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CONSTRUCTION INDUSTRY ARBITRATION COMMISSION (CIAC) 5. Parties would submit only specific issues to the CIAC for arbitration,
leaving other claims to this Honorable Court for further hearing and
1. G.R. No. 169095 December 8, 2008 adjudication. Specifically, the issues to be submitted to the CIAC are as
follows:
HEUNGHWA INDUSTRY CO., LTD., petitioner,
vs. a. Manpower and equipment standby time;
DJ BUILDERS CORPORATION, respondent.
b. Unrecouped mobilization expenses;
DECISION
c. Retention;
AUSTRIA-MARTINEZ, J.:
d. Discrepancy of billings; and
Before this Court is a Petition for Review on Certiorari1 under Rule 45 of the
Rules of Court, seeking to set aside the August 20, 2004 Decision 2 and e. Price escalation for fuel and oil usage.7
August 1, 2005 Resolution3 of the Court of Appeals (CA) in CA-G.R. SP Nos.
70001 and 71621. On the same day, the RTC issued an Order8 granting the motion.

The facts of the case, as aptly presented by the CA, are as follows: On October 9, 2000, petitioner, through its counsel, filed an "Urgent
Manifestation"9 praying that additional matters be referred to CIAC for
Heunghwa Industry Co., Ltd. (petitioner) is a Korean corporation doing arbitration, to wit:
business in the Philippines, while DJ Builders Corporation (respondent) is a
corporation duly organized under the laws of the Philippines. Petitioner was 1. Additional mobilization costs incurred by [petitioner] for work abandoned
able to secure a contract with the Department of Public Works and by [respondent];
Highways (DPWH) to construct the Roxas-Langogan Road in Palawan.
2. Propriety of liquidated damages in favor of [petitioner] for delay incurred
Petitioner entered into a subcontract agreement with respondent to do by [respondent];
earthwork, sub base course and box culvert of said project in the amount
3. Propriety of downtime costs on a daily basis during the period of the
of Php113, 228, 918.00. The agreement contained an arbitration clause.
existence of the previous temporary restraining order against
The agreed price was not fully paid; hence, on January 19, 2000,
[petitioner].10
respondent filed before the Regional Trial Court (RTC) of Puerto Princesa,
Branch 51, a Complaint for "Breach of Contract, Collection of Sum of
On October 24, 2000, respondent filed with CIAC a Request for
Money with Application for Preliminary Injunction, Preliminary Attachment,
Adjudication11 accompanied by a Complaint. Petitioner, in turn filed a
and Prayer for Temporary Restraining Order and Damages" docketed as
"Reply/ Manifestation" informing the CIAC that it was abandoning the
Civil Case No. 3421.4
submission to CIAC and pursuing the case before the RTC. In respondent's
Comment on petitioner's Manifestation, it prayed for CIAC to declare
Petitioner's Amended Answer averred that it was not obliged to pay
5
petitioner in default.
respondent because the latter caused the stoppage of work. Petitioner
further claimed that it failed to collect from the DPWH due to respondent's
CIAC then issued an Order12 dated November 27, 2000 ordering
poor equipment performance. The Amended Answer also contained a
respondent to move for the dismissal of Civil Case No. 3421 pending before
counterclaim for Php24,293,878.60.
the RTC of Palawan and directing petitioner to file anew its answer. The
said Order also denied respondent's motion to declare petitioner in default.
On September 27, 2000, parties through their respective counsels, filed a
"Joint Motion to Submit Specific Issues To The Construction Industry
Arbitration Commission"6 (CIAC), to wit:
Arbit-Part III |2

Respondent filed a Motion for Partial Reconsideration of the November 27, April 6, 2001 - CIAC granted
2000 Order while petitioner moved to suspend the proceeding before the petitioner's motion and suspended
CIAC until the RTC had dismissed Civil Case No. 3421. the hearings dated April 10 and 17,
2001.
On January 8, 2000, CIAC issued an Order13 setting aside its Order of
November 27, 2000 by directing the dismissal of Civil Case No. 3421 only May 16, 2001 - the RTC issued a
insofar as the five issues referred to it were concerned. It also directed Resolution18 granting petitioner's
respondent to file a request for adjudication. In compliance, respondent Motion to Recall.19
filed anew a "Revised Complaint"14 which increased the amount of the
claim from Php23,391,654.22 to Php65,393,773.42. June 1, 2001- Respondent moved for
a reconsideration of the May 16, 2001
On February 22 2001, petitioner, through its new counsel, filed with the Resolution and prayed for the
RTC a motion to withdraw the Order dated September 27, 2000 which dismissal of the case without
referred the case to the CIAC, claiming it never authorized the referral. prejudice to the filing of a complaint
Respondent opposed the motion15 contending that petitioner was already with the CIAC.20
estopped from asking for the recall of the Order.
June 11, 2001- Petitioner opposed
Petitioner filed in the CIAC its opposition to the second motion to declare it
respondent's motion for
in default, with a motion to dismiss informing the CIAC that it was
reconsideration and also prayed for
abandoning the submission of the case to it and asserting that the RTC had
the dismissal of the case but with
original and exclusive jurisdiction over Civil Case No. 3421, including the
prejudice.21
five issues referred to the CIAC.
July 6, 2001 - The RTC denied
On March 5, 2001, the CIAC denied petitioner's motion to dismiss on the
respondent's motion for
ground that the November 27, 2000 Order had already been superseded by
reconsideration but stated that
its Order of January 8, 2001.16
respondent may file a formal motion
On March 13, 2001, the CIAC issued an Order setting the preliminary to dismiss if it so desired.22
conference on April 10, 2001.17
July 16, 2001- Respondent filed with
On March 23, 2001 petitioner filed with the CIAC a motion for the RTC a Motion to Dismiss23 Civil
reconsideration of the March 5, 2001 Order. Case No. 3421 praying for the
dismissal of the complaint without
For clarity, the succeeding proceedings before the RTC and CIAC are prejudice to the filing of the proper
presented in graph form in chronological order. complaint with the CIAC.

RTC CIAC On the same day, the RTC granted


the motion without prejudice to
April 5, 2001 - Petitioner filed a petitioner's counterclaim.24
Motion to Suspend proceedings
because of the Motion to Recall it August 1, 2001- Petitioner moved for
filed with the RTC. a reconsideration of the July 16, 2001
Order claiming it was denied due
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process.25 2001 Order which dismissed the


case "without force and effect"
August 7, 2001 - Respondent filed and set the case for hearing on
with the CIAC a motion for the May 30, 2002.
resumption of the proceedings
claiming that the dismissal of Civil March 15, 2002 - Petitioner filed a
Case No. 3421 became final on Manifestation before the CIAC that
August 3, 2001. the CIAC had no authority to hear
the case.
August 15, 2001 - Petitioner filed a
counter-manifestation26 asserting March 18, 2002 - CIAC issued an
that the RTC Order dated July 16, Order setting the hearing on April 2,
2001 was not yet final. Petitioner 2002.
reiterated the prayer to dismiss the
case. March 21, 2002 - Petitioner filed a
Manifestation/Motion that the RTC
August 27, 2001 - CIAC issued an had recalled the July 16, 2001
Order maintaining the suspension Order and had asserted jurisdiction
but did not rule on petitioner's over the entire case and praying for
Motion to Dismiss. the dismissal of the pending case.29

January 22, 2002 - CIAC issued an March 22, 2002 - CIAC issued an
Order setting the case for Order30denying the Motion to
Preliminary Conference on February Dismiss filed by petitioner and
7, 2002. holding that the CIAC had
jurisdiction over the case.
February 1, 2002 - Petitioner filed a
Motion for Reconsideration of the March 25, 2002- Respondent moved March 26, 2002 - CIAC ordered
January 22, 2002 Order which also for a reconsideration31 of the March respondent to file a reply to
included a prayer to resolve the 13, 2002 Order recalling the July 16, petitioner's March 21, 2002
Motion for Reconsideration of the 2001 Order which petitioner opposed. Manifestation.
July 16, 2001 Order.
June 17, 2002 - RTC denied
February 5, 2002 - CIAC denied respondent's Motion for
petitioner's Motion for Reconsideration.
Reconsideration.
The parties, without waiting for the reply required by the CIAC,32 filed two
February 7, 2002 - CIAC conducted separate petitions for certiorari: petitioner, on April 5, 2002, docketed as
a preliminary conference.27 CA-G.R. SP No. 70001; and respondent, on July 5, 2002, docketed as CA-
G.R. SP No. 71621 with the CA.
March 13, 2002 - the RTC issued a
Resolution28 declaring the July 16,
Arbit-Part III |4

In CA-G.R. SP No. 70001, petitioner assailed the denial by the CIAC of its Lastly, the CA found no merit in petitioner's prayer to remand the case to
motion to dismiss and sought to enjoin the CIAC from proceeding with the the CIAC.
case.
Petitioner's Motion for Reconsideration was denied by the CA. Hence,
In CA-G.R. SP No. 71621, respondent questioned the March 13, 2002 herein petition raising the following assignment of errors:
Order of the RTC which reinstated Civil Case No. 3421 as well as the Order
dated June 17, 2002 which denied respondent's motion for reconsideration. A.
Respondent also sought to restrain the RTC from further proceeding with
THE COURT OF APPEALS COMMITTED SERIOUS ERROR WHEN IT
the civil case.
RULED THAT THE PETITION SUFFERED FROM PROCEDURAL
In other words, petitioner is questioning the jurisdiction of the CIAC; while INFIRMITIES WHEN PETITIONER HEUNGHWA, IN VIEW OF THE
respondent is questioning the jurisdiction of the RTC over the case. QUESTIONS OF LAW INVOLVED IN THE CASE, IMMEDIATELY
INVOKED ITS AID BY WAY OF PETITION FOR CERTIORARI
Both cases were consolidated by the CA. WITHOUT FIRST FILING A MOTION FOR RECONSIDERATION OF
THE CIAC'S ORDER DATED 22 MARCH 2002. THE COURT OF
The CA ruled against petitioner on procedural and substantive grounds. APPEALS FURTHER ERRED IN RULING THAT A DENIAL OF A
MOTION TO DISMISS (IN REFERENCE TO THE ORDER DATED 22
On matters of procedure, the CA took note of the fact that petitioner did
MARCH 2002), BEING AN INTERLOCUTORY ORDER, IS NOT THE
not file a motion for reconsideration of the March 22, 2002 Order of the
PROPER SUBJECT OF A PETITION FOR CERTIORARI.
CIAC and held that it is in violation of the well-settled rule that a motion for
reconsideration should be filed to allow the respondent tribunal to correct B.
its error before a petition can be entertained.33 Moreover, the CA ruled that
it is well-settled that a denial of a motion to dismiss, being an interlocutory THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN
order, is not the proper subject for a petition for certiorari.34 CONFIRMING THE JURISDICTION OF THE CIAC OVER THE CASE. ITS
RELIANCE ON THE NATIONAL IRRIGATION AUTHORITY VS. COURT
Moreover, the CA ruled against petitioner's main argument that the OF APPEALS ("NIA VS. CA") WAS MISPLACED AS THE FACTS OF THE
arbitration clause found in the subcontract agreement between the parties INSTANT CASE ARE SERIOUSLY AND SUBSTANTIALLY DIFFERENT
did not refer to CIAC as the arbitral body. The CA held that the CIAC had FROM THOSE OF NIA VS. CA.
jurisdiction over the controversy because the construction agreement
contained a provision to submit any dispute for arbitration, and there was a C.
joint motion to submit certain issues to the CIAC for arbitration.35
THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN
Anent petitioner's argument that its previous lawyer was not authorized to DISREGARDING PETITIONER'S REQUEST TO AT LEAST REMAND THE
submit the case for arbitration, the CA held that what is required for a CASE TO THE CIAC FOR FURTHER RECEPTION OF EVIDENCE IN THE
dispute to fall under the jurisdiction of the CIAC is for the parties to agree INTEREST OF JUSTICE AND EQUITY AS PETITIONER COULD NOT
to submit to voluntary arbitration. Since the parties agreed to submit to HAVE AVAILED OF ITS OPPORTUNITY TO PRESENT ITS SIDE ON
voluntary arbitration in the construction contract, the authorization insisted ACCOUNT OF ITS JURISDICTIONAL OBJECTION.38
upon by petitioner was a mere superfluity.36
The petition is devoid of merit.
The CA further cited National Irrigation Administration v. Court of
Appeals37 (NIA), where this Court ruled that active participation in the The first assignment of error raises two issues: first, whether or not the
arbitration proceedings serves to estop a party from denying that it had in non-filing of a motion for reconsideration was fatal to the petition
fact agreed to submit the dispute for arbitration. for certiorari filed before the CA; and second, whether or not a petition
Arbit-Part III |5

for certiorari is the proper remedy to assail an order denying a motion to equivalent to lack of jurisdiction. The word "capricious," usually used in
dismiss as in the case at bar . tandem with the term "arbitrary," conveys the notion of willful and
unreasoning action.42
As a general rule, a petition for certiorari before a higher court will not
prosper unless the inferior court has been given, through a motion for The question then is: "Did the denial by the CIAC of the motion to dismiss
reconsideration, a chance to correct the errors imputed to it. This rule, constitute a patent grave abuse of discretion?"
though, has certain exceptions: (1) when the issue raised is purely of law,
(2) when public interest is involved, or (3) in case of urgency. As a fourth Records show that the CIAC acted within its jurisdiction and it did not
exception, it has been held that the filing of a motion for reconsideration commit patent grave abuse of discretion when it issued the assailed Order
before availment of the remedy of certiorari is not a condition sine qua denying petitioner's motion to dismiss. Thus, this Court rules in the
non when the questions raised are the same as those that have already negative.
been squarely argued and exhaustively passed upon by the lower court.39
Based on law and jurisprudence, the CIAC has jurisdiction over the present
The Court agrees with petitioner that the main issue of the petition dispute.
for certiorari filed before the CA undoubtedly involved a question of
The CIAC, in its assailed Order, correctly applied the doctrine laid down
jurisdiction as to which between the RTC and the CIAC had authority to
in Philrock, Inc. v. Construction Industry Arbitration
hear the case. Whether the subject matter falls within the exclusive
Commission43 (Philrock) where this Court held that what vested in the CIAC
jurisdiction of a quasi-judicial agency is a question of law.40Thus, given the
original and exclusive jurisdiction over the construction dispute was the
circumstances present in the case at bar, the non-filing of a motion for
agreement of the parties and not the Court's referral order. The CIAC aptly
reconsideration by petitioner to the CIAC Order should have been
ruled that the recall of the referral order by the RTC did not deprive the
recognized as an exception to the rule.
CIAC of the jurisdiction it had already acquired,44 thus:
Anent the second issue, petitioner argues that when its motion to dismiss
x x x The position of CIAC is anchored on Executive Order No. 1008 (1985)
was denied by the CIAC, the latter acted without jurisdiction or with grave
which created CIAC and vested in it "original and exclusive jurisdiction"
abuse of discretion amounting to lack or excess of jurisdiction; thus, the
over construction disputes in construction projects in the Philippines
same is the proper subject of a petition for certiorari.
provided the parties agreed to submit such disputes to arbitration. The
As a general rule, an order denying a motion to dismiss cannot be the basis of the Court referral is precisely the agreement of the parties in
subject of a petition for certiorari. However, this Court has provided court, and that, by this agreement as well as by the court referral of the
exceptions thereto: specified issues to arbitration, under Executive Order No. 1008 (1985), the
CIAC had in fact acquired original and exclusive jurisdiction over these
Under certain situations, recourse to certiorari or mandamus is considered issues.45
appropriate, i.e., (a) when the trial court issued the order without or
in excess of jurisdiction; (b) where there is patent grave abuse of In the case at bar, the RTC was indecisive of its authority and capacity to
discretion by the trial court; or (c) appeal would not prove to be a hear the case. Respondent first sought redress from the RTC for its claim
speedy and adequate remedy as when appeal would not promptly relieve a against petitioner. Thereafter, upon motion by both counsels for petitioner
defendant from the injurious effects of the patently mistaken order and respondent, the RTC allowed the referral of five specific issues to the
maintaining the plaintiff's baseless action and compelling the defendant CIAC. However, the RTC later recalled the case from the CIAC because of
needlessly to go through a protracted trial and clogging the court dockets the alleged lack of authority of the counsel for petitioner to submit the case
by another futile case."41 (Emphasis supplied) for arbitration. The RTC recalled the case even if it already admitted its
lack of expertise to deal with the intricacies of the construction business.46
The term "grave abuse of discretion" in its judicial sense connotes a
capricious, despotic, oppressive or whimsical exercise of judgment as is
Arbit-Part III |6

Afterwards, the RTC issued a Resolution recommending that respondent except that a decision by the Owner or Consultant shall not be a condition
file a motion to dismiss without prejudice to the counterclaim of petitioner, precedent to arbitration. If the Prime Contract does not provide for
so that it could pursue arbitration proceedings under the arbitration or fails to specify the manner and procedure for arbitration, it
CIAC.47 Respondent complied with the recommendation of the RTC and shall be conducted in accordance with the law of the Philippines currently in
filed a motion to dismiss which was granted by the said court. 48Later, effect unless the Parties mutually agree otherwise.53 (Emphasis supplied)
however, the RTC again asserted jurisdiction over the dispute because it
apparently made a mistake in granting respondent's motion to dismiss However, petitioner insists that the General Conditions which form part of
without conducting any hearing on the motion.49 the Prime Contract provide for a specific venue for arbitration, to wit:

On the other hand, the CIAC's assertion of its jurisdiction over the dispute 5.19.3. Any dispute shall be settled under the Rules of Conciliation and
was consistent from the moment the RTC allowed the referral of specific Arbitration of the International Chamber of Commerce by one or more
issues to it. arbitrators appointed under such Rules.54

Executive Order 100850 grants to the CIAC original and exclusive The claim of petitioner is not plausible.
jurisdiction over disputes arising from, or connected with, contracts
In National Irrigation Administration v. Court of Appeals55 this Court
entered into by parties involved in construction in the Philippines. In the
recognized the new procedure in the arbitration of disputes before the
case at the bar, it is undeniable that the controversy involves a
CIAC, in this wise:
construction dispute as can be seen from the issues referred to the CIAC,
to wit:
It is undisputed that the contracts between HYDRO and NIA contained an
arbitration clause wherein they agreed to submit to arbitration any dispute
1. Manpower and equipment standby time;
between them that may arise before or after the termination of the
2. Unrecouped mobilization expenses; agreement. Consequently, the claim of HYDRO having arisen from the
contract is arbitrable. NIA's reliance with the ruling on the case of Tesco
3. Retention; Services Incorporated v. Vera, is misplaced.

4. Discrepancy of billings; and The 1988 CIAC Rules of Procedure which were applied by this Court in
Tesco case had been duly amended by CIAC Resolutions No. 2-91 and 3-
5. Price escalation for fuel and oil usage.51 93, Section 1 of Article III of which reads as follows:

xxxx Submission to CIAC Jurisdiction - An arbitration clause in a


construction contract or a submission to arbitration of a
The Court notes that the Subcontract Agreement 52 between the parties
construction dispute shall be deemed an agreement to submit an
provides an arbitration clause, to wit:
existing or future controversy to CIAC jurisdiction, notwithstanding
the reference to a different arbitration institution or arbitral body
Article 7
in such contract or submission. When a contract contains a clause for
Arbitration the submission of a future controversy to arbitration, it is not necessary for
the parties to enter into a submission agreement before the claimant may
7. Any controversy or claim between the Contractor and the Subcontractor invoke the jurisdiction of CIAC.
arising out of or related to this Subcontract, or the breach thereof, shall
be settled by arbitration, which shall be conducted in the same Under the present Rules of Procedure, for a particular construction contract
manner and under the same procedure as provided in the Prime to fall within the jurisdiction of CIAC, it is merely required that the parties
Contract with Respect to claims between the Owner and the Contractor, agree to submit the same to voluntary arbitration. Unlike in the original
version of Section 1, as applied in the Tesco case, the law as it now stands
Arbit-Part III |7

does not provide that the parties should agree to submit disputes arising The foregoing notwithstanding, CIAC has jurisdiction over the construction
from their agreement specifically to the CIAC for the latter to acquire dispute because of the mere presence of the arbitration clause in the
jurisdiction over the same. Rather, it is plain and clear that as long as subcontract agreement.
the parties agree to submit to voluntary arbitration, regardless of
what forum they may choose, their agreement will fall within the Thus, the CIAC did not commit any patent grave abuse of discretion, nor
jurisdiction of the CIAC, such that, even if they specifically choose did it act without jurisdiction when it issued the assailed Order denying
another forum, the parties will not be precluded from electing to petitioner's motion to dismiss. Accordingly, there is no compelling reason
submit their dispute before the CIAC because this right has been for this Court to deviate from the rule that a denial of a motion to dismiss,
vested upon each party by law, i.e., E.O. No. 1008.56 (Emphasis and absent a showing of lack of jurisdiction or grave abuse of discretion
underscoring supplied) amounting to lack of or excess jurisdiction, being an interlocutory order, is
not the proper subject of a petition for certiorari.
Based on the foregoing, there are two acts which may vest the CIAC with
jurisdiction over a construction dispute. One is the presence of an Anent the second assigned error, the Court notes that the reliance of the
arbitration clause in a construction contract, and the other is the CA on NIA is inaccurate. In NIA,58this Court observed:
agreement by the parties to submit the dispute to the CIAC.
Moreover, it is undeniable that NIA agreed to submit the dispute for
The first act is applicable to the case at bar. The bare fact that the parties arbitration to the CIAC. NIA through its counsel actively participated in the
incorporated an arbitration clause in their contract is sufficient to vest the arbitration proceedings by filing an answer with counterclaim, as well as its
CIAC with jurisdiction over any construction controversy or claim between compliance wherein it nominated arbitrators to the proposed panel,
the parties. The rule is explicit that the CIAC has jurisdiction participating in the deliberations on, and the formulation of the Terms of
notwithstanding any reference made to another arbitral body. Reference of the arbitration proceeding, and examining the documents
submitted by HYDRO after NIA asked for originals of the said
It is well-settled that jurisdiction is conferred by law and cannot be waived documents."59
by agreement or acts of the parties. Thus, the contention of petitioner that
it never authorized its lawyer to submit the case for arbitration must In the case at bar, the only participation that can be attributed to petitioner
likewise fail. Petitioner argues that notwithstanding the presence of an is the joint referral of specific issues to the CIAC and the manifestation
arbitration clause, there must be a subsequent consent by the parties to praying that additional matters be referred to the CIAC. Both acts,
submit the case for arbitration. To stress, the CIAC was already vested however, have been disputed by petitioner because said acts were
with jurisdiction the moment both parties agreed to incorporate an performed by their lawyer who was not authorized to submit the case for
arbitration clause in the sub-contract agreement. Thus, a subsequent arbitration. And even if these were duly authorized, this would still not
consent by the parties would be superfluous and unnecessary. change the correct finding of the CA that the CIAC had jurisdiction over the
dispute because, as has been earlier stressed, the arbitration clause in the
It must be noted however that the reliance of the CIAC in it's assailed subcontract agreement ipso facto vested the CIAC with jurisdiction.
Order on Philrock57is inaccurate. In Philrock, the Court ruled that the CIAC
had jurisdiction over the case because of the agreement of the parties to In passing, even the RTC in its Resolution recognized the authority of the
refer the case to arbitration. In the case at bar, the agreement to refer CIAC to hear the case, to wit:
specific issues to the CIAC is disputed by petitioner on the ground that
Courts cannot and will not resolve a controversy involving a question which
such agreement was entered into by its counsel who was not authorized to
is within the jurisdiction of an administrative tribunal, especially where the
do so. In addition, in Philrock, the petitioner therein had actively
question demands the exercise of sound administrative discretion requiring
participated in the arbitration proceedings, while in the case at bar there
the special knowledge, experience and services of the administrative
where only two instances wherein petitioner participated, to wit: 1) the
tribunal to determine technical and intricate matters of fact. And
referral of five specific issues to the CIAC; and 2) the subsequent
manifestation that additional matters be referred to the CIAC.
Arbit-Part III |8

undoubtedly in this case, the CIAC it cannot be denied, is that SECTION 13.14 Reopening of hearing - The hearing may be reopened
administrative tribunal.60(Emphasis supplied) by the Arbitral Tribunal on their own motion or upon the request of
any party, upon good cause shown, at any time before the award is
It puzzles this Court why petitioner would insist that the RTC should hear rendered. When hearings are thus reopened, the effective date for the
the case when the CIAC has the required skill and expertise in addressing closing of the hearing shall be the date of closing of the reopened hearing.
construction disputes. Records will bear out the fact that petitioner refused (Emphasis supplied)
to and did not participate in the CIAC proceedings. In its defense,
petitioner cited jurisprudence to the effect that active participation before a But because of the belated action of the CA, the CIAC had to proceed with
quasi-judicial body would be tantamount to an invocation of the latter the hearing notwithstanding the non-participation of petitioner.
bodies' jurisdiction and a willingness to abide by the resolution of the
case.61 Pursuant to such doctrine, petitioner argued that had it participated Under the CIAC rules, even without the participation of petitioner in the
in the CIAC proceedings, it would have been barred from impugning the proceedings, the CIAC was still required to proceed with the hearing of the
jurisdiction of the CIAC. construction dispute. Section 4.2 of the CIAC rules provides:

Petitioner cannot presume that it would have been estopped from SECTION 4.2 Failure or refusal to arbitrate - Where the jurisdiction of
questioning the jurisdiction of the CIAC had it participated in the CIAC is properly invoked by the filing of a Request for Arbitration in
proceedings. In fact, estoppel is a matter for the court to consider. The accordance with these Rules, the failure despite due notice which
doctrine of laches or of stale demands is based upon grounds of public amounts to a refusal of the Respondent to arbitrate, shall not stay
policy which requires, for the peace of society, the discouragement of stale the proceedings notwithstanding the absence or lack of
claims and, unlike the statute of limitations, is not a mere question of time participation of the Respondent. In such case, CIAC shall appoint the
but is principally a question of the inequity or unfairness of permitting a arbitrator/s in accordance with these Rules. Arbitration proceedings shall
right or claim to be enforced or asserted.62 The Court always looks into the continue, and the award shall be made after receiving the evidence of the
attendant circumstances of the case so as not to subvert public Claimant. (Emphasis and underscoring supplied)
policy.63 Given that petitioner questioned the jurisdiction of the CIAC from
This Court finds that the CIAC simply followed its rules when it proceeded
the beginning, it was not remiss in enforcing its right. Hence, petitioner's
with the hearing of the dispute notwithstanding that petitioner refused to
claim that it would have been estopped is premature.
participate therein.
The Court finds the last assigned error to be without merit.
To reiterate, the proceedings before the CIAC were valid, for the same had
It is well to note that in its petition for certiorari64 filed with the CA on April been conducted within its authority and jurisdiction and in accordance with
9, 2002, petitioner prayed for the issuance of a temporary restraining order the rules of procedure provided by Section 4.2 of the CIAC Rules.
and a writ of preliminary injunction to enjoin the CIAC from hearing the
The ruling of the Supreme Court in Lastimoso v. Asayo67 is instructive:
case. On September 27, 2002, the CIAC promulgated its decision awarding
Php31,119,465.81 to respondent. It is unfortunate for petitioner that the
xxxx
CA did not timely act on its petition. Records show that the temporary
restraining order65 was issued only on October 15, 2002 and a writ of In addition, it is also understandable why respondent immediately resorted
preliminary injunction66 was granted on December 11, 2002, long after the to the remedy of certiorari instead of pursuing his motion for
CIAC had concluded its proceedings. The only effect of the writ was to reconsideration of the PNP Chief's decision as an appeal before the National
enjoin temporarily the enforcement of the award of the CIAC. Appellate Board (NAB). It was quite easy to get confused as to which
body had jurisdiction over his case. The complaint filed against
The Court notes that had the CA performed its duty promptly, then this
respondent could fall under both Sections 41 and 42 of Republic Act
present petition could have been avoided as the CIAC rules allow for the
(R.A.) No. 6975 or the Department of Interior and Local
reopening of hearings, to wit:
Government Act of 1990. Section 41 states that citizens' complaints
Arbit-Part III |9

should be brought before the People's Law Enforcement Board (PLEB),


while Section 42 states that it is the PNP Chief who has authority to
immediately remove or dismiss a PNP member who is guilty of conduct
unbecoming of a police officer.

It was only in Quiambao v. Court of Appeals, promulgated in 2005


or after respondent had already filed the petition for certiorari with
the trial court, when the Court resolved the issue of which body has
jurisdiction over cases that fall under both Sections 41 and 42 of
R.A. No. 6975. x x x

With the foregoing peculiar circumstances in this case, respondent should


not be deprived of the opportunity to fully ventilate his arguments against
the factual findings of the PNP Chief. x x x

xxxx

Thus, the opportunity to pursue an appeal before the NAB should be


deemed available to respondent in the higher interest of substantial
justice.68 (Emphasis supplied)

In Lastimoso, this Court allowed respondent to appeal his case before the
proper agency because of the confusion as to which agency had jurisdiction
over the case. In the case at bar, law and supporting jurisprudence are
clear and leave no room for interpretation that the CIAC has jurisdiction
over the present controversy.

The proceedings cannot then be voided merely because of the non-


participation of petitioner. Section 4.2 of the CIAC Rules is clear and it
leaves no room for interpretation. Therefore, petitioner's prayer that the
case be remanded to CIAC in order that it may be given an opportunity to
present evidence is untenable. Petitioner had its chance and lost it, more
importantly so, by its own choice. This Court will not afford a relief that is
apparently inconsistent with the law.

WHEREFORE, the petition is denied for lack of merit. The August 20, 2004
Decision and August 1, 2005 Resolution of the Court of Appeals in CA-G.R.
SP Nos. 70001 and 71621 are AFFIRMED.

Double costs against petitioner.

SO ORDERED.
Arbit-Part III |10

2. G.R. No. 167022 April 4, 2011 On December 16, 1997, LICOMCEN sent word to FSI that it was
considering major design revisions and the suspension of work on the
LICOMCEN INCORPORATED, Petitioner, Citimall project. FSI replied on December 18, 1997, expressing concern
vs. over the revisions and the suspension, as it had fully mobilized its
FOUNDATION SPECIALISTS, INC., Respondent. manpower and equipment, and had ordered the delivery of steel bars. FSI
also asked for the payment of accomplished work amounting to
x - - - - - - - - - - - - - - - - - - - - - - -x
₱3,627,818.00.7 A series of correspondence between LICOMCEN and FSI
then followed.
G.R. No. 169678
ESCA wrote FSI on January 6, 1998, stating that the revised design
FOUNDATION SPECIALISTS, INC., Petitioner,
necessitated a change in the bored piles requirement and a substantial
vs.
reduction in the number of piles. Thus, ESCA proposed to FSI that only
LICOMCEN INCORPORATED, Respondent.
50% of the steel bars be delivered to the jobsite and the rest be shipped
DECISION back to Manila.8 Notwithstanding this instruction, all the ordered steel bars
arrived in Legaspi City on January 14, 1998.9
BRION, J.:
On January 15, 1998, LICOMCEN instructed FSI to "hold all construction
THE FACTS activities on the project,"10 in view of a pending administrative case against
the officials of the City Government of Legaspi and LICOMCEN filed before
The petitioner, LICOMCEN Incorporated (LICOMCEN), is a domestic the Ombudsman (OMB-ADM-1-97-0622).11 On January 19, 1998, ESCA
corporation engaged in the business of operating shopping malls in the formalized the suspension of construction activities and ordered the
country. construction’s demobilization until the case was resolved.12 In response,
FSI sent ESCA a letter, dated February 3, 1998, requesting payment of
In March 1997, the City Government of Legaspi awarded to LICOMCEN,
costs incurred on account of the suspension which totaled
after a public bidding, a lease contract over a lot located in the central
₱22,667,026.97.13 FSI repeated its demand for payment on March 3,
business district of the city. Under the contract, LICOMCEN was obliged to
1998.14
finance the construction of a commercial complex/mall to be known as the
LCC Citimall (Citimall). It was also granted the right to operate and ESCA replied to FSI’s demands for payment on March 24, 1998, objecting
manage Citimall for 50 years, and was, thereafter, required to turn over to some of the claims.15 It denied the claim for the cost of the steel bars
the ownership and operation to the City Government.1 that were delivered, since the delivery was done in complete disregard of
its instructions. It further disclaimed liability for the other FSI claims based
For the Citimall project, LICOMCEN hired E.S. de Castro and Associates
on the suspension, as its cause was not due to LICOMCEN’s fault. FSI
(ESCA) to act as its engineering consultant. Since the Citimall was
rejected ESCA’s evaluation of its claims in its April 15, 1998 letter.16
envisioned to be a high-rise structure, LICOMCEN contracted respondent
Foundation Specialists, Inc. (FSI) to do initial construction works, On March 14, 2001, FSI sent a final demand letter to LICOMCEN for
specifically, the construction and installation of bored piles payment of ₱29,232,672.83.17 Since LICOMCEN took no positive action on
foundation.2 LICOMCEN and FSI signed the Construction Agreement,3 and FSI’s demand for payment,18 FSI filed a petition for arbitration with the
the accompanying Bid Documents4 and General Conditions of Construction Industry Arbitration Commission (CIAC) on October 2, 2002,
Contract (GCC) on September 1, 1997. Immediately thereafter, FSI
5
docketed as CIAC Case No. 37-2002.19In the arbitration petition, FSI
purchased the materials needed for the Citimall 6 project and began demanded payment of the following amounts:
working in order to meet the 90-day deadline set by LICOMCEN.
Arbit-Part III |11

a. Unpaid accomplished work billings……………. P 1,264,404.12 a. Unpaid accomplished work billings……………. ₱ 1,264,404.12

b. Material costs at site…………………………….. 15,143,638.51 b. Material costs at site…………………………… 14,643,638.51

c. Equipment and labor standby costs…………….. 3,058,984.34 c. Equipment and labor standby costs…………… 2,957,989.94

d. Unrealized gross profit………………………….. 9,023,575.29 d. Unrealized gross profit………………………… 5,120,000.00

e. Attorney’s fees………………………………….. 300,000.00 LICOMCEN was also required to bear the costs of arbitration in the total
amount of ₱474,407.95.

f. Interest expenses …………... equivalent to 15% LICOMCEN appealed the CIAC’s decision before the Court of Appeals (CA).
of the total claim On November 23, 2004, the CA upheld the CIAC’s decision, modifying only
the amounts awarded by (a) reducing LICOMCEN’s liability for material
LICOMCEN again denied liability for the amounts claimed by FSI. It justified costs at site to ₱5,694,939.87, and (b) deleting its liability for equipment
its decision to indefinitely suspend the Citimall project due to the cases and labor standby costs and unrealized gross profit; all the other awards
filed against it involving its Lease Contract with the City Government of were affirmed.24 Both parties moved for the reconsideration of the CA’s
Legaspi. LICOMCEN also assailed the CIAC’s jurisdiction, contending that Decision; LICOMCEN’s motion was denied in the CA’s February 4, 2005
FSI’s claims were matters not subject to arbitration under GC-61 of the Resolution, while FSI’s motion was denied in the CA’s September 13, 2005
GCC, but one that should have been filed before the regular courts of Resolution. Hence, the parties filed their own petition for review on
Legaspi City pursuant to GC-05.20 certiorari before the Court.25

During the preliminary conference of January 28, 2003, LICOMCEN LICOMCEN’s Arguments
reiterated its objections to the CIAC’s jurisdiction, which the arbitrators
simply noted. Both FSI and LICOMCEN then proceeded to draft the Terms LICOMCEM principally raises the question of the CIAC’s jurisdiction,
of Reference.21 insisting that FSI’s claims are non-arbitrable. In support of its position,
LICOMCEN cites GC-61 of the GCC:
On February 4, 2003, LICOMCEN, through a collaborating counsel, filed its
Ex Abundati Ad Cautela Omnibus Motion, insisting that FSI’s petition before GC-61. DISPUTES AND ARBITRATION
the CIAC should be dismissed for lack of jurisdiction; thus, it prayed for the
Should any dispute of any kind arise between the LICOMCEN
suspension of the arbitration proceedings until the issue of jurisdiction was
INCORPORATED and the Contractor [referring to FSI] or the Engineer
finally settled. The CIAC denied LICOMCEN’s motion in its February 20,
[referring to ESCA] and the Contractor in connection with, or arising out of
2003 order,22 finding that the question of jurisdiction depends on certain
the execution of the Works, such dispute shall first be referred to and
factual conditions that have yet to be established by ample evidence. As
settled by the LICOMCEN, INCORPORATED who shall within a period of
the CIAC’s February 20, 2003 order stood uncontested, the arbitration
thirty (30) days after being formally requested by either party to resolve
proceedings continued, with both parties actively participating.
the dispute, issue a written decision to the Engineer and Contractor.
The CIAC issued its decision on July 7, 2003,23 ruling in favor of FSI and
Such decision shall be final and binding upon the parties and the
awarding the following amounts:
Contractor shall proceed with the execution of the Works with due diligence
notwithstanding any Contractor's objection to the decision of the Engineer.
If within a period of thirty (30) days from receipt of the LICOMCEN,
Arbit-Part III |12

INCORPORATED's decision on the dispute, either party does not officially LICOMCEN considers its March 24, 1998 letter as its final decision on FSI’s
give notice to contest such decision through arbitration, the said decision claims, but declares that FSI’s reply letter of April 15, 1998 is not the
shall remain final and binding. However, should any party, within thirty "notice to contest" required by GC-61 that authorizes resort to arbitration
(30) days from receipt of the LICOMCEN, INCORPORATED's decision, before the CIAC. It posits that nothing in FSI’s April 15, 1998 letter states
contest said decision, the dispute shall be submitted for arbitration under that FSI will avail of arbitration as a mode to settle its dispute with
the Construction Industry Arbitration Law, Executive Order 1008. The LICOMCEN. While FSI’s final demand letter of March 14, 2001 mentioned
arbitrators appointed under said rules and regulations shall have full power its intention to refer the matter to arbitration, LICOMCEN declares that the
to open up, revise and review any decision, opinion, direction, certificate or letter was made three years after its March 24, 1998 letter, hence, long
valuation of the LICOMCEN, INCORPORATED. Neither party shall be limited after the 30-day period provided in GC-61. Indeed, FSI filed the petition for
to the evidence or arguments put before the LICOMCEN, INCORPORATED arbitration with the CIAC only on October 2, 2002. 29 Considering FSI’s
for the purpose of obtaining his said decision. No decision given by the delays in asserting its claims, LICOMCEN also contends that FSI’s action is
LICOMCEN, INCORPORATED shall disqualify him from being called as a barred by laches.
witness and giving evidence in the arbitration. It is understood that the
obligations of the LICOMCEN, INCORPORATED, the Engineer and the With respect to the monetary claims of FSI, LICOMCEM alleges that the CA
Contractor shall not be altered by reason of the arbitration being conducted erred in upholding its liability for material costs at site for the reinforcing
during the progress of the Works.26 steel bars in the amount of ₱5,694,939.87, computed as follows30:

LICOMCEN posits that only disputes "in connection with or arising out of 2nd initial rebar requirements purchased from
the execution of the Works" are subject to arbitration. LICOMCEN Pag-Asa Steel Works, Inc……………………………….. ₱ 799,506.83
construes the phrase "execution of the Works" as referring to the physical
construction activities, since "Works" under the GCC specifically refer to the Reinforcing steel bars purchased from ARCA
"structures and facilities" required to be constructed and completed for the Industrial Sales (total net weight of 744,197.66
Citimall project.27 It considers FSI’s claims as mere contractual monetary kilograms) – 50% of net amount due………………. 5,395,433.04
claims that should be litigated before the courts of Legaspi City, as
provided in GC-05 of the GCC:

GC-05. JURISDICTION Subtotal……………………………………………. 6,194,939.87

Any question between the contracting parties that may arise out of or in Less
connection with the Contract, or breach thereof, shall be litigated in the
courts of Legaspi City except where otherwise specifically stated or except Purchase cost of steel bars by Ramon
when such question is submitted for settlement thru arbitration as provided Quinquileria…………………………………….. (500,000.00)
herein.28
TOTAL LIABILITY OF LICOMCEN TO FSI FOR
LICOMCEN also contends that FSI failed to comply with the condition
MATERIAL COSTS AT SITE……………... 5,694,939.87
precedent for arbitration laid down in GC-61 of the GCC. An arbitrable
dispute under GC-61 must first be referred to and settled by LICOMCEN,
Citing GC-42(2) of the GCC, LICOMCEN says it shall be liable to pay FSI
which has 30 days to resolve it. If within a period of 30 days from receipt
"[t]he cost of materials or goods reasonably ordered for the Permanent or
of LICOMCEN’s decision on the dispute, either party does not officially give
Temporary Works which have been delivered to the Contractor but not yet
notice to contest such decision through arbitration, the said decision shall
used, and which delivery has been certified by the Engineer."31 None of
remain final and binding. However, should any party, within 30 days from
these requisites were allegedly complied with. It contends that FSI failed to
receipt of LICOMCEN’s decision, contest said decision, the dispute shall be
establish that the steel bars delivered in Legaspi City, on January 14, 1998,
submitted for arbitration under the Construction Industry Arbitration Law.
Arbit-Part III |13

were for the Citimall project. In fact, the steel bars were delivered not at ESCA’s January 6, 1998 letter simply suggested that only 50% of the steel
the site of the Citimall project, but at FSI’s batching plant called Tuanzon bars be shipped to Legaspi City; it was not a clear and specific directive.
compound, a few hundred meters from the site. Even if delivery to Even if it was, the steel bars were ordered and paid for long before the
Tuanzon was allowed, the delivery was done in violation of ESCA’s notice to suspend was given; by then, it was too late to stop the delivery.
instruction to ship only 50% of the materials. Advised as early as FSI also claims that since it believed in good faith that the Citimall project
December 1997 to suspend the works, FSI proceeded with the delivery of was simply suspended, it expected work to resume soon after and decided
the steel bars in January 1998. LICOMCEN declared that it should not be to proceed with the shipment.37
made to pay for costs that FSI willingly incurred for itself.32
Contrary to LICOMCEN’s arguments, GC-42 of the GCC does not require
Assuming that LICOMCEN is liable for the costs of the steel bars, it argues delivery of the materials at the site of the Citimall project; it only requires
that its liability should be minimized by the fact that FSI incurred no actual delivery to the contractor, which is FSI. Moreover, the Tuanzon compound,
damage from the purchase and delivery of the steel bars. During the where the steel bars were actually delivered, is very close to the Citimall
suspension of the works, FSI sold 125,000 kg of steel bars for ₱500,000.00 project site. FSI contends that it is a normal construction practice for
to a third person (a certain Ramon Quinquileria). LICOMCEN alleges that contractors to set up a "staging site," to prepare the materials and
FSI sold the steel bars for a ridiculously low price of ₱ 4.00/kilo, when the equipment to be used, rather than stock them in the crowded job/project
prevailing rate was ₱20.00/kilo. The sale could have garnered a higher site. FSI also asserts that it was useless to have the delivery certified by
price that would offset LICOMCEN’s liability. LICOMCEN also wants FSI to ESCA because by then the Citimall project had been suspended. It would
account for and deliver to it the remaining 744 metric tons of steel bars not be unfair to demand FSI to perform an act that ESCA and LICOMCEN
sold. Otherwise, FSI would be unjustly enriched at LICOMCEN’s expense, themselves had prevented from happening.38
receiving payment for materials not delivered to LICOMCEN.33
The CA deleted the awards for equipment and labor standby costs on the
LICOMCEN also disagrees with the CA ruling that declared it solely liable to ground that FSI’s documentary evidence was inadequate. FSI finds the
pay the costs of arbitration. The ruling was apparently based on the finding ruling erroneous, since LICOMCEN never questioned the list of employees
that LICOMCEN’s "failure or refusal to meet its obligations, legal, financial, and equipments employed and rented by FSI for the duration of the
and moral, caused FSI to bring the dispute to arbitration."34 LICOMCEN suspension.39
asserts that it was FSI’s decision to proceed with the delivery of the steel
bars that actually caused the dispute; it insists that it is not the party at FSI also alleges that LICOMCEN maliciously and unlawfully suspended the
fault which should bear the arbitration costs.35 Citimall project. While LICOMCEN cited several other cases in its petition
for review on certiorari as grounds for suspending the works, its
FSI’s Arguments letters/notices of suspension only referred to one case, OMB-ADM-1-97-
0622, an administrative case before the Ombudsman that was dismissed
FSI takes exception to the CA ruling that modified the amount for material as early as October 12, 1998. LICOMCEN never notified FSI of the
costs at site, and deleted the awards for equipment and labor standby dismissal of this case. More importantly, no restraining order or injunction
costs and unrealized profits. was issued in any of these cases to justify the suspension of the Citimall
project.40 FSI posits that LICOMCEN’s true intent was to terminate its
Proof of damage to FSI is not required for LICOMCEN to be liable for the
contract with it, but, to avoid paying damages for breach of contract,
material costs of the steel bars. Under GC-42, it is enough that the
simply declared it as "indefinitely suspended." That LICOMCEN conducted
materials were delivered to the contractor, although not used. FSI said that
another public bidding for the "new designs" is a telling indication of
the 744 metric tons of steel bars were ordered and paid for by it for the
LICOMCEN’s intent to ease out FSI.41 Thus, FSI states that LICOMCEN’s
Citimall project as early as November 1997. If LICOMCEN contends that
bad faith in indefinitely suspending the Citimall project entitles it to claim
these were procured for other projects FSI also had in Legaspi City, it
unrealized profit. The restriction under GC-41 that "[t]he contractor shall
should have presented proof of this claim, but it failed to do so.36
have no claim for anticipated profits on the work thus terminated,"42 will
not apply because the stipulation refers to a contract lawfully and properly
Arbit-Part III |14

terminated. FSI seeks to recover unrealized profits under Articles 1170 and by the parties’ stipulation that only disputes in connection with or arising
2201 of the Civil Code. out of the physical construction activities (execution of the works) are
arbitrable before it.
THE COURT’S RULING
In fact, all that is required for the CIAC to acquire jurisdiction is for the
The jurisdiction of the CIAC parties to a construction contract to agree to submit their dispute to
arbitration. Section 1, Article III of the 1988 CIAC Rules of Procedure (as
The CIAC was created through Executive Order No. 1008 (E.O. 1008), in
amended by CIAC Resolution Nos. 2-91 and 3-93) states:
recognition of the need to establish an arbitral machinery that would
expeditiously settle construction industry disputes. The prompt resolution Section 1. Submission to CIAC Jurisdiction. – An arbitration clause in a
of problems arising from or connected with the construction industry was construction contract or a submission to arbitration of a construction
considered of necessary and vital for the fulfillment of national dispute shall be deemed an agreement to submit an existing or future
development goals, as the construction industry provides employment to a controversy to CIAC jurisdiction, notwithstanding the reference to a
large segment of the national labor force and is a leading contributor to the different arbitration institution or arbitral body in such contract or
gross national product.43 Section 4 of E.O. 1008 states: submission. When a contract contains a clause for the submission of a
future controversy to arbitration, it is not necessary for the parties to enter
Sec. 4. Jurisdiction. The CIAC shall have original and exclusive jurisdiction
into a submission agreement before the claimant may invoke the
over disputes arising from, or connected with, contracts entered into by
jurisdiction of CIAC.
parties involved in construction in the Philippines, whether the dispute
arises before or after the completion of the contract, or after the An arbitration agreement or a submission to arbitration shall be in writing,
abandonment or breach thereof. These disputes may involve government but it need not be signed by the parties, as long as the intent is clear that
or private contracts. For the Board to acquire jurisdiction, the parties to a the parties agree to submit a present or future controversy arising from a
dispute must agree to submit the same to voluntary arbitration. construction contract to arbitration.

The jurisdiction of the CIAC may include but is not limited to violation of In HUTAMA-RSEA Joint Operations, Inc. v. Citra Metro Manila Tollways
specifications for materials and workmanship; violation of the terms of Corporation,47 the Court declared that "the bare fact that the parties x x x
agreement; interpretation and/or application of contractual time and incorporated an arbitration clause in [their contract] is sufficient to vest the
delays; maintenance and defects; payment, default of employer or CIAC with jurisdiction over any construction controversy or claim between
contractor and changes in contract cost. the parties. The arbitration clause in the construction contract ipso facto
vested the CIAC with jurisdiction."
Excluded from the coverage of this law are disputes arising from employer-
employee relationships which shall continue to be covered by the Labor Under GC-61 and GC-05 of the GCC, read singly and in relation with one
Code of the Philippines. another, the Court sees no intent to limit resort to arbitration only to
disputes relating to the physical construction activities.
The jurisdiction of courts and quasi-judicial bodies is determined by the
Constitution and the law.44 It cannot be fixed by the will of the parties to a First, consistent with the intent of the law, an arbitration clause pursuant
dispute;45 the parties can neither expand nor diminish a tribunal’s to E.O. 1008 should be interpreted at its widest signification. Under GC-61,
jurisdiction by stipulation or agreement. The text of Section 4 of E.O. 1008 the voluntary arbitration clause covers any dispute of any kind, not only
is broad enough to cover any dispute arising from, or connected with arising of out the execution of the works but also in connection therewith.
construction contracts, whether these involve mere contractual money The payments, demand and disputed issues in this case – namely, work
claims or execution of the works.46 Considering the intent behind the law billings, material costs, equipment and labor standby costs, unrealized
and the broad language adopted, LICOMCEN erred in insisting on its profits – all arose because of the construction activities and/or are
restrictive interpretation of GC-61. The CIAC’s jurisdiction cannot be limited connected or related to these activities. In other words, they are there
Arbit-Part III |15

because of the construction activities. Attorney’s fees and interests jurisdiction over a dispute should the construction contract contain an
payment, on the other hand, are costs directly incidental to the dispute. arbitration clause.48
Hence, the scope of the arbitration clause, as worded, covers all the
disputed items. The CIAC is given the original and exclusive jurisdiction over disputes
arising from, or connected with, contracts entered into by parties involved
Second and more importantly, in insisting that contractual money claims in construction in the Philippines.49 This jurisdiction cannot be altered by
can be resolved only through court action, LICOMCEN deliberately ignores stipulations restricting the nature of construction disputes, appointing
one of the exceptions to the general rule stated in GC-05: another arbitral body, or making that body’s decision final and binding.

GC-05. JURISDICTION The jurisdiction of the CIAC to resolve the dispute between LICOMCEN and
FSI is, therefore, affirmed.
Any question between the contracting parties that may arise out of or in
connection with the Contract, or breach thereof, shall be litigated in the The validity of the indefinite
courts of Legaspi City except where otherwise specifically stated or except suspension of the works on the
when such question is submitted for settlement thru arbitration as provided Citimall project
herein.
Before the Court rules on each of FSI’s contractual monetary claims, we
The second exception clause authorizes the submission to arbitration of deem it important to discuss the validity of LICOMCEN’s indefinite
any dispute between LICOMCEM and FSI, even if the dispute does not suspension of the works on the Citimall project. We quote below two
directly involve the execution of physical construction works. This was contractual stipulations relevant to this issue:
precisely the avenue taken by FSI when it filed its petition for arbitration
with the CIAC. GC-38. SUSPENSION OF WORKS

If the CIAC’s jurisdiction can neither be enlarged nor diminished by the The Engineer [ESCA] through the LICOMCEN, INCORPORATED shall have
parties, it also cannot be subjected to a condition precedent. GC-61 the authority to suspend the Works wholly or partly by written order for
requires a party disagreeing with LICOMCEN’s decision to "officially give such period as may be deemed necessary, due to unfavorable weather or
notice to contest such decision through arbitration" within 30 days from other conditions considered unfavorable for the prosecution of the Works,
receipt of the decision. However, FSI’s April 15, 1998 letter is not the or for failure on the part of the Contractor to correct work conditions which
notice contemplated by GC-61; it never mentioned FSI’s plan to submit the are unsafe for workers or the general public, or failure or refusal to carry
dispute to arbitration and instead requested LICOMCEN to reevaluate its out valid orders, or due to change of plans to suit field conditions as found
claims. Notwithstanding FSI’s failure to make a proper and timely notice, necessary during construction, or to other factors or causes which, in the
LICOMCEN’s decision (embodied in its March 24, 1998 letter) cannot opinion of the Engineer, is necessary in the interest of the Works and to
become "final and binding" so as to preclude resort to the CIAC arbitration. the LICOMCEN, INCORPORATED. The Contractor [FSI] shall immediately
To reiterate, all that is required for the CIAC to acquire jurisdiction is for comply with such order to suspend the work wholly or partly directed.
the parties to agree to submit their dispute to voluntary arbitration:
In case of total suspension or suspension of activities along the critical path
[T]he mere existence of an arbitration clause in the construction contract is of the approved PERT/CPM network and the cause of which is not due to
considered by law as an agreement by the parties to submit existing or any fault of the Contractor, the elapsed time between the effective order
future controversies between them to CIAC jurisdiction, without any for suspending work and the order to resume work shall be allowed the
qualification or condition precedent. To affirm a condition precedent in the Contractor by adjusting the time allowed for his execution of the Contract
construction contract, which would effectively suspend the jurisdiction of Works.
the CIAC until compliance therewith, would be in conflict with the
The Engineer through LICOMCEN, INCORPORATED shall issue the order
recognized intention of the law and rules to automatically vest CIAC with
lifting the suspension of work when conditions to resume work shall have
Arbit-Part III |16

become favorable or the reasons for the suspension have been duly ADM-1-97-0622), which ESCA and LICOMCEN cited in their letters to FSI
corrected.50 as a ground for the suspension, was dismissed as early as October 12,
1998, but neither ESCA nor LICOMCEN informed FSI of this development.
GC-41 LICOMCEN, INCORPORATED's RIGHT TO SUSPEND WORK OR The pendency of the other cases52 may justify the continued suspension of
TERMINATE THE CONTRACT the works, but LICOMCEN never bothered to inform FSI of the existence of
these cases until the arbitration proceedings commenced. By May 28,
xxxx
2002, the City Government of Legaspi sent LICOMCEN a notice instructing
it to proceed with the Citimall project;53 again, LICOMCEN failed to relay
2. For Convenience of LICOMCEN, INCORPORATED
this information to FSI. Instead, LICOMCEN conducted a rebidding of the
If any time before completion of work under the Contract it shall be found Citimall project based on the new design.54LICOMCEN’s claim that the
by the LICOMCEN, INCORPORATED that reasons beyond the control of the rebidding was conducted merely to get cost estimates for the new design
parties render it impossible or against the interest of the LICOMCEN, goes against the established practice in the construction industry. We find
INCORPORATED to complete the work, the LICOMCEN, INCORPORATED at the CIAC’s discussion on this matter relevant:
any time, by written notice to the Contractor, may discontinue the work
But what is more appalling and disgusting is the allegation x x x that the x
and terminate the Contract in whole or in part. Upon the issuance of such
x x invitation to bid was issued x x x solely to gather cost estimates on the
notice of termination, the Contractor shall discontinue to work in such
redesigned [Citimall project] x x x. This Arbitral Tribunal finds said act of
manner, sequence and at such time as the LICOMCEN,
asking for bids, without any intention of awarding the project to the lowest
INCORPORATED/Engineer may direct, continuing and doing after said
and qualified bidder, if true, to be extremely irresponsible and highly
notice only such work and only until such time or times as the LICOMCEN,
unprofessional. It might even be branded as fraudulent x x x [since] the
INCORPORATED/Engineer may direct.51
invited bidders [were required] to pay P2,000.00 each for a set of the new
Under these stipulations, we consider LICOMCEN’s initial suspension of the plans, which amount was non-refundable. The presence of x x x deceit
works valid. GC-38 authorizes the suspension of the works for factors or makes the whole story repugnant and unacceptable.55
causes which ESCA deems necessary in the interests of the works and
LICOMCEN’s omissions and the imprudent rebidding of the Citimall project
LICOMCEN. The factors or causes of suspension may pertain to a change or
are telling indications of LICOMCEN’s intent to ease out FSI and terminate
revision of works, as cited in the December 16, 1997 and January 6, 1998
their contract. As with GC-31, GC-42(2) grants LICOMCEN ample discretion
letters of ESCA, or to the pendency of a case before the Ombudsman
to determine what reasons render it against its interest to complete the
(OMB-ADM-1-97-0622), as cited in LICOMCEN’s January 15, 1998 letter
work – in this case, the pendency of the other cases and the revised
and ESCA’s January 19, 1998 and February 17, 1998 letters. It was not
designs for the Citimall project. Given this authority, the Court fails to the
necessary for ESCA/LICOMCEN to wait for a restraining or injunctive order
see the logic why LICOMCEN had to resort to an "indefinite suspension" of
to be issued in any of the cases filed against LICOMCEN before it can
the works, instead of outrightly terminating the contract in exercise of its
suspend the works. The language of GC-38 gives ESCA/LICOMCEN
rights under GC-42(2).
sufficient discretion to determine whether the existence of a particular
situation or condition necessitates the suspension of the works and serves
We now proceed to discuss the effects of these findings with regard to
the interests of LICOMCEN.1avvphi1
FSI’s monetary claims against LICOMCEN.
Although we consider the initial suspension of the works as valid, we find
The claim for material costs at site
that LICOMCEN wrongfully prolonged the suspension of the works (or
"indefinite suspension" as LICOMCEN calls it). GC-38 requires GC-42 of the GCC states:
ESCA/LICOMCEN to "issue an order lifting the suspension of work when
conditions to resume work shall have become favorable or the reasons for GC-42 PAYMENT FOR TERMINATED CONTRACT
the suspension have been duly corrected." The Ombudsman case (OMB-
Arbit-Part III |17

If the Contract is terminated as aforesaid, the Contractor will be paid for all requirement of the project. The change involved a substantial reduction in
items of work executed, satisfactorily completed and accepted by the the number and length of piles.
LICOMCEN, INCORPORATED up to the date of termination, at the rates and
prices provided for in the Contract and in addition: We expected that you would have suspended the deliveries of the steel
bars until the new design has been approved.
1. The cost of partially accomplished items of additional or extra work
agreed upon by the LICOMCEN, INCORPORATED and the Contractor. According to you[,] the steel bars had already been paid and loaded and
out of Manila on said date.
2. The cost of materials or goods reasonably ordered for the Permanent or
Temporary Works which have been delivered to the Contractor but not yet In order to avoid double handling, storage, security problems, we suggest
used and which delivery has been certified by the Engineer. that only 50% of the total requirement of steel bars be delivered at jobsite.
The balance should be returned to Manila where storage and security is
3. The reasonable cost of demobilization better.

For any payment due the Contractor under the above conditions, the In order for us to consider additional cost due to the shipping of the excess
LICOMCEN, INCORPORATED, however, shall deduct any outstanding steel bars, we need to know the actual dates of purchase, payments and
balance due from the Contractor for advances in respect to mobilization loading of the steel bars. Obviously, we cannot consider the additional cost
and materials, and any other sum the LICOMCEN, INCORPORATED is if you have had the chance to delay the shipping of the steel bars.57
entitled to be credited.56
From the above, it appears that FSI was informed of the necessity of
For LICOMCEN to be liable for the cost of materials or goods, item two of suspending the works as early as December 16, 1997. Pursuant to GC-38
GC-42 requires that of the GCC, FSI was expected to immediately comply with the order to
suspend the work.58 Though ESCA’s December 16, 1997 notice may not
a. the materials or goods were reasonably ordered for the Permanent or have been categorical in ordering the suspension of the works, FSI’s reply
Temporary Works; letter of December 18, 1997 indicated that it actually complied with the
notice to suspend, as it said, "We hope for the early resolution of the new
b. the materials or goods were delivered to the Contractor but not yet
foundation plan and the resumption of work."59 Despite the suspension, FSI
used; and
claimed that it could not stop the delivery of the steel bars (nor found the
need to do so) because (a) the steel bars were ordered as early as
c. the delivery was certified by the Engineer.
November 1997 and were already loaded in Manila and expected to arrive
Both the CIAC and the CA agreed that these requisites were met by FSI to in Legaspi City by December 23, 1997, and (b) it expected immediate
make LICOMCEN liable for the cost of the steel bars ordered for the Citimall resumption of work to meet the 90-day deadline.
60

project; the two tribunals differed only to the extent of LICOMCEN’s liability
Records, however, disclose that these claims are not entirely accurate. The
because the CA opined that it should be limited only to 50% of the cost of
memorandum of agreement and sale covering the steel bars specifically
the steel bars. A review of the records compels us to uphold the CA’s
stated that these would be withdrawn from the Cagayan de Oro depot, not
finding.
Manila61; indeed, the bill of lading stated that the steel bars were loaded in
Prior to the delivery of the steel bars, ESCA informed FSI of the suspension Cagayan de Oro on January 11, 1998, and arrived in Legaspi City within
of the works; ESCA’s January 6, 1998 letter reads: three days, on January 14, 1998.62 The loading and delivery of the steel
bar thus happened after FSI received ESCA’s December 16, 1997 and
As per our information to you on December 16, 1997, a major revision in January 6, 1998 letters – days after the instruction to suspend the works.
the design of the Legaspi Citimall necessitated a change in the bored piles Also, the same stipulation that authorizes LICOMCEN to suspend the works
allows the extension of the period to complete the works. The relevant
Arbit-Part III |18

portion of FSI contends that it is not barred from recovering unrealized profit under
GC-38 states: GC-41(2), which states:

In case of total suspension x x x and the cause of which is not due to any GC-41. LICOMCEN, INCORPORATED’s RIGHT TO SUSPEND WORK OR
fault of the Contractor [FSI], the elapsed time between the effective order TERMINATE THE CONTRACT
for suspending work and the order to resume work shall be allowed the
Contractor by adjusting the time allowed for his execution of the Contract xxxx
Works.63
2. For Convenience of the LICOMCEN, INCORPORATED
The above stipulation, coupled with the short period it took to ship the
x x x. The Contractor [FSI] shall not claim damages for such
steel bars from Cagayan de Oro to Legaspi City, thus negates both FSI’s
discontinuance or termination of the Contract, but the Contractor shall
argument and the CIAC’s ruling64 that there was no necessity to stop the receive compensation for reasonable expenses incurred in good faith for
shipment so as to meet the 90-day deadline. These circumstances prove the performance of the Contract and for reasonable expenses associated
that FSI acted imprudently in proceeding with the delivery, contrary to with termination of the Contract. The LICOMCEN, INCORPORATED will
LICOMCEN’s instructions. The CA was correct in holding LICOMCEN liable determine the reasonableness of such expenses. The Contractor [FSI] shall
for only 50% of the costs of the steel bars delivered. have no claim for anticipated profits on the work thus terminated, nor any
other claim, except for the work actually performed at the time of complete
The claim for equipment and discontinuance, including any variations authorized by the LICOMCEN,
labor standby costs INCORPORATED/Engineer to be done.

The Court upholds the CA’s ruling deleting the award for equipment and The prohibition, FSI posits, applies only where the contract was properly
labor standby costs. We quote in agreement pertinent portions of the CA and lawfully terminated, which was not the case at bar. FSI also took pains
decision: in differentiating its claim for "unrealized profit" from the prohibited claim
for "anticipated profits"; supposedly, unrealized profit is "one that is built-
The CIAC relied solely on the list of 37 pieces of equipment respondent in in the contract price, while anticipated profit is not." We fail to see the
allegedly rented and maintained at the construction site during the distinction, considering that the contract itself neither defined nor
suspension of the project with the prorated rentals incurred x x x. To the differentiated the two terms. [A] contract must be interpreted from the
mind of this Court, these lists are not sufficient to establish the fact that language of the contract itself, according to its plain and ordinary
indeed [FSI] incurred the said expenses. Reliance on said lists is purely meaning."66 If the terms of a contract are clear and leave no doubt upon
speculative x x x the list of equipments is a mere index or catalog of the the intention of the contracting parties, the literal meaning of the
equipments, which may be utilized at the construction site. It is not the stipulations shall control.67
best evidence to prove that said equipment were in fact rented and
maintained at the construction site during the suspension of the work. x x Nonetheless, on account of our earlier discussion of LICOMCEN’s failure to
x [FSI] should have presented the lease contracts or any similar observe the proper procedure in terminating the contract by declaring that
documents such as receipts of payments x x x. Likewise, the list of it was merely indefinitely suspended, we deem that FSI is entitled to the
employees does not in anyway prove that those employees in the list were payment of nominal damages. Nominal damages may be awarded to a
indeed at the construction site or were required to be on call should their plaintiff whose right has been violated or invaded by the defendant, for the
services be needed and were being paid their salaries during the purpose of vindicating or recognizing that right, and not for indemnifying
suspension of the project. Thus, in the absence of sufficient evidence, We the plaintiff for any loss suffered by him.68 Its award is, thus, not for the
deny the claim for equipment and labor standby costs.65 purpose of indemnification for a loss but for the recognition and vindication
of a right. A violation of the plaintiff’s right, even if only technical, is
The claim for unrealized profit
Arbit-Part III |19

sufficient to support an award of nominal damages.69 FSI is entitled to


recover the amount of ₱100,000.00 as nominal damages.

The liability for costs of arbitration

Under the parties’ Terms of Reference, executed before the CIAC, the costs
of arbitration shall be equally divided between them, subject to the CIAC’s
determination of which of the parties shall eventually shoulder the
amount.70The CIAC eventually ruled that since LICOMCEN was the party at
fault, it should bear the costs. As the CA did, we agree with this finding.
Ultimately, it was LICOMCEN’s imprudent declaration of indefinitely
suspending the works that caused the dispute between it and FSI.
LICOMCEN should bear the costs of arbitration.

WHEREFORE, premises considered, the petition for review on certiorari of


LICOMCEN INCORPORATED, docketed as G.R. No. 167022, and the petition
for review on certiorari of FOUNDATION SPECIALISTS, INC., docketed as
G.R. No. 169678, are DENIED. The November 23, 2004 Decision of the
Court of Appeals in CA-G.R. SP No. 78218 is MODIFIED to include the
award of nominal damages in favor of FOUNDATION SPECIALISTS, INC.
Thus, LICOMCEN INCORPORATED is ordered to pay FOUNDATION
SPECIALISTS, INC. the following amounts:

a. ₱1,264,404.12 for unpaid balance on FOUNDATION SPECIALISTS, INC.


billings;

b. ₱5,694,939.87 for material costs at site; and

c. ₱100,000.00 for nominal damages.

LICOMCEN INCORPORATED is also ordered to pay the costs of arbitration.


No costs.

SO ORDERED.
Arbit-Part III |20

3. On 30 July 2004, petitioner received the first Notice of Garnishment


against the receivables of LMM Construction issued by the Construction
4. G.R. No. 180765 February 27, 2009 Industry Arbitration Commission (CIAC) in connection with CIAC Case No.
11-2002 filed by Asia-Con Builders against LMM Construction, wherein LMM
FORT BONIFACIO DEVELOPMENT CORPORATION, Petitioner,
Construction was adjudged liable to Asia-Con Builders for the amount of
vs.
₱5,990,927.77.
MANUEL N. DOMINGO, Respondent.
On 30 April 2005, petitioner received a letter dated 18 April 2005 from
DECISION
respondent inquiring on the retention money supposedly due to LMM
Construction and informing petitioner that a portion of the amount
CHICO-NAZARIO, J.:
receivable by LMM Construction therefrom was already assigned to him as
Before this Court is a Petition for Review on Certiorari under Rule 45 of the evidenced by the Deed of Assignment executed by LMM Construction in
Revised Rules of Court, filed by petitioner Fort Bonifacio Development respondent’s favor on 28 February 2005. LMM Construction assigned its
Corporation, seeking to reverse and set aside the Decision dated 19 July receivables from petitioner to respondent to settle the alleged unpaid
20071 and the Resolution dated 10 December 2007 2 of the Court of obligation of LMM Construction to respondent amounting to ₱804,068.21.
Appeals in CA-G.R. SP No. 97731. The appellate court, in its assailed
Through its letter dated 11 October 2005, addressed to respondent,
Decision, affirmed the Order3 of the Regional Trial Court (RTC) of Pasay
petitioner acknowledged that LMM Construction did have receivables still
City, Branch 109, in Civil Case No. 06-2000-CFM, denying the Motion to
with petitioner, consisting of the retention money; but petitioner also
Dismiss of petitioner; and in its assailed Resolution, refused to reconsider
advised respondent that the retention money was not yet due and
its decision.
demandable and may be ascertained only after the completion of the
Petitioner, a domestic corporation duly organized under Philippine laws, is corrective works undertaken by the new contractor on the condominium
engaged in the real estate development business. Respondent is the project. Petitioner also notified respondent that part of the receivables was
assignee of L and M Maxco Specialist Engineering Construction (LMM also being garnished by the other creditors of LMM Construction.
Construction) of its receivables from petitioner.
Unsatisfied with the reply of petitioner, respondent sent another letter
On 5 July 2000, petitioner entered into a Trade Contract with LMM dated 14 October 2005 asserting his ownership over a portion of the
Construction for partial structural and architectural works on one of its retention money assigned to him and maintaining that the amount thereof
projects, the Bonifacio Ridge Condominium. According to the said Contract, pertaining to him can no longer be garnished to satisfy the obligations of
petitioner had the right to withhold the retention money equivalent to 5% LMM Construction to other persons since it already ceased to be the
of the contract price for a period of one year after the completion of the property of LMM Construction by virtue of the Deed of Assignment.
project. Retention money is a portion of the contract price, set aside by the Attached to respondent’s letter was the endorsement of LMM Construction
project owner, from all approved billings and retained for a certain period dated 17 January 2005 approving respondent’s claim upon petitioner in the
to guarantee the performance by the contractor of all corrective works amount of ₱804,068.21 chargeable against the retention money that may
during the defect-liability period.4 be received by LMM Construction from the petitioner.

Due to the defect and delay in the work of LMM Construction on the Before respondent’s claim could be fully addressed, petitioner, on 6 June
condominium project, petitioner unilaterally terminated the Trade 2005, received the second Notice of Garnishment against the receivables of
Contract5 and hired another contractor to finish the rest of the work left LMM Construction, this time, issued by the National Labor Relations
undone by LMM Construction. Despite the pre-termination of the Trade Commission (NLRC) to satisfy the liability of LMM Construction to Nicolas
Contract, petitioner was liable to pay LMM Construction a fraction of the Consigna in NLRC Case No. 00-07-05483-2003.
contract price in proportion to the works already performed by the latter.6
Arbit-Part III |21

On 13 July 2005, petitioner received an Order of Delivery of Money issued one between LMM Construction and petitioner should be made accountable
by the Office of the Clerk of Court and Ex-Officio Sheriff enforcing the first for the sum due to respondent.
Notice of Garnishment and directing petitioner to deliver to Asia-Con
Builders, through the Sheriff, the amount of ₱5,990,227.77 belonging to Petitioner sought remedy from the Court of Appeals by filing a Petition for
LMM Construction. In compliance with the said Order, petitioner was able Certiorari, docketed as CA-G.R. SP No. 97731, challenging the RTC Order
to deliver to Asia-Con Builders on 22 July 2005 and on 11 August 2005 dated 6 June 2006 for having been rendered by the trial court with grave
partial payments amounting to ₱1,170,601.81, covered by the appropriate abuse of discretion.
Acknowledgement Receipts.
In its Decision promulgated on 19 July 2007, the Court of Appeals
A third Notice of Garnishment against the receivables of LMM Construction, dismissed the Petition for Certiorari and affirmed the 6 June 2006 Order of
already accompanied by an Order of Delivery of Money, both issued by the the RTC denying the Motion to Dismiss of petitioner. The appellate court
RTC of Makati, Branch 133, was served upon petitioner on 26 January rejected the argument of petitioner that respondent, as the assignee of
2006. The Order enjoined petitioner to deliver the amount of ₱558,448.27 LMM Construction, was bound by the stipulation in the Trade Contract that
to the Sheriff to answer for the favorable judgment obtained by Concrete disputes arising therefrom should be brought before the CIAC. The Court of
Masters, Inc. (Concrete Masters) against LMM Construction in Civil Case Appeals declared that respondent was not privy, but a third party, to the
No. 05-164. Trade Contract; and money claims of third persons against the contractor,
developer, or owner of the project are lodged in the regular courts and not
Petitioner, in a letter dated 31 January 2006, categorically denied in the CIAC.
respondent’s claim on the retention money, reasoning that after the
completion of the rectification works on the condominium project and Similarly ill-fated was petitioner’s Motion for Reconsideration, which was
satisfaction of the various garnishment orders, there was no more left of denied by the Court of Appeals in its Resolution dated 10 December 2007.
the retention money of LMM Construction.
Petitioner now comes to this Court via this instant Petition for Review on
It would appear, however, that petitioner fully satisfied the first Notice of Certiorari praying for the reversal of the 19 July 2007 Decision of the Court
Garnishment in the amount of ₱5,110,833.44 only on 31 January of Appeals and 6 June 2006 Order of the RTC and, ultimately, for the
2006,7 the very the same date that it expressly denied respondent’s claim. dismissal of Civil Case No. 06-0200-CFM pending before the RTC.
Also, petitioner complied with the Notice of Garnishment and its
For the resolution of this Court is the sole issue of:
accompanying Order of Delivery of Money in the amount of ₱558,448.27 on
8 February 2006, a week after its denial of respondent’s claim.8
WHETHER OR NOT THE RTC HAS JURISDICTION OVER CIVIL CASE NO. 06-
0200-CFM.
The foregoing events prompted respondent to file a Complaint for collection
of sum of money, against both LMM Construction and petitioner, docketed
The jurisdiction of CIAC is defined under Executive Order No. 1008 as
as Civil Case No. 06-0200-CFM before the RTC of Pasay City, Branch 109.
follows:
Instead of filing an Answer, petitioner filed a Motion to Dismiss Civil Case
SECTION 4. Jurisdiction.—The CIAC shall have original and exclusive
No. 06-0200-CFM on the ground of lack of jurisdiction over the subject
jurisdiction over disputes arising from, or connected with, contracts
matter. Petitioner argued that since respondent merely stepped into the
entered into by parties involved in construction in the Philippines, whether
shoes of LMM Construction as its assignor, it was the CIAC and not the
the disputes arises before or after the completion of the contract, or after
regular courts that had jurisdiction over the dispute as provided in the
the abandonment or breach thereof. These disputes may involve
Trade Contract.
government or private contracts. For the Board to acquire jurisdiction, the
parties to a dispute must agree to submit the same to voluntary
On 6 June 2006, the RTC issued an Order denying the Motion to Dismiss of
arbitration.
petitioner, ruling that a full-blown trial was necessary to determine which
Arbit-Part III |22

The jurisdiction of the CIAC may include but is not limited to violation of The allegations in respondent’s Complaint are clear and simple: That LMM
specifications for materials and workmanship; violation of the terms of Construction had an outstanding obligation to respondent in the amount of
agreement; interpretation and/or application of contractual provisions; ₱804,068.21; that in payment of the said amount, LMM Construction
amount of damages and penalties; commencement time and delays; assigned to respondent its receivables from petitioner, which assignment
maintenance and defects; payment default of employer or contractor and was properly made known to petitioner as early as 18 April 2005; that
changes in contract cost. despite due notice of such assignment, petitioner still refused to deliver the
amount assigned to respondent, giving preference, instead, to the
Excluded from the coverage of this law are disputes arising from employer- garnishing creditors of LMM Construction; that at the time petitioner was
employee relationships which shall continue to be covered by the Labor notified of the assignment, only one notice of garnishment, the first Notice
Code of the Philippines. of Garnishment, was received by it; that had petitioner properly recognized
respondent’s right as an assignee of a portion of the receivables of LMM
In assailing the 19 July 2007 Decision of the Court of Appeals, petitioner
Construction, there could have been sufficient residual amounts to satisfy
invoked Article 1311 of the Civil Code on relativity of contracts. According
respondent’s claim; and that, uncertain over which one between LMM
to said provision, all contracts shall only take effect between the
Construction and petitioner he may resort to for payment, respondent
contracting parties, their assigns and heirs except when the rights and
named them both as defendants in Civil Case No. 06-0200-CFM. A
obligations arising from the contract are not transmissible. Petitioner
scrupulous examination of the aforementioned allegations in respondent’s
argues that the appellate court, in recognizing the existence of the Deed of
Complaint unveils the fact that his cause of action springs not from a
Assignment executed by LMM Construction -- in favor of respondent -- of
violation of the provisions of the Trade Contract, but from the non-payment
its receivables under the Trade Contract, should have considered the
of the monetary obligation of LMM Construction to him.
concomitant result thereof, i.e., that respondent became a party to the
Trade Contract and, therefore, bound by the arbitral clause therein. A cause of action is a party’s act or omission that violates the rights of the
other.10 The right of the respondent that was violated, prompting him to
Respondent counters that the CIAC is devoid of jurisdiction over money
initiate Civil Case No. 06-0200-CFM, was his right to receive payment for
claims of third persons against the contractor, developer or owner of the
the financial obligation incurred by LMM Construction and to be preferred
project. The jurisdiction of the CIAC is limited to settling disputes arising
over the other creditors of LMM Construction, a right which pre-existed
among contractors, developers and/or owners of construction projects. It
and, thus, was separate and distinct from the right to payment of LMM
does not include the determination of who among the many creditors of the
Construction under the Trade Contract.
contractor should enjoy preference in payment of its receivables from the
developer/owner. Petitioner’s unceasing reliance on Article 131111 of the Civil Code on
relativity of contracts is unavailing. It is true that respondent, as the
It is an elementary rule of procedural law that jurisdiction of the court over
assignee of the receivables of LMM Construction from petitioner under the
the subject matter is determined by the allegations of the complaint,
Trade Contract, merely stepped into the shoes of LMM Construction.
irrespective of whether or not the plaintiff is entitled to recover upon all or
However, it bears to emphasize that the right of LMM Construction to such
some of the claims asserted therein. As a necessary consequence, the
receivables from petitioner under the Trade Contract is not even in dispute
jurisdiction of the court cannot be made to depend upon the defenses set
in Civil Case No. 06-0200-CFM. What respondent puts in issue before the
up in the answer or upon the motion to dismiss; for otherwise, the
RTC is the purportedly arbitrary exercise of discretion by the petitioner in
question of jurisdiction would almost entirely depend upon the defendant.
giving preference to the claims of the other creditors of LMM Construction
What determines the jurisdiction of the court is the nature of the action
over the receivables of the latter.
pleaded as appearing from the allegations in the complaint. The averments
therein and the character of the relief sought are the ones to be It is encouraged that disputes arising from construction contracts be
consulted.9 Accordingly, the issues in the instant case can only be properly referred first to the CIAC for their arbitration and settlement, since such
resolved by an examination and evaluation of respondent’s allegations in cases would often require expertise and technical knowledge in
his Complaint in Civil Case No. 06-0200-CFM. construction. Hence, some of the matters over which the CIAC may
Arbit-Part III |23

exercise jurisdiction, upon agreement of the parties to the construction WHEREFORE, premises considered, the instant Petition is DENIED. The
contract, "include but [are] not limited to violation of specifications for Decision dated 19 July 2007 and the Resolution dated 10 December 2007
materials and workmanship; violation of the terms of agreement; of the Court of Appeals in CA-G.R. SP No. 97731 are hereby AFFIRMED in
interpretation and/or application of contractual provisions; amount of toto. Costs against the petitioner.
damages and penalties; commencement time and delays; maintenance and
defects; payment default of employer or contractor and changes in SO ORDERED.
contract cost."12 Although the jurisdiction of the CIAC is not limited to the
afore-stated enumeration, other issues which it could take cognizance of
must be of the same or a closely related kind or species applying the
principle of ejusdem generis in statutory construction.

Respondent’s claim is not even construction-related at all. Construction is


defined as referring to all on-site works on buildings or altering structures,
from land clearance through completion including excavation, erection and
assembly and installation of components and equipment.13 Petitioner’s
insistence on the application of the arbitration clause of the Trade Contract
to respondent is clearly anchored on an erroneous premise that respondent
is seeking to enforce a right under the same. Again, the right to the
receivables of LMM Construction from petitioner under the Trade Contract
is not being impugned herein. In fact, petitioner readily conceded that LMM
Construction still had receivables due from petitioner, and respondent did
not even have to refer to a single provision in the Trade Contract to assert
his claim. What respondent is demanding is that a portion of such
receivables amounting to ₱804,068.21 should have been paid to him first
before the other creditors of LMM Construction, which, clearly, does not
require the CIAC’s expertise and technical knowledge of construction.

The adjudication of Civil Case No. 06-0200-CFM necessarily involves the


application of pertinent statutes and jurisprudence to matters such as
obligations, contracts of assignment, and, if appropriate, even preference
of credits, a task more suited for a trial court to carry out after a full-blown
trial, than an arbitration body specifically devoted to construction
contracts.

This Court recognizes the laudable objective of voluntary arbitration 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. It cannot, however, altogether
surrender to arbitration those cases, such as the one at bar, the extant
facts of which plainly call for the exercise of jurisdiction by the regular
courts for their resolution.
Arbit-Part III |24

5. G.R. No. 163582 August 9, 2010 6. ₱4,835,933.95 for interest charges on unpaid overdue billings on labor
cost adjustment and change orders.
WILLIAM GOLANGCO CONSTRUCTION CORPORATION, Petitioner,
vs. or for a total of Fifty Three Million Six Hundred Sixty-Seven Thousand Two
RAY BURTON DEVELOPMENT CORPORATION, Respondent. Hundred Nineteen and 45/xx (₱53,667,219.45) and interest charges based
on the prevailing bank rates on the foregoing amount from March 1, 2002
DECISION and until such time as the same shall be fully paid.

PERALTA, J.: On April 12, 2002, petitioner RBDC filed a Motion to Dismiss the aforesaid
complaint on the ground of lack of jurisdiction. It is petitioner's contention
This resolves the Petition for Review on Certiorari under Rule 45 of the
that the CIAC acquires jurisdiction over disputes arising from or connected
Rules of Court, praying that the Decision1 of the Court of Appeals (CA)
with construction contracts only when the parties to the contract agree to
dated December 19, 2003, holding that the Construction Industry
submit the same to voluntary arbitration. In the contract between
Arbitration Commission (CIAC) had no jurisdiction over the dispute
petitioner and private respondent, petitioner claimed that only disputes by
between herein parties, and the CA Resolution2 dated May 24, 2004,
reason of differences in interpretation of the contract documents shall be
denying herein petitioner's motion for reconsideration, be reversed and set
deemed subject to arbitration.
aside.
Private respondent filed a Comment and Opposition to the aforesaid Motion
The undisputed facts, as accurately narrated in the CA Decision, are as
dated April 15, 2002. Private respondent averred that the claims set forth
follows.
in the complaint require contract interpretation and are thus cognizable by
the CIAC pursuant to the arbitration clause in the construction contract
On July 20, 1995, petitioner Ray Burton Development Corporation [herein
between the parties. Moreover, even assuming that the claims do not
respondent] (RBDC for brevity) and private respondent William Golangco
involve differing contract interpretation, they are still cognizable by the
Construction Corporation [herein petitioner] (WGCC) entered into a
CIAC as the arbitration clause mandates their direct filing therewith.
Contract for the construction of the Elizabeth Place (Office/Residential
Condominium).
On May 6, 2002, the CIAC rendered an Order the pertinent portion of
which reads as follows:
On March 18, 2002, private respondent WGCC filed a complaint with a
request for arbitration with the Construction Industry Arbitration
The Commission has taken note of the foregoing arguments of the parties.
Commission (hereinafter referred to as CIAC). In its complaint, private
After due deliberations, the Commission resolved to DENY Respondent's
respondent prayed that CIAC render judgment ordering petitioner to pay
motion on the following grounds:
private respondent the amount of, to wit:
[1] Clause 17.2 of Art. XVII of the Contract Agreement explicitly provides
1. ₱24,703,132.44 for the unpaid balance on the contract price;
that "any dispute" arising under the construction contract shall be
submitted to "the Construction Arbitration Authority created by the
2. ₱10,602,670.25 for the unpaid balance on the labor cost adjustment;
Government." Even without this provision, the bare agreement to submit a
3. ₱9,264,503.70 for the unpaid balance of additive works; construction dispute to arbitration vests in the Commission original and
exclusive jurisdiction by virtue of Sec. 4 of Executive Order No. 1008,
4. ₱2,865,615.10 for extended overhead expenses; whether or not a dispute involves a collection of sum of money or contract
interpretation as long as the same arises from, or in connection with,
5. ₱1,395,364.01 for materials cost adjustment and trade contractors' contracts entered into by the parties involved. The Supreme Court
utilities expenses; jurisprudence on Tesco vs. Vera case referred to by respondent is no
Arbit-Part III |25

longer controlling as the same was based on the old provision of Article III, contended that CIAC acted without or in excess of its jurisdiction when it
Sec. 1 of the CIAC Rules which has long been amended. issued the questioned order despite the clear showing that there is lack of
jurisdiction on the issue submitted by private respondent for arbitration.3
[2] The issue raised by Respondent in its Motion to Dismiss is similar to the
issue set forth in CA-G.R. Sp. No. 67367, Continental Cement Corporation On December 19, 2003, the CA rendered the assailed Decision granting the
vs. CIAC and EEI Corporation, where the appellate court upheld the ruling petition for certiorari, ruling that the CIAC had no jurisdiction over the
of the CIAC thereon that since the parties agreed to submit to arbitration subject matter of the case because the parties agreed that only disputes
any dispute, the same does not exclude disputes relating to claims for regarding differences in interpretation of the contract documents shall be
payment in as much as the said dispute originates from execution of the submitted for arbitration, while the allegations in the complaint make out a
works. As such, the subject dispute falls within the original and exclusive case for collection of sum of money. Petitioner moved for reconsideration
jurisdiction of the CIAC. of said ruling, but the same was denied in a Resolution dated May 24,
2004.
WHEREFORE, in view of the foregoing, Respondent's Motion to Dismiss
is DENIED for lack of merit. Respondent is given anew an inextendible Hence, this petition where it is alleged that:
period of ten (10) days from receipt hereof within which to file its Answer
and nominees for the Arbitral Tribunal. If Respondent shall fail to comply I.
within the prescribed period, the Commission shall proceed with arbitration
THE COURT OF APPEALS ACTED WITH GRAVE ABUSE OF DISCRETION IN
in accordance with its Rules. x x x
FAILING TO DISMISS PRIVATE RESPONDENT RBDC'S PETITION IN CA-G.R.
Thereafter, petitioner filed a Motion to Suspend Proceedings praying that SP NO. 70959 OUTRIGHT IN VIEW OF RBDC'S FAILURE TO FILE A MOTION
the CIAC order a suspension of the proceedings in Case No. 13-2002 until FOR RECONSIDERATION OF THE CIAC'S ORDER, AS WELL AS FOR RBDC'S
the resolution of the negotiations between the parties, and consequently, FAILURE TO ATTACH TO THE PETITION THE RELEVANT PLEADINGS IN
that the period to file an Answer be held in abeyance. CIAC CASE NO. 13-2002, IN VIOLATION OF THE REQUIREMENT UNDER
RULE 65, SECTIONS 1 AND 2, PARAGRAPH 2 THEREOF, AND RULE 46,
Private respondent filed an Opposition to the aforesaid Motion and a SECTION 3, PARAGRAPH 2 THEREOF.
Counter-Motion to Declare respondent to Have Refused to Arbitrate and to
Proceed with Arbitration Ex Parte. II.

On May 24, 2002 the CIAC issued an Order, the pertinent portion of which THE COURT OF APPEALS ERRED GRAVELY IN NOT RULING THAT THE CIAC
reads: HAS JURISDICTION OVER WGCC'S CLAIMS, WHICH ARE IN THE NATURE
OF ARBITRABLE DISPUTES COVERED BY CLAUSE 17.1 OF ARTICLE XVII
In view of the foregoing, Respondent's (petitioner's) Motion to Suspend INVOLVING CONTRACT INTERPRETATION.
Proceedings is DENIED. Accordingly, respondent is hereby given a non-
extendible period of five (5) days from receipt thereof within which to x x x x
submit its Answer and nominees for the Arbitral Tribunal. In default
III.
thereof, claimant's (private respondent's) Counter-Motion is deemed
granted and arbitration shall proceed in accordance with the CIAC Rules
THE COURT OF APPEALS ERRED GRAVELY IN FAILING TO DISCERN THAT
Governing Construction Arbitration.
CLAUSE 17.2 OF ARTICLE XVII CANNOT BE TREATED AS BEING "LIMITED
TO DISPUTES ARISING FROM INTERPRETATION OF THE CONTRACT."
SO ORDERED. x x x
xxxx
On June 3, 2002, petitioner RBDC filed [with the Court of Appeals (CA)] a
petition for Certiorari and Prohibition with prayer for the issuance of a
IV.
temporary restraining order and a writ of preliminary injunction. Petitioner
Arbit-Part III |26

THE COURT OF APPEALS ERRED GRAVELY IN NOT RULING THAT RBDC IS the facts with certainty and praying that judgment be rendered annulling or
ESTOPPED FROM DISPUTING THE JURISDICTION OF THE CIAC. modifying the proceedings of such tribunal, board or officer, and granting
such incidental reliefs as law and justice may require.
xxxx
The petition shall be accompanied by a certified true copy of the judgment,
V. order or resolution subject thereof, copies of all pleadings and documents
relevant and pertinent thereto, and a sworn certification of non-forum
FINALLY, THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF
shopping as provided in the third paragraph of Section 3, Rule 46.
DISCRETION IN REFUSING TO PAY HEED TO THE DECLARATION IN
(Emphasis supplied.)
EXECUTIVE ORDER NO. 1008 THAT THE POLICY OF THE STATE IS IN
FAVOR OF ARBITRATION OF CONSTRUCTION DISPUTES, WHICH POLICY And Sec. 3 of Rule 46 provides:
HAS BEEN REINFORCED FURTHER BY THE RECENT PASSAGE OF THE
"ALTERNATIVE DISPUTE RESOLUTION ACT OF 2004"(R.A. NO. 9285).4 SEC. 3. Contents and filing of petition; effect of non-compliance with
requirements. – The petition shall contain the full names and actual
The petition is meritorious. addresses of all the petitioners and respondents, a concise statement of
the matters involved, the factual background of the case, and the grounds
The aforementioned issues boil down to (1) whether the CA acted with
relied upon for the relief prayed for.
grave abuse of discretion in failing to dismiss the petition for certiorari filed
by herein respondent, in view of the latter's failure to file a motion for In actions filed under Rule 65, the petition shall further indicate the
reconsideration of the assailed CIAC Order and for failure to attach to the material dates showing when notice of the judgment or final order or
petition the relevant pleadings in CIAC Case No. 13-2002; and (2) whether resolution subject thereof was received, when a motion for new trial or
the CA gravely erred in not upholding the jurisdiction of the CIAC over the reconsideration, if any, was filed and when notice of the denial thereof was
subject complaint. received.

Petitioner is correct that it was grave error for the CA to have given due It shall be filed in seven (7) clearly legible copies together with proof of
course to respondent's petition for certioraridespite its failure to attach service thereof on the respondent with the original copy intended for the
copies of relevant pleadings in CIAC Case No. 13-2002. In Tagle v. court indicated as such by the petitioner and shall be accompanied by a
Equitable PCI Bank,5the party filing the petition for certiorari before the CA clearly legible duplicate original or certified true copy of the judgment,
failed to attach the Motion to Stop Writ of Possession and the Order order, resolution, or ruling subject thereof, such material portions of the
denying the same. On the ground of non-compliance with the rules, the CA record as are referred to therein, and other documents relevant or
dismissed said petition for certiorari. When the case was elevated to this pertinent thereto. The certification shall be accomplished by the proper
Court via a petition for certiorari, the same was likewise dismissed. In said clerk of court or by his duly-authorized representative, or by the proper
case, the Court emphasized the importance of complying with the formal officer of the court, tribunal, agency or office involved or by his duly
requirements for filing a petition for certiorari and held as follows: authorized representative. The other requisite number of copies of the
petition shall be accompanied by clearly legible plain copies of all
x x x Sec. 1, Rule 65, in relation to Sec. 3, Rule 46, of the Revised Rules of
documents attached to the original.
Court. Sec. 1 of Rule 65 reads:
xxxx
SECTION 1. Petition for certiorari. – When any tribunal, board or officer
exercising judicial or quasi-judicial functions has acted without or in excess The failure of the petitioner to comply with any of the foregoing
of its or his jurisdiction, or with grave abuse of discretion amounting to lack requirements shall be sufficient ground for the dismissal of the petition.
or excess of [its or his] jurisdiction, and there is no appeal, or any plain, (Emphasis supplied.)
speedy, and adequate remedy in the ordinary course of law, a person
aggrieved thereby may file a verified petition in the proper court, alleging
Arbit-Part III |27

The afore-quoted provisions are plain and unmistakable. Failure to contract documents; hence, the CIAC cannot assume jurisdiction over the
comply with the requirement that the petition be accompanied by a case.
duplicate original or certified true copy of the judgment, order, resolution
or ruling being challenged is sufficient ground for the dismissal of said Respondent's contention is tenuous.
petition. Consequently, it cannot be said that the Court of Appeals
The contract between herein parties contained an arbitration clause which
acted with grave abuse of discretion amounting to lack or excess of
reads as follows:
jurisdiction in dismissing the petition x x x for non-compliance with
Sec. 1, Rule 65, in relation to Sec. 3, Rule 46, of the Revised Rules
17.1.1. Any dispute arising in the course of the execution of this Contract
of Court.6
by reason of differences in interpretation of the Contract Documents which
the OWNER and the CONTRACTOR are unable to resolve between
In the present case, herein petitioner (private respondent below) strongly
themselves, shall be submitted by either party for resolution or decision, x
argued against the CA's granting due course to the petition, pointing out
x x to a Board of Arbitrators composed of three (3) members, to be chosen
that pertinent pleadings such as the Complaint before the CIAC, herein
as follows:
respondent's Motion to Dismiss, herein petitioner's Comment and
Opposition (Re: Motion to Dismiss), and the Motion to Suspend
One (1) member each shall be chosen by the OWNER and the
Proceedings, have not been attached to the petition. Herein respondent
CONTRACTOR. The said two (2) members, in turn, shall select a third
(petitioner before the CA) argued in its Reply7 before the CA that it did not
member acceptable to both of them. The decision of the Board of
deem such pleadings or documents germane to the petition. However, in
Arbitrators shall be rendered within fifteen (15) days from the first meeting
the CA Resolution8 dated July 4, 2002, the appellate court itself revealed
of the Board. The decision of the Board of Arbitrators when reached
the necessity of such documents by ordering the submission of copies of
through the affirmative vote of at least two (2) of its members shall be
pleadings relevant to the petition. Indeed, such pleadings are necessary for
final and binding upon the OWNER and the CONTRACTOR.
a judicious resolution of the issues raised in the petition and should have
been attached thereto. As mandated by the rules, the failure to do so is 17.2 Matters not otherwise provided for in this Contract or by special
sufficient ground for the dismissal of the petition. The CA did not give any agreement of the parties shall be governed by the provisions of the
convincing reason why the rule regarding requirements for filing a petition Construction Arbitration Law of the Philippines. As a last resort, any dispute
should be relaxed in favor of herein respondent. Therefore, it was error for which is not resolved by the Board of Arbitrators shall be submitted to the
the CA to have given due course to the petition for certiorari despite herein Construction Arbitration Authority created by the government.9
respondent's failure to comply with the requirements set forth in Section 1,
Rule 65, in relation to Section 3, Rule 46, of the Revised Rules of Court. In gist, the foregoing provisions mean that herein parties agreed to submit
disputes arising by reason of differences in interpretation of the contract to
Even on the main issue regarding the CIAC's jurisdiction, the CA erred in a Board of Arbitrators the composition of which is mutually agreed upon by
ruling that said arbitration body had no jurisdiction over the complaint filed the parties, and, as a last resort, any other dispute which had not been
by herein petitioner. There is no question that, as provided under Section 4 resolved by the Board of Arbitrators shall be submitted to the Construction
of Executive Order No. 1008, also known as the "Construction Industry Arbitration Authority created by the government, which is no other than
Arbitration Law," the CIAC has original and exclusive jurisdiction over the CIAC. Moreover, other matters not dealt with by provisions of the
disputes arising from, or connected with, contracts entered into by parties contract or by special agreements shall be governed by provisions of the
involved in construction in the Philippines and all that is needed for the Construction Industry Arbitration Law, or Executive Order No. 1008.
CIAC to acquire jurisdiction is for the parties to agree to submit the same
to voluntary arbitration. Nevertheless, respondent insists that the only The Court finds that petitioner's claims that it is entitled to payment for
disputes it agreed to submit to voluntary arbitration are those arising from several items under their contract, which claims are, in turn, refuted by
interpretation of contract documents. It argued that the claims alleged in respondent, involves a "dispute arising from differences in interpretation of
petitioner's complaint are not disputes arising from interpretation of the contract." Verily, the matter of ascertaining the duties and obligations
Arbit-Part III |28

of the parties under their contract all involve interpretation of the contract x x x." Elementary is the rule that when laws or rules are clear, it
provisions of the contract. Therefore, if the parties cannot see eye to eye is incumbent on the court to apply them. When the law (or rule) is
regarding each other’s obligations, i.e., the extent of work to be expected unambiguous and unequivocal, application, not interpretation thereof, is
from each of the parties and the valuation thereof, this is properly a imperative.1avvphi1
dispute arising from differences in the interpretation of the contract.
Hence, the bare fact that the parties herein incorporated an arbitration
Note, further, that in respondent's letter10 dated February 14, 2000, it clause in the EPCC is sufficient to vest the CIAC with jurisdiction over any
stated that disputed items of work such as Labor Cost Adjustment and construction controversy or claim between the parties. The arbitration
interest charges, retention, processing of payment on Cost Retained by clause in the construction contract ipso facto vested the CIAC with
WGCC, Determination of Cost of Deletion for miscellaneous Finishing jurisdiction. This rule applies, regardless of whether the parties specifically
Works, are considered "unresolved dispute[s] as to the proper choose another forum or make reference to another arbitral body. Since
interpretation of our respective obligations under the Contract," which the jurisdiction of CIAC is conferred by law, it cannot be subjected to any
should be referred to the Board of Arbitrators. Even if the dispute subject condition; nor can it be waived or diminished by the stipulation, act or
matter of said letter had been satisfactorily settled by herein parties, the omission of the parties, as long as the parties agreed to submit their
contents of the letter evinces respondent's frame of mind that the claims construction contract dispute to arbitration, or if there is an arbitration
being made by petitioner in the complaint subject of this petition, are clause in the construction contract. The parties will not be precluded from
indeed matters involving disputes arising from differences in interpretation. electing to submit their dispute to CIAC, because this right has been vested
in each party by law.
Clearly, the subject matter of petitioner's claims arose from differences in
interpretation of the contract, and under the terms thereof, such disputes xxxx
are subject to voluntary arbitration. Since, under Section 4 of Executive
Order No. 1008 the CIAC shall have original and exclusive jurisdiction over It bears to emphasize that the mere existence of an arbitration clause
disputes arising from, or connected with, contracts entered into by parties in the construction contract is considered by law as an agreement
involved in construction in the Philippines and all that is needed for the by the parties to submit existing or future controversies between
CIAC to acquire jurisdiction is for the parties to agree to submit the same them to CIAC jurisdiction, without any qualification or condition
to voluntary arbitration, there can be no other conclusion but that the CIAC precedent. To affirm a condition precedent in the construction contract,
had jurisdiction over petitioner's complaint. Furthermore, Section 1, Article which would effectively suspend the jurisdiction of the CIAC until
III of the CIAC Rules of Procedure Governing Construction Arbitration compliance therewith, would be in conflict with the recognized intention of
(CIAC Rules) further provide that "[a]n arbitration clause in a construction the law and rules to automatically vest CIAC with jurisdiction over a
contract or a submission to arbitration of a construction dispute shall be dispute should the construction contract contain an arbitration clause.
deemed an agreement to submit an existing or future controversy to CIAC
Moreover, the CIAC was created in recognition of the contribution of the
jurisdiction, notwithstanding the reference to a different arbitration
construction industry to national development goals. Realizing that delays
institution or arbitral body in such contract or submission." Thus, even if
in the resolution of construction industry disputes would also hold up the
there is no showing that petitioner previously brought its claims before a
development of the country, Executive Order No. 1008 expressly mandates
Board of Arbitrators constituted under the terms of the contract, this
the CIAC to expeditiously settle construction industry disputes and, for this
circumstance would not divest the CIAC of jurisdiction. In HUTAMA-RSEA
purpose, vests in the CIAC original and exclusive jurisdiction over disputes
Joint Operations, Inc. v. Citra Metro Manila Tollways Corporation,11 the
arising from, or connected with, contracts entered into by the parties
Court held that:
involved in construction in the Philippines.12
Under Section 1, Article III of the CIAC Rules, an arbitration clause in a
Thus, there is no question that in this case, the CIAC properly took
construction contract shall be deemed as an agreement to submit an
cognizance of petitioner's complaint as it had jurisdiction over the same.
existing or future controversy to CIAC jurisdiction, "notwithstanding the
reference to a different arbitration institution or arbitral body in such
Arbit-Part III |29

IN VIEW OF THE FOREGOING, the Petition is GRANTED. The Decision of


the Court of Appeals, dated December 19, 2003, and its Resolution dated
May 24, 2004 in CA-G.R. SP No. 70959 are REVERSED and SET
ASIDE. The Order of the Construction Industry Arbitration Commission
is REINSTATED.

SO ORDERED.
Arbit-Part III |30

6. G.R. Nos. 152505-06 September 13, 2007 In accordance with the terms of the contract, Equinox paid J’Marc a
downpayment of P9,250,000.00 equivalent to 25% of the contract price.
PRUDENTIAL GUARANTEE and ASSURANCE, INC., petitioner,
vs. J’Marc did not adhere to the terms of the contract. It failed to submit the
EQUINOX LAND CORPORATION, respondent. required monthly progress billings for the months of March and April 1997.
Its workers neglected to cover the drainpipes, hence, they were clogged by
DECISION wet cement. This delayed the work on the project.

SANDOVAL-GUTIERREZ, J.: On May 23, 1997, J’Marc requested an unscheduled cash advance
of P300,000.00 from Equinox, explaining it had encountered cash
Before us for resolution is the instant Petition for Review
problems. Equinox granted J’Marc’s request to prevent delay.
on Certiorari assailing the Decision1 of the Court of Appeals (Third Division)
dated November 23, 2001 in CA-G.R. SP No. 56491 and CA-G.R. SP No. On May 31, 1997, J’Marc submitted its first progress billing showing that it
57335. had accomplished only 7.3825% of the construction work estimated
at P2,731,535.00. After deducting the advanced payments, the net amount
The undisputed facts of the case, as established by the Construction
payable to J’Marc was only P1,285,959.12. Of this amount, Equinox paid
Industry Arbitration Commission (CIAC) and affirmed by the Court of
J’Marc only P697,005.12 because the former paid EXAN P588,954.00 for
Appeals, are:
concrete mix.
Sometime in 1996, Equinox Land Corporation (Equinox), respondent,
Shortly after Equinox paid J’Marc based on its first progress billing, the
decided to construct five (5) additional floors to its existing building, the
latter again requested an advanced payment of P150,000.00. Again
Eastgate Centre, located at 169 EDSA, Mandaluyong City. It then sent
Equinox paid J’Marc this amount. Eventually, Equinox found that the
invitations to bid to various building contractors. Four (4) building
amount owing to J’Marc’s laborers was only P121,000.00, not P150,000.00.
contractors, including J’Marc Construction & Development Corporation
(J’Marc), responded. In June 1997, EXAN refused to deliver concrete mix to the project site due
to J’Marc’s recurring failure to pay on time. Faced with a looming delay in
Finding the bid of J’Marc to be the most advantageous, Equinox offered the
the project schedule, Equinox acceded to EXAN’s request that payments for
construction project to it. On February 22, 1997, J’Marc accepted the offer.
the concrete mix should be remitted to it directly.
Two days later, Equinox formally awarded to J’Marc the contract to build
the extension for a consideration of P37,000,000.00. On June 30, 1997, J’Marc submitted its second progress billing showing
that it accomplished only 16.0435% of the project after 4 months of
On February 24, 1997, J’Marc submitted to Equinox two (2) bonds,
construction work. Based on the contract and its own schedule, J’Marc
namely: (1) a surety bond issued by Prudential Guarantee and Assurance,
should have accomplished at least 37.70%.
Inc. (Prudential), herein petitioner, in the amount of P9,250,000.00 to
guarantee the unliquidated portion of the advance payment payable to Faced with the problem of delay, Equinox formally gave J’Marc one final
J’Marc; and (2) a performance bond likewise issued by Prudential in the chance to take remedial steps in order to finish the project on time.
amount of P7,400,000.00 to guarantee J’Marc’s faithful performance of its However, J’Marc failed to undertake any corrective measure. Consequently,
obligations under the construction agreement. on July 10, 1997, Equinox terminated its contract with J’Marc and took
over the project. On the same date, Equinox sent Prudential a letter
On March 17, 1997, Equinox and J’Marc signed the contract and related
claiming relief from J’Marc’s violations of the contract.
documents. Under the terms of the contract, J’Marc would supply all the
labor, materials, tools, equipment, and supervision required to complete On July 11, 1997, the work on the project stopped. The personnel of both
the project. Equinox and J’Marc jointly conducted an inventory of all materials, tools,
equipment, and supplies at the construction site. They also measured and
Arbit-Part III |31

recorded the amount of work actually accomplished. As of July 11, 1997, After considering the evidence and the arguments of the parties, we find
J’Marc accomplished only 19.0573% of the work or a shortage of 21.565% that:
in violation of the contract.
1. J’Marc has been duly notified of the filing and pendency of the
The cost of J’Marc’s accomplishment was only P7,051,201.00. In other arbitration proceeding commenced by Equinox against J’Marc and that
words, Equinox overpaid J’Marc in the sum of P3,974,300.25 inclusive of CIAC has acquired jurisdiction over J’Marc;
the 10% retention on the first progress billing amounting to P273,152.50.
In addition, Equinox also paid the wages of J’Marc’s laborers, the billings 2. The construction Contract was validly terminated by Equinox due to
for unpaid supplies, and the amounts owing to subcontractors of J’Marc in J’Marc’s failure to provide a timely supply of adequate labor, materials,
the total sum of P664,998.09. tools, equipment, and technical services and to remedy its inability to
comply with the construction schedule;
On August 25, 1997, Equinox filed with the Regional Trial Court (RTC),
Branch 214, Mandaluyong City a complaint for sum of money and damages 3. Equinox is not entitled to claim liquidated damages, although under the
against J’Marc and Prudential. Equinox prayed that J’Marc be ordered to circumstances, in the absence of adequate proof of actual and
reimburse the amounts corresponding to its (Equinox) advanced payments compensatory damages, we award to Equinox nominal or temperate
and unliquidated portion of its downpayment; and to pay damages. damages in the amount of P500,000.00;
Equinox also prayed that Prudential be ordered to pay its liability under the
4. The percentage of accomplishment of J’Marc at the time of the
bonds.
termination of the Contract was 19.0573% of the work valued
In its answer, J’Marc alleged that Equinox has no valid ground for at P7,051,201.00. This amount should be credited to J’Marc. On the other
terminating their contract. For its part, Prudential denied Equinox’s claims hand, Equinox [i] had paid J’Marc 25% of the contract price as down or
and instituted a cross-claim against J’Marc for any judgment that might be advance payment, [ii] had paid J’Marc its first progress billing, [iii] had
rendered against its bonds. made advances for payroll of the workers, and for unpaid supplies and the
works of J’Marc’s subcontractors, all in the total sum of P11,690,483.34.
During the hearing, Prudential filed a motion to dismiss the complaint on Deducting the value of J’Marc’s accomplishment from these advances and
the ground that pursuant to Executive Order No. 1008, it is the CIAC which payment, there is due from J’Marc to Equinox the amount
has jurisdiction over it. of P4,639,285.34. We hold J’Marc liable to pay Equinox this amount
of P4,639,285.34.
On February 12, 1999, the trial court granted Prudential’s motion and
dismissed the case. 5. If J’Marc had billed Equinox for its accomplishment as of July 11, 1997,
25% of the P7,051,201.00 would have been recouped as partial payment
On May 19, 1999, Equinox filed with the CIAC a request for arbitration, of the advanced or down payment. This would have resulted in reducing
docketed as CIAC Case No. 17-99. Prudential submitted a position paper Prudential’s liability on the Surety Bond from P8,250,000.00 to
contending that the CIAC has no jurisdiction over it since it is not a privy to P7,487,199.80. We, therefore, find that Prudential is liable to Equinox on
the construction contract between Equinox and J’Marc; and that its surety its Surety Bond the amount of P7,487,199.80;
and performance bonds are not construction agreements, thus, any action
thereon lies exclusively with the proper court. 6. Prudential is furthermore liable on its Performance Bond for the following
amounts: the advances made by Equinox on behalf of J’Marc to the
On December 21, 1999, the CIAC rendered its Decision in favor of Equinox workers, suppliers, and subcontractors amounting to P664,985.09, the
and against J’Marc and Prudential, thus: nominal damages of P500,000.00 and attorney’s fees of P100,000.00 or a
total amount of P1,264,985.00;
AWARD
7. All other claims and counterclaims are denied;
Arbit-Part III |32

8. J’Marc shall pay the cost of arbitration and shall indemnify Equinox the Dissatisfied, Equinox filed with the Court of Appeals a petition for review,
total amount paid by Equinox as expenses of arbitration; docketed as CA-G.R. SP No. 57335. This case was consolidated with CA-
G.R. SP No. 56491 filed by Prudential.
9. The total liability of J’Marc to Equinox is determined to be P5,139,285.34
plus attorney’s fees of P100,000.00. The surety’s liability cannot exceed On November 23, 2001, the Court of Appeals rendered its Decision in CA-
that of the principal debtor [Art. 2054, Civil Code}. We hold that, G.R. SP No. 57335 and CA-G.R. SP No. 56491, the dispositive portion of
notwithstanding our finding in Nos. 5 and 6 of this Award, Prudential is which reads:
liable to Equinox on the Surety Bond and Performance Bond an amount not
to exceed P5,239,285.34. The cost of arbitration shall be paid by J’Marc WHEREFORE, the Amended Decision dated February 2, 2000 is AFFIRMED
alone. with MODIFICATION in paragraph 4 in the Award by holding J’Marc liable
for unliquidated damages to Equinox in the amount of P5,358,167.09 and
The amount of P5,239,285.34 shall be paid by respondent J’Marc and in paragraph 9 thereof by increasing the total liability of J’Marc to Equinox
respondent Prudential, jointly and severally, with interest at six percent to P5,958,167.09 (in view of the additional award of P500,000.00 as
[6%] per annum from promulgation of this award. This amount, including nominal and temperate damages and P100,000.00 in attorney’s fees), and
accrued interest, shall earn interest at the rate of 12% per annum from the AFFIRMED in all other respects.
time this decision becomes final and executory until the entire amount is
fully paid or judgment fully satisfied. The expenses of arbitration, which SO ORDERED.
shall be paid by J’Marc alone, shall likewise earn interest at 6% per annum
Prudential seasonably filed a motion for reconsideration but it was denied
from the date of promulgation of the award, and 12% from the date the
by the Court of Appeals.
award becomes final until this amount including accrued interest is fully
paid.
The issue raised before us is whether the Court of Appeals erred in (1)
upholding the jurisdiction of the CIAC over the case; and (2) finding
SO ORDERED.
Prudential solidarily liable with J’Marc for damages.
Thereupon, Prudential filed with the Court of Appeals a petition for review,
On the first issue, basic is the rule that administrative agencies are
docketed as CA-G.R. SP No. 56491. Prudential alleged that the CIAC erred
tribunals of limited jurisdiction and as such, can only wield such powers as
in ruling that it is bound by the terms of the construction contract between
are specifically granted to them by their enabling statutes.2
Equinox and J’Marc and that it is solidarily liable with J’Marc under its
bonds.
Section 4 of Executive Order No. 1008,3 provides:
Equinox filed a motion for reconsideration on the ground that there is an
SEC. 4. Jurisdiction. – The CIAC shall have original and exclusive
error in the computation of its claim for unliquidated damages; and that it
jurisdiction over disputes arising from, or connected with contracts entered
is entitled to an award of liquidated damages.
into by parties involved in construction in the Philippines, whether the
dispute arises before or after the completion of the contract, or after the
On February 2, 2000, the CIAC amended its Award by reducing the total
abandonment or breach thereof. These disputes may involve government
liability of J’Marc to Equinox to P4,060,780.21, plus attorney’s fees
or private contracts. For the Board to acquire jurisdiction, the parties to a
of P100,000 or P4,160,780.21, and holding that Prudential’s liability to
dispute must agree to submit the same to voluntary arbitration.
Equinox on the surety and performance bonds should not exceed the said
amount of P4,160,780.21, payable by J’Marc and Prudential jointly and
The jurisdiction of the CIAC may include but is not limited to violation of
severally.
specifications for materials and workmanship, violation of the terms of
agreement, interpretation and/or application of contractual time and
delays, maintenance and defects, payment, default of employer or
contractor and changes in contract cost.
Arbit-Part III |33

Excluded from the coverage of the law are disputes arising from employer- undertakings issued under Act 5368, as amended." Corollarily, Article 2047
employee relationships which continue to be covered by the Labor Code of of the Civil Code provides that suretyship arises upon the solidary binding
the Philippines. of a person deemed the surety with the principal debtor for the purpose of
fulfilling an obligation.
In David v. Construction Industry and Arbitration Commission,4 we ruled
that Section 4 vests upon the CIAC original and exclusive jurisdiction over In Castellvi de Higgins and Higgins v. Seliner,9 we held that while a surety
disputes arising from or connected with construction contracts entered into and a guarantor are alike in that each promises to answer for the debt or
by parties who have agreed to submit their case for voluntary arbitration. default of another, the surety assumes liability as a regular party to
the undertaking and hence its obligation is primary.
As earlier mentioned, when Equinox lodged with the RTC its complaint for a
sum of money against J’Marc and Prudential, the latter filed a motion to In Security Pacific Assurance Corporation v. Tria-Infante,10 we reiterated
dismiss on the ground of lack of jurisdiction, contending that since the case the rule that while a contract of surety is secondary only to a valid principal
involves a construction dispute, jurisdiction lies with CIAC. Prudential’s obligation, the surety’s liability to the creditor is said to be direct, primary,
motion was granted. However, after the CIAC assumed jurisdiction over and absolute. In other words, the surety is directly and equally bound with
the case, Prudential again moved for its dismissal, alleging that it is not a the principal. Thus, Prudential is barred from disclaiming that its liability
party to the construction contract between Equinox and J’Marc; and that with J’Marc is solidary.
the surety and performance bonds it issued are not construction
agreements. WHEREFORE, we DENY the petition. The assailed Decision of the Court of
Appeals (Third Division) dated November 23, 2001 in CA-G.R. SP No.
After having voluntarily invoked before the RTC the jurisdiction of 56491 and CA-G.R. SP No. 57355 is AFFIRMED in toto. Costs against
CIAC, Prudential is estopped to question its jurisdiction. As we held petitioner.
in Lapanday Agricultural & Development Corporation v. Estita,5 the active
participation of a party in a case pending against him before a court or a SO ORDERED.
quasi-judicial body is tantamount to a recognition of that court’s or quasi-
judicial body’s jurisdiction and a willingness to abide by the resolution of
the case and will bar said party from later on impugning the court’s or
quasi-judicial body’s jurisdiction.

Moreover, in its Reply to Equinox’s Opposition to the Motion to Dismiss


before the RTC, Prudential, citing Philippine National Bank v.
Pineda6 and Finman General Assurance Corporation v. Salik,7 argued that
as a surety, it is considered under the law to be the same party as the
obligor in relation to whatever is adjudged regarding the latter’s obligation.
Therefore, it is the CIAC which has jurisdiction over the case involving a
construction contract between Equinox and J’Marc. Such an admission by
Prudential binds it and it cannot now claim otherwise.

Anent the second issue, it is not disputed that Prudential entered into a
suretyship contract with J’Marc. Section 175 of the Insurance Code defines
a suretyship as "a contract or agreement whereby a party, called the
suretyship, guarantees the performance by another party, called the
principal or obligor, of an obligation or undertaking in favor of a third party,
called the obligee. It includes official recognizances, stipulations, bonds, or
Arbit-Part III |34

7. G.R. No. 159795 July 30, 2004 petitioners in the construction of the building. It was found that petitioners
revised and deviated from the structural plan of the building without notice
SPOUSES ROBERTO & EVELYN DAVID and COORDINATED GROUP, to or approval by the respondents.1
INC., petitioners,
vs. Respondents filed a case for breach of contract against petitioners before
CONSTRUCTION INDUSTRY AND ARBITRATION COMMISSION and the Regional Trial Court (RTC) of Manila. At the pre-trial conference, the
SPS. NARCISO & AIDA QUIAMBAO,respondents. parties agreed to submit the case for arbitration to the CONSTRUCTION
INDUSTRY ARBITRATION COMMISSION (CIAC). Respondents filed a
DECISION request2 for arbitration with the CIAC and nominated Atty. Custodio O.
Parlade as arbitrator. Atty. Parlade was appointed by the CIAC as sole
PUNO, J.:
arbitrator to resolve the dispute. With the agreement of the parties, Atty.
Parlade designated Engr. Loreto C. Aquino to assist him in assessing the
This is a petition for review on certiorari under Rule 45 of the Revised Rules
technical aspect of the case. The RTC of Manila then dismissed the case
of Court, assailing the Decision and Resolution of the Court of Appeals,
and transmitted its records to the CIAC.3
dated June 30, 2003 and August 27, 2003, respectively, in CA-G.R. SP No.
72736.
After conducting hearings and two (2) ocular inspections of the
construction site, the arbitrator rendered judgment against petitioners,
Petitioner COORDINATED GROUP, INC. (CGI) is a corporation engaged in
thus:
the construction business, with petitioner-spouses ROBERTO and EVELYN
DAVID as its President and Treasurer, respectively.
AWARD
The records reveal that on October 7, 1997, respondent-spouses NARCISO
In summary, award is hereby made in favor of the Quiambaos against the
and AIDA QUIAMBAO engaged the services of petitioner CGI to design and
Respondents, jointly and severally, as follows:
construct a five-storey concrete office/residential building on their land in
Tondo, Manila. The Design/Build Contract of the parties provided that: (a)
Lost Rentals - P1,680,000.00
petitioner CGI shall prepare the working drawings for the construction
project; (b) respondents shall pay petitioner CGI the sum of Seven Million
Three Hundred Nine Thousand Eight Hundred Twenty-One and 51/100 Cost to Complete, Rectification, etc. - 2,281,028.71
Pesos (P7,309,821.51) for the construction of the building, including the
costs of labor, materials and equipment, and Two Hundred Thousand Pesos
(P200,000.00) for the cost of the design; and (c) the construction of the Damages due to erroneous staking - 117,000.00
building shall be completed within nine (9) months after securing the
building permit.
Professional fees for geodetic surveys, etc. - 72,500.00
The completion of the construction was initially scheduled on or before July
16, 1998 but was extended to November 15, 1998 upon agreement of the Misc. expenses/ professional fees of - 118,642.50
parties. It appears, however, that petitioners failed to follow the engineers
specifications and plans as previously agreed upon. Respondents
demanded the correction of the errors but petitioners failed to act on their
complaint. Consequently, respondents rescinded the contract on October Bills for water and electricity, PLDT - 15,247.68
31, 1998, after paying 74.84% of the cost of construction.

Respondents then engaged the services of another contractor, RRA and


Associates, to inspect the project and assess the actual accomplishment of
Arbit-Part III |35

WHEREFORE, the Respondents are hereby ordered to pay, jointly and


Attorney’s Fees - 100,000.00
severally, the Claimants the amount of P4,073,229.94 with interest at 6%
per annum from the date of the promulgation of this Award, and 12% per
Moral Damages - 250,000.00 annum of the net award, including accrued interest, from the time it
becomes final and executory until it is fully paid.

Exemplary Damages - 250,000.00 Each party is hereby directed to pay to the Commission P15,000.00 as
such party’s share in the expert’s fees paid to Engr. Loreto C. Aquino.

TOTAL P4,884,418.89 SO ORDERED.4

There is likewise an award in favor of the Respondents (petitioners herein) Petitioners appealed to the Court of Appeals which affirmed the arbitrator’s
and against the Claimants (respondents herein) for the value of the Decision but deleted the award for lost rentals.5
materials and equipment left at (the) site (in) the amount of P238,372.75.
Respondent CGI is likewise credited with an 80% accomplishment having a Unsatisfied, petitioners filed this petition for review on certiorari, raising
total value of P5,847,857.20. the following issues:

All other claims and counterclaims are hereby dismissed for lack of merit. I. THERE WAS NO BASIS, IN FACT AND IN LAW, TO ALLOW RESPONDENTS
TO UNILATERALLY RESCIND THE DESIGN/BUILT CONTRACT, AFTER
PETITIONERS HAVE (SIC) SUBSTANTIALLY PERFORMED THEIR
To recapitulate:
OBLIGATION UNDER THE SAID CONTRACT.

II. THE HONORABLE COURT OF APPEALS ERRED IN FINDING PETITIONERS


Payments already made to CGI - P5,275,041.00
JOINTLY AND SEVERALLY LIABLE WITH CO-PETITIONER COORDINATED
(GROUP, INC.), IN CLEAR VIOLATION OF THE DOCTRINE OF SEPARATE
Amount awarded above to Claimants - 4,864,418.89 JURIDICAL PERSONALITY.

We find no merit in the petition.


Total 10,159,459.89
Executive Order No. 1008 entitled, "Construction Industry Arbitration Law"
provided for an arbitration mechanism for the speedy resolution of
Payments due CGI for 80% construction disputes other than by court litigation. It recognized the role
work accomplishment P5,847,857.20 - of the construction industry in the country’s economic progress as it utilizes
a large segment of the labor force and contributes substantially to the
Cost of materials and gross national product of the country.6 Thus, E.O. No. 1008 vests on the
equipment 238,372.75 - Construction Industry Arbitration Commission (CIAC) original and exclusive
jurisdiction over disputes arising from or connected with construction
contracts entered into by parties who have agreed to submit their case to
Total : P6,086,299.95 voluntary arbitration. Section 19 of E.O. No. 1008 provides that its
arbitral award shall be appealable to the Supreme Court only on
Deducting this amount of P6,086,229.95 from P10,159,459.89, the result questions of law.7
is a net award in favor the Claimants of (sic) the amount of P4,073,229.94.
There is a question of law when the doubt or difference in a given case
arises as to what the law is on a certain set of facts, and there is
Arbit-Part III |36

a question of fact when the doubt arises as to the truth or falsity of the called for double-type stainless kitchen sinks x x x; (4) installation of much
alleged facts.8 Thus, for a question to be one of law, it must not involve an smaller windows than those required; (5) misaligned window easements to
examination of the probative value of the evidence presented by the wall, (6) floors were damaged by roof leaks, (6) poor floor finish,
parties and there must be no doubt as to the veracity or falsehood of the misaligned tiles, floors with "kapak" and disproportionate drawers and
facts alleged.9 cabinets. A more comprehensive list of alleged defects, deviations and
complaints of the Quiambaos is found in a report marked Exhibit C-
In the case at bar, it is readily apparent that petitioners are raising 144. Many of these defects were seen during the site inspection and
questions of fact. In their first assigned error, petitioners claim that at the only defense and comment of CGI was that these were punch-
the time of rescission, they had completed 80% of the construction work list items which could have been corrected prior to completion and
and still have 15 days to finish the project. They likewise insist that they turn-over of the Building had the Contract not been terminated by
constructed the building in accordance with the contract and any the Claimants (respondents here). x x x Thus, x x x (petitioner) CGI
modification on the plan was with the consent of the respondents. argued that: "In any construction work, before a contractor turns-over the
project to the owner, punchlisting of defects is done so as to ensure
These claims of petitioners are refuted by the evidence on record. In
compliance and satisfaction of both the contractor and the owner. Punch
holding that respondents were justified in rescinding the contract,
listing means that the contractor will list all major and minor defects and
the Court of Appeals upheld the factual findings of the sole
rectifies them before the turnover of the project to the owner. After all
arbitrator, thus:
defects had been arranged, the project is now turned over to the owner.
For this particular project, no turn over was made by the contractor to the
xxx
owner yet. Actually, we were already pinpointing these defects for punch
(A)s the Building was taking shape, they noticed deviations from listing before we were terminated illegally. As alleged by the owner, the
the approved plans and specifications for the Building. Most deficiencies mentioned are stubouts of water closets at toilets, roofing and
noticeable were two (2) concrete columns in the middle of the framing, doors, cabinets, ceiling and stairs and other were not yet
basement which effectively and permanently obstructed the completed and rectified by us. In fact we were counting on our project
basement for the parking of vehicles x x x. In addition, three (3) engineer in charge x x x to do this in as much as this is one of his duties to
additional concrete columns were constructed from the ground do for the company. x x x" Confirmatory of this assertion of CGI that it was
floor to the roof deck x x x which affected the overall dimension of willing to undertake the appropriate corrective works (whether or not the
the building such as altering the specified beam depths, items are punch-list items) is Exhibit C-88 which is a letter prepared by
passageways and windows. In addition, Mrs. Quiambao provided a CGI’s Windell F. Vizconde, checked by CGI’s Gary M. Garcia and noted by
virtual litany of alleged defects, to wit: (a) the Building was not vertically CGI’s Benjie Lipardo, addressed to the Quiambaos which stated that:
plumbed xxx; (b) provisions for many architectural members were not
"As per our discussion during the last meeting dated Sept. 28, 1998 the
provided for, such as, (i) the recesses for window plant boxes are lacking
following items was (sic) confirmed and clarified. These are described as
xxx, (ii) provisions for precast molding are lacking xxx, (iii) canopies are
follows:
also lacking x x x; (c) misaligned walls, ugly discrepancies and gaps; (d)
skewed walls to floors/landings; (e) low head clearances and truncated
"1. All ceiling cornices shall be installed as per plan specification which is 1"
beams x x x; (f) narrow and disproportionate stairs xxx one (1) instead of
x 4" in size.
two (2) windows at the fire exit x x x, (g) absence of water-proofing along
the basement wall x x x and at the roof deck which caused leaks that "2. All baseboards shall be installed as per plan specification which is wood
damages the mezzanine floor x x x; (h) the use of smaller diagonal steel 1" x 4" in size.
trusses at the penthouse. x x x There were others which were shown
during the site inspection such as: (1) L-shaped kitchen counters instead of "3. Electrical Meter center and main panel breaker should be retained to its
the required U-shaped counters x x x; (2) failure to provide marble tops for present location.
the kitchen counters; (3) installation of single-tub sinks where the plans
Arbit-Part III |37

"4. Elevation of office, dining and stair lobby of ground floor shall be 4" the mechanical test results and chemical composition of the steel materials
higher than the elevation of parking area (subject for verification). tested x x x. However, the samples were provided by the manufacturer,
not by CGI, to Steel Asia, and there is no showing that the materials
"5. All door jambs at C.R. has (sic) to be replaced with concrete framing supplied by the manufacturer to CGI for the Building formed part of the
jambs. steel materials, part of which was tested.

"6. All ceilings mailers should be 2 x 2 in size. xxx

"7. All plywood ceiling that was damaged by rain water shall be replaced. Regarding the additional columns at the basement and at the first
floor to the roof deck of the Building, which effectively restricted
"8. Provide a pipe chase for the enclosure of soil stack pipe and water line
the use of the basement as a parking area, and likewise reduced
pipe at the ground floor level between grid line 3-4 along the light well
the area which could be used by the Quiambaos in the different
area.
floors of the Building, Engr. Roberto J. David admitted that these
represented a design change which was made and implemented by
"9. Front side elevation view shall be follow (sic) as per plan specialy (sic)
CGI without the conformnity of the Claimants. The Contract
at 4th flr.
specifically provided in Article II that "the CONTRACTOR shall submit to the
"10. One column at basement floor along grid line 2# B has to be verified OWNER all designs for the OWNER’S approval." This implies necessarily
by the structural designer if ever it is safe to removed (sic) the column and that all changes in the approved design shall likewise be submitted to the
what will be their (sic) recommendation to support the load. OWNER for approval. This change, in my view, is the single most
serious breach of the Contract committed by CGI which justified
"11. Existing doors D-2 and D-3 shall be replaced a (sic) new one." the decision of the Claimants to terminate the Contract. x x x
(T)here is no evidence to show that the Quiambaos approved the revision
While Mrs. Quiambao appeared not to have given her conformity, this of the structural plans to provide for the construction of the additional
document from CGI is an admission by CGI of the deficiencies in columns. x x x
the construction of the Building which needed to be corrected.
x x x Engr. Villasenor defended his structural design as adequate. He
It appears that concrete samples taken from the basement, ground admitted that the revision of the plans which resulted in the
floor, mezzanine and 2nd floor of the Building were subjected to a construction of additional columns was in pursuance of the request
concrete core test by Geotesting International, Inc., geotechnical of Engr. David to revise the structural plans to provide for a
and materials testing engineers. A report dated January 20, 1999 x x x significant reduction of the cost of construction. When Engr. David
showed x x x that (5) samples x x x failed the test. Sample S2 while it was asked for the justification for the revision for the plans, he
showed a comprehensive strength of 3147 psi, the corrective strength in confirmed that he wanted to reduce the cost of construction. In any
psi was below the specified comprehensive strength of 3000 psi. CGI failed case, whether the cause of revision of the plans was the under-
to produce evidence of similar tests during the construction of the Building design of the foundation or for reasons of economy, it is CGI which
although it is normal construction practice for the contractor to provide is at fault. CGI prepared the structural plans and quoted the price
samples for concrete core tests. for constructing the Building. The Quiambaos accepted both the
plans and the price. If CGI made a mistake in designing the
Deformed reinforcing steel bar specimens from the building were
foundation or in estimating the cost of construction, it was at fault.
subjected to physical tests. These tests were conducted at the Materials
It cannot correct that mistake by revising the plans and
Testing Laboratory of the Department of Civil Engineering, College of
implementing the revisions without informing the Quiambaos and
Engineering, University of the Philippines. x x x There were 18 samples and
obtaining their unequivocal approval of such changes.
x x x 8 failed the test although all of them passed the cold bend test. x x
x CGI submitted Quality Test Certificates issued by Steel Asia certifying to
Arbit-Part III |38

In addition, CGI admitted that no relocation survey was made by it prior to These are technical findings of fact made by expert witnesses and affirmed
the construction of the Building. Consequently, a one-meter portion of the by the arbitrator. They were also affirmed by the Court of Appeals. We find
Building was constructed beyond the property line. In justification, Engr. no reason to revise them.
Barba V. Santos declared that CGI made the layout of the proposed
structure based on the existing fence. x x x (I)t is understood that a The second assigned error likewise involves a question of fact. It is
contractor, in constructing a building, must first conduct a relocation contended that petitioner-spouses David cannot be held jointly and
survey before construction precisely to avoid the situation which developed severally liable with petitioner CGI in the payment of the arbitral award as
here, that the Building was not properly constructed within the owner’s they are merely its corporate officers.
property line. x x x This resulted in the under-utilization of the property,
At first glance, the issue may appear to be a question of law as it would
small as it is, and the exposure of the Quiambaos to substantial damages
call for application of the law on the separate liability of a corporation.
to the owner of the adjoining property encroached upon.
However, the law can be applied only after establishing a factual basis, i.e.,
A third major contested issue concerned the construction of the whether petitioner-spouses as corporate officers were grossly negligent in
cistern. x x x A cistern is an underground tank used to collect water ordering the revisions on the construction plan without the knowledge and
for drinking purposes. The contentious points regarding the construction consent of the respondent-spouses. On this issue, the Court of Appeals
of the cistern are: first, that the cistern was designed to accumulate again affirmed the factual findings of the arbitrator, thus:
up to 10,000 gallons of water; as constructed, its capacity was less
As a general rule, the officers of a corporation are not personally liable for
than the design capacity. Second, there is no internal partition
their official acts unless it is shown that they have exceeded their
separating the cistern from the sump pit. x x x
authority. However, the personal liability of a corporate director,
Considering that the cistern is a receptacle for the collection of trustee or officer, along with corporation, may so validly attach
drinking water, it is incomprehensible why the Respondents when he assents to a patently unlawful act of the corporation or for
(herein petitioners), in the design and construction of the cistern, bad faith or gross negligence in directing its affairs.
has (sic) not taken the necessary measures to make certain that the
The following findings of public respondent (CIAC) would support its ruling
water in the cistern will be free from contamination. x x x
in holding petitioners severally and jointly liable with the Corporation:
Thus, granting the arguments of the Respondents (herein petitioners) that
" x x x When asked whether the Building was underdesigned considering
the observed defects in the Building could be corrected before turn-over
the poor quality of the soil, Engr. Villasenor defended his structural design
and acceptance of the Building if CGI had been allowed to complete its
as adequate. He admitted that the revision of the plans which resulted
construction, the construction of additional columns, the construction
in the construction of additional columns was in pursuance of the
of the Building such that part of it is outside the property line
request of Engr. David to revise the structural plans to provide for a
established a sufficient legal and factual basis for the decision of
significant reduction of the cost of construction. When Engr. David
the Quiambaos to terminate the Contract. The fact that five (5) of
was asked for the justification for the revision of the plans, he
nine (9) the (sic) concrete samples subjected to a core test, and
confirmed that he wanted to reduce the cost of construction. x x
eight (8) of eighteen (18) deformed reinforcing steel bar specifics
x" (emphases supplied)11
subjected to physical tests failed the tests and the under-design of
the cistern was established after the Contract was terminated also
Clearly, the case at bar does not raise any genuine issue of law. We
served to confirm the justified suspicion of the Quiambaos that the
reiterate the rule that factual findings of construction arbitrators are final
Building was defective or was not constructed according to
and conclusive and not reviewable by this Court on appeal, except when
approved plans and specifications.10 (emphases supplied)
the petitioner proves affirmatively 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
Arbit-Part III |39

guilty of misconduct in refusing to postpone the hearing upon sufficient be as "legal questions." The parties here had recourse to arbitration and
cause shown, or in refusing to hear evidence pertinent and material to the chose the arbitrators themselves; they must have had confidence in such
controversy; (4) one or more of the arbitrators were disqualified to act as arbitrators. The Court will not, therefore, permit the parties to
such under section nine of Republic Act No. 876 and willfully refrained from relitigate before it the issues of facts previously presented and
disclosing such disqualifications or of any other misbehavior by which the argued before the Arbitral Tribunal, save only where a clear
rights of any party have been materially prejudiced; or (5) the arbitrators showing is made that, in reaching its factual conclusions, the
exceeded their powers, or so imperfectly executed them, that a mutual, Arbitral Tribunal committed an error so egregious and hurtful to
final and definite award upon the subject matter submitted to them was one party as to constitute a grave abuse of discretion resulting in
not made.12Petitioners failed to show that any of these exceptions lack or loss of jurisdiction. Prototypical examples would be factual
applies to the case at bar. conclusions of the Tribunal which resulted in deprivation of one or the other
party of a fair opportunity to present its position before the Arbitral
Finally, it bears to remind petitioners of this Court’s ruling in the 1993 case Tribunal, and an award obtained through fraud or the corruption of
of Hi-Precision Steel Center, Inc. vs. Lim Kim Steel Builders, arbitrators. Any other more relaxed rule would result in setting at naught
Inc.13 which emphasized the rationale for limiting appeal to legal questions the basic objective of a voluntary arbitration and would reduce arbitration
in construction cases resolved through arbitration, thus: to a largely inutile institution. (emphases supplied)

x x x Consideration of the animating purpose of voluntary arbitration in IN VIEW WHEREOF, the petition is DISMISSED for lack of merit. Costs
general, and arbitration under the aegis of the CIAC in particular, requires against petitioners.
us to apply rigorously the above principle embodied in Section 19 that the
Arbitral Tribunal’s findings of fact shall be final and inappealable (sic). SO ORDERED.

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 the national development goals.

Aware of the objective of voluntary arbitration in the labor field, in the


construction industry, and in 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 findings of an arbitral tribunal upon the artful allegation that
such body had "misapprehended facts" and will not pass upon issues which
are, at bottom, issues of fact, no matter how cleverly disguised they might
Arbit-Part III |40

8. G.R. No. 172525 October 20, 2010 parties also agreed that respondent will perform variation orders in the
Project. In connection with the Project, petitioner supplied manpower
SHINRYO (PHILIPPINES) COMPANY, INC., Petitioner, chargeable against respondent.
vs.
RRN INCORPORATED,* Respondent. Respondent was not able to finish the entire works with petitioner due to
financial difficulties. Petitioner paid respondent a total amount of
DECISION ₱26,547,624.76. On June 25, 2005 [should read 2003], respondent,
through its former counsel sent a letter to petitioner demanding for the
PERALTA, J.:
payment of its unpaid balance amounting to ₱5,275,184.17. Petitioner
claimed material back charges in the amount of ₱4,063,633.43. On
This resolves the Petition for Review on Certiorari under Rule 45 of the
September 26, 2003, respondent only acknowledged ₱2,371,895.33 as
Rules of Court, praying that the Decision1 of the Court of Appeals (CA)
material back charges. Thereafter, on October 16, 2003, respondent sent
dated February 22, 2006, affirming the Decision of the Construction
another letter to petitioner for them to meet and settle their dispute.
Industry Arbitration Commission (CIAC), and the CA Resolution2 dated April
26, 2006, denying herein petitioner's motion for reconsideration, be
On January 8, 2004, respondent sent another letter to petitioner regarding
reversed and set aside.
the cost of equipment rental and the use of scaffolding. Thereafter, on
August 12, 2004, petitioner sent a letter to respondent denying any unpaid
The facts, as accurately narrated in the CA Decision, are as follows.
account and the failure in their negotiations for amicable settlement.
Petitioner Shinryo (Philippines) Company, Inc. (hereinafter petitioner) is a
On September 3, 2004, respondent, through its new counsel, advised
domestic corporation organized under Philippine laws. Private respondent
petitioner of their intention to submit the matter to arbitration. Thereafter,
RRN Incorporated (hereinafter respondent) is likewise a domestic
their dispute was submitted to arbitration. During the preliminary
corporation organized under Philippine laws.
conference, the parties agreed in their Terms of Reference to resolve eight
Respondent filed a claim for arbitration against petitioner before CIAC for issues, to wit:
recovery of unpaid account which consists of unpaid portions of the sub-
1. What should be the basis in evaluating the variation cost?
contract, variations and unused materials in the total sum of
₱5,275,184.17 and legal interest in the amount of ₱442,014.73. Petitioner
1.1 How much is the variation cost?
filed a counterclaim for overpayment in the amount of ₱2,512,997.96.
2. Is the Respondent (petitioner in the instant case) justified in charging
The parties admitted several facts before the CIAC. It was shown that
claimant (herein respondent) the equipment rental fee and for the use of
petitioner and respondent executed an Agreement and Conditions of Sub-
the scaffoldings? If so, how much should be charged to Claimant?
contract (hereafter Agreement signed on June 11, 1996 and June 14,
1996, respectively. Respondent signified its willingness to accept and 3. What should be the basis in evaluating the total cost of materials
perform for petitioner in any of its projects, a part or the whole of the supplied by Respondent to the Project which is chargeable to Claimant?
works more particularly described in Conditions of Sub-Contract and other
Sub-contract documents. 3.1 How much is the total cost of materials supply chargeable to Claimant?

On June 11, 2002, the parties executed a "Supply of Manpower, 4. How much is the value of the remaining works left undone by the
Tools/Equipment, Consumables for the Electrical Works-Power and Claimant in the project?
Equipment Supply, Bus Duct Installation" for the Phillip Morris Greenfield
Project (hereafter Project) covered by Purchase Order Nos. 4501200300- 5. Is the Claimant's claim for inventory of excess materials valid? If so,
000274 and 4501200300-000275 amounting to ₱15,724,000.00 and how much is the value thereof?
₱9,276,000.00 respectively, or a total amount of ₱25,000,000.00. The
Arbit-Part III |41

6. Is the Respondent entitled to its claim for an overpayment in the III. THE COURT OF APPEALS COMMITTED A GRAVE REVERSIBLE ERROR IN
amount of ₱2,512,997.96? AFFIRMING THE CIAC AWARD FOR THE VALUE OF INVENTORIED
MATERIALS CONSIDERING THAT:
7. Is Claimant entitled to its claim for interest? If so, how much?
A. RESPONDENT RRN ADMITTED THE VALIDITY OF THE DEDUCTIONS ON
8. Who between the parties shall bear the cost of Arbitration? ACCOUNT OF MATERIAL SUPPLY, WHICH INCLUDED THE INVENTORIED
MATERIALS.
The CIAC rendered the assailed decision after the presentation of the
parties' evidence. [The dispositive portion of said decision reads as follows: B. RESPONDENT RRN HAS NO BASIS TO CLAIM BECAUSE ENGR.
BONIFACIO ADMITTED THAT RESPONDENT RRN FAILED TO ESTABLISH
WHEREFORE, judgment is hereby rendered in favor of the claimant and
WHETHER THE MATERIALS CAME FROM RESPONDENT RRN OR FROM
respondent is ordered to pay claimant its unpaid account in the sum of
PETITIONER AND THAT IT WAS PETITIONER THAT ACTUALLY INSTALLED
₱3,728,960.54 plus legal interest of 6% reckoned from June 25, 2003 up
THE SAID MATERIALS AS PART OF REMAINING WORKS THAT PETITIONER
to the filing of the case on October 11, 2004 and 12% of ₱3,728,960.54
TOOK OVER FROM RESPONDENT RRN.
from the finality of the judgment until fully paid and arbitration cost of
₱104,333.82 representing claimant's share of the arbitration cost which C. THE CLAIM FOR THE VALUE OF INVENTORIED MATERIALS IS A DOUBLE
respondent should reimburse. CLAIM OR DOUBLE ENTRY BECAUSE IN THE COMPUTATION OF THE FINAL
ACCOUNT, RESPONDENT RRN WAS CREDITED THE FULL CONTRACT PRICE
SO ORDERED.]
AND THE COST OF VARIATIONS, WHICH INCLUDED THE INVENTORIED
MATERIALS.
Petitioner accepts the ruling of the CIAC only in Issue No. 1 and Sub-Issue
No. 1.1 and in Issue No. 2 in so far as the amount of ₱440,000.00 awarded
IV. IN RENDERING THE QUESTIONED DECISION AND QUESTIONED
as back charges for the use of scaffoldings. x x x3
RESOLUTION, THE COURT OF APPEALS COMMITTED A GRAVE REVERSIBLE
ERROR IN THAT IT COMPLETELY DISREGARDED THE PROVISION OF THE
On February 22, 2006, the CA promulgated the assailed Decision affirming
SUBCONTRACT, WHICH ALLOWED PAYMENT OF ACTUAL COST INCURRED
the decision of the CIAC. The CA upheld the CIAC ruling that petitioner
BY PETITIONER IN COMPLETING THE REMAINING WORKS THAT PRIVATE
failed to adduce sufficient proof that the parties had an agreement
RESPONDENT ADMITTEDLY FAILED TO COMPLETE.
regarding charges for respondent's use of the manlift. As to the other
charges for materials, the CA held that the evidence on record amply
V. THE COURT OF APPEALS COMMITTED A GRAVE REVERSIBLE ERROR
supports the CIAC findings. Petitioner moved for reconsideration of said
WHEN IT COMPLETELY DISREGARDED THE EVIDENCE ON ACTUAL COST
ruling, but the same was denied per Resolution dated April 26, 2006.
INCURRED BY PETITIONER IN COMPLETING THE REMAINING WORKS.
Hence, this petition where it is alleged that:
VI. THE COURT OF APPEALS COMMITTED GRAVE REVERSIBLE ERROR
WHEN IT AFFIRMED THE CIAC AWARD FOR INTERESTS AND ARBITRATION
I. THE HONORABLE COURT OF APPEALS COMMITTED GRAVE REVERSIBLE
COSTS IN FAVOR OF RESPONDENT RRN.4
ERROR WHEN IT DENIED PETITIONER'S CLAIM FOR MANLIFT EQUIPMENT
RENTAL IN THE AMOUNT OF ₱511,000.00 DESPITE EVIDENCE ON RECORD
The petition is bereft of merit.
THAT RESPONDENT RRN ACTUALLY USED AND BENEFITED FROM THE
MANLIFT EQUIPMENT. Despite petitioner's attempts to make it appear that it is advancing
questions of law, it is quite clear that what petitioner seeks is for this Court
II. IN RENDERING THE QUESTIONED DECISION AND QUESTIONED
to recalibrate the evidence it has presented before the CIAC. It insists that
RESOLUTION, THE HONORABLE COURT OF APPEALS HAS DECIDED A
its evidence sufficiently proves that it is entitled to payment for
QUESTION OF SUBSTANCE NOT IN ACCORD WITH LAW AND/OR WITH THE
respondent's use of its manlift equipment, and even absent proof of the
APPLICABLE DECISIONS OF THE HONORABLE SUPREME COURT.
supposed agreement on the charges petitioner may impose on respondent
Arbit-Part III |42

for the use of said equipment, respondent should be made to pay based on rule, are present here. Such being the case, the Court, not being a trier of
the principle of unjust enrichment. Petitioner also questions the amounts facts, is not duty-bound to examine, appraise and analyze anew the
awarded by the CIAC for inventoried materials, and costs incurred by evidence presented before the arbitration body.7
petitioner for completing the work left unfinished by respondent.
Petitioner's reliance on the principle of unjust enrichment is likewise
As reiterated by the Court in IBEX International, Inc. v. Government misplaced. The ruling of the Court in University of the Philippines v. Philab
Service Insurance System,5 to wit: Industries, Inc.8 is highly instructive, thus:

It is settled that findings of fact of quasi-judicial bodies, which have Unjust enrichment claims do not lie simply because one party benefits from
acquired expertise because their jurisdiction is confined to specific the efforts or obligations of others, but instead it must be shown that a
matters, are generally accorded not only respect, but also finality, party was unjustly enriched in the sense that the term unjustly could mean
especially when affirmed by the Court of Appeals. In particular, illegally or unlawfully.
factual findings of construction arbitrators are final and conclusive
and not reviewable by this Court on appeal. Moreover, to substantiate a claim for unjust enrichment, the claimant must
unequivocally prove that another party knowingly received something of
This rule, however, admits of certain exceptions. In Uniwide Sales Realty value to which he was not entitled and that the state of affairs are such
and Resources Corporation v. Titan-Ikeda Construction and Development that it would be unjust for the person to keep the benefit. Unjust
Corporation, we said: enrichment is a term used to depict result or effect of failure to make
remuneration of or for property or benefits received under circumstances
In David v. Construction Industry and Arbitration Commission, we ruled that give rise to legal or equitable obligation to account for them; to be
that, as exceptions, factual findings of construction arbitrators may be entitled to remuneration, one must confer benefit by mistake, fraud,
reviewed by this Court when the petitioner proves affirmatively that: (1) coercion, or request. Unjust enrichment is not itself a theory of reconvey.
the award was procured by corruption, fraud or other undue means; (2) Rather, it is a prerequisite for the enforcement of the doctrine of
there was evident partiality or corruption of the arbitrators or any of them; restitution.
(3) the arbitrators were guilty of misconduct in refusing to hear evidence
pertinent and material to the controversy; (4) one or more of the Article 22 of the New Civil Code reads:
arbitrators were disqualified to act as such under Section nine of Republic
Act No. 876 and willfully refrained from disclosing such disqualifications or Every person who, through an act of performance by another, or any other
of any other misbehavior by which the rights of any party have been means, acquires or comes into possession of something at the expense of
materially prejudiced; or (5) the arbitrators exceeded their powers, or so the latter without just or legal ground, shall return the same to him.
imperfectly executed them, that a mutual, final and definite award upon
In order that accion in rem verso may prosper, the essential elements
the subject matter submitted to them was not made.1avvp++i1
must be present: (1) that the defendant has been enriched, (2) that the
Other recognized exceptions are as follows: (1) when there is a very clear plaintiff has suffered a loss, (3) that the enrichment of the defendant is
showing of grave abuse of discretion resulting in lack or loss of jurisdiction without just or legal ground, and (4) that the plaintiff has no other action
as when a party was deprived of a fair opportunity to present its position based on contract, quasi-contract, crime or quasi-delict.
before the Arbitral Tribunal or when an award is obtained through fraud or
An accion in rem verso is considered merely an auxiliary action, available
the corruption of arbitrators, (2) when the findings of the Court of Appeals
only when there is no other remedy on contract, quasi-contract, crime, and
are contrary to those of the CIAC, and (3) when a party is deprived of
quasi-delict. If there is an obtainable action under any other institution of
administrative due process.6
positive law, that action must be resorted to, and the principle of accion in
A perusal of the records would reveal that none of the aforementioned rem verso will not lie.9
circumstances, which would justify exemption of this case from the general
Arbit-Part III |43

As found by both the CIAC and affirmed by the CA, petitioner failed to The awards for interests and arbitration costs are, likewise, correct as they
prove that respondent's free use of the manlift was without legal ground are in keeping with prevailing jurisprudence.13
based on the provisions of their contract. Thus, the third requisite, i.e.,
that the enrichment of respondent is without just or legal ground, is IN VIEW OF THE FOREGOING, the Petition is DENIED. The Decision of
missing. In addition, petitioner's claim is based on contract, hence, the the Court of Appeals dated February 22, 2006 and its Resolution dated
fourth requisite − that the plaintiff has no other action based on contract, April 26, 2006 are AFFIRMED.
quasi-contract, crime or quasi-delict − is also absent. Clearly, the principle
SO ORDERED.
of unjust enrichment is not applicable in this case.

The other issues raised by petitioner all boil down to whether the CIAC or
the CA erred in rejecting its claims for costs of some materials.

Again, these issues are purely factual and cannot be properly addressed in
this petition for review on certiorari. In Hanjin Heavy Industries and
Construction Co., Ltd. v. Dynamic Planners and Construction Corp.,10 it was
emphasized that mathematical computations, the propriety of arbitral
awards, claims for "other costs" and "abandonment" are factual questions.
Since the discussions of the CIAC and the CA in their respective Decisions
show that its factual findings are supported by substantial evidence, there
is no reason why this Court should not accord finality to said findings.
Verily, to accede to petitioner's request for a recalibration of its evidence,
which had been thoroughly studied by both the CIAC and the CA would
result in negating the objective of Executive Order No. 1008, which created
an arbitration body to ensure the prompt and efficient settlement of
disputes in the construction industry. Thus, the Court held in Uniwide Sales
Realty and Resources Corporation v. Titan-Ikeda Construction and
Development Corporation,11 that:

x x x The Court will not review the factual findings of an arbitral tribunal
upon the artful allegation that such body had "misapprehended 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 confidence in such arbitrators. The Court will not, therefore,
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.12

As discussed above, there is nothing in the records that point to any grave
abuse of discretion committed by the CIAC.
Arbit-Part III |44

9. G.R. No. 177210 April 7, 2009 After efforts to reach an amicable settlement between SK-KG and Romago
failed, Romago filed a complaint with the CIAC on 18 August 2004. The
SUMMA KUMAGAI, INC. - KUMAGAI, GUMI CO., LTD. JOINT case was docketed as CIAC Case No. 28-2004. On 20 September 2004,
VENTURE, Petitioner, SK-KG filed its Answer with Counterclaim. Romago did not file a Reply.
vs. After the issues were joined, an Arbitration Panel was constituted by the
ROMAGO, INCORPORATED, Respondent. CIAC to hear the case.

DECISION During the hearings, Romago tried to present evidence to controvert the
counterclaims of SK-KG. However, the Arbitration Panel did not allow
CHICO-NAZARIO, J.:
Romago to do so on the ground that the failure of Romago to file a Reply to
the Answer was deemed an admission of the counterclaims of SK-KG.
This is a Petition for Review under Rule 45, seeking the reversal of (1) the
Decision1 dated 22 December 2006 of the Court of Appeals in CA-G.R. SP
Romago filed a Motion to Submit Additional Evidence on 21 April 2005, but
No. 89959, which modified the Decision dated 3 March 2005 of the
was denied by the Officer-in-Charge of the CIAC. On 3 March 2005, the
Construction Industry Arbitration Commission (CIAC) in CIAC Case No. 28-
CIAC rendered its Decision, the dispositive portion of which reads as
2004; and (2) the Resolution2 dated 20 March 2007 of the appellate court
follows:
in the same case which denied the Motion for Reconsideration of petitioner
Summa Kumagai, Inc. – Kumagai Gumi Co., Ltd. Joint Venture (SK-KG). WHEREFORE, judgment is hereby rendered and award made on the
monetary claims of the parties as FOLLOWS:
The facts of the case are as follows:
A. In favor of the [herein respondent]-Sub Contractor ROMAGO, INC.,
SK-KG engaged the services of respondent Romago, Incorporated
against [herein petitioner] Main Contractor SUMMA KUMAGAI, INC.,
(Romago), under a Sub-Contract Agreement, for electrical works needed in
KUMAGAI GUMI CO., LTD. JOINT VENTURE:
the construction of The New Medical City Superstructure Project, the
original date of completion of which was set on 18 September 2003.
₱2,195,535.18 - as the admitted liability of the [SK-KG] to the
As the implementation of the contract progressed, SK-KG issued change [Romago] for the unpaid balance of the PMIs
orders through Project Management Instructions (PMI), Contractor’s and the CIs.
Instructions and oral instructions. Romago complied with the specified
changes, although they were allegedly outside the scope of the Sub- ₱480,538.89 - for the total of Claim Items Nos. 186, 187 and
Contract Agreement. 198 of the unreconciled items on this claim.

From the early part of the project, SK-KG incurred delays in its payment to
Romago. SK-KG also incurred delays in the delivery of equipment to ₱296,039.37 - representing what [SK-KG] admittedly had
Romago, prompting the latter to do crash programs. The changes in the mistakenly overcharged [Romago] for its
specified contracted works led to an extension of 101 days. These electric power consumption interest at the rate
complications resulted in additional expenses on the part of Romago. Also of 6% per annum shall be computed from 29
according to Romago, it encountered so much difficulty resulting from an October 2003 up to the date of payment.
alleged extraction of arbitrary back charges and illegal deductions on the
part of SK-KG.
₱263,984.95 - for the installation of the ECB’s. Interest at the
Romago eventually completed the contracted works. SK-KG though refused rate of 6% per annum shall be computed from
to pay its obligations to Romago, and did not issue a certificate of 06 September 2003 up to the date of payment.
completion for the works it subcontracted to Romago.
Arbit-Part III |45

for the costs of power interconnection to the OFFSETTING the foregoing awards respectively made to the parties, there
₱484,883.26 -
DDC. Interest at the rate of 6% per annum remains a balance of ₱29,786,916.912 in favor of [SK-KG].3
shall be computed from 14 July 2003 up to the
It is hereby DIRECTED that [SK-KG] shall release the sum of
date of payment.
₱7,375,400.39 being the balance of the Retention Sum after the warranty
period on 10 June 2005.
₱553,225.20 - for the installation of extension ring boxes to
connect pipes and to complete the rough-in Romago filed a Petition for Review with the Court of Appeals, which was
conduit works performed by the previous docketed as CA-G.R. SP No. 89959. Meanwhile, SK-KG filed with the CIAC
Electrical Sub-Contractor, Engineering a Motion for Execution of the CIAC award. On 30 January 2006, CIAC
Equipment Incorporated SKI-KG JV. granted the Motion. On 30 March 2006, CIAC issued a Writ of Execution.

On 12 May 2006, the Court of Appeals issued a Temporary Restraining


₱3,568,077.03 - as reimbursement of [Romago’s] bid amount Order enjoining the CIAC from implementing the appealed Decision.
based on the OLEX Brand of Fire Rated Cable.
After the Court of Appeals heard the oral arguments of the parties, it
issued a Resolution dated 8 June 2006 requiring the CIAC to elevate the
₱157,675.05 - as payment for rectification works due to entire case records. In a Resolution dated 28 June 2006, the Court of
spatial clashes in the second floor. Appeals resolved to issue a Writ of Preliminary Injunction. On 22 December
2006, the Court of Appeals rendered its assailed Decision, modifying the
₱7,999,958.13 - TOTAL DUE TO [Romago] CIAC Decision, to wit:

WHEREFORE, the decision dated March 3, 2005 of the Construction


B. In favor of the [petitioner]-Main Contractor SUMMA KUMAGAI, INC., -
Industry Arbitration Commission in CIAC Case No. 28-2004 is hereby
KUMAGAI GUMI CO., LTD JOINT VENTURE and against the [respondent]-
MODIFIED. [Herein petitioner] Summa Kumagai, Inc. – Kumagai Gumi Co.,
Sub Contractor ROMAGO, INC. Ltd., Inc. Joint Venture is hereby DIRECTED to pay Romago, Incorporated
the following sums:
₱5,351,057.36 - on its counterclaim, for the unrecouped actual
cost of Supplemental Manpower; representing the unpaid balance under
₱6,103,531.94 –
the original contract;
₱5,575,310.03 - on its counterclaim for the unrecouped actual
cost of tools, materials and equipment. representing additional expenses
₱6,251,394.00 –
incurred under Romago’s crash program;
₱25,729,263.86 - as the unrecouped balance of the cash
advances given to the [Romago]. representing additional manpower and
₱6,739,737.72 –
materials under the Extended
₱1,131,244.29 - as the deductions or backcharges admitted by Preliminaries;
the [respondent] to have been validly made.
₱2,682,394.41 – for expenses in testing and
₱37,786,875.04 - TOTAL DUE TO [SK-KG] commissioning electrical equipment;
Arbit-Part III |46

for improperly deducted savings from the The Division Clerk of Court is hereby ORDERED to return to the
₱700,000.00 –
Construction Industry Arbitration Commission the records of CIAC Case No.
use of local FABRIDUCT materials;
28-2004 as soon as possible.41avvphi1.zw+

₱914,365.72 – representing price differential for Styline On 18 January 2007, SK-KG filed a Motion for Reconsideration of the
Model Hubbell devices; aforementioned Decision, but the Motion was denied by the Court of
Appeals in a Resolution dated 20 March 2007. SK-KG received a copy of
the said Court of Appeals Resolution on 30 March 2007.
₱711,633.51 – cost of supply and installation of
extended bus bars; On 13 April 2007, SK-KG filed a motion before this Court requesting a 30-
day extension within which to file a Petition for Review on Certiorari. On 16
₱498,813.34 – representing improper deduction for May 2007, SK-KG filed the instant Petition.
rental of temporary Alimak lifts;
Initially, this Court denied the Petition of SK-KG in a Resolution dated 4
July 2007 for being tardy. The last day of the original period for filing the
₱262,500.00 – as compensation for As-built Drawings; said Petition was on 14 April 2007, 15 days from 30 March 2007 when SK-
KG received a copy of the Court of Appeals Resolution denying its Motion
for Reconsideration. Counting from 14 April 2007, the 30-day extension
₱787,172.62 – representing material escalation;
period would have ended on 14 May 2007. Counsel for SK-KG sought
reconsideration of the denial of the Petition by the Court, averring stress
₱854,923.28 – representing cost of ancilliary fittings for and fatigue, which resulted in his miscalculation of the reglementary
lighting fixtures; period. Since 14 April 2007 fell on a Saturday, SK-KG had until 16 April
2007, Monday, to file its Petition under the original period. Counsel for SK-
KG counted the 30-day extension period from 16 April 2007 which ended
₱7,375,400.39 – representing the balance of retention
on 16 May 2007, when he did actually file the Petition on behalf of his
money due to Romago, Incorporated.
client. In a Resolution dated 19 September 2007, the Court reinstated the
Petition of SK-KG.

SK-KG submits the following issues for the consideration of this Court:
₱33,881,866.93
============== I

WHETHER OR NOT THE DUE PROCESS RIGHTS OF [ROMAGO] WERE


The other awards in favor of Romago, Incorporated in CIAC Decision dated VIOLATED BY CIAC THAT WOULD WARRANT THE REVERSAL BY THE COURT
March 3, 2005 in CIAC Case No. 28-2004, the aggregate amount of OF APPEALS OF THE MONETARY AWARDS OF CIAC RENDERED IN FAVOR
₱7,999,958.13, are AFFIRMED. All awards in favor of [SK-KG] in the same OF [SK-KG].
case are hereby NULLIFIED and SET ASIDE.
II
Attorney’s fees in an amount equivalent to five percent (5%) of all awards
in favor of Romago, Incorporated are AWARDED to the [Romago]. WHETHER OR NOT THE COURT OF APPEALS CAN REVERSE A RULING BY
THE CIAC A QUASI JUDICIAL BODY WITH SPECIALIZED SKILL OR
The writ of preliminary injunction issued pursuant to the Resolution of this EXPERTISE IN ADJUDICATING CONSTRUCTION RELATED DISPUTES BASED
Court dated June 28, 2006 is made PERMANENT. ON FINDINGS THAT ARE CONTRARY TO THE EVIDENCE ON RECORD,
ADMISSIONS OF [ROMAGO], AND THE UNDISPUTED FACTS.
Arbit-Part III |47

III It is, however, too late for Romago to assail the Resolution dated 19
September 2007 of this Court reinstating the Petition for Review of SK-KG,
WHETHER OR NOT THE COURT OF APPEALS CAN RENDER MONETARY having failed to file a Motion for Reconsideration of the said Resolution.
AWARDS BASED ON DOCUMENTS THAT WERE NOT PART OF THE Moreover, considering the enormous amounts involved in the case at bar,
EVIDENCE BEFORE THE CIAC AND WERE ONLY BELATEDLY SUBMITTED BY it is only proper for the Court to determine the case on the merits. Time
[ROMAGO] IN VIOLATION OF THE DUE PROCESS RIGHTS OF [SK-KG]. and again, this Court has stressed that the primordial concern of rules of
procedure is to secure substantial justice. Otherwise stated, they are but a
IV
means to an end. Hence, a rigid and technical enforcement of these rules
which overrides the ends of justice shall not be countenanced. Substance
WHETHER OR NOT THE COURT OF APPEALS CAN RENDER MONETARY
cannot be subordinated to procedure when to do so would deprive a party
AWARDS FOR RELIEF THAT WAS NOT PRAYED FOR OR RAISED AS AN
of his day in court on the basis solely of a technicality.7
ISSUE IN THE PETITION BY [ROMAGO], WAS NOT PART OF THE CLAIMS
SOUGHT BY [ROMAGO] IN THE CIAC, AND WAS NOT EVEN ONE OF THE
We shall now go into the merits of the present petition.
ISSUES DECIDED UPON IN THE CIAC THAT WAS THE SUBJECT OF THE
APPEAL. SK-KG insists that there was no violation of due process on the part of the
CIAC in granting its counterclaims against Romago, arguing that due
V
process in administrative hearings require only that the parties be given an
opportunity to be heard.8 SK-KG then proceeds to enumerate the
WHETHER OR NOT THE COURT OF APPEALS RENDERED MONETARY
opportunities granted to Romago in presenting its evidence, from the filing
AWARDS BASED ON SPECULATION, SURMISE OR CONJECTURE,
of the Complaint to the termination of the proceedings before the CIAC.
CONTRARY TO ADMISSIONS OF PARTY, BASED ON MANIFESTLY MISTAKEN
AND THE EVIDENCE ON RECORD (sic), AND CONTRARY TO THE WELL
The Court does not agree.
ESTABLISHED LEGAL PRINCIPLES ON THE AWARD OF MORAL DAMAGES.5
The reason of the CIAC Panel of Arbitrators for disallowing the presentation
Romago adds the following issues for our resolution:
of evidence by Romago against the counterclaims of SK-KG is evident in
the following transcript of the proceedings:
I. WHETHER THE FINALITY OF THE CA DECISION SHOULD BE IGNORED
FOR THE ADMITTED ERROR OF COUNSEL IN COMPUTING THE
ATTY. BAROQUE:
REGLEMENTARY PERIOD DUE TO ALLEGED STRESS AND FATIGUE IN
PREPARING THE INSTANT PETITION. Your Honor, the point that I’m trying to make is that it was not allowed in
the Terms of Reference, [it’s] not one of the claims being made by the
II. WHETHER THE INSTANT PETITION HAS ENOUGH MERIT TO OVERLOOK
claimant and yet x x x.
THE FINALITY OF THE CA DECISION.6
PROF. A. F. TADIAR:
Before proceeding to the merits of the present Petition, the Court shall first
tackle the objection of Romago to the reinstatement of the Petition for Which one?
Review of SK-KG. Romago argues that the excuses of stress and fatigue
proffered by the counsel for SK-KG are too convenient to inspire belief. ATTY. BAROQUE:
Romago invokes A.M. No. 00-02-14-SC which provides that any extension
of time to file the required pleading should be counted from the expiration The unrecouped supplementary manpower cost x x x.
of the period, regardless of the fact that said due date is a Saturday,
xxxx
Sunday or legal holiday.
PROF. A. F. TADIAR:
Arbit-Part III |48

Unrecouped expenses. Yes, Your Honor.

ATTY. BAROQUE: xxxx

Your honor, the [Romago] has already listed specifically all the back ATTY. BAROQUE:
charges that they are questioning in this case and the back charges for the
manpower and the tools and the materials were never raised in the But for clarification, your Honors, they already waived their rights with
complaint and were never cited in the Terms of Reference. So my respect to backcharging of the supplemental manpower and materials.
clarification is, are we allowing them to produce evidence with respect to That’s not listed in one of their claims so x x x.10
the x x x? But these back charges in effect questioning the back charges
xxxx
when, in fact, they did not raise in their claim in the complaint and were
not discussed during the Terms of Reference.
PROF. A. F. TADIAR:
xxxx
I agree with the observation of [SK-KG’s] counsel as to why he cannot
understand why we are dwelling so much on this particular issue when you
ATTY. BAROQUE:
are not making any claim as to the validity of [the] backcharging and the
My clarification, your Honor, is can the [Romago] produce evidence with supplemental manpower? So let’s move on to some other point? 11
respect to claims that are not listed in their Complaint?
xxxx
PROF. A. F. TADIAR:
ENGR. J. J. MARCIANO:
He is refuting your entitlement to your counterclaim, not claim. This is a
I have a fundamental question, Counselor. Since you appear to be
question in relation to refuting your counterclaim not establishing their
disputing all these backcharges, why did you not place this as [an] issue in
claim.9
your Complaint?
xxxx
ATTY. M. L. VILLA:
ENGR. J.J. MARCIANO:
Your Honor, again as we are saying, we are claiming only these amounts of
Is this still part of this ₱10,702,000.00? money because these are the amounts that we feel [are] justly due [to]
Romago [for the] works done.
ATTY. VILLA:
PROF. A. F. TADIAR:
Yes, your Honor.
But are you not aware that if they win on their counterclaim, all your
MR. ABALORA: claims will be wiped out, is that not correct?

Yes, Your Honor. ATTY. M. L. VILLA:

ENGR. J. J. MARCIANO: Yes, Your Honor. But when we made the [Complaint], your Honor, we felt
it was already jumping the [gun] that we will be defending [against]
That they are backcharging you? something [that] they’re not claiming yet.

MR. ABALORA: PROF. A. F. TADIAR:


Arbit-Part III |49

Why did you not submit a Reply to the Answer? You know that you are evidence are not strictly applied and administrative due process cannot be
entitled to make a Reply to the Answer, is it not correct? fully equated with due process in its strict judicial sense.13

ATTY. M. L. VILLA: Hence, it is completely unreasonable for an administrative body such as


CIAC to be even more severe than the courts when it comes to requiring
Yes, Your Honor. the filing of a reply. It does well for the CIAC Arbitrators to remember that
the CIAC Rules explicitly direct them to use every and all reasonable
PROF. A. F. TADIAR:
means to ascertain the facts in each case speedily and objectively without
regard to technicalities of law and procedure, all in the interest of
Earlier it is understandable [not] to mention that in your [Complaint], of
substantive due process.14
course you cannot deny their countercharges because you don’t know yet
what is their counterclaim. But when you came to know when they filed
Accordingly, the Court of Appeals was correct in finding the judgment of
their Answer that they contained counterclaims, why did you not make a
the CIAC with respect to the counterclaims of SK-KG to have been
Reply disputing all of their backcharges? That is the issue, ATTY. VILLA.
rendered in disregard of the right of Romago to due process. Considering
Okay. Go ahead.12
the amounts involved in the case at bar, the CIAC should have been more
circumspect in its admission or rejection of evidence presented before it.
The CIAC is completely mistaken in denying the attempt of Romago to
CIAC should not have taken the evidence of SK-KG hook, line and sinker,
present evidence against the counterclaims of the SK-KG on the ground
and should have used all means to ascertain the facts in the interest of
that the failure of Romago to file a Reply to the Answer of SK-KG was
substantial justice.1avvphi1
deemed an admission of the counterclaims in said Answer.
This Court has held that where the denial of the fundamental right of due
There is no basis for such a conclusion.
process is apparent, a decision rendered in disregard of that right is void
Section 10, Rule 6 of the Rules of Court describes the effect of non-filing of for lack of jurisdiction.15 In the case at bar, the Court is constrained to
a reply: affirm the Decision of the Court of Appeals annulling the awards for the
counterclaims of SK-KG granted by the CIAC for having been clearly
SEC. 10. Reply.—A reply is a pleading, the office or function of which is to rendered in disregard of the right of Romago to due process.
deny, or allege facts in denial or avoidance of new matters alleged by way
of defense in the answer and thereby join or make issue as to such new To the mind of this Court, however, and in the interest of substantial
matters. If a party does not file such reply, all the new matters alleged in justice, SK-KG may still assert its claims against Romago, and Romago
the answer are deemed controverted. may still refute the same. Just as it is wrong to award the counterclaims of
SK-KG without allowing Romago to submit contrary evidence, neither is it
If the plaintiff whishes to interpose any claims arising out of the new just to dismiss the counterclaims outright for the same reasons. Counsel
matters so alleged such claims shall be set forth in an amended or for Romago himself has persistently argued that his client should have
supplemental complaint. (Emphasis supplied.) been allowed to present evidence on the counterclaims of SK-KG. And
although counsel for SK-KG has actively argued that CIAC should not allow
It is true that the Rules of Procedure Governing Construction Arbitration the presentation by Romago of evidence against the counterclaims of SK-
(CIAC Rules) does not mention any suppletory application of the Rules of KG, it is only to be expected of a counsel required by the Code of
Court to CIAC proceedings. However, rules of procedure of courts are Professional Responsibility to represent his client with zeal.16 Whether SK-
stricter than those of quasi-judicial bodies. Administrative tribunals KG should be awarded its counterclaims should depend on the merit
exercising quasi-judicial powers are unfettered by the rigidity of certain thereof and the evidence of the parties.
procedural requirements, subject to the observance of fundamental and
essential requirements of due process in justiciable cases presented before The Court takes note that permissive counterclaims are considered as
them. In administrative proceedings, technical rules of procedure and separate actions in themselves,17 and may be severed from the action on
Arbit-Part III |50

the Complaint. In the case at bar, the counterclaims of SK-KG rest on


different provisions of the contract, and relate to amounts/obligations
separate and distinct from those being claimed by SK-KG in its Complaint.
The evidence required for SK-KG to prove its claims is different from that
needed to establish the demands of Romago in its Complaint; thus, the
counterclaim of SK-KG is merely permissive18 and, consequently, may be
severed from the main action.

As to the judgment of the Court of Appeals increasing the award in favor of


Romago, the Court affirms the same. SK-KG questions the power and
authority of the Court of Appeals to reverse the ruling of CIAC, on the
ground that CIAC is specialized body with the special knowledge,
experience and capability to hear and determine promptly disputes on
technical matters or essentially factual matters. However, although CIAC
findings are entitled to respect, the Court of Appeals is not always bound
thereby. The Court of Appeals necessarily has the power to affirm, modify
or reverse the findings of fact of the CIAC if the evidence so warrants;
otherwise, appeals would be inutile. In Metro Construction, Inc. v.
Chatham Properties, Inc.,19 we held that review of the CIAC award may
involve either questions of fact or of law, or of both fact and law.

WHEREFORE, the instant Petition for Review on Certiorari is DENIED. The


Decision of the Court of Appeals dated 22 December 2006 in CA-G.R. SP
No. 89959 and the Resolution dated 20 March 2007, which denied the
Motion for Reconsideration, are hereby AFFIRMED. No costs.

SO ORDERED.
Arbit-Part III |51

10. G.R. No. 153310 March 2, 2004 released immediately while five (5) equal installments of ₱7,000,000.00
were to be released depending on the turn-over of units from the 26th floor
MEGAWORLD GLOBUS ASIA, INC., petitioner, to the 40th floor. The remaining amount of ₱15,000,000.00 of the
vs. ₱53,000,000.00 consisted of half of the retention money.7
DSM CONSTRUCTION AND DEVELOPMENT CORPORATION and
PRUDENTIAL GUARANTEE AND ASSURANCE, INC., respondents. Because of the differences that arose from the billings, DSM Construction
filed on August 21, 2002, a Complaint before the CIAC for compulsory
DECISION arbitration, claiming payment of ₱97,743,808.33 for the outstanding
balance of the three construction contracts, variation works, labor
TINGA, J.:
escalation, preliminaries loss and expense, earned retention money,
interests, and attorney’s fees.8 DSM Construction alleged that it already
Before this Court is a Petition for Review on Certiorari assailing
commenced the finishing works on the existing 12 floors on August 1,
the Decision dated February 14, 2002, of the Court of Appeals in CA G.R.
1997, instead of waiting for the entire 40-floor structure to be completed.
SP No. 67432, which affirmed the Decision of the Construction Industry
1 2
At one time, DSM Construction worked with other contractors whose work
Arbitration Commission (CIAC) dated September 8, 2001, in CIAC Case
3
often depended on, interfered or conflicted with said contractors. Delay by
No. 22-2000 finding petitioner Megaworld Globus Asia, Inc., liable to DSM
a trade contractor would start a chain reaction by delaying or putting off
Construction in the amount of ₱62,760,558.49.
other works.9
The antecedents are as follows:
Interposing mainly the defense of delay in the turn-over of units and the
Relative to the construction of a condominium project called "The Salcedo poor quality of work of DSM Construction, Megaworld filed its Answer and
Park," located at H.V. dela Costa St., Salcedo Village, Makati City, the made a counter-claim for loss of profits, liquidated damages, costs of take-
project owner, Megaworld, entered into three separate contracts with DSM over and rectification works, administration expenses, interests, attorney’s
Construction, namely: (1) Contract for Architectural Finishing Works; (2) fees and cost of arbitration in the total amount of ₱85,869,870.28.10
Contract for Interior Finishing Works; and (3) Contract for Supply and
Prudential Guarantee and Assurance, Inc. (PGAI), which issued
Installation of Kitchen Cabinets and Closets. The total contract price, which
a Performance Bond to guarantee Megaworld’s contractual obligation on
was initially placed at ₱300 Million, was later reduced to ₱240 Million when
the project, was impleaded by Megaworld as a third-party respondent.11
the items for kitchen cabinets and walk-in closets were deleted.4 The
contracts also contain a stipulation for Retention Money, which is a portion
On March 28, 2001, the parties signed before the members of the Arbitral
of the total contract price (usually, as in this case, 10%) set aside by the
Tribunal the Terms of Reference12 (TOR) where they setforth their admitted
project owner from all approved billings and retained for a certain period to
facts,13 respective documentary evidence,14 summary of claims15 and
guarantee the performance by the contractor of all corrective works during
issues to be resolved by the tribunal.16 After presenting their evidence in
the defect-liability period which, in this case, is twelve months from the
the form of affidavits of witnesses,17 the parties submitted their respective
issuance of the Taking Over Certificate of Works.5
memoranda/draft decisions.18
The Letter of Award for Architectural Finishing Works provides that the
On October 19, 2001, the Arbitral Tribunal promulgated its Decision dated
period for commencement and completion shall be twelve months, from
September 28, 2001, awarding ₱62,760,558.49 to DSM Construction and
August 1, 1997 to July 31, 1998. However, on February 21, 2000,
₱9,473,799.46 to Megaworld.19
representatives of both Megaworld and DSM Construction entered into
an Interim Agreement whereby they agreed on a new schedule of the Megaworld filed a Petition for Review under Rule 43 of the Rules of Civil
turnover of units from the 26th floor to the 40th floor, which was the last of Procedure before the Court of Appeals. It faulted the Arbitral Tribunal for
the contracted works.6 The consideration agreed upon in the Interim finding that DSM Construction achieved a 95.56% level of accomplishment
Agreement was ₱53,000,000.00. Of this amount, ₱3,000,000.00 was to be as of February 14, 2000; for absolving DSM Corporation of the
Arbit-Part III |52

consequences of the alleged delay in the performance of its work; and for Chatham properties, inc. case when it dismissed mgai’s petition despite the
ruling that DSM Construction had complied with the contractual grave questions of both fact and law brought before it by the petitioner.
requirements for filing requests for extension. Megaworld likewise
questioned the sufficiency of evidence to justify the awards for liquidated II
damages; the balance of the contract price; the balance of amounts
the finding of the appellate court that the decision was based on
payable on account of the Interim Agreement of February 21, 2000; the
substantial evidence adduced by both parties sans any review of the record
amount of ₱6,596,675.55 for variation orders; the amount of
or of attachments of dsm is fatally wrong, such finding being merely an
₱29,380,902.35 as reimbursement for preliminaries/loss and expense; the
adoption of the tribunal’s decision which, as earlier pointed out, was not
amount of ₱413,041.52 for labor escalation costs; and the balance of the
supported by competent, credible and admissible evidence.
retention money in the amount of ₱14,700,000.00 despite its award of
₱11,820,000.00 under the February 21, 2000, Interim Agreement. Finally,
III
Megaworld claimed that the Arbitral Tribunal erred in denying its claim for
liquidated damages, expenses incurred for the cost of take-over work, the court of appeals seriously erred in giving blanket approval of all the
administrative expenses, and its recourse against PGAI and for limiting its unfounded claims and conclusions of the ciac arbitral tribunal’s SEPTEMBER
recovery for rectification work to only ₱9,197,863.55.20 28, 2001 decision to the detriment of petitioner’s cardinal right to due
process, particularly to its right to administrative due process.
On February 14, 2002, the Court of Appeals promulgated
its Decision affirming that of the Arbitral Tribunal. The court pointed out
21
IV
that only questions of law may be raised before it on appeal from an award
of the CIAC.22 That pronouncement notwithstanding, the Court of Appeals the findings and conclusions made by a highly partisan ciac arbitral tribunal
proceeded to review the decision of the Arbitral Tribunal and found the have no basis on the evidence on record. hence, the exception to the rule
same to be amply supported by evidence.23 that only questions of law may be brought to the honorable court is
applicable in the case AT bar.27
Megaworld sought reconsideration of the Court of
Appeals’ Decision arguing, among other things, that the appellate court Although Megaworld, at the outset,28 intimates that the case involves grave
ignored the ruling in Metro Construction, Inc. v. Chatham Properties24 that questions of both fact and law, a cursory reading of the Petition reveals
the review of the CIAC award may involve either questions of fact, law, or that, except for the amorphous advertence to administrative due process,
both fact and law. the alleged errors fundamentally involve only questions of fact.
Megaworld’s plea for the Court to pass upon the findings of facts of the
The Court of Appeals denied the motion for reconsideration in Arbitral Tribunal, which were upheld by the appellate court, must perforce
its Resolution25 dated April 25, 2002. While acknowledging that the findings fail.
of fact of the CIAC may be questioned in line with Metro Construction,26 the
appellate court stressed that the tribunal’s decision is not devoid of factual To jumpstart its bid, Megaworld exploits the Court of Appeals’
or evidentiary support. pronouncement in the assailed decision that only questions of law may be
raised before it from an award of the CIAC. The appellate court did so,
Megaworld elevated the case to this Court through the present Petition, Megaworld continues, in evident disregard of Metro Construction.29
advancing the following grounds, viz:
Under Section 19 of Executive Order No. 1008,30 the CIAC’s arbitral award
I "shall be final and inappealable except on questions of law which shall be
appealable to the Supreme Court." In Metro Construction, however, this
THE COURT OF APPEALS IN EFFECT REFUSED TO HEED THE RULE LAID
Court held that, with the modification of E.O. No. 1008 by subsequent laws
DOWN BY THIS Honorable Court in the Metro Construction, INC. vs.
and issuances,31 decisions of the CIAC may be appealed to the Court of
Arbit-Part III |53

Appeals not only on questions of law but also on questions of fact and TCGI,36 which came up with a different percentage of accomplishment that
mixed questions of law and fact. are notably higher than Megaworld’s computation.37

Of such subsequent laws and issuances, only Section 1,32 Rule 43 of the In resolving this issue, the Arbitral Tribunal relied on the computation of
1997 Rules of Civil Procedure expressly mentions the CIAC. While an Davis Langdon & Seah (DLS), the project’s independent surveyor, 38 which
argument may be made that procedural rules cannot modify substantive found the level of accomplishment as of February 14, 2000, to be 95.56%.
law, adding in support thereof that Section 1, Rule 43 has increased the DLS’s computation is recited in Exhibit "NN",39 thus:
jurisdiction of the Court of Appeals by expanding the scope of review of
CIAC awards, or that it contravenes the rationale for arbitration, extant Architectural Finishing :40
from the record is the fact that no party raised such argument.
Consequently, the matter need not be delved into.
The 24th Progress Billing
In any case, the attack against the merits of the Court of evaluated by DLS
Appeals’ Decision must fail. Although Metro Construction may have been covering the period
unbeknownst to the appellate court when it promulgated its Decision, the November 15, 1999 to Php213,658,888.774 =
fact remains that, as noted therein,33 it reviewed the findings of facts of December 15, 1999 over Php223,456,756.68 95.62%
the CIAC and ruled that the findings are amply supported by the evidence. the Contract Price for
Architectural Finishing
The Court of Appeals is presumed to have reviewed the case based on Works.
the Petition and its annexes, and weighed them against the Comment of
DSM Construction and the Decision of the Arbitral Tribunal to arrive at the Kitchen Cabinets & Bedroom Closets:43
conclusion that the said Decision is based on substantial evidence. In
administrative or quasi-judicial bodies like the CIAC, a fact may be
established if supported by substantial evidence or that amount of relevant The 9th Progress Billing
evidence which a reasonable mind might accept as adequate to justify a evaluated by DLS
conclusion.34 covering the period
December 1, 1999 to Php26,228,091.7344 =
The tenability of the assailed Decision is clear from the following discussion December 9, 1999 over Php28,556,915.1745 91.84%
of the arguments raised by Megaworld before the Court of Appeals which the contract price for
significantly are the same arguments it has raised before this Court. Kitchen Cabinet and
Bedroom Closet.
Issue of Accomplishment Level

Megaworld contested the finding of 95.56% level of accomplishment by the Interior Finishing Works:46
Arbitral Tribunal, alleging that the receipts DSM Construction issued for
payments under the Interim Agreement show that the latter only achieved The 13th Progress Billing
90% accomplishment up to the 31st floor while the 32nd to the 34th floors evaluated by DLS
were only 60% completed.35 Megaworld insisted, therefore, that the level covering the period
of accomplishment was nowhere near 90%. Php49,383,114.6747 =
January 8, 2000 to
Php50,685,416.5548 95.55%
February 7, 2000 for the
DSM Construction countered that Megaworld, in claiming a level of Interior Finishing Works
accomplishment of only 90%, contradicted its own Project Manager, over the contract price
for Interior Finishing
Arbit-Part III |54

Work. The Contractor shall accept the Site as found on the date for possession
and at their own expense clear the site of any debris which may have been
left by the preceding occupants/contractors.
289,270,295.17=95
Php213,658,888.77 + Php26,228,091.72 + Php49,383,114.67 =
.56%
The Arbitral Tribunal held that Section 2.01 presupposes that on the date
of possession by DSM Construction of the work premises, the preceding
Php223,456,756.68 Php 28,556,915.17 Php50,685,416.55 302,699,097.40 contractor had already left the same.51 The tribunal explained that the
delay incurred by other trade contractors also resulted in the delay of the
work of DSM Construction.
Clearly, thus, CIAC’s finding that the level of accomplishment of DSM
Construction as of February 12, 2002, stood at 95.56% was affirmed by It also pointed out that under Section 5.3 (1)52 of the Interim
the Court of Appeals because it is supported by substantial evidence. Agreement,53 Megaworld is required to complete and turn over to DSM
Construction preceding works for the latter to complete their works in
The Court of Appeals also noted that the Arbitral Tribunal did not give due accordance with the Revised Work Schedule. Section 5.3 (1), the Arbitral
course to all of DSM Construction’s claims. Indeed, the Arbitral Tribunal Tribunal noted, even allows DSM Construction to recover losses incurred on
rejected the construction company’s demand for payment for subsequent account of the standby time of DSM’s personnel/manpower or workers
works done after February 12, 2000, because Exhibit "OO," on which DSM mobilized while Megaworld is not ready to turn over the preceding works.
Construction’s demand was based, does not bear any mark that it had The Arbitral Tribunal further held that, in accordance with Section 5.3
been received by Megaworld. Thus, the Arbitral Tribunal concluded that (2)54of the Interim Agreement, DSM Construction was entitled to an
subsequent works up to September 22, 2000, when DSM Construction extension of time corresponding to the number of days of delay reckoned
supposedly stopped working on the project, had not been established.49 from the time the preceding work item or area should have been turned
over to DSM Construction. Consequently, such delay, which is not
This Court observes that between the two contrasting claims of Megaworld
exclusively imputable to DSM Construction, negates the claim for liquidated
and DSM Construction on the percentage of work accomplishment, the
damages by Megaworld.55
Arbitral Tribunal instead accorded weight to the assessment of DLS which
is the project surveyor. Apart from being reasonable, DLS’s evaluation is In affirming the Arbitral Tribunal’s disposition of the issues of delay and
impartial. Thus, as correctly pointed out by the Arbitral Tribunal, DLS payment of liquidated damages, the appellate court noted that the Arbitral
rejected DSM Construction’s 99% accomplishment claim when it limited its Tribunal narrated the claims and defenses of both DSM Construction and
evaluation to only 95.56%. Megaworld before making an evaluation thereof and arriving at its
conclusion.56 Clearly, the evidence and arguments were carefully weighed
Issues of Delay and Liquidated Damages
to justify the said disposition.
Next, Megaworld attributed the delay in the completion of the construction
The Tribunal’s finding that the project had already been delayed even
project solely to DSM Construction. The latter countered that among the
before DSM Construction commenced its work is borne out by the
causes of delay was the lack of coordination among trade contractors and
evidence. In his letter, Exhibit X-2,57 Project Management Consultant
the absence of a general contractor.50 Although the contract purportedly
Eduardo C. Arrojado, conceded that the previous contractors had delayed
contains a provision for the coordination of trade contractors, the lack of
the project, at the same time faulting DSM Construction for incurring its
privity among them prevented coordination such that DSM Construction
own delay. Furthermore, the work of DSM Construction pertaining as it did
could not require compliance on the part of the other trade contractors.
to the architectural and interior finishing stages as well as the supply and
installation of kitchen cabinets and closets, obviously related to the final
The Arbitral Tribunal decided this question by turning to Section 2.01 of the
details and completion stage of the project. Thus, commencement of its
General Conditions of the Contract, which states:
task had to depend on the turn over of the complete work of the prior
2.01 SITE, ACCESS & WORKS
Arbit-Part III |55

contractors. Hence, the delay of the previous contractors resulted in the Megaworld’s allegation that the tribunal adopted "hook, line and sinker"
delay of DSM Construction’s work. DSM Construction’s claims.61

Issues of the Contract Price Balance and Retention Money This Court finds the award of the balance of the contract price of
₱7,129,825.20 justified in view of DLS’ explanation in Exhibit MM-362 that
Megaworld also questioned the Arbitral Tribunal’s awards of ₱7,129,825.19 the amount of ₱7,129,825.20 represented the unpaid billing for
corresponding to the balance of the contract price, and ₱11,820,000.00 architectural, interior and kitchen billings before Megaworld and DSM
pursuant to the Interim Agreement.58 Megaworld alleged that DSM Construction drafted the Interim Agreement.
Construction was no longer entitled to the balance of the contract price and
the retention money after the latter received payments pursuant to Issue of Variation Works
the Interim Agreement in the amounts of ₱5,444,553.18 for the 26th to the
28th floors, another ₱5,444,553.18 for the 29th to the 31st floors at a 90% Megaworld also disputed before the Court of Appeals the
completion rate, and ₱4,161,818.18 for the 32nd to the 34thfloors which ₱6,686,675.55 award by the Arbitral Tribunal for variation works.
63

were 60% completed. Megaworld also contended that since it spent more Variation works consist of the addition, omission or alteration to the kind,
money to complete the scope of work of DSM Construction, the latter was quality or quantity of the works.64 DSM Construction originally claimed a
no longer entitled to any of the balance. total of ₱26,208,639.00 for variation works done but, of this claim, the
Arbitral Tribunal only awarded ₱6,686,675.55 in line with the evaluation of
On the other hand, DSM Construction argued that the award was justified DLS.
in view of the failure of Megaworld to controvert the amount of
₱7,129,825.19 included in the Account Overview of DLS. DSM Construction Megaworld conceded that DSM Construction performed additional works to
also emphasized that it was not claiming the entire ₱53 Million under the extent of ₱5,036,252.81. However, Megaworld claimed that since it
the Interim Agreement but only the amount corresponding to the actual incurred expenses when it hired another trade contractor to take over the
work done. Even based on DLS’s computation, a total of ₱11,820,000.00 of works left uncompleted by DSM Construction, the latter lost its right to
retention money is still unpaid out of the 50% agreed to be released under claim such amount especially since DSM Construction did not comply with
the Interim Agreement (₱15,000,000.00 less ₱3,180,000.00 retention the documentation when claiming variation works.65
money or ₱11,820,000.00 for the paid billings).59
DSM Construction asserted that the Arbitral Tribunal, in fact, should have
The Arbitral Tribunal ruled that the balance claimed under the three awarded ₱26,208,639.00 instead of limiting the award to only
contracts was based on what DSM Construction had actually accomplished ₱6,686,675.55 because it was not even disputed that variation works were
less the payments it had previously received. Considering that the performed. It also contended that it cannot be faulted for the lack of
remaining works which were performed by another trade contractor, documentation because the fault lay on Megaworld’s project manager who
Deticio and Isabedra Builders, were paid directly by Megaworld, no other failed to forward the variation orders to DLS.66
cost for work accomplished in the Interim Agreement is due DSM
The Arbitral Tribunal ruled in favor of DSM Construction, holding that there
Construction except the retention money of ₱11,820,000.00.60
was enough evidence to prove that the contractor made a request for
The Court of Appeals affirmed the award of the Arbitral Tribunal regarding change or variation orders. The Arbitral Tribunal also found the testimony
the balance of the contract price of ₱7,129,825.19 and the retention of Engineer Eduardo C. Arrojado convincing, factual and balanced despite
money of ₱11,820,000.00 to DSM Construction. The Court of Appeals Megaworld’s attempt to discredit him. However, while the amount claimed
noted that the Arbitral Tribunal again narrated the claims and defenses of for variation works was ₱26,208,639.00, the Arbitral Tribunal limited the
both DSM Construction and Megaworld before arriving at its conclusion. awarded to only ₱6,686,675.5567 since a closer scrutiny of the other items
The appellate court further stated that the mere fact that the tribunal did indicated that some works were not performed.68
not award the whole amount claimed by DSM Construction
(₱12,820,000.00) and instead awarded only ₱11,820,000.00 belies
Arbit-Part III |56

The appellate court upheld the award of the Arbitral Tribunal because the The Arbitral Tribunal ruled that DSM Construction was entitled to extended
award was based not only on the documentary exhibits prepared by DLS preliminaries considering that delay was not attributable to DSM
but on the testimony of Engineer Eduardo C. Arrojado, as well.69 Construction. The Arbitral Tribunal observed that Megaworld did not
present evidence to refute the claim for extended preliminaries which were
This Court is convinced that payments for variation works is due. previously evaluated by DLS. However, after assessing the two previous
Undoubtedly, variation works were performed by DSM Construction. This evaluations by DLS, the tribunal ruled that the claims for hauling and
was confirmed by Engineer Eduardo C. Arrojado who testified that he disposal and cleaning and clearing of debris should not be included in the
recommended the payment for substantial additional works to DSM extended preliminaries. Hence, the Arbitral Tribunal reduced the amount of
Construction. He further stated that since time was of the essence in the ₱44,051.62 from the claim of ₱2,655,879.89 per Exhibit "MM-7," and
completion of the project, there were variation orders which were ₱3,883,309.54 from the claim of ₱5,651,235.24 per Exhibit "MM-8," such
performed without the prior approval of the owner. However, he explained amounts being unnecessary.76
that this was a common construction practice. Finally, he stated that he
agreed with the evaluation of DLS.70 The appellate court affirmed the award, stressing the fact that the Arbitral
Tribunal denied some of the claims which it did not find valid.77
The testimony justified the Arbitral Tribunal’s reliance on the evaluation
made by DLS which limited the claim for variation works to ₱6,596,675.55. DSM Construction’s entitlement to the payment for preliminaries was
explained by Engineer Eduardo C. Arrojado to be the necessary result of
Issue of Preliminaries/Loss and Expense the extension of the contract between DSM Construction and
Megaworld.78 Notably, majority of the claims of DSM Construction was
Megaworld also disputed the award of ₱29,380,902.35 for
reduced by the Arbitral Tribunal on the basis of Exhibit MM-479 or
preliminaries/losses and expense.
the Summary of Variation Order Status Report prepared by DLS.
The provision for preliminaries/loss and expense in the contract assumes a
Although the Arbitral Tribunal ruled that DSM Construction was entitled to
direct loss and/or expense incurred in the regular progress of work for
claim for preliminaries, the award was not based on the claim of DSM
which the contractor would not be reimbursed under any other provision of
Construction but on the evaluation made by DLS.
the contract.71 DSM Construction’s claim for preliminaries/loss and expense
in the amount of ₱36,603,192.82 covered the loss and expense incurred on The foregoing disquisition adequately shows that the evidence on record
payroll, equipment rental, materials and site clearing on account of such supports the findings of facts of the Arbitral Tribunal on which the Court of
factors as delay in the execution of the works for causes not attributable to Appeals based its decision. In fact, although not all the exhibits in the
DSM Construction.72 Arbitral Tribunal were presented before the Court of Appeals, the record of
the appellate court contains the operative facts and the substance of said
Megaworld refused to recognize DSM Construction’s claim because the
exhibits, thus enabling the intelligent disposition of the issues presented
latter allegedly failed to comply with Clause 6.16 of the Conditions of
before it. This Court went over all the records, including the exhibits, to
Contract, which imposes a two-month deadline for submission of claims for
ascertain whether the appellate court missed any crucial point. It did not.
preliminaries reckoned from "the happening of the event giving rise to the
loss and expense."73 DSM Construction, however, argued that the The alleged undue favor accorded by the Arbitral Tribunal to DSM
documentary evidence shows that out of the four claims for preliminaries, Construction is belied by the fact that the Arbitral Tribunal did not grant all
only one (Exhibit MM-5with an evaluation of ₱17,552,722.47), covering the of DSM Construction’s claims. In majority of DSM Construction’s claims, the
period August 1, 1998 to April 1999, was submitted beyond the two- Arbitral Tribunal awarded amounts lower than what DSM Construction
months requirement.74 DSM Construction also pointed out that the two- demanded. The Arbitral Tribunal also granted some of Megaworld’s
month requirement for this claim was waived by Megaworld through DLS claims.80
when the latter recognized the validity of claims by coming up with an
evaluation of ₱17,552,722.47 for the period covered in Exhibit MM-5.75
Arbit-Part III |57

Neither did the Court of Appeals merely "swallow hook, line and sinker" the WHEREFORE, the Petition is DENIED. The Decision dated February 14,
award of the Arbitral Tribunal. While the appellate court affirmed the 2001, of the Court of Appeals is AFFIRMED. The Temporary Restraining
decision of the Arbitral Tribunal, it also ruled in favor of Megaworld when it Order issued by this Court on July 12, 2002, is hereby LIFTED. Costs
limited DSM Construction’s lien to only six units instead of all the against Petitioner.
condominium units to which DSM was entitled under the Contract,
rationalizing that the ₱62 Million award can be covered by the value of the SO ORDERED.
six units of the condominium project.81

Considering that the computations, as well as the propriety of the awards


of the Arbitral Tribunal, are unquestionably factual issues that have been
discussed and ruled upon by Arbitral Tribunal and affirmed by the Court of
Appeals, we cannot depart from such findings. Findings of fact of
administrative agencies and quasi-judicial bodies, which have acquired
expertise because their jurisdiction is confined to specific matters, are
generally accorded not only respect, but finality when affirmed by the
Court of Appeals.82

Megaworld, however, adamantly contends that the present case constitutes


an exception to the above rule because: (1) there is grave abuse of
discretion in the appreciation of facts; (2) the judgment is premised on
misapprehension of facts; and, (3) the findings of fact of the Court of
Appeals is premised on the supposed absence of evidence and is
contradicted by the evidence on record.83

We disagree. None of these flaws appear in this case. Grave abuse of


discretion means the capricious or whimsical exercise of judgment that is
so patent and gross as to amount to an evasion of positive duty or a virtual
refusal to perform a duty enjoined by law, or to act at all in contemplation
of law, as where the power is exercised in an arbitrary and despotic
manner by reason of passion or hostility.84 No abuse of discretion was
established by Megaworld. On the contrary, what is apparent is
Megaworld’s effort to attribute grave abuse of discretion to the Arbitral
Tribunal simply because of the unfavorable judgment against it.
Megaworld’s assertion that there was misapprehension of facts and that
the evidence is insufficient to support the decision is also untenable.
The Decisions of the Arbitral Tribunal and the Court of Appeals adequately
explain the reasons therefor and are supported by substantial evidence.

Likewise unmeritorious is Megaworld’s assertion that it was deprived of


administrative due process. The Arbitral Tribunal considered the arguments
and the evidence submitted by both parties. That it accorded greater
weight to DSM Construction’s evidence, by itself, does not constitute a
denial of due process.
Arbit-Part III |58

ADDITIONAL: "On September 14, 1992, the Cid spouses, herein private respondents,
filed a Complaint for damages against Philrock and seven of its officers and
1. G.R. No. 132848-49 June 26, 2001 engineers with the Regional Trial Court of Quezon City, Branch 82.

PHILROCK, INC., petitioner, "On December 7, 1993, the initial trial date, the trial court issued an Order
vs. dismissing the case and referring the same to the CIAC because the Cid
CONSTRUCTION INDUSTRY ARBITRATION COMMISSION and spouses and Philrock had filed an Agreement to Arbitrate with the CIAC.
Spouses VICENTE and NELIA CID, respondents.
"Thereafter, preliminary conferences were held among the parties and their
PANGANIBAN, J.: appointed arbitrators. At these conferences, disagreements arose as to
whether moral and exemplary damages and tort should be included as an
Courts encourage the use of alternative methods of dispute resolution.
issue along with breach of contract, and whether the seven officers and
When parties agree to settle their disputes arising from or connected with
engineers of Philrock who are not parties to the Agreement to Arbitrate
construction contracts, the Construction Industry Arbitration Commission
should be included in the arbitration proceedings. No common ground
(CIAC) acquires primary jurisdiction. It may resolve not only the merits of
could be reached by the parties, hence, on April 2, 1994, both the Cid
such controversies; when appropriate, it may also award damages,
spouses and Philrock requested that the case be remanded to the trial
interests, attorney’s fees and expenses of litigation.
court. On April 13, 1994, the CIAC issued an Order stating, thus:
The Case
'x x x the Arbitral Tribunal hereby formally dismisses the above-captioned
case for referral to Branch 82 of the Regional Trial Court, Quezon City
Before us is a Petition for Review under Rule 45 of the Rules of Court. The
where it first originated.
Petition seeks the reversal of the July 9, 1997 Decision1 and the February
24, 1998 Resolution of the Court of Appeals (CA) in the consolidated cases
SO ORDERED.'
docketed as CA-GR SP Nos. 39781 and 42443. The assailed Decision
disposed as follows: "The Cid spouses then filed with said Branch of the Regional Trial Court of
Quezon City a Motion To Set Case for Hearing which motion was opposed
"WHEREFORE, judgment is hereby rendered DENYING the petitions and,
by Philrock.
accordingly, AFFIRMING in totothe CIAC’s decision. Costs against
petitioner."2 "On June 13, 1995, the trial court declared that it no longer had jurisdiction
over the case and ordered the records of the case to be remanded anew to
The assailed Resolution ruled in this wise:
the CIAC for arbitral proceedings.
"Considering that the matters raised and discussed in the motion for
"Pursuant to the aforementioned Order of the Regional Trial C[o]urt of
reconsideration filed by appellant’s counsel are substantially the same
Quezon City, the CIAC resumed conducting preliminary conferences. On
arguments which the Court had passed upon and resolved in the decision
August 21, 1995, herein [P]etitioner Philrock requested to suspend the
sought to be reconsidered, and there being no new issue raised, the
proceedings until the court clarified its ruling in the Order dated June 13,
subject motion is hereby DENIED."3
1995. Philrock argued that said Order was based on a mistaken premise
that 'the proceedings in the CIAC fell through because of the refusal of
The Facts
[Petitioner] Philrock to include the issue of damages therein,' whereas the
The undisputed facts of the consolidated cases are summarized by the CA true reason for the withdrawal of the case from the CIAC was due to
as follows: Philrock's opposition to the inclusion of its seven officers and engineers,
who did not give their consent to arbitration, as party defendants. On the
other hand, private respondent Nelia Cid manifested that she was willing to
Arbit-Part III |59

exclude the seven officers and engineers of Philrock as parties to the case 6. P50,000.00 representing attorney's fees and expenses of litigation.
so as to facilitate or expedite the proceedings. With such manifestation
from the Cid spouses, the Arbitral Tribunal denied Philrock's request for the 7. P144,756.80 representing arbitration fees, minus such amount that may
suspension of the proceedings. Philrock's counsel agreed to the already have been paid to CIAC by respondent.
continuation of the proceedings but reserved the right to file a pleading
"Let a copy of this Decision be furnished the Honorable Salvador C.
elucidating the position he [had] raised regarding the Court's Order dated
Ceguera, presiding judge, Branch 82 of Regional Trial Court of Quezon City
June 13, 1995. The parties then proceeded to finalize, approve and sign
who referred this case to the Construction Industry Arbitration Commission
the Terms of Reference. Philrock's counsel and representative, Atty.
for arbitration and proper disposition.' (pp. 44-45, Rollo, CA-G.R. SP No.
Pericles C. Consunji affixed his signature to said Terms of Reference which
42443) "4
stated that 'the parties agree that their differences be settled by an Arbitral
Tribunal x x x x' (p. 9, Terms of Reference, p. 200, Rollo).
Before the CA, petitioner filed a Petition for Review, docketed as CA-GR SP
No. 42443, contesting the jurisdiction of the CIAC and assailing the
"On September 12, 1995, [P]etitioner Philrock filed its Motion to Dismiss,
propriety of the monetary awards in favor of respondent spouses. This
alleging therein that the CIAC had lost jurisdiction to hear the arbitration
Petition was consolidated by the CA with CA-GR SP No. 39781, a Petition
case due to the parties' withdrawal of their consent to arbitrate. The
for Certiorari earlier elevated by petitioner questioning the jurisdiction of
motion was denied by x x x CIAC per Order dated September 22, 1995. On
the CIAC.
November 8, public respondent ordered the parties to appear before it on
November 28, 1995 for the continuation of the arbitral proceedings, and on
Ruling of the Court of Appeals
February 7, 1996, public respondent directed [P]etitioner Philrock to set
two hearing dates in the month of February to present its evidence and to The CA upheld the jurisdiction of the CIAC5 over the dispute between
pay all fees assessed by it, otherwise x x x Philrock would be deemed to petitioner and private respondent. Under Executive Order No. 1008, the
have waived its right to present evidence. CIAC acquires jurisdiction when the parties agree to submit their dispute to
voluntary arbitration. Thus, in the present case, its jurisdiction continued
"Hence, petitioner instituted the petition for certiorari but while said
despite its April 13, 1994 Order referring the case back to the Regional
petition was pending, the CIAC rendered its Decision dated September 24,
Trial Court (RTC) of Quezon City, Branch 82, the court of origin. The CIAC’s
1996, the dispositive portion of which reads, as follows:
action was based on the principle that once acquired, jurisdiction remains
"until the full termination of the case unless a law provides the contrary."
'WHEREFORE, judgment is hereby rendered in favor of the Claimant,
No such "full termination" of the case was evident in the said Order; nor
directing Respondent to pay Claimant as follows:
did the CIAC or private respondents intend to put an end to the case.
1. P23,276.25 representing the excess cash payment for materials ordered
Besides, according to Section 3 of the Rules of Procedure Governing
by the Claimants, (No. 7 of admitted facts) plus interests thereon at the
Construction Arbitration, technical rules of law or procedure are not
rate of 6% per annum from September 26, 1995 to the date payment is
applicable in a single arbitration or arbitral tribunal. Thus, the "dismissal"
made.
could not have divested the CIAC of jurisdiction to ascertain the facts of
2. P65,000.00 representing retrofitting costs. the case, arrive at a judicious resolution of the dispute and enforce its
award or decision.
3. P13,404.54 representing refund of the value of delivered but unworkable
concrete mix that was laid to waste. Since the issues concerning the monetary awards were questions of fact,
the CA held that those awards were inappropriate in a petition for
4. P50,000.00 representing moral damages. certiorari. Such questions are final and not appealable according to Section
19 of EO 1008, which provides that "arbitral awards shall be x x x final and
5. P50,000.00 representing nominal damages. [u]nappealable except on questions of law which shall be appealable to the
Arbit-Part III |60

Supreme Court x x x." Nevertheless, the CA reviewed the records and Whether or not Petitioner Philrock should be held liable for the payment of
found that the awards were supported by substantial evidence. In matters arbitration fees."7
falling under the field of expertise of quasi-judicial bodies, their findings of
fact are accorded great respect when supported by substantial evidence. In sum, petitioner imputes reversible error to the CA (1) for upholding the
jurisdiction of the CIAC after the latter had dismissed the case and referred
Hence, this Petition.6 it to the regular court, (2) for ruling that respondent spouses had a cause
of action against petitioner, and (3) for sustaining the award of damages.
Issues
This Court’s Ruling
The petitioner, in its Memorandum, raises the following issues:
The Petition has no merit.
"A.
First Issue: Jurisdiction
Whether or not the CIAC could take jurisdiction over the case of
Respondent Cid spouses against Petitioner Philrock after the case had been Petitioner avers that the CIAC lost jurisdiction over the arbitration case
dismissed by both the RTC and the CIAC. after both parties had withdrawn their consent to arbitrate. The June 13,
1995 RTC Order remanding the case to the CIAC for arbitration was
"B. allegedly an invalid mode of referring a case for arbitration.

Whether or not Respondent Cid spouses have a cause of action against We disagree. Section 4 of Executive Order 1008 expressly vests in the
Petitioner Philrock. CIAC original and exclusive jurisdiction over disputes arising from or
connected with construction contracts entered into by parties that have
"C.
agreed to submit their dispute to voluntary arbitration.8
Whether or not the awarding of the amount of P23,276.75 for materials
It is undisputed that the parties submitted themselves to the jurisdiction of
ordered by Respondent Spouses Cid plus interest thereon at the rate of 6%
the Commission by virtue of their Agreement to Arbitrate dated November
from 26 September 1995 is proper.
24, 1993. Signatories to the Agreement were Atty. Ismael J. Andres and
Perry Y. Uy (president of Philippine Rock Products, Inc.) for petitioner, and
"D.
Nelia G. Cid and Atty. Esteban A. Bautista for respondent spouses.9
Whether or not the awarding of the amount of P65,000.00 as retrofitting
Petitioner claims, on the other hand, that this Agreement was withdrawn
costs is proper.
by respondents on April 8, 1994, because of the exclusion of the seven
"E. engineers of petitioners in the arbitration case. This withdrawal became the
basis for the April 13, 1994 CIAC Order dismissing the arbitration case and
Whether or not the awarding of the amount of P1,340,454 for the value of referring the dispute back to the RTC. Consequently, the CIAC was
the delivered but the allegedly unworkable concrete which was wasted is divested of its jurisdiction to hear and decide the case.
proper.
This contention is untenable. First, private respondents removed the
"F. obstacle to the continuation of the arbitration, precisely by withdrawing
their objection to the exclusion of the seven engineers. Second, petitioner
Whether or not the awarding o[f] moral and nominal damages and continued participating in the arbitration even after the CIAC Order had
attorney's fees and expenses of litigation in favor of respondents is proper. been issued. It even concluded and signed the Terms of Reference 10 on
August 21, 1995, in which the parties stipulated the circumstances leading
"G.
to the dispute; summarized their respective positions, issues, and claims;
Arbit-Part III |61

and identified the composition of the tribunal of arbitrators. The document jobsite. It should be noted that there is no evidence to show that all the
clearly confirms both parties’ intention and agreement to submit the transit mixers arrived at the site within the allowable time that would
dispute to voluntary arbitration. In view of this fact, we fail to see how the ensure the workability of the concrete mix delivered.
CIAC could have been divested of its jurisdiction.
"On the other hand, there is sufficiently strong evidence to show that
Finally, as pointed out by the solicitor general, petitioner maneuvered to difficulties were encountered in the pouring of concrete mix from certain
avoid the RTC’s final resolution of the dispute by arguing that the regular transit mixers necessitating the [addition] of water and physically pushing
court also lost jurisdiction after the arbitral tribunal’s April 13, 1994 Order the mix, obviously because the same [was] no longer workable. This
referring the case back to the RTC. In so doing, petitioner conceded and Tribunal holds that the unworkability of said concrete mix has been firmly
estopped itself from further questioning the jurisdiction of the CIAC. The established.
Court will not countenance the effort of any party to subvert or defeat the
objective of voluntary arbitration for its own private motives. After "There is no dispute, however, to the fact that there are defects in some
submitting itself to arbitration proceedings and actively participating areas of the poured structures. In this regard, this Tribunal holds that the
therein, petitioner is estopped from assailing the jurisdiction of the CIAC, only logical reason is that the unworkable concrete was the one that was
merely because the latter rendered an adverse decision.11 poured in the defective sections."14

Second Issue: Cause of Action Third Issue: Monetary Awards

Petitioner contends that respondent spouses were negligent in not Petitioner assails the monetary awards given by the arbitral tribunal for
engaging the services of an engineer or architect who should oversee their alleged lack of basis in fact and in law. The solicitor general counters that
construction, in violation of Section 308 of the National Building Code. It the basis for petitioner’s assigned errors with regard to the monetary
adds that even if the concrete it delivered was defective, respondent awards is purely factual and beyond the review of this Court. Besides,
spouses should bear the loss arising from their illegal operation. In short, it Section 19, EO 1008, expressly provides that monetary awards by the
alleges that they had no cause of action against it. CIAC are final and unappealable.

We disagree. Cause of action is defined as an act or omission by which a We disagree with the solicitor general. As pointed out earlier, factual
party violates the right of another.12 A complaint is deemed to have stated findings of quasi-judicial bodies that have acquired expertise are generally
a cause of action provided it has indicated the following: (1) the legal right accorded great respect and even finality, if they are supported by
of the plaintiff, (2) the correlative obligation of the defendant, and (3) the substantial evidence.15 The Court, however, has consistently held that
act or the omission of the defendant in violation of the said legal despite statutory provisions making the decisions of certain administrative
right.13 The cause of action against petitioner was clearly established. agencies "final," it still takes cognizance of petitions showing want of
Respondents were purchasers of ready-mix concrete from petitioner. The jurisdiction, grave abuse of discretion, violation of due process, denial of
concrete delivered by the latter turned out to be of substandard quality. As substantial justice or erroneous interpretation of the law. 16 Voluntary
a result, respondents sustained damages when the structures they built arbitrators, by the nature of their functions, act in a quasi-judicial capacity,
using such cement developed cracks and honeycombs. Consequently, the such that their decisions are within the scope of judicial review.17
construction of their residence had to be stopped.
Petitioner protests the award to respondent spouses of P23,276.25 as
Further, the CIAC Decision clearly spelled out respondents’ cause of action excess payment with six percent interest beginning September 26, 1995. It
against petitioner, as follows: alleges that this item was neither raised as an issue by the parties during
the arbitration case, nor was its justification discussed in the CIAC
"Accordingly, this Tribunal finds that the mix was of the right proportions at Decision. It further contends that it could not be held liable for interest,
the time it left the plant. This, however, does not necessarily mean that all because it had earlier tendered a check in the same amount to respondent
of the concrete mix delivered had remained workable when it reached the spouses, who refused to receive it.
Arbit-Part III |62

Petitioner’s contentions are completely untenable. Respondent Nelia G. Cid Petitioner assails the award of moral damages, claiming no malice or bad
had already raised the issue of overpayment even prior to the formal faith on its part.
arbitration. In paragraph 9 of the Terms of Reference, she stated:
We disagree. Respondents were deprived of the comfort and the safety of a
"9. Claimants were assured that the problem and her demands had been house and were exposed to the agony of witnessing the wastage and the
the subject of several staff meetings and that Arteche was very much decay of the structure for more than seven years. In her Memorandum,
aware of it, a memorandum having been submitted citing all the demands Respondent Nelia G. Cid describes her family’s sufferings arising from the
of [c]laimants. This assurance was made on July 31, 1992 when unreasonable delay in the construction of their residence, as follows: "The
Respondents Secillano, Martillano and Lomibao came to see Claimant Nelia family lives separately for lack of space to stay in. Mrs. Cid is staying in a
Cid and offered to refund P23,276.25, [t]he difference between the billing small dingy bodega, while her son occupies another makeshift room. Their
by Philrock’s Marketing Department in the amount of P125,586.25 and the only daughter stayed with her aunt from 1992 until she got married in
amount charged by Philrock's Batching Plant Department in the amount of 1996. x x x."21 The Court also notes that during the pendency of the case,
only P102,586.25, which [c]laimant refused to accept by saying, ‘Saka na Respondent Vicente Cid died without seeing the completion of their
lang’."18 home.22 Under the circumstances, the award of moral damages is proper.

The same issue was discussed during the hearing before the arbitration Petitioner also contends that nominal damages should not have been
tribunal on December 19, 1995.19 It was also mentioned in that tribunal’s granted, because it did not breach its obligation to respondent spouses.
Decision dated September 24, 1996.20
Nominal damages are recoverable only if no actual or substantial damages
The payment of interest is based on Article 2209 of the Civil Code, which resulted from the breach, or no damage was or can be shown. 23 Since
provides that if the obligation consists of the payment of a sum of money, actual damages have been proven by private respondents for which they
and the debtor incurs delay, the indemnity for damages shall be the were amply compensated, they are no longer entitled to nominal damages.
payment of legal interest which is six per cent per annum, in the absence
of a stipulation of the rate. Petitioner protests the grant of attorney’s fees, arguing that respondent
spouses did not engage the services of legal counsel. Also, it contends that
Awards for Retrofitting Costs, Wasted Unworkable attorney’s fees and litigation expenses are awarded only if the opposing
But Delivered Concrete, and Arbitration Fees party acted in gross and evident bad faith in refusing to satisfy plaintiff’s
valid, just and demandable claim.
Petitioner maintains that the defects in the concrete structure were due to
respondent spouses’ failure to secure the services of an engineer or We disagree. The award is not only for attorney’s fees, but also for
architect to supervise their project. Hence, it claims that the award for expenses of litigation. Hence, it does not matter if respondents represented
retrofitting cost was without legal basis. It also denies liability for the themselves in court, because it is obvious that they incurred expenses in
wasted unworkable but delivered concrete, for which the arbitral court pursuing their action before the CIAC, as well as the regular and the
awarded P13,404.54. Finally, it complains against the award of litigation appellate courts. We find no reason to disturb this award.1âwphi1.nêt
expenses, inasmuch as the case should not have been instituted at all had
respondents complied with the requirements of the National Building Code. WHEREFORE, the Petition is DENIED and the assailed
Decision AFFIRMED; however, the award of nominal damages
We are unconvinced. Not only did respondents disprove the contention of is DELETED for lack of legal basis. Costs against petitioner. SO ORDERED.
petitioner; they also showed that they sustained damages due to the
defective concrete it had delivered. These were items of actual damages
they sustained due to its breach of contract.

Moral and Nominal Damages, Attorney’s Fees and Costs


Arbit-Part III |63

2. G.R. No. 148267 August 8, 2002 26, 1996, upholding petitioner’s opposition/adverse claim. This dispositive
portion of said Resolution reads:
ARMANDO C. CARPIO, petitioner,
vs. ‘x x x. WHEREFORE, the opposition/adverse claims of ARMANDO C. CARPIO
SULU RESOURCES DEVELOPMENT CORPORATION, respondent. is hereby UPHELD. Accordingly, the properties of CARPIO are ordered
excluded from the area of PMPSA-IV-131 of SULU RESOURCES
DECISION DEVELOPMENT CORPORATION, and the area not covered by the adverse
claim as subject to mining locations in accordance with existing laws, rules
PANGANIBAN, J.:
and regulations.
Decisions and final orders of the Mines Adjudication Board (MAB) are
‘SO ORDERED.’
appealable to the Court of Appeals under Rule 43 of the 1997 Rules of
Court. Although not expressly included in the Rule, the MAB is "Respondent appealed the foregoing Resolution to the Mines Adjudication
unquestionably a quasi-judicial agency and stands in the same category as Board. Meanwhile, petitioner filed a motion to dismiss appeal on the
those enumerated in its provisions. ground of respondent’s failure to comply with the requirements of the New
Mining Act’s Implementing Rules and Regulations.
The Case
"On June 20, 1997, the Mines Adjudication Board rendered the assailed
Before us is a Petition for Review on Certiorari under Rule 45 of the Rules
Order dismissing petitioner’s opposition/adverse claim. The dispositive
of Court, challenging the August 31, 2000 Decision1 and May 3, 2001
portion of the assailed Order provides:
Resolution2 of the Court of Appeals (CA) in CA-GR SP No. 46830. The
Assailed Decision disposed as follows: ‘WHEREFORE, in view of the foregoing premises, this Resolution of the
Panel of Arbitrators of Region IV dated September 26, 1996, is hereby SET
"WHEREFORE, premises considered, the petition for review is hereby
ASIDE and the adverse claim/opposition of CARPIO DISMISSED.
DENIED."3
Accordingly, the PMSPA of SULU should be given due process and
evaluated subject to the pertinent provisions of RA 7942 and DAO 96-40.
Reconsideration was denied in the assailed Resolution.
‘SO ORDERED.’
The Facts
"Petitioner filed a motion for reconsideration of said Order which was
In the challenged Decision, the CA summarized the facts of this case as
denied by the Board per Order dated November 24, 1997, the decretal
follows:
portion of which provides:
"This case originated from a petition filed by respondent [Sulu Resources
‘WHEREFORE, the Motion for Reconsideration is hereby DENIED for lack of
Development Corporation] for Mines Production Sharing Agreement (MPSA)
merit.’"4
No. MPSA-IV-131, covering certain areas in Antipolo, Rizal. Petitioner
[Armando C. Carpio] filed an opposition/adverse claim thereto,
Ruling of the Court of Appeals
alleging, inter alia, that his landholdings in Cupang and Antipolo, Rizal will
be covered by respondent’s claim, thus he enjoys a preferential right to Citing Section 79 of Chapter XIII of the Philippine Mining Act of 1995 (RA
explore and extract the quarry resources on his properties. 7942), the CA ruled that it did not have jurisdiction to review the Decision
of the Mines Adjudication Board (MAB). The adjudication of conflicting
"After due proceedings were held, the Panel of Arbitrators of the Mines and
mining claims is completely administrative in nature, as held in Pearson v.
Geo-Sciences Bureau of the DENR rendered a Resolution dated September
Intermediate Appellate Court.5 Under RA 7942, the "settlement of disputes
involving rights to mining areas, mineral agreements, and surface owners,
Arbit-Part III |64

occupants and claimholders/concessionaires shall pertain exclusively to a jurisdiction. The latter’s factual findings, decisions and final orders on such
Panel of Arbitrators in the regional office of the Department of Environment matters are final and executory as provided in Section 79 of Chapter XIII
and Natural Resources, whose decisions are appealable to the Mines of the Philippine Mining Act of 1995 and as held in Pearson v. IAC. Since
Adjudication Board." Under Section 79 of RA 7942, "the findings of fact by the appeal of petitioner pertains to the factual matter of whether he was
the MAB as well as its decision or order shall be final and executory." able to prove the existence of the overlap or conflict between his claimed
area and that covered by respondent’s application, then the findings of the
Inasmuch as the issue raised by petitioner relates to whether an overlap or MAB should be deemed final and executory.
a conflict between his properties and the area covered by the application of
respondent has been proven, MAB’s finding thereon was binding and The CA refused to take jurisdiction over the case because, under Section
conclusive, and the Board’s Decision was already final and executory. 79 of the Philippine Mining Act of 1995, petitions for review of MAB
decisions are to be brought directly to the Supreme Court. The provision
Hence, this Petition.6 reads in part:

Issue "x x x xxx xxx

In his Memorandum, petitioner raises this sole issue for our consideration: "A petition for review by certiorari and question of law may be filed by the
aggrieved party with the Supreme Court within thirty (30) days from
"Whether or not appeals from the Decision or Final Orders of the Mines
receipt of the order or decision of the Board."
Adjudication Board should be made directly to the Supreme Court as
contended by the respondent and the Court of Appeals, or such appeals be We hold that respondent’s reliance on Pearson is misplaced. The claimant
first made to the Court of Appeals as contended by herein petitioner."7 therein sued in the then Court of First Instance (CFI) to prevent the
execution of a Decision rendered by the panel of investigators of the
This Court’s Ruling
Bureau of Mines and the Office of the President. Despite a Motion to
Dismiss filed by the mining companies, the CFI ordered the creation of a
The Petition is meritorious.
committee to determine the correct tie-point of their claims. So, the mining
Sole Issue: companies went to the then Intermediate Appellate Court (IAC) via a
Petition for Certiorari under Rule 65. The claimants averred that the
Appellate Jurisdiction over MAB Decisions appellate court had no jurisdiction.

Petitioner submits that appeals from the decisions of the MAB should be In the case at bar, petitioner went to the CA through a Petition for Review
filed with the CA. First, the Supreme Court has authority, under Section on Certiorari under Rule 43, seeking a reversal of the MAB Decision. Given
5(5) of Article VIII of the Philippine Constitution, to promulgate rules of the difference in the reason for and the mode of appeal, it is obvious
procedure in all courts, including all quasi-judicial agencies such as the that Pearson is not applicable here.
MAB. Second, Section 3 of Rule 43 of the 1997 Rules of Civil Procedure
authorizes appeals to the CA from judgments or final orders of quasi- Still, we can draw one lesson. Far from dismissing the case on the ground
of lack of jurisdiction, Pearson expressly held that the CA had jurisdiction
judicial tribunals by means of petitions for review. Third, the MAB gravely
over the petition for certiorari, because "Section 9 of BP Blg. 129 (The
abused its discretion in "deliberately, willfully and unlawfully" disregarding
Judiciary Reorganization Act of 1980), now incorporated in Section 4, Rule
petitioner’s rights to the land unduly included in the questioned application
for a Mines Productive Sharing Agreement (MPSA). 65 of the 1997 Rules of Civil Procedure, vested the then IAC with original
jurisdiction to issue writs of certiorari and prohibition, among other
En contrario, the CA ruled and respondent agrees that the settlement of auxillary writs x x x." However, even though the Supreme Court has
disputes involving rights to mining areas and overlapping or conflicting concurrent jurisdiction with the CA and the Regional Trial Courts to issue a
claim is a purely administrative matter, over which the MAB has appellate writ of mandamus, prohibition or certiorari, litigants are well advised
Arbit-Part III |65

against taking a direct recourse to this Court without initially seeking (COSLAP) were appealable exclusively to the Supreme Court.14 There is no
proper relief from the lower courts, in accordance with the hierarchy of convincing reason why appeals from the COSLAP should be treated
courts.8 differently from those arising from other quasi-judicial bodies, the decisions
of which are directly appealable to the CA under Rule 43 of the 1997 Rules.
In Pearson, what was under review was the ruling of the CFI to take
cognizance of the case which had been earlier decided by the MAB, not the Finally, Metro Construction, Inc. v. Chat ham Properties, Inc.15 held that
MAB Decision itself which was promulgated by the CA under Rule 43. The Section 19 of Executive Order No. 1008 -- which had deemed arbitral
present petitioner seeks a review of the latter. awards of the Construction Industry Arbitration Commission (CIAC) to be
appealable to the Supreme Court on questions of law -- was modified by
Pearson held that the nature of the primary powers granted by law to the Circular No. 1-91, Batas Pambansa Blg. 129 as amended by RA 7902,
then secretary of agriculture and natural resources as well as to the Revised Administrative Circular 1-95, and Rule 43 of the Rules of Court.
director of mines were executive or administrative, such as "granting of Reiterating Fabian, the Court ruled that appeals were procedural and
license, permits, lease and contracts[;] or approving, rejecting, reinstating remedial in nature; hence, constitutionally subject to this Court’s rule-
or canceling applications[;] or deciding conflicting applications." These making power.
powers should be distinguished from litigants’ disagreements or
controversies that are civil or contractual in nature, which may be In the present case, it is claimed that a petition for review is improper
adjudicated only by the courts of justice. The findings of fact of the MAB, because petitioner’s challenge is purely factual, bearing only on the MAB
which exercises appellate jurisdiction over decisions or orders of the panel ruling that there was no overlap or conflict between the litigants’ claims.
of arbitrators, are conclusive and binding on the parties; its decisions or
We clarify. Factual controversies are usually involved in administrative
orders on these are final and executory. But petitions for certiorari may be
filed with the appropriate courts.9 In short, the Court held that the actions; and the CA is prepared to handle such issues because, unlike this
Court, it is mandated to rule on questions of fact.16 In Metro
appellate jurisdiction of the IAC (now the CA) in Pearson fell under Rule 65
-- not 43 -- because what was being impugned was grave abuse of Construction, we observed that not only did the CA have appellate
discretion on the part of the CFI. jurisdiction over CIAC decisions and orders, but the review of such
decisions included questions of fact and law.17 At the very least when
Pearson, however, should be understood in the light of other equally factual findings of the MAB are challenged or alleged to have been made in
relevant jurisprudence. In Fabian v. Desierto,10the Court clarified that grave abuse of discretion as in the present case, the CA may review them,
appeals from judgments and final orders of quasi-judicial agencies are now consistent with the constitutional duty18 of the judiciary.
required to be brought to the CA, under the requirements and conditions
set forth in Rule 43. This Rule was adopted precisely to provide a uniform To summarize, there are sufficient legal footings authorizing a review of
rule of appellate procedure from quasi-judicial agencies.11 the MAB Decision under Rule 43 of the Rules of Court. First, Section 30 of
Article VI of the 1987 Constitution, mandates that "[n]o law shall be
Section 27 of RA 677012 which is similarly worded as Section 79 of the passed increasing the appellate jurisdiction of the Supreme Court as
Philippine Mining Act, was struck down by Fabian as unconstitutional, provided in this Constitution without its advice and consent." On the other
because it had broadened the appellate jurisdiction of the Supreme Court hand, Section 79 of RA No. 7942 provides that decisions of the MAB may
without its consent, in violation of Section 30 of Article VI of the be reviewed by this Court on a "petition for review by certiorari." This
Constitution.13 In short, Section 27 of RA 6770 which provides that provision is obviously an expansion of the Court’s appellate jurisdiction, an
all administrative decisions of the Office of the Ombudsman may be expansion to which this Court has not consented. Indiscriminate enactment
appealed to the Supreme Court, was unconstitutional. of legislation enlarging the appellate jurisdiction of this Court would
unnecessarily burden it.19
In another case, held invalid in the light of Rule 43 of the 1997 Rules of
Court was Section 3(2) of Executive Order No. 561, which had declared Second, when the Supreme Court, in the exercise of its rule-making power,
that decisions of the Commission on Settlement of Land Problems transfers to the CA pending cases involving a review of a quasi-judicial
Arbit-Part III |66

body’s decisions, such transfer relates only to procedure; hence, it does Consistent with these rulings and legal bases, we therefore hold that
not impair the substantive and vested rights of the parties. The aggrieved Section 79 of RA 7942 is likewise to be understood as having been
party’s right to appeal is preserved; what is changed is only the procedure modified by Circular No. 1-91, BP Blg. 129 as amended by RA 7902,
by which the appeal is to be made or decided. 20 The parties still have a Revised Administrative Circular 1-95, and Rule 43 of the Rules of Court. In
remedy and a competent tribunal to grant this remedy.1âwphi1 brief, appeals from decisions of the MAB shall be taken to the CA through
petitions for review in accordance with the provisions of Rule 43 of the
Third, the Revised Rules of Civil Procedure included Rule 43 to provide a 1997 Rules of Court.
uniform rule on appeals from quasi-judicial agencies.21 Under the rule,
appeals from their judgments and final orders are now required to be WHEREFORE, the Petition is GRANTED, and the assailed Decision and
brought to the CA on a verified petition for review.22 A quasi-judicial agency Resolution REVERSED and SET ASIDE. The Petition in CA-GR SP No. 46830
or body has been defined as an organ of government, other than a court or is REINSTATED, and the CA is ordered to RESOLVE it on the merits with
legislature, which affects the rights of private parties through either deliberate dispatch. No costs.
adjudication or rule-making.23 MAB falls under this definition; hence, it is
no different from the other quasi-judicial bodies enumerated under Rule SO ORDERED.
43. Besides, the introductory words in Section 1 of Circular No. 1-91 --
"among these agencies are" -- indicate that the enumeration is not
exclusive or conclusive and acknowledge the existence of other quasi-
judicial agencies which, though not expressly listed, should be deemed
included therein.24

Fourth, the Court realizes that under Batas Pambansa (BP) Blg. 129 25 as
amended by RA No. 7902,26 factual controversies are usually involved in
decisions of quasi-judicial bodies; and the CA, which is likewise tasked to
resolve questions of fact, has more elbow room to resolve them. By
including questions of fact27 among the issues that may be raised in an
appeal from quasi-judicial agencies to the CA, Section 3 of Revised
Administrative Circular No. 1-95 and Section 3 of Rule 43 explicitly
expanded the list of such issues.

According to Section 3 of Rule 43, "[a]n appeal under this Rule may be
taken to the Court of Appeals within the period and in the manner herein
provided whether the appeal involves questions of fact, of law, or mixed
questions of fact and law." Hence, appeals from quasi-judicial agencies
even only on questions of law may be brought to the CA.

Fifth, the judicial policy of observing the hierarchy of courts dictates that
direct resort from administrative agencies to this Court will not be
entertained, unless the redress desired cannot be obtained from the
appropriate lower tribunals, or unless exceptional and compelling
circumstances justify availment of a remedy falling within and calling for
the exercise of our primary jurisdiction.28
Arbit-Part III |67

3. G.R. No. 175048 February 10, 2009 Chua as its President and General Manager. On 26 January 2004, Win filed
a complaint for a sum of money9 against petitioner and Mr. Ying amounting
EXCELLENT QUALITY APPAREL, INC., Petitioner, to ₱8,634,448.20. It also prayed for the issuance of a writ of attachment
vs. claiming that Mr. Ying was about to abscond and that petitioner was about
WIN MULTI RICH BUILDERS, INC., represented by its President, to close. Win obtained a surety bond10 issued by Visayan Surety &
WILSON G. CHUA, Respondent. Insurance Corporation. On 10 February 2004, the RTC issued the Writ of
Attachment11 against the properties of petitioner.
DECISION
On 16 February 2004, Sheriff Salvador D. Dacumos of the RTC of Manila,
TINGA, J.:
Branch 32, went to the office of petitioner in CPEZ to serve the Writ of
Attachment, Summons12 and the Complaint. Petitioner issued Equitable
Before us is a Rule 45 petition1 seeking the reversal of the Decision2 and
PCIBank (PEZA Branch) Check No. 160149, dated 16 February 2004, in the
Resolution3 of the Court of Appeals in CA-G.R. SP No. 84640. The Court of
amount of ₱8,634,448.20, to prevent the Sheriff from taking possession of
Appeals had annulled two orders of the Regional Trial Court (RTC), Branch
4
its properties.13 The check was made payable to the Office of the Clerk of
32, of Manila in Civil Case No. 04-108940. This case involves a claim for a
Court of the RTC of Manila as a guarantee for whatever liability there may
sum of money which arose from a construction dispute.
be against petitioner.
On 26 March 1996, petitioner Excellent Quality Apparel, Inc. (petitioner)
Petitioner filed an Omnibus Motion14 claiming that it was neither about to
then represented by Max L.F. Ying, Vice-President for Productions, and
close. It also denied owing anything to Win, as it had already paid all its
Alfiero R. Orden, Treasurer, entered into a contract 5 with Multi-Rich
obligations to it. Lastly, it questioned the jurisdiction of the trial court from
Builders (Multi-Rich) represented by Wilson G. Chua (Chua), its President
taking cognizance of the case. Petitioner pointed to the presence of the
and General Manager, for the construction of a garment factory within the
Arbitration Clause and it asserted that the case should be referred to the
Cavite Philippine Economic Zone Authority (CPEZ). 6 The duration of the
Construction Industry Arbitration Commission (CIAC) pursuant to Executive
project was for a maximum period of five (5) months or 150 consecutive
Order (E.O.) No. 1008.
calendar days. Included in the contract is an arbitration clause which is as
follows:
In the hearing held on 10 February 2004, the counsel of Win moved that
its name in the case be changed from "Win Multi-Rich Builders, Inc." to
Article XIX : ARBITRATION CLAUSE
"Multi-Rich Builders, Inc." It was only then that petitioner apparently
Should there be any dispute, controversy or difference between the parties became aware of the variance in the name of the plaintiff. In the
arising out of this Contract that may not be resolved by them to their Reply15 filed by petitioner, it moved to dismiss the case since Win was not
mutual satisfaction, the matter shall be submitted to an Arbitration the contractor and neither a party to the contract, thus it cannot institute
Committee of three (3) members; one (1) chosen by the OWNER; one (1) the case. Petitioner obtained a Certificate of Non-Registration of
chosen by the CONTRACTOR; and the Chairman thereof to be chosen by Corporation/Partnership16 from the SEC which certified that the latter did
two (2) members. The decision of the Arbitration Committee shall be final not have any records of a "Multi-Rich Builders, Inc." Moreover, Win in its
and binding on both the parties hereto. The Arbitration shall be governed Rejoinder17 did not
by the Arbitration Law (R.A. [No.] 876). The cost of arbitration shall be
oppose the allegations in the Reply. Win admitted that it was only
borned [sic] jointly by both CONTRACTOR and OWNER on 50-50 basis.7
incorporated on 20 February 1997 while the construction contract was
The construction of the factory building was completed on 27 November executed on 26 March 1996. Likewise, it admitted that at the time of
1996. execution of the contract, Multi-Rich was a registered sole proprietorship
and was issued a business permit18 by the Office of the Mayor of Manila.
Respondent Win Multi-Rich Builders, Inc. (Win) was incorporated with the
Securities and Exchange Commission (SEC) on 20 February 19978 with
Arbit-Part III |68

In an Order19 dated 12 April 2004, the RTC denied the motion and stated Win admitted that the contract was executed between Multi-Rich and
that the issues can be answered in a full-blown trial. Upon its denial, petitioner. It further admitted that Multi-Rich was a sole proprietorship with
petitioner filed its Answer and prayed for the dismissal of the case. 20 Win a business permit issued by the Office of the Mayor of Manila. A sole
filed a Motion21 to deposit the garnished amount to the court to protect its proprietorship is the oldest, simplest, and most prevalent form of business
legal rights. In a Manifestation,22 petitioner vehemently opposed the enterprise.31 It is an unorganized business owned by one person. The sole
deposit of the garnished amount. The RTC issued an Order 23 dated 20 April proprietor is personally liable for all the debts and obligations of the
2004, which granted the motion to deposit the garnished amount. On the business.32 In the case of Mangila v. Court of Appeals,33 we held that:
same date, Win filed a motion24 to release the garnished amount to it.
Petitioner filed its opposition25 to the motion claiming that the release of x x x In fact, there is no law authorizing sole proprietorships to file a suit in
the money does not have legal and factual basis. court.

On 18 June 2004, petitioner filed a petition for review on certiorari26 under A sole proprietorship does not possess a juridical personality separate and
Rule 65 before the Court of Appeals, which questioned the jurisdiction of distinct from the personality of the owner of the enterprise. The law merely
the RTC and challenged the orders issued by the lower court with a prayer recognizes the existence of a sole proprietorship as a form of business
for the issuance of a temporary retraining order and a writ of preliminary organization conducted for profit by a single individual and requires its
injunction. Subsequently, petitioner filed a Supplemental Manifestation and proprietor or owner to secure licenses and permits, register its business
Motion27 and alleged that the money deposited with the RTC was turned name, and pay taxes to the national government. The law does not vest a
over to Win. Win admitted that the garnished amount had already been separate legal personality on the sole proprietorship or empower it to file
released to it. On 14 March 2006, the Court of Appeals rendered its or defend an action in court.
Decision28 annulling the 12 April and 20 April 2004 orders of the
The original petition was instituted by Win, which is a SEC-registered
RTC.1avvphi1 It also ruled that the RTC had jurisdiction over the case since
corporation. It filed a collection of sum of money suit which involved a
it is a suit for collection of sum of money. Petitioner filed a Motion for
construction contract entered into by petitioner and Multi-Rich, a sole
Reconsideration29 which was subsequently denied in a resolution.30
proprietorship. The counsel of Win wanted to change the name of the
Hence this petition. plaintiff in the suit to Multi-Rich. The change cannot be countenanced. The
plaintiff in the collection suit is a corporation. The name cannot be changed
Petitioner raised the following issues to wit: (1) does Win have a legal to that of a sole proprietorship. Again, a sole proprietorship is not vested
personality to institute the present case; (2) does the RTC have jurisdiction with juridical personality to file or defend an action.34
over the case notwithstanding the presence of the arbitration clause; and
(3) was the issuance of the writ of attachment and the subsequent Petitioner had continuously contested the legal personality of Win to
garnishment proper. institute the case. Win was given ample opportunity to adduce evidence to
show that it had legal personality. It failed to do so. Corpus Juris
A suit may only be instituted by the real party in interest. Section 2, Rule 3 Secundum, notes:
of the Rules of Court defines "parties in interest" in this manner:
x x x where an individual or sole trader organizes a corporation to take
A real party in interest is the party who stands to be benefited or injured over his business and all his assets, and it becomes in effect merely an
by the judgment in the suit, or the party entitled to the avails of the suit. alter ego of the incorporator, the corporation, either on the grounds of
Unless otherwise authorized by law or these Rules, every action must be implied assumption of the debts or on the grounds that the business is the
prosecuted or defended in the name of the real party in interest. same and is merely being conducted under a new guise, is liable for the
incorporator's preexisting debts and liabilities. Clearly, where the
Is Win a real party in interest? We answer in the negative. corporation assumes or accepts the debt of its predecessor in business it is
liable and if the transfer of assets is in fraud of creditors it will be liable to
the extent of the assets transferred. The corporation is not liable on an
Arbit-Part III |69

implied assumption of debts from the receipt of assets where the There is nothing in the law which limits the exercise of jurisdiction to
incorporator retains sufficient assets to pay the indebtedness, or where complex or difficult cases. E.O. No. 1008 does not distinguish between
none of his assets are transferred to the corporation, or where, although all claims involving payment of money or not.37 The CIAC acquires jurisdiction
the assets of the incorporator have been transferred, there is a change in over a construction contract by the mere fact that the parties agreed to
the persons carrying on the business and the corporation is not merely an submit to voluntary arbitration.38 The law does not preclude parties from
alter ego of the person to whose business it succeeded.35 stipulating a preferred forum or arbitral body but they may not divest the
CIAC of jurisdiction as provided by law.39 Arbitration is an alternative
In order for a corporation to be able to file suit and claim the receivables of method of dispute resolution which is highly encouraged. 40 The arbitration
its predecessor in business, in this case a sole proprietorship, it must show clause is a commitment on the part of the parties to submit to arbitration
proof that the corporation had acquired the assets and liabilities of the sole the disputes covered since that clause is binding, and they are expected to
proprietorship. Win could have easily presented or attached any document
e.g., deed of assignment which will show whether the assets, liabilities and abide by it in good faith.41 Clearly, the RTC should not have taken
receivables of Multi-Rich were acquired by Win. Having been given the cognizance of the collection suit. The presence of the arbitration clause
opportunity to rebut the allegations made by petitioner, Win failed to use vested jurisdiction to the CIAC over all construction disputes between
that opportunity. Thus, we cannot presume that Multi-Rich is the Petitioner and Multi-Rich. The RTC does not have jurisdiction.42
predecessor-in-business of Win and hold that the latter has standing to
institute the collection suit. Based on the foregoing, there is no need to discuss the propriety of the
issuance of the writ of attachment. However, we cannot allow Win to retain
Assuming arguendo that Win has legal personality, the petition will still be the garnished amount which was turned over by the RTC. The RTC did not
granted. have jurisdiction to issue the questioned writ of attachment and to order
the release of the garnished funds.
Section 4 of E.O. No. 100836 provides for the jurisdiction of the
Construction Industry Arbitration Commission, to wit: WHEREFORE, the petition is GRANTED. The Decision of the Court of
Appeals is hereby MODIFIED. Civil Case No. 04-108940 is DISMISSED. Win
Section 4. Jurisdiction.—The CIAC shall have original and exclusive Multi-Rich Builders, Inc. is ORDERED to return the garnished amount of
jurisdiction over disputes arising from, or connected with, contracts EIGHT MILLION SIX HUNDRED THIRTY-FOUR THOUSAND FOUR HUNDRED
entered into by parties involved in construction in the Philippines, whether
the disputes arises before or after the completion of the contract, or after FORTY-EIGHT PESOS AND FORTY CENTAVOS (₱8,634,448.40),
the abandonment or breach thereof. These disputes may involve
government or private contracts. For the Board to acquire jurisdiction, the which was turned over by the Regional Trial Court, to petitioner with legal
parties to a dispute must agree to submit the same to voluntary interest of 12 percent (12%) per annum upon finality of this Decision until
arbitration. payment.

The jurisdiction of the CIAC may include but is not limited to violation of SO ORDERED.
specifications for materials and workmanship; violation of the terms of
agreement; interpretation and/or application of contractual time and
delays; amount of damages and penalties; commencement time and
delays; maintenance and defects; payment, default of employer or
contractor and changes in contract cost.

Excluded from the coverage of this law are disputes from employer-
employee relationships which shall continue to be covered by the Labor
Code of the Philippines.
Arbit-Part III |70

4. G.R. No. 177556 December 8, 2010 by Transcept. In a letter dated 7 March 2005, Transcept outlined its
program to reinforce or redo the substandard works discovered by ASTEC.
TRANSCEPT CONSTRUCTION AND MANAGEMENT PROFESSIONALS, On 28 March 2005, ASTEC, through Engr. Jaime E. Rioflorido (Engr.
INC., Petitioner, Rioflorido), sent Aguilar an Evaluation of Contractor’s Performance which
vs. showed that aside from the substandard workmanship and use of
TERESA C. AGUILAR, Respondent. substandard materials, Transcept was unreasonably and fraudulently billing
Aguilar. Of the downpayment amounting to ₱1,632,436.29, Engr.
DECISION
Rioflorido’s reasonable assessment of Transcept’s accomplishment
amounted only to ₱527,875.94. Engr. Rioflorido recommended the partial
CARPIO, J.:
demolition of Transcept’s work.
The Case
On 30 May 2005, Transcept and Aguilar entered into a Construction
Before the Court is a petition for review assailing the 24 January 2007 Contract (Second Contract) to extend the date of completion from 7 June
Decision1 and the 20 April 2007 Resolution2of the Court of Appeals in CA- 2005 to 29 July 2005 and to use up the ₱1.6 million downpayment paid by
G.R. SP No. 93021. Aguilar. Aguilar hired the services of Engr. Edgardo Anonuevo (Engr.
Anonuevo) to ensure that the works would comply with the plans in the
The Antecedent Facts Second Contract.

From the decisions of the Court of Appeals and the Construction Industry Transcept failed to finish the Project on 29 July 2005, alleging that the
Arbitration Commission (CIAC), we gathered the following facts: delay was due to additional works ordered by Aguilar. Transcept also asked
for payment of the additional amount of ₱290,824.96. Aguilar countered
On 18 August 2004, Teresa C. Aguilar (Aguilar) entered into an Owner- that the Second Contract did not provide for additional works.
General Contractor Agreement (First Contract) with Transcept Construction
and Management Professionals, Inc. (Transcept) for the construction of a On 2 September 2005, Aguilar sent a demand letter to Transcept asking for
two-storey split level vacation house (the Project) located at Phase 3, Block payment of ₱581,844.54 for refund and damages. Transcept ignored the
3, Lot 7, Canyon Woods, Laurel, Batangas. Under the First Contract, the demand letter. On 6 September 2005, Aguilar filed a complaint against
Project would cost ₱3,486,878.64 and was to be completed within Transcept before CIAC.
2103working days from the date of the First Contract or on 7 June 2005.
Aguilar paid a downpayment of ₱1 million on 27 August 2004. The Decision of the CIAC

On 30 November 2004, Transcept submitted its First Billing to Aguilar for CIAC assessed the work accomplished with the corresponding costs, as
work accomplishments from start to 15 November 2004, in accordance against the downpayment of ₱1,632,436.29 which was the contract price in
with the Progressive Billing payment scheme. Aguilar paid ₱566,356. the Second Contract. On 16 January 2006, the CIAC promulgated its
Decision.4
On 1 February 2005, Aguilar received the Second Billing amounting to
₱334,488 for the period of 16 November 2004 to 15 December 2004. For Labor and Materials of the Scope of Work, the CIAC credited the
Transcept informed Aguilar that non-payment would force them to halt all accomplishment to be ₱1,110,440.13 representing Aguilar’s estimate which
works on the Project. Aguilar questioned the Second Billing as unusual for was reassessed by the CIAC after the ocular inspection conducted by the
being 45 days ahead of actual accomplishment. Aguilar did not pay and on parties. For indirect costs for General Requirements of the Scope of Work,
2 February 2005, Transcept stopped working on the Project. the CIAC’s computation was ₱275,355.50. The CIAC noted that Aguilar did
not submit any evidence on indirect costs and her counsel did not cross-
Thereafter, Aguilar hired ASTEC, a duly accredited testing laboratory, to examine Transcept’s witnesses on the matter. For the Septic Tank, which
test Transcept’s quality of work. The test showed substandard works done the CIAC found to be part of the Second Contract, the CIAC assessed the
Arbit-Part III |71

accomplishment to amount to ₱7,300. The CIAC added 5% Contingencies 6% interests from the date of the promulgation of this case, until fully
and 10% Contractor’s Profit which are the minimum factors in making paid.
estimates practiced in the construction industry. The CIAC thus estimated
that the total accomplishment amounted to ₱1,602,359.97 which was 2. Respondent shall pay Claimant the amount of ₱75,000.00, representing
₱30,076.72 below the contract price of ₱1,632,436.29. The tabulated the cost of Consultancy Services, plus 6% interests from the date of the
amount shows: promulgation of this case, until fully paid.

3. Claimant shall pay Respondent the amount of ₱189,909.91, representing


Direct Costs for Labor and Materials ₱1,110,440.13
the cost of work performed over & above the scope of work in the contract.

Indirect Costs for General Requirements 275,355.50 4. The cost for liquidated damages and cost representing interests of
construction bond, prayed for the Claimant, are denied for being without
merit.
Septic Tank 7,300.00
5. Attorney’s fees prayed for by both parties are denied for being without
merit.
Sub-Total ₱1,393,095.63
6. Cost of Arbitration shall be shared equally by the parties.
Plus 5% Contingencies 69,654.78
SO ORDERED.5

Add 10% of Sub-Total for Contractor's Profit 139,309.56 Aguilar assailed the CIAC’s decision before the Court of Appeals.

The Decision of the Court of Appeals


Total ₱1,602,359.97
In its 24 January 2007 Decision, the Court of Appeals reversed the CIAC’s
The CIAC ruled that the accomplishment of ₱1,602,359.97 was 98.16% of decision.
₱1,632,436.29, which was way above 95% and should therefore be
The Court of Appeals agreed with the CIAC that Aguilar did not allege in
considered as substantial completion of the Project. As such, the CIAC
her complaint the amount corresponding to the indirect costs for General
ruled that liquidated damages could not be awarded to Aguilar. The CIAC,
Requirements. However, the Court of Appeals made a recomputation of the
however, ruled that Aguilar was entitled to ₱75,000 as Consultancy
indirect costs for General Requirements based on ₱1,632,436.29 and made
Expenses.
the following findings:
The CIAC also found that Aguilar demanded extra works which entailed
additional working days. The CIAC computed that the additional works Direct Costs for Labor and Materials ₱1,110,440.13
performed over and above the Second Contract amounted to ₱189,909.91.
Indirect Costs for General Requirements 128,799.22
The dispositive portion of the CIAC’s decision reads:

In view of all the foregoing, it is hereby ordered that: Septic Tank 7,300.00

1. Respondent [Transcept] shall pay Claimant [Aguilar] the amount of


₱30,076.72, representing the unaccomplished works in the contract, plus Sub-Total ₱1,246,539.35
Arbit-Part III |72

Transcept filed a motion for reconsideration. In its 20 April 2007


Plus 5% Contingencies 62,326.96
Resolution, the Court of Appeals denied the motion.

Add 10% of Sub-Total for Contractor's Profit 124,653.93 Hence, the petition before this Court.

The Issues
Total ₱1,433,520.24
The issues in this case are the following:
The Court of Appeals then deducted ₱1,433,520.24 from ₱1,632,436.29
1. Whether the Court of Appeals erred in holding that Aguilar is entitled to
and concluded that Aguilar is entitled to ₱198,916.05 instead of
₱198,916.02 instead of ₱30,076.72 for unaccomplished works;
₱30,076.72.
2. Whether the Court of Appeals erred in awarding Aguilar liquidated
From the above computation, the Court of Appeals ruled that Transcept
damages;
only accomplished 87.81% of the contract price thus entitling Aguilar to
liquidated damages equivalent to 10% of ₱1,632,436.29 or ₱163,243.63.
3. Whether the Court of Appeals erred in deleting the CIAC’s award of
₱189,909.91 to Transcept representing additional works done under the
The Court of Appeals further ruled that Transcept was not entitled to
Second Contract; and
payment for additional works because they were in fact only rectifications
of the works poorly done by Transcept. Finally, the Court of Appeals ruled
4. Whether the Court of Appeals erred in awarding Aguilar the amount of
that Aguilar was able to prove that she paid ₱135,000 for consultancy
₱135,000 for consultancy services.
services.
The Ruling of this Court
The dispositive portion of the Court of Appeals’ decision reads:
The petition is partly meritorious.
WHEREFORE, the foregoing considered, the instant petition is hereby
GRANTED and the assailed decision REVERSED AND SET ASIDE. Refund for Unaccomplished Works
Accordingly, a new one is entered ordering respondent to pay petitioner
the following: The Court of Appeals ruled that CIAC erred in adopting Transcept’s
computation of unaccomplished works. The Court of Appeals agreed with
1) ₱198,916.02 for unaccomplished works in the second contract, plus 6% Aguilar that the CIAC’s computation was based on what Transcept
interest from the date of the filing of the case, until fully paid; submitted which was based on the original contract price of ₱3,486,878.64
instead of the contract price of ₱1,632,436.29 under the Second Contract.
2) ₱135,000.00, representing the cost of consultancy services, plus 6%
interest from the filing of the case, until fully paid; and However, the Court of Appeals failed to consider the CIAC’s as well as its
own finding that Aguilar did not present any evidence on indirect costs for
3) ₱163,243.63 as and by way of liquidated damages.
General Requirements. In addition, Aguilar’s counsel did not cross-examine
Transcept’s witnesses. In short, Aguilar did not dispute but merely
The award of ₱189,909.91 in favor of Aguilar for additional works is hereby
accepted Transcept’s computation on indirect expenses. Aguilar did not
deleted.
interpose any objection to the computation until after the CIAC ruled that
No costs. Transcept substantially complied with the Project. We also note Transcept’s
explanation, as well as the CIAC’s finding, that General Requirements refer
SO ORDERED.6 to mobilization, overhead, insurance, hoarding and protection, temporary
facilities, equipment, materials testing, line set out, as-built drawings, and
Arbit-Part III |73

clean out. They had been used up at the start of the Project. Hence, costs representing the unaccomplished works in the Second Contract as found by
for General Requirements are not dependent on the amount of the contract the CIAC, which is the difference between the contract price of
because they were incurred at the beginning of the Project. We should ₱1,632,436.29 and the accomplishment of ₱1,602,359.97.
therefore revert to the computation made by the CIAC, as follows:
Additional Works
Direct Costs for Labor and Materials ₱1,110,440.13
The Second Contract excluded the construction of the following works:

Indirect Costs for General Requirements 275,355.50 1. Architectural Works - - Roofing System

2. Interior Fit-Out Works/Glass/Windows/CAB/CARP


Septic Tank 7,300.00
3. Truss System

Sub-Total ₱1,393,095.63 4. Supply and Installation of Plumbing Fixtures and Bathroom Accessories

5. Supply and Installation of Downspout System


Plus 5% Contingencies 69,654.78
6. Electrical Roughing-in and Wiring Works
Add 10% of Sub-Total for Contractor's Profit 139,309.56
7. Supply and Installation of Wiring Devices

Total ₱1,602,359.97 8. Supply and Installation of Circuit Breakers

9. Testing and Commissioning.8


Liquidated Damages
The CIAC found that Aguilar demanded additional works from Transcept.
Section 20.11(A)(a) of the Construction Industry Authority of the The CIAC found that the additional works include the balcony, lifting of roof
Philippines (CIAP) Document No. 102 provides that "[t]here is substantial beams, and extra fast walls which are not covered by the Second Contract.
completion when the Contractor completes 95% of the Work, provided that However, we agree with the Court of Appeals that the works done were
the remaining work and the performance of the work necessary to just for correction of the substandard works done under the First Contract.
complete the Work shall not prevent the normal use of the completed During the ocular inspection, Aguilar pointed out that the lifting of the roof
portion." beam was done because the construction was three meters short of that
specified in the First Contact.9 Hence, while the roofing system is excluded
According to CIAC’s computation, Transcept’s accomplishment amounted to
from the Second Contract, it could not be said that the lifting of the roof
98.16% of the contract price. It is beyond the 95% required under CIAP
beam is an additional work on the part of Transcept.
Document No. 102 and is considered a substantial completion of the
Project. We thus agree with CIAC’s application of Article 1234 of the Civil The Court notes that the Second Contract was entered into by the parties
Code, which provides that "[i]f the obligation had been substantially precisely to correct the substandard works discovered by ASTEC. Hence,
performed in good faith, the obligor may recover as though there had been Aguilar should not be made to pay for works done to correct these
a strict and complete fulfillment, less damages suffered by the substandard works.
obligee."7lavvphil
Consultancy Services
There being a substantial completion of the Project, Aguilar is not entitled
to liquidated damages but only to actual damages of ₱30,076.72,
Arbit-Part III |74

The Court of Appeals correctly awarded Aguilar the cost of consultancy


services amounting to ₱135,000. While Engr. Rioflorido was not presented
as a witness, it was established that Aguilar hired ASTEC, a duly accredited
testing laboratory, to test Transcept’s quality of work, and that Engr.
Rioflorido represented ASTEC. As found by the Court of Appeals, Aguilar
paid Engr. Rioflorido the amount of ₱65,000 for the services, which should
be added to the ₱75,000 consultancy services awarded to Aguilar.10

WHEREFORE, we AFFIRM the 24 January 2007 Decision and the 20 April


2007 Resolution of the Court of Appeals in CA-G.R. SP No. 93021, with
the MODIFICATION that the award of ₱198,916.02 for unaccomplished
works is reduced to ₱30,076.72, and the award of ₱163,243.63 for
liquidated damages is deleted.

SO ORDERED.