FIRST DIVISION

[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.

DECISION

YNARES-SANTIAGO , J : p

This Petition for Review on Certiorari under Rule 45 of the Rules of Court assails the
Decision 1 of the Court of Appeals dated February 18, 2005, which sustained the Order 2
dated April 23, 2004 of the Arbitral Tribunal 3 of the Construction Industry Arbitration
Commission (CIAC), denying petitioner's Motion to Terminate Proceedings and its
Resolution 4 dated May 20, 2005 denying petitioner's 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 Construction Agreement 5 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, Paranaque City.
In accordance with the contract, spouses Esquig paid the amount of P1,050,000 as down
payment. 6 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 petitioner's progress billing and the
salary of the laborers. 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 Homeowner's Association requesting for the cancellation of
the contractor's work permit. EHITaS

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
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 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,
attorney's fees and costs of the suit.
Instead of submitting an answer, petitioner filed with the CIAC a motion to dismiss 7 on
grounds of lack of jurisdiction to 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 petitioner's motion to dismiss, holding
that since the Design-Build Construction Agreement contained an arbitration clause, any
dispute arising from said contract is within CIAC's 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. CDEaAI

Meanwhile, on February 27, 2004, the Regional Trial Court of Muntinlupa City, Branch 203
issued an Order 8 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 terminate proceedings but the
same was denied 9 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. Petitioner's motion for
reconsideration was denied hence this petition raising the following issues:
I

THE COURT OF APPEALS ERRED WHEN IT RULED THAT PETITIONER AGREED

TO HAVE THE CASE SUBMITTED FOR VOLUNTARY ARBITRATION.

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
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 JURISDICTION OVER THE SUBJECT CONTROVERSY AND HAD NOT
RELINQUISHED THE SAME TO CIAC. 1 0

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 petitioner's complaint was filed earlier thus, rendering
the arbitration clause moot, unenforceable and revocable. IADaSE

The petition lacks merit.

Executive Order (EO) No. 1008 entitled, "Construction Industry Arbitration Law" 1 1 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 country's
economic progress as it utilizes a large segment of the labor force and contributes
substantially to the gross national product of the country. 1 2
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 Commission, 1 3 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
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
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 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 parties' 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. 1 4
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. 1 5

With respect to petitioner's 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: DIEAHc

As regards Respondent's 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. 1 6

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
rendered judgment on July 29, 2005 1 7 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

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 the project plus legal interest until fully paid;
b. P296,658.85 representing balance of the contract price plus legal
interest until fully paid;

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 attorney's fees;

f. Cost of suit.

SO ORDERED. 1 8

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, respondents' manifestation with prayer
for the issuance of a temporary restraining order (TRO). ISHCcT

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 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. 1 9
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 petitioner's Motion to Terminate Proceedings, and its Resolution
dated May 20, 2005 denying petitioner's 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., Austria-Martinez, Callejo, Sr. and Chico-Nazario, JJ., concur.
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 Footnotes

1. Rollo, pp. 34-48. Penned by Associate Justice Delilah Vidallon-Magtolis as concurred in

by Associate Justices Perlita J. Tria-Tirona and Jose C. Reyes, Jr.
2. Id. at 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 51-55.
6. Id. at 118-119.
7. Id. at 166-174.
8. Id. at 235-238. Penned by Judge Pedro M. Sabundayo, Jr.
9. Id. at 255.
10. Id. at 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.
13. 412 Phil. 236, 245 (2001).

14. LM Power Engineering Corp. v. Capitol Industrial Construction Groups, Inc., 447 Phil.
705, 716 (2003).

15. See Section 2, Article III of the Rules of Procedure Governing Construction Arbitration.
16. Rollo, p. 189.
17. Id. at 506.
18. Id. at 546.
19. LM Power Engineering Corp. v. Capitol Industrial Construction Groups, Inc., supra note
14 at 714.

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