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THIRD DIVISION

[G.R. Nos. 132848-49. June 26, 2001]


PHILROCK,
INC., petitioner, vs. CONSTRUCTION
INDUSTRY ARBITRATION COMMISSION
and Spouses VICENTE and NELIA
CID, respondents.
DECISION
PANGANIBAN, J.:
Courts encourage the use of alternative
methods of dispute resolution. When parties
agree to settle their disputes arising from or
connected with construction contracts, the
Construction Industry Arbitration Commission
(CIAC) acquires primary jurisdiction. It may
resolve not only the merits of such
controversies; when appropriate, it may also
award damages, interests, attorneys fees
and expenses of litigation.
The Case
Before us is a Petition for Review under Rule
45 of the Rules of Court. The Petition seeks
the
reversal
of
the
July
9,
1997
Decision[1] and the February 24, 1998
Resolution of the Court of Appeals (CA) in the
consolidated cases docketed as CA-GR SP
Nos. 39781 and 42443. The assailed Decision
disposed as follows:
WHEREFORE,
judgment
is
hereby
rendered DENYING the
petitions
and,
accordingly, AFFIRMING in toto the
CIACs
decision. Costs against petitioner.[2]
The assailed Resolution ruled in this wise:
Considering that the matters raised and
discussed in the motion for reconsideration
filed by appellants counsel are substantially
the same arguments which the Court had
passed upon and resolved in the decision
sought to be reconsidered, and there being
no new issue raised, the subject motion is
hereby DENIED.[3]
The Facts
The undisputed facts of the consolidated
cases are summarized by the CA as follows:
"On September 14, 1992, the Cid spouses,
herein private respondents, filed a Complaint
for damages against Philrock and seven of its
officers and engineers with the Regional Trial
Court of Quezon City, Branch 82.
On December 7, 1993, the initial trial date,
the trial court issued an Order dismissing the
case and referring the same to the CIAC
because the Cid spouses and Philrock had

filed an Agreement to Arbitrate with the


CIAC.
Thereafter, preliminary conferences were
held among the parties and their appointed
arbitrators. At
these
conferences,
disagreements arose as to whether moral
and exemplary damages and tort should be
included as an issue along with breach of
contract, and whether the seven officers and
engineers of Philrock who are not parties to
the Agreement to Arbitrate should be
included in the arbitration proceedings.No
common ground could be reached by the
parties, hence, on April 2, 1994, both the Cid
spouses and Philrock requested that the case
be remanded to the trial court. On April 13,
1994, the CIAC issued an Order stating, thus:
'x x x the Arbitral Tribunal hereby formally
dismisses the above-captioned case for
referral to Branch 82 of the Regional Trial
Court, Quezon City where it first originated.
SO ORDERED.'
The Cid spouses then filed with said Branch
of the Regional Trial Court of Quezon City a
Motion To Set Case for Hearing which motion
was opposed by Philrock.
On June 13, 1995, the trial court declared
that it no longer had jurisdiction over the
case and ordered the records of the case to
be remanded anew to the CIAC for arbitral
proceedings.
Pursuant to the aforementioned Order of the
Regional Trial C[o]urt of Quezon City, the
CIAC
resumed
conducting
preliminary
conferences. On August 21, 1995, herein
[P]etitioner Philrock requested to suspend
the proceedings until the court clarified its
ruling in the Order dated June 13,
1995. Philrock argued that said Order was
based on a mistaken premise that 'the
proceedings in the CIAC fell through because
of the refusal of [Petitioner] Philrock to
include the issue of damages therein,'
whereas the true reason for the withdrawal
of the case from the CIAC was due to
Philrock's opposition to the inclusion of its
seven officers and engineers, who did not
give their consent to arbitration, as party
defendants. On the other hand, private
respondent Nelia Cid manifested that she
was willing to exclude the seven officers and
engineers of Philrock as parties to the case
so as to facilitate or expedite the
proceedings. With such manifestation from
the Cid spouses, the Arbitral Tribunal denied
Philrock's request for the suspension of the

proceedings. Philrock's counsel agreed to the


continuation of the proceedings but reserved
the right to file a pleading elucidating the
position he [had] raised regarding the Court's
Order dated June 13, 1995. The parties then
proceeded to finalize, approve and sign the
Terms of Reference. Philrock's counsel and
representative, Atty. Pericles C. Consunji
affixed his signature to said Terms of
Reference which stated that 'the parties
agree that their differences be settled by an
Arbitral Tribunal x x x x' (p. 9, Terms of
Reference, p. 200, Rollo).
On September 12, 1995, [P]etitioner Philrock
filed its Motion to Dismiss, alleging therein
that the CIAC had lost jurisdiction to hear the
arbitration case due to the parties'
withdrawal of their consent to arbitrate. The
motion was denied by x x x CIAC per Order
dated September 22, 1995. On November 8,
public respondent ordered the parties to
appear before it on November 28, 1995 for
the continuation of the arbitral proceedings,
and on February 7, 1996, public respondent
directed [P]etitioner Philrock to set two
hearing dates in the month of February to
present its evidence and to pay all fees
assessed by it, otherwise x x x Philrock would
be deemed to have waived its right to
present evidence.
Hence, petitioner instituted the petition for
certiorari but while said petition was
pending, the CIAC rendered its Decision
dated September 24, 1996, the dispositive
portion of which reads, as follows:
'WHEREFORE, judgment is hereby rendered
in
favor
of
the
Claimant,
directing
Respondent to pay Claimant as follows:
1. P23,276.25 representing the excess cash
payment for materials ordered by the
Claimants, (No. 7 of admitted facts) plus
interests thereon at the rate of 6% per
annum from September 26, 1995 to the date
payment is made.
2. P65,000.00 representing retrofitting costs.
3. P13,404.54 representing refund of the
value of delivered but unworkable concrete
mix that was laid to waste.
4. P50,000.00 representing moral damages.
5. P50,000.00
representing
nominal
damages.
6. P50,000.00 representing attorney's fees
and expenses of litigation.
7. P144,756.80 representing arbitration fees,
minus such amount that may already have
been paid to CIAC by respondent.

Let a copy of this Decision be furnished the


Honorable Salvador C. Ceguera, presiding
judge, Branch 82 of Regional Trial Court of
Quezon City who referred this case to the
Construction Industry Arbitration Commission
for arbitration and proper disposition.' (pp.
44-45, Rollo, CA-G.R. SP No. 42443) "[4]
Before the CA, petitioner filed a Petition for
Review, docketed as CA-GR SP No. 42443,
contesting the jurisdiction of the CIAC and
assailing the propriety of the monetary
awards in favor of respondent spouses. This
Petition was consolidated by the CA with CAGR SP No. 39781, a Petition for Certiorari
earlier elevated by petitioner questioning the
jurisdiction of the CIAC.
Ruling of the Court of Appeals
The CA upheld the jurisdiction of the
CIAC[5] over the dispute between petitioner
and private respondent. Under Executive
Order No. 1008, the CIAC acquires
jurisdiction when the parties agree to submit
their dispute to voluntary arbitration. Thus, in
the present case, its jurisdiction continued
despite its April 13, 1994 Order referring the
case back to the Regional Trial Court (RTC) of
Quezon City, Branch 82, the court of
origin. The CIACs action was based on the
principle that once acquired, jurisdiction
remains until the full termination of the case
unless a law provides the contrary. No such
full termination of the case was evident in
the said Order; nor did the CIAC or private
respondents intend to put an end to the
case.
Besides, according to Section 3 of the Rules
of
Procedure
Governing
Construction
Arbitration, technical rules of law or
procedure are not applicable in a single
arbitration or arbitral tribunal. Thus, the
dismissal could not have divested the CIAC of
jurisdiction to ascertain the facts of the case,
arrive at a judicious resolution of the dispute
and enforce its award or decision.
Since the issues concerning the monetary
awards were questions of fact, the CA held
that those awards were inappropriate in a
petition for certiorari. Such questions are
final and not appealable according to Section
19 of EO 1008, which provides that arbitral
awards shall be x x x final and
[u]nappealable except on questions of law
which shall be appealable to the Supreme
Court x x x. Nevertheless, the CA reviewed
the records and found that the awards were
supported
by
substantial
evidence. In

matters falling under the field of expertise of


quasi-judicial bodies, their findings of fact are
accorded great respect when supported by
substantial evidence.
Hence, this Petition.[6]
Issues
The petitioner, in its Memorandum, raises
the following issues:
A.
Whether or not the CIAC could take
jurisdiction over the case of Respondent Cid
spouses against Petitioner Philrock after the
case had been dismissed by both the RTC
and the CIAC.
B.
Whether or not Respondent Cid spouses
have a cause of action against Petitioner
Philrock.
C.
Whether or not the awarding of the amount
of P23,276.75 for materials ordered by
Respondent Spouses Cid plus interest
thereon at the rate of 6% from 26 September
1995 is proper.
D.
Whether or not the awarding of the amount
of P65,000.00 as retrofitting costs is proper.
E.
Whether or not the awarding of the amount
of P1,340,454 for the value of the delivered
but the allegedly unworkable concrete which
was wasted is proper.
F.
Whether or not the awarding o[f] moral and
nominal damages and attorney's fees and
expenses of litigation in favor of respondents
is proper.
G.
Whether or not Petitioner Philrock should be
held liable for the payment of arbitration
fees.[7]
In sum, petitioner imputes reversible error to
the CA (1) for upholding the jurisdiction of
the CIAC after the latter had dismissed the
case and referred it to the regular court, (2)
for ruling that respondent spouses had a
cause of action against petitioner, and (3) for
sustaining the award of damages.
This Courts Ruling
The Petition has no merit.
First Issue: Jurisdiction
Petitioner avers that the CIAC lost jurisdiction
over the arbitration case after both parties
had withdrawn their consent to arbitrate. The
June 13, 1995 RTC Order remanding the case
to the CIAC for arbitration was allegedly an

invalid mode of referring a case for


arbitration.
We disagree. Section 4 of Executive Order
1008 expressly vests in the CIAC original and
exclusive jurisdiction over disputes arising
from or connected with construction
contracts entered into by parties that have
agreed to submit their dispute to voluntary
arbitration.[8]
It is undisputed that the parties submitted
themselves to the jurisdiction of the
Commission by virtue of their Agreement to
Arbitrate
dated
November
24,
1993. Signatories to the Agreement were
Atty. Ismael J. Andres and Perry Y. Uy
(president of Philippine Rock Products, Inc.)
for petitioner, and Nelia G. Cid and Atty.
Esteban A. Bautista for respondent spouses.
[9]

Petitioner claims, on the other hand, that this


Agreement was withdrawn by respondents
on April 8, 1994, because of the exclusion of
the seven engineers of petitioners in the
arbitration case. This withdrawal became the
basis for the April 13, 1994 CIAC Order
dismissing the arbitration case and referring
the dispute back to the RTC. Consequently,
the CIAC was divested of its jurisdiction to
hear and decide the case.
This contention is untenable. First, private
respondents removed the obstacle to the
continuation of the arbitration, precisely by
withdrawing their objection to the exclusion
of the seven engineers.Second, petitioner
continued participating in the arbitration
even after the CIAC Order had been issued. It
even concluded and signed the Terms of
Reference[10] on August 21, 1995, in which
the parties stipulated the circumstances
leading to the dispute; summarized their
respective positions, issues, and claims; and
identified the composition of the tribunal of
arbitrators. The document clearly confirms
both parties intention and agreement to
submit
the
dispute
to
voluntary
arbitration. In view of this fact, we fail to see
how the CIAC could have been divested of its
jurisdiction.
Finally, as pointed out by the solicitor
general, petitioner maneuvered to avoid the
RTCs final resolution of the dispute by
arguing that the regular court also lost
jurisdiction after the arbitral tribunals April
13, 1994 Order referring the case back to the
RTC. In so doing, petitioner conceded and
estopped itself from further questioning the

jurisdiction of the CIAC. The Court will not


countenance the effort of any party to
subvert or defeat the objective of voluntary
arbitration for its own private motives. After
submitting itself to arbitration proceedings
and actively participating therein, petitioner
is estopped from assailing the jurisdiction of
the CIAC, merely because the latter rendered
an adverse decision.[11]
Second Issue: Cause of Action
Petitioner contends that respondent spouses
were negligent in not engaging the services
of an engineer or architect who should
oversee their construction, in violation of
Section 308 of the National Building Code. It
adds that even if the concrete it delivered
was defective, respondent spouses should
bear the loss arising from their illegal
operation. In short, it alleges that they had
no cause of action against it.
We disagree. Cause of action is defined as an
act or omission by which a party violates the
right of another.[12] A complaint is deemed to
have stated a cause of action provided it has
indicated the following: (1) the legal right of
the plaintiff, (2) the correlative obligation of
the defendant, and (3) the act or the
omission of the defendant in violation of the
said legal right.[13] The cause of action
against
petitioner
was
clearly
established. Respondents were purchasers of
ready-mix concrete from petitioner. The
concrete delivered by the latter turned out to
be of substandard quality. As a result,
respondents sustained damages when the
structures they built using such cement
developed
cracks
and
honeycombs. Consequently, the construction
of their residence had to be stopped.
Further, the CIAC Decision clearly spelled out
respondents
cause
of
action
against
petitioner, as follows:
Accordingly, this Tribunal finds that the mix
was of the right proportions at the time it left
the
plant. This,
however,
does
not
necessarily mean that all of the concrete mix
delivered had remained workable when it
reached the jobsite. It should be noted that
there is no evidence to show that all the
transit mixers arrived at the site within the
allowable time that would ensure the
workability of the concrete mix delivered.
On the other hand, there is sufficiently strong
evidence to show that difficulties were
encountered in the pouring of concrete mix
from certain transit mixers necessitating the

[addition] of water and physically pushing


the mix, obviously because the same [was]
no longer workable. This Tribunal holds that
the unworkability of said concrete mix has
been firmly established.
There is no dispute, however, to the fact that
there are defects in some areas of the
poured structures. In this regard, this Tribunal
holds that the only logical reason is that the
unworkable concrete was the one that was
poured in the defective sections.[14]
Third Issue: Monetary Awards
Petitioner assails the monetary awards given
by the arbitral tribunal for alleged lack of
basis in fact and in law. The solicitor general
counters that the basis for petitioners
assigned errors with regard to the monetary
awards is purely factual and beyond the
review of this Court. Besides, Section 19, EO
1008, expressly provides that monetary
awards by the CIAC are final and
unappealable.
We disagree with the solicitor general. As
pointed out earlier, factual findings of quasijudicial bodies that have acquired expertise
are generally accorded great respect and
even finality, if they are supported by
substantial evidence.[15] The Court, however,
has consistently held that despite statutory
provisions making the decisions of certain
administrative agencies final, it still takes
cognizance of petitions showing want of
jurisdiction, grave abuse of discretion,
violation of due process, denial of substantial
justice or erroneous interpretation of the law.
[16]
Voluntary arbitrators, by the nature of
their functions, act in a quasi-judicial
capacity, such that their decisions are within
the scope of judicial review.[17]
Petitioner protests the award to respondent
spouses of P23,276.25 as excess payment
with
six
percent
interest
beginning
September 26, 1995. It alleges that this item
was neither raised as an issue by the parties
during the arbitration case, nor was its
justification discussed in the CIAC Decision. It
further contends that it could not be held
liable for interest, because it had earlier
tendered a check in the same amount to
respondent spouses, who refused to receive
it.
Petitioners
contentions
are
completely
untenable. Respondent Nelia G. Cid had
already raised the issue of overpayment
even prior to the formal arbitration. In

paragraph 9 of the Terms of Reference, she


stated:
9. Claimants were assured that the problem
and her demands had been the subject of
several staff meetings and that Arteche was
very much aware of it, a memorandum
having been submitted citing all the
demands of [c]laimants. This assurance was
made on July 31, 1992 when Respondents
Secillano, Martillano and Lomibao came to
see Claimant Nelia Cid and offered to
refund P23,276.25, [t]he difference between
the
billing
by
Philrocks
Marketing
Department in the amount of P125,586.25
and the amount charged by Philrock's
Batching Plant Department in the amount of
only P102,586.25, which [c]laimant refused
to accept by saying, Saka na lang.[18]
The same issue was discussed during the
hearing before the arbitration tribunal on
December 19, 1995.[19] It was also mentioned
in that tribunals Decision dated September
24, 1996.[20]
The payment of interest is based on Article
2209 of the Civil Code, which provides that if
the obligation consists of the payment of a
sum of money, and the debtor incurs delay,
the indemnity for damages shall be the
payment of legal interest which is six per
cent per annum, in the absence of a
stipulation of the rate.
Awards for Retrofitting Costs, Wasted
Unworkable But Delivered Concrete,
and Arbitration Fees
Petitioner maintains that the defects in the
concrete structure were due to respondent
spouses failure to secure the services of an
engineer or architect to supervise their
project. Hence, it claims that the award for
retrofitting cost was without legal basis. It
also denies liability for the wasted
unworkable but delivered concrete, for which
the
arbitral
court
awarded P13,404.54. Finally, it complains
against the award of litigation expenses,
inasmuch as the case should not have been
instituted at all had respondents complied
with the requirements of the National
Building Code.
We
are
unconvinced. Not
only
did
respondents disprove the contention of
petitioner; they also showed that they
sustained damages due to the defective
concrete it had delivered. These were items
of actual damages they sustained due to its
breach of contract.

Moral and Nominal Damages, Attorneys


Fees and Costs
Petitioner assails the award of moral
damages, claiming no malice or bad faith on
its part.
We disagree. Respondents were deprived of
the comfort and the safety of a house and
were exposed to the agony of witnessing the
wastage and the decay of the structure for
more than seven years. In her Memorandum,
Respondent Nelia G. Cid describes her
familys
sufferings
arising
from
the
unreasonable delay in the construction of
their residence, as follows: The family lives
separately for lack of space to stay in. Mrs.
Cid is staying in a small dingy bodega, while
her
son
occupies
another
makeshift
room. Their only daughter stayed with her
aunt from 1992 until she got married in
1996. x x x.[21] The Court also notes that
during the pendency of the case, Respondent
Vicente Cid died without seeing the
completion of their home.[22] Under the
circumstances, the award of moral damages
is proper.
Petitioner also contends that nominal
damages should not have been granted,
because it did not breach its obligation to
respondent spouses.
Nominal damages are recoverable only if no
actual or substantial damages resulted from
the breach, or no damage was or can be
shown.[23] Since actual damages have been
proven by private respondents for which they
were amply compensated, they are no longer
entitled to nominal damages.
Petitioner protests the grant of attorneys
fees, arguing that respondent spouses did
not
engage
the
services
of
legal
counsel. Also, it contends that attorneys fees
and litigation expenses are awarded only if
the opposing party acted in gross and
evident bad faith in refusing to satisfy
plaintiffs valid, just and demandable claim.
We disagree. The award is not only for
attorneys fees, but also for expenses of
litigation. Hence, it does not matter if
respondents represented themselves in
court, because it is obvious that they
incurred expenses in pursuing their action
before the CIAC, as well as the regular and
the appellate courts. We find no reason to
disturb this award.
WHEREFORE, the Petition is DENIED and the
assailed Decision AFFIRMED; however, the

award of nominal damages is DELETED for


lack of legal basis. Costs against petitioner.
SO ORDERED.
Melo,
(Chairman),
Vitug,
GonzagaReyes, and Sandoval-Gutierrez, JJ., concur.

SECOND DIVISION
EXCELLENT QUALITY APPAREL, G.R. No.
175048
INC.,
Petitioner,
Present:
QUISUMBING, J.,
Chairperson,
- versus - CARPIO MORALES
TINGA,
VELASCO, JR., and
WIN MULTI RICH BUILDERS, INC., BRION, JJ.
represented by its President,
WILSON G. CHUA, Promulgated:
Respondent.
February 10, 2009
x
--------------------------------------------------------------------------------x
DECISION
TINGA, J.:
Before us is a Rule 45 petition [1] seeking the
reversal of the Decision[2] and Resolution[3] of
the Court of Appeals in CA-G.R. SP No.
84640. The Court of Appeals had annulled
two orders[4] of the Regional Trial Court (RTC),
Branch 32, of Manila in Civil Case No. 04108940. This case involves a claim for a sum
of money which arose from a construction
dispute.
On 26 March 1996, petitioner Excellent
Quality Apparel, Inc. (petitioner) then
represented by Max L.F. Ying, Vice-President
for Productions, and Alfiero R. Orden,

Treasurer, entered into a contract [5] with


Multi-Rich Builders (Multi-Rich) represented
by Wilson G. Chua (Chua), its President and
General Manager, for the construction of a
garment factory within the Cavite Philippine
Economic Zone Authority (CPEZ).[6] The
duration of the project was for a maximum
period of five (5) months or 150 consecutive
calendar days. Included in the contract is an
arbitration clause which is as follows:
Article XIX : ARBITRATION CLAUSE
Should there be any dispute, controversy or
difference between the parties arising out of
this Contract that may not be resolved by
them to their mutual satisfaction, the matter
shall be submitted to an Arbitration
Committee of three (3) members; one (1)
chosen by the OWNER; one (1) chosen by the
CONTRACTOR; and the Chairman thereof to
be chosen by two (2) members. The decision
of the Arbitration Committee shall be final
and binding on both the parties hereto. The
Arbitration shall be governed by the
Arbitration Law (R.A. [No.] 876). The cost of
arbitration shall be borned [sic] jointly by
both CONTRACTOR and OWNER on 50-50
basis.[7]
The construction of the factory building was
completed on 27 November 1996.
Respondent Win Multi-Rich Builders, Inc.
(Win) was incorporated with the Securities
and Exchange Commission (SEC) on 20
February 1997[8] with Chua as its President
and General Manager. On 26 January 2004,
Win filed a complaint for a sum of
money[9] against petitioner and Mr. Ying
amounting to P8,634,448.20. It also prayed
for the issuance of a writ of attachment
claiming that Mr. Ying was about to abscond
and that petitioner was about to close. Win
obtained a surety bond[10] issued by Visayan
Surety & Insurance Corporation. On 10
February 2004, the RTC issued the Writ of
Attachment[11] against the properties of
petitioner.
On 16 February 2004, Sheriff Salvador D.
Dacumos of the RTC of Manila, Branch 32,
went to the office of petitioner in CPEZ to
serve
the
Writ
of
Attachment,
Summons[12]and the Complaint. Petitioner
issued Equitable PCIBank (PEZA Branch)

Check No. 160149, dated 16 February 2004,


in the amount of P8,634,448.20, to prevent
the Sheriff from taking possession of its
properties.[13] The check was made payable
to the Office of the Clerk of Court of the RTC
of Manila as a guarantee for whatever
liability there may be against petitioner.
Petitioner
filed
an
Omnibus
Motion[14] claiming that it was neither about
to close. It also denied owing anything to
Win, as it had already paid all its obligations
to it. Lastly, it questioned the jurisdiction of
the trial court from taking cognizance of the
case. Petitioner pointed to the presence of
the Arbitration Clause and it asserted that
the case should be referred to the
Construction Industry Arbitration Commission
(CIAC) pursuant to Executive Order (E.O.) No.
1008.
In the hearing held on 10 February 2004, the
counsel of Win moved that its name in the
case be changed from Win Multi-Rich
Builders, Inc. to Multi-Rich Builders, Inc. It
was only then that petitioner apparently
became aware of the variance in the name of
the plaintiff. In the Reply[15] filed by
petitioner, it moved to dismiss the case since
Win was not the contractor and neither a
party to the contract, thus it cannot institute
the case. Petitioner obtained a Certificate of
Non-Registration
of
[16]
Corporation/Partnership
from
the
SEC
which certified that the latter did not have
any
records
of
a
Multi-Rich Builders,
Inc. Moreover, Win in its Rejoinder[17] did not
oppose the allegations in the Reply. Win
admitted that it was only incorporated on 20
February
1997 while
the
construction
contract was executed on 26 March 1996.
Likewise, it admitted that at the time of
execution of the contract, Multi-Rich was a
registered sole proprietorship and was issued
a business permit[18] by the Office of the
Mayor of Manila.
In an Order[19] dated 12 April 2004, the RTC
denied the motion and stated that the issues
can be answered in a full-blown trial. Upon
its denial, petitioner filed its Answer and
prayed for the dismissal of the case.[20] Win
filed a Motion[21] to deposit the garnished
amount to the court to protect its legal
rights.
In
a
Manifestation,[22] petitioner
vehemently opposed the deposit of the

garnished amount. The RTC issued an


Order[23] dated 20 April 2004, which granted
the motion to deposit the garnished
amount. On the same date, Win filed a
motion[24] to release the garnished amount to
it. Petitioner filed its opposition [25] to the
motion claiming that the release of the
money does not have legal and factual basis.
On 18 June 2004, petitioner filed a petition
for review on certiorari[26] under Rule 65
before the Court of Appeals, which
questioned the jurisdiction of the RTC and
challenged the orders issued by the lower
court with a prayer for the issuance of a
temporary retraining order and a writ of
preliminary
injunction.
Subsequently, petitioner
filed
a
Supplemental
Manifestation
and
Motion[27] and alleged that the money
deposited with the RTC was turned over to
Win. Win admitted that the garnished
amount had already been released to it.
On 14 March 2006, the Court of Appeals
rendered its Decision[28] annulling the 12 April
and 20 April 2004 orders of the RTC. It also
ruled that the RTC had jurisdiction over the
case since it is a suit for collection of sum of
money. Petitioner filed a Motion for
Reconsideration[29] which was subsequently
denied in a resolution.[30]
Hence this petition.
Petitioner raised the following issues to wit:
(1) does Win have a legal personality to
institute the present case; (2) does the RTC
have
jurisdiction
over
the
case
notwithstanding the presence
of
the
arbitration clause; and (3) was the issuance
of the writ of attachment and the subsequent
garnishment proper.

A suit may only be instituted by the real


party in interest. Section 2, Rule 3 of the
Rules of Court defines parties in interest in
this manner:
A real party in interest is the party who
stands to be benefited or injured by the
judgment in the suit, or the party entitled to
the avails of the suit. Unless otherwise
authorized by law or these Rules, every

action must be prosecuted or defended in


the name of the real party in interest.
Is Win a real party in interest? We answer in
the negative.
Win admitted that the contract was executed
between Multi-Rich and petitioner. It further
admitted that Multi-Rich was a sole
proprietorship with a business permit issued
by the Office of the Mayor of Manila. A sole
proprietorship is the oldest, simplest, and
most prevalent form of business enterprise.
[31]
It is an unorganized business owned by
one person. The sole proprietor is personally
liable for all the debts and obligations of the
business.[32] In the case of Mangila v. Court of
Appeals,[33] we held that:
x x x In fact, there is no law authorizing
sole proprietorships to file a suit in court.
A sole proprietorship does not possess a
juridical personality separate and distinct
from the personality of the owner of the
enterprise. The law merely recognizes the
existence of a soleproprietorship as a form of
business organization conducted for profit by
a single individual and requires its proprietor
or
owner to secure licenses and
permits,
register its business name, and pay taxes to
the national government. The law does not
vest a separate legal personality on the
sole proprietorship or empower it to file or
defend an action in court.
The original petition was instituted by Win,
which is a SEC-registered corporation. It filed
a collection of sum of money suit which
involved a construction contract entered into
by petitioner and Multi-Rich, a sole
proprietorship. The counsel of Win wanted to
change the name of the plaintiff in the suit to
Multi-Rich.
The
change
cannot
be
countenanced. The plaintiff in the collection
suit is a corporation. The name cannot be
changed to that of a sole proprietorship.
Again, a sole proprietorship is not vested
with juridical personality to file or defend an
action.[34]
Petitioner had continuously contested the
legal personality of Win to institute the case.
Win was given ample opportunity to adduce
evidence to show that it had legal

personality.It failed to do so. Corpus Juris


Secundum, notes:
x x x where an individual or sole trader
organizes a corporation to take over his
business and all his assets, and it becomes in
effect merely an alter ego of the
incorporator, the corporation, either on the
grounds of implied assumption of the debts
or on the grounds that the business is the
same and is merely being conducted under a
new guise, is liable for the incorporator's
preexisting debts and liabilities. Clearly,
where the corporation assumes or accepts
the debt of its predecessor in business it is
liable and if the transfer of assets is in fraud
of creditors it will be liable to the extent of
the assets transferred. The corporation is not
liable on an implied assumption of debts
from the receipt of assets where the
incorporator retains sufficient assets to pay
the
indebtedness,
or
where none of his assets are transferred to t
he corporation, or
where, although all the assets of the
incorporator have been transferred, there is
a change in the persons carrying on the
business and the corporation is not merely
an alter ego of the person to whose business
it succeeded.[35]

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 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.

In order for a corporation to be able to file


suit and claim the receivables of its
predecessor in business, in this case a sole
proprietorship, it must show proof that the
corporation had acquired the assets and
liabilities of the sole proprietorship. Win
could have easily presented or attached any
document e.g., deed of assignment which
will show whether the assets, liabilities and
receivables of Multi-Rich were acquired by
Win. Having been given the opportunity to
rebut the allegations made by petitioner, Win
failed to use that opportunity. Thus, we
cannot presume that Multi-Rich is the
predecessor-in-business of Win and hold that
the latter has standing to institute the
collection suit.

There is nothing in the law which limits the


exercise of jurisdiction to complex or difficult
cases. E.O. No. 1008 does not distinguish
between claims involving payment of money
or not.[37] The CIAC acquires jurisdiction over
a construction contract by the mere fact that
the parties agreed to submit to voluntary
arbitration.[38] The law does not preclude
parties from stipulating a preferred forum or
arbitral body but they may not divest the
CIAC of jurisdiction as provided by law.
[39]
Arbitration is an alternative method of
dispute
resolution
which
is
highly
encouraged.[40] The arbitration clause is a
commitment on the part of the parties to
submit to arbitration the disputes covered
since that clause is binding, and they are
expected to
abide by it in good faith.[41] Clearly, the RTC
should not have taken cognizance of the
collection suit. The presence of the
arbitration clause vested jurisdiction to the
CIAC over all construction disputes between
Petitioner and Multi-Rich. The RTC does not
have jurisdiction.[42]

Assuming arguendo that


Win
has
legal
personality, the petition will still be granted.
Section 4 of E.O. No. 1008[36] provides for the
jurisdiction of the Construction Industry
Arbitration Commission, to wit:

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;
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
from
employer-employee
relationships which shall continue to be
covered by the Labor Code of the Philippines.

Based on the foregoing, there is no need to


discuss the propriety of the issuance of the
writ of attachment. However, we cannot
allow Win to retain the garnished amount
which was turned over by the RTC. The RTC
did not have jurisdiction to issue the
questioned writ of attachment and to order
the release of the garnished funds.
WHEREFORE, the petition is GRANTED. The
Decision of the Court of Appeals is
hereby MODIFIED. Civil Case No. 04-108940
is DISMISSED. Win Multi-Rich Builders, Inc.
is ORDERED to
return
the
garnished
amount of EIGHT MILLION SIX HUNDRED THIR
TY-FOUR THOUSAND FOUR HUNDRED

FORTY-EIGHT PESOS AND FORTY CENTAVOS


(P8,634,448.40),
which was turned over by the Regional Trial
Court, to petitioner with legal interest of 12
percent (12%) per annum upon finality of
this Decision until payment.
SO ORDERED.

METROPOLITAN CEBU WATER DISTRICT,


Petitioner, - versus - MACTAN ROCK
INDUSTRIES, INC.,
Respondent.
This is a petition for review on certiorari
under Rule 45 assailing the February 20,
2006 Decision[1] and the March 30, 2006
Resolution[2] of the Court of Appeals (CA) in
CAG.R. 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] as amended, with its principal office
address at the MCWD Building, Magallanes
corner Lapu-Lapu Streets, Cebu City.[4] 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]
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]
On May 19, 1997, MCWD entered into a
Water Supply Contract[7] (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]
On March 15, 2004, MRII filed a Complaint[9]
against MCWD with the Construction Industry
Arbitration Commission (CIAC), citing the
arbitration clause (Clause 18)[10] 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/DeEscalation 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]
On May 7, 2002, MCWD filed its Answer[12]
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]
denying MCWDs motion to dismiss, and
calling the parties to a preliminary
conference for the review and signing of the
Terms of Reference.[14]
MCWD, thus, filed a petition for certiorari[15]
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]
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]
Decision of the CIAC
The CIAC promulgated its Decision[18] 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
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]

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] 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] Citing Philrock Inc. v.
Construction
Industry
Arbitration
Commission,[22] 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]
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 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] (Citations omitted.)
MCWDs motion for reconsideration of the
decision in the First Petition was still pending
when it filed the petition for review[25] under
Rule 43 (Second Petition) appealing the
decision of the CIAC. The motion for
reconsideration was eventually denied in a
Resolution[26] dated May 3, 2006. MCWD did
not appeal from the denial of the motion. It,
thus, became final and executory.[27]
Decision of the CA in CA-G.R. CEB SP. No.
00623 Petition for review under Rule 43
appealing the decision of the CIAC

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]
MCWD filed a motion for reconsideration but
it was denied in the CA Resolution dated
March 30, 2006.
Thus, this petition.

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 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

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 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]

covered by the Labor Code of the Philippines.


(Underscoring supplied)

RULING OF THE COURT

The jurisdiction of the CIAC as a quasi-judicial


body is confined to construction disputes,
[32] 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] The CIAC has jurisdiction over all such
disputes whether the dispute arises before or
after the completion of the contract.[34]

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

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]

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 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]
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 18th Division 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 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]
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] 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]
In the First Petition, MCWD argued that the
CIACs issuance of its Order[41] 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.
Other measures of relief, which are just and
equitable under the foregoing premise are
also prayed for.[42]
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]
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]
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 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]

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 pro-forma 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]
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]

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
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.

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]
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]

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] 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]

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

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 employeremployee 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] 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 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]
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] 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]
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 quasijudicial 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] 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.
In National Housing Authority v. First United
Constructors Corporation,[58] 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 employeremployee 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]

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]
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
participate in the arbitration proceedings

to

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 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]
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]
In fact, in Philrock, Inc. v. Construction
Industry Arbitration Commission,[63] 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 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.
xxx

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
5.

Capital Cost Adjustment Foreign

xxx
Current Forex Base Forex x 70% of 30% of
Base Selling Price of Water
Base Forex
xxx[64]
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:

Power Cost Adjustment:

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

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
portion, the body of the decision will prevail.
[65]
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.
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 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.

THIRD DIVISION
[G.R. No. 120105. March 27, 1998]
BF CORPORATION, petitioner, vs. COURT OF
APPEALS,
SHANGRI-LA
PROPERTIES,
COLAYCO, ALFREDO C. RAMOS, INC., RUFO B.
MAXIMO G. LICAUCO III and BENJAMIN C.
RAMOS, respondents.
DECISION
ROMERO, J.:
The basic issue in this petition for review on
certiorari is whether or not the contract for
the construction of the EDSA Plaza between
petitioner BF Corporation and respondent
Shangri-la Properties, Inc. embodies an
arbitration clause in case of disagreement
between the parties in the implementation of
contractual provisions.
Petitioner
and
respondent
Shangri-la
Properties, Inc. (SPI) entered into an
agreement whereby the latter engaged the
former to construct the main structure of the
EDSA Plaza Project, a shopping mall complex
in the City of Mandaluyong.
The construction work was in progress when
SPI decided to expand the project by
engaging the services of petitioner again.
Thus, the parties entered into an agreement
for the main contract works after which
construction work began.
However, petitioner incurred delay in the
construction work that SPI considered as
serious and substantial.[1] On the other

hand,
according
to
petitioner,
the
construction works progressed in faithful
compliance with the First Agreement until a
fire broke out on November 30, 1990
damaging Phase I of the Project.[2] Hence,
SPI proposed the re-negotiation of the
agreement between them.
Consequently, on May 30, 1991, petitioner
and SPI entered into a written agreement
denominated as Agreement for the Execution
of Builders Work for the EDSA Plaza Project.
Said agreement would cover the construction
work on said project as of May 1, 1991 until
its eventual completion.
According to SPI, petitioner failed to
complete the construction works and
abandoned the project.[3] This resulted in
disagreements between the parties as
regards their respective liabilities under the
contract. On July 12, 1993, upon SPIs
initiative,
the
parties
respective
representatives met in conference but they
failed to come to an agreement.[4]
Barely two days later or on July 14, 1993,
petitioner filed with the Regional Trial Court
of Pasig a complaint for collection of the
balance
due
under
the
construction
agreement. Named defendants therein were
SPI and members of its board of directors
namely, Alfredo C. Ramos, Rufo B. Colayco,
Antonio B. Olbes, Gerardo O. Lanuza, Jr.,
Maximo G. Licauco III and Benjamin C.
Ramos.
On August 3, 1993, SPI and its co-defendants
filed a motion to suspend proceedings
instead of filing an answer. The motion was
anchored on defendants allegation that the
formal trade contract for the construction of
the project provided for a clause requiring
prior resort to arbitration before judicial
intervention could be invoked in any dispute
arising from the contract. The following day,
SPI submitted a copy of the conditions of the
contract containing the arbitration clause
that it failed to append to its motion to
suspend proceedings.
Petitioner opposed said motion claiming that
there was no formal contract between the
parties although they entered into an
agreement
defining
their
rights
and
obligations in undertaking the project. It

emphasized that the agreement did not


provide for arbitration and therefore the
court could not be deprived of jurisdiction
conferred by law by the mere allegation of
the existence of an arbitration clause in the
agreement between the parties.
In reply to said opposition, SPI insisted that
there was such an arbitration clause in the
existing contract between petitioner and SPI.
It alleged that suspension of proceedings
would not necessarily deprive the court of its
jurisdiction over the case and that arbitration
would expedite rather than delay the
settlement of the parties respective claims
against each other.
In a rejoinder to SPIs reply, petitioner
reiterated that there was no arbitration
clause in the contract between the parties. It
averred that granting that such a clause
indeed formed part of the contract,
suspension of the proceedings was no longer
proper. It added that defendants should be
declared in default for failure to file their
answer within the reglementary period.

Work Trade Contractor dated 01 May 1991,


page 2 of which is entitled `Contents of
Contract Documents with a list of the
documents therein contained, and Section A
thereof consists of the abovementioned
Letter-Agreement dated May 30, 1991.
Section C of the said Contract Documents is
entitled
`Articles
of
Agreement
and
Conditions of Contract which, per its Index,
consists of Part A (Articles of Agreement) and
B (Conditions of Contract). The said Articles
of Agreement appears to have been duly
signed by President Rufo B. Colayco of
Shangri-La Properties, Inc. and President
Bayani F. Fernando of BF and their witnesses,
and was thereafter acknowledged before
Notary Public Nilberto R. Briones of Makati,
Metro Manila on November 15, 1991. The
said Articles of Agreement also provides that
the `Contract Documents' therein listed
`shall be deemed an integral part of this
Agreement, and one of the said documents is
the `Conditions of Contract which contains
the Arbitration Clause relied upon by the
defendants in their Motion to Suspend
Proceedings.

In its sur-rejoinder, SPI pointed out the


significance of petitioners admission of the
due execution of the Articles of Agreement.
Thus, on page D/6 thereof, the signatures of
Rufo B. Colayco, SPI president, and Bayani
Fernando, president of petitioner appear,
while page D/7 shows that the agreement is
a public document duly notarized on
November 15, 1991 by Notary Public Nilberto
R. Briones as document No. 345, page 70,
book No. LXX, Series of 1991 of his notarial
register.[5]

This Court notes, however, that the


`Conditions of Contract referred to, contains
the following provisions:

Thereafter, upon a finding that an arbitration


clause indeed exists, the lower court[6]
denied the motion to suspend proceedings,
thus:

And it is significant to note further that the


said `Conditions of Contract is not duly
signed by the parties on any page thereof --although it bears the initials of BFs
representatives (Bayani F. Fernando and
Reynaldo M. de la Cruz) without the initials
thereon of any representative of Shangri-La
Properties, Inc.

It appears from the said document that in


the letter-agreement dated May 30, 1991
(Annex C, Complaint), plaintiff BF and
defendant Shangri-La Properties, Inc. agreed
upon the terms and conditions of the
Builders Work for the EDSA Plaza Project
(Phases I, II and Carpark), subject to the
execution by the parties of a formal trade
contract. Defendants have submitted a copy
of the alleged trade contract, which is
entitled `Contract Documents For Builders

`3. Contract Document.


Three copies of the Contract Documents
referred to in the Articles of Agreement shall
be signed by the parties to the contract and
distributed to the Owner and the Contractor
for their safe keeping. (underscoring
supplied)

Considering the insistence of the plaintiff


that the said Conditions of Contract was not
duly executed or signed by the parties, and
the failure of the defendants to submit any
signed copy of the said document, this Court
entertains serious doubt whether or not the
arbitration clause found in the said

Conditions of Contract is binding upon the


parties to the Articles of Agreement.
(Underscoring supplied.)
The lower court then ruled that, assuming
that the arbitration clause was valid and
binding, still, it was too late in the day for
defendants to invoke arbitration. It quoted
the following provision of the arbitration
clause:
Notice of the demand for arbitration of a
dispute shall be filed in writing with the other
party to the contract and a copy filed with
the Project Manager. The demand for
arbitration shall be made within a reasonable
time after the dispute has arisen and
attempts to settle amicably have failed; in no
case, however, shall the demand he made be
later than the time of final payment except
as otherwise expressly stipulated in the
contract.
Against the above backdrop, the lower court
found that per the May 30, 1991 agreement,
the project was to be completed by October
31, 1991. Thereafter, the contractor would
pay P80,000 for each day of delay counted
from November 1, 1991 with liquified (sic)
damages up to a maximum of 5% of the total
contract price.
The lower court also found that after the
project was completed in accordance with
the agreement that contained a provision on
progress payment billing, SPI took possession
and started operations thereof by opening
the same to the public in November, 1991.
SPI, having failed to pay for the works,
petitioner billed SPI in the total amount of
P110,883,101.52, contained in a demand
letter sent by it to SPI on February 17, 1993.
Instead of paying the amount demanded, SPI
set up its own claim of P220,000,000.00 and
scheduled a conference on that claim for July
12, 1993. The conference took place but it
proved futile.
Upon the above facts, the lower court
concluded:
Considering the fact that under the supposed
Arbitration Clause invoked by defendants, it
is required that `Notice of the demand for
arbitration of a dispute shall be filed in
writing with the other party x x x x in no case

x x x x later than the time of final payment x


x x x which apparently, had elapsed, not only
because defendants had taken possession of
the finished works and the plaintiffs billings
for the payment thereof had remained
pending since November, 1991 up to the
filing of this case on July 14, 1993, but also
for the reason that defendants have failed to
file any written notice of any demand for
arbitration during the said long period of one
year and eight months, this Court finds that
it cannot stay the proceedings in this case as
required by Sec. 7 of Republic Act No. 876,
because defendants are in default in
proceeding with such arbitration.
The lower court denied SPIs motion for
reconsideration for lack of merit and directed
it and the other defendants to file their
responsive pleading or answer within fifteen
(15) days from notice.
Instead of filing an answer to the complaint,
SPI filed a petition for certiorari under Rule
65 of the Rules of Court before the Court of
Appeals. Said appellate court granted the
petition, annulled and set aside the orders
and stayed the proceedings in the lower
court. In so ruling, the Court of Appeals held:
The reasons given by the respondent Court
in denying petitioners motion to suspend
proceedings are untenable.
1. The notarized copy of the articles of
agreement attached as Annex A to
petitioners reply dated August 26, 1993, has
been submitted by them to the respondent
Court (Annex G, petition). It bears the
signature of petitioner Rufo B. Colayco,
president of petitioner Shangri-La Properties,
Inc., and of Bayani Fernando, president of
respondent
Corporation
(Annex
G-1,
petition). At page D/4 of said articles of
agreement it is expressly provided that the
conditions of contract are `deemed an
integral part thereof (page 188, rollo). And it
is at pages D/42 to D/44 of the conditions of
contract that the provisions for arbitration
are found (Annexes G-3 to G-5, petition, pp.
227-229). Clause No. 35 on arbitration
specifically provides:
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 thereunder or in connection
therewith (including any matter or being 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.
The fact that said conditions of contract
containing the arbitration clause bear only
the initials of respondent Corporations
representatives,
Bayani
Fernando
and
Reynaldo de la Cruz, without that of the
representative of petitioner Shangri-La
Properties, Inc. does not militate against its
effectivity.
Said
petitioner
having
categorically admitted that the document,
Annex A to its reply dated August 26, 1993
(Annex G, petition), is the agreement
between the parties, the initial or signature
of said petitioners representative to signify
conformity to arbitration is no longer
necessary. The parties, therefore, should be
allowed to submit their dispute to arbitration
in accordance with their agreement.
2. The respondent Court held that petitioners
`are in default in proceeding with such
arbitration. It took note of `the fact that
under the supposed Arbitration Clause
invoked by defendants, it is required that
Notice of the demand for arbitration of a
dispute shall be filed in writing with the other
party x x x in no case x x x later than the
time of final payment, which apparently, had
elapsed, not only because defendants had
taken possession of the finished works and
the plaintiffs billings for the payment thereof
had remained pending since November,
1991 up to the filing of this case on July 14,
1993, but also for the reason that defendants
have failed to file any written notice of any

demand for arbitration during the said long


period of one year and eight months, x x x.
Respondent Court has overlooked the fact
that under the arbitration clause
Notice of the demand for arbitration dispute
shall be filed in writing with the other party
to the contract and a copy filed with the
Project Manager. The demand for arbitration
shall be made within a reasonable time after
the dispute has arisen and attempts to settle
amicably had failed; in no case, however,
shall the demand be made later than the
time of final payment except as otherwise
expressly
stipulated
in
the
contract
(underscoring supplied)
quoted in its order (Annex A, petition). As the
respondent Court there said, after the final
demand
to
pay
the
amount
of
P110,883,101.52,
instead
of
paying,
petitioners set up its own claim against
respondent Corporation in the amount of
P220,000,000.00 and set a conference
thereon on July 12, 1993. Said conference
proved futile. The next day, July 14, 1993,
respondent Corporation filed its complaint
against petitioners. On August 13, 1993,
petitioners wrote to respondent Corporation
requesting
arbitration.
Under
the
circumstances, it cannot be said that
petitioners resort to arbitration was made
beyond reasonable time. Neither can they be
considered in default of their obligation to
respondent Corporation.
Hence, this petition before this Court.
Petitioner assigns the following errors:
A.
THE COURT OF APPEALS ERRED IN ISSUING
THE EXTRAORDINARY WRIT OF CERTIORARI
ALTHOUGH THE REMEDY OF APPEAL WAS
AVAILABLE TO RESPONDENTS.
B.
THE COURT OF APPEALS ERRED IN FINDING
GRAVE ABUSE OF DISCRETION IN THE
FACTUAL FINDINGS OF THE TRIAL COURT
THAT:
(i) THE PARTIES DID NOT ENTER INTO AN
AGREEMENT TO ARBITRATE.

(ii) ASSUMING THAT THE PARTIES DID ENTER


INTO THE AGREEMENT TO ARBITRATE,
RESPONDENTS ARE ALREADY IN DEFAULT IN
INVOKING THE AGREEMENT TO ARBITRATE.
On the first assigned error, petitioner
contends that the Order of the lower court
denying the motion to suspend proceedings
is a resolution of an incident on the merits.
As such, upon the continuation of the
proceedings,
the
lower
court
would
appreciate the evidence adduced in their
totality and thereafter render a decision on
the merits that may or may not sustain the
existence of an arbitration clause. A decision
containing a finding that the contract has no
arbitration clause can then be elevated to a
higher court in an ordinary appeal where an
adequate remedy could be obtained. Hence,
to petitioner, the Court of Appeals should
have dismissed the petition for certiorari
because the remedy of appeal would still be
available to private respondents at the
proper time.[7]

The Court has likewise ruled that certiorari


will not be issued to cure errors in
proceedings or correct erroneous conclusions
of law or fact. As long as a court acts within
its jurisdiction, any alleged errors committed
in the exercise of its jurisdiction will amount
to nothing more than errors of judgment
which are reviewable by timely appeal and
not by a special civil action of certiorari.[9]v.
Court of Appeals, 327 Phil. 1, 41-42 (1996).9
This is not exactly so in the instant case.
While this Court does not deny the eventual
jurisdiction of the lower court over the
controversy, the issue posed basically is
whether the lower court prematurely
assumed jurisdiction over it. If the lower
court
indeed
prematurely
assumed
jurisdiction over the case, then it becomes
an error of jurisdiction which is a proper
subject of a petition for certiorari before the
Court of Appeals. And if the lower court does
not have jurisdiction over the controversy,
then any decision or order it may render may
be annulled and set aside by the appellate
court.

The above contention is without merit.


The rule that the special civil action of
certiorari may not be invoked as a substitute
for the remedy of appeal is succinctly
reiterated in Ongsitco v. Court of Appeals[8]
as follows:
x x x. Countless times in the past, this Court
has held that `where appeal is the proper
remedy, certiorari will not lie. The writs of
certiorari and prohibition are remedies to
correct lack or excess of jurisdiction or grave
abuse of discretion equivalent to lack of
jurisdiction committed by a lower court.
`Where the proper remedy is appeal, the
action for certiorari will not be entertained. x
x x. Certiorari is not a remedy for errors of
judgment. Errors of judgment are correctible
by appeal, errors of jurisdiction are
reviewable by certiorari.
Rule 65 is very clear. The extraordinary
remedies of certiorari, prohibition and
mandamus are available only when `there is
no appeal or any plain, speedy and adequate
remedy in the ordinary course of law x x x.
That is why they are referred to as
`extraordinary. x x x.

However, the question of jurisdiction, which


is a question of law depends on the
determination of the existence of the
arbitration clause, which is a question of fact.
In the instant case, the lower court found
that there exists an arbitration clause.
However, it ruled that in contemplation of
law, said arbitration clause does not exist.
The issue, therefore, posed before the Court
of Appeals in a petition for certiorari is
whether the Arbitration Clause does not in
fact exist. On its face, the question is one of
fact which is not proper in a petition for
certiorari.
The Court of Appeals found that an
Arbitration Clause does in fact exist. In
resolving said question of fact, the Court of
Appeals interpreted the construction of the
subject contract documents containing the
Arbitration Clause in accordance with
Republic Act No. 876 (Arbitration Law) and
existing
jurisprudence
which
will
be
extensively discussed hereunder. In effect,
the issue posed before the Court of Appeals
was likewise a question of law. Being a
question of law, the private respondents

rightfully invoked the special civil action of


certiorari.
It is that mode of appeal taken by private
respondents before the Court of Appeals that
is being questioned by the petitioners before
this Court. But at the heart of said issue is
the question of whether there exists an
Arbitration Clause because if an Arbitration
Clause does not exist, then private
respondents took the wrong mode of appeal
before the Court of Appeals.
For this Court to be able to resolve the
question of whether private respondents
took the proper mode of appeal, which,
incidentally, is a question of law, then it has
to answer the core issue of whether there
exists
an
Arbitration
Clause
which,
admittedly, is a question of fact.
Moreover, where a rigid application of the
rule that certiorari cannot be a substitute for
appeal will result in a manifest failure or
miscarriage of justice, the provisions of the
Rules of Court which are technical rules may
be relaxed.[10] As we shall show hereunder,
had the Court of Appeals dismissed the
petition for certiorari, the issue of whether or
not an arbitration clause exists in the
contract would not have been resolved in
accordance with evidence extant in the
record of the case. Consequently, this would
have resulted in a judicial rejection of a
contractual provision agreed by the parties
to the contract.
In the same vein, this Court holds that the
question of the existence of the arbitration
clause in the contract between petitioner and
private respondents is a legal issue that
must be determined in this petition for
review on certiorari.
Petitioner, while not denying that there exists
an arbitration clause in the contract in
question, asserts that in contemplation of
law there could not have been one
considering the following points. First, the
trial court found that the conditions of
contract embodying the arbitration clause is
not duly signed by the parties. Second,
private respondents misrepresented before
the Court of Appeals that they produced in
the trial court a notarized duplicate original
copy of the construction agreement because

what were submitted were mere photocopies


thereof. The contract(s) introduced in court
by private respondents were therefore of
dubious authenticity because: (a) the
Agreement for the Execution of Builders
Work for the EDSA Plaza Project does not
contain an arbitration clause, (b) private
respondents surreptitiously attached as
Annexes `G-3 to `G-5 to their petition before
the Court of Appeals but these documents
are not parts of the Agreement of the parties
as there was no formal trade contract
executed, (c) if the entire compilation of
documents is indeed a formal trade contract,
then it should have been duly notarized, (d)
the
certification
from
the
Records
Management and Archives Office dated
August 26, 1993 merely states that the
notarial record of Nilberto Briones x x x is
available in the files of (said) office as
Notarial Registry Entry only, (e) the same
certification attests that the document
entered in the notarial registry pertains to
the Articles of Agreement only without any
other
accompanying
documents,
and
therefore, it is not a formal trade contract,
and (f) the compilation submitted by
respondents are a mere hodge-podge of
documents and do not constitute a single
intelligible agreement.
In other words, petitioner denies the
existence of the arbitration clause primarily
on the ground that the representatives of the
contracting corporations did not sign the
Conditions of Contract that contained the
said clause. Its other contentions, specifically
that insinuating fraud as regards the alleged
insertion of the arbitration clause, are
questions of fact that should have been
threshed out below.
This Court may as well proceed to determine
whether the arbitration clause does exist in
the parties contract. Republic Act No. 876
provides for the formal requisites of an
arbitration agreement as follows:
Section 4. Form of arbitration agreement. A
contract to arbitrate a controversy thereafter
arising between the parties, as well as a
submission
to
arbitrate
an
existing
controversy, shall be in writing and
subscribed by the party sought to be
charged, or by his lawful agent.

The making of a contract or submission for


arbitration described in section two hereof,
providing for arbitration of any controversy,
shall be deemed a consent of the parties of
the province or city where any of the parties
resides, to enforce such contract of
submission. (Underscoring supplied.)
The formal requirements of an agreement to
arbitrate are therefore the following: (a) it
must be in writing and (b) it must be
subscribed
by
the
parties
or
their
representatives. There is no denying that the
parties entered into a written contract that
was submitted in evidence before the lower
court. To subscribe means to write
underneath, as ones name; to sign at the
end of a document.[11] That word may
sometimes be construed to mean to give
consent to or to attest.[12]
The Court finds that, upon a scrutiny of the
records of this case, these requisites were
complied with in the contract in question.
The
Articles
of
Agreement,
which
incorporates all the other contracts and
agreements between the parties, was signed
by representatives of both parties and duly
notarized. The failure of the private
respondents representative to initial the
`Conditions of Contract would therefor not
affect
compliance
with
the
formal
requirements for arbitration agreements
because that particular portion of the
covenants between the parties was included
by reference in the Articles of Agreement.
Petitioners contention that there was no
arbitration clause because the contract
incorporating said provision is part of a
hodge-podge
document,
is
therefore
untenable. A contract need not be contained
in a single writing. It may be collected from
several different writings which do not
conflict with each other and which, when
connected, show the parties, subject matter,
terms and consideration, as in contracts
entered into by correspondence.[13] A
contract may be encompassed in several
instruments even though every instrument is
not signed by the parties, since it is sufficient
if the unsigned instruments are clearly
identified or referred to and made part of the
signed instrument or instruments. Similarly,
a written agreement of which there are two
copies, one signed by each of the parties, is

binding on both to the same extent as


though there had been only one copy of the
agreement and both had signed it.[14]
The flaw in petitioners contentions therefore
lies in its having segmented the various
components of the whole contract between
the parties into several parts. This
notwithstanding, petitioner ironically admits
the execution of the Articles of Agreement.
Notably, too, the lower court found that the
said Articles of Agreement also provides that
the `Contract Documents therein listed `shall
be deemed an integral part of this
Agreement, and one of the said documents is
the `Conditions of Contract which contains
the Arbitration Clause. It is this Articles of
Agreement that was duly signed by Rufo B.
Colayco, president of private respondent SPI,
and Bayani F. Fernando, president of
petitioner corporation. The same agreement
was duly subscribed before notary public
Nilberto R. Briones. In other words, the
subscription of the principal agreement
effectively covered the other documents
incorporated by reference therein.
This Court likewise does not find that the
Court of Appeals erred in ruling that private
respondents were not in default in invoking
the provisions of the arbitration clause which
states that (t)he demand for arbitration shall
be made within a reasonable time after the
dispute has arisen and attempts to settle
amicably had failed. Under the factual milieu,
private respondent SPI should have paid its
liabilities under the contract in accordance
with its terms. However, misunderstandings
appeared to have cropped up between the
parties ostensibly brought about by either
delay in the completion of the construction
work or by force majeure or the fire that
partially gutted the project. The almost twoyear delay in paying its liabilities may not
therefore be wholly ascribed to private
respondent SPI.
Besides, private respondent SPIs initiative in
calling for a conference between the parties
was a step towards the agreed resort to
arbitration. However, petitioner posthaste
filed the complaint before the lower court.
Thus, while private respondent SPIs request
for arbitration on August 13, 1993 might
appear an afterthought as it was made after
it had filed the motion to suspend

proceedings, it was because petitioner also


appeared to act hastily in order to resolve
the controversy through the courts.
The arbitration clause provides for a
reasonable time within which the parties
may avail of the relief under that clause.
Reasonableness is a relative term and the
question of whether the time within which an
act has to be done is reasonable depends on
attendant circumstances.[15] This Court
finds that under the circumstances obtaining
in this case, a one-month period from the
time the parties held a conference on July 12,
1993 until private respondent SPI notified
petitioner that it was invoking the arbitration
clause, is a reasonable time. Indeed,
petitioner may not be faulted for resorting to
the court to claim what was due it under the
contract. However, we find its denial of the
existence of the arbitration clause as an
attempt to cover up its misstep in hurriedly
filing the complaint before the lower court.
In this connection, it bears stressing that the
lower court has not lost its jurisdiction over
the case. Section 7 of Republic Act No. 876
provides that proceedings therein have only

been stayed. After the special proceeding of


arbitration[16] has been pursued and
completed, then the lower court may confirm
the award[17] made by the arbitrator.
It should be noted that in this jurisdiction,
arbitration has been held valid and
constitutional. Even before the approval on
June 19, 1953 of Republic Act No. 876, this
Court has countenanced the settlement of
disputes through arbitration.[18] Republic
Act No. 876 was adopted to supplement the
New Civil Codes provisions on arbitration.
[19] Its potentials as one of the alternative
dispute resolution methods that are now
rightfully vaunted as the wave of the future
in international relations, is recognized
worldwide. To brush aside a contractual
agreement calling for arbitration in case of
disagreement between the parties would
therefore be a step backward.
WHEREFORE, the questioned Decision of the
Court of Appeals is hereby AFFIRMED and the
petition for certiorari DENIED. This Decision
is immediately executory. Costs against
petitioner.
SO ORDERED.

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