Close Reader

SUPREME COURT REPORTS ANNOTATED VOLUME 587

Information | Reference

Case Title:
FORT BONIFACIO DEVELOPMENT
CORPORATION, petitioner, vs. HON.
EDWIN D. SORONGON and
VALENTIN FONG, respondents.
Citation: 587 SCRA 613
More...
Search Result
Petition granted, judgment and resolution reversed and
set aside. That of RTC reinstated.
Notes.·Reconveyance is available not only to the legal
owner of a property but also to the person with a better
right than the person under whose name said property was
erroneously registered. (Gasataya vs. Mabasa, 516 SCRA
105 [2007])
An action for reconveyence respects the decree of
registration as incontrovertible but seeks the transfer of
property, which has been wrongfully or erroneously
registered in other personsÊ name, to its rightful and legal
owners, or to those
who claim to have a better right. There is no special
ground for an action for reconveyance. (Heirs of Valeriano
S. Concha, Jr. vs. Lumocso, 540 SCRA 1 [2007])
··o0o··

G.R. No. 176709. May 8, 2009.*

FORT BONIFACIO DEVELOPMENT CORPORATION,

petitioner, vs. HON. EDWIN D. SORONGON and
VALENTIN FONG, respondents.

Actions; Jurisdiction; Jurisdiction of the court over the subject

matter is determined by the allegations of the complaint without
regard to whether or not the plaintiff is entitled to recover upon
all or some of the claims asserted therein is a well entrenched
principle.·Jurisdiction is defined as the authority to try, hear
and decide a case. Moreover, that jurisdiction of the court over
the subject matter is determined by the allegations of the
complaint without regard to whether or not the plaintiff is
entitled to recover upon all or some of the claims asserted
therein is a well entrenched principle. In this regard, the
jurisdiction of the court does not depend upon the de-

_______________

* SECOND DIVISION.

614

614 SUPREME COURT REPORTS ANNOTATED

Fort Bonifacio Development Corporation vs. Sorongon

fenses pleaded in the answer or in the motion to dismiss, lest the

question of jurisdiction would almost entirely depend upon the
defendant.
Same; Same; Alternative Dispute Resolution; Construction
Industry Arbitration Commission (CIAC); Words and Phrases;
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; A creditorÊs demand
that the portion of retention money should have been paid to him
before the other creditors of a contractor clearly, does not require
the Construction Industry Arbitration CommissionÊs (CIACÊs)
expertise and technical knowledge of construction.·Although the
jurisdiction of the CIAC is not limited to the instances
enumerated in Section 4 of E.O. No. 1008, FongÊs claim is not
even construction-related at all. This court has held that:
„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.‰ Thus, petitionerÊs
insistence on the application of the arbitration clause of the
Trade Contract to Fong is clearly anchored on an erroneous
premise that the latter is seeking to enforce a right under the
trade contract. This premise cannot stand since the right to the
retention money of Maxco under the Trade Contract is not being
impugned herein. It bears mentioning that petitioner readily
conceded the existence of the retention money. FongÊs demand
that the portion of retention money should have been paid to him
before the other creditors of Maxco clearly, does not require the
CIACÊs expertise and technical knowledge of construction.
Same; Same; Same; Same; Obligations and Contracts;
Assignment and Preference of Credits; The adjudication of a case
which necessarily involves the application of pertinent statutes
and jurisprudence to matters of assignment and preference of
credits is more suited for a trial court to carry out after a full-
blown trial, than an arbitration body specifically devoted to
construction contracts.·The adjudication of Civil Case
necessarily involves the application of pertinent statutes and
jurisprudence to matters of assignment and preference of credits.
As this Court held in Fort Bonifacio Development Corporation v.
Domingo, 580 SCRA 397 (2009), this task more

615

VOL. 587, MAY 8, 2009 615

Fort Bonifacio Development Corporation vs. Sorongon

suited for a trial court to carry out after a full-blown trial, than
an arbitration body specifically devoted to construction contracts.
Same; Pleadings and Practice; Failure to state a cause of
action refers to the insufficiency of allegation in the pleading.·
The second error raised also has no merit. Failure to state a
cause of action refers to the insufficiency of allegation in the
pleading. In resolving a motion to dismiss based on the failure to
state a cause of action only the facts alleged in the complaint
must be considered. The test is whether the court can render a
valid judgment on the complaint based on the facts alleged and
the prayer asked for.
Same; Parties; Words and Phrases; An indispensable party is
defined as one who has such an interest in the controversy or
subject matter that a final adjudication cannot be made, in his
absence, without injuring or affecting that interest.·The final
error raised by petitioner that the other judgment creditors as
well as the trial court that issued the writ of garnishment and
CIAC should have been impleaded as defendants in the case as
they were indispensable parties is likewise weak. Section 7, Rule
3 of the Revised Rules of Court provides for the compulsory
joinder of indispensable parties without whom no final
determination can be had of an action. An indispensable party is
defined as one who has such an interest in the controversy or
subject matter that a final adjudication cannot be made, in his
absence, without injuring or affecting that interest. The other
judgment creditors are entitled to the fruits of the final
judgments rendered in their favor. Their rights are distinct from
the rights acquired by the respondent over the portion of the
retention money assigned to the latter by Maxco. Their interests
are in no way affected by any judgment to be rendered in this
case.

PETITION for review on certiorari of the decision and

resolution of the Court of Appeals.
The facts are stated in the opinion of the Court.
Lim, Ocampo, Leynes for petitioner.
Abella & Romero Law Offices for respondent Valentin
Fong.

616

616 SUPREME COURT REPORTS ANNOTATED

Fort Bonifacio Development Corporation vs. Sorongon

TINGA, J.:
Petitioner Fort Bonifacio Development Corporation
(petitioner), a corporation registered under Philippine
laws, is engaged in the business of real estate
development. Respondent, Valentin Fong (respondent)
doing business under the name VF Industrial Sales is the
assignee of L & M Maxco Specialist ConstructionÊs (Maxco)
retention money from the Bonifacio Ridge Condominium
Phase 1 (BRCP 1).
In this Petition for Review,1 petitioner assails the
Decision2 of the Court of Appeals dated November 30, 2006
which ruled that it is the regional trial court and not the
Construction Industry Arbitration Commission (CIAC)
that has jurisdiction over respondentÊs claim.
The facts are as follows:
On July 2000, Petitioner entered into a trade contract
with Maxco wherein Maxco would undertake the
structural and partial architectural package of the BRCP
1. Later petitioner accused Maxco of delay in completion of
its work and on August 24, 2004 sent the latter a notice of
termination. Petitioner also instructed Maxco to perform
remedial measures prior to the contract expiration
pursuant to Clause 23.1 of the contract.
Subsequently, Maxco was sued by its creditors including
respondent for debts unrelated to BRCP 1. In order to
settle the collection suit, on February 28, 2005, Maxco
assigned its receivables representing its retention money
from the BRCP 1 in the amount of one million five hundred
seventy seven thousand one hundred fifteen pesos and
ninety centavos (P1,577,115.90). On April 18, 2005,
respondent wrote to petitioner, informing the latter of
MaxcoÊs assignment in his favor

_______________

1 Rollo, pp. 11-104, with annexes.

2 Penned by Justice Martin S. Villarama Jr. and concurred in by,
Justices Lucas P. Bersamin and Monina Arevalo-Zenarosa, id., at pp.
106-122.

617
 VOL. 587, MAY 8, 2009 617
Fort Bonifacio Development Corporation vs. Sorongon

and asking the latter to confirm the validity of MaxcoÊs

receivables.3 Petitioner replied, informing the respondent
that Maxco did have receivables, however these were not
due and demandable until January of next year, moreover
the amount had to be ascertained and liquidated.
A subsequent exchange of correspondence failed to settle
the matter. Specifically, on January 31, 2006,4 petitioner
through counsel, wrote to respondent informing the latter
that there is no more amount due to Maxco from petitioner
after the rectification of defect as well as the satisfaction of
notices of garnishment dated July 30, 20045 and January
26, 2006.6 On February 13, 2006, respondent filed a
complaint for a sum of money against petitioner and Maxco
in the Regional Trial Court of Mandaluyong City.7
Respondent claimed that there were sufficient residual
amounts to pay the receivables of Maxco at the time he
served notice of the assignment. The subsequent notices of
garnishment should not adversely affect the receivables
assigned to him. The retention money was over due in
January 2006 and despite demand, petitioner did not pay
the amount subject of the deed of assignment. Petitioner
however, paid out the retention money to other garnishing
creditors of Maxco to the detriment of respondent.
On March 16, 2006, instead of filing an Answer,
petitioner filed a Motion to Dismiss on the ground of lack
of jurisdiction over the subject matter.8 Petitioner argued
that since respondent merely stepped into the shoes of
Maxco as its assignee, it was the CIAC and not the regular
courts that had jurisdiction over the dispute as provided in
the Trade Contract. Judge

_______________

3 Id., at pp. 131.

4 Id., at p. 137.
5 Asia-Con Builders Inc. v. L & M Maxco Inc., CIAC Case No. 11-
2002.
6 Concrete Masters Inc. v. L & M Maxco Inc., Civil Case No. 05-164 of
the RTC, Makati City, Branch 133.
7 Rollo, pp. 126-130.
8 Id., at pp. 138-186.

618

618 SUPREME COURT REPORTS ANNOTATED

Fort Bonifacio Development Corporation vs. Sorongon

Edwin Sorongon issued an Order dated June 27, 2006

denying the motion to dismiss.9 Petitioner moved for
reconsideration but this was denied in an Order dated
August 15, 2006.
On October 16, 2006, petitioner filed a petition for
certiorari and prohibition with the Court of Appeals. On
November 30, 2006, the Court of Appeals denied the
petition for lack of merit. The dispositive portion reads:

„WHEREFORE, premises considered, the present petition is

hereby DENIED DUE COURSE and accordingly DISMISSED
for lack of merit. The assailed Orders dated June 27, 2006 and
August 15, 2006 of respondent Judge in Civil Case No. MC-06-
2928 are hereby AFFIRMED.
With costs against the petitioner.
SO ORDERED.‰10

The appellate court held that it was the trial court and
not the Construction Industry Arbitration Commission
(CIAC) that had jurisdiction over the claims of Valentin
Fong. The claim could not be construed as related to the
construction industry as it is for enforcement of MaxcoÊs
deed of assignment over its retention money.
Petitioner moved for reconsideration on December 22,
2006 but this was denied by the appellate court in a
resolution dated February 29, 2006.
Hence, the present petition for review on certiorari.
Petitioners sets forth four (4) errors committed by the
appellate court namely: (1) the original and exclusive
jurisdiction over respondentÊs complaint is vested with the
CIAC; (2) RespondentÊs complaint failed to state a cause of
action; (3) the claim of respondent has already been
extinguished; and (4) the conditions precedent for the
complaint have not been complied with.

_______________

9  Id., at pp. 267-269.

10 Id., at p. 122.

619

VOL. 587, MAY 8, 2009 619

Fort Bonifacio Development Corporation vs. Sorongon

The petition lacks merit.

In reference to the first error, Section 4 of Executive
Order No. 1008, Series of 1985 (E.O. No. 1008) sets forth
the jurisdiction of CIAC. To wit:

„SECTION 4. Jurisdiction.·The CIAC shall have original

and exclusive jurisdiction over disputes arising from, or
connected with, contracts entered into by parties involved in
construction in the Philippines, whether the dispute arises
before or after the completion of the contract, or after the
abandonment or breach thereof. These disputes may involve
government or private contracts. For the Board to acquire
jurisdiction, the parties to a dispute must agree to submit the
same to voluntary arbitration.
The jurisdiction of the CIAC may include but is not limited to
violation of specifications for materials and workmanship;
violation of the terms of agreement; interpretation and/or
application of contractual provisions; maintenance and defects;
payment default of employer or contractor and changes in
contract cost.
Excluded from the coverage of this law are disputes arising
from employer-employee relationships which shall continue to be
covered by the Labor Code of the Philippines.‰

Jurisdiction is defined as the authority to try, hear and

decide a case.11 Moreover, that jurisdiction of the court
over the subject matter is determined by the allegations of
the complaint without regard to whether or not the
plaintiff is entitled to recover upon all or some of the
claims asserted therein is a well entrenched principle.12 In
this regard, the jurisdiction of the court does not depend
upon the defenses pleaded in the

_______________

11 Tolentino v. Leviste, G.R. No. 156118, 19 November 2004, 443

SCRA 274, 284; Toyota v. The Director of the Bureau of Labor Relations,
363 Phil. 437; 304 SCRA 95 (1999); Zamora v. Court of Appeals, G.R. No.
78206, 19 March 1990, 183 SCRA 279.
12 Laresma v. Abellana, G.R. No. 140973, November 11, 2004, 442
SCRA 156, 169; Cruz v. Spouses Torres, 374 Phil. 529, 533; 316 SCRA
193, 196 (1999).

620

620 SUPREME COURT REPORTS ANNOTATED

Fort Bonifacio Development Corporation vs. Sorongon

answer or in the motion to dismiss, lest the question of

jurisdiction would almost entirely depend upon the
defendant.13
An examination of the allegations in FongÊs complaint
reveals that his cause of action springs not from a violation
of the provisions of the Trade Contract, but from the
assignment of MaxcoÊs retention money to him and failure
of petitioner to turn over the retention money. The
allegations in FongÊs Complaint are clear and simple: (1)
That Maxco had an outstanding obligation to respondent;
(2) Maxco assigned to Fong its retention from petitioner in
payment of the said obligation; (3) Petitioner as early as
April 18, 2005 was notified of the assignment; (4) Despite
due notice of such assignment, petitioner still refused to
deliver the amount assigned to respondent, giving
preference, instead, to the 2 other creditors of Maxco; (5)
At the time petitioner was notified of the assignment,
there were only one other notice of garnishment and there
were sufficient residual amounts to satisfy FongÊs claim;
and (6) uncertain over which one between Maxco and
petitioner he may resort to for payment, respondent named
them both as defendants in Civil Case No. 06-0200-CFM.
While it is true that respondent, as the assignee of the
receivables of Maxco from petitioner under the Trade
Contract, merely stepped into the shoes of Maxco.
However, the right of Maxco to the retention money from
petitioner under the trade contract is not even in dispute
in Civil Case No. 06-0200-CFM. Respondent raises as an
issue before the RTC is the petitionerÊs alleged unjustified
preference to the claims of the other creditors of Maxco
over the retention money.
Although the jurisdiction of the CIAC is not limited to
the instances enumerated in Section 4 of E. O. No. 1008,
FongÊs

_______________

13 Caparros v. Court of Appeals, G.R. No. 56803, 28 February 1989,

170 SCRA 758; Ganadin v. Ramos, 188 Phil. 28, 35; 99 SCRA 613, 621
(1980); Fuentes v. Hon. Bautista, 153 Phil. 171; 53 SCRA 420 (1973);
Simpao, Jr. v. Lilles, 148-B Phil. 157; 40 SCRA 180 (1971); Vencilao v.
Camarenta, 140 Phil. 99; 29 SCRA 473 (1969).

621

VOL. 587, MAY 8, 2009 621

 Fort Bonifacio Development Corporation vs. Sorongon

claim is not even construction-related at all. This court has

held that: „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.‰14 Thus, petitionerÊs insistence on the
application of the arbitration clause of the Trade Contract
to Fong is clearly anchored on an erroneous premise that
the latter is seeking to enforce a right under the trade
contract. This premise cannot stand since the right to the
retention money of Maxco under the Trade Contract is not
being impugned herein. It bears mentioning that petitioner
readily conceded the existence of the retention money.
FongÊs demand that the portion of retention money should
have been paid to him before the other creditors of Maxco
clearly, does not require the CIACÊs expertise and technical
knowledge of construction.
The adjudication of Civil Case necessarily involves the
application of pertinent statutes and jurisprudence to
matters of assignment and preference of credits. As this
Court held in Fort Bonifacio Development Corporation v.
Domingo,15 this task more suited for a trial court to carry
out after a full-blown trial, than an arbitration body
specifically devoted to construction contracts.
The second error raised also has no merit. Failure to
state a cause of action refers to the insufficiency of
allegation in the pleading. In resolving a motion to dismiss
based on the failure to state a cause of action only the facts
alleged in the complaint must be considered. The test is
whether the court can render a valid judgment on the
complaint based on the facts alleged and the prayer asked
for.

_______________

14 Fort Bonifacio Development Corporation v. Domingo, G.R. No.

180765, 27 February 2009, citing Gammon Philippines, Inc. v. Metro
Rail Transit Development Corporation, G.R. No. 144792, 31 January
2006, 481 SCRA 209, 218-219.
15 G.R. No. 180765, 27 February 2009, 580 SCRA 397.

622

622 SUPREME COURT REPORTS ANNOTATED

Fort Bonifacio Development Corporation vs. Sorongon

In this case the complaint alleges that:

„x x x at the time he served notice of assignment to defendant

FBDC there was only one notice of garnishment that the latter
had received and there were still sufficient residual amounts to
pay that assigned by defendant Maxco to the plaintiff.
Subsequent notices of garnishment received by defendant FBDC
could not adversely affect the amounts already assigned to the
plaintiff as they are already his property, no longer that of
defendant Maxco.‰16

From this statement alone, it is clear that a cause of

action is present in the complaint filed a quo. Respondent
has specifically alleged that the undue preference given to
other creditors of Maxco over the retention money by
petitioner was to the prejudice of his rights.
Petitioner next asserts that the appellate court erred in
not ruling that the claim of respondent was extinguished
by payment to the other garnishing creditors of Maxco. The
assignment of this as an error is misleading as this is
precisely one of the issues that need to be resolved in a full
blown trial and one of the reasons that respondent
impleaded Maxco and petitioner in the alternative.
The final error raised by petitioner that the other
judgment creditors17 as well as the trial court that issued
the writ of garnishment and CIAC should have been
impleaded as defendants in the case as they were
indispensable parties is likewise weak. Section 7, Rule 3 of
the Revised Rules of Court provides for the compulsory
joinder of indispensable parties without whom no final
determination can be had of an action. An indispensable
party is defined as one who has such an interest in the
controversy or subject matter that a final adjudication
cannot be made, in his absence, without injuring or

_______________

16 Rollo, p. 127.
17 Concrete Masters Inc. in Civil Case No. 05-164 of the RTC, Makati
City, Branch 133 and Asia-Con Builders Inc. in CIAC Case No. 11-2002.

623

VOL. 587, MAY 8, 2009 623

Fort Bonifacio Development Corporation vs. Sorongon

affecting that interest.18 The other judgment creditors are

entitled to the fruits of the final judgments rendered in
their favor. Their rights are distinct from the rights
acquired by the respondent over the portion of the
retention money assigned to the latter by Maxco. Their
interests are in no way affected by any judgment to be
rendered in this case.
WHEREFORE, premises considered, the instant
Petition is DENIED. The Decision dated November 30,
2006 and the Resolution dated February 19, 2007 of the
Court of Appeals in CA-G.R. SP No. 96532 are hereby
AFFIRMED.
SO ORDERED.

Carpio-Morales,** Velasco, Jr., Leonardo-De Castro***

and Brion, JJ., concur.

Petition denied, judgment and resolution affirmed.

Note.·The CIAC, having been duly constituted by law

as the quasi-judicial agency accorded with jurisdiction to
resolve disputes arising from contracts involving
construction in the Philippines, the Supreme Court must
confer finality to its findings when they are supported by
evidence. (Philippine National Construction Corporation
vs. Court of Appeals, 512 SCRA 684 [2007])
··o0o··

_______________
 18 Moldes v. Villanueva, G.R. No. 161955, 31 August 2005, 48 SCRA
697, 707.
**  Acting Chairperson as replacement of Justice Leonardo A.
Quisumbing who is on official leave per Special Order No. 618.
*** Additional member of the Second Division per Special Order No.
619.

© Copyright 2010 CentralBooks Inc. All rights reserved.