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-

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* SECOND DIVISION.

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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 creditor’s 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 Commission’s (CIAC’s) 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, Fong’s claim is not even construction-related at all. This court has held that:
“Constructionis 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, petitioner’s 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. Fong’s demand that the portion of
retention money should have been paid to him before the other creditors of Maxco clearly, does not
require the CIAC’s 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
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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.

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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 Construction’s (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 respondent’s 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
Maxco’s assignment in his favor

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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.

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and asking the latter to confirm the validity of Maxco’s 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.7Respondent 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
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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.

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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
Maxco’s 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
respondent’s complaint is vested with the CIAC; (2) Respondent’s 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.

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9  Id., at pp. 267-269.

10 Id., at p. 122.

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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

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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).

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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 Fong’s complaint reveals that his cause of action
springs not from a violation of the provisions of the Trade Contract, but from the assignment
of Maxco’s retention money to him and failure of petitioner to turn over the retention money.
The allegations in Fong’s 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 Fong’s 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
petitioner’s 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, Fong’s

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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).

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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, petitioner’s 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. Fong’s demand that the portion of retention money should have been paid to
him before the other creditors of Maxco clearly, does not require the CIAC’s 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.

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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.

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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

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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.

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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])