Diesel Construction Co. v. Upsi Property Holdings

Summary

This consolidated case involves a construction contract dispute between Diesel Construction Co., Inc. (contractor) and UPSI Property Holdings, Inc. (owner) over interior architectural works for UPSI Building 3. The core issues were whether Diesel was in delay warranting liquidated damages and the amount of unpaid contract balance due. The CIAC initially ruled for Diesel, finding no delay and awarding the full unpaid balance plus attorney's fees. The Court of Appeals reversed, finding 45 days of delay and awarding liquidated damages to UPSI while reducing the unpaid balance. The Supreme Court ultimately modified both decisions, finding that change orders issued by UPSI effectively extended the completion date and that Diesel's 97.56% work accomplishment constituted substantial performance under Article 1234 of the Civil Code. The Court deleted the liquidated damages award, affirmed the full unpaid balance to Diesel, and awarded attorney's fees and arbitration costs against UPSI for bad faith refusal to pay, while allowing UPSI damages for the 2.44% unfinished work. The decision reinforces principles of substantial performance in construction contracts and the binding effect of change orders on completion schedules.