EVIDENCE

Case 7
Uniwide Sales Realty and Resources Corporation v. Titan-Ikeda Construction and Development Corporation
RECITATION-READY SUMMARY

The petitioner (Uniwide), and the respondent (Titan), entered into agreements for the construction of several buildings.
The projects include: (1) the Warehouse Club and Administration Building in Libis, Quezon City, (2) an additional floor
and renovation of a warehouse at the EDSA Central Market Area in Mandaluyong City, and (3) the Uniwide Sales
Department Store Building in Kalookan City. Disputes emerged over payments for additional works, VAT liabilities,
liquidated damages for delays, and deficiencies in construction.
RULINGS:
1. Payment by Mistake for Project 1: The Court determined that Article 1724 of the New Civil Code, which
mandates written authorization for additional works, was inapplicable because Uniwide had already paid for the
additional works. This payment was considered a voluntary fulfillment of a natural obligation under Article 1423
of the New Civil Code. Uniwide failed to prove that the payment was made through mistake, a necessary
condition for invoking the principle of solutio indebiti under Articles 2154 and 2156 of the New Civil Code.
2. Liability for the Value-Added Tax (VAT): The Court concurred with the CIAC and the Court of Appeals that the
amount of P2,400,000.00 paid by Uniwide was for the VAT on Project 1. Although the contract for Project 1 did
not specify VAT liability, evidence indicated that the parties had agreed to pass the VAT to Uniwide based on a
lower contract price. The CIAC's finding that the VAT was calculated on the basis of 4% of P60,000,000.00 was
upheld.
3. Liquidated Damages: The CIAC dismissed Uniwide's claim for liquidated damages because it was not included
in the counterclaims, the Terms of Reference (TOR), or any modified version of the TOR. The Court of Appeals
affirmed this, noting that the CIAC is not bound by the Rules of Court and that the issue was not sufficiently
concrete during the arbitration proceedings. The Court emphasized that arbitration aims to provide a speedy
and inexpensive method of settling disputes, and the CIAC can only resolve issues brought before it through
the TOR.
4. Deficiencies in Project 2: The Court upheld the CIAC's finding that Uniwide is liable for the unpaid balance of
P6,301,075.77 for Project 2. The submission of "as-built" plans was not a prerequisite for payment, and the
claim of overpricing was dismissed due to lack of evidence. The CIAC's ocular inspection and findings showed
that the alleged defects were not attributable to Titan's construction work. The Court reiterated that factual
findings of the CIAC, especially when affirmed by the Court of Appeals, are generally accorded finality and
respect.

CASE DOCTRINE

The purpose for which evidence is offered must be specified because such evidence may be admissible for several
purposes under the doctrine of multiple admissibility, or may be admissible for one purpose and not for another,
otherwise the adverse party cannot interpose the proper objection. Evidence submitted for one purpose may not be
considered for any other purpose.
PARTIES
● Petitioner
○ Uniwide Sales Realty and Resources Corporation
● Respondent
○ Titan-Ikeda Construction and Development Corporation

I. FACTS
● The case originated from an action for a sum of money filed by Titan-Ikeda Construction and Development
Corporation (Titan) against Uniwide Sales Realty and Resources Corporation (Uniwide) with the Regional Trial
Court (RTC), Branch 119, Pasay City arising from Uniwide's non-payment of certain claims billed by Titan after
completion of three projects covered by agreements they entered into with each other.
● Upon Uniwide's motion to dismiss/suspend proceedings and Titan's open court manifestation agreeing to the
suspension, Civil Case No. 98-0814 was suspended for it to undergo arbitration.Titan's complaint was thus re-filed
with the CIAC. Before the CIAC, Uniwide filed an answer which was later amended and re-amended, denying the

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material allegations of the complaint, with counterclaims for refund of overpayments, actual and exemplary
damages, and attorney's fees. The agreements between Titan and Uniwide are briefly described below.
PROJECT 1. The first agreement (Project 1) was a written "Construction Contract" entered into by Titan and Uniwide
sometime in May 1991 whereby Titan undertook to construct Uniwide's Warehouse Club and Administration Building in
Libis, Quezon City for a fee of P120,936,591.50, payable in monthly progress billings to be certified to by Uniwide's
representative. The parties stipulated that the building shall be completed not later than 30 November 1991. The building
was eventually finished on 15 February 1992 and turned over to Uniwide.

PROJECT 2. Sometime in July 1992, Titan and Uniwide entered into the second agreement (Project 2) whereby the
former agreed to construct an additional floor and to renovate the latter's warehouse located at the EDSA Central Market
Area in Mandaluyong City. There was no written contract executed between the parties for this project. Construction was
allegedly to be on the basis of drawings and specifications provided by Uniwide's structural engineers. The parties
proceeded on the basis of a cost estimate of P21,301,075.77 inclusive of Titan's 20% mark-up. Titan conceded in its
complaint to having received P15,000,000.00 of this amount. This project was completed in the latter part of October 1992
and turned over to Uniwide.

PROJECT 3. The parties executed the third agreement (Project 3) in May 1992. In a written "Construction Contract," Titan
undertook to construct the Uniwide Sales Department Store Building in Kalookan City for the price of P118,000,000.00
payable in progress billings to be certified to by Uniwide's representative. It was stipulated that the project shall be
completed not later than 28 February 1993. The project was completed and turned over to Uniwide in June 1993.
Uniwide asserted in its petition that: (a) it overpaid Titan for unauthorized additional works in Project 1 and Project 3; (b) it
is not liable to pay the Value-Added Tax (VAT) for Project 1; (c) it is entitled to liquidated damages for the delay incurred in
constructing Project 1 and Project 3; and (d) it should not have been found liable for deficiencies in the defectively
constructed Project 2.

Construction On Project 1 – Libis:

Industry [Uniwide] is absolved of any liability for the claims made by [Titan] on this Project.
Arbitration Project 2 – Edsa Central:
Commission [Uniwide] is absolved of any liability for VAT payment on this project, the same being for the account
of the [Titan]. On the other hand, [Titan] is absolved of any liability on the counterclaim for defective
construction of this project.
[Uniwide] is held liable for the unpaid balance in the amount of P6,301,075.77 which is ordered to be
paid to the [Titan] with 12% interest per annum commencing from 19 December 1992 until the date of
payment.
On Project 3 – Kalookan:
[Uniwide] is held liable for the unpaid balance in the amount of P5,158,364.63 which is ordered to be
paid to the [Titan] with 12% interest per annum commencing from 08 September 1993 until the date
of payment.
[Uniwide] is held liable to pay in full the VAT on this project, in such amount as may be computed by
the Bureau of Internal Revenue to be paid directly thereto.

CA Denied Uniwide's motion for reconsideration.

II. ISSUES
(1) Whether Uniwide is entitled to a return of the amount it allegedly paid by mistake to Titan for additional works done on
Project 1
(2) Whether Uniwide is liable for the payment of the Value-Added Tax (VAT) on Project 1
(3) Whether Uniwide is entitled to liquidated damages for Projects 1 and 3. (Offer of evidence was mentioned in the
discussion)
(4) Whether Uniwide is liable for deficiencies in Project 2.

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III. RULINGS
1. No. Uniwide is not entitled to a return of the amount it allegedly paid by mistake to Titan for additional works
done on Project 1.
The first issue refers to the P5,823,481.75 paid by Uniwide for additional works done on Project 1. Uniwide asserts that
Titan was not entitled to be paid this amount because the additional works were without any written authorization.
It should be noted that the contracts do not contain stipulations on "additional works," Uniwide's liability for "additional
works," and prior approval as a requirement before Titan could perform "additional works."
Nonetheless, Uniwide cites Article (Art. ) 1724 of the New Civil Code as basis for its claim that it is not liable to pay for
"additional works" it did not authorize or agree upon in writing. The provision states:

Art. 1724. The contractor who undertakes to build a structure or any other work for a stipulated price, in conformity with
plans and specifications agreed upon with the landowner, can neither withdraw from the contract nor demand an increase
in the price on account of the higher cost of labor or materials, save when there has been a change in the plans and
specifications, provided:
(1) Such change has been authorized by the proprietor in writing; and
(2) The additional price to be paid to the contractor has been determined in writing by both parties.

Clearly, Art. 1724 denies, as a matter of right, payment to the contractor for additional works which were not authorized in
writing by the proprietor, and the additional price of which was not determined in writing by the parties.
Yet the distinction pointed out by the Court of Appeals is material. The issue is no longer centered on the right of the
contractor to demand payment for additional works undertaken because payment, whether mistaken or not, was already
made by Uniwide. Thus, it would not anymore be incumbent on Titan to establish that it had the right to demand or receive
such payment.
But, even if the Court accepts Art. 1724 as applicable in this case, such recognition does not ipso facto accord Uniwide
the right to be reimbursed for payments already made, since Art. 1724 does not effect such right of reimbursement. It has
to be understood that Art. 1724 does not preclude the payment to the contractor who performs additional works without
any prior written authorization or agreement as to the price for such works if the owner decides anyway to make such
payment. What the provision does preclude is the right of the contractor to insist upon payment for unauthorized additional
works.
Accordingly, Uniwide, as the owner who did pay the contractor for such additional works even if they had not been
authorized in writing, has to establish its own right to reimbursement not under Art. 1724, but under a different provision of
law. Uniwide's burden of establishing its legal right to reimbursement becomes even more crucial in the light of the general
presumption contained in Section 3(f), Rule 131 of the Rules of Court that "money paid by one to another was due to the
latter."
Uniwide undertakes such a task before this Court, citing the provisions on solutio indebiti under Arts. 2154 and 2156 of
the Civil Code. However, it is not enough to prove that the payments made by Uniwide to Titan were "not due" because
there was no prior authorization or agreement with respect to additional works. There is a further requirement that the
payment by the debtor was made either through mistake or under a cloud of doubt. In short, for the provisions on solutio
indebiti to apply, there has to be evidence establishing the frame of mind of the payor at the time the payment was made.
The CIAC refused to acknowledge that the additional works on Project 1 were indeed unauthorized by Uniwide. Neither
did the Court of Appeals arrive at a contrary determination. There would thus be some difficulty for this Court to agree with
this most basic premise submitted by Uniwide that it did not authorize the additional works on Project 1 undertaken by
Titan. Still, Uniwide does cite testimonial evidence from the record alluding to a concession by employees of Titan that
these additional works on Project 1 were either authorized or documented.
Yet even conceding that the additional works on Project 1 were not authorized or committed into writing, the undisputed
fact remains that Uniwide paid for these additional works. Thus, to claim a refund of payments made under the principle of
solutio indebiti, Uniwide must be able to establish that these payments were made through mistake. Again, this is a factual
matter that would have acquired a mantle of invulnerability had it been determined by both the CIAC and the Court of
Appeals. However, both bodies failed to arrive at such a conclusion. Moreover, Uniwide is unable to direct our attention to
any pertinent part of the record that would indeed establish that the payments were made by reason of mistake.
We note that Uniwide alleged in its petition that the CIAC award in favor of Titan in the amount P5,158,364.63 as the
unpaid balance in Project 3 included claims for additional works of P1,087,214.18 for which no written authorization was
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presented. Unfortunately, this issue was not included in its memorandum as one of the issues submitted for the resolution
of the Court.
1.) Yes. Uniwide is liable for the payment of the Value-Added Tax (VAT) on Project 1.
The contract for Project 1 is silent on which party should shoulder the VAT while the contract for Project 3 contained a
provision to the effect that Uniwide is the party responsible for the payment of the VAT. Thus, when Uniwide paid the
amount of P2,400,000.00 as billed by Titan for VAT, it assumed that it was the VAT for Project 3. However, the CIAC and
the Court of Appeals found that the same was for Project 1.
We agree with the conclusions of both the CIAC and the Court of Appeals that the amount of P2,400,000.00 was paid by
Uniwide as VAT for Project 1. This conclusion was drawn from an Order of Payment dated 7 October 1992 wherein Titan
billed Uniwide the amount of P2,400,000.00 as "Value Added Tax based on P60,000,000.00 Contract," computed on the
basis of 4% of P60,000,000.00. The reduced base for the computation of the tax, according to the Court of Appeals, was
an indication that the parties agreed to pass the VAT for Project 1 to Uniwide but based on a lower contract price.

2.) No. Uniwide is not entitled to liquidated damages for Projects 1 and 3.
Uniwide insists that the CIAC should have applied Section 5, Rule 10 of the Rules of Court. On this matter, the Court of
Appeals held that the CIAC is an arbitration body, which is not necessarily bound by the Rules of Court. Also, the Court of
Appeals found that the issue has never been made concrete enough to make Titan and the CIAC aware that it will be an
issue. In fact, Uniwide only introduced and quantified its claim for liquidated damages in its Memorandum submitted to the
CIAC at the end of the arbitration proceeding. The Court of Appeals also noted that the only evidence on record to prove
delay in the construction of Project 1 is the testimony of Titan's engineer regarding the date of completion of the project
while the only evidence of delay in the construction of Project 3 is the affidavit of Uniwide's President.

According to Uniwide, the ruling of the Court of Appeals on the issue of liquidated damages goes against the established
judicial policy that a court should always strive to settle in one proceeding the entire controversy leaving no root or branch
to bear the seeds of future litigations. Uniwide claims that the required evidence for an affirmative ruling on its claim is
already on the record. It cites the pertinent provisions of the written contracts which contained deadlines for liquidated
damages. Uniwide also noted that the evidence show that Project 1 was completed either on 15 February 1992, as found
by the CIAC, or 12 March 1992, as shown by Titan's own evidence, while Project 3, according to Uniwide's President, was
completed in June 1993. Furthermore, Uniwide asserts, the CIAC should have applied procedural rules such as Section 5,
Rule 10 with more liberality because it was an administrative tribunal free from the rigid technicalities of regular courts.

Arbitration has been defined as "an arrangement for taking and abiding by the judgment of selected persons in some
disputed matter, instead of carrying it to established tribunals of justice, and is intended to avoid the formalities, the delay,
the expense and vexation of ordinary litigation.” Voluntary arbitration, on the other hand, 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.

As an arbitration body, the CIAC can only resolve issues brought before it by the parties through the TOR which functions
similarly as a pre-trial brief. Thus, if Uniwide's claim for liquidated damages was not raised as an issue in the TOR or in
any modified or amended version of it, the CIAC cannot make a ruling on it. The Rules of Court cannot be used to
contravene the spirit of the CIAC rules, whose policy and objective is to "provide a fair and expeditious settlement of
construction disputes through a non-judicial process which ensures harmonious and friendly relations between or among
the parties."

Further, a party may not be deprived of due process of law by an amendment of the complaint as provided in Section 5,
Rule 10 of the Rules of Court. In this case, as noted by the Court of Appeals, Uniwide only introduced and quantified
its claim for liquidated damages in its memorandum submitted to the CIAC at the end of the arbitration
proceeding. Verily, Titan was not given a chance to present evidence to counter Uniwide's claim for liquidated
damages.
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Uniwide alludes to an alleged judicial admission made by Engr. Luzon Tablante wherein he stated that Project 1
was completed on 10 March 1992. It now claims that by virtue of Engr. Tablante's statement, Titan had admitted
that it was in delay. We disagree. The testimony of Engr. Tablante was offered ONLY to prove that Project 1 was
indeed completed. It was NOT offered to prove the fact of delay.

It must be remembered that the purpose for which evidence is offered must be specified because such evidence may be
admissible for several purposes under the doctrine of multiple admissibility, or may be admissible for one purpose and not
for another, otherwise the adverse party cannot interpose the proper objection. Evidence submitted for one purpose may
not be considered for any other purpose.

Furthermore, even assuming, for the sake of argument, that said testimony on the date of completion of Project 1 is
admitted, the establishment of the mere fact of delay is not sufficient for the imposition of liquidated damages. It must
further be shown that delay was attributable to the contractor if not otherwise justifiable. Contrarily, Uniwide's belated
claim constitutes an admission that the delay was justified and implies a waiver of its right to such damages.

3.) Yes. Uniwide is liable for deficiencies in Project 2.

To determine whether or not Uniwide is liable for the unpaid balance of P6,301,075.77 for Project 2, we need to resolve
four sub-issues, namely: (1) whether or not it was necessary for Titan to submit "as-built" plans before it can be paid by
Uniwide; (2) whether or not there was overpricing of the project; (3) whether or not the P15,000,000.00 paid by Uniwide to
Titan for Project 2 constitutes full payment; and (4) whether or not Titan can be held liable for defective construction of
Project 2.

On the necessity of submitting "as-built" plans, this Court rules that the submission of such plans is not a pre-requisite for
Titan to be paid by Uniwide. The argument that said plans are required by Section 308 of Presidential Decree No. 1098
(National Building Code) and by Section 2.11 of its Implementing Rules before payment can be made is untenable. The
purpose of the law is "to safeguard life, health, property, and public welfare, consistent with the principles of sound
environmental management and control." The submission of these plans is necessary only in furtherance of the law's
purpose by setting minimum standards and requirements to control the "location, site, design, quality of materials,
construction, use, occupancy, and maintenance" of buildings constructed and not as a requirement for payment to the
contractor. The testimony of Engr. Tablante to the effect that the "as-built" plans are required before payment can be
claimed by Titan is a mere legal conclusion which is not binding on this Court.

Uniwide claims that, according to one of its consultants, the true price for Project 2 is only P7,812,123.60.Indeed, Uniwide
is bound by the amount indicated in the above document. Claims of connivance or fraudulent conspiracy between Titan
and Uniwide's representatives which, it is alleged, grossly exaggerated the price may properly be dismissed. As held by
the CIAC:

The Tribunal holds that [Uniwide] has not introduced any evidence to sustain its charge of fraudulent conspiracy. As a
matter of fact, [Uniwide]'s own principal witness, Jimmy Gow, admitted on cross-examination that he does not have any
direct evidence to prove his charge of connivance or complicity between the [Titan] and his own representatives. He only
made that conclusion by the process of his own "logical reasoning" arising from his consultation with other contractors
who gave him a much lower estimate for the construction of the Dau Project. There is thus no reason to invalidate the
binding character of Exhibit "2-A" which, it is significant to point out, is [Uniwide]'s own evidence.

Accordingly, deducting the P15,000,000.00 already paid by Uniwide from the total contract price of P21,301,075.77, the
unpaid balance due for Project 2 is P6,301,075.77. This is the same amount reflected in the Order of Payment prepared
by Uniwide's representative, Le Consultech, Inc. and signed by no less than four top officers and architects of Le
Consultech, Inc. endorsing for payment by Uniwide to Titan the amount of P6,301,075.77.

Uniwide asserts that Titan should not have been allowed to recover on Project 2 because the said project was defective
and would require repairs in the amount of P800,000.00. It claims that the CIAC and the Court of Appeals should have
applied Nakpil and Sons v. Court of Appeals51 and Art. 1723 of the New Civil Code holding a contractor responsible for

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damages if the edifice constructed falls within fifteen years from completion on account of defects in the construction or
the use of materials of inferior quality furnished by him or due to any violation of the terms of the contract.

On this matter, the CIAC conducted an ocular inspection of the premises on 30 January 1995. According to these
evidence, the CIAC concluded:

It is likewise the holding of this Tribunal that [Uniwide]'s counterclaim of defective construction has not been sufficiently
proven. The credibility of Engr. Cruz, [Uniwide]'s principal witness on this issue, has been severely impaired. During the
ocular inspection of the premises, he gave such assurance of the soundness of his opinion as an expert that a certain
column was heavily damaged judging from the external cracks that was readily apparent
On insistence of the Tribunal, the plaster was chipped off and revealed a structurally sound column
Further, it turns out that what was being passed off as a defective construction by [Titan], was in fact an old column, as
admitted by Mr. Gow himself

Uniwide had the burden of proving that there was defective construction in Project 2 but it failed to discharge this burden.
Even the credibility of its own witness was severely impaired. Further, it was found that the concrete slab placed by Titan
was not attached to the old columns where cracks were discovered. The CIAC held that the post-tensioning of the new
concrete slab could not have caused any of the defects manifested by the old columns. We are bound by this finding of
fact by the CIAC.

ADDITIONAL NOTES:

● Hi-Precision Steel Center, Inc. v. Lim Kim Steel Builders, Inc. which was reiterated in David v. Construction
Industry and Arbitration Commission:
○ 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.
○ The Court will not permit the parties to relitigate before it the issues of facts previously presented and
argued before the Arbitral Tribunal, save only where a clear showing is made that, in reaching its factual
conclusions, the Arbitral Tribunal committed an error so egregious and hurtful to one party as to constitute
a grave abuse of discretion resulting in lack or loss of jurisdiction.