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[G.R. No. 143581. January 7, 2008.] KOREA TECHNOLOGIES CO., LTD., petitioner, vs. HON. ALBERTO A.

. ALBERTO A. LERMA, in his capacity as


Presiding Judge of Branch 256 of Regional Trial Court of Muntinlupa City, and PACIFIC GENERAL STEEL MANUFACTURING
CORPORATION, respondents.
In our jurisdiction, the policy is to favor alternative methods of resolving disputes, particularly in civil and commercial disputes.
Arbitration along with mediation, conciliation, and negotiation, being inexpensive, speedy and less hostile methods have long been
favored by this Court. The petition before us puts at issue an arbitration clause in a contract mutually agreed upon by the parties
stipulating that they would submit themselves to arbitration in a foreign country. Regrettably, instead of hastening the resolution of
their dispute, the parties wittingly or unwittingly prolonged the controversy.
Petitioner Korea Technologies Co., Ltd. (KOGIES) is a Korean corporation which is engaged in the supply and installation of Liquefied
Petroleum Gas (LPG) Cylinder manufacturing plants, while private respondent Pacific General Steel Manufacturing Corp. (PGSMC) is
a domestic corporation.
On March 5, 1997, PGSMC and KOGIES executed a Contract 1 whereby KOGIES would set up an LPG Cylinder Manufacturing Plant in
Carmona, Cavite. The contract was executed in the Philippines. On April 7, 1997, the parties executed, in Korea, an Amendment for
Contract No. KLP-970301 dated March 5, 1997 2 amending the terms of payment. The contract and its amendment stipulated that
KOGIES will ship the machinery and facilities necessary for manufacturing LPG cylinders for which PGSMC would pay USD 1,224,000.
KOGIES would install and initiate the operation of the plant for which PGSMC bound itself to pay USD 306,000 upon the plant's
production of the 11-kg. LPG cylinder samples. Thus, the total contract price amounted to USD 1,530,000.
On October 14, 1997, PGSMC entered into a Contract of Lease 3 with Worth Properties, Inc. (Worth) for use of Worth's 5,079-square
meter property with a 4,032-square meter warehouse building to house the LPG manufacturing plant. The monthly rental was
PhP322,560 commencing on January 1, 1998 with a 10% annual increment clause. Subsequently, the machineries, equipment, and
facilities for the manufacture of LPG cylinders were shipped, delivered, and installed in the Carmona plant. PGSMC paid KOGIES USD
1,224,000.
However, gleaned from the Certificate 4 executed by the parties on January 22, 1998, after the installation of the plant, the initial
operation could not be conducted as PGSMC encountered financial difficulties affecting the supply of materials, thus forcing the
parties to agree that KOGIES would be deemed to have completely complied with the terms and conditions of the March 5, 1997
contract. SDHacT
For the remaining balance of USD306,000 for the installation and initial operation of the plant, PGSMC issued two postdated checks:
(1) BPI Check No. 0316412 dated January 30, 1998 for PhP4,500,000; and (2) BPI Check No. 0316413 dated March 30, 1998 for
PhP4,500,000. 5
When KOGIES deposited the checks, these were dishonored for the reason "PAYMENT STOPPED." Thus, on May 8, 1998, KOGIES
sent a demand letter 6 to PGSMC threatening criminal action for violation of Batas Pambansa Blg. 22 in case of nonpayment. On the
same date, the wife of PGSMC's President faxed a letter dated May 7, 1998 to KOGIES' President who was then staying at a Makati
City hotel. She complained that not only did KOGIES deliver a different brand of hydraulic press from that agreed upon but it had not
delivered several equipment parts already paid for.
On May 14, 1998, PGSMC replied that the two checks it issued KOGIES were fully funded but the payments were stopped for reasons
previously made known to KOGIES. 7
On June 1, 1998, PGSMC informed KOGIES that PGSMC was canceling their Contract dated March 5, 1997 on the ground that KOGIES
had altered the quantity and lowered the quality of the machineries and equipment it delivered to PGSMC, and that PGSMC would
dismantle and transfer the machineries, equipment, and facilities installed in the Carmona plant. Five days later, PGSMC filed before
the Office of the Public Prosecutor an Affidavit-Complaint for Estafa docketed as I.S. No. 98-03813 against Mr. Dae Hyun Kang,
President of KOGIES.
On June 15, 1998, KOGIES wrote PGSMC informing the latter that PGSMC could not unilaterally rescind their contract nor dismantle
and transfer the machineries and equipment on mere imagined violations by KOGIES. It also insisted that their disputes should be
settled by arbitration as agreed upon in Article 15, the arbitration clause of their contract.
On June 23, 1998, PGSMC again wrote KOGIES reiterating the contents of its June 1, 1998 letter threatening that the machineries,
equipment, and facilities installed in the plant would be dismantled and transferred on July 4, 1998. Thus, on July 1, 1998, KOGIES
instituted an Application for Arbitration before the Korean Commercial Arbitration Board (KCAB) in Seoul, Korea pursuant to Art. 15
of the Contract as amended.
On July 3, 1998, KOGIES filed a Complaint for Specific Performance, docketed as Civil Case No. 98-117 8 against PGSMC before the
Muntinlupa City Regional Trial Court (RTC). The RTC granted a temporary restraining order (TRO) on July 4, 1998, which was
subsequently extended until July 22, 1998. In its complaint, KOGIES alleged that PGSMC had initially admitted that the checks that
were stopped were not funded but later on claimed that it stopped payment of the checks for the reason that "their value was not
received" as the former allegedly breached their contract by "altering the quantity and lowering the quality of the machinery and
equipment" installed in the plant and failed to make the plant operational although it earlier certified to the contrary as shown in a
January 22, 1998 Certificate. Likewise, KOGIES averred that PGSMC violated Art. 15 of their Contract, as amended, by unilaterally
rescinding the contract without resorting to arbitration. KOGIES also asked that PGSMC be restrained from dismantling and
transferring the machinery and equipment installed in the plant which the latter threatened to do on July 4, 1998.
On July 9, 1998, PGSMC filed an opposition to the TRO arguing that KOGIES was not entitled to the TRO since Art. 15, the arbitration
clause, was null and void for being against public policy as it ousts the local courts of jurisdiction over the instant controversy.
On July 17, 1998, PGSMC filed its Answer with Compulsory Counterclaim 9 asserting that it had the full right to dismantle and transfer
the machineries and equipment because it had paid for them in full as stipulated in the contract; that KOGIES was not entitled to the
PhP9,000,000 covered by the checks for failing to completely install and make the plant operational; and that KOGIES was liable for
damages amounting to PhP4,500,000 for altering the quantity and lowering the quality of the machineries and equipment.
Moreover, PGSMC averred that it has already paid PhP2,257,920 in rent (covering January to July 1998) to Worth and it was not
willing to further shoulder the cost of renting the premises of the plant considering that the LPG cylinder manufacturing plant never
became operational. EcaDCI
After the parties submitted their Memoranda, on July 23, 1998, the RTC issued an Order denying the application for a writ of
preliminary injunction, reasoning that PGSMC had paid KOGIES USD 1,224,000, the value of the machineries and equipment as
shown in the contract such that KOGIES no longer had proprietary rights over them. And finally, the RTC held that Art. 15 of the
Contract as amended was invalid as it tended to oust the trial court or any other court jurisdiction over any dispute that may arise
between the parties. KOGIES' prayer for an injunctive writ was denied. 10 The dispositive portion of the Order stated:
WHEREFORE, in view of the foregoing consideration, this Court believes and so holds that no cogent reason exists for this
Court to grant the writ of preliminary injunction to restrain and refrain defendant from dismantling the machineries and
facilities at the lot and building of Worth Properties, Incorporated at Carmona, Cavite and transfer the same to another site:
and therefore denies plaintiff's application for a writ of preliminary injunction.
On July 29, 1998, KOGIES filed its Reply to Answer and Answer to Counterclaim. 11 KOGIES denied it had altered the quantity and
lowered the quality of the machinery, equipment, and facilities it delivered to the plant. It claimed that it had performed all the
undertakings under the contract and had already produced certified samples of LPG cylinders. It averred that whatever was
unfinished was PGSMC's fault since it failed to procure raw materials due to lack of funds. KOGIES, relying on Chung Fu Industries
(Phils.), Inc. v. Court of Appeals, 12 insisted that the arbitration clause was without question valid.
After KOGIES filed a Supplemental Memorandum with Motion to Dismiss 13 answering PGSMC's memorandum of July 22, 1998 and
seeking dismissal of PGSMC's counterclaims, KOGIES, on August 4, 1998, filed its Motion for Reconsideration 14 of the July 23, 1998
Order denying its application for an injunctive writ claiming that the contract was not merely for machinery and facilities worth USD
1,224,000 but was for the sale of an "LPG manufacturing plant" consisting of "supply of all the machinery and facilities" and "transfer
of technology" for a total contract price of USD 1,530,000 such that the dismantling and transfer of the machinery and facilities
would result in the dismantling and transfer of the very plant itself to the great prejudice of KOGIES as the still unpaid owner/seller
of the plant. Moreover, KOGIES points out that the arbitration clause under Art. 15 of the Contract as amended was a valid
arbitration stipulation under Art. 2044 of the Civil Code and as held by this Court in Chung Fu Industries (Phils.), Inc. 15

In the meantime, PGSMC filed a Motion for Inspection of Things 16 to determine whether there was indeed alteration of the quantity
and lowering of quality of the machineries and equipment, and whether these were properly installed. KOGIES opposed the motion
positing that the queries and issues raised in the motion for inspection fell under the coverage of the arbitration clause in their
contract.
On September 21, 1998, the trial court issued an Order (1) granting PGSMC's motion for inspection; (2) denying KOGIES' motion for
reconsideration of the July 23, 1998 RTC Order; and (3) denying KOGIES' motion to dismiss PGSMC's compulsory counterclaims as
these counterclaims fell within the requisites of compulsory counterclaims.
On October 2, 1998, KOGIES filed an Urgent Motion for Reconsideration 17 of the September 21, 1998 RTC Order granting inspection
of the plant and denying dismissal of PGSMC's compulsory counterclaims.
Ten days after, on October 12, 1998, without waiting for the resolution of its October 2, 1998 urgent motion for reconsideration,
KOGIES filed before the Court of Appeals (CA) a petition for certiorari 18 docketed as CA-G.R. SP No. 49249, seeking annulment of the
July 23, 1998 and September 21, 1998 RTC Orders and praying for the issuance of writs of prohibition, mandamus, and preliminary
injunction to enjoin the RTC and PGSMC from inspecting, dismantling, and transferring the machineries and equipment in the
Carmona plant, and to direct the RTC to enforce the specific agreement on arbitration to resolve the dispute.
In the meantime, on October 19, 1998, the RTC denied KOGIES' urgent motion for reconsideration and directed the Branch Sheriff to
proceed with the inspection of the machineries and equipment in the plant on October 28, 1998. 19
Thereafter, KOGIES filed a Supplement to the Petition 20 in CA-G.R. SP No. 49249 informing the CA about the October 19, 1998 RTC
Order. It also reiterated its prayer for the issuance of the writs of prohibition, mandamus and preliminary injunction which was not
acted upon by the CA. KOGIES asserted that the Branch Sheriff did not have the technical expertise to ascertain whether or not the
machineries and equipment conformed to the specifications in the contract and were properly installed. TaISDA
On November 11, 1998, the Branch Sheriff filed his Sheriff's Report 21 finding that the enumerated machineries and equipment were
not fully and properly installed.
The Court of Appeals affirmed the trial court and declared
the arbitration clause against public policy
On May 30, 2000, the CA rendered the assailed Decision 22 affirming the RTC Orders and dismissing the petition for certiorari filed by
KOGIES. The CA found that the RTC did not gravely abuse its discretion in issuing the assailed July 23, 1998 and September 21, 1998
Orders. Moreover, the CA reasoned that KOGIES' contention that the total contract price for USD 1,530,000 was for the whole plant
and had not been fully paid was contrary to the finding of the RTC that PGSMC fully paid the price of USD 1,224,000, which was for
all the machineries and equipment. According to the CA, this determination by the RTC was a factual finding beyond the ambit of a
petition for certiorari.
On the issue of the validity of the arbitration clause, the CA agreed with the lower court that an arbitration clause which provided for
a final determination of the legal rights of the parties to the contract by arbitration was against public policy.
On the issue of nonpayment of docket fees and non-attachment of a certificate of non-forum shopping by PGSMC, the CA held that
the counterclaims of PGSMC were compulsory ones and payment of docket fees was not required since the Answer with
counterclaim was not an initiatory pleading. For the same reason, the CA said a certificate of non-forum shopping was also not
required.
Furthermore, the CA held that the petition for certiorari had been filed prematurely since KOGIES did not wait for the resolution of
its urgent motion for reconsideration of the September 21, 1998 RTC Order which was the plain, speedy, and adequate remedy
available. According to the CA, the RTC must be given the opportunity to correct any alleged error it has committed, and that since
the assailed orders were interlocutory, these cannot be the subject of a petition for certiorari.
Hence, we have this Petition for Review on Certiorari under Rule 45.
The Issues
Petitioner posits that the appellate court committed the following errors:
a.PRONOUNCING THE QUESTION OF OWNERSHIP OVER THE MACHINERY AND FACILITIES AS "A QUESTION OF FACT"
"BEYOND THE AMBIT OF A PETITION FOR CERTIORARI" INTENDED ONLY FOR CORRECTION OF ERRORS OF JURISDICTION OR
GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF (SIC) EXCESS OF JURISDICTION, AND CONCLUDING THAT THE TRIAL
COURT'S FINDING ON THE SAME QUESTION WAS IMPROPERLY RAISED IN THE PETITION BELOW;
b.DECLARING AS NULL AND VOID THE ARBITRATION CLAUSE IN ARTICLE 15 OF THE CONTRACT BETWEEN THE PARTIES FOR
BEING "CONTRARY TO PUBLIC POLICY" AND FOR OUSTING THE COURTS OF JURISDICTION;
c.DECREEING PRIVATE RESPONDENT'S COUNTERCLAIMS TO BE ALL COMPULSORY NOT NECESSITATING PAYMENT OF DOCKET
FEES AND CERTIFICATION OF NON-FORUM SHOPPING;
d.RULING THAT THE PETITION WAS FILED PREMATURELY WITHOUT WAITING FOR THE RESOLUTION OF THE MOTION FOR
RECONSIDERATION OF THE ORDER DATED SEPTEMBER 21, 1998 OR WITHOUT GIVING THE TRIAL COURT AN OPPORTUNITY
TO CORRECT ITSELF; aHIEcS
e.PROCLAIMING THE TWO ORDERS DATED JULY 23 AND SEPTEMBER 21, 1998 NOT TO BE PROPER SUBJECTS OF CERTIORARI
AND PROHIBITION FOR BEING "INTERLOCUTORY IN NATURE;"
f.NOT GRANTING THE RELIEFS AND REMEDIES PRAYED FOR IN HE (SIC) PETITION AND, INSTEAD, DISMISSING THE SAME FOR
ALLEGEDLY "WITHOUT MERIT." 23
The Court's Ruling
The petition is partly meritorious.
Before we delve into the substantive issues, we shall first tackle the procedural issues.
The rules on the payment of docket fees for counterclaims and cross claims were amended effective August 16, 2004
KOGIES strongly argues that when PGSMC filed the counterclaims, it should have paid docket fees and filed a certificate of non-
forum shopping, and that its failure to do so was a fatal defect.
We disagree with KOGIES.
As aptly ruled by the CA, the counterclaims of PGSMC were incorporated in its Answer with Compulsory Counterclaim dated July 17,
1998 in accordance with Section 8 of Rule 11, 1997 Revised Rules of Civil Procedure, the rule that was effective at the time the
Answer with Counterclaim was filed. Sec. 8 on existing counterclaim or cross-claim states, "A compulsory counterclaim or a cross-
claim that a defending party has at the time he files his answer shall be contained therein."
On July 17, 1998, at the time PGSMC filed its Answer incorporating its counterclaims against KOGIES, it was not liable to pay filing
fees for said counterclaims being compulsory in nature. We stress, however, that effective August 16, 2004 under Sec. 7, Rule 141,
as amended by A.M. No. 04-2-04-SC, docket fees are now required to be paid in compulsory counterclaim or cross-claims.
As to the failure to submit a certificate of forum shopping, PGSMC's Answer is not an initiatory pleading which requires a
certification against forum shopping under Sec. 5 24 of Rule 7, 1997 Revised Rules of Civil Procedure. It is a responsive pleading,
hence, the courts a quo did not commit reversible error in denying KOGIES' motion to dismiss PGSMC's compulsory counterclaims.
Interlocutory orders proper subject of certiorari
Citing Gamboa v. Cruz, 25 the CA also pronounced that "certiorari and Prohibition are neither the remedies to question the propriety
of an interlocutory order of the trial court." 26 The CA erred on its reliance on Gamboa. Gamboa involved the denial of a motion to
acquit in a criminal case which was not assailable in an action for certiorari since the denial of a motion to quash required the
accused to plead and to continue with the trial, and whatever objections the accused had in his motion to quash can then be used as
part of his defense and subsequently can be raised as errors on his appeal if the judgment of the trial court is adverse to him. The
general rule is that interlocutory orders cannot be challenged by an appeal. 27 Thus, in Yamaoka v. Pescarich Manufacturing
Corporation, we held:
The proper remedy in such cases is an ordinary appeal from an adverse judgment on the merits, incorporating in said appeal
the grounds for assailing the interlocutory orders. Allowing appeals from interlocutory orders would result in the 'sorry
spectacle' of a case being subject of a counterproductive ping-pong to and from the appellate court as often as a trial court is
perceived to have made an error in any of its interlocutory rulings. However, where the assailed interlocutory order was
issued with grave abuse of discretion or patently erroneous and the remedy of appeal would not afford adequate and
expeditious relief, the Court allows certiorari as a mode of redress. 28
Also, appeals from interlocutory orders would open the floodgates to endless occasions for dilatory motions. Thus, where the
interlocutory order was issued without or in excess of jurisdiction or with grave abuse of discretion, the remedy is certiorari. 29 HDcaAI
The alleged grave abuse of discretion of the respondent court equivalent to lack of jurisdiction in the issuance of the two assailed
orders coupled with the fact that there is no plain, speedy, and adequate remedy in the ordinary course of law amply provides the
basis for allowing the resort to a petition for certiorari under Rule 65.
Prematurity of the petition before the CA
Neither do we think that KOGIES was guilty of forum shopping in filing the petition for certiorari. Note that KOGIES' motion for
reconsideration of the July 23, 1998 RTC Order which denied the issuance of the injunctive writ had already been denied. Thus,
KOGIES' only remedy was to assail the RTC's interlocutory order via a petition for certiorari under Rule 65.

While the October 2, 1998 motion for reconsideration of KOGIES of the September 21, 1998 RTC Order relating to the inspection of
things, and the allowance of the compulsory counterclaims has not yet been resolved, the circumstances in this case would allow an
exception to the rule that before certiorari may be availed of, the petitioner must have filed a motion for reconsideration and said
motion should have been first resolved by the court a quo. The reason behind the rule is "to enable the lower court, in the first
instance, to pass upon and correct its mistakes without the intervention of the higher court." 30
The September 21, 1998 RTC Order directing the branch sheriff to inspect the plant, equipment, and facilities when he is not
competent and knowledgeable on said matters is evidently flawed and devoid of any legal support. Moreover, there is an urgent
necessity to resolve the issue on the dismantling of the facilities and any further delay would prejudice the interests of KOGIES.
Indeed, there is real and imminent threat of irreparable destruction or substantial damage to KOGIES' equipment and machineri es.
We find the resort to certiorari based on the gravely abusive orders of the trial court sans the ruling on the October 2, 1998 motion
for reconsideration to be proper.
The Core Issue: Article 15 of the Contract
We now go to the core issue of the validity of Art. 15 of the Contract, the arbitration clause. It provides:
Article 15.Arbitration. All disputes, controversies, or differences which may arise between the parties, out of or in relation
to or in connection with this Contract or for the breach thereof, shall finally be settled by arbitration in Seoul, Korea in
accordance with the Commercial Arbitration Rules of the Korean Commercial Arbitration Board. The award rendered by the
arbitration(s) shall be final and binding upon both parties concerned. (Emphasis supplied.)
Petitioner claims the RTC and the CA erred in ruling that the arbitration clause is null and void.
Petitioner is correct.
Established in this jurisdiction is the rule that the law of the place where the contract is made governs. Lex loci contractus. The
contract in this case was perfected here in the Philippines. Therefore, our laws ought to govern. Nonetheless, Art. 2044 of the Civil
Code sanctions the validity of mutually agreed arbitral clause or the finality and binding effect of an arbitral award. Art. 2044
provides, "Any stipulation that the arbitrators' award or decision shall be final, is valid, without prejudice to Articles 2038, 2039
and 2040." (Emphasis supplied.)
Arts. 2038, 31 2039, 32 and 2040 33 abovecited refer to instances where a compromise or an arbitral award, as applied to Art. 2044
pursuant to Art. 2043, 34 may be voided, rescinded, or annulled, but these would not denigrate the finality of the arbitral award.
The arbitration clause was mutually and voluntarily agreed upon by the parties. It has not been shown to be contrary to any law, or
against morals, good customs, public order, or public policy. There has been no showing that the parties have not dealt with each
other on equal footing. We find no reason why the arbitration clause should not be respected and complied with by both parties. In
Gonzales v. Climax Mining Ltd., 35 we held that submission to arbitration is a contract and that a clause in a contract providing that
all matters in dispute between the parties shall be referred to arbitration is a contract. 36 Again in Del Monte Corporation-USA v.
Court of Appeals, we likewise ruled 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." 37 CAacTH
Arbitration clause not contrary to public policy
The arbitration clause which stipulates that the arbitration must be done in Seoul, Korea in accordance with the Commercial
Arbitration Rules of the KCAB, and that the arbitral award is final and binding, is not contrary to public policy. This Court has
sanctioned the validity of arbitration clauses in a catena of cases. In the 1957 case of Eastboard Navigation Ltd. v. Juan Ysmael and
Co., Inc., 38 this Court had occasion to rule that an arbitration clause to resolve differences and breaches of mutually agreed
contractual terms is valid. In BF Corporation v. Court of Appeals, we held that "[i]n 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. Republic Act No. 876 was adopted to supplement the New Civil Code's provisions on arbitration." 39
And in LM Power Engineering Corporation v. Capitol Industrial Construction Groups, Inc., we declared that:
Being an inexpensive, speedy and amicable method of settling disputes, arbitration along with mediation, conciliation and
negotiation is encouraged by the Supreme Court. Aside from unclogging judicial dockets, arbitration also hastens the
resolution of disputes, especially of the commercial kind. It is thus regarded as the "wave of the future" in international civil
and commercial disputes. Brushing aside a contractual agreement calling for arbitration between the parties would be a step
backward.
Consistent with the above-mentioned policy of encouraging alternative dispute resolution methods, courts should liberally
construe arbitration clauses. Provided such clause is susceptible of an interpretation that covers the asserted dispute, an
order to arbitrate should be granted. Any doubt should be resolved in favor of arbitration. 40
Having said that the instant arbitration clause is not against public policy, we come to the question on what governs an arbi tration
clause specifying that in case of any dispute arising from the contract, an arbitral panel will be constituted in a foreign country and
the arbitration rules of the foreign country would govern and its award shall be final and binding.
RA 9285 incorporated the UNCITRAL Model law
to which we are a signatory
For domestic arbitration proceedings, we have particular agencies to arbitrate disputes arising from contractual relations. In case a
foreign arbitral body is chosen by the parties, the arbitration rules of our domestic arbitration bodies would not be applied. As
signatory to the Arbitration Rules of the UNCITRAL Model Law on International Commercial Arbitration 41 of the United Nations
Commission on International Trade Law (UNCITRAL) in the New York Convention on June 21, 1985, the Philippines committed itsel f
to be bound by the Model Law. We have even incorporated the Model Law in Republic Act No. (RA) 9285, otherwise known as the
Alternative Dispute Resolution Act of 2004 entitled An Act to Institutionalize the Use of an Alternative Dispute Resolution System in
the Philippines and to Establish the Office for Alternative Dispute Resolution, and for Other Purposes, promulgated on April 2, 2004.
Secs. 19 and 20 of Chapter 4 of the Model Law are the pertinent provisions:
CHAPTER 4 INTERNATIONAL COMMERCIAL ARBITRATION
SEC. 19.Adoption of the Model Law on International Commercial Arbitration. International commercial arbitration shall be
governed by the Model Law on International Commercial Arbitration (the "Model Law") adopted by the United Nations
Commission on International Trade Law on June 21, 1985 (United Nations Document A/40/17) and recommended for
enactment by the General Assembly in Resolution No. 40/72 approved on December 11, 1985, copy of which is hereto
attached as Appendix "A". cEATSI
SEC. 20.Interpretation of Model Law. In interpreting the Model Law, regard shall be had to its international origin and to
the need for uniformity in its interpretation and resort may be made to the travaux preparatories and the report of the
Secretary General of the United Nations Commission on International Trade Law dated March 25, 1985 entitled,
"International Commercial Arbitration: Analytical Commentary on Draft Trade identified by reference number A/CN. 9/264."
While RA 9285 was passed only in 2004, it nonetheless applies in the instant case since it is a procedural law which has a retroactive
effect. Likewise, KOGIES filed its application for arbitration before the KCAB on July 1, 1998 and it is still pending because no arbitral
award has yet been rendered. Thus, RA 9285 is applicable to the instant case. Well-settled is the rule that procedural laws are
construed to be applicable to actions pending and undetermined at the time of their passage, and are deemed retroactive in that
sense and to that extent. As a general rule, the retroactive application of procedural laws does not violate any personal rights
because no vested right has yet attached nor arisen from them. 42
Among the pertinent features of RA 9285 applying and incorporating the UNCITRAL Model Law are the following:
(1)The RTC must refer to arbitration in proper cases
Under Sec. 24, the RTC does not have jurisdiction over disputes that are properly the subject of arbitration pursuant to an arbitration
clause, and mandates the referral to arbitration in such cases, thus:
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.
(2)Foreign arbitral awards must be confirmed by the RTC
Foreign arbitral awards while mutually stipulated by the parties in the arbitration clause to be final and binding are not immediately
enforceable or cannot be implemented immediately. Sec. 35 43 of the UNCITRAL Model Law stipulates the requirement for the
arbitral award to be recognized by a competent court for enforcement, which court under Sec. 36 of the UNCITRAL Model Law may
refuse recognition or enforcement on the grounds provided for. RA 9285 incorporated these provisos to Secs. 42, 43, and 44 relative
to Secs. 47 and 48, thus:

SEC. 42.Application of the New York Convention. The New York Convention shall govern the recognition and enforcement
of arbitral awards covered by said Convention.
The recognition and enforcement of such arbitral awards shall be filed with the Regional Trial Court in accordance with the
rules of procedure to be promulgated by the Supreme Court. Said procedural rules shall provide that the party relying on the
award or applying for its enforcement shall file with the court the original or authenticated copy of the award and the
arbitration agreement. If the award or agreement is not made in any of the official languages, the party shall supply a duly
certified translation thereof into any of such languages.
The applicant shall establish that the country in which foreign arbitration award was made in party to the New York
Convention.
xxx xxx xxx
SEC. 43.Recognition and Enforcement of Foreign Arbitral Awards Not Covered by the New York Convention. The recognition
and enforcement of foreign arbitral awards not covered by the New York Convention shall be done in accordance with
procedural rules to be promulgated by the Supreme Court. The Court may, on grounds of comity and reciprocity, recognize
and enforce a non-convention award as a convention award. IEHaSc
SEC. 44.Foreign Arbitral Award Not Foreign Judgment. A foreign arbitral award when confirmed by a court of a foreign
country, shall be recognized and enforced as a foreign arbitral award and not as a judgment of a foreign court.
A foreign arbitral award, when confirmed by the Regional Trial Court, shall be enforced in the same manner as final and
executory decisions of courts of law of the Philippines.
xxx xxx xxx
SEC. 47.Venue and Jurisdiction. Proceedings for recognition and enforcement of an arbitration agreement or for vacations,
setting aside, correction or modification of an arbitral award, and any application with a court for arbitration assistance and
supervision shall be deemed as special proceedings and shall be filed with the Regional Trial Court (i) where arbitration
proceedings are conducted; (ii) where the asset to be attached or levied upon, or the act to be enjoined is located; (iii) where
any of the parties to the dispute resides or has his place of business; or (iv) in the National Judicial Capital Region, at the
option of the applicant.
SEC. 48.Notice of Proceeding to Parties. In a special proceeding for recognition and enforcement of an arbitral award, the
Court shall send notice to the parties at their address of record in the arbitration, or if any part cannot be served notice at
such address, at such party's last known address. The notice shall be sent al least fifteen (15) days before the date set for the
initial hearing of the application.
It is now clear that foreign arbitral awards when confirmed by the RTC are deemed not as a judgment of a foreign court but as a
foreign arbitral award, and when confirmed, are enforced as final and executory decisions of our courts of law.
Thus, it can be gleaned that the concept of a final and binding arbitral award is similar to judgments or awards given by some of our
quasi-judicial bodies, like the National Labor Relations Commission and Mines Adjudication Board, whose final judgments are
stipulated to be final and binding, but not immediately executory in the sense that they may still be judicially reviewed, upon the
instance of any party. Therefore, the final foreign arbitral awards are similarly situated in that they need first to be confirmed by the
RTC.
(3)The RTC has jurisdiction to review foreign arbitral awards
Sec. 42 in relation to Sec. 45 of RA 9285 designated and vested the RTC with specific authority and jurisdiction to set aside, reject, or
vacate a foreign arbitral award on grounds provided under Art. 34 (2) of the UNCITRAL Model Law. Secs. 42 and 45 provide:
SEC. 42.Application of the New York Convention. The New York Convention shall govern the recognition and enforcement
of arbitral awards covered by said Convention.
The recognition and enforcement of such arbitral awards shall be filed with the Regional Trial Court in accordance with the
rules of procedure to be promulgated by the Supreme Court. Said procedural rules shall provide that the party relying on the
award or applying for its enforcement shall file with the court the original or authenticated copy of the award and the
arbitration agreement. If the award or agreement is not made in any of the official languages, the party shall supply a duly
certified translation thereof into any of such languages.
The applicant shall establish that the country in which foreign arbitration award was made is party to the New York
Convention.
If the application for rejection or suspension of enforcement of an award has been made, the Regional Trial Court may, if it
considers it proper, vacate its decision and may also, on the application of the party claiming recognition or enforcement of
the award, order the party to provide appropriate security. ADHcTE
xxx xxx xxx
SEC. 45.Rejection of a Foreign Arbitral Award. A party to a foreign arbitration proceeding may oppose an application for
recognition and enforcement of the arbitral award in accordance with the procedures and rules to be promulgated by the
Supreme Court only on those grounds enumerated under Article V of the New York Convention. Any other ground raised
shall be disregarded by the Regional Trial Court.
Thus, while the RTC does not have jurisdiction over disputes governed by arbitration mutually agreed upon by the parties, sti ll the
foreign arbitral award is subject to judicial review by the RTC which can set aside, reject, or vacate it. In this sense, what this Court
held in Chung Fu Industries (Phils.), Inc. relied upon by KOGIES is applicable insofar as the foreign arbitral awards, while final and
binding, do not oust courts of jurisdiction since these arbitral awards are not absolute and without exceptions as they are still
judicially reviewable. Chapter 7 of RA 9285 has made it clear that all arbitral awards, whether domestic or foreign, are subject to
judicial review on specific grounds provided for.
(4)Grounds for judicial review different in domestic and foreign arbitral awards
The differences between a final arbitral award from an international or foreign arbitral tribunal and an award given by a local arbitral
tribunal are the specific grounds or conditions that vest jurisdiction over our courts to review the awards.
For foreign or international arbitral awards which must first be confirmed by the RTC, the grounds for setting aside, rejecting or
vacating the award by the RTC are provided under Art. 34 (2) of the UNCITRAL Model Law.
For final domestic arbitral awards, which also need confirmation by the RTC pursuant to Sec. 23 of RA 876 44 and shall be recognized
as final and executory decisions of the RTC, 45 they may only be assailed before the RTC and vacated on the grounds provided under
Sec. 25 of RA 876. 46
(5)RTC decision of assailed foreign arbitral award appealable
Sec. 46 of RA 9285 provides for an appeal before the CA as the remedy of an aggrieved party in cases where the RTC sets asi de,
rejects, vacates, modifies, or corrects an arbitral award, thus:
SEC. 46.Appeal from Court Decision or Arbitral Awards. A decision of the Regional Trial Court confirming, vacating, setting
aside, modifying or correcting an arbitral award may be appealed to the Court of Appeals in accordance with the rules and
procedure to be promulgated by the Supreme Court.
The losing party who appeals from the judgment of the court confirming an arbitral award shall be required by the appellate
court to post a counterbond executed in favor of the prevailing party equal to the amount of the award in accordance with
the rules to be promulgated by the Supreme Court.
Thereafter, the CA decision may further be appealed or reviewed before this Court through a petition for review under Rule 45 of
the Rules of Court.
PGSMC has remedies to protect its interests
Thus, based on the foregoing features of RA 9285, PGSMC must submit to the foreign arbitration as it bound itself through the
subject contract. While it may have misgivings on the foreign arbitration done in Korea by the KCAB, it has available remedies under
RA 9285. Its interests are duly protected by the law which requires that the arbitral award that may be rendered by KCAB must be
confirmed here by the RTC before it can be enforced.
With our disquisition above, petitioner is correct in its contention that an arbitration clause, stipulating that the arbitral award is
final and binding, does not oust our courts of jurisdiction as the international arbitral award, the award of which is not absolute and
without exceptions, is still judicially reviewable under certain conditions provided for by the UNCITRAL Model Law on ICA as applied
and incorporated in RA 9285. aHSCcE
Finally, it must be noted that there is nothing in the subject Contract which provides that the parties may dispense with the
arbitration clause.
Unilateral rescission improper and illegal
Having ruled that the arbitration clause of the subject contract is valid and binding on the parties, and not contrary to public policy;
consequently, being bound to the contract of arbitration, a party may not unilaterally rescind or terminate the contract for whatever
cause without first resorting to arbitration.
What this Court held in University of the Philippines v. de Los Angeles 47 and reiterated in succeeding cases, 48 that the act of
treating a contract as rescinded on account of infractions by the other contracting party is valid albeit provisional as it can be
judicially assailed, is not applicable to the instant case on account of a valid stipulation on arbitration. Where an arbitration clause in
a contract is availing, neither of the parties can unilaterally treat the contract as rescinded since whatever infractions or breaches by
a party or differences arising from the contract must be brought first and resolved by arbitration, and not through an extrajudicial
rescission or judicial action.

The issues arising from the contract between PGSMC and KOGIES on whether the equipment and machineries delivered and
installed were properly installed and operational in the plant in Carmona, Cavite; the ownership of equipment and payment of the
contract price; and whether there was substantial compliance by KOGIES in the production of the samples, given the alleged fact
that PGSMC could not supply the raw materials required to produce the sample LPG cylinders, are matters proper for arbitration.
Indeed, we note that on July 1, 1998, KOGIES instituted an Application for Arbitration before the KCAB in Seoul, Korea pursuant to
Art. 15 of the Contract as amended. Thus, it is incumbent upon PGSMC to abide by its commitment to arbitrate.
Corollarily, the trial court gravely abused its discretion in granting PGSMC's Motion for Inspection of Things on September 21, 1998,
as the subject matter of the motion is under the primary jurisdiction of the mutually agreed arbitral body, the KCAB in Korea.
In addition, whatever findings and conclusions made by the RTC Branch Sheriff from the inspection made on October 28, 1998, as
ordered by the trial court on October 19, 1998, is of no worth as said Sheriff is not technically competent to ascertain the actual
status of the equipment and machineries as installed in the plant.
For these reasons, the September 21, 1998 and October 19, 1998 RTC Orders pertaining to the grant of the inspection of the
equipment and machineries have to be recalled and nullified.
Issue on ownership of plant proper for arbitration
Petitioner assails the CA ruling that the issue petitioner raised on whether the total contract price of USD 1,530,000 was for the
whole plant and its installation is beyond the ambit of a Petition for Certiorari.
Petitioner's position is untenable.
It is settled that questions of fact cannot be raised in an original action for certiorari. 49 Whether or not there was full payment for the
machineries and equipment and installation is indeed a factual issue prohibited by Rule 65.
However, what appears to constitute a grave abuse of discretion is the order of the RTC in resolving the issue on the ownership of
the plant when it is the arbitral body (KCAB) and not the RTC which has jurisdiction and authority over the said issue. The RTC's
determination of such factual issue constitutes grave abuse of discretion and must be reversed and set aside.
RTC has interim jurisdiction to protect the rights of the parties
Anent the July 23, 1998 Order denying the issuance of the injunctive writ paving the way for PGSMC to dismantle and transfer the
equipment and machineries, we find it to be in order considering the factual milieu of the instant case. AcDaEH
Firstly, while the issue of the proper installation of the equipment and machineries might well be under the primary jurisdiction of
the arbitral body to decide, yet the RTC under Sec. 28 of RA 9285 has jurisdiction to hear and grant interim measures to protect
vested rights of the parties. Sec. 28 pertinently provides:
SEC. 28.Grant of interim Measure of Protection. (a) It is not incompatible with an arbitration agreement for a party to
request, before constitution of the tribunal, from a Court to grant such measure. After constitution of the arbitral tribunal
and during arbitral proceedings, a request for an interim measure of protection, or modification thereof, may be made with
the arbitral or to the extent that the arbitral tribunal has no power to act or is unable to act effectivity, the request may be
made with the Court. The arbitral tribunal is deemed constituted when the sole arbitrator or the third arbitrator, who has
been nominated, has accepted the nomination and written communication of said nomination and acceptance has been
received by the party making the request.
(b)The following rules on interim or provisional relief shall be observed:
Any party may request that provisional relief be granted against the adverse party.
Such relief may be granted:
(i)to prevent irreparable loss or injury;
(ii)to provide security for the performance of any obligation;
(iii)to produce or preserve any evidence; or
(iv)to compel any other appropriate act or omission.
(c)The order granting provisional relief may be conditioned upon the provision of security or any act or omission specified in
the order.
(d)Interim or provisional relief is requested by written application transmitted by reasonable means to the Court or arbitral
tribunal as the case may be and the party against whom the relief is sought, describing in appropriate detail the precise relief,
the party against whom the relief is requested, the grounds for the relief, and the evidence supporting the request.
(e)The order shall be binding upon the parties.
(f)Either party may apply with the Court for assistance in implementing or enforcing an interim measure ordered by an
arbitral tribunal.
(g)A party who does not comply with the order shall be liable for all damages resulting from noncompliance, including all
expenses, and reasonable attorney's fees, paid in obtaining the order's judicial enforcement. (Emphasis ours.)
Art. 17 (2) of the UNCITRAL Model Law on ICA defines an "interim measure" of protection as:
Article 17.Power of arbitral tribunal to order interim measures
xxx xxx xxx
(2)An interim measure is any temporary measure, whether in the form of an award or in another form, by which, at any time
prior to the issuance of the award by which the dispute is finally decided, the arbitral tribunal orders a party to:
(a)Maintain or restore the status quo pending determination of the dispute;
(b)Take action that would prevent, or refrain from taking action that is likely to cause, current or imminent harm or prejudice
to the arbitral process itself; DTISaH
(c)Provide a means of preserving assets out of which a subsequent award may be satisfied; or
(d)Preserve evidence that may be relevant and material to the resolution of the dispute.
Art. 17 J of UNCITRAL Model Law on ICA also grants courts power and jurisdiction to issue interim measures:
Article 17 J. Court-ordered interim measures
A court shall have the same power of issuing an interim measure in relation to arbitration proceedings, irrespective of
whether their place is in the territory of this State, as it has in relation to proceedings in courts. The court shall exercise such
power in accordance with its own procedures in consideration of the specific features of international arbitration.
In the recent 2006 case of Transfield Philippines, Inc. v. Luzon Hydro Corporation, we were explicit that even "the pendency of an
arbitral proceeding does not foreclose resort to the courts for provisional reliefs." We explicated this way:
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. Likewise, Section 14 of Republic Act (R.A.) No. 876 (The Arbitration Law) 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. 50 AacCIT
It is thus beyond cavil that the RTC has authority and jurisdiction to grant interim measures of protection.
Secondly, considering that the equipment and machineries are in the possession of PGSMC, it has the right to protect and preserve
the equipment and machineries in the best way it can. Considering that the LPG plant was non-operational, PGSMC has the right to
dismantle and transfer the equipment and machineries either for their protection and preservation or for the better way to make
good use of them which is ineluctably within the management discretion of PGSMC.
Thirdly, and of greater import is the reason that maintaining the equipment and machineries in Worth's property is not to the best
interest of PGSMC due to the prohibitive rent while the LPG plant as set-up is not operational. PGSMC was losing PhP322,560 as
monthly rentals or PhP3.87M for 1998 alone without considering the 10% annual rent increment in maintaining the plant.
Fourthly, and corollarily, while the KCAB can rule on motions or petitions relating to the preservation or transfer of the equipment
and machineries as an interim measure, yet on hindsight, the July 23, 1998 Order of the RTC allowing the transfer of the equipment
and machineries given the non-recognition by the lower courts of the arbitral clause, has accorded an interim measure of protection
to PGSMC which would otherwise been irreparably damaged.
Fifth, KOGIES is not unjustly prejudiced as it has already been paid a substantial amount based on the contract. Moreover, KOGIES is
amply protected by the arbitral action it has instituted before the KCAB, the award of which can be enforced in our jurisdiction
through the RTC. Besides, by our decision, PGSMC is compelled to submit to arbitration pursuant to the valid arbitration clause of its
contract with KOGIES.
PGSMC to preserve the subject equipment and machineries
Finally, while PGSMC may have been granted the right to dismantle and transfer the subject equipment and machineries, it does not
have the right to convey or dispose of the same considering the pending arbitral proceedings to settle the differences of the parties.
PGSMC therefore must preserve and maintain the subject equipment and machineries with the diligence of a good father of a family
51 until final resolution of the arbitral proceedings and enforcement of the award, if any.
WHEREFORE, this petition is PARTLY GRANTED, in that:

(1)The May 30, 2000 CA Decision in CA-G.R. SP No. 49249 is REVERSED and SET ASIDE;
(2)The September 21, 1998 and October 19, 1998 RTC Orders in Civil Case No. 98-117 are REVERSED and SET ASIDE;
(3)The parties are hereby ORDERED to submit themselves to the arbitration of their dispute and differences arising from the subject
Contract before the KCAB; and
(4)PGSMC is hereby ALLOWED to dismantle and transfer the equipment and machineries, if it had not done so, and ORDERED to
preserve and maintain them until the finality of whatever arbitral award is given in the arbitration proceedings.
No pronouncement as to costs. IEAHca
SO ORDERED.












[G.R. No. 169332. February 11, 2008.]ABS-CBN BROADCASTING CORPORATION, petitioner, vs. WORLD INTERACTIVE NETWORK
SYSTEMS (WINS) JAPAN CO., LTD., respondent.
This petition for review on certiorari under Rule 45 of the Rules of Court seeks to set aside the February 16, 2005 decision 1 and
August 16, 2005 resolution 2 of the Court of Appeals (CA) in CA-G.R. SP No. 81940.
On September 27, 1999, petitioner ABS-CBN Broadcasting Corporation entered into a licensing agreement with respondent World
Interactive Network Systems (WINS) Japan Co., Ltd., a foreign corporation licensed under the laws of Japan. Under the agreement,
respondent was granted the exclusive license to distribute and sublicense the distribution of the television service known as "The
Filipino Channel" (TFC) in Japan. By virtue thereof, petitioner undertook to transmit the TFC programming signals to respondent
which the latter received through its decoders and distributed to its subscribers. aTHCSE
A dispute arose between the parties when petitioner accused respondent of inserting nine episodes of WINS WEEKLY, a weekly 35-
minute community news program for Filipinos in Japan, into the TFC programming from March to May 2002. 3 Petitioner claimed
that these were "unauthorized insertions" constituting a material breach of their agreement. Consequently, on May 9, 2002, 4
petitioner notified respondent of its intention to terminate the agreement effective June 10, 2002.
Thereafter, respondent filed an arbitration suit pursuant to the arbitration clause of its agreement with petitioner. It contended that
the airing of WINS WEEKLY was made with petitioner's prior approval. It also alleged that petitioner only threatened to termi nate
their agreement because it wanted to renegotiate the terms thereof to allow it to demand higher fees. Respondent also prayed for
damages for petitioner's alleged grant of an exclusive distribution license to another entity, NHK (Japan Broadcasting Corporation). 5
The parties appointed Professor Alfredo F. Tadiar to act as sole arbitrator. They stipulated on the following issues in their terms of
reference (TOR): 6 HIETAc
1.Was the broadcast of WINS WEEKLY by the claimant duly authorized by the respondent [herein petitioner]?
2.Did such broadcast constitute a material breach of the agreement that is a ground for termination of the agreement in
accordance with Section 13 (a) thereof?
3.If so, was the breach seasonably cured under the same contractual provision of Section 13 (a)?
4.Which party is entitled to the payment of damages they claim and to the other reliefs prayed for?
xxx xxx xxx
The arbitrator found in favor of respondent. 7 He held that petitioner gave its approval to respondent for the airing of WINS WEEKLY
as shown by a series of written exchanges between the parties. He also ruled that, had there really been a material breach of the
agreement, petitioner should have terminated the same instead of sending a mere notice to terminate said agreement. The
arbitrator found that petitioner threatened to terminate the agreement due to its desire to compel respondent to re-negotiate the
terms thereof for higher fees. He further stated that even if respondent committed a breach of the agreement, the same was
seasonably cured. He then allowed respondent to recover temperate damages, attorney's fees and one-half of the amount it paid as
arbitrator's fee. SHADcT
Petitioner filed in the CA a petition for review under Rule 43 of the Rules of Court or, in the alternative, a petition for certiorari under
Rule 65 of the same Rules, with application for temporary restraining order and writ of preliminary injunction. It was docketed as
CA-G.R. SP No. 81940. It alleged serious errors of fact and law and/or grave abuse of discretion amounting to lack or excess of
jurisdiction on the part of the arbitrator.
Respondent, on the other hand, filed a petition for confirmation of arbitral award before the Regional Trial Court (RTC) of Quezon
City, Branch 93, docketed as Civil Case No. Q-04-51822.
Consequently, petitioner filed a supplemental petition in the CA seeking to enjoin the RTC of Quezon City from further proceeding
with the hearing of respondent's petition for confirmation of arbitral award. After the petition was admitted by the appellate court,
the RTC of Quezon City issued an order holding in abeyance any further action on respondent's petition as the assailed decisi on of
the arbitrator had already become the subject of an appeal in the CA. Respondent filed a motion for reconsideration but no
resolution has been issued by the lower court to date. 8
On February 16, 2005, the CA rendered the assailed decision dismissing ABS-CBN's petition for lack of jurisdiction. It stated that as
the TOR itself provided that the arbitrator's decision shall be final and unappealable and that no motion for reconsideration shall be
filed, then the petition for review must fail. It ruled that it is the RTC which has jurisdiction over questions relating to arbitration. It
held that the only instance it can exercise jurisdiction over an arbitral award is an appeal from the trial court's decision confirming,
vacating or modifying the arbitral award. It further stated that a petition for certiorari under Rule 65 of the Rules of Court is proper
in arbitration cases only if the courts refuse or neglect to inquire into the facts of an arbitrator's award. The dispositive portion of
the CA decision read: TSIEAD
WHEREFORE, the instant petition is hereby DISMISSED for lack of jurisdiction. The application for a writ of injunction and
temporary restraining order is likewise DENIED. The Regional Trial Court of Quezon City, Branch 93 is directed to proceed
with the trial for the Petition for Confirmation of Arbitral Award. SO ORDERED.
Petitioner moved for reconsideration. The same was denied. Hence, this petition.
Petitioner contends that the CA, in effect, ruled that: (a) it should have first filed a petition to vacate the award in the RTC and only
in case of denial could it elevate the matter to the CA via a petition for review under Rule 43 and (b) the assailed decision implied
that an aggrieved party to an arbitral award does not have the option of directly filing a petition for review under Rule 43 or a
petition for certiorari under Rule 65 with the CA even if the issues raised pertain to errors of fact and law or grave abuse of
discretion, as the case may be, and not dependent upon such grounds as enumerated under Section 24 (petition to vacate an
arbitral award) of RA 876 (the Arbitration Law). Petitioner alleged serious error on the part of the CA. HTAIcD
The issue before us is whether or not an aggrieved party in a voluntary arbitration dispute may avail of, directly in the CA, a petition
for review under Rule 43 or a petition for certiorari under Rule 65 of the Rules of Court, instead of filing a petition to vacate the
award in the RTC when the grounds invoked to overturn the arbitrator's decision are other than those for a petition to vacate an
arbitral award enumerated under RA 876.
RA 876 itself mandates that it is the Court of First Instance, now the RTC, which has jurisdiction over questions relating to
arbitration, 9 such as a petition to vacate an arbitral award.
Section 24 of RA 876 provides for the specific grounds for a petition to vacate an award made by an arbitrator:
Sec. 24.Grounds for vacating award. In any one of the following cases, the court must make an order vacating the award
upon the petition of any party to the controversy when such party proves affirmatively that in the arbitration proceedings:
(a)The award was procured by corruption, fraud, or other undue means; or
(b)That there was evident partiality or corruption in the arbitrators or any of them; or THEDcS
(c)That the arbitrators were guilty of misconduct in refusing to postpone the hearing upon sufficient cause shown, or in
refusing to hear evidence pertinent and material to the controversy; that one or more of the arbitrators was disqualified to
act as such under section nine hereof, and willfully refrained from disclosing such disqualifications or of any other
misbehavior by which the rights of any party have been materially prejudiced; or
(d)That 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.
Based on the foregoing provisions, the law itself clearly provides that the RTC must issue an order vacating an arbitral award only "in
any one of the . . . cases" enumerated therein. Under the legal maxim in statutory construction expressio unius est exclusio alterius,
the explicit mention of one thing in a statute means the elimination of others not specifically mentioned. As RA 876 did not expressly
provide for errors of fact and/or law and grave abuse of discretion (proper grounds for a petition for review under Rul e 43 and a
petition for certiorari under Rule 65, respectively) as grounds for maintaining a petition to vacate an arbitral award in the RTC, it
necessarily follows that a party may not avail of the latter remedy on the grounds of errors of fact and/or law or grave abuse of
discretion to overturn an arbitral award.
Adamson v. Court of Appeals 10 gave ample warning that a petition to vacate filed in the RTC which is not based on the grounds
enumerated in Section 24 of RA 876 should be dismissed. In that case, the trial court vacated the arbitral award seemingly based on
grounds included in Section 24 of RA 876 but a closer reading thereof revealed otherwise. On appeal, the CA reversed the decision of
the trial court and affirmed the arbitral award. In affirming the CA, we held:
The Court of Appeals, in reversing the trial court's decision held that the nullification of the decision of the Arbitration
Committee was not based on the grounds provided by the Arbitration Law and that . . . private respondents (petitioners
herein) have failed to substantiate with any evidence their claim of partiality. Significantly, even as respondent judge ruled
against the arbitrator's award, he could not find fault with their impartiality and integrity. Evidently, the nullification of the
award rendered at the case at bar was not made on the basis of any of the grounds provided by law. AEIHCS
xxx xxx xxx
It is clear, therefore, that the award was vacated not because of evident partiality of the arbitrators but because the latter
interpreted the contract in a way which was not favorable to herein petitioners and because it considered that herein private
respondents, by submitting the controversy to arbitration, was seeking to renege on its obligations under the contract.
xxx xxx xxx
It is clear then that the Court of Appeals reversed the trial court not because the latter reviewed the arbitration award
involved herein, but because the respondent appellate court found that the trial court had no legal basis for vacating the
award. (Emphasis supplied).
In cases not falling under any of the aforementioned grounds to vacate an award, the Court has already made several
pronouncements that a petition for review under Rule 43 or a petition for certiorari under Rule 65 may be availed of in the CA.
Which one would depend on the grounds relied upon by petitioner.
In Luzon Development Bank v. Association of Luzon Development Bank Employees, 11 the Court held that a voluntary arbitrator is
properly classified as a "quasi-judicial instrumentality" and is, thus, within the ambit of Section 9 (3) of the Judiciary Reorganization
Act, as amended. Under this section, the Court of Appeals shall exercise:
xxx xxx xxx
(3)Exclusive appellate jurisdiction over all final judgments, decisions, resolutions, orders or awards of Regional Trial Courts
and quasi-judicial agencies, instrumentalities, boards or commissions, including the Securities and Exchange Commission, the
Employees' Compensation Commission and the Civil Service Commission, except those falling within the appellate
jurisdiction of the Supreme Court in accordance with the Constitution, the Labor Code of the Philippines under Presidential
Decree No. 442, as amended, the provisions of this Act and of subparagraph (1) of the third paragraph and subparagraph (4)
of the fourth paragraph of Section 17 of the Judiciary Act of 1948. (Emphasis supplied)
As such, decisions handed down by voluntary arbitrators fall within the exclusive appellate jurisdiction of the CA. This deci sion was
taken into consideration in approving Section 1 of Rule 43 of the Rules of Court. 12 Thus: cI CHTD
SEC. 1.Scope. This Rule shall apply to appeals from judgments or final orders of the Court of Tax Appeals and from awards,
judgments, final orders or resolutions of or authorized by any quasi-judicial agency in the exercise of its quasi-judicial
functions. Among these agencies are the Civil Service Commission, Central Board of Assessment Appeals, Securities and
Exchange Commission, Office of the President, Land Registration Authority, Social Security Commission, Civil Aeronautics
Board, Bureau of Patents, Trademarks and Technology Transfer, National Electrification Administration, Energy Regulatory
Board, National Telecommunications Commission, Department of Agrarian Reform under Republic Act Number 6657,
Government Service Insurance System, Employees Compensation Commission, Agricultural Inventions Board, Insurance
Commission, Philippine Atomic Energy Commission, Board of Investments, Construction Industry Arbitration Commission,
and voluntary arbitrators authorized by law. (Emphasis supplied)
This rule was cited in Sevilla Trading Company v. Semana, 13 Manila Midtown Hotel v. Borromeo, 14 and Nippon Paint Employees
Union-Olalia v. Court of Appeals. 15 These cases held that the proper remedy from the adverse decision of a voluntary arbitrator, if
errors of fact and/or law are raised, is a petition for review under Rule 43 of the Rules of Court. Thus, petitioner's contention that it
may avail of a petition for review under Rule 43 under the circumstances of this case is correct.
As to petitioner's arguments that a petition for certiorari under Rule 65 may also be resorted to, we hold the same to be in
accordance with the Constitution and jurisprudence.
Section 1 of Article VIII of the 1987 Constitution provides that:
SEC. 1.The judicial power shall be vested in one Supreme Court and in such lower courts as may be established by law.
Judicial power includes the duty of the courts of justice to settle actual controversies involving rights which are legally
demandable and enforceable, and to determine whether or not there has been a grave abuse of discretion amounting to
lack or excess of jurisdiction on the part of any branch or instrumentality of the Government. (Emphasis supplied) DHTECc
As may be gleaned from the above stated provision, it is well within the power and jurisdiction of the Court to inquire whether any
instrumentality of the Government, such as a voluntary arbitrator, has gravely abused its discretion in the exercise of its functions
and prerogatives. Any agreement stipulating that "the decision of the arbitrator shall be final and unappealable" and "that no
further judicial recourse if either party disagrees with the whole or any part of the arbitrator's award may be availed of" cannot be
held to preclude in proper cases the power of judicial review which is inherent in courts. 16 We will not hesitate to review a
voluntary arbitrator's award where there is a showing of grave abuse of authority or discretion and such is properly raised i n a
petition for certiorari 17 and there is no appeal, nor any plain, speedy remedy in the course of law. 18
Significantly, Insular Savings Bank v. Far East Bank and Trust Company 19 definitively outlined several judicial remedies an aggrieved
party to an arbitral award may undertake:
(1)a petition in the proper RTC to issue an order to vacate the award on the grounds provided for in Section 24 of RA 876; ASCTac
(2)a petition for review in the CA under Rule 43 of the Rules of Court on questions of fact, of law, or mixed questions of fact
and law; and
(3)a petition for certiorari under Rule 65 of the Rules of Court should the arbitrator have acted without or in excess of his
jurisdiction or with grave abuse of discretion amounting to lack or excess of jurisdiction.
Nevertheless, although petitioner's position on the judicial remedies available to it was correct, we sustain the dismissal of its
petition by the CA. The remedy petitioner availed of, entitled "alternative petition for review under Rule 43 or petition for certiorari
under Rule 65," was wrong. CcTHaD
Time and again, we have ruled that the remedies of appeal and certiorari are mutually exclusive and not alternative or successive. 20
Proper issues that may be raised in a petition for review under Rule 43 pertain to errors of fact, law or mixed questions of fact and
law. 21 While a petition for certiorari under Rule 65 should only limit itself to errors of jurisdiction, that is, grave abuse of discretion
amounting to a lack or excess of jurisdiction. 22 Moreover, it cannot be availed of where appeal is the proper remedy or as a
substitute for a lapsed appeal. 23
In the case at bar, the questions raised by petitioner in its alternative petition before the CA were the following:
A.THE SOLE ARBITRATOR COMMITTED SERIOUS ERROR AND/OR GRAVELY ABUSED HIS DISCRETION IN RULING THAT THE
BROADCAST OF "WINS WEEKLY" WAS DULY AUTHORIZED BY ABS-CBN.
B.THE SOLE ARBITRATOR COMMITTED SERIOUS ERROR AND/OR GRAVELY ABUSED HIS DISCRETION IN RULING THAT THE
UNAUTHORIZED BROADCAST DID NOT CONSTITUTE MATERIAL BREACH OF THE AGREEMENT.
C.THE SOLE ARBITRATOR COMMITTED SERIOUS ERROR AND/OR GRAVELY ABUSED HIS DISCRETION IN RULING THAT WINS
SEASONABLY CURED THE BREACH. CaDATc
D.THE SOLE ARBITRATOR COMMITTED SERIOUS ERROR AND/OR GRAVELY ABUSED HIS DISCRETION IN RULING THAT
TEMPERATE DAMAGES IN THE AMOUNT OF P1,166,955.00 MAY BE AWARDED TO WINS.
E.THE SOLE ARBITRATOR COMMITTED SERIOUS ERROR AND/OR GRAVELY ABUSED HIS DISCRETION IN AWARDING
ATTORNEY'S FEES IN THE UNREASONABLE AMOUNT AND UNCONSCIONABLE AMOUNT OF P850,000.00.
F.THE ERROR COMMITTED BY THE SOLE ARBITRATOR IS NOT A SIMPLE ERROR OF JUDGMENT OR ABUSE OF DISCRETION. IT IS
GRAVE ABUSE OF DISCRETION TANTAMOUNT TO LACK OR EXCESS OF JURISDICTION.
A careful reading of the assigned errors reveals that the real issues calling for the CA's resolution were less the alleged grave abuse
of discretion exercised by the arbitrator and more about the arbitrator's appreciation of the issues and evidence presented by the
parties. Therefore, the issues clearly fall under the classification of errors of fact and law questions which may be passed upon by
the CA via a petition for review under Rule 43. Petitioner cleverly crafted its assignment of errors in such a way as to straddle both
judicial remedies, that is, by alleging serious errors of fact and law (in which case a petition for review under Rule 43 would be
proper) and grave abuse of discretion (because of which a petition for certiorari under Rule 65 would be permissible). ITaESD
It must be emphasized that every lawyer should be familiar with the distinctions between the two remedies for it is not the duty of
the courts to determine under which rule the petition should fall. 24 Petitioner's ploy was fatal to its cause. An appeal taken either
to this Court or the CA by the wrong or inappropriate mode shall be dismissed. 25 Thus, the alternative petition filed in the CA,
being an inappropriate mode of appeal, should have been dismissed outright by the CA.
WHEREFORE, the petition is hereby DENIED. The February 16, 2005 decision and August 16, 2005 resolution of the Court of Appeals
in CA-G.R. SP No. 81940 directing the Regional Trial Court of Quezon City, Branch 93 to proceed with the trial of the petition for
confirmation of arbitral award is AFFIRMED.
Costs against petitioner. SaETCI
SO ORDERED.













[G.R. No. 106879. May 27, 1994.] DR. LUCAS G. ADAMSON and ADAMSON MANAGEMENT CORPORATION, petitioners, vs. HON.
COURT OF APPEALS and APAC HOLDINGS LIMITED, respondents.
Before us is a petition for review on certiorari of a decision of the Court of Appeals, the dispositive portion of which is quoted
hereunder:
"WHEREFORE, judgment is hereby rendered setting aside respondent judge's questioned order dated 23 August 1991 and
conforming the subject arbitration award. Costs against private respondents. LLpr
SO ORDERED."
The antecedents of this case are as follows:
On June 15, 1990, the parties, Adamson Management Corporation and Lucas Adamson on the one hand, and APAC Holdings Limited
on the other, entered into a contract whereby the former sold 99.97% of outstanding common shares of stocks of Adamson and
Adamson, Inc. to the latter for P24,384,600.00 plus the Net Asset Value (NAV) of Adamson and Adamson, Inc. as of June 19, 1990.
But the parties failed to agree on a reasonable Net Asset Value. This prompted them to submit the case for arbitration in accordance
with Republic Act No. 876, otherwise known as the Arbitration Law.
On May 15, 1991, the Arbitration Committee rendered a decision finding the Net Asset Value of the Company to be P167,118.00
which was computed on the basis of a pro-forma balance sheet submitted by SGV and which was the difference between the total
assets of the Company amounting to P65,554,258.00 (the sum of the balance sheet asset amounting to P65,413,978.00 and the
increase in Cuevo appraisal amounting to P140,280.00) and total liabilities amounting to P65,387,140.00 (the difference between
current liabilities and long term debt amounting to P68,356,132.00 and Tax Savings for 1987 amounting to P2,968,992). Cdpr
In so holding that NAV equals P167,118.00, the Arbitration Committee disregarded petitioners' argument that there was a fixed NAV
amounting to P5,146,000.00 as of February 28, 1990 to which should be added the value of intangible assets (P19,116,000.00), the
increment of tangible assets excluding land P17,003,976.00), the 1987 tax savings (P2,968,992.00), and estimated net income from
February 28, 1990 to June 19, 1990 (P1,500,000.00, later increased to P3,949,772.00). According to the Committee, however, the
amount of P5,146,000.00 which was claimed as initial NAV by petitioners, was merely an estimate of the Company's NAV as of
February 28, 1990 which was still subject to financial developments until June 19, 1990, the cut-off date. The basis for this ruling was
Clause 3(B) of the Agreement which fixed the said amount; Clause 1(A) which defined NAV and provided that it should be computed
in accordance with Clause 7(A); Clause 7(A) which directed the auditors to prepare in accordance with good accounting principles a
balance sheet as of cut-off date which would include the goodwill and intangible assets (P19,116,000.00), the value of tangible
assets excluding the land as per Cuervo appraisal, the adjustment agreed upon by the parties, and the cost of redeeming preferred
shares; and Clause 5(E). Furthermore, the Committee held that the parties used the figures in the pro-forma balance sheet to arrive
at the said amount of P5,146,000.00; that the same had already included the value of the intangible assets and of the Cuervo
appraisal of the tangible assets so that the latter items could not be added again to what Vendor claimed to be the initial NAV; and
that apart from being an estimate, the amount of P5,146,000.00 was tentative as it was still subject to the adjustments to be made
thereto to reflect subsequent financial events up to the cut-off date. prLL
In the computation of the NAV, the Committee deemed it proper to appreciate in favor of petitioners the 1987 tax savings because
as of the date of the proceedings, no assessment was ever made by the BIR and the three-year prescriptive period had already
expired. However, it did not consider the estimated net income for the period beginning February 28, 1990 to June 19, 1990 as part
of the NAV because it found that as of June 1990, the books of the company carried a net loss of P4,678,627.00 which increased to
P8,547,868.00 after the proposed adjustments were included in the computation of the NAV. The Committee pointed out that
although petitioners herein contested the adjustments, they were, however, not able to prove that these were not valid, except with
respect to the tax savings.
Aside from deciding the amount of NAV, the Committee also held that any ambiguity in the contract should not necessarily be
interpreted against herein private respondents because the parties themselves had stipulated that the draft of the agreement was
submitted to petitioners for approval and that the latter even proposed changes which were eventually incorporated in the final
form of the Agreement.
Thereafter, APAC Holdings Ltd. filed a petition for confirmation of the arbitration award before the Regional Trial Court of Makati.
Herein petitioners opposed the petition and prayed for the nullification, modification and/or correction of the same, alleging that
the arbitrators committed evident partiality and grave abuse of discretion as shown by the following errors:
a.In creating an entirely new contract for the parties that contradicts the essence of their agreement and results in the
absurd situation where a seller incurs enormous expense to sell his property;
b.In treating the provisions in the Agreement independently of one another and thereby nullifying the simple, clear and
express stipulations therein. LLpr
c.In interpreting the Agreement although it is couched in plain, simple and clear language, contrary to the well established
principle that if the terms of a contract are clear, the literal meaning of its stipulations shall control;
d.In accepting SGV's proposed adjustments, contrary to the parties' stipulation that the final adjustment items shall pertain
to a specific period and subject to their agreement; and in giving full reliance on SGV report despite SGV's disclosure of its
lack of independence because it acted solely to assist petitioner and its report was intended solely for petitioner's
information;
e.In not applying the "suppressed evidence" rule against petitioner inspite of its refusal to present the Company's income
statement or any other similar report for the adjustment period; and in disregarding respondent's estimate of the net income
for the period as "Adjustment" using SGV's figures and ratios;
f.In not awarding damages and attorney's fee to respondents despite petitioner's bad faith in violating the contract. 1
The Regional Trial Court rendered a decision vacating the arbitration award. The dispositive portion of the decision reads as follows:
"WHEREFORE, the Decision/Arbitration Award in question is hereby VACATED, and APAC (herein petitioner) is hereby
ordered to pay ADAMSON (herein respondents) the final NAV of Forty-seven Million One Hundred Twenty-One Thousand
Four Hundred Sixty-Eight Pesos (P47,121,468.00), Philippine Currency, in accordance with the pertinent stipulations
expressed in the Agreement as discussed above, plus twelve (12) percent interest on the above amount which ADAMSON
should have earned had the balance of the final NAV been paid to the Escrow Agent after offset on August 2, 1990.

ADAMSON's claim for moral and exemplary damages and attorney's fees are (sic) dismissed for lack of sufficient merit. LLphil
SO ORDERED." 2
On appeal, the above decision was reversed and a petition for review was filed in this Court. Petitioners allege that the Court of
Appeals erred and acted in excess of jurisdiction or with grave abuse of discretion in holding that: (a) the trial judge reversed the
arbitration award solely on the basis of the pleadings submitted by the parties; (b) petitioners failed to substantiate with proofs their
imputation of partiality to the members of the arbitration committee; (c) the nullification by the trial court of the award was not
based on any of the grounds provided by law; (d) to allow the trial judge to substitute his own findings in lieu of the arbitrators'
would defeat the object of arbitration which is to avoid litigation; and (e) if there really was a ground for vacating the award, it was
improper for trial judge to reverse the decision because it contravened Section 25 of R.A. No. 876.
Did the Court of Appeals err in affirming the arbitration award and in reversing the decision of the trial court?
The Court of Appeals, in reversing the trial court's decision held that the nullification of the decision of the Arbitration Committee
was not based on the grounds provided by the Arbitration Law and that ". . . private respondents [petitioners herein] have failed to
substantiate with any evidence their claim of partiality. Significantly, even as respondent judge ruled against the arbitrators' award,
he could not find fault with their impartiality and integrity. Evidently, the nullification of the award rendered at the case at bar was
made not on the basis of any of the grounds provided by law." 3
Assailing the above conclusion, petitioners argue that ". . . evident partiality is a state of mind that need not be proved by direct
evidence but may be inferred from the circumstances of the case (citations omitted). It is related to intention which is a mental
process, an internal state of mind that must be judged by the person's conduct and acts which are the best index of his intention
(citations omitted.)" 4 They pointed out that from the following circumstances may be inferred the arbitrators' evident partiality:
1.the material difference between the results of the arbitrators' computation of the NAV and that of petitioners;
2.the alleged piecemeal interpretation by the arbitrators of the Agreement which went beyond the clear provisions of the
contract and negated the obvious intention of the parties;
3.reliance by the arbitrators on the financial statements and reports submitted by SGV which, according to petitioners, acted
solely for the interests of private respondents; and
4.the finding of the trial court that "the arbitration committee has advanced no valid justification to warrant a departure
from the well-settled rule in contract interpretation that if the terms of the contract are clear and leave no doubt upon the
intention of the contracting parties the literal meaning of its interpretation shall control." 5
We find no reason to depart from the Court of Appeal's conclusion.
Section 24 of the Arbitration Law provides as follows: Cdpr
"Sec. 24.Grounds for vacating award. In any one of the following cases, the court must make an order vacating the award
upon the petition of any party to the controversy when such party proves affirmatively that in the arbitration proceedings:
(a)The award was procured by corruption, fraud or other undue means; or
(b)That there was evident partiality or corruption in the arbitrators or any of them; or
(c)That the arbitrators were guilty of misconduct in refusing to postpone the hearing upon sufficient
cause shown, or in refusing to hear evidence pertinent and material to the controversy; that one or more of the
arbitrators was disqualified to act as such under section nine hereof, and willfully refrained from disclosing such
disqualifications or any other misbehavior by which the rights of any party have been materially prejudiced; or
(d)That 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. . . ."
Petitioners herein failed to prove their allegation of partiality on the part of the arbitrators. Proofs other than mere inferences are
needed to establish evident partiality. That they were disadvantaged by the decision of the Arbitration Committee does not prove
evident partiality.
Too much reliance has been accorded by petitioners on the decision of the trial court. However, we find that the same is but an
adaptation of the arguments of petitioners to defeat the petition for confirmation of the arbitral award in the trial court by herein
private respondent. The trial court itself stated as follows:
"In resolving the issues in favor of respondents, the Court has no alternative but to agree with the connection of said party,
as supported by their exhaustive and very convincing arguments contained in more than twenty-one (21) pages, doubled-
spaced, which are adopted and reproduced herein by reference. Said arguments may be CAPSULIZED as follows: cdll
The penultimate paragraph of its decision reads, thus:
To allay any fear of petitioner that its reply and opposition, dated 11 June 1991, has not been taken into
account in resolving this case, it will be well to state that the court has carefully read the same and, what is more, it
has also read respondents' comment, dated 19 June 1991, wherein they made convincing arguments which are
likewise adopted and incorporated herein by reference." 6
The justifications advanced by the trial court for vacating the arbitration award are the following: (a) ". . . that the arbitration
committee had advanced no valid justification to warrant a departure from the well-settled rule in contract interpretation that if the
terms of the contract are clear and leave no doubt upon the intention of the contracting parties the literal meaning of its
interpretation shall control; (b) that the final NAV of P47,121,468.00 as computed by herein petitioners was well within APAC's
normal investment level which was at least US$1 million and to say that the NAV was merely P167,118.00 would negate Clause 6 of
the Agreement which provided that the purchaser would deposit in escow P5,146,000.00 to be held for two (2) years and to be used
to satisfy any actual or contingent liability of the vendor under the Agreement; (c) that the provision for an escow account negated
any idea of the NAV being less than P5,146,000.00; and (d) that herein private respondent, being the drafter of the Agreement could
not avoid performance of its obligations by raising ambiguity of the contract, or its failure to express the intention of the parties, or
the difficulty of performing the same.
It is clear therefore, that the award was vacated not because of evident partiality of the arbitrators but because the latter
interpreted the contract in a way which was not favorable to herein petitioners and because it considered that herein private
respondents, by submitting the controversy to arbitration, was seeking to renege on its obligations under the contract.
That the award was unfavorable to petitioners herein did not prove evident partiality. The arbitrators resorted to contract
interpretation neither constituted a ground for vacating the award because under the circumstances, the same was necessary to
settle the controversy between the parties regarding the amount of the NAV. In any case, this Court finds that the interpretation
made by the arbitrators did not create a new contract, as alleged by herein petitioners but was a faithful application of the
provisions of the Agreement. Neither was the award arbitrary for it was based on the statements prepared by the SGV which was
chosen by both parties to be the "auditors."
The trial court held that herein private respondent could not shirk from performing its obligations on account of the difficulty of
complying with the terms of the contract. It said further that the contract may be harsh but private respondent could not excuse
itself from performing its obligations on account of the ambiguity of the contract because as its drafter, private respondent was well
aware of the implications of the Agreement. We note herein that during the arbitration proceedings, the parties agreed that the
contract as prepared by private respondent, was submitted to petitioners for approval. Petitioners, therefore, are presumed to have
studied the provisions of the Agreement and agreed to its import when they approved and signed the same. When it was submitted
to arbitration to settle the issue regarding the computation of the NAV, petitioners agreed to be bound by the judgment of the
arbitration committee, except in cases where the grounds for vacating the award existed. Petitioners cannot now refuse to perform
its obligation after realizing that it had erred in its understanding of the Agreement. LLpr
Petitioners also assailed the arbitrator's reliance upon the financial statements submitted by SGV as they allegedly served the
interests of private respondents and did not reflect the true intention of the parties. We agree with the observation made by the
arbitrators that SGV, being a reputable firm, it should be presumed to have prepared the statements in accordance with sound
accounting principles. Petitioners have presented no proof to establish that SGV's computation was erroneous and biased.
Petitioners likewise pointed out that the computation of the arbitrators leads to the absurd result of petitioners incurring great
expense just to sell its properties. In arguing that the NAV could not be less than P5,146,000, petitioners quote Clause (B) of the
Agreement as follows:
"CLAUSE 3 (B)
The consideration for the purchase of the Sale Shares by the Purchaser shall be equivalent to the Net Asset Value of the
Company, . . . which the parties HAVE FIXED at P5,146,000.00 prior to Adjustments . . . "

However, such quotation is incomplete and, therefore, misleading. The full text of the above provision as quoted by the arbitration
committee reads as follows:
"(B)The consideration for the purchase of the Sale Shares by the purchaser shall be equivalent to the Net Asset Value of the
Company, without the Property, which the parties have fixed at P5,146,000 prior to Adjustments plus P24,384,600. The
consideration for the sale of the Sale Shares by the Vendor, is the acquisition of the property by the Vendor, through Aloha,
from the Company at historical cost plus all Taxes due on said transfer of Property, and the release of all collaterals of the
Vendor securing the RSBS Credit Facility. However, in the implementation of this Agreement, the parties shall designate the
amounts specified in Clause 5 as the purchaser prices in the pro-forma deeds of sale and other documents required to effect
the transfers contemplated in this Agreement."
Thus, petitioner cannot claim that the consideration for private respondent's acquisition of the outstanding common shares of stock
was grossly inadequate. If the NAV as computed was small, the result was not due to error in the computations made by the
arbitrators but due to the extent of the liabilities being borne by the petitioners. During the arbitration proceedings, the committee
found that petitioner has been suffering losses since 1983, a fact which was not denied by petitioner. We cannot sustain the
argument of petitioners that the amount of P5,146,000.00 was an initial NAV as of February 28, 1990 to which should still be added
the value of tangible assets (excluding the land) and of intangible assets. If indeed the P5,146,000.00 was the initial NAV as of
February 28, 1990, then as of said date, the total assets and liabilities of the company have already been set off against each other.
NET ASSET VALUE, is arrived at only after deducting TOTAL LIABILITIES from TOTAL ASSETS. "TOTAL ASSETS" includes those that are
tangible and intangible. If the amount of the tangible and intangible assets would still be added to the "initial NAV," this would
constitute double counting. Unless the company acquired new assets from February 28, 1990 up to June 19, 1990, no value
corresponding to tangible and intangible assets may be added to the NAV. LibLex
We also note that the computation by petitioners of the NAV did not reflect the liabilities of the company. The term "net asset
value" indicates the amount of assets exceeding the liabilities as differentiated from total assets which include the liabilities. If
petitioners were not satisfied, they could have presented their own financial statements to rebut SGV's report but this, they did not
do.
Lastly, in assailing the decision of the Court of Appeals, petitioners would have this Court believe that the respondent court held that
the decision of the arbitrators was not subject to review by the courts. This was not the position taken by the respondent court.
The Court of Appeals, in its decision stated, thus:
It is settled that arbitration awards are subject to judicial review. In the recent case of Chung Fu Industries (Philippines), Inc.,
et al. v. Court of Appeals, Hon. Francisco X. Velez, et. al. G.R. No. 96283, February 25, 1992, the Supreme Court categorically
ruled that:
"It is stated expressly 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 arbitration are obtaining, the arbitrators' award may be annulled or rescinded, Additionally,
under Sections 24 and 25 of the Arbitration Law, there are grounds for vacating, modifying or rescinding an
arbitrators' award. Thus, if and when the factual circumstances referred to in the above-cited provisions are
present, judicial review of the award is properly warranted."
Clearly, though recourse to the courts may be availed of by parties aggrieved by decisions or awards rendered by
arbitrator/s, the extent of such is neither absolute nor all encompassing. . . . 7
It is clear then that the Court of Appeals reversed the trial court not because the latter reviewed the arbitration award involved
herein, but because the respondent appellate court found that the trial court had no legal basis for vacating the award. LLpr
WHEREFORE, in view of the foregoing, this petition is hereby DISMISSED and the decision of the Court of Appeals AFFIRMED.
SO ORDERED.







[G.R. No. 169095. December 8, 2008.] HEUNGHWA INDUSTRY CO., LTD., petitioner, vs. DJ BUILDERS CORPORATION, respondent.
Before this Court is a Petition for Review on Certiorari 1 under Rule 45 of the Rules of Court, seeking to set aside the August 20, 2004
Decision 2 and August 1, 2005 Resolution 3 of the Court of Appeals (CA) in CA-G.R. SP Nos. 70001 and 71621. ESCDHA
The facts of the case, as aptly presented by the CA, are as follows:
Heunghwa Industry Co., Ltd. (petitioner) is a Korean corporation doing business in the Philippines, while DJ Builders Corporation
(respondent) is a corporation duly organized under the laws of the Philippines. Petitioner was able to secure a contract with the
Department of Public Works and Highways (DPWH) to construct the Roxas-Langogan Road in Palawan.
Petitioner entered into a subcontract agreement with respondent to do earthwork, sub base course and box culvert of said project
in the amount of Php113,228,918.00. The agreement contained an arbitration clause. The agreed price was not fully paid; hence, on
January 19, 2000, respondent filed before the Regional Trial Court (RTC) of Puerto Princesa, Branch 51, a Complaint for "Breach of
Contract, Collection of Sum of Money with Application for Preliminary Injunction, Preliminary Attachment, and Prayer for Temporary
Restraining Order and Damages" docketed as Civil Case No. 3421. 4
Petitioner's Amended Answer 5 averred that it was not obliged to pay respondent because the latter caused the stoppage of work.
Petitioner further claimed that it failed to collect from the DPWH due to respondent's poor equipment performance. The Amended
Answer also contained a counterclaim for Php24,293,878.60.
On September 27, 2000, parties through their respective counsels, filed a "Joint Motion to Submit Specific Issues To The
Construction Industry Arbitration Commission" 6 (CIAC), to wit:
5.Parties would submit only specific issues to the CIAC for arbitration, leaving other claims to this Honorable Court for further
hearing and adjudication. Specifically, the issues to be submitted to the CIAC are as follows:
a.Manpower and equipment standby time;
b.Unrecouped mobilization expenses;
c.Retention;
d.Discrepancy of billings; and
e.Price escalation for fuel and oil usage. 7
On the same day, the RTC issued an Order 8 granting the motion.
On October 9, 2000, petitioner, through its counsel, filed an "Urgent Manifestation" 9 praying that additional matters be referred to
CIAC for arbitration, to wit: cSTHa E
1.Additional mobilization costs incurred by [petitioner] for work abandoned by [respondent];
2.Propriety of liquidated damages in favor of [petitioner] for delay incurred by [respondent];
3.Propriety of downtime costs on a daily basis during the period of the existence of the previous temporary restraining order
against [petitioner]. 10
On October 24, 2000, respondent filed with CIAC a Request for Adjudication 11 accompanied by a Complaint. Petitioner, in turn filed
a "Reply/Manifestation" informing the CIAC that it was abandoning the submission to CIAC and pursuing the case before the RTC. In
respondent's Comment on petitioner's Manifestation, it prayed for CIAC to declare petitioner in default.
CIAC then issued an Order 12 dated November 27, 2000 ordering respondent to move for the dismissal of Civil Case No. 3421
pending before the RTC of Palawan and directing petitioner to file anew its answer. The said Order also denied respondent's motion
to declare petitioner in default.
Respondent filed a Motion for Partial Reconsideration of the November 27, 2000 Order while petitioner moved to suspend the
proceeding before the CIAC until the RTC had dismissed Civil Case No. 3421.
On January 8, 2000, CIAC issued an Order 13 setting aside its Order of November 27, 2000 by directing the dismissal of Civil Case No.
3421 only insofar as the five issues referred to it were concerned. It also directed respondent to file a request for adjudication. In
compliance, respondent filed anew a "Revised Complaint" 14 which increased the amount of the claim from Php23,391,654.22 to
Php65,393,773.42.
On February 22, 2001, petitioner, through its new counsel, filed with the RTC a motion to withdraw the Order dated September 27,
2000 which referred the case to the CIAC, claiming it never authorized the referral. Respondent opposed the motion 15 contending
that petitioner was already estopped from asking for the recall of the Order.
Petitioner filed in the CIAC its opposition to the second motion to declare it in default, with a motion to dismiss informing the CIAC
that it was abandoning the submission of the case to it and asserting that the RTC had original and exclusive jurisdiction over Civil
Case No. 3421, including the five issues referred to the CIAC. HSDCTA
On March 5, 2001, the CIAC denied petitioner's motion to dismiss on the ground that the November 27, 2000 Order had already
been superseded by its Order of January 8, 2001. 16
On March 13, 2001, the CIAC issued an Order setting the preliminary conference on April 10, 2001. 17
On March 23, 2001 petitioner filed with the CIAC a motion for reconsideration of the March 5, 2001 Order.
For clarity, the succeeding proceedings before the RTC and CIAC are presented in graph form in chronological order.
RTCCIAC
April 5, 2001 Petitioner filed a
Motion
to Suspend proceedings because of
the
Motion to Recall it filed with the RTC.
April 6, 2001 CIAC granted
petitioner's
motion and suspended the hearings
dated
April 10 and 17, 2001.
May 16, 2001 the RTC issued a
Resolution 18 granting petitioner's
Motion to Recall. 19
June 1, 2001 Respondent moved
for a reconsideration of the May 16,
2001 Resolution and prayed for
the dismissal of the case without
prejudice to the filing of a
complaint with the CIAC. 20
June 11, 2001 Petitioner
opposed respondent's motion for
reconsideration and also prayed
for the dismissal of the case but
with prejudice. 21 SHTcDE
July 6, 2001 The RTC denied
respondent's motion for
reconsideration but stated that
respondent may file a formal
motion to dismiss if it so
desired. 22
July 16, 2001 Respondent
filed with the RTC a Motion to
Dismiss 23 Civil Case No. 3421
praying for the dismissal of the
complaint without prejudice to
the filing of the proper complaint
with the CIAC.
On the same day, the RTC granted
the motion without prejudice to
petitioner's counterclaim. 24
August 1, 2001 Petitioner moved
for a reconsideration of the July 16,
2001 Order claiming it was denied
due process. 25 THa CAI
August 7, 2001 Respondent filed
with
the CIAC a motion for the resumption
of
the proceedings claiming that the
dismissal
of Civil Case No. 3421 became final
on
August 3, 2001.
August 15, 2001 Petitioner filed a
counter-manifestation 26 asserting
that
the RTC Order dated July 16, 2001
was
not yet final. Petitioner reiterated the
prayer to dismiss the case.
August 27, 2001 CIAC issued an
Order
maintaining the suspension but did
not rule
on petitioner's Motion to Dismiss.
January 22, 2002 CIAC issued an
Order
setting the case for Preliminary
Conference
on February 7, 2002.
February 1, 2002 Petitioner filed a
Motion for Reconsideration of the
January
22, 2002 Order which also included a
prayer to resolve the Motion for
Reconsideration of the July 16, 2001
Order.
February 5, 2002 CIAC denied
petitioner's Motion for
Reconsideration.
February 7, 2002 CIAC conducted
a
preliminary conference. 27
March 13, 2002 the RTC issued
a Resolution 28 declaring the July
16,
2001 Order which dismissed the
case "without force and effect"
and set the case for hearing on
May 30, 2002.
March 15, 2002 Petitioner filed a
Manifestation before the CIAC that
the
CIAC had no authority to hear the
case.
March 18, 2002 CIAC issued an
Order
setting the hearing on April 2, 2002. DcITaC
March 21, 2002 Petitioner filed a
Manifestation/Motion that the RTC
had
recalled the July 16, 2001 Order and
had
asserted jurisdiction over the entire
case
and praying for the dismissal of the
pending case. 29
March 22, 2002 CIAC issued an
Order 30 denying the Motion to
Dismiss
filed by petitioner and holding that
the
CIAC had jurisdiction over the case.
March 25, 2002 RespondentMarch
26, 2002 CIAC ordered
moved for a
reconsiderationrespondent to file a
reply to petitioner's
31 of the March 13, 2002March 21,
2002 Manifestation.
Order recalling the July 16,
2001 Order which petitioner
opposed.
June 17, 2002 RTC denied
respondent's Motion for
Reconsideration.
The parties, without waiting for the reply required by the CIAC, 32 filed two separate petitions for certiorari: petitioner, on April 5,
2002, docketed as CA-G.R. SP No. 70001; and respondent, on July 5, 2002, docketed as CA-G.R. SP No. 71621 with the CA.
In CA-G.R. SP No. 70001, petitioner assailed the denial by the CIAC of its motion to dismiss and sought to enjoin the CIAC from
proceeding with the case.
In CA-G.R. SP No. 71621, respondent questioned the March 13, 2002 Order of the RTC which reinstated Civil Case No. 3421 as well as
the Order dated June 17, 2002 which denied respondent's motion for reconsideration. Respondent also sought to restrain the RTC
from further proceeding with the civil case.
In other words, petitioner is questioning the jurisdiction of the CIAC; while respondent is questioning the jurisdiction of the RTC over
the case. HTI EaS
Both cases were consolidated by the CA.
The CA ruled against petitioner on procedural and substantive grounds.
On matters of procedure, the CA took note of the fact that petitioner did not file a motion for reconsideration of the March 22, 2002
Order of the CIAC and held that it is in violation of the well-settled rule that a motion for reconsideration should be filed to allow the
respondent tribunal to correct its error before a petition can be entertained. 33 Moreover, the CA ruled that it is well-settled that a
denial of a motion to dismiss, being an interlocutory order, is not the proper subject for a petition for certiorari. 34
Moreover, the CA ruled against petitioner's main argument that the arbitration clause found in the subcontract agreement between
the parties did not refer to CIAC as the arbitral body. The CA held that the CIAC had jurisdiction over the controversy because the
construction agreement contained a provision to submit any dispute for arbitration, and there was a joint motion to submit certain
issues to the CIAC for arbitration. 35
Anent petitioner's argument that its previous lawyer was not authorized to submit the case for arbitration, the CA held that what is
required for a dispute to fall under the jurisdiction of the CIAC is for the parties to agree to submit to voluntary arbitration. Since the
parties agreed to submit to voluntary arbitration in the construction contract, the authorization insisted upon by petitioner was a
mere superfluity. 36
The CA further cited National Irrigation Administration v. Court of Appeals 37 (NIA), where this Court ruled that active participation
in the arbitration proceedings serves to estop a party from denying that it had in fact agreed to submit the dispute for arbitration.
Lastly, the CA found no merit in petitioner's prayer to remand the case to the CIAC.
Petitioner's Motion for Reconsideration was denied by the CA. Hence, herein petition raising the following assignment of errors:
A. THE COURT OF APPEALS COMMITTED SERIOUS ERROR WHEN IT RULED THAT THE PETITION SUFFERED FROM
PROCEDURAL INFIRMITIES WHEN PETITIONER HEUNGHWA, IN VIEW OF THE QUESTIONS OF LAW INVOLVED IN THE CASE,
IMMEDIATELY INVOKED ITS AID BY WAY OF PETITION FOR CERTIORARI WITHOUT FIRST FILING A MOTION FOR
RECONSIDERATION OF THE CIAC'S ORDER DATED 22 MARCH 2002. THE COURT OF APPEALS FURTHER ERRED IN RULING
THAT A DENIAL OF A MOTION TO DISMISS (IN REFERENCE TO THE ORDER DATED 22 MARCH 2002), BEING AN
INTERLOCUTORY ORDER, IS NOT THE PROPER SUBJECT OF A PETITION FOR CERTIORARI. aDTS Hc
B. THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN CONFIRMING THE JURISDICTION OF THE CIAC OVER THE
CASE. ITS RELIANCE ON THE NATIONAL IRRIGATION AUTHORITY VS. COURT OF APPEALS ("NIA VS. CA") WAS MISPLACED
AS THE FACTS OF THE INSTANT CASE ARE SERIOUSLY AND SUBSTANTIALLY DIFFERENT FROM THOSE OF NIA VS. CA.
C. THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN DISREGARDING PETITIONER'S REQUEST TO AT LEAST
REMAND THE CASE TO THE CIAC FOR FURTHER RECEPTION OF EVIDENCE IN THE INTEREST OF JUSTICE AND EQUITY AS
PETITIONER COULD NOT HAVE AVAILED OF ITS OPPORTUNITY TO PRESENT ITS SIDE ON ACCOUNT OF ITS JURISDICTIONAL
OBJECTION. 38
The petition is devoid of merit.
The first assignment of error raises two issues: first, whether or not the non-filing of a motion for reconsideration was fatal to the
petition for certiorari filed before the CA; and second, whether or not a petition for certiorari is the proper remedy to assail an order
denying a motion to dismiss as in the case at bar.
As a general rule, a petition for certiorari before a higher court will not prosper unless the inferior court has been given, through a
motion for reconsideration, a chance to correct the errors imputed to it. This rule, though, has certain exceptions: (1) when the issue
raised is purely of law, (2) when public interest is involved, or (3) in case of urgency. As a fourth exception, it has been held that the
filing of a motion for reconsideration before availment of the remedy of certiorari is not a condition sine qua non when the
questions raised are the same as those that have already been squarely argued and exhaustively passed upon by the lower court. 39
The Court agrees with petitioner that the main issue of the petition for certiorari filed before the CA undoubtedly involved a
question of jurisdiction as to which between the RTC and the CIAC had authority to hear the case. Whether the subject matter falls
within the exclusive jurisdiction of a quasi-judicial agency is a question of law. 40 Thus, given the circumstances present in the case
at bar, the non-filing of a motion for reconsideration by petitioner to the CIAC Order should have been recognized as an exception to
the rule.
Anent the second issue, petitioner argues that when its motion to dismiss was denied by the CIAC, the latter acted without
jurisdiction or with grave abuse of discretion amounting to lack or excess of jurisdiction; thus, the same is the proper subject of a
petition for certiorari.
As a general rule, an order denying a motion to dismiss cannot be the subject of a petition for certiorari. However, this Court has
provided exceptions thereto:
Under certain situations, recourse to certiorari or mandamus is considered appropriate, i.e., (a) when the trial court issued
the order without or in excess of jurisdiction; (b) where there is patent grave abuse of discretion by the trial court; or (c)
appeal would not prove to be a speedy and adequate remedy as when appeal would not promptly relieve a defendant from
the injurious effects of the patently mistaken order maintaining the plaintiff's baseless action and compelling the defendant
needlessly to go through a protracted trial and clogging the court dockets by another futile case." 41 (Emphasis supplied)
The term "grave abuse of discretion" in its judicial sense connotes a capricious, despotic, oppressive or whimsical exercise of
judgment as is equivalent to lack of jurisdiction. The word "capricious", usually used in tandem with the term "arbitrary", conveys
the notion of willful and unreasoning action. 42 cHSIAC
The question then is: "Did the denial by the CIAC of the motion to dismiss constitute a patent grave abuse of discretion?"
Records show that the CIAC acted within its jurisdiction and it did not commit patent grave abuse of discretion when it issued the
assailed Order denying petitioner's motion to dismiss. Thus, this Court rules in the negative.
Based on law and jurisprudence, the CIAC has jurisdiction over the present dispute.
The CIAC, in its assailed Order, correctly applied the doctrine laid down in Philrock, Inc. v. Construction Industry Arbitration
Commission 43 (Philrock) where this Court held that what vested in the CIAC original and exclusive jurisdiction over the construction
dispute was the agreement of the parties and not the Court's referral order. The CIAC aptly ruled that the recall of the referral order
by the RTC did not deprive the CIAC of the jurisdiction it had already acquired, 44 thus:
. . . The position of CIAC is anchored on Executive Order No. 1008 (1985) which created CIAC and vested in it "original and
exclusive jurisdiction" over construction disputes in construction projects in the Philippines provided the parties agreed to
submit such disputes to arbitration. The basis of the Court referral is precisely the agreement of the parties in court, and that,
by this agreement as well as by the court referral of the specified issues to arbitration, under Executive Order No. 1008
(1985), the CIAC had in fact acquired original and exclusive jurisdiction over these issues. 45
In the case at bar, the RTC was indecisive of its authority and capacity to hear the case. Respondent first sought redress from the RTC
for its claim against petitioner. Thereafter, upon motion by both counsels for petitioner and respondent, the RTC allowed the
referral of five specific issues to the CIAC. However, the RTC later recalled the case from the CIAC because of the alleged l ack of
authority of the counsel for petitioner to submit the case for arbitration. The RTC recalled the case even if it already admitted its lack
of expertise to deal with the intricacies of the construction business. 46 cCSHET
Afterwards, the RTC issued a Resolution recommending that respondent file a motion to dismiss without prejudice to the
counterclaim of petitioner, so that it could pursue arbitration proceedings under the CIAC. 47 Respondent complied with the
recommendation of the RTC and filed a motion to dismiss which was granted by the said court. 48 Later, however, the RTC again
asserted jurisdiction over the dispute because it apparently made a mistake in granting respondent's motion to dismiss without
conducting any hearing on the motion. 49
On the other hand, the CIAC's assertion of its jurisdiction over the dispute was consistent from the moment the RTC allowed the
referral of specific issues to it.
Executive Order 1008 50 grants to the CIAC original and exclusive jurisdiction over disputes arising from, or connected with,
contracts entered into by parties involved in construction in the Philippines. In the case at the bar, it is undeniable that the
controversy involves a construction dispute as can be seen from the issues referred to the CIAC, to wit:
1.Manpower and equipment standby time;
2.Unrecouped mobilization expenses;
3.Retention;
4.Discrepancy of billings; and
5.Price escalation for fuel and oil usage. 51
xxx xxx xxx
The Court notes that the Subcontract Agreement 52 between the parties provides an arbitration clause, to wit:
Article 7
Arbitration
7.Any controversy or claim between the Contractor and the Subcontractor arising out of or related to this Subcontract, or the
breach thereof, shall be settled by arbitration, which shall be conducted in the same manner and under the same
procedure as provided in the Prime Contract with Respect to claims between the Owner and the Contractor,
except that a decision by the Owner or Consultant shall not be a condition precedent to arbitration. If the Prime
Contract does not provide for arbitration or fails to specify the manner and procedure for arbitration, it shall be
conducted in accordance with the law of the Philippines currently in effect unless the Parties mutually agree
otherwise. 53 (Emphasis supplied) SaIACT
However, petitioner insists that the General Conditions which form part of the Prime Contract provide for a specific venue for
arbitration, to wit:
5.19.3.Any dispute shall be settled under the Rules of Conciliation and Arbitration of the International Chamber of Commerce
by one or more arbitrators appointed under such Rules. 54
The claim of petitioner is not plausible.
In National Irrigation Administration v. Court of Appeals 55 this Court recognized the new procedure in the arbitration of disputes
before the CIAC, in this wise:
It is undisputed that the contracts between HYDRO and NIA contained an arbitration clause wherein they agreed to submit to
arbitration any dispute between them that may arise before or after the termination of the agreement. Consequently, the
claim of HYDRO having arisen from the contract is arbitrable. NIA's reliance with the ruling on the case of Tesco Services
Incorporated v. Vera, is misplaced.
The 1988 CIAC Rules of Procedure which were applied by this Court in Tesco case had been duly amended by CIAC
Resolutions No. 2-91 and 3-93, Section 1 of Article III of which reads as follows:
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.
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. 56 (Emphasis and underscoring supplied)
Based on the foregoing, there are two acts which may vest the CIAC with jurisdiction over a construction dispute. One is the
presence of an arbitration clause in a construction contract, and the other is the agreement by the parties to submit the dispute to
the CIAC.
The first act is applicable to the case at bar. The bare fact that the parties incorporated an arbitration clause in their contract is
sufficient to vest the CIAC with jurisdiction over any construction controversy or claim between the parties. The rule is explicit that
the CIAC has jurisdiction notwithstanding any reference made to another arbitral body.
It is well-settled that jurisdiction is conferred by law and cannot be waived by agreement or acts of the parties. Thus, the contention
of petitioner that it never authorized its lawyer to submit the case for arbitration must likewise fail. Petitioner argues that
notwithstanding the presence of an arbitration clause, there must be a subsequent consent by the parties to submit the case for
arbitration. To stress, the CIAC was already vested with jurisdiction the moment both parties agreed to incorporate an arbitration
clause in the sub-contract agreement. Thus, a subsequent consent by the parties would be superfluous and unnecessary. AEDHST
It must be noted however that the reliance of the CIAC in it's assailed Order on Philrock 57 is inaccurate. In Philrock, the Court ruled
that the CIAC had jurisdiction over the case because of the agreement of the parties to refer the case to arbitration. In the case at
bar, the agreement to refer specific issues to the CIAC is disputed by petitioner on the ground that such agreement was entered into
by its counsel who was not authorized to do so. In addition, in Philrock, the petitioner therein had actively participated in the
arbitration proceedings, while in the case at bar there where only two instances wherein petitioner participated, to wit: 1) the
referral of five specific issues to the CIAC; and 2) the subsequent manifestation that additional matters be referred to the CIAC.
The foregoing notwithstanding, CIAC has jurisdiction over the construction dispute because of the mere presence of the arbitration
clause in the subcontract agreement.
Thus, the CIAC did not commit any patent grave abuse of discretion, nor did it act without jurisdiction when it issued the assailed
Order denying petitioner's motion to dismiss. Accordingly, there is no compelling reason for this Court to deviate from the rule that
a denial of a motion to dismiss, absent a showing of lack of jurisdiction or grave abuse of discretion amounting to lack of or excess
jurisdiction, being an interlocutory order, is not the proper subject of a petition for certiorari.
Anent the second assigned error, the Court notes that the reliance of the CA on NIA is inaccurate. In NIA, 58 this Court observed:
Moreover, it is undeniable that NIA agreed to submit the dispute for arbitration to the CIAC. NIA through its counsel actively
participated in the arbitration proceedings by filing an answer with counterclaim, as well as its compliance wherein it
nominated arbitrators to the proposed panel, participating in the deliberations on, and the formulation of the Terms of
Reference of the arbitration proceeding, and examining the documents submitted by HYDRO after NIA asked for originals of
the said documents." 59
In the case at bar, the only participation that can be attributed to petitioner is the joint referral of specific issues to the CIAC and the
manifestation praying that additional matters be referred to the CIAC. Both acts, however, have been disputed by petitioner
because said acts were performed by their lawyer who was not authorized to submit the case for arbitration. And even if these were
duly authorized, this would still not change the correct finding of the CA that the CIAC had jurisdiction over the dispute because, as
has been earlier stressed, the arbitration clause in the subcontract agreement ipso facto vested the CIAC with jurisdiction.
In passing, even the RTC in its Resolution recognized the authority of the CIAC to hear the case, to wit:
Courts cannot and will not resolve a controversy involving a question which is within the jurisdiction of an administrative
tribunal, especially where the question demands the exercise of sound administrative discretion requiring the special
knowledge, experience and services of the administrative tribunal to determine technical and intricate matters of fact. And
undoubtedly in this case, the CIAC it cannot be denied, is that administrative tribunal. 60 (Emphasis supplied)
It puzzles this Court why petitioner would insist that the RTC should hear the case when the CIAC has the required skill and expertise
in addressing construction disputes. Records will bear out the fact that petitioner refused to and did not participate in the CIAC
proceedings. In its defense, petitioner cited jurisprudence to the effect that active participation before a quasi -judicial body would
be tantamount to an invocation of the latter bodies' jurisdiction and a willingness to abide by the resolution of the case. 61 Pursuant
to such doctrine, petitioner argued that had it participated in the CIAC proceedings, it would have been barred from impugning the
jurisdiction of the CIAC. EcIaTA
Petitioner cannot presume that it would have been estopped from questioning the jurisdiction of the CIAC had it participated in the
proceedings. In fact, estoppel is a matter for the court to consider. The doctrine of laches or of stale demands is based upon grounds
of public policy which requires, for the peace of society, the discouragement of stale claims and, unlike the statute of limitations, is
not a mere question of time but is principally a question of the inequity or unfairness of permitting a right or claim to be enforced or
asserted. 62 The Court always looks into the attendant circumstances of the case so as not to subvert public policy. 63 Given that
petitioner questioned the jurisdiction of the CIAC from the beginning, it was not remiss in enforcing its right. Hence, petitioner's
claim that it would have been estopped is premature.
The Court finds the last assigned error to be without merit.
It is well to note that in its petition for certiorari 64 filed with the CA on April 9, 2002, petitioner prayed for the issuance of a
temporary restraining order and a writ of preliminary injunction to enjoin the CIAC from hearing the case. On September 27, 2002,
the CIAC promulgated its decision awarding Php31,119,465.81 to respondent. It is unfortunate for petitioner that the CA did not
timely act on its petition. Records show that the temporary restraining order 65 was issued only on October 15, 2002 and a writ of
preliminary injunction 66 was granted on December 11, 2002, long after the CIAC had concluded its proceedings. The only effect of
the writ was to enjoin temporarily the enforcement of the award of the CIAC.
The Court notes that had the CA performed its duty promptly, then this present petition could have been avoided as the CIAC rules
allow for the reopening of hearings, to wit:
SEC. 13.14Reopening of hearing. The hearing may be reopened by the Arbitral Tribunal on their own motion or upon the
request of any party, upon good cause shown, at any time before the award is rendered. When hearings are thus
reopened, the effective date for the closing of the hearing shall be the date of closing of the reopened hearing. (Emphasis
supplied)

But because of the belated action of the CA, the CIAC had to proceed with the hearing notwithstanding the non-participation of
petitioner.
Under the CIAC rules, even without the participation of petitioner in the proceedings, the CIAC was still required to proceed with the
hearing of the construction dispute. Section 4.2 of the CIAC rules provides:
SEC. 4.2Failure or refusal to arbitrate. Where the jurisdiction of CIAC is properly invoked by the filing of a Request for
Arbitration in accordance with these Rules, the failure despite due notice which amounts to a refusal of the Respondent to
arbitrate, shall not stay the proceedings notwithstanding the absence or lack of participation of the Respondent. In such
case, CIAC shall appoint the arbitrator/s in accordance with these Rules. Arbitration proceedings shall continue, and the
award shall be made after receiving the evidence of the Claimant. (Emphasis and underscoring supplied)
This Court finds that the CIAC simply followed its rules when it proceeded with the hearing of the dispute notwithstanding that
petitioner refused to participate therein.
To reiterate, the proceedings before the CIAC were valid, for the same had been conducted within its authority and jurisdiction and
in accordance with the rules of procedure provided by Section 4.2 of the CIAC Rules. aS cITE
The ruling of the Supreme Court in Lastimoso v. Asayo 67 is instructive:
xxx xxx xxx
In addition, it is also understandable why respondent immediately resorted to the remedy of certiorari instead of pursuing
his motion for reconsideration of the PNP Chief's decision as an appeal before the National Appellate Board (NAB). It was
quite easy to get confused as to which body had jurisdiction over his case. The complaint filed against respondent could
fall under both Sections 41 and 42 of Republic Act (R.A.) No. 6975 or the Department of Interior and Local Government Act
of 1990. Section 41 states that citizens' complaints should be brought before the People's Law Enforcement Board (PLEB),
while Section 42 states that it is the PNP Chief who has authority to immediately remove or dismiss a PNP member who is
guilty of conduct unbecoming of a police officer.
It was only in Quiambao v. Court of Appeals, promulgated in 2005 or after respondent had already filed the petition for
certiorari with the trial court, when the Court resolved the issue of which body has jurisdiction over cases that fall under
both Sections 41 and 42 of R.A. No. 6975. . . .
With the foregoing peculiar circumstances in this case, respondent should not be deprived of the opportunity to fully
ventilate his arguments against the factual findings of the PNP Chief. . . .
xxx xxx xxx
Thus, the opportunity to pursue an appeal before the NAB should be deemed available to respondent in the higher interest
of substantial justice. 68 (Emphasis supplied)
In Lastimoso, this Court allowed respondent to appeal his case before the proper agency because of the confusion as to which
agency had jurisdiction over the case. In the case at bar, law and supporting jurisprudence are clear and leave no room for
interpretation that the CIAC has jurisdiction over the present controversy.
The proceedings cannot then be voided merely because of the non-participation of petitioner. Section 4.2 of the CIAC Rules is clear
and it leaves no room for interpretation. Therefore, petitioner's prayer that the case be remanded to CIAC in order that it may be
given an opportunity to present evidence is untenable. Petitioner had its chance and lost it, more importantly so, by its own choice.
This Court will not afford a relief that is apparently inconsistent with the law. AHcDEI
WHEREFORE, the petition is denied for lack of merit. The August 20, 2004 Decision and August 1, 2005 Resolution of the Court of
Appeals in CA-G.R. SP Nos. 70001 and 71621 are AFFIRMED.
Double costs against petitioner.
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.
[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.
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 2005 1 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 Reconsideration 2 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 Clarification 3 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 jurisprudence 5 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.
161957 10 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 19.1 11 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.
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. HSTAcI
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. HSCAIT
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 it to arbitration. They requi re 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. Climax-Arimco 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. xxx xxx xxx
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 Law 24 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 Appeals 28 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 BF Corporation is not availing in the present petition. The disquisition in BF 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 Civi l 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 Appeals 37 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 Florida 42 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. . . . 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 . . . of another to arbitrate . . . , [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 . . . . 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 tri al 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 enforceabili ty 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.
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. TEacSA
SO ORDERED.








[G.R. No. 118349. May 23, 1997.] PHILIPPINE NATIONAL CONSTRUCTION CORPORATION, petitioner, vs. COURT OF APPEALS and
STRONGHOLD INSURANCE CO., INC.,respondents.
PHILIPPINE NATIONAL CONSTRUCTION CORPORATION (formerly Construction Development Corporation of the Philippines) filed on
18 March 1985 an action for a sum of money with damages against Ronaldo L. Calupitan and Stronghold Insurance Co., Inc., before
the Regional Trial Court of Pasig. cda
On 4 January 1991 judgment was rendered ordering Calupitan and his surety, respondent Stronghold, to pay petitioner jointly and
severally (a) P317,500.00 representing the downpayment pursuant to the Subcontract Agreement of 23 December 1982; (b)
P500,000.00 as liquidated damages; and, (c) P50,000.00 as attorney's fees and expenses of litigation, all the foregoing amounts to
earn interest at twelve percent (12%) per annum from the filing of the case until fully paid. As to the cross claim, Calupitan was
ordered to pay Stronghold any and all amounts paid by the latter to petitioner by reason of the judgment as well as P50,000.00 for
attorney's fees and litigation expenses, said amounts likewise to earn twelve percent (12%) interest per annum from the date of
payment by Stronghold to petitioner until fully paid. 1
On 4 February 1991 Stronghold filed a notice of appeal, approved by the trial court the following day, 5 February 1991, with an order
to elevate the records to the Court of Appeals.
On 17 June 1994 petitioner moved for the dismissal of the appeal on the ground that despite the lapse of more than three (3) years
respondent Stronghold had not taken steps to prosecute its appeal. Petitioner relied heavily on our rulings in Estella v. Court of
Appeals 2 that gross inaction for more than one (1) year amounts to failure to prosecute, and in Fagtanac v. Court of Appeals 3 that
it is the duty of the appellant to prosecute his appeal with reasonable diligence.
Stronghold opposed the motion contending that it had not yet received notices from respondent court to pay the docket fee and
other charges and thereafter to file its brief. It claimed good faith in waiting for said notices.
On 15 August 1994 respondent court denied the motion on the rationalization that
. . . the so-called failure to prosecute is not due to the fault of appellant considering that the omission to transmit the records
of the case to this Court is not the responsibility of appellant. Rather, it is the duty of the Branch Clerk of Court (Sec. 1, Rule 4
of the Internal Rules of this Court) to elevate the entire record from approval of the notice of appeal.
Thus, respondent court directed the Branch Clerk of Court to transmit the entire records of the case within five (5) days from receipt
of its resolution. 4 On 4 November 1994 it denied reconsideration. 5
Petitioner now challenges the Resolutions of 15 August 1994 and 4 November 1994 contending that they were issued without or in
excess of jurisdiction and/or with grave abuse of discretion. It stresses that the appeal should have been dismissed by respondent
court based on the same cases it previously invoked.
The arguments of petitioner are well taken. It strains credulity that respondent court should still look the other way. In relying solely
on Sec. 1, Rule 4, of its Internal Rules, respondent court ignored settled jurisprudence timely brought to its attention. Our rulings
take precedence over the Internal Rules of respondent appellate court.
In Arcega v. Court of Appeals 6 the petitioners disputed the dismissal of their appeal based practically on the same grounds invoked
in the present case. Therein they asserted that they had not yet been notified that the records of the case were already with the
appellate court and that they had to pay the required docket and other fees. Furthermore, they claimed that the elevation of the
records of the case was beyond their means and control.
But we were not impressed
. . . while it is the duty of the clerk of the lower court to transmit the records of an appealed case to the appellate court, it is
also the duty of the appellant to make the clerk of court act, and the failure of the clerk to perform his legal duty is no
justification for the appellant's failure to perform his, and he cannot justify his failure by saying that the fault was that of the
clerk of the lower court (emphasis supplied). 7
We also quoted therein the disquisition in the earlier case of Fagtanac
. . . A rule long familiar to practitioners in this jurisdiction is that it is the duty of the appellant to prosecute his appeal with
reasonable diligence. He cannot simply fold his arms and say that it is the duty of the Clerk of Court of First Instance under
the provisions of Section 11, Rule 41 of the Rules of Court, to transmit the record on appeal to the appellate court. It is
appellant's duty to make the Clerk act and, if necessary, procure a court order to compel him to act. He cannot idly sit by and
wait till this is done. He cannot afterwards wash his hands and say that delay in the transmittal of the record on appeal was
not his fault. For, indeed, this duty imposed upon him was precisely to spur on the slothful (emphasis supplied). 8
The Court was impelled in Fagtanac to make a policy statement that failure to prosecute will not be countenanced on the
consideration that delays in litigation have always been a bane in our judicial system and there is a growing tendency of defeated
suitors and their lawyers to disregard their duties under the Rules of Court in the hope that they can stall the final day of reckoning. prcd
Since it appeared that the petitioners in Arcega did nothing to effect or facilitate the transmittal of the records to the appellate court
for almost two (2) years from the order to elevate the records, we sustained the dismissal of their appeal.
Estella v. Court of Appeals 9 dwells on the same indolence of an appellant
We cannot subscribe to petitioners' gratuitous statement that "as the rule now exists, the appellant is justified if he merely
'folds his hands' after the trial judge has ordered that the records of the case be transmitted to the appellate court."
Conceding to the point that it is the clerk of court who is primarily responsible for seeing to it that the records of appealed
cases are properly sent to the appellate court without delay (and having failed to do so subjects him to administrative
liability), it behooves the litigants to be more vigilant of their rights. They should take it upon themselves to call the attention
of the trial court as to any delay in action over their cases.
The rule that it is the duty of the appellant to prosecute his appeal with reasonable diligence is still a sound rule. He cannot
simply "fold his hands" and say that it is the duty of the clerk of court to have his case promptly submitted to the appellate
court for the disposition of his appeal.
This absence of an awareness or regard on the part of the defeated litigant to personally see to it that the needed records
are forthwith sent to the appellate court is one major cause of delays in litigations . . . (emphasis supplied). 10
Likewise, we sustained therein the dismissal of the appeal for failure to prosecute covering a period of only one (1) year, one (1)
month and twenty-two (22) days, as compared to Stronghold's appeal which has remained dormant for three (3) years and four (4)
months. With more reason therefore that the appeal in the present case should have been dismissed.
Rule 4 of the Revised Internal Rules of the Court of Appeals outlines the procedure in appealed civil cases. As aforementioned, Sec. 1
imposes the duty on the Clerk of the Regional Trial Court to transmit to the Court of Appeals the entire original records and other
documents. The Civil Cases Section of its Judicial Records Division, upon receipt of the records, is then mandated under Sec. 2 to
immediately, inter alia, issue the proper notice to the appellant to pay the docketing and other legal fees. Therefore, rather than
having waited for the receipt of the notices to pay the docket fee and other charges and thereafter to file its brief, Stronghold should
have ascertained whether the records of the case had already been transmitted to respondent court; otherwise, it should have
caused the elevation thereof. We take a dim view of its complacent attitude. Ex nihilo nihil fit. 11

It is manifest that respondent court gravely abused its discretion in denying petitioner's motion to dismiss the appeal of respondent
Stronghold and, corollarily, in denying reconsideration thereof.
WHEREFORE, the petition is GRANTED. The Resolutions of respondent Court of Appeals of 15 August 1994 denying petitioner's
motion to dismiss the appeal and of 4 November 1994 denying reconsideration thereof are SET ASIDE. Respondent court is directed
to DISMISS the appeal of respondent Stronghold Insurance Co., Inc., for failure to prosecute for an unreasonable length of time. cdt
SO ORDERED.













[G.R. No. 167022. August 31, 2007.]LICOMCEN INCORPORATED, petitioner, vs. FOUNDATION SPECIALISTS, INC. respondent.
[G.R. No. 169678. August 31, 2007.]FOUNDATION SPECIALISTS, INC., petitioner, vs. LICOMCEN INCORPORATED AND COURT OF
APPEALS, respondents.
For review in these consolidated petitions is the November 23, 2004 Decision 1 of the Court of Appeals (CA) in CA-G.R. SP. No. 78218,
as well as the Resolutions dated February 4, 2005 2 and September 13, 2005, 3 denying the motions for its reconsideration. DIcTEC
Liberty Commercial Center, Inc. (LICOMCEN) is a corporation engaged in the business of operating shopping malls. In March 1997,
the City Government of Legaspi leased its lot in the Central District of Legaspi to LICOMCEN. The Lease Contract was based on the
Build-Operate-Transfer Scheme under which LICOMCEN will finance, develop and construct the LCC City Mall (CITIMALL). LICOMCEN
engaged E.S. De Castro and Associates (ESCA) as its engineering consultant for the project.
On September 1, 1997, LICOMCEN and Foundation Specialist, Inc. (FSI) signed a Construction Agreement for the bored pile
foundation of CITIMALL. 4 Forming part of the agreement were the Bid Documents and the General Conditions of Contract (GCC) 5
prepared by ESCA. A salient provision of the GCC is the authority granted the engineering consultant to suspend the work, wholly or
partly. LICOMCEN was also given the right to suspend the work or terminate the contract. Among other caveats, GC-05 provided that
questions arising out or in connection with the contract or its breach should be litigated in the courts of Legaspi, except where
otherwise stated, or when such question is submitted for settlement through arbitration. GC-61 also provided that disputes arising
out of the execution of the work should first be submitted to LICOMCEN for resolution, whose deci sion shall be final and binding, if
not contested within thirty (30) days from receipt. Otherwise, the dispute shall be submitted to the Construction Industry Arbitration
Commission (CIAC) for arbitration.
Upon receipt of the notice to proceed, FSI commenced work and undertook to complete it within ninety (90) days, all in accordance
with the approved drawing, plans, and specifications.
In the course of the construction, LICOMCEN revised the design for the CITIMALL involving changes in the bored piles and substantial
reduction in number and length of the piles. ESCA, thus, informed FSI of the major revision on December 16, 1997 6 and ordered the
non-delivery of the steel bars, pending approval of the new design. FSI, however, responded that the steel bars had already been
loaded and shipped out of Manila. ESCA then suggested the delivery of 50% of the steel bars to the jobsite and the return of the
other 50% to Manila, where storage and security were better. 7
On January 15, 1998, LICOMCEN sent another letter to FSI ordering all the construction activities suspended, because Albay
Accredited Constructions Association (AACA) had contested the award of the Contract of Lease to LICOMCEN and filed criminal
complaints with the Office of the Ombudsman for violation of the Anti-Graft and Corrupt Practices Act against LICOMCEN and the
City Government of Legaspi. Thus, pending a clear resolution of the case, LICOMCEN decided to suspend all construction activi ties. It
also requested FSI not to unload the steel bars. 8 AEHCDa
On January 17, 1998, the steel bars for the CITIMALL arrived at the Legaspi port, and despite LICOMCEN's previous request, these
were unloaded and delivered to the jobsite and some to Tuanzon compound, 9 FSI's batching site. Then, on January 19, 1998,
LICOMCEN reiterated its decision to suspend construction, and ordered demobilization of the materials and equipment for the
project. 10 Finally, on February 17, 1998, LICOMCEN indefinitely suspended the project, due to the pending cases in the Ombudsman.
FSI demanded payment for its work accomplishments, material costs, and standby off equipment, as well as other expenses
amounting to P22,667,026.97, 12 but LICOMCEN took no heed.
On October 12, 1998, the Ombudsman dismissed the cases filed against the City Government and LICOMCEN. The dismissal was
affirmed by this Court 13 and attained finality on September 20, 2000. 14 This notwithstanding, LICOMCEN did not lift the suspension
of the construction that it previously ordered. It then hired Designtech Consultants and Management System (Designtech) as its new
project consultant, which, in turn, invited contractors, including FSI, to bid for the bored piling works for CITIMALL. 15
FSI reiterated its demand for payment from LICOMCEN, but the latter failed and refused to pay, prompting FSI to file a petiti on for
arbitration with the CIAC, docketed as CIAC Case No. 37-2002.
LICOMCEN denied the claim of FSI, arguing that it lacks factual and legal basis. It also assailed the jurisdiction of the CIAC to take
cognizance of the suit, claiming that jurisdiction over the controversy was vested in the regular courts, and that arbitration under the
GC-61 of the GCC may only be resorted to if the dispute concerns the execution of works, not if it concerns breach of contract.
During the preliminary conference, the parties agreed to submit the controversy to the Arbitral Tribunal and signed the Terms of
Reference (TOR). 16 But on February 4, 2003, LICOMCEN, through a collaborating counsel, filed an Ex Abundati Ad Cautela Omnibus
Motion. 17 It reiterated the claim that the arbitration clause in the contract does not cover claims for payment of unrealized profits
and damages, and FSI did not comply with the condition precedent for the filing of the suit, thus, the CIAC cannot take cogni zance of
the suit. LICOMCEN further averred that FSI has no cause of action against it because the claim for material costs has no factual basis
and because the contract is clear that FSI cannot claim damages beyond the actual work accomplishments, but only reasonable
expenses for the suspension or termination of the contract. LICOMCEN also alleged that the expenses incurred by FSI, if there be
any, cannot be considered reasonable, because there was no showing that the materials were ordered and actually delivered to the
job site. Finally, it prayed for the suspension of the proceedings, pending the resolution of its omnibus motion. HaAISC
On February 20, 2003, the CIAC issued an Order 18 denying LICOMCEN's omnibus motion on the ground that it runs counter to the
stipulations in the TOR. Trial, thereafter, ensued. FSI and LICOMCEN presented witnesses in support of their respective claims.
After due proceedings, the CIAC rendered a Decision 19 in favor of FSI, the dispositive portion of which reads:
WHEREFORE, premises considered, judgment is hereby rendered in favor of Claimant FOUNDATION SPECIALIST, INC. and
against Respondent LICOMCEN, INCORPORATED, ordering the latter to pay to the former the following amounts:
1.P14,643,638.51 representing material costs at site;
2.P2,957,989.94 representing payment for equipment and labor standby costs;
3.P5,120,000.00 representing unrealized profit; and
4.P1,264,404.12 representing the unpaid balance of FSI's billing.
FURTHER, the said Respondent is ordered to solely and exclusively bear the entire cost of arbitration proceedings in the total
amount of P474,407.95 as indicated in the TOR, and to reimburse the herein Claimant of any amount thereof which it had
advanced and paid pursuant to TOR.
All the above-awarded amounts shall bear interest of 6% per annum from the date of the formal demand on February 3,
1998 (Par. 10, Admitted Facts, TOR) until the date this Decision/Award becomes final and executory and 12% per annum
from the date this Decision/Award becomes final and executory until fully paid. SO ORDERED. 20
LICOMCEN elevated the CIAC Decision to the CA. It faulted the CIAC for taking cognizance of the case, arguing that it has no
jurisdiction over the suit. It also assailed the award and the ruling that the contract had been terminated, allegedly for lack of factual
and legal basis.
On November 23, 2004, the CA rendered the assailed Decision, modifying the CIAC Decision, viz.:
WHEREFORE, the foregoing considered, the assailed Decision is hereby MODIFIED to the extent that paragraph 1 of the
dispositive portion is amended and accordingly, petitioner is ordered to pay only the amount of P5,694,939.865 representing
the material costs at site; and paragraphs 2 and 3 on equipment and labor standby costs and unrealized profit of the same
dispositive portion are deleted. The rest is AFFIRMED in all respects. No costs. AICEDc
SO ORDERED. 21
Both LICOMCEN and FSI filed motions for partial reconsideration, but these were denied by the CA in its Resolutions dated
February 4, 2005 22 and September 13, 2005. 23
LICOMCEN and FSI reacted with the instant petitions. Considering that the cases involve the same parties, issues and assailed
decision, this Court ordered the consolidation of G.R. No. 167022 and G.R. No. 169678 in its Resolution dated November 20, 2006.
LICOMCEN raised the following issues:
1.WHETHER OR NOT THE PROJECT WAS MERELY SUSPENDED AND NOT TERMINATED.
2.WHETHER OR NOT THE TRIBUNAL HAD JURISDICTION OVER THE DISPUTE.
3.WHETHER OR NOT FSI IS ENTITLED TO CLAIM ANY AMOUNT OF DAMAGES.
4.WHETHER OR NOT LICOMCEN IS THE PARTY AT FAULT. 24
FSI, on the other hand, interposes the following:
1.THE COURT OF APPEALS ERRED IN NOT AWARDING TO PETITIONER THE FULL AMOUNT OF MATERIAL COSTS AT THE SITE. EDHCSI
2.THE COURT OF APPEALS ERRED IN DENYING PETITIONER'S CLAIM FOR EQUIPMENT AND LABOR STANDBY COSTS.
3.THE COURT OF APPEALS ERRED IN DENYING PETITIONER'S CLAIM FOR UNREALIZED PROFIT.
4.THE COURT OF APPEALS ERRED IN RENDERING A MERE MINUTE RESOLUTION IN RESOLVING PETITIONER'S MOTION FOR
PARTIAL RECONSIDERATION. 25
First, we resolve the issue of the CIAC's jurisdiction.
LICOMCEN insists that the CIAC had no jurisdiction over the suit. Citing GC-05 and GC-61 of the GCC, it posits that jurisdiction over
the dispute rests with the regular courts of Legaspi City.
The argument is misplaced.
The power and authority of a court to hear, try, and decide a case is defined as jurisdiction. Elementary is the distinction between
jurisdiction over the subject matter and jurisdiction over the person. The former is conferred by the Constitution or by law, while the
latter is acquired by virtue of the party's voluntary submission to the authority of the court through the exercise of its coercive
process. 26
Section 4 of Executive Order (E.O.) No. 1008, or the Construction Industry Arbitration Law, provides:
SECTION 4. Jurisdiction. The CIAC shall have original and exclusive jurisdiction over disputes arising from, or connected
with, contracts entered into by parties involved in construction in the Philippines, whether the dispute arises before or after
the completion of the contract, or after the abandonment or breach thereof. These disputes may involve government or
private contracts. For the Board to acquire jurisdiction, the parties to a dispute must agree to submit the same to voluntary
arbitration. ACEIac
The jurisdiction of the CIAC may include but is not limited to violation of specifications for materials and workmanship;
violation of the terms of agreement; interpretation and/or application of contractual provisions; amount of damages and
penalties; commencement time and delays; maintenance and defects; payment default of employer or contractor and
changes in contract cost.
Excluded from the coverage of this law are disputes arising from employer-employee relationships which shall continue to be
covered by the Labor Code of the Philippines. (Emphasis supplied)
Corollarily, Section 1, Article III of the Rules of Procedure Governing Construction Arbitration provides that recourse to the CIAC
may be availed of whenever a contract contains a clause for the submission of a future controversy to arbitration, thus:
SECTION 1. Submission to CIAC Jurisdiction. An arbitration clause in a construction contract or a submission to arbitration
of a construction dispute shall be deemed an agreement to submit an existing or future controversy to CIAC jurisdiction,
notwithstanding the reference to a different arbitration institution or arbitral body in such contract or submission. When a
contract contains a clause for the submission of a future controversy to arbitration, it is not necessary for the parties to enter
into a submission agreement before the claimant may invoke the jurisdiction of CIAC.
Clearly then, the CIAC has original and exclusive jurisdiction over disputes arising from or connected with construction contracts
entered into by parties that have agreed to submit their dispute to voluntary arbitration. 27
The GCC signed by LICOMCEN and FSI had the following arbitral clause:
GC-61 DISPUTES AND ARBITRATION
Should any dispute of any kind arise between the LICOMCEN, INCORPORATED and the Contractor or the Engineer and the
Contractor in connection with, or arising out of the execution of the Works, such dispute shall first be referred to and settled
by the LICOMCEN, INCORPORATED who shall within a period of thirty (30) days after being formally requested by either party
to resolve the dispute, issue a written decision to the Engineer and Contractor.
Such decision shall be final and binding upon the parties and the Contractor shall proceed with the execution of the Works
with due diligence notwithstanding any Contractor's objection to the decision of the Engineer. If within a period of thirty (30)
days from receipt of the LICOMCEN, INCORPORATED's decision on the dispute, either party does not officially give notice to
contest such decision through arbitration, the said decision shall remain final and binding. However, should any party within
thirty (30) days from receipt of the LICOMCEN, INCORPORATED's decision contest said decision, the dispute shall be
submitted for arbitration under the Construction Industry Arbitration Law, Executive Order 1008. The arbitrators appointed
under said rules and regulations shall have full power to open up, revise and review any decision, opinion, direction,
certificate or valuation of the LICOMCEN, INCORPORATED. Neither party shall be limited to the evidence or arguments put
before the LICOMCEN, INCORPORATED for the purpose of obtaining his said decision. No decision given by the LICOMCEN,
INCORPORATED shall disqualify him from being called as a witness and giving evidence in the arbitration. It is understood
that the obligations of the LICOMCEN, INCORPORATED, the Engineer and the Contractor shall not be altered by reason of the
arbitration being conducted during the progress of the Works. 28 ECDHI c
LICOMCEN theorizes that this arbitration clause cannot vest jurisdiction in the CIAC, because it covers only disputes arising out of or
in connection with the execution of works, whether permanent or temporary. It argues that since the claim of FSI was not connected
to or did not arise out of the execution of the works as contemplated in GC-61, but is based on alleged breach of contract, under GC-
05 29 of the GCC, the dispute can only be taken cognizance of by the regular courts. Furthermore, FSI failed to comply with the
condition precedent for arbitration. Thus, according to LICOMCEN, the CIAC erred in assuming jurisdiction over the case.
Contrary to what LICOMCEN wants to portray, the CIAC validly acquired jurisdiction over the dispute. Firstly, LICOMCEN submitted
itself to the jurisdiction of the CIAC when its president Antonio S. Tan signed the TOR 30 during the preliminary conference. The TOR
states:
V.MODE OF ARBITRATION
The parties agree that their differences be settled by an Arbitral Tribunal who were appointed in accordance with the
provision of Article V, Section 2 of the CIAC Rules of Procedure Governing Construction Arbitration, as follows:
SALVADOR C. CEGUERA
Chairman
FELISBERTO G.L. REYES
Member
SALVADOR P. CASTRO, JR.
Member
The case shall be decided in accordance with the Contract of the parties and the Construction Industry Arbitration Law
(Executive Order No. 1008) and on the basis of evidence submitted, applicable laws, and industry practices where applicable
under the law. 31 DEICHc
Secondly, we agree with the CA that the suit arose from the execution of works defined in the contract. As it aptly ratiocinated:
[T]he dispute between [FSI] and [LICOMCEN] arose out of or in connection with the execution of works. [LICOMCEN] has
gone quite far in interpreting "disputes arising out of or in connection with the execution of work" as separate and distinct
from "disputes arising out of or in connection with the contract" citing the various provisions of the Construction Agreement
and Bid Documents to preclude CIAC from taking cognizance of the case. To the mind of this Court, such differentiation is
immaterial. Article 1374 of the Civil Code on the interpretation of contracts ordains that "the various stipulations of a
contract shall be interpreted together, attributing to the doubtful ones that sense which may result from all of them taken
jointly." Essentially, while we agree that [FSI's] money claims against [LICOMCEN] arose out of or in connection with the
contract, the same necessarily arose from the work it accomplished or sought to accomplish pursuant thereto. Thus, said
monetary claims can be categorized as a dispute arising out of or in connection with the execution of work. 32
Thirdly, FSI complied with the condition precedent provided in GC-61. Record shows that FSI referred the claim to ESCA on February
3, 1998, and then to LICOMCEN on March 3, 1998, 33 but it was disallowed on March 24, 1998. 34 Then, on April 15, 1998, FSI
rejected the evaluation of the billings made by ESCA and LICOMCEN and further informed the latter of its intention to turn over the
project. 35 FSI exerted efforts to have the claim settled amicably, but no settlement was arrived at. Hence, on March 14, 2001, FSI
through counsel made a final demand to pay. 36 LICOMCEN, however, adamantly refused to pay, prompting FSI to file suit with the
CIAC. Clearly, FSI substantially complied with the condition precedent laid down in GC-61. Finally, the arbitral clause in the
agreement, considering that the requisites for its application are present, is a commitment by the parties to submit to arbitration
the disputes covered therein. Because that clause is binding, they are expected to abide by it in good faith. 37
Just as meaningful, the issue of jurisdiction was rendered moot by LICOMCEN's active participation in the proceedings before the
CIAC. It is true that LICOMCEN initially assailed the jurisdiction of the CIAC. But when the CIAC asserted its jurisdiction in its February
20, 2003 Order, 38 LICOMCEN did not seek relief from the CIAC ruling. Instead, LICOMCEN took part in the discussion on the merits of
the case, even going to the extent of seeking affirmative relief. The active involvement of a party in the proceedings is tantamount to
an invocation of, or at least an acquiescence to, the court's jurisdiction. Such participation indicates a willingness to abide by the
resolution of the case, and will bar said party from later on impugning the court or body's jurisdiction. 39 The Court will not
countenance the effort of any party to subvert or defeat the objective of voluntary arbitration for its own private motives. 40 After
submitting itself to arbitration proceedings and actively participating therein, LICOMCEN is estopped from assailing the juri sdiction
of the CIAC, merely because the latter rendered an adverse decision. IATHaS
Having resolved the issue of jurisdiction, we proceed to the merits of the case.
LICOMCEN faults the CIAC and the CA for ruling that the contract had been terminated, insisting that it was merely indefinitely
suspended. To bolster its position, LICOMCEN cited GC-41 of the GCC which reads:
GC-41 LICOMCEN, INCORPORATED'S RIGHT TO SUSPEND WORK OR TERMINATE THE CONTRACT
xxx xxx xxx
2.For Convenience of LICOMCEN, INCORPORATED
If any time before completion of work under the Contract it shall be found by the LICOMCEN, INCORPORATED that reasons
beyond the control of the parties render it impossible or against the interest of LICOMCEN, INCORPORATED to complete the
work, the LICOMCEN, INCORPORATED at any time, by written notice to the Contractor, may discontinue the work and
terminate the Contract in whole or in part. Upon issuance of such notice of termination, the Contractor shall discontinue the
work in such manner, sequence and at such time as the LICOMCEN, INCORPORATED/Engineer may direct, continuing and
doing after said notice only such work and only until such time or times as the LICOMCEN, INCORPORATED/Engineer may
direct. . . . 41 (Emphasis supplied)
Unfortunately for LICOMCEN, this provision does not support but enervates its theory of indefinite suspension. The cited
provision may be invoked only in cases of termination of contract, as clearly inferred from the phrase "discontinue the work and
terminate the contract." And in statutory construction implies conjunction, joinder or union. 42 Thus, by invoking GC-41,
LICOMCEN, in effect, admitted that the contract had already been terminated.
The termination of the contract was made obvious and unmistakable when LICOMCEN's new project consultant rebidded the
contract for the bored piling works for the CITIMALL. 43 The claim that the rebidding was conducted for purposes of getting cost
estimates for a possible new design 44 taxes our credulity. It impresses us as nothing more than a lame attempt of LICOMCEN to
avoid liability under the contract. As the CIAC had taken pains to demonstrate: SAHITC
Suspension of work is ordinarily understood to mean a temporary work stoppage or a cessation of work for the time being. It
may be assumed that, at least initially, LCC had a valid reason to suspend the Works on December 16, 1997 pursuant to GC-
38 above-quoted. The evidence show, however, that it has not ordered a resumption of work up to the present despite the
lapse of more than four years, and despite the dismissal of the case filed with the Office of the Ombudsman which it gave as
reason for the suspension in the first place. As such, LCC's suspension of the Works had already lost its essential
characteristic of being merely temporary or only for the time being. To still consider it a "suspension" at this point is to do
violence to reason and logic.
Perhaps because of this LCC came up with the assertion that what we have is an "indefinite suspension." There is no such
term in the Construction Agreement or the Contract Documents. In fact, it is unknown in the construction industry.
Construction work may either be suspended or terminated, but never indefinitely suspended. Since it is not sanctioned by
practice and not mentioned in the herein Construction Agreement and the Contract Documents, "indefinite suspension" is
irregular and invalid. Due to the apparent incongruity of an "indefinite suspension," LCC changed the term to "continued
suspension" in its Memorandum. Unfortunately for it, the factual situation remains unchanged. The Works stay suspended
for an indefinite period of time. 45
Accordingly, the CA did not err in affirming the CIAC ruling that the contract had already been terminated.
Neither can LICOMCEN find refuge in the principle of laches to steer clear of liability. It is not just the lapse of time or delay that
constitutes laches. The essence of laches is the failure or neglect, for an unreasonable and unexplained length of time, to do that
which, through due diligence, could or should have been done earlier, thus giving rise to a presumption that the party entitled to
assert it had either abandoned or declined to assert it. 46
Indeed, FSI filed its petition for arbitration only on October 8, 2002, or after the lapse of more than four years since the project was
"indefinitely suspended." But we agree with the CIAC and the CA that such delay can hardly be considered unreasonable to give rise
to the conclusion that FSI already abandoned its claim. On the contrary, the delay was due to the fact that FSI exerted efforts to have
the claim settled extra-judicially which LICOMCEN rebuffed. Besides, except for LICOMCEN's allegation that the filing of the suit is
already barred by laches, no proof was offered to show that the filing of the suit was iniquitous or unfair to LICOMCEN. We reiterate
that, unless reasons of inequitable proportions are adduced, a delay within the prescriptive period is sanctioned by law and is not to
be considered delay that would bar relief. 47 In the instant case, FSI filed its claim well within the ten-year prescriptive period
provided for in Article 1144 of the Civil Code. 48 Therefore, laches cannot be invoked to bar FSI from instituting this suit. cSIACD
The doctrine of laches is based upon grounds of public policy which require, for the peace of society, discouraging stale claims. It is
principally a question of the inequity or unfairness of permitting a right or claim to be enforced or asserted. There is no absolute rule
as to what constitutes laches; each case is to be determined according to its particular circumstances. The question of laches is
addressed to the sound discretion of the court, and since it is an equitable doctrine, its application is controlled by equitable
considerations. It cannot be worked to defeat justice or to perpetrate fraud and injustice. 49
We now come to the monetary awards granted to FSI. LICOMCEN avers that the award lacked factual and legal basis. FSI, on the
other hand, posits otherwise, and cries foul on the modification made by the CA. It asserts that the CA erred in disregarding the
pieces of evidence that it submitted in support of the claim despite the lack of objection and opposition from LICOMCEN. It i nsists
entitlement to the full amount of material costs at site, for equipment and labor standard costs, as well as unrealized profits.
In this connection, we must emphasize the distinction between admissibility of evidence and its probative value. Just because a
piece of evidence is not objected to does not ipso facto mean that it conclusively proves the fact in dispute. The admissibility of
evidence should not be confused with its probative value. Admissibility refers to the question of whether certain pieces of evidence
are to be considered at all, while probative value refers to the question of whether the admitted evidence proves an issue. Thus, a
particular item of evidence may be admissible, but its evidentiary weight depends on judicial evaluation within the guidelines
provided by the rules of evidence. 50
We have carefully gone over the records and are satisfied that the findings of the CA are well supported by evidence. As mentioned
above, the contract between LICOMCEN and FSI had already been terminated and, in such case, the GCC expressly provides that: SAcCIH
GC-42 PAYMENT FOR TERMINATED CONTRACT
If the Contract is terminated as aforesaid, the Contractor will be paid for all items of work executed, and satisfactorily
completed and accepted by the LICOMCEN, INCORPORATED up to the date of termination, at the rates and prices provided
for in the contract and in addition:
1.The cost of partially accomplished items of additional or extra work agreed upon by the LICOMCEN, INCORPORATED and
the Contractor.
2.The cost of materials or goods reasonably ordered for the Permanent or Temporary Works which have been delivered to
the Contractor but not yet used and which delivery has been certified by the Engineer.
3.The reasonable cost of demobilization
For any payment due the Contractor under the above conditions, the LICOMCEN, INCORPORATED, however, shall deduct any
outstanding balance due from the Contractor for advances in respect to mobilization and materials, and any other sum the
LICOMCEN, INCORPORATED is entitled to be credited. 51
We agree with the Court of Appeals that the liability of LICOMCEN for the cost of materials on site is only P5,694,939.85. The said
award represents the materials reasonably ordered for the project and which were delivered to the job site. FSI cannot demand full
payment of the steel bars under Purchase Order No. 6035. 52 As shown by the records, the steel bars were loaded at M/V Alberto
only on January 12, 1998 53 and reached Legaspi City on January 16, 1998. 54 But as early as December 16, 1997, LICOMCEN already
informed FSI of the major revision of the design and ordered the non-delivery to the jobsite of the 50% of the steel bars.
Inexplicably, FSI continued the delivery. Worse, it unloaded all the steel bars and delivered them to the jobsite and some to the
Tuanzon batching plant on January 17, 1998, 55 despite LICOMCEN's order not to do so. FSI cannot now claim payment of the cost of
all these materials. ISDHEa
LICOMCEN, however, cannot deny liability for 50% of the steel bars because, as mentioned, it ordered their delivery to the jobsite.
The steel bars had in fact been delivered to the jobsite and inventoried by Cesar Cortez of ESCA, 56 contrary to LICOMCEN's claim.
The payment of these materials is, therefore, in order, pursuant to GC-41:
The Contractor shall receive compensation for reasonable expenses incurred in good faith for the performance of the
Contract and for reasonable expenses associated with the termination of the Contract. . . . 57
We also uphold the denial of FSI's claim for equipment and labor standard costs, as no convincing evidence was presented to prove
it. The list of rented equipment 58 and the list of workers 59 offered by FSI and which were admitted by CIAC, are far from being clear
and convincing proof that FSI actually incurred the expenses stated therein.

As aptly said by the CA, FSI should have presented convincing pieces of documentary evidence, such as the lease contract or the
receipts of payment issued by the owners of the rented equipment, to establish the claim. As to its claimed labor expenses, the list
of employees does not categorically prove that these listed employees were actually employed at the construction site during the
suspension. Hence, even assuming that LICOMCEN failed to submit evidence to rebut these lists, they do not ipso facto translate into
duly proven facts. FSI still had the burden of proving its cause of action, because it is the one asserting entitlement to an affirmative
relief. 60 On this score, FSI failed. The CA, therefore, committed no reversible error in denying the claim.
FSI's claim for unrealized profit has to be rejected too. GC-41 specifically provided that:
. . . The Contractor shall have no claim for anticipated profits on the work thus terminated, nor any other claim, except for
work actually performed at the time of complete discontinuance, including any variations authorized by the LICOMCEN,
INCORPORATED/Engineer to be done under the section dealing with variation, after the date of said order, and for any claims
for variations accruing up to the date of said notice of termination. 61 (Emphasis supplied) TCaEAD
The provision was agreed upon by the parties freely, and significantly, FSI did not question this. It is not for the Court to change
the stipulations in the contract when they are not illegal. Article 1306 of the Civil Code provides that the contracting parties may
establish such stipulations, clauses, terms and conditions as they may deem convenient, provided they are not contrary to law,
morals, good customs, public order, or public policy. 62 Besides, no convincing proof was offered to prove the claim. In light of
the foregoing, the CA, therefore, correctly denied the claim for unrealized profit.
Similarly, we agree with the CIAC and the CA that LICOMCEN should bear the cost of arbitration as it adamantly refused to pay FSI's
just and valid claim, prompting the latter to institute a petition for arbitration.
In sum, we find no reason to disturb the decision of the CA. It cannot be faulted for denying FSI's motion for reconsideration through
a mere Minute Resolution, for as we held in Ortigas and Company Limited Partnership v. Velasco: 63
The filing of a motion for reconsideration, authorized by Rule 52 of the Rules of Court, does not impose on the Court the
obligation to deal individually and specifically with the grounds relied upon therefor, in much the same way that the Court
does in its judgment or final order as regards the issues raised and submitted for decision. This would be a useless formality
or ritual invariably involving merely a reiteration of the reasons already set forth in the judgment or final order for rejecting
the arguments advanced by the movant; and it would be a needless act, too, with respect to issues raised for the first time,
these being, . . . deemed waived because not asserted at the first opportunity. It suffices for the Court to deal generally and
summarily with the motion for reconsideration, and merely state a legal ground for its denial (Sec. 14, Art. VIII, Constitution);
i.e., the motion contains merely a reiteration or rehash of arguments already submitted to and pronounced without merit by
the Court in its judgment, or the basic issues have already been passed upon, or the motion discloses no substantial
argument or cogent reason to warrant reconsideration or modification of the judgment or final order; or the arguments in
the motion are too unsubstantial to require consideration, etc.
WHEREFORE, the herein petitions for review are DENIED, and the assailed Decision and Resolutions of the Court of Appeals are
AFFIRMED.
SO ORDERED. DcSEHT

[G.R. No. 158560. August 17, 2007.] FRABELLE FISHING CORPORATION, petitioner, vs. THE PHILIPPINE AMERICAN LIFE INSURANCE
COMPANY, PHILAM PROPERTIES CORPORATION and PERF REALTY CORPORATION, respondents.
Before us is the instant Petition for Review on Certiorari under Rule 45 of the 1997 Rules of Civil Procedure, as amended, assailing
the Decision 1 and Resolution of the Court of Appeals dated December 2, 2002 and May 30, 2003, respectively, in CA-G.R. SP No.
71389.
The facts are:
Philam Properties Corporation, Philippine American Life Insurance Company, and PERF Realty Corporation, herein respondents, are
all corporations duly organized and existing under Philippine laws.
On May 8, 1996, respondents entered into a Memorandum of Agreement (1996 MOA) 2 whereby each agreed to contribute cash,
property, and services for the construction and development of Philamlife Tower, a 45-storey office condominium along Paseo de
Roxas, Makati City. SAHEIc
On December 6, 1996, respondents executed a Deed of Assignment (1996 DOA) 3 wherein they assigned to Frabelle Properties
Corporation (Frabelle) their rights and obligations under the 1996 MOA with respect to the construction, development, and
subsequent ownership of Unit No. 38-B located at the 38th floor of Philamlife Tower. The parties also stipulated that the assignee
shall be deemed as a co-developer of the construction project with respect to Unit No. 38-B. 4
Frabelle, in turn, assigned to Frabelle Fishing Corporation (Frabelle Fishing), petitioner herein, its rights, obligations and interests
over Unit No. 38-B.
On March 9, 1998, petitioner Frabelle Fishing and respondents executed a Memorandum of Agreement (1998 MOA) 5 to fund the
construction of designated office floors in Philamlife Tower. CAcEaS
The dispute between the parties started when petitioner found material concealment on the part of respondents regarding certain
details in the 1996 DOA and 1998 MOA and their gross violation of their contractual obligations as condominium developers. These
violations are: (a) the non-construction of a partition wall between Unit No. 38-B and the rest of the floor area; and (b) the reduction
of the net usable floor area from four hundred sixty eight (468) square meters to only three hundred fifteen (315) square meters. IaEACT
Dissatisfied with its existing arrangement with respondents, petitioner, on October 22, 2001, referred the matter to the Phil ippine
Dispute Resolution Center, Inc. (PDRCI) for arbitration. 6 However, in a letter 7 dated November 7, 2001, respondents manifested
their refusal to submit to PDRCI's jurisdiction. STIcEA
On February 11, 2002, petitioner filed with the Housing and Land Use Regulatory Board (HLURB), Expanded National Capital Regi on
Field Office a complaint 8 for reformation of instrument, specific performance and damages against respondents, docketed as
HLURB Case No. REM-021102-11791. Petitioner alleged, among others, that the contracts do not reflect the true intention of the
parties; and that it is a mere buyer and not co-developer and/or co-owner of the condominium unit. CcAESI
After considering their respective memoranda, HLURB Arbiter Atty. Dunstan T. San Vicente, with the approval of HLURB Regional
Director Jesse A. Obligacion, issued an Order 9 dated May 14, 2002, the dispositive portion of which reads:
Accordingly, respondents' plea for the outright dismissal of the present case is denied. Set the initial preliminary hearing of
this case on June 25, 2002 at 10:00 A.M.
IT IS SO ORDERED.
Respondents then filed with the Court of Appeals a petition for prohibition with prayer for the issuance of a temporary restraining
order and/or writ of preliminary injunction, 10 docketed as CA-G.R. SP No. 71389. Petitioner claimed, among others, that the HLURB
has no jurisdiction over the subject matter of the controversy and that the contracts between the parties provide for compulsory
arbitration.
On December 2, 2002, the Court of Appeals rendered its Decision 11 granting the petition, thus: ATESCc
WHEREFORE, premises considered, the petition is GRANTED. Public respondents Atty. Dunstan San Vicente and Jesse A.
Obligacion of the Housing and Land Use Regulatory Board, Expanded National Capital Region Field Office are hereby
permanently ENJOINED and PROHIBITED from further proceeding with and acting on HLURB Case No. REM-021102-11791.
The order of May 14, 2002 is hereby SET ASIDE and the complaint is DISMISSED.
SO ORDERED.
In dismissing petitioner's complaint, the Court of Appeals held that the HLURB has no jurisdiction over an action for reformation of
contracts. The jurisdiction lies with the Regional Trial Court.
Forthwith, petitioner filed a motion for reconsideration 12 but it was denied by the appellate court in its Resolution 13 dated May 30,
2003.
Hence, the instant petition for review on certiorari.
The issues for our resolution are: (1) whether the HLURB has jurisdiction over the complaint for reformation of instruments, specific
performance and damages; and (2) whether the parties should initially resort to arbitration. HEacAS
The petition lacks merit.
As the records show, the complaint filed by petitioner with the HLURB is one for reformation of instruments. Petitioner claimed that
the terms of the contract are not clear and prayed that they should be reformed to reflect the true stipulations of the parties.
Petitioner prayed: SCIAaT
WHEREFORE, in view of all the foregoing, it is respectfully prayed of this Honorable Office that after due notice and hearing, a
judgment be please rendered: ACTIHa
1.Declaring that the instruments executed by the complainant FRABELLE and respondent PHILAM to have been in fact a
Contract to Sell. The parties are thereby governed by the provisions of P.D. 957 entitled, "Regulating the Sale of Subdivision
Lots and Condominiums, Providing Penalties for Violations Thereof" as buyer and developer, respectively, of a condominium
unit and not as co-developer and/or co-owner of the same; cTaDHS
xxx xxx xxx (Emphasis supplied)
We hold that being an action for reformation of instruments, petitioner's complaint necessarily falls under the jurisdiction of the
Regional Trial Court pursuant to Section 1, Rule 63 of the 1997 Rules of Civil Procedure, as amended, which provides: a cHITE
SECTION 1. Who may file petition. Any person interested under a deed, will, contract or other written instrument, whose
rights are affected by a statute, executive order or regulation, ordinance, or any other governmental regulation may, before
breach or violation thereof, bring an action in the appropriate Regional Trial Court to determine any question of construction
or validity arising, and for a declaration of his rights or duties thereunder. IDTSEH
An action for the reformation of an instrument, to quiet title to real property or remove clouds therefrom, or to consolidate
ownership under Article 1607 of the Civil Code, may be brought under this Rule. (Emphasis ours) HCEcAa
As correctly held by the Court of Appeals, any disagreement as to the nature of the parties' relationship which would require first an
amendment or reformation of their contract is an issue which the courts may and can resolve without the need of the expertise and
specialized knowledge of the HLURB.
With regard to the second and last issue, paragraph 4.2 of the 1998 MOA mandates that any dispute between or among the parties
"shall finally be settled by arbitration conducted in accordance with the Rules of Conciliation and Arbitration of the International
Chamber of Commerce." 14 Petitioner referred the dispute to the PDRCI but respondents refused to submit to its jurisdiction. aTSEcA
It bears stressing that such arbitration agreement is the law between the parties. They are, therefore, expected to abide by it in
good faith. 15
This Court has previously held that arbitration is one of the alternative methods of dispute resolution that is now rightfull y vaunted
as "the wave of the future" in international relations, and 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. 16 CacHES
WHEREFORE, we DENY the petition. The challenged Decision and Resolution of the Court of Appeals in CA-G.R. SP No. 71389 are
AFFIRMED.
Costs against petitioner.
SO ORDERED.







[G.R. Nos. 167829-30. November 13, 2007.] FILIPINAS (PRE-FAB BLDG.) SYSTEMS, INC., petitioner, vs. MRT DEVELOPMENT
CORPORATION; COURT OF APPEALS; CONSTRUCTION INDUSTRY ARBITRATION COMMISSION; and VICTOR P. LAZATIN, ELISEO I.
EVANGELISTA, and JACINTO M. BUTALID, in their capacities as Chairman and members of the Arbitral Tribunal of the Construction
Industry Arbitration Commission, respondents.
The Case
This Petition for Review on Certiorari under Rule 45 seeks to reverse and set aside the January 6, 2004 Decision 1 and April 8, 2005
Resolution 2 of the Court of Appeals (CA), dismissing petitioner's appeal and denying petitioner's February 4, 2004 Motion for
Reconsideration, 3 respectively.
The Facts
The Metro Rail Transit Development Corporation (MRTDC) is the owner of the MRT-3 North Triangle Development Project located at
the corner of Epifanio Delos Santos Avenue (EDSA) and North Avenue in Quezon City. The North Triangle Project was part of the
Manila North Triangle Project, which was conceived as a major hub of the light rail transit line system along EDSA starting from the
North Triangle area near the corner of Quezon Avenue and EDSA, and connecting to the Light Rail Transit-1 starting in Pasay City at
the intersection of Taft Avenue and EDSA. Part of the North Triangle Project is a podium structure which would serve as the depot
and maintenance area for the trains and would serve as the base or foundation for any commercial development.
MRTDC engaged Parsons Interpro JV (PIJV) to act as the Project Management Team (PMT) to supervise and monitor the project. PIJV
was a joint venture company composed of Parsons International, an international project management firm, and Interpro, a local
construction management company. Each of these companies appointed a representative as project managers to supervise the
project, namely: Engr. Augustus Salgado for Interpro and Arch. Melvin Satok for PIJV. As joint project managers, their duties were to
monitor the progress of construction on behalf of the owner, to recommend the payment of regular progress billings, to ensure that
work was being completed in accordance with the construction schedule, and other similar matters. Directly under them was David
Sampson, who was designated as the Area Construction Manager, tasked to monitor the day-to-day activities on the site with the
help of other PIJV area engineers.
There were six contractors who submitted their respective bids for the construction of the four-level podium facility (Project). The
Project was initially awarded to the lowest bidder, Gammon Philippines, Inc. (GPI), while Filipinas Systems, Inc. (FSI) submitted the
second lowest bid. Subsequently, MRTDC decided to construct levels one and two of the Project only with a third level to be
constructed on the area above the workshop. Thus, GPI submitted another proposal on March 11, 1998 for the revised Project
specifications. Later, GPI was issued a Notice of Award/Notice to Proceed (NOA/NTP) dated June 10, 1998 in its favor by MRTDC
which required GPI to accept the award and NTP within five (5) business days from receipt, failing which the award and the NTP
would be automatically withdrawn.
While negotiations with GPI were ongoing, MRTDC was conducting negotiations with FSI as the second lowest bidder to ensure that
another contractor would be in a position to immediately accept the Project and start construction.
Accordingly, FSI submitted a letter-proposal dated June 6, 1998 4 proposing to construct the two-level podium facility within 180
days for PhP878,888,888.88. Paragraph 12, page 3 of the proposal stated that:
12.In case of delayed payment by the Owner, after 30 days from receipt by the Construction Manager of approved progress
billings, the Owner shall be charged at the rate of 2% per month of delay and charge for standby time of equipment
and manpower (direct cost + VAT) and shall give the Contractor an automatic time extension on the completion of
the work of the same number of delays provided the works are in compliance with the plans and specifications.
After 60 days of delay, the Contractor shall have the right to stop work and bill the Owner for remobilization
expenses in case of resumption of work.
GPI refused the terms of the NOA/NTP dated June 10, 1998 due to the strict timetable imposed by MRTDC.
Thus, MRTDC issued a NOA/NTP dated June 17, 1998 5 to FSI which contained, among others, the following provision:
The successful operation of the depot and the related rail system is of national importance. In the light of this fact and to
conform with the schedule provided for in the BLT Agreement, FSI in accepting this NTP agrees to finish the Work within 6
months from acceptance of this NTP, inclusive of any rain delays but subject to force majeure as defined in the BLT
Agreement a photocopy of which is attached herewith. In addition, Filsystem hereby agrees to a bonus/penalty scheme as
follows:
Liquidated Damages:US$100,000.00 per day of delay based on the Six-month period.
Bonus:US$30,000.00 per day of early accomplishment
FSI, through its President, Felipe A. Cruz, Jr., as indicated by his conformity on the NOA/NTP, accepted the NOA/NTP.
In a letter dated October 5, 1998 issued by MRTDC to FSI, day one of the construction period was reckoned on July 14, 1998 to end
180 days after or on January 14, 1999.
In the course of the construction, there were several change orders issued by MRTDC to FSI which included the realignment or
shifting of several columns and the construction of a sewerage treatment plant and septic tank, among others.
FSI finished 98.7% of the Project on April 30, 1999 or 106 days from the original January 14, 1999 deadline. Full completion was
achieved on May 17, 1999.
On October 8, 1999 or almost six months after the completion of the Project, FSI issued a letter to David Sampson, the PIJV
Construction Manager, requesting an extension of 228 days. Attached to the letter was a spreadsheet showing the time extensions
that they were entitled to, which allegedly moved the Project deadline to August 30, 1999. At the bottom right hand corner of the
spreadsheet was the signature of David Sampson, ostensibly approving the extension but only until August 2, 1999 for a period of
200 days. 6
Thereafter, FSI issued several letters to MRTDC asking for payment of additional amounts for owner-caused delays. FSI claimed that
by virtue of par. 12 of its letter-proposal dated June 6, 1998, for each day MRTDC was delayed in paying FSI's progress billing, the
latter was entitled to a corresponding additional day for the completion of the Project. FSI contended that payment of the progress
billings had been delayed for 1,800 days. Adding that to the previous 200-day extension approved by David Sampson, the extension
period would total 2,000 days.
Reckoning the completion of the Project on May 30, 1999 and taking into account the 2,000-day extension FSI claimed it was
entitled to, FSI alleged that it completed the Project 1,894 days ahead of schedule which would amount to an early accomplishment
bonus of USD 56,820,000.
FSI also demanded from MRTDC the payment of actual extended cost in the amount of PhP33,145,515.13 due to the extended
Project time attributable to MRTDC's change orders. Additionally, FSI claimed that MRTDC's change orders which affected the design
of the Project necessarily required it to change the construction methodology from the sliding hydraulic-lift table formwork system
to the conventional formworks, resulting in extra costs amounting to PhP99,515,759.
MRTDC refused to pay the claims. It alleged that FSI failed to finish the construction of the Project within the 180-day period agreed
upon and that it had already paid FSI the amounts due for work accomplished as well as for interest on delayed payments.
Thus, on June 5, 2002, FSI filed with the Construction Industry Arbitration Commission (CIAC) a Request for Adjudication of i ts claims
against MRTDC. In its June 3, 2002 Complaint, FSI reduced its claim for early completion bonus to USD 19,590,000 allegedly to lower
the prohibitive filing fees of the CIAC.
After due hearing, the CIAC issued an Award dated May 6, 2003 in favor of FSI for USD 2,820,000 as early completion bonus, denying
FSI's other claims, the dispositive portion of which states:
WHEREFORE, in view of all the foregoing, the Arbitral Tribunal hereby renders the following award:
1.Filsystem's claim for early completion bonus in the amount of TWO MILLION EIGHT HUNDRED EIGHT HUNDRED TWENTY THOUSAND US DOLLARS
(US$2,820,000.00) is hereby granted.
2.Filsystems' claim for extra costs due to change in methodology in the amount of P99,515,790.00 is hereby denied.
3.Filsystems' claim for extra overhead costs in the amount of P33,140,515.13 is hereby denied.
4.MRTDC's claim for liquidated damages is hereby denied.
5.MRTDC's claim for reimbursement for interest is hereby denied.
6.Filsystems and MRTDC are ordered to share the cost of arbitration equally.
The foregoing monetary award shall bear interest at the rate of six percent (6%) per annum on the total amount due from
the date hereof until finality of this Award, after which interest at the rate of twelve percent (12%) per annum shall be paid
on the said total amount until full payment.
SO ORDERED.
In the Award, as there was no actual contract for the Project, the CIAC made a finding that the following documents shall govern in
the relationship of the parties:
a.The NOA/NTP dated June 17, 1998;
b.The June 6, 1998 Letter of FSI to MRTDC;
c.The General Conditions and the Drawing and Specifications included with the Bid Documents except to the
extent that the same is inconsistent with the two (2) previous documents.
The CIAC found that David Sampson was the Project Manager and thus could authorize change orders, contrary to MRTDC's
allegation that he was not the Project Manager. It also found that no specific construction methodology was agreed upon.

With regard FSI's claim for early completion bonus, specifically as to the financial time extension, that is, time extension for delayed
payment of progress billings, the CIAC found that MRTDC was already sufficiently penalized for any delay in payment by the two
percent (2%) interest per month. Furthermore, the CIAC determined that additional time for delayed payment would amount to
double payment and is unconscionable resulting in a 1,800-day time extension or 1000% increase from the original contract period
of 180 days.
As to the technical time extension which arose from the change orders of MRTDC, the latter claimed that David Sampson was not
the Project Manager and was not authorized to issue change orders in behalf of MRTDC. However, the CIAC found that MRTDC itself
represented David Sampson as its Project Manager and that documentary exhibits prove that he was indeed the Project Manager.
Thus, by virtue of Articles 20.07 and 21.04 of the General Conditions of Contract, 7 David Sampson could authorize change orders in
behalf of MRTDC. This was further supported by the Construction Industry Authority of the Philippines (CIAP) Document No. 102,
par. 21.04-A(a) which allows the adjustment of completion time due to delays caused by the owner.
The CIAC ruled that FSI is entitled to a technical time extension of 200 days or until August 2, 1999 as authorized by David Sampson.
Therefore, FSI substantially finished construction of the Project on April 30, 1999 or 94 days before the deadline. This translates to
an early accomplishment bonus of USD 2,820,000.
As to the extended overhead costs, the CIAC determined that such claim partakes of a claim for actual damages, and explained that
jurisprudence dictates that such claim be established with actual pieces of evidence, which include receipts, invoices, and other
similar documents. FSI failed to present any piece of evidence. Thus, this claim was denied by the CIAC.
With regard FSI's claim for extra cost due to construction methodology, the CIAC denied the claim holding that such claim was not
supported by any contractual or legal basis as well as the fact that FSI could have used the sliding hydraulic-lift formworks in some
areas, but chose not to.
From such Award, both parties filed their respective petition for review under Rule 43 of the Rules of Court with the CA.
On January 6, 2004, the CA issued the assailed Decision, the dispositive portion of which reads:
WHEREFORE, in consideration of the foregoing premises, judgment is hereby rendered partially reversing and setting aside
the Award of the Construction Industry Arbitration Commission (CIAC) in these consolidated cases and MODIFYING the same
by deleting the award of US$2,820,000.00, representing early completion bonus in favor of Filsystems, while the rest of the
Award is AFFIRMED.
In view of the modification of the CIAC Award as stated above, MRTDC's application for the issuance of a temporary
restraining order/writ of preliminary injunction is hereby declared moot and academic considering that the modified Award
no longer contains monetary award that may be enforced by the CIAC pursuant to the provisions of Sec. 4 of the CIAC Rules
of Procedure Governing Construction Arbitration.
In deleting the award for financial time extension, the CA reasoned that the consent of the Project Manager was insufficient as
change orders require a modification of the contract which must be consented to by MRTDC itself.
Hence, FSI filed this Petition for Review on Certiorari.
The Issues
FSI raised the following issues in its petition:
Grounds for the Allowance of the Petition
The Court of Appeals committed grave abuse reversible error and decided questions of substance in a way not in accordance
with law and applicable decisions of the Honorable Court, and has departed from the accepted and usual course of judicial
proceedings, necessitating the Honorable Court's exercise of its power of supervision, considering that:
I.
The Court of Appeals inexplicably reversed and supplanted the CIAC Arbitral Tribunal's expert and technical determination in
its Award dated 06 May 2003 which ruled that the original contract period of 180 days was extended by 200 days of technical
time extension, a conclusion determined by the said tribunal after extensive technical evidentiary hearings.
A.The minimum of 200 days of technical time extension as determined by the CIAC Arbitral Tribunal is generally conclusive as
a specialized quasi-judicial body's factual and technical determination of equitable adjustment based on the
evidence on record. This minimum equitable adjustment of 200 days is not only in accord with the governing
contractual documents, but is demanded by applicable law, construction industry practice, and the approval by the
Project Manager.
B.As correctly found by the CIAC Arbitral Tribunal, the governing contractual documents do not require the consent or
approval of respondent MRTDC as a precondition to petitioner Filsystems's entitlement to technical time extension:
1.Under Article 20.07 of the General Conditions of the Bid Documents, if the owner orders changes in the
work with cost and time impact, an equitable adjustment shall be made. In such cases, there is no
requirement for petitioner Filsystems to submit a request for time extension and for the approval
by the owner, PMT, or Project Manager.
2.Contrary to the ruling of the Court of Appeals, under Article 21.04 of the General Conditions of the Bid
Documents, the PMT, through the Project Manager as its authorized representative, has the
authority to grant time extensions independent of the approval of respondent MRTDC. As
admitted by respondent MRTDC itself and as provided under the governing contractual
documents, there is no requirement for another approval by respondent MRTDC of any time
extension as determined and granted by the Project Manager.
3.The Court of Appeals arbitrarily disregarded the facts and conclusion correctly found by the CIAC Arbitral
Tribunal and borne by the evidence on record, confirming that petitioner Filsystems complied
with the contractual requirements for claiming time extension.
C.The determination of an equitable adjustment of time extension cannot be left solely to the discretion of one of the
parties. If there is a dispute between the parties as to what the equitable adjustment should be, then resort may be
had to the arbitration machinery as contractually agreed upon by the parties. In this case, the grant by the CIAC
Arbitral Tribunal of the 200-day technical time extension is a factual and technical determination of the minimum
equitable adjustment of the completion period to which petitioner Filsystems is, at the very least, entitled. There is
nothing to show that the CIAC Arbitral Tribunal acted with grave abuse of discretion, arbitrarily arrived at its
findings of facts, or disregarded evidence on record, in granting 200-day technical time extension, either as
approved by the Project Manager or as a determination of equitable adjustment.
D.Finally, assuming that the owner's approval is necessary, the 200-day technical time extension was deemed approved by
respondent MRTDC considering that, as correctly found by the CIAC Arbitral Tribunal, the Project Manager in this
case already approved/granted a technical time extension of 200 days which approval/grant, despite receipt by
respondent MRTDC, has not been disapproved not revoked by the latter.
II.
The Court of Appeals erroneously denied petitioner Filsystems's claim for financial time extension when it ruled that the
provision on automatic financial time extension stated in the accepted letter proposal does not apply for purposes of
determining entitlement to early accomplishment bonus.
A.The governing contract documents, i.e., bid documents, letter proposal and Notice of Award/Notice to Proceed, do not
provide for a distinction between financial time extension and technical time extension insofar as bonus
compensation is concerned. Thus, petitioner Filsystems's earned financial time extension should necessarily be
credited also in determining early accomplishment bonus.
B.The application of financial time extension for purposes of determining entitlement to early accomplishment bonus is
consistent with the basic principle of mutuality of the interests of the contracting parties, putting them in
approximately equal footing, and with the principle of greater reciprocity of interests of the parties to an onerous
contract, consistent with Article 1350 and 1378 of the Civil Code.
C.Contrary to the ruling of the Court of Appeals, petitioner Filsystems's entitled to early accomplishment bonus based on
financial time extension is not unconscionable for allegedly being a double financial penalty.
D.The fact that the intention of the parties was to consider also financial time extension for determining early
accomplishment bonus was even admitted by the PIJV personnel and engineers on site.
E.The Court of Appeals conveniently ignored the Letter dated 14 October 1998 of PIJV Vice-President Melvin Satok addressed
to respondent MRTDC, which letter is respondent MRTDC's own evidence, and in fact corroborated by its witness,
where the bonus clause was extensively discussed and petitioner Filsystems's anticipated claim for significant
bonuses was acknowledged. That conclusively confirms that the parties were of the understanding that petitioner
Filsystems would be entitled to early accomplishment bonus on account of financial time extensions beyond the
original 180-day construction period.
F.Equitable considerations demand that financial time extension be applied in determining bonus compensation.
1.The foregoing ruling of the Court of Appeals overlooks the total train system project as a whole, of which the
podium depot structure project is only a part.
2.Although contractually, as with liquidated damages, it is not necessary for petitioner Filsystems to prove actual
damages, or to even have suffered damages at all; petitioner Filsystems did in fact suffer damages in the
amount of around US Dollars Twenty Seven Million Four Hundred Eight Thousand Seven Hundred Fifty
(US$27,408,750) for which the early accomplishment bonus can equitably compensate.

3.MRTDC does not find inequitable its US Dollars One Hundred Thousand (US$100,000) per day liquidated
damages, thus neither should the early accomplishment bonus of only US Dollars Thirty Thousand
(US$30,000) a day be deemed inequitable.
4.It is inequitable not to apply extensions earned due to the owner's delays in payment (financial time extension)
for the purpose of determining early accomplishment bonus, since construction cannot proceed without
funds and the owner can simply intentionally delay or refuse payment for several months or years just to
defeat the contractor's claim for early accomplishment bonus.
5.The very purpose for early accomplishment bonus, which was to ensure that the project will be completed in
time for the operation of the metro rail project, was actually served.
6.As borne by the Letter dated 14 October 1998, respondent MRTDC and PIJV already knew at the time that the
project period would extend beyond 180 days and the petitioner Filsystems would be claiming early
accomplishment bonus.
7.Even before the issuance of the Notice of Award/Notice to Proceed to petitioner Filsystems, respondent MRTDC
knew that the 180-day period would be inevitably extended.
8.The total amount of early accomplishment bonus that petitioner Filsystems is entitled to has already been
equitably reduced.
G.At the very least, considering that respondent MRTDC itself admitted that it incurred 211 days of delay in its payment of
petitioner Filsystems's progress billings, which fact of delay is even recognized by the CIAC Arbitral Tribunal, the
equivalent amount of at least US Dollars Six Million Three Hundred Thirty Thousand (US$6,330,000.00) should have
been additionally granted as early accomplishment bonus based on financial time extension.
III.
The Court of Appeals arbitrarily ignored petitioner Filsystems's claim for extended overhead cost despite the evidence on
record and respondent MRTDC's own admission that extended overhead cost is claimed separately of and independently
from the cost impact of the various change orders.
A.The Court of Appeals arbitrarily and completely ignored the evidence on record showing petitioner Filsystems's compliance
with the contractual requirements for claiming extended overhead cost.
B.Since the business documents, i.e., vouchers, receipts, billings, payments, petty cash replenishments, and similar
documents, supporting petitioner Filsystems's claim for extended overhead cost are indisputably numerous and
voluminous, and the fact sought to be established from them is only the general result of the whole, the originals
thereof need not be presented pursuant to Section 3 (c), Rule 130 of the Rules of Court. As proven during the trial,
the originals thereof were actually available and manifested to be accessible for scrutiny but respondent MRTDC
waived and squandered the same. Moreover, this issue was not even raised by respondent MRTDC in the course of
the submission of its countervailing affidavits and evidence.
IV.
The Court of Appeals erred in denying petitioner Filsystems's claim for extra cost due to change in construction methodology
considering that as found by the CIAC Arbitral Tribunal, petitioner Filsystems was indeed constrained to incur increased cost,
i.e., a "radical increase in manpower as well as formworks", to meet the construction deadline brought about by the several
change orders issued by respondent MRTDC. Thus, petitioner Filsystems should be compensated for extra cost due to change
in construction methodology pursuant to article 20.08 of the General Conditions of the Bid Documents, and based on the
principle against unjust enrichment and on quantum meruit.
V.
Respondent MRTDC should bear the arbitration cost alone, considering the undisputed fact that petitioner Filsystems was
constrained and forced to litigate and institute the arbitration proceedings below to protect its interest due to respondent
MRTDC's bad faith and unjustified, malicious, unreasonable and fraudulent conduct. 8
Summarized, the issues are:
1.Whether FSI is entitled to be paid early completion bonus based on technical time extension;
2.Whether FSI is entitled to be paid early compensation bonus based on financial time extension;
3.Whether FSI is entitled to be paid for extended overhead cost;
4.Whether FSI is entitled to be paid for costs due to change in construction methodology; and
5.Whether MRTDC should bear the arbitration costs alone.
The Court's Ruling
First Issue: FSI is entitled to be paid early completion bonus based on technical time extension
The CIAC granted FSI's claim for early completion bonus to the extent of 94 days, awarding FSI the amount of USD 2,820,000, based
on a 200-day technical time extension. 9 There was no evidence presented before the CIAC to prove that MRTDC authorized any
technical time extension. However, FSI presented a timetable 10 showing technical time extension up to August 2, 1999 which was
approved by the Project Manager, David Sampson. FSI is not claiming payment for the change orders directed by MRTDC through
David Sampson, such change orders having already been paid. What FSI is claiming is that it is entitled to an extension to the agreed
completion date and consequently to early completion bonus.
This award was deleted by the CA in its assailed Decision on the ground that in order to bind MRTDC to the change orders issued by
the Project Manager, the consent of MRTDC to modify its contract with FSI is required. Since MRTDC did not order nor authorize the
modification of the contract, it is not bound to honor or pay for the change orders. The CA reasoned, as follows:
Thus, if the change orders caused an increase or decrease in the amount due, i.e., contract cost, and in the time required for
its performance, i.e., completion period of the project, an equitable adjustment shall be made but it is a requirement that the
"Contract shall be modified in writing accordingly".
Inasmuch as an equitable adjustment required the modification of the contract in writing, We find and so rule that it should
be MRTDC as a contracting party, who should give its consent to such contractual modification. This was necessitated by the
fact that in case of directed changes, the scope or nature of works to be performed were to be altered and there would be
additional price or costs to be paid by the owner of the project. Necessarily, there was direct impact on performance period
of the obligation. Besides, this power was NOT delegated by MRTDC in the above-quoted Clause 20.07 because only the
authority to make the change orders was given to the PMT but it did not extend such authority to bind MRTDC in
modifying the contract in writing. NO such provision could be read or even implied from the above-quoted contractual
provision. 11
The CA cited Article 20.07, pars. (a) and (c), and Article 21.04, par. (a) of the General Conditions of Contract, which provide:
Art. 20: WORK
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20.07 CHANGES IN THE WORK:
a.CHANGES ORDERED BY THE OWNER: The Owner may at any time, without invalidating the Contract and without notice to
the sureties, order extra work or make changes by altering, adding to or deducting from the work, as covered by
the Drawings and Specifications of this Contract and within the general scope thereof. Such changes shall be
ordered by the Project Management Team in writing, and no change or omission from the Drawings and
Specifications shall be considered to have been authorized without written instructions signed by the Project
Manager.
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c.ADJUSTMENT OF CONTRACT: All such work shall be executed under the conditions of the original contract. If such changes
cause an increase or decrease in the amount due under this Contract, or in the time required for its performance,
an equitable adjustment shall be made and the Contract shall be modified in writing accordingly. The express
consent of the sureties shall be obtained in writing. In the event that the work involved is increased by such
changes, the Contractor shall furnish proportionate additional performance bond.
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Art. 21: TIME OF COMPLETION OF WORK
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21.04 EXTENSION OF TIME: The Contractor will be allowed an extension of time based on the following conditions:
a.Should the Contractor be obstructed or delayed in the prosecution or completion of the work by the act, neglect, delay, or
default of the Owner or any other contractor employed by the Owner on the work: by strikes, lockouts; by an Act of
God or Force Majeure as defined in Article 1.26; by delay authorized by the PMT pending arbitration; then the
Contractor shall within fifteen (15) days from the occurrence of such delay file the necessary request for extension,
the PMT may grant the request for extension for such period of time as he considers reasonable. 12
We do not agree with the CA. A plain reading of par. (c) of Art. 20.07 would show that change orders can be executed immediately
and that contract modification is not a pre-condition for it. Nowhere in the above provisions is it stated that the modification of the
contract is a requisite for the execution of the change orders. It only states that in the event that such changes cause an i ncrease or
decrease in the amount due under the contract, or in the time required for its performance, an equitable adjustment shall be made
and the contract shall be modified in writing accordingly. This means that the contract could be made to conform to the agreement
that has already been agreed upon.
Besides, MRTDC's proposition is absurd.
MRTDC admits that the Project Manager could order changes in the Contract Work but cannot bind the owner to it. Having to await
for the consent of the owner to change orders would defeat the purpose of authorizing the Project Manager to order such changes.

While the general rule is one cannot be bound to a contract entered into by another person, there are exceptions, such as when the
contracting person was authorized to enter a contract on behalf of another, or when such contract was ratified, as enunciated in the
Civil Code:
Article 1317.No one may contract in the name of another without being authorized by the latter, or unless he has by law a
right to represent him.
A contract entered into in the name of another by one who has no authority or legal representation, or who has acted
beyond his powers shall be unenforceable, unless it is ratified, expressly or impliedly, by the person on whose behalf it has
been executed, before it is revoked by the other contracting party.
Here, David Sampson was clearly authorized to issue change orders. The relationship between MRTDC as the owner, PIJV as the
PMT, and David Sampson as the Project Manager is embodied in Sections 1.02, 1.03 and 1.05 of the General Conditions of the Bid
Documents. Said provisions state:
1.02OWNER: shall mean METRO RAIL TRANSIT DEVELOPMENT CORPORATION (abbreviated as "MRTDC" or "MRTDevCo"), the
person or entity ordering the project for execution, including duly appointed successors, or authorized
representatives.
1.03PROJECT MANAGEMENT TEAM (PMT): shall mean PARSONS-INTERPRO JV, the authorized representative of the Owner to
oversee the execution of the Contract Work, either directly or through the properly authorized agents. Such agents
shall be acting within the scope of the particular duties to them. They are responsible to the Owner through the
PARSONS-INTERPRO JV Program Director or Project Manager.
xxx xxx xxx
1.05PROJECT MANAGER (PROJECT MANAGER): shall mean the personally authorized representative of the PMT.
Evidently, David Sampson was the representative or agent of PIJV who was engaged as the Project Manager by MRTDC. However,
the relationship between MRTDC and PIJV cannot be strictly characterized as a contract of agency. The practice in the construction
industry is that the Project Manager exercises discretion on technical matters involving the construction work, such as change
orders. This is because owners of the Project are oftentimes not technically suited to oversee the construction work and hire
professional project managers precisely to oversee the day-to-day operations on the construction site and to exercise professional
judgment when expedient. Thus, the CIAC ruled:
In practice, in case of a dispute between the owner and the contractor, the independent third party project manager will
exercise his own independent professional judgment and render his independent decision on technical matters such as
adjustments in cost and time occasioned by a change order which he issued.
This is the reason why the PMT and the Project Manager were authorized under Art. 20.07, par. (a) of the General Conditions of the
Bid Documents to modify the Contract Work. It may thus be concluded that the PMT and consequently the Project Manager were
authorized by the owner to modify the Contract or the Project Specifications.
Relative to the contract, the CIAC correctly held that:
The authority to issue the field instructions cannot be divorced from the corresponding authority to cause the appropriate
adjustment in price and time resulting from these instructions; otherwise, the filed instructions will never be followed by the
contractor without the corresponding authority to adjust the price and time. While theoretically it is possible to divorce the
two, it is not the norm specially in a project where the time for completion is tight as the separation would invariably lead to
delay. 13
Relying on Art. 1724 and Powton Conglomerate, Inc. v. Agocolicol, 14 it is argued that a written consent of the owner of a project in
order that increased costs shall be binding is required and the Project Manager in this case had no such written consent.
Art.1724 provides:
Article 1724.The contractor who undertakes to build a structure or any other work for a stipulated price, in conformity with
plans and specifications agreed upon with the land-owner, can neither withdraw from the contract nor demand an increase
in the price on account of the higher cost of labor or materials, save when there has been a change in the plans and
specification, 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.
In Powton Conglomerate, Inc., we enunciated:
The present Civil Code added substantive requisites before recovery of the contractor may be validly had. It will be noted
that while under the precursor provision, recovery for additional costs may be allowed if consent to make such additions can
be proved, the present provision clearly requires that changes should be authorized, such authorization by the proprietor in
writing. The evident purpose of the amendment is to prevent litigation for additional costs incurred by reason of additions or
changes in the original plan. Undoubtedly, it was adopted to serve as a safeguard or a substantive condition precedent to
recovery. 15
We agree that indeed a written consent is needed. In the instant case, the written consent is embodied in the General Conditi ons of
the Bid Documents issued by MRTDC and found by the CIAC as one of the documents comprising the contract between MRTDC and
FSI. 16 Arts. 20.07 and 21.04 authorized the Project Manager to issue change orders and time extensions, respectively. And as
discussed above, such authority extends to the modification of the contract between the parties.
Moreover, an examination of the records will show that PIJV issued several Certificates of Payment for progress billings covering
Change Order Nos. 1 through 15. 17 One of these is Certificate of Payment No. JV4390 18 which was approved by David Sampson,
endorsed for payment by Melvin Satok and Augustus Salgado and approved for payment by an Owner's Representative. Clearly,
MRTDC cannot now question the authority of the Project Manager to bind MRTDC, as it is now estopped from so doing 19 having
paid the change orders ordered by David Sampson thereby ratifying the same.
Verily, David Sampson was authorized to order changes in the Contract Work as well as binding MRTDC to it.
Additionally, the appellate court declared that the CIAC mistakenly quoted Article 21.04 as the basis in recognizing that David
Sampson has the power or authority to bind MRTDC to a contract modification and that the situation was more properly covered by
par. (c) of Article 20.07 of the General Conditions of the Bid Documents, to wit:
Furthermore, CIAC was guilty of misapprehension or misinterpretation of the contractual provisions by ruling that Clause
21.04 in relation to Construction Industry Authority of the Philippines (CIAP) Document No. 102, paragraph 21.04-A(a) should
be applied to the instant case. The misinterpretation is confirmed by the fact that CIACs' premise had always been that the
equitable adjustment of the contract cost and performance period was based on change orders or what is called "directed
changes." On the other hand, Clause 21.04 covered extension of time due to obstruction or delay in the prosecution of the
project, thus
xxx xxx xxx
It is very clear from the above quoted contractual provisions that equitable adjustment of the cost and time were due to
change orders or directed changes and they are different from the causes provided in Clause 21.04 which had reference to
obstruction or delay in the prosecution or completion of the project by act, neglect, delay or default of the owner. Despite
the glaring differences in the meaning and coverage of the foregoing contractual provisions, CIAC mistakenly quoted Clause
21.04 as the basis in recognizing that Mr. David Sampson had the power or authority to bind MRTDC to a contract
modification, a situation clearly governed by paragraph c of Clause 20.07 of the General Conditions of the Bid Documents. 20
This is wrong.
Actually, the CIAC stated in its Award that:
Also from the above discussion, it is the PMT or the PROJECT MANAGER as representative of the Owner MRTDC which has
the authority to grant the technical time extensions based on change orders/deviation/act/neglect/delay or default of the
Owner, in accordance with Articles 21.04 and 20.07. However, the formal approval of MRTDC of the time extensions as
approved and recommended by the PMT/PROJECT MANAGER is of ministerial [sic] in nature, except for grave error or
collusion which is not the case here. MRTDC should have acted upon recommendations by its technical personnel, the
Project Manager, who had the direct knowledge and with accurate assessments of the construction activities in the project.
It is not accurate to state that the whole PIJV is the Project Manager because it is composed of the President, the Vice-
President, the Construction Manager and the Area Engineers. Looking at the technical functions and responsibilities, the
Arbitral Tribunal holds that Dave Sampson is the Project Manager who had the authority to grant time extension being the
highest technical personnel in the field for submittal to the Owner's formal approval.
While MRTDC did not formally grant or approve any technical time extension, nevertheless Filsystems is entitled to time
extension based on the contract, the law and industry practice. This is clear from Articles 21.04 and 20.07 of the General
Conditions of the Bid Documents which are part of the contract between the parties. This conclusion is likewise justified by
the construction industry practice and that of Construction Industry Authority of the Philippines (CIAP) Document No. 102,
paragraph 21.04-A(a), which states that "The Contractor shall be entitled to an equitable adjustment of Completion Time
where the Contractor is obstructed or delayed in the prosecution of the Work by the act, neglect, delay or default of the
Owner, or any other contractor employed by the Owner of the work." 21

The appellate court erred in ruling that Arts. 20.07 and 21.04 of the General Conditions of the Bid Documents cannot be harmonized
and applied simultaneously. To clarify, Art. 20.07 deals with changes in the Work, such as change orders and who may issue them.
Art. 21.04, on the other hand, deals with the circumstances that could allow for extension of time for completion of the work. An
order by the owner certainly is encompassed as an "act, neglect, delay, or default of the Owner".
In our view, the CIAC correctly cited Article 21.04 of the General Conditions of the Bid Documents and CIAP Document No. 102, par.
21.04-A(a) as giving authority to the Project Manager to modify the contract with regard the extension of the contract's completion
date.
As to the observation that the performance period was extended after the completion of the Project, we note that the technical
time extension on the change orders was the subject of evaluation from both FSI and Project Technical Group of PIJV. Thus, the CIAC
noted, thus:
Both Filsystems and PTG's graphical representation had credited an average of 20-day technical time extensions for each
change/extra/variation orders affecting the critical path per project area. This average of 20-day technical time extension of
all the change/extra/variation orders was derived from the joint evaluations per project area and agreed by both the
engineers and technical personnel of Filsystems and the PTG who were directly involved in the field, and adopted by the Area
Construction Manager, as duly authorized representatives of the Owner.
Clearly, it could be gleaned from the aforecited finding that the technical time extension could not have been submitted to MRTDC
for approval prior to the completion of the Project.
As to David Sampson's authority to approve such time extension at a time when the Project was already completed and his term as
Project Manager already terminated, note that he was the one who directed the change orders in the first place, and, thus, he was
uniquely situated to approve the time extension relative to such change orders. He was the most competent person to do it. In
addition, to delegate such function to another person not privy to the change orders would render their results questionable at best.
Furthermore, although the construction of the Project was already completed, the winding up of the contractual obligations relative
to the Project was not yet finished. The bonus scheme employed by MRTDC could only be implemented upon the completion of the
Project after computing for time extensions. Although David Sampson may have been already employed as a consultant by MRTDC
at the time that he approved the 200-day technical time extension, it must be stressed that his engagement as the Project Manager
did not end with the completion of the construction works. David Sampson signed Certificate of Payment No. MRT-1299 dated July
22, 1999 22 as the Area Construction Manager or Project Manager along with the signatures of: Gaudioso Del Rosario, AVP
Operations; Augustus V. Salgado, President; and an Owner's Representative. Patently, David Sampson was still engaged as the
Project Manager at the time that he approved the 200-day technical time extension.
Hence, FSI is entitled to the 200-day Technical Time Extension and, consequently, to the 94-day early accomplishment bonus
awarded by the CIAC.
Second Issue: FSI is not entitled to financial time extension
In FSI's letter-proposal dated June 6, 1998 found by the CIAC as one of the binding documents governing the relationship between
the parties, par. 12 reads;
12.In case of delayed payment by the Owner, after 30 days from receipt by the Construction Manager of approved progress
billings, the Owners shall be charged at the rate of 2% per month of delay and charge for standby time of
equipment and manpower (direct cost + VAT) and shall give the Contractor an automatic time extension on the
completion of the work of the same number of delays provided the works are in compliance with the plans and
specifications. After 60 days of delay, the Contractor shall have the right to stop work and bill the Owner for
remobilization expenses ion case of resumption of work.
FSI argues that delays in the payment of progress billings should also be counted in the computation for the early completion bonus
in the NOA/NTP dated June 17, 1998 issued by MRTDC, classified as financial time extensions. An examination of the relevant
contractual provisions would reveal that financial time extension should not be considered in the computation of early
accomplishment bonus.
MRTDC's consistent position has been that time extensions, to be considered for the early completion bonus, must actually del ay
the construction project or cause the stoppage of construction work. Thus, in Art. 21.04 of the General Conditions of the Bid
Documents which enumerated the instances when time extensions may be allowed, it is only when "the Contractor be obstructed or
delayed in the prosecution or completion of the work" that the contractor will be allowed an extension of time. While in the
NOA/NTP, the complete provision for early accomplishment bonus is as follows:
The successful operation of the depot and the related rail system is of national importance. In the light of this fact and to
conform with the schedule provided in the BLT Agreement, FSI in accepting this NTP agrees to finish the Work within 6
months from acceptance of this NTP, inclusive of any rain delays but subject to force majeure as defined in the BLT
Agreement a photocopy of which is attached herewith. In addition, Filsystem hereby agrees to a bonus/penalty scheme as
follows:
Liquidated Damages:US$100,000.00 per day of delay based on the Six-month period
Bonus:US$30,000.00 per day of early accomplishment
(Emphasis supplied.)
Furthermore, the contemporaneous conduct of MRTDC in allowing long delays in the payment of the FSI's progress billings would
indicate their belief that such automatic time extension shall not be included in the computation of early accomplishment bonus.
Certainly, MRTDC never intended that it should be liable to FSI for 1,800 days 23 of delay amounting to USD 54,000,000 of early
completion bonus.
Such financial time extension must be distinguished from the earlier discussed technical time extension. The technical time
extension resulted from change orders issued by the Project Manager on the so-called "critical path" of the Project, whereby the
construction could not proceed until such change orders were completed. Clearly, in the computation for early accomplishment
bonus, MRTDC only contemplated time extensions when the actual work had to cease.
It thus becomes clear that MRTDC never consented to nor ratified the inclusion of financial time extensions in the computation of
early accomplishment bonus.
It must also be pointed out that FSI was sufficiently indemnified for the delay in the payment of its progress billings with the
payment of interest at the rate of 2% per month, or 24% per annum, on the amount due.
Thus, FSI is not entitled to financial time extension.
Third Issue: FSI is not entitled to be paid for extended overhead cost
During the hearing before the CIAC, it was found that FSI failed to adduce admissible evidence in support of its claim for extended
overhead cost. The pieces of evidence that it presented in support of its claim for extended overhead costs were summaries and not
actual receipts, invoices, contracts and similar documents. Such finding is a factual question that cannot be raised before this Court.
It is a well-settled principle that the Supreme Court is not a trier of facts, and findings of fact made by the trial court, especially when
the same are reiterated by the CA, must be given great respect if not considered as final. Thus, we ruled in Security Bank and Trust
Company v. Gan, that:
It is well established that under Rule 45 of the Rules of Court, only questions of law, not of fact, may be raised before the
Supreme Court. It must be stressed that this Court is not a trier of facts and it is not its function to re-examine and weigh
anew the respective evidence of the parties. Factual findings of the trial court, especially those affirmed by the CA, are
conclusive on this Court when supported by the evidence on record. 24
To such general rule there are exceptions; however, the instant case does not fall under any of them.
The reason propounded by FSI why it presented mere summaries and not the actual documents to prove the extended overhead
cost is anchored on Rule 130, Section 3, par. (c) of the Rules of Court:
Section 3.Original document must be produced; exceptions. When the subject of the inquiry is the contents of a
document, no evidence shall be admissible other than the original document itself, except in the following cases:
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(c)When the original consists of numerous accounts or other documents which cannot be examined in court without great
loss of time and the fact sought to be established from them is only the general result of the whole.
FSI claims that what is sought to be established with the evidence in question is merely the general result of the evidence or the
amount of extended overhead cost that it suffered.
FSI's claim for extended overhead cost may be classified as a claim for actual damages. 25 Actual damages is defined as:
Actual damages are such compensation or damages for an injury and will put the injured party in the position in which he
was before he was injured. They are those damages which the injured party is entitled to recover, for the wrong done and
injuries received when none was intended. They indicate such losses as are actually sustained and susceptible of
measurement, and as used in this sense, the phrase, "determinate pecuniary loss" has been suggested as a more appropriate
designation. They include all kinds of damages except exemplary or primitive damages. Compensatory damages are awarded
as an equivalent for the injury done. It is synonymous with actual damages.

Thus, as correctly argued by the CIAC, actual damages must be duly proven and so proved with a reasonable degree of certainty. 26
Contrary to FSI's contention, it is not merely the general result of the evidence that is sought in the instant case. The very fact of
such overhead cost is also in question and evidence must be adduced to support any claim such as receipts. FSI did not. It is
therefore not entitled to be paid extended overhead cost.
Fourth Issue: FSI is not entitled to be paid for costs due to change in construction methodology
The factual findings of the CIAC on this matter, which were reiterated by the CA, are:
There were no prior notice by Filsystems to MRTDC regarding the changed of methodology, and its financial consequences
to MRTDC. Filsystems should have included this as extra cost or additional costs during the billings of the respective
change orders. The absence of any contractual commitment on the part of MRTDC, there can be no legal basis to hold
MRTDC liable for the extra cost in the alleged changed of methodology. If at all, Filsystems should have asserted this claim
as a consequence of the change in methodology but it did not. There was likewise no reservation when Filsystems accepted
payment for the several Change Orders. (Emphasis supplied.)
As discussed above, findings of fact of the CA are binding upon this Court. Thus, increases in the cost of the Project unless authorized
by the owner will not make the latter liable for its cost. Here, no evidence supports the proposition that the owner authorized the
change in construction methodology. FSI must bear the costs of such change in construction methodology having executed the same
unilaterally.
Fifth Issue: The parties must equally share the arbitration costs
Philippine National Construction Corporation v. Court of Appeals provides the general rule in the determination of who should bear
the costs of arbitration, to wit:
In respect of the costs of arbitration, Sec. 5, Article XV of the Rules of Procedure Governing Construction Arbitration states:
Decision as to Cost of Arbitration. In the case of non-monetary claims or where the parties agreed that the sharing of fees
shall be determined by the Arbitrator(s), the award shall, in addition to dealing with the merits of the case, fix the cost of
arbitration, and/or decide which of the parties shall bear the cost(s) or in what proportion the cost(s) shall be borne by each.
Rule 142 of the Revised Rules of Court of the Philippines governing the imposition of costs likewise provides the following:
Section 1.Costs Ordinarily follow the result of suit. Unless otherwise provided in these rules, costs shall be allowed to the
prevailing party as a matter of course, but the court shall have power for special reasons, to adjudge that either party shall
pay the cost of an action, or that the same shall be divided, as may be equitable. 27
In the instant case, there is no basis for assessing the arbitration costs against one party or the other, as the parties' prayers were
only partially granted. We find it is just and equitable that both parties equally share the costs of arbitration.
WHEREFORE, the petition is hereby PARTIALLY GRANTED. The January 6, 2004 CA Decision is hereby MODIFIED with the
reinstatement of the CIAC's award to FSI of early accomplishment bonus in the amount of TWO MILLION EIGHT HUNDRED TWENTY
THOUSAND US DOLLARS (USD 2,820,000). The May 6, 2003 Award of the CIAC is AFFIRMED IN TOTO. No pronouncement as to costs.
SO ORDERED.