[19] G.R. No.
211504 construction contracts entered into by parties, and whether such disputes arise before or after the
FEDERAL BUILDERS, INC., Petitioner vs POWER FACTORS, INC., Respondent
Construction Industry Arbitration Commission; Jurisdiction; Under the Construction Industry
Arbitration Commission Revised Rules of Procedure Governing Construction
Arbitration (CIAC Revised Rules), all that is required for the CIAC to acquire jurisdiction is for the
parties of any construction contract to agree to submit their dispute to arbitration.—The need to
establish a proper arbitral machinery to settle disputes expeditiously was recognized by the
Government in order to promote and maintain the development of the country’s construction industry.
With such recognition came the creation of the CIAC through Executive Order No. 1008 (E.O. No.
1008), also known as The Construction Industry Arbitration Law. Section 4 of E.O. No. 1008
provides: Sec. 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. x x x Under the CIAC Revised Rules of Procedure Governing Construction
Arbitration (CIAC Revised Rules), all that is required for the CIAC to acquire jurisdiction is for the
parties of any construction contract to agree to submit their dispute to arbitration.  Also, Section 2.3 of
the CIAC Revised Rules states that the agreement may be reflected in an arbitration clause in their
contract or by subsequently agreeing to submit their dispute to voluntary arbitration. The
CIAC Revised Rules clarifies, however, that the agreement of the parties to submit their dispute to
arbitration need not be signed or be formally agreed upon in the contract because it can also be in the
form of other modes of communication in writing.
Same; Same; Executive Order (EO) No. 1008 emphasizes that the modes of voluntary dispute
resolution like arbitration are always preferred because they settle disputes in a speedy and amicable
manner.—The liberal application of procedural rules as to the form by which the agreement is
embodied is the objective of the CIAC Revised Rules. Such liberality conforms to the letter and spirit
of E.O. No. 1008 itself which emphasizes that the modes of voluntary dispute resolution like
arbitration are always preferred because they settle disputes in a speedy and amicable manner. They
likewise help in alleviating or unclogging the judicial dockets. Verily, E.O. No. 1008 recognizes that
the expeditious resolution of construction disputes will promote a healthy partnership between the
Government and the private sector as well as aid in the continuous growth of the country considering
that the construction industry provides employment to a large segment of the national labor force aside
from its being a leading contributor to the gross national product.
Same; Same; Construction Disputes; Section 2.1, Rule 2 of the Construction Industry Arbitration
Commission (CIAC) Revised Rules particularly specifies that the CIAC has original and exclusive
jurisdiction over construction disputes, whether such disputes arise from or are merely connected
with the construction contracts entered into by parties, and whether such disputes
arise before or after the completion of the contracts.—Worthy to note is that the jurisdiction of the
CIAC is over the dispute, not over the contract between the parties. Section 2.1, Rule 2 of the
CIAC Revised Rules particularly specifies that the CIAC has original and exclusive jurisdiction
over construction disputes, whether such disputes arise from or are merely connected with the
₯Construction Industry Arbitration Commission- Set III
completion of the contracts. Accordingly, the execution of the contracts and the effect of the agreement
to submit to arbitration are different matters, and the signing or non-signing of one does not necessarily
affect the other. In other words, the formalities of the contract have nothing to do with the jurisdiction
of the CIAC.
Civil Law; Contracts; A contract does not need to be in writing in order to be obligatory and
effective unless the law specifically requires so.—Under Article 1318 of the Civil Code, a valid
contract should have the following essential elements, namely: (a) consent of the contracting parties;
(b) object certain that is the subject matter of the contract; and (c) cause or consideration. Moreover, a
contract does not need to be in writing in order to be obligatory and effective unless the law
specifically requires so. Pursuant to Article 1356 and Article 1357 of the Civil Code, contracts shall be
obligatory in whatever form they may have been entered into, provided that all the essential requisites
for their validity are present. Indeed, there was a contract between Federal and Power even if the
Contract of Service was unsigned. Such contract was obligatory and binding between them by virtue of
all the essential elements for a valid contract being present.
Construction Industry Arbitration Commission; Jurisdiction; Although the agreement to submit
to arbitration has been expressly required to be in writing and signed by the parties therein by Section
4 of Republic Act (RA) No. 876 (Arbitration Law), the requirement is conspicuously absent from the
Construction Industry Arbitration Commission (CIAC) Revised Rules, which even expressly allows
such agreement not to be signed by the parties therein.—The agreement contemplated in the
CIAC Revised Rules to vest jurisdiction of the CIAC over the parties’ dispute is not necessarily an
arbitration clause to be contained only in a signed and finalized construction contract. The agreement
could also be in a separate agreement, or any other form of written communication, as long as their
intent to submit their dispute to arbitration is clear. The fact that a contract was signed by both parties
has nothing to do with the jurisdiction of the CIAC, and this is the explanation why the CIAC Revised
Rules itself expressly provides that the written communication or agreement need not be signed by the
parties. Although the agreement to submit to arbitration has been expressly required to be in writing
and signed by the parties therein by Section 4 of Republic Act No. 876 (Arbitration Law), the
requirement is conspicuously absent from the CIAC Revised Rules, which even expressly allows such
agreement not to be signed by the parties therein. Brushing aside the obvious contractual agreement in
this case warranting the submission to arbitration is surely a step backward. Consistent with the policy
of encouraging alternative dispute resolution methods, therefore, any doubt should be resolved in favor
of arbitration. In this connection, the CA correctly observed that the act of Atty. Albano in manifesting
that Federal had agreed to the form of arbitration was unnecessary and inconsequential considering the
recognition of the value of the Contract of Service despite its being an unsigned draft.
DECISION
BERSAMIN, J.:
An agreement to submit to voluntary arbitration for purposes of vesting jurisdiction over a
construction dispute in the Construction Industry Arbitration Commission (CIAC) need not be
contained in the construction contract, or be signed by the parties. It is enough that the
agreement be in writing.
Page 1 of 41
The Case Federal did not thereafter participate in the proceedings until the CIAC rendered the Final
Award dated May 12, 2010,9 disposing:
Federal Builders Inc. (Federal) appeals to reverse the decision promulgated on August 12,
2013,1 whereby the Court of Appeals (CA) affirmed the adverse decision rendered on May In summary: Respondent Federal Builders, Inc. is hereby ordered to pay claimant Power
12, 2010 by the Construction Industry Arbitration Commission (CIAC) with modification of the Factors, Inc. the following sums:
total amount awarded.2
1. Unpaid balance on the original contract ₱4,276,614.75;
Antecedents
2. Unpaid balance on change order nos. 1, 2, 3, 4, 5, 6, 7, 8, & 9 3,006,970.32;
Federal was the general contractor of the Bullion Mall under a construction agreement with 3. Interest to May 13, 2010 1,686,149.94;
Bullion Investment and Development Corporation (BIDC). In 2004, Federal engaged
respondent Power Factors Inc. (Power) as its subcontractor for the electric works at the 4. Attorney's Fees 250,000.00;
Bullion Mall and the Precinct Building for ₱l8,000,000.00. 3
5. Cost of Arbitration 149,503.86;
On February 19, 2008, Power sent a demand letter to Federal claiming the unpaid amount of   ₱9,369 ,238.87
₱ll,444,658.97 for work done by Power for the Bullion Mall and the Precinct Building. Federal
replied that its outstanding balance under the original contract only amounted to  
₱1,641,513.94, and that the demand for payment for work done by Power after June 21,
2005 should be addressed directly to BIDC. 4 Nonetheless, Power made several demands on The foregoing amount shall earn legal interest at the rate of 6% per annum from the date of
Federal to no avail. this Final Award until this award becomes final and executory, Claimant shall then be entitled
to 12% per annum until the entire amount is fully satisfied by Respondent.
On October 29, 2009, Power filed a request for arbitration in the CIAC invoking the arbitration
clause of the Contract of Service reading as follows: Federal appealed the award to the CA insisting that the CIAC had no jurisdiction to hear and
decide the case; and that the amounts thereby awarded to Power lacked legal and factual
15. ARBITRATION COMMITTEE - All disputes, controversies or differences, which may arise bases.
between the parties herein, out of or in relation to or in connection with this Agreement, or for
breach thereof shall be settled by the Construction Industry Arbitration Commission (CIAC) On August 12, 2013, the CA affirmed the CIAC's decision with modification as to the amounts
which shall have original and exclusive jurisdiction over the aforementioned disputes. 5 due to Power,10 viz.:

On November 20, 2009, Atty. Vivencio Albano, the counsel of Federal, submitted a letter to WHEREFORE, the CIAC Final Award dated 12 May 20l0 in CIAC Case No. 31-2009 is
the CIAC manifesting that Federal agreed to arbitration and sought an extension of 15 days hereby AFFIRMED with MODIFICATION. As modified, FEDERAL BUILDERS, INC. is
to file its answer, which request the CIAC granted. ordered to pay POWER FACTORS, INC. the following:

On December 16, 2009, Atty. Albano filed his withdrawal of appearance stating that Federal 1. Unpaid balance on the original contract ₱4,276,614.75;
had meanwhile engaged another counsel.6
2. Unpaid balance on change orders 2,864,113.32;
Federal, represented by new counsel (Domingo, Dizon, Leonardo and Rodillas Law Office), 3. Attorney's Fees 250,000.00;
moved to dismiss the case on the ground that CIAC had no jurisdiction over the case
inasmuch as the Contract of Service between Federal and Power had been a mere draft that 4. Cost of Arbitration 149,503.86;
was never finalized or signed by the parties. Federal contended that in the absence of the
agreement for arbitration, the CIAC had no jurisdiction to hear and decide the case. 7
The interest to be imposed on the net award (unpaid balance on the original contract and
change order) amounting to P.7, 140,728.07 awarded to POWER FACTORS INC. shall be
On February 8, 2010, the CIAC issued an order setting the case for hearing, and directing six (6%) per annum, reckoned from 4 July 2006 until this Decision becomes final and
that Federal's motion to dismiss be resolved after the reception of evidence of the parties. 8 executory. Further, the total award due to POWER FACTORS INC. shall be subjected to an

₯Construction Industry Arbitration Commission- Set III Page 2 of 41

interest of twelve percent (12%) per annum computed from the time this judgment becomes
final and executory, until full satisfaction. SO ORDERED. 11
Anent jurisdiction, the CA explained that the CIAC Revised Rules of Procedure stated that
the agreement to arbitrate need not be signed by the parties; that the consent to submit to
voluntary arbitration was not necessary in view of the arbitration clause contained in the
Contract of Service; and that Federal's contention that its former counsel's act of manifesting
its consent to the arbitration stipulated in the draft Contract of Service did not bind it was
inconsequential on the issue of jurisdiction.12
Concerning the amounts awarded, the CA opined that the CIAC should not have allowed the
increase based on labor-cost escalation because of the absence of the agreement between
the parties on such escalation and because there was no authorization in writing allowing the
adjustment or increase in the cost of materials and labor. 13
After the CA denied Federal's motion for reconsideration on February 19, 2004, 14 Federal has
come to the Court on appeal.
Issue
The issues to be resolved are: (a) whether the CA erred in upholding CIAC's jurisdiction over
the present case; and (b) whether the CA erred in holding that Federal was liable to pay
Power the amount of ₱7,140,728.07.
Ruling of the Court
The appeal is bereft of merit.
1.The parties had an effective agreement to submit to voluntary arbitration; hence, the CIAC
had jurisdiction
The need to establish a proper arbitral machinery to settle disputes expeditiously was
recognized by the Government in order to promote and maintain the development of the
country's construction industry. With such recognition came the creation of the CIAC through
Executive Order No. 1008 (E.O. No. 1008), also known as The Construction Industry
Arbitration Law. Section 4 of E.O. No. 1008 provides:
Sec. 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. x x x
₯Construction Industry Arbitration Commission- Set III
Under the CIAC Revised Rules of Procedure Governing Construction
Arbitration (CIAC Revised Rules), all that is required for the CIAC to acquire jurisdiction is for
the parties of any construction contract to agree to submit their dispute to arbitration. 15 Also,
Section 2.3 of the CIAC Revised
Rules states that the agreement may be reflected in an arbitration clause in their contract or
by subsequently agreeing to submit their dispute to voluntary arbitration. The CIAC Revised
Rules clarifies, however, that the agreement of the parties to submit their dispute to
arbitration need not be signed or be formally agreed upon in the contract because it can also
be in the form of other modes of communication in writing, viz.:
RULE 4 - EFFECT OF AGREEMENT TO ARBITRATE
SECTION 4.1. 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.
4.1.1 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.
4.1.2 An arbitration agreement or a submission to arbitration shall be in writing, but it need
not be signed by the parties, as long as the intent is clear that the parties agree to submit a
present or future controversy arising from a construction contract to arbitration. It may be in
the form of exchange of letters sent by post or by telefax, telexes, telegrams, electronic mail
or any other mode of communication.
The liberal application of procedural rules as to the form by which the agreement is embodied
is the objective of the CIAC Revised Rules.  Such liberality conforms to the letter and spirit of
E.O. No. 1008 itself which emphasizes that the modes of voluntary dispute resolution like
arbitration are always preferred because they settle disputes in a speedy and amicable
manner. They likewise help in alleviating or unclogging the judicial dockets. Verily, E.O. No.
1008 recognizes that the expeditious resolution of construction disputes will promote a
healthy partnership between the Government and the private sector as well as aid in the
continuous growth of the country considering that the construction industry provides
employment to a large segment of the national labor force aside from its being a leading
contributor to the gross national product.16
Worthy to note is that the jurisdiction of the CIAC is over the dispute, not over the contract
between the parties.17 Section 2.1, Rule 2 of the CIAC Revised Rules particularly specifies
that the CIAC has original and exclusive jurisdiction over construction disputes,  whether
such disputes arise from or are merely connected with  the construction contracts entered into
by parties, and whether such disputes arise before  or after the completion of the contracts.
Page 3 of 41
Accordingly, the execution of the contracts and the effect of the agreement to submit to
arbitration are different matters, and the signing or non-signing of one does not necessarily
affect the other. In other words, the formalities of the contract have nothing to do with the
jurisdiction of the CIAC.
Federal contends that there was no mutual consent and no meeting of the minds between it
and Power as to the operation and binding effect of the arbitration clause because they had
rejected the draft service contract.
The contention of Federal deserves no consideration.
Under Article 1318 of the Civil Code, a valid contract should have the following essential
elements, namely: (a)  consent of the contracting parties;
(b) object certain that is the subject matter of the contract; and (c) cause or consideration.
Moreover, a contract does not need to be in writing in order to be obligatory and effective
unless the law specifically requires so.
Pursuant to Article 135618 and Article 135719 of the Civil Code,  contracts shall be obligatory in
whatever form they may have been entered into, provided that all the essential requisites for
their validity are present. Indeed, there was a contract between Federal and Power even if
the Contract of Service was unsigned. Such contract was obligatory and binding between
them by virtue of all the essential elements for a valid contract being present.
It clearly appears that the works promised to be done by Power were already executed albeit
still incomplete; that Federal paid Power ₱l ,000,000.00 representing the originally proposed
downpayment, and the latter accepted the payment; and that the subject of their dispute
concerned only the amounts still due to Power. The records further show that Federal
admitted having drafted the Contract of Services containing the following clause on
submission to arbitration, to wit:
15. ARBITRATION COMMITTEE -All disputes, controversies or differences, which may arise
between the Parties herein, out of or in relation to or in connection with this Agreement, or for
breach thereof shall be settled by the Construction Industry Arbitration Commission (CIAC)
which shall have original and exclusive jurisdiction over the aforementioned disputes. 20
With the parties having no issues on the provisions or parts of the Contract of Service other
than that pertaining to the downpayment that Federal was supposed to pay, Federal could not
validly insist on the lack of a contract in order to defeat the jurisdiction of the CIAC. As earlier
pointed out, the CIAC Revised Rules  specifically allows any written mode of communication
to show the parties' intent or agreement to submit to arbitration their present or future
disputes arising from or connected with their contract.
The CIAC and the CA both found that the parties had disagreed on the amount of the
downpayment.1âwphi1 On its part, Power indicated after receiving and reviewing the draft of
₯Construction Industry Arbitration Commission- Set III
the Contract of Service that it wanted 30% as the downpayment. Even so, Power did not
modify anything else in the draft, and returned the draft to Federal after signing it. It was
Federal that did not sign the draft because it was not amenable to the amount as modified by
Power. It is notable that the arbitration clause written in the draft of Federal was unchallenged
by the parties until their dispute arose.
Moreover, Federal asserted the original contract to support its claim against Power. If Federal
would insist that the remaining amount due to Power was only ₱l,641,513.94 based on the
original contract,21 it was really inconsistent for Federal to rely on the draft when it is
beneficial to its side, and to reject its efficacy and existence just to relieve itself from the
CIAC's unfavorable decision.
The agreement contemplated in the CIAC Revised Rules to vest jurisdiction of the CIAC over
the parties' dispute is not necessarily an arbitration clause to be contained only in a signed
and finalized construction contract. The agreement could also be in a separate agreement, or
any other form of written communication, as long as their intent to submit their dispute to
arbitration is clear. The fact that a contract was signed by both parties has nothing to do with
the jurisdiction of the CIAC, and this is the explanation why the CIAC Revised Rules  itself
expressly provides that the written communication or agreement need not be signed by the
parties.
Although the agreement to submit to arbitration has been expressly required to be in writing
and signed by the parties therein by Section 4 22 of Republic Act No. 876 (Arbitration
Law),23  the requirement is conspicuously absent from the CIAC Revised Rules,  which even
expressly allows such agreement not to be signed by the parties therein. 24 Brushing aside the
obvious contractual agreement in this case warranting the submission to arbitration is surely
a step backward.25 Consistent with the policy of encouraging alternative dispute resolution
methods, therefore, any doubt should be resolved in favor of arbitration. 26 In this connection,
the CA correctly observed that the act of Atty. Albano in manifesting that Federal had agreed
to the form of arbitration was unnecessary and inconsequential considering the recognition of
the value of the Contract of Service despite its being an unsigned draft.
2. Amounts as modified by the CA are correct
We find no reversible error regarding the amounts as modified by the CA. Power did not
sufficiently establish that the change or increase of the cost of materials and labor was to be
separately determined and approved by both parties as provided under Article 1724 of
the Civil Code. As such, Federal should not be held liable for the labor cost escalation.
WHEREFORE, the Court AFFIRMS the decision promulgated on August 12, 2013;
and ORDERS the petitioner to pay the costs of suit.
SO ORDERED.
Page 4 of 41
[20] G.R. No. 184295               July 30, 2014
NATIONAL TRANSMISSION CORPORATION, Petitioner, vs. ALPHAOMEGA
INTEGRATED CORPORATION, Respondent.
Remedial Law; Civil Procedure; Section 1, Rule 45 of the Rules of Court provides that a petition
for review on certiorari under the said rule, as in this case, “shall raise only questions of law which
must be distinctly set forth.”—TRANSCO seeks through this petition a recalibration of the
evidence presented before the CIAC Arbitral Tribunal, insisting that AIC is not entitled to any
damages not only because it had previously waived all claims for standby fees in case of project delays
but had eventually failed to perform the workable portions of the projects. This is evidently a factual
question which cannot be the proper subject of the present petition.  Section 1, Rule 45 of the Rules of
Court provides that a petition for review on certiorari under the said rule, as in this case, “shall raise
only questions of law which must be distinctly set forth.” Thus, absent any of the existing exceptions
impelling the contrary, the Court is, as general rule, precluded from delving on factual determinations,
as what TRANSCO essentially seeks in this case.
Same; Same; It is well-settled that findings of fact of quasi-judicial bodies, which have acquired
expertise because their jurisdiction is confined to specific matters, are generally accorded not only
respect, but also finality, especially when affirmed by the Court of Appeals (CA).—The Court finds no
reason to disturb the factual findings of the CIAC Arbitral Tribunal on the matter of AIC’s entitlement
to damages which the CA affirmed as being well supported by evidence and properly referred to in the
record. It is well-settled that findings of fact of quasi-judicial bodies, which have acquired expertise
because their jurisdiction is confined to specific matters, are generally accorded not only respect, but
also finality, especially when affirmed by the CA. The CIAC possesses that required expertise in the
field of construction arbitration and the factual findings of its construction arbitrators are final and
conclusive, not reviewable by this Court on appeal.
Same; Same; It is well-settled that no relief can be granted a party who does not appeal and that
a party who did not appeal the decision may not obtain any affirmative relief from the appellate court
other than what he had obtained from the lower court, if any, whose decision is brought up on appeal.
—It must be emphasized that the petition for review before the CA was filed by TRANSCO. AIC
never elevated before the courts the matter concerning the discrepancy between the amount of the
award stated in the body of the Final Award and the total award shown in its dispositive portion.   The
issue was touched upon by the CA only after AIC raised the same through its Comment (With Motion
to Acknowledge Actual Amount of Award) to TRANSCO’s petition for review. The CA should not
have modified the amount of the award to favor AIC because it is well-settled that no relief can be
granted a party who does not appeal and that a party who did not appeal the decision may not obtain
any affirmative relief from the appellate court other than what he had obtained from the lower court, if
any, whose decision is brought up on appeal. The disposition, as stated in the fallo of the CIAC
Arbitral Tribunal’s Final Award, should therefore stand.
DECISION
₯Construction Industry Arbitration Commission- Set III
PERLAS-BERNABE, J.:
Assailed in this petition for review on certiorari 1 are the Decision2 dated April 8, 2008 and the
Resolution3 dated August 27, 2008 of the Court of Appeals (CA) in CA-G.R. SP No. 99454
affirming with modification the Final Award4 of the Construction Industry Arbitration
Commission (CIAC) Arbitral Tribunal in favor of respondent Alphaomega Integrated
Corporation (AIC) by increasing petitioner National· Transmission Corporation's (TRANSCO)
liability from Pl 7,495,117.44 to Pl 8,896,673.31.
The Facts
AIC, a duly licensed transmission line contractor, participated in the public biddings
conducted by TRANSCO and was awarded six ( 6) government construction projects,
namely: (a) Contract .for the Construction & Erection of Batangas Transmission
Reinforcement Project Schedule III (BTRP Schedule III Project); (b) Contract for the
Construction & Erection of Batangas Transmission Reinforcement Project Schedule I (BTRP
Schedule I Project); (c) Contract for the Construction,Erection & Installation of 230 KV and 69
KV S/S Equipment and Various Facilities for Makban Substation under the Batangas
Transmission Reinforcement Project (Schedule II) (Makban Substation Project); (d) Contract
for the Construction, Erection & Installation of 138 & 69 KV S/S Equipment for Bacolod
Substation under the Negros III-Panay III Substation Projects (Schedule II) (Bacolod
Substation Project); (e) Contract for the Construction, Erection & Installation of 138 & 69 KV
Substation Equipment for the New Bunawan Switching Station Project (Bunawan Substation
Project); and (f) Contract for the Construction, Erection & Installation of 138 and 69 KV
Substation Equipment for Quiot Substation Project (Quiot Substation Project). 5
In the course of the performance ofthe contracts, AIC encountered difficulties and incurred
losses allegedly due to TRANSCO’s breach of their contracts, prompting it to surrender the
projects to TRANSCO under protest. In accordance with an express stipulation in the
contracts that disagreements shall be settled by the parties through arbitration before the
CIAC, AIC submitted a request for arbitration before the CIAC on August 28, 2006, and,
thereafter, filed an Amended Complaint against TRANSCO alleging that the latter breached
the contracts by its failure to: (a) furnish the required Detailed Engineering; (b) arrange a well-
established right-of-way to the project areas; (c) secure the necessary permits and
clearances from the concerned local government units (LGUs); (d) ensure a continuous
supply of construction materials; and (e) carry out AIC’s requests for power shut down. The
aforementioned transgressions resultedin protracted delays and contract suspensions for
each project,6 as follows:
Contract Original Duration of Transco- Percentage (%) of Original
Contract Approved Suspension Contract Duration
Duration and/or Extensions
1) BTRP Schedule III 560 days 711 days 127%
Page 5 of 41
2) BTRP Schedule I 270 days 406 days 170%
3) Makban Substation 365 days 452 days 124%
4) Bacolod Substation 360 days 289 days 80%
5) Bunawan Substation 330 days 130 days 39%
6) Quiot Substation 300 days 131 days 44%
7
2119 days
AIC prayed for judgment declaring all six (6) contracts rescinded and ordering TRANSCO to
pay, in addition to what had already been paid under the contracts, moral damages,
exemplary damages, and attorney’s fees at ₱100,000.00 each, and a total of ₱40,201,467.19
as actual and compensatory damages.8
TRANSCO, for its part, contended that: (a) it had conducted Detailed Engineering prior to the
conduct of the bidding; and (b) it had obtained the necessary government permits and
endorsements from the affected LGUs. It asserted that AIC was guilty of frontloading– that
is,collecting the bulk of the contract price for work accomplished at the early stages of the
project and then abandoning the later stagesof the project which has a lower contract price 9 –
and that it disregarded the workable portions of the projects not affected by the lack of
supplies and drawings. TRANSCO further argued that AIC was estopped from asking for
standby fees to cover its overhead expenses during project suspensions considering that the
delays, such as the unresolved right-of-way issues and non-availability of materials, were
factors already covered by the time extensions and suspensions of work allowed under the
contracts.10
11
On April 18, 2007, the CIAC Arbitral Tribunal rendered its Final Award  in CIAC Case No. 21-
2006 ordering the payment of actual and compensatory damages which AIC would not have
suffered had it not been for the project delays attributable to TRANSCO. It found ample
evidence to support the claim for the increase in subcontract cost in BTRP Schedule I, as well
as such items of cost as house and yard rentals, electric bills, water bills, and maintained
personnel, but disallowed the claims for communications bills, maintenance costs for idle
equipment, finance charges, and materials cost increases. 12 According to the Arbitral
Tribunal, even if AIC itself made the requests for contract time extensions, this did not bar its
claim for damages as a result of project delayssince a contrary ruling would allow TRANSCO
to profit from its own negligence and leave AIC to suffer serious material prejudice as a direct
consequence of that negligence leaving it without any remedy at law. 13 The Arbitral Tribunal
upheld AIC’s right to rescind the contracts in accordancewith Resolution No. 018-2004 of the
Government Procurement Policy Board (GPPB), which explicitly gives the contractor the right
to terminate the contract if the works are completely stopped for a continuous period of at
least 60 calendar days, through no fault of its own, due to the failure of the procuring entity to
deliver within a reasonable time, supplied materials, right-of-way, or other items that it is
₯Construction Industry Arbitration Commission- Set III
obligated to furnish under the terms of the contract, among others. 14 The dispositive portion of
the Arbitral Tribunal’s Final Award reads:
WHEREFORE, Respondent, National Transmission Corporation [TRANSCO] is hereby
ordered to pay Claimant, Alphaomega Integrated Corporation, the following sums:
(a) For BTRP Schedule III - ₱6,423,496.67
(b) For BTRP Schedule I - 5,214,202.30
(c) For Makban Substation - 3,075,870.95
(d) For Bacolod Substation - 1,362,936.77
(e) For Bunawan Substation - 820,481.72
(f) For Quiot Substation - 598, 129.03
TOTAL ₱17,495,117.44
Each Party shall shoulder its own cost of arbitration.
The foregoing amount of ₱17,495,117.44 shall earn interest at the rate of six percent (6%)
per annum from the date of promulgation of this Final Award until it becomes final and
executory. Thereafter, the Final Award, including accrued interest, shall earn interest at the
rate of 12% per annum until the entire amount due is fully paid. 15 (Emphasis supplied)
Unconvinced, TRANSCO instituted a petition for review16 with the CA.
Before filing its comment17 to the petition, AIC moved for the issuance of a writ of
execution,18 not for the amount of 17,495,117.44 awarded in the Final Award, but for the
increased amount of 18,967,318.49.19 It sought correction of the discrepancies between the
amount of the award appearing in the dispositive portion 20 and the body of the Final
Award.21 The Arbitral Tribunal, however, denied AIC’s motion, holding that while the CIAC
Revised Rules of Procedure Governing Construction Arbitration (CIAC Rules) would have
allowed the correction of the Final Award for evident miscalculation of figures, typographical
or arithmetical errors, AIC failed to file its motionfor the purpose within the time limitation of 15
days from its receipt of the Final Award.22
The CA Ruling
In the Decision23 dated April 8, 2008, the CAaffirmed the Arbitral Tribunal’s factual findings
that TRANSCOfailed to exercise due diligence in resolving the problems regarding the right-
of-way and the lack of materials before undertaking the bidding process and entering into the
contracts with AIC.24 It found no merit in TRANSCO’s allegation that AIC refused to perform
the remaining workable portions of the projects not affected by problems of right-of-way,
Page 6 of 41
shutdowns, supplies and drawings, firstly, because the certificates ofaccomplishments issued
by TRANSCO in the course of project implementation signifying its satisfaction with AIC’s
performance negate such claim and, secondly, because all the orders issued by TRANSCO
suspended the contracts not only in part but in their entirety, thus, permitting no work activity
at all during such periods.25
The CA upheld the Arbitral Tribunal’s Final Award as having been sufficiently established by
evidence but modified the total amount of the award after noting a supposed mathematical
error in the computation. Setting aside TRANSCO’s objections, it ruled that when a case is
brought to a superior court on appeal every aspect of the case is thrown open for
review,26 hence, the subject error could be rectified. The CA held that the correct amount of
the award should be ₱18,896,673.31, and not ₱17,495,117.44 as stated in the Arbitral
Tribunal’s Final Award.27 Dissatisfied, TRANSCO moved for reconsideration 28 but was,
however, denied by the CA in a Resolution 29 dated August 27, 2008, hence, the instant
petition.
The Issues Before the Court
The essential issues for the Court’s consideration are whether or not the CA erred (a) in
affirming the CIAC Arbitral Tribunal’s findings that AIC was entitled to its claims for damages
as a result of project delays, and (b) in increasing the total amount of compensation awarded
in favor of AIC despite the latter’s failure to raise the allegedly erroneous computation of the
award before the CIAC in a timely manner, that is, within fifteen (15) days from receipt of the
Final Award as provided under Section 17.1 of the CIAC Rules.
The Court’s Ruling
TRANSCO seeks through this petition a recalibration of the evidencepresented before the
CIAC ArbitralTribunal, insisting that AIC is not entitled to any damages not only because it
had previously waived all claims for standby fees in case of project delays but had eventually
failed to perform the workable portions of the projects. This is evidently a factual question
which cannot be the proper subject of the present petition. Section 1, Rule 45 of the Rules of
Court provides that a petition for review on certiorariunder the said rule, as in this case, "shall
raise only questions of law which must be distinctly set forth." Thus, absent any of the existing
exceptions impelling the contrary, the Court is, as a general rule, precluded from delving on
factual determinations, as what TRANSCO essentially seeks in this case. Similar to the
foregoing is the Court’s ruling in Hanjin Heavy Industries and Construction Co., Ltd. v.
Dynamic Planners and Construction Corp.,30 the pertinent portions ofwhich are hereunder
quoted:
Dynamic maintains that the issues Hanjin raised in its petitions are factual in nature and are,
therefore, not proper subject of review under Section 1 of Rule 45, prescribing that a petition
under the said rule, like the one at bench, "shall raise only questions of law which must be
distinctly set forth." Dynamic’s contention is valid topoint as, indeed, the matters raised by
Hanjin are factual, revolving as they do on the entitlement of Dynamic to the awards granted
₯Construction Industry Arbitration Commission- Set III
and computed by the CIAC and the CA. Generally, this would be a question of fact that this
Court would not delve upon. Imperial v. Jauciansuggests as much. There, the Court ruled that
the computation of outstanding obligation is a question of fact:
Arguing that she had already fully paid the loan x x x, petitioner alleges that the two lower
courts misappreciated the facts when they ruled that she still had an outstanding balance of
₱208,430.
This issue involves a question of fact. Such question exists when a doubt or difference arises
as to the truth or the falsehood of alleged facts; and when there is need for a calibration of the
evidence, considering mainly the credibility of witnesses and the existence and the relevancy
of specific surrounding circumstances, their relation to each other and to the whole, and the
probabilities of the situation. (G.R. No. 149004, April 14, 2004, 427 SCRA 517, 523-524.)
The rule, however, precluding the Court from delving on the factual determinations of the CA,
admits of several exceptions. In Fuentes v. Court of Appeals, we held that the findings of
facts of the CA, which are generally deemed conclusive, may admit review by the Court in
any of the following instances, among others:
(1) when the factual findings of the [CA] and the trial court are contradictory;
(2) when the findings are grounded entirely on speculation, surmises, or conjectures;
(3) when the inference made bythe [CA] from its findings of fact is manifestly
mistaken, absurd, or impossible;
(4) when there is grave abuse of discretion in the appreciation of facts;
(5) when the [CA], in making its findings, goes beyond the issues of the case, and
such findings are contrary to the admissions of both appellant and appellee;
(6) when the judgment of the [CA] is premised on a misapprehension of facts;
(7) when the [CA] fails to notice certain relevant facts which, if properly considered,
will justify a different conclusion;
(8) when the findings of fact are themselves conflicting;
(9) when the findings of fact are conclusions without citation of the specific evidence
on which they are based; and
(10) when the findings of fact of the [CA] are premised on the absence of evidence
but such findings are contradicted by the evidence on record. (G.R. No. 109849,
February 26, 1997, 268 SCRA 703, 709)
Page 7 of 41
Significantly, jurisprudence teaches that mathematical computations as well as the propriety
of the arbitral awards are factual determinations. And just as significant is that the factual
findings of the CIAC and CA—in each separate appealed decisions—practically dovetail with
each other. The perceptible essential difference, at least insofar as the CIAC’s Final Award
and the CA Decision in CA-G.R. SP No. 86641 are concerned, rests merely on mathematical
computations or adjustments of baseline amounts which the CIAC may have inadvertently
utilized.31 (Emphases and underscoring supplied)
In any case, the Court finds no reason to disturb the factual findings of the CIAC Arbitral
Tribunal on the matter of AIC’s entitlement to damages which the CA affirmed as being well
supported by evidence and properly referred to in the record. It is well-settled that findings of
fact of quasijudicial bodies, which have acquired expertise because their jurisdiction is
confined to specific matters, are generally accorded not only respect, but also finality,
especially when affirmed by the CA. 32 The CIAC possesses that required expertise in the field
of construction arbitration and the factual findings of its construction arbitrators are final and
conclusive, not reviewable by this Court on appeal.33
While the CA correctly affirmed infull the CIAC Arbitral Tribunal’s factual determinations, it
improperly modified the amount of the award in favor of AIC, which modification did not
observe the proper procedure for the correction of an evident miscalculation of figures,
including typographical or arithmetical errors, in the arbitral award. Section 17.1 of the CIAC
Rules mandates the filing of a motion for the foregoing purpose within fifteen (15) days from
receipt thereof, viz.:
Section 17.1 Motion for correction of final award– Any of the parties may file a motion for
correction of the Final Award within fifteen (15) days from receipt thereof upon any of the
following grounds:
a. An evident miscalculation of figures, a typographical or arithmetical error; (Emphasis
supplied)
xxxx
Failure to file said motion would consequentlyrender the award final and executory under
Section 18. 1 of the same rules, viz.:
Section 18.1 Execution of Award – A final arbitral award shall become executory upon the
lapse of fifteen (15) days from receipt thereof by the parties.1âwphi1
AIC admitted that it had ample time to file a motion for correction of the Final Award but
claimed to have purposely sat on its right to seek correction supposedly as a strategic move
against TRANSCO34 and, instead, filed with the CIAC Arbitral Tribunal on June 13, 2007 a
"Motion for Issuance of Writ of Execution for the Total Amount of 18,967,318.49 as Embodied
in the Final Award."35 The Arbitral Tribunal eventually denied AIC’s aforesaid motion for
execution because, despite its merit, the Arbitral Tribunal could not disregard the time-
₯Construction Industry Arbitration Commission- Set III
limitation under the CIAC Rules.36 Clearly, having failed to move for the correction of the Final
Award and, thereafter, having opted to file insteada motion for execution of the arbitral
tribunal’s unopposed and uncorrected Final Award, AIC cannot now question against the
correctness of the CIAC’s disposition. Notably, while there is jurisprudential authority stating
that "[a] clerical error in the judgment appealed from may be corrected by the appellate
court,"37 the application of that rule cannot be made in this case considering that the CIAC
Rules provides for a specific procedureto deal with particular errors involving "[a]n evident
miscalculation of figures, a typographical or arithmetical error." Indeed, the rule iswell
entrenched: Specialis derogat generali. When two rules apply to a particular case, thatwhich
was specially designed for the said case must prevail over the other. 38
Furthermore, it must be emphasized that the petition for review before the CA was filed by
TRANSCO.39 AIC never elevated before the courts the matter concerning the discrepancy
between the amount of the award stated in the body of the Final Award and the total award
shown in its dispositive portion. The issue was touched upon bythe CA only after AIC raised
the same through its Comment (With Motion to Acknowledge Actual Amount of Award) 40 to
TRANSCO’s petition for review. The CA should not have modified the amount of the award to
favor AIC because it is well-settled that no relief can be granted a party who does not
appeal41 and that a party who did not appeal the decision may not obtain any affirmative relief
from the appellate court other than what he had obtained from the lower court, if any, whose
decision is brought up on appeal. 42 The disposition, as stated in the fallo of the CIAC Arbitral
Tribunal's Final Award, should therefore stand.43
WHEREFORE, the petition is PARTLY GRANTED. The Decision dated April 8, 2008 of the
Court of Appeals in CA-G.R. SP No. 99454 is hereby AFFIRMED with MODIFICATION. The
compensation awarded in favor of Alphaomega Integrated Corporation in the amount of
₱17,495,117.44, as shown in the fallo of the ·construction Industry Arbitration Commission's
Final Award dated April 18, 2007, stands.
SO ORDERED.
Page 8 of 41
[21] G.R. No. 192725, August 09, 2017
CE CONSTRUCTION CORPORATION, PETITIONER, VS. ARANETA CENTER INC.,
RESPONDENT.
Construction Industry Arbitration Commission; The Construction Industry Arbitration
Commission (CIAC) was a creation of Executive Order (EO) No. 1008, otherwise known as the
Construction Industry Arbitration Law.—The Construction Industry Arbitration Commission was a
creation of Executive Order No. 1008, otherwise known as the Construction Industry Arbitration Law.
At inception, it was under the administrative supervision of the Philippine Domestic Construction
Board which, in turn, was an implementing agency of the Construction Industry Authority of the
Philippines (CIAP). The CIAP is presently attached to the Department of Trade and Industry.
Same; Construction Disputes; Alternative Dispute Resolution; Alternative Dispute Resolution
Act of 2004; Arbitration of construction disputes through the Construction Industry Arbitration
Commission (CIAC) was formally incorporated into the general statutory framework on alternative
dispute resolution through Republic Act No. 9285, the Alternative Dispute Resolution Act of 2004
(ADR Law).—Republic Act No. 9184 or the Government Procurement Reform Act, enacted on
January 10, 2003, explicitly recognized and confirmed the competence of the CIAC: Section
59. Arbitration.—Any and all disputes arising from the implementation of a contract covered by this
Act shall be submitted to arbitration in the Philippines according to the provisions of Republic Act No.
876, otherwise known as the “Arbitration Law”: Provided, however, That, disputes that are within the
competence of the Construction Industry Arbitration Commission to resolve shall be referred
thereto. The process of arbitration shall be incorporated as a provision in the contract that will be
executed pursuant to the provisions of this Act: Provided, That by mutual agreement, the parties may
agree in writing to resort to alternative modes of dispute resolution. Arbitration of construction
disputes through the CIAC was formally incorporated into the general statutory framework on
alternative dispute resolution through Republic Act No. 9285, the Alternative Dispute Resolution Act
of 2004 (ADR Law). Chapter 6, Section 34 of ADR Law made specific reference to the Construction
Industry Arbitration Law, while Section 35 confirmed the CIAC’s jurisdiction.
Same; Construction; Words and Phrases; The Construction Industry Arbitration Commission
(CIAC) has the state’s confidence concerning the entire technical expanse of construction, defined in
jurisprudence as “referring to all on-site works on buildings or altering structures, from land
clearance through completion including excavation, erection and assembly and installation of
components and equipment.”—The CIAC does not only serve the interest of speedy dispute resolution,
it also facilitates authoritative dispute resolution. Its authority proceeds not only from juridical
legitimacy but equally from technical expertise. The creation of a special adjudicatory body for
construction disputes presupposes distinctive and nuanced competence on matters that are conceded to
be outside the innate expertise of regular courts and adjudicatory bodies concerned with other
specialized fields. The CIAC has the state’s confidence concerning the entire technical expanse of
construction, defined in jurisprudence as “referring to all on-site works on buildings or altering
structures, from land clearance through completion including excavation, erection and assembly and
installation of components and equipment.”
₯Construction Industry Arbitration Commission- Set III
Same; The most recent jurisprudence maintains that the Construction Industry Arbitration
Commission (CIAC) is a quasi-judicial body.—The most recent jurisprudence maintains that the CIAC
is a quasi-judicial body. This Court’s November 23, 2016 Decision in Fruehauf Electronics v.
Technology Electronics Assembly and Management Pacific, 810 SCRA 280, distinguished
construction arbitration, as well as voluntary arbitration pursuant to Article 219(14) of the Labor Code,
from commercial arbitration. It ruled that commercial arbitral tribunals are not quasi-judicial agencies,
as they are purely ad hoc bodies operating through contractual consent and as they intend to serve
private, proprietary interests. In contrast, voluntary arbitration under the Labor Code and construction
arbitration operate through the statutorily vested jurisdiction of government instrumentalities that exist
independently of the will of contracting parties and to which these parties submit.
 
Same; Appeals; Petitions for Review; Rule 43, Section 1 explicitly lists Construction Industry
Arbitration Commission (CIAC) as among the quasi-judicial agencies covered by Rule 43. Section 3
indicates that appeals through Petitions for Review under Rule 43 are to “be taken to the Court of
Appeals (CA) . . . whether the appeal involves questions of fact, of law, or mixed questions of fact and
law.”—Rule 43 of the 1997 Rules of Civil Procedure standardizes appeals from quasi-judicial
agencies. Rule 43, Section 1 explicitly lists CIAC as among the quasi-judicial agencies covered by
Rule 43. Section 3 indicates that appeals through Petitions for Review under Rule 43 are to “be taken
to the Court of Appeals . . . whether the appeal involves questions of fact, of law, or mixed questions of
fact and law.”
Same; Same; Arbitral Tribunals; The Supreme Court’s (SC’s) primordial inclination must be to
uphold the factual findings of arbitral tribunals.—Consistent with this restrictive approach, this Court
is duty-bound to be extremely watchful and to ensure that an appeal does not become an ingenious
means for undermining the integrity of arbitration or for conveniently setting aside the conclusions
arbitral processes make. An appeal is not an artifice for the parties to undermine the process they
voluntarily elected to engage in. To prevent this Court from being a party to such perversion, this
Court’s primordial inclination must be to uphold the factual findings of arbitral tribunals.
Arbitral Tribunals; Common sense dictates that by the parties’ voluntary submission, they
acknowledge that an arbitral tribunal constituted under the Construction Industry Arbitration
Commission (CIAC) has full competence to rule on the dispute presented to it.—ACI and
CECON voluntarily submitted themselves to the CIAC Arbitral Tribunal’s jurisdiction. The
contending parties’ own volition is at the inception of every construction arbitration proceeding.
Common sense dictates that by the parties’ voluntary submission, they acknowledge that an arbitral
tribunal constituted under the CIAC has full competence to rule on the dispute presented to it. They
concede this not only with respect to the literal issues recited in their terms of reference, as ACI
suggests, but also with respect to their necessary incidents. Accordingly, in delineating the authority of
arbitrators, the CIAC Rules of Procedure speak not only of the literally recited issues but also of
“related matters”: SECTION 21.3.
Extent of power of arbitrator.—The Arbitral Tribunal shall decide only such issues and related
matters as are submitted to them for adjudication. They have no power to add, to subtract from,
modify, or amend any of the terms of the contract or any supplementary agreement thereto, or any rule,
regulation or policy promulgated by the CIAC. To otherwise be puritanical about cognizable issues
would be to cripple CIAC arbitral tribunals. It would potentially be to condone the parties’ efforts at
Page 9 of 41
tying the hands of tribunals through circuitous, trivial recitals that fail to address the complete extent of
their claims and which are ultimately ineffectual in dispensing an exhaustive and dependable
resolution. Construction arbitration is not a game of guile which may be left to ingenious textual or
technical acrobatics, but an endeavor to ascertain the truth and to dispense justice “by every and all
reasonable means without regard to technicalities of law or procedure.”
Construction Contracts; Jurisprudence has settled that even in cases where parties enter into
contracts which do not strictly conform to standard formalities or to the typifying provisions of
nominate contracts, when one renders services to another, the latter must compensate the former for
the reasonable value of the services rendered.—Jurisprudence has settled that even in cases where
parties enter into contracts which do not strictly conform to standard formalities or to the typifying
provisions of nominate contracts, when one renders services to another, the latter must compensate the
former for the reasonable value of the services rendered. This amount shall be fixed by a court. This is
a matter so basic, this Court has once characterized it as one that “springs from the fountain of good
conscience”: As early as 1903, in Perez v. Pomar, this Court ruled that where one has rendered
services to another, and these services are accepted by the latter, in the absence of proof that the
service was rendered gratuitously, it is but just that he should pay a reasonable remuneration therefore
because “it is a well known principle of law, that no one should be permitted to enrich himself to the
damage of another.” Similary in 1914, this Court declared that in this jurisdiction, even in the absence
of statute, “. . . under the general principle that one person may not enrich himself at the expense of
another, a judgment creditor would not be permitted to retain the purchase price of land sold as the
property of the judgment debtor after it has been made to appear that the judgment debtor had no title
to the land and that the purchaser had failed to secure title thereto.” The foregoing equitable principle
which springs from the fountain of good conscience are applicable to the case at bar. Consistent with
the Construction Industry Arbitration Law’s declared policy, the CIAC Arbitral Tribunal was
specifically charged with “ascertain[ing] the facts in each case by every and all reasonable means.” In
discharging its task, it was permitted to even transcend technical rules on admissibility of evidence.
Same; Article 1724 demands two (2) requisites in order that a price may become immutable:
first, there must be an actual, stipulated price; and second, plans and specifications must have
definitely been agreed upon.—Article 1724 demands two (2) requisites in order that a price may
become immutable: first, there must be an actual, stipulated price; and second, plans and specifications
must have definitely been agreed upon. Neither requisite avails in this case. Yet again, ACI is begging
the question. It is precisely the crux of the controversy that no price has been set. Article 1724 does not
work to entrench a disputed price and make it sacrosanct. Moreover, it was ACI which thrust itself
upon a situation where no plans and specifications were immediately agreed upon and from which no
deviation could be made. It was ACI, not CECON, which made, revised, and deviated from designs
and specifications.
DECISION
LEONEN, J.:
A tribunal confronted not only with ambiguous contractual terms but also with the total
absence of an instrument which definitively articulates the contracting parties' agreement
does not act in excess of jurisdiction when it employs aids in interpretation, such as those
₯Construction Industry Arbitration Commission- Set III
articulated in Articles 1370 to 1379 of the Civil Code. In so doing, a tribunal does not conjure
its own contractual terms and force them upon the parties.
In addressing an iniquitous predicament of a contractor that actually renders services but
remains inadequately compensated, arbitral tribunals of the Construction Industry Arbitration
Commission (CIAC) enjoy a wide latitude consistent with their technical expertise and the
arbitral process' inherent inclination to afford the most exhaustive means for dispute
resolution. When their awards become the subject of judicial review, courts must defer to the
factual findings borne by arbitral tribunals' technical expertise and irreplaceable experience of
presiding over the arbitral process. Exceptions may be availing but only in instances when the
integrity of the arbitral tribunal itself has been put in jeopardy. These grounds are more
exceptional than those which are regularly sanctioned in Rule 45 petitions.
This resolves a Petition for Review on Certiorari[1] under Rule 45 of the 1997 Rules of Civil
Procedure, praying that the assailed April 28, 2008 Decision[2] and July 1, 2010 Amended
Decision[3] of the Court of Appeals in CA-G.R. SP No. 96834 be reversed and set aside. It
likewise prays that the October 25, 2006 Decision[4] of the CIAC Arbitral Tribunal be
reinstated.
The CIAC Arbitral Tribunal October 25, 2006 Decision awarded a total sum of
P217,428,155.75 in favor of petitioner CE Construction Corporation (CECON). This sum
represented adjustments in unit costs plus interest, variance in take-out costs, change orders,
time extensions, attendance fees, contractor-supplied equipment, and costs of arbitration.
This amount was net of the countervailing awards in favor of respondent Araneta Center, Inc.
(ACI), for defective and incomplete works, permits, licenses and other advances.[5]
The assailed Court of Appeals April 28, 2008 Decision modified the CIAC Arbitral Tribunal
October 25, 2006 Decision by awarding a net amount of P82,758,358.80 in favor of CECON.
[6] The Court of Appeals July 1, 2010 Amended Decision adjusted this amount to
P93,896,335.71.
Petitioner CECON was a construction contractor, which, for more than 25 years, had been
doing business with respondent ACI, the developer of Araneta Center, Cubao, Quezon City.
[8]
In June 2002, ACI sent invitations to different construction companies, including CECON, for
them to bid on a project identified as "Package #4 Structure/Mechanical, Electrical, and
Plumbing/Finishes (excluding Part A Substructure)," a part of its redevelopment plan for
Araneta Center Complex.[9] The project would eventually be the Gateway Mall. As described
by ACI, "[t]he Project involved the design, coordination, construction and completion of all
architectural and structural portions of Part B of the Works[;] and the construction of the
architectural and structural portions of Part A of the Works known as Package 4 of the
Araneta Center Redevelopment Project."[10]
As part of its invitation to prospective contractors, ACI furnished bidders with Tender
Documents, consisting of:
Page 10 of 41
Volume I: Tender Invitation, Project Description, Instructions to Tenderers, Form of Tender,
Dayworks, Preliminaries and General Requirements, and Conditions of Contract;
Volume II: Technical Specifications for the Architectural, Structural, Mechanical, Plumbing,
Fire Protection and Electrical Works; and
Addenda Nos. 1, 2, 3, and 4 relating to modifications to portions of the Tender Documents.
[11]
The Tender Documents described the project's contract sum to be a "lump sum" or "lump
sum fixed price" and restricted cost adjustments, as follows:
6 TYPE OF CONTRACT
6.1 This is a Lump Sum Contract and the price is a fixed price not subject to measurement or
recalculation should the actual quantities of work and materials differ from any estimate
available at the time of contracting, except in regard to Cost-Bearing Changes which may be
ordered by the Owner which shall be valued under the terms of the Contract in accordance
with the Schedule of Rates, and with regard to the Value Engineering Proposals under
Clause 27. The Contract Sum shall not be adjusted for changes in the cost of labour,
materials or other matters.[12]
TENDER AND CONTRACT
Fixed Price Contract
The Contract Sum payable to the Contactor is a Lump Sum Fixed Price and will not be
subject to adjustment, save only where expressly provided for within the Contract Documents
and the Form of Agreement.
The Contract Sum shall not be subject to any adjustment "in respect of rise and fall in the cost
of materials[,] labor, plant, equipment, exchange rates or any other matters affecting the cost
of execution of Contract, save only where expressly provided for within the Contract
Documents or the Form of Agreement.
The Contract Sum shall further not be subject to any change in subsequent legislation, which
causes additional or reduced costs to the Contractor.[13]
The bidders' proposals for the project were submitted on August 30, 2002. These were based
on "design and construct" bidding.[14]
CECON submitted its bid, indicating a tender amount of P1,449,089,174.00. This amount was
inclusive of "both the act of designing the building and executing its construction." Its bid and
tender were based on schematic drawings, i.e., conceptual designs and suppositions culled
from ACI's Tender Documents. CECON's proposal "specifically stated that its bid was valid
₯Construction Industry Arbitration Commission- Set III
for only ninety (90) days, or only until 29 November 2002." This tender proposed a total of
400 days, or until January 10, 2004, for the implementation and completion of the project.
CECON offered the lowest tender amount. However, ACI did not award the project to any
bidder, even as the validity of CECON's proposal lapsed on November 29, 2002. ACI only
subsequently informed CECON that the contract was being awarded to it. ACI elected to
inform CECON verbally and not in writing.
In a phone call on December 7, 2002, ACI instructed CECON to proceed with excavation
works on the project. ACI, however, was unable to deliver to CECON the entire project site.
Only half, identified as the Malvar-to-Roxas portion, was immediately available. The other
half, identified as the Roxas to-Coliseum portion, was delivered only about five (5) months
later.
As the details of the project had yet to be finalized, ACI and CECON pursued further
negotiations. ACI and CECON subsequently agreed to include in the project the construction
of an office tower atop the portion identified as Part A of the project. This escalated CECON's
project cost to P1,582,810,525.00.
After further negotiations, the project cost was again adjusted to P1,613,615,244.00. Still
later, CECON extended to ACI a P73,615,244.00 discount, thereby"reducing its offered
project cost to P1,540,000.00.
Despite these developments, ACI still failed to formally award the project to CECON. The
parties had yet to execute a formal contract. This prompted CECON to write a letter to ACI,
dated December 27, 2002,[20] emphasizing that the project cost quoted to ACI was "based
upon the prices prevailing at December 26, 2002" price levels.
By January 2003 and with the project yet to be formally awarded, the prices of steel products
had increased by 5% and of cement by P5.00 per bag. On January 8, 2003, CECON again
wrote ACI notifying it of these increasing costs and specifically stating that further delays may
affect the contract sum.
Still without a formal award, CECON again wrote to ACI on January 21, 2003[23] indicating
cost and time adjustments to its original proposal. Specifically, it referred to an 11.52%
increase for the cost of steel products, totalling P24,921,418.00 for the project; a P5.00
increase per bag of cement, totalling P3,698,540.00 for the project; and costs incurred
because of changes to the project's structural framing, totalling P26,011,460.00. The contract
sum, therefore, needed to be increased to P1,594,631,418.00. CECON also specifically
stated that its tender relating to these adjusted prices were valid only until January 31, 2003,
as further price changes may be forthcoming. CECON emphasized that its steel supplier had
actually already advised it of a forthcoming 10% increase in steel prices by the first week of
February 2003. CECON further impressed upon ACI the need to adjust the 400 days allotted
for the completion of the project.
Page 11 of 41
On February 4, 2003, ACI delivered to CECON the initial tranche of its down payment for the
project. By then, prices of steel had been noted to have increased by 24% from December
2002 prices. This increase was validated by ACI.
Subsequently, ACI informed CECON that it was taking upon itself the design component of
the project, removing from CECON's scope of work the task of coming up with designs.
On June 2, 2003, ACI finally wrote a letter[27] to CECON indicating its acceptance of
CECON's August 30, 2002 tender for an adjusted contract sum of P1,540,000.00 only:
Araneta Center, Inc. (ACI) hereby accepts the C-E Construction Corporation (CEC) tender
dated August 30, 2002, submitted to ACI in the adjusted sum of One Billion Five Hundred
Forty Million Pesos Only (P1,540,000,000.00), which sum includes all additionally quoted and
accepted items within this acceptance letter and attachments, Appendix A, consisting of one
(1) page, and Appendix B, consisting of seven (7) pages plus attachments, which sum of One
Billion Five Hundred Forty Million Pesos Only (P1,540,000,000.00) is inclusive of any
Government Customs Duty and Taxes including Value Added Tax (VAT) and Expanded
Value Added Tax (EVAD, and which sum is hereinafter referred to as the Contract Sum.[28]
Item 4, Appendix B of this acceptance letter explicitly recognized that "all design except
support to excavation sites, is now by ACI."[29] It thereby confirmed that the parties were not
bound by a design-and-construct agreement, as initially contemplated in ACI's June 2002
invitation, but by a construct-only agreement. The letter stated that "[CECON] acknowledge[s]
that a binding contract is now existing."[30] However, consistent with ACI's admitted changes,
it also expressed ACI's corresponding undertaking: "This notwithstanding, formal contract
documents embodying these positions will shortly be prepared and forwarded to you for
execution.
Despite ACI's undertaking, no formal contract documents were delivered to CECON or
otherwise executed between ACI and CECON.
As it assumed the design aspect of the project, ACI issued to CECON the construction
drawings for the project. Unlike schematics, these drawings specified "the kind of work to be
done and the kind of material to be used."[33] CECON laments, however, that "ACI issued
the construction drawings in piece-meal fashion at times of its own choosing."[34] From the
commencement of CECON's engagement until its turnover of the project to ACI, ACI issued
some 1,675 construction drawings. CECON emphasized that many of these drawings were
partial and frequently pertained to revisions of prior items of work.[35] Of these drawings,
more than 600 were issued by ACI well after the intended completion date of January 10,
2004: Drawing No. 1040 was issued on January 12, 2004, and the latest, Drawing No. 1675,
was issued on November 26, 2004.
Apart from shifting its arrangement with CECON from design-and-construct to construct only,
ACI introduced other changes to its arrangements with CECON. CECON underscored two (2)
of the most notable of these changes which impelled it to seek legal relief.
₯Construction Industry Arbitration Commission- Set III
First, on January 30, 2003, ACI issued Change Order No. 11,[37] which shifted the portion
identified as Part B of the project from reinforced concrete framing to structural steel framing.
Deleting the cost for reinforced concrete framing meant removing P380,560,300.00 from the
contract sum. Nevertheless, replacing reinforced concrete framing with structural steel
framing "entailed substitute cost of Php217,585,000, an additional Php44,281,100 for the
additional steel frames due to revisions, and another Php1,950,000 for the additional pylon."
Second, instead of leaving it to CECON, ACI opted to purchase on its own certain pieces of
equipment-elevators, escalators, chillers, generator sets, indoor substations, cooling towers,
pumps, and tanks-which were to be installed in the project. This entailed "take-out costs"; that
is, the value of these pieces of equipment needed to be removed from the total amount due
to CECON. ACI considered a sum totalling P251,443,749.00 to have been removed from the
contract sum due to CECON. This amount of P251,443,749.00 was broken down, as follows:
(a) For elevators/escalators, PhP106,000,000;
(b) For Chillers, PhP41,152,900;
(c) For Generator Sets, PhP53,040,000;
(d) For Indoor Substation, PhP23,024,150;
(e) For Cooling Towers, PhP5,472,809; and
(f) For Pumps and Tanks, PhP22,753,890.[39]
CECON avers that in removing the sum of P251,443,749.00, ACI "simply deleted the amount
in the cost breakdown corresponding to each of the items taken out in the contract
documents."[40] ACI thereby disregarded that the corresponding stipulated costs pertained
not only to the acquisition cost of these pieces of equipment but also to so-called "builder's
works" and other costs relating to their preparation for and installation in the project. Finding it
unjust to be performing auxiliary services practically for free, CECON proposed a reduction in
the take-out costs claimed by ACI. It instead claimed P26,892,019.00 by way of
compensation for the work that it rendered.
With many changes to the project and ACI's delays in delivering drawings and specifications,
CECON increasingly found itself unable to complete the project on January 10, 2004. It noted
that it had to file a total of 15 Requests for Time Extension from June 10, 2003 to December
15, 2003, all of which ACI failed to timely act on.
Exasperated, CECON served notice upon ACI that it would avail of arbitration. On January
29, 2004, it filed with the CIAC its Request for Adjudication.[43] It prayed that a total sum of
P183,910,176.92 representing adjusted project costs be awarded in its favor.[44]
On March 31, 2004, CECON and ACI filed before the CIAC a Joint Manifestation[45]
indicating that some issues between them had already been settled. Proceedings before the
Page 12 of 41
CIAC were then suspended to enable CECON and ACI to arrive at an amicable settlement.
[46] On October 14, 2004, ACI filed a motion before the CIAC noting that it has validated
P85,000,000.00 of the total amount claimed by CECON. It prayed for more time to arrive at a
settlement.
In the meantime, CECON completed the project and turned over Gateway Mall to ACI.[48] It
had its blessing on November 26, 2004.
As negotiations seemed futile, on December 29, 2004, CECON filed with the CIAC a Motion
to Proceed with arbitration proceedings. ACI filed an Opposition.
After its Opposition was denied, ACI filed its Answer dated January 26, 2005.[51] It attributed
liability for delays to CECON and sought to recover counterclaims totalling P180,752 297.84.
This amount covered liquidated damages for CECON's supposed delays, the cost of
defective works which had to be rectified, the cost of procuring permits and licenses, and
ACI's other advances.
On February 8, 2005, ACI filed a Manifestation and Motion seeking the CIAC's clearance for
the parties to enter into mediation. Mediation was then instituted with Atty. Sedfrey Ordonez
acting as mediator.
After mediation failed, an arbitral tribunal was constituted through a March 16, 2005 Order of
the CIAC. It was to be composed of Dr. Ernesto S. De Castro, who acted as Chairperson with
Engr. Reynaldo T. Viray and Atty. James S. Villafranca as members.
ACI filed a Motion for Reconsideration of the CIAC March 16, 2005 Order. This was denied in
the Order dated March 30, 2005.
In the Order dated April 1, 2005, the CIAC Arbitral Tribunal set the preliminary conference on
April 13, 2005.
At the preliminary conference, CECON indicated that, the total sum it was entitled to recover
from ACI needed to be adjusted to P324,113,410.08. The CIAC Arbitral Tribunal, thus,
directed CECON to file an Amended Request for Adjudication/Amended Complaint.
Following the filing of CECON's Amended Request for Adjudication/Amended Complaint and
the ensuing responsive pleadings, another preliminary conference was set on May 13, 2005.
The initial hearing of the case was then set on June 10, 2005.
At the initial hearing, the CIAC Arbitral Tribunal resolved to exclude the amount of
P20,483,505.12 from CECON's claims as these pertained to unpaid accomplishments that
did not relate to the issue of cost adjustments attributed to ACI, as originally pleaded by
CECON.
Following the conduct of hearings, the submission of the parties' memoranda and offers of
exhibits, the CIAC Arbitral Tribunal rendered its Decision on October 25, 2006. It awarded a
₯Construction Industry Arbitration Commission- Set III
total of P229,223,318.69 to CECON, inclusive of the costs of arbitration. It completely denied
ACI's claims for liquidated damages, but awarded to ACI a total of P11,795,162.93 on
account of defective and rectification works, as well as permits, licenses, and other
advances.Thus, the net amount due to CECON was determined to be P217,428,155.75.
The CIAC Arbitral Tribunal noted that while ACI's initial invitation to bidders was for a lump-
sum design-and-construct arrangement, the way that events actually unfolded clearly
indicated a shift to an arrangement where the designs were contingent upon ACI itself.
Considering that the premise for CECON's August 30, 2002 lump-sum offer of P1,540,000.00
was no longer availing, CECON was no longer bound by its representations in respect of that
lump-sum amount. It may then claim cost adjustments totalling P16,429,630.74, as well as
values accruing to the various change orders issued by ACI, totalling P159,827,046.94.
The CIAC Arbitral Tribunal found ACI liable for the delays. This entitled CECON to extended
overhead costs and the ensuing extension cost of its Contractor's All Risk Insurance. For
these costs, the CIAC Arbitral Tribunal awarded CECON the total amount of P16,289,623.08.
As it was ACI that was liable for the delays, the CIAC Arbitral Tribunal ruled that ACI was not
entitled to liquidated damages.
The CIAC Arbitral Tribunal ruled that CECON was entitled to a differential in take out costs
representing builder's works and related costs with respect to the equipment purchased by
ACI. This differential cost was in the amount of P15,332,091.47.[63] The CIAC Arbitral
Tribunal further noted that while ACI initially opted to purchase by itself pumps, tanks, and
cooling towers and removed these from CECON's scope of work, it subsequently elected to
still obtain these through CECON. Considering that the corresponding amount deducted as
take-out costs did not encompass the overhead costs and profits under day work, which
should have accrued to CECON because of these equipment, the CIAC Arbitral Tribunal
ruled that CECON was entitled to 18% day work rate or a total of P21,267,908.00.
The CIAC Arbitral Tribunal also found that, apart from adjusted costs incurred on account of
ACI's own activities, it also became necessary for CECON, as main contractor, to continue
extending auxiliary services to the project's subcontractors because of the delays. Thus, the
CIAC Arbitral Tribunal awarded CECON attendance fees-the main contractor's mark-up for
auxiliary services extended to subcontractors - totalling P14,335,674.88. This amount was
lower than the original amount prayed for by CECON (i.e., P19,544,667.81)[65] as the CIAC
Arbitral Tribunal ruled that CECON may not claim attendance fees pertaining to
subcontractors which directly dealt with ACI.
Considering that CECON's predicament was borne by ACI's fault, the CIAC Arbitral Tribunal
saw it fit to award to CECON the costs of arbitration totalling P1,083,802.58.
While mainly ruling in CECON's favor, the CIAC Arbitral Tribunal found CECON liable for
discolored and mismatched tiles. It noted that CECON had engaged the services of a
subcontractor for the installation of tiles, for which it claimed attendance fees. Thus, it
awarded P7,980,000.00 to ACI.[68] In addition, it found CECON liable to ACI for amounts
Page 13 of 41
paid in advance for permits and licenses for the additional office tower, electrical
consumption, and garbage collection. Thus, it awarded another P3,815,162.93 to ACI.
The dispositive portion of the CIAC Arbitral Tribunal Decision read:
WHEREFORE, Respondent is hereby ordered to pay the Claimant the amount of PESOS
TWO HUNDRED SEVENTEEN MILLION, FOUR HUNDRED TWENTY-EIGHT THOUSAND,
ONE HUNDRED FIFTY[-]FIVE PESOS AND SEVENTY[-]FIVE CENTAVOS
(Php217,428,155.75) within thirty (30) days upon promulgation of the award. Interest 6% per
annum shall be imposed on the award for any balance remaining from the promulgation of
the award up to the time the award becomes final and executory. Thereafter, interest of 12%
per annum shall be imposed on any balance of the award until fully paid. SO ORDERED.
On December 4, 2006, ACI filed before the Court of Appeals a Petition for Review[71] under
Rule 43 of the 1997 Rules of Civil Procedure.
In the meantime, on December 28, 2006, the CIAC Arbitral Tribunal issued an Order[72]
acknowledging arithmetical errors in its October 25, 2006 Decision, Thus, it modified its
October 25, 2006 Decision, indicating that the net amount due to CECON was
P231,357,136.72, rather than P217,428,155.75.
In its assailed April28, 2008 Decision,[74] the Court of Appeals reduced the award in favor of
CECON to P114,324,605.00 and increased the award to ACI to P31,566,246.20.
The Court of Appeals held as inviolable the lump-sum fixed price arrangement between ACI
and CECON. It faulted the CIAC Arbitral Tribunal for acting in excess of jurisdiction as it
supposedly took it upon itself to unilaterally modify the arrangement between ACI and
CECON.
Thus, the Court of Appeals deleted the CIAC Arbitral Tribunal's award representing cost
adjustments. However, the Court of Appeals also noted that in ACI's and CECON's March 30,
2004 Joint Ma11ifestation before CIAC, ACI conceded that P10,266,628.00 worth of cost
adjustments was due to CECON and undertook to pay CECON that amount. The Court of
Appeals, hence, maintained a P10,266,628.00 award of cost adjustment in favor of CECON.
On the cost increases borne by Change Order No. 11-the shift from reinforced concrete to
structural steel framing-and by transitions from schematic diagrams to construction drawings,
the Court of Appeals dismissed the CIAC Arbitral Tribunals award to CECON as arising from
"pity" and unwarranted by the lump-sum, fixed-price arrangement.
The Court of Appeals held ACI liable to CECON for the sum of P12,672,488.36 for
miscellaneous change orders, which it construed to be "separate contracts that have been
entered into at the time [ACI] required them."[79] It likewise held ACI liable for P1,132,946.17
representing the balance of 12 other partially paid change orders.
₯Construction Industry Arbitration Commission- Set III
The Court of Appeals noted that CECON was not entitled to time extensions because the
arrangement between ACI and CECON had never been altered. Consequently, it was not
entitled to acceleration co ts, additional overhead, ru1d reimbursement for extending the
Contractor's All Risk Insurance.[81] Conversely, the Court of Appeals held CECON liable for
delays thereby entitling ACI to liquidated damages corresponding to 10% of the supposed
contract sum of P1,540,000,000.00, or P15,400,000.00.
Also on account of the supposed lump-sum arrangement, the Court of Appeals held that
CECON was not entitled to attendance fees on contract amounts increased by change order
works.[83] It also stated that the rate for attendance fees, overhead, and profit for
subcontractors' works remained subject to the original contract documents based on ACI's
original invitation to bidders and had never been altered.
Regarding attendance fees, the Court of Appeals proffered that the work attributed to
subcontractors was merely work done by CECON itself, thereby negating the need for
attendance fees.
Concerning take-out costs, the Court of Appeals stated that CECON was in no position to
propose its own take-out costs as the tender documents issued along with ACI's invitation to
bidders stated that take-out costs must be based exclusively on the rates provided in the
Contract Cost Breakdown. Nevertheless, as ACI had previously undertaken to pay the
variance in takeout costs amounting to P3,811,289.70, the Court of Appeals concluded that
an award for take-out costs in that amount was proper.
On the CIAC Arbitral Tribunal's award for overhead costs and profits under day work, the
Court of Appeals held that it was improper to grant this award based on stipulations on day
works pertaining "only to 'materials' and not to equipment."
Finally, the Court of Appeals held that CECON was not entitled to costs of litigation
considering that "no premium is to be placed on the right to litigate"[88] and since ACI could
not be faulted for delays.
The dispositive portion of the assailed Court of Appeals April 28, 2008 Decision read:
WHEREFORE, based on all the foregoing, the Decision of the Arbitral Tribunal is modified as
follows:
a. AWARD TO CECON
NO.
ISSUE
Pesos (PHP)
1. Cost Adjustment- 10,266,628.00
Page 14 of 41
 2. Take Out Cost of Equipment- 3,811,289.70 The dispositive portion of the assailed Court of Appeals July 1, 2010 Amended Decision read:
3. Change Orders - 99,119,200.09
WHEREFORE, Our Decision dated 28 April 2008 is hereby modified as follows:
a. Approved Change Orders- 1,132,946.17
I - AWARD:
b. [Schematic Drawings] to [Construction Drawings]- 80,108,761.60
a. AWARD TO CE CONSTRUCTION, INC.
c. Miscellaneous Change Orders- 12,672,488.30
NO.
d. Change Order No.- 5,205,004.02
ISSUE
4. Equipment Supplied by Owner- 1,127,486.50
PESOS (PhP)
Total- 114,324,605.00 (sic)
1. Additional costs spent on rebars- 10,266,628.00
b. AWARD TO ARANETA 2. Increase in the costs of cement and formworks falling under cost-bearing change.-
5,205,004.02
NO. 3. Representing undervaluation of respondent's works in the supply and installation of
G.I. sheets- 1,209,782.50
ISSUE 4. Representing Miscellaneous Change Orders- 27,601,469.32
5. Drilling of Holes- 4,543,450.00
Pesos (PHP)
6. [Schematic Drawings] to [Construction Drawings]- 80,108,761.60
5. Liquidated Damages -15,400,000.00 7. Installation of equipment supplied by owner- 1,127,486.50

6. Defective and Incomplete Works- 3,000,000.00 TOTAL- 130,062,581.94

Bookmarking Granite Tiles- 6,980,000.00 b. AWARD TO ARANETA CENTER, INC.

7 Permits, Licenses and Other Advances- 6,186,246.23 1. Liquidated Damage - 20,000,000.00

Total- 31,566,246.20 (sic) 2. Defective and Incomplete Works- 3,000,000.00

In addition, CECON is directed to submit all required. close-out documents within thirty (30) 3. Bookmarking Granite Tiles- 6,980,000.00
days from receipt of this Decision.
4. Permits, Licenses and other Advances- 6,186,246.23
The parties shall bear their own costs of arbitration and litigation.
TOTAL- 36,166,246.23
SO ORDERED.
II - COMPUTATION:
Acting on CECON's Motion for Reconsideration, the Court of Appeals issued its Amended
Decision on July 1, 2010.[90] This Amended Decision increased the award for miscellaneous AWARD TO CE CONSTRUCTION, INC- 130,062,581.94
change orders to P27,601,469.32; reinstated awards for undervalued works in supplying and
installing G.I. sheets worth P1,209,782.50[91] and for the drilling of holes and application of LESS
epoxy worth P4,543,456.00;[92] and deleted the award for takeout costs.

₯Construction Industry Arbitration Commission- Set III Page 15 of 41


AWARD TO ARANETA CENTER, INC.- 36,166,246.23
BALANCE PAYABLE BY ARANETA TO CECON- 93,896,335.71
SO ORDERED.
Aggrieved at the Court of Appeals' ruling, CECON tiled the present Petition insisting on the
propriety of the CIAC Arbitral Tribunal's conclusions and findings.[95] It prays that the
assailed Court of Appeals decisions be reversed and that the CIAC Arbitral Tribunal October
25, 2006 Decision, as modified by its December 28, 2006 Order, be reinstated.
ACI counters that the Court of Appeals July 1, 2010 Amended Decision must be upheld.
ACI insists on the inviolability of its supposed agreement with CECON, as embodied in the
contract documents delivered to contractors alongside the original offer to bid. It cites specific
provisions of these documents such as valuation rules and required notices for extensions
and changes, reckoning of losses and expenses, the ensuing liquidated damages for defects,
cost-bearing changes and provisional sums,[98] which define parameters for permissible
changes and for reckoning corresponding costs and liabilities. However, it did not attach any
of these documents to its Comment or Memorandum. It also cites statutory provisions-Articles
1715[99] and 1724[100] of the Civil Code-on CECON's liabilities and the primacy of stipulated
contract prices.
By the inviolability their agreement, ACI insists on the supposed immutability of the stipulated
contract sum and on the impropriety of the CIAC Arbitral Tribunal in writing its own terms for
ACI and CECON to follow.It faults the CIAC Arbitral Tribunal for erroneously reckoning the
sums due to CECON, particularly in relying on factual considerations that run afoul of
contractual stipulations and on bases such as industry practices and standards, which
supposedly should not have even been considered as the parties have already adduced their
respective evidence. It insists upon CECON's fault for delays and defects, making it liable for
liquidated damages.
Though nominally modifying the CIAC Arbitral Tribunal October 25, 2006 Decision, the Court
of Appeals actually reversed it on the pivotal matter of the characterization of the contract
between CECON and ACI. Upon its characterization of the contract as one for a lump-sum
fixed price, the Court of Appeals deleted much of the CIAC Arbitral Tribunal's monetary
awards to CECON and awarded liquidated damages to ACI.
On initial impression, what demands resolution is the issue of whether or not the Court of
Appeals erred in characterizing the contractual arrangement between petitioner CE
Construction Corporation and respondent Araneta Center, Inc. as immutably one for a lump-
sum fixed price.
₯Construction Industry Arbitration Commission- Set III
However, this is not merely a matter of applying and deriving conclusions from cut and dried
contractual provisions. More accurately, what is on issue is whether or not the Court of
Appeals correctly held that the CIAC Arbitral Tribunal acted beyond its jurisdiction in holding
that the price of P1,540,000,000.00 did not bind the parties as an immutable lump-sum.
Subsumed in this issue is the matter of whether or not the Court of Appeals correctly ruled
that CECON was rightfully entitled to time extensions and that intervening circumstances had
made ACI liable for cost adjustments, increases borne by change orders, additional overhead
costs, extended contractor's all risk insurance coverage, increased attendance fees vis-a-vis
subcontractors, and arbitration costs which it awarded to CECON.
This Court limits itself to the legal question of the CIAC Arbitral Tribunal's competence.
Unless any of the exceptional circumstances that warrant revisiting the factual matter of the
accuracy of the particulars of every item awarded to the parties is availing, this Court shall not
embark on its own audit of the amounts owing to each.
I. This Court begins by demarcating the jurisdictional and technical competence of the CIAC
and of its arbitral tribunals.
I.A. The Construction Industry Arbitration Commission was a creation of Executive Order No.
1008, otherwise known as the Construction Industry Arbitration Law.[105] At inception, it was
under the administrative supervision of the Philippine Domestic Construction Board[106]
which, in turn, was an implementing agency of the Construction Industry Authority of the
Philippines (CIAP).[107] The CIAP is presently attached to the Department of Trade and
Industry.
The CIAC was created with the specific purpose of an "early and expeditious settlement of
disputes"[109] cognizant of the exceptional role of construction to "the furtherance of national
development goals."
Section 4 of the Construction Industry Arbitration Law spells out the jurisdiction of the CIAC:
Section 4. Jurisdiction. - The CIAC shall have original and exclusive jurisdiction over disputes
arising from, or connected with, contracts entered into by parties involved in construction in
the Philippines, whether the dispute arises before or after the completion of the contract, or
after the abandonment or breach thereof. These disputes may involve government or private
contracts. For the Board to acquire jurisdiction, the parties to a dispute must agree to submit
the same to voluntary arbitration.
The jurisdiction of the CIAC may include but is not limited to violation of specifications for
materials and workmanship; violation of the terms of agreement; interpretation and/or
application of contractual time and delays; maintenance and defects; payment, default of
employer or contractor and changes in contract cost.
Excluded from the coverage of this law are disputes arising from employer-employee
relationships which shall continue to be covered by the Labor Code of the Philippines.
Page 16 of 41
Though created by the act of a Chief Executive who then exercised legislative powers
concurrently with the Batasang Pambansa, the creation, continuing existence, and
competence of the CIAC have since been validated by acts of Congress,
Republic Act No. 9184 or the Government Procurement Reform Act, enacted on January 10,
2003, explicitly recognized and confirmed the competence of the CIAC:
Section 59. Arbitration. - Any and all disputes arising from the implementation of a contract
covered by this Act shall be submitted to arbitration in the Philippines according to the
provisions of Republic Act No. 876, otherwise known as the "Arbitration Law": Provided,
however, That, disputes that are within the competence of the Construction Industry
Arbitration Commission to resolve shall be referred thereto. The process of arbitration shall
be incorporated as a provision in the contract that will be executed pursuant to the provisions
of this Act: Provided, That by mutual agreement, the patties may agree in writing to resort to
alternative modes of dispute resolution. (Emphasis supplied)
Arbitration of construction disputes through the CIAC was formally incorporated into the
general statutory framework on alternative dispute resolution through Republic Act No. 9285,
the Alternative Dispute Resolution Act of 2004 (ADR Law). Chapter 6, Section 34 of ADR Law
made specific reference to the Construction Industry Arbitration Law, while Section 35
confirmed the CIAC's jurisdiction:
CHAPTER 6
ARBITRATION OF CONSTRUCTION DISPUTES
Section 34. Arbitration of Construction Disputes: Governing Law. - The arbitration of
construction disputes shall be governed by Executive Order No. 1008, otherwise known as
the Construction Industry Arbitration Law.
Section 35. Coverage of the Law. - Construction disputes which fall within the original and
exclusive jurisdiction of the Construction Industry Arbitration Commission (the "Commission")
shall include those between or among parties to, or who are otherwise bound by, an
arbitration agreement, directly or by reference whether such parties are project owner,
contractor, subcontractor, fabricator, project manager, design professional, consultant,
quantity surveyor, bondsman or issuer of an insurance policy in a construction project.
The Commission shall continue to exercise original and exclusive jurisdiction over
construction disputes although the arbitration is "commercial" pursuant to Section 21 of this
Act.
I.B. The CIAC does not only serve the interest of speedy dispute resolution, it also facilitates
authoritative dispute resolution. Its authority proceeds not only from juridical legitimacy but
equally from technical expertise. The creation of a special adjudicatory body for construction
disputes presupposes distinctive and nuanced competence on matters that are conceded to
be outside the innate expertise of regular courts and adjudicatory bodies concerned with
₯Construction Industry Arbitration Commission- Set III
other specialized fields. The CIAC has the state's confidence concerning the entire technical
expanse of construction, defined in jurisprudence as "referring to all on-site works on
buildings or altering structures, from land clearance through completion including excavation,
erection and assembly and installation of components and equipment."[111]
Jurisprudence has characterized the CIAC as a quasi-judicial, administrative agency
equipped with technical proficiency that enables it to efficiently and promptly resolve conflicts;
[The CIAC] is a quasi-judicial agency. A quasi-judicial agency or body has been defined as an
organ of government other than a court and other than a legislature, which affects the rights
of private parties through either adjudication or rule-making. The very definition of an
administrative agency includes its being vested with quasi-judicial powers. The ever
increasing variety of powers and functions given to administrative agencies recognizes the
need for the active intervention of administrative agencies in matters calling for technical
knowledge and speed in countless controversies which cannot possibly be handled by
regular courts. The CIAC's primary function is that of a quasi-judicial agency, which is to
adjudicate claims and/or determine rights in accordance with procedures set forth in E.O. No.
1008.
The most recent jurisprudence maintains that the CIAC is a quasi-judicial body. This Court's
November 23, 2016 Decision in Fruehauf Electronics v. Technology Electronics Assembly
and Management Pacific[113] distinguished construction arbitration, as well as voluntary
arbitration pursuant to Article 219(14) of the Labor Code,[114] from commercial arbitration. It
ruled that commercial arbitral tribunals are not quasi-judicial agencies, as they are purely ad
hoc bodies operating through contractual consent and as they intend to serve private,
proprietary interests.[115] In contrast, voluntary arbitration under the Labor Code and
construction arbitration operate through the statutorily vested jurisdiction of government
instrumentalities that exist independently of the will of contracting parties and to which these
parties submit. They proceed from the public interest imbuing their respective spheres:
Voluntary Arbitrators resolve labor disputes and grievances arising from the interpretation of
Collective Bargaining Agreements. These disputes were specifically excluded from the
coverage of both the Arbitration Law and the ADR Law.
Unlike purely commercial relationships, the relationship between capital and labor are heavily
impressed with public interest. Because of this. Voluntary Arbitrators authorized to resolve
labor disputes have been clothed with quasi-judicial authority.
On the other hand, commercial relationships covered by our commercial arbitratjon laws are
purely private and contractual in nature. Unlike labor relationships, they do not possess the
same compelling state interest that would justify state interference into the autonomy of
contracts. Hence, commercial arbitration is a purely private system of adjudication facilitated
by private citizens instead of government instrumentalities wielding quasi-judicial powers.
Page 17 of 41
Moreover, judicial or quasi-judicial jurisdiction cannot be conferred upon a tribunal by the
parties alone. The Labor Code itself confers subject-matter jurisdiction to Voluntary
Arbitrators.
Notably, the other arbitration body listed in Rule 43 the Construction Industry Arbitration
Commission (CIAC) - is also a government agency attached to the Department of Trade and
Industry. Its jurisdiction is likewise conferred by statute. By contrast, the subject matter
urisdiction of commercial arbitrators is stipulated by the parties.
Consistent with the primacy of technical mastery, Section 14 of the Construction Industry
Arbitration Law on the qualification of arbitrators provides:
Section 14. Arbitrators. - A sole arbitrator or three arbitrators may settle a dispute
Arbitrators shall be men of distinction in whom the business sector and the government can
have confidence. They shall not be permanently employed with the CIAC. Instead, thy shall
render services only when called to arbitrate. For each dispute they settle, they shall be given
fees.
Section 8.1 of the Revised Rules of Procedure Governing Construction Arbitration establishes
that the foremost qualification of arbitrators shall be technical proficiency. It explicitly enables
not only lawyers but also "engineers, architects, construction managers, engineering
consultants, and businessmen familiar with the construction industry" to serve as arbitrators:
Section 8.1 General Qualification of Arbitrators. - The Arbitrators shall be men of distinction in
whom the business sector and the government can have confidence. They shall be
technically qualified to resolve any construction dispute expeditiously and equitably. The
Arbitrators shall come from different professions. They may include engineers, architects,
construction managers, engineering consultants, and businessmen familiar with the
construction industry and lawyers who are experienced in construction disputes.
Of the 87 CIAC accredited arbitrators as of January 2017, only 33 are lawyers. The majority
are experts from construction-related professions or engaged in related fields.
Apart from arbitrators, technical experts aid the CIAC in dispute resolution. Section 15 of the
Construction Industry Arbitration Law provides:
Section 15. Appointment of Experts. - The services of technical or legal experts may be
utilized in the settlement of disputes if requested by any of the parties or by the Arbitral
Tribunal. If the request for an expert is done by either or by both of the parties, it is necessary
that the appointment of the expert be confirmed by the Arbitral Tribunal.
Whenever the parties request for the services of an expert, they shall equally shoulder the
expert's fees and expenses, half of which shall be deposited with the Secretariat before the
expert renders service. When only one party makes the request, it shall deposit the whole
amount required.
₯Construction Industry Arbitration Commission- Set III
II. Consistent with CIAC's technical expertise is the primacy and deference accorded to its
decisions. There is only a very narrow room for assailing its rulings.
Section 19 of the Construction Industry Arbitration Law establishes that CIAC arbitral awards
may not be assailed, except on pure questions of law:
Section 19. Finality of Awards. - The arbitral award shall be binding upon the parties. It shall
be final and inappealable except on questions of law which shall be appealable to the
Supreme Court.
Rule 43 of the 1997 Rules of Civil Procedure standardizes appeals from quasi-judicial
agencies.[118] Rule 43, Section 1 explicitly lists CIAC as among the quasi judicial agencies
covered by Rule 43.[119] Section 3 indicates that appeals through Petitions for Review under
Rule 43 are to "be taken to the Court of Appeals ... whether the affoeal involves questions of
fact, of law, or mixed questions of fact and law."
This is not to say that factual findings of CIAC arbitral tribunals may now be assailed before
the Court of Appeals. Section 3's statement "whether the appeal involves questions of fact, of
law, or mixed questions of fact and law" merely recognizes variances in the disparate modes
of appeal that Rule 43 standardizes: there were those that enabled questions of fact; there
were those that enabled questions of law, and there were those that enabled mixed questions
fact and law. Rule 43 emphasizes that though there may have been variances, all appeals
under its scope are to be brought before the Court of Appeals. However, in keeping with the
Construction Industry Arbitration Law, any appeal from CIAC arbitral tribunals must remain
limited to questions of law.
Hi-Precision Steel Center, Inc. v. Lim Kim Steel Builders, Inc.[121] explained the wisdom
underlying the limitation of appeals to pure questions of law:
Section 19 makes it crystal clear that questions of fact cannot be raised in proceedings before
the Supreme Court - which is not a trier of facts - in respect of an arbitral award rendered
under the aegis of the CIAC. Consideration of the animating purpose of voluntary arbitration
in generaland arbitration under the aegis of the CIAC in particular, requires us to apply
rigorously the above principle embodied in Section 19 that the Arbitral Tribunal's findings of
fact shall be final and unappealable.
Page 18 of 41
Voluntary arbitration involves the reference of a dispute to an impartial body, the members of
which are chosen by the parties themselves, which parties freely consent in advance to abide
by the arbitral award issued after proceedings where both parties had the opportunity to be
heard. The basic objective is to provide a speedy and inexpensive method of settling disputes
by allowing the parties to avoid the formalities, delay, expense and aggravation which
commonly accompany ordinary litigation, especially litigation which goes through the entire
hierarchy of courts. [The Construction Industry Arbitration Law] created an arbitration facility
to which the construction industry in the Philippines can have recourse. The [Construction
Industry Arbitration Law] was enacted to encourage the early and expeditious settlement of
disputes in the construction industry, a public policy the implementation of which is necessa
and important for the realization of national development goals.
Consistent with this restrictive approach, this Court is duty-bound to be extremely watchful
and to ensure that an appeal does not become an ingenious means for und rmining the
integrity of arbitration or for conveniently setting aside the conclusions arbitral processes
make. An appeal is not an artifice for the parties to undermine the process they voluntarily
elected to engage in. To prevent this Court from being a party to such perversion, this Court's
primordial inclination must be to uphold the factual finqings of arbitral tribunals:
Aware of the objective of voluntary arbitration in the labor field, in the construction industry,
and in any other area for that matter, the Court will not assist one or the other or even both
parties in any effort to subvert or defeat that objective tbr their private purposes. The Court
will not review the factual findings of an arbitral tribunal upon the artful allegation that such
body had "misapprehended the facts" and will not pass upon issues which are, at bottom,
issues of fact, no matter how cleverly disguised they might be as "legal questions." The
parties here had recourse to arbitration and chose the arbitrators themselves; they must have
had confidence in such arbitrators. The Court will not, therefore, permit the parties to relitigate
before it the issues of facts previously presented and argued before the Arbitral Tribunal,
save only where a very clear showing is made that, in reaching its factual conclusions, the
Arbitral Tribunal committed an error so egregious and hurtful to one party as to constitute a
grave abuse of discretion resulting in lack or loss of jurisdiction. Prototypical examples would
be factual conclusions of the Tribunal which resulted in deprivation of one or the other party
of a fair opportunity to present its position before the Arbitral Tribunal, and an award obtained
through fraud or the corruption of arbitrators. Any other, more relaxed, rule would result in
setting at naught the basic objective of a voluntary arbitration and would reduce arbitration to
a largely inutile institution.
Thus, even as exceptions to the highly restrictive nature of appeals may be contemplated,
these exceptions are only on the nanowest of grounds. Factual findings of CIAC arbitral
tribunals may be revisited not merely because arbitral tribunals may have erred, not even on
the already exceptional grounds traditionally available in Rule 45 Petitions.[124] Rather,
factual findings may be reviewed only in cases where the CIAC arbitral tribunals conducted
their affairs in a haphazard, immodest manner that the most basic integrity of the arbitral
process was imperiled. In Spouses David v. Construction Industry and Arbitration
Commission:
₯Construction Industry Arbitration Commission- Set III
We reiterate the rule that factual findings of construction arbitrators are final and conclusive
and not reviewable by this Court on appeal, except when the petitioner proves affirmatively
that: (1) the award was procured by corruption, fraud or other undue means; (2) there was
evident partiality or corruption of the arbitrators or of any of them; (3) the arbitrators were
guilty of misconduct in refusing to postpone the hearing upon sufficient cause shown, or in
refusing to hear evidence pertinent and material to the controversy; (4) one or more of the
arbitrators were disqualified to act as such under section nine of Republic Act No. 876 and
willfully refrained from disclosing such disqualifications or of any other misbehavior by which
the rights of any party have been materially prejudiced; or (5) the arbitrators exceeded their
powers, or so imperfectly executed them, that a mutual, final and definite award upon the
subject matter submitted to them was not made.
Guided by the primacy of CIAC's technical competence, in exercising this Court's limited
power of judicial review, this Court proceeds to rule on whether or not the Court of Appeals
erred in its assailed decisions.
III. Properly discerning the issues in this case reveals that what is involved is not a mere
matter of contractual interpretation but a question of the CIAC Arbitral Tribunal's exercise of
its powers.
III.A
F.F. Cruz v. HR Construction[127] distinguished questions of law, properly cognizable in
appeals from CIAC arbitral awards, from questions of fact:
A question of law arises when there is doubt as to what the law is on a certain state of facts,
while there is a question of fact when the doubt arises as to the truth or falsity of the alleged
facts. For a question to be one of law, the same must not involve an examination of the
probative value of the evidence presented by the litigants or any of them. The resolution of
tbe issue must rest solely on what the law provides on the given set of circumstances. Once it
is clear that the issue invites a review of the evidence presented, the question posed is one of
fact.[128]
It further explained that an inquiry into the true intention of the contracting parties is a legal,
rather than a factual, issue:
On the surface, the instant petition appears to merely raise factual questions as it mainly puts
in issue the appropriate amount that is due to HRCC. However, a more thorough analysis of
the issues raised by FFCCl would show that it actually asserts questions of law.
FFCCI primarily seeks from this Court a determination of whether [the] amount claimed by
HRCC in its progress billing may be enforced against it in the absence of a joint
measurement of the former's completed works. Otherwise stated, the main question
advanced by FFCCI is this: in the absence of the joint measurement agreed upon in the
Subcontract Agreement, how will the completed works of HRCC be verified and the amolfnt
due thereon be computed?
Page 19 of 41
The determination of the foregoing question entails an interpretation of the terms of the
Subcontract Agreement vis-a-vis the respective rights of the parties herein. On this point, it
should be stressed that where an interpretation of the true agreement between the parties is
involved in an appeal, the appeal is in effect an inquiry of the law between the parties, its
interpretation necessarily involves a question of law.
Moreover, we are not called upon to examine the probative value of the evidence presented
before the CIAC. Rather, what is actually sought from this Court is an interpretation of the
terms of the Subcontract Agreement as it relates to the dispute between the parties.
Though similarly concerned with "an interpretation of the true agreement between the
parties,"[130] this case is not entirely congruent with F.F. Cruz.
In F.F. Cruz, the parties' agreement had been clearly set out in writing. There was a definitive
instrument which needed only to be consulted to ascertain the parties' intent:
In resolving the dispute as to the proper valuation of the works accomplished by HRCC, the
primordial consideration should be the terms of the Subcontract Agreement. It is basic that if
the tem1s of a contract are clear and leave no doubt upon the intention of the contracting
parties, the literal meaning of its stipulations shall control.[131]
Thus, this Court concluded:
Pursuant to the terms of payment agreed upon by the parties, FFCCI obliged itself to pay the
monthly progress billings of HRCC within 30 days from receipt of the same. Additionally, the
monthly progress billings of HRCC should indicate the extent of the works completed by it,
the same beinff essential to the valuation of the amount that FFCCI would pay to HRCC.[132]
III.B. In this case, there is no established contract that simply required interpretation and
application.
The assailed Court of Appeals April 28, 2008 Decision implies that all that had to be done to
resolve the present controversy was to apply the supposedly clear and unmistakable terms of
the contract between ACI and CECON. It even echoes the words of F.F. Cruz:
It is a legal principle of long standing that when the language of the contract is explicit,
leaving no doubt as to the intention of the parties, the courts may not read into it any other
intention that would contradict its plain import. The clear terms of the contract should never
be the subject matter of interpretation. Neither abstract justice nor the rule of liberal
interpretation justifies the creation of a contract for the parties which they did not make
themselves or the imposition upon one party to a contract or obligation not assumed simply or
merely to avoid seeming hardships. Their true meaning must be enforced, as it is to be
presumed that the contracting parties know their scope and effects.
The Contract Documents expressly characterize the construction contract between [ACI] and
CECON as "lump-sum" and "fixed price" in nature. As a consequence, the Contract
₯Construction Industry Arbitration Commission- Set III
Documents expressly prohibit any adjustment of the contract sum due to any changes or
fluctuations in the cost of labor, materials or other matters.[133] (Citations omitted)
Upon its characterization of the contract as one for the lump-sum, fixed price of
P1,540,000,000.00, the Court of Appeals faulted the CIAC Arbitral Tribunal for acting in
excess of jurisdiction as it supposedly countermanded the parties' agreement, or worse,
conjured its own tenns for the parties' compliance.[134]
It was the Court of Appeals, not the CIAC Arbitral Tribunal, that committed serious error.
To rule that the CIAC Arbitral Tribunal modified the parties' agreement because it was
indisputably one for a lump-sum, fixed price of P1,540,000,000.00 is begging the question.
The Court of Appeals used a conclusion as a premise to support itself. It erroneously jumped
to a conclusion only to plead this conclusion in support of points that should have made up its
anterior framework, points that would have been the ones to lead to a conclusion. It then
used this abortive conclusion to injudiciously dispose of the case.
The Court of Appeals took the parties' contractual relation as a revealed and preordained
starting point. Then, it dismissed every prior or subsequent detail that contradicted this
assumption. It thereby conveniently terminated the discussion before it even began.
III.C. There was never a meeting of minds on the price of P1,540,000,000.00. Thus, that
stipulation could not have been the basis of any obligation.
The only thing that ACI has in its favor is its initial delivery of tender documents to prospective
bidders. Everything that transpired after this delivery militates against ACI's position.
Before proceeding to a consideration of the circumstances that negate a meeting of minds,
this Court emphasizes that ACI would have this Court sustain claims premised on supposed
inviolable documents. Yet, it did not annex copies of these documents either to its Comment
or to its Memorandum.
ACI leaves this Court compelled to rely purely on their packaged presentation and in a bind,
unable to verify even the accuracy of the syntax of its citations. This Court cannot approve of
this predicament. To cursorily acquiesce to ACI's overtures without due diligence and
substantiation is being overly solicitous, even manifestly partisan.
ACI and its counsel must have fully known the importance of equipping this Court with a
reliable means of confirmation, especially in a case so steeped in the sway of circumstances.
ACI's omission can only work against its cause.
By delivering tender documents to bidders, ACI made an offer. By these documents, it
specitled its terms and defined the parameters within which bidders could operate. These
tender documents, therefore, guided the bidders in formulating their own offers to ACI, or,
even more fundamentally, helped them make up their minds if they were even willing to
consider undertaking the proposed project. In responding and submitting their bids,
Page 20 of 41
contractors, including CECON, did not peremptorily become subservient to ACI's terms.
Rather, they made their own representations as to their own willingness and ability. They
adduced their own counter offers, although these were already tailored to work within ACI's
parameters.
These exchanges were in keeping with Article 1326 of the Civil Code:
Article 1326. Advertisements for bidders are simply invitations to make proposals, and the
advertiser is not bound to accept the highest or lowest bidder, unless the contrary appears.
The mere occurrence of these exchanges of offers fails to satisfy the Civil Code's requirement
of absolute and unqualified acceptance:
Article 1319. Consent is manifested by the meeting of the offer and the acceptance upon the
thing and the cause which are to constitute the contract. The offer must be certain and the
acceptance absolute. A qualified acceptance constitutes a counter-offer.
Acceptance made by letter or telegram does not bind the offerer except from the time it came
to his knowledge. The contract, in such a case, is presumed to have been entered into in the
place where the offer was made. (Emphasis supplied)
Subsequent events do not only show that there was no meeting of minds on CECON's initial
offered contract sum of P1,449,089,174.00 as stated in its August 30, 2002 bid. They also
show that there was never any meeting of minds on the contract sum at all.
In accordance with Article 1321 of the Civil Code,[135] an offeror may fix the time of
acceptance. Thus, CECON's August 30, 2002 offer of P1,449,089,174.00 "specifically stated
that its bid was valid for only ninety (90) days, or only until 29 November 2002."[136]
November 29, 2002 lapsed and ACI failed to manifest its acceptance of CECON's offered
contract sum.
It was only sometime after November 29, 2002 that ACI verbally informed CECON that the
contract was being awarded to it. Through a telephone call on December 7, 2002, ACI
informed CECON that it may commence excavation works. However, there is no indication
that an agreement was reached on the contract sum in any of these conversations. ACI,
CECON, the CIAC Arbitral Tribunal, and the Court of Appeals all concede that negotiations
persisted.
Still without settling on a contract sum, even the object of the contract was subjected to
multiple modifications. Absent a concurrence of consent and object, no contract was
perfected.
An office tower atop Part A was included in CECON's scope of works and the contract sum
increased to P1,582,810,525.00. Price fluctuations were conceded after this and the project
cost was again adjusted to P1,613,615,244.00. Thereafter, CECON agreed to extend a
discount and reduced its offered project cost to P1,540,000,000.00.[138]
₯Construction Industry Arbitration Commission- Set III
After all these, ACI demurred on the tenns of its own tender documents and changed the
project from one encompassing both design and construction to one that was limited to
construction.
Though not pertaining to the object of the contract itself but only to one (1) of its many facets,
ACI also removed from CECON's scope of works the acquisition of elevators, escalators,
chillers, generator sets, indoor substations, cooling towers, pumps, and tanks. However,
much later, ACI reneged on its own and opted to still obtain pumps, tanks, and cooling towers
through CECON.
It is ACI's contention that the offered project cost of P1,540,000,000.00 is what binds the
parties because its June 2, 2003 letter indicated acceptance of this offered amount.
This is plain error.
CECON was never remiss in impressing upon ACI that the P1,540,000,000.00 offer was not
perpetually availing. WithoutACI's timely acceptance, on December 27, 2002, CECON wrote
to ACI emphasizing that the quoted sum of P1,540,000,000.00 was "based [only] upon the
prices prevailing at December 26, 2002" levels.[139] On January 8, 2003, CECON notified
ACI of further increases in costs and specifically stated that "[f]urther delay in the acceptance
of the revised offer and release of the down payment may affect the revised lump sum
amount."[140] Finally, on January 21, 2003, CECON wrote again to ACI,[141] stating that the
contract sum had to be increased to P1,594,631,418.00. CECON also specifically stated,
consistent with Article 1321 of the Civil Code, that its tender of this adjusted price was valid
only until January 31, 2003, as further price changes may be forthcoming. CECON also
impressed upon ACI that the 400 days allotted for the completion of the project had to be
adjusted.
When ACI indicated acceptance, CECON's P1,540,000,000.00 offer had been superseded.
Even CECON's subsequent offer of P1,594,631,418.00 had, by then, lapsed by more than
four (4) months. Apparently totally misinformed, ACI's acceptance letter did not even realize
or remotely reference CECON's most recent P1,594,631,418.00 stipulation but insisted on
the passe offer of P1,540,000,000.00 from the past year.
ACI's supposed acceptance was not an effective, unqualified acceptance, as contemplated
by Article 1319 of the Civil Code. At most, it was a counter-offer to revert to
P1,540,000,000.00.
ACI's June 2, 2003 letter stated an undertaking: "This notwithstanding, formal contract
documents embodying these positions will shortly be prepared and forwarded to you for
execution."[143] Through this letter, ACI not only undertook to deliver documents, it also
admitted that the final, definitive terms between the parties had yet to be articulated in writing.
ACI's delivery CECON's review, and both parties' final act of formalizing their respective
consent and affixing their respective signatures would have established a clear point in which
the contract between ACI and CECON has been perfected. These points, i.e. ACI's delivery,
Page 21 of 41
CECON's review, and parties' formalization, too, would have validated the Court of Appeals'
assertion that all that remained to be done was to apply unequivocal contractual provisions.
ACI would fail on its own undertaking.
III.D. Without properly executed contract documents, what would have been a straightforward
exercise, akin to the experience in F.F. Cruz, became a drawn-out fact-finding affair. The
situation that ACI engendered made it necessary for the CIAC Arbitral Tribunal to unravel the
terms binding ACI to CECON from sources other than definitive documents.
It is these actions of the CIAC Arbitral Tribunal that raise an issue, purely as a matter of law,
now the subject of this Court's review; that is, faced with the lacunae confronting it, whether
or not the CIAC Arbitral Tribunal acted within its jurisdiction.
IV. The CIAC Arbitral Tribunal did not act in excess of its jurisdiction. Contrary to the Court of
Appeals' and ACI's assertions, it did not draw up its own tenns and force these terms upon
ACI and CECON.
IV.A. The CIAC Arbitral Tribunal was not confronted with a barefaced controversy for which a
fom1ulaic resolution sufficed. More pressingly, it was confronted with a state of affairs where
CECON rendered services to ACI, with neither definitive governing instrwnents nor a
confirmed, fixed remuneration for its services. Thus, did the CIAC Arbitral Tribunal go about
the task of asce1taining the sum properly due to CECON.
This task was well within its jurisdiction. This determination entailed the full range of subjects
expressly stipulated by Section 4 of the Construction Industry Arbitration Law to be within the
CIAC's subject matter jurisdiction.
Section 4. Jurisdiction. - The jurisdiction of the CIAC may include but is not limited to violation
of specifications for materials and workmanship; violation of the terms of agreement;
interpretation and/or application of contractual time and delays; maintenance and defects;
payment, default of employer or contractor and changes in contract cost.
CECON raised the principal issue of the payment due to it on account, not only of fluctuating
project costs but more so because of ACI's inability to timely act on many contingencies,
despite proper notice and communication from and by CECON. Theretbre, at the heart of the
controversy was the "interpretation and/or application of contractual time and delays." ACI's
counter-arguments, too, directly appealed to CIAC's subject matter jurisdiction. ACI countered
by asserting that sanctioning CECON's claims was tantamount to violating the tem1s of their
agreement. It further claimed liability on CECON's part for "maintenance and defects," and for
"violation of specifications for materials and workmanship."
ACI and CECON voluntarily submitted themselves to the CIAC Arbitral Tribunal's jurisdiction.
The contending parties' own volition is at the inception of every construction arbitration
proceeding.[144] Common sense dictates that by the parties' voluntary submission, they
acknowledge that an arbitral tribunal constituted under the CIAC has full competence to rule
₯Construction Industry Arbitration Commission- Set III
on the dispute presented to it. They concede this not only with respect to the literal issues
recited in their terms of reference, as ACI suggests,[145] but also with respect to their
necessary incidents. Accordingly, in delineating the authority of arbitrators, the CIAC Rules of
Procedure speak not only of the literally recited issues but also of "related matters":
SECTION 21.3 Extent of power of arbitrator - The Arbitral Tribunal shall decide only such
issues and related matters as are submitted to them for adjudication. They have no power to
add, to subtract from, modify, or amend any of the terms of the contract or any supplementary
agreement thereto, or any rule, regulation or policy promulgated by the CIAC.
To otherwise be puritanical about cognizable issues would be to cripple CIAC arbitral
tribunals. It would potentially be to condone the parties' efforts at tying the hands of tribunals
through circuitous, trivial recitals that fail to address the complete extent of their claims and
which are ultimately ineffectual in dispensing an exhaustive and dependable resolution.
Construction arbitration is not a game of guile which may be left to ingenious textual or
technical acrobatics, but an endeavor to ascertain the tluth and to dispense justice "by every
and all reasonable means without regard to technicalities of law or proc.edure."
IV.B. Two (2) guiding principles steered the CIAC Arbitral Tribunal in going about its task.
First was the basic matter of fairness. Second was effective dispute resolution or the
overarching principle of arbitration as a mechanism relieved of the encumbrances of litigation.
In Section 1.1 of the CIAC Rules of Procedure:
SECTION 1.1 Statement of policy and objectives - It is the policy and objective of these Rules
to provide a fair and expeditious resolution of construction disputes as an altemative to
judicial proceedings, which may restore the disrupted harmonious and friendly relationships
between or among the parties. (Emphasis supplied)
CECON's predicament demanded compensation. The precise extent may yet to have been
settled; yet, as the exigencies that prompted CECON to request for arbitration unraveled, it
became clear that it was not for the CIAC Arbitral Tribunal to turn a blind eye to CECON's just
entitlement to compensation.
Jurisprudence has settled that even in cases where parties enter into contracts which do not
strictly confmm to standard formalities or to the typifying provisions of nominate contracts,
when one renders services to another, the latter must compensate the fonner for the
reasonable value of the services rendered. This amount shall be fixed by a court. This is a
matter so basic, this Court has once characterized it as one that "springs from the fountain of
good conscience":
As early as 1903, in Perez v. Pomar, this Court mled that where one has rendered services to
another, and these services are accepted by the latter, in the absence of proof that the
service was rendered gratuitously, it is but just that he should pay a reasonable remuneration
therefore because "it is a well known principle of law, that no one should be permitted to
enrich himself to the damage of another." Similary in 1914, this Court declared that in this
jurisdiction, even in the absence of statute, ". . . under the general principle that one person
Page 22 of 41
may not enrich himself at the expense of another, a judgment creditor would not be permitted
to retain the purchase price of land sold as the property of the judgment debtor after it has
been made to appear that the judgment debtor had no title to the land and that the purchaser
had failed to secure title thereto . . ." The foregoing equitable principle which springs from the
fountain of good conscience are applicable to the case at bar.[147]
Consistent with the Construction Industry Arbitration Law's declared policy,[148] the CIAC
Arbitral Tribunal was specifically charged with "ascertain[ing] the facts in each case by every
and all reasonable means."[149] In discharging its task, it was permitted to even transcend
technical rules on admissibility of evidence.[150]
IV.C. The reality of a vacuum where there were no definite contractual terms, coupled with
the demands of a "fair and expeditious resolution" of a dispute centered on contractual
interpretation, called into operation Article 1371 of the Civil Code:
Article 1371. In order to judge the intention of the contracting parties, their contemporaneous
and subsequent acts shall be principally considered. (Emphasis supplled)
Article 1379 of the Civil Code invokes principles from the Revised Rules on Evidence. By
invoking these principles, Article 1379 makes them properly applicable in every instance of
contractual interpretation, even those where the need for interpretation arises outside of court
proceedings:
Article 1379. The principles of interpretation stated in Rule 123 of the Rules of Court shall
likewise be observed in the construction of contracts.
As with Article 1371, therefore, the following principles from the Revised Rules on Evidence
equally governed the CIAC Arbitral Tribunal's affairs:
4. Interpretation of Documents
Section 12. Interpretation according to intention; general and particular provisions. - In the
construction of an instrument, the intention of the parties is to be pursued; and when a
general and a particular provision are inconsistent, the latter is paramount to the former. So a
particular intent will control a general one that is inconsistent with it.
Section 13. Interpretation according to circumstances. - For the proper construction of an
instrument, the circumstances under which it was made, including the situation of the subject
thereof and of the parties to it, may be shown, so that the judge may be placed in the position
of those whose language he is to interpret.
Within its competence and in keeping with basic principles on contractual interpretation, the
CIAC Arbitral Tribunal ascertained the trqe and just terms governing ACI and CECON. Thus,
the CIAC Arbitral Tribunal did not conjure its own contractual creature out of nothing. In
keeping with this, the CIAC Arbitral Tribtmal found it proper to sustain CECON's position.
There having been no meeting of minds on the contract sum, the amount due to CECON
₯Construction Industry Arbitration Commission- Set III
became susceptible to reasonable adjustment, subject to proof of legitimate costs that
CECON can adduce.
V. Unravelling the CIAC Arbitral Tribunal's competence and establishing how it acted
consistent with law resolves the principal legal issue before us. From this threshold, the
inquiry transitions to the matter of whether or not the conclusions made by the CIAC Arbitral
Tribunal were warranted.
They were. Far from being capricious, the CIAC Arbitral Tribunal's conclusions find solid
basis in law and evidence.
V.A. The tender documents may have characterized the contract sum as fixed and lump-sum,
but the premises for this arrangement have undoubtedly been repudiated by intervening
circumstances.
When CECON made its offer of P1,540,000,000.00, it proceeded from several premises.
First, ACI would timely respond to the representations made in its bid. Second, CECON could
act on the basis of prices prevailing then. Third, the subject matter of the contract was the
entire expanse of design and construction covering all elements disclosed in the tender
documents, nothing more and nothing less. Fourth, the basic specifications for designing and
building the Gateway Mall, as stated in the tender documents, would remain consistent.
Lastly, ACI would timely deliver on its concomitant obligations.
Contrary to CECON's reasonable expectations, ACI failed to timely act either on CECON's
bid or on those of its competitors. Negotiations persisted for the better part of two (2) calendar
years, during which the quoted contract sum had to be revised at least five (5) times. The
object of the contract and CECON's scope of work widely varied. There were radical changes
like the addition of an entire office tower to the project and the change in the project's
structural framing. There was also the undoing of CECON's freedom to design, thereby
rendering it entirely dependent on configurations that ACI was to unilaterally resolve, It turned
out that ACI took its time in delivering construction drawings to CECON, with almost 38% of
construction drawings being delivered after the intended completion date. There were many
other less expansive changes to the project, such as ACI's fickleness on which equipment it
would acquire by itself. ACI even failed to immediately deliver the project site to CECON so
that CECON may commence excavation, the most basic task in setting up a structure's
foundation. ACI also failed to produce definite instruments articulating its agreement with
CECON, the final contract documents.
With the withering of the premises upon which a lump-sum, fixed price arrangement would
have been founded, such an arrangement must have certainly been negated:
[T]he contract is fixed and lump sum when it was tendered and contracted as a design and
constmct package. The contract scope and character significantly changed when the design
was taken over by the Respondent. At the time of the negotiation and agreement of the
amount of Php1.54 billion, there were no final plans for the change to structural steel, and all
the [mechanical, electrical and plumbing] drawings were all schematics.
Page 23 of 41
[I]t is apparent to the Tribunal that the quantity and materials at the time of the P1.54B
agreement are significantly different from the original plans to the finally implemented plans.
The price increases in the steel products and cement were established to have already
increased by 11.52% and by P5.00 per bag respectively by January 21, 2003. The Tribunal
finds agreement with the Claimant that it is fairer to award the price increase.
It should also be mentioned that Respondent had changed the scope and character of the
agreement. First, there were major changes in the plans and specifications. Originally, the
contract was for design and construct. The design was deleted from the scope of the
Claimant. It was changed to a straight construction contract. As a straight construction
contract, there were no final plans to speak of at the time of the instructions to change. Then
there was a verbal change to structural steel frame. No plans were available upon this
instruction to change. Next, the [mechanical, electrical and plumbing] plans were all
schematics. It is therefore expected that changes of plans are forthcoming, and that changes
in costs would follow ...
It has been established that the original tender, request for proposal and award is for a design
and construct contract. The contract documents are therefore associated for said system of
construction. When Respondent decided to change and take over the design, such as the
change from concrete to structural steel framing, "take-out" equipment from the contract and
modify the [mechanical, electrical and plumbing w]orks, the original scope of work had been
drastically changed. To tie down the Claimant to the tmit prices for the proposal for a different
scope of work would be grossly unfair. This Tribunal will hold that unit price adjustment could
be allowed but only for change orders that were not in the original scope of work, such as the
change order from concrete to structural framing, the [mechanical, electrical and plumbing
w]orks, [schematic drawings to construction drawings] and the Miscellaneous Change Order
Works.
V.B. Contrary to ACI's oft-repeated argument,[152] the CIAC Arbitral Tribunal correctly found
that ACI had gained no solace in statutory provisions on the immutability of prices stipulated
between a contractor and a landowner. Article 1724 of the Civil Code reads:
Article 1724. The contractor who undertakes to build a structure or any other work for a
stipulated price, in conformity with plans and specifications agreed upon with the land-owner,
can neither withdraw from the contract nor demand an increase in the price on account of the
higher cost of labor or materials, save when there has been a change in the plans and
specifications, provided:
(1) Such change has been authorized by the proprietor in writing; and
(2) The additional price to be paid to the contractor has been determined in writing by both
parties.
Article 1724 demands two (2) requisites in order that a price may become immutable: first,
there must be an actual, stipulated price; and second, plans and specifications must have
definitely been agreed upon.
₯Construction Industry Arbitration Commission- Set III
Neither requisite avails in this case. Yet again, ACI is begging the question. It is precisely the
crux of the controversy that no price has been set. Article 1724 does not work to entrench a
disputed price and make it sacrosanct. Moreover, it was ACI which thn1st itself upon a
situation where no plans and specifications were immediately agreed upon and from which no
deviation could be made. It was ACI, not CECON, which made, revised, and deviated from
designs and specifications.
V.C. The CIAC Arbitral Tribunal also merely held ACI to account for its voluntarily admitted
adjustments. The CIAC Rules of Procedure pennit deviations from technical rules on
evidence, including those on admissions. Still, common sense dictates that the principle that
"[t]he act, declaration or omission of a party as to a relevant fact may be given in evidence
against him"[153] must equally hold true in administrative or quasi-judicial proceedings as
they do in court actions. Certainly, each must be held to account for his or her own voluntary
declarations. It would have been plainly absurd to disregard ACI's reneging on its own
admissions:
Respondent has agreed to the price increase in structural steel and after some negotiation
paid the agreed amount. Respondent also agreed to the price increase in the reinforcing bars
and instructed the Claimant to bill it accordingly. To the Tribunal, such action is an
acknowledgment of the price increase. Respondent can make the case that said agreement
is conditional, i.e., the Complaint must be withdrawn. To the Tribunal, the conditionality falls
both ways. The Claimant has as much interest to agree to a negotiated price increase so that
it can collect payments for the claims. The conditionalities do not change the basis for the
quantity and the amotmt. The process of the negotiation has arrived at the price difference
and quantities. The Tribunal finds the process in arriving at the Joint Manifestation, a fair
determination of the unit price increase. This holding will render the discussions on Exhibit
JJJJ, and the demand of the burden of proof of the Respondent superfluous.[154]
This absurdity is so patent that the Court of Appeals was still compelled to uphold awards
premised on ACI's admissions, even as it reversed the CIAC Arbitral Tribunal decision on the
primordial issue of the characterization of the contractual arrangement between CECON and
ACI:
As stated, the contract between [ACI] and CECON has not been amended or revised. The
Arbitral Tribunal had no power to amend the contract to provide that there be allowed price
and/or cost adjustment removing the express stipulation that the Project is for a lump sum or
fixed price consideration. Accordingly, this Court removes the award for additional costs
spent by CECON on cement and formworks due to price increases or removing the award for
these items in the total amount of PhP5,598,338.20. Since CECON is not entitled to its claim
for price increase, it is likewise not entitled to the award of the interest rate of 6% per annum.
With regard however to the additional costs for the rebars due to price increases. this Court
finds that CECON is entitled to the amount of PhP10,266,628.00 representing the additional
costs spent by CECON for rebars due to price increases, notwithstanding the Arbitral
Tribunal's excess of jurisdiction in amending the contract between the parties because [ACI]
and CECON had in fact agreed that CECON was entitled to such an amount and that [ACI]
Page 24 of 41
would pay the same. This agreement was made in the parties' Joint Manifestation of
Compliance dated March 30, 2004 which they filed with th Arbitral Tribunal ("Joint
Manifestation").
No extraordinary technical or legal proficiency is required to see that it would be the height of
absurdity and injustice to insist on the payment of an amount the consideration of which has
been reduced to a distant memory. ACI's invocation of Article 1724 is useless as the
premises for its application are absent. ACI's position is an invitation for this Court to lend its
imprimatur to unjust enrichment enabled by the gradual wilting of what should have been a
reliable contractual relation. Basic decency impels this Court to not give in to ACI's advances
and instead sustain the CIAC Arbitral Tribunal's conclusion that the amount due to CECON
has become susceptible to reasonable adjustment.
VI. The Arbitral Tribunal's award must be reinstated.
VI.A. With the undoing of the foundation for the Court of Appeal's fallacious, circular
reasoning, its monetary awards must also necessarily give way to the reinstatement of the
CIAC Arbitral Tribunal's awards.
The inevitable changes borne by ACI's own trifling actions justify, as a consequence,
compensation for cost adjustments and the ensuing change orders, additional overhead costs
for the period of extension, extended coverage for contractor's all-risk insurance, and
attendance fees for auxiliary services to subcontractors whose functions were also
necessarily prolonged. ACI's frivolity on the acquisition of elevators, escalators, chillers,
generator sets, indoor substations, cooling towers, pumps, and tanlcs also vindicates
compensation for the works that remained under CECON's account. ACI's authorship of the
causes of delay supports time extensions favoring CECON and, conversely, discredits
liquidated damages benefitting ACI.
This Court upholds the Arbitral Tribunal's awards on each of the items due to CECON, as well
as on its findings relating to CECON's countervailing liabilities.
In fulfilling its task, the CIAC Arbitral Tribunal was equipped with its technical competence,
adhered to the rigors demanded by the CIAC Rules of Procedure, and was endowed with the
experience of exclusively presiding over 19 months of arbitral proceedings, examining object
and documentary evidence, and probing witnesses.
VI.B. Within the CIAC Arbitral Tribunal's technical competence was its reference to prevailing
industry practices, a much-bewailed point by ACI.[156] This reference was made not only
desirable but even necessary by the absence of definitive governing instruments. Moreover,
this reference was made feasible by the CIAC Arbitral Tribunars inherent expertise in the
construction industry.
This reference was not only borne by practical contingencies and buttressed by recognized
proficiency, it was also sanctioned by the statutory framework of contractual interpretation
within which the CIAC Arbitral Tribunal operated. Thus, the following principles governed the
₯Construction Industry Arbitration Commission- Set III
interpretation of the change orders, requests, and other communications, which had
effectively been surrogates of a single definite instrument executed by the parties.
From the Civil Code:
Article 1375. Words which may have different significations shall be understood in that which
is most in keeping with the nature and object of the contract.
Article 1376. The usage or custom of the place shall be borne in mind in the interpretation of
the ambiguities of a contract, and shall fill the omission of stipulations which are ordinarily
established.
From the Revised Rules on Evidence, the following have been made applicable even outside
regular litigation by Article 1379 of the Civil Code:
Section 14. Peculiar signification of terms. - The terms of a writing are presumed to have
been used in their primary and general acceptation, but evidence is admissible to show that
they have a local, technical, or otherwise peculiar signification, and were so used and
understood in the particular instance, in which case the agreement must be construed
accordingly.
Section 19. Interpretation according to usage. - An instrument may be construed according to
usage, in order to determine its true character.[157] (Emphasis supplied)
Equally availing is the following principle. This is especially tlue of the remuneration due to
CECON, considering that stipulations for remuneration are devised for the benefit of the
person rendering the service:
Section 17. Of two constn.1ctions, which preferred. - When the terms of an agreement have
been intended in a different sense by the different parties to it, that sense is to prevail against
either party in which he supposed the other understood it, and when different constructions of
a provision are otherwise equally proper, that is to be taken which is the most favorable to the
party in whose favor the provision was made.[158]
VI.C. In appraising the CIAC Arbitral Tribunal's awards, it is not the province of the present
Rule 45 Petition to supplant this Court's wisdom for the inherent technical competence of and
the insights drawn by the CIAC Arbitral Tribunal throughout the protracted proceedings before
it. The CIAC Arbitral Tribunal perused each of the parties' voluminous pieces of evidence.
[159] Its members personally heard, observed, tested, and propounded questions to each of
the witnesses. Having been constituted solely and precisely for the purpose of resolving the
dispute between ACI and CECON for 19 months, the CIAC Arbitral Tribunal devoted itself to
no other task than resolving that controversy. This Court has the benefit neither of the CIAC
Arbitral Tribunal's technical competence nor of its irreplaceable experience of hearing the
case, scrutinizing every piece of evidence, and probing the witnesses.
Page 25 of 41
True, the inhibition that impels this Court admits of exceptions enabling it to embark on its
own factual inquiry. Yet, none of these exceptions, which are all anchored on considerations
of the CIAC Arbitral Tribunal's integrity and not merely on mistake, doubt, or conflict, is
availing.
This Court finds no basis for casting aspersions on the integrity of the CIAC Arbitral TribunaL
There does not appear to have been an undisclosed disqualification for any of its three (3)
members or proof of any prejudicial misdemeanor. There is nothing to sustain an allegation
that the parties' voluntarily selected arbitrators were conupt, fraudulent, manifestly partial, or
otherwise abusive. From all indications, it appears that the CIAC Arbitral Tribunal extended
every possible opportunity for each of the parties to not only plead their case but also to
arrive at a mutually beneficial settlement. This Court has ruled, precisely, that the arbitrators
acted in keeping with their lawful competencies. This enabled them to come up with an
otherwise definite and reliable award on the controversy before it.
Inventive, hair-splitting recitals of the supposed imperfections in the CIAC Arbitral Tribunal's
execution of its tasks will not compel this Court to supplant itself as a fact-finding, technical
expert.
ACI's refutations on each of the specific items claimed by CECON and its counterclaims of
sums call for the point by point appraisal of work, progress, defects and rectifications, and
delays and their causes. They are, in truth, invitations for this Court to engage in its own audit
of works and corresponding financial consequences. In the alternative, its refutations insist on
the application of rates, schedules, and other stipulations in the same tender documents,
copies of which ACI never adduced and the efficacy of which this Court has previously
discussed to be, at best, doubtful.
This Court now rectifies the error made by the Court of Appeals. By this rectification, this
Court does not open the doors to an inordinate and overzealous display of this Court's
authority as a final arbiter.
Without a showing of any of the exceptional circumstances justifying factual review, it is
neither this Court's business nor in this Court's competence to pontificate on technical
matters. These include things such as fluctuations in prices of materials from 2002 to 2004,
the architectural and engineering consequences - with their ensuing financial effects - of
shifting from reinforced concrete to structural steel, the feasibility of rectification works for
defective installations and fixtures, the viability of a given schedule of rates as against
another, the audit of changes for every schematic drawing as revised by construction
drawings, the proper mechanism for examining discolored and mismatched tiles, the minutiae
of installing G.I. sheets and sealing cracks with epoxy sealants, or even unpaid sums for
garbage collection.
The CIAC Arbitral Tribunal acted in keeping with the law, its competence, and the adduced
evidence; thus, this Court upholds and reinstates the CIAC Arbitral Tribunal's monetary
awards.
₯Construction Industry Arbitration Commission- Set III
VII. It does not escape this Court's attention that this controversy has dragged on for more
than 13 years since CECON initially sought to avail of arbitration.
The CIAC Arbitral Tribunal noted that ACI consumed a total of 840 days filing several motions
and manifestations, including at least eight (8) posturings at pursuing settlement.[160] It
added, however, that ACI repeatedly failed to respond to CECON's claims during meetings
thereby constraining CECON to file motions to proceed after repeatedly being dangled hope
of an early resolution.[161] It appeared that ACI was more interested in buying time than in
effecting a consummate voluntary settlement.
The CIAC Arbitral Tribunal October 25, 2006 Decision should have long brought this matter to
an end. This Court does not fault ACI for availing of remedies. Yet, this Court also notes that
even in proceedings outside of the CIAC Arbitral Tribunal, ACI seems to not have been
sufficiently conscientious of time.
In this Court alone, ACI sought extensions to file its Comment no less than five (5) times.[162]
It sought several other extensions in the filing of its Memorandum.[163]
It also does not escape this Court's attention that while ACI's arguments have perennially
pleaded the supposed primacy and itnmutability of stipulations originally articulated in the
tender documents, it never bothered to annex any of these documents either to its Comment
or to its Memorandum. Without these and other supporting materials, this Court is left in the
uneasy predicament of merely relying on ACI's self-stated assertions and without means of
verifying even the syntax of its citations.
While presumptions of good faith may be indulged, the repercussions of ACI's vacillation
cannot be denied.
Even if this Court were to ignore the delays borne by ACI's procedural posturing, this Court is
compelled to hearken to ACI's original faults. These are, after all, what begot these
proceedings. These are the same original faults which so exasperated CECON; it was left
with no recourse but to seek the intervention of CIAC.
These faults began as soon as bidders responded to ACI's invitation. In CECON's case, its
communicated time for the validity of its offer lapsed without confinnation from ACI. ACI only
verbally responded and only after CECON's communicated timeframe. It told CECON to
commence excavation works but failed to completely deliver the project site until five (5)
months later. It engaged in protracted negotiations, never confirming acceptance until the
tenth month, after bidders had submitted their offers. By then, ACI's supposed acceptance
could not even identify CECON's most recent quoted price. It undertook to process and
deliver formal documents, yet this controversy already reached this Court and not a single
page of those documents has seen the light of day. It has repeatedly added and taken from
CECONs scope of works but vigorously opposed adjustments that should have at least been
given reasonable consideration, only to admit and partially stipulate on thern. In taking upon
itself the task of designing, it took its time in delivering as many as 1,675 construction
Page 26 of 41
drawings to CECON, more than 600 of which were not delivered until well after the project's
intended completion date.

This Court commenced its discussion by underscoring that arbitration primarily serves the
need of expeditious dispute resolution. This interest takes on an even greater urgency in the
context of construction projects and the national interest so intimately tied with them. ACI's
actions have so bogged down its contractor. Nearing 13 years after the Gateway Mall's
completion, its contractor has yet to be fully and properly compensated. Not only have ACI's
actions begotten this dispute, they have hyper-extended arbitration proceedings and dragged
courts into the controversy. The delays have virtually bastardized the hopes at expeditious
and effective dispute resolution which are supposedly the hallmarks of arbitration
proceedings.

For these, in addition to sustaining each of the awards due to CECON arising from the facets
of the project, this Court also sustains the CIAC Arbitral Tribunal's award to CECON of
arbitration costs. Further, this Court imposes upon respondent Araneta Corporation, Inc. the
burden of bearing the costs of what have mutated into a full-fledged litigation before this
Court and the Court of Appeals.

WHEREFORE, the Petition is GRANTED. The assailed April 28, 2008 Decision and July 1,
2010 Amended Decision of the Court of Appeals in CA-G.R. SP No. 96834 are REVERSED
and SET ASIDE. The Construction Industry Arbitration Commission Arbitral Tribunal October
25, 2006 Decision in CIAC Case No. 01-2004 is REINSTATED.

Legal interest at the rate of six percent (6%) per annum is imposed on the award from the
finality of this Decision until its full satisfaction.

Costs against respondent.

SO ORDERED.

₯Construction Industry Arbitration Commission- Set III Page 27 of 41

[22] G.R. No. 192948, December 07, 2016
B.F. CORPORATION AND HONORIO PINEDA, Petitioners, v. FORM-EZE SYSTEMS, INC.,
Respondent.
Construction Contracts; Cases in which Factual Finding of Construction Arbitrators May be
Reviewed by the Court.—Factual findings of construction arbitrators may be reviewed by the Court in
cases where: 1) the award was procured by corruption, fraud or other undue means; (2) there was
evident partiality or corruption of the arbitrators or any of them; (3) the arbitrators were guilty of
misconduct in refusing to hear evidence pertinent and material to the controversy; (4) one or more of
the arbitrators were disqualified to act as such under Section nine of Republic Act (R.A.) No. 876 and
willfully refrained from disclosing such disqualifications or of any other misbehavior by which the
rights of any party have been materially prejudiced; (5) the arbitrators exceeded their powers, or so
imperfectly executed them, that a mutual, final and definite award upon the subject matter submitted to
them was not made; (6) when there is a very clear showing of grave abuse of discretion resulting in
lack or loss of jurisdiction as when a party was deprived of a fair opportunity to present its position
before the Arbitral Tribunal or when an award is obtained through fraud or the corruption of
arbitrators; (7) when the findings of the Court of Appeals are contrary to those of the CIAC, and (8)
when a party is deprived of administrative due process.
Civil Law; Unjust Enrichment; The principle of unjust enrichment essentially contemplates
payment when there is no duty to pay, and the person who receives the payment has no right to receive
it.—To award the full contract price to Form-Eze in Contract No. 1 is tantamount to unjust enrichment.
There is unjust enrichment under Article 22 of the Civil Code when (1) a person is unjustly benefited,
and (2) such benefit is derived at the expense of or with damages to another. The principle of unjust
enrichment essentially contemplates payment when there is no duty to pay, and the person who
receives the payment has no right to receive it. By requiring BFC to pay the full contract price when it
only supplied deckforms which covered only 5,149.85 contact square meters of formworks, the CIAC
Arbitral Tribunal is essentially unjustly giving unwarranted benefit to Form-Eze by allowing it to earn
more than it legally and contractually deserved. It is also worth mentioning that Form-Eze had in fact
only been claiming for the contact area where its equipment was used.
Same; Contracts; Reformation of Contracts; Reformation is a remedy in equity, whereby a
written instrument is made or construed so as to express or conform to the real intention of the parties,
where some error or mistake has been committed.—An action for reform a contract is grounded on
Article 1359 of the New Civil Code which provides: ARTICLE 1359. When, there having been a
meeting of the minds of the parties to a contract, 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. x x x x Reformation is a remedy in equity, whereby a written instrument is made or
construed so as to express or conform to the real intention of the parties, where some error or mistake
has been committed. In granting reformation, the remedy in equity is not making a new contract for the
parties, but establishing and perpetuating the real contract between the parties which, under the
technical rules of law, could not be enforced but for such reformation. In order that an action for
reformation of instrument may prosper, the following requisites must concur: (1) there must have been
a meeting of the minds of the parties to the contract; (2) the instrument does not express the true
₯Construction Industry Arbitration Commission- Set III
intention of the parties; and (3) the failure of the instrument to express the true intention of the parties
is due to mistake, fraud, inequitable conduct or accident.
Construction Industry Arbitration Commission; Jurisdiction; Section 4 of Executive Order (EO)
No. 1008 vests jurisdiction on Construction Industry Arbitration Commission (CIAC) over disputes
arising from, or connected with, contracts entered into by parties involved in construction in the
Philippines, whether the dispute arises before or after the completion of the contract, or after the
abandonment or breach thereof.—Section 4 of Executive Order No. 1008 vests jurisdiction on CIAC
over disputes 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. Moreover, the party involved must agree to
submit to voluntary arbitration. In other words, anyone who is not a party to the contract in his
personal capacity is not subject to the jurisdiction of the CIAC. In this case, Pineda signed the
challenged contracts in his capacity as President of BFC. There is no indication that he voluntarily
submitted himself as a party to the arbitration case. In fact, he has been consistently contesting his
inclusion as a respondent in the CIAC proceedings. CIAC however considered Pineda as a joint
tortfeasor, thus justifying his joinder as a codefendant.
Attorney’s Fees; Under Article 2208 of the Civil Code, attorney’s fees may, among others, be
recovered where defendant acted in gross and evident bad faith in refusing to satisfy the plaintiff’s
plainly valid, just and demandable claim.—Under Article 2208 of the Civil Code, attorney’s fees may,
among others, be recovered where defendant acted in gross and evident bad faith in refusing to satisfy
the plaintiff’s plainly valid, just and demandable claim. We observe that in filing the complaint against
BFC, Form-Eze was merely seeking payment for its service under the contract. BFC had admitted to
its obligation. The problem lies only on the amount to be paid. This is not tantamount to bad faith.
DECISION
PEREZ, J.:
This petition for review assails the 15 January 2010 Decision1 and 13 July 2010 Resolution2
of the Court of Appeals in CA-G.R. SP No. 102007 which affirmed the Final Award rendered
by the Construction Industry Arbitration Commission (CIAC) Arbitral Tribunal on 7 December
2007.
FACTUAL ANTECEDENTS
Petitioner B.F. Corporation (BFC) is a corporation engaged in general engineering and civil
works construction. Petitioner Honorio H. Pineda (Pineda) is the President of BFC.
Respondent Form-Eze Systems Inc. (Form-Eze) is a corporation engaged in highway and
street construction.
On 29 August 2006, SM Prime Holdings, Inc. awarded the contract for general construction of
the SM City-Marikina mall (the Project) to BFC whereby the latter undertook to supply
materials, labor, tools, equipment and supervision for the complete construction of the
Project.3 In turn, BFC engaged Form-Eze for the lease of formwork system and related
equipment for and needed by the Project. Accordingly, five (5) contracts and two (2) letter-
Page 28 of 41
agreements were executed by the BFC, represented by its President Pineda, and Form-Eze,
represented by its President, James W. Franklin. These contracts and their salient provisions
are provided in the following table:
CONTRACT NO. 1: Contract for the Lease of the Equipment for the Beam and Slab
Hardware for the Formwork on SM Marikina Mall Project dated 20 December 20064
Obligations of Form-Eze
Furnish all hardware required in the formwork system for the poured in place beam and slab
concrete decks excluding the scaffoldings and accessories required to support the system;
and Provide consumable beam ties and steel accessories needed to maintain the rigidity and
alignment of the plywood formed surfaces.
Obligations of BFC
Furnish all scaffoldings as required to support the system at no ,cost to Form-Eze;
Furnish all plywood and lumber as required in the formwork operation as no cost to Form-
Eze;
Purchase materials for the formwork as requested by Form-Eze. The direct cost of materials
shall be deducted from the contract and the balance paid to Form-Eze; and
Responsible for the freight of the equipment to and fro the Marikina jobsite and the Form-Eze
warehouse in Cainta, Rizal.
Work Specifications
The amount of hardware to be furnished is sufficient to provide 7,000 contact square meters
of formwork.
Contract Price
Total contract amount for the equipment: 126,000 contact square meters (equipment to be
used) x P225.00/contact square meter (cost per use of the hardware for forming the elevated
beam and slab)= P28,350,000.00.
Terms of Payment
15% down payment or P4,252,500.00 paid to Form-Eze on or before pick up of equipment;
When concrete is placed on the slab forms, the equipment rental per contact square meter is
due and payable to Form-Eze and shall be paid on the first day of the following month;
₯Construction Industry Arbitration Commission- Set III
All equipment purchased by BFC as requested by Form-Eze shall be prorated and deducted
equally in the first 4-month duration of the equipment lease; and
Monthly progress payments for the equipment lease shall be made timely.
CONTRACT NO. 2: Contract for Stripping and Moving Form-Eze Systems Inc. Equipment
from Location to Location on SM Marikina Mall Project dated 20 December 2006 5
Obligations of Form-Eze
Furnish forklift for the movement of the deck forms and related hardware of the forming
system from location to location;
Strip all formwork from under the poured concrete slab and beam deck. Move all equipment
to the next location where it will be reset by BFC; and
Assist BFC in setting the deck forms to the proper grade and locations provided that BFC has
laid out the grid lines as needed for placing the scaffoldings under the deck forms and
provided the scaffoldings is readily available for placement under the deck forms.
Obligations of BFC
Furnish additional hoisting; and
Provide all labor requested by Form-Eze and deducted from the contract at P60.00 per
carpenter man-hour.
Contract Price
Total contract amount for moving equipment: 126,000 x P50.00/contact square meter (cost
for stripping and movement of the equipment, excluding cost of resetting to grade, cleaning
plywood surfaces and applying release agent) P6,300,000.00.
Terms of Payment
15% down payment or P945,000.00 paid to Form-Eze on or before pick up of equipment; and
Monthly progress billing will coincide with the contact square meters formed with the Form-
Eze equipment.
CONTRACT NO. 3: Contract for Column Formwork on the SM Marikina Mall Project dated 20
December 20066
Obligations of Form-Eze
Page 29 of 41
Furnish sufficient number of built up column forms as required to complete 6 poured in place
full height concrete columns per day provided the installation of the rebar and the placement
of the concrete can maintain that schedule of performance;
Provide supervision for the column formwork operation;
Responsible for bracing the columns to maintain them plumb when poured;
Correct any defects in the poured column due to failure in the formwork. (Not responsible for
air entrapment or aggregate separation caused by improper placement or improper vibration
of the concrete; and
Furnish chamfer and form release agent
Obligations of BFC
Furnish all hoisting and moving of the columns;
Responsible for installation of the rebar and placement of the concrete;
Furnish labor as required by Form-Eze for forming columns and will deduct fro Form-Eze
P60.00 per man-hour for each carpenters for the column framework; and
Responsible for all column grid lay-out and establishing elevations on the columns
Terms of Payment
Total Contract Amount: 9,100 contact square meters of formwork x P355.00/contact square
meter= P3,230,500.00;
Downpayment of P484,575.00 (15%) on or before pick up of equipment;
BFC agrees to purchase all materials for the formwork as required by Form-Eze and the
direct cost of those materials will be deducted from this contract and the balance paid to
Form-Eze; and
When columns are poured and stripped, P355.00 per contact square meter is due and
payable at that time. Progress payments will be made for the work completed in a particular
month and paid on the first day of the following month. Any materials or equipment purchased
by BFC at the request of Form-Eze shall be deducted from this contract and prorated equally
over a 4-month period.
CONTRACT NO. 4: Contract for the Lease of the Heavy Duty Galvanized Scaffold Frames
and Related Accessories on SM Marikina Mall Project dated 29 January 20077
Obligations of BFC
₯Construction Industry Arbitration Commission- Set III
Manufacture heavy duty galvanized scaffoldings and certain accessories for Form-Eze. The
scaffoldings and accessories will be manufactured exactly as per the drawings and samples
given to BFC by Form-Eze, provided the equipment produced is of excellent quality and to
the exact specification specified by Form-Eze;
The agreement is for 1,500 pieces of heavy duty galvanized 6-ft frames and related
accessories (3,000 pcs of 14-inch adjustable u-heads and 3,000 pcs heavy duty base plates);
and
BFC will deduct P6,352,500.00 from Form-Eze equipment leased contract (all equipment
must be in good condition and turned over to Form-Eze at the end of project). Form-Eze will
own the equipment.
Obligations of Form-Eze
Form-Eze will credit BFC with P4,235.00 per frame and related accessories; and
Form-Eze will accept all frames in good condition up to a maximum of 1,500 frames and
related accessories.
Agreement is contingent upon parties entering into an exclusive licensing agreement with
BFC for the manufacture of Form-Eze equipment.
CONTRACT NO. 5: Contract for the Purchase and Lease of the Heavy Duty Galvanized X-
Bracing on SM Marikina Mall Project dated 29 January 20078
Obligations of BFC
Manufacture heavy duty galvanized x-bracing.
Obligations of Form-Eze
Credit BFC with P400.00 per x-brace. If the x-bracing is not manufactured exactly as
specified by Form-Eze, credit is P300.00 per x-brace.
Agreement is contingent upon parties entering into an exclusive licensing agreement for the
manufacturing of Form-Eze equipment.
MEMORANDUM OF AGREEMENT dated 5 January 20079
BFC will manufacture Form-Eze equipment and will sell exclusively to Form-Eze.
LETTER-AGREEMENT dated 5 January 200710
Changes to Contract No.4
Page 30 of 41
The 18-inch adjustable u-head will be changed to a 14-inch adjustable u-head. Under the Terms of Reference, the parties made the following admissions:

The threading of the heavy duty screw will be accomplished in segments and then machined. The existence of five contracts, a memorandum of agreement and a supplemental contract.

Form-Eze will send to the jobsite all 18-inch and 24-inch adjustable u-heads available in its
current stock in order to start forming the project while BFC is fabricating the 14-innch
adjustable u-heads. When the 3.000 pieces 14-inch u-heads are completed and are on the
jobsite, Form-Eze will take back the 18-inch and 24-inch adjustable u-heads that were
temporarily in use at the jobsite.
The creditable amount for the purchase of the 6-foot heavy duty galvanized scaffolding and
related accessories is changed to P4,235.00 per 6-foot heavy duty galvanized frames,
adjustable u-heads and heavy duty base plate.
On 30 March 2007, Form-Eze filed a Request for Arbitration11 before the CIAC. In its
Complaint, Form-Eze alleged that BFC has an unpaid obligation amounting to P9,189,024.58;
that BFC wanted to re-negotiate the equipment leases; and that it was not complying with the
contractual and supplemental agreements in effect. Form-Eze prayed for the following relief:
[For BFC] to pay the current monthly equipment rentals;
Provisions made to guarantee the earned monthly equipment leased amounts are paid
timely;
To legislate provisions to ensure the lease contracts are not breached during the construction
of the SM Marikina Mall;
BFC renegotiated Contract #1 but it did not result in a separate written contract.
Under Contract #1, BFC is willing and ready to pay Form-Eze the amount of P3,515,003.59,
which amount shall be deducted from the amount of the latter's claim.
Under Contract BFC is willing and ready to pay Form-Eze the amount of P675,788.97, which
amount shall be deducted from the amount of the latter's claim.
BFC admits that it has the obligation to return to Form-Eze equipment furnished them under
Contracts #1, 2, and 3, and all heavy duty galvanized scaffold frames and related
accessories, heavy duty galvanized x-bracing and adjustable U-heads and base plates
fabricated and manufactured by BFC under Contracts #4, 5 and letters dated 5 January
2007.14
The claims15 of the parties are summarized, as follow:
FORM-EZE'S CLAIMS As of 7/19/2007 From 7/20/2007 to end of contract based on agreed
minimum contact sq.m. of 126,000
Arrears on Contract No.1
P26,310,476.29

Provisions made to guarantee the performance of [BFC] for the manufacturing of the shoring - 3,515,003.59
equipment purchased by Form-Eze from BFC;
22,795,472.70
Provisions made to guarantee the return of all Form-Eze equipment when the concrete
structure is completed and all lost and damaged equipment has been paid for by [BFC]; and P11,489,523.71

All cost related to Arbitration.12 Arrears on Contract No. 2

In its Amended Answer with Counterclaim, BFC sought for reformation of Contract #1 to 4,771,723.63
incorporate a provision that BFC shall deduct from said billing the cost of labor supplied by it
for the fabrication and assembly of the forming system and for the stripping, cleaning, -675,788.97
resetting thereof at the rate of P60.00 per man-hour. BFC also demanded the refund of
P5,773,440.00 as expenses for the manufacture of additional hardware to complete the 7,000 4,095,934.66
square meters of formwork required in Contract #1. BFC explained that Form-Eze had only
furnished 4,682.4 square meters of formwork.13 1,528,276. 37

The CIAC appointed a 3-member Arbitral Tribunal (CIAC Arbitral Tribunal), composed of Atty. Arrears on Contract No.3 2,099,825.00 1,130,675.00
Custodio O. Parlade, Atty. Alfredo F. Tadiar and Engineer Romeo C. David, to adjudicate
Form-Eze's claims. Arrears on Letter dated 1/5/07 740,600.00 483,000.00

₯Construction Industry Arbitration Commission- Set III Page 31 of 41

 P29,731,832.36 P14,631,475.08 Contracts #4 and 5 - Provision to guarantee the performance of [BFC] for the manufacturing
of the shoring equipment purchased by Form-Eze from BF Corp.;
Attorney's Fees 300,000.00____
Contracts#1, 2, 3, 4 and 5 -Provision for [BFC] to pay for the lost and damaged equipment
TOTAL SUM IN DISPUTE P44,663,307.44 furnished them by the [Form-Eze]; and

BFC's COUNTERCLAIM Contract #1 - Provision in the Contract to include the P75 per contact sq.m. for labor
guarantee.
Cost of labor, helmet & expenses for x-bracing for the assembly of the form
Is [BFC] #1 entitled to the reformation of Contract #1 to include a provision that [BFC] #1 shall
system under Contract #1 P 812,791.09 deduct from [Form-Eze's] billing the cost of labor, helmet and expenses for x-bracing supplied
by it for the assembly of the form system amounting to P812,791.09 , to deduct from the
Cost of stripping, petroleum, oil, & helmet under Contract #2 1,391,086.02 billing under Contract #2 the cost of labor for the stripping thereof, the costs of petroleum, oil
and lubricant and helmet of the said laborers up to the end of the contract in the sum of
Attorney's Fees 300,000.00 P1,391,086.02 and from the billing under Contract #3, the cost of labor for the installation and
forming of the built up column forms from June 19, 2007 up to the end of the project in the
Total Counterclaims P2,503,877.11 sum of P273,240.00?16]

TOTAL SUM IN DISPUTE P46,867,184.55 Is it proper to include Mr. Honorio Pineda as Respondent No. 2?

The total arbitration fees amounted to P616,393.73. Does the Arbitral Tribunal have the jurisdiction to award claims that accrued after the filing of
the Request for Arbitration or does the Claimant have a cause of action for claims that
CIAC Arbitral Tribunal was tasked to resolve the following issues, to wit: accrued during the same period?

Is Claimant entitled to its total claim of P34,284,996.41 representing the alleged arrear on
equipment rental under Contract #1?
Is Claimant entitled to its claim of P5,624,211.03 representing the alleged arrears under
Contract #2?
Who between the parties is entitled to attorney's fees?
Who between the parties should bear the arbitration costs?17
FINAL AWARD BY CIAC

Is Claimant entitled to its claim of P3,230,500.00 representing the alleged arrears under On 7 December 2007, the CIAC Arbitral Tribunal rendered a Final Award in favor of Form-
Contract #3? Eze. The dispositive portion reads:

Is Claimant entitled to its claim of P1,374,408.00 representing the rental fees under Letter WHEREFORE, award is hereby made in favor of Claimant and against [BFC], ordering the
dated 5 January 2007? latter to pay the former the following amounts:

Is Claimant entitled to its claim for the reformation of the subject Contracts to include the a) On Contracts No. 1
following:
P28,350,000.00
Contract #1 - Provisions to guarantee the earned monthly equipment leased amounts are
paid timely; Less: Payments already made

Contract #1 - Provision to ensure that the lease contracts are not breached during the 7,700,000.00
construction of the SM Marikina Mall;
_____________

₯Construction Industry Arbitration Commission- Set III Page 32 of 41

TOTAL 5,250,000.00

P20,650,000.00 Contract No. 3

b) On Contract No. 2 2,056,751.67

P 6,300,000.00 Letter Agreement of January 5, 2007

Less: Payments already made 560,000.00

990,000.00 ____________

Less: Cost of labor GRAND TOTAL

60,000.00 P28,517,251.67

____________ The Tribunal further awards in favor of [Form-Eze] and against [BFC] and [Pineda] who are
ordered, jointly and severally to pay [Form Eze] P300,00.00 as attorney's fees, and to
TOTAL indemnify [Form-Eze's] cost of arbitration paid to CIAC.

P 5,250,000.00 The Tribunal likewise disposes of the remaining issues as follows:

c) On Contract No.3 a) The claims under Issues No. 5 and 6 for reformation of Contracts No 1, 2, 3, 4 and 5
are denied for lack of merit.
P 2,153,166.67 b) The inclusion of Mr. Honorio Pineda in the Complaint as additional respondent is
proper.
Less: cost of labor
c) The Tribunal has jurisdiction over the claims of [Form-Eze] and finds that the
Complaint states a cause of action as to claims that accrued after the filing of the
96,915.00
Complaint.
____________ d) All other claims and counterclaims submitted pursuant to the definition of issues in
the Terms of Reference, not otherwise disposed of or resolved above, are dismissed
P2,056,751.67 for lack of merit. All claims and counterclaims peripherally discussed in these
proceedings which are outside the scope of the definition of issues in the Terms of
On Letter Agreement of January 5, 2008 to December 8, 2007 Reference are likewise outside the scope of this Final Award.
e) The net award in favor of [Form-Eze] amounting to P28,517,251.67 shall earn
P560,000.00
interest at the rate of 6% per annum fro the date of this Final Award, and 12% from
IN SUM THE FOLLOWING AWARDS ARE MADE: the date the Final Award becomes final and executory until the same is fully paid.18

Contract No. 1 BFC filed a Motion for Correction of the Final Award. Form-Eze asserted that the calculations
made on the total quantity of deckforms supplied to be used under Contract No. 1 is
P 20,650,000.00 erroneous because the quantity of the accessories that were delivered together with the loose
truss chords and assembled trusses that were backloaded were ignored in the computation.
Contract No. 2 BFC explained that the hardware supplied must be assembled first into deckforms since what
is actually rented under Contract No. 1 are the deckforms, and not the hardware, thus:

₯Construction Industry Arbitration Commission- Set III Page 33 of 41

Evidently, in the computation thereof, the total quantity of the accessories that were delivered
together with the said loose truss chords and assembled trusses, both of which are shown in
the same delivery receipts, and the total length of the loose truss chords and assembled
trusses that were backloaded, were not considered and totally ignored.
Needless to state, these accessories, such as joist and beam hanger, just like the chords and
the trusses, are component and indispensable parts of a deckform without which it can not be
completely assembled to be used for the purpose intended. In the case of a deckform 44 ft. in
length, it will need, for it to be completely assembled, 34 pieces of joists and 68 pieces of
beam hangers, as shown in the herewith attached Annex "A" hereof.
Therefore, to form 87 completely assembled deckforms of 44 ft. in length out of/from the
delivered chords and trusses, it will require 2,958 pieces of joist and 5,916 pieces of beam
hangers.
However, as show in Exhibits "C-9(5)", "C-9(11)", "C-9(15)", "C-9(18)", "C-9(21)", "C-9(25)",
"C-9(27)", "C-9(30)", and "C-9(31)", only 2,512 pieces of joists and in Exhibits "C-9(8)", "C-
9(15)", "C-9(16)", "C- 9(18)", "C-9(21)", "C-9(27)", "C-9(32)", "C-9(34)", "C-9(35)", "C-9(37)",
"C-9(38)", "C-9(41)", "C-9(35)", "C-9(38)", "C-9(40)", and "C-9(41)", only 3,626 pieces of
beam hangers, the very documents on which this Commission/Tribunal anchored its finding
now sought to be corrected, were actually delivered by the Claimant.
Accordingly, 87 deckforms of 44 ft. in length can not be completely assembled from the
delivered chords and trusses because the quantity of the delivered accessories is insufficient
for the purpose. To be precise, only 53 deckforms of 44ft. in length can be completely
assembled out of the total length of the chords and trusses with the use of 1,802 pieces of
joists and 3,604 pieces of beam hangers (with an excess of 22 pieces of beam hangers, 710
pieces of joist and 2,720 ft of chords and trusses) which are sufficient to provide only
4,441.73 contact sq.m. of formworks.
To therefore conclude that 87 deckforms of 44 ft. in length can be completely assembled with
the use of/out of 2,512 pieces of joists and 3,626 pieces of beam hangers, is an evident
miscalculation.
In as much as only 3,626 pieces of beam hangers were actually delivered, which, when used
with the delivered quantity of joists and length of the delivered chords and trusses in
completely assembling 53 deckforms of 44 ft. in length, is sufficient to provide only 4,441.73
contact sq.m. of formworks, the minimum rental amount stipulated under Contract No. l
should correspondingly be reduced to only Php17,989,006.50, less payment of Php
7,700,000.00=Php 10,829,006.50 as the net amout of rent due the Claimant thereunder, as
shown in the herewith attached Annex "B" hereof.
On the same ground, the minimum contact amount stipulated under Contract No. 2 should
also be proportionately reduced to Php 3,997,557.00, less payment of Php 990,000.00 + cost
of labor of Php60,000.00 = Php 2,947,557.00 as the net amount due the Claimant
thereunder.
₯Construction Industry Arbitration Commission- Set III
The CIAC Arbitral Tribunal denied the motion prompting BFC to file a petition for review
before the Court of Appeals.
While the case was pending before the Court of Appeals, Form-Eze filed a Motion with Leave
to Direct BFC to return pieces of equipment on 14 July 2009.
On 15 January 2010, the Court of Appeals dismissed the petition for lack of merit. The Court
of Appeals heavily relied on factual findings of the CIAC Arbitral Tribunal.
THE PETITION
BFC filed a motion for reconsideration but it was denied by the Court of Appeals in a
Resolution dated 13 July 2010. Hence, the present petition. BFC, in its Memorandum, raised
the following issues for our resolution:
I. Whether or not the Court of Appeals committed a reversible error in affirming the
CIAC's ruling that BFC is liable to pay rent to the [Form Eze] under Contract Nos. 1, 2,
and 3 even for portions where the latter's supplied formwork system were not used.
II. Whether or not the Court of Appeals committed a reversible error in affirming the
CIAC's conclusion that [Form-Eze] was able to supply BFC with such quantity of
deckforms sufficient to provide the stipulated 7,000 contact square meter of formworks
as to entitle said [Form-Eze] to the stipulated minimum contract rental price of
Php28,350,000.00 under Contract No. 1 and consequently to Php6,300,000.00 under
Contract No. 2, when, based on the quantity of the delivered accessories, which are
component pm1s of deck form system, but which the CIAC totally ignored, [Form-Eze]
can only provide 4,441.73 contact square meters of formworks that will entitle it to only
Php17,989,006.05 and Php3,997,557.00, respectively thereunder.
III. Whether or not the Court of Appeals committed reversible error in affirming the CIAC's
ruling that [Form-Eze] is entitled to twoOthirds of the stipulated minimum contract
amount of Php3,230,500.00 or Php2,153,666.67 under Contract No. 3, considering
that CIAC did not state the factual and legal basis of said ruling and despite its
contrary factual finding that [Form-Eze] failed to supply the minimum required
columnforms.
IV. Whether or not the Court of Appeals committed a reversible error in affirming the
CIAC's ruling against the reformation of Contract No. 1 to include a provision that BFC
shall furnish the labor needed by [Form-Eze] in assembling the deckforms and that it shall
deduct therefrom the agreed cost of labor at Php60.00 per man hour, since it has been
the true intention and real agreement of the parties thereto.
V. Whether or not the Court of Appeals committed a reversible error in affirming the
CIAC when it did not deduct the following costs incurred by BFC from the minimum
contract amounts due:
Page 34 of 41
(1) under Contract No. 1 for the cost of labor in assembling the deckforms, the cost of Payment made on Billing No. 1
helmets of said laborers, and the expenses for x-bracing supplied by BFC for the assembly of
said forms in the total amount ofPhp812,791.09; 487,828.05

(2) under Contract No. 2 for the cost of labor in the stripping of said deckforms, the cost of Cost of labor in assembling Deckforms, expenses for xBracings and cost of helmet
petroleum, oil and lubricant and helmet up to the end of the contract in the sum total of
Php1,391,086.02; and 812,791.90

(3) under Contract No. 3 for the cost of labor in installing and forming the built up 9,000,619.95
columnforms from 25 June 2007 up to the end of the contract in the sum total of
Php273,240.00, when BFC is legally entitled thereto. SUBTOTAL

VI. Whether or not the Court of Appeals committed a reversible error in affirming the Php 8,988,386.55
CIAC in ordering BFC to pay rental fees under letter dated 5 January 2007, covering the
period from 25 June 2007 to 17 December 2007 in the sum total of Php560,000.00 at b. On Contract No. 2- Php 3,997,557.50
Php96,000.00 a month, when the acquisition cost of the pieces of u-heads and plates
referred to therein is allegedly only Php96,000.00, and there is evidence presented to Less: Payments already made- Php 990,000.00
show that these items were purchased at Php96,000.00 and there is on evidence to
show the prevailing rate of rent for the same items. Costs of labor in stripping And moving of the same Deckforms, petroleum, oil And lubricant
and helmet- 1,304,036.82
VI. Whether or not the Court of Appeals committed a reversible error in affirming the
CIAC in ruling that Respondent Pineda can be held as co-respondent (in the arbitration Php 2,294,036.82
case) when he is not a party to the contracts and agreements involved in this case, as
well as the arbitration agreement, and he did not voluntarily submit himself to arbitration SUBTOTAL
in this case.
VII. Whether or not the Court of Appeals committed a reversible error when it Php 1,702,520.68
ruled that the attorney's fees and cost of arbitration shall be for the account of
c. On Contract No. 3 Php 538,417.87
Petitioners, considering that [Form-Eze] failed to supply the minimum required
equipment under the contracts and when the root cause of the dispute is the imprecision Less:
of the language and the incompleteness of the contracts and agreements, which were
prepared by the Respondents.20 Cost of labor in the installation and removal of the Columnforms - 96,915.00

BFC prays for a modification of the Final Award to read: SUBTOTAL

a. On Contract No. 1 Php 441,502.87

Php17,989,006.50 d. On Letter Agreement dated 5 January 2007

Less: Php 70,000.00

Payments already made e. The award of attorney's fees be deleted; and

Php 7,700,000.00 f. The award for cost of arbitration fees be deleted.21

THE COURT'S RULING

₯Construction Industry Arbitration Commission- Set III Page 35 of 41

The Final Award of CIAC is subject to review by the Court of Appeals.
BFC first asserts that the Court of Appeals has the power and the duty to review the factual
findings made by CIAC and that the Court of Appeals should not be bound by the factual
findings of the construction arbitrators.
The case of Asian Construction and Dev't. Corp. v. Sumimoto Corporation22 summarized the
development of the principle that the final award of CIAC may be still be subject to judicial
review, thus:
To begin, Executive Order No. (EO) 1008, which vests upon the CIAC original and exclusive
jurisdiction over disputes arising from, or connected with, contracts entered into by parties
involved in construction in the Philippines, plainly states that the arbitral award "shall be final
and inappealable except on questions of law which shall be appealable to the Court." Later,
however, the Court, in Revised Administrative Circular (RAC) No. 1-95, modified this rule,
directing that the appeals from the arbitral award of the CIAC be first brought to the CA on
"questions of fact, law or mixed questions of fact and law." This amendment was eventually
transposed into the present CIAC Revised Rules which direct that "a petition for review from a
final award may be taken by any of the parties within fifteen (15) days from receipt thereof in
accordance with the provisions of Rule 43 of the Rules of Court." Notably, the current
provision is in harmony with the Court's pronouncement that ''despite statutory provisions
making the decisions of certain administrative agencies 'final,' the Court 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" and that, in particular,
"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."23
Factual findings of construction arbitrators may be reviewed by the Court in cases where: 1)
the award was procured by corruption, fraud or other undue means; (2) there was evident
partiality or corruption of the arbitrators or any of them; (3) the arbitrators were guilty of
misconduct in refusing to hear evidence pertinent and material to the controversy; (4) one or
more of the arbitrators were disqualified to act as such under Section nine of Republic Act
(R.A.) No. 876 and willfully refrained from disclosing such disqualifications or of any other
misbehavior by which the rights of any party have been materially prejudiced; (5) the
arbitrators exceeded their powers, or so imperfectly executed them, that a mutual, final and
definite award upon the subject matter submitted to them was not made; (6) when there is a
very clear showing of grave abuse of discretion resulting in lack or loss of jurisdiction as when
a party was deprived of a fair opportunity to present its position before the Arbitral Tribunal or
when an award is obtained through fraud or the corruption of arbitrators; (7) when the findings
of the Court of Appeals are contrary to those of the CIAC, and (8) when a party is deprived of
administrative due process.
While this rule, which limits the scope of the review of CIAC findings, applies only to the
Supreme Court, the Court of Appeals nonetheless is not precluded from reviewing findings of
facts, it being a reviewer of facts. By conveniently adopting the CIAC's decision as its own
and refusing to delve into its factual findings, the Court of Appeals had effectively turned a
₯Construction Industry Arbitration Commission- Set III
blind eye to the evidentiary facts which should have been the basis for an equitable and just
award.
While factual findings are not within the purview of a petition for review before this Court, we
take exception in this case on the ground of the appellate court's refusal to delve into the
findings of facts of the CIAC Arbitral Tribunal.
Under Contract No. 1, Form-Eze was not able to supply BFC with deckforms sufficient to
provide 7,000 contact square meter of formworks.
The CIAC Arbitral Tribunal conducted its own study and came up with the following findings:
The receipted hardware deliveries made by [Form-Eze] show that the total length of loose
truss chords delivered was 11,912 lineal feet and the length of the truss chords from the
assembled trusses delivered was 2,052 lineal feet or a total available length of trusses of
13,964 lineal feet. By an iterative process of selection and elimination, 175 units of 44' long
trusses could be assembled, equivalent to 87 deckforms of 44 feet in length. The assembled
87- 44' deckforms can provide 7,268.58 square meters of contact area, broken down as
follows:
Contact Area (%)
Interior & Near Column Slabs = 4,156.89 sq.m. (57.19%)
Grid Beams (B-1) = 740.37 sq.m. (10.19%)
Interior Beams (B-2) = 1,663.20 sq.m. (22.88%)
Grid Girders (G-2) = 708.12 sq.m. (9.74%)
Total = 7,268.58 sq.m. (100%)
The resulting contact area of 7,628.58 sq.m. is 3.84% over the 7,000 sq.m. requirement of
the contract. But the former figure includes the contact area of girders which according to
[petitioners] should not be included. As shown in ANNEX "A", sheets 5 & 6 of 6, the contact
area contributed by the girders is only 708.12 sq.m., and if this is deducted from the
computed total contact area, the remaining available contact area would be 6,560.46 sq.m. or
93.72%. The fact, however, is that the non inclusion of the contact area provided by the
girders would be a violation of the letter-contract dated 8 February 2007, paragraph 9 of
which provides that: "[Form-Eze] offered to install beam hangers and ledger angles in order to
support the moment beam from from column to column and thereby save BFC considerable
labor and eliminate the use of BFC's light duty scaffolding underneath and beam. By doing
that it will also speed up the forming operation and save BFC labor. The only light duty
scaffolding that BFC will be installing is that under the girder which supports tremendous
loading during the stressing of the beams prior to it being stressed. By forming the girder in
this manner, [Form-Eze] is not involved in the tripping or resetting of the girder formwork.
Page 36 of 41
However, [Form-Eze] is has purchased and furnished considerable forming hardware and
consumables (tie rods, pvc sleeves, pvc cones, whaler clips and brackets and wing-nuts)
which are being used on girders and the beams. [Form-Eze] will give the ownership of this
equipment to BFC and BFC will buy all additional consumables and hardware (as needed)
directly from Comer. In return, [Form-Eze] will include the contact square meters of formwork
in the girders in its billing for both the equipment lease and for the moving contract." This
letter-contract, Exhibit C-12, binds [BFC] to pay Claimant for the girder formworks contact
area for both Contract No. 1 and Contract No. 2.
Petitioners argued that the formwork of the girder (or large beam) is independent of the deck
form system and so should not be counted in favor of [Form-Eze]. The Tribunal does not
agree. How could the girder formwork be considered independent from the deckform system
when both sides of the girder formworks are held stiff together by "tie rods, pvc sleeves (to
make the tie rods reusable), pvc cones, whaler clips and brackets and wing-nuts" supplied by
the [Form-Eze] and pressed between deckforms preparatory to concrete pouring? The girder
cannot be considered structurally independent of the deck slabs because it is the requirement
of design and the National Building Code and its reference code the American Concrete
Institute Code (ACI Code) that the girders are to be poured monolithically with the slabs and
beams up to L/3 or 1/3 of the floor span (the point of infection and location of the construction
joint where the bending moment is the least or zero), as is clearly shown on the floor concrete
pouring schedule plans.
Conclusion of Tribunal
In view of the above, it is the finding of the Arbitral Tribunal that [Form-Eze] had been able to
furnish the amount of hardware that was sufficient to provide 7,000 contact square meters of
formwork, all in accordance to Contract No. 1. Thus, the remaining question to resolve is the
area of the project covered by the formwork equipment in contact square meters.25
BFC accuses the CIAC of coming up with its own biased computation of the contact area of
the hardware supplied by Form-Eze under Contract No. 1. According to BFC, Form-Eze had
furnished only 53 completely assembled deckforms of 44 ft. in length which correspond to
only 4,441.73 contact square meters of formworks, while CIAC found that Form-Eze had
delivered truss chords equivalent to 87 deckforms which can provide 7,268.58 contact square
meters. BFC maintains that Contract No. 1 is clear that the object is the supply of the
complete deckform system and not unassembled hardware such as loose truss chords. BFC
adds that Form-Eze judicially admitted that it is only claiming equipment rentals for the areas
that its equipment are being used. BFC reiterates that based on the provisions of Contract
No. 1 on the contemporaneous and subsequent acts of the parties, as well as application of
principles of contract interpretation, the inclusion of loose truss chords in the computation of
the quantity of hardware supplied by Form-Eze is an erroneous interpretation by CIAC. BFC
also claims that the CIAC wrongfully included the contact area of girders in the computation
of the sufficiency of equipment supplied by Form-Eze. BFC contends that the girders are not
part of the deckforms contemplated in Contract No. 1. BFC offers to compensate Form-Eze to
the extent that its supplied deckforms were used under the principle of quantum meruit. BFC
₯Construction Industry Arbitration Commission- Set III
submits that 4,441.73 contact square meters or 63.45% of the 7,000 minimum contact area
required under Contract No. 1 is a reasonable computation.
We reverse the finding of the CIAC on this point as it is contrary to the evidence on record.
We agree with BFC that the CIAC should not have included the unassembled truss chords in
theoretically forming deckforms. We subscribe to BFC's submission that the object of
Contract No. 1 is the deckforms and not just the hardware that make up the formwork.
Contract No. 1, in itself, is clear that "F-E has agreed to furnish all hardware required in the
formwork system for the poured in place beam and slab concrete decks x x x." In fact, the
equipment rental is only due and payable to Form-Eze when the concrete is placed on the
slab forms, which provision is based on the premise that the hardware had already been
assembled into deckforms ready for concrete pouring. Moreover, the Proposed SM Marikina
Mall Project Elevated Beam and Slab Formwork dated 7 December 2006, which document
has been admitted by the parties in the Term of Reference, provides that Form-Eze will
furnish sufficient deckforms to produce 1/2 floor each month on the project.
BFC had also explained to our satisfaction that loose truss chords alone could not be
assembled into deckforms, to wit:
To try to assemble truss chords alone into a deckform is like taking three two-foot round
pegs, trying to stand them upright, then balancing twelve-inch round wooden slab on top, and
expect it to be a stool capable of supporting a person. Joist, beam hangers and other
component parts fix the truss chords into place for the structural integrity of a deckform. In the
case of a deckform 44 ft. in length, it will need, for it to be completely assembled, 34 pieces of
joists and 68 pieces of beam hangers as illustrated in the Petitioner's Motion for Correction of
Final Award.
Thus, assembling 87 deeckforms of 44 ft. in length would require 2,958 pieces of joist and
5,916 pieces of beam hangers to assemble such 87 44-foot deckforms. However, as show in
the same documents that CIAC anchored its theoretical findings, only 2,512 pieces of joists
and only 3,626 pieces of beam hangers were actually delivered by [Form- Eze].
BFC's computation of the total contact area covered by the deckforms furnished by Form-Eze
is backed by delivery receipts of the joists and beam hangers while CIAC's computation is
more theoretical than it is actual.
The inclusion of the additional contact area of the grid girders in the calculation of the total
contact area of the equipment supplied by Form-Eze under Contract No. 1, however, should
be upheld. Paragraph 9 of the Letter dated 8 February 2007, which was also admitted by the
parties, clearly provides:
[Form-Eze] offered to install beam hangers and ledger angles in order to support the moment
beam fro column to column and thereby save BFC considerable labor and eliminate the use
of BFC's light duty scaffolding underneath that beam. By doing that it will also speed up the
forming operation and save BFC labor. The only light duty scaffolding that BFC will be
Page 37 of 41
installing is under the girder which supports tremendous loading during the stressing for the
beams prior to it being stressed. By forming the girder in this manner F-E is not involved in
the stripping or resetting of the girder formwork. However, [Form-Eze] has purchased and
furnished considerable forming hardware and consumables (tie rods, pvc sleeves, pvc cones,
whaler clips and brackets and wing-nuts) which are being used on the girders and the beams.
[Form-Eze] will give ownership to this equipment toi BFC and BFC will buy all additional
consumables and hardware (as needed) directly from Comer. In return [Form-Eze] will
include the contact square meters of formwork in the girders in its billing for both the
equipment lease and for the moving contract.27
BFC cannot claim that this provision does not refer to Contract No. 1. Said provision mentions
beam hangers and ledger angles which are used to support the beams forming the deckform
and to eliminate the use of light duty scaffolding on the part of BFC which it had initially
obligated to provide under Contract No. 1. More pertinently, the inclusion of the contact
square meters of formwork in the girders is a mere application of one of the provisions in
Contract No. 1, i.e., "BFC agrees to purchase materials for the formwork as requested by F-E
and the direct cost of those materials will be deducted from this contract and the balance paid
to [Form-Eze]." Form-Eze is giving ownership of the forming hardware and consumables
which are used on the girders and beams to BFC. Instead of deducting the cost of these
materials from the contract, Form-Eze will instead include the contact square meters of
formwork in the girder in its billing for the lease of the deckforms.
As agreed upon by the parties, the 708.12 sq. m. contact area covered by the grid girders
should be included in the billing. Taking into account this contact area corresponding the grid
girders and the 4,441.73 contact square meter assembled deckforms, the total contact area is
only 5,149.85, which still falls short of the 7,000 contact area requirement.
To award the full contract price to Form-Eze in Contract No. 1 is tantamount to unjust
enrichment. There is unjust enrichment under Article 22 of the Civil Code when (1) a person
is unjustly benefited, and (2) such benefit is derived at the expense of or with damages to
another. The principle of unjust enrichment essentially contemplates payment when there is
no duty to pay, and the person who receives the payment has no right to receive it.28 By
requiring BFC to pay the full contract price when it only supplied deckforms which covered
only 5,149.85 contact square meters of formworks, the CIAC Arbitral Tribunal is essentially
unjustly giving unwarranted benefit to Form-Eze by allowing it to earn more than it legally and
contractually deserved. It is also worth mentioning that Form-Eze had in fact only been
claiming for the contact area where its equipment was used.
Therefore, using the computation of BFC, the amount of contact square meters that the
delivered hardware and deckforms can handle is:
126,000 sq. m. x
= 92,696.40 contact sq. m
₯Construction Industry Arbitration Commission- Set III
7,000 sq. m.
5,149.85 sq. m.
deckforms delivered
Contract No. 1 be reformed to include a labor guarantee provision.
An action for reform a contract is grounded on Article 1359 of the New Civil Code which
provides:
ARTICLE 1359. When, there having been a meeting of the minds of the parties to a contract,
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.
Reformation is a remedy in equity, whereby a written instrument is made or construed so as
to express or conform to the real intention of the parties, where some error or mistake has
been committed. In granting reformation, the remedy in equity is not making a new contract
for the parties, but establishing and perpetuating the real contract between the parties which,
under the technical rules of law, could not be enforced but for such reformation.29
In order that an action for reformation of instrument may prosper, the following requisites
must concur: (1) there must have been a meeting of the minds of the parties to the contract;
(2) the instrument does not express the true intention of the parties; and (3) the failure of the
instrument to express the true intention of the parties is due to mistake, fraud, inequitable
conduct or accident.30
In the instant case, the question to be resolved is whether the contract expressed their true
intention; and, if not, whether it was due to mistake, fraud, inequitable conduct or accident.
While intentions involve a state of mind which may sometimes be difficult to decipher,
subsequent and contemporaneous acts of the parties as well as the evidentiary facts as
proved and admitted can be reflective of one's intention.31
BFC relies on the Form-Eze Proposed SM Marikina Mall Project Elevated Beam and Slab
Formwork dated 7 December 200632 to support its contention that Contract No. 1 should
have a provision on the cost of labor. Indeed, in the aforementioned proposal, BFC has
agreed "to furnish the labor required for fabrication and assembly of the forming equipment"
and that "BFC will deduct from the total contract amount 50.00 per man-hour each carpenter
or laborer supplied to Form-Eze." Notably, Contracts No. 2 and 3 contain labor-guarantee
provisions considering that BFC has committed to provide the necessary labor for both
contracts.
Page 38 of 41
As initially agreed upon, BFC hired workers for the assembly of the deckforms since Form-
Eze only undertook to supervise the installation of the deckforms. This was evident during the
cross-examination of Mr. Romano Clemente (Mr. Clemente) who admitted that no workers of
Form Eze were employed for the installation of the deckforms, thus:
ATTY. D. MORGA, JR. (COUNSEL-RESPONDENT):
Since it is the obligation of the Claimant to assemble the hardware into deckform, how many
workers were employed for the purpose.
MR. R.V. CLEMENTE (CLAIMANT): We are only supplier sir. We supervise the guys in the
jobsite for tern to install all these deckforms.
ATTY. D. MORGA, JR. (COUNSEL-RESPONDENT): Ano?
MR. R.V. CLEMENTE (CLAIMANT): To install the guys in the jobsite like for example your
laborers carpenters to install this deckforms. We just only supply one supervisor in the jobsite
for him to supervise the installation of this form.
ATTY. D. MORGA, JR. (COUNSEL-RESPONDENT): You mean BF Corporation has the
expertise to assemble this.
MR. R.V. CLEMENTE (CLAIMANT): No, we will supervise your guys for them to assemble
this.
ATTY. D. MORGA, JR. (COUNSEL-RESPONDENT): Do you know if BF has the expertise to
assemble this?
MR. R.V. CLEMENTE (CLAIMANT): That is why we were there in your jobsite. If they don't
have really the expertise we are the one who supervise them to install the deckforms.
Supervise them to install the deckforms
ATTY. D. MORGA, JR. (COUNSEL-RESPONDENT): You mean no former workers of the
Claimant were employed for the purpose.
MR. R.V. CLEMENTE (CLAIMANT): No.33
Obviously, BFC would want to be compensated for the labor it provided to Form-Eze as
shown in Contracts No. 2 and 3.
As a matter of fact, Mr. James Franklin, the President of Form-Eze conceded that Contract
No. 1 should be modified to include a labor-guarantee provision, to wit:
Q: Mr. Witness, respondent [BFC], in their counterlcaims, would like this Commission to
reform Contract No. 1 to include a provision that it should deduct from your billing the cost of
₯Construction Industry Arbitration Commission- Set III
labor, helmet and expense for x-bracing supplied by it for the assembly of the form system,
what can you say?
A: [BFC] is allowed to deduct the cost of the x-bracing purchase from Comer that was used in
the FORM-EZE deck assemblies. [BFC] is allowed to deduct the cost of the assembly labor
for the deck forms which is included in the Labor Guarantee. These deductions have been
reflected in all our billings where the P75.00 Labor Guarantee has been applied. The cost of
helmet is not included and should not be included. Contract No. 1 is only a lease contract but
it was modified to include a Labor Guarantee. For the [BFC] to deduct from our billing the cost
of labor, etc. which allegedly they supplied for the use of our said equipment for the assembly
thereof is included in the Labor Guarantee. They should be allowed to do so in conformance
with the Labor Guarantee but definitely the cost of helmet and their other claims of deductions
would not have any basis at all since these have not been agreed upon both in the original
contract and in the subsequent agreement as contain (sic) in the February 8, 2007 signed
letter.
This admission by Form-Eze bolsters the conclusion that the parties intended to include a
labor-guarantee provision in Contract No. 1. Both Contracts No. 2 and 3 set the labor rate at
P60.00 per carpenter man-hour. BFC fixed the cost of labor at P453,294.50.
Considering that both parties admitted that there should be a labor guarantee clause in
Contract No. 1, it can be reasonably inferred that the failure to include said provision was due
to mistake. A reformation is in order to include a cost of labor provision in Contract No. 1.
Expenses for x-bracing and the cost of labor should be deductedunder Contracts No. 2 and 3.
Except for the expenses for x-bracing used in deck assemblies which had been admitted by
Form-Eze President James Franklin, BFC is not entitled to be reimbursed for the cost of
helmets, petroleum, and oil lubricants in the absence of any stipulations in the contracts. The
cost of labor, on the other hand, should be deducted pursuant to the labor-guarantee
provisions in Contracts No. 2 and 3.
The cost for x-bracing amounts to P358,250.00 as evidenced by the receipt issued by
Comer.35
The costs of labor are as follow:
Contract No. 1 = P453,294.50
Contract No. 2 = P1,373,634.60
Contract No. 3 = P273,240.00
Obligation of BFC under Contract No. 1:
92,696.40 contact square meters x P225.00 = P20,856,690.00
Page 39 of 41
Less: Amount paid- 7,700,000.00
Payment for billing for Pour 1- 487,828.05
Cost of labor- 453,294.50
Cost of X-bracing- 358,250.00
___________
P11,857,317.45
The Memorandum of Agreement dated 5 January 2007 is an exclusive licensing agreement.
BFC avers that CIAC erred when it stated the BFC was given the exclusive license to
manufacture Form-Eze's equipment consisting of scaffoldings and accessories and they
became part of that provided by Form Eze to BFC.
At the outset, we agree that the subsequent Memorandum of Agreement executed by the
parties on 5 January 2007 is an exclusive licensing agreement. It was signed by both parties
wherein BFC has agreed to sell the scaffolding frames and accessories it manufactured to
Form-Eze at the end of the project. This Agreement was incorporated in Contract No. 4
wherein BFC will be allowed to deduct P6,352,500.00 from the equipment lease contract,
which is presumably Contract No. 1. At this point, Contract No. 4 is deemed to have novated
the obligation of BFC with respect to furnishing all scaffoldings. Contract No. 1 states that
BFC shall furnish the scaffoldings at no cost to Form-Eze. On the other hand, Contract No. 4
requires BFC to sell the scaffoldings to Form-Eze at the end of the project and deduct the
cost of the same from the contract price of Contract No. 1. This setup cannot in any way be
interpreted as part of the deckform supplied by Form-Eze. As pointed out by BFC, the
scaffoldings and accessories were the responsibility of BFC under Contract No. 1. Thus, the
manufactured hardware under Contract No. 4 could not have added to the deckform system
because they are not the equipment of Form-Eze had obligated itself to supply under
Contract No. 1.
Obligation of BFC under Contract No.2
BFC maintains that since Form-Eze failed to meet the minimum conditions under Contract
No. 1 where the minimum 126,000 contact square meters were not reached, then the forklifts
under Contract No. 2 were also not used for a minimum of 126,000 contact square meters.
We agree. BFC is liable only to pay the amount proportionate to 92,696.40 contact square
meters at P50.00 per contact square meter, the rental rate for the forklifts. Thus:
92,696.40 contact square meters x P50.00 = P 4,634,820.00
Less: Payments made- 990,000.00
₯Construction Industry Arbitration Commission- Set III
Cost of Labor- 1,286,377.50
___________
SUBTOTAL
P2,358,442.50
Obligation of BFC under Contract No. 3.
The CIAC had correctly noted the ambiguity in Contract No. 3, particularly the "sufficient
number of column forms as required to complete six (6) poured in place columns per day."
For BFC, the sufficient number of column forms is 12 sets a day while Form-Eze considered
its supply of six (6) full height built up column forms as sufficient. The CIAC found that Form-
Eze failed to comply with the requirements under Contract No. 3, hence it merely awarded
Form-Eze 2/3 of the minimum contract amount at P2,153,666.67.
We find that the CIAC's award lacked bases. It gave credence to the methodology used by
Form-Eze and noted that the latter had supplied six (6) full height built-up columforms, albeit
insufficient. We hold the contrary. The methodology used by BFC, which involves
"columnforms with window openings and that from its installation, alignment, bracing,
inspection, approval of alignment, verticality and rigidity of the erected columnforms, pouring,
drying and removal of the forms, it will require twelve (12) column forms a day, should have
been considered. The CIAC itself had already ruled that the ambiguity in Contract No. 3
should not favor Form-Eze, the party who prepared the contract. Thus, it is only logical that
the methodology employed by BFC should be credited.
Using 12 column forms as the minimum requisite and Form-Eze having supplied only four (4)
usable column forms, it can be established that the delivered column forms can only be used
for 1/3 portion of the 9,100 contact square meters or 3,033.33 contact square meters. It was
further proven by BFC that about 50% of the column form requirements of the project were
already completed with the use of their own equipment. Thus, it is but equitable that the
3,033.33 contact square meters be further reduced by 50% or 1,516.67 contact square
meters. BFC is then liable to pay P441,502.87 broken down as follows:
1,516.67 X P355.00 = P 538,417.85
Less: Cost of Labor 96,915.00
__________
SUBTOTAL:
P 441,502.87
BFC is obliged to pay rental for u-heads under Letter-Agreement dated 5 January 2007.
Page 40 of 41
Under the letter dated 8 February 2007, "BFC has completed fabrication on a sufficient just and demandable claim. We observe that in filing the complaint against BFC, Form-Eze
quantity of u-heads with screw assemblies and heavy duty bases so that BFC can was merely seeking payment for its service under the contract. BFC had admitted to its
immediately start returning the 24 inch and 18 inch u-head assemblies (561 pcs) and heavy obligation. The problem lies only on the amount to be paid. This is not tantamount to bad
duty bases (483 pcs) which were on temporary loan to BFC by [Form-Eze] until BFC could faith.
manufacture their own equipment. The temporary loan was expected to be approximately
[two] (2) weeks and the equipment was picked-up January 9th, 2007 and still in used Finally, both parties should equally share the costs of arbitration since their prayers were only
today."36 It is understood that upon expiration of the two-week temporary loan and upon partially granted.39
failure by BFC to return the equipment, it is then liable to pay for rent. We find that the
monthly rental amount of P96,600.00 was substantiated by Form-Eze. 483 pieces of 24 inch WHEREFORE, the petition is PARTIALLY GRANTED. The Decision dated 15 January 2010
and 18 inch galvanized adjustable heads and 483 pieces of galvanized heavy duty plates and Resolution dated 13 July 2010 are MODIFIED. Petitioner B.F. Corporation is ordered to
were indeed delivered to BFC as evidenced by the delivery receipts.37 According to Mr. pay respondent Form-Eze Systems Inc. the following amounts:
Clemente, Form-Eze's Sales Engineer, the rental amount for adjustable u-heads are fixed at
P160.00 per unit, while the galvanized heavy duty plates are at P40.00 per unit.38 By Under Contract No. 1: P11 ,857,317.45
agreeing to the terms of the 8 February 2007 Letter, BFC is deemed to have acquiesced to
the rental fee in case it failed to return the u-heads and plates on time. Therefore, we affirm Under Contract No. 2: 2,358,442.50
the CIAC's ruling that BFC is liable to pay rental of the equipment in the amount of
P96,000.00 per month until the equipment leased is fully returned to Form-Eze. Under Contract No. 3: 441,502.87

BFC President should not be included as party to this case? Under Letter-Agreement dated 7 January 2007: 560,000.00

Section 4 of Executive Order No. 1008 vests jurisdiction on CIAC over disputes 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 GRAND TOTAL: P15,217,262.82 and 50% of the Cost of Arbitration.
after the abandonment or breach thereof. Moreover, the party involved must agree to submit
to voluntary arbitration. In other words, anyone who is not a party to the contract in his SO ORDERED.
personal capacity is not subject to the jurisdiction of the CIAC. In this case, Pineda signed the
challenged contracts in his capacity as President of BFC. There is no indication that he
voluntarily submitted himself as a party to the arbitration case. In fact, he has been
consistently contesting his inclusion as a respondent in the CIAC proceedings. CIAC however
considered Pineda as a joint tortfeasor, thus justifying his joinder as a co-defendant.

We do not consider the imputed acts of Pineda as an indicia of bad faith to classify him as a
joint tortfeasor. First, it was proven that Form-Eze is not entitled to all its monetary claims
under the contract. Second, we have also subscribed to BFC's position that Contract No. 1
should have included a labor guarantee provision and that it was by mistake that said clause
was excluded. Third, BFC's alleged refusal to return the u-head assemblies and heavy duty
bases was meted with a heavy penalty in the form of a huge rental fee. BFC had, as a matter
of fact, admitted to owing Form-Eze rental payment. Fourth, the claim of threat against Form-
Eze's President is unsubstantiated and uncorroborated.

Attorney's Fees and Costs of Arbitration.

The controversy essentially boils down to the interpretation and factual application of the
existing contracts. Neither party was able to prove bad faith in their dealing with each other.
Under Article 2208 of the Civil Code, attorney's fees may, among others, be recovered where
defendant acted in gross and evident bad faith in refusing to satisfy the plaintiff’s plainly valid,

₯Construction Industry Arbitration Commission- Set III Page 41 of 41