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186 SUPREME COURT REPORTS

ANNOTATED
Reyes vs. Balde II

*
G.R. No. 168384. August 7, 2006.

CHARLES BERNARD H. REYES

doing business under the name and
style CBH REYES ARCHITECTS,
petitioner, vs. ANTONIO YULO
BALDE II, PAULINO M. NOTO and
ERNESTO J. BATTAD, SR., in their
capacities as Arbitrators of the
CONSTRUCTION INDUSTRY
ARBITRATION COMMISSION,
SPOUSES CESAR and CARMELITA
ESQUIG and ROSEMARIE PAPAS,
respondents.

Alternative Dispute Resolution;

Arbitration; Construction Industry
Arbitration Commission (CIAC);
Jurisdictions; The Construction Industry
Arbitration Commission (CIAC) has
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.·In the
case of Philrock, Inc. v. Construction
Industry Arbitration Commission, 359
SCRA 632 (2001), the Court has ruled that
CIAC has 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. Section 1, Article III of the
CIAC Rules of Procedure Governing
Construction Arbitration likewise provides
that recourse to the CIAC may be availed
of whenever a contract contains a clause
for the submission of a future controversy
to arbitration, thus: SECTION 1.
Submission to CIAC Juris-

_______________

* FIRST DIVISION.

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VOL. 498, AUGUST 7, 2006 187

Reyes vs. Balde II

diction.·An arbitration clause in a

construction contract or a submission
to arbitration of a construction
dispute shall be deemed an agreement
to submit an existing or future
controversy to CIAC jurisdiction,
notwithstanding the reference to a
different arbitration institution or arbitral
body in such contract or submission. When
a contract contains a clause for the
submission of a future controversy to
arbitration, it is not necessary for the
parties to enter into a submission
agreement before the claimant may invoke
the jurisdiction of CIAC. (Emphasis
supplied)
 Same; Same; Same; The presence of
the arbitration clause in the partiesÊ
contract vests jurisdiction on the
Construction Industry Arbitration
Commission (CIAC) on all controversies
arising from such contract.·We agree with
the findings of the Court of Appeals that
the Design-Build Construction Agreement
mutually entered into by the parties
contain an arbitration clause, to wit:
ARTICLE 10. ARBITRATION. All
questions in dispute under the Agreement
shall be submitted in accordance with the
provisions of Philippine Law on
Arbitration and provided for in Article
2042 of the New Civil Code of the
Philippines and the provisions of Republic
Act No. 876. Clearly, the presence of the
arbitration clause in the partiesÊ contract
vests jurisdiction on the CIAC on all
controversies arising from such contract.
The arbitral clause in the agreement is a
commitment by the parties to submit to
arbitration the disputes covered therein.
Because that clause is binding, they are
expected to abide by it in good faith. Where
the jurisdiction of CIAC is properly
invoked, the failure or refusal of herein
petitioner to arbitrate shall not affect the
proceedings. Arbitration proceedings shall
continue notwithstanding the absence or
lack of participation of petitioner, and the
award shall be made after receiving the
evidence of the claimant.

Same; Same; Same; Jurisdictions;

E.O. No. 1008 which vests jurisdiction to
the Construction Industry Arbitration
Commission (CIAC) over construction
disputes is a special law·hence, it takes
precedence over Batas Pambansa Blg. 129
or the Judiciary Reorganization Act of
1980, a general law which vests
jurisdiction to the Regional Trial Courts
over civil actions in which the subject of the
litigation is incapable of pecuniary
estimation.·With respect to petitionerÊs
contention that the action is purely civil in
nature hence, jurisdiction rests with the
Regional Trial Court, the same must fail.
Since the action is rooted on alleged
violations of the agreement, it is

188

188 SUPREME COURT REPORTS

ANNOTATED

Reyes vs. Balde II

embraced by the term „construction

dispute.‰ As CIAC aptly ruled: As regards
RespondentÊs assertion that the claims in
the civil case are not arbitrable, this
Commission again begs to digress. A
cursory perusal of the claims in civil case
would show that such fall within the scope
of CIAC jurisdiction, to wit: (1) accounting
of all payments made for the purchase of
construction materials; (2) cost of
additional work; (3) balance on the
contract price; (4) interest; (5) rescission of
contract; (6) moral damages; (7) exemplary
damages; and (8) cost of suit. Besides,
Section 23 of E.O. No. 1008 expressly
provides that all provisions of existing
laws, proclamations, decrees, letters of
instructions and executive orders contrary
to or inconsistent with E.O. No. 1008 are
repealed or modified accordingly. E.O. No.
1008 which vests jurisdiction to the CIAC
over construction disputes is a special law;
hence, it takes precedence over Batas
Pambansa Blg. 129 or the Judiciary
Reorganization Act of 1980, a general law
which vests jurisdiction to the Regional
Trial Courts over civil actions in which the
subject of the litigation is incapable of
pecuniary estimation.

Same; Same; Being an inexpensive,

speedy and amicable method of settling
disputes, arbitration·along with
mediation, conciliation and negotiation·is
encouraged by the Supreme Court.·It
bears to stress that being an inexpensive,
speedy and amicable method of settling
disputes, arbitration·along with
mediation, conciliation and negotiation·is
encouraged by the Supreme Court. Aside
from unclogging judicial dockets,
arbitration also hastens the resolution of
disputes, especially of the commercial
kind. It is thus regarded as the „wave of
the future‰ in international civil and
commercial disputes. Brushing aside a
contractual agreement calling for
arbitration between the parties would be a
step backward.

PETITION for review on certiorari of

the decision and resolution of the
Court of Appeals.
The facts are stated in the opinion of
the Court.
Chavez, Miranda, Aseoche Law
Offices for petitioner.
Villa, Judan & Associates for
private respondents.

189

VOL. 498, AUGUST 7, 2006 189

 Reyes vs. Balde II

YNARES-SANTIAGO, J.:

This Petition for Review on Certiorari

under Rule 45 of the Rules of Court
1
assails the Decision of the Court of
Appeals dated February 18, 2005,
2
which sustained the Order dated
April 23, 2004 of the Arbitral
3
Tribunal of the Construction
Industry Arbitration Commission
(CIAC), denying petitionerÊs Motion
to Terminate Proceedings and its
4
Resolution dated May 20, 2005
denying petitionerÊs motion for
reconsideration.
The facts of the case are as follows:
On October 20, 2002, respondent-
spouses Cesar and Carmelita Esquig
entered into a Design-Build
5
Construction Agreement with
petitioner Charles Bernard H. Reyes,
doing business under the name and
style of CBH Reyes Architects, for the
architectural design and construction
of a 2-storey residence in Tahanan
Village, Parañaque City.
In accordance with the contract,
spouses Esquig paid the amount of
6
P1,050,000 as down payment.
Thereafter, construction commenced.
The relationship between
petitioner and respondent spouses
went on smoothly until sometime in
January 2003 when the latter left for
the United States and designated
their co-respondent, Rosemarie
Papas, as their representative.
According to petitioner, Papas
meddled with the construction works
by demanding changes and additional
works which entailed additional cost.
Papas also refused to pay petitionerÊs
progress billing and the salary of the
laborers.

_______________

1 Rollo, pp. 34-48. Penned by Associate

Justice Delilah Vidal-lon-Magtolis as
concurred in by Associate Justices Perlita J.
Tria-Tirona and Jose C. Reyes, Jr.
2 Id., at pp. 254-255.
3 Composed of Antonio Yulo Balde II as
Chairman, with Paulino M. Noto and Ernesto
J. Battad, Sr. as members.
4 Rollo, p. 50.
5 Id., at pp. 51-55.
6 Id., at pp. 118-119.

190

190 SUPREME COURT REPORTS

ANNOTATED
Reyes vs. Balde II

Petitioner thereafter prepared an

accounting report of all the additional
works and their corresponding costs,
however, Papas denied all the items
in the list and refused to pay the
same. Worse, on May 8, 2003, Papas
wrote the Board of Directors of
Tahanan Village HomeownerÊs
Association requesting for the
cancellation of the contractorÊs work
permit.
Thus, on May 26, 2003, petitioner
filed a complaint for Accounting,
Collection of Sum of Money,
Rescission of Contract with Damages
against spouses Esquig and
Rosemarie Papas with the Regional
Trial Court of Muntinlupa City which
was docketed as Civil Case No. 03-
110. In the complaint, petitioner
prayed that an accounting be
rendered to determine the cost of the
materials purchased by Papas; that
respondents be ordered to pay the
cost of the additional works done on
the property; that the Design-Build
Construction Agreement be ordered
rescinded because respondents
breached the same; and that
respondents be ordered to pay moral
and exemplary damages and
litigation expenses.
On July 15, 2003, respondents
filed a motion to dismiss Civil Case
No. 03-110 on the ground that the
court has no jurisdiction over the
subject matter of the case. They
claimed that the Design-Build
Construction Agreement contained
an arbitration clause, thus any
dispute arising therefrom should be
brought before the CIAC.
On even date, respondents also
filed a complaint before the CIAC
against the petitioner, docketed as
CIAC Case No. 13-2003. Respondents
alleged that petitioner unreasonably
delayed the construction and refused
to finish the project. Thus, they
prayed that petitioner be ordered to
finish the project or, in the
alternative, to pay the cost to finish
the same; to reimburse the
overpayments made by respondents;
and to pay liquidated damages,
attorneyÊs fees and costs of the suit.
Instead of submitting an answer,
petitioner filed with the CIAC a
 7
motion to dismiss on grounds of lack
of jurisdiction to

_______________

7 Id., at pp. 166-174.

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VOL. 498, AUGUST 7, 2006 191

Reyes vs. Balde II

hear and decide the case as well as

the pendency of the case before the
trial court involving the same subject
matter.
In an Order dated October 17,
2003, CIAC denied petitionerÊs
motion to dismiss, holding that since
the Design-Build Construction
Agreement contained an arbitration
clause, any dispute arising from said
contract is within CIACÊs jurisdiction.
Petitioner filed a motion for
reconsideration which was denied by
CIAC in its Order dated November
27, 2003. Thus, petitioner filed his
Answer Ad Cautelam. Thereafter,
CIAC constituted the Arbitral
Tribunal and directed the same to
carry on with the arbitration
proceedings in accordance with CIAC
Rules.
Meanwhile, on February 27, 2004,
the Regional Trial Court of
Muntinlupa 8
City, Branch 203 issued
an Order denying the motion to
dismiss filed by respondents. The
trial court held that it has
jurisdiction over the complaint for
accounting, rescission of contract and
damages. Petitioner then filed with
the CIAC a motion to terminate9
proceedings but the same was denied
in an Order dated April 23, 2004.
Thus, petitioner filed a petition for
certiorari and prohibition before the
Court of Appeals which was docketed
as CA-G.R. SP No. 83816. On
February 18, 2005, the Court of
Appeals rendered the assailed
Decision dismissing the petition for
lack of merit. It held that CIAC
properly acquired jurisdiction over
the subject property. PetitionerÊs
motion for reconsideration was
denied hence this petition raising the
following issues:

THE COURT OF APPEALS ERRED

WHEN IT RULED THAT PETITIONER
AGREED TO HAVE THE CASE
SUBMITTED FOR VOLUNTARY
ARBITRATION.

_______________

8 Id., at pp. 235-238. Penned by Judge

Pedro M. Sabundayo, Jr.
9 Id., at p. 255.

192

192 SUPREME COURT REPORTS

ANNOTATED
Reyes vs. Balde II

II

EVEN ASSUMING ARGUENDO THAT

PETITIONER AGREED TO HAVE THE
PRESENT CASE SUBMITTED FOR
ARBITRATION, THE COURT OF
APPEALS ERRED IN HOLDING THAT
THE CIAC MAY TAKE COGNIZANCE OF
THE PRESENT CASE CONSIDERING
THAT THE PRESENT CASE INVOLVED
ISSUES WHICH ARE OUTSIDE ITS
JURISDICTION.

III

THE COURT OF APPEALS ERRED IN

NOT HOLDING THAT ANY
PROCEEDING IN THE CIAC MUST BE
TERMINATED SINCE THE RTC
ALREADY ASSUMED JURISDICTION
OVER THE SUBJECT CONTROVERSY
AND HAD NOT RELINQUISHED THE
10
SAME TO CIAC.

The primordial issue in the instant

case is, which body has jurisdiction
over the present controversy·the
Regional Trial Court or the CIAC?
Petitioner contends that the CIAC
has no jurisdiction to entertain the
case because it is purely civil in
nature and does not involve
construction dispute nor require the
resolution of highly technical issues.
Moreover, petitioner alleges that the
trial court acquired jurisdiction prior
to the CIAC since petitionerÊs
complaint was filed earlier thus,
rendering the arbitration clause
moot, unenforceable and revocable.
The petition lacks merit.
Executive Order (EO) No. 1008
entitled, „Construction
11
Industry
Arbitration Law‰ provided for an
arbitration mechanism for the speedy
resolution of construction disputes
other than by court litigation. It
recognized the role of the
construction industry in the countryÊs
economic progress as it utilizes a
large segment of the labor force and
contributes substantially to the gross
12
national product of the country.

_______________

10 Id., at p. 20.
11 Issued on February 4, 1985.
12 David v. Construction Industry [and]
Arbitration Commission, G.R. No. 159795,
July 30, 2004, 435 SCRA 654, 660.

193

VOL. 498, AUGUST 7, 2006 193

Reyes vs. Balde II

Section 4 of E.O. No. 1008 provides:

SECTION 4. Jurisdiction.·The CIAC

shall have original and exclusive
jurisdiction over disputes arising from, or
connected with, contracts entered into by
parties involved in construction in the
Philippines, whether the dispute arises
before or after the completion of the
contract, or after the abandonment or
breach thereof. These disputes may involve
government or private contracts. For the
Board to acquire jurisdiction, the parties to
a dispute must agree to submit the same to
voluntary arbitration.
The jurisdiction of the CIAC may
include but is not limited to violation of
specifications for materials and
workmanship; violation of the terms of
agreement; interpretation and/or
application of contractual provisions;
amount of damages and penalties;
commencement time and delays;
maintenance and defects; payment default
of employer or contractor and changes in
contract cost.
Excluded from the coverage of this law
are disputes arising from employer-
employee relationships which shall
continue to be covered by the Labor Code
of the Philippines.

In the case of Philrock, Inc. v.

Construction Industry Arbitration
13
Commission, the Court has ruled
that CIAC has 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.
Section 1, Article III of the CIAC
Rules of Procedure Governing
Construction Arbitration likewise
provides that recourse to the CIAC
may be availed of whenever a
contract contains a clause for the
submission of a future controversy to
arbitration, thus:

SECTION 1. Submission to CIAC

Jurisdiction.·An arbitration clause in
a construction contract or a
submission to arbitration of a
construction dispute shall be deemed
an agreement to submit an existing or
future controversy to CIAC
jurisdiction, notwithstanding the
reference to a different arbitra-

_______________

13 412 Phil. 236, 245; 359 SCRA 632, 640

(2001).

194

194 SUPREME COURT REPORTS

ANNOTATED
Reyes vs. Balde II

tion institution or arbitral body in such

contract or submission. When a contract
contains a clause for the submission of a
future controversy to arbitration, it is not
necessary for the parties to enter into a
submission agreement before the claimant
may invoke the jurisdiction of CIAC.
(Emphasis supplied)

We agree with the findings of the

Court of Appeals that the Design-
Build Construction Agreement
mutually entered into by the parties
contain an arbitration clause, to wit:
ARTICLE 10. ARBITRATION.

All questions in dispute under the

Agreement shall be submitted in
accordance with the provisions of
Philippine Law on Arbitration and
provided for in Article 2042 of the New
Civil Code of the Philippines and the
provisions of Republic Act No. 876.

Clearly, the presence of the

arbitration clause in the partiesÊ
contract vests jurisdiction on the
CIAC on all controversies arising
from such contract. The arbitral
clause in the agreement is a
commitment by the parties to submit
to arbitration the disputes covered
therein. Because that clause is
binding, they are expected to abide by
 14
it in good faith. Where the
jurisdiction of CIAC is properly
invoked, the failure or refusal of
herein petitioner to arbitrate shall
not affect the proceedings.
Arbitration proceedings shall
continue notwithstanding the
absence or lack of participation of
petitioner, and the award shall be
made after receiving the evidence of
15
the claimant.
With respect to petitionerÊs
contention that the action is purely
civil in nature hence, jurisdiction
rests with the Regional Trial Court,
the same must fail. Since the action
is rooted on alleged violations of the
agreement, it is embraced by the
term „construction dispute.‰ As CIAC
aptly ruled:

_______________

14 LM Power Engineering Corp. v. Capitol

Industrial Construction Groups, Inc., 447 Phil.
705, 716; 399 SCRA 562, 571-572 (2003).
15 See Section 2, Article III of the Rules of
Procedure Governing Construction
Arbitration.

195

VOL. 498, AUGUST 7, 2006 195

Reyes vs. Balde II

„As regards RespondentÊs assertion that

the claims in the civil case are not
arbitrable, this Commission again begs to
digress. A cursory perusal of the claims in
civil case would show that such fall within
the scope of CIAC jurisdiction, to wit: (1)
accounting of all payments made for the
purchase of construction materials; (2) cost
of additional work; (3) balance on the
contract price; (4) interest; (5) rescission of
contract; (6) moral damages; (7) exemplary
16
damages; and (8) cost of suit.‰

Besides, Section 23 of E.O. No. 1008

expressly provides that all provisions
of existing laws, proclamations,
decrees, letters of instructions and
executive orders contrary to or
inconsistent with E.O. No. 1008 are
repealed or modified accordingly. E.O.
No. 1008 which vests jurisdiction to
the CIAC over construction disputes
is a special law; hence, it takes
precedence over Batas Pambansa
Blg. 129 or the Judiciary
Reorganization Act of 1980, a general
law which vests jurisdiction to the
Regional Trial Courts over civil
actions in which the subject of the
litigation is incapable of pecuniary
estimation.
Meanwhile, it appears that the
Regional Trial Court of Muntinlupa
City, Branch 203 17rendered judgment
on July 29, 2005 in Civil Case No.
03-110 in favor of herein petitioner,
the dispositive portion of which
reads:

„WHEREFORE, judgment is rendered

declaring a rescission of the Design Build
Construction Agreement dated 20 October
2002; ordering defendants to render an
accounting of all the construction
materials they bought for the construction
of the project subject matter of the present
case; further ordering defendants, jointly
and severally, to pay plaintiff as follows:
 a. P840,300.00 representing cost of
additional works and changes in
the project plus legal interest until
fully paid;
b. P296,658.85 representing balance
of the contract price plus legal
interest until fully paid;

_______________

16 Rollo, p. 189.
17 Id., at p. 506.

196

196 SUPREME COURT REPORTS

ANNOTATED
Reyes vs. Balde II

c. P500,000.00 as and by way of

moral damages;
d. P500,000.00 as and by way of
exemplary damages;
e. P500,000.00 as and by way of
attorneyÊs fees;
f. Cost of suit.
18
SO ORDERED.‰

On June 29, 2006, the presiding

judge ordered the designated sheriff
to implement the writ of execution
dated May 17, 2006. Consequently,
Sheriff Melvin T. Bagabaldo levied on
the personal properties of respondent
Papas. Hence, respondentsÊ
manifestation with prayer for the
issuance of a temporary restraining
order (TRO).
In the Resolution dated July 12,
2006, we issued a TRO enjoining the
Presiding Judge of Regional Trial
Court of Muntinlupa City, Branch
203, from continuing with any of the
proceedings in Civil Case No. 03-110
and from enforcing the Order dated
June 29, 2006 ordering the sheriff to
implement the writ.
Thus, considering our findings
that the CIAC and not the RTC
which has jurisdiction over the
instant controversy, the injunction
against the Presiding Judge of the
Regional Trial Court of Muntinlupa
City, Branch 203 from further
proceeding with Civil Case No. 03-
110 must be made permanent. All the
proceedings therein are declared null
and void for lack of jurisdiction. The
designated sheriff is enjoined from
proceeding with the sale of the levied
personal properties and is ordered to
return the same to respondents.
Accordingly, Civil Case No. 03-110
must be dismissed on the ground of
lack of jurisdiction.
It bears to stress that being an
inexpensive, speedy and amicable
method of settling disputes,
arbitration·along with mediation,
conciliation and negotiation·is
encouraged by the Supreme Court.
Aside from unclogging judicial
dockets, arbitration also hastens the
resolution of disputes, especially of

_______________

18 Id., at p. 546.

197

VOL. 498, AUGUST 7, 2006 197

 Reyes vs. Balde II

the commercial kind. It is thus

regarded as the „wave of the future‰
in international civil and commercial
disputes. Brushing aside a
contractual agreement calling for
arbitration between the parties would
19
be a step backward.
WHEREFORE, in view of the
foregoing, the instant petition is
DENIED. The Decision of the Court
of Appeals dated February 18, 2005
in CA-G.R. SP No. 83816 which
sustained the Order of the Arbitral
Tribunal of the Construction Industry
Arbitration Commission dated April
23, 2004 denying petitionerÊs Motion
to Terminate Proceedings, and its
Resolution dated May 20, 2005
denying petitionerÊs motion for
reconsideration, are AFFIRMED. The
Presiding Judge of the Regional Trial
Court of Muntinlupa City, Branch
203 is PERMANENTLY ENJOINED
from proceeding with Civil Case No.
03-110 and all the proceedings
therein are DECLARED NULL AND
VOID. Sheriff Melvin T. Bagabaldo is
ENJOINED from proceeding with the
sale of the levied personal properties
and is ORDERED to return them to
the respondents. The Presiding Judge
of the Regional Trial Court of
Muntinlupa City, Branch 203 is
further DIRECTED to dismiss Civil
Case No. 03-110 for lack of
jurisdiction.
SO ORDERED.

Panganiban (C.J.,
Chairperson), Austria-Martinez,
 Callejo, Sr. and Chico-Nazario, JJ.,
concur.

Petition denied, judgment and

resolution affirmed.

Note.·While a voluntary
arbitrator is not part of the
governmental unit or labor
departmentÊs personnel, said
arbitrator renders arbitration
services provided for under labor
laws. (Ludo & Luym Corporation vs.
Saornido, 395 SCRA 451 [2003])

··o0o··

_______________

19 LM Power Engineering Corp. v. Capitol

Industrial Construction Groups, Inc., supra
note 14 at p. 714; p. 569.

198

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