G.R. No.

96283 February 25, 1992

CHUNG FU INDUSTRIES (PHILIPPINES) INC., its Directors and Officers namely: HUANG KUO-CHANG, HUANG AN-CHUNG,
JAMES J.R. CHEN, TRISTAN A. CATINDIG, VICENTE B. AMADOR, ROCK A.C. HUANG, JEM S.C. HUANG, MARIA TERESA
SOLIVEN and VIRGILIO M. DEL ROSARIO, petitioners,
vs.
COURT OF APPEALS, HON. FRANCISCO X. VELEZ (Presiding Judge, Regional Trail Court of Makati [Branch 57]) and
ROBLECOR PHILIPPINES, INC., respondents.
ROMERO, J.:

This is a special civil action for certiorari seeking to annul the Resolutions of the Court of Appeals* dated October
22, 1990 and December 3, 1990 upholding the Orders of July 31, 1990 and August 23, 1990 of the Regional
Trial Court of Makati, Branch 57, in Civil Case No. 90-1335. Respondent Court of Appeals affirmed the ruling of
the trial court that herein petitioners, after submitting themselves for arbitration and agreeing to the terms and
conditions thereof, providing that the arbitration award shall be final and unappealable, are precluded from
seeking judicial review of subject arbitration award.

It appears that on May 17, 1989, petitioner Chung Fu Industries (Philippines) (Chung Fu for brevity) and private
respondent Roblecor Philippines, Inc. (Roblecor for short) forged a construction agreement 1 whereby
respondent contractor committed to construct and finish on December 31, 1989, petitioner corporation's
industrial/factory complex in Tanawan, Tanza, Cavite for and in consideration of P42,000,000.00. In the event of
disputes arising from the performance of subject contract, it was stipulated therein that the issue(s) shall be
submitted for resolution before a single arbitrator chosen by both parties.

Apart from the aforesaid construction agreement, Chung Fu and Roblecor entered into two (2) other ancillary
contracts, to wit: one dated June 23, 1989, for the construction of a dormitory and support facilities with a contract
price of P3,875,285.00, to be completed on or before October 31, 1989; 2 and the other dated August 12, 1989,
for the installation of electrical, water and hydrant systems at the plant site, commanding a price of P12.1 million
and requiring completion thereof one month after civil works have been finished. 3

However, respondent Roblecor failed to complete the work despite the extension of time allowed it by Chung
Fu. Subsequently, the latter had to take over the construction when it had become evident that Roblecor was
not in a position to fulfill its obligation.

Claiming an unsatisfied account of P10,500,000.00 and unpaid progress billings of P2,370,179.23, Roblecor on
May 18, 1990, filed a petition for Compulsory Arbitration with prayer for Temporary Restraining Order before
respondent Regional Trial Court, pursuant to the arbitration clause in the construction agreement. Chung Fu
moved to dismiss the petition and further prayed for the quashing of the restraining order.

Subsequent negotiations between the parties eventually led to the formulation of an arbitration agreement which,
among others, provides:

2. The parties mutually agree that the arbitration shall proceed in accordance with the following
terms and conditions: —

xxx xxx xxx

d. The parties mutually agree that they will abide by the decision of the arbitrator
including any amount that may be awarded to either party as compensation,
consequential damage and/or interest thereon;

e. The parties mutually agree that the decision of the arbitrator shall be final and
unappealable. Therefore, there shall be no further judicial recourse if either party
disagrees with the whole or any part of the arbitrator's award.

f. As an exception to sub-paragraph (e) above, the parties mutually agree that

either party is entitled to seek judicial assistance for purposes of enforcing the
arbitrator's award;
 xxx xxx xxx 4

(Emphasis supplied)

Respondent Regional Trial Court approved the arbitration agreement thru its Order of May 30, 1990. Thereafter,
Engr. Willardo Asuncion was appointed as the sole arbitrator.

On June 30, 1990, Arbitrator Asuncion ordered petitioners to immediately pay respondent contractor, the sum of
P16,108,801.00. He further declared the award as final and unappealable, pursuant to the Arbitration Agreement
precluding judicial review of the award.

Consequently, Roblecor moved for the confirmation of said award. On the other hand, Chung Fu moved to
remand the case for further hearing and asked for a reconsideration of the judgment award claiming that
Arbitrator Asuncion committed twelve (12) instances of grave error by disregarding the provisions of the parties'
contract.

Respondent lower court denied Chung Fu's Motion to Remand thus compelling it to seek reconsideration
therefrom but to no avail. The trial court granted Roblecor's Motion for Confirmation of Award and accordingly,
entered judgment in conformity therewith. Moreover, it granted the motion for the issuance of a writ of execution
filed by respondent.

Chung Fu elevated the case via a petition for certiorari to respondent Court of Appeals. On October 22,1990 the
assailed resolution was issued. The respondent appellate court concurred with the findings and conclusions of
respondent trial court resolving that Chung Fu and its officers, as signatories to the Arbitration Agreement are
bound to observe the stipulations thereof providing for the finality of the award and precluding any appeal
therefrom.

A motion for reconsideration of said resolution was filed by petitioner, but it was similarly denied by respondent
Court of Appeals thru its questioned resolution of December 3, 1990.

Hence, the instant petition anchored on the following grounds:

First

Respondents Court of Appeals and trial Judge gravely abused their discretion and/or exceeded
their jurisdiction, as well as denied due process and substantial justice to petitioners, — (a) by
refusing to exercise their judicial authority and legal duty to review the arbitration award, and (b)
by declaring that petitioners are estopped from questioning the arbitration award allegedly in view
of the stipulations in the parties' arbitration agreement that "the decision of the arbitrator shall be
final and unappealable" and that "there shall be no further judicial recourse if either party
disagrees with the whole or any part of the arbitrator's award."

Second

Respondent Court of Appeals and trial Judge gravely abused their discretion and/or exceeded
their jurisdiction, as well as denied due process and substantial justice to petitioner, by not
vacating and annulling the award dated 30 June 1990 of the Arbitrator, on the ground that the
Arbitrator grossly departed from the terms of the parties' contracts and misapplied the law, and
thereby exceeded the authority and power delegated to him. (Rollo, p. 17)

Allow us to take a leaf from history and briefly trace the evolution of arbitration as a mode of dispute settlement.

Because conflict is inherent in human society, much effort has been expended by men and institutions in devising
ways of resolving the same. With the progress of civilization, physical combat has been ruled out and instead,
more specific means have been evolved, such as recourse to the good offices of a disinterested third party,
whether this be a court or a private individual or individuals.
Legal history discloses that "the early judges called upon to solve private conflicts were primarily the arbiters,
persons not specially trained but in whose morality, probity and good sense the parties in conflict reposed full
trust. Thus, in Republican Rome, arbiter and judge (judex) were synonymous. The magistrate or praetor, after
noting down the conflicting claims of litigants, and clarifying the issues, referred them for decision to a private
person designated by the parties, by common agreement, or selected by them from an apposite listing (the album
judicium) or else by having the arbiter chosen by lot. The judges proper, as specially trained state officials
endowed with own power and jurisdiction, and taking cognizance of litigations from beginning to end, only
appeared under the Empire, by the so-called cognitio extra ordinem." 5

Such means of referring a dispute to a third party has also long been an accepted alternative to litigation at
common law. 6

Sparse though the law and jurisprudence may be on the subject of arbitration in the Philippines, it was
nonetheless recognized in the Spanish Civil Code; specifically, the provisions on compromises made applicable
to arbitrations under Articles 1820 and 1821.7 Although said provisions were repealed by implication with the
repeal of the Spanish Law of Civil Procedure, 8 these and additional ones were reinstated in the present Civil
Code. 9

Arbitration found a fertile field in the resolution of labor-management disputes in the Philippines. Although early
on, Commonwealth Act 103 (1936) provided for compulsory arbitration as the state policy to be administered by
the Court of Industrial Relations, in time such a modality gave way to voluntary arbitration. While not completely
supplanting compulsory arbitration which until today is practiced by government officials, the Industrial Peace
Act which was passed in 1953 as Republic Act No. 875, favored the policy of free collective bargaining, in
general, and resort to grievance procedure, in particular, as the preferred mode of settling disputes in industry.
It was accepted and enunciated more explicitly in the Labor Code, which was passed on November 1, 1974 as
Presidential Decree No. 442, with the amendments later introduced by Republic Act No. 6715 (1989).

Whether utilized in business transactions or in employer-employee relations, arbitration was gaining wide
acceptance. A consensual process, it was preferred to orders imposed by government upon the disputants.
Moreover, court litigations tended to be time-consuming, costly, and inflexible due to their scrupulous observance
of the due process of law doctrine and their strict adherence to rules of evidence.

As early as the 1920's, this Court declared:

In the Philippines fortunately, the attitude of the courts toward arbitration agreements is slowly
crystallizing into definite and workable form. . . . The rule now is that unless the agreement is such
as absolutely to close the doors of the courts against the parties, which agreement would be void,
the courts will look with favor upon such amicable arrangements and will only with great reluctance
interfere to anticipate or nullify the action of the arbitrator. 10

That there was a growing need for a law regulating arbitration in general was acknowledged when Republic Act
No. 876 (1953), otherwise known as the Arbitration Law, was passed. "Said Act was obviously adopted to
supplement — not to supplant — the New Civil Code on arbitration. It expressly declares that "the provisions of
chapters one and two, Title XIV, Book IV of the Civil Code shall remain in force." 11

In recognition of the pressing need for an arbitral machinery for the early and expeditious settlement of disputes
in the construction industry, a Construction Industry Arbitration Commission (CIAC) was created by Executive
Order No. 1008, enacted on February 4, 1985.

In practice nowadays, absent an agreement of the parties to resolve their disputes via a particular mode, it is the
regular courts that remain the fora to resolve such matters. However, the parties may opt for recourse to third
parties, exercising their basic freedom to "establish such stipulation, clauses, terms and conditions as they may
deem convenient, provided they are not contrary to law, morals, good customs, public order or public policy." 12 In
such a case, resort to the arbitration process may be spelled out by them in a contract in anticipation of disputes
that may arise between them. Or this may be stipulated in a submission agreement when they are actually
confronted by a dispute. Whatever be the case, such recourse to an extrajudicial means of settlement is not
intended to completely deprive the courts of jurisdiction. In fact, the early cases on arbitration carefully spelled
out the prevailing doctrine at the time, thus: ". . . a clause in a contract providing that all matters in dispute
between the parties shall be referred to arbitrators and to them alone is contrary to public policy and cannot oust
the courts of Jurisdiction." 13

But certainly, the stipulation to refer all future disputes to an arbitrator or to submit an ongoing dispute to one is
valid. Being part of a contract between the parties, it is binding and enforceable in court in case one of them
neglects, fails or refuses to arbitrate. Going a step further, in the event that they declare their intention to refer
their differences to arbitration first before taking court action, this constitutes a condition precedent, such that
where a suit has been instituted prematurely, the court shall suspend the same and the parties shall be directed
forthwith to proceed to arbitration. 14
15
A court action may likewise be proven where the arbitrator has not been selected by the parties.

Under present law, may the parties who agree to submit their disputes to arbitration further provide that the
arbitrators' award shall be final, unappealable and executory?

Article 2044 of the Civil Code recognizes the validity of such stipulation, thus:

Any stipulation that the arbitrators' award or decision shall be final is valid, without prejudice to
Articles 2038, 2039 and 2040.

Similarly, the Construction Industry Arbitration Law provides that the arbitral award "shall be final and
inappealable except on questions of law which shall be appealable to the Supreme Court." 16

Under the original Labor Code, voluntary arbitration awards or decisions were final, unappealable and executory.
"However, voluntary arbitration awards or decisions on money claims, involving an amount exceeding One
Hundred Thousand Pesos (P100,000.00) or forty-percent (40%) of the paid-up capital of the respondent
employer, whichever is lower, maybe appealed to the National Labor Relations Commission on any of the
following grounds: (a) abuse of discretion; and (b) gross incompetence." 17 It is to be noted that the appeal in the
instances cited were to be made to the National Labor Relations Commission and not to the courts.

With the subsequent deletion of the above-cited provision from the Labor Code, the voluntary arbitrator is now
mandated to render an award or decision within twenty (20) calendar days from the date of submission of the
dispute and such decision shall be final and executory after ten (10) calendar days from receipt of the copy of
the award or decision by the parties. 18

Where the parties agree that the decision of the arbitrator shall be final and unappealable as in the instant case,
the pivotal inquiry is whether subject arbitration award is indeed beyond the ambit of the court's power of judicial
review.

We rule in the negative. It is stated explicitly under Art. 2044 of the Civil Code that the finality of the arbitrators'
award is not absolute and without exceptions. Where the conditions described in Articles 2038, 2039 and 2040
applicable to both compromises and arbitrations are obtaining, the arbitrators' award may be annulled or
rescinded. 19 Additionally, under Sections 24 and 25 of the Arbitration Law, there are grounds for vacating,
modifying or rescinding an arbitrator's award. 20 Thus, if and when the factual circumstances referred to in the
above-cited provisions are present, judicial review of the award is properly warranted.

What if courts refuse or neglect to inquire into the factual milieu of an arbitrator's award to determine whether it
is in accordance with law or within the scope of his authority? How may the power of judicial review be invoked?

This is where the proper remedy is certiorari under Rule 65 of the Revised Rules of Court. It is to be borne in
mind, however, that this action will lie only where a grave abuse of discretion or an act without or in excess of
jurisdiction on the part of the voluntary arbitrator is clearly shown. For "the writ of certiorari is an extra-ordinary
remedy and that certiorari jurisdiction is not to be equated with appellate jurisdiction. In a special civil action
of certiorari, the Court will not engage in a review of the facts found nor even of the law as interpreted or applied
by the arbitrator unless the supposed errors of fact or of law are so patent and gross and prejudicial as to amount
to a grave abuse of discretion or an exces de pouvoir on the part of the arbitrator." 21
Even decisions of administrative agencies which are declared "final" by law are not exempt from judicial review
when so warranted. Thus, in the case of Oceanic Bic Division (FFW), et al. v. Flerida Ruth P. Romero, et
al., 22 this Court had occasion to rule that:

. . . Inspite of statutory provisions making "final" the decisions of certain administrative

agencies, we have taken cognizance of petitions questioning these decisions where want of
jurisdiction, grave abuse of discretion, violation of due process, denial of substantial justice or
erroneous interpretation of the law were brought to our attention . . . 23 (Emphasis ours).

It should be stressed, too, that voluntary arbitrators, by the nature of their functions, act in a quasi-judicial
capacity. 24 It stands to reason, therefore, that their decisions should not be beyond the scope of the power of
judicial review of this Court.

In the case at bar, petitioners assailed the arbitral award on the following grounds, most of which allege error on
the part of the arbitrator in granting compensation for various items which apparently are disputed by said
petitioners:

1. The Honorable Arbitrator committed grave error in failing to apply the terms and conditions of
the Construction Agreement, Dormitory Contract and Electrical Contract, and in using instead the
"practices" in the construction industry;

2. The Honorable Arbitrator committed grave error in granting extra compensation to Roblecor for
loss of productivity due to adverse weather conditions;

3. The Honorable Arbitrator committed grave error in granting extra compensation to Roblecor for
loss due to delayed payment of progress billings;

4. The Honorable Arbitrator committed grave error in granting extra compensation to Roblecor for
loss of productivity due to the cement crisis;

5. The Honorable Arbitrator committed grave error in granting extra compensation to Roblecor for
losses allegedly sustained on account of the failed coup d'état;

6. The Honorable Arbitrator committed grave error in granting to Roblecor the amount
representing the alleged unpaid billings of Chung Fu;

7. The Honorable Arbitrator committed grave error in granting to Roblecor the amount
representing the alleged extended overhead expenses;

8. The Honorable Arbitrator committed grave error in granting to Roblecor the amount
representing expenses for change order for site development outside the area of responsibility of
Roblecor;

9. The Honorable Arbitrator committed grave error in granting to Roblecor the cost of warehouse
No. 2;

10. The Honorable Arbitrator committed grave error in granting to Roblecor extra compensation
for airduct change in dimension;

11. The Honorable Arbitrator committed grave error in granting to Roblecor extra compensation
for airduct plastering; and

12. The Honorable Arbitrator committed grave error in awarding to Roblecor attorney's fees.

After closely studying the list of errors, as well as petitioners' discussion of the same in their Motion to Remand
Case For Further Hearing and Reconsideration and Opposition to Motion for Confirmation of Award, we find that
petitioners have amply made out a case where the voluntary arbitrator failed to apply the terms and provisions
of the Construction Agreement which forms part of the law applicable as between the parties, thus committing a
grave abuse of discretion. Furthermore, in granting unjustified extra compensation to respondent for several
items, he exceeded his powers — all of which would have constituted ground for vacating the award under
Section 24 (d) of the Arbitration Law.

But the respondent trial court's refusal to look into the merits of the case, despite prima facie showing of the
existence of grounds warranting judicial review, effectively deprived petitioners of their opportunity to prove or
substantiate their allegations. In so doing, the trial court itself committed grave abuse of discretion. Likewise, the
appellate court, in not giving due course to the petition, committed grave abuse of discretion. Respondent courts
should not shirk from exercising their power to review, where under the applicable laws and jurisprudence, such
power may be rightfully exercised; more so where the objections raised against an arbitration award may properly
constitute grounds for annulling, vacating or modifying said award under the laws on arbitration.

WHEREFORE, the petition is GRANTED. The Resolutions of the Court of Appeals dated October 22, 1990 and
December 3, 1990 as well as the Orders of respondent Regional Trial Court dated July 31, 1990 and August 23,
1990, including the writ of execution issued pursuant thereto, are hereby SET ASIDE. Accordingly, this case is
REMANDED to the court of origin for further hearing on this matter. All incidents arising therefrom are reverted
to the status quo ante until such time as the trial court shall have passed upon the merits of this case. No costs.

SO ORDERED.
G.R. No. 110434 December 13, 1993
HI-PRECISION STEEL CENTER, INC., petitioner,
vs.
LIM KIM STEEL BUILDERS, INC., and CONSTRUCTION INDUSTRY ARBITRATION COMMISSION, respondents.
Felix Q. Vinluan and Siguion Reyna, Montecillo & Ongsiako for petitioner.
De Castro & Cagampang Law Offices for Lim Kim teel Builders, Inc.
RESOLUTION

FELICIANO, J.:
On 18 June 1993, a "Petition for Extension to File Petition for Review" 1 was filed before the Court, petitioner Hi-
Precision Steel Center, Inc. ("Hi-Precision") stating that it intended to file a Petition for Review on Certiorari in
respect of the 13 November 1992 Award 2 and 13 May 1993 Order 3 of public respondent Construction Industry
Arbitration Commission ("CIAC") in Arbitration Case No. 13-90. The Petition (really a Motion) prayed for an
extension of thirty (30) days or until 21 July 1993 within which to file a Petition for Review.

An opposition 4 to the Motion was filed by private respondent Lim Kim Steel Builders, Inc. ("Steel Builders") on 5
July 1993. On the same day, however, the Court issued a Resolution 5 granting the Motion with a warning that
no further extension would be given.

The Opposition, the subsequent Reply 6 of petitioner filed on 20 July 1993 and the Petition for Review 7 dated
21 July 1993, were noted by the Court in its Resolution 8 of 28 July 1993. The Court also required private
respondent Steel Builders to file a Comment on the Petition for Review and Steel Builders complied.

The Petition prays for issuance of a temporary restraining order 9 to stay the execution of the assailed Order and
Award in favor of Steel Builders, which application the Court merely noted, as it did subsequent Urgent Motions
for a temporary restraining order. 10

Petitioner Hi-Precision entered into a contract with private respondent Steel Builders under which the latter as
Contractor was to complete a P21 Million construction project owned by the former within a period of 153
days, i.e. from 8 May 1990 to 8 October 1990. The project completion date was first moved to 4 November 1990.
On that date, however, only 75.8674% of the project was actually completed. Petitioner attributed this non-
completion to Steel Builders which allegedly had frequently incurred delays during the
original contract period and the extension period. Upon the other hand, Steel Builders insisted that the delays in
the project were either excusable or due to Hi-Precision's own fault and issuance of change orders. The project
was taken over on 7 November 1990, and eventually completed on February 1991, by Hi-Precision.

Steel Builders filed a "Request for Adjudication" with public respondent CIAC. In its Complaint filed with the
CIAC, Steel Builders sought payment of its unpaid progress buildings, alleged unearned profits and other
receivables. Hi-Precision, upon the other hand, in its Answer and Amended Answer, claimed actual and
liquidated damages, reimbursement of alleged additional costs it had incurred in order to complete the project
and attorney's fees.

The CIAC formed an Arbitral Tribunal with three (3) members, two (2) being appointed upon nomination of Hi-
Precision and Steel Builders, respectively; the third member (the Chairman) was appointed by the CIAC as a
common nominee of the two (2) parties. On the Chairman was a lawyer. After the arbitration proceeding, the
Arbitral Tribunal rendered a unanimous Award dated 13 November 1992, the dispositive portion of which reads
as follows:

WHEREFORE, premises considered, the Owner [petitioner Hi-Precision] is ordered to pay the
Contractor [private respondent Steel Builders] the amount of P6,400,717.83 and all other claims
of the parties against each other are deemed compensated and offset. No pronouncement as to
costs.
11
The Parties are enjoined to abide by the award.

Upon motions for reconsideration filed, respectively, by Hi-Precision and Steel Builders, the Arbitral
Tribunal issued an Order dated 13 May 1993 which reduced the net amount due to contractor Steel
Builders to P6,115,285.83. 12
In its Award, the Arbitral Tribunal stated that it was guided by Articles 1169, 1192 and 2215 of the Civil Code.
With such guidance, the arbitrators concluded that (a) both parties were at fault, though the Tribunal could not
point out which of the parties was the first infractor; and (b) the breaches by one party affected the discharge of
the reciprocal obligations of the other party. With mutual fault as a principal premise, the Arbitral Tribunal denied
(a) petitioner's claims for the additional costs allegedly incurred to complete the project; and (b) private
respondent's claim for profit it had failed to earn because of petitioner's take over of the project.

The Tribunal then proceeded to resolve the remaining specific claims of the parties. In disposing of these
multiple, detailed claims the Arbitral Tribunal, in respect of one or more of the respective claims of the parties:
(a) averaged out the conflicting amounts and percentages claimed by the parties; 13 (b) found neither basis nor
justification for a particular claim; 14 (c) found the evidence submitted in support of particular claims either weak
or non-existent; 15 (d) took account of the admissions of liability in respect of particular claims; 16 (e) relied on its
own expertise in resolving particular claims; 17 and (f) applied a "principle of equity" in requiring each party to
bear its own loss resulting or arising from mutual fault or delay (compensation morae). 18

Petitioner Hi-Precision now asks this Court to set aside the Award, contending basically that it was the contractor
Steel Builders who had defaulted on its contractual undertakings and so could not be the injured party and should
not be allowed to recover any losses it may have incurred in the project. Petitioner Hi-Precision insists it is still
entitled to damages, and claims that the Arbitral Tribunal committed grave abuse of discretion when it allowed
certain claims by Steel Builders and offset them against claims of Hi-Precision.

A preliminary point needs to be made. We note that the Arbitral Tribunal has not been impleaded as a respondent
in the Petition at bar. The CIAC has indeed been impleaded; however, the Arbitral Award was not rendered by
the CIAC, but rather by the Arbitral Tribunal. Moreover, under Section 20 of Executive Order No. 1008, dated 4
February 1985, as amended, it is the Arbitral Tribunal, or the single Arbitrator, with the concurrence of the CIAC,
which issues the writ of execution requiring any sheriff or other proper officer to execute the award. We consider
that the Arbitral Tribunal which rendered the Award sought to be reviewed and set aside, should be impleaded
even though the defense of its Award would presumably have to be carried by the prevailing party.

Petitioner Hi-Precision apparently seeks review of both under Rule 45 and Rule 65 of the Rules of Court. 19 We
do not find it necessary to rule which of the two: a petition for review under Rule 45 or a petition for certiorari under
Rule 65 — is necessary under Executive Order No. 1008, as amended; this issue was, in any case, not squarely
raised by either party and has not been properly and adequately litigated.

In its Petition, Hi-Precision purports to raise "legal issues," and in presenting these issues, prefaced each with a
creative formula:

(1)

The public respondent [should be the "Arbitral Tribunal'] committed serious error in law, if not
grave abuse of discretion, when it failed to strictly apply Article 1191, New Civil Code, against the
contractor . . .;

(2)

The public respondent committee serious error in law, if not grave abuse of discretion, when it
failed to rule in favor of the owner, now petitioner herein, all the awards it claimed on arbitration,
and when it nonetheless persisted in its awards of damages in favor of the
respondent. . . .;

(3)

The public respondent committed serious error in law, if not grave abuse of discretion, for its
abject failure to apply the doctrine of waiver, estoppel against the contractor, the private
respondent herein, when it agreed on November 16, 1990 to award termination of the contract
and the owner's takeover of the project . . .;
 (4)

The public respondent committed serious error in law, if not grave abuse of discretion, when it did
not enforce the law between the parties, the "technical specification[s]" which is one of the contract
documents, particularly to par. (a), sub-part 3.01, part 3, Sec. 2b, which expressly requires that
major site work activities like stripping, removal and stockpiling of top soil shall be done "prior to
the start of regular excavation or backfiling work", the principal issue in arbitration being non-
compliance with the contract documents;

(5)

The public respondent committed serious error in law, if not grave abuse of discretion, when it
found, in the May 13, 1993 Order, the petitioner "guilty of estoppel" although it is claimed that the
legal doctrine of estoppel does not apply with respect to the required written formalities in the
issuance of change order . . .;

(6)

The exceptional circumstances in Remalante vs. Tibe, 158 SCRA 138, where the Honorable
Supreme Court may review findings of facts, are present in the instant case, namely; (a) when
the inference made is manifestly absurd, mistaken or impossible (Luna vs. Linatoc, 74 Phil. 15);
(2) when there is grave abuse of discretion in the appreciation of facts (Buyco vs. People, 95 Phil.
253); (3) when the judgment is premised on a misapprehension of facts (De la Cruz v. Sosing, 94
Phil. 26 and Castillo vs. CA, 124 SCRA 808); (4) when the findings of fact are conflicting (Casica
v. Villaseca, 101 Phil. 1205); (5) when the findings are contrary to the admissions of the parties
(Evangelista v. Alto Surety, 103 Phil. 401), and therefore, the findings of facts of the public
respondent in the instant case may be reviewed by the Honorable Supreme Court. 20 (Emphasis
partly applied and partly in the original)

From the foregoing, petitioner Hi-Precision may be seen to be making two (2) basic arguments:

(a) Petitioner asks this Court to correct legal errors committed by the Arbitral Tribunal, which at
the same time constitute grave abuse of discretion amounting to lack of jurisdiction on the part of
the Arbitral Tribunal; and

(b) Should the supposed errors petitioner asks us to correct be characterized as errors of fact,
such factual errors should nonetheless be reviewed because there was "grave abuse of
discretion" in the misapprehension of facts on the part of the Arbitral Tribunal.

Executive Order No. 1008, as amended, provides, in its Section 19, as follows:

Sec. 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.

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 general, and 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 inappealable.

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. Executive Order No. 1008 created an arbitration facility to which the construction industry in
the Philippines can have recourse. The Executive Order was enacted to encourage the early and expeditious
settlement of disputes in the construction industry, a public policy the implementation of which is necessary and
important for the realization of national development goals. 21

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 for 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. 22 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. 23 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.

Examination of the Petition at bar reveals that it is essentially an attempt to re-assert and re-litigate before this
Court the detailed or itemized factual claims made before the Arbitral Tribunal under a general averment that the
Arbitral Tribunal had "misapprehended the facts" submitted to it. In the present Petition, too, Hi-Precision claims
that the Arbitral Tribunal had committed grave abuse of discretion amounting to lack of jurisdiction in reaching
its factual and legal conclusions.

The first "legal issue" submitted by the Petition is the claimed misapplication by the Arbitral Tribunal of the first
and second paragraphs of Article 1911 of the Civil Code. 24 Article 1191 reads:

Art. 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the
obligors should not comply with what is incumbent upon him.

The injured party may choose between the fulfillment and the rescission of the obligation, with the
payment of damages in either case. He may also seek rescission, even after he has chosen
fulfillment, if the latter should become impossible.

The court shall decree the rescission claimed, unless there be just cause authorizing the fixing of
a period.

This is understood to be without prejudice to the rights of third persons who have acquired the
thing, in accordance with articles 1385 and 1388 and the Mortgage Law.

Hi-Precision contends energetically that it is the injured party and that Steel Builders was the obligor who did not
comply with what was incumbent upon it, such that Steel Builders was the party in default and the entity guilty of
negligence and delay. As the injured party, Hi-Precision maintains that it may choose between the fulfillment or
rescission of the obligation in accordance with Article 1191, and is entitled to damages in either case. Thus, Hi-
Precision continues, when the contractor Steel Builders defaulted on the 153rd day of the original contract period,
Hi-Precision opted for specific performance and gave Steel Builders a 30-day extension period with which to
complete the project.

What petitioner Hi-Precision, in its above argument, disregards is that the determination of whether Hi-Precision
or Steel Builders was the "injured party" is not to be resolved by an application of Article 1191. That determination
is eminently a question of fact, for it requires ascertainment and identification of which the two (2) contending
parties had first failed to comply with what is incumbent upon it. In other words, the supposed misapplication of
Article 1191, while ostensibly a "legal issue," is ultimately a question of fact, i.e., the determination of the
existence or non-existence of a fact or set of facts in respect of which Article 1191 may be properly applied.
Thus, to ask this Court to correct a claimed misapplication or non-application of Article 1191 is to compel this
Court to determine which of the two (2) contending parties was the "injured party" or the "first infractor." As noted
earlier, the Arbitral Tribunal after the prolonged arbitration proceeding, was unable to make that factual
determination and instead concluded that both parties had committed breaches of their respective obligations.
We will not review, and much less reverse, that basic factual finding of the Arbitral Tribunal.

A second "legal issue" sought to be raised by petitioner Hi-Precision relates to the supposed failure of the Arbitral
Tribunal to apply the doctrines of estoppel and waiver as against Steel Builders. 25 The Arbitral Tribunal, after
declaring that the parties were mutually at fault, proceeded to enumerate the faults of each of the parties. One
of the faults attributed to petitioner Hi-Precision is that it had failed to give the contractor Steel Builders the
required 15-day notice for termination of the contract. 26 This was clearly a finding of fact on the part of the
Tribunal, supported by the circumstance that per the record, petitioner had offered no proof that it had complied
with such 15-day notice required under Article 28.01 of the General Conditions of Contract forming part of the
Contract Documents. Petitioner Hi-Precision's argument is that a written Agreement dated 16 November 1990
with Steel Builders concerning the take over of the project by Hi-Precision, constituted waiver on the part of the
latter of its right to a 15-day notice of contract termination. Whether or not that Agreement dated 16 November
1990 (a document not submitted to this Court) is properly characterized as constituting waiver on the part of
Steel Builders, may be conceded to be prima facie a question of law; but, if it is, and assuming arguendo that
the Arbitral Tribunal had erred in resolving it, that error clearly did not constitute a grave abuse of discretion
resulting in lack or loss of jurisdiction on the part of the Tribunal.

A third "legal issue" posed by Hi-Precision relates to the supposed failure on the part of the Arbitral Tribunal "to
uphold the supremacy of 'the
law between the parties' and enforce it against private respondent [Steel Builders]." 27 The "law between that
parties" here involved is the "Technical Specifications" forming part of the Contract Documents. Hi-Precision
asserts that the Arbitral Tribunal did not uphold the "law between the parties," but instead substituted the same
with "its [own] absurd inference and 'opinion' on mud." Here again, petitioner is merely disguising a factual
question as a "legal issue," since petitioner is in reality asking this Court to review the physical operations relating,
e.g., to site preparation carried out by the contractor Steel Builders and to determine whether such operations
were in accordance with the Technical Specifications of the project. The Arbitral Tribunal resolved Hi-Precision's
claim by finding that Steel Builders had complied substantially with the Technical Specifications. This Court will
not pretend that it has the technical and engineering capability to review the resolution of that factual issue by
the Arbitral Tribunal.

Finally, the Petition asks this Court to "review serious errors in the findings of fact of the [Arbitral Tribunal]." 28 In
this section of its Petition,
Hi-Precision asks us to examine each item of its own claims which the Arbitral Tribunal had rejected in its Award,
and each claim of the contractor Steel Builders which the Tribunal had granted. In respect of each item of the
owner's claims and each item of the contractor's claims, Hi-Precision sets out its arguments, to all appearances
the same arguments it had raised before the Tribunal. As summarized in the Arbitral Award, Contractor's Claims
were as follows:

12.1. Unpaid Progress Billing 1,812,706.95

12.2. Change Order 1 0.00
12.3. -do- 2 10,014.00
12.4. -do- 3 320,000.00
12.5. -do- 4 112,300.70
12.6. -do- 5 398,398.00
12.7. -do- 6 353,050.38
12.8. -do- 7 503,836.53
12.9. -do- 8 216,138.75
12.10. -do- 9 101,621.40
12.11. -do- 10 7,200.00
12.12. -do- 11 0.00
12.13. -do- 12 7,800.00
12.14. -do- 13 49,250.00
12.15. -do- 14 167,952.00
12.16. -do- 15 445,600.00
12.17. -do- 16 92,457.30
12.18. -do- 17 1,500.00
 12.19. 20,240.00
12.20. 63,518.00
12.21. 0.00
12.22. 0.00
12.23. 0.00
12.24. 0.00
12.25. 0.00
12.26. 730,201.57
12.27. 1,130,722.70
12.28. 0.00
12.29. 273,991.00
12.30. 0.00
———————
12.31. 7,318,499.28 29
=============
Upon the other hand, the petitioner's claims we are asked to review and grant are summarized as follows:

1. Actual Damages

Advance Downpayment
[at] signing of Contract
which is subject to 40%
deduction every progress
billing (40% of Contract Price) P8,406,000.00

Progress Billings 5,582,585.55

Advances made to Lim Kim

a) prior to take-over 392,781.45

b) after the take-over

Civil Works 1,158,513.88

Materials 4,213,318.72
Labor 2,155,774.79
Equipment Rental 1,448,208.90

———————

P8,974,816.45

Total Amount Paid for Construction 23,650,183.00

Less: Contract Price (21,000,000.00)

IA Excess of amount paid

over contract price 2,650,163.29

IB Other items due from Lim

Kim Steel Builders

a. Amount not yet deducted

from Downpayment due
to non-completion of Project
(P24.1326%) 2,027,138.40

b. Due to Huey Commercial

used for HSCI Project 51,110.40

IC Additional construction expenses

a. Increases in prices since Oct. 5,272,096.81

 b. Cost of money of (a) 873,535.49

ID Installation of machinery

a. Foreign exchange loss 11,565,048.37

b. Cost of money (a) 2,871,987.01

I[E] Raw Materials

a. Foreign exchange loss 4,155,982.18

b. Cost of money (a) 821,242.72
c. Additional import levy of 5% 886,513.33
d. Cost of money (c) 170,284.44
e. Cost of money on marginal
deposit on Letter of Credit 561,195.25

IF Cost of money on holding to CRC INTY 3,319,609.63

Total Actual Damages 35,295,927.32

2. Liquidated Damages 2,436,000.00

3. Attorney's Fees 500,000.00

———————

P38,231,927.3230

=============

We consider that in asking this Court to go over each individual claim submitted by it and each individual
countering claim submitted by Steel Builders to the Arbitral Tribunal, petitioner Hi-Precision is asking this Court
to pass upon claims which are either clearly and directly factual in nature or require previous determination of
factual issues. This upon the one hand. Upon the other hand, the Court considers that petitioner Hi-Precision
has failed to show any serious errors of law amounting to grave abuse of discretion resulting in lack of jurisdiction
on the part of the Arbitral Tribunal, in either the methods employed or the results reached by the Arbitral Tribunal,
in disposing of the detailed claims of the respective parties.

WHEREFORE, for all the foregoing, the Petition is hereby DISMISSED for lack of merit. Costs against petitioner.

SO ORDERED.
G.R. No. 120105 March 27, 1998
BF CORPORATION, petitioner,
vs.
COURT OF APPEALS, SHANGRI-LA PROPERTIES, INC., RUFO B. COLAYCO, ALFREDO C. RAMOS, MAXIMO G.
LICAUCO III and BENJAMIN C. RAMOS, respondents.

ROMERO, J.:
The basic issue in this petition for review on certiorari is whether or not the contract for the construction of the
EDSA Plaza between petitioner BF Corporation and respondent Shangri-la Properties, Inc. embodies an
arbitration clause in case of disagreement between the parties in the implementation of contractual provisions.

Petitioner and respondent Shangri-la Properties, Inc. (SPI) entered into an agreement whereby the latter
engaged the former to construct the main structure of the "EDSA Plaza Project," a shopping mall complex in the
City of Mandaluyong. The construction work was in progress when SPI decided to expand the project by
engaging the services of petitioner again. Thus, the parties entered into an agreement for the main contract
works after which construction work began.

However, petitioner incurred delay in the construction work that SPI considered as "serious and substantial."1 On
the other hand, according to petitioner, the construction works "progressed in faithful compliance with the First
Agreement until a fire broke out on November 30, 1990 damaging Phase I" of the Project. 2 Hence, SPI proposed
the re-negotiation of the agreement between them.

Consequently, on May 30, 1991, petitioner and SPI entered into a written agreement denominated as
"Agreement for the Execution of Builder's Work for the EDSA Plaza Project." Said agreement would cover the
construction work on said project as of May 1, 1991 until its eventual completion.

According to SPI, petitioner "failed to complete the construction works and abandoned the project."3 This resulted
in disagreements between the parties as regards their respective liabilities under the contract. On July 12, 1993,
upon SPI's initiative, the parties' respective representatives met in conference but they failed to come to an
agreement.4

Barely two days later or on July 14, 1993, petitioner filed with the Regional Trial Court of Pasig a complaint for
collection of the balance due under the construction agreement. Named defendants therein were SPI and
members of its board of directors namely, Alfredo C. Ramos, Rufo B. Calayco, Antonio B. Olbes, Gerardo O.
Lanuza, Jr., Maximo G. Licauco III and Benjamin C. Ramos.

On August 3, 1993, SPI and its co-defendants filed a motion to suspend proceedings instead of filing an answer.
The motion was anchored on defendants' allegation that the formal trade contract for the construction of the
project provided for a clause requiring prior resort to arbitration before judicial intervention could be invoked in
any dispute arising from the contract. The following day, SPI submitted a copy of the conditions of the contract
containing the arbitration clause that it failed to append to its motion to suspend proceedings.

Petitioner opposed said motion claiming that there was no formal contract between the parties although they
entered into an agreement defining their rights and obligations in undertaking the project. It emphasized that the
agreement did not provide for arbitration and therefore the court could not be deprived of jurisdiction conferred
by law by the mere allegation of the existence of an arbitration clause in the agreement between the parties.

In reply to said opposition, SPI insisted that there was such an arbitration clause in the existing contract between
petitioner and SPI. It alleged that suspension of proceedings would not necessarily deprive the court of its
jurisdiction over the case and that arbitration would expedite rather than delay the settlement of the parties'
respective claims against each other.

In a rejoinder to SPI's reply, petitioner reiterated that there was no arbitration clause in the contract between the
parties. It averred that granting that such a clause indeed formed part of the contract, suspension of the
proceedings was no longer proper. It added that defendants should be declared in default for failure to file their
answer within the reglementary period.
In its sur-rejoinder, SPI pointed out the significance of petitioner's admission of the due execution of the "Articles
of Agreement." Thus, on page D/6 thereof, the signatures of Rufo B. Colayco, SPI president, and Bayani
Fernando, president of petitioner appear, while page D/7 shows that the agreement is a public document duly
notarized on November 15, 1991 by Notary Public Nilberto R. Briones as document No. 345, page 70, book No.
LXX, Series of 1991 of his notarial register.5

Thereafter, upon a finding that an arbitration clause indeed exists, the lower court6 denied the motion to suspend
proceedings, thus:

It appears from the said document that in the letter-agreement dated May 30, 1991 (Annex C,
Complaint), plaintiff BF and defendant Shangri-La Properties, Inc. agreed upon the terms and
conditions of the Builders Work for the EDSA Plaza Project (Phases I, II and Carpark), subject to
the execution by the parties of a formal trade contract. Defendants have submitted a copy of the
alleged trade contract, which is entitled "Contract Documents For Builder's Work Trade
Contractor" dated 01 May 1991, page 2 of which is entitled "Contents of Contract Documents"
with a list of the documents therein contained, and Section A thereof consists of the
abovementioned Letter-Agreement dated May 30, 1991. Section C of the said Contract
Documents is entitled "Articles of Agreement and Conditions of Contract" which, per its Index,
consists of Part A (Articles of Agreement) and B (Conditions of Contract). The said Articles of
Agreement appears to have been duly signed by President Rufo B. Colayco of Shangri-La
Properties, Inc. and President Bayani F. Fernando of BF and their witnesses, and was thereafter
acknowledged before Notary Public Nilberto R. Briones of Makati, Metro Manila on November 15,
1991. The said Articles of Agreement also provides that the "Contract Documents" therein listed
"shall be deemed an integral part of this Agreement", and one of the said documents is the
"Conditions of Contract" which contains the Arbitration Clause relied upon by the defendants in
their Motion to Suspend Proceedings.

This Court notes, however, that the 'Conditions of Contract' referred to, contains the following provisions:

3. Contract Document.

Three copies of the Contract Documents referred to in the Articles of

Agreement shall be signed by the parties to the contract and distributed to the
Owner and the Contractor for their safe keeping." (emphasis supplied).

And it is significant to note further that the said "Conditions of Contract" is not duly signed by the
parties on any page thereof — although it bears the initials of BF's representatives (Bayani F.
Fernando and Reynaldo M. de la Cruz) without the initials thereon of any representative of
Shangri-La Properties, Inc.

Considering the insistence of the plaintiff that the said Conditions of Contract was not duly
executed or signed by the parties, and the failure of the defendants to submit any signed copy of
the said document, this Court entertains serious doubt whether or not the arbitration clause found
in the said Conditions of Contract is binding upon the parties to the Articles of Agreement."
(Emphasis supplied.)

The lower court then ruled that, assuming that the arbitration clause was valid and binding, still, it was "too late
in the day for defendants to invoke arbitration." It quoted the following provision of the arbitration clause:

Notice of the demand for arbitration of a dispute shall be filed in writing with the other party to the
contract and a copy filed with the Project Manager. The demand for arbitration shall be made
within a reasonable time after the dispute has arisen and attempts to settle amicably have failed;
in no case, however, shall the demand he made be later than the time of final payment except as
otherwise expressly stipulated in the contract.
Against the above backdrop, the lower court found that per the May 30, 1991 agreement, the project was to be
completed by October 31, 1991. Thereafter, the contractor would pay P80,000 for each day of delay counted
from November 1, 1991 with "liquified (sic) damages up to a maximum of 5% of the total contract price."

The lower court also found that after the project was completed in accordance with the agreement that contained
a provision on "progress payment billing," SPI "took possession and started operations thereof by opening the
same to the public in November, 1991." SPI, having failed to pay for the works, petitioner billed SPI in the total
amount of P110,883,101.52, contained in a demand letter sent by it to SPI on February 17, 1993. Instead of
paying the amount demanded, SPI set up its own claim of P220,000,000.00 and scheduled a conference on that
claim for July 12, 1993. The conference took place but it proved futile.

Upon the above facts, the lower court concluded:

Considering the fact that under the supposed Arbitration Clause invoked by defendants, it is
required that "Notice of the demand for arbitration of a dispute shall be filed in writing with the
other party . . . . in no case . . . . later than the time of final payment . . . "which apparently, had
elapsed, not only because defendants had taken possession of the finished works and the
plaintiff's billings for the payment thereof had remained pending since November, 1991 up to the
filing of this case on July 14, 1993, but also for the reason that defendants have failed to file any
written notice of any demand for arbitration during the said long period of one year and eight
months, this Court finds that it cannot stay the proceedings in this case as required by Sec. 7 of
Republic Act No. 876, because defendants are in default in proceeding with such arbitration.

The lower court denied SPI's motion for reconsideration for lack of merit and directed it and the other defendants
to file their responsive pleading or answer within fifteen (15) days from notice.

Instead of filing an answer to the complaint, SPI filed a petition for certiorari under Rule 65 of the Rules of Court
before the Court of Appeals. Said appellate court granted the petition, annulled and set aside the orders and
stayed the proceedings in the lower court. In so ruling, the Court of Appeals held:

The reasons given by the respondent Court in denying petitioners' motion to suspend proceedings
are untenable.

1. The notarized copy of the articles of agreement attached as Annex A to petitioners' reply dated
August 26, 1993, has been submitted by them to the respondent Court (Annex G, petition). It
bears the signature of petitioner Rufo B. Colayco, president of petitioner Shangri-La Properties,
Inc., and of Bayani Fernando, president of respondent Corporation (Annex G-1, petition). At page
D/4 of said articles of agreement it is expressly provided that the conditions of contract are
"deemed an integral part" thereof (page 188, rollo). And it is at pages D/42 to D/44 of the
conditions of contract that the provisions for arbitration are found (Annexes G-3 to G-5, petition,
pp. 227-229). Clause No. 35 on arbitration specifically provides:

Provided always that in case any dispute or difference shall arise between the
Owner or the Project Manager on his behalf and the Contractor, either during the
progress or after the completion or abandonment of the Works as to the
construction of this Contract or as to any matter or thing of whatsoever nature
arising thereunder or in connection therewith (including any matter or being left by
this Contract to the discretion of the Project Manager or the withholding by the
Project Manager of any certificate to which the Contractor may claim to be entitled
or the measurement and valuation mentioned in clause 30 (5) (a) of these
Conditions' or the rights and liabilities of the parties under clauses 25, 26, 32 or 33
of these Conditions), the Owner and the Contractor hereby agree to exert all efforts
to settle their differences or dispute amicably. Failing these efforts then such
dispute or difference shall be referred to Arbitration in accordance with the rules
and procedures of the Philippine Arbitration Law.
 The fact that said conditions of contract containing the arbitration clause bear only the initials of
respondent Corporation's representatives, Bayani Fernando and Reynaldo de la Cruz, without
that of the representative of petitioner Shangri-La Properties, Inc. does not militate against its
effectivity. Said petitioner having categorically admitted that the document, Annex A to its reply
dated August 26, 1993 (Annex G, petition), is the agreement between the parties, the initial or
signature of said petitioner's representative to signify conformity to arbitration is no longer
necessary. The parties, therefore, should be allowed to submit their dispute to arbitration in
accordance with their agreement.

2. The respondent Court held that petitioners "are in default in proceeding with such arbitration."
It took note of "the fact that under the supposed Arbitration Clause invoked by defendants, it is
required that "Notice of the demand for arbitration of a dispute shall be filed in writing with the
other party . . . in no case . . . later than the time of final payment," which apparently, had elapsed,
not only because defendants had taken possession of the finished works and the plaintiff's billings
for the payment thereof had remained pending since November, 1991 up to the filing of this case
on July 14, 1993, but also for the reason that defendants have failed to file any written notice of
any demand for arbitration during the said long period of one year and eight months, . . . ."

Respondent Court has overlooked the fact that under the arbitration
clause —

Notice of the demand for arbitration dispute shall be filed in writing with the other
party to the contract and a copy filed with the Project Manager. The demand for
arbitration shall be made within a reasonable time after the dispute has arisen and
attempts to settle amicably had failed; in no case, however, shall the demand be
made later than the time of final payment except as otherwise expressly stipulated
in the contract (emphasis supplied)

quoted in its order (Annex A, petition). As the respondent Court there said, after the final demand
to pay the amount of P110,883,101.52, instead of paying, petitioners set up its own claim against
respondent Corporation in the amount of P220,000,000.00 and set a conference thereon on July
12, 1993. Said conference proved futile. The next day, July 14, 1993, respondent Corporation
filed its complaint against petitioners. On August 13, 1993, petitioners wrote to respondent
Corporation requesting arbitration. Under the circumstances, it cannot be said that petitioners'
resort to arbitration was made beyond reasonable time. Neither can they be considered in default
of their obligation to respondent Corporation.

Hence, this petition before this Court. Petitioner assigns the following errors:

THE COURT OF APPEALS ERRED IN ISSUING THE EXTRAORDINARY WRIT

OF CERTIORARI ALTHOUGH THE REMEDY OF APPEAL WAS AVAILABLE TO
RESPONDENTS.

THE COURT OF APPEALS ERRED IN FINDING GRAVE ABUSE OF DISCRETION IN THE

FACTUAL FINDINGS OF THE TRIAL COURT THAT:

(i) THE PARTIES DID NOT ENTER INTO AN AGREEMENT TO

ARBITRATE.

(ii) ASSUMING THAT THE PARTIES DID ENTER INTO THE

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

The above contention is without merit.

The rule that the special civil action of certiorari may not be invoked as a substitute for the remedy of appeal is
succinctly reiterated in Ongsitco v. Court of Appeals8 as follows:

. . . . Countless times in the past, this Court has held that "where appeal is the proper
remedy, certiorari will not lie." The writs of certiorari and prohibition are remedies to correct lack
or excess of jurisdiction or grave abuse of discretion equivalent to lack of jurisdiction committed
by a lower court. "Where the proper remedy is appeal, the action for certiorari will not be
entertained. . . . Certiorari is not a remedy for errors of judgment. Errors of judgment are
correctible by appeal, errors of jurisdiction are reviewable by certiorari."

Rule 65 is very clear. The extraordinary remedies of certiorari, prohibition and mandamus are
available only when "there is no appeal or any plain, speedy and adequate remedy in the ordinary
course of law . . . ." That is why they are referred to as "extraordinary." . . . .

The Court has likewise ruled that "certiorari will not be issued to cure errors in proceedings or correct erroneous
conclusions of law or fact. As long as a court acts within its jurisdiction, any alleged errors committed in the
exercise of its jurisdiction will amount to nothing more than errors of judgment which are reviewable by timely
appeal and not by a special civil action of certiorari."9

This is not exactly so in the instant case. While this Court does not deny the eventual jurisdiction of the lower
court over the controversy, the issue posed basically is whether the lower court prematurely assumed jurisdiction
over it. If the lower court indeed prematurely assumed jurisdiction over the case, then it becomes an error of
jurisdiction which is a proper subject of a petition for certiorari before the Court of Appeals. And if the lower court
does not have jurisdiction over the controversy, then any decision or order it may render may be annulled and
set aside by the appellate court.

However, the question of jurisdiction, which is a question of law depends on the determination of the existence
of the arbitration clause, which is a question of fact. In the instant case, the lower court found that there exists
an arbitration clause. However, it ruled that in contemplation of law, said arbitration clause does not exist.

The issue, therefore, posed before the Court of Appeals in a petition for certiorari is whether the Arbitration
Clause does not in fact exist. On its face, the the question is one of fact which is not proper in a petition
for certiorari.

The Court of Appeals found that an Arbitration Clause does in fact exist. In resolving said question of fact, the
Court of Appeals interpreted the construction of the subject contract documents containing the Arbitration Clause
in accordance with Republic Act No. 876 (Arbitration Law) and existing jurisprudence which will be extensively
discussed hereunder. In effect, the issue posed before the Court of Appeals was likewise a question of law.
Being a question of law, the private respondents rightfully invoked the special civil action of certiorari.

It is that mode of appeal taken by private respondents before the Court of Appeals that is being questioned by
the petitioners before this Court. But at the heart of said issue is the question of whether there exists an Arbitration
Clause because if an Arbitration Clause does not exist, then private respondents took the wrong mode of appeal
before the Court of Appeals.
For this Court to be able to resolve the question of whether private respondents took the proper mode of appeal,
which, incidentally, is a question of law, then it has to answer the core issue of whether there exists an Arbitration
Clause which, admittedly, is a question of fact.

Moreover, where a rigid application of the rule that certiorari cannot be a substitute for appeal will result in a
manifest failure or miscarriage of justice, the provisions of the Rules of Court which are technical rules may be
relaxed. 10 As we shall show hereunder, had the Court of Appeals dismissed the petition for certiorari, the issue
of whether or not an arbitration clause exists in the contract would not have been resolved in accordance with
evidence extant in the record of the case. Consequently, this would have resulted in a judicial rejection of a
contractual provision agreed by the parties to the contract.

In the same vein, this Court holds that the question of the existence of the arbitration clause in the contract
between petitioner and private respondents is a legal issue that must be determined in this petition for review
on certiorari.

Petitioner, while not denying that there exists an arbitration clause in the contract in question, asserts that in
contemplation of law there could not have been one considering the following points. First, the trial court found
that the "conditions of contract" embodying the arbitration clause is not duly signed by the parties. Second,
private respondents misrepresented before the Court of Appeals that they produced in the trial court a notarized
duplicate original copy of the construction agreement because what were submitted were mere photocopies
thereof. The contract(s) introduced in court by private respondents were therefore "of dubious authenticity"
because: (a) the Agreement for the Execution of Builder's Work for the EDSA Plaza Project does not contain an
arbitration clause, (b) private respondents "surreptitiously attached as Annexes "G-3" to "G-5" to their petition
before the Court of Appeals but these documents are not parts of the Agreement of the parties as "there was no
formal trade contract executed," (c) if the entire compilation of documents "is indeed a formal trade contract,"
then it should have been duly notarized, (d) the certification from the Records Management and Archives Office
dated August 26, 1993 merely states that "the notarial record of Nilberto Briones . . . is available in the files of
(said) office as Notarial Registry Entry only," (e) the same certification attests that the document entered in the
notarial registry pertains to the Articles of Agreement only without any other accompanying documents, and
therefore, it is not a formal trade contract, and (f) the compilation submitted by respondents are a "mere hodge-
podge of documents and do not constitute a single intelligible agreement."

In other words, petitioner denies the existence of the arbitration clause primarily on the ground that the
representatives of the contracting corporations did not sign the "Conditions of Contract" that contained the said
clause. Its other contentions, specifically that insinuating fraud as regards the alleged insertion of the arbitration
clause, are questions of fact that should have been threshed out below.

This Court may as well proceed to determine whether the arbitration clause does exist in the parties' contract.
Republic Act No. 876 provides for the formal requisites of an arbitration agreement as follows:

Sec. 4. Form of arbitration agreement. — A contract to arbitrate a controversy thereafter arising

between the parties, as well as a submission to arbitrate an existing controversy, shall be in writing
and subscribed by the party sought to be charged, or by his lawful agent.

The making of a contract or submission for arbitration described in section two hereof, providing
for arbitration of any controversy, shall be deemed a consent of the parties of the province or city
where any of the parties resides, to enforce such contract of submission. (Emphasis supplied.).

The formal requirements of an agreement to arbitrate are therefore the following: (a) it must be in writing and (b)
it must be subscribed by the parties or their representatives. There is no denying that the parties entered into a
written contract that was submitted in evidence before the lower court. To "subscribe" means to write underneath,
as one's name; to sign at the end of a document. 11 That word may sometimes be construed to mean to give
consent to or to attest.12

The Court finds that, upon a scrutiny of the records of this case, these requisites were complied with in the
contract in question. The Articles of Agreement, which incorporates all the other contracts and agreements
between the parties, was signed by representatives of both parties and duly notarized. The failure of the private
respondent's representative to initial the "Conditions of Contract" would therefor not affect compliance with the
formal requirements for arbitration agreements because that particular portion of the covenants between the
parties was included by reference in the Articles of Agreement.

Petitioner's contention that there was no arbitration clause because the contract incorporating said provision is
part of a "hodge-podge" document, is therefore untenable. A contract need not be contained in a single writing.
It may be collected from several different writings which do not conflict with each other and which, when
connected, show the parties, subject matter, terms and consideration, as in contracts entered into by
correspondence. 13 A contract may be encompassed in several instruments even though every instrument is not
signed by the parties, since it is sufficient if the unsigned instruments are clearly identified or referred to and
made part of the signed instrument or instruments. Similarly, a written agreement of which there are two copies,
one signed by each of the parties, is binding on both to the same extent as though there had been only one copy
of the agreement and both had signed it. 14

The flaw in petitioner's contentions therefore lies in its having segmented the various components of the whole
contract between the parties into several parts. This notwithstanding, petitioner ironically admits the execution
of the Articles of Agreement. Notably, too, the lower court found that the said Articles of Agreement "also provides
that the 'Contract Documents' therein listed 'shall be deemed an integral part of this Agreement,' and one of the
said documents is the 'Conditions of Contract' which contains the Arbitration Clause.'" It is this Articles of
Agreement that was duly signed by Rufo B. Colayco, president of private respondent SPI, and Bayani F.
Fernando, president of petitioner corporation. The same agreement was duly subscribed before notary public
Nilberto R. Briones. In other words, the subscription of the principal agreement effectively covered the other
documents incorporated by reference therein.

This Court likewise does not find that the Court of Appeals erred in ruling that private respondents were not in
default in invoking the provisions of the arbitration clause which states that "(t)he demand for arbitration shall be
made within a reasonable time after the dispute has arisen and attempts to settle amicably had failed." Under
the factual milieu, private respondent SPI should have paid its liabilities tinder the contract in accordance with its
terms. However, misunderstandings appeared to have cropped up between the parties ostensibly brought about
by either delay in the completion of the construction work or by force majeure or the fire that partially gutted the
project. The almost two-year delay in paying its liabilities may not therefore be wholly ascribed to private
respondent SPI.

Besides, private respondent SPI's initiative in calling for a conference between the parties was a step towards
the agreed resort to arbitration. However, petitioner posthaste filed the complaint before the lower court. Thus,
while private respondent SPI's request for arbitration on August 13, 1993 might appear an afterthought as it was
made after it had filed the motion to suspend proceedings, it was because petitioner also appeared to act hastily
in order to resolve the controversy through the courts.

The arbitration clause provides for a "reasonable time" within which the parties may avail of the relief under that
clause. "Reasonableness" is a relative term and the question of whether the time within which an act has to be
done is reasonable depends on attendant circumstances. 15 This Court finds that under the circumstances
obtaining in this case, a one-month period from the time the parties held a conference on July 12, 1993 until
private respondent SPI notified petitioner that it was invoking the arbitration clause, is a reasonable time. Indeed,
petitioner may not be faulted for resorting to the court to claim what was due it under the contract. However, we
find its denial of the existence of the arbitration clause as an attempt to cover up its misstep in hurriedly filing the
complaint before the lower court.

In this connection, it bears stressing that the lower court has not lost its jurisdiction over the case. Section 7 of
Republic Act No. 876 provides that proceedings therein have only been stayed. After the special proceeding of
arbitration 16 has been pursued and completed, then the lower court may confirm the award 17 made by the
arbitrator.

It should be noted that in this jurisdiction, arbitration has been held valid and constitutional. Even before the
approval on June 19, 1953 of Republic Act No. 876, this Court has countenanced the settlement of disputes
through arbitration. 18 Republic Act No. 876 was adopted to supplement the New Civil Code's provisions on
arbitration. 19 Its potentials as one of the alternative dispute resolution methods that are now rightfully vaunted
as "the wave of the future" in international relations, is recognized worldwide. To brush aside a contractual
agreement calling for arbitration in case of disagreement between the parties would therefore be a step
backward.

WHEREFORE, the questioned Decision of the Court of Appeals is hereby AFFIRMED and the petition
for certiorari DENIED. This Decision is immediately executory. Costs against petitioner.

SO ORDERED.
G.R. No. 132848-49 June 26, 2001
PHILROCK, INC., petitioner,
vs.
CONSTRUCTION INDUSTRY ARBITRATION COMMISSION and Spouses VICENTE and NELIA CID, respondents.
PANGANIBAN, J.:
Courts encourage the use of alternative methods of dispute resolution. When parties agree to settle their disputes
arising from or connected with construction contracts, the Construction Industry Arbitration Commission (CIAC)
acquires primary jurisdiction. It may resolve not only the merits of such controversies; when appropriate, it may
also award damages, interests, attorney’s fees and expenses of litigation.

The Case

Before us is a Petition for Review under Rule 45 of the Rules of Court. The Petition seeks the reversal of the
July 9, 1997 Decision1 and the February 24, 1998 Resolution of the Court of Appeals (CA) in the consolidated
cases docketed as CA-GR SP Nos. 39781 and 42443. The assailed Decision disposed as follows:

"WHEREFORE, judgment is hereby rendered DENYING the petitions and,

accordingly, AFFIRMING in toto the CIAC’s decision. Costs against petitioner."2

The assailed Resolution ruled in this wise:

"Considering that the matters raised and discussed in the motion for reconsideration filed by appellant’s
counsel are substantially the same arguments which the Court had passed upon and resolved in the
decision sought to be reconsidered, and there being no new issue raised, the subject motion is
hereby DENIED."3

The Facts

The undisputed facts of the consolidated cases are summarized by the CA as follows:

"On September 14, 1992, the Cid spouses, herein private respondents, filed a Complaint for damages
against Philrock and seven of its officers and engineers with the Regional Trial Court of Quezon City,
Branch 82.

"On December 7, 1993, the initial trial date, the trial court issued an Order dismissing the case and
referring the same to the CIAC because the Cid spouses and Philrock had filed an Agreement to Arbitrate
with the CIAC.

"Thereafter, preliminary conferences were held among the parties and their appointed arbitrators. At
these conferences, disagreements arose as to whether moral and exemplary damages and tort should
be included as an issue along with breach of contract, and whether the seven officers and engineers of
Philrock who are not parties to the Agreement to Arbitrate should be included in the arbitration
proceedings. No common ground could be reached by the parties, hence, on April 2, 1994, both the Cid
spouses and Philrock requested that the case be remanded to the trial court. On April 13, 1994, the CIAC
issued an Order stating, thus:

'x x x the Arbitral Tribunal hereby formally dismisses the above-captioned case for referral to
Branch 82 of the Regional Trial Court, Quezon City where it first originated.

SO ORDERED.'

"The Cid spouses then filed with said Branch of the Regional Trial Court of Quezon City a Motion To Set
Case for Hearing which motion was opposed by Philrock.

"On June 13, 1995, the trial court declared that it no longer had jurisdiction over the case and ordered
the records of the case to be remanded anew to the CIAC for arbitral proceedings.
 "Pursuant to the aforementioned Order of the Regional Trial C[o]urt of Quezon City, the CIAC resumed
conducting preliminary conferences. On August 21, 1995, herein [P]etitioner Philrock requested to
suspend the proceedings until the court clarified its ruling in the Order dated June 13, 1995. Philrock
argued that said Order was based on a mistaken premise that 'the proceedings in the CIAC fell through
because of the refusal of [Petitioner] Philrock to include the issue of damages therein,' whereas the true
reason for the withdrawal of the case from the CIAC was due to Philrock's opposition to the inclusion of
its seven officers and engineers, who did not give their consent to arbitration, as party defendants. On
the other hand, private respondent Nelia Cid manifested that she was willing to exclude the seven officers
and engineers of Philrock as parties to the case so as to facilitate or expedite the proceedings. With such
manifestation from the Cid spouses, the Arbitral Tribunal denied Philrock's request for the suspension of
the proceedings. Philrock's counsel agreed to the continuation of the proceedings but reserved the right
to file a pleading elucidating the position he [had] raised regarding the Court's Order dated June 13, 1995.
The parties then proceeded to finalize, approve and sign the Terms of Reference. Philrock's counsel and
representative, Atty. Pericles C. Consunji affixed his signature to said Terms of Reference which stated
that 'the parties agree that their differences be settled by an Arbitral Tribunal x x x x' (p. 9, Terms of
Reference, p. 200, Rollo).

"On September 12, 1995, [P]etitioner Philrock filed its Motion to Dismiss, alleging therein that the CIAC
had lost jurisdiction to hear the arbitration case due to the parties' withdrawal of their consent to arbitrate.
The motion was denied by x x x CIAC per Order dated September 22, 1995. On November 8, public
respondent ordered the parties to appear before it on November 28, 1995 for the continuation of the
arbitral proceedings, and on February 7, 1996, public respondent directed [P]etitioner Philrock to set two
hearing dates in the month of February to present its evidence and to pay all fees assessed by it,
otherwise x x x Philrock would be deemed to have waived its right to present evidence.

"Hence, petitioner instituted the petition for certiorari but while said petition was pending, the CIAC
rendered its Decision dated September 24, 1996, the dispositive portion of which reads, as follows:

'WHEREFORE, judgment is hereby rendered in favor of the Claimant, directing Respondent to pay
Claimant as follows:

1. P23,276.25 representing the excess cash payment for materials ordered by the Claimants, (No.
7 of admitted facts) plus interests thereon at the rate of 6% per annum from September 26, 1995
to the date payment is made.

2. P65,000.00 representing retrofitting costs.

3. P13,404.54 representing refund of the value of delivered but unworkable concrete mix that was
laid to waste.

4. P50,000.00 representing moral damages.

5. P50,000.00 representing nominal damages.

6. P50,000.00 representing attorney's fees and expenses of litigation.

7. P144,756.80 representing arbitration fees, minus such amount that may already have been
paid to CIAC by respondent.

"Let a copy of this Decision be furnished the Honorable Salvador C. Ceguera, presiding judge, Branch
82 of Regional Trial Court of Quezon City who referred this case to the Construction Industry Arbitration
Commission for arbitration and proper disposition.' (pp. 44-45, Rollo, CA-G.R. SP No. 42443) "4

Before the CA, petitioner filed a Petition for Review, docketed as CA-GR SP No. 42443, contesting the jurisdiction
of the CIAC and assailing the propriety of the monetary awards in favor of respondent spouses. This Petition
was consolidated by the CA with CA-GR SP No. 39781, a Petition for Certiorari earlier elevated by petitioner
questioning the jurisdiction of the CIAC.
Ruling of the Court of Appeals

The CA upheld the jurisdiction of the CIAC5 over the dispute between petitioner and private respondent. Under
Executive Order No. 1008, the CIAC acquires jurisdiction when the parties agree to submit their dispute to
voluntary arbitration. Thus, in the present case, its jurisdiction continued despite its April 13, 1994 Order referring
the case back to the Regional Trial Court (RTC) of Quezon City, Branch 82, the court of origin. The CIAC’s action
was based on the principle that once acquired, jurisdiction remains "until the full termination of the case unless
a law provides the contrary." No such "full termination" of the case was evident in the said Order; nor did the
CIAC or private respondents intend to put an end to the case.

Besides, according to Section 3 of the Rules of Procedure Governing Construction Arbitration, technical rules of
law or procedure are not applicable in a single arbitration or arbitral tribunal. Thus, the "dismissal" could not have
divested the CIAC of jurisdiction to ascertain the facts of the case, arrive at a judicious resolution of the dispute
and enforce its award or decision.

Since the issues concerning the monetary awards were questions of fact, the CA held that those awards were
inappropriate in a petition for certiorari. Such questions are final and not appealable according to Section 19 of
EO 1008, which provides that "arbitral awards shall be x x x final and [u]nappealable except on questions of law
which shall be appealable to the Supreme Court x x x." Nevertheless, the CA reviewed the records and found
that the awards were supported by substantial evidence. In matters falling under the field of expertise of quasi-
judicial bodies, their findings of fact are accorded great respect when supported by substantial evidence.

Hence, this Petition.6

Issues

The petitioner, in its Memorandum, raises the following issues:

"A.

Whether or not the CIAC could take jurisdiction over the case of Respondent Cid spouses against Petitioner
Philrock after the case had been dismissed by both the RTC and the CIAC.

"B.

Whether or not Respondent Cid spouses have a cause of action against Petitioner Philrock.

"C.

Whether or not the awarding of the amount of P23,276.75 for materials ordered by Respondent Spouses Cid
plus interest thereon at the rate of 6% from 26 September 1995 is proper.

"D.

Whether or not the awarding of the amount of P65,000.00 as retrofitting costs is proper.

"E.

Whether or not the awarding of the amount of P1,340,454 for the value of the delivered but the allegedly
unworkable concrete which was wasted is proper.

"F.

Whether or not the awarding o[f] moral and nominal damages and attorney's fees and expenses of litigation in
favor of respondents is proper.

"G.
Whether or not Petitioner Philrock should be held liable for the payment of arbitration fees." 7

In sum, petitioner imputes reversible error to the CA (1) for upholding the jurisdiction of the CIAC after the latter
had dismissed the case and referred it to the regular court, (2) for ruling that respondent spouses had a cause
of action against petitioner, and (3) for sustaining the award of damages.

This Court’s Ruling

The Petition has no merit.

First Issue:

Jurisdiction

Petitioner avers that the CIAC lost jurisdiction over the arbitration case after both parties had withdrawn their
consent to arbitrate. The June 13, 1995 RTC Order remanding the case to the CIAC for arbitration was allegedly
an invalid mode of referring a case for arbitration.

We disagree. Section 4 of Executive Order 1008 expressly vests in the CIAC original and exclusive jurisdiction
over disputes arising from or connected with construction contracts entered into by parties that have agreed to
submit their dispute to voluntary arbitration.8

It is undisputed that the parties submitted themselves to the jurisdiction of the Commission by virtue of their
Agreement to Arbitrate dated November 24, 1993. Signatories to the Agreement were Atty. Ismael J. Andres
and Perry Y. Uy (president of Philippine Rock Products, Inc.) for petitioner, and Nelia G. Cid and Atty. Esteban
A. Bautista for respondent spouses.9

Petitioner claims, on the other hand, that this Agreement was withdrawn by respondents on April 8, 1994,
because of the exclusion of the seven engineers of petitioners in the arbitration case. This withdrawal became
the basis for the April 13, 1994 CIAC Order dismissing the arbitration case and referring the dispute back to the
RTC. Consequently, the CIAC was divested of its jurisdiction to hear and decide the case.

This contention is untenable. First, private respondents removed the obstacle to the continuation of the
arbitration, precisely by withdrawing their objection to the exclusion of the seven engineers. Second, petitioner
continued participating in the arbitration even after the CIAC Order had been issued. It even concluded and
signed the Terms of Reference10 on August 21, 1995, in which the parties stipulated the circumstances leading
to the dispute; summarized their respective positions, issues, and claims; and identified the composition of the
tribunal of arbitrators. The document clearly confirms both parties’ intention and agreement to submit the dispute
to voluntary arbitration. In view of this fact, we fail to see how the CIAC could have been divested of its jurisdiction.

Finally, as pointed out by the solicitor general, petitioner maneuvered to avoid the RTC’s final resolution of the
dispute by arguing that the regular court also lost jurisdiction after the arbitral tribunal’s April 13, 1994 Order
referring the case back to the RTC. In so doing, petitioner conceded and estopped itself from further questioning
the jurisdiction of the CIAC. The Court will not countenance the effort of any party to subvert or defeat the
objective of voluntary arbitration for its own private motives. After submitting itself to arbitration proceedings and
actively participating therein, petitioner is estopped from assailing the jurisdiction of the CIAC, merely because
the latter rendered an adverse decision.11

Second Issue:

Cause of Action

Petitioner contends that respondent spouses were negligent in not engaging the services of an engineer or
architect who should oversee their construction, in violation of Section 308 of the National Building Code. It adds
that even if the concrete it delivered was defective, respondent spouses should bear the loss arising from their
illegal operation. In short, it alleges that they had no cause of action against it.
We disagree. Cause of action is defined as an act or omission by which a party violates the right of another.12 A
complaint is deemed to have stated a cause of action provided it has indicated the following: (1) the legal right
of the plaintiff, (2) the correlative obligation of the defendant, and (3) the act or the omission of the defendant in
violation of the said legal right.13 The cause of action against petitioner was clearly established. Respondents
were purchasers of ready-mix concrete from petitioner. The concrete delivered by the latter turned out to be of
substandard quality. As a result, respondents sustained damages when the structures they built using such
cement developed cracks and honeycombs. Consequently, the construction of their residence had to be stopped.

Further, the CIAC Decision clearly spelled out respondents’ cause of action against petitioner, as follows:

"Accordingly, this Tribunal finds that the mix was of the right proportions at the time it left the plant. This,
however, does not necessarily mean that all of the concrete mix delivered had remained workable when
it reached the jobsite. It should be noted that there is no evidence to show that all the transit mixers
arrived at the site within the allowable time that would ensure the workability of the concrete mix delivered.

"On the other hand, there is sufficiently strong evidence to show that difficulties were encountered in the
pouring of concrete mix from certain transit mixers necessitating the [addition] of water and physically
pushing the mix, obviously because the same [was] no longer workable. This Tribunal holds that the
unworkability of said concrete mix has been firmly established.

"There is no dispute, however, to the fact that there are defects in some areas of the poured structures.
In this regard, this Tribunal holds that the only logical reason is that the unworkable concrete was the one
that was poured in the defective sections."14

Third Issue:

Monetary Awards

Petitioner assails the monetary awards given by the arbitral tribunal for alleged lack of basis in fact and in law.
The solicitor general counters that the basis for petitioner’s assigned errors with regard to the monetary awards
is purely factual and beyond the review of this Court. Besides, Section 19, EO 1008, expressly provides that
monetary awards by the CIAC are final and unappealable.

We disagree with the solicitor general. As pointed out earlier, factual findings of quasi-judicial bodies that have
acquired expertise are generally accorded great respect and even finality, if they are supported by substantial
evidence.15 The Court, however, has consistently held that despite statutory provisions making the decisions of
certain administrative agencies "final," it still takes cognizance of petitions showing want of jurisdiction, grave
abuse of discretion, violation of due process, denial of substantial justice or erroneous interpretation of the
law.16 Voluntary arbitrators, by the nature of their functions, act in a quasi-judicial capacity, such that their
decisions are within the scope of judicial review.17

Petitioner protests the award to respondent spouses of P23,276.25 as excess payment with six percent interest
beginning September 26, 1995. It alleges that this item was neither raised as an issue by the parties during the
arbitration case, nor was its justification discussed in the CIAC Decision. It further contends that it could not be
held liable for interest, because it had earlier tendered a check in the same amount to respondent spouses, who
refused to receive it.

Petitioner’s contentions are completely untenable. Respondent Nelia G. Cid had already raised the issue of
overpayment even prior to the formal arbitration. In paragraph 9 of the Terms of Reference, she stated:

"9. Claimants were assured that the problem and her demands had been the subject of several staff
meetings and that Arteche was very much aware of it, a memorandum having been submitted citing all
the demands of [c]laimants. This assurance was made on July 31, 1992 when Respondents Secillano,
Martillano and Lomibao came to see Claimant Nelia Cid and offered to refund P23,276.25, [t]he
difference between the billing by Philrock’s Marketing Department in the amount of P125,586.25 and the
amount charged by Philrock's Batching Plant Department in the amount of only P102,586.25, which
[c]laimant refused to accept by saying, ‘Saka na lang’."18
The same issue was discussed during the hearing before the arbitration tribunal on December 19, 1995.19 It was
also mentioned in that tribunal’s Decision dated September 24, 1996.20

The payment of interest is based on Article 2209 of the Civil Code, which provides that if the obligation consists
of the payment of a sum of money, and the debtor incurs delay, the indemnity for damages shall be the payment
of legal interest which is six per cent per annum, in the absence of a stipulation of the rate.

Awards for Retrofitting Costs, Wasted Unworkable

But Delivered Concrete, and Arbitration Fees

Petitioner maintains that the defects in the concrete structure were due to respondent spouses’ failure to secure
the services of an engineer or architect to supervise their project. Hence, it claims that the award for retrofitting
cost was without legal basis. It also denies liability for the wasted unworkable but delivered concrete, for which
the arbitral court awarded P13,404.54. Finally, it complains against the award of litigation expenses, inasmuch
as the case should not have been instituted at all had respondents complied with the requirements of the National
Building Code.

We are unconvinced. Not only did respondents disprove the contention of petitioner; they also showed that they
sustained damages due to the defective concrete it had delivered. These were items of actual damages they
sustained due to its breach of contract.

Moral and Nominal Damages, Attorney’s Fees and Costs

Petitioner assails the award of moral damages, claiming no malice or bad faith on its part.

We disagree. Respondents were deprived of the comfort and the safety of a house and were exposed to the
agony of witnessing the wastage and the decay of the structure for more than seven years. In her Memorandum,
Respondent Nelia G. Cid describes her family’s sufferings arising from the unreasonable delay in the
construction of their residence, as follows: "The family lives separately for lack of space to stay in. Mrs. Cid is
staying in a small dingy bodega, while her son occupies another makeshift room. Their only daughter stayed
with her aunt from 1992 until she got married in 1996. x x x."21 The Court also notes that during the pendency of
the case, Respondent Vicente Cid died without seeing the completion of their home.22 Under the circumstances,
the award of moral damages is proper.

Petitioner also contends that nominal damages should not have been granted, because it did not breach its
obligation to respondent spouses.

Nominal damages are recoverable only if no actual or substantial damages resulted from the breach, or no
damage was or can be shown.23 Since actual damages have been proven by private respondents for which they
were amply compensated, they are no longer entitled to nominal damages.

Petitioner protests the grant of attorney’s fees, arguing that respondent spouses did not engage the services of
legal counsel. Also, it contends that attorney’s fees and litigation expenses are awarded only if the opposing
party acted in gross and evident bad faith in refusing to satisfy plaintiff’s valid, just and demandable claim.

We disagree. The award is not only for attorney’s fees, but also for expenses of litigation. Hence, it does not
matter if respondents represented themselves in court, because it is obvious that they incurred expenses in
pursuing their action before the CIAC, as well as the regular and the appellate courts. We find no reason to
disturb this award.1âwphi1.nêt

WHEREFORE, the Petition is DENIED and the assailed Decision AFFIRMED; however, the award of nominal
damages is DELETED for lack of legal basis. Costs against petitioner.

SO ORDERED.
G. R. No. 141833 - March 26, 2003
LM POWER ENGINEERING CORPORATION, Petitioner, vs. CAPITOL INDUSTRIAL CONSTRUCTION GROUPS,
INC., Respondent.
PANGANIBAN, J.:
Alternative dispute resolution methods or ADRs -- like arbitration, mediation, negotiation and conciliation -- are
encouraged by the Supreme Court. By enabling parties to resolve their disputes amicably, they provide solutions
that are less time-consuming, less tedious, less confrontational, and more productive of goodwill and lasting
relationships.1

The Case

Before us is a Petition for Review on Certiorari2 under Rule 45 of the Rules of Court, seeking to set aside the
January 28, 2000 Decision of the Court of Appeals3 (CA) in CA-GR CV No. 54232. The dispositive portion of the
Decision reads as follows:

"WHEREFORE, the judgment appealed from is REVERSED and SET ASIDE. The parties are ORDERED to
present their dispute to arbitration in accordance with their Sub-contract Agreement. The surety bond posted by
[respondent] is [d]ischarged."4

The Facts

On February 22, 1983, Petitioner LM Power Engineering Corporation and Respondent Capitol Industrial
Construction Groups Inc. entered into a "Subcontract Agreement" involving electrical work at the Third Port of
Zamboanga.5

On April 25, 1985, respondent took over some of the work contracted to petitioner. 6 Allegedly, the latter had
failed to finish it because of its inability to procure materials.7

Upon completing its task under the Contract, petitioner billed respondent in the amount of
P6,711,813.90.8 Contesting the accuracy of the amount of advances and billable accomplishments listed by the
former, the latter refused to pay. Respondent also took refuge in the termination clause of the Agreement.9 That
clause allowed it to set off the cost of the work that petitioner had failed to undertake -- due to termination or
take-over -- against the amount it owed the latter.

Because of the dispute, petitioner filed with the Regional Trial Court (RTC) of Makati (Branch 141) a
Complaint10 for the collection of the amount representing the alleged balance due it under the Subcontract.
Instead of submitting an Answer, respondent filed a Motion to Dismiss,11 alleging that the Complaint was
premature, because there was no prior recourse to arbitration.

In its Order12 dated September 15, 1987, the RTC denied the Motion on the ground that the dispute did not
involve the interpretation or the implementation of the Agreement and was, therefore, not covered by the arbitral
clause.13

After trial on the merits, the RTC14 ruled that the take-over of some work items by respondent was not equivalent
to a termination, but a mere modification, of the Subcontract. The latter was ordered to give full payment for the
work completed by petitioner.

Ruling of the Court of Appeals

On appeal, the CA reversed the RTC and ordered the referral of the case to arbitration. The appellate court held
as arbitrable the issue of whether respondents take-over of some work items had been intended to be a
termination of the original contract under Letter "K" of the Subcontract. It ruled likewise on two other issues:
whether petitioner was liable under the warranty clause of the Agreement, and whether it should reimburse
respondent for the work the latter had taken over.15

Hence, this Petition.16

The Issues
In its Memorandum, petitioner raises the following issues for the Courts consideration:

"A

Whether or not there exist[s] a controversy/dispute between petitioner and respondent regarding the
interpretation and implementation of the Sub-Contract Agreement dated February 22, 1983 that requires prior
recourse to voluntary arbitration;

"B

In the affirmative, whether or not the requirements provided in Article III 1 of CIAC Arbitration Rules regarding
request for arbitration ha[ve] been complied with[.]"17

The Courts Ruling

The Petition is unmeritorious.

First Issue:
Whether Dispute Is Arbitrable

Petitioner claims that there is no conflict regarding the interpretation or the implementation of the Agreement.
Thus, without having to resort to prior arbitration, it is entitled to collect the value of the services it rendered
through an ordinary action for the collection of a sum of money from respondent. On the other hand, the latter
contends that there is a need for prior arbitration as provided in the Agreement. This is because there are some
disparities between the parties positions regarding the extent of the work done, the amount of advances and
billable accomplishments, and the set off of expenses incurred by respondent in its take-over of petitioners work.

We side with respondent. Essentially, the dispute arose from the parties ncongruent positions on whether certain
provisions of their Agreement could be applied to the facts. The instant case involves technical discrepancies
that are better left to an arbitral body that has expertise in those areas. In any event, the inclusion of an arbitration
clause in a contract does not ipso facto divest the courts of jurisdiction to pass upon the findings of arbitral
bodies, because the awards are still judicially reviewable under certain conditions.18

In the case before us, the Subcontract has the following arbitral clause:

"6. The Parties hereto agree that any dispute or conflict as regards to interpretation and implementation of this
Agreement which cannot be settled between [respondent] and [petitioner] amicably shall be settled by means of
arbitration x x x."19

Clearly, the resolution of the dispute between the parties herein requires a referral to the provisions of their
Agreement. Within the scope of the arbitration clause are discrepancies as to the amount of advances and
billable accomplishments, the application of the provision on termination, and the consequent set-off of
expenses.

A review of the factual allegations of the parties reveals that they differ on the following questions: (1) Did a take-
over/termination occur? (2) May the expenses incurred by respondent in the take-over be set off against the
amounts it owed petitioner? (3) How much were the advances and billable accomplishments?

The resolution of the foregoing issues lies in the interpretation of the provisions of the Agreement. According to
respondent, the take-over was caused by petitioners delay in completing the work. Such delay was in violation
of the provision in the Agreement as to time schedule:

"G. TIME SCHEDULE

"[Petitioner] shall adhere strictly to the schedule related to the WORK and complete the WORK within the period
set forth in Annex C hereof. NO time extension shall be granted by [respondent] to [petitioner] unless a
corresponding time extension is granted by [the Ministry of Public Works and Highways] to the CONSORTIUM." 20
Because of the delay, respondent alleges that it took over some of the work contracted to petitioner, pursuant to
the following provision in the Agreement:

"K. TERMINATION OF AGREEMENT

"[Respondent] has the right to terminate and/or take over this Agreement for any of the following causes:

xxx-xxx-xxx

6. If despite previous warnings by [respondent], [petitioner] does not execute the WORK in accordance with this
Agreement, or persistently or flagrantly neglects to carry out [its] obligations under this Agreement."21

Supposedly, as a result of the "take-over," respondent incurred expenses in excess of the contracted price. It
sought to set off those expenses against the amount claimed by petitioner for the work the latter accomplished,
pursuant to the following provision:

"If the total direct and indirect cost of completing the remaining part of the WORK exceed the sum which would
have been payable to [petitioner] had it completed the WORK, the amount of such excess [may be] claimed by
[respondent] from either of the following:

1. Any amount due [petitioner] from [respondent] at the time of the termination of this Agreement." 22

The issue as to the correct amount of petitioners advances and billable accomplishments involves an evaluation
of the manner in which the parties completed the work, the extent to which they did it, and the expenses each of
them incurred in connection therewith. Arbitrators also need to look into the computation of foreign and local
costs of materials, foreign and local advances, retention fees and letters of credit, and taxes and duties as set
forth in the Agreement. These data can be gathered from a review of the Agreement, pertinent portions of which
are reproduced hereunder:

"C. CONTRACT PRICE AND TERMS OF PAYMENT

xxx-xxx-xxx

"All progress payments to be made by [respondent] to [petitioner] shall be subject to a retention sum of ten
percent (10%) of the value of the approved quantities. Any claims by [respondent] on [petitioner] may be
deducted by [respondent] from the progress payments and/or retained amount. Any excess from the retained
amount after deducting [respondents] claims shall be released by [respondent] to [petitioner] after the issuance
of [the Ministry of Public Works and Highways] of the Certificate of Completion and final acceptance of the WORK
by [the Ministry of Public Works and Highways].

xxx-xxx-xxx

"D. IMPORTED MATERIALS AND EQUIPMENT

"[Respondent shall open the letters of credit for the importation of equipment and materials listed in Annex E
hereof after the drawings, brochures, and other technical data of each items in the list have been formally
approved by [the Ministry of Public Works and Highways]. However, petitioner will still be fully responsible for all
imported materials and equipment.

"All expenses incurred by [respondent], both in foreign and local currencies in connection with the opening of the
letters of credit shall be deducted from the Contract Prices.

xxx-xxx-xxx

"N. OTHER CONDITIONS

xxx-xxx-xxx
"2. All customs duties, import duties, contractors taxes, income taxes, and other taxes that may be required by
any government agencies in connection with this Agreement shall be for the sole account of [petitioner]." 23

Being an inexpensive, speedy and amicable method of settling disputes,24 arbitration -- along with mediation,
conciliation and negotiation -- is encouraged by the Supreme Court. Aside from unclogging judicial dockets,
arbitration also hastens the resolution of disputes, especially of the commercial kind.25 It is thus regarded as the
"wave of the future" in international civil and commercial disputes.26 Brushing aside a contractual agreement
calling for arbitration between the parties would be a step backward.27

Consistent with the above-mentioned policy of encouraging alternative dispute resolution methods, courts should
liberally construe arbitration clauses. Provided such clause is susceptible of an interpretation that covers the
asserted dispute, an order to arbitrate should be granted.28 Any doubt should be resolved in favor of arbitration.29

Second Issue:
Prior Request for Arbitration

According to petitioner, assuming arguendo that the dispute is arbitrable, the failure to file a formal request for
arbitration with the Construction Industry Arbitration Commission (CIAC) precluded the latter from acquiring
jurisdiction over the question. To bolster its position, petitioner even cites our ruling in Tesco Services
Incorporated v. Vera.30 We are not persuaded.

Section 1 of Article II of the old Rules of Procedure Governing Construction Arbitration indeed required the
submission of a request for arbitration, as follows:

"SECTION. 1. Submission to Arbitration -- Any party to a construction contract wishing to have recourse to
arbitration by the Construction Industry Arbitration Commission (CIAC) shall submit its Request for Arbitration in
sufficient copies to the Secretariat of the CIAC; PROVIDED, that in the case of government construction
contracts, all administrative remedies available to the parties must have been exhausted within 90 days from the
time the dispute arose."

Tesco was promulgated by this Court, using the foregoing provision as reference.

On the other hand, Section 1 of Article III of the new Rules of Procedure Governing Construction Arbitration has
dispensed with this requirement and recourse to the CIAC may now be availed of whenever a contract "contains
a clause for the submission of a future controversy to arbitration," in this wise:

"SECTION 1. Submission to CIAC Jurisdiction An arbitration clause in a construction contract or a submission

to arbitration of a construction dispute shall be deemed an agreement to submit an existing or future controversy
to CIAC jurisdiction, notwithstanding the reference to a different arbitration institution or arbitral body in such
contract or submission. When a contract contains a clause for the submission of a future controversy to
arbitration, it is not necessary for the parties to enter into a submission agreement before the claimant may
invoke the jurisdiction of CIAC."

The foregoing amendments in the Rules were formalized by CIAC Resolution Nos. 2-91 and 3-93.31

The difference in the two provisions was clearly explained in China Chang Jiang Energy Corporation
(Philippines) v. Rosal Infrastructure Builders et al.32 (an extended unsigned Resolution) and reiterated in National
Irrigation Administration v. Court of Appeals,33 from which we quote thus:

"Under the present Rules of Procedure, for a particular construction contract to fall within the jurisdiction of CIAC,
it is merely required that the parties agree to submit the same to voluntary arbitration Unlike in the original version
of Section 1, as applied in the Tesco case, the law as it now stands does not provide that the parties should
agree to submit disputes arising from their agreement specifically to the CIAC for the latter to acquire jurisdiction
over the same. Rather, it is plain and clear that as long as the parties agree to submit to voluntary arbitration,
regardless of what forum they may choose, their agreement will fall within the jurisdiction of the CIAC, such that,
even if they specifically choose another forum, the parties will not be precluded from electing to submit their
dispute before the CIAC because this right has been vested upon each party by law, i.e., E.O. No. 1008." 34
Clearly, there is no more need to file a request with the CIAC in order to vest it with jurisdiction to decide a
construction dispute.

The arbitral clause in the Agreement is a commitment on the part of the parties to submit to arbitration the
disputes covered therein. Because that clause is binding, they are expected to abide by it in good faith. 35 And
because it covers the dispute between the parties in the present case, either of them may compel the other to
arbitrate.36

Since petitioner has already filed a Complaint with the RTC without prior recourse to arbitration, the proper
procedure to enable the CIAC to decide on the dispute is to request the stay or suspension of such action, as
provided under RA 876 [the Arbitration Law].37

WHEREFORE, the Petition is DENIED and the assailed Decision AFFIRMED. Costs against petitioner.

SO ORDERED.
G.R. No. 152878 : May 5, 2003
RIZAL COMMERCIAL BANKING CORPORATION, Petitioner, v. MAGWIN MARKETING CORPORATION, NELSON TIU,
BENITO SY and ANDERSON UY, Respondents.
DECISION
BELLOSILLO, J.:
WE ARE PERTURBED that this case should drag this Court in the banal attempts to decipher the hazy and
confused intent of the trial court in proceeding with what would have been a simple, straightforward and hardly
arguable collection case. Whether the dismissal without prejudice for failure to prosecute was unconditionally
reconsidered, reversed and set aside to reinstate the civil case and have it ready for pre-trial are matters which
should have been clarified and resolved in the first instance by the court a quo. Unfortunately, this feckless
imprecision of the trial court became the soup stock of the parties and their lawyers to further delay the case
below when they could have otherwise put things in proper order efficiently and effectively.

On 4 March 1999 petitioner Rizal Commercial Banking Corporation (RCBC) filed a complaint for recovery of a
sum of money with prayer for a writ of preliminary attachment against respondents Magwin Marketing
Corporation, Nelson Tiu, Benito Sy and Anderson Uy.1 On 26 April 1999, the trial court issued a writ of
attachment. 2 On 4 June 1999 the writ was returned partially satisfied since only a parcel of land purportedly
owned by defendant Benito Sy was attached.3 In the meantime, summons was served on each of the defendants,
respondents herein, who filed their respective answers, except for defendant Gabriel Cheng who was dropped
without prejudice as party-defendant as his whereabouts could not be located.4 On 21 September 1999 petitioner
moved for an alias writ of attachment which on 18 January 2000 the court a quo denied.5cräläwvirtualibräry

Petitioner did not cause the case to be set for pre-trial.6 For about six (6) months thereafter, discussions between
petitioner and respondents Magwin Marketing Corporation, Nelson Tiu, Benito Sy and Anderson Uy, as parties
in Civil Case No. 99-518, were undertaken to restructure the indebtedness of respondent Magwin Marketing
Corporation.7 On 9 May 2000 petitioner approved a debt payment scheme for the corporation which on 15 May
2000 was communicated to the latter by means of a letter dated 10 May 2000 for the conformity of its officers,
i.e., respondent Nelson Tiu as President/General Manager of Magwin Marketing Corporation and respondent
Benito Sy as Director thereof.8 Only respondent Nelson Tiu affixed his signature on the letter to signify his
agreement to the terms and conditions of the restructuring.9cräläwvirtualibräry

On 20 July 2000 the RTC of Makati City, on its own initiative, issued an Order dismissing without prejudice Civil
Case No. 99-518 for failure of petitioner as plaintiff therein to prosecute its action for an unreasonable length of
time x x x.10 On 31 July 2000 petitioner moved for reconsideration of the Order by informing the trial court of
respondents unremitting desire to settle the case amicably through a loan restructuring program.11 On 22 August
2000 petitioner notified the trial court of the acquiescence thereto of respondent Nelson Tiu as an officer of
Magwin Marketing Corporation and defendant in the civil case.12cräläwvirtualibräry

On 8 September 2000 the court a quo issued an Order reconsidering the dismissal without prejudice of Civil
Case No. 99-518

Acting on plaintiffs Motion for Reconsideration of the Order dated 20 July 2000 dismissing this case for failure to
prosecute, it appearing that there was already conformity to the restructuring of defendants indebtedness with
plaintiff by defendant Nelson Tiu, President of defendant corporation per Manifestation and Motion filed by
plaintiff on 22 August 2000, there being probability of settlement among the parties, as prayed for, the Order
dated 20 July 2000 is hereby set aside.

Plaintiff is directed to submit the compromise agreement within 15 days from receipt hereof. Failure on the part
of plaintiff to submit the said agreement shall cause the imposition of payment of the required docket fees for re-
filing of this case.13cräläwvirtualibräry

On 27 July 2000 petitioner filed in Civil Case No. 99-518 a Manifestation and Motion to Set Case for Pre-Trial
Conference alleging that [t]o date, only defendant Nelson Tiu had affixed his signature on the May 10, 2000 letter
which informed the defendants that plaintiff [herein petitioner] already approved defendant Magwin Marketing
Corporations request for restructuring of its loan obligations to plaintiff but subject to the terms and conditions
specified in said letter.14 This motion was followed on 5 October 2000 by petitioners Supplemental Motion to
Plaintiffs Manifestation and Motion to Set Case for Pre-Trial Conference affirming that petitioner could not submit
a compromise agreement because only defendant Nelson Tiu had affixed his signature on the May 10, 2000
letter x x x.15 Respondent Anderson Uy opposed the foregoing submissions of petitioner while respondents
Magwin Marketing Corporation, Nelson Tiu and Benito Sy neither contested nor supported
them.16cräläwvirtualibräry

The trial court, in an undated Order (although a date was later inserted in the Order), denied petitioners motion
to calendar Civil Case No. 99-518 for pre-trial stating that -

Acting on plaintiffs [herein petitioner] Manifestation and Motion to Set Case for Pre-Trial Conference, the
Opposition filed by defendant Uy and the subsequent Supplemental Motion filed by plaintiff; defendant Uys
Opposition, and plaintiffs Reply; for failure of the plaintiff to submit a compromise agreement pursuant to the
Order dated 8 September 2000 plaintiffs motion to set case for pre-trial conference is hereby
denied.17cräläwvirtualibräry

On 15 November 2000 petitioner filed its Notice of Appeal from the 8 September 2000 Order of the trial court as
well as its undated Order in Civil Case No. 99-518. On 16 November 2000 the trial court issued two (2) Orders,
one of which inserted the date 6 November 2000 in the undated Order rejecting petitioners motion for pre-trial in
the civil case, and the other denying due course to the Notice of Appeal on the ground that the Orders dated 8
September 2000 and 6 November 2000 are interlocutory orders and therefore, no appeal may be taken x x
x.18cräläwvirtualibräry

On 7 December 2000 petitioner elevated the Orders dated 8 September 2000, 6 November 2000 and 16
November 2000 of the trial court to the Court of Appeals in a petition for certiorari under Rule 65 of the Rules of
Civil Procedure.19 In the main, petitioner argued that the court a quo had no authority to compel the parties in
Civil Case No. 99-518 to enter into an amicable settlement nor to deny the holding of a pre-trial conference on
the ground that no compromise agreement was turned over to the court a quo.20cräläwvirtualibräry

On 28 September 2001 the appellate court promulgated its Decision dismissing the petition for lack of merit and
affirming the assailed Orders of the trial court21 holding that -

x x x although the language of the September 8, 2000 Order may not be clear, yet, a careful reading of the same
would clearly show that the setting aside of the Order dated July 20, 2000 which dismissed petitioners complaint
x x x for failure to prosecute its action for an unreasonable length of time is dependent on the following conditions,
to wit: a) The submission of the compromise agreement by petitioner within fifteen (15) days from notice; and b)
Failure of petitioner to submit the said compromise agreement shall cause the imposition of the payment of the
required docket fees for the re-filing of the case; so much so that the non-compliance by petitioner of condition
no. 1 would make condition no. 2 effective, especially that petitioners manifestation and motion to set case for
pre-trial conference and supplemental motion x x x [were] denied by the respondent judge in his Order dated
November 6, 2000, which in effect means that the Order dated July 20, 2000 was ultimately not set aside
considering that a party need not pay docket fees for the re-filing of a case if the original case has been revived
and reinstated.22cräläwvirtualibräry

On 2 April 2002 reconsideration of the Decision was denied; hence, this petition.

In the instant case, petitioner maintains that the trial court cannot coerce the parties in Civil Case No. 99-518 to
execute a compromise agreement and penalize their failure to do so by refusing to go forward with the pre-trial
conference. To hold otherwise, so petitioner avers, would violate Art. 2029 of the Civil Code which provides that
[t]he court shall endeavor to persuade the litigants in a civil case to agree upon some fair compromise, and this
Courts ruling in Goldloop Properties, Inc. v. Court of Appeals23 where it was held that the trial court cannot
dismiss a complaint for failure of the parties to submit a compromise agreement.

On the other hand, respondent Anderson Uy filed his comment after several extensions asserting that there are
no special and important reasons for undertaking this review. He also alleges that petitioners attack is limited to
the Order dated 8 September 2000 as to whether it is conditional as the Court of Appeals so found and the
applicability to this case of the ruling in Goldloop Properties, Inc. v. Court of Appeals. Respondent Uy claims that
the Order reconsidering the dismissal of Civil Case No. 99-518 without prejudice is on its face contingent upon
the submission of the compromise agreement which in the first place was the principal reason of petitioner to
justify the withdrawal of the Order declaring his failure to prosecute the civil case. He further contends that the
trial court did not force the parties in the civil case to execute a compromise agreement, the truth being that it
dismissed the complaint therein for petitioners dereliction.

Finally, respondent Uy contests the relevance of Goldloop Properties, Inc. v. Court of Appeals, and refers to its
incongruence with the instant case, i.e., that the complaint of petitioner was dismissed for failure to prosecute
and not for its reckless disregard to present an amicable settlement as was the situation in Goldloop Properties,
Inc., and that the dismissal was without prejudice, in contrast with the dismissal with prejudice ordered in the
cited case. For their part, respondents Magwin Marketing Corporation, Nelson Tiu and Benito Sy waived their
right to file a comment on the instant petition and submitted the same for resolution of this
Court.24cräläwvirtualibräry

The petition of Rizal Commercial Banking Corporation is meritorious. It directs our attention to questions of
substance decided by the courts a quo plainly in a way not in accord with applicable precedents as well as the
accepted and usual course of judicial proceedings; it offers special and important reasons that demand the
exercise of our power of supervision and review. Furthermore, petitioners objections to the proceedings below
encompass not only the Order of 8 September 2000 but include the cognate Orders of the trial court of 6 and 16
November 2000. This is evident from the prayer of the instant petition which seeks to reverse and set aside
the Decision of the appellate court and to direct the trial court to proceed with the pre-trial conference in Civil
Case No. 99-518. Evidently, the substantive issue involved herein is whether the proceedings in the civil case
should progress, a question which at bottom embroils all the Orders affirmed by the Court of Appeals.

On the task at hand, we see no reason why RTC-Br. 135 of Makati City should stop short of hearing the civil
case on the merits. There is no substantial policy worth pursuing by requiring petitioner to pay again the docket
fees when it has already discharged this obligation simultaneously with the filing of the complaint for collection
of a sum of money. The procedure for dismissed cases when re-filed is the same as though it was initially lodged,
i.e., the filing of answer, reply, answer to counter-claim, including other foot-dragging maneuvers, except for the
rigmarole of raffling cases which is dispensed with since the re-filed complaint is automatically assigned to the
branch to which the original case pertained.25 A complaint that is re-filed leads to the re-enactment of past
proceedings with the concomitant full attention of the same trial court exercising an immaculate slew of
jurisdiction and control over the case that was previously dismissed,26 which in the context of the instant case is
a waste of judicial time, capital and energy.

What judicial benefit do we derive from starting the civil case all over again, especially where three (3) of the four
(4) defendants, i.e., Magwin Marketing Corporation, Nelson Tiu and Benito Sy, have not contested petitioners
plea before this Court and the courts a quo to advance to pre-trial conference? Indeed, to continue hereafter
with the resolution of petitioners complaint without the usual procedure for the re-filing thereof, we will save the
court a quo invaluable time and other resources far outweighing the docket fees that petitioner would be forfeiting
should we rule otherwise.

Going over the specifics of this petition and the arguments of respondent Anderson Uy, we rule that the Order of
8 September 2000 did not reserve conditions on the reconsideration and reversal of the Order dismissing without
prejudice Civil Case No. 99-518. This is quite evident from its text which does not use words to signal an intent
to impose riders on the dispositive portion -

Acting on plaintiffs Motion for Reconsideration of the Order dated 20 July 2000 dismissing this case for failure to
prosecute, it appearing that there was already conformity to the restructuring of defendants indebtedness with
plaintiff by defendant Nelson Tiu, President of defendant corporation per Manifestation and Motion filed by
plaintiff on 22 August 2000, there being probability of settlement among the parties, as prayed for, the Order
dated 20 July 2000 is hereby set aside.

Plaintiff is directed to submit the compromise agreement within 15 days from receipt hereof. Failure on the part
of plaintiff to submit the said agreement shall cause the imposition of payment of the required docket fees for re-
filing of this case.27cräläwvirtualibräry

Contrary to respondent Uys asseverations, the impact of the second paragraph upon the first is simply to illustrate
what the trial court would do after setting aside the dismissal without prejudice: submission of the compromise
agreement for the consideration of the trial court. Nothing in the second paragraph do we read that the
reconsideration is subject to two (2) qualifications. Certainly far from it, for in Goldloop Properties, Inc. v. Court
of Appeals28 a similar directive, i.e., [t]he parties are given a period of fifteen (15) days from today within which
to submit a Compromise Agreement, was held to mean that should the parties fail in their negotiations the
proceedings would continue from where they left off. Goldloop Properties, Inc. further said that its order, or a
specie of it, did not constitute an agreement or even an expectation of the parties that should they fail to settle
their differences within the stipulated number of days their case would be dismissed.

The addition of the second sentence in the second paragraph does not change the absolute nullification of the
dismissal without prejudice decreed in the first paragraph. The sentence [f]ailure on the part of plaintiff to submit
the said agreement shall cause the imposition of payment of the required docket fees for re-filing of this case is
not a directive to pay docket fees but only a statement of the event that may result in its imposition. The reason
for this is that the trial court could not have possibly made such payment obligatory in the same civil case, i.e.,
Civil Case No. 99-518, since docket fees are defrayed only after the dismissal becomes final and executory and
when the civil case is re-filed.

It must be emphasized however that once the dismissal attains the attribute of finality, the trial court cannot
impose legal fees anew because a final and executory dismissal although without prejudice divests the trial court
of jurisdiction over the civil case as well as any residual power to order anything relative to the dismissed case;
it would have to wait until the complaint is docketed once again.29 On the other hand, if we are to concede that
the trial court retains jurisdiction over Civil Case No. 99-518 for it to issue the assailed Orders, a continuation of
the hearing thereon would not trigger a disbursement for docket fees on the part of petitioner as this would
obviously imply the setting aside of the order of dismissal and the reinstatement of the complaint.

Indubitably, it is speculative to reckon the effectivity of the Order of dismissal without prejudice to the
presentation of the compromise agreement. If we are to admit that the efficacy of the invalidation of the Order of
dismissal is dependent upon this condition, then we must inquire: from what date do we count the fifteen (15)-
day reglementary period within which the alleged revival of the order of dismissal began to run? Did it commence
from the lapse of the fifteen (15) days provided for in the Order of 8 September 2000? Or do we count it from the
6 November 2000 Order when the trial court denied the holding of a pre-trial conference? Or must it be upon
petitioners receipt of the 16 November 2000 Order denying due course to its Notice of Appeal? The court a
quo could not have instituted an Order that marked the proceedings before it with a shadow of instability and
chaos rather than a semblance of constancy and firmness.

The subsequent actions of the trial court also belie an intention to revive the Order of dismissal without prejudice
in the event that petitioner fails to submit a compromise agreement. The Orders of 6 and 16 November 2000
plainly manifest that it was retaining jurisdiction over the civil case, a fact which would not have been possible
had the dismissal without prejudice been resuscitated. Surely, the court a quo could not have denied on 6
November 2000 petitioners motion to calendar Civil Case No. 99-518 for pre-trial if the dismissal had been
restored to life in the meantime. By then the dismissal without prejudice would have already become final and
executory so as to effectively remove the civil case from the docket of the trial court.

The same is true with the Order of 16 November 2000 denying due course to petitioners Notice of Appeal. There
would have been no basis for such exercise of discretion because the jurisdiction of the court a quo over the civil
case would have been discharged and terminated by the presumed dismissal thereof. Moreover, we note the
ground for denying due course to the appeal: the Orders dated 8 September 2000 and 6 November 2000 are
interlocutory orders and therefore, no appeal may be taken from x x x. 30 This declaration strongly suggests that
something more was to be accomplished in the civil case, thus negating the claim that the Order of dismissal
without prejudice was resurrected upon the parties failure to yield a compromise agreement. A final order issued
by a court has been defined as one which disposes of the subject matter in its entirety or terminates a particular
proceeding or action, leaving nothing else to be done but to enforce by execution what has been determined by
the court, while an interlocutory order is one which does not dispose of a case completely but leaves something
more to be decided upon.31cräläwvirtualibräry

Besides the semantic and consequential improbabilities of respondent Uys argument, our ruling in Goldloop
Properties, Inc., is decisive of the instant case. In Goldloop Properties, Inc., we reversed the action of the trial
court in dismissing the complaint for failure of the plaintiff to prosecute its case, which was in turn based on its
inability to forge a compromise with the other parties within fifteen (15) days from notice of the order to do so
and held -

Since there is nothing in the Rules that imposes the sanction of dismissal for failing to submit a compromise
agreement, then it is obvious that the dismissal of the complaint on the basis thereof amounts no less to a gross
procedural infirmity assailable by certiorari. For such submission could at most be directory and could not result
in throwing out the case for failure to effect a compromise. While a compromise is encouraged, very strongly in
fact, failure to consummate one does not warrant any procedural sanction, much less an authority to jettison a
civil complaint worth P4,000,000.00 x x x Plainly, submission of a compromise agreement is never mandatory,
nor is it required by any rule.32cräläwvirtualibräry

As also explained therein, the proper course of action that should have been taken by the court a quo, upon
manifestation of the parties of their willingness to discuss a settlement, was to suspend the proceedings and
allow them reasonable time to come to terms (a) If willingness to discuss a possible compromise is expressed
by one or both parties; or (b) If it appears that one of the parties, before the commencement of the action or
proceeding, offered to discuss a possible compromise but the other party refused the offer, pursuant to Art. 2030
of the Civil Code. If despite efforts exerted by the trial court and the parties the negotiations still fail, only then
should the action continue as if no suspension had taken place.33cräläwvirtualibräry

Ostensibly, while the rules allow the trial court to suspend its proceedings consistent with the policy to encourage
the use of alternative mechanisms of dispute resolution, in the instant case, the trial court only gave the parties
fifteen (15) days to conclude a deal. This was, to say the least, a passive and paltry attempt of the court a quo in
its task of persuading litigants to agree upon a reasonable concession. 34 Hence, if only to inspire confidence in
the pursuit of a middle ground between petitioner and respondents, we must not interpret the trial
courts Orders as dismissing the action on its own motion because the parties, specifically petitioner, were
anxious to litigate their case as exhibited in their several manifestations and motions.

We reject respondent Uys contention that Goldloop Properties, Inc. v. Court of Appeals is irrelevant to the case
at bar on the dubious reasoning that the complaint of petitioner was dismissed for failure to prosecute and not
for the non-submission of a compromise agreement which was the bone of contention in that case, and that the
dismissal imposed in the instant case was without prejudice, in contrast to the dismissal with prejudice decreed
in the cited case. To begin with, whether the dismissal is with or without prejudice if grievously erroneous is
detrimental to the cause of the affected party; Goldloop Properties, Inc. does not tolerate a wrongful dismissal
just because it was without prejudice. More importantly, the facts in Goldloop Properties, Inc. involve, as in the
instant case, a dismissal for failure to prosecute on the ground of the parties inability to come up with a
compromise agreement within fifteen (15) days from notice of the courts order therein. All told, the parallelism
between them is unmistakable.

Even if we are to accept on face value respondents understanding of Goldloop Properties, Inc. as solely about
the failure to submit a compromise agreement, it is apparent that the present case confronts a similar problem.
Perhaps initially the issue was one of failure to prosecute, as can be observed from the Order dated 20 July
2000, although later reversed and set aside. But thereafter, in the Order of 6 November 2000, the trial court
refused to proceed to pre-trial owing to the failure of the plaintiff to submit a compromise agreement pursuant to
the Order dated 8 September 2000. When the civil case was stalled on account of the trial courts refusal to call
the parties to a pre-trial conference, the reason or basis therefor was the absence of a negotiated settlement - a
circumstance that takes the case at bar within the plain ambit of Goldloop Properties, Inc. In any event, given
that the instant case merely revolves around the search for a reasonable interpretation of the several Orders of
the trial court, i.e., as to whether the dismissal without prejudice was revived upon petitioners helplessness to
perfect an out-of-court arrangement, with more reason must we employ the ruling in Goldloop Properties, Inc. to
resolve the parties differences of opinion.

We also find nothing in the record to support respondent Uys conclusion that petitioner has been mercilessly
delaying the prosecution of Civil Case No. 99-518 to warrant its dismissal. A complaint may be dismissed due to
plaintiffs fault: (a) if he fails to appear during a scheduled trial, especially on the date for the presentation of his
evidence in chief, or when so required at the pre-trial; (b) if he neglects to prosecute his action for an
unreasonable length of time; or (c) if he does not comply with the rules or any order of the court. None of these
was obtaining in the civil case.
While there was a lull of about six (6) months in the prosecution of Civil Case No. 99-518, it must be remembered
that respondents themselves contributed largely to this delay. They repeatedly asked petitioner to consider re-
structuring the debt of respondent Magwin Marketing Corporation to which petitioner graciously acceded.
Petitioner approved a new debt payment scheme that was sought by respondents, which it then communicated
to respondent Corporation through a letter for the conformity of the latters officers, i.e., respondent Nelson Tiu
as President/General Manager and respondent Benito Sy as Director thereof. Regrettably, only respondent
Nelson Tiu affixed his signature on the letter to signify his concurrence with the terms and conditions of the
arrangement. The momentary lag in the civil case was aggravated when respondent Benito Sy for unknown and
unexplained reasons paid no heed to the adjustments in the indebtedness although curiously he has not opposed
before this Court or the courts a quo petitioners desire to go ahead with the pre-trial conference.

Admittedly, delay took place in this case but it was not an interruption that should have entailed the dismissal of
the complaint even if such was designated as without prejudice. To constitute a sufficient ground for dismissal,
the inattention of plaintiff to pursue his cause must not only be prolonged but also be unnecessary and dilatory
resulting in the trifling of judicial processes. In the instant case, the adjournment was not only fleeting as it lasted
less than six (6) months but was also done in good faith to accommodate respondents incessant pleas to
negotiate. Although the dismissal of a case for failure to prosecute is a matter addressed to the sound discretion
of the court, that judgment however must not be abused. The availability of this recourse must be determined
according to the procedural history of each case, the situation at the time of the dismissal, and the diligence of
plaintiff to proceed therein.35 Stress must also be laid upon the official directive that courts must endeavor to
convince parties in a civil case to consummate a fair settlement, 36 and to mitigate damages to be paid by the
losing party who has shown a sincere desire for such give-and-take.37 All things considered, we see no
compelling circumstances to uphold the dismissal of petitioners complaint regardless of its characterization as
being without prejudice.

In fine, petitioner cannot be said to have lost interest in fighting the civil case to the end. A court may dismiss a
case on the ground of non prosequitur but the real test of the judicious exercise of such power is whether under
the circumstances plaintiff is chargeable with want of fitting assiduousness in not acting on his complaint with
reasonable promptitude. Unless a partys conduct is so indifferent, irresponsible, contumacious or slothful as to
provide substantial grounds for dismissal, i.e., equivalent to default or non-appearance in the case, the courts
should consider lesser sanctions which would still amount to achieving the desired end.38 In the absence of a
pattern or scheme to delay the disposition of the case or of a wanton failure to observe the mandatory
requirement of the rules on the part of the plaintiff, as in the case at bar, courts should decide to dispense rather
than wield their authority to dismiss.39cräläwvirtualibräry

Clearly, another creative remedy was available to the court a quo to attain a speedy disposition of Civil Case No.
99-518 without sacrificing the course of justice. Since the failure of petitioner to submit a compromise agreement
was the refusal of just one of herein respondents, i.e., Benito Sy, to sign his name on the conforme of the loan
restructure documents, and the common concern of the courts a quo was dispatch in the proceedings, the
holding of a pre-trial conference was the best-suited solution to the problem as this stage in a civil action is where
issues are simplified and the dispute quickly and genuinely reconciled. By means of pre-trial, the trial court is
fully empowered to sway the litigants to agree upon some fair compromise.

Dismissing the civil case and compelling petitioner to re-file its complaint is a dangerous, costly and circuitous
route that may end up aggravating, not resolving, the disagreement. This case management strategy is
frighteningly deceptive because it does so at the expense of petitioner whose cause of action, perhaps, may
have already been admitted by its adverse parties as shown by three (3) of four (4) defendants not willing to
contest petitioners allegations, and more critically, since this approach promotes the useless and thankless
duplication of hard work already undertaken by the trial court. As we have aptly observed, [i]nconsiderate
dismissals, even if without prejudice, do not constitute a panacea nor a solution to the congestion of court
dockets. While they lend a deceptive aura of efficiency to records of individual judges, they merely postpone the
ultimate reckoning between the parties. In the absence of clear lack of merit or intention to delay, justice is better
served by a brief continuance, trial on the merits, and final disposition of the cases before the
court.40cräläwvirtualibräry
WHEREFORE, the Petition for Review is GRANTED. The Decision dated 28 September 2001
and Resolution dated 2 April 2002 of the Court of Appeals in CA-G.R. SP No. 62102 are REVERSED and SET
ASIDE.

The Orders dated 8 September 2000, 6 November 2000 and 16 November 2000 of the Regional Trial Court,
Branch 135, of Makati City, docketed as Civil Case No. 99-518, are also REVERSED and SET ASIDE insofar
as these Orders are interpreted to impose upon and collect anew from petitioner RIZAL COMMERCIAL
BANKING CORPORATION docket or legal fees for its complaint, or to dismiss without prejudice Civil Case No.
99-518, or to preclude the trial court from calling the parties therein to pre-trial conference, or from proceeding
thereafter with dispatch to resolve the civil case.

Civil Case No. 99-518 is deemed REINSTATED in, as it was never taken out from, the dockets of the Regional
Trial Court, Branch 135, of Makati City. The trial court is ORDERED to exercise its jurisdiction over Civil Case
No. 99-518, to CONDUCT the pre-trial conference therein with dispatch, and to UNDERTAKE thereafter such
other proceedings as may be relevant, without petitioner being charged anew docket or other legal fees in
connection with its reinstatement. Costs against respondents.

SO ORDERED.
G.R. No. 161957 January 22, 2007
JORGE GONZALES and PANEL OF ARBITRATORS, Petitioners,
vs.
CLIMAX MINING LTD., CLIMAX-ARIMCO MINING CORP., and AUSTRALASIAN PHILIPPINES MINING
INC., Respondents.
x--------------------------------------------------------------------------------- x
G.R. No. 167994 January 22, 2007
JORGE GONZALES, Petitioner,
vs.
HON. OSCAR B. PIMENTEL, in his capacity as PRESIDING JUDGE of BR. 148 of the REGIONAL TRIAL COURT of
MAKATI CITY, and CLIMAX-ARIMCO MINING CORPORATION, Respondents.
RESOLUTION
TINGA, J.:
This is a consolidation of two petitions rooted in the same disputed Addendum Contract entered into by the
parties. In G.R. No. 161957, the Court in its Decision of 28 February 20051 denied the Rule 45 petition of
petitioner Jorge Gonzales (Gonzales). It held that the DENR Panel of Arbitrators had no jurisdiction over the
complaint for the annulment of the Addendum Contract on grounds of fraud and violation of the Constitution and
that the action should have been brought before the regular courts as it involved judicial issues. Both parties filed
separate motions for reconsideration. Gonzales avers in his Motion for Reconsideration2 that the Court erred in
holding that the DENR Panel of Arbitrators was bereft of jurisdiction, reiterating its argument that the case
involves a mining dispute that properly falls within the ambit of the Panel’s authority. Gonzales adds that the
Court failed to rule on other issues he raised relating to the sufficiency of his complaint before the DENR Panel
of Arbitrators and the timeliness of its filing.

Respondents Climax Mining Ltd., et al., (respondents) filed their Motion for Partial Reconsideration and/or
Clarification3 seeking reconsideration of that part of the Decision holding that the case should not be brought for
arbitration under Republic Act (R.A.) No. 876, also known as the Arbitration Law.4 Respondents, citing American
jurisprudence5 and the UNCITRAL Model Law,6 argue that the arbitration clause in the Addendum Contract
should be treated as an agreement independent of the other terms of the contract, and that a claimed rescission
of the main contract does not avoid the duty to arbitrate. Respondents add that Gonzales’s argument relating to
the alleged invalidity of the Addendum Contract still has to be proven and adjudicated on in a proper proceeding;
that is, an action separate from the motion to compel arbitration. Pending judgment in such separate action, the
Addendum Contract remains valid and binding and so does the arbitration clause therein. Respondents add that
the holding in the Decision that "the case should not be brought under the ambit of the Arbitration Law" appears
to be premised on Gonzales’s having "impugn[ed] the existence or validity" of the addendum contract. If so, it
supposedly conveys the idea that Gonzales’s unilateral repudiation of the contract or mere allegation of its
invalidity is all it takes to avoid arbitration. Hence, respondents submit that the court’s holding that "the case
should not be brought under the ambit of the Arbitration Law" be understood or clarified as operative only where
the challenge to the arbitration agreement has been sustained by final judgment.

Both parties were required to file their respective comments to the other party’s motion for
reconsideration/clarification.7 Respondents filed their Comment on 17 August 2005,8 while Gonzales filed his
only on 25 July 2006.9

On the other hand, G.R. No. 167994 is a Rule 65 petition filed on 6 May 2005, or while the motions for
reconsideration in G.R. No. 16195710 were pending, wherein Gonzales challenged the orders of the Regional
Trial Court (RTC) requiring him to proceed with the arbitration proceedings as sought by Climax-Arimco Mining
Corporation (Climax-Arimco).

On 5 June 2006, the two cases, G.R. Nos. 161957 and 167994, were consolidated upon the recommendation
of the Assistant Division Clerk of Court since the cases are rooted in the same Addendum Contract.

We first tackle the more recent case which is G.R. No. 167994. It stemmed from the petition to compel arbitration
filed by respondent Climax-Arimco before the RTC of Makati City on 31 March 2000 while the complaint for the
nullification of the Addendum Contract was pending before the DENR Panel of Arbitrators. On 23 March 2000,
Climax-Arimco had sent Gonzales a Demand for Arbitration pursuant to Clause 19.111 of the Addendum Contract
and also in accordance with Sec. 5 of R.A. No. 876. The petition for arbitration was subsequently filed and
Climax-Arimco sought an order to compel the parties to arbitrate pursuant to the said arbitration clause. The
case, docketed as Civil Case No. 00-444, was initially raffled to Br. 132 of the RTC of Makati City, with Judge
Herminio I. Benito as Presiding Judge. Respondent Climax-Arimco filed on 5 April 2000 a motion to set the
application to compel arbitration for hearing.

On 14 April 2000, Gonzales filed a motion to dismiss which he however failed to set for hearing. On 15 May
2000, he filed an Answer with Counterclaim,12 questioning the validity of the Addendum Contract containing the
arbitration clause. Gonzales alleged that the Addendum Contract containing the arbitration clause is void in view
of Climax-Arimco’s acts of fraud, oppression and violation of the Constitution. Thus, the arbitration clause, Clause
19.1, contained in the Addendum Contract is also null and void ab initio and legally inexistent.1awphi1.net

On 18 May 2000, the RTC issued an order declaring Gonzales’s motion to dismiss moot and academic in view
of the filing of his Answer with Counterclaim.13

On 31 May 2000, Gonzales asked the RTC to set the case for pre-trial.14 This the RTC denied on 16 June 2000,
holding that the petition for arbitration is a special proceeding that is summary in nature.15 However, on 7 July
2000, the RTC granted Gonzales’s motion for reconsideration of the 16 June 2000 Order and set the case for
pre-trial on 10 August 2000, it being of the view that Gonzales had raised in his answer the issue of the making
of the arbitration agreement.16

Climax-Arimco then filed a motion to resolve its pending motion to compel arbitration. The RTC denied the same
in its 24 July 2000 order.

On 28 July 2000, Climax-Arimco filed a Motion to Inhibit Judge Herminio I. Benito for "not possessing the cold
neutrality of an impartial judge."17 On 5 August 2000, Judge Benito issued an Order granting the Motion to Inhibit
and ordered the re-raffling of the petition for arbitration.18 The case was raffled to the sala of public respondent
Judge Oscar B. Pimentel of Branch 148.

On 23 August 2000, Climax-Arimco filed a motion for reconsideration of the 24 July 2000 Order.19 Climax-Arimco
argued that R.A. No. 876 does not authorize a pre-trial or trial for a motion to compel arbitration but directs the
court to hear the motion summarily and resolve it within ten days from hearing. Judge Pimentel granted the
motion and directed the parties to arbitration. On 13 February 2001, Judge Pimentel issued the first assailed
order requiring Gonzales to proceed with arbitration proceedings and appointing retired CA Justice Jorge Coquia
as sole arbitrator.20

Gonzales moved for reconsideration on 20 March 2001 but this was denied in the Order dated 7 March 2005.21

Gonzales thus filed the Rule 65 petition assailing the Orders dated 13 February 2001 and 7 March 2005 of Judge
Pimentel. Gonzales contends that public respondent Judge Pimentel acted with grave abuse of discretion in
immediately ordering the parties to proceed with arbitration despite the proper, valid, and timely raised argument
in his Answer with Counterclaim that the Addendum Contract, containing the arbitration clause, is null and void.
Gonzales has also sought a temporary restraining order to prevent the enforcement of the assailed orders
directing the parties to arbitrate, and to direct Judge Pimentel to hold a pre-trial conference and the necessary
hearings on the determination of the nullity of the Addendum Contract.

In support of his argument, Gonzales invokes Sec. 6 of R.A. No. 876:

Sec. 6. Hearing by court.—A party aggrieved by the failure, neglect or refusal of another to perform under an
agreement in writing providing for arbitration may petition the court for an order directing that such arbitration
proceed in the manner provided for in such agreement. Five days notice in writing of the hearing of such
application shall be served either personally or by registered mail upon the party in default. The court shall hear
the parties, and upon being satisfied that the making of the agreement or such failure to comply therewith is not
in issue, shall make an order directing the parties to proceed to arbitration in accordance with the terms of the
agreement. If the making of the agreement or default be in issue the court shall proceed to summarily hear such
issue. If the finding be that no agreement in writing providing for arbitration was made, or that there is no default
in the proceeding thereunder, the proceeding shall be dismissed. If the finding be that a written provision for
arbitration was made and there is a default in proceeding thereunder, an order shall be made summarily directing
the parties to proceed with the arbitration in accordance with the terms thereof.
The court shall decide all motions, petitions or applications filed under the provisions of this Act, within ten (10)
days after such motions, petitions, or applications have been heard by it.

Gonzales also cites Sec. 24 of R.A. No. 9285 or the "Alternative Dispute Resolution Act of 2004:"

Sec. 24. Referral to Arbitration.—A court before which an action is brought in a matter which is the subject matter
of an arbitration agreement shall, if at least one party so requests not later than the pre-trial conference, or upon
the request of both parties thereafter, refer the parties to arbitration unless it finds that the arbitration agreement
is null and void, inoperative or incapable of being performed.

According to Gonzales, the above-quoted provisions of law outline the procedure to be followed in petitions to
compel arbitration, which the RTC did not follow. Thus, referral of the parties to arbitration by Judge Pimentel
despite the timely and properly raised issue of nullity of the Addendum Contract was misplaced and without legal
basis. Both R.A. No. 876 and R.A. No. 9285 mandate that any issue as to the nullity, inoperativeness, or
incapability of performance of the arbitration clause/agreement raised by one of the parties to the alleged
arbitration agreement must be determined by the court prior to referring them to arbitration. They require that the
trial court first determine or resolve the issue of nullity, and there is no other venue for this determination other
than a pre-trial and hearing on the issue by the trial court which has jurisdiction over the case. Gonzales adds
that the assailed 13 February 2001 Order also violated his right to procedural due process when the trial court
erroneously ruled on the existence of the arbitration agreement despite the absence of a hearing for the
presentation of evidence on the nullity of the Addendum Contract.

Respondent Climax-Arimco, on the other hand, assails the mode of review availed of by Gonzales. Climax-
Arimco cites Sec. 29 of R.A. No. 876:

Sec. 29. Appeals.—An appeal may be taken from an order made in a proceeding under this Act, or from a
judgment entered upon an award through certiorari proceedings, but such appeals shall be limited to questions
of law. The proceedings upon such an appeal, including the judgment thereon shall be governed by the Rules
of Court in so far as they are applicable.

Climax-Arimco mentions that the special civil action for certiorari employed by Gonzales is available only where
there is no appeal or any plain, speedy, and adequate remedy in the ordinary course of law against the
challenged orders or acts. Climax-Arimco then points out that R.A. No. 876 provides for an appeal from such
orders, which, under the Rules of Court, must be filed within 15 days from notice of the final order or resolution
appealed from or of the denial of the motion for reconsideration filed in due time. Gonzales has not denied that
the relevant 15-day period for an appeal had elapsed long before he filed this petition for certiorari. He cannot
use the special civil action of certiorari as a remedy for a lost appeal.

Climax-Arimco adds that an application to compel arbitration under Sec. 6 of R.A. No. 876 confers on the trial
court only a limited and special jurisdiction, i.e., a jurisdiction solely to determine (a) whether or not the parties
have a written contract to arbitrate, and (b) if the defendant has failed to comply with that contract. Respondent
cites La Naval Drug Corporation v. Court of Appeals,22 which holds that in a proceeding to compel arbitration,
"[t]he arbitration law explicitly confines the court’s authority only to pass upon the issue of whether there is or
there is no agreement in writing providing for arbitration," and "[i]n the affirmative, the statute ordains that the
court shall issue an order ‘summarily directing the parties to proceed with the arbitration in accordance with the
terms thereof.’"23 Climax-Arimco argues that R.A. No. 876 gives no room for any other issue to be dealt with in
such a proceeding, and that the court presented with an application to compel arbitration may order arbitration
or dismiss the same, depending solely on its finding as to those two limited issues. If either of these matters is
disputed, the court is required to conduct a summary hearing on it. Gonzales’s proposition contradicts both the
trial court’s limited jurisdiction and the summary nature of the proceeding itself.

Climax-Arimco further notes that Gonzales’s attack on or repudiation of the Addendum Contract also is not a
ground to deny effect to the arbitration clause in the Contract. The arbitration agreement is separate and
severable from the contract evidencing the parties’ commercial or economic transaction, it stresses. Hence, the
alleged defect or failure of the main contract is not a ground to deny enforcement of the parties’ arbitration
agreement. Even the party who has repudiated the main contract is not prevented from enforcing its arbitration
provision. R.A. No. 876 itself treats the arbitration clause or agreement as a contract separate from the
commercial, economic or other transaction to be arbitrated. The statute, in particular paragraph 1 of Sec. 2
thereof, considers the arbitration stipulation an independent contract in its own right whose enforcement may be
prevented only on grounds which legally make the arbitration agreement itself revocable, thus:

Sec. 2. Persons and matters subject to arbitration.—Two or more persons or parties may submit to the arbitration
of one or more arbitrators any controversy existing, between them at the time of the submission and which may
be the subject of an action, or the parties to any contract may in such contract agree to settle by arbitration a
controversy thereafter arising between them. Such submission or contract shall be valid, enforceable and
irrevocable, save upon such grounds as exist at law for the revocation of any contract.

xxxx

The grounds Gonzales invokes for the revocation of the Addendum Contract—fraud and oppression in the
execution thereof—are also not grounds for the revocation of the arbitration clause in the Contract, Climax-
Arimco notes. Such grounds may only be raised by way of defense in the arbitration itself and cannot be used
to frustrate or delay the conduct of arbitration proceedings. Instead, these should be raised in a separate action
for rescission, it continues.

Climax-Arimco emphasizes that the summary proceeding to compel arbitration under Sec. 6 of R.A. No. 876
should not be confused with the procedure in Sec. 24 of R.A. No. 9285. Sec. 6 of R.A. No. 876 refers to an
application to compel arbitration where the court’s authority is limited to resolving the issue of whether there is
or there is no agreement in writing providing for arbitration, while Sec. 24 of R.A. No. 9285 refers to an ordinary
action which covers a matter that appears to be arbitrable or subject to arbitration under the arbitration
agreement. In the latter case, the statute is clear that the court, instead of trying the case, may, on request of
either or both parties, refer the parties to arbitration, unless it finds that the arbitration agreement is null and void,
inoperative or incapable of being performed. Arbitration may even be ordered in the same suit brought upon a
matter covered by an arbitration agreement even without waiting for the outcome of the issue of the validity of
the arbitration agreement. Art. 8 of the UNCITRAL Model Law24 states that where a court before which an action
is brought in a matter which is subject of an arbitration agreement refers the parties to arbitration, the arbitral
proceedings may proceed even while the action is pending.

Thus, the main issue raised in the Petition for Certiorari is whether it was proper for the RTC, in the proceeding
to compel arbitration under R.A. No. 876, to order the parties to arbitrate even though the defendant therein has
raised the twin issues of validity and nullity of the Addendum Contract and, consequently, of the arbitration clause
therein as well. The resolution of both Climax-Arimco’s Motion for Partial Reconsideration and/or Clarification in
G.R. No. 161957 and Gonzales’s Petition for Certiorari in G.R. No. 167994 essentially turns on whether the
question of validity of the Addendum Contract bears upon the applicability or enforceability of the arbitration
clause contained therein. The two pending matters shall thus be jointly resolved.

We address the Rule 65 petition in G.R. No. 167994 first from the remedial law perspective. It deserves to be
dismissed on procedural grounds, as it was filed in lieu of appeal which is the prescribed remedy and at that far
beyond the reglementary period. It is elementary in remedial law that the use of an erroneous mode of appeal is
cause for dismissal of the petition for certiorari and it has been repeatedly stressed that a petition for certiorari is
not a substitute for a lost appeal. As its nature, a petition for certiorari lies only where there is "no appeal," and
"no plain, speedy and adequate remedy in the ordinary course of law."25 The Arbitration Law specifically provides
for an appeal by certiorari, i.e., a petition for review under certiorari under Rule 45 of the Rules of Court that
raises pure questions of law.26 There is no merit to Gonzales’s argument that the use of the permissive term
"may" in Sec. 29, R.A. No. 876 in the filing of appeals does not prohibit nor discount the filing of a petition for
certiorari under Rule 65.27 Proper interpretation of the aforesaid provision of law shows that the term "may" refers
only to the filing of an appeal, not to the mode of review to be employed. Indeed, the use of "may" merely
reiterates the principle that the right to appeal is not part of due process of law but is a mere statutory privilege
to be exercised only in the manner and in accordance with law.

Neither can BF Corporation v. Court of Appeals28 cited by Gonzales support his theory. Gonzales argues that
said case recognized and allowed a petition for certiorari under Rule 65 "appealing the order of the Regional
Trial Court disregarding the arbitration agreement as an acceptable remedy."29 The BF Corporation case had its
origins in a complaint for collection of sum of money filed by therein petitioner BF Corporation against Shangri-
la Properties, Inc. (SPI). SPI moved to suspend the proceedings alleging that the construction agreement or the
Articles of Agreement between the parties contained a clause requiring prior resort to arbitration before judicial
intervention. The trial court found that an arbitration clause was incorporated in the Conditions of Contract
appended to and deemed an integral part of the Articles of Agreement. Still, the trial court denied the motion to
suspend proceedings upon a finding that the Conditions of Contract were not duly executed and signed by the
parties. The trial court also found that SPI had failed to file any written notice of demand for arbitration within the
period specified in the arbitration clause. The trial court denied SPI's motion for reconsideration and ordered it
to file its responsive pleading. Instead of filing an answer, SPI filed a petition for certiorari under Rule 65, which
the Court of Appeals, favorably acted upon. In a petition for review before this Court, BF Corporation alleged,
among others, that the Court of Appeals should have dismissed the petition for certiorari since the order of the
trial court denying the motion to suspend proceedings "is a resolution of an incident on the merits" and upon the
continuation of the proceedings, the trial court would eventually render a decision on the merits, which decision
could then be elevated to a higher court "in an ordinary appeal."30

The Court did not uphold BF Corporation’s argument. The issue raised before the Court was whether SPI had
taken the proper mode of appeal before the Court of Appeals. The question before the Court of Appeals was
whether the trial court had prematurely assumed jurisdiction over the controversy. The question of jurisdiction in
turn depended on the question of existence of the arbitration clause which is one of fact. While on its face the
question of existence of the arbitration clause is a question of fact that is not proper in a petition for certiorari, yet
since the determination of the question obliged the Court of Appeals as it did to interpret the contract documents
in accordance with R.A. No. 876 and existing jurisprudence, the question is likewise a question of law which may
be properly taken cognizance of in a petition for certiorari under Rule 65, so the Court held.31

The situation in B.F. Corporation is not availing in the present petition. The disquisition in B.F. Corporation led to
the conclusion that in order that the question of jurisdiction may be resolved, the appellate court had to deal first
with a question of law which could be addressed in a certiorari proceeding. In the present case, Gonzales’s
petition raises a question of law, but not a question of jurisdiction. Judge Pimentel acted in accordance with the
procedure prescribed in R.A. No. 876 when he ordered Gonzales to proceed with arbitration and appointed a
sole arbitrator after making the determination that there was indeed an arbitration agreement. It has been held
that as long as a court acts within its jurisdiction and does not gravely abuse its discretion in the exercise thereof,
any supposed error committed by it will amount to nothing more than an error of judgment reviewable by a timely
appeal and not assailable by a special civil action of certiorari.32 Even if we overlook the employment of the
wrong remedy in the broader interests of justice, the petition would nevertheless be dismissed for failure of
Gonzalez to show grave abuse of discretion.

Arbitration, as an alternative mode of settling disputes, has long been recognized and accepted in our jurisdiction.
The Civil Code is explicit on the matter.33 R.A. No. 876 also expressly authorizes arbitration of domestic disputes.
Foreign arbitration, as a system of settling commercial disputes of an international character, was likewise
recognized when the Philippines adhered to the United Nations "Convention on the Recognition and the
Enforcement of Foreign Arbitral Awards of 1958," under the 10 May 1965 Resolution No. 71 of the Philippine
Senate, giving reciprocal recognition and allowing enforcement of international arbitration agreements between
parties of different nationalities within a contracting state. 34 The enactment of R.A. No. 9285 on 2 April 2004
further institutionalized the use of alternative dispute resolution systems, including arbitration, in the settlement
of disputes.

Disputes do not go to arbitration unless and until the parties have agreed to abide by the arbitrator’s decision.
Necessarily, a contract is required for arbitration to take place and to be binding. R.A. No. 876 recognizes the
contractual nature of the arbitration agreement, thus:

Sec. 2. Persons and matters subject to arbitration.—Two or more persons or parties may submit to the arbitration
of one or more arbitrators any controversy existing, between them at the time of the submission and which may
be the subject of an action, or the parties to any contract may in such contract agree to settle by arbitration a
controversy thereafter arising between them. Such submission or contract shall be valid, enforceable and
irrevocable, save upon such grounds as exist at law for the revocation of any contract.

Such submission or contract may include question arising out of valuations, appraisals or other controversies
which may be collateral, incidental, precedent or subsequent to any issue between the parties.
A controversy cannot be arbitrated where one of the parties to the controversy is an infant, or a person judicially
declared to be incompetent, unless the appropriate court having jurisdiction approve a petition for permission to
submit such controversy to arbitration made by the general guardian or guardian ad litem of the infant or of the
incompetent. [Emphasis added.]

Thus, we held in Manila Electric Co. v. Pasay Transportation Co.35 that a submission to arbitration is a contract.
A clause in a contract providing that all matters in dispute between the parties shall be referred to arbitration is
a contract,36 and in Del Monte Corporation-USA v. Court of Appeals37 that "[t]he provision to submit to arbitration
any dispute arising therefrom and the relationship of the parties is part of that contract and is itself a contract. As
a rule, contracts are respected as the law between the contracting parties and produce effect as between them,
their assigns and heirs."38

The special proceeding under Sec. 6 of R.A. No. 876 recognizes the contractual nature of arbitration clauses or
agreements. It provides:

Sec. 6. Hearing by court.—A party aggrieved by the failure, neglect or refusal of another to perform under an
agreement in writing providing for arbitration may petition the court for an order directing that such arbitration
proceed in the manner provided for in such agreement. Five days notice in writing of the hearing of such
application shall be served either personally or by registered mail upon the party in default. The court shall hear
the parties, and upon being satisfied that the making of the agreement or such failure to comply therewith is not
in issue, shall make an order directing the parties to proceed to arbitration in accordance with the terms of the
agreement. If the making of the agreement or default be in issue the court shall proceed to summarily hear such
issue. If the finding be that no agreement in writing providing for arbitration was made, or that there is no default
in the proceeding thereunder, the proceeding shall be dismissed. If the finding be that a written provision for
arbitration was made and there is a default in proceeding thereunder, an order shall be made summarily directing
the parties to proceed with the arbitration in accordance with the terms thereof.

The court shall decide all motions, petitions or applications filed under the provisions of this Act, within ten days
after such motions, petitions, or applications have been heard by it. [Emphasis added.]

This special proceeding is the procedural mechanism for the enforcement of the contract to arbitrate. The
jurisdiction of the courts in relation to Sec. 6 of R.A. No. 876 as well as the nature of the proceedings therein
was expounded upon in La Naval Drug Corporation v. Court of Appeals.39 There it was held that R.A. No. 876
explicitly confines the court's authority only to the determination of whether or not there is an agreement in writing
providing for arbitration. In the affirmative, the statute ordains that the court shall issue an order "summarily
directing the parties to proceed with the arbitration in accordance with the terms thereof." If the court, upon the
other hand, finds that no such agreement exists, "the proceeding shall be dismissed." 40 The cited case also
stressed that the proceedings are summary in nature.41 The same thrust was made in the earlier case of
Mindanao Portland Cement Corp. v. McDonough Construction Co. of Florida42 which held, thus:

Since there obtains herein a written provision for arbitration as well as failure on respondent's part to comply
therewith, the court a quo rightly ordered the parties to proceed to arbitration in accordance with the terms of
their agreement (Sec. 6, Republic Act 876). Respondent's arguments touching upon the merits of the dispute
are improperly raised herein. They should be addressed to the arbitrators. This proceeding is merely a summary
remedy to enforce the agreement to arbitrate. The duty of the court in this case is not to resolve the merits of the
parties' claims but only to determine if they should proceed to arbitration or not. x x x x 43

Implicit in the summary nature of the judicial proceedings is the separable or independent character of the
arbitration clause or agreement. This was highlighted in the cases of Manila Electric Co. v. Pasay Trans.
Co.44 and Del Monte Corporation-USA v. Court of Appeals.45

The doctrine of separability, or severability as other writers call it, enunciates that an arbitration agreement is
independent of the main contract. The arbitration agreement is to be treated as a separate agreement and the
arbitration agreement does not automatically terminate when the contract of which it is part comes to an end.46

The separability of the arbitration agreement is especially significant to the determination of whether the invalidity
of the main contract also nullifies the arbitration clause. Indeed, the doctrine denotes that the invalidity of the
main contract, also referred to as the "container" contract, does not affect the validity of the arbitration
agreement. Irrespective of the fact that the main contract is invalid, the arbitration clause/agreement still remains
valid and enforceable.47

The separability of the arbitration clause is confirmed in Art. 16(1) of the UNCITRAL Model Law and Art. 21(2)
of the UNCITRAL Arbitration Rules.48

The separability doctrine was dwelt upon at length in the U.S. case of Prima Paint Corp. v. Flood & Conklin
Manufacturing Co.49 In that case, Prima Paint and Flood and Conklin (F & C) entered into a consulting agreement
whereby F & C undertook to act as consultant to Prima Paint for six years, sold to Prima Paint a list of its
customers and promised not to sell paint to these customers during the same period. The consulting agreement
contained an arbitration clause. Prima Paint did not make payments as provided in the consulting agreement,
contending that F & C had fraudulently misrepresented that it was solvent and able for perform its contract when
in fact it was not and had even intended to file for bankruptcy after executing the consultancy agreement. Thus,
F & C served Prima Paint with a notice of intention to arbitrate. Prima Paint sued in court for rescission of the
consulting agreement on the ground of fraudulent misrepresentation and asked for the issuance of an order
enjoining F & C from proceeding with arbitration. F & C moved to stay the suit pending arbitration. The trial court
granted F & C’s motion, and the U.S. Supreme Court affirmed.

The U.S. Supreme Court did not address Prima Paint’s argument that it had been fraudulently induced by F & C
to sign the consulting agreement and held that no court should address this argument. Relying on Sec. 4 of the
Federal Arbitration Act—which provides that "if a party [claims to be] aggrieved by the alleged failure x x x of
another to arbitrate x x x, [t]he court shall hear the parties, and upon being satisfied that the making of the
agreement for arbitration or the failure to comply therewith is not in issue, the court shall make an order directing
the parties to proceed to arbitration x x x. If the making of the arbitration agreement or the failure, neglect, or
refusal to perform the same be in issue, the court shall proceed summarily to the trial thereof"—the U.S. High
Court held that the court should not order the parties to arbitrate if the making of the arbitration agreement is in
issue. The parties should be ordered to arbitration if, and only if, they have contracted to submit to arbitration.
Prima Paint was not entitled to trial on the question of whether an arbitration agreement was made because its
allegations of fraudulent inducement were not directed to the arbitration clause itself, but only to the consulting
agreement which contained the arbitration agreement.50 Prima Paint held that "arbitration clauses are ‘separable’
from the contracts in which they are embedded, and that where no claim is made that fraud was directed to the
arbitration clause itself, a broad arbitration clause will be held to encompass arbitration of the claim that the
contract itself was induced by fraud."51

There is reason, therefore, to rule against Gonzales when he alleges that Judge Pimentel acted with grave abuse
of discretion in ordering the parties to proceed with arbitration. Gonzales’s argument that the Addendum Contract
is null and void and, therefore the arbitration clause therein is void as well, is not tenable. First, the proceeding
in a petition for arbitration under R.A. No. 876 is limited only to the resolution of the question of whether the
arbitration agreement exists. Second, the separability of the arbitration clause from the Addendum Contract
means that validity or invalidity of the Addendum Contract will not affect the enforceability of the agreement to
arbitrate. Thus, Gonzales’s petition for certiorari should be dismissed.

This brings us back to G.R. No. 161957. The adjudication of the petition in G.R. No. 167994 effectively modifies
part of the Decision dated 28 February 2005 in G.R. No. 161957. Hence, we now hold that the validity of the
contract containing the agreement to submit to arbitration does not affect the applicability of the arbitration clause
itself. A contrary ruling would suggest that a party’s mere repudiation of the main contract is sufficient to avoid
arbitration. That is exactly the situation that the separability doctrine, as well as jurisprudence applying it, seeks
to avoid. We add that when it was declared in G.R. No. 161957 that the case should not be brought for arbitration,
it should be clarified that the case referred to is the case actually filed by Gonzales before the DENR Panel of
Arbitrators, which was for the nullification of the main contract on the ground of fraud, as it had already been
determined that the case should have been brought before the regular courts involving as it did judicial issues.

The Motion for Reconsideration of Gonzales in G.R. No. 161957 should also be denied. In the motion, Gonzales
raises the same question of jurisdiction, more particularly that the complaint for nullification of the Addendum
Contract pertained to the DENR Panel of Arbitrators, not the regular courts. He insists that the subject of his
complaint is a mining dispute since it involves a dispute concerning rights to mining areas, the Financial and
Technical Assistance Agreement (FTAA) between the parties, and it also involves claimowners. He adds that
the Court failed to rule on other issues he raised, such as whether he had ceded his claims over the mineral
deposits located within the Addendum Area of Influence; whether the complaint filed before the DENR Panel of
Arbitrators alleged ultimate facts of fraud; and whether the action to declare the nullity of the Addendum Contract
on the ground of fraud has prescribed.1avvphi1.net

These are the same issues that Gonzales raised in his Rule 45 petition in G.R. No. 161957 which were resolved
against him in the Decision of 28 February 2005. Gonzales does not raise any new argument that would sway
the Court even a bit to alter its holding that the complaint filed before the DENR Panel of Arbitrators involves
judicial issues which should properly be resolved by the regular courts. He alleged fraud or misrepresentation in
the execution of the Addendum Contract which is a ground for the annulment of a voidable contract. Clearly,
such allegations entail legal questions which are within the jurisdiction of the courts.

The question of whether Gonzales had ceded his claims over the mineral deposits in the Addendum Area of
Influence is a factual question which is not proper for determination before this Court. At all events, moreover,
the question is irrelevant to the issue of jurisdiction of the DENR Panel of Arbitrators. It should be pointed out
that the DENR Panel of Arbitrators made a factual finding in its Order dated 18 October 2001, which it reiterated
in its Order dated 25 June 2002, that Gonzales had, "through the various agreements, assigned his interest over
the mineral claims all in favor of [Climax-Arimco]" as well as that without the complainant [Gonzales] assigning
his interest over the mineral claims in favor of [Climax-Arimco], there would be no FTAA to speak of."52 This
finding was affirmed by the Court of Appeals in its Decision dated 30 July 2003 resolving the petition for certiorari
filed by Climax-Arimco in regard to the 18 October 2001 Order of the DENR Panel.53

The Court of Appeals likewise found that Gonzales’s complaint alleged fraud but did not provide any particulars
to substantiate it. The complaint repeatedly mentioned fraud, oppression, violation of the Constitution and similar
conclusions but nowhere did it give any ultimate facts or particulars relative to the allegations.54

Sec. 5, Rule 8 of the Rules of Court specifically provides that in all averments of fraud, the circumstances
constituting fraud must be stated with particularity. This is to enable the opposing party to controvert the particular
facts allegedly constituting the same. Perusal of the complaint indeed shows that it failed to state with particularity
the ultimate facts and circumstances constituting the alleged fraud. It does not state what particulars about
Climax-Arimco’s financial or technical capability were misrepresented, or how the misrepresentation was done.
Incorporated in the body of the complaint are verbatim reproductions of the contracts, correspondence and
government issuances that reportedly explain the allegations of fraud and misrepresentation, but these are, at
best, evidentiary matters that should not be included in the pleading.

As to the issue of prescription, Gonzales’s claims of fraud and misrepresentation attending the execution of the
Addendum Contract are grounds for the annulment of a voidable contract under the Civil Code.55 Under Art.
1391 of the Code, an action for annulment shall be brought within four years, in the case of fraud, beginning from
the time of the discovery of the same. However, the time of the discovery of the alleged fraud is not clear from
the allegations of Gonzales’s complaint. That being the situation coupled with the fact that this Court is not a trier
of facts, any ruling on the issue of prescription would be uncalled for or even unnecessary.

WHEREFORE, the Petition for Certiorari in G.R. No. 167994 is DISMISSED. Such dismissal effectively renders
superfluous formal action on the Motion for Partial Reconsideration and/or Clarification filed by Climax Mining
Ltd., et al. in G.R. No. 161957.

The Motion for Reconsideration filed by Jorge Gonzales in G.R. No. 161957 is DENIED WITH FINALITY.

SO ORDERED.
[G.R. NO. 147080. April 26, 2005]
CAPITOL MEDICAL CENTER, INC., Petitioners, v. NATIONAL LABOR RELATIONS COMMISSION, JAIME IBABAO,
JOSE BALLESTEROS, RONALD CENTENO, NARCISO SARMIENTO, EDUARDO CANAVERAL, SHERLITO DELA
CRUZ, SOFRONIO COMANDAO, MARIANO GALICIA, RAMON MOLOD, CARMENCITA SARMIENTO, HELEN
MOLOD, ROSA COMANDAO, ANGELITO CUIZON, ALEX MARASIGAN, JESUS CEDRO, ENRICO ROQUE, JAY
PERILLA, HELEN MENDOZA, MARY GLADYS GEMPEROSO, NINI BAUTISTA, ELENA MACARUBBO, MUSTIOLA
SALVACION DAPITO, ALEXANDER MANABE, MICHAEL EUSTAQUIO, ROSE AZARES, FERNANDO MANZANO,
HENRY VERA CRUZ, CHITO MENDOZA, FREDELITA TOMAYAO, ISABEL BRUCAL, MAHALKO LAYACAN, RAINIER
MANACSA, KAREN VILLARENTE, FRANCES ACACIO, LAMBERTO CONTI, LORENA BEACH, JUDILAH RAVALO,
DEBORAH NAVE, MARILEN CABALQUINTO, EMILIANA RIVERA, MA. ROSARIO URBANO, ROWENA ARILLA,
CAPITOL MEDICAL CENTER EMPLOYEES ASSOCIATION-AFW, GREGORIO DEL PRADO, ARIEL ARAJA, and
JESUS STA. BARBARA, JR., Respondents.
DECISION
CALLEJO, SR., J.:
This is a Petition for Review of the Decision1 of the Court of Appeals (CA) in CA-G.R. SP No. 57500 and its
Resolution denying the motion for reconsideration thereof.

The Antecedents2

Whether the respondent Capitol Medical Center Employees Association-Alliance of Filipino Workers (the Union,
for brevity) was the exclusive bargaining agent of the rank-and-file employees of the petitioner Capitol Medical
Center, Inc. had been the bone of contention between the Union and the petitioner. The petitioner's refusal to
negotiate for a collective bargaining agreement (CBA) resulted in a union-led strike on April 15, 1993.

The Union had to contend with another union - the Capitol Medical Center Alliance of Concerned Employees
(CMC-ACE) - which demanded for a certification election among the rank-and-file employees of the petitioner.
Med-Arbiter Brigida Fadrigon granted the petition, and the matter was appealed to the Secretary of Labor and
Employment (SOLE). Undersecretary Bienvenido E. Laguesma rendered a Resolution on November 18, 1994
granting the appeal. He, likewise, denied the motion filed by the petitioner and the CMC-ACE. The latter
thereafter brought the matter to the Court which rendered judgment on February 4, 1997 affirming the resolution
of Undersecretary Laguesma, thus:

1. Dismissing the petition for certification election filed by the Capitol Medical Center Alliance of Concerned
Employees-United Filipino Services Workers for lack of merit; andcralawlibrary

2. Directing the management of the Capitol Medical Center to negotiate a CBA with the Capitol Medical Center
Employees Association-Alliance of Filipino Workers, the certified bargaining agent of the rank-and-file
employees.3

The decision of the Court became final and executory. Thereafter, in a Letter dated October 3, 1997 addressed
to Dr. Thelma N. Clemente, the President and Director of the petitioner, the Union requested for a meeting to
discuss matters pertaining to a negotiation for a CBA, conformably with the decision of the Court. 4 However, in
a Letter to the Union dated October 10, 1997, Dr. Clemente rejected the proposed meeting, on her claim that it
was a violation of Republic Act No. 6713 and that the Union was not a legitimate one. On October 15, 1997, the
petitioner filed a Petition for the Cancellation of the Union's Certificate of Registration with the Department of
Labor and Employment (DOLE) on the following grounds:

3) Respondent has failed for several years to submit annually its annual financial statements and other
documents as required by law. For this reason, respondent has long lost its legal personality as a union.

4) Respondent also engaged in a strike which has been declared illegal by the National Labor Relations
Commission.5

Apparently unaware of the petition, the Union reiterated its proposal for CBA negotiations in a Letter dated
October 16, 1997 and suggested the date, time and place of the initial meeting. The Union further reiterated its
plea in another Letter6 dated October 28, 1997, to no avail.
Instead of filing a motion with the SOLE for the enforcement of the resolutions of Undersecretary Laguesma as
affirmed by this Court, the Union filed a Notice of Strike on October 29, 1997 with the National Conciliation and
Mediation Board (NCMB), serving a copy thereof to the petitioner. The Union alleged as grounds for the projected
strike the following acts of the petitioner: (a) refusal to bargain; (b) coercion on employees; and (c) interference/
restraint to self-organization.7

A series of conferences was conducted before the NCMB (National Capital Region), but no agreement was
reached. On November 6, 1997, the petitioner even filed a Letter with the Board requesting that the notice of
strike be dismissed;8 the Union had apparently failed to furnish the Regional Branch of the NCMB with a copy of
a notice of the meeting where the strike vote was conducted.

On November 20, 1997, the Union submitted to the NCMB the minutes9 of the alleged strike vote purportedly
held on November 10, 1997 at the parking lot in front of the petitioner's premises, at the corner of Scout
Magbanua Street and Panay Avenue, Quezon City. It appears that 178 out of the 300 union members
participated therein, and the results were as follows: 156 members voted to strike; 14 members cast negative
votes; and eight votes were spoiled.10

On November 28, 1997, the officers and members of the Union staged a strike. Subsequently, on December 1,
1997, the Union filed an ex parte motion with the DOLE, praying for its assumption of jurisdiction over the dispute.
The Union likewise prayed for the imposition of appropriate legal sanctions, not limited to contempt and other
penalties, against the hospital director/president and other responsible corporate officers for their continuous
refusal, in bad faith, to bargain collectively with the Union, to adjudge the same hospital director/president and
other corporate officers guilty of unfair labor practices, and for other just, equitable and expeditious reliefs in the
premises.11

On December 4, 1997, the SOLE issued an Order, assuming jurisdiction over the ongoing labor dispute. The
decretal portion of the order reads:

WHEREFORE, this Office now assumes jurisdiction over the labor disputes at Capitol Medical Center pursuant
to Article 263(g) of the Labor Code, as amended. Consequently, all striking workers are directed to return to work
within twenty-four (24) hours from the receipt of this Order and the management to resume normal operations
and accept back all striking workers under the same terms and conditions prevailing before the strike. Further,
parties are directed to cease and desist from committing any act that may exacerbate the situation.

Moreover, parties are hereby directed to submit within 10 days from receipt of this Order proposals and counter-
proposals leading to the conclusion of the collective bargaining agreements in compliance with aforementioned
Resolution of the Office as affirmed by the Supreme Court.

SO ORDERED.12

In obedience to the order of the SOLE, the officers and members of the Union stopped their strike and returned
to work.

For its part, the petitioner filed a petition13 to declare the strike illegal with the National Labor Relations
Commission (NLRC), docketed as NLRC NCR Case No. 00-12-08644-97. In its position paper, the petitioner
appended the affidavit of Erwin Barbacena, the overseer of the property across the hospital which was being
used as a parking lot, at the corner of Scout Magbanua Street and Panay Avenue, Quezon City. Also included
were the affidavits of Simon J. Tingzon and Reggie B. Barawid, the petitioner's security guards assigned in front
of the hospital premises. They attested to the fact that no secret balloting took place at the said parking lot from
6:00 a.m. to 7:00 p.m. of November 10, 1997.14 The petitioner also appended the affidavit of Henry V. Vera Cruz,
who alleged that he was a member of the Union and had discovered that signatures on the Statements of Cash
Receipt Over Disbursement submitted by the Union to the DOLE purporting to be his were not his genuine
signatures;15 the affidavits of 17 of its employees, who declared that no formal voting was held by the members
of the Union on the said date, were also submitted. The latter employees also declared that they were not
members of any union, and yet were asked to sign documents purporting to be a strike vote attendance and
unnumbered strike vote ballots on different dates from November 8 to 11, 1997.
In their position paper, the respondents appended the joint affidavit of the Union president and those members
who alleged that they had cast their votes during the strike vote held on November 10, 1997.16

In the meantime, on September 30, 1998, the Regional Director of the DOLE rendered a Decision denying the
petition for the cancellation of the respondent Union's certificate of registration. The decision was affirmed by the
Director of the Bureau of Labor Relations on December 29, 1998.

In a parallel development, Labor Arbiter Facundo L. Leda rendered a Decision on December 23, 1998 in NLRC
NCR Case No. 00-12-08644-97 in favor of the petitioner, and declared the strike staged by the respondents
illegal. The fallo of the decision reads:

1. Declaring as illegal the strike staged by the respondents from November 28, 1997 to December 5, 1997;

2. Declaring respondent Jaime Ibabao, in his capacity as union president, the other union officers, and
respondents Ronald Q. Centeno, Michael Eustaquio and Henry Vera Cruz to have lost their employment status
with petitioner; andcralawlibrary

3. Ordering the above respondents to pay, jointly and severally, petitioner the amount of Two Hundred Thousand
Pesos (P200,000.00) by way of damages.17

The Labor Arbiter ruled that no voting had taken place on November 10, 1997; moreover, no notice of such
voting was furnished to the NCMB at least twenty-four (24) hours prior to the intended holding of the strike vote.
According to the Labor Arbiter, the affidavits of the petitioner's 17 employees who alleged that no strike vote was
taken, and supported by the affidavit of the overseer of the parking lot and the security guards, must prevail as
against the minutes of the strike vote presented by the respondents. The Labor Arbiter also held that in light of
Article 263(9) of the Labor Code, the respondent Union should have filed a motion for a writ of execution of the
resolution of Undersecretary Laguesma which was affirmed by this Court instead of staging a strike.

The respondents appealed the decision to the NLRC which rendered a Decision18 on June 14, 1999, granting
their appeal and reversing the decision of the Labor Arbiter. The NLRC also denied the petitioner's petition to
declare the strike illegal. In resolving the issue of whether the union members held a strike vote on November
10, 1997, the NLRC ruled as follows:

We find untenable the Labor Arbiter's finding that no actual strike voting took place on November 10, 1997,
claiming that this is supported by the affidavit of Erwin Barbacena, the overseer of the parking lot across the
hospital, and the sworn statements of nineteen (19) (sic) union members. While it is true that no strike voting
took place in the parking lot which he is overseeing, it does not mean that no strike voting ever took place at all
because the same was conducted in the parking lot immediately/directly fronting, not across, the hospital building
(Annexes "1-J," "1-K" to "1-K-6"). Further, it is apparent that the nineteen (19) (sic) hospital employees, who
recanted their participation in the strike voting, did so involuntarily for fear of loss of employment, considering
that their Affidavits are uniform and pro forma (Annexes "H-2" to "H-19").19

The NLRC ruled that under Section 7, Rule XXII of DOLE Order No. 9, Series of 1997, absent a showing that
the NCMB decided to supervise the conduct of a secret balloting and informed the union of the said decision, or
that any such request was made by any of the parties who would be affected by the secret balloting and to which
the NCMB agreed, the respondents were not mandated to furnish the NCMB with such notice before the strike
vote was conducted.20

The petitioner filed a motion for the reconsideration of the decision, but the NLRC denied the said motion on
September 30, 1999.21

The petitioner filed a petition for certiorari with the CA assailing the decision and resolution of the NLRC on the
following allegation:

PUBLIC RESPONDENT NATIONAL LABOR RELATIONS COMMISSION (NLRC) COMMITTED GRAVE

ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION, ACTED CAPRICIOUSLY,
AND CONTRAVENED THE LAW AND ESTABLISHED JURISPRUDENCE IN REVERSING THE LABOR
ARBITER'S DECISION DATED DECEMBER 23, 1998 (ANNEX "E") AND IN UPHOLDING THE LEGALITY OF
THE STRIKE STAGED BY PRIVATE RESPONDENTS FROM NOVEMBER 28, 1997 TO DECEMBER 5, 1997.22

On September 29, 2000, the CA rendered judgment dismissing the petition and affirming the assailed decision
and resolution of the NLRC.

The petitioner filed the instant Petition for Review on Certiorari under Rule 45 of the Rules of Court on the
following ground:

THE COURT OF APPEALS GRAVELY ERRED IN UPHOLDING THE NLRC'S FINDING THAT RESPONDENTS
COMPLIED WITH THE LEGAL REQUIREMENTS FOR STAGING THE SUBJECT STRIKE.23

The petitioner asserts that the NLRC and the CA erred in holding that the submission of a notice of a strike vote
to the Regional Branch of the NCMB as required by Section 7, Rule XXII of the Omnibus Rules Implementing
the Labor Code, is merely directory and not mandatory. The use of the word "shall" in the rules, the petitioner
avers, indubitably indicates the mandatory nature of the respondent Union's duty to submit the said notice of
strike vote.

The petitioner contends that the CA erred in affirming the decision of the NLRC which declared that the
respondents complied with all the requirements for a lawful strike. The petitioner insists that, as gleaned from
the affidavits of the 17 union members and that of the overseer, and contrary to the joint affidavit of the officers
and some union members, no meeting was held and no secret balloting was conducted on November 10, 1997.

The petitioner faults the CA and the NLRC for holding that a meeting for a strike vote was held on the said date
by the respondents, despite the fact that the NLRC did not conduct an ocular inspection of the area where the
respondent's members allegedly held the voting. The petitioner also points out that it adduced documentary
evidence in the form of affidavits executed by 17 members of the respondent union which remained unrebutted.
The petitioner also posits that the CA and the NLRC erred in reversing the finding of the Labor Arbiter;
furthermore, there was no need for the respondent union to stage a strike on November 28, 1997 because it had
filed an urgent motion with the DOLE for the enforcement and execution of the decision of this Court in G.R. No.
118915.

The petition is meritorious.

We agree with the petitioner that the respondent Union failed to comply with the second paragraph of Section
10, Rule XXII of the Omnibus Rules of the NLRC which reads:

Section 10. Strike or lockout vote. 'A decision to declare a strike must be approved by a majority of the total
union membership in the bargaining unit concerned obtained by secret ballot in meetings or referenda called for
the purpose. A decision to declare a lockout must be approved by a majority of the Board of Directors of the
employer, corporation or association or the partners obtained by a secret ballot in a meeting called for the
purpose.

The regional branch of the Board may, at its own initiative or upon the request of any affected party, supervise
the conduct of the secret balloting. In every case, the union or the employer shall furnish the regional branch of
the Board and notice of meetings referred to in the preceding paragraph at least twenty-four (24) hours before
such meetings as well as the results of the voting at least seven (7) days before the intended strike or lockout,
subject to the cooling-off period provided in this Rule.

Although the second paragraph of Section 10 of the said Rule is not provided in the Labor Code of the Philippines,
nevertheless, the same was incorporated in the Omnibus Rules Implementing the Labor Code and has the force
and effect of law.24

Aside from the mandatory notices embedded in Article 263, paragraphs (c) and (f) of the Labor Code, a union
intending to stage a strike is mandated to notify the NCMB of the meeting for the conduct of strike vote, at least
twenty-four (24) hours prior to such meeting. Unless the NCMB is notified of the date, place and time of the
meeting of the union members for the conduct of a strike vote, the NCMB would be unable to supervise the
holding of the same, if and when it decides to exercise its power of supervision. In National Federation of Labor
v. NLRC,25 the Court enumerated the notices required by Article 263 of the Labor Code and the Implementing
Rules, which include the 24-hour prior notice to the NCMB:

1) A notice of strike, with the required contents, should be filed with the DOLE, specifically the Regional Branch
of the NCMB, copy furnished the employer of the union;

2) A cooling-off period must be observed between the filing of notice and the actual execution of the strike thirty
(30) days in case of bargaining deadlock and fifteen (15) days in case of unfair labor practice. However, in the
case of union busting where the union's existence is threatened, the cooling-off period need not be observed.

4) Before a strike is actually commenced, a strike vote should be taken by secret balloting, with a 24-hour prior
notice to NCMB. The decision to declare a strike requires the secret-ballot approval of majority of the total union
membership in the bargaining unit concerned.

5) The result of the strike vote should be reported to the NCMB at least seven (7) days before the intended strike
or lockout, subject to the cooling-off period.

A union is mandated to notify the NCMB of an impending dispute in a particular bargaining unit via a notice of
strike. Thereafter, the NCMB, through its conciliator-mediators, shall call the parties to a conference at the
soonest possible time in order to actively assist them in exploring all possibilities for amicable settlement. In the
event of the failure in the conciliation/mediation proceedings, the parties shall be encouraged to submit their
dispute for voluntary arbitration. However, if the parties refuse, the union may hold a strike vote, and if the
requisite number of votes is obtained, a strike may ensue. The purpose of the strike vote is to ensure that the
decision to strike broadly rests with the majority of the union members in general and not with a mere minority,
and at the same time, discourage wildcat strikes, union bossism and even corruption.26 A strike vote report
submitted to the NCMB at least seven days prior to the intended date of strike ensures that a strike vote was,
indeed, taken. In the event that the report is false, the seven-day period affords the members an opportunity to
take the appropriate remedy before it is too late.27 The 15 to 30 day cooling-off period is designed to afford the
parties the opportunity to amicably resolve the dispute with the assistance of the NCMB
conciliator/mediator,28 while the seven-day strike ban is intended to give the DOLE an opportunity to verify
whether the projected strike really carries the imprimatur of the majority of the union members. 29

The requirement of giving notice of the conduct of a strike vote to the NCMB at least 24 hours before the meeting
for the said purpose is designed to (a) inform the NCMB of the intent of the union to conduct a strike vote; (b)
give the NCMB ample time to decide on whether or not there is a need to supervise the conduct of the strike
vote to prevent any acts of violence and/or irregularities attendant thereto; and (c) should the NCMB decide on
its own initiative or upon the request of an interested party including the employer, to supervise the strike vote,
to give it ample time to prepare for the deployment of the requisite personnel, including peace officers if need
be. Unless and until the NCMB is notified at least 24 hours of the union's decision to conduct a strike vote, and
the date, place, and time thereof, the NCMB cannot determine for itself whether to supervise a strike vote meeting
or not and insure its peaceful and regular conduct. The failure of a union to comply with the requirement of the
giving of notice to the NCMB at least 24 hours prior to the holding of a strike vote meeting will render the
subsequent strike staged by the union illegal.

In this case, the respondent Union failed to comply with the 24-hour prior notice requirement to the NCMB before
it conducted the alleged strike vote meeting on November 10, 1997. As a result, the petitioner complained that
no strike vote meeting ever took place and averred that the strike staged by the respondent union was illegal.

Conformably to Article 264 of the Labor Code of the Philippines30 and Section 7, Rule XXII of the Omnibus Rules
Implementing the Labor Code,31 no labor organization shall declare a strike unless supported by a majority vote
of the members of the union obtained by secret ballot in a meeting called for that purpose. The requirement is
mandatory and the failure of a union to comply therewith renders the strike illegal.32 The union is thus mandated
to allege and prove compliance with the requirements of the law.

In the present case, there is a divergence between the factual findings of the Labor Arbiter, on the one hand,
and the NLRC and the CA, on the other, in that the Labor Arbiter found and declared in his decision that no
secret voting ever took place in the parking lot fronting the hospital on November 10, 1997 by and among the
300 members of the respondent Union. Erwin Barbacena, the overseer of the only parking lot fronting the
hospital, and security guards Simon Tingzon and Reggie Barawid, declared in their respective affidavits that no
secret voting ever took place on November 10, 1997; 17 employees of the petitioner also denied in their
respective statements that they were not members of the respondent Union, and were asked to merely sign
attendance papers and unnumbered votes. The NLRC and the CA declared in their respective decisions that the
affidavits of the petitioner's 17 employees had no probative weight because the said employees merely executed
their affidavits out of fear of losing their jobs. The NLRC and the CA anchored their conclusion on their finding
that the affidavits of the employees were uniform and pro forma.

We agree with the finding of the Labor Arbiter that no secret balloting to strike was conducted by the respondent
Union on November 10, 1997 at the parking lot in front of the hospital, at the corner of Scout Magbanua Street
and Panay Avenue, Quezon City. This can be gleaned from the affidavit of Barbacena and the joint affidavit of
Tingzon and Barawid, respectively:

1. That I am working as an overseer of a parking lot owned by Mrs. Madelaine Dionisio and located right in front
of the Capitol Medical Center, specifically at the corner of Scout Magbanua Street and Panay Avenue, Quezon
City;

2. That on November 10, 1997, during my entire tour of duty from 6:00 a.m. to 6:00 p.m., no voting or election
was conducted in the aforementioned parking space for employees of the Capitol Medical Center and/or their
guests, or by any other group for that matter.33

1. That I, Simon J. Tingzon, am a security officer of Veterans Philippine Scout Security Agency (hereinafter
referred to as VPSSA), assigned, since July 1997 up to the present, as Security Detachment Commander at
Capitol Medical Center (hereinafter referred to as CMC) located at Scout Magbanua corner Panay Avenue,
Quezon City;

2. That my (Tingzon) functions as such include over-all in charge of security of all buildings and properties of
CMC, and roving in the entire premises including the parking lots of all the buildings of CMC;

3. That I, Reggie B. Barawid, am a security guard of VPSSA, assigned, since June 1997 up to the present, as
security guard at CMC;

4. That my (Barawid) functions as such include access control of all persons coming in and out of CMC's buildings
and properties. I also sometimes guard the parking areas of CMC;

5. That on November 10, 1997, both of us were on duty at CMC from 7:00 a.m. to 7:00 p.m., with me (Barawid)
assigned at the main door of the CMC's Main Building along Scout Magbanua St.;

6. That on said date, during our entire tour of duty, there was no voting or election conducted in any of the four
parking spaces for CMC personnel and guests.34

The allegations in the foregoing affidavits belie the claim of the respondents and the finding of the NLRC that a
secret balloting took place on November 10, 1997 in front of the hospital at the corner of Scout Magbanua Street
and Panay Avenue, Quezon City. The respondents failed to prove the existence of a parking lot in front of the
hospital other than the parking lot across from it. Indeed, 17 of those who purportedly voted in a secret voting
executed their separate affidavits that no secret balloting took place on November 10, 1997, and that even if
they were not members of the respondent Union, were asked to vote and to sign attendance papers. The
respondents failed to adduce substantial evidence that the said affiants were coerced into executing the said
affidavits. The bare fact that some portions of the said affidavits are similarly worded does not constitute
substantial evidence that the petitioner forced, intimidated or coerced the affiants to execute the same.

IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The Decisions of the Court of Appeals and
NLRC are SET ASIDE AND REVERSED. The Decision of the Labor Arbiter is REINSTATED. No costs.

SO ORDERED.
G.R. No. 146717 May 19, 2006
TRANSFIELD PHILIPPINES, INC., Petitioner,
vs.
LUZON HYDRO CORPORATION, AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED and SECURITY
BANK CORPORATION, Respondents.
RESOLUTION
TINGA, J.:
The adjudication of this case proved to be a two-stage process as its constituent parts involve two segregate but
equally important issues. The first stage relating to the merits of the case, specifically the question of the propriety
of calling on the securities during the pendency of the arbitral proceedings, was resolved in favor of Luzon Hydro
Corporation (LHC) with the Court’s Decision1 of 22 November 2004. The second stage involving the issue of
forum-shopping on which the Court required the parties to submit their respective memoranda2 is disposed of in
this Resolution.

The disposal of the forum-shopping charge is crucial to the parties to this case on account of its profound effect
on the final outcome of the international arbitral proceedings which they have chosen as their principal dispute
resolution mechanism.3

LHC claims that Transfield Philippines, Inc. (TPI) is guilty of forum-shopping when it filed the following suits:

1. Civil Case No. 04-332 filed on 19 March 2004, pending before the Regional Trial Court (RTC) of Makati,
Branch 56 for confirmation, recognition and enforcement of the Third Partial Award in case 11264
TE/MW, ICC International Court of Arbitration, entitled Transfield Philippines, Inc. v. Luzon Hydro
Corporation.4

2. ICC Case No. 11264/TE/MW, Transfield Philippines, Inc. v. Luzon Hydro Corporation filed before the
International Court of Arbitration, International Chamber of Commerce (ICC) a request for arbitration
dated 3 November 2000 pursuant to the Turnkey Contract between LHC and TPI;

3. G.R. No. 146717, Transfield Philippines, Inc. v. Luzon Hydro Corporation, Australia and New Zealand
Banking Group Limited and Security Bank Corp. filed on 5 February 2001, which was an appeal by
certiorari with prayer for TRO/preliminary prohibitory and mandatory injunction, of the Court of Appeals
Decision dated 31 January 2001 in CA-G.R. SP No. 61901.

a. CA-G.R. SP No. 61901 was a petition for review of the Decision in Civil Case No. 00-1312,
wherein TPI claimed that LHC’s call on the securities was premature considering that the issue
of default has not yet been resolved with finality; the petition was however denied by the Court of
Appeals;

b. Civil Case No. 00-1312 was a complaint for injunction with prayer for temporary restraining
order and/or writ of preliminary injunction dated 5 November 2000, which sought to restrain LHC
from calling on the securities and respondent banks from transferring or paying of the securities;
the complaint was denied by the RTC.

On the other hand, TPI claims that it is LHC which is guilty of forum-shopping when it raised the issue of forum-
shopping not only in this case, but also in Civil Case No. 04-332, and even asked for the dismissal of the other
case based on this ground. Moreover, TPI argues that LHC is relitigating in Civil Case No. 04-332 the very same
causes of action in ICC Case No. 11264/TE/MW, and even manifesting therein that it will present evidence earlier
presented before the arbitral tribunal.5

Meanwhile, ANZ Bank and Security Bank moved to be excused from filing a memorandum. They claim that with
the finality of the Court’s Decision dated 22 November 2004, any resolution by the Court on the issue of forum-
shopping will not materially affect their role as the banking entities involved are concerned. 6 The Court granted
their respective motions.

On 1 August 2005, TPI moved to set the case for oral argument, positing that the resolution of the Court on the
issue of forum-shopping may have significant implications on the interpretation of the Alternative Dispute
Resolution Act of 2004, as well as the viability of international commercial arbitration as an alternative mode of
dispute resolution in the country.7 Said motion was opposed by LHC in its opposition filed on 2 September 2005,
with LHC arguing that the respective memoranda of the parties are sufficient for the Court to resolve the issue
of forum-shopping.8 On 28 October 2005, TPI filed its Manifestation and Reiterative Motion9 to set the case for
oral argument, where it manifested that the International Chamber of Commerce (ICC) arbitral tribunal had
issued its Final Award ordering LHC to pay TPI US$24,533,730.00 (including the US$17,977,815.00 proceeds
of the two standby letters of credit). TPI also submitted a copy thereof with a Supplemental Petition 10 to the
Regional Trial Court (RTC), seeking recognition and enforcement of the said award. 11

The essence of forum-shopping is the filing of multiple suits involving the same parties for the same cause of
action, either simultaneously or successively, for the purpose of obtaining a favorable judgment. 12 Forum-
shopping has likewise been defined as the act of a party against whom an adverse judgment has been rendered
in one forum, seeking and possibly getting a favorable opinion in another forum, other than by appeal or the
special civil action of certiorari, or the institution of two or more actions or proceedings grounded on the same
cause on the supposition that one or the other court would make a favorable disposition.13

Thus, for forum-shopping to exist, there must be (a) identity of parties, or at least such parties as represent the
same interests in both actions; (b) identity of rights asserted and relief prayed for, the relief being founded on the
same facts; and (c) the identity of the two preceding particulars is such that any judgment rendered in the other
action will, regardless of which party is successful, amount to res judicata in the action under consideration.14

There is no identity of causes of action between and among the arbitration case, the instant petition, and Civil
Case No. 04-332.

The arbitration case, ICC Case No. 11264 TE/MW, is an arbitral proceeding commenced pursuant to the Turnkey
Contract between TPI and LHC, to determine the primary issue of whether the delays in the construction of the
project were excused delays, which would consequently render valid TPI’s claims for extension of time to finish
the project. Together with the primary issue to be settled in the arbitration case is the equally important question
of monetary awards to the aggrieved party.

On the other hand, Civil Case No. 00-1312, the precursor of the instant petition, was filed to enjoin LHC from
calling on the securities and respondent banks from transferring or paying the securities in case LHC calls on
them. However, in view of the fact that LHC collected the proceeds, TPI, in its appeal and petition for review
asked that the same be returned and placed in escrow pending the resolution of the disputes before the ICC
arbitral tribunal.15

While the ICC case thus calls for a thorough review of the facts which led to the delay in the construction of the
project, as well as the attendant responsibilities of the parties therein, in contrast, the present petition puts in
issue the propriety of drawing on the letters of credit during the pendency of the arbitral case, and of course,
absent a final determination by the ICC Arbitral tribunal. Moreover, as pointed out by TPI, it did not pray for the
return of the proceeds of the letters of credit. What it asked instead is that the said moneys be placed in escrow
until the final resolution of the arbitral case. Meanwhile, in Civil Case No. 04-332, TPI no longer seeks the
issuance of a provisional relief, but rather the issuance of a writ of execution to enforce the Third Partial Award.

Neither is there an identity of parties between and among the three (3) cases. The ICC case only involves TPI
and LHC logically since they are the parties to the Turnkey Contract. In comparison, the instant petition includes
Security Bank and ANZ Bank, the banks sought to be enjoined from releasing the funds of the letters of credit.
The Court agrees with TPI that it would be ineffectual to ask the ICC to issue writs of preliminary injunction
against Security Bank and ANZ Bank since these banks are not parties to the arbitration case, and that the ICC
Arbitral tribunal would not even be able to compel LHC to obey any writ of preliminary injunction issued from its
end.16 Civil Case No. 04-322, on the other hand, logically involves TPI and LHC only, they being the parties to
the arbitration agreement whose partial award is sought to be enforced.

As a fundamental point, the pendency of arbitral proceedings does not foreclose resort to the courts for
provisional reliefs. The Rules of the ICC, which governs the parties’ arbitral dispute, allows the application of a
party to a judicial authority for interim or conservatory measures. 17 Likewise, Section 14 of Republic Act (R.A.)
No. 876 (The Arbitration Law)18 recognizes the rights of any party to petition the court to take measures to
safeguard and/or conserve any matter which is the subject of the dispute in arbitration. In addition, R.A. 9285,
otherwise known as the "Alternative Dispute Resolution Act of 2004," allows the filing of provisional or interim
measures with the regular courts whenever the arbitral tribunal has no power to act or to act effectively. 19

TPI’s verified petition in Civil Case No. 04-332, filed on 19 March 2004, was captioned as one "For: Confirmation,
Recognition and Enforcement of Foreign Arbitral Award in Case 11264 TE/MW, ICC International Court of
Arbitration, ‘Transfield Philippines, Inc. v. Luzon Hydro Corporation (Place of arbitration: Singapore)." 20 In the
said petition, TPI prayed:

1. That the THIRD PARTIAL AWARD dated February 18, 2004 in Case No. 11264/TE/MW made by the
ICC International Court of Arbitration, the signed original copy of which is hereto attached as Annex "H"
hereof, be confirmed, recognized and enforced in accordance with law.

2. That the corresponding writ of execution to enforce Question 31 of the said Third Partial Award, be
issued, also in accordance with law.

3. That TPI be granted such other relief as may be deemed just and equitable, and allowed, in accordance
with law.21

The pertinent portion of the Third Partial Award22 relied upon by TPI were the answers to Questions 10 to 26, to
wit:

"Question 30 Did TPI [LHC] wrongfully draw upon the security?

Yes

"Question 31 Is TPI entitled to have returned to it any sum wrongfully taken by LHC for liquidated damages?

Yes

"Question 32 Is TPI entitled to any acceleration costs?

TPI is entitled to the reasonable costs TPI incurred after Typhoon Zeb as a result of LHC’s 5 February 1999
Notice to Correct.23

According to LHC, the filing of the above case constitutes forum-shopping since it is the same claim for the return
of US$17.9 Million which TPI made before the ICC Arbitral Tribunal and before this Court. LHC adds that while
Civil Case No. 04-332 is styled as an action for money, the Third Partial Award used as basis of the suit does
not authorize TPI to seek a writ of execution for the sums drawn on the letters of credit. Said award does not
even contain an order for the payment of money, but instead has reserved the quantification of the amounts for
a subsequent determination, LHC argues. In fact, even the Fifth Partial Award,24 dated 30 March 2005, does not
contain such orders. LHC insists that the declarations or the partial awards issued by the ICC Arbitral Tribunal
do not constitute orders for the payment of money and are not intended to be enforceable as such, but merely
constitute amounts which will be included in the Final Award and will be taken into account in determining the
actual amount payable to the prevailing party.25

R.A. No. 9825 provides that international commercial arbitrations shall be governed shall be governed by the
Model Law on International Commercial Arbitration ("Model Law") adopted by the United Nations Commission
on International Trade Law (UNCITRAL).26 The UNCITRAL Model Law provides:

ARTICLE 35. Recognition and enforcement

(1) An arbitral award, irrespective of the country in which it was made, shall be recognized as binding
and, upon application in writing to the competent court, shall be enforced subject to the provisions of this
article and of article 36.

(2) The party relying on an award or applying for its enforcement shall supply the duly authenticated
original award or a duly certified copy thereof, and the original arbitration agreement referred to in article
 7 or a duly certified copy thereof. If the award or agreement is not made in an official language of this
State, the party shall supply a duly certified translation thereof into such language.

Moreover, the New York Convention,27 to which the Philippines is a signatory, governs the recognition and
enforcement of foreign arbitral awards. The applicability of the New York Convention in the Philippines was
confirmed in Section 42 of R.A. 9285. Said law also provides that the application for the recognition and
enforcement of such awards shall be filed with the proper RTC. While TPI’s resort to the RTC for recognition and
enforcement of the Third Partial Award is sanctioned by both the New York Convention and R.A. 9285, its
application for enforcement, however, was premature, to say the least. True, the ICC Arbitral Tribunal had indeed
ruled that LHC wrongfully drew upon the securities, yet there is no order for the payment or return of the proceeds
of the said securities. In fact, Paragraph 2142, which is the final paragraph of the Third Partial Award, reads:

2142. All other issues, including any issues as to quantum and costs, are reserved to a future award. 28

Meanwhile, the tribunal issued its Fifth Partial Award29 on 30 March 2005. It contains, among others, a
declaration that while LHC wrongfully drew on the securities, the drawing was made in good faith, under the
mistaken assumption that the contractor, TPI, was in default. Thus, the tribunal ruled that while the amount drawn
must be returned, TPI is not entitled to any damages or interests due to LHC’s drawing on the securities.30 In the
Fifth Partial Award, the tribunal ordered:

6. Order

6.1 General

166. This Fifth Partial Award deals with many issues of quantum.1avvphil.net However, it does not resolve them
all. The outstanding quantum issues will be determined in a future award. It will contain a reconciliation of
the amounts awarded to each party and a determination of the net amount payable to Claimant or Respondent,
as the case may be.

167. In view of this the Tribunal will make no orders for payment in this Fifth Partial Award. The Tribunal will
make a number of declarations concerning the quantum issues it has resolved in this Award together with the
outstanding liability issues. The declarations do not constitute orders for the payment of money and are
not intended to be enforceable as such. They merely constitute amounts which will be included in the
Final Award and will be taken into account in determining the actual amount payable.31 (Emphasis
Supplied.)

Further, in the Declarations part of the award, the tribunal held:

6.2 Declarations

168. The Tribunal makes the following declarations:

xxx

3. LHC is liable to repay TPI the face value of the securities drawn down by it, namely, $17,977,815. It is not
liable for any further damages claimed by TPI in respect of the drawdown of the securities.

x x x.32

Finally, on 9 August 2005, the ICC Arbitral tribunal issued its Final Award, in essence awarding
US$24,533,730.00, which included TPI’s claim of U$17,977,815.00 for the return of the securities from LHC.33

The fact that the ICC Arbitral tribunal included the proceeds of the securities shows that it intended to make a
final determination/award as to the said issue only in the Final Award and not in the previous partial awards. This
supports LHC’s position that when the Third Partial Award was released and Civil Case No. 04-332 was filed,
TPI was not yet authorized to seek the issuance of a writ of execution since the quantification of the amounts
due to TPI had not yet been settled by the ICC Arbitral tribunal. Notwithstanding the fact that the amount of
proceeds drawn on the securities was not disputed the application for the enforcement of the Third Partial Award
was precipitately filed. To repeat, the declarations made in the Third Partial Award do not constitute orders for
the payment of money.

Anent the claim of TPI that it was LHC which committed forum-shopping, suffice it to say that its bare allegations
are not sufficient to sustain the charge.

WHEREFORE, the Court RESOLVES to DISMISS the charges of forum-shopping filed by both parties against
each other.

No pronouncement as to costs.

SO ORDERED.
G.R. No. 126619 December 20, 2006
UNIWIDE SALES REALTY AND RESOURCES CORPORATION, petitioner,
vs.
TITAN-IKEDA CONSTRUCTION AND DEVELOPMENT CORPORATION, respondent.

DECISION
TINGA, J.:
This Petition for Review on Certiorari under Rule 45 seeks the partial reversal of the 21 February 1996
Decision1 of the Court of Appeals Fifteenth Division in CA-G.R. SP No. 37957 which modified the 17 April 1995
Decision2 of the Construction Industry Arbitration Commission (CIAC).

The case originated from an action for a sum of money filed by Titan-Ikeda Construction and Development
Corporation (Titan) against Uniwide Sales Realty and Resources Corporation (Uniwide) with the Regional Trial
Court (RTC), Branch 119,3 Pasay City arising from Uniwide's non-payment of certain claims billed by Titan after
completion of three projects covered by agreements they entered into with each other. Upon Uniwide's motion
to dismiss/suspend proceedings and Titan's open court manifestation agreeing to the suspension, Civil Case
No. 98-0814 was suspended for it to undergo arbitration.4 Titan's complaint was thus re-filed with the
CIAC.5 Before the CIAC, Uniwide filed an answer which was later amended and re-amended, denying the
material allegations of the complaint, with counterclaims for refund of overpayments, actual and exemplary
damages, and attorney's fees. The agreements between Titan and Uniwide are briefly described below.

PROJECT 1.6

The first agreement (Project 1) was a written "Construction Contract" entered into by Titan and Uniwide sometime
in May 1991 whereby Titan undertook to construct Uniwide's Warehouse Club and Administration Building in
Libis, Quezon City for a fee of P120,936,591.50, payable in monthly progress billings to be certified to by
Uniwide's representative.7 The parties stipulated that the building shall be completed not later than 30 November
1991. As found by the CIAC, the building was eventually finished on 15 February 19928 and turned over to
Uniwide.

PROJECT 2.

Sometime in July 1992, Titan and Uniwide entered into the second agreement (Project 2) whereby the former
agreed to construct an additional floor and to renovate the latter's warehouse located at the EDSA Central Market
Area in Mandaluyong City. There was no written contract executed between the parties for this project.
Construction was allegedly to be on the basis of drawings and specifications provided by Uniwide's structural
engineers. The parties proceeded on the basis of a cost estimate of P21,301,075.77 inclusive of Titan's 20%
mark-up. Titan conceded in its complaint to having received P15,000,000.00 of this amount. This project was
completed in the latter part of October 1992 and turned over to Uniwide.

PROJECT 3.9

The parties executed the third agreement (Project 3) in May 1992. In a written "Construction Contract," Titan
undertook to construct the Uniwide Sales Department Store Building in Kalookan City for the price
of P118,000,000.00 payable in progress billings to be certified to by Uniwide's representative.10 It was stipulated
that the project shall be completed not later than 28 February 1993. The project was completed and turned over
to Uniwide in June 1993.

Uniwide asserted in its petition that: (a) it overpaid Titan for unauthorized additional works in Project 1 and Project
3; (b) it is not liable to pay the Value-Added Tax (VAT) for Project 1; (c) it is entitled to liquidated damages for
the delay incurred in constructing Project 1 and Project 3; and (d) it should not have been found liable for
deficiencies in the defectively constructed Project 2.

An Arbitral Tribunal consisting of a chairman and two members was created in accordance with the CIAC Rules
of Procedure Governing Construction Arbitration. It conducted a preliminary conference with the parties and
thereafter issued a Terms of Reference (TOR) which was signed by the parties. The tribunal also conducted an
ocular inspection, hearings, and received the evidence of the parties consisting of affidavits which were subject
to cross-examination. On 17 April 1995, after the parties submitted their respective memoranda, the Arbitral
Tribunal promulgated a Decision,11 the decretal portion of which is as follows:

"WHEREFORE, judgment is hereby rendered as follows:

On Project 1 – Libis:

[Uniwide] is absolved of any liability for the claims made by [Titan] on this Project.

Project 2 – Edsa Central:

[Uniwide] is absolved of any liability for VAT payment on this project, the same being for the account of
the [Titan]. On the other hand, [Titan] is absolved of any liability on the counterclaim for defective
construction of this project.

[Uniwide] is held liable for the unpaid balance in the amount of P6,301,075.77 which is ordered to be paid
to the [Titan] with 12% interest per annum commencing from 19 December 1992 until the date of
payment.

On Project 3 – Kalookan:

[Uniwide] is held liable for the unpaid balance in the amount of P5,158,364.63 which is ordered to be paid
to the [Titan] with 12% interest per annum commencing from 08 September 1993 until the date of
payment.

[Uniwide] is held liable to pay in full the VAT on this project, in such amount as may be computed by the
Bureau of Internal Revenue to be paid directly thereto. The BIR is hereby notified that [Uniwide] Sales
Realty and Resources Corporation has assumed responsibility and is held liable for VAT payment on this
project. This accordingly exempts Claimant Titan-Ikeda Construction and Development Corporation from
this obligation.

Let a copy of this Decision be furnished the Honorable Aurora P. Navarette Recina, Presiding Judge,
Branch 119, Pasay City, in Civil Case No. 94-0814 entitled Titan-Ikeda Construction Development
Corporation, Plaintiff – versus – Uniwide Sales Realty and Resources Corporation, Defendant, pending
before said court for information and proper action.

SO ORDERED."12

Uniwide filed a motion for reconsideration of the 17 April 1995 decision which was denied by the CIAC in its
Resolution dated 6 July 1995. Uniwide accordingly filed a petition for review with the Court of Appeals, 13 which
rendered the assailed decision on 21 February 1996. Uniwide's motion for reconsideration was likewise denied
by the Court of Appeals in its assailed Resolution14 dated 30 September 1996.

Hence, Uniwide comes to this Court via a petition for review under Rule 45. The issues submitted for resolution
of this Court are as follows:15 (1) Whether Uniwide is entitled to a return of the amount it allegedly paid by mistake
to Titan for additional works done on Project 1; (2) Whether Uniwide is liable for the payment of the Value-Added
Tax (VAT) on Project 1; (3) Whether Uniwide is entitled to liquidated damages for Projects 1 and 3; and (4)
Whether Uniwide is liable for deficiencies in Project 2.

As a rule, findings of fact of administrative agencies and 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.16 In particular, factual findings of construction arbitrators are
final and conclusive and not reviewable by this Court on appeal.17 This rule, however admits of certain
exceptions.

In David v. Construction Industry and Arbitration Commission,18 we ruled that, as exceptions, factual findings of
construction arbitrators may be reviewed by this Court 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 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.19

Other recognized exceptions are as follows: (1) when there is a very clear showing of grave abuse of
discretion20 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,21 (2) when the findings of the Court of Appeals are contrary to those of the CIAC, 22 and (3) when a
party is deprived of administrative due process.23

Thus, in Hi-Precision Steel Center, Inc. v. Lim Kim Builders, Inc.,24 we refused to review the findings of fact of
the CIAC for the reason that petitioner was requiring the Court to go over each individual claim and counterclaim
submitted by the parties in the CIAC. A review of the CIAC's findings of fact would have had the effect of "setting
at naught the basic objective of a voluntary arbitration and would reduce arbitration to a largely inutile institution."
Further, petitioner therein failed to show any serious error of law amounting to grave abuse of discretion resulting
in lack of jurisdiction on the part of the Arbitral Tribunal, in either the methods employed or the results reached
by the Arbitral Tribunal, in disposing of the detailed claims of the respective parties. In Metro Construction, Inc.
v. Chatham Properties, Inc.,25 we reviewed the findings of fact of the Court of Appeals because its findings on
the issue of whether petitioner therein was in delay were contrary to the findings of the CIAC. Finally,
in Megaworld Globus Asia, Inc. v. DSM Construction and Development Corporation, 26 we declined to depart
from the findings of the Arbitral Tribunal considering that the computations, as well as the propriety of the awards,
are unquestionably factual issues that have been discussed by the Arbitral Tribunal and affirmed by the Court of
Appeals.

In the present case, only the first issue presented for resolution of this Court is a question of law while the rest
are factual in nature. However, we do not hesitate to inquire into these factual issues for the reason that the
CIAC and the Court of Appeals, in some matters, differed in their findings.

We now proceed to discuss the issues in seriatim.

Payment by Mistake for Project 1

The first issue refers to the P5,823,481.75 paid by Uniwide for additional works done on Project 1. Uniwide
asserts that Titan was not entitled to be paid this amount because the additional works were without any written
authorization.

It should be noted that the contracts do not contain stipulations on "additional works," Uniwide's liability for
"additional works," and prior approval as a requirement before Titan could perform "additional works."

Nonetheless, Uniwide cites Article (Art. ) 1724 of the New Civil Code as basis for its claim that it is not liable to
pay for "additional works" it did not authorize or agree upon in writing. The provision states:

Art. 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 landowner, 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.

The Court of Appeals did take note of this provision, but deemed it inapplicable to the case at bar because
Uniwide had already paid, albeit with unwritten reservations, for the "additional works." The provision would have
been operative had Uniwide refused to pay for the costs of the "additional works." Instead, the Court of Appeals
applied Art. 142327 of the New Civil Code and characterized Uniwide's payment of the said amount as a voluntary
fulfillment of a natural obligation. The situation was characterized as being akin to Uniwide being a debtor who
paid a debt even while it knew that it was not legally compelled to do so. As such debtor, Uniwide could no longer
demand the refund of the amount already paid.

Uniwide counters that Art. 1724 makes no distinction as to whether payment for the "additional works" had
already been made. It claims that it had made the payments, subject to reservations, upon the false
representation of Titan-Ikeda that the "additional works" were authorized in writing. Uniwide characterizes the
payment as a "mistake," and not a "voluntary" fulfillment under Art. 1423 of the Civil Code. Hence, it urges the
application, instead, of the principle of solutio indebiti under Arts. 215428 and 215629 of the Civil Code.

To be certain, this Court has not been wont to give an expansive construction of Art. 1724, denying, for example,
claims that it applies to constructions made of ship vessels,30 or that it can validly deny the claim for payment of
professional fees to the architect.31 The present situation though presents a thornier problem. Clearly, Art. 1724
denies, as a matter of right, payment to the contractor for additional works which were not authorized in writing
by the proprietor, and the additional price of which was not determined in writing by the parties.

Yet the distinction pointed out by the Court of Appeals is material. The issue is no longer centered on the right
of the contractor to demand payment for additional works undertaken because payment, whether mistaken or
not, was already made by Uniwide. Thus, it would not anymore be incumbent on Titan to establish that it had the
right to demand or receive such payment.

But, even if the Court accepts Art. 1724 as applicable in this case, such recognition does not ipso facto accord
Uniwide the right to be reimbursed for payments already made, since Art. 1724 does not effect such right of
reimbursement. It has to be understood that Art. 1724 does not preclude the payment to the contractor who
performs additional works without any prior written authorization or agreement as to the price for such works if
the owner decides anyway to make such payment. What the provision does preclude is the right of the contractor
to insist upon payment for unauthorized additional works.

Accordingly, Uniwide, as the owner who did pay the contractor for such additional works even if they had not
been authorized in writing, has to establish its own right to reimbursement not under Art. 1724, but under a
different provision of law. Uniwide's burden of establishing its legal right to reimbursement becomes even more
crucial in the light of the general presumption contained in Section 3(f), Rule 131 of the Rules of Court that
"money paid by one to another was due to the latter."

Uniwide undertakes such a task before this Court, citing the provisions on solutio indebiti under Arts. 2154 and
2156 of the Civil Code. However, it is not enough to prove that the payments made by Uniwide to Titan were
"not due" because there was no prior authorization or agreement with respect to additional works. There is a
further requirement that the payment by the debtor was made either through mistake or under a cloud of doubt.
In short, for the provisions on solutio indebiti to apply, there has to be evidence establishing the frame of mind
of the payor at the time the payment was made.32

The CIAC refused to acknowledge that the additional works on Project 1 were indeed unauthorized by Uniwide.
Neither did the Court of Appeals arrive at a contrary determination. There would thus be some difficulty for this
Court to agree with this most basic premise submitted by Uniwide that it did not authorize the additional works
on Project 1 undertaken by Titan. Still, Uniwide does cite testimonial evidence from the record alluding to a
concession by employees of Titan that these additional works on Project 1 were either authorized or
documented.33

Yet even conceding that the additional works on Project 1 were not authorized or committed into writing, the
undisputed fact remains that Uniwide paid for these additional works. Thus, to claim a refund of payments made
under the principle of solutio indebiti, Uniwide must be able to establish that these payments were made through
mistake. Again, this is a factual matter that would have acquired a mantle of invulnerability had it been determined
by both the CIAC and the Court of Appeals. However, both bodies failed to arrive at such a conclusion. Moreover,
Uniwide is unable to direct our attention to any pertinent part of the record that would indeed establish that the
payments were made by reason of mistake.
We note that Uniwide alleged in its petition that the CIAC award in favor of Titan in the amount P5,158,364.63
as the unpaid balance in Project 3 included claims for additional works of P1,087,214.18 for which no written
authorization was presented. Unfortunately, this issue was not included in its memorandum as one of the issues
submitted for the resolution of the Court.

Liability for the Value-Added Tax (VAT)

The second issue takes us into an inquiry on who, under the law, is liable for the payment of the VAT, in the
absence of a written stipulation on the matter. Uniwide claims that the VAT was already included in the contract
price for Project 1. Citing Secs. 99 and 102 of the National Internal Revenue Code, Uniwide asserts that VAT,
being an indirect tax, may be shifted to the buyer by including it in the cash or selling price and it is entirely up to
the buyer to agree or not to agree to absorb the VAT.34 Thus, Uniwide concludes, if there is no provision in the
contract as to who should pay the VAT, it is presumed that it would be the seller.35

The contract for Project 1 is silent on which party should shoulder the VAT while the contract for Project 3
contained a provision to the effect that Uniwide is the party responsible for the payment of the VAT.36 Thus, when
Uniwide paid the amount of P2,400,000.00 as billed by Titan for VAT, it assumed that it was the VAT for Project
3. However, the CIAC and the Court of Appeals found that the same was for Project 1.

We agree with the conclusions of both the CIAC and the Court of Appeals that the amount of P2,400,000.00 was
paid by Uniwide as VAT for Project 1. This conclusion was drawn from an Order of Payment 37 dated 7 October
1992 wherein Titan billed Uniwide the amount of P2,400,000.00 as "Value Added Tax based on P60,000,000.00
Contract," computed on the basis of 4% of P60,000,000.00. Said document which was approved by the President
of Uniwide expressly indicated that the project involved was the "UNIWIDE SALES WAREHOUSE CLUB &
ADMIN BLDG." located at "90 E. RODRIGUEZ JR. AVE., LIBIS, Q.C." The reduced base for the computation of
the tax, according to the Court of Appeals, was an indication that the parties agreed to pass the VAT for Project
1 to Uniwide but based on a lower contract price. Indeed, the CIAC found as follows:

Without any documentary evidence than Exhibit "H" to show the extent of tax liability assumed by
[Uniwide], the Tribunal holds that the parties is [sic] obliged to pay only a share of the VAT payment up
to P60,000,000.00 out of the total contract price of P120,936,591.50. As explained by Jimmy Gow,
VAT is paid on labor only for construction contracts since VAT had already been paid on the
materials purchased. Since labor costs is [sic] proportionately placed at 60%-40% of the contract
price, simplified accounting computes VAT at 4% of the contract price. Whatever is the balance for
VAT that remains to be paid on Project 1 – Libis shall remain the obligation of [Titan]. (Emphasis
supplied.)38

Liquidated Damages

On the third issue of liquidated damages, the CIAC rejected such claim while the Court of Appeals held that the
matter should be left for determination in future proceedings where the issue has been made clear.

In rejecting Uniwide's claim for liquidated damages, the CIAC held that there is no legal basis for passing upon
and resolving Uniwide's claim for the following reasons: (1) no claim for liquidated damages arising from the
alleged delay was ever made by Uniwide at any time before the commencement of Titan's complaint; (2) the
claim for liquidated damages was not included in the counterclaims stated in Uniwide's answer to Titan's
complaint; (3) the claim was not formulated as an issue to be resolved by the CIAC in the TOR; 39 and (4) no
attempt was made to modify the TOR to accommodate the same as an issue to be resolved.

Uniwide insists that the CIAC should have applied Section 5, Rule 10 of the Rules of Court.40 On this matter, the
Court of Appeals held that the CIAC is an arbitration body, which is not necessarily bound by the Rules of Court.
Also, the Court of Appeals found that the issue has never been made concrete enough to make Titan and the
CIAC aware that it will be an issue. In fact, Uniwide only introduced and quantified its claim for liquidated
damages in its Memorandum submitted to the CIAC at the end of the arbitration proceeding. The Court of
Appeals also noted that the only evidence on record to prove delay in the construction of Project 1 is the
testimony of Titan's engineer regarding the date of completion of the project while the only evidence of delay in
the construction of Project 3 is the affidavit of Uniwide's President.
According to Uniwide, the ruling of the Court of Appeals on the issue of liquidated damages goes against the
established judicial policy that a court should always strive to settle in one proceeding the entire controversy
leaving no root or branch to bear the seeds of future litigations. 41 Uniwide claims that the required evidence for
an affirmative ruling on its claim is already on the record. It cites the pertinent provisions of the written contracts
which contained deadlines for liquidated damages. Uniwide also noted that the evidence show that Project 1
was completed either on 15 February 1992, as found by the CIAC, or 12 March 1992, as shown by Titan's own
evidence, while Project 3, according to Uniwide's President, was completed in June 1993. Furthermore, Uniwide
asserts, the CIAC should have applied procedural rules such as Section 5, Rule 10 with more liberality because
it was an administrative tribunal free from the rigid technicalities of regular courts. 42

On this point, the CIAC held:

The Rule of Procedure Governing Construction Arbitration promulgated by the CIAC contains no
provision on the application of the Rules of Court to arbitration proceedings, even in a suppletory capacity.
Hypothetically admitting that there is such a provision, suppletory application is made only if it would not
contravene a specific provision in the arbitration rules and the spirit thereof. The Tribunal holds that such
importation of the Rules of Court provision on amendment to conform to evidence would
contravene the spirit, if not the letter of the CIAC rules. This is for the reason that the formulation of
the Terms of Reference is done with the active participation of the parties and their counsel themselves.
The TOR is further required to be signed by all the parties, their respective counsel and all the members
of the Arbitral Tribunal. Unless the issues thus carefully formulated in the Terms of Reference were
expressly showed [sic] to be amended, issues outside thereof may not be resolved. As already noted in
the Decision, "no attempt was ever made by the [Uniwide] to modify the TOR in order to accommodate
the issues related to its belated counterclaim" on this issue. (Emphasis supplied.)

Arbitration has been defined as "an arrangement for taking and abiding by the judgment of selected persons in
some disputed matter, instead of carrying it to established tribunals of justice, and is intended to avoid the
formalities, the delay, the expense and vexation of ordinary litigation."43 Voluntary arbitration, on the other hand,
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.44 As an arbitration body, the CIAC can only resolve issues brought before it by the parties through the
TOR which functions similarly as a pre-trial brief. Thus, if Uniwide's claim for liquidated damages was not raised
as an issue in the TOR or in any modified or amended version of it, the CIAC cannot make a ruling on it. The
Rules of Court cannot be used to contravene the spirit of the CIAC rules, whose policy and objective is to "provide
a fair and expeditious settlement of construction disputes through a non-judicial process which ensures
harmonious and friendly relations between or among the parties."45

Further, a party may not be deprived of due process of law by an amendment of the complaint as provided in
Section 5, Rule 10 of the Rules of Court. In this case, as noted by the Court of Appeals, Uniwide only introduced
and quantified its claim for liquidated damages in its memorandum submitted to the CIAC at the end of the
arbitration proceeding. Verily, Titan was not given a chance to present evidence to counter Uniwide's claim for
liquidated damages.

Uniwide alludes to an alleged judicial admission made by Engr. Luzon Tablante wherein he stated that Project
1 was completed on 10 March 1992. It now claims that by virtue of Engr. Tablante's statement, Titan had admitted
that it was in delay. We disagree. The testimony of Engr. Tablante was offered only to prove that Project 1 was
indeed completed. It was not offered to prove the fact of delay. It must be remembered that the purpose for which
evidence is offered must be specified because such evidence may be admissible for several purposes under the
doctrine of multiple admissibility, or may be admissible for one purpose and not for another, otherwise the
adverse party cannot interpose the proper objection. Evidence submitted for one purpose may not be considered
for any other purpose.46 Furthermore, even assuming, for the sake of argument, that said testimony on the date
of completion of Project 1 is admitted, the establishment of the mere fact of delay is not sufficient for the
imposition of liquidated damages. It must further be shown that delay was attributable to the contractor if not
otherwise justifiable. Contrarily, Uniwide's belated claim constitutes an admission that the delay was justified and
implies a waiver of its right to such damages.

Project 2: "as-built" plans, overpricing, defective construction

To determine whether or not Uniwide is liable for the unpaid balance of P6,301,075.77 for Project 2, we need to
resolve four sub-issues, namely: (1) whether or not it was necessary for Titan to submit "as-built" plans before it
can be paid by Uniwide; (2) whether or not there was overpricing of the project; (3) whether or not
the P15,000,000.00 paid by Uniwide to Titan for Project 2 constitutes full payment; and (4) whether or not Titan
can be held liable for defective construction of Project 2.

The CIAC, as affirmed by the Court of Appeals, held Uniwide liable for deficiency relating to Project 2 in the
amount of P6,301,075.77. It is nonetheless alleged by Uniwide that Titan failed to submit any "as-built" plans for
Project 2, such plans allegedly serving as a condition precedent for payment. Uniwide further claims that Titan
had substantially overcharged Uniwide for Project 2, there being uncontradicted expert testimony that the total
cost of Project 2 did not exceed P7,812,123.60. Furthermore, Uniwide alleged that the works performed were
structurally defective, as evidenced by the structural damage on four columns as observed on ocular inspection
by the CIAC and confirmed by Titan's project manager.

On the necessity of submitting "as-built" plans, this Court rules that the submission of such plans is not a pre-
requisite for Titan to be paid by Uniwide. The argument that said plans are required by Section 308 of Presidential
Decree No. 1098 (National Building Code) and by Section 2.11 of its Implementing Rules before payment can
be made is untenable. The purpose of the law is "to safeguard life, health, property, and public welfare, consistent
with the principles of sound environmental management and control." The submission of these plans is
necessary only in furtherance of the law's purpose by setting minimum standards and requirements to control
the "location, site, design, quality of materials, construction, use, occupancy, and maintenance" of buildings
constructed and not as a requirement for payment to the contractor.47 The testimony of Engr. Tablante to the
effect that the "as-built" plans are required before payment can be claimed by Titan is a mere legal conclusion
which is not binding on this Court.

Uniwide claims that, according to one of its consultants, the true price for Project 2 is only P7,812,123.60. The
CIAC and the Court of Appeals, however, found the testimony of this consultant suspect and ruled that the total
contract price for Project 2 is P21,301,075.77. The CIAC held:

The Cost Estimate for Architectural and Site Development Works for the EDSA Central, Dau Branch
Project (Exhibit "2-A" for [Uniwide] and made as a common exhibit by [Titan] who had it marked at [sic] its
own Exhibit "U"), which was admittedly prepared by Fermindoza and Associates, [Uniwide]'s own
architects, shows that the amount of P17,750,896.48 was arrived at. Together with the agreed upon
mark-up of 20% on said amount, the total project cost was P21,301,075.77.

The Tribunal holds that the foregoing document is binding upon the [Uniwide], it being the mode agreed
upon by which its liability for the project cost was to be determined.48 (Emphasis supplied.)

Indeed, Uniwide is bound by the amount indicated in the above document. Claims of connivance or fraudulent
conspiracy between Titan and Uniwide's representatives which, it is alleged, grossly exaggerated the price may
properly be dismissed. As held by the CIAC:

The Tribunal holds that [Uniwide] has not introduced any evidence to sustain its charge of fraudulent
conspiracy. As a matter of fact, [Uniwide]'s own principal witness, Jimmy Gow, admitted on cross-
examination that he does not have any direct evidence to prove his charge of connivance or complicity
between the [Titan] and his own representatives. He only made that conclusion by the process of his own
"logical reasoning" arising from his consultation with other contractors who gave him a much lower
estimate for the construction of the Dau Project. There is thus no reason to invalidate the binding
character of Exhibit "2-A" which, it is significant to point out, is [Uniwide]'s own evidence.49 (Emphasis
supplied.)
Accordingly, deducting the P15,000,000.00 already paid by Uniwide from the total contract price
of P21,301,075.77, the unpaid balance due for Project 2 is P6,301,075.77. This is the same amount reflected in
the Order of Payment prepared by Uniwide's representative, Le Consultech, Inc. and signed by no less than four
top officers and architects of Le Consultech, Inc. endorsing for payment by Uniwide to Titan the amount
of P6,301,075.77.50

Uniwide asserts that Titan should not have been allowed to recover on Project 2 because the said project was
defective and would require repairs in the amount of P800,000.00. It claims that the CIAC and the Court of
Appeals should have applied Nakpil and Sons v. Court of Appeals51 and Art. 1723 of the New Civil Code holding
a contractor responsible for damages if the edifice constructed falls within fifteen years from completion on
account of defects in the construction or the use of materials of inferior quality furnished by him or due to any
violation of the terms of the contract.

On this matter, the CIAC conducted an ocular inspection of the premises on 30 January 1995. What transpired
in the said ocular inspection is described thus:

On 30 January 1995, an ocular inspection was conducted by the Arbitral Tribunal as requested by
[Uniwide]. Photographs were taken of the alleged construction defects, an actual ripping off of the plaster
of a certain column to expose the alleged structural defect that is claimed to have resulted in its being
"heavily damaged" was done, clarificatory questions were asked and manifestations on observations
were made by the parties and their respective counsels. The entire proceedings were recorded on tape
and subsequently transcribed. The photographs and transcript of the ocular inspection form part of the
records and considered as evidence.52

And, according to these evidence, the CIAC concluded as follows:

It is likewise the holding of this Tribunal that [Uniwide]'s counterclaim of defective construction has not
been sufficiently proven. The credibility of Engr. Cruz, [Uniwide]'s principal witness on this issue, has
been severely impaired. During the ocular inspection of the premises, he gave such assurance of the
soundness of his opinion as an expert that a certain column was heavily damaged judging from the
external cracks that was readily apparent x x x

xxxx

On insistence of the Tribunal, the plaster was chipped off and revealed a structurally sound column x x x

Further, it turns out that what was being passed off as a defective construction by [Titan], was in fact an
old column, as admitted by Mr. Gow himself x x x x53 (Emphasis supplied.)

Uniwide had the burden of proving that there was defective construction in Project 2 but it failed to discharge this
burden. Even the credibility of its own witness was severely impaired. Further, it was found that the concrete
slab placed by Titan was not attached to the old columns where cracks were discovered. The CIAC held that the
post-tensioning of the new concrete slab could not have caused any of the defects manifested by the old
columns. We are bound by this finding of fact by the CIAC.

It is worthy to stress our ruling in Hi-Precision Steel Center, Inc. v. Lim Kim Steel Builders, Inc.54 which was
reiterated in David v. Construction Industry and Arbitration Commission,55 that:

x x x Executive Order No. 1008 created an arbitration facility to which the construction industry in the
Philippines can have recourse. The Executive Order was enacted to encourage the early and
expeditious settlement of disputes in the construction industry, a public policy the
implementation of which is necessary and important for the realization of national development
goals.

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 for their private purposes. The Court will not review the factual findings
 of an arbitral tribunal upon the artful allegation that such body had "misapprehended 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 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. (Emphasis supplied.)

WHEREFORE, premises considered, the petition is DENIED and the Decision of the Court of Appeals dated 21
February 1996 in CA-G.R. SP No. 37957 is hereby AFFIRMED.

SO ORDERED.