1. SALAS VS.

LAPERAL REALTY CORPORATION

FACTS:

Petition for review on certiorari dismissing petitioners complaint

for rescission of several sale transactions involving land owned by
Augusto Salas

Salas, Jr. was the registered owner of a vast tract of land in

Lipa City, Batangas spanning 1,484,354 square meters.

May
1987:
he
entered
into
an
Owner-Contractor
Agreement with respondent Laperal Realty Corp to render
and provide complete construction services on his land

September 1988: Salas, Jr. executed a Special Power of

Attorney in favor of respondent Laperal Realty
o Exercise general control, supervision and management of
the sale of his land, for cash or on installment basis

June 1989: Salas, Jr. left his home in the morning for a business
trip to Nueva Ecija
o He never returned

August 1996: Teresita Diaz Salas filed with the RTC of Makati a
verified petition for the declaration of presumptive death
of her husband, Salas, Jr.
o Who had been missing for more than 7 years
o Granted

Laperal Realty subdivided the land of Salas, Jr. and sold subdivided
portions thereof to Respondents Rockway Real Estate Corporation
and South Ridge Village, Inc. in 1990; to Respondent spouses
Abrajano and Lava and Oscar Dacillo in 1991; and to Respondents
Eduardo Vacuna, Florante de la Cruz and Jesus Vicente Capellan in
1996 (Buyers)

February 1998: petitioners as heirs of Salas, Jr. filed in the RTC of

Lipa City a Complaint for declaration of nullity of sale,
reconveyance, cancellation of contract, accounting and
damages against respondents

Laperal Realty filed a Motion to Dismiss on the ground that

petitioners failed to submit their grievance to arbitration
as required under Article VI of the Agreement which
provides:
o

"ARTICLE VI. ARBITRATION.

All cases of dispute between CONTRACTOR and OWNER'S
representative shall be referred to the committee represented by:
a. One representative of the OWNER;
b. One representative of the CONTRACTOR;
c. One representative acceptable to both OWNER and
CONTRACTOR

Trial court issued the herein assailed Order dismissing

petitioners' Complaint for non-compliance with the
foregoing arbitration clause.

ISSUE: Whether or not the arbitration clause under Article VI of the OwnerContractor Agreement is binding upon the Respondent Lot Buyers.
HELD:

A submission to arbitration is a contract

the Agreement, containing the stipulation on arbitration, binds the

parties, as well as their assigns and heirs. But only they

Petitioners, as heirs of Salas, Jr., and respondent Laperal Realty

are certainly bound by the Agreement

If respondent Laperal Realty had assigned its rights under the

Agreement to a third party, making the former, the assignor, and
the latter, the assignee, such assignee would also be bound
by the arbitration provision since assignment involves
such transfer of rights as to vest in the assignee the power
to enforce them to the same extent as the assignor could
have enforced them against the debtor or in this case,
against the heirs of the original party to the Agreement

However, respondents Rockway Real Estate Corporation, South

Ridge Village, Inc., Maharami Development Corporation, spouses
Abrajano, spouses Lava, Oscar Dacillo, Eduardo Vacuna, Florante
de la Cruz and Jesus Vicente Capellan are not assignees of the
rights of respondent Laperal Realty under the Agreement to
develop Salas, Jr.'s land and sell the same
o They are, rather, buyers of the land that respondent
Laperal Realty was given the authority to develop
and sell under the Agreement.
o As such, they are not "assigns" contemplated in Art. 1311
of the New Civil Code which provides that "contracts take
effect only between the parties, their assigns and heirs".

Petitioners argue that rescission, being their cause of action, falls

under the exception clause in Sec. 2 of Republic Act No. 876 which
provides that "such submission [to] or contract [of arbitration]
shall be valid, enforceable and irrevocable, save, upon such
grounds as exist at law for the revocation of any contract".

While rescission, as a general rule, is an arbitrable issue they

impleaded in the suit for rescission the respondent lot buyers
who are neither parties to the Agreement nor the latter's
assigns or heirs.
o Right to arbitrate as provided in Article VI of the
Agreement was never vested in respondent lot buyers

Respondent Laperal Realty, as a contracting party to the

Agreement, has the right to compel petitioners to first arbitrate
before seeking judicial relief.

However, to split the proceedings into arbitration for

respondent Laperal Realty and trial for the respondent lot
buyers, or to hold trial in abeyance pending arbitration

between petitioners and respondent Laperal Realty, would

in effect result in multiplicity of suits
On the other hand, it would be in the interest of justice if the trial
court hears the complaint against all herein respondents and
adjudicates petitioners' rights as against theirs in a single and
complete proceeding
Petition granted

2. J PLUS ASIA DEVT CORP VS. UTILITY ASSURANCE CORP

FACTS:

Petition for review on certiorari assailing decision of CA

December 2007: J Plus Asia represented by its Chairman, Joo Han

Lee, and Martin E. Mabunay, doing business under the name and
style of Seven Shades of Blue Trading and Services, entered into
a Construction Agreement
o Latter Undertook to build the former's 72-room
condominium/hotel (Condotel Building 25) located in
Boracay Island, Malay, Aklan.
o The project, costing P42,000,000.00, was to be completed
within one year or 365 days reckoned from the first
calendar day after signing of the Notice of Award and
Notice to Proceed and receipt of down payment (20% of
contract price).

The P8,400,000.00 down payment was fully paid in January 2008

Payment of the balance of the contract price will be based on

actual work finished within 15 days from receipt of the monthly
progress billings

Per the agreed work schedule, the completion date of the project
was December 2008

Mabunay also submitted the required Performance Bond issued by

respondent Utility Assurance Corporation (UTASSCO) in the
amount equivalent to 20% down payment or P8.4 million

Mabunay commenced work at the project site in January 2008

Petitioner paid up to the 7th monthly progress billing sent by

Mabuhay

As of September 2008, petitioner had paid the total amount of

P15,979,472.03 inclusive of the 20% down payment
o However,
as
of
said
date,
Mabunay
had
accomplished only 27.5% of the project

In the Joint Construction Evaluation Result and Status Report

signed by Mabuhay the following findings were accepted as true
o As of November 2008, only 31.9% of the project was
complete

Value of construction materials allocated for the project

has been P1, 049, 364.45
Nov 2008: Petitioner terminated the contract and sent demand
letters to Mabunay and respondent surety
o Demands went unheaded; petitioner filed a request
for Arbitration before the Construction Industry
Arbitration Commission (CIAC)
o Petitioner prayed that Mabunay be ordered to pay the sum
of P8, 980, 575. 89 as liquidated damages and P2, 379,
441. 53 as unrecouped down payment or overpayment
petitioner made
Mabunay: claimed that delay was caused by the retrofitting and
other revision works ordered by Lee
o Asserted that he actually had until April 30, 2009 to finish
the project since the 365 day period of completion started
only on May 2, 2008
o Hence, termination of the contract was premature
Respondent filed a Motion to Dismiss on the ground that Petitioner
has no cause of action and the complaint states no cause
of action against it
o CIAC denied the Motion to Dismiss.
In its Answer Ex Abundante Ad Cautelam with Compulsory
Counterclaims and Cross-claims, Respondent argued that
the Performance Bond merely guaranteed the 20% down payment
and not the entire obligation of Mabunay under the Construction
Agreement.
Since the value of the projects accomplishment already exceeded
the said amount, Respondents obligation under the Performance
Bond had been fully extinguished
As to the claim for alleged overpayment to Mabunay, Respondent
contended that it should not be credited against the 20% down
payment which was already exhausted and such application by
Petitioner is tantamount to reviving an obligation that had been
legally extinguished by payment
Respondent also set up a cross-claim against Mabunay who
executed in its favor an Indemnity Agreement whereby Mabunay
undertook to indemnify Respondent for whatever amounts it may
be adjudged liable to pay Petitioner under the surety bond
o

February 2010: CIAC rendered its Decision and made Awards in

favor of Petitioner
o Ruled that Mabunay had incurred delay which entitled
Petitioner to the stipulated liquidated damages and
unrecouped down payment.
Respondent filed in the CA a Petition for Review under Rule 43 of
the 1997 Rules of Civil Procedure, as amended, which reversed
the CIACs ruling

o
o

Not all requisites in order to consider the obligor or debtor

in default were present in this case
Held that it is only from December 24, 2008 (completion
date) that we should reckon default because the
Construction Agreement provided only for delay in the
completion of the project and not delay on a monthly
basis using the work schedule approved by petitioner as
the reference point
Hence, petitioner's termination of the contract was
premature since the delay in this case was merely
speculative; the obligation was not yet demandable

ISSUE: W/N the Alternative Dispute Resolution Act of 2004 and the Special
ADR Rules have stripped the CA of jurisdiction to review arbitral awards?

HELD:

Petitioner contends that that with the institutionalization of

alternative dispute resolution under RA No. 9285, otherwise known
as the Alternative Dispute Resolution Act of 2004, the CA was
divested of jurisdiction to review the decisions or awards of the
CIAC.

The Petitioners contention is without merit

Petitioner erroneously relied on the provision in RA No.
9285 allowing any party to a domestic arbitration to file in the RTC
a petition either to confirm, correct or vacate a domestic arbitral
award.
SC holds that RA No. 9285 did not confer on RTCs
jurisdiction to review awards or decisions of the CIAC in
construction disputes
On the contrary, Section 40 thereof expressly declares that
confirmation by the RTC is NOT required, thus:
o SEC. 40. Confirmation of Award. The confirmation of a
domestic arbitral award shall be governed by Section 23
of R.A. 876.
A domestic arbitral award when confirmed shall be
enforced in the same manner as final and executory
decisions of the RTC
The confirmation of a domestic award shall be made by the RTC in
accordance with the Rules of Procedure to be promulgated by the
SC
A CIAC arbitral award need not be confirmed by the RTC to be
executory as provided under E.O. No. 1008
EO No. 1008 vests upon the CIAC 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
By express provision of Section 19 thereof, the arbitral award of
the CIAC is final and unappealable, except on questions of law,
which are appealable to the Supreme Court
With the amendments introduced by RA No. 7902 and
promulgation of the 1997 Rules of Civil Procedure, as amended,
the CIAC was included in the enumeration of quasi- judicial
agencies whose decisions or awards may be appealed to the CA in
a Petition for Review under Rule 43.
Such review of the CIAC award may involve either questions of
fact, of law, or of fact and law.
Petitioner misread the provisions of A.M. No. 07-11-08-SC (Special
ADR Rules) promulgated by the SC and which took effect on
October 30, 2009. Since RA No. 9285 explicitly excluded CIAC
awards from domestic arbitration awards that need to be
confirmed to be executory, said awards are therefore not covered
by Rule 11 of the Special ADR Rules, as they continue to be
governed by EO No. 1008, as amended and the rules of procedure
of the CIAC
CIAC Revised rules provide for the manner and mode of appeal
from CIAC decisions or awards in Section 18 thereof, which reads:
o

SECTION 18.2 Petition for review. A petition for review from a

final award may be taken by any of the parties within fifteen (15)
days from receipt thereof in accordance with the provisions of
Rule 43 of the Rules of Court.

SC reversed the Court of Appeals and ruled that Mabunays failure

to substantially perform the work on account of tremendous
delays in executing the scheduled work of activities constitutes
default under Article 13 of the Agreement that entitles J Plus Asia
to collect against the Performance Bond.

o There was no prior recourse to Arbitration

o DENIED
RTC: ruled that the take-over of some work items by respondent
was not equivalent to a termination but a mere modification of the
subcontract; ordered respondent to give full payment for work
completed by petitioner
CA: reversed RTC ruling; ordered the referral of the case to
arbitration
o Held as arbitrable issue of W/N respondents take-over
had been intended to be a termination of the original
contract

ISSUES:
1. W/N there exists a controversy that requires prior recourse to
voluntary arbitration
2. In the affirmative, W/N the requirements provided in Art. 3 of CIAC
Arbitration Rules regarding request for arbitration have been
complied with

4. LM POWER ENGINEERING
CONSTRUCTION GROUPS, INC.

CORP.

VS.

CAPITOL

INDUSTRIAL

FACTS:

Petition for Review on Certiorari under R45 seeking to set aside CA

Decision

Fe 1983: LM Power Engineering and Capitol Industrial Construction

entered into a Subcontract Agreement involving electrical
work at the 3rd Port of Zamboanga

April 1985: Respondent took over some work contracted to

petitioner because the latter had failed to finish because of
inability to procure materials

Upon completion of the task under the Contract, petitioner billed

respondent in the amount of P6, 711, 813. 90
o Respondent refused to pay

Respondent relied on the termination clause of the

Agreement
o Clause allowed it to set off the cost of work that
petitioner had failed to undertake

Petitioner filed with RTC of Makati a complaint for collection of sum

of money

Respondent filed a Motion to Dismiss alleging that the Complaint

was premature

HELD:

The dispute arose from the parties incongruent positions on

whether certain provisions of their Agreement could be applied to
the facts

Instant case involves technical discrepancies that are better left to

an arbitral body that has expertise in those areas

The Subcontract has the following arbitral clause:

o 6.The Parties hereto agree that any dispute or conflict as
regards to interpretation and implementation of this
Agreement which cannot be settled between [respondent]
and [petitioner] amicably shall be settled by means of
arbitration . .

Clearly, resolution of the dispute between the parties requires a

referral to arbitration

A review of the factual allegations of the parties reveals that they

differ on the following questions:
o (1) Did a take-over/termination occur?
o (2) May the expenses incurred by respondent in the
take-over be set off against the amounts it owed
petitioner?
o (3) How much were the advances and billable
accomplishments?

Being an inexpensive, speedy and amicable method of

settling disputes, arbitration along with mediation,
conciliation and negotiation is encouraged by the
Supreme Court

Aside from unclogging judicial dockets, arbitration also hastens

the resolution of disputes, especially of the commercial kind

It is thus regarded as the "wave of the future" in international civil

and commercial disputes
Brushing aside a contractual agreement calling for arbitration
between the parties would be a step backward
Consistent with the above-mentioned policy of encouraging
alternative dispute resolution methods, courts should liberally
construe arbitration clauses
o Provided such clause is susceptible of an interpretation
that covers the asserted dispute, an order to arbitrate
should be granted
o Any doubt should be resolved in favor of arbitration
According to petitioner, assuming that the dispute is arbitrable,
the failure to file a formal request for arbitration with the CIAC
precluded the latter from acquiring jurisdiction over the question
Section 1 of Article II of the old Rules of Procedure Governing
Construction Arbitration indeed required the submission of a
request for arbitration, as follows:
o

SECTION 1.Submission to Arbitration Any party to a

construction contract wishing to have recourse to
arbitration by the Construction Industry Arbitration
Commission (CIAC) shall submit its Request for
Arbitration in sufficient copies to the Secretariat of the
CIAC; PROVIDED, that in the case of government
construction contracts, all administrative remedies
available to the parties must have been exhausted
within 90 days from the time the dispute arose."

Tesco was promulgated by this Court, using the foregoing

provision as reference.
On the other hand, Section 1 of Article III of the new Rules of
Procedure Governing Construction Arbitration has dispensed with
this requirement and recourse to the CIAC may now be availed of
whenever a contract "contains a clause for the submission of a
future controversy to arbitration," in this wise:
o
"SECTION 1.Submission to CIAC Jurisdiction An
arbitration clause in a construction contract or a
submission to arbitration of a construction dispute shall
be deemed an agreement to submit an existing or future
controversy to CIAC jurisdiction, notwithstanding the
reference to a different arbitration institution or arbitral
body in such contract or 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 into a submission agreement before the
claimant may invoke the jurisdiction of CIAC."

The foregoing amendments in the Rules were formalized by CIAC

Resolution Nos. 2-91 and 3-93.
The difference in the two provisions was clearly explained in China
Chang Jiang Energy Corporation (Philippines) v. Rosal
Infrastructure Builders et al. (an extended unsigned Resolution)

and reiterated in National Irrigation Administration v. Court of

Appeals, from which we quote thus:
o
"Under the present Rules of Procedure, for a particular
construction contract to fall within the jurisdiction of
CIAC, it is merely required that the parties 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 does not
provide that the parties should agree to submit disputes
arising from their agreement specifically to the CIAC for
the latter to acquire jurisdiction over the same. Rather, it
is plain and clear that as long as the parties agree to
submit to voluntary arbitration, regardless of what forum
they may choose, their agreement will fall within the
jurisdiction of the CIAC, such that, even if they
specifically choose another forum, the parties will not be
precluded from electing to submit their dispute before
the CIAC because this right has been vested upon each
party by law, i.e., E.O. No. 1008." 34

Clearly, there is no more need to file a request with the

CIAC in order to vest it with jurisdiction to decide a
construction dispute.
CA ruling AFFIRMED

5. NATIONAL IRRIGATION ADMINISTRATION VS. CA

FACTS:

Special civil action for certiorari under R65 NIA seeks to annul
resolution of CA

in a competitive bidding held by NIA in August 1978, Hydro

Resources Contractors Corporation was awarded Contract MPI-C-2
for the construction of the main civil works of the Magat River
Multi-Purpose Project
o Contract provided that HYDRO would be paid partly in
Philippine pesos and partly in U.S. dollars

HYDRO substantially completed the works under the contract in

1982 and final acceptance by NIA was made in 1984
HYDRO thereafter determined that it still had an account
receivable from NIA representing the dollar rate differential of the
price escalation for the contract.
After unsuccessfully pursuing its case with NIA, HYDRO, in
December 1994, filed with the CIAC a Request for Adjudication of
the aforesaid claim
HYDRO nominated six arbitrators for the arbitration panel, from
among whom CIAC appointed Engr. Lauro M. Cruz
January 1995: NIA filed its Answer wherein it questioned the
jurisdiction of the CIAC alleging lack of cause of action,
laches and estoppel in view of HYDRO's alleged failure to
avail of its right to submit the dispute to arbitration within
the prescribed period as provided in the contract
NIA filed a Compliance wherein it nominated six arbitrators, from
among whom CIAC appointed Atty. Custodio O. Parlade, and made
a counterclaim for P1,000,000 as moral damages; at least
P100,000 as exemplary damages; P100,000 as attorney's fees;
and the costs of the arbitration.
The arbitrators appointed Certified Public Accountant Joven B.
Joaquin as Chairman of the Arbitration Panel
Parties required to submit copies of the evidence they intended to
present during the proceedings and were provided the draft Terms
of Reference
At the preliminary conference, NIA through its counsel Atty. Joy C.
Legaspi of the Office of the Government Corporate Counsel,
manifested that it could not admit the genuineness of HYDRO's
evidence since NIA's records had already been destroyed
NIA requested an opportunity to examine the originals of the
documents which HYDRO agreed to provide
After reaching an accord on the issues to be considered by the
arbitration panel, the parties scheduled the dates of hearings and
of submission of simultaneous memoranda
March 1995: NIA filed a Motion to Dismiss
o Alleging lack of jurisdiction over the disputes
o NIA contended that there was no agreement with HYDRO
to submit the dispute to CIAC for arbitration considering
that the construction contract was executed in 1978 and
the project completed in 1982, whereas the Construction
Industry Arbitration Law creating CIAC was signed only in
1985
o That while they have agreed to arbitration as a mode of
settlement of disputes, they could not have contemplated
submission of their disputes to CIAC

April 1995: the arbitral body issued an order which

deferred the determination of the motion to dismiss and
resolved to proceed with the hearing of the case on the
merits as the grounds cited by NIA did not seem to be
"indubitable."
o NIA filed a motion for reconsideration of the aforesaid
Order
o CIAC in denying the motion for reconsideration ruled that
it has jurisdiction over the HYDRO's claim over NIA
pursuant to E.O. 1008 and that the hearing should
proceed as scheduled
NIA filed with the CA an original action of certiorari and prohibition
with prayer for restraining order and/or injunction, seeking to
annul the Orders of the CIAC for having been issued without or in
excess of jurisdiction
CA: no abuse of discretion on part of CIAC; dismissed petition

ISSUE: W/N CIAC has jurisdiction over the controversy

HELD:

The rules forbid recourse to a special civil action for certiorari if

appeal is available, as the remedies of appeal and certiorari are
mutually exclusive and not alternative or successive

Although there are exceptions to the rules, none is present in the

case at bar

NIA failed to show circumstances that will justify a deviation from

the general rule as to make available a petition for certiorari in
lieu of taking an appropriate appeal

Petition should be dismissed based on the foregoing

ASSUMING 65 IS PROPER:

Contrary to the claim of NIA, the CIAC has jurisdiction over the
controversy. Executive Order No. 1008, otherwise known as the
"Construction Industry Arbitration Law" vests upon CIAC
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

NIA's argument that CIAC had no jurisdiction to arbitrate on

contract which preceded its existence is untenable.

E.O. 1008 is clear that the CIAC has jurisdiction over all disputes
arising from or connected with construction contract whether the
dispute arises before or after the completion of the contract

Thus, the date the parties entered into a contract and the date of
completion of the same, even if these occurred before the
constitution of the CIAC, did not automatically divest the CIAC of

jurisdiction as long as the dispute submitted for arbitration arose

after the constitution of the CIAC

Stated differently, the jurisdiction of CIAC is over the dispute, not

the contract; and the instant dispute having arisen when CIAC was
already constituted, the arbitral board was actually exercising
current, not retroactive, jurisdiction

As such, there is no need to pass upon the issue of whether E.O.

No. 1008 is a substantive or procedural statute.

NIA also contended that the CIAC did not acquire jurisdiction over
the dispute since it was only HYDRO that requested for arbitration

It is undisputed that the contracts between HYDRO and

NIA contained an arbitration clause wherein they agreed
to submit to arbitration any dispute between them that
may arise before or after the termination of the agreement
Consequently, the claim of HYDRO having arisen from the
contract is arbitrable

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 3-93, Section 1 of Article III of which read as follows:
o

Submission to CIAC Jurisdiction An arbitration clause

in a construction contract or a submission to arbitration
of a construction contract or a submission to arbitration
of a construction dispute shall be deemed an agreement
to submit an existing or future controversy to CIAC
jurisdiction, notwithstanding the reference to a different
arbitration institution or arbitral body in such contract or
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 into a submission
agreement before the claimant may invoke the
jurisdiction of CIAC. cdphil

Under the present Rules of Procedure, for a particular construction

contract to fall within the jurisdiction of CIAC, it is merely
required that the parties agree to submit the same to
voluntary arbitration.
o The law as it now stands does not provide that the parties
should agree to submit disputes arising from their
agreement specifically to the CIAC for the latter to acquire
jurisdiction over the same
o As long as the parties agree to submit to voluntary
arbitration, regardless of what forum they may
choose, their agreement will fall within the
jurisdiction of the CIAC, such that, even if they
specifically choose another forum, the parties will not be
precluded from electing to submit their dispute before the
CIAC because this right has been vested upon each party
by law

It is undeniable that NIA agreed to submit the dispute for

arbitration to the CIAC
NIA through its counsel actively participated in the
arbitration proceedings by filing an answer with
counterclaim, as well as its compliance wherein it
nominated arbitrators to the proposed panel, participating
in the deliberations on, and the formulation of, the Terms
of Reference of the arbitration proceeding, and examining
the documents submitted by HYDRO after NIA asked for
the originals of the said documents
As to the defenses of laches and prescription, they are evidentiary
in nature which could not be established by mere allegations in
the pleadings and must not be resolved in a motion to dismiss

Those issues must be resolved at the trial of the case on

the merits wherein both parties will be given ample
opportunity to prove their respective claims and defenses
o An allegation of prescription can effectively be used in a
motion to dismiss only when the complaint on its face
shows that indeed the action has already prescribed.
In the instant case, the issue of prescription and laches cannot be
resolved on the basis solely of the complaint
o It mustmbe pointed that under the new rules, deferment
of the resolution is no longer permitted
o The court may either grant the motion to dismiss, deny it,
or order the amendment of the pleading
Petition DISMISSED
o