILLION TWO
HUNDRED NINETY THREE THOUSAND FIVE HUNDRED THIRTY TWO
PESOS & 72/100 ONLY ([P]31,293,532.72) inclusive of Value Added Tax . .
..
xxx xxx xxx
4.3 Terms of Payment
FFCCI shall pay [HRCC] within thirty (30) days upon receipt of the
[HRCC's] Monthly Progress Billings subject to deductions due to ten
percent (10%) retention, and any other sums that may be due and
recoverable by FFCCI from [HRCC] under this SUBCONTRACT. In all cases,
however, two percent (2%) expanded withholding tax on the [HRCC's]
income will be deducted from the monthly payments.
Requests for the payment by the [HRCC] shall include progress
accomplishment of completed works (unit of work accomplished x
unit cost) as approved by [FFCCI] . Cut-off date of monthly billings shall
be every 25th of the month and joint measurement shall be
conducted with the DPWH's representative, Consultants, FFCCI
and [HRCC] to arrive at a common/agreed quantity . 3 3 (Emphasis
supplied)

Pursuant to the terms of payment agreed upon by the parties, FFCCI obliged itself to pay
the monthly progress billings of HRCC within 30 days from receipt of the same.
Additionally, the monthly progress billings of HRCC should indicate the extent of the works
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 completed by it, the same being essential to the valuation of the amount that FFCCI would
pay to HRCC.
The parties further agreed that the extent of HRCC's completed works that would be
indicated in the monthly progress billings should be determined through a joint
measurement conducted by FFCCI and HRCC together with the representative of DPWH
and the consultants.
It is the responsibility of FFCCI to
call for the joint measurement of
HRCC's completed works.
It bears stressing that the joint measurement contemplated under the Subcontract
Agreement should be conducted by the parties herein together with the representative of
the DPWH and the consultants. Indubitably, FFCCI, being the main contractor of DPWH, has
the responsibility to request the representative of DPWH to conduct the said joint
measurement. HDTCSI

On this score, the testimony of Engineer Antonio M. Aganon, Jr., project manager of FFCCI,
during the reception of evidence before the CIAC is telling, thus:
MR. J. B. JOAQUIN:
Engr. Aganon, earlier there. was a stipulation that in all the four billings, there
never was a joint quantification.
PROF. A. F. TADIAR:
He admitted that earlier. Pinabasa ko sa kanya.
ENGR. R. B. SAN JUAN:
The joint quantification was done only between them and DPWH.

xxx xxx xxx

ENGR. AGANON:
Puwede ko po bang i-explain sandali lang po regarding lang po doon sa
quantification na iyon? Basically po as main contractor of DPWH, we are the
ones who [are] requesting for joint survey quantification with the owner,
DPWH . Ngayon po, although wala sa papel na nag-witness and [HRCC] still the
same po, nandoon din po sila during that time, kaya lang ho . . .
MR. J. B. JOAQUIN:
Hindi pumirma?

ENGR. AGANON:
Hindi sila puwede pumirma kasi ho kami po ang contractor ng DPWH hindi sila.
3 4 (Emphasis supplied) cHEATI

FFCCI had waived its right to

demand for a joint measurement of
HRCC's completed works under
the Subcontract Agreement.

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 The CIAC held that FFCCI, on account of its failure to demand the joint measurement of
HRCC's completed works, had effectively waived its right to ask for the conduct of the
same as a condition sine qua non to HRCC's submission of its monthly progress billings.
We agree.
In People of the Philippines v. Donato, 3 5 this Court explained the doctrine of waiver in this
wise:
Waiver is de ned as "a voluntary and intentional relinquishment or abandonment
of a known existing legal right, advantage, benefit, claim or privilege, which except
for such waiver the party would have enjoyed; the voluntary abandonment or
surrender, by a capable person, of a right known by him to exist, with the intent
that such right shall be surrendered and such person forever deprived of its
bene t; or such conduct as warrants an inference of the relinquishment
of such right; or the intentional doing of an act inconsistent with
claiming it ."
As to what rights and privileges may be waived, the authority is settled:
. . . the doctrine of waiver extends to rights and privileges of any character,
and, since the word 'waiver' covers every conceivable right, it is the
general rule that a person may waive any matter which affects
his property, and any alienable right or privilege of which he is
the owner or which belongs to him or to which he is legally
entitled, whether secured by contract , conferred with statute, or
guaranteed by constitution, provided such rights and privileges rest
in the individual, are intended for his sole bene t, do not infringe
on the rights of others, and further provided the waiver of the
right or privilege is not forbidden by law, and does not contravene
public policy ; and the principle is recognized that everyone has a right to
waive, and agree to waive, the advantage of a law or rule made solely for
the bene t and protection of the individual in his private capacity, if it can
be dispensed with and relinquished without infringing on any public right,
and without detriment to the community at large. . . . 3 6 (Emphasis
supplied and citations omitted)

Here, it is undisputed that the joint measurement of HRCC's completed works

contemplated by the parties in the Subcontract Agreement never materialized. Indeed,
HRCC, on separate occasions, submitted its monthly progress billings indicating the extent
of the works it had completed sans prior joint measurement. Thus: THCSEA

Progress Billing Period Covered Amount

1st Progress Billing dated August 16 to September 15, 2004 P2,029,081.59

September 17, 2004 3 7
2nd Progress Billing dated September 18 to 25, 2004 P1,587,760.23
October 29, 2004 3 8
3rd Progress Billing dated September 26 to October 25, 2004 P2,569,543.57
October 29, 2004 3 9
4th Progress Billing dated October 26 to November 25, 2004 P1,527,112.95
November 25, 2004

FFCCI did not contest the said progress billings submitted by HRCC despite the lack of a
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 joint measurement of the latter's completed works as required under the Subcontract
Agreement. Instead, FFCCI proceeded to conduct its own verification of the works actually
completed by HRCC and, on separate dates, made the following payments to HRCC:
Date of Payment Period Covered Amount

December 3, 2004 4 0 April 2 to July 25, 2004 P373,452.24

December 21, 2004 4 1 July 26 to September 25, 2004 P1,771,429.45
March 11, 2005 4 2 September 26 to November 25, 2004 P1,327,639.87

FFCCI's voluntary payment in favor of HRCC, albeit in amounts substantially different from
those claimed by the latter, is a glaring indication that it had effectively waived its right to
demand for the joint measurement of the completed works. FFCCI's failure to demand a
joint measurement of HRCC's completed works reasonably justi ed the inference that it
had already relinquished its right to do so. Indeed, not once did FFCCI insist on the conduct
of a joint measurement to verify the extent of HRCC's completed works despite its receipt
of the four monthly progress billings submitted by the latter.
FFCCI is already barred from
contesting HRCC's valuation of the
completed works having waived its
right to demand the joint
measurement requirement.
In view of FFCCI's waiver of the joint measurement requirement, the CA, essentially echoing
the CIAC's disposition, found that FFCCI is obliged to pay the amount claimed by HRCC in
its monthly progress billings. The CA reasoned thus:
Verily, the joint measurement that [FFCCI] claims it conducted without the
participation of [HRCC], to which [FFCCI] anchors its claim of full payment of its
obligations to [HRCC], cannot be applied, nor imposed, on [HRCC]. In other words,
[HRCC] cannot be made to accept a quanti cation of its works when the said
quanti cation was made without its participation. As a consequence, [FFCCI's]
claim of full payment cannot be upheld as this is a result of a quanti cation that
was made contrary to the express provisions of the Subcontract Agreement.

The Court is aware that by ruling so, [FFCCI] would seem to be placed at a
disadvantage because it would result in [FFCCI] having to pay exactly what
[HRCC] was billing the former. If, on the other hand, the Court were to rule
otherwise[,] then [HRCC] would be the one at a disadvantage because it would be
made to accept payment that is less than what it was billing.

Circumstances considered, however, the Court deems it proper to rule in favor of

[HRCC] because of the explicit provision of the Subcontract Agreement that
requires the participation of the latter in the joint measurement. If the Court were
to rule otherwise, then the Court would, in effect, be disregarding the explicit
agreement of the parties in their contract. 4 3
TaCDAH

Essentially, the question that should be resolved is this: In view of FFCCI's waiver of its
right to demand a joint measurement of HRCC's completed works, is FFCCI now barred
from disputing the claim of HRCC in its monthly progress billings?
We rule in the affirmative.
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 As intimated earlier, the joint measurement requirement is a mechanism essentially
granting FFCCI the opportunity to verify and, if necessary, contest HRCC's valuation of its
completed works prior to the submission of the latter's monthly progress billings.
In the nal analysis, the joint measurement requirement seeks to limit the dispute between
the parties with regard to the valuation of HRCC's completed works. Accordingly, any issue
which FFCCI may have with regard to HRCC's valuation of the works it had completed
should be raised and resolved during the said joint measurement instead of raising the
same after HRCC had submitted its monthly progress billings. Thus, having relinquished its
right to ask for a joint measurement of HRCC's completed works, FFCCI had necessarily
waived its right to dispute HRCC's valuation of the works it had accomplished.
Second Substantive Issue:
Validity of HRCC's Rescission of the Subcontract Agreement
Both the CA and the CIAC held that the work stoppage of HRCC was justi ed as the same
is but an exercise of its right to rescind the Subcontract Agreement in view of FFCCI's
failure to pay the former's monthly progress billings. Further, the CIAC stated that FFCCI
could no longer assail the work stoppage of HRCC as it failed to le any counterclaim
against HRCC pursuant to the terms of the Subcontract Agreement.
For its part, FFCCI asserted that the work stoppage of HRCC was not justi ed and, in any
case, its failure to raise a counterclaim against HRCC for liquidated damages before the
CIAC does not amount to a ratification of the latter's work stoppage.
The determination of the validity of HRCC's work stoppage depends on a determination of
the following: rst, whether HRCC has the right to extrajudicially rescind the Subcontract
Agreement; and second, whether FFCCI is already barred from disputing the work
stoppage of HRCC. EcDATH

HRCC had waived its right,

to rescind the Subcontract
Agreement.
The right of rescission is statutorily recognized in reciprocal obligations. Article 1191 of
the Civil Code pertinently reads:
Art. 1191. The power to rescind obligations is implied in reciprocal ones, in
case one of the obligors should not comply with what is incumbent upon him.

The injured party may choose between the ful llment and the rescission of the
obligation, with the payment of damages in either case. He may also seek
rescission, even after he has chosen ful llment, if the latter should become
impossible.

The court shall decree the rescission claimed, unless there be just cause
authorizing the fixing of a period.
This is understood to be without prejudice to the rights of third persons who have
acquired the thing, in accordance with Articles 1385 and 1388 and the Mortgage
Law.

The rescission referred to in this article, more appropriately referred to as resolution is on

the breach of faith by the defendant which is violative of the reciprocity between the
parties. 4 4 The right to rescind, however, may be waived, expressly or impliedly. 4 5
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 While the right to rescind reciprocal obligations is implied, that is, that such right need not
be expressly provided in the contract, nevertheless the contracting parties may waive the
same. 4 6
Contrary to the respective dispositions of the CIAC and the CA, we nd that HRCC had no
right to rescind the Subcontract Agreement in the guise of a work stoppage, the latter
having waived such right. Apropos is Article 11.2 of the Subcontract Agreement, which
reads:
11.2 Effects of Disputes and Continuing Obligations
Notwithstanding any dispute, controversy, differences or arbitration
proceedings relating directly or indirectly to this SUBCONTRACT
Agreement and without prejudice to the eventual outcome thereof,
[HRCC] shall at all times proceed with the prompt performance of
the Works in accordance with the directives of FFCCI and this
SUBCONTRACT Agreement . 4 7 (Emphasis supplied) DaCEIc

Hence, in spite of the existence of dispute or controversy between the parties during the
course of the Subcontract Agreement, HRCC had agreed to continue the performance of
its obligations pursuant to the Subcontract Agreement. In view of the provision of the
Subcontract Agreement quoted above, HRCC is deemed to have effectively waived its right
to effect extrajudicial rescission of its contract with FFCCI. Accordingly, HRCC, in the guise
of rescinding the Subcontract Agreement, was not justi ed in implementing a work
stoppage.
The costs of arbitration should be
shared by the parties equally.
Section 1, Rule 142 of the Rules of Court provides:
Section 1. Costs ordinarily follow results of suit. — Unless otherwise provided
in these rules, costs shall be allowed to the prevailing party as a matter of course,
but the court shall have power, for special reasons, to adjudge that either party
shall pay the costs of an action, or that the same be divided, as may be
equitable . No costs shall be allowed against the Republic of the Philippines
unless otherwise provided by law. (Emphasis supplied)

Although, generally, costs are adjudged against the losing party, courts nevertheless have
discretion, for special reasons, to decree otherwise.
Here, considering that the work stoppage of HRCC is not justi ed, it is only tting that both
parties should share in the burden of the cost of arbitration equally. HRCC had a valid
reason to institute the complaint against FFCCI in view of the latter's failure to pay the full
amount of its monthly progress billings. However, we disagree with the CIAC and the CA
that only FFCCI should shoulder the arbitration costs. The arbitration costs should be
shared equally by FFCCI and HRCC in view of the latter's unjustified work stoppage.
WHEREFORE , in consideration of the foregoing disquisitions, the Decision dated February
6, 2009 and Resolution dated April 13, 2009 of the Court of Appeals in CA-G.R. SP No.
91860 are hereby AFFIRMED with MODIFICATION that the arbitration costs shall be
shared equally by the parties herein. cSEAHa

SO ORDERED .

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 Carpio, Brion, Perez and Sereno, JJ., concur.

Footnotes

1. Penned by Associate Justice Romeo F. Barza, with Associate Justices Josefina Guevara-
Salonga and Arcangelita M. Romilla-Lontok, concurring; rollo, pp. 47-69.

2. Id. at 78.
3. Id. at 85-92.
4. Id. at 93.
5. Id. at 109.
6. Id. at 111.
7. Id. at 94.
8. Id. at 95.
9. Id. at 113.
10. Id. at 96.
11. Id. at 79-84.
12. Id. at 97-105.
13. Id. at 124.
14. Id. at 116-135.
15. Id. at 134.
16. Id. at 127-128.
17. Id. at 130-131.
18. Supra note 1.
19. Rollo, pp. 70-77.
20. Supra note 2.
21. Rollo, pp. 21-22.
22. Creating an Arbitration Machinery in the Construction Industry of the Philippines,
otherwise known as the "Construction Industry Arbitration Law".
23. SC Circular No. 1-91 and Revised Administrative Circular No. 1-95 provides that appeal
from the arbitral award of the CIAC must first be brought to the CA on questions of fact,
law or mixed questions of fact and law.

24. G.R. No. 110434, December 13, 1993, 228 SCRA 397.
25. Id. at 405.
26. 479 Phil. 578 (2004).
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 27. Id. at 590-591.
28. Vda. De Formoso v. Philippine National Bank, G.R. No. 154704, June 1, 2011.
29. See Philippine National Construction Corporation v. Court of Appeals, G.R. No. 159417,
January 25, 2007, 512 SCRA 684, 695.

30. CIVIL CODE OF THE PHILIPPINES, Article 1370.

31. G.R. No. 168108, April 13, 2007, 521 SCRA 131.
32. Id. at 144.
33. Rollo, p. 87.
34. Id. at 330-331.
35. G.R. No. 79269, June 5, 1991, 198 SCRA 130.

36. Id. at 154.

37. Supra note 4.
38. Supra note 7.
39. Supra note 8.
40. Supra note 5.
41. Supra note 6.
42. Supra note 9.
43. Rollo, pp. 65-66.
44. Pryce Corp. v. Phil. Amusement and Gaming Corp., 497 Phil. 490, 505 (2005), citing the
Concurring Opinion of Mr. Justice J. B. L. Reyes in Universal Food Corp. v. CA, 144 Phil.
1, 21 (1970).

45. Francisco v. DEAC Construction, Inc., G.R. No. 171312, February 4, 2008, 543 SCRA 644,
655.
46. Tolentino, COMMENTARIES AND JURISPRUDENCE ON THE CIVIL CODE OF THE
PHILIPPINES, Vol. IV (1991).

47. Rollo, p. 91.

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