6 percent more for cicc contractor: Capitol told: Pay interest

CEBU, Philippines - The Supreme Court has affirmed the decision of the appellate court imposing a six percent legal interest per annum on the Province of Cebu’s financial obligation to WT Construction, Incorporated (WTCI).

“…(T)he Court agrees with the Court of Appeals (CA) that the legal interest rate of 6% shall be imposed from the finality of the herein judgment until satisfaction thereof,” read the decision penned Associate Justice Estela Perlas-Bernabe.

In imposing the interest payment, Bernabe agreed that the obligation of the provincial government did not arise from loan or forbearance of money but from the non-payment of services rendered by WTCI.

She, however, denied the consolidated petitions for review on certiorari filed by WTCI asking for a 12 percent interest a year.

Earlier, WTCI appealed the decision of the appellate court when it reduced the interest rate to be imposed to just six percent per annum instead of the 12 percent awarded by the Regional Trial Court.

WTCI argued that “performance of the additional works was… financial accommodation to the Province of Cebu, thereby warranting the imposition of legal interest at the rate of 12 percent per annum, as originally decreed by the Regional Trial Court (RTC).”

The case stemmed from the refusal of the Cebu provincial government to pay for additional works WTCI did in constructing the Cebu International Convention Center.

The CICC was built after then president Gloria Macapagal-Arroyo chose Cebu Province in 2005 as host of the 12th Association of Southeast Asian Nations (ASEAN) Summit.

Phase I and Phase II of the structure were awarded to WTCI.

When Phase II was nearing completion, the provincial government asked WTCI to perform additional works on the project, including site development and additional structural, architectural, electrical, and plumbing works.  WTCI agreed to perform the additional works without public bidding.

In 2007, WTCI billed Cebu Province P261.22 million for the additional works.

The Capitol, though, refused due to the lack of contract for the additional works, prompting WTCI to bring the matter to the court.

The RTC ruled in favor of WTCI and ordered Cebu Province to pay the firm P263.26 million representing the cost of the additional works with legal interest at a rate of 12 percent per annum computed from the filing of the complaint on January 22, 2008 until it is fully paid; plus P50,000 in attorney’s fees and cost of the lawsuit.

“The RTC found that there was a perfected oral contract between the parties for the additional works on CICC, and that WTCI must be compensated therefore under the doctrine of quantum meruit; otherwise, the Province of Cebu would be unjustly enriched,” read the RTC judgment.

The Province of Cebu then sought for reconsideration, arguing that the additional works cost only P257.41 million and not P263.26 million.  It maintained that the provincial government was not liable to pay the interest because WTCI performed the additional works “at its own risk” since there was no public bidding.

The RTC, however, denied the petition, prompting the provincial government to bring the matter to the Court of Appeals.

In reducing the interest to be imposed on the payment to just six percent per annum, Ber-nabe said it was in accordance with the guidelines laid down in Eastern Shipping Lines, Inc. versus Court of Appeals as modified by Nacar versus Gallery Frames.

“When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum,” read the said guidelines.

In the CA ruling, Bernabe set that the legal interest of six percent per annum will start at the time of the filing of the complaint on January 22, 2008.

She also set the amount to P257.41 million, which was in accordance with the 2006 cost standards provided by the Commission on Audit, National Statistics Office, the Department of Trade and Industry, and the Province of Cebu.

Provincial legal office Orvi Ortega said they will not yet comment as they have not yet received a copy of the decision.

“I would beg off from making any comment unless we officially received and read the said decision,” he said. — /RHM (FREEMAN)