ADR: PART 4 CASES
respondent Roblecor and further declared the
CHUNG FU vs. CA
FACTS: Petitioner Chung Fu Industries and private
respondent Roblecor Philippines, Inc. forged a
construction agreement whereby respondent
contractor committed to construct and finish on
December 31, 1989, petitioner corporation's
industrial/factory complex in Tanawan, Tanza,
Cavite for and in consideration of P42,000,000.00. It
was stipulated therein that the issue(s) shall be
submitted for resolution before a single arbitrator
chosen by both parties in the event of disputes
arising from the performance of subject contract.
Moreso, Chung Fu and Roblecor entered into two
(2) other ancillary contracts, to wit: one, for the
construction of a dormitory and support facilities;
and the other for the installation of electrical, water
and hydrant systems at the plant site and requiring
completion thereof one month after civil works
have been finished.
However, respondent Roblecor failed to complete
the work despite the extension of time allowed it by
Chung Fu. Subsequently, the latter had to take over
the construction when it had become evident that
Roblecor was not in a position to fulfill its
obligation.
Claiming an unsatisfied account of P10,500,000.00
and unpaid progress billings of P2,370,179.23,
Roblecor filed a petition for Compulsory Arbitration
before respondent RTC, pursuant to the arbitration
clause in the construction agreement. Chung Fu
moved to dismiss the petition and further prayed
for the quashing of the restraining order.
Subsequent negotiations between the parties
eventually led to the formulation of an arbitration
agreement which includes -- “decision of the
arbitrator shall be final and unappealable ,
therefore there shall be no further judicial recourse
if either party disagrees with the whole or any part
of the arbitrator’s award, but can seek judicial
assistance for purposes of enforcing of the
arbitrator’s award.
The RTC approved the arbitration agreement. The
appointed sole arbitrator is Engr. Asuncion.
Arbitrator Asuncion ruled in favor of private
award final and unappealable, pursuant to the
arbitration agreement.
On the other hand, Chung Fu moved to remand the
case for further hearing and asked for a
reconsideration of the judgment award claiming
that Arbitrator Asuncion committed twelve (12)
instances of grave error by disregarding the
provisions of the parties' contract. RTC denied
petitioner’s motion to remand and granted private
respondent Roblecor’s motion for writ of Execution.
CA also denied petitioner’s motion to remand.
ISSUE:
1. WON the subject arbitration award is beyond the
ambit of the court’s power of judicial review
2. WON respondent court committed grave abuse
of discretion
HELD:
1. No. It is stated explicitly under Art. 2044 of the
Civil Code that the finality of the arbitrators' award
is not absolute and without exceptions. Where the
conditions described in Articles 2038, 2039 and
2040 applicable to both compromises and
arbitrations are obtaining, the arbitrators' award
may be annulled or rescinded. Additionally, under
Sections 24 and 25 of the Arbitration Law, there are
grounds for vacating, modifying or rescinding an
arbitrator's award. Thus, if and when the factual
circumstances referred to in the above-cited
provisions are present, judicial review of the award
is properly warranted.
In practice nowadays, absent an agreement of the
parties to resolve their disputes via a particular
mode, it is the regular courts that remain the fora
to resolve such matters. However, the parties may
opt for recourse to third parties, exercising their
basic freedom to "establish such stipulation,
clauses, terms and conditions as they may deem
convenient, provided they are not contrary to law,
morals, good customs, public order or public
policy." In such a case, resort to the arbitration
process may be spelled out by them in a contract in
anticipation of disputes that may arise between
them. Or this may be stipulated in a submission
agreement when they are actually confronted by a
dispute. Whatever be the case, such recourse to an
extrajudicial means of settlement is not intended to
completely deprive the courts of jurisdiction. In fact,
the early cases on arbitration carefully spelled out
the prevailing doctrine at the time, thus: ". . . a
clause in a contract providing that all matters in
dispute between the parties shall be referred to
arbitrators and to them alone is contrary to public
policy and cannot oust the courts of Jurisdiction."
But certainly, the stipulation to refer all future
disputes to an arbitrator or to submit an ongoing
dispute to one is valid. Being part of a contract
between the parties, it is binding and enforceable in
court in case one of them neglects, fails or refuses
to arbitrate. Going a step further, in the event that
they declare their intention to refer their
differences to arbitration first before taking court
action, this constitutes a condition precedent, such
that where a suit has been instituted prematurely,
the court shall suspend the same and the parties
shall be directed forthwith to proceed to
arbitration.
A court action may likewise be proven where the
arbitrator has not been selected by the parties.
Under present law, may the parties who agree to
submit their disputes to arbitration further provide
that the arbitrators' award shall be final,
unappealable and executory? Article 2044 of the
Civil Code recognizes the validity of such stipulation,
thus: Any stipulation that the arbitrators' award or
decision shall be final is valid, without prejudice to
Articles 2038, 2039 and 2040.
Similarly, the Construction Industry Arbitration Law
provides that the arbitral award "shall be final and
inappealable except on questions of law which shall
be appealable to the Supreme Court."
What if courts refuse or neglect to inquire into the
factual milieu of an arbitrator's award to determine
whether it is in accordance with law or within the
scope of his authority? How may the power of
judicial review be invoked? This is where the proper
remedy is certiorari under Rule 65 of the Revised
Rules of Court. It is to be borne in mind, however,
that this action will lie only where a grave abuse of
discretion or an act without or in excess of
jurisdiction on the part of the voluntary arbitrator is
clearly shown. For "the writ of certiorari is an extra-
ordinary remedy and that certiorari jurisdiction is
not to be equated with appellate jurisdiction. In a
special civil action of certiorari, the Court will not
engage in a review of the facts found nor even of
the law as interpreted or applied by the arbitrator
unless the supposed errors of fact or of law are so
patent and gross and prejudicial as to amount to a
grave abuse of discretion or an exces de pouvoir on
the part of the arbitrator." Even decisions of
administrative agencies which are declared "final"
by law are not exempt from judicial review when so
warranted.
It should be stressed, too, that voluntary
arbitrators, by the nature of their functions, act in a
quasi-judicial capacity. It stands to reason,
therefore, that their decisions should not be beyond
the scope of the power of judicial review of this
Court.
2. YES, there is a grave abuse of discretion.
In the case at bar, petitioners assailed the arbitral
award on the following grounds, most of which
allege error on the part of the arbitrator in granting
compensation for various items which apparently
are disputed by said petitioners. After closely
studying the list of errors, as well as petitioners’
discussion of the same in their Motion to Remand
Case For Further Hearing and Reconsideration and
Opposition to Motion for Confirmation of Award,
we find that petitioners have amply made out a
case where the voluntary arbitrator failed to apply
the terms and provisions of the Construction
Agreement which forms part of the law applicable
as between the parties, thus committing a grave
abuse of discretion. Furthermore, in granting
unjustified extra compensation to respondent for
several items, he exceeded his powers — all of
which would have constituted ground for vacating
the award under Section 24 (d) of the Arbitration
Law.
But the respondent trial court's refusal to look into
the merits of the case, despite prima facie showing
of the existence of grounds warranting judicial
review, effectively deprived petitioners of their
opportunity to prove or substantiate their
allegations. In so doing, the trial court itself
committed grave abuse of discretion. Likewise, the
appellate court, in not giving due course to the
petition, committed grave abuse of discretion.
Respondent courts should not shirk from exercising
their power to review, where under the applicable
laws and jurisprudence, such power may be
rightfully exercised; more so where the objections
raised against an arbitration award may properly
constitute grounds for annulling, vacating or
modifying said award under the laws on arbitration.
WILLIAM GOLANGCO CONSTRUCTION (WGCC) vs.
RAY BURTON DEV’T CORP (RBDC)
FACTS: Petitioner RBDC and private respondent
WGCC entered into a Contract for the construction
of the Elizabeth Place (Office/Residential
Condominium). Private respondent WGCC filed a
complaint with a request for arbitration with the
Construction Industry Arbitration Commission
(CIAC), seeking to collect P53,667,219.45 and
interest charges.
Petitioner RBDC filed a Motion to Dismiss the
aforesaid complaint on the ground of lack of
jurisdiction. It is petitioner's contention that the
CIAC acquires jurisdiction over disputes arising from
or connected with construction contracts only when
the parties to the contract agree to submit the
same to voluntary arbitration. In the contract
between petitioner and private respondent,
petitioner claimed that only disputes by reason of
differences in interpretation of the contract
documents shall be deemed subject to arbitration.
Private respondent averred that the claims set forth
in the complaint require contract interpretation and
are thus cognizable by the CIAC pursuant to the
arbitration clause in the construction contract
between the parties. Moreover, even assuming that
the claims do not involve differing contract
interpretation, they are still cognizable by the CIAC
as the arbitration clause mandates their direct filing
therewith. The CIAC denied RBDC’s motion to
dismiss, saying that the bare agreement to submit a
construction to dispute to arbitration vests in the
Commission original and exclusive jurisdiction by
virtue of Sec. 4 E.O. No. 1008.
Petitioner RBDC filed with the CA a petition for
Certiorari and Prohibition contending that CIAC
acted without or in excess of its jurisdiction when it
issued the questioned order despite the clear
showing that there is lack of jurisdiction on the
issue submitted by private respondent for
arbitration.
The CA granted the petition for certiorari, ruling
that the CIAC had no jurisdiction over the subject
matter of the case because the parties agreed that
only disputes regarding differences in interpretation
of the contract documents shall be submitted for
arbitration, while the allegations in the complaint
make out a case for collection of sum of money.
ISSUE:
1. won the CA acted with 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 reconsideration of the assailed
CIAC Order and for failure to attach to the petition
the relevant pleadings in CIAC Case No. 13-2002
2. WON the the CIAC has jurisdiction over the case
HELD:
1. YES. Petitioner is correct that it was grave error
for the CA to have given due course to respondent's
petition for certiorari despite its failure to attach
copies of relevant pleadings in CIAC Case No. 13-
2002. (See Sec. 1, Rule 65, in relation to Sec. 3, Rule
46, of the Revised Rules of Court)
The afore-quoted provisions are plain and
unmistakable. Failure to comply with the
requirement that the petition be accompanied by a
duplicate original or certified true copy of the
judgment, order, resolution or ruling being
challenged is sufficient ground for the dismissal of
said petition.
In the present case, herein petitioner strongly
argued against the CA's granting due course to the
petition, pointing out that pertinent pleadings have
not been attached to the petition. Herein
respondent (petitioner before the CA) argued that it
did not deem such pleadings or documents
germane to the petition. However, in the CA
Resolution the appellate court itself revealed the
necessity of such documents by ordering the
submission of copies of pleadings relevant to the
petition. Indeed, such pleadings are necessary for 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
sufficient ground for the dismissal of the petition.
The CA did not give any convincing reason why the
rule regarding requirements for filing a petition
should be relaxed in favor of herein respondent.
Therefore, it was error for the CA to have given due
course to the petition for certiorari despite herein
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.
2. YES. Even on the main issue regarding the CIAC's
jurisdiction, the CA erred in ruling that said
arbitration body had no jurisdiction over the
complaint filed by herein petitioner. There is no
question that, as provided under Section 4 of
Executive Order No. 1008, also known as the
Construction Industry Arbitration Law, the CIAC has
original and exclusive jurisdiction over disputes
arising from, or connected with, contracts entered
into by parties involved in construction in the
Philippines and all that is needed for the CIAC to
acquire jurisdiction is for the parties to agree to
submit the same to voluntary arbitration.
Nevertheless, respondent insists that the only
disputes it agreed to submit to voluntary arbitration
are those arising from interpretation of contract
documents. It argued that the claims alleged in
petitioner's complaint are not disputes arising from
interpretation of contract documents; hence, the
CIAC cannot assume jurisdiction over the case. –
This contention is insubstantial. (see arbitration
clause, 17.1 and 17.2)
In gist, the foregoing provisions mean that herein
parties agreed to submit disputes arising by reason
of differences in interpretation of the contract to a
Board of Arbitrators the composition of which is
mutually agreed upon by the parties, and, as a last
resort, any other dispute which had not been
resolved by the Board of Arbitrators shall be
submitted to the Construction Arbitration Authority
created by the government, which is no other than
the CIAC. Moreover, other matters not dealt with
by provisions of the contract or by special
agreements shall be governed by provisions of the
Construction Industry Arbitration Law, or Executive
Order No. 1008.
The Court finds that petitioner's claims that it is
entitled to payment for several items under their
contract, which claims are, in turn, refuted by
respondent, involves a dispute arising from
differences in interpretation of the contract. Verily,
the matter of ascertaining the duties and
obligations of the parties under their contract all
involve interpretation of the provisions of the
contract. Therefore, if the parties cannot see eye to
eye regarding each other’s obligations, i.e., the
extent of work to be expected from each of the
parties and the valuation thereof, this is properly a
dispute arising from differences in the
interpretation of the contract.
Section 4 of Executive Order No. 1008 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 and all that is needed for the CIAC to
acquire jurisdiction is for the parties to agree to
submit the same to voluntary arbitration, there can
be no other conclusion but that the CIAC had
jurisdiction over petitioner's complaint.
Furthermore, Section 1, Article III of the CIAC Rules
of Procedure Governing Construction Arbitration
(CIAC Rules) further provide that [a]n 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. Thus, even if there is no
showing that petitioner previously brought its
claims before a Board of Arbitrators constituted
under the terms of the contract, this circumstance
would not divest the CIAC of jurisdiction.
It bears to emphasize that the mere existence of an
arbitration clause in the construction contract is
considered by law as an agreement by the parties to
submit existing or future controversies between
them to CIAC jurisdiction, without any qualification
or condition precedent. To affirm a condition
precedent in the construction contract, which
would effectively suspend the jurisdiction of the
CIAC until compliance therewith, would be in
conflict with the recognized intention of the law
and rules to automatically vest CIAC with
jurisdiction over a dispute should the construction
contract contain an arbitration clause.
Moreover, the CIAC was created in recognition of
the contribution of the construction industry to
national development goals. Realizing that delays in
the resolution of construction industry disputes
would also hold up the development of the country,
Executive Order No. 1008 expressly mandates the
CIAC to expeditiously settle construction industry
disputes and, for this purpose, vests in the CIAC
original and exclusive jurisdiction over disputes
arising from, or connected with, contracts entered
into by the parties involved in construction in the
Philippines.
FEDERAL BUILDERS, INC vs. POWER FACTORS, INC
FACTS: Federal, the general contractor of the
Bullion Mall under a construction agreement with
Bullion Investment and Development Corporation
(BIDC). Federal engaged respondent Power Factors
Inc. (Power) as its subcontractor for the electric
works at the Bullion Mall and the Precinct Building.
Power demanded the Federal for the unpaid
amount for work done by Power for the Bullion Mall
and the Precinct Building which answered that its
outstanding balance of P11.444,658.97 should be
addressed directly to BIDC. Nonetheless, Power
made several demands on Federal to no avail.
The Power filed a request for arbitration in the CIAC
invoking the arbitration clause of the Contract of
Service reading as follows: ARBITRATION
COMMITTEE - Construction Industry Arbitration
Commission (CIAC) which shall have original and
exclusive jurisdiction over the aforementioned
disputes between the parties.
Federal moved to dismiss the case on the ground
that CIAC had no jurisdiction over the case
inasmuch as the Contract of Service between
Federal and Power had been a mere draft that was
never finalized or signed by the parties. Federal
contended that in the absence of the agreement for
arbitration, the CIAC had no jurisdiction to hear and
decide the case.
The CIAC set the case for hearing, and directing that
Federal's motion to dismiss be resolved after the
reception of evidence of the parties. Federal did not
thereafter participate in the proceedings until the
CIAC rendered the Final Award.
CA affirmed CIAC’s decision but with modification as
to the amounts due to Power.
The CA explained that the CIAC Revised Rules of
Procedure stated that the agreement to arbitrate
need not be signed by the parties; that the consent
to submit to voluntary arbitration was not
necessary in view of the arbitration clause
contained in the Contract of Service; and that
Federal's contention that its former counsel's act of
manifesting its consent to the arbitration stipulated
in the draft Contract of Service did not bind it was
inconsequential on the issue of jurisdiction.
ISSUE: WON the CA erred in upholding CIAC's
jurisdiction over the present case; and
HELD:
CIAC had jurisdiction. The need to establish a
proper arbitral machinery to settle disputes
expeditiously was recognized by the Government in
order to promote and maintain the development of
the country's construction industry. With such
recognition came the creation of the CIAC through
Executive Order No. 1008 (E.O. No. 1008), a.k.a
Construction Industry Arbitration Law.
Section 4 of E.O. No. 1008 provides: 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. x x x
Under the CIAC Revised Rules of Procedure
Governing Construction Arbitration (CIAC Revised
Rules), all that is required for the CIAC to acquire
jurisdiction is for the parties of any construction
contract to agree to submit their dispute to
arbitration.
Also, Section 2.3 of the CIAC Revised
Rules states that the agreement may be reflected in
an arbitration clause in their contract or by
subsequently agreeing to submit their dispute to
voluntary arbitration. The CIAC Revised Rules
clarifies, however, that the agreement of the parties
to submit their dispute to arbitration need not be
signed or be formally agreed upon in the contract
because it can also be in the form of other modes of
communication in writing.
(see Sec. 4.1, 4.1.1 4.1.2, RULE 4)
The liberal application of procedural rules as to the
form by which the agreement is embodied is the
objective of the CIAC Revised Rules. Such liberality
conforms to the letter and spirit of E.O. No. 1008
itself which emphasizes that the modes of voluntary
dispute resolution like arbitration are always
preferred because they settle disputes in a speedy
and amicable manner. They likewise help in
alleviating or unclogging the judicial dockets. Verily,
E.O. No. 1008 recognizes that the expeditious
resolution of construction disputes will promote a
healthy partnership between the Government and
the private sector as well as aid in the continuous
growth of the country considering that the
construction industry provides employment to a
large segment of the national labor force aside from
its being a leading contributor to the gross national
product.
The jurisdiction of the CIAC is over the dispute, not
over the contract between the parties. Section 2.1,
Rule 2 of the CIAC Revised Rules particularly
specifies that the CIAC has original and exclusive
jurisdiction over construction disputes, whether
such disputes arise from or are merely connected
with the construction contracts entered into by
parties, and whether such disputes arise before or
after the completion of the contracts. Accordingly,
the execution of the contracts and the effect of the
agreement to submit to arbitration are different
matters, and the signing or non-signing of one does
not necessarily affect the other. In other words, the
formalities of the contract have nothing to do with
the jurisdiction of the CIAC.
Federal contends that there was no mutual consent
and no meeting of the minds between it and Power
as to the operation and binding effect of the
arbitration clause because they had rejected the
draft service contract. - The contention of Federal
deserves no consideration.
Under Article 1318 of the Civil Code, a valid
contract should have the following essential
elements, namely: (a) consent of the contracting
parties; (b) object certain that is the subject matter
of the contract; and (c) cause or consideration.
Moreover, a contract does not need to be in writing
in order to be obligatory and effective unless the
law specifically requires so.
Pursuant to Article 135618 and Article 135719 of
the Civil Code, contracts shall be obligatory in
whatever form they may have been entered into,
provided that all the essential requisites for their
validity are present. Indeed, there was a contract
between Federal and Power even if the Contract of
Service was unsigned. Such contract was obligatory
and binding between them by virtue of all the
essential elements for a valid contract being
present.
It clearly appears that the works promised to be
done by Power were already executed albeit still
incomplete; that Federal paid Power ₱l ,000,000.00
representing the originally proposed downpayment,
and the latter accepted the payment; and that the
subject of their dispute concerned only the
amounts still due to Power.
With the parties having no issues on the provisions
or parts of the Contract of Service other than that
pertaining to the downpayment that Federal was
supposed to pay, Federal could not validly insist on
the lack of a contract in order to defeat the
jurisdiction of the CIAC. As earlier pointed out, the
CIAC Revised Rules specifically allows any written
mode of communication to show the parties' intent
or agreement to submit to arbitration their present
or future disputes arising from or connected with
their contract.
The agreement contemplated in the CIAC Revised
Rules to vest jurisdiction of the CIAC over the
parties' dispute is not necessarily an arbitration
clause to be contained only in a signed and finalized
construction contract. The agreement could also be
in a separate agreement, or any other form of
written communication, as long as their intent to
submit their dispute to arbitration is clear. The fact
that a contract was signed by both parties has
nothing to do with the jurisdiction of the CIAC, and
this is the explanation why the CIAC Revised Rules
itself expressly provides that the written
communication or agreement need not be signed
by the parties.
Although the agreement to submit to arbitration
has been expressly required to be in writing and
signed by the parties therein by Section 422 of
Republic Act No. 876 (Arbitration Law), the
requirement is conspicuously absent from the CIAC
Revised Rules, which even expressly allows such
agreement not to be signed by the parties therein.
Consistent with the policy of encouraging
alternative dispute resolution methods, therefore,
any doubt should be resolved in favor of arbitration.
In this connection, the CA correctly observed that
the act of Atty. Albano in manifesting that Federal
had agreed to the form of arbitration was
unnecessary and inconsequential considering the
recognition of the value of the Contract of Service
despite its being an unsigned draft.