Construction Arbitration.doc

CASES IN CBA & ADR According to 2018 syllabus of Atty. Josh Ventura

C. Construction Arbitration 9. (MCWD vs. MACTAN ROCK INDUSTRIES, INC., (G.R. NO. 172438, JULY 4, 2012)

METROPOLITAN CEBU WATER DISTRICT, Petitioner,

G.R. No. 172438 Present:

VELASCO, JR., J., Chairperson,

- versus -

PERALTA, MENDOZA, MACTAN ROCK INDUSTRIES, INC., Respondent.

REYES,*ﾧ and PERLAS-BERNABE, JJ.

Promulgated:

July 4, 2012 x ---------------------------------------------------------------------------------------- x DECISION MENDOZA, J.:

This is a petition for review on certiorari under Rule 45 assailing the February 20, 2006 Decision[1]ﾧ and the March 30, 2006 Resolution[2]ﾧ of the Court of Appeals (CA) in CAG.R.

Sacha May R. Chavez

CASES IN CBA & ADR According to 2018 syllabus of Atty. Josh Ventura

CEB SP. No. 00623.

THE FACTS Petitioner Metropolitan Cebu Water District (MCWD) is a government-owned and controlled corporation (GOCC) created pursuant to Presidential Decree (PD) No. 198,[3] ﾧ as amended, with its principal office address at the MCWD Building, Magallanes corner Lapu-Lapu Streets, Cebu City.[4] ﾧ It is mandated to supply water within its service area in the cities of Cebu, Talisay, Mandaue, and Lapu-Lapu and the municipalities of Compostela, Liloan, Consolacion, and Cordova in the Province of Cebu.[5]ﾧ Respondent Metro Rock Industries, Inc. (MRII) is a domestic corporation with principal office address at the 2nd Level of the Waterfront Cebu Hotel and Casino, Lahug, Cebu City.[6]ﾧ On May 19, 1997, MCWD entered into a Water Supply Contract[7]ﾧ (the Contract) with MRII wherein it was agreed that the latter would supply MCWD with potable water, in accordance with the World Health Organization (WHO) standard or the Philippine national standard, with a minimum guaranteed annual volume.[8]ﾧ On March 15, 2004, MRII filed a Complaint[9]ﾧ against MCWD with the Construction Industry Arbitration Commission (CIAC), citing the arbitration clause (Clause 18)[10] ﾧ of the Contract. The case was docketed as CIAC Case No. 12-2004. In the said complaint, MRII sought the reformation of Clause 17 of the Contract, or the Price Escalation/De-Escalation Clause, in order to include Capital Cost Recovery in the price escalation formula, and to have such revised formula applied from 1996 when the bidding was conducted, instead of from the first day when MRII started selling water to MCWD. It also sought the payment of the unpaid price escalation/adjustment, and the payment of unpaid variation/extra work order and interest/cost of money up to December 31, 2003.[11]ﾧ On May 7, 2002, MCWD filed its Answer[12]ﾧ dated April 27, 2004, which included a motion to dismiss the complaint on the ground that the CIAC had no jurisdiction over the case, as the Contract was not one for construction or infrastructure. The CIAC thereafter issued an order[13] ﾧ denying MCWDs motion to dismiss, and calling the parties to a preliminary conference for the review and signing of the Terms of Reference.[14]ﾧ

Sacha May R. Chavez

CASES IN CBA & ADR According to 2018 syllabus of Atty. Josh Ventura

MCWD, thus, filed a petition for certiorari[15]ﾧ under Rule 65 with the CA, questioning the jurisdiction of the CIAC. The petition was docketed as CA-G.R. SP. No. 85579 (First Petition). Meanwhile, the CIAC proceeded with the preliminary conference scheduled on June 10 and July 22, 2004 which MWCD opted not to attend. MRII and the CIAC both signed the Terms of Reference. Pursuant to the Terms of Reference and the CIAC Order dated July 22, 2004, MRII submitted its documentary evidence and affidavits of its witnesses.[16]ﾧ

On August 27, 2004, MRII submitted its Formal Offer of Evidence and its memorandum of arguments in the form of a proposed/draft decision. MCWD did not attend the hearings. It did not submit evidence other than those annexed to its Answer. Neither did it file a formal offer of evidence, or a memorandum of legal arguments.[17]ﾧ Decision of the CIAC The CIAC promulgated its Decision[18] ﾧ on April 14, 2005, the dispositive portion of which reads: WHEREFORE[,] premises considered, judgment is hereby rendered as follows: 1.

Ordering the reformation of Clause 17 of the Water Supply Contract to read:

17[.] Price Escalation and/or De-Escalation shall be based on the parametric formula: 17.1

Power Rate Price Adjustment/Power Cost Adjustment

Current Power Rate - Base Power Rate x 30% of base selling price of water Base Power Rate 17.2 Consumer Price Index (CPI) Adjustment/Operating Cost Adjustment: Current CPI Base CPI x 40% of base selling price of water Base CPI 17.3 Capital Cost Recovery Adjustment: Current Peso to Base Peso to US$ US$ Exchange Rate Exchange Rate x 30% of base selling price of water Sacha May R. Chavez

CASES IN CBA & ADR According to 2018 syllabus of Atty. Josh Ventura

Base Peso to US $ Exchange Rate Price escalation shall be reckoned from January 1999 when the water was first delivered by Mactan Rock Industries, Inc. to the MCWD facilities in Mactan. The base CPI, base US$ Exchange Rate and the Base Power Rate shall be the prevailing rate in January 1999, while the Base Selling Price of water shall mean the 1996 rate per cubic meter of water as provided for in the Water Supply Contract. 2.

Ordering Respondent Metropolitan Cebu Water District to pay Claimant, Mactan Rock Industries, Inc[.] under the reformed Clause 17 of the Water Supply Contract, the net amount of Php12,126,296.70 plus legal interest of six percent (6%) per annum from the (sic) March 15, 2004, the date of filling (sic) of the case with the Construction Industry Arbitration Commission, the rate increased to twelve percent (12%) per annum from the date the herein Decision have (sic) become final and executory until the foregoing amounts shall have been fully paid[.]

3.

Claimant Mactan Rock Industries, Inc. and Metropolitan Cebu Water District shall share equally the cost of arbitration.

SO ORDERED.[19]ﾧ Decision of the CA in CA-G.R. SP No. 85579 Petition for certiorari under Rule 65 with the Court of Appeals questioning the jurisdiction of the CIAC Meanwhile, on October 28, 2005, the CA in its decision[20]ﾧ in the First Petition upheld the jurisdiction of the CIAC over the case. The CA held that when parties agree to settle their disputes arising from or connected with construction contracts, the CIAC acquires primary jurisdiction.[21]ﾧ Citing Philrock Inc. v. Construction Industry Arbitration Commission,[22]ﾧ the CA stated that the CIAC may resolve not only the merits of such controversies, but may also award damages, interest, attorneys fees, and expenses of litigation, when appropriate.[23]ﾧ

Second, the CA held that the claims in question fall under the jurisdiction of the CIAC. Thus: Xxx Section 4 of Executive Order No. 1008, otherwise known as the Construction Industry Arbitration Law delineates CIACs jurisdiction as original and exclusive jurisdiction over disputes arising from, or connected with, contracts entered into by parties involved in construction in the Philippines, whether the

Sacha May R. Chavez

CASES IN CBA & ADR According to 2018 syllabus of Atty. Josh Ventura

disputes arise before or after the completion of the contract, or after abandonment thereof. Moreover, Section 5 (k) of Republic Act No. 9184 otherwise known as [the] Government Procurement Reform Act expressly defines infrastructure project as including water supply[,] construction, rehabilitation[,] demolition, repair, restoration and maintenance. Consistent with the above-mentioned policy of encouraging alternative dispute resolution methods, courts should liberally construe arbitration clauses. Provided such clause is susceptible of an interpretation that covers the asserted dispute, an order to arbitrate should be granted. Any doubt should be resolved in favor of arbitration. It is to be highlighted that the dispute in the case at bar arose from the parties incongruent positions with regard to clause 17 of the Water Supply Contract[,] specifically the price escalation/adjustment. The instant case involves technical discrepancies that are better left to an arbitral body that has expertise in those areas. Nevertheless, in any event, the inclusion of an arbitration clause in a contract does not ipso facto divest the courts of jurisdiction to pass upon the findings of arbitral bodies, because the awards are still judicially reviewable under certain conditions.[24]ﾧ (Citations omitted.) MCWDs motion for reconsideration of the decision in the First Petition was still pending when it filed the petition for review[25]ﾧ under Rule 43 (Second Petition) appealing the decision of the CIAC. The motion for reconsideration was eventually denied in a Resolution[26]ﾧ dated May 3, 2006. MCWD did not appeal from the denial of the motion. It, thus, became final and executory. [27]ﾧ

Decision of the CA in CA-G.R. CEB SP. No. 00623 Petition for review under Rule 43 appealing the decision of the CIAC Aggrieved by the CIAC Decision, MCWD filed a petition for review under Rule 43 with the CA which was docketed as CA-G.R. CEB SP. No. 00623. The CA, however, dismissed the petition in its Decision dated February 20, 2006. The Court therein stated that the issue of jurisdiction had already been resolved by the 18th Division in the First Petition, where the CA upheld the jurisdiction of the CIAC over Arbitration Case No. 12-2004. Citing jurisprudence, the CA also ruled that there being an arbitration clause in the Contract, the action for reformation of contract instituted by MRII in this case fell squarely

Sacha May R. Chavez

CASES IN CBA & ADR According to 2018 syllabus of Atty. Josh Ventura

within the jurisdiction of the CIAC, not the courts. In relation to this, the CA noted that the present rule is that courts will look with favor upon amicable agreements to settle disputes through arbitration, and will only interfere with great reluctance to anticipate or nullify the action of the arbitrator. MCWD being a signatory and a party to the Water Supply Contract, it cannot escape its obligation under the arbitration clause. [28] The CA also held that the CIAC did not err in finding that the Water Supply Contract is clear on the matter of the reckoning period for the computation of the escalation cost from January 9, 1999, or the first day of delivery of water. Moreover, the CA found that the CIAC did not err in ruling that the contract be reformed to include Capital Cost Recovery in the parametric formula for price escalation. Neither did it err in holding that the Capital Cost Recovery shall be 30% of the Base Selling Price of water as a consequence of the reformation of Clause 17. Finally, the CA stressed that factual findings of administrative agencies which are deemed to have acquired expertise in matters within their respective jurisdictions are generally accorded not only respect but even finality when supported by substantial evidence.[29]ﾧ MCWD filed a motion for reconsideration but it was denied in the CA Resolution dated March 30, 2006. Thus, this petition. ISSUES MCWD raises the following issues in its petition for review: MAY THE CONSTRUCTION INDUSTRY [ARBITRATION] COMMISSION EXERCISE JURISDICTION OVER DISPUTES ARISING FROM A WATER SUPPLY CONTRACT? MAY A PARTY, WHO IS A SIGNATORY TO THE WATER SUPPLY CONTRACT[,] IN EFFECT SUBMITTING ITSELF TO THE JURISDICTION OF THE CONSTRUCTION INDUSTRY ARBITRATION COMMISSION, QUESTION THE JURISDICTION OF [THE] CIAC? DOES THE CONSTRUCTION INDUSTRY ARBITRATION COMMISSION HAVE THE (SIC) JURISDICTION OVER A COMPLAINT PRAYING FOR A REFORMATION OF A WATER SUPPLY CONTRACT? MAY THE COURT OF APPEALS REFUSE TO RENDER A [SIC] JUDGMENT ON AN ISSUE BECAUSE THIS HAS BEEN ALREADY SETTLED IN A DECISION RENDERED BY ANOTHER DIVISION OF THE COURT OF

Sacha May R. Chavez

CASES IN CBA & ADR According to 2018 syllabus of Atty. Josh Ventura

APPEALS IN A PETITION FOR CERTIORARI, EVEN IF THE SAID DECISION HAS NOT YET BEEN (SIC) FINAL DUE TO A TIMELY FILING OF A MOTION FOR RECONSIDERATION?[30]ﾧ

RULING OF THE COURT Creation of the CIAC The Construction Industry Arbitration Commission (CIAC) was created in 1985 under Executive Order (E.O.) No. 1008 (Creating an Arbitration Machinery for the Philippine Construction Industry), in recognition of the need to establish an arbitral machinery that would expeditiously settle construction industry disputes. The prompt resolution of problems arising from, or connected to, the construction industry was considered necessary and vital for the fulfillment of national development goals, as the construction industry provided employment to a large segment of the national labor force, and was a leading contributor to the gross national product. [31] Under Section 4 of E.O. No. 1008, the CIACs jurisdiction was specifically delineated as follows: 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 disputes arise 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; amount of damages and penalties; commencement time and delays; maintenance and defects; payment default of employer or contractor and changes in contract cost.

Excluded from the coverage of this law are disputes arising from employer-employee relationships which shall continue to be covered by the Labor Code of the Philippines. (Underscoring supplied)

Sacha May R. Chavez

CASES IN CBA & ADR According to 2018 syllabus of Atty. Josh Ventura

The jurisdiction of the CIAC as a quasi-judicial body is confined to construction disputes, [32] ﾧ that is, those arising from, or connected to, contracts involving 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.[33] ﾧ The CIAC has jurisdiction over all such disputes whether the dispute arises before or after the completion of the contract.[34]ﾧ Whether the CIAC has jurisdiction over the dispute As earlier stated, following the denial of its motion to dismiss by CIAC, MCWD filed the First Petition with the CA, which decided in favor of MRII and upheld the jurisdiction of the CIAC. Not being in conformity, MCWD filed a motion for reconsideration. While the said motion was pending with the CA, MCWD filed the Second Petition with the same court. Eventually, the motion was denied, and MCWD never appealed the case. Thus, the decision of the CA in the First Petition became final and executory.

The question now is whether such final and executory decision is binding such that courts are generally precluded from passing judgment on the issue of jurisdiction in the present petition. The Court finds in the affirmative. This Court has held time and again that a final and executory judgment, no matter how erroneous, cannot be changed, even by this Court. Nothing is more settled in law than that once a judgment attains finality, it thereby becomes immutable and unalterable. It may no longer be modified in any respect, even if such modification is meant to correct what is perceived to be an erroneous conclusion of fact or law, and regardless of whether the modification is attempted to be made by the court rendering it or by the highest court of the land.[35]ﾧ In its Decision in the First Petition, the CA affirmed the arbitral bodys finding in CIAC Case No. 12-2004 that the case was within its jurisdiction. Such decision having become final, it is beyond the jurisdiction of this Court, or any court or body, for that matter, to review or modify, even supposing for the sake of argument, that it is indeed erroneous. Also, the parties apparently characterized the Contract as one involving construction, as

Sacha May R. Chavez

CASES IN CBA & ADR According to 2018 syllabus of Atty. Josh Ventura

its arbitration clause specifically refers disputes, controversies or claims arising out of or relating to the Contract or the breach, termination or validity thereof, if the same cannot be settled amicably, to an arbitration tribunal, in accordance with E.O. No. 1008, or the Construction Industry Arbitration Law:

V. DISPUTES AND JURISDICTION: 18. Any dispute, controversy or claim arising out of or relating to this contract or the breach, termination or invalidity thereof, if the same cannot be settled amicably, may be submitted for arbitration to an Arbitration Tribunal in accordance with Executive Order No. 1008 dated 4 February 1985, otherwise known as the Construction Industry Arbitration Law and the place of arbitration shall be the City of Cebu, Philippines, otherwise said dispute or controversy arising out of the contract or breach thereof shall be submitted to the court of law having jurisdiction thereof in the city where MCWD is located.[36]ﾧ Had the parties been of the mutual understanding that the Contract was not of construction, they could have instead referred the matter to arbitration citing Republic Act (R.A.) No. 876, or The Arbitration Law. Having been passed into law in 1953, the said statute was already in existence at the time the contract was entered into, and could have been applied to arbitration proceedings other than those specifically within the arbitral jurisdiction of the CIAC. Whether the CA erred in refusing to render judgment on the issue of jurisdiction ___________ On a related matter, MWCD also raises the issue of whether the 19th Division of the CA, Cebu City, erred in refusing to render judgment on the issue of jurisdiction raised in the Second Petition on the ground that it had already been settled by the 18th Division in its decision in the First Petition, even if the 18thDivision decision had not yet become final due to a timely filing of a motion for reconsideration. The Court rules in the negative. The 19th Division was correct in refusing to render judgment on the issue of jurisdiction as, at that time, the issue was still pending before another division of the CA. Litis pendentia is predicated on the principle that a party should not be allowed to vex another more than once regarding the same subject matter and for the same cause of action. It is founded on the public policy that the same subject matter should not be the subject of

Sacha May R. Chavez

CASES IN CBA & ADR According to 2018 syllabus of Atty. Josh Ventura

controversy in courts more than once, in order that possible conflicting judgments may be avoided for the sake of the stability of the rights and status of persons, and also to avoid the costs and expenses incident to numerous suits. [37] With the two petitions then pending before the CA, all the elements of litis pendentia were present, that is, identity of the parties in the two actions, substantial identity in the causes of action and in the reliefs sought by the parties, and identity between the two actions such that any judgment that may be rendered in one case, regardless of which party is successful, would amount to res judicata in the other.[38]ﾧ In both cases, MCWD was the petitioner and MRII, the respondent. Although they differ in form, in essence, the two cases involved a common issue, that is, MCWDs challenge to the jurisdiction of the CIAC over the arbitration proceedings arising from the Water Supply Contract between the petitioner and respondent. To determine whether there is identity of the rights asserted and reliefs prayed for, grounded on the same facts and bases, the following tests may be utilized: (1) whether the same evidence would support and sustain both the first and the second causes of action, also known as the same evidence test; or (2) whether the defenses in one case may be used to substantiate the complaint in the other.[39] ﾧ Also fundamental is the test of determining whether the cause of action in the second case existed at the time of the filing of the first case.[40]ﾧ In the First Petition, MCWD argued that the CIACs issuance of its Order[41]ﾧ dated May 28, 2004 was tainted with grave abuse of discretion amounting to excess or lack of jurisdiction. Thus, MCWD stated in its prayer: WHEREFORE, in light of the premises laid down, petitioner most respectfully prays: 1. Upon the filing of this Petition, a Writ of Preliminary Injunction or restraining order be issued forthwith, enjoining the respondent from proceeding with the hearing of the case until further orders from the Honorable Court of Appeals; 2. After consideration, petitioner also prays that the Order dated May 28, 2004, denying petitioners motion to dismiss be declared without force and effect; 3. Petitioner also prays that the Construction Industry Arbitration Commission be barred from hearing the case filed by Mactan Rock Industries, Inc., private respondent herein.

Sacha May R. Chavez

CASES IN CBA & ADR According to 2018 syllabus of Atty. Josh Ventura

Other measures of relief, which are just and equitable under the foregoing premise are also prayed for.[42]ﾧ The Second Petition, on the other hand, raised the following issues: a. Whether or not the Arbitral Tribunal of CIAC gravely erred in taking and exercising jurisdiction over the complaint filed by the respondent; b. Whether or not the Arbitral Tribunal of CIAC gravely erred in reforming Clause 17 of the Contract; c. Whether or not the same tribunal gravely committed an error in considering Capital Cost Recovery Adjustment in awarding in favor of the complainant, when the same is extraneous to the provisions of the contract;[43]ﾧ Thus, it prayed: WHEREFORE, PREMISES CONSIDERED, it is most respectfully prayed of the Honorable Court that a Judgment be issued reversing the findings of the Arbitral Tribunal of the Construction Industry Arbitration Commission in its Decision dated April 14, 2005, as far as the order of reformation of the water supply contract and in granting the monetary award. It is further prayed that the decision rendered by the Arbitral Tribunal be declared invalid for want of jurisdiction to arbitrate and to order the reformation of the water supply contract; It is also prayed that the decision awarding money to the respondent be strike (sic) down as erroneous and without legal basis for lack of jurisdiction by the Arbitral Tribunal, which rendered the Decision. It is also prayed that a Temporary Restraining Order and a Writ of Preliminary Injunction be issued at the outset, ordering the stay of execution pending the resolution of the issues raised in the Petition. Other measures of relief, which are just and equitable, are also prayed for. [44]ﾧ

In both cases, the parties also necessarily relied on the same laws and arguments in support of their respective positions on the matter of jurisdiction. In the First Petition, in support of its argument, that the CIAC had no jurisdiction to Sacha May R. Chavez

CASES IN CBA & ADR According to 2018 syllabus of Atty. Josh Ventura

arbitrate the causes of action raised by MRII, MCWD cited the portions of the Contract on the obligations of the water supplier, E.O. No. 1008 (specifically Section 4 on jurisdiction), the Rules of Procedure Governing Construction Arbitration (Section 1, Article III). It also alleged that in issuing the order denying its motion to dismiss, the CIAC misread the provisions of LOI No. 1186 and R.A. No. 9184 on the definition of an infrastructure project.[45]ﾧ MRII, however, opined that the CIAC had jurisdiction over the complaint and, therefore, correctly denied petitioners motion to dismiss. MRII argued that certiorari was not a proper remedy in case of denial of a motion to dismiss and that the claims fell squarely under CIACs original and exclusive jurisdiction. MRII, in support of its position, cited Section 1 of LOI No. 1186 and Section 5(k) of R.A. No. 9184. MRII further proposed that, as shown by MCWDs proforma Water Supply Contract, Specifications, Invitation to Submit Proposal, Pre-Bid Conference minutes, Addendum No. 1, and MRIIs Technical and Financial Proposals, the undertaking contemplated by the parties is one of infrastructure and of works, rather than one of supply or mere services.[46]ﾧ In the Second Petition, in support of the issue of jurisdiction, MCWD again relied on Section 4 of E.O. No. 1008 and Section 1, Article III of the Rules of Procedure Governing Construction Arbitration. It also brought to fore the alleged faulty conclusion of MRII that a water supply contract is subsumed under the definition of an infrastructure project under LOI 1186.[47]ﾧ In its Comment, MRII reiterated and adopted its arguments before the CIAC, and insisted that the undertaking contemplated by the parties was one of infrastructure and of works, as distinguished from mere supply from off-the-shelf or from mere services.[48]ﾧ Section 1 of LOI No. 1186, to define infrastructure and Section 5(k) of R.A. No. 9184 to include water supply, were again cited. In support of its arguments, MRII cited anew MCWDs pro-forma Water Supply Contract, Specifications (in its Invitation to Submit Proposal), pronouncements at the Pre-Bid Conference, Addendum No. 1, and MRIIs Technical and Financial Proposals. MRII further extensively reproduced the content of the joint affidavit of Messrs. Antonio P. Tompar and Lito R. Maderazo, MRIIs President/CEO and Financial Manager, respectively.[49]ﾧ Given that the same arguments were raised on the matter of CIAC jurisdiction, the parties thus relied on substantially the same evidence in both petitions. MCWD annexed to both petitions copies of the Water Supply Contract, the complaint filed by MRII with the CIAC, and its Answer to the said complaint. On the other hand, MRII presented Addendum No. 1 to the Water Supply Contract and its Technical and Financial Proposals. Moreover, the first cause of action in the Second Petition, that is, the CIACs having

Sacha May R. Chavez

CASES IN CBA & ADR According to 2018 syllabus of Atty. Josh Ventura

assumed jurisdiction, allegedly unlawfully, over the dispute arising from the Water Supply Contract, obviously existed at the time the First Petition was filed, as the latter case dealt with the jurisdiction of the CIAC over the complaint filed. Finally, any judgment that may be rendered in the First Petition on the matter of whether the CIAC has jurisdiction over the arbitration proceedings, regardless of which party was successful, would amount to res judicata in the Second Petition, insofar as the issue of jurisdiction is concerned. In fact, what MCWD should have done was to appeal to the Court after the denial of its motion for reconsideration in the First Petition. For not having done so, the decision therein became final and, therefore, immutable. Thus, following the above discussion, the 19th Division was correct in refusing to render judgment on the issue of jurisdiction in the Second Petition. Whether the CIAC had jurisdiction to order the reformation of the Water Supply Contract The jurisdiction of courts and quasi-judicial bodies is determined by the Constitution and the law.[50]ﾧ It cannot be fixed by the will of the parties to the dispute, nor can it be expanded or diminished by stipulation or agreement. [51] The text of Section 4 of E.O. No. 1008 is broad enough to cover any dispute arising from, or connected with, construction contracts, whether these involve mere contractual money claims or execution of the works. This jurisdiction cannot be altered by stipulations restricting the nature of construction disputes, appointing another arbitral body, or making that bodys decision final and binding.[52]ﾧ Thus, unless specifically excluded, all incidents and matters relating to construction contracts are deemed to be within the jurisdiction of the CIAC. Based on the previously cited provision outlining the CIACs jurisdiction, it is clear that with regard to contracts over which it has jurisdiction, the only matters that have been excluded by law are disputes arising from employer-employee relationships, which continue to be governed by the Labor Code of the Philippines. Moreover, this is consistent with the policy against split jurisdiction. In fact, in National Irrigation Administration v. Court of Appeals,[53]ﾧ it was held that the CIAC had jurisdiction over the dispute, and not the contract. Therefore, even if the contract preceded the existence of the CIAC, since the dispute arose when the CIAC had already been constituted, the arbitral board was exercising current, and not retroactive, jurisdiction. In the same case, it was held 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

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CASES IN CBA & ADR According to 2018 syllabus of Atty. Josh Ventura

from electing to submit their dispute to the CIAC because this right has been vested upon each party by law. This is consistent with the principle that when an administrative agency or body is conferred quasi-judicial functions, all controversies relating to the subject matter pertaining to its specialization are deemed to be included within its jurisdiction since the law does not sanction a split of jurisdiction, as stated in Pea v. Government Service Insurance System.[54]ﾧ In Pea, the Court held that although the complaint for specific performance, annulment of mortgage, and damages filed by the petitioner against the respondent included title to, possession of, or interest in, real estate, it was well within the jurisdiction of the Housing and Land Use Regulatory Board (HLURB),a quasi-judicial body, as it involved a claim against the subdivision developer, Queens Row Subdivision, Inc., as well as the Government Service Insurance System (GSIS). This case was later cited in Badillo v. Court of Appeals,[55]ﾧ where the Court concluded that the HLURB had jurisdiction over complaints for annulment of title. The Court also held that courts will not determine a controversy where the issues for resolution demand the exercise of sound administrative discretion, such as that of the HLURB, the sole regulatory body for housing and land development. It was further pointed out that the extent to which an administrative agency may exercise its powers depends on the provisions of the statute creating such agency. The ponencia further quoted from C.T. Torres Enterprises, Inc. v. Hibionada:[56]ﾧ The argument that only courts of justice can adjudicate claims resoluble under the provisions of the Civil Code is out of step with the fast-changing times. There are hundreds of administrative bodies now performing this function by virtue of a valid authorization from the legislature. This quasi-judicial function, as it is called, is exercised by them as an incident of the principal power entrusted to them of regulating certain activities falling under their particular expertise. In the Solid Homes case for example the Court affirmed the competence of the Housing and Land Use Regulatory Board to award damages although this is an essentially judicial power exercisable ordinarily only by the courts of justice. This departure from the traditional allocation of governmental powers is justified by expediency, or the need of the government to respond swiftly and competently to the pressing problems of the modern world. In Bagunu v. Spouses Aggabao,[57] ﾧ the Court ruled that the RTC must defer the exercise of its jurisdiction on related issues involving the same subject matter properly within its jurisdiction, such as the distinct cause of action for reformation of contracts involving the same property, since the DENR assumed jurisdiction over the lot in question, pursuant to its mandate.

Sacha May R. Chavez

CASES IN CBA & ADR According to 2018 syllabus of Atty. Josh Ventura

In National Housing Authority v. First United Constructors Corporation,[58]ﾧ the Court held that there was no basis for the exclusion of claims for business losses from the jurisdiction of the CIAC because E.O. No. 1008 excludes from the coverage of the law only those disputes arising from employer-employee relationships which are covered by the Labor Code, conveying an intention to encompass a broad range of arbitrable issues within the jurisdiction of CIAC.[59] ﾧ Section 4 provides that (t)he jurisdiction of the CIAC may include but is not limited to x x x, underscoring the expansive character of the CIACs jurisdiction. Very clearly, the CIAC has jurisdiction over a broad range of issues and claims arising from construction disputes, including but not limited to claims for unrealized profits and opportunity or business losses. What E.O. No. 1008 emphatically excludes is only disputes arising from employer-employee relationships.[60]ﾧ Where the law does not delineate, neither should we. Neither the provisions of the Civil Code on reformation of contracts nor the law creating the CIAC exclude the reformation of contracts from its jurisdiction. Jurisprudence further dictates that the grant of jurisdiction over related and incidental matters is implied by law. Therefore, because the CIAC has been held to have jurisdiction over the Contract, it follows that it has jurisdiction to order the reformation of the Contract as well. Whether MCWD can validly refuse to participate in the arbitration proceedings In light of the finality of the CA decision on the matter of jurisdiction, the only remaining issue to be disposed of is whether the CIAC could proceed with the case even if the MCWD refused to participate in the arbitration proceedings. The Court rules in the affirmative. Though one party can refuse to participate in the arbitration proceedings, this cannot prevent the CIAC from proceeding with the case and issuing an award in favor of one of the parties. Section 4.2 of the Revised Rules of Procedure Governing Construction Arbitration (CIAC Rules) specifically provides that where the jurisdiction of the CIAC is properly invoked by the filing of a Request for Arbitration in accordance with CIAC Rules, the failure of a respondent to appear, which amounts to refusal to arbitrate, will not stay the proceedings, notwithstanding the absence of the respondent or the lack of participation of such party. In such cases, the CIAC is mandated to appoint the arbitrator/s in accordance with the Rules, and the arbitration proceedings shall continue. The award shall then be made after receiving the evidence of the claimant. In such a case, all is not lost for the party who did not participate. Even after failing to appear, a respondent is still given the opportunity, under the CIAC Rules, to have the

Sacha May R. Chavez

CASES IN CBA & ADR According to 2018 syllabus of Atty. Josh Ventura

proceedings reopened and be allowed to present evidence, although with the qualification that this is done before an award is issued: 4.2.1 In the event that, before award, the Respondent who had not earlier questioned the jurisdiction of the Tribunal, appears and offers to present his evidence, the Arbitral Tribunal may, for reasons that justifies (sic) the failure to appear, reopen the proceedings, require him to file his answer with or without counterclaims, pay the fees, where required under these Rules, and allow him to present his evidence, with limited right to cross examine witnesses already in the discretion of the Tribunal. Evidence already admitted shall remain. The Tribunal shall decide the effect of such controverting evidence presented by the Respondent on evidence already admitted prior to such belated appearance.

Thus, under the CIAC Rules, even without the participation of one of the parties in the proceedings, the CIAC is still required to proceed with the hearing of the construction dispute. [61]ﾧ This Court has held that the CIAC has jurisdiction over a dispute arising from a construction contract even though only one of the parties requested for arbitration.[62]ﾧ In fact, in Philrock, Inc. v. Construction Industry Arbitration Commission,[63]ﾧ the Court held that the CIAC retained jurisdiction even if both parties had withdrawn their consent to arbitrate. In this case, there being a valid arbitration clause mutually stipulated by the parties, they are both contractually bound to settle their dispute through arbitration before the CIAC. MCWD refused to participate, but this should not affect the authority of the CIAC to conduct the proceedings, and, thereafter, issue an arbitral award. Now, with the CIAC decision being questioned by MCWD, the Court takes a cursory reading of the said decision. It reveals that the conclusions arrived at by CIAC are supported by facts and the law. Article 1359 of the Civil Code states that when there has been a meeting of the minds of the parties to a contract, but their true intention is not expressed in the instrument purporting to embody the agreement by reason of mistake, fraud, inequitable conduct or accident, one of the parties may ask for the reformation of the instrument to the end that such true intention may be expressed. The CIAC, in this case, found that the parametric formula for price escalation reflected in the Water Supply Contract involved two items: Power Rate Price Adjustment (30% of the base selling price of water) and Consumer Price Index Adjustment (40% of the base selling price of water). The remaining 30% of the selling price of water, which should have been for Capital Cost Recovery, was inadvertently left out in this parametric formula. Thus, the Contract should be reformed accordingly to reflect the intention of the parties to include in the price escalation formula the Capital Cost Recovery Adjustment. These conclusions were

Sacha May R. Chavez

CASES IN CBA & ADR According to 2018 syllabus of Atty. Josh Ventura

affirmed by the CA in the assailed decision of February 20, 2006. As noted by MCWD in its reply, however, the dispositive portion of the CIAC decision reforming the price escalation formula is inconsistent with what was stated in the body of the decision. The formula contained in the body of the decision is as follows: PRICE ADJUSTMENT COMPUTATION Based on Reformed Clause 17 of the Water Supply Contract 1.

Power Cost Adjustment: xxx

Current Power Rate Base Power Rate x 30% of Base Selling Price of water Base Power Rate xxx 2. Operating Cost Adjustment - Local xxx Current CPI Base CPI x 30% of 40% of Base Selling Price of Water Base CPI xxx 3. Operating Cost Adjustment Foreign xxx Current Forex Base Forex x 70% of 40% of Base Selling Price of Water Base Forex xxx 4.

Capital Cost Adjustment Local

xxx Current CPI Base CPI x 30% of 30% of Base Selling Price of Water Base CPI xxx

Sacha May R. Chavez

CASES IN CBA & ADR According to 2018 syllabus of Atty. Josh Ventura

5.

Capital Cost Adjustment Foreign

xxx Current Forex Base Forex x 70% of 30% of Base Selling Price of Water Base Forex xxx[64]ﾧ The dispositive portion of the decision, however, reads: WHEREFORE[,] premises considered, judgment is hereby rendered as follows: 1.

Ordering the reformation of Clause 17 of the Water Supply Contract to read: 17[.] Price Escalation and/or De-Escalation shall be based on the parametric formula: 17.1

Power Rate Price Adjustment/Power Cost Adjustment

Current Power Rate Base Power Rate x 30% of Base Selling Price of water Base Power Rate 17.2 Consumer Price Index (CPI) Adjustment/Operatiing (sic) Cost Adjustment: Current CPI Base CPI x 40% of Base Selling Price of Water Base CPI 17.3

Capital Cost Recovery Adjustment:

Current Peso to Base Peso to US$ US$ Exchange Rate Exchange Rate x 30% of base selling price of water Base Peso to US $ Exchange Rate

The general rule is that where there is a conflict between the fallo, or the dispositive part, and the body of the decision or order, the fallo prevails on the theory that the fallo is the final order and becomes the subject of execution, while the body of the decision merely contains the reasons or conclusions of the court ordering nothing. However, where one can clearly and unquestionably conclude from the body of the decision that there was a mistake in the dispositive

Sacha May R. Chavez

CASES IN CBA & ADR According to 2018 syllabus of Atty. Josh Ventura

portion, the body of the decision will prevail.[65]ﾧ Following the reasoning of the CIAC in this case, there are three components to price adjustment: (1) Power Cost Adjustment (30% of the base selling price of water); (2) Operating Cost Adjustment (40% of the base selling price of water); and (3) Capital Cost Adjustment (30% of the base selling price of water). In turn, the second componentOperating Cost Adjustmentis computed based on Local Operating Cost Adjustment (30%), and Foreign Operating Cost Adjustment (70%). Capital Cost Adjustment, on the other hand, is composed of Local Capital Cost Adjustment (30%), and Foreign Capital Cost Adjustment (70%). This is consistent with the formula set forth in the body of the CIAC decision. If the formula in the dispositive portion were to be followed, Operating Cost Adjustment would be computed with the Local Operating Cost Adjustment representing the entire 40% of the base selling price of water instead of just 30% of the Operating Cost Adjustment. Moreover, if the Capital Cost Recovery Adjustment were to be computed based solely on Foreign Capital Cost Recovery Adjustment, it would represent the entire 30% of the base selling price of water, and not just 70% of the Capital Cost Recovery Adjustment. The omission of the marked portions of the formula as stated in the body of the CIAC decision represents substantial changes to the formula for price escalation. It is thus clear that the formula as stated in the body of the decision should govern. WHEREFORE, the petition is DENIED. The Decision and Resolution of the Court of Appeals in C.A.-G.R. CEB SP. No. 00623 are AFFIRMED with the modification that the formula for the computation of the Capital Cost Recovery Adjustment in the fallo of the CIAC decision should be amended to read as follows: WHEREFORE, premises considered, judgment is hereby rendered as follows: 1.

Ordering the reformation of Clause 17 of the Water Supply Contract to read: 17. Price Escalation and/or De-Escalation shall be based on the parametric formula: 17.1.

Sacha May R. Chavez

Power Rate Price Adjustment/Power Cost Adjustment

CASES IN CBA & ADR According to 2018 syllabus of Atty. Josh Ventura

Current Power Rate - Base Power Rate x 30% of base selling price of water Base Power Rate 17.2 Consumer Price Index (CPI) Adjustment/Operating Cost Adjustment: Current CPI Base CPI x 30% of 40% of base selling price of water Base CPI 17.3 Capital Cost Recovery Adjustment: Current Peso to Base Peso to US$ US$ Exchange Rate Exchange Rate x 70% of 30% of base selling price of water Base Peso to US $ Exchange Rate Price escalation shall be reckoned from January 1999 when the water was first delivered by Mactan Rock Industries, Inc. to the MCWD facilities in Mactan. The base CPI, base US$ Exchange Rate and the Base Power Rate shall be the prevailing rate in January 1999, while the Base Selling Price of water shall mean the 1996 rate per cubic meter of water as provided for in the Water Supply Contract. 2.

Ordering Respondent Metropolitan Cebu Water District to pay Claimant, Mactan Rock Industries, Inc. under the reformed Clause 17 of the Water Supply Contract, the net amount of Php12,126,296.70 plus legal interest of six percent (6%) per annum from March 15, 2004, the date of filing of the case with the Construction Industry Arbitration Commission, and twelve percent (12%) per annum from the date this Decision becomes final and executory, until the foregoing amounts shall have been fully paid.

3.

Claimant Mactan Rock Industries, Inc. and Metropolitan Cebu Water District shall share the cost of arbitration equally.

SO ORDERED.

10. PRO BUILDERS, INC., vs. TG UNIVERSAL BUSINESS VENTURES, INC.,(G.R. No. 194960, February 03, 2016

Sacha May R. Chavez

CASES IN CBA & ADR According to 2018 syllabus of Atty. Josh Ventura

PRO BUILDERS, INC., Petitioner, vs. TG UNIVERSAL BUSINESS VENTURES, INC., Respondent. DECISION PEREZ, J.: This Petition for Review on Certiorari assails the Decision1 dated 13 October 2010 and Resolution2 dated 16 December 2010 issued by the Court of Appeals in CA-G.R. SP No. 106407 which modified the Decision of the Arbitral Tribunal of the Construction Industry Arbitration Commission. (CIAC) Factual Antecedents On 29 May 2007, TG Universal Business Ventures, Inc. (TG) entered into an Owner-Contractor Agreement (Agreement) with Pro Builders, Inc. (Pro Builders) for the construction of a 15-storey building at Asiatown LT. Park in Lahug, Cebu City. In consideration of the sum of Seventy Million Pesos (P70,000,000.00), Pro Builders undertook to provide the labor, materials and equipment, and to perform all structural works for the project. On the other hand, TG undertook to pay Pro Builders a down payment of Twenty-One Million Pesos (P21,000,000.00), or equivalent to 30% of the amount of contract. Pursuant to the Agreement, the completion of the project is slated on 31 May 2008 but is subject to extension upon request of Pro Builders to TG, through its Project Manager, Prime Edifice, Inc., on the grounds of force majeure or fortuitous event and/or additional work approved by TG, or any other special circumstances as may be determined by TG.3 Upon signing of the Agreement, Pro Builders posted a performance bond obtained from Prudential Guarantee and Assurance, Inc. The Notice of Award was issued to Pro Builders on 15 May 2007. The project site was turned over to Pro Builders on 22 May 2007. The construction was set to officially begin on 1 June 2007.4 On 19 June 2007, Pro Builders received the 30% down payment equivalent to P21,000,000.00. Extremely unsatisfied with the progress of the works, TG took over the project, hired another contractor to finish the work, and demanded the balance of its overpayment from Pro Builders. The parties failed to reach an amic'able settlement, prompting TG to file a Request for Arbitration with the CIAC praying for the payment of cost to complete the project, amounting to P13,489,807.48.5 Request for Arbitration filed by TG According to the Project Manager, Project Manager, Prime Edifice, Inc., Pro Builders missed its target milestone for July 2007. On 28 August 2007, Project Manager, Prime Edifice, Inc. wrote to Pro Builders raising serious concerns on the latter's ability to complete the project as scheduled. Project Manager, Prime Edifice, Inc. presented a Performance Evaluation for the period ending

Sacha May R. Chavez

CASES IN CBA & ADR According to 2018 syllabus of Atty. Josh Ventura

28 August 2007 showing that Pro Builders only accomplished 13.37% out of the 19.09% target accomplishment or a variance of 5.72%. Project Manager, Prime Edifice, Inc. attributed Pro Builders' failure to meet the target to its inability to deploy the required manpower and equipment. On 31 August 2007, Project Manager, Prime Edifice, Inc. recommended to TG a full takeover by a more competent contractor to take effect immediately. Pro Builders responded to Project Manager, Prime Edifice, Inc. 's letter and alleged that some of the delays were attributable to TG, such as the delayed release of down payment and delivery of owner-supplied materials, particularly the reinforcing bars (rebars). For September 2007, Project Manager, Prime Edifice, Inc. revealed that Pro Builders again failed to meet its September milestones, accomplishing only 18.11 % out of the 33.42% target accomplishment or slippage of-15.32%. Due to the dismal performance of Pro Builders, TG invoked Article 9 of the Agreement or the Option to Complete Work Takeover. Pro Builders refused to turn over the works and demanded the payment of its unpaid progress billings. On 11 January 2008, TG sent a Statement of Account to Pro Builders demanding payment of the excess cost to complete the project amounting to P13,489,807.48, which is broken down as follows: P5,582,92 l. l 0 - unconsumed down payment (21,000,000.00 - 15,417,078.90 assessed value of Pro Builders accomplishment as of 15 October 2007) P7, 771,553 .04 - additional expenses by engaging another contractor P135,333.34 - miscellaneous expenses (violation of Asiatown's guidelines, damage to property, lotrental)6 On 26 February 2008, TG filed a claim against the surety bond and performance bond. The summary ofTG's claim is as follows: Unliquidated down payment Cost to complete

P5,582,921.10 7,771,553.04

Miscellaneous expenses

135,333.34

Litigation expenses

700,000.00

Attorney's fees

300,000.00

Total Claims

P14,489,807.487

Pro Builder's Amended Answer with Counterclaims In its Answer, Pro Builders claimed that TG incurred delay when it only delivered 16% of the total requirement of rebars, an owner-supplied material.1âwphi1 Pro Builders insisted that the Sacha May R. Chavez

CASES IN CBA & ADR According to 2018 syllabus of Atty. Josh Ventura

targeted milestones were duly accomplished. Pro Builders added that the reckoning date of the performance evaluation should be within seven days upon receipt of the 30% down payment. Pro Builders counterclaimed for the following amounts and damages: Unpaid work accomplishment

P2,104,642.11

Compensatory damages

5,000,000.00

Rental deposit of the forms & scaffoldings for the period of one year

1,500,000.00

Surety bond

157,000.00

Construction all risk bond

142,000.00

Performance bond Litigation expenses

96,450.00 1,000,000.00

Exemplary damages

500,000.00

Attorney's fees

200,000.00

Total counterclaims

P10, 700,092.118

An Arbitral Tribunal was created and composed of Jacinto M. Butalid, as Chairman, Guadalupe 0. Mansueto and Kian Hun T. Tiu. The Arbitral Tribunal limited the issues to the following: 1. Who between the parties failed to comply with the terms and conditions of the Contract Agreement? 1.1. Was Respondent-CONTRACTOR in delay in the Performance of the Construction Agreement? 1.2. Was CLAIMANT in delay in the release of down payment and delivery of the OwnerSupplied materials? 2. Is CLAIMANT entitled to its claim for unliquidated down payment in the amount of Php 5,582,921.10? 3. Is CLAIMANT entitled to the amount of Php 7,771,553.04 as cost to complete the Project? 3.1. How much was CLAIMANT's cost to complete the works? 3.2. How much was the Claimant's cost to complete the works IN EXCESS of the balance of the original contract price?

Sacha May R. Chavez

CASES IN CBA & ADR According to 2018 syllabus of Atty. Josh Ventura

4. Is CLAIMANT entitled to its claim of Php 135,333.34 as miscellaneous expenses? 5. Is CLAIMANT entitled to its claim for litigation expenses in the amount of Php700.000.00? If so, how much? 6. Is CLAIMANT entitled to its claim for attorney's fees in the amount of Php300,000.00? If so, how much? 7. Is Respondent-CONTRACTOR entitled to its counterclaim of Php2,104,642.11 as unpaid work accomplishment? 8. Is Respondent-CONTRACTOR entitled to its counterclaim of Php5,000,000.00 as compensatory damages? If so, how much? 9. Is Respondent-CONTRACTOR entitled to its counterclaim of Php 1,500,000.00 as rental deposit of the forms & scaffoldings for the period of one year? 10. Is Respondent-CONTRACTOR entitled to its counterclaim of Php 157,000.00 as cost incurred for its surety bond? 11. Is Respondent-CONTRACTOR entitled to its counterclaim of Php 142,000.00 as cost incurred for the construction all risk bond? 12. Is Respondent-CONTRACTOR entitled to its counterclaim of Php96,450.00 as cost incurred for the performance bond? 13. Is Respondent-CONTRACTOR entitled to its counterclaim of Php I ,000,000.00 as litigation expenses? If so, how much? 14. Is Respondent-CONTRACTOR entitled to its counterclaim of Php500,000.00 as exemplary damages? If so, how much? 15. Is Respondent-CONTRACTOR entitled to its counterclaim of Php200,000.00 as attorney's fees? If so, how much? 16. Is Respondent-Surety solidarily liable on its performance and surety bonds up to the total amount thereof? 17. Whether or not the right of the CLAIMANT to claim against the subject surety and performance bonds of the respondent PRUDENTIAL had already expired and/or become timebarred or deemed waived? 18. Whether or not the CLAIMANT as well as the other third-party Respondents are legally obliged jointly and severally to indemnify, pay or reimburse PRUDENTIAL in the unlikely event that the latter is held liable to pay CLAIMANT by virtue of the subject surety and performance bonds.9

Sacha May R. Chavez

CASES IN CBA & ADR According to 2018 syllabus of Atty. Josh Ventura

ArbitraLTribunal's Decision On 1 October 2008, the Arbitral Tribunal rendered a Decision , the dispos1tive portion of which reads: In view of the foregoing, it is hereby ordered that: 1. [TG] to pay [Pro Builders] for unpaid accomplishment in the amount of Php2, 104,642.11. 2. [Pro Builders] to pay [TG] the amount of Php58,333.34 miscellaneous expenses as reimbursement of the said amount paid by [TG] for the rental of the staging area used by the [Pro Builders]. OFFSETTING Number 1 and 2, [TG] shall pay CONTRACTOR PRO Builders, Inc. the amount of Php2,046,308.77. [TG's] claim for Unliquidated Down Payment, Cost to Complete the works, miscellaneous expenses except rental of the staging area, exemplary damages, litigation expenses and attorney's fees are denied for lack of merits. [Pro Builders'] claim for compensatory damages, exemplary damages, rental deposit of forms and scaffoldings, cost of Surety Bond, Performance Bond and All Risk Bond, litigation expenses and attorney's fees are denied for lack of merits.10 The Arbitral Tribunal found that both parties failed to comply with their respective obligations and responsibilities under the Agreement.1awp++i1 The Arqitral Tribunal expounded that Pro Builders failed to meet its target due to inability to deploy the required resources, i.e. manpower and equipment. Pro Builders also committed violations of concrete protocol. On the other hand, TG made the down payment only on 19 June 2007 and not upon execution of the Agreement as provided therein. TG also did not pay Pro Builders' progress billings and change order and incurred delay in the delivery of the owner-supplied rebars. The Arbitral Tribunal denied TG's claim of P5,582,921.10 representing the unliquidated portion of the down payment. The Arbitral Tribunal gave credence to Pro Builders' billed amount of P23, 104,642.11 as the value of the accomplished works. The Arbitral Tribunal did not agree with TG's claim of P7,771,553.04 as the cost to complete the project. The Arbitral Tribunal held that said value can only be determined after the project has been fully completed. The Arbitral Tribunal favored TG's claim of P58,333.34 for the advanced rental of the staging area after finding that TG paid in advance the rental for a property adjacent to the project site used by Pro Builders. The Arbitral Tribunal did not find any justification to award cost of litigation and compensatory damages to both parties. The Arbitral Tribunal ruled that Pro Builders is entitled to P2, 104,642.11 as the amount of

Sacha May R. Chavez

CASES IN CBA & ADR According to 2018 syllabus of Atty. Josh Ventura

unpaid accomplishment by subtracting the P21,000.000.00 down payment from the total accomplishment of P23, 104,642.11. The Arbitral Tribunal found that Pro Builders is not entitled to its claim for rental deposit for the forms and scaffoldings. With respect to the cost of the bonds, the Arbitral Tribunal held that there is no provision in the contract or in the policy issued by Prudential for the reimbursement of the costs of the bonds. But the Arbitral Tribunal held that Prudential and Pro Builders are solidarily liable on its performance and surety bonds upon the total amount thereof. In the event that Prudential would be made to pay any liability by virtue of the surety and performance bonds, the Arbitral Tribunal stressed that it is only the third-party respondents who will be legally obliged to pay or reimburse the bonding company. Aggrieved, TG filed a petition for review with the Court of Appeals challenging in part the Decision of the Arbitral Tribunal, specifically on the following points: 1. TG was remiss in its obligation when it failyd to give Pro Builders the down payment on time. 2. TG was not entitled to reimbursement of P,5,582,921.10 which was the balance of the unspent 30% down payment. 3. TG was not allowed to charge P7,771,553.04 to Pro Builders representing the cost of what it had spent in completing the construction. 4. TG did not have any right to miscellaneous expenses of P177,200.00. 5. TG was not entitled to attorney's fees an.d expenses for litigation, cost of rectification and exemplary damages.11 The Court of Appeals Decision On 13 October 2010, the Court of Appeals rendered the assailed Decision favoring TG, the decretal portion reads:. ACCORDINGLY, the petition is GRANTED IN PART. The Decision dated October 1, 2008 of the Arbitral Tribunal of the Construction Industry Arbitration Commission in CIAC Case No. 042008 is MODIFIED: a) ordering Pro Builders, Inc. to pay petitioner TG Universal Business Ventures, Inc. P5,582,921.10 as balance of the unspent 30% down payment; P7,771,553.04 as petitioner's cost in completing the subject construction; P77,200.00 as additional miscellaneous expenses; and P500,000.00as attorney's fees and expenses of litigation. b) declaring that petitioner is NOT ENTITLED to cost of rectification and exemplary damages.

Sacha May R. Chavez

CASES IN CBA & ADR According to 2018 syllabus of Atty. Josh Ventura

c) deleting the award of P2, 104,642.11 to Pro Builders Inc. The Decision is AFFIRMED IN ALL OTHER RESPECTS.12 The Court of Appeals found that all inadequate performance was attributable to Pro Builders alone. The appellate court found no delay in the down payment of P2l,000,000.00 as its release on 19 June 2007 coincided with Pro Builder's posting of the surety bond. The Court of Appeals found merit in the claim for P5,582,921.10 by subtracting the down payment of P21,000,000.00 by Pro Builder's accomplishments worth P15,417,078.90. The appellate court sustained TG's estimate of Pro Builder's accomplishment to P15,417,078.90 because it was supported by documentary evidence. The appellate court added that TG's receipt of Pro Builder's progress billings did not estop the former from disputing the real amount of the latter's undertakings in the project. As the cost to complete the balance of the construction, the Court of Appeals held that TG is entitled to payment of P7,771,553.04 when it took over the project. Said amount is supported by documents presented by TG but which were disregarded by the Arbitral Tribunal. The appellate court also awarded P77,200.00 to TG, which is the total cost of damages that Pro Builders caused upon the properties of Asiatown I.T. Park where the project was built. Attorney's fees and expenses of litigation were also awarded to TG by the appellate court because it found that TG was compelled to initiate the proceedings before the Arbitral Tribunal. Pro Builders sought a reconsideration of the unfavorable Decision but it was denied by the Court of Appeals in its Resolution13 dated 16 December 2010. Petition At the outset, Pro Builders implores us to delve into the facts as an exception to the rule that this Court is not a trier of facts. Pro Builders cites as ground the conflicting findings of the Arbitral Tribunal and the Court of Appeals. Pro Builders asserts that the Court of Appeals erred in declaring that its accomplishments is worth only Pl5,417,078.90. Pro Builders refuted the joint evaluation used as basis by the Court of Appeals in denying its valuation on the ground that said joint evaluation was done solely by Project Manager, Prime Edifice, Inc. while Pro Builders' engineers had no participation in the evaluation. Moreover, said evaluation was submitted only on 11 January 2008, long after the contract was terminated. Pro Builders also defend the finding of the Arbitral Tribunal that its progress billings are more accurate and reliable than .TG's valuation. Consequently, Pro Builders asserts that it still has a collectible of P2,104,642.11 and from that amount, the sum of P58,333.34 representing the rental of the staging area, should be deducted. TG then is obliged to pay P2,046,308.77 to Pro Builders. Pro Builders echoes the Arbitral Tribunal's ruling that the cost overrun cannot be computed because at the time the case was submitted to the Arbitral Tribunal, the project was still not finished.

Sacha May R. Chavez

CASES IN CBA & ADR According to 2018 syllabus of Atty. Josh Ventura

Pro Builders questions the award of attorney's fees and expenses of litigation for lack of basis. Finally, Pro Builders avers that TG availed of the wrong remedy when it filed a petition for partial review before the Court of Appeals. Pro Builders maintains that the arbitral award of the CIAC is appealable on questions of law to this Court. OUR RULING Procedural Issue Executive Order (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. Section 19 thereof declares the arbitral award of the CIAC as final and unappealable, except on questions of law, which are appealable to the Supreme Court. By virtue of the amendments introduced by R.A. 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 Court of Appeals 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. The CIAC Revised Rules of Procedure Governing Construction Arbitration provide for the manner and mode of appeal from CIAC decisions or awards in Section 18 thereof, which reads: 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.14 Applying the aforestated rules, the Court of Appeals is correct in taking cognizance of TG's appeal filed via petiti6n for review. Substantive Issues The issues raised by Pro Builders involve a question of fact. A question of fact exists when the issue raised on appeal pertains to the truth or falsity of the alleged facts. If the question posed requires a re-evaluation of the credibility of witnesses, or the existence or relevance of surrounding circumstances and their relationship to each other, the issue is factual.15 The general rule that findings of facts of the Courts of Appeals are deemed conclusive is subject to certain exceptions, such as: (1) when the factual findings of the [Court of Appeals] and the trial court are contradictory; (2) when the findings are grounded entirely on speculation, surmises, or conjectures; (3) when the inference made by the [Court of Appeals] from its findings of fact is manifestly

Sacha May R. Chavez

CASES IN CBA & ADR According to 2018 syllabus of Atty. Josh Ventura

mistaken, absurd, or impossible; (4) when there is grave abuse of discretion in the appreciation of facts; (5) when the [Court of Appeals], in making its findings, goes beyond the issues of the case, and such findings are contrary to the admissions of both appellant and appellee; (6) when the judgment of the [Court of Appeals] is premised on a misapprehension of facts; (7) when the [Court of Appeals] fails to notice certain relevant facts which, if properly considered, will justify a different conclusion; (8) when the findings of fact are themselves confticting; (9) when the findings of fact are conclusions without citation of the specific evidence on which they are based; and (10) when the findings of fact of the [Court of Appeals] are premised on the absence of evidence but such findings are contradicted by the evidence on record.16 Indeed, the factual finding of the Court of Appeals is contrary to the Arbitral Tribunal. This necessitates a review of the evidence adduced in this case. Valuation of Pro Builders' Accomplished Works The focal point of this controversy is the monetary equivalent of the accomplished works of Pro Builders. Based on Pro Builders' computation, which were wholly based on its progress billings, the monetary value of its accomplishments is P22,482,934.34, broken down as follows: Billing Period

Billed Amount

June 1- July 31, 2007

7,187,694.16

August 1-3 1, 2007

6,142,108.17

Sept. 1-30, 2007

6,844,363. 73

Oct. 1-15, 2007

2,308,777.28

SUBTOTAL Change Order TOTAL

Sacha May R. Chavez

22,482,943.34 621,698.77 23,104,642.11 17

CASES IN CBA & ADR According to 2018 syllabus of Atty. Josh Ventura

By deducting the downpayment of P21,000,000.00 from the estimate of P22,482,943 .34 and adding the amount of the change order of P62 l ,698. 77, Pro Builders claims that it is entitled to additional payment of P2, 104,642.11. Per TG's computation, the amount of Pro Builder's accomplishments is only P15,417,078.90, as supported by documentary evidence such as the Joint Evaluation allegedly made by both parties' representatives; photographs showing suspended slabs at the second floor; letter taking note of a joint inspection of the construction; summary of additive and deductive works; and written computation made by Pro Builders of the value of its Work Accomplishment. Thus, TG contends that Pro Builders must return the amount of P5,582,921.10 in excess of the P21,000,000.00 down payment. We are called to determine which of the parties' valuation of accomplished works should be credited. The Arbitral Tribunal gave more credence to the valuation of Pro Builders on the ground that TG's valuation lacked details. On the contrary, the Comi of Appeals favored TG' s valuation. We find Pro Builders' valuation of the accomplished works to be more accurate. A joint evaluation was agreed upon by the parties. Pro Builders initially demanded for a joint assessment of its accomplishment. TG responded that it is amenable for a joint assessment and added that such assessment had already been completed. As found by the Arbitral Tribunal however, the alleged joint evaluation conducted by TG is in fact one-sided. It need not be emphasized that the Arbitral Tribunal's expertise is well recognized in the field of construction arbitration, as CIAC is indeed the body upon which the law vested with exclusive jurisdiction over any dispute arising from, or connected with construction contracts.18 In a letter dated 28 November 2007, Engineer Glenn Realiza, TGU Project Inspector sent his evaluation to Pro Builders' Project-in-Charge, Engineer Jeffrey Blanco (Engr. Blanco), months after the takeover and asked for the latters' feedback. The letter reads: November 28, 2007 Engr. Jeffrey Blanco BPI Project in Charge TGU Project Dear Jeff: I am sending you my evaluation of your accomplishment (structural works only) from foundation to second floor. The additive portion is your accomplishment for the third floor while the deductive covers for your unaccomplished works from foundation to second floor. Please give me your feedback regarding this matter within 3 days so I can finalize the evaluation and forward it to our project manager.

Sacha May R. Chavez

CASES IN CBA & ADR According to 2018 syllabus of Atty. Josh Ventura

Truly yours, Red Glenn H. Realiza TGU Project Inspector19 Project Manager, Prime Edifice, Inc. was appointed as Project Manager by TG Universal and has "authority at the job site throughout the duration of the PROJECT and x x x to certify to the satisfactory completion and implementation of this Agreement."20 Still on 11 January 2008, Project Manager, Prime Edifice, Inc. President Engineer Ed Hitosis wrote to Pro Builders' President Architect Paul G. Morgia demanding the settlement of P13,489,807.48 and inadvertently admitted that assessment of Pro Builders' accomplishment was done only by Project Manager, Prime Edifice, Inc., thus: We have completed the assessment of your accomplishment for the above project as of October 15, 2007 as well as updated the cost of the project given your original scope of work as quoted by the new contractor, ALCCON pursuant to Article 9, "OPTION TO COMPLETE WORK TAKEOVER" of your contract with TG Universal Business Ventures which states: xxxx We have attached our computation for your review. We appreciate your prompt action regarding the settlement of the total amount of PESOS: Thirteen Million Four Hundred Eighty-Nine Thousand Eight Hundred Seven and 48/100 (P13,489,807.48) Only.21 Documents attached to the Joint Evaluation, such as numerous photographs showing the suspended slabs at the second floor and a detailed computation of the works accomplished from mobilization, excavation, concreting works and formworks are self-serving because there was no showing that Pro Builders participated in the computation of their accomplished works. Pro Builders' contention that Engineer Blanco and Engineer Bucol had participated in the project survey but the computation and evaluation were done solely by Project Manager, Prime Edifice, Inc. was sustained by the Arbitral Tribunal. We agree that: The documents on cost overrun (official receipts, check disbursement vouchers, billings, etc) mentioned by the CLAIMANT in its Memorandum/Draft Decision were not participated in by the CONTRACTOR, nor had been confronted by the· CLAIMANT during the hearing for the CONTRACTOR to deny, comment or admit.22 On the other hand, the progress billings prepared by Pro Builders provide an accurate summary of Pro Builders' accomplishments. Article 5.03 of the Agreement states: 5.03 The CONTRACTOR shall submit to the OWNER through the PROJECT MANAGER progress billing based on actual accomplishment of the various phases of the PROJECT. The PROJECT MANAGER shall process, certify to the correctness of, and make appropriate recommendations, and based on the recommendations, the OWNER shall make the actual

Sacha May R. Chavez

CASES IN CBA & ADR According to 2018 syllabus of Atty. Josh Ventura

payments. The appropriate recommendation shall be completed within fifteen (15) calendar days from receipt of complete billing documents. Final Payment shall be made in accordance with Article 17 of this Agreement.23 Clearly, it is the Project Manager's responsibility to evaluate, certify and recommend the payment of the progress billings. Pursuant to the Agreement, the appropriate recommendation should be completed within fifteen (15) calendar days from receipt of complete billing documents. Pro Builders sent four (4) progress billings to TG from August to October 2007. None of these progress billings were acted upon, paid or contested by TG in violation of the Agreement. On account of TG's failure to act upon the progress billings, it had effectively waived its right to question the accuracy and veracity of Pro Builders' computation, thus the amounts stated in the progress billings are deemed valid and binding on TG, thus: Progress Billing Date

% of Accomplishment

Amount

1 August 2007

10.27%

P4,312,616.4924

13 September 2007

19.04%

P7,997,881.4125

1 October 2007

29.21%

P12,104,449.6326

30 October 2007

32.65%

P2,104,642.11 27

In F.F. Cruz & Co., Inc. v. HR Construction Corp.,28the Court held that the owner is barred from contesting the contractor's valuation of the completed works when it waived its right to demand the joint measurement requirement. In the same vein, truly with more reason should it be concluded that TG had effectively waived its right to contest the computations in the progress billings since it failed to even act, one way or the other, on the progress billings within the time allowed under the Agreement. As shown by the numbers, Pro Builders is entitled to payment of P2, 104.,642.11 for unpaid accomplishment of works, which amount is arrived at by subtracting the 30% down payment from the total unpaid billings and adding the change order. Necessarily, TG's claim for cost to complete project is denied in view of its own failure to comply with its obligations under the Agreement. Both Parties were in Breach of the Agreement We likewise affirm the Arbitral Tribunal's finding that both parties failed to comply with their obligations under the Agreement. Records reveal that in the Notice of Award, Pro Builders was instructed "to mobilize within 7 days upon receipt of the 30% down payment."29 TG Universal however failed to pay the down payment during the signing, as provided for in the Agreement. Pro Builders received the down payment only on 19 June 2007.30 Thereafter, Pro Builders sought a clarification from TG as to the exact date of Day 1 of the construction citing as grounds

Sacha May R. Chavez

CASES IN CBA & ADR According to 2018 syllabus of Atty. Josh Ventura

the delay in the receipt of down payment, delay in the delivery of rebars and cement, rebar testing and heavy rainfall causing soil erosion.31 Pro Builders was asked to support its claims with documents. Upon submission by Pro Builders, TG found these submitted documents lacking in particulars. It was also proven during the proceedings before the Arbitral Tribunal that Pro Builders had failed to provide sufficient manpower and equipment which caused further delay to the project. As culled from the circumstances cited above, it is clear that both parties had been remiss in their respective obligations. The respective violations of the parties were encapsulated in the Decision of the Arbitral Tribunal, to wit: [Pro Builders'] failure to comply with its Obligations/Responsibilities Violations of concrete protocol as shown in the Concrete Pouring permits and Pouring Logs (Exhibit "C-26). The [Pro Builders'] Technical and Financial Annexes (TFIA) showing the equipment it will provide, but was not able to do so for the project (Exhibit "C-5"). As testified by Engr. Hitosis and Engr. Realiza of the project Management Team, (Exhibit "R-31 ")the table below shows the type and the number of equipment required in the project, as well as, the actual number furnished by the [Pro Builders]. Equipment

June 1-30, 2007

July 1-31, 2007

August 1-31, 2007

TFI A

Actual

TFI A

Actual

TFI A

Actual

4 Tower Crane

0

0

0

0

2

1

1 POa4y2loader

1

0

1

0

0

0

Back Hoe hb 405

2

1

2

1

2

1

Mini Roller 1 ton

2

2

2

1

2

1

1 bagger mixer

1

0

1

0

1

0

Vibrator

0

2

5

4

5

1

Electric bar cutter

0

2

2

2

2

1

Mdale Crane 25TONE

0

1

0

1

0

1

Required

The [Pro Builders'] Technical and Financial Annexes (TFIA) to the Contract show the number of men to carry out the various phases of work. The table below shows these and the actual number of workmen in the job site. (Joint Affidavit of [TG's] Engineers).

Sacha May R. Chavez

CASES IN CBA & ADR According to 2018 syllabus of Atty. Josh Ventura

Period Covered

No. of Manpower in TFIA

No. of Manpower at Jobsite

June 1-30, 2007

55

45

July 1-31, 2007

83

81

August 1-31, 2007

158

110 xxxx

[TG's) failure to comply with the Obligations/Responsibilities The 30% down payment was made on 19 June 2008, not upon execution of the Agreement on 29 May 2007 as provided therein. Not one of the [Pro Builders'] progress billings (No. 1 to No. 4) and the Change Order was ever paid by the [TG]. [Pro Builders] claims delay in the delivery of the owner-supplied rebars, as follows: a. On 26 June 2007, [TG's] structural engineers, Aromin & Sy, computed bar requirements to be 1,091,964.53 kilograms (Exhibit "R-10-A"). As of 13 July 2007, only 437,990.08 kilograms or re bars were delivered (Exhibits "R-10-B"). b. As of 13 August 2007, a total of 967,954.38 kilograms of rebars were delivered far short of the 1,431,63 7.36 kilograms Per cutting list of re bar requirements from the foundation to the third floor approved by the [TO's] structural engineers (Exhibit "R-12-A"). c. The delivery of the balance of rebars required were done only on 09 October 2007 (Exhibit "C-17"). d. The excavation works for the footings and the foundations of the building was completed by the [TO] only on 24 August 2007, not on 31 July 2007 as required (Affidavit of Arch. Paul O. Morgia, PBJ President, and Engr. Jeffrey Blanco, Project Engineer of the [Pro Builders]). Arbitral Tribunal's Findings On the delay by the [Pro Builders] in the performance of the construction agreement, the [Pro Builders] contends that had [TO] approved their request for the adjustment of Day 1 of the contract in accordance with the Notice of Award, the slippage would have been insignificant, if any, The Notice of Award (Exhibit "R-2") dated 15 May 2007 states, among others, that "you are hereby instructed to mobilize within 7 days upon receipt of the 30% down payment x x x. Project duration shall be 360 calendar days.

Sacha May R. Chavez

CASES IN CBA & ADR According to 2018 syllabus of Atty. Josh Ventura

One of the Admitted Facts (Item 5.1) states that during the Pre-Construction Meeting No. 2 held on 22 May 2007, "Day 1 of the Construction officially slated on June 1, 2007". (Annex B, Supplemental Complaint). On 09 July 2007, [Pro Builders] asked for time extension without specifying the number of days, but was required by the project Manager to submit additional documents (Exhibit "R-8"). On 16 July 2007, [Pro Builders] complied with the submittal of the required documents and asked for the start of Day 1 of the construction to be 15 July 2007 (instead of June 26 as provided for in the Notice of Award). [Pro Builders] contends that this was never acted by the Project Manager of the [TG] (Exhibit "R-9"). What the [Pro Builders] submitted was a Revised Work Schedule, but did not take into account a lot of factors, most especially, the time allocation for each activity. (Annex K, Complaint). There was no S-Curve or PERT/CPM Network diagram submitted by the [Pro Builders] from where the corresponding monthly accomplishment can be assessed. On 02 August 2007, the [Pro Builders] submitted Progress Billing No. 1 covering the period from June 1 to July 31, 2007. (Exhibit "R-25B" & "R-29"). On 28 August 2007, the project Manager wrote the [Pro Builders] raising serious concerns on the latter's ability to complete the project as scheduled (No. 14, Complaint). [Pro Builders'] failure to meet its target could be accounted by its inability to deploy the required resources, i.e. manpower and equipment both of which arc major factors in the concrete production output of the [Pro Builders] (Exhibits "C-6" to "C-10"). [TG] assessed the [Pro Builders'], monthly accomplishment to be behind schedule. The slippage as of 28 August 2007 was (-) 5.72% (Annex "G", Complaint) and (-) 15.32% on 30 September 2007 (Annex "M", Complaint). On the delivery of owner-supplied reinforcing bars, the fact that as of 13 August 2007, 967, 954.38 kilograms or approximately 968 tons had been delivered is undisputed. However, the parties' disagreement is with respect to the quantity of rebars required for the project. The [Pro Builders] presented the transmittal letter dated 25 September 2007 with the attached Rebar Requirement, to wit: a. From foundation to 3rd floor (Exhibit "C-125-c")

- 1, 431, 637.76 kilograms

b. From 4th floor to 9th floor (Exhibit "C-125-b")

- 1, 22S, 020.06 kilograms

c. From 10th floor to Helipad level (Exhibit "C-125-a")

- l, 263, 647.61 kilograms

TOTAL

- 3, 920,505.33 kilograms

Sacha May R. Chavez

CASES IN CBA & ADR According to 2018 syllabus of Atty. Josh Ventura

The rebar requirements from foundation to the 3rd floor as alleged by [Pro Builders] is 1,431,637.76 kilograms as against [TG's] 967,954,38 kilograms. On cross-examination by the Counsel of the [TG's]. Arch. Morgia confirmed that based on their Bill of Quantities the rebar requirement from foundation to the 3rd floor is more of less 900,000 kilograms (TSN, page 266.) In the [Pro Builders'] Bid Form (Exhibit "C-117") and the Bill of Quantities (Exhibit "C-117-a") attached to the Contract, the total rebar requirement of the project from basement to roof deck is 2,705,850.33 'kilograms only. During the hearing, Arch. Morgia alleged that the rebar requirements in the letter of PRO Builders dated 25 September 2007 was due to changes in design. However, there was no evidence presented to establish the [Pro Builders'] contention that there were indeed design changes approved by the [TG]. As to the alleged delay in the delivery of concrete, [TG's] Summary of concrete Pouring Activities (Exhibit "C-25") indicates the dates of delivery, volume of concrete delivered and location in the project of the concrete pouring activities. These data were based on the Concrete Pouring permits of the [Pro Builders], which bear the date of approval and signatures of [TG's] project inspectors. Referring to the circumstances enumerated in the preceding paragraphs, the Arbitral Tribunal finds both parties had failures to comply with their respective obligations and responsibilities as provided for in the Owner-Contractor Agreement.32 (Emphasis supplied) With respect to Pro Builders' counterclaims, the same are correctly denied for lack of factual and legal bases. In sum, we resolve to reinstate in its entirety the 1 October 2008 Decision of the CIAC. WHEREFORE, based on the foregoing, we GRANT the petition. The 13 October 2010 Decision of the Court of Appeals in CA-G.R. SP No. 106407 is REVERSED AND SET ASIDE. The Decision of the Construction Industry Arbitration Commission dated 1 October 2008 in CIAC Case No. 04-2008 is REINSTATED. SO ORDERED.

11. NATIONAL TRANSMISSION CORPORATION, vs. ALPHAOMEGA INTEGRATED CORPORATION, G.R. No. 184295 July 30, 2014 NATIONAL TRANSMISSION CORPORATION, Petitioner, vs. ALPHAOMEGA INTEGRATED CORPORATION, Respondent. DECISION

Sacha May R. Chavez

CASES IN CBA & ADR According to 2018 syllabus of Atty. Josh Ventura

PERLAS-BERNABE, J.: Assailed in this petition for review on certiorari1 are the Decision2 dated April 8, 2008 and the Resolution3 dated August 27, 2008 of the Court of Appeals (CA) in CA-G.R. SP No. 99454 affirming with modification the Final Award4of the Construction Industry Arbitration Commission (CIAC) Arbitral Tribunal in favor of respondent Alphaomega Integrated Corporation (AIC) by increasing petitioner National· Transmission Corporation's (TRANSCO) liability from Pl 7,495,117.44 to Pl 8,896,673.31. The Facts AIC, a duly licensed transmission line contractor, participated in the public biddings conducted by TRANSCO and was awarded six ( 6) government construction projects, namely: (a) Contract .for the Construction & Erection of Batangas Transmission Reinforcement Project Schedule III (BTRP Schedule III Project); (b) Contract for the Construction & Erection of Batangas Transmission Reinforcement Project Schedule I (BTRP Schedule I Project); (c) Contract for the Construction,Erection & Installation of 230 KV and 69 KV S/S Equipment and Various Facilities for Makban Substation under the Batangas Transmission Reinforcement Project (Schedule II) (Makban Substation Project); (d) Contract for the Construction, Erection & Installation of 138 & 69 KV S/S Equipment for Bacolod Substation under the Negros III-Panay III Substation Projects (Schedule II) (Bacolod Substation Project); (e) Contract for the Construction, Erection & Installation of 138 & 69 KV Substation Equipment for the New Bunawan Switching Station Project (Bunawan Substation Project); and (f) Contract for the Construction, Erection & Installation of 138 and 69 KV Substation Equipment for Quiot Substation Project (Quiot Substation Project).5 In the course of the performance ofthe contracts, AIC encountered difficulties and incurred losses allegedly due to TRANSCO’s breach of their contracts, prompting it to surrender the projects to TRANSCO under protest. In accordance with an express stipulation in the contracts that disagreements shall be settled by the parties through arbitration before the CIAC, AIC submitted a request for arbitration before the CIAC on August 28, 2006, and, thereafter, filed an Amended Complaint against TRANSCO alleging that the latter breached the contracts by its failure to: (a) furnish the required Detailed Engineering; (b) arrange a well-established right-of-way to the project areas; (c) secure the necessary permits and clearances from the concerned local government units (LGUs); (d) ensure a continuous supply of construction materials; and (e) carry out AIC’s requests for power shut down. The aforementioned transgressions resultedin protracted delays and contract suspensions for each project,6 as follows: Origin al Contrac Contra t ct Durati on 1)

560

Sacha May R. Chavez

Percenta ge (%) of Original Contract Duration

Duration of Transco-Approved Suspension and/or Extensions 711 days

127%

CASES IN CBA & ADR According to 2018 syllabus of Atty. Josh Ventura

BTRP Schedu le III

days

2) BTRP Schedu le I

270 days

406 days

170%

3) Makba n Substat ion

365 days

452 days

124%

4) Bacolo d Substat ion

360 days

289 days

80%

130 days

39%

5) Bunaw 330 an days Substat ion 6) Quiot Substat ion

300 days

131 days 44% 2119 days7

AIC prayed for judgment declaring all six (6) contracts rescinded and ordering TRANSCO to pay, in addition to what had already been paid under the contracts, moral damages, exemplary damages, and attorney’s fees at ₱100,000.00 each, and a total of ₱40,201,467.19 as actual and compensatory damages.8 TRANSCO, for its part, contended that: (a) it had conducted Detailed Engineering prior to the conduct of the bidding; and (b) it had obtained the necessary government permits and endorsements from the affected LGUs. It asserted that AIC was guilty of frontloading– that is,collecting the bulk of the contract price for work accomplished at the early stages of the project and then abandoning the later stagesof the project which has a lower contract price9 –and that it disregarded the workable portions of the projects not affected by the lack of supplies and drawings. TRANSCO further argued that AIC was estopped from asking for standby fees to cover its overhead expenses during project suspensions considering that the delays, such as the unresolved right-of-way issues and non-availability of materials, were factors already covered by the time extensions and suspensions of work allowed under the contracts.10

Sacha May R. Chavez

CASES IN CBA & ADR According to 2018 syllabus of Atty. Josh Ventura

On April 18, 2007, the CIAC Arbitral Tribunal rendered its Final Award11 in CIAC Case No. 212006 ordering the payment of actual and compensatory damages which AIC would not have suffered had it not been for the project delays attributable to TRANSCO. It found ample evidence to support the claim for the increase in subcontract cost in BTRP Schedule I, as well as such items of cost as house and yard rentals, electric bills, water bills, and maintained personnel, but disallowed the claims for communications bills, maintenance costs for idle equipment, finance charges, and materials cost increases.12 According to the Arbitral Tribunal, even if AIC itself made the requests for contract time extensions, this did not bar its claim for damages as a result of project delayssince a contrary ruling would allow TRANSCO to profit from its own negligence and leave AIC to suffer serious material prejudice as a direct consequence of that negligence leaving it without any remedy at law.13 The Arbitral Tribunal upheld AIC’s right to rescind the contracts in accordancewith Resolution No. 018-2004 of the Government Procurement Policy Board (GPPB), which explicitly gives the contractor the right to terminate the contract if the works are completely stopped for a continuous period of at least 60 calendar days, through no fault of its own, due to the failure of the procuring entity to deliver within a reasonable time, supplied materials, right-of-way, or other items that it is obligated to furnish under the terms of the contract, among others.14 The dispositive portion of the Arbitral Tribunal’s Final Award reads: WHEREFORE, Respondent, National Transmission Corporation [TRANSCO] is hereby ordered to pay Claimant, Alphaomega Integrated Corporation, the following sums: (a) For BTRP Schedule III -

₱6,423,496.67

(b) For BTRP Schedule I -

5,214,202.30

(c) For Makban Substation -

3,075,870.95

(d) For Bacolod Substation -

1,362,936.77

(e) For Bunawan Substation -

820,481.72

(f) For Quiot Substation -

598, 129.03

TOTAL

₱17,495,117.44

Each Party shall shoulder its own cost of arbitration. The foregoing amount of ₱17,495,117.44 shall earn interest at the rate of six percent (6%) per annum from the date of promulgation of this Final Award until it becomes final and executory. Thereafter, the Final Award, including accrued interest, shall earn interest at the rate of 12% per annum until the entire amount due is fully paid.15(Emphasis supplied) Unconvinced, TRANSCO instituted a petition for review16 with the CA. Before filing its comment17 to the petition, AIC moved for the issuance of a writ of execution,18 not for the amount of 17,495,117.44 awarded in the Final Award, but for the increased amount of 18,967,318.49.19 It sought correction of the discrepancies between the amount of the award appearing in the dispositive portion20 and the body of the Final Award.21 The Arbitral Tribunal, Sacha May R. Chavez

CASES IN CBA & ADR According to 2018 syllabus of Atty. Josh Ventura

however, denied AIC’s motion, holding that while the CIAC Revised Rules of Procedure Governing Construction Arbitration (CIAC Rules) would have allowed the correction of the Final Award for evident miscalculation of figures, typographical or arithmetical errors, AIC failed to file its motionfor the purpose within the time limitation of 15 days from its receipt of the Final Award.22 The CA Ruling In the Decision23 dated April 8, 2008, the CAaffirmed the Arbitral Tribunal’s factual findings that TRANSCOfailed to exercise due diligence in resolving the problems regarding the right-ofway and the lack of materials before undertaking the bidding process and entering into the contracts with AIC.24 It found no merit in TRANSCO’s allegation that AIC refused to perform the remaining workable portions of the projects not affected by problems of right-of-way, shutdowns, supplies and drawings, firstly, because the certificates ofaccomplishments issued by TRANSCO in the course of project implementation signifying its satisfaction with AIC’s performance negate such claim and, secondly, because all the orders issued by TRANSCO suspended the contracts not only in part but in their entirety, thus, permitting no work activity at all during such periods.25 The CA upheld the Arbitral Tribunal’s Final Award as having been sufficiently established by evidence but modified the total amount of the award after noting a supposed mathematical error in the computation. Setting aside TRANSCO’s objections, it ruled that when a case is brought to a superior court on appeal every aspect of the case is thrown open for review,26 hence, the subject error could be rectified. The CA held that the correct amount of the award should be ₱18,896,673.31, and not ₱17,495,117.44 as stated in the Arbitral Tribunal’s Final Award.27Dissatisfied, TRANSCO moved for reconsideration28 but was, however, denied by the CA in a Resolution29 dated August 27, 2008, hence, the instant petition. The Issues Before the Court-SC The essential issues for the Court’s consideration are whether or not the CA erred (a) in affirming the CIAC Arbitral Tribunal’s findings that AIC was entitled to its claims for damages as a result of project delays, and (b) in increasing the total amount of compensation awarded in favor of AIC despite the latter’s failure to raise the allegedly erroneous computation of the award before the CIAC in a timely manner, that is, within fifteen (15) days from receipt of the Final Award as provided under Section 17.1 of the CIAC Rules. The Court’s Ruling TRANSCO seeks through this petition a recalibration of the evidencepresented before the CIAC ArbitralTribunal, insisting that AIC is not entitled to any damages not only because it had previously waived all claims for standby fees in case of project delays but had eventually failed to perform the workable portions of the projects. This is evidently a factual question which cannot be the proper subject of the present petition. Section 1, Rule 45 of the Rules of Court provides that a petition for review on certiorariunder the said rule, as in this case, "shall raise only questions of law which must be distinctly set forth." Thus, absent any of the existing

Sacha May R. Chavez

CASES IN CBA & ADR According to 2018 syllabus of Atty. Josh Ventura

exceptions impelling the contrary, the Court is, as a general rule, precluded from delving on factual determinations, as what TRANSCO essentially seeks in this case. Similar to the foregoing is the Court’s ruling in Hanjin Heavy Industries and Construction Co., Ltd. v. Dynamic Planners and Construction Corp.,30 the pertinent portions ofwhich are hereunder quoted: Dynamic maintains that the issues Hanjin raised in its petitions are factual in nature and are, therefore, not proper subject of review under Section 1 of Rule 45, prescribing that a petition under the said rule, like the one at bench, "shall raise only questions of law which must be distinctly set forth." Dynamic’s contention is valid topoint as, indeed, the matters raised by Hanjin are factual, revolving as they do on the entitlement of Dynamic to the awards granted and computed by the CIAC and the CA. Generally, this would be a question of fact that this Court would not delve upon. Imperial v. Jauciansuggests as much. There, the Court ruled that the computation of outstanding obligation is a question of fact: Arguing that she had already fully paid the loan x x x, petitioner alleges that the two lower courts misappreciated the facts when they ruled that she still had an outstanding balance of ₱208,430. This issue involves a question of fact. Such question exists when a doubt or difference arises as to the truth or the falsehood of alleged facts; and when there is need for a calibration of the evidence, considering mainly the credibility of witnesses and the existence and the relevancy of specific surrounding circumstances, their relation to each other and to the whole, and the probabilities of the situation. (G.R. No. 149004, April 14, 2004, 427 SCRA 517, 523-524.) The rule, however, precluding the Court from delving on the factual determinations of the CA, admits of several exceptions. In Fuentes v. Court of Appeals, we held that the findings of facts of the CA, which are generally deemed conclusive, may admit review by the Court in any of the following instances, among others: (1) when the factual findings of the [CA] and the trial court are contradictory; (2) when the findings are grounded entirely on speculation, surmises, or conjectures; (3) when the inference made bythe [CA] from its findings of fact is manifestly mistaken, absurd, or impossible; (4) when there is grave abuse of discretion in the appreciation of facts; (5) when the [CA], in making its findings, goes beyond the issues of the case, and such findings are contrary to the admissions of both appellant and appellee; (6) when the judgment of the [CA] is premised on a misapprehension of facts; (7) when the [CA] fails to notice certain relevant facts which, if properly considered, will justify a different conclusion; (8) when the findings of fact are themselves conflicting;

Sacha May R. Chavez

CASES IN CBA & ADR According to 2018 syllabus of Atty. Josh Ventura

(9) when the findings of fact are conclusions without citation of the specific evidence on which they are based; and (10) when the findings of fact of the [CA] are premised on the absence of evidence but such findings are contradicted by the evidence on record. (G.R. No. 109849, February 26, 1997, 268 SCRA 703, 709) Significantly, jurisprudence teaches that mathematical computations as well as the propriety of the arbitral awards are factual determinations. And just as significant is that the factual findings of the CIAC and CA—in each separate appealed decisions—practically dovetail with each other. The perceptible essential difference, at least insofar as the CIAC’s Final Award and the CA Decision in CA-G.R. SP No. 86641 are concerned, rests merely on mathematical computations or adjustments of baseline amounts which the CIAC may have inadvertently utilized.31 (Emphases and underscoring supplied) In any case, the Court finds no reason to disturb the factual findings of the CIAC Arbitral Tribunal on the matter of AIC’s entitlement to damages which the CA affirmed as being well supported by evidence and properly referred to in the record. It is well-settled that findings of fact of quasijudicial bodies, which have acquired expertise because their jurisdiction is confined to specific matters, are generally accorded not only respect, but also finality, especially when affirmed by the CA.32 The CIAC possesses that required expertise in the field of construction arbitration and the factual findings of its construction arbitrators are final and conclusive, not reviewable by this Court on appeal.33 While the CA correctly affirmed infull the CIAC Arbitral Tribunal’s factual determinations, it improperly modified the amount of the award in favor of AIC, which modification did not observe the proper procedure for the correction of an evident miscalculation of figures, including typographical or arithmetical errors, in the arbitral award. Section 17.1 of the CIAC Rules mandates the filing of a motion for the foregoing purpose within fifteen (15) days from receipt thereof, viz.: Section 17.1 Motion for correction of final award– Any of the parties may file a motion for correction of the Final Award within fifteen (15) days from receipt thereof upon any of the following grounds: a. An evident miscalculation of figures, a typographical or arithmetical error; (Emphasis supplied) xxxx Failure to file said motion would consequentlyrender the award final and executory under Section 18. 1 of the same rules, viz.: Section 18.1 Execution of Award – A final arbitral award shall become executory upon the lapse of fifteen (15) days from receipt thereof by the parties.1âwphi1

Sacha May R. Chavez

CASES IN CBA & ADR According to 2018 syllabus of Atty. Josh Ventura

AIC admitted that it had ample time to file a motion for correction of the Final Award but claimed to have purposely sat on its right to seek correction supposedly as a strategic move against TRANSCO34 and, instead, filed with the CIAC Arbitral Tribunal on June 13, 2007 a "Motion for Issuance of Writ of Execution for the Total Amount of 18,967,318.49 as Embodied in the Final Award."35 The Arbitral Tribunal eventually denied AIC’s aforesaid motion for execution because, despite its merit, the Arbitral Tribunal could not disregard the time-limitation under the CIAC Rules.36 Clearly, having failed to move for the correction of the Final Award and, thereafter, having opted to file insteada motion for execution of the arbitral tribunal’s unopposed and uncorrected Final Award, AIC cannot now question against the correctness of the CIAC’s disposition. Notably, while there is jurisprudential authority stating that "[a] clerical error in the judgment appealed from may be corrected by the appellate court,"37 the application of that rule cannot be made in this case considering that the CIAC Rules provides for a specific procedureto deal with particular errors involving "[a]n evident miscalculation of figures, a typographical or arithmetical error." Indeed, the rule iswell entrenched: Specialis derogat generali. When two rules apply to a particular case, thatwhich was specially designed for the said case must prevail over the other.38 Furthermore, it must be emphasized that the petition for review before the CA was filed by TRANSCO.39 AIC never elevated before the courts the matter concerning the discrepancy between the amount of the award stated in the body of the Final Award and the total award shown in its dispositive portion. The issue was touched upon bythe CA only after AIC raised the same through its Comment (With Motion to Acknowledge Actual Amount of Award)40 to TRANSCO’s petition for review. The CA should not have modified the amount of the award to favor AIC because it is well-settled that no relief can be granted a party who does not appeal41 and that a party who did not appeal the decision may not obtain any affirmative relief from the appellate court other than what he had obtained from the lower court, if any, whose decision is brought up on appeal.42 The disposition, as stated in the fallo of the CIAC Arbitral Tribunal's Final Award, should therefore stand.43 WHEREFORE, the petition is PARTLY GRANTED. The Decision dated April 8, 2008 of the Court of Appeals in CA-G.R. SP No. 99454 is hereby AFFIRMED with MODIFICATION. The compensation awarded in favor of Alphaomega Integrated Corporation in the amount of ₱17,495,117.44, as shown in the fallo of the ·construction Industry Arbitration Commission's Final Award dated April 18, 2007, stands. SO ORDERED.

12. STRONGHOLD INSURANCE COMPANY, INC. v. SPOUSES RUNE AND LEA STROEM, G.R. No. 204689, January 21, 2015 G.R. No. 204689, January 21, 2015 STRONGHOLD INSURANCE COMPANY, INC., Petitioner, v. SPOUSES RUNE AND

Sacha May R. Chavez

CASES IN CBA & ADR According to 2018 syllabus of Atty. Josh Ventura

LEA STROEM, Respondents. DECISION LEONEN, J.: For resolution is a Petition for Review1 under Rule 45 of the Rules of Court assailing the Decision2 dated November 20, 2012 of the Court of Appeals in CA-G.R. CV No. 96017. The Court of Appeals affirmed the Decision3 of the Regional Trial Court of Makati, Branch 133 in Civil Case No. 02-1108 for collection of a sum of money. This case involves the proper invocation of the Construction Industry Arbitration Committee’s (CIAC) jurisdiction through an arbitration clause in a construction contract. The main issue here is whether the dispute — liability of a surety under a performance bond — is connected to a construction contract and, therefore, falls under the exclusive jurisdiction of the CIAC. Spouses Rune and Lea Stroem (Spouses Stroem) entered into an Owners-Contractor Agreement 4 with Asis-Leif & Company, Inc. (Asis-Leif) for the construction of a two-storey house on the lot owned by Spouses Stroem. The lot was located at Lot 4A, Block 24, Don Celso Tuason Street, Valley Golf Subdivision, Barangay Mayamot, Antipolo, Rizal.5chanroblesvirtuallawlibrary On November 15, 1999, pursuant to the agreement, Asis-Leif secured Performance Bond No. LP/G(13)83056 in the amount of P4,500,000.00 from Stronghold Insurance Company, Inc. (Stronghold).6 Stronghold and Asis-Leif, through Ms. Ma. Cynthia Asis-Leif, bound themselves jointly and severally to pay the Spouses Stroem the agreed amount in the event that the construction project is not completed.7chanroblesvirtuallawlibrary Asis-Leif failed to finish the project on time despite repeated demands of the Spouses Stroem.8chanroblesvirtuallawlibrary Spouses Stroem subsequently rescinded the agreement.9 They then hired an independent appraiser to evaluate the progress of the construction project.10chanroblesvirtuallawlibrary Appraiser Asian Appraisal Company, Inc.’s evaluation resulted in the following percentage of completion: 47.53% of the residential building, 65.62% of the garage, and 13.32% of the swimming pool, fence, gate, and land development.11chanroblesvirtuallawlibrary On April 5, 2001, Stronghold sent a letter to Asis-Leif requesting that the company settle its obligations with the Spouses Stroem. No response was received from AsisLeif.12chanroblesvirtuallawlibrary On September 12, 2002, the Spouses Stroem filed a Complaint (with Prayer for Preliminary Attachment)13for breach of contract and for sum of money with a claim for damages against Asis-Leif, Ms. Cynthia Asis-Leif, and Stronghold.14 Only Stronghold was served summons. Ms. Cynthia Asis-Leif allegedly absconded and moved out of the 15 country. chanroblesvirtuallawlibrary

Sacha May R. Chavez

CASES IN CBA & ADR According to 2018 syllabus of Atty. Josh Ventura

On July 13, 2010, the Regional Trial Court rendered a judgment in favor of the Spouses Stroem. The trial court ordered Stronghold to pay the Spouses Stroem ?4,500,000.00 with 6% legal interest from the time of first demand.16 The dispositive portion of the trial court Decision reads:chanRoblesvirtualLawlibrary WHEREFORE, finding plaintiffs’ cause of action to be sufficiently established being supported by evidence on records, judgement is hereby rendered in favor of the plaintiff spouses Rune and Lea Stroem and against the defendant Stronghold Insurance Company Incorporated ordering the latter to pay the plaintiff the sums of:chanRoblesvirtualLawlibrary 1) Php4,500,000.00 with six (6%) percent legal interest from the time of first demand and interest due shall earn legal interest from the time of judicial demand until fully paid. 2) Php35,000.00 by way of attorney’s fees and other litigation expenses. Defendant is further ordered to pay the costs of this suit. SO ORDERED.17 Both Stronghold and the Spouses Appeals.18chanroblesvirtuallawlibrary

Stroem

appealed

to

the

Court

of

The Court of Appeals affirmed with modification the trial court’s Decision. It increased the amount of attorney’s fees to ?50,000.00.19chanroblesvirtuallawlibrary The dispositive portion of the Court of Appeals Decision reads:chanRoblesvirtualLawlibrary WHEREFORE, the appeal of Stronghold Company, Inc[.] is DISMISSED, while the appeal of spouses Rune and Lea Stroem is PARTLY GRANTED. The November 27, 2009 Decision of the Regional Trial Court of Makati City is AFFIRMED with MODIFICATION that the award of attorney’s fees is increased to P50,000.00 SO ORDERED.20 On March 20, 2013, this court required the Spouses Stroem to submit their Comment on the Petition.21chanroblesvirtuallawlibrary We noted the Spouses Stroem’s Comment on July 31, 2013. 22 We also required Stronghold to file its Reply to the Comment, 23 which was noted on December 9, 2013.24chanroblesvirtuallawlibrary Stronghold argues that the trial court did not acquire jurisdiction over the case and, therefore, the Court of Appeals committed reversible error when it upheld the Decision of the Regional Trial

Sacha May R. Chavez

CASES IN CBA & ADR According to 2018 syllabus of Atty. Josh Ventura

Court.25 The lower courts should have dismissed the case in view of the arbitration clause in the agreement and considering that “[Republic Act No. 876] explicitly confines the court’s authority only to pass upon the issue of whether there is [an] agreement . . . providing for arbitration. In the affirmative, the statute ordains that the court shall issue an order ‘summarily directing the parties to proceed with the arbitration in accordance with the terms thereof.’”26chanroblesvirtuallawlibrary Moreover, “the stipulations in said Agreement are part and parcel of the conditions in the bond. Were it not for such stipulations in said agreement, [Stronghold] would not have agreed to issue a bond in favor of the Spouses Stroem. The parties to the bond are ALB/Ms. Asis-[L]eif, Spouses Stroem and [Stronghold] such that ALB/Ms. Asis-[L]eif never ceased to be a party to the surety agreement.”27chanroblesvirtuallawlibrary In any case, Stronghold’s liability under the performance bond is limited only to additional costs for the completion of the project.28 In addition, the Court of Appeals erred in holding that Stronghold changed its theory with regard to the notice requirement29 and in modifying the trial court’s award of attorney’s fees.30chanroblesvirtuallawlibrary On the other hand, the Spouses Stroem argue that Stronghold committed forum shopping warranting dismissal of the case.31 According to the Spouses Stroem, Stronghold deliberately committed forum shopping when it filed the present petition despite the pendency of the Spouses Stroem’s Motion for Partial Reconsideration of the Court of Appeals Decision dated November 20, 2012.32chanroblesvirtuallawlibrary More importantly, the Owners-Contractor Agreement is “separate and distinct from the Bond. The parties to the Agreement are ALB/Ms. Asis-Leif and Spouses Stroem, while the parties to the Bond are Spouses Stroem and Stronghold. The considerations for the two contracts are likewise distinct. Thus, the arbitration clause in the Agreement is binding only on the parties thereto, specifically ALB/Ms. Asis-Leif and Spouses Stroem[.]”33chanroblesvirtuallawlibrary Contrary to Stronghold’s argument, Spouses Stroem argues that stronghold is liable for the full amount of the performance bond. The terms of the bond clearly show that Stronghold is liable as surety.34 Verily, notice to Stronghold is not required for its liability to attach.35chanroblesvirtuallawlibrary The issues for consideration are:chanRoblesvirtualLawlibrary (1 Whether the dispute involves a construction contract; ) (2 Whether the CIAC has exclusive jurisdiction over the controversy between the parties; ) (3 Whether the Regional Trial Court should have dismissed the petition outright as required by ) law and jurisprudence and referred the matter to the CIAC; and (4 Whether petitioner Stronghold Insurance Company, Inc. is liable under Performance Bond No. ) LP/G(13)83056. (a)Whether petitioner Stronghold Insurance Company,

Sacha May R. Chavez

CASES IN CBA & ADR According to 2018 syllabus of Atty. Josh Ventura

Inc. is only liable as to the extent of any additional cost for the completion of the project due to any increase in prices for labor and materials. (b Whether the case involves ordinary suretyship or ) corporate suretyship. After considering the parties’ arguments and the records of this case, this court resolves to deny the Petition. On forum-shopping Respondents argue that petitioner committed forum shopping; hence, the case should have been dismissed outright. Records show that petitioner received a copy of the Decision of the Court of Appeals on December 5, 2012.36 Petitioner did not file a Motion for Reconsideration of the assailed Decision. It filed before this court a Motion for Extension of Time To File Petition for Review requesting an additional period of 30 days from December 20, 2012 or until January 19, 2013 to file the Petition.37chanroblesvirtuallawlibrary Respondents filed their Motion for Partial Reconsideration of the Court of Appeals Decision on December 11, 2012.38 They sought the modification of the Decision as to the amounts of moral damages, exemplary damages, attorney’s fees, and costs of the suit.39chanroblesvirtuallawlibrary Respondents alleged in their Comment that as early as January 9, 2013, petitioner received a copy of the Court of Appeals’ Resolution requiring Comment on the Motion for Partial Reconsideration.40 Still, petitioner did not disclose in its Verification and Certification Against Forum Shopping the pendency of respondents’ Motion for Partial Reconsideration.41chanroblesvirtuallawlibrary For its part, petitioner claims that it did not commit forum shopping. It fully disclosed in its Petition that what it sought to be reviewed was the Decision dated November 20, 2012 of the Court of Appeals. “Petitioner merely exercised its available remedy with respect to the Decision of the Court of Appeals by filing [the] Petition.”42 What the rules mandate to be stated in the Certification Against Forum Shopping is the status of “any other action.” This other action involves the same issues and parties but is an entirely different case. Indeed, petitioner is guilty of forum shopping. There is forum shopping when:chanRoblesvirtualLawlibrary as a result of an adverse opinion in one forum, a party seeks a favorable opinion (other than by appeal or certiorari) in another. The principle applies not only with respect to suits filed in the courts but also in connection with litigations commenced in the courts while an administrative proceeding is pending[.]43 (Citation omitted)

Sacha May R. Chavez

CASES IN CBA & ADR According to 2018 syllabus of Atty. Josh Ventura

This court has enumerated the elements of forum-shopping: “(a) identity of parties, or at least such parties as represent the same interests in both actions; (b) identity of rights asserted and reliefs prayed for, the reliefs being founded on the same facts; and (c) the identity with respect to the two preceding particulars in the two cases is such that any judgment rendered in the pending cases, regardless of which party is successful, amount to res judicata in the other case.”44chanroblesvirtuallawlibrary Rule 42, Section 245 in relation to Rule 45, Section 4 of the Rules of Court mandates petitioner to submit a Certification Against Forum Shopping and promptly inform this court about the pendency of any similar action or proceeding before other courts or tribunals. The rule’s purpose is to deter the unethical practice of pursuing simultaneous remedies in different forums, which “wreaks havoc upon orderly judicial procedure.”46 Failure to comply with the rule is a sufficient ground for the dismissal of the petition.47chanroblesvirtuallawlibrary Records show that petitioner’s duly authorized officer certified the following on January 21, 2013:chanRoblesvirtualLawlibrary 4. I further certify that: (a) I have not commenced any other action or proceeding involving the same issues in the Supreme Court, Court of Appeals, or any other tribunal or agency; (b) to the best of my knowledge, no such action or proceeding is pending in the Supreme Court, the Court of Appeals or different Divisions thereof, or any tribunal or agency; (c) if I should thereafter learn that a similar action or proceeding has been filed or is pending before the Supreme Court, the Court of Appeals, or different Divisions thereof, or any other tribunal or agency, I undertake to promptly inform the aforesaid courts and such tribunal or agency of the fact within five (5) days therefrom.48 Petitioner failed to carry out its duty of promptly informing this court of any pending action or proceeding before this court, the Court of Appeals, or any other tribunal or agency. This court cannot countenance petitioner’s disregard of the rules. This court has held before that:chanRoblesvirtualLawlibrary [u]ltimately, what is truly important to consider in determining whether forum-shopping exists or not is the vexation caused the courts and parties-litigant by a party who asks different courts and/or administrative agencies to rule on the same or related causes and/or to grant the same or substantially the same reliefs, in the process creating the possibility of conflicting decisions being rendered by the different fora upon the same issue.49 (Emphasis supplied) On this basis, this case should be dismissed. On arbitration and the CIAC’s jurisdiction Petitioner changed the theory of its case since its participation in the trial court proceedings. It

Sacha May R. Chavez

CASES IN CBA & ADR According to 2018 syllabus of Atty. Josh Ventura

raised the issue of lack of jurisdiction in view of an arbitration agreement for the first time. Generally, parties may not raise issues for the first time on appeal.50 Such practice is violative of the rules and due process and is frowned upon by the courts. However, it is also well-settled that jurisdiction can never be waived or acquired by estoppel.51 Jurisdiction is conferred by the Constitution or by law.52 “Lack of jurisdiction of the court over an action or the subject matter of an action cannot be cured by the silence, by acquiescence, or even by express consent of the parties.”53chanroblesvirtuallawlibrary Section 4 of Executive Order No. 100854 is clear in defining the exclusive jurisdiction of the CIAC:chanRoblesvirtualLawlibrary 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 time and delays; maintenance and defects; payment, default of employer or contractor and changes in contract cost. Excluded from the coverage of this law are disputes arising from employer-employee relationships which shall continue to be covered by the Labor Code of the Philippines. (Emphasis supplied) Similarly, Section 35 of Republic Act No. 9285 or the Alternative Dispute Resolution Act of 2004 states:chanRoblesvirtualLawlibrary SEC. 35. Coverage of the Law. - Construction disputes which fall within the original and exclusive jurisdiction of the Construction Industry Arbitration Commission (the “Commission”) shall include those between or among parties to, or who are otherwise bound by, an arbitration agreement, directly or by reference whether such parties are project owner, contractor, subcontractor, quantity surveyor, bondsman or issuer of an insurance policy in a construction project. The Commission shall continue to exercise original and exclusive jurisdiction over construction disputes although the arbitration is “commercial” pursuant to Section 21 of this Act. (Emphasis supplied) In Heunghwa Industry Co., Ltd., v. DJ Builders Corporation,55 this court held that “there are two acts which may vest the CIAC with jurisdiction over a construction dispute. One is the presence

Sacha May R. Chavez

CASES IN CBA & ADR According to 2018 syllabus of Atty. Josh Ventura

of an arbitration clause in a construction contract, and the other is the agreement by the parties to submit the dispute to the CIAC.”56chanroblesvirtuallawlibrary This court has ruled that when a dispute arises from a construction contract, the CIAC has exclusive and original jurisdiction.57 Construction has been 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.”58chanroblesvirtuallawlibrary In this case, there is no dispute as to whether the Owners-Contractor Agreement between AsisLeif and respondents is a construction contract. Petitioner and respondents recognize that CIAC has jurisdiction over disputes arising from the agreement. What is at issue in this case is the parties’ agreement, or lack thereof, to submit the case to arbitration. Respondents argue that petitioner is not a party to the arbitration agreement. Petitioner did not consent to arbitration. It is only respondent and Asis-Leif that may invoke the arbitration clause in the contract. This court has previously held that a performance bond, which is meant “to guarantee the supply of labor, materials, tools, equipment, and necessary supervision to complete the project[,]”59 is significantly and substantially connected to the construction contract and, therefore, falls under the jurisdiction of the CIAC.60chanroblesvirtuallawlibrary Prudential Guarantee and Assurance Inc. v. Anscor Land, Inc.61 involved circumstances similar to the present case. In Prudential, property owner Anscor Land, Inc. (ALI) entered into a contract for the construction of an eight-unit townhouse located in Capitol Hills, Quezon City with contractor Kraft Realty and Development Corporation (KRDC).62 KRDC secured the completion of the construction project through a surety and performance bond issued by Prudential Guarantee and Assurance Inc. (PGAI).63chanroblesvirtuallawlibrary The delay in the construction project resulted in ALI’s termination of the contract and claim against the performance bond.64 “ALI [subsequently] commenced arbitration proceedings against KRDC and PGAI in the CIAC.”65 PGAI, however, argued that it was not a party to the construction contract.66chanroblesvirtuallawlibrary The CIAC ruled that PGAI was not liable under the performance bond.67 Upon review, the Court of Appeals held that PGAI was jointly and severally liable with KRDC under the performance bond.68chanroblesvirtuallawlibrary PGAI appealed the Court of Appeals Decision and claimed that CIAC did not have jurisdiction over the performance bond.69 This court ruled:chanRoblesvirtualLawlibrary A guarantee or a surety contract under Article 2047 of the Civil Code of the Philippines is an accessory contract because it is dependent for its existence upon the principal obligation guaranteed by it.

Sacha May R. Chavez

CASES IN CBA & ADR According to 2018 syllabus of Atty. Josh Ventura

In fact, the primary and only reason behind the acquisition of the performance bond by KRDC was to guarantee to ALI that the construction project would proceed in accordance with the contract terms and conditions. In effect, the performance bond becomes liable for the completion of the construction project in the event KRDC fails in its contractual undertaking. Because of the performance bond, the construction contract between ALI and KRDC is guaranteed to be performed even if KRDC fails in its obligation. In practice, a performance bond is usually a condition or a necessary component of construction contracts. In the case at bar, the performance bond was so connected with the construction contract that the former was agreed by the parties to be a condition for the latter to push through and at the same time, the former is reliant on the latter for its existence as an accessory contract. Although not the construction contract itself, the performance bond is deemed as an associate of the main construction contract that it cannot be separated or severed from its principal. The Performance Bond is significantly and substantially connected to the construction contract that there can be no doubt it is the CIAC, under Section 4 of EO No. 1008, which has jurisdiction over any dispute arising from or connected with it. 70 (Emphasis supplied, citations omitted) At first look, the Owners-Contractor Agreement and the performance bond reference each other; the performance bond was issued pursuant to the construction agreement. A performance bond is a kind of suretyship agreement. A suretyship agreement is an agreement “whereby a party, called the surety, guarantees the performance by another party, called the principal or obligor, of an obligation or undertaking in favor of another party, called the obligee.”71 In the same vein, a performance bond is “designed to afford the project owner security that the . . . contractor, will faithfully comply with the requirements of the contract . . . and make good [on the] damages sustained by the project owner in case of the contractor’s failure to so perform.”72chanroblesvirtuallawlibrary It is settled that the surety’s solidary obligation for the performance of the principal debtor’s obligation is indirect and merely secondary.73 Nevertheless, the surety’s liability to the “creditor or promisee of the principal is said to be direct, primary and absolute; in other words, he is directly and equally bound with the principal.”74chanroblesvirtuallawlibrary Verily, “[i]n enforcing a surety contract, the ‘complementary-contracts-construed-together’ doctrine finds application. According to this principle, an accessory contract must be read in its entirety and together with the principal agreement.”75 Article 1374 of the Civil Code provides:chanRoblesvirtualLawlibrary ART. 1374. The various stipulations of a contract shall be interpreted together, attributing to the doubtful ones that sense which may result from all of them taken jointly. Applying the “complementary-contracts-construed-together” doctrine, this court in

Sacha May R. Chavez

CASES IN CBA & ADR According to 2018 syllabus of Atty. Josh Ventura

Prudential held that the surety willingly acceded to the terms of the construction contract despite the silence of the performance bond as to arbitration:chanRoblesvirtualLawlibrary In the case at bar, the performance bond was silent with regard to arbitration. On the other hand, the construction contract was clear as to arbitration in the event of disputes. Applying the said doctrine, we rule that the silence of the accessory contract in this case could only be construed as acquiescence to the main contract. The construction contract breathes life into the performance bond. We are not ready to assume that the performance bond contains reservations with regard to some of the terms and conditions in the construction contract where in fact it is silent. On the other hand, it is more reasonable to assume that the party who issued the performance bond carefully and meticulously studied the construction contract that it guaranteed, and if it had reservations, it would have and should have mentioned them in the surety contract.76 (Emphasis supplied) This court, however, cannot apply the ruling in Prudential to the present case. Several factors militate against petitioner’s claim. The contractual stipulations in this case and in Prudential are different. The relevant provisions of the Owners-Contractor Agreement in this case state:chanRoblesvirtualLawlibrary ARTICLE 5. THE CONTRACT DOCUMENTS The following documents prepared by the CONTRACTOR shall constitute an integral part of this contract as fully as if hereto attached or herein stated, except as otherwise modified by mutual agreement of parties, and attached to this agreement. Attachment 5.1 Attachment 5.2 Attachment 5.3 Attachment 5.4

Working Drawings Outline Specifications Bill of Quantities CONTRACTOR Business License

. . . .cralawred

ARTICLE 7. PERFORMANCE (SURETY) BOND 7.1 Within 30 days of the signing of this agreement, CONTRACTOR shall provide to OWNERS a performance bond, issued by a duly licensed authority acceptable to the OWNERS, and equal to the amount of PHP 4,500,000.00 (Four Million and Five Hundred Thousand Philippine Pesos), with the OWNERS as beneficiary.

Sacha May R. Chavez

CASES IN CBA & ADR According to 2018 syllabus of Atty. Josh Ventura

7.2 The performance bond will guarantee the satisfactory and faithful performance by the CONTRACTOR of all provisions stated within this contract. ARTICLE 8. ARBITRATION 8.1 Any dispute between the parties hereto which cannot be amicably settled shall be finally settled by arbitration in accordance with the provision of Republic Act 876, of The Philippines, as amended by the Executive Order 1008 dated February 4, 1985.77 (Emphasis in the original) In contrast, the provisions of the construction contract in Prudential provide:chanRoblesvirtualLawlibrary Article 1 CONTRACT DOCUMENTS 1.1 The following shall form part of this Contract and together with this Contract, are known as the “Contract Documents”:chanRoblesvirtualLawlibrary a. Bid Proposal .... d. Notice to proceed .... j. Appendices A & B (respectively, Surety Bond for Performance and, Supply of Materials by the Developer)78 (Emphasis supplied) This court in Prudential held that the construction contract expressly incorporated the performance bond into the contract.79 In the present case, Article 7 of the Owners-Contractor Agreement merely stated that a performance bond shall be issued in favor of respondents, in which case petitioner and Asis-Leif Builders and/or Ms. Ma. Cynthia Asis-Leif shall pay P4,500,000.00 in the event that Asis-Leif fails to perform its duty under the Owners-Contractor Agreement.80 Consequently, the performance bond merely referenced the contract entered into by respondents and Asis-Leif, which pertained to Asis-Leif’s duty to construct a two-storey residence building with attic, pool, and landscaping over respondents’ property.81chanroblesvirtuallawlibrary To be clear, it is in the Owners-Contractor Agreement that the arbitration clause is found. The construction agreement was signed only by respondents and the contractor, Asis-Leif, as

Sacha May R. Chavez

CASES IN CBA & ADR According to 2018 syllabus of Atty. Josh Ventura

represented by Ms. Ma. Cynthia Asis-Leif. It is basic that “[c]ontracts take effect only between the parties, their assigns and heirs[.]”82 Not being a party to the construction agreement, petitioner cannot invoke the arbitration clause. Petitioner, thus, cannot invoke the jurisdiction of the CIAC. Moreover, petitioner’s invocation of the arbitration clause defeats the purpose of arbitration in relation to the construction business. The state has continuously encouraged the use of dispute resolution mechanisms to promote party autonomy.83 In LICOMCEN, Incorporated v. Foundation Specialists, Inc.,84 this court upheld the CIAC’s jurisdiction in line with the state’s policy to promote arbitration:chanRoblesvirtualLawlibrary The CIAC was created through Executive Order No. 1008 (E.O. 1008), in recognition of the need to establish an arbitral machinery that would expeditiously settle construction industry disputes. The prompt resolution of problems arising from or connected with the construction industry was considered of necessary and vital for the fulfillment of national development goals, as the construction industry provides employment to a large segment of the national labor force and is a leading contributor to the gross national product.85 (Citation omitted) However, where a surety in a construction contract actively participates in a collection suit, it is estopped from raising jurisdiction later. Assuming that petitioner is privy to the construction agreement, we cannot allow petitioner to invoke arbitration at this late stage of the proceedings since to do so would go against the law’s goal of prompt resolution of cases in the construction industry. WHEREFORE, the petition is DENIED. The case is DISMISSED. Petitioner’s counsel is STERNLY WARNED that a repetition or similar violation of the rule on Certification Against Forum Shopping will be dealt with more severely. SO ORDERED.

13. GERARDO LANUZA, JR. AND ANTONIO O. OLBES, v. BF CORPORATION, SHANGRI-LA PROPERTIES, INC., ALFREDO C. RAMOS, RUFO B. COLAYCO, MAXIMO G. LICAUCO III, AND BENJAMIN C. RAMOS, G.R. No. 174938, October 01, 2014 G.R. No. 174938

October 1, 2014

GERARDO LANUZA, JR. AND ANTONIO O. OLBES, Petitioners, vs. BF CORPORATION, SHANGRI-LA PROPERTIES, INC., ALFREDO C. RAMOS, RUFO B. COLAYCO, MAXIMO G. LICAUCO III, AND BENJAMIN C. RAMOS, Respondents.

Sacha May R. Chavez

CASES IN CBA & ADR According to 2018 syllabus of Atty. Josh Ventura

DECISION LEONEN, J.: Corporate representatives may be compelled to submit to arbitration proceedings pursuant to a contract entered into by the corporation they represent if there are allegations of bad faith or malice in their acts representing the corporation. This is a Rule 45 petition, assailing the Court of Appeals' May 11, 2006 decision and October 5, 2006 resolution. The Court of Appeals affirmed the trial court's decision holding that petitioners, as director, should submit themselves as parties tothe arbitration proceedings between BF Corporation and Shangri-La Properties, Inc. (Shangri-La). In 1993, BF Corporation filed a collection complaint with the Regional Trial Court against Shangri-Laand the members of its board of directors: Alfredo C. Ramos, Rufo B.Colayco, Antonio O. Olbes, Gerardo Lanuza, Jr., Maximo G. Licauco III, and Benjamin C. Ramos.1 BF Corporation alleged in its complaint that on December 11, 1989 and May 30, 1991, it entered into agreements with Shangri-La wherein it undertook to construct for Shangri-La a mall and a multilevel parking structure along EDSA.2 Shangri-La had been consistent in paying BF Corporation in accordance with its progress billing statements.3However, by October 1991, Shangri-La started defaulting in payment.4 BF Corporation alleged that Shangri-La induced BF Corporation to continue with the construction of the buildings using its own funds and credit despite Shangri-La’s default. 5 According to BF Corporation, ShangriLa misrepresented that it had funds to pay for its obligations with BF Corporation, and the delay in payment was simply a matter of delayed processing of BF Corporation’s progress billing statements.6 BF Corporation eventually completed the construction of the buildings.7 Shangri-La allegedly took possession of the buildings while still owing BF Corporation an outstanding balance.8 BF Corporation alleged that despite repeated demands, Shangri-La refused to pay the balance owed to it.9 It also alleged that the Shangri-La’s directors were in bad faith in directing ShangriLa’s affairs. Therefore, they should be held jointly and severally liable with Shangri-La for its obligations as well as for the damages that BF Corporation incurred as a result of Shangri-La’s default.10 On August 3, 1993, Shangri-La, Alfredo C. Ramos, Rufo B. Colayco, Maximo G. Licauco III, and Benjamin C. Ramos filed a motion to suspend the proceedings in view of BF Corporation’s failure to submit its dispute to arbitration, in accordance with the arbitration clauseprovided in its contract, quoted in the motion as follows:11 35. Arbitration

Sacha May R. Chavez

CASES IN CBA & ADR According to 2018 syllabus of Atty. Josh Ventura

(1) Provided always that in case any dispute or difference shall arise between the Owner or the Project Manager on his behalf and the Contractor, either during the progress or after the completion or abandonment of the Works as to the construction of this Contract or as to any matter or thing of whatsoever nature arising there under or inconnection therewith (including any matter or thing left by this Contract to the discretion of the Project Manager or the withholding by the Project Manager of any certificate to which the Contractor may claim to be entitled or the measurement and valuation mentioned in clause 30(5)(a) of these Conditions or the rights and liabilities of the parties under clauses 25, 26, 32 or 33 of these Conditions), the owner and the Contractor hereby agree to exert all efforts to settle their differences or dispute amicably. Failing these efforts then such dispute or difference shall be referred to arbitration in accordance with the rules and procedures of the Philippine Arbitration Law. xxx

xxx

xxx

(6) The award of such Arbitrators shall be final and binding on the parties. The decision of the Arbitrators shall be a condition precedent to any right of legal action that either party may have against the other. . . .12 (Underscoring in the original) On August 19, 1993, BF Corporation opposed the motion to suspend proceedings.13 In the November 18, 1993 order, the Regional Trial Court denied the motion to suspend proceedings.14 On December 8, 1993, petitioners filed an answer to BF Corporation’s complaint, with compulsory counter claim against BF Corporation and crossclaim against Shangri-La. 15 They alleged that they had resigned as members of Shangri-La’s board of directors as of July 15, 1991.16 After the Regional Trial Court denied on February 11, 1994 the motion for reconsideration of its November 18, 1993 order, Shangri-La, Alfredo C. Ramos, Rufo B. Colayco,Maximo G. Licauco III, and Benjamin Ramos filed a petition for certiorari with the Court of Appeals.17 On April 28, 1995, the Court of Appeals granted the petition for certiorari and ordered the submission of the dispute to arbitration.18 Aggrieved by the Court of Appeals’ decision, BF Corporation filed a petition for review on certiorari with this court.19On March 27, 1998, this court affirmed the Court of Appeals’ decision, directing that the dispute be submitted for arbitration.20 Another issue arose after BF Corporation had initiated arbitration proceedings. BF Corporation and Shangri-La failed to agree as to the law that should govern the arbitration proceedings.21 On October 27, 1998, the trial court issued the order directing the parties to conduct the proceedings in accordance with Republic Act No. 876.22 Shangri-La filed an omnibus motion and BF Corporation an urgent motion for clarification, both seeking to clarify the term, "parties," and whether Shangri-La’s directors should be included in

Sacha May R. Chavez

CASES IN CBA & ADR According to 2018 syllabus of Atty. Josh Ventura

the arbitration proceedings and served with separate demands for arbitration.23 Petitioners filed their comment on Shangri-La’s and BF Corporation’s motions, praying that they be excluded from the arbitration proceedings for being non-parties to Shangri-La’s and BF Corporation’s agreement.24 On July 28, 2003, the trial court issued the order directing service of demands for arbitration upon all defendants in BF Corporation’s complaint.25 According to the trial court, Shangri-La’s directors were interested parties who "must also be served with a demand for arbitration to give them the opportunity to ventilate their side of the controversy, safeguard their interest and fend off their respective positions."26 Petitioners’ motion for reconsideration ofthis order was denied by the trial court on January 19, 2005.27 Petitioners filed a petition for certiorari with the Court of Appeals, alleging grave abuse of discretion in the issuance of orders compelling them to submit to arbitration proceedings despite being third parties to the contract between Shangri-La and BF Corporation.28 In its May 11, 2006 decision,29 the Court of Appeals dismissed petitioners’ petition for certiorari. The Court of Appeals ruled that ShangriLa’s directors were necessary parties in the arbitration proceedings.30 According to the Court of Appeals: [They were] deemed not third-parties tothe contract as they [were] sued for their acts in representation of the party to the contract pursuant to Art. 31 of the Corporation Code, and that as directors of the defendant corporation, [they], in accordance with Art. 1217 of the Civil Code, stand to be benefited or injured by the result of the arbitration proceedings, hence, being necessary parties, they must be joined in order to have complete adjudication of the controversy. Consequently, if [they were] excluded as parties in the arbitration proceedings and an arbitral award is rendered, holding [Shangri-La] and its board of directors jointly and solidarily liable to private respondent BF Corporation, a problem will arise, i.e., whether petitioners will be bound bysuch arbitral award, and this will prevent complete determination of the issues and resolution of the controversy.31 The Court of Appeals further ruled that "excluding petitioners in the arbitration proceedings . . . would be contrary to the policy against multiplicity of suits."32 The dispositive portion of the Court of Appeals’ decision reads: WHEREFORE, the petition is DISMISSED. The assailed orders dated July 28, 2003 and January 19, 2005 of public respondent RTC, Branch 157, Pasig City, in Civil Case No. 63400, are AFFIRMED.33 The Court of Appeals denied petitioners’ motion for reconsideration in the October 5, 2006 resolution.34 On November 24, 2006, petitioners filed a petition for review of the May 11, 2006 Court of Appeals decision and the October 5, 2006 Court of Appeals resolution.35

Sacha May R. Chavez

CASES IN CBA & ADR According to 2018 syllabus of Atty. Josh Ventura

The issue in this case is whether petitioners should be made parties to the arbitration proceedings, pursuant to the arbitration clause provided in the contract between BF Corporation and Shangri-La. Petitioners argue that they cannot be held personally liable for corporate acts or obligations.36 The corporation is a separate being, and nothing justifies BF Corporation’s allegation that they are solidarily liable with Shangri-La.37Neither did they bind themselves personally nor did they undertake to shoulder Shangri-La’s obligations should it fail in its obligations. 38 BF Corporation also failed to establish fraud or bad faith on their part.39 Petitioners also argue that they are third parties to the contract between BF Corporation and Shangri-La.40Provisions including arbitration stipulations should bind only the parties.41 Based on our arbitration laws, parties who are strangers to an agreement cannot be compelled to arbitrate.42 Petitioners point out thatour arbitration laws were enacted to promote the autonomy of parties in resolving their disputes.43 Compelling them to submit to arbitration is against this purpose and may be tantamount to stipulating for the parties.44 Separate comments on the petition werefiled by BF Corporation, and Maximo G. Licauco III, Alfredo C.Ramos and Benjamin C. Ramos.45 Maximo G. Licauco III Alfredo C. Ramos, and Benjamin C. Ramos agreed with petitioners that Shangri-La’sdirectors, being non-parties to the contract, should not be made personally liable for Shangri-La’s acts.46 Since the contract was executed only by BF Corporation and Shangri-La, only they should be affected by the contract’s stipulation. 47 BF Corporation also failed to specifically allege the unlawful acts of the directors that should make them solidarily liable with Shangri-La for its obligations.48 Meanwhile, in its comment, BF Corporation argued that the courts’ ruling that the parties should undergo arbitration "clearly contemplated the inclusion of the directors of the corporation[.]" 49 BF Corporation also argued that while petitioners were not parties to the agreement, they were still impleaded under Section 31 of the Corporation Code.50Section 31 makes directors solidarily liable for fraud, gross negligence, and bad faith. 51 Petitioners are not really third parties to the agreement because they are being sued as Shangri-La’s representatives, under Section 31 of the Corporation Code.52 BF Corporation further argued that because petitioners were impleaded for their solidary liability, they are necessary parties to the arbitration proceedings. 53 The full resolution of all disputes in the arbitration proceedings should also be done in the interest of justice.54 In the manifestation dated September 6, 2007, petitioners informed the court that the Arbitral Tribunal had already promulgated its decision on July 31, 2007. 55 The Arbitral Tribunal denied BF Corporation’s claims against them.56Petitioners stated that "[they] were included by the Arbitral Tribunal in the proceedings conducted . . . notwithstanding [their] continuing objection thereto. . . ."57 They also stated that "[their] unwilling participation in the arbitration case was done ex abundante ad cautela, as manifested therein on several occasions." 58 Petitioners informed

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CASES IN CBA & ADR According to 2018 syllabus of Atty. Josh Ventura

the court that they already manifested with the trial court that "any action taken on [the Arbitral Tribunal’s decision] should be without prejudice to the resolution of [this] case."59 Upon the court’s order, petitioners and Shangri-La filed their respective memoranda. Petitioners and Maximo G. Licauco III, Alfredo C. Ramos, and Benjamin C. Ramos reiterated their arguments that they should not be held liable for Shangri-La’s default and made parties to the arbitration proceedings because only BF Corporation and Shangri-La were parties to the contract. In its memorandum, Shangri-La argued that petitioners were impleaded for their solidary liability under Section 31 of the Corporation Code. Shangri-La added that their exclusion from the arbitration proceedings will result in multiplicity of suits, which "is not favored in this jurisdiction."60 It pointed out that the case had already been mooted by the termination of the arbitration proceedings, which petitioners actively participated in.61 Moreover, BF Corporation assailed only the correctness of the Arbitral Tribunal’s award and not the part absolving ShangriLa’s directors from liability.62 BF Corporation filed a counter-manifestation with motion to dismiss 63 in lieu of the required memorandum. In its counter-manifestation, BF Corporation pointed out that since "petitioners’ counterclaims were already dismissed with finality, and the claims against them were likewise dismissed with finality, they no longer have any interest orpersonality in the arbitration case. Thus, there is no longer any need to resolve the present Petition, which mainly questions the inclusion of petitioners in the arbitration proceedings."64 The court’s decision in this case will no longer have any effect on the issue of petitioners’ inclusion in the arbitration proceedings.65 The petition must fail. The Arbitral Tribunal’s decision, absolving petitioners from liability, and its binding effect on BF Corporation, have rendered this case moot and academic. The mootness of the case, however, had not precluded us from resolving issues so that principles may be established for the guidance of the bench, bar, and the public. In De la Camara v. Hon. Enage,66 this court disregarded the fact that petitioner in that case already escaped from prison and ruled on the issue of excessive bails: While under the circumstances a ruling on the merits of the petition for certiorari is notwarranted, still, as set forth at the opening of this opinion, the fact that this case is moot and academic should not preclude this Tribunal from setting forth in language clear and unmistakable, the obligation of fidelity on the part of lower court judges to the unequivocal command of the Constitution that excessive bail shall not be required.67 This principle was repeated in subsequent cases when this court deemed it proper to clarify important matters for guidance.68

Sacha May R. Chavez

CASES IN CBA & ADR According to 2018 syllabus of Atty. Josh Ventura

Thus, we rule that petitioners may be compelled to submit to the arbitration proceedings in accordance with Shangri-Laand BF Corporation’s agreement, in order to determine if the distinction between Shangri-La’s personality and their personalities should be disregarded. This jurisdiction adopts a policy in favor of arbitration. Arbitration allows the parties to avoid litigation and settle disputes amicably and more expeditiously by themselves and through their choice of arbitrators. The policy in favor of arbitration has been affirmed in our Civil Code, 69 which was approved as early as 1949. It was later institutionalized by the approval of Republic Act No. 876, 70 which expressly authorized, made valid, enforceable, and irrevocable parties’ decision to submit their controversies, including incidental issues, to arbitration. This court recognized this policy in Eastboard Navigation, Ltd. v. Ysmael and Company, Inc.:71 As a corollary to the question regarding the existence of an arbitration agreement, defendant raises the issue that, even if it be granted that it agreed to submit its dispute with plaintiff to arbitration, said agreement is void and without effect for it amounts to removing said dispute from the jurisdiction of the courts in which the parties are domiciled or where the dispute occurred. It is true that there are authorities which hold that "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" (Manila Electric Co. vs. Pasay Transportation Co., 57 Phil., 600, 603), however, there are authorities which favor "the more intelligent view that arbitration, as an inexpensive, speedy and amicable method of settling disputes, and as a means of avoiding litigation, should receive every encouragement from the courts which may be extended without contravening sound public policy or settled law" (3 Am. Jur., p. 835). Congress has officially adopted the modern view when it reproduced in the new Civil Code the provisions of the old Code on Arbitration. And only recently it approved Republic Act No. 876 expressly authorizing arbitration of future disputes.72 (Emphasis supplied) In view of our policy to adopt arbitration as a manner of settling disputes, arbitration clauses are liberally construed to favor arbitration. Thus, in LM Power Engineering Corporation v. Capitol Industrial Construction Groups, Inc.,73 this court said: 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. Provided such clause is susceptible of an interpretation that covers the asserted dispute, an order to arbitrate should be granted. Any doubt should be resolved in favor of arbitration.74(Emphasis supplied) A more clear-cut statement of the state policy to encourage arbitration and to favor

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CASES IN CBA & ADR According to 2018 syllabus of Atty. Josh Ventura

interpretations that would render effective an arbitration clause was later expressed in Republic Act No. 9285:75 SEC. 2. Declaration of Policy.- It is hereby declared the policy of the State to actively promote party autonomy in the resolution of disputes or the freedom of the party to make their own arrangements to resolve their disputes. Towards this end, the State shall encourage and actively promote the use of Alternative Dispute Resolution (ADR) as an important means to achieve speedy and impartial justice and declog court dockets. As such, the State shall provide means for the use of ADR as an efficient tool and an alternative procedure for the resolution of appropriate cases. Likewise, the State shall enlist active private sector participation in the settlement of disputes through ADR. This Act shall be without prejudice to the adoption by the Supreme Court of any ADR system, such as mediation, conciliation, arbitration, or any combination thereof as a means of achieving speedy and efficient means of resolving cases pending before all courts in the Philippines which shall be governed by such rules as the Supreme Court may approve from time to time. .... SEC. 25. Interpretation of the Act.- In interpreting the Act, the court shall have due regard to the policy of the law in favor of arbitration.Where action is commenced by or against multiple parties, one or more of whomare parties who are bound by the arbitration agreement although the civil action may continue as to those who are not bound by such arbitration agreement. (Emphasis supplied) Thus, if there is an interpretation that would render effective an arbitration clause for purposes ofavoiding litigation and expediting resolution of the dispute, that interpretation shall be adopted. Petitioners’ main argument arises from the separate personality given to juridical persons vis-àvis their directors, officers, stockholders, and agents. Since they did not sign the arbitration agreement in any capacity, they cannot be forced to submit to the jurisdiction of the Arbitration Tribunal in accordance with the arbitration agreement. Moreover, they had already resigned as directors of Shangri-Laat the time of the alleged default. Indeed, as petitioners point out, their personalities as directors of Shangri-La are separate and distinct from Shangri-La. A corporation is an artificial entity created by fiction of law.76 This means that while it is not a person, naturally, the law gives it a distinct personality and treats it as such. A corporation, in the legal sense, is an individual with a personality that is distinct and separate from other persons including its stockholders, officers, directors, representatives, 77 and other juridical entities. The law vests in corporations rights,powers, and attributes as if they were natural persons with physical existence and capabilities to act on their own.78 For instance, they have the power to sue and enter into transactions or contracts. Section 36 of the Corporation Code enumerates some of a corporation’s powers, thus: Section 36. Corporate powers and capacity.– Every corporation incorporated under this Code has the power and capacity:

Sacha May R. Chavez

CASES IN CBA & ADR According to 2018 syllabus of Atty. Josh Ventura

1. To sue and be sued in its corporate name; 2. Of succession by its corporate name for the period of time stated in the articles of incorporation and the certificate ofincorporation; 3. To adopt and use a corporate seal; 4. To amend its articles of incorporation in accordance with the provisions of this Code; 5. To adopt by-laws, not contrary to law, morals, or public policy, and to amend or repeal the same in accordance with this Code; 6. In case of stock corporations, to issue or sell stocks to subscribers and to sell treasury stocks in accordance with the provisions of this Code; and to admit members to the corporation if it be a non-stock corporation; 7. To purchase, receive, take or grant, hold, convey, sell, lease, pledge, mortgage and otherwise deal with such real and personal property, including securities and bonds of other corporations, as the transaction of the lawful business of the corporation may reasonably and necessarily require, subject to the limitations prescribed by law and the Constitution; 8. To enter into merger or consolidation with other corporations as provided in this Code; 9. To make reasonable donations, including those for the public welfare or for hospital, charitable, cultural, scientific, civic, or similar purposes: Provided, That no corporation, domestic or foreign, shall give donations in aid of any political party or candidate or for purposes of partisan political activity; 10. To establish pension, retirement, and other plans for the benefit of its directors, trustees, officers and employees; and 11. To exercise such other powers asmay be essential or necessary to carry out its purpose or purposes as stated in its articles of incorporation. (13a) Because a corporation’s existence is only by fiction of law, it can only exercise its rights and powers through itsdirectors, officers, or agents, who are all natural persons. A corporation cannot sue or enter into contracts without them. A consequence of a corporation’s separate personality is that consent by a corporation through its representatives is not consent of the representative, personally. Its obligations, incurred through official acts of its representatives, are its own. A stockholder, director, or representative does not become a party to a contract just because a corporation executed a contract through that stockholder, director or representative. Hence, a corporation’s representatives are generally not bound by the terms of the contract executed by the corporation. They are not personally liable for obligations and liabilities incurred

Sacha May R. Chavez

CASES IN CBA & ADR According to 2018 syllabus of Atty. Josh Ventura

on or in behalf of the corporation. Petitioners are also correct that arbitration promotes the parties’ autonomy in resolving their disputes. This court recognized in Heirs of Augusto Salas, Jr. v. Laperal Realty Corporation 79 that an arbitration clause shall not apply to persons who were neither parties to the contract nor assignees of previous parties, thus: A submission to arbitration is a contract. As such, the Agreement, containing the stipulation on arbitration, binds the parties thereto, as well as their assigns and heirs. But only they.80 (Citations omitted) Similarly, in Del Monte Corporation-USA v. Court of Appeals,81 this court ruled: The provision to submit to arbitration any dispute arising therefrom and the relationship of the parties is part of that contract and is itself a contract. As a rule, contracts are respected as the law between the contracting parties and produce effect as between them, their assigns and heirs. Clearly, only parties to the Agreement . . . are bound by the Agreement and its arbitration clause as they are the only signatories thereto.82 (Citation omitted) This court incorporated these rulings in Agan, Jr. v. Philippine International Air Terminals Co., Inc.83 and Stanfilco Employees v. DOLE Philippines, Inc., et al.84 As a general rule, therefore, a corporation’s representative who did not personally bind himself or herself to an arbitration agreement cannot be forced to participate in arbitration proceedings made pursuant to an agreement entered into by the corporation. He or she is generally not considered a party to that agreement. However, there are instances when the distinction between personalities of directors, officers,and representatives, and of the corporation, are disregarded. We call this piercing the veil of corporate fiction. Piercing the corporate veil is warranted when "[the separate personality of a corporation] is used as a means to perpetrate fraud or an illegal act, or as a vehicle for the evasion of an existing obligation, the circumvention of statutes, or to confuse legitimate issues."85 It is also warranted in alter ego cases "where a corporation is merely a farce since it is a mere alter ego or business conduit of a person, or where the corporation is so organized and controlled and its affairs are so conducted as to make it merely an instrumentality, agency, conduit or adjunct of another corporation."86 When corporate veil is pierced, the corporation and persons who are normally treated as distinct from the corporation are treated as one person, such that when the corporation is adjudged liable, these persons, too, become liable as if they were the corporation. Among the persons who may be treatedas the corporation itself under certain circumstances are its directors and officers. Section 31 of the Corporation Code provides the instances when directors, trustees, or officers may become liable for corporate acts:

Sacha May R. Chavez

CASES IN CBA & ADR According to 2018 syllabus of Atty. Josh Ventura

Sec. 31. Liability of directors, trustees or officers. - Directors or trustees who willfully and knowingly vote for or assent to patently unlawful acts of the corporation or who are guilty of gross negligence or bad faith in directing the affairs of the corporation or acquire any personal or pecuniary interest in conflict with their duty as such directors or trustees shall be liable jointly and severally for all damages resulting therefrom suffered by the corporation, its stockholders or members and other persons. When a director, trustee or officer attempts to acquire or acquires, in violation of his duty, any interest adverse to the corporation in respect of any matter which has been reposed inhim in confidence, as to which equity imposes a disability upon him to deal in his own behalf, he shall be liable as a trustee for the corporation and must account for the profits which otherwise would have accrued to the corporation. (n) Based on the above provision, a director, trustee, or officer of a corporation may be made solidarily liable with it for all damages suffered by the corporation, its stockholders or members, and other persons in any of the following cases: a) The director or trustee willfully and knowingly voted for or assented to a patently unlawful corporate act; b) The director or trustee was guilty of gross negligence or bad faith in directing corporate affairs; and c) The director or trustee acquired personal or pecuniary interest in conflict with his or her duties as director or trustee. Solidary liability with the corporation will also attach in the following instances: a) "When a director or officer has consented to the issuance of watered stocks or who, having knowledge thereof, did not forthwith file with the corporate secretary his written objection thereto";87 b) "When a director, trustee or officer has contractually agreed or stipulated to hold himself personally and solidarily liable with the corporation";88 and c) "When a director, trustee or officer is made, by specific provision of law, personally liable for his corporate action."89 When there are allegations of bad faith or malice against corporate directors or representatives, it becomes the duty of courts or tribunals to determine if these persons and the corporation should be treated as one. Without a trial, courts and tribunals have no basis for determining whether the veil of corporate fiction should be pierced. Courts or tribunals do not have such prior knowledge. Thus, the courts or tribunals must first determine whether circumstances exist towarrant the courts or tribunals to disregard the distinction between the corporation and the persons representing it. The determination of these circumstances must be made by one tribunal or court in a proceeding participated in by all parties involved, including current representatives of the

Sacha May R. Chavez

CASES IN CBA & ADR According to 2018 syllabus of Atty. Josh Ventura

corporation, and those persons whose personalities are impliedly the sameas the corporation. This is because when the court or tribunal finds that circumstances exist warranting the piercing of the corporate veil, the corporate representatives are treated as the corporation itself and should be held liable for corporate acts. The corporation’s distinct personality is disregarded, and the corporation is seen as a mere aggregation of persons undertaking a business under the collective name of the corporation. Hence, when the directors, as in this case, are impleaded in a case against a corporation, alleging malice orbad faith on their part in directing the affairs of the corporation, complainants are effectively alleging that the directors and the corporation are not acting as separate entities. They are alleging that the acts or omissions by the corporation that violated their rights are also the directors’ acts or omissions.90 They are alleging that contracts executed by the corporation are contracts executed by the directors. Complainants effectively pray that the corporate veilbe pierced because the cause of action between the corporation and the directors is the same. In that case, complainants have no choice but to institute only one proceeding against the parties.1âwphi1 Under the Rules of Court, filing of multiple suits for a single cause of action is prohibited. Institution of more than one suit for the same cause of action constitutes splitting the cause of action, which is a ground for the dismissal ofthe others. Thus, in Rule 2: Section 3. One suit for a single cause of action. — A party may not institute more than one suit for a single cause of action. (3a) Section 4. Splitting a single cause of action;effect of. — If two or more suits are instituted on the basis of the same cause of action, the filing of one or a judgment upon the merits in any one is available as a ground for the dismissal of the others. (4a) It is because the personalities of petitioners and the corporation may later be found to be indistinct that we rule that petitioners may be compelled to submit to arbitration. However, in ruling that petitioners may be compelled to submit to the arbitration proceedings, we are not overturning Heirs of Augusto Salas wherein this court affirmed the basic arbitration principle that only parties to an arbitration agreement may be compelled to submit to arbitration. In that case, this court recognizedthat persons other than the main party may be compelled to submit to arbitration, e.g., assignees and heirs. Assignees and heirs may be considered parties to an arbitration agreement entered into by their assignor because the assignor’s rights and obligations are transferred to them upon assignment. In other words, the assignor’s rights and obligations become their own rights and obligations. In the same way, the corporation’s obligations are treated as the representative’s obligations when the corporate veil is pierced. Moreover, in Heirs of Augusto Salas, this court affirmed its policy against multiplicity of suits and unnecessary delay. This court said that "to split the proceeding into arbitration for some parties and trial for other parties would "result in multiplicity of suits, duplicitous procedure and unnecessary delay."91 This court also intimated that the interest of justice would be best observed if it adjudicated rights in a single proceeding. 92 While the facts of that case prompted this court to direct the trial court to proceed to determine the issues of thatcase, it did not prohibit courts from allowing the case to proceed to arbitration, when circumstances warrant.

Sacha May R. Chavez

CASES IN CBA & ADR According to 2018 syllabus of Atty. Josh Ventura

Hence, the issue of whether the corporation’s acts in violation of complainant’s rights, and the incidental issue of whether piercing of the corporate veil is warranted, should be determined in a single proceeding. Such finding would determine if the corporation is merely an aggregation of persons whose liabilities must be treated as one with the corporation. However, when the courts disregard the corporation’s distinct and separate personality from its directors or officers, the courts do not say that the corporation, in all instances and for all purposes, is the same as its directors, stockholders, officers, and agents. It does not result in an absolute confusion of personalities of the corporation and the persons composing or representing it. Courts merely discount the distinction and treat them as one, in relation to a specific act, in order to extend the terms of the contract and the liabilities for all damages to erring corporate officials who participated in the corporation’s illegal acts. This is done so that the legal fiction cannot be used to perpetrate illegalities and injustices. Thus, in cases alleging solidary liability with the corporation or praying for the piercing of the corporate veil, parties who are normally treated as distinct individuals should be made to participate in the arbitration proceedings in order to determine ifsuch distinction should indeed be disregarded and, if so, to determine the extent of their liabilities. In this case, the Arbitral Tribunal rendered a decision, finding that BF Corporation failed to prove the existence of circumstances that render petitioners and the other directors solidarily liable. It ruled that petitioners and Shangri-La’s other directors were not liable for the contractual obligations of Shangri-La to BF Corporation. The Arbitral Tribunal’s decision was made with the participation of petitioners, albeit with their continuing objection. In view of our discussion above, we rule that petitioners are bound by such decision. WHEREFORE, the petition is DENIED. The Court of Appeals' decision of May 11, 2006 and resolution of October 5, 2006 are AFFIRMED. SO ORDERED.

Sacha May R. Chavez