G.R. No.

L-23390

April 24, 1967

MINDANAO PORTLAND CEMENT CORPORATION, petitioner-appellee,

vs.
McDONOUGH CONSTRUCTION COMPANY OF FLORIDA, respondent-appellant.
Gonzalo W. Gonzalez for respondent-appellant.
Alberto B. Villaraza for petitioner-appellee.
BENGZON, J.P. J.:
On February 13, 1961, petitioner Mindanao Portland Cement Corporation and
respondent McDonough Construction Company of Florida, U.S.A., executed a
contract1 for the construction by the respondent for the petitioner of a dry portland,
cement plant at Iligan City. In a separate contract, Turnbull, Inc. the "engineer"
referred to in the construction contract was engaged to design and manage the
construction of the plant, supervise the construction, schedule deliveries and the
construction work as well as check and certify ill contractors' progress and fiscal
requests for payment.
Alterations in the plans and specifications were subsequently made during the
progress of the construction as set forth in Addenda 2 to 8 thereto. Due to this and
to other causes deemed sufficient by Turnbull, Inc., extensions of time for the
termination of the project, initially agreed to be finished on December 17, 1961,
were granted.2
Respondent finally completed the project on October 22, 1962, except as to delivery
of certain spare parts for replacements and installations of floodlamps; and on
November 14, 1962, these latter items were complied with. As to the Addenda in
the plans and specifications, Addenda 2, 3 and 7 were not signed by petitioner
although the same were forwarded to it, after having been signed by respondent;
these are still in its possession. Addenda 4, 5 and 6 were signed by petitioner and
respondent.3
Differences later arose. Petitioner claimed from respondent damages in the amount
of more than P2,000,000 allegedly occasioned by the delay in the project's
completion. Respondent in turn asked for more than P450,000 from petitioner for
alleged losses due to cost of extra work and overhead as of April 1962. A
conference was held on about May 29, 1962 between petitioner and Turnbull, Inc.,
on one hand, and respondent on the other, to settle the differences aforementioned,
but no satisfactory results were reached.1wph1.t
Petitioner sent respondent, on August 8, 1962, and again on September 24,1962,
written invitations to arbitrate, invoking a provision in their contract regarding
arbitration of disputes.
Instead of answering said invitations, respondent, on November 14, 1962, with
Turnbull, Inc.'s approval, submitted to petitioner for payment its final statement of
work accomplished, asking for P403,700 as unpaid balance of the consideration of
the contract.

Petitioner, on January 29, 1963, filed the present action in the Court of First Instance
of Manila to compel respondent to arbitrate with it concerning alleged disputes
arising from their contract. It averred inter alia that deletions and additions to the
plans and specifications were agreed upon during the progress of the construction;
that disagreement arose between them as to the cost of the additional or extra
work done, and respondent's deviation from some agreed specifications; that
petitioner claims having overpaid respondent by P33,810.81; that petitioner further
claims to have suffered damages due to respondent's delay in finishing the project;
that respondent, on the other hand, still claims an unpaid balance of about
P403,700; that these matters fall under the general arbitration clause of their
contract; and that respondent has failed to proceed to arbitration despite several
requests therefor.
Respondent filed, on February 23, 1963, its answer. It denied the alleged existence
of disagreement between the parties. And as special defense, it alleged that its
claim for P403,700 was not disputed and that the respective claims for damages
should be resolved by Turnbull, Inc., pursuant to the exception in the arbitration
clause of the construction contract.
After stipulation of facts and submission of documentary evidence, the court, on
May 13, 1964, rendered its decision finding that dispute or disagreement obtained
between the parties with respect to their rights and obligations under their contract
and that the same should be submitted to arbitration pursuant to par. 39 of said
contract the arbitration clause and to Republic Act 876 the Arbitration Law.
And thus it ordered petitioner and respondent to proceed to arbitration in
accordance with the terms of their contract.
Not satisfied with the ruling, respondent appealed therefrom to Us to raise the
purely legal question of whether under these facts respondent is duty-bound to
submit to arbitration.
The provision of the contract on "Arbitration of Disagreements" (par. 39) says:
39. In the event of disagreement between the Owner and the Contractor in respect
of the rights or obligations of either of the parties hereunder except the
interpretation of the plans and specifications and questions concerning the
sufficiency of materials, the time, sequence and method of performing the work,
which questions are to be finally determined by the Engineer, they shall submit the
matter to arbitration, the Owner choosing one arbitrator, the Contractor one, and
the two so chosen shall select a third. The decision of such arbitrators or a majority
of them shall be made in writing to both parties and when so made shall be binding
upon the parties thereto. (Emphasis supplied).
Respondent, herein appellant, contends first, that there is no showing of
disagreement; and second, that if there is, the same falls under the exception, to be
resolved by the engineer.
As to the first point, the fact of disagreement has been determined by the court
below upon the stipulation of facts and documentary evidence submitted. In this

appeal involving pure questions of law, the above finding should not be disturbed.
Furthermore, the existence of disagreement is plainly shown in the record.
Respondent admits the existence of petitioner's claim but denies its merit.4 It
likewise admits that petitioner has refused to pay its claim for the unpaid balance of
the price of the contract.5 Paragraph 8 of the stipulation of facts shows the dispute
of the parties regarding their mutual claims and that said dispute remained
unsettled:
8. That on or about May 29, 1962, a conference was held between petitioner and
Turnbill, Inc., on the one hand, and respondent, on the other, to settle their
differences involving the claim for damages of petitioner in the amount of more
than P2,000,000, occasioned by the delay in the completion of the project, and the
claim of respondent for losses due to the cost of extra plant and overhead in the
amount of more than P450,000, as of April, 1962, but no satisfactory results were
reached; (Emphasis supplied).
Regarding the second point, the parties agreed by way of exception that
disagreements with respect to the following matters shall be finally resolved by the
engineer, instead of being submitted to arbitration: (1) The interpretation of plans
and specifications; (2) sufficiency of materials; and (3) the time, sequence and
method of performing the work.
The disputes involved here, on the other hand, are on (1) the proper computation of
the total contract price,6 including the cost of additional or extra work;7 and (2) the
liability for alleged delay in completing the project and for alleged losses due to
change in the plans and specifications.
Now from the contract itself We can determine the scope of the exceptions
aforementioned. Thus, pars. 19 to 22 of its General Conditions deal with the subject
"Interpretation of Plans and Specifications". And thereunder, the engineer is
empowered to correct all discrepancies, errors or omissions in the plans and
specifications; to explain all doubts that may arise thereon; and to furnish further
plans and specifications as may be required. No mention is made therein as to the
cost of the project; this matter is covered by the engineering contract, under which
Turnbull, Inc.'s function is limited to making estimates of costs only.
"Sufficiency of materials" and "method of performing the work" under the second
and third exceptions above-mentioned are treated in pars. 2 to 6 of the General
Conditions under the heading "QUALITY OF WORKS AND MATERIALS". Turnbull, Inc.,
is therein empowered to determine the land fitness of the several kinds of work and
materials furnished and to reject or condemn many of them which, in its opinions,
does not fully conform to the terms of the contract. In the present case, the dispute
is not as to the quality of the materials or of the kind of work done.
"Time" and "Sequence of Work" are covered by pars. 9 to 17 of the General
Conditions under the heading "SCHEDULING." Neither would the disputes fall under
these exceptions. Turnbull, Inc.'s power here is to schedule the deliveries and
construction work and expedite the same so that the project can be finished on
time. It is also authorized, under par. 15, to determine whether any eventuality is
sufficient enough to warrant in extension of time and if so, to determine the period

of such extension. The delay envisioned here is one that occurs during the progress
of the work which disturbs the pre-scheduling plan, thus necessitating an extension
of the over-all deadline precisely to prevent respondent from going beyond the
same. Turnbull, Inc.'s function goes no further than to calculate and fix the period of
extension. But the delay petitioner alleged is different; it is delay beyond the last
date of extension fixed by Turnbull, Inc. Clearly, the question of liability therefor, is
not embraced in the exception.
To none of the exceptions then do the disagreements in question belong, the rule of
arbitration therefore applies. The parties in fact also stipulated in their contract,
under "EXTRA WORK", that the cost of extra work to be paid shall be subject to
negotiations.8 This negates the proposition that Turnbull, Inc.'s cost estimates
appearing in Addenda 2, 3 and 7 are final and conclusive.
The reason, moreover, for the exceptions interpretation of plans and
specifications; sufficiency of materials; sequence, time and method of performing
the work is the need to decide these matters immediately, since the progress of
the work would await their determination. The same is not true as to matters
relating to the liability for delay in the project's completion; these are questions that
the engineer does not have to resolve before the project can go on. Consequently,
We view that it is not included in the exceptions, as indeed the related provisions of
their agreement indicate.
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. And although it has
been ruled that a frivolous or patently baseless claim should not be ordered to
arbitration, it is also recognized that the mere fact that a defense exists against a
claim does not make it frivolous or baseless.9
Wherefore, the judgment appealed from, ordering the parties to proceed to
arbitration according to the terms of their agreement, is hereby affirmed, with costs
against appellant. So ordered.
Concepcion, C.J., Reyes, J.B.L., Dizon, Regala, Makalintal, Zaldivar, Sanchez and
Castro, JJ., concur.
G.R. No. 99042
September 26, 1994
BLOOMFIELD ACADEMY AND RODOLFO J. LAGERA, petitioners,
vs.
THE HONORABLE COURT OF APPEALS, BLOOMFIELD ACADEMY PARENTS ADVISORY
ASSOCIATION, INC. (BAPAA), represented by its Vice-President, Menardo Bordeos;
and The Hon. SALVADOR P. DE GUZMAN, JR., Presiding Judge of the Regional Trial
Court, National Capital Judicial Region, Branch 142, Makati, Metro Manila,
respondents.

Villaranza & Cruz for petitioners.

San Buenaventura, Reyes, Moraleda (SAREM) Law Offices for private respondent.

VITUG, J.:
This petition for review on certiorari seeks to reverse the decision of the Court of
Appeals dismissing, in CA-G.R. SP. No. 20846, the special civil action for certiorari
that has assailed a writ of preliminary injunction issued by the court a quo.
We adopt, for purposes of this review, the case and factual settings recited by the
appellate court in its decision. We quote:
The petition originated in a complaint for injunction filed on
April 6, 1990 by private respondent, the association of parents and guardians of
students enrolled in petitioner. One of the defendants in the said case is petitioner
which is a non-stock, non-profit educational institution. What is being disputed
before respondent court is the increase in tuition fee. More particularly, the
complaint alleged, among other things, that:
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4.
On the pretext that the operation, much more the survival of defendant
educational institution is in danger due to the mandatory increase of the minimum
wage under R.A. 6727, which the former is to comply, the defendant Corporation
decided to increase its aforesaid tuition fees under the following rates:
FROM TO
P

INCREASE IN

Grade I

P6,135

P7,485

Grade II

6,135 7,485 1,350 22.00

Grade III

6,235 7,675 1,350 21.34

Grade IV

6,235 7,675 1,350 21.34

Grade V

6,380 7,730 1,350 21.16

Grade VI

6,380 7,770 1,350 21.79

HS 1st year 6,700 8,050 1,350 20.15

HS 2nd year 6,700 8,050 1,350 20.15

P1,350

22.00


Average

6,385 7,740 1,355 21.22

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5.
The amount of the increase constitutes a whopping 21.22% average increase
of the 89-90 tuition fees and that the said increase was made without prior
consultation to the parents which is a requirement before any such increase should
be made effective;
6.
The aforesaid increases was not approved and vigorously objected to by the
plaintiff as contained in its letters to defendant Rodolfo J. Lagera . . . Honorable
Isidro Cario in his capacity as the Secretary of Education, Culture and Sports . . .
These two letters brought to the attention of the defendants that the tuition fees
presently being charged by defendants Bloomfield Academy are already among the
highest in the community, even if compared to Dela Salle Ayala and Elizabeth Seton
which have much better school and library facilities than the defendant, and that
the proposed increase is not only untimely but grossly inappropriate, and, worse,
without any valid basis already, after both parties agreed on 50% of the increase
which was implemented and paid by the students during the school year with the
clear understanding that the other 50% is waived by the defendant;
7.
In spite of the clear sharing by the plaintiff through the aforesaid letters of
the gross inappropriateness of the aforesaid proposal increase in tuition fees,
defendants Honorable Isidro Cario, blindly approved such proposal in its letter
addressed to defendant Rodolfo S. Lagera dated March 27, 1990 . . .;
8.
Subsequently plaintiff received from the defendant Bloomfield Academy
through defendant Rodolfo S. Lagera a
letter . . . demanding full payment of the approved tuition fee increase on or before
April 6, 1990 in blatant isolation of the agreement with the plaintiff that only 50% of
the increase will be collected. As a matter of fact, the plaintiff has already paid the
said 50% of the increase;
9.
The implementation of the aforesaid approval to increase tuition fees, if not
retained by this Honorable Court, would work injustice to the herein plaintiff . . .
while incorporators keep huge profits, by siphoning them to another corporation,
Rudlin International, Inc. while they also owned and is now asking for increase in the
rentals of the buildings retroactively for three (3) years.
On the date the complaint was filed, respondent court issued an order enjoining
petitioners and Secretary Cario and/or their agents, representatives or persons
acting in their behalf from implementing their aforesaid increase in tuition fees, and
not withholding their release of the report cards and/or other papers necessary for
the students desiring to transfer to other schools until further orders from
respondent court.
The application for injunction was set for hearing on April 19, 1990 at
2:00 p.m.

Answer to the complaint was filed by petitioners on April 19, 1990. On the same
date, respondent court conducted the first hearing on the application for a writ of
preliminary injunction which hearing was followed by settings on April 25, 26 and
27, 1990.
After petitioners submitted their complete set of exhibits and memorandum in
opposition to the application for a writ of preliminary injunction, respondent court
issued the disputed order . . . 1
The order of the court a quo, dated 30 April 1990, referred to by the appellate court
read:
WHEREFORE, let a writ of preliminary injunction be issued ordering the defendants,
their agents, their representatives, and all persons acting under them from
collecting the second P675.00 from the enrollees, limiting themselves only to the
first P675.00 and/or from withholding or refusing the release of the report cards and
other papers necessary for students transferring to other school, until further order
from this court, upon the posting by the plaintiff of a bond in the sum of
P200,000.00 conditioned to the payment in favor of the defendants of whatever
damages they may suffer by virtue of this injunction should it appear that the
plaintiff is not entitled thereto. 2
In holding to be without merit the petition for certiorari attributing to the court a
quo grave abuse of discretion in the issuance of the aforequoted order, the
appellate court ratiocinated thusly:
It is a well established rule that the grant or denial of an injunction rests upon the
sound discretion of the court, in the exercise of which appellate courts will not
interfere except on a case of a clear abuse (Belisle Investment and Finance Co., Inc.
W. State Investment House; Rodolfo vs. Alfonso, 76 Phil. 225). And to justify the
issuance of a writ of certiorari it must be shown that the abuse of discretion was
grave and patent and that the discretion was exercised arbitrarily or despotically
(Soriano, et al., vs. Atienza, et al., 171 SCRA 284).
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Rightly or wrongly, respondent judge's conclusion, which served as basis in issuing

the questioned writ, was reached only after considering the facts bared in the
course of the hearing. In other words, respondent judge was merely exercising his
judgment. Errors of judgment are not within the province of a special civil action for
certiorari (Purefoods Corporation vs. NLRC, 174 SCRA 415).
One thing we noticed about this petition is that the issues raised are factual
involving as they do errors of judgment on the part of respondent judge. Invariably,
we encounter the following arguments:
. . . public respondent Judge de Guzman appears to have been mislead by the
private respondent BAPAA's claim that petitioner Bloomfield Academy did not
conduct the requisite consultation before implementing the tuition fee increase.

. . . public respondent Judge de Guzman appears to have been mislead by the

private respondent's untruthful claim.
It must emphatically be reiterated, since so often it is overlooked, the special civil
action for certiorari is a remedy designed for the correction of errors of jurisdiction
and not errors of judgment. Consequently, an error of jurisdiction is not
controvertible through the original civil action of certiorari (Purefoods Corporation
vs. NLRC, 171 SCRA 418).
Anent the allegation that respondent judge disregarded the fact that the private
respondent failed to exhaust available administrative remedies in assailing the
decision of the Department of Education Culture and Sports approving the tuition
fee increase suffice it to state that the principle requiring the previous exhaustion of
administrative remedies is not applicable when the respondent is a department
secretary whose act as an alter-ego of the President bears the implied or assumed
approval of the latter (Animos vs. Phil. Veterans Affairs Office, 174 SCRA 214.). 3
In the herein petition for review on certiorari before this Court, petitioners formulate
the sole issue of whether or not the court a quo has acted within its jurisdiction in
issuing the questioned order and, in the affirmative, whether or not it has
committed grave abuse of discretion specifically in granting private respondent's
application for a writ of preliminary injunction.
We see merit in the petition.
The pertinent provisions of Republic Act No. 6728, also commonly known as "An Act
Providing Government Assistance to Students and Teachers in Private Education,
And Appropriating Funds Therefor," provide:
Sec. 9. Further Assistance To Students in Private Colleges and Universities. . . . .
(b)
For students enrolled in schools charging above one thousand five hundred
pesos (P1,500.00) per year in tuition and other fees during the school year 19881989 or such amount in subsequent years as may be determined from time to time
by the State Assistance Council, no assistance for tuition fees shall be granted by
the Government: Provided, however, That the schools concerned may raise their
tuition fees subject to Section 10 hereof.
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Sec. 10.
Consultation. In any proposed increase in the rate of tuition fee,
there shall be appropriate consultations conducted by the school administration
with the duly organized parents and teachers associations and faculty associations
with respect to secondary schools, and with students governments or councils,
alumni and faculty associations with respect to colleges. For this purpose, audited
financial statements shall be made available to authorized representatives of these
sectors. Every effort shall be exerted to reconcile possible differences. In case of
disagreement, the alumni association of the school or any other impartial body of
their choosing shall act as arbitrator.

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Sec. 14.
Program Administration/Rules and Regulations. The State Assistance
Council shall be responsible for policy guidance and direction, monitoring and
evaluation of new and existing programs, and the promulgation of rules and
regulations, while the Department of Education, Culture and Sports shall be
responsible for the day to day administration and program implementation.
Likewise, it may engage the services and support of any qualified government or
private entity for its implementation. (Emphasis supplied.)
Private respondent filed with the court a quo an action, entitled "Injunction with
Preliminary Prohibitory Injunction with Prayer for Temporary Restraining Order"
(docketed Civil Case No. 90-971), against petitioners and the Secretary of
Education, Culture and Sports ("DECS") seeking to stop the implementation of the
increase in tuition fees by petitioner school. Private respondent asserted that the
increase was adopted without the prior
consultation required by law and that, in any case, the approved increase was
exorbitant (at 21.22%). Petitioners, on their part, contended that the parties did, in
fact, hold consultations at which the wage increase for teachers mandated by
Republic Act 6727 and the resulting increase in tuition fees allowed by Republic Act
No. 6728 were discussed at length. The Solicitor General, answering the complaint
for and in behalf of the DECS Secretary, attested to the approval by DECS of a fifty
percent (50%) tuition fee increase for the school year 1989-1990.
The judicial action initiated by private respondent before the court a quo appears to
us to be an inappropriate recourse. It remains undisputed that the DECS Secretary
has, in fact, taken cognizance of the case for the tuition fee increase and has
accordingly acted thereon. We can only assume that in so doing the DECS Secretary
has duly passed upon the relevant legal and factual issues dealing on the propriety
of the matter. In the decision process, the DECS Secretary has verily acted in a
quasi-judicial capacity. The remedy from that decision is an appeal. Conformably
with Batas Pambansa Blg. 129, the exclusive appellate jurisdiction to question that
administrative action lies with the Court of Appeals, not with the court a quo. If we
were to consider, upon the other hand, the case for injunction filed with the court a
quo to be a ordinary action solely against herein petitioner (with DECS being then
deemed to be merely a nominal party), it would have meant the court's taking
cognizance over the case in disregard of the doctrine of primary jurisdiction. 4
Neither can we treat the case as a special civil action for certiorari or prohibition as
the complaint filed by private respondent with the court a quo, contains no
allegation of lack, or grave abuse in the exercise, of jurisdiction on the part of DECS
nor has there been any finding made to that effect by either the court a quo or the
appellate court that could warrant the extraordinary remedy. A special civil action,
either for certiorari or prohibition, can be grounded only on either lack of jurisdiction
or grave abuse of discretion. 5
In passing, we also observe that the parties have both remained silent on the
provisions of Republic Act No. 6728 to the effect that in case of disagreement on
tuition fee increases (in this instance by herein private parties), the issue should be
resolved through arbitration. Although the matter has not been raised by the

parties, it is an aspect, nevertheless, in our view, that could have well been
explored by them instead of immediately invoking, such as they apparently did, the
administrative and judicial relief to resolve the controversy.
All told, we hold that the court a quo has been bereft of jurisdiction in taking
cognizance of private respondent's complaint. We see no real justification, on the
basis of the factual and case settings here obtaining, to permit a deviation from the
long standing rule that the issue of jurisdiction may be raised at any time even on
appeal.
WHEREFORE, conformably with our above opinion, the instant petition is GRANTED
and the questioned ordered of the court a quo and the decision of the appellate
court are SET ASIDE. No costs.
SO ORDERED.