Sie sind auf Seite 1von 41

[G.R. Nos. 132848-49.

June 26, 2001]


PHILROCK, INC., petitioner, vs. CONSTRUCTION INDUSTRY ARBITRATION COMMISSION and
Spouses VICENTE and NELIA CID,respondents.
DECISION
PANGANIBAN, J.:
Courts encourage the use of alternative methods of dispute resolution. When parties agree to settle their
disputes arising from or connected with construction contracts, the Construction Industry Arbitration
Commission (CIAC) acquires primary jurisdiction. It may resolve not only the merits of such controversies;
when appropriate, it may also award damages, interests, attorneys fees and expenses of litigation.
The Case
Before us is a Petition for Review under Rule 45 of the Rules of Court. The Petition seeks the reversal of the
July 9, 1997 Decision[1] and the February 24, 1998 Resolution of the Court of Appeals (CA) in the consolidated
cases docketed as CA-GR SP Nos. 39781 and 42443. The assailed Decision disposed as follows:
WHEREFORE, judgment is hereby rendered DENYING the petitions and,
accordingly, AFFIRMING in toto the CIACs decision. Costs against petitioner.[2]
The assailed Resolution ruled in this wise:
Considering that the matters raised and discussed in the motion for reconsideration filed by appellants counsel
are substantially the same arguments which the Court had passed upon and resolved in the decision sought to be
reconsidered, and there being no new issue raised, the subject motion is hereby DENIED.[3]
The Facts
The undisputed facts of the consolidated cases are summarized by the CA as follows:
"On September 14, 1992, the Cid spouses, herein private respondents, filed a Complaint for damages against
Philrock and seven of its officers and engineers with the Regional Trial Court of Quezon City, Branch 82.
On December 7, 1993, the initial trial date, the trial court issued an Order dismissing the case and referring the
same to the CIAC because the Cid spouses and Philrock had filed an Agreement to Arbitrate with the CIAC.
Thereafter, preliminary conferences were held among the parties and their appointed arbitrators. At these
conferences, disagreements arose as to whether moral and exemplary damages and tort should be included as an
issue along with breach of contract, and whether the seven officers and engineers of Philrock who are not
parties to the Agreement to Arbitrate should be included in the arbitration proceedings. No common ground
could be reached by the parties, hence, on April 2, 1994, both the Cid spouses and Philrock requested that the
case be remanded to the trial court. On April 13, 1994, the CIAC issued an Order stating, thus:

'x x x the Arbitral Tribunal hereby formally dismisses the above-captioned case for referral to Branch 82 of the
Regional Trial Court, Quezon City where it first originated.
SO ORDERED.'
The Cid spouses then filed with said Branch of the Regional Trial Court of Quezon City a Motion To Set Case
for Hearing which motion was opposed by Philrock.
On June 13, 1995, the trial court declared that it no longer had jurisdiction over the case and ordered the
records of the case to be remanded anew to the CIAC for arbitral proceedings.
Pursuant to the aforementioned Order of the Regional Trial C[o]urt of Quezon City, the CIAC resumed
conducting preliminary conferences. On August 21, 1995, herein [P]etitioner Philrock requested to suspend the
proceedings until the court clarified its ruling in the Order dated June 13, 1995. Philrock argued that said Order
was based on a mistaken premise that 'the proceedings in the CIAC fell through because of the refusal of
[Petitioner] Philrock to include the issue of damages therein,' whereas the true reason for the withdrawal of the
case from the CIAC was due to Philrock's opposition to the inclusion of its seven officers and engineers, who
did not give their consent to arbitration, as party defendants. On the other hand, private respondent Nelia Cid
manifested that she was willing to exclude the seven officers and engineers of Philrock as parties to the case so
as to facilitate or expedite the proceedings. With such manifestation from the Cid spouses, the Arbitral Tribunal
denied Philrock's request for the suspension of the proceedings. Philrock's counsel agreed to the continuation of
the proceedings but reserved the right to file a pleading elucidating the position he [had] raised regarding the
Court's Order dated June 13, 1995. The parties then proceeded to finalize, approve and sign the Terms of
Reference. Philrock's counsel and representative, Atty. Pericles C. Consunji affixed his signature to said Terms
of Reference which stated that 'the parties agree that their differences be settled by an Arbitral Tribunal x x x x'
(p. 9, Terms of Reference, p. 200, Rollo).
On September 12, 1995, [P]etitioner Philrock filed its Motion to Dismiss, alleging therein that the CIAC had
lost jurisdiction to hear the arbitration case due to the parties' withdrawal of their consent to arbitrate. The
motion was denied by x x x CIAC per Order dated September 22, 1995. On November 8, public respondent
ordered the parties to appear before it on November 28, 1995 for the continuation of the arbitral proceedings,
and on February 7, 1996, public respondent directed [P]etitioner Philrock to set two hearing dates in the month
of February to present its evidence and to pay all fees assessed by it, otherwise x x x Philrock would be deemed
to have waived its right to present evidence.
Hence, petitioner instituted the petition for certiorari but while said petition was pending, the CIAC rendered
its Decision dated September 24, 1996, the dispositive portion of which reads, as follows:
'WHEREFORE, judgment is hereby rendered in favor of the Claimant, directing Respondent to pay Claimant as
follows:
1. P23,276.25 representing the excess cash payment for materials ordered by the Claimants, (No. 7 of admitted
facts) plus interests thereon at the rate of 6% per annum from September 26, 1995 to the date payment is made.
2. P65,000.00 representing retrofitting costs.

3. P13,404.54 representing refund of the value of delivered but unworkable concrete mix that was laid to waste.
4. P50,000.00 representing moral damages.
5. P50,000.00 representing nominal damages.
6. P50,000.00 representing attorney's fees and expenses of litigation.
7. P144,756.80 representing arbitration fees, minus such amount that may already have been paid to CIAC by
respondent.
Let a copy of this Decision be furnished the Honorable Salvador C. Ceguera, presiding judge, Branch 82 of
Regional Trial Court of Quezon City who referred this case to the Construction Industry Arbitration
Commission for arbitration and proper disposition.' (pp. 44-45, Rollo, CA-G.R. SP No. 42443) "[4]
Before the CA, petitioner filed a Petition for Review, docketed as CA-GR SP No. 42443, contesting the
jurisdiction of the CIAC and assailing the propriety of the monetary awards in favor of respondent
spouses. This Petition was consolidated by the CA with CA-GR SP No. 39781, a Petition for Certiorari earlier
elevated by petitioner questioning the jurisdiction of the CIAC.
Ruling of the Court of Appeals
The CA upheld the jurisdiction of the CIAC[5] over the dispute between petitioner and private
respondent. Under Executive Order No. 1008, the CIAC acquires jurisdiction when the parties agree to submit
their dispute to voluntary arbitration. Thus, in the present case, its jurisdiction continued despite its April 13,
1994 Order referring the case back to the Regional Trial Court (RTC) of Quezon City, Branch 82, the court of
origin. The CIACs action was based on the principle that once acquired, jurisdiction remains until the full
termination of the case unless a law provides the contrary. No such full termination of the case was evident
in the said Order; nor did the CIAC or private respondents intend to put an end to the case.
Besides, according to Section 3 of the Rules of Procedure Governing Construction Arbitration, technical rules
of law or procedure are not applicable in a single arbitration or arbitral tribunal. Thus, the dismissal could not
have divested the CIAC of jurisdiction to ascertain the facts of the case, arrive at a judicious resolution of the
dispute and enforce its award or decision.
Since the issues concerning the monetary awards were questions of fact, the CA held that those awards were
inappropriate in a petition for certiorari. Such questions are final and not appealable according to Section 19 of
EO 1008, which provides that arbitral awards shall be x x x final and [u]nappealable except on questions of
law which shall be appealable to the Supreme Court x x x. Nevertheless, the CA reviewed the records and
found that the awards were supported by substantial evidence. In matters falling under the field of expertise of
quasi-judicial bodies, their findings of fact are accorded great respect when supported by substantial evidence.
Hence, this Petition.[6]
Issues
The petitioner, in its Memorandum, raises the following issues:

A.
Whether or not the CIAC could take jurisdiction over the case of Respondent Cid spouses against Petitioner
Philrock after the case had been dismissed by both the RTC and the CIAC.
B.
Whether or not Respondent Cid spouses have a cause of action against Petitioner Philrock.
C.
Whether or not the awarding of the amount of P23,276.75 for materials ordered by Respondent Spouses Cid
plus interest thereon at the rate of 6% from 26 September 1995 is proper.
D.
Whether or not the awarding of the amount of P65,000.00 as retrofitting costs is proper.
E.
Whether or not the awarding of the amount of P1,340,454 for the value of the delivered but the allegedly
unworkable concrete which was wasted is proper.
F.
Whether or not the awarding o[f] moral and nominal damages and attorney's fees and expenses of litigation in
favor of respondents is proper.
G.
Whether or not Petitioner Philrock should be held liable for the payment of arbitration fees.[7]
In sum, petitioner imputes reversible error to the CA (1) for upholding the jurisdiction of the CIAC after the
latter had dismissed the case and referred it to the regular court, (2) for ruling that respondent spouses had a
cause of action against petitioner, and (3) for sustaining the award of damages.
This Courts Ruling
The Petition has no merit.
First Issue: Jurisdiction
Petitioner avers that the CIAC lost jurisdiction over the arbitration case after both parties had withdrawn their
consent to arbitrate. The June 13, 1995 RTC Order remanding the case to the CIAC for arbitration was
allegedly an invalid mode of referring a case for arbitration.

We disagree. Section 4 of Executive Order 1008 expressly vests in the CIAC original and exclusive jurisdiction
over disputes arising from or connected with construction contracts entered into by parties that have agreed to
submit their dispute to voluntary arbitration.[8]
It is undisputed that the parties submitted themselves to the jurisdiction of the Commission by virtue of their
Agreement to Arbitrate dated November 24, 1993. Signatories to the Agreement were Atty. Ismael J. Andres
and Perry Y. Uy (president of Philippine Rock Products, Inc.) for petitioner, and Nelia G. Cid and Atty. Esteban
A. Bautista for respondent spouses.[9]
Petitioner claims, on the other hand, that this Agreement was withdrawn by respondents on April 8, 1994,
because of the exclusion of the seven engineers of petitioners in the arbitration case. This withdrawal became
the basis for the April 13, 1994 CIAC Order dismissing the arbitration case and referring the dispute back to the
RTC. Consequently, the CIAC was divested of its jurisdiction to hear and decide the case.
This contention is untenable. First, private respondents removed the obstacle to the continuation of the
arbitration, precisely by withdrawing their objection to the exclusion of the seven engineers. Second, petitioner
continued participating in the arbitration even after the CIAC Order had been issued. It even concluded and
signed the Terms of Reference[10] on August 21, 1995, in which the parties stipulated the circumstances leading
to the dispute; summarized their respective positions, issues, and claims; and identified the composition of the
tribunal of arbitrators. The document clearly confirms both parties intention and agreement to submit the
dispute to voluntary arbitration. In view of this fact, we fail to see how the CIAC could have been divested of
its jurisdiction.
Finally, as pointed out by the solicitor general, petitioner maneuvered to avoid the RTCs final resolution of the
dispute by arguing that the regular court also lost jurisdiction after the arbitral tribunals April 13, 1994 Order
referring the case back to the RTC. In so doing, petitioner conceded and estopped itself from further
questioning the jurisdiction of the CIAC. The Court will not countenance the effort of any party to subvert or
defeat the objective of voluntary arbitration for its own private motives. After submitting itself to arbitration
proceedings and actively participating therein, petitioner is estopped from assailing the jurisdiction of the CIAC,
merely because the latter rendered an adverse decision.[11]
Second Issue: Cause of Action
Petitioner contends that respondent spouses were negligent in not engaging the services of an engineer or
architect who should oversee their construction, in violation of Section 308 of the National Building Code. It
adds that even if the concrete it delivered was defective, respondent spouses should bear the loss arising from
their illegal operation. In short, it alleges that they had no cause of action against it.
We disagree. Cause of action is defined as an act or omission by which a party violates the right of another.
[12]
A complaint is deemed to have stated a cause of action provided it has indicated the following: (1) the legal
right of the plaintiff, (2) the correlative obligation of the defendant, and (3) the act or the omission of the
defendant in violation of the said legal right.[13] The cause of action against petitioner was clearly
established. Respondents were purchasers of ready-mix concrete from petitioner. The concrete delivered by the
latter turned out to be of substandard quality. As a result, respondents sustained damages when the structures
they built using such cement developed cracks and honeycombs. Consequently, the construction of their
residence had to be stopped.

Further, the CIAC Decision clearly spelled out respondents cause of action against petitioner, as follows:
Accordingly, this Tribunal finds that the mix was of the right proportions at the time it left the plant. This,
however, does not necessarily mean that all of the concrete mix delivered had remained workable when it
reached the jobsite. It should be noted that there is no evidence to show that all the transit mixers arrived at the
site within the allowable time that would ensure the workability of the concrete mix delivered.
On the other hand, there is sufficiently strong evidence to show that difficulties were encountered in the
pouring of concrete mix from certain transit mixers necessitating the [addition] of water and physically pushing
the mix, obviously because the same [was] no longer workable. This Tribunal holds that the unworkability of
said concrete mix has been firmly established.
There is no dispute, however, to the fact that there are defects in some areas of the poured structures. In this
regard, this Tribunal holds that the only logical reason is that the unworkable concrete was the one that was
poured in the defective sections.[14]
Third Issue: Monetary Awards
Petitioner assails the monetary awards given by the arbitral tribunal for alleged lack of basis in fact and in
law. The solicitor general counters that the basis for petitioners assigned errors with regard to the monetary
awards is purely factual and beyond the review of this Court. Besides, Section 19, EO 1008, expressly provides
that monetary awards by the CIAC are final and unappealable.
We disagree with the solicitor general. As pointed out earlier, factual findings of quasi-judicial bodies that have
acquired expertise are generally accorded great respect and even finality, if they are supported by substantial
evidence.[15] The Court, however, has consistently held that despite statutory provisions making the decisions of
certain administrative agencies final, it still takes cognizance of petitions showing want of jurisdiction, grave
abuse of discretion, violation of due process, denial of substantial justice or erroneous interpretation of the law.
[16]
Voluntary arbitrators, by the nature of their functions, act in a quasi-judicial capacity, such that their
decisions are within the scope of judicial review.[17]
Petitioner protests the award to respondent spouses of P23,276.25 as excess payment with six percent interest
beginning September 26, 1995. It alleges that this item was neither raised as an issue by the parties during the
arbitration case, nor was its justification discussed in the CIAC Decision. It further contends that it could not be
held liable for interest, because it had earlier tendered a check in the same amount to respondent spouses, who
refused to receive it.
Petitioners contentions are completely untenable. Respondent Nelia G. Cid had already raised the issue of
overpayment even prior to the formal arbitration. In paragraph 9 of the Terms of Reference, she stated:
9. Claimants were assured that the problem and her demands had been the subject of several staff meetings and
that Arteche was very much aware of it, a memorandum having been submitted citing all the demands of
[c]laimants. This assurance was made on July 31, 1992 when Respondents Secillano, Martillano and Lomibao
came to see Claimant Nelia Cid and offered to refund P23,276.25, [t]he difference between the billing by
Philrocks Marketing Department in the amount of P125,586.25 and the amount charged by Philrock's Batching

Plant Department in the amount of only P102,586.25, which [c]laimant refused to accept by saying, Saka na
lang.[18]
The same issue was discussed during the hearing before the arbitration tribunal on December 19, 1995.[19] It was
also mentioned in that tribunals Decision dated September 24, 1996.[20]
The payment of interest is based on Article 2209 of the Civil Code, which provides that if the obligation
consists of the payment of a sum of money, and the debtor incurs delay, the indemnity for damages shall be the
payment of legal interest which is six per cent per annum, in the absence of a stipulation of the rate.
Awards for Retrofitting Costs, Wasted Unworkable But Delivered Concrete, and Arbitration Fees
Petitioner maintains that the defects in the concrete structure were due to respondent spouses failure to secure
the services of an engineer or architect to supervise their project. Hence, it claims that the award for retrofitting
cost was without legal basis. It also denies liability for the wasted unworkable but delivered concrete, for which
the arbitral court awarded P13,404.54. Finally, it complains against the award of litigation expenses, inasmuch
as the case should not have been instituted at all had respondents complied with the requirements of the
National Building Code.
We are unconvinced. Not only did respondents disprove the contention of petitioner; they also showed that they
sustained damages due to the defective concrete it had delivered. These were items of actual damages they
sustained due to its breach of contract.
Moral and Nominal Damages, Attorneys Fees and Costs
Petitioner assails the award of moral damages, claiming no malice or bad faith on its part.
We disagree. Respondents were deprived of the comfort and the safety of a house and were exposed to the
agony of witnessing the wastage and the decay of the structure for more than seven years. In her Memorandum,
Respondent Nelia G. Cid describes her familys sufferings arising from the unreasonable delay in the
construction of their residence, as follows: The family lives separately for lack of space to stay in. Mrs. Cid is
staying in a small dingy bodega, while her son occupies another makeshift room. Their only daughter stayed
with her aunt from 1992 until she got married in 1996. x x x.[21] The Court also notes that during the pendency
of the case, Respondent Vicente Cid died without seeing the completion of their home.[22] Under the
circumstances, the award of moral damages is proper.
Petitioner also contends that nominal damages should not have been granted, because it did not breach its
obligation to respondent spouses.
Nominal damages are recoverable only if no actual or substantial damages resulted from the breach, or no
damage was or can be shown.[23] Since actual damages have been proven by private respondents for which they
were amply compensated, they are no longer entitled to nominal damages.
Petitioner protests the grant of attorneys fees, arguing that respondent spouses did not engage the services of
legal counsel. Also, it contends that attorneys fees and litigation expenses are awarded only if the opposing
party acted in gross and evident bad faith in refusing to satisfy plaintiffs valid, just and demandable claim.

We disagree. The award is not only for attorneys fees, but also for expenses of litigation. Hence, it does not
matter if respondents represented themselves in court, because it is obvious that they incurred expenses in
pursuing their action before the CIAC, as well as the regular and the appellate courts. We find no reason to
disturb this award.
WHEREFORE, the Petition is DENIED and the assailed Decision AFFIRMED; however, the award of
nominal damages is DELETED for lack of legal basis. Costs against petitioner.
SO ORDERED.
Melo, (Chairman), Vitug, Gonzaga-Reyes, and Sandoval-Gutierrez, JJ., concur.

G.R. No. 175048


EXCELLENT QUALITY APPAREL,
INC., Petitioner, v. WIN MULTI RICH BUILDERS, INC,, represented by its President, WILSON G.
CHUA, Respondent.
February 10, 2009
x ---------------------------------------------------------------------------------x

DECISION
TINGA, J.:
Before us is a Rule 45 petition[1] seeking the reversal of the Decision[2] and Resolution[3] of the Court of Appeals
in CA-G.R. SP No. 84640. The Court of Appeals had annulled two orders[4] of the Regional Trial Court (RTC),
Branch 32, of Manila in Civil Case No. 04-108940. This case involves a claim for a sum of money which arose
from a construction dispute.
On 26 March 1996, petitioner Excellent Quality Apparel, Inc. (petitioner) then represented by Max L.F. Ying,
Vice-President for Productions, and Alfiero R. Orden, Treasurer, entered into a contract[5] with Multi-Rich
Builders (Multi-Rich) represented by Wilson G. Chua (Chua), its President and General Manager, for the
construction of a garment factory within the Cavite Philippine Economic Zone Authority (CPEZ).[6] The
duration of the project was for a maximum period of five (5) months or 150 consecutive calendar days. Included
in the contract is an arbitration clause which is as follows:

Article XIX

ARBITRATION CLAUSE

Should there be any dispute, controversy or difference between the parties arising out of this Contract that may
not be resolved by them to their mutual satisfaction, the matter shall be submitted to an Arbitration Committee
of three (3) members; one (1) chosen by the OWNER; one (1) chosen by the CONTRACTOR; and the
Chairman thereof to be chosen by two (2) members. The decision of the Arbitration Committee shall be final
and binding on both the parties hereto. The Arbitration shall be governed by the Arbitration Law (R.A. [No.]
876). The cost of arbitration shall be borned [sic] jointly by both CONTRACTOR and OWNER on 50-50 basis.
[7]

The construction of the factory building was completed on 27 November 1996.


Respondent Win Multi-Rich Builders, Inc. (Win) was incorporated with the Securities and Exchange
Commission (SEC) on 20 February 1997[8] with Chua as its President and General Manager. On 26 January

2004, Win filed a complaint for a sum of money[9] against petitioner and Mr. Ying amounting toP8,634,448.20.
It also prayed for the issuance of a writ of attachment claiming that Mr. Ying was about to abscond and that
petitioner was about to close. Win obtained a surety bond[10] issued by Visayan Surety & Insurance Corporation.
On 10 February 2004, the RTC issued the Writ of Attachment[11]against the properties of petitioner.
On 16 February 2004, Sheriff Salvador D. Dacumos of the RTC of Manila, Branch 32, went to the office
of petitioner in CPEZ to serve the Writ of Attachment, Summons[12] and the Complaint. Petitioner issued
Equitable PCIBank (PEZA Branch) Check No. 160149, dated 16 February 2004, in the amount
of P8,634,448.20, to prevent the Sheriff from taking possession of its properties.[13] The check was made
payable to the Office of the Clerk of Court of the RTC of Manila as a guarantee for whatever liability there may
be against petitioner.
Petitioner filed an Omnibus Motion[14] claiming that it was neither about to close. It also denied owing
anything to Win, as it had already paid all its obligations to it. Lastly, it questioned the jurisdiction of the trial
court from taking cognizance of the case. Petitioner pointed to the presence of the Arbitration Clause and it
asserted that the case should be referred to the Construction Industry Arbitration Commission (CIAC) pursuant
to Executive Order (E.O.) No. 1008.
In the hearing held on 10 February 2004, the counsel of Win moved that its name in the case be changed
from Win Multi-Rich Builders, Inc. to Multi-Rich Builders, Inc. It was only then that petitioner apparently
became aware of the variance in the name of the plaintiff. In the Reply[15] filed by petitioner, it moved to dismiss
the case since Win was not the contractor and neither a party to the contract, thus it cannot institute the case.
Petitioner obtained a Certificate of Non-Registration of Corporation/Partnership[16] from the SEC which
certified that the latter did not have any records of a Multi-Rich Builders, Inc. Moreover, Win in its
Rejoinder[17] did not oppose the allegations in the Reply. Win admitted that it was only incorporated on 20
February 1997 while the construction contract was executed on 26 March 1996. Likewise, it admitted that at the
time of execution of the contract, Multi-Rich was a registered sole proprietorship and was issued a business
permit[18] by the Office of the Mayor of Manila.
In an Order[19] dated 12 April 2004, the RTC denied the motion and stated that the issues can be answered
in a full-blown trial. Upon its denial, petitioner filed its Answer and prayed for the dismissal of the case.[20] Win
filed a Motion[21] to deposit the garnished amount to the court to protect its legal rights. In a Manifestation,
[22]
petitioner vehemently opposed the deposit of the garnished amount. The RTC issued an Order[23] dated 20
April 2004, which granted the motion to deposit the garnished amount. On the same date, Win filed a
motion[24] to release the garnished amount to it. Petitioner filed its opposition[25] to the motion claiming that the
release of the money does not have legal and factual basis.
On 18 June 2004, petitioner filed a petition for review on certiorari[26] under Rule 65 before the Court of
Appeals, which questioned the jurisdiction of the RTC and challenged the orders issued by the lower court with
a prayer for the issuance of a temporary retraining order and a writ of preliminary injunction.
Subsequently, petitioner filed a Supplemental Manifestation and Motion[27] and alleged that the money
deposited with the RTC was turned over to Win. Win admitted that the garnished amount had already been
released to it. On 14 March 2006, the Court of Appeals rendered its Decision[28] annulling the 12 April and 20
April 2004 orders of the RTC. It also ruled that the RTC had jurisdiction over the case since it is a suit for
collection of sum of money. Petitioner filed a Motion for Reconsideration[29] which was subsequently denied in
a resolution.[30]

Hence this petition.


Petitioner raised the following issues to wit: (1) does Win have a legal personality to institute the present
case; (2) does the RTC have jurisdiction over the case notwithstanding the presence of the arbitration clause;
and (3) was the issuance of the writ of attachment and the subsequent garnishment proper.

A suit may only be instituted by the real party in interest. Section 2, Rule 3 of the Rules of Court defines
parties in interest in this manner:
A real party in interest is the party who stands to be benefited or injured by the judgment in the suit, or the party
entitled to the avails of the suit. Unless otherwise authorized by law or these Rules, every action must be
prosecuted or defended in the name of the real party in interest.
Is Win a real party in interest? We answer in the negative.
Win admitted that the contract was executed between Multi-Rich and petitioner. It further admitted that
Multi-Rich was a sole proprietorship with a business permit issued by the Office of the Mayor of Manila. A sole
proprietorship is the oldest, simplest, and most prevalent form of business enterprise.[31] It is an unorganized
business owned by one person. The sole proprietor is personally liable for all the debts and obligations of the
business.[32] In the case of Mangila v. Court of Appeals,[33] we held that:
x x x In fact, there is no law authorizing sole proprietorships to file a suit in court.
A sole proprietorship does not possess a juridical personality separate and distinct from the personality of the
owner of the enterprise. The law merely recognizes the existence of a sole proprietorship as a form of business
organization conducted for profit by a single individual and requires its proprietor or
owner to secure licenses and permits, register its business name, and pay taxes to the national government.
The law does not vest a separate legal personality on the sole proprietorship or empower it to file or defend an
action in court.
The original petition was instituted by Win, which is a SEC-registered corporation. It filed a collection of sum
of money suit which involved a construction contract entered into by petitioner and Multi-Rich, a sole
proprietorship. The counsel of Win wanted to change the name of the plaintiff in the suit to Multi-Rich. The
change cannot be countenanced. The plaintiff in the collection suit is a corporation. The name cannot be
changed to that of a sole proprietorship. Again, a sole proprietorship is not vested with juridical personality to
file or defend an action.[34]
Petitioner had continuously contested the legal personality of Win to institute the case. Win was given
ample opportunity to adduce evidence to show that it had legal personality. It failed to do so. Corpus Juris
Secundum, notes:

x x x where an individual or sole trader organizes a corporation to take over his business and all his assets, and
it becomes in effect merely an alter ego of the incorporator, the corporation, either on the grounds of implied
assumption of the debts or on the grounds that the business is the same and is merely being conducted under a
new guise, is liable for the incorporator's preexisting debts and liabilities. Clearly, where the corporation
assumes or accepts the debt of its predecessor in business it is liable and if the transfer of assets is in fraud of
creditors it will be liable to the extent of the assets transferred. The corporation is not liable on an implied
assumption of debts from the receipt of assets where the incorporator retains sufficient assets to pay the
indebtedness, or where none of his assets are transferred to the corporation, or where, although all the
assets of the incorporator have been transferred, there is a change in the persons carrying on the business and
the corporation is not merely an alter ego of the person to whose business it succeeded.[35]
In order for a corporation to be able to file suit and claim the receivables of its predecessor in business, in this
case a sole proprietorship, it must show proof that the corporation had acquired the assets and liabilities of the
sole proprietorship. Win could have easily presented or attached any document e.g., deed of assignment which
will show whether the assets, liabilities and receivables of Multi-Rich were acquired by Win. Having been given
the opportunity to rebut the allegations made by petitioner, Win failed to use that opportunity. Thus, we cannot
presume that Multi-Rich is the predecessor-in-business of Win and hold that the latter has standing to institute
the collection suit.
Assuming arguendo that Win has legal personality, the petition will still be granted.
Section 4 of E.O. No. 1008[36] provides for the jurisdiction of the Construction Industry Arbitration
Commission, to wit:
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 disputes arises before or after the completion of the contract, or after the abandonment or breach thereof.
These disputes may involve government or private contracts. For the Board to acquire jurisdiction, the parties to
a dispute must agree to submit the same to voluntary arbitration.
The jurisdiction of the CIAC may include but is not limited to violation of specifications for materials
and workmanship; violation of the terms of agreement; interpretation and/or application of contractual time and
delays; 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 from employer-employee relationships which shall
continue to be covered by the Labor Code of the Philippines.
There is nothing in the law which limits the exercise of jurisdiction to complex or difficult cases. E.O. No. 1008
does not distinguish between claims involving payment of money or not.[37] The CIAC acquires jurisdiction over
a construction contract by the mere fact that the parties agreed to submit to voluntary arbitration.[38] The law
does not preclude parties from stipulating a preferred forum or arbitral body but they may not divest the CIAC
of jurisdiction as provided by law.[39] Arbitration is an alternative method of dispute resolution which is highly
encouraged.[40] The arbitration clause is a commitment on the part of the parties to submit to arbitration the
disputes covered since that clause is binding, and they are expected to

abide by it in good faith.[41] Clearly, the RTC should not have taken cognizance of the collection suit. The
presence of the arbitration clause vested jurisdiction to the CIAC over all construction disputes between
Petitioner and Multi-Rich. The RTC does not have jurisdiction.[42]
Based on the foregoing, there is no need to discuss the propriety of the issuance of the writ of attachment.
However, we cannot allow Win to retain the garnished amount which was turned over by the RTC. The RTC did
not have jurisdiction to issue the questioned writ of attachment and to order the release of the garnished funds.
WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals is hereby MODIFIED.
Civil Case No. 04-108940 isDISMISSED. Win Multi-Rich Builders, Inc. is ORDERED to return the garnished
amount of EIGHT MILLION SIX HUNDRED THIRTY-FOUR THOUSAND FOUR HUNDRED
FORTY-EIGHT PESOS AND FORTY CENTAVOS (P8,634,448.40),
which was turned over by the Regional Trial Court, to petitioner with legal interest of 12 percent (12%) per
annum upon finality of this Decision until payment.

SO ORDERED.
G.R. No. 172438
METROPOLITAN CEBU WATER
DISTRICT,
Present:
Petitioner,

VELASCO, JR., J., Chairperson,


PERALTA,
MENDOZA,
REYES,* and
- versus PERLAS-BERNABE, JJ.

Promulgated:

MACTAN ROCK INDUSTRIES,


INC.,
July 4, 2012
Respondent.
x ---------------------------------------------------------------------------------------- x

DECISION
MENDOZA, J.
This is a petition for review on certiorari under Rule 45 assailing the February 20, 2006 Decision[1] and
the March 30, 2006 Resolution[2] of the Court of Appeals (CA) in CAG.R. CEB SP. No. 00623.
THE FACTS
Petitioner Metropolitan Cebu Water District (MCWD) is a government-owned and controlled
corporation (GOCC) created pursuant to Presidential Decree (PD) No. 198,[3] as amended, with its principal
office address at the MCWD Building, Magallanes corner Lapu-Lapu Streets, Cebu City.[4] It is mandated to
supply water within its service area in the cities of Cebu, Talisay, Mandaue, and Lapu-Lapu and the
municipalities of Compostela, Liloan, Consolacion, and Cordova in the Province of Cebu.[5]
Respondent Metro Rock Industries, Inc. (MRII) is a domestic corporation with principal office address at the
2nd Level of the Waterfront Cebu Hotel and Casino, Lahug, Cebu City.[6]
On May 19, 1997, MCWD entered into a Water Supply Contract[7] (the Contract) with MRII wherein it was
agreed that the latter would supply MCWD with potable water, in accordance with the World Health
Organization (WHO) standard or the Philippine national standard, with a minimum guaranteed annual volume.[8]
On March 15, 2004, MRII filed a Complaint[9] against MCWD with the Construction Industry Arbitration
Commission (CIAC), citing the arbitration clause (Clause 18)[10] of the Contract. The case was docketed as
CIAC Case No. 12-2004. In the said complaint, MRII sought the reformation of Clause 17 of the Contract, or
the Price Escalation/De-Escalation Clause, in order to include Capital Cost Recovery in the price escalation
formula, and to have such revised formula applied from 1996 when the bidding was conducted, instead of from
the first day when MRII started selling water to MCWD. It also sought the payment of the unpaid price
escalation/adjustment, and the payment of unpaid variation/extra work order and interest/cost of money up
to December 31, 2003.[11]
On May 7, 2002, MCWD filed its Answer[12] dated April 27, 2004, which included a motion to dismiss the
complaint on the ground that the CIAC had no jurisdiction over the case, as the Contract was not one for
construction or infrastructure.
The CIAC thereafter issued an order[13] denying MCWDs motion to dismiss, and calling the parties to a
preliminary conference for the review and signing of the Terms of Reference.[14]

MCWD, thus, filed a petition for certiorari[15] under Rule 65 with the CA, questioning the jurisdiction of the
CIAC. The petition was docketed as CA-G.R. SP. No. 85579 (First Petition).
Meanwhile, the CIAC proceeded with the preliminary conference scheduled on June 10 and July 22,
2004 which MWCD opted not to attend. MRII and the CIAC both signed the Terms of Reference. Pursuant to
the Terms of Reference and the CIAC Order dated July 22, 2004, MRII submitted its documentary evidence and
affidavits of its witnesses.[16]
On August 27, 2004, MRII submitted its Formal Offer of Evidence and its memorandum of arguments in the
form of a proposed/draft decision. MCWD did not attend the hearings. It did not submit evidence other than
those annexed to its Answer. Neither did it file a formal offer of evidence, or a memorandum of legal
arguments.[17]
Decision of the CIAC
The CIAC promulgated its Decision[18] on April 14, 2005, the dispositive portion of which reads:
WHEREFORE[,] premises considered, judgment is hereby rendered as follows:

1.

Ordering the reformation of Clause 17 of the Water Supply Contract to read:

17[.] Price Escalation and/or De-Escalation shall be based on the parametric formula:

17.1

Power Rate Price Adjustment/Power Cost Adjustment

Current Power Rate - Base Power Rate x 30% of base selling price of water
Base Power Rate
17.2

Consumer Price Index (CPI) Adjustment/Operating Cost Adjustment:

Current CPI Base CPI x 40% of base selling price of water


Base CPI
17.3

Capital Cost Recovery Adjustment:

Current Peso to

Base Peso to US$

US$ Exchange Rate Exchange Rate x 30% of base selling price of water

Base Peso to US $ Exchange Rate


Price escalation shall be reckoned from January 1999 when the water was first delivered by Mactan Rock
Industries, Inc. to the MCWD facilities in Mactan. The base CPI, base US$ Exchange Rate and the Base Power
Rate shall be the prevailing rate in January 1999, while the Base Selling Price of water shall mean the 1996 rate
per cubic meter of water as provided for in the Water Supply Contract.
2.
Ordering Respondent Metropolitan Cebu Water District to pay Claimant, Mactan Rock Industries,
Inc[.] under the reformed Clause 17 of the Water Supply Contract, the net amount of Php12,126,296.70 plus
legal interest of six percent (6%) per annum from the (sic) March 15, 2004, the date of filling (sic) of the case
with the Construction Industry Arbitration Commission, the rate increased to twelve percent (12%) per annum
from the date the herein Decision have (sic) become final and executory until the foregoing amounts shall have
been fully paid[.]
3.
Claimant Mactan Rock Industries, Inc. and Metropolitan Cebu Water District shall share equally
the cost of arbitration.
SO ORDERED.[19]

Decision of the CA in CA-G.R. SP No. 85579 - Petition for certiorari under Rule 65 with the Court of Appeals
questioning the jurisdiction of the CIAC
Meanwhile, on October 28, 2005, the CA in its decision[20] in the First Petition upheld the jurisdiction of the
CIAC over the case. The CA held that when parties agree to settle their disputes arising from or connected with
construction contracts, the CIAC acquires primary jurisdiction.[21] Citing Philrock Inc. v. Construction Industry
Arbitration Commission,[22] the CA stated that the CIAC may resolve not only the merits of such controversies,
but may also award damages, interest, attorneys fees, and expenses of litigation, when appropriate.[23]

Second, the CA held that the claims in question fall under the jurisdiction of the CIAC. Thus:
Xxx Section 4 of Executive Order No. 1008, otherwise known as the Construction Industry Arbitration Law
delineates CIACs jurisdiction as original and exclusive jurisdiction over disputes arising from, or connected
with, contracts entered into by parties involved in construction in the Philippines, whether the disputes arise
before or after the completion of the contract, or after abandonment thereof. Moreover, Section 5 (k) of
Republic Act No. 9184 otherwise known as [the] Government Procurement Reform Act expressly defines
infrastructure project as including water supply[,] construction, rehabilitation[,] demolition, repair,
restoration and maintenance.
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. It is to be highlighted that the dispute in the case at bar arose from the parties incongruent positions
with regard to clause 17 of the Water Supply Contract[,] specifically the price escalation/adjustment. The instant
case involves technical discrepancies that are better left to an arbitral body that has expertise in those areas.
Nevertheless, in any event, the inclusion of an arbitration clause in a contract does not ipso facto divest the
courts of jurisdiction to pass upon the findings of arbitral bodies, because the awards are still judicially
reviewable under certain conditions.[24] (Citations omitted.)
MCWDs motion for reconsideration of the decision in the First Petition was still pending when it filed
the petition for review[25] under Rule 43(Second Petition) appealing the decision of the CIAC. The motion for
reconsideration was eventually denied in a Resolution[26] dated May 3, 2006. MCWD did not appeal from the
denial of the motion. It, thus, became final and executory.[27]
Decision of the CA in CA-G.R. CEB SP. No. 00623 Petition for review under Rule 43 appealing the decision
of the CIAC
Aggrieved by the CIAC Decision, MCWD filed a petition for review under Rule 43 with the CA which was
docketed as CA-G.R. CEB SP. No. 00623.
The CA, however, dismissed the petition in its Decision dated February 20, 2006. The Court therein stated that
the issue of jurisdiction had already been resolved by the 18th Division in the First Petition, where the CA
upheld the jurisdiction of the CIAC over Arbitration Case No. 12-2004.
Citing jurisprudence, the CA also ruled that there being an arbitration clause in the Contract, the action for
reformation of contract instituted by MRII in this case fell squarely within the jurisdiction of the CIAC, not the
courts. In relation to this, the CA noted that the present rule is that courts will look with favor upon amicable
agreements to settle disputes through arbitration, and will only interfere with great reluctance to anticipate or
nullify the action of the arbitrator. MCWD being a signatory and a party to the Water Supply Contract, it cannot
escape its obligation under the arbitration clause. [28]
The CA also held that the CIAC did not err in finding that the Water Supply Contract is clear on the matter of
the reckoning period for the computation of the escalation cost from January 9, 1999, or the first day of delivery
of water. Moreover, the CA found that the CIAC did not err in ruling that the contract be reformed to include
Capital Cost Recovery in the parametric formula for price escalation. Neither did it err in holding that the
Capital Cost Recovery shall be 30% of the Base Selling Price of water as a consequence of the reformation of
Clause 17.

Finally, the CA stressed that factual findings of administrative agencies which are deemed to have acquired
expertise in matters within their respective jurisdictions are generally accorded not only respect but even finality
when supported by substantial evidence.[29]
MCWD filed a motion for reconsideration but it was denied in the CA Resolution dated March 30, 2006.
Thus, this petition.

ISSUES
MCWD raises the following issues in its petition for review:

MAY THE CONSTRUCTION INDUSTRY [ARBITRATION] COMMISSION EXERCISE


JURISDICTION OVER DISPUTES ARISING FROM A WATER SUPPLY CONTRACT?

MAY A PARTY, WHO IS A SIGNATORY TO THE WATER SUPPLY CONTRACT[,] IN EFFECT


SUBMITTING ITSELF TO THE JURISDICTION OF THE CONSTRUCTION INDUSTRY
ARBITRATION COMMISSION, QUESTION THE JURISDICTION OF [THE] CIAC?

DOES THE CONSTRUCTION INDUSTRY ARBITRATION COMMISSION HAVE THE (SIC)


JURISDICTION OVER A COMPLAINT PRAYING FOR A REFORMATION OF A WATER SUPPLY
CONTRACT?

MAY THE COURT OF APPEALS REFUSE TO RENDER A [SIC] JUDGMENT ON AN ISSUE


BECAUSE THIS HAS BEEN ALREADY SETTLED IN A DECISION RENDERED BY ANOTHER
DIVISION OF THE COURT OF APPEALS IN A PETITION FOR CERTIORARI, EVEN IF THE SAID
DECISION HAS NOT YET BEEN (SIC) FINAL DUE TO A TIMELY FILING OF A MOTION FOR
RECONSIDERATION?[30]

RULING OF THE COURT

Creation of the CIAC


The Construction Industry Arbitration Commission (CIAC) was created in 1985 under Executive
Order (E.O.) No. 1008 (Creating an Arbitration Machinery for the Philippine Construction Industry), in
recognition of the need to establish an arbitral machinery that would expeditiously settle construction industry
disputes. The prompt resolution of problems arising from, or connected to, the construction industry was
considered necessary and vital for the fulfillment of national development goals, as the construction industry
provided employment to a large segment of the national labor force, and was a leading contributor to the gross
national product. [31]
Under Section 4 of E.O. No. 1008, the CIACs jurisdiction was specifically delineated as follows:
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 disputes arise before or after the completion of the contract, or after the abandonment or breach thereof.
These disputes may involve government or private contracts. For the Board to acquire jurisdiction, the parties to
a dispute must agree to submit the same to voluntary arbitration.
The jurisdiction of the CIAC may include but is not limited to violation of specifications for materials and
workmanship; violation of the terms of agreement; interpretation and/or application of contractual provisions;
amount of damages and penalties; commencement time and delays; maintenance and defects; payment default
of employer or contractor and changes in contract cost.
Excluded from the coverage of this law are disputes arising from employer-employee relationships which shall
continue to be covered by the Labor Code of the Philippines. (Underscoring supplied)
The jurisdiction of the CIAC as a quasi-judicial body is confined to construction disputes,[32] that is, those
arising from, or connected to, contracts involving all on-site works on buildings or altering structures from
land clearance through completion including excavation, erection and assembly and installation of components
and equipment.[33] The CIAC has jurisdiction over all such disputes whether the dispute arises before or after
the completion of the contract.[34]
Whether the CIAC has jurisdiction over the dispute
As earlier stated, following the denial of its motion to dismiss by CIAC, MCWD filed the First Petition
with the CA, which decided in favor of MRII and upheld the jurisdiction of the CIAC.
Not being in conformity, MCWD filed a motion for reconsideration.
While the said motion was pending with the CA, MCWD filed the Second Petition with the same court.
Eventually, the motion was denied, and MCWD never appealed the case. Thus, the decision of the CA in the
First Petition became final and executory.
The question now is whether such final and executory decision is binding such that courts are generally
precluded from passing judgment on the issue of jurisdiction in the present petition.

The Court finds in the affirmative.


This Court has held time and again that a final and executory judgment, no matter how erroneous, cannot be
changed, even by this Court. Nothing is more settled in law than that once a judgment attains finality, it thereby
becomes immutable and unalterable. It may no longer be modified in any respect, even if such modification is
meant to correct what is perceived to be an erroneous conclusion of fact or law, and regardless of whether the
modification is attempted to be made by the court rendering it or by the highest court of the land.[35]
In its Decision in the First Petition, the CA affirmed the arbitral bodys finding in CIAC Case No. 122004 that the case was within its jurisdiction. Such decision having become final, it is beyond the jurisdiction of
this Court, or any court or body, for that matter, to review or modify, even supposing for the sake of argument,
that it is indeed erroneous.
Also, the parties apparently characterized the Contract as one involving construction, as its arbitration clause
specifically refers disputes, controversies or claims arising out of or relating to the Contract or the breach,
termination or validity thereof, if the same cannot be settled amicably, to an arbitration tribunal, in accordance
with E.O. No. 1008, or the Construction Industry Arbitration Law:
V. DISPUTES AND JURISDICTION:
18. Any dispute, controversy or claim arising out of or relating to this contract or the breach, termination or
invalidity thereof, if the same cannot be settled amicably, may be submitted for arbitration to an Arbitration
Tribunal in accordance with Executive Order No. 1008 dated 4 February 1985, otherwise known as the
Construction Industry Arbitration Law and the place of arbitration shall be the City of Cebu, Philippines,
otherwise said dispute or controversy arising out of the contract or breach thereof shall be submitted to the court
of law having jurisdiction thereof in the city where MCWD is located.[36]
Had the parties been of the mutual understanding that the Contract was not of construction, they could have
instead referred the matter to arbitration citing Republic Act (R.A.) No. 876, or The Arbitration Law. Having
been passed into law in 1953, the said statute was already in existence at the time the contract was entered into,
and could have been applied to arbitration proceedings other than those specifically within the arbitral
jurisdiction of the CIAC.
Whether the CA erred in refusing to render judgment on the issue
of jurisdiction
___________
On a related matter, MWCD also raises the issue of whether the 19th Division of the CA, Cebu City, erred in
refusing to render judgment on the issue of jurisdiction raised in the Second Petition on the ground that it had
already been settled by the 18th Division in its decision in the First Petition, even if the 18thDivision decision had
not yet become final due to a timely filing of a motion for reconsideration.
The Court rules in the negative.

The 19th Division was correct in refusing to render judgment on the issue of jurisdiction as, at that time, the
issue was still pending before another division of the CA.
Litis pendentia is predicated on the principle that a party should not be allowed to vex another more than once
regarding the same subject matter and for the same cause of action. It is founded on the public policy that the
same subject matter should not be the subject of controversy in courts more than once, in order that possible
conflicting judgments may be avoided for the sake of the stability of the rights and status of persons, and also to
avoid the costs and expenses incident to numerous suits. [37]
With the two petitions then pending before the CA, all the elements of litis pendentia were present, that
is, identity of the parties in the two actions, substantial identity in the causes of action and in the reliefs sought
by the parties, and identity between the two actions such that any judgment that may be rendered in one case,
regardless of which party is successful, would amount to res judicata in the other.[38]
In both cases, MCWD was the petitioner and MRII, the respondent. Although they differ in form, in essence, the
two cases involved a common issue, that is, MCWDs challenge to the jurisdiction of the CIAC over the
arbitration proceedings arising from the Water Supply Contract between the petitioner and respondent.
To determine whether there is identity of the rights asserted and reliefs prayed for, grounded on the same facts
and bases, the following tests may be utilized: (1) whether the same evidence would support and sustain both
the first and the second causes of action, also known as the same evidence test; or (2) whether the defenses in
one case may be used to substantiate the complaint in the other.[39] Also fundamental is the test of
determining whether the cause of action in the second case existed at the time of the filing of the first case.[40]
In the First Petition, MCWD argued that the CIACs issuance of its Order[41] dated May 28, 2004 was tainted
with grave abuse of discretion amounting to excess or lack of jurisdiction. Thus, MCWD stated in its prayer:
WHEREFORE, in light of the premises laid down, petitioner most respectfully prays:
1. Upon the filing of this Petition, a Writ of Preliminary Injunction or restraining order be issued forthwith,
enjoining the respondent from proceeding with the hearing of the case until further orders from the Honorable
Court of Appeals;
2. After consideration, petitioner also prays that the Order dated May 28, 2004, denying petitioners motion to
dismiss be declared without force and effect;
3. Petitioner also prays that the Construction Industry Arbitration Commission be barred from hearing the case
filed by Mactan Rock Industries, Inc., private respondent herein.
Other measures of relief, which are just and equitable under the foregoing premise are also prayed for.[42]
The Second Petition, on the other hand, raised the following issues:
a.
Whether or not the Arbitral Tribunal of CIAC gravely erred in taking and exercising jurisdiction
over the complaint filed by the respondent;

b.
Contract;

Whether or not the Arbitral Tribunal of CIAC gravely erred in reforming Clause 17 of the

c.
Whether or not the same tribunal gravely committed an error in considering Capital Cost
Recovery Adjustment in awarding in favor of the complainant, when the same is extraneous to the provisions of
the contract;[43]
Thus, it prayed:
WHEREFORE, PREMISES CONSIDERED, it is most respectfully prayed of the Honorable Court that a
Judgment be issued reversing the findings of the Arbitral Tribunal of the Construction Industry Arbitration
Commission in its Decision dated April 14, 2005, as far as the order of reformation of the water supply contract
and in granting the monetary award.
It is further prayed that the decision rendered by the Arbitral Tribunal be declared invalid for want of
jurisdiction to arbitrate and to order the reformation of the water supply contract;
It is also prayed that the decision awarding money to the respondent be strike (sic) down as erroneous and
without legal basis for lack of jurisdiction by the Arbitral Tribunal, which rendered the Decision.
It is also prayed that a Temporary Restraining Order and a Writ of Preliminary Injunction be issued at the outset,
ordering the stay of execution pending the resolution of the issues raised in the Petition.
Other measures of relief, which are just and equitable, are also prayed for.[44]
In both cases, the parties also necessarily relied on the same laws and arguments in support of their respective
positions on the matter of jurisdiction.
In the First Petition, in support of its argument, that the CIAC had no jurisdiction to arbitrate the causes of
action raised by MRII, MCWD cited the portions of the Contract on the obligations of the water supplier, E.O.
No. 1008 (specifically Section 4 on jurisdiction), the Rules of Procedure Governing Construction Arbitration
(Section 1, Article III). It also alleged that in issuing the order denying its motion to dismiss, the CIAC misread
the provisions of LOI No. 1186 and R.A. No. 9184 on the definition of an infrastructure project.[45]
MRII, however, opined that the CIAC had jurisdiction over the complaint and, therefore, correctly denied
petitioners motion to dismiss. MRII argued that certiorari was not a proper remedy in case of denial of a
motion to dismiss and that the claims fell squarely under CIACs original and exclusive jurisdiction. MRII, in
support of its position, cited Section 1 of LOI No. 1186 and Section 5(k) of R.A. No. 9184. MRII further
proposed that, as shown by MCWDs pro-forma Water Supply Contract, Specifications, Invitation to Submit
Proposal, Pre-Bid Conference minutes, Addendum No. 1, and MRIIs Technical and Financial Proposals, the
undertaking contemplated by the parties is one of infrastructure and of works, rather than one of supply or mere
services.[46]
In the Second Petition, in support of the issue of jurisdiction, MCWD again relied on Section 4 of E.O. No.
1008 and Section 1, Article III of the Rules of Procedure Governing Construction Arbitration. It also brought to

fore the alleged faulty conclusion of MRII that a water supply contract is subsumed under the definition of an
infrastructure project under LOI 1186.[47]
In its Comment, MRII reiterated and adopted its arguments before the CIAC, and insisted that the undertaking
contemplated by the parties was one of infrastructure and of works, as distinguished from mere supply from
off-the-shelf or from mere services.[48] Section 1 of LOI No. 1186, to define infrastructure and Section 5(k)
of R.A. No. 9184 to include water supply, were again cited. In support of its arguments, MRII cited anew
MCWDs pro-forma Water Supply Contract, Specifications (in its Invitation to Submit Proposal),
pronouncements at the Pre-Bid Conference, Addendum No. 1, and MRIIs Technical and Financial Proposals.
MRII further extensively reproduced the content of the joint affidavit of Messrs. Antonio P. Tompar and Lito R.
Maderazo, MRIIs President/CEO and Financial Manager, respectively.[49]
Given that the same arguments were raised on the matter of CIAC jurisdiction, the parties thus relied on
substantially the same evidence in both petitions. MCWD annexed to both petitions copies of the Water Supply
Contract, the complaint filed by MRII with the CIAC, and its Answer to the said complaint. On the other hand,
MRII presented Addendum No. 1 to the Water Supply Contract and its Technical and Financial Proposals.
Moreover, the first cause of action in the Second Petition, that is, the CIACs having assumed jurisdiction,
allegedly unlawfully, over the dispute arising from the Water Supply Contract, obviously existed at the time the
First Petition was filed, as the latter case dealt with the jurisdiction of the CIAC over the complaint filed.
Finally, any judgment that may be rendered in the First Petition on the matter of whether the CIAC has
jurisdiction over the arbitration proceedings, regardless of which party was successful, would amount to res
judicata in the Second Petition, insofar as the issue of jurisdiction is concerned. In fact, what MCWD should
have done was to appeal to the Court after the denial of its motion for reconsideration in the First Petition. For
not having done so, the decision therein became final and, therefore, immutable.
Thus, following the above discussion, the 19th Division was correct in refusing to render judgment on the issue
of jurisdiction in the Second Petition.
Whether the CIAC had jurisdiction to order the reformation of the Water Supply Contract
The jurisdiction of courts and quasi-judicial bodies is determined by the Constitution and the law.[50] It cannot be
fixed by the will of the parties to the dispute, nor can it be expanded or diminished by stipulation or
agreement. [51] The text of Section 4 of E.O. No. 1008 is broad enough to cover any dispute arising from, or
connected with, construction contracts, whether these involve mere contractual money claims or execution of
the works. This jurisdiction cannot be altered by stipulations restricting the nature of construction disputes,
appointing another arbitral body, or making that bodys decision final and binding.[52]
Thus, unless specifically excluded, all incidents and matters relating to construction contracts are deemed to be
within the jurisdiction of the CIAC. Based on the previously cited provision outlining the CIACs jurisdiction, it
is clear that with regard to contracts over which it has jurisdiction, the only matters that have been excluded by
law are disputes arising from employer-employee relationships, which continue to be governed by the Labor
Code of the Philippines. Moreover, this is consistent with the policy against split jurisdiction.

In fact, in National Irrigation Administration v. Court of Appeals,[53] it was held that the CIAC had jurisdiction
over the dispute, and not the contract. Therefore, even if the contract preceded the existence of the CIAC, since
the dispute arose when the CIAC had already been constituted, the arbitral board was exercising current, and
not retroactive, jurisdiction. In the same case, it was held 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 to the CIAC because this right has been vested upon each party by law.
This is consistent with the principle that when an administrative agency or body is conferred quasi-judicial
functions, all controversies relating to the subject matter pertaining to its specialization are deemed to be
included within its jurisdiction since the law does not sanction a split of jurisdiction, as stated inPea v.
Government Service Insurance System.[54]
In Pea, the Court held that although the complaint for specific performance, annulment of mortgage, and
damages filed by the petitioner against the respondent included title to, possession of, or interest in, real estate,
it was well within the jurisdiction of the Housing and Land Use Regulatory Board(HLURB), a quasi-judicial
body, as it involved a claim against the subdivision developer, Queens Row Subdivision, Inc., as well as the
Government Service Insurance System (GSIS).
This case was later cited in Badillo v. Court of Appeals,[55] where the Court concluded that the
HLURB had jurisdiction over complaints for annulment of title. The Court also held that courts will not
determine a controversy where the issues for resolution demand the exercise of sound administrative discretion,
such as that of the HLURB, the sole regulatory body for housing and land development. It was further pointed
out that the extent to which an administrative agency may exercise its powers depends on the provisions of the
statute creating such agency.
The ponencia further quoted from C.T. Torres Enterprises, Inc. v. Hibionada:[56]
The argument that only courts of justice can adjudicate claims resoluble under the provisions of the Civil
Code is out of step with the fast-changing times. There are hundreds of administrative bodies now performing
this function by virtue of a valid authorization from the legislature. This quasi-judicial function, as it is called, is
exercised by them as an incident of the principal power entrusted to them of regulating certain activities falling
under their particular expertise.
In the Solid Homes case for example the Court affirmed the competence of the Housing and Land Use
Regulatory Board to award damages although this is an essentially judicial power exercisable ordinarily only by
the courts of justice. This departure from the traditional allocation of governmental powers is justified by
expediency, or the need of the government to respond swiftly and competently to the pressing problems of the
modern world.
In Bagunu v. Spouses Aggabao,[57] the Court ruled that the RTC must defer the exercise of its jurisdiction on
related issues involving the same subject matter properly within its jurisdiction, such as the distinct cause of
action for reformation of contracts involving the same property, since the DENR assumed jurisdiction over the
lot in question, pursuant to its mandate.

In National Housing Authority v. First United Constructors Corporation,[58] the Court held that there was
no basis for the exclusion of claims for business losses from the jurisdiction of the CIAC because E.O. No. 1008
excludes from the coverage of the law only those disputes arising from employer-employee relationships
which are covered by the Labor Code, conveying an intention to encompass a broad range of arbitrable issues
within the jurisdiction of CIAC.[59] Section 4 provides that (t)he jurisdiction of the CIAC may include but is
not limited to x x x, underscoring the expansive character of the CIACs jurisdiction. Very clearly, the CIAC
has jurisdiction over a broad range of issues and claims arising from construction disputes, including but not
limited to claims for unrealized profits and opportunity or business losses. What E.O. No. 1008 emphatically
excludes is only disputes arising from employer-employee relationships.[60]
Where the law does not delineate, neither should we. Neither the provisions of the Civil Code on reformation of
contracts nor the law creating the CIAC exclude the reformation of contracts from its jurisdiction. Jurisprudence
further dictates that the grant of jurisdiction over related and incidental matters is implied by law. Therefore,
because the CIAC has been held to have jurisdiction over the Contract, it follows that it has jurisdiction to order
the reformation of the Contract as well.
Whether MCWD can validly refuse to participate in the arbitration proceedings
In light of the finality of the CA decision on the matter of jurisdiction, the only remaining issue to be
disposed of is whether the CIAC could proceed with the case even if the MCWD refused to participate in the
arbitration proceedings.
The Court rules in the affirmative. Though one party can refuse to participate in the arbitration proceedings,
this cannot prevent the CIAC from proceeding with the case and issuing an award in favor of one of the parties.
Section 4.2 of the Revised Rules of Procedure Governing Construction Arbitration (CIAC Rules) specifically
provides that where the jurisdiction of the CIAC is properly invoked by the filing of a Request for Arbitration in
accordance with CIAC Rules, the failure of a respondent to appear, which amounts to refusal to arbitrate, will
not stay the proceedings, notwithstanding the absence of the respondent or the lack of participation of such
party. In such cases, the CIAC is mandated to appoint the arbitrator/s in accordance with the Rules, and the
arbitration proceedings shall continue. The award shall then be made after receiving the evidence of the
claimant.

In such a case, all is not lost for the party who did not participate. Even after failing to appear, a respondent is
still given the opportunity, under the CIAC Rules, to have the proceedings reopened and be allowed to present
evidence, although with the qualification that this is done before an award is issued:
4.2.1 In the event that, before award, the Respondent who had not earlier questioned the jurisdiction of the
Tribunal, appears and offers to present his evidence, the Arbitral Tribunal may, for reasons that justifies (sic) the
failure to appear, reopen the proceedings, require him to file his answer with or without counterclaims, pay the
fees, where required under these Rules, and allow him to present his evidence, with limited right to cross
examine witnesses already in the discretion of the Tribunal. Evidence already admitted shall remain. The
Tribunal shall decide the effect of such controverting evidence presented by the Respondent on evidence
already admitted prior to such belated appearance.

Thus, under the CIAC Rules, even without the participation of one of the parties in the proceedings, the CIAC is
still required to proceed with the hearing of the construction dispute.[61]
This Court has held that the CIAC has jurisdiction over a dispute arising from a construction contract even
though only one of the parties requested for arbitration.[62] In fact, in Philrock, Inc. v. Construction Industry
Arbitration Commission,[63] the Court held that the CIAC retained jurisdiction even if both parties had
withdrawn their consent to arbitrate.
In this case, there being a valid arbitration clause mutually stipulated
by the parties, they are both contractually bound to settle their dispute
through arbitration before the CIAC. MCWD refused to participate, but this should not affect the authority of
the CIAC to conduct the proceedings, and, thereafter, issue an arbitral award.
Now, with the CIAC decision being questioned by MCWD, the Court takes a cursory reading of the said
decision. It reveals that the conclusions arrived at by CIAC are supported by facts and the law. Article 1359 of
the Civil Code states that when there has been a meeting of the minds of the parties to a contract, but their true
intention is not expressed in the instrument purporting to embody the agreement by reason of mistake, fraud,
inequitable conduct or accident, one of the parties may ask for the reformation of the instrument to the end that
such true intention may be expressed. The CIAC, in this case, found that the parametric formula for price
escalation reflected in the Water Supply Contract involved two items: Power Rate Price Adjustment (30% of the
base selling price of water) and Consumer Price Index Adjustment (40% of the base selling price of water). The
remaining 30% of the selling price of water, which should have been for Capital Cost Recovery, was
inadvertently left out in this parametric formula. Thus, the Contract should be reformed accordingly to reflect
the intention of the parties to include in the price escalation formula the Capital Cost Recovery Adjustment.
These conclusions were affirmed by the CA in the assailed decision of February 20, 2006.
As noted by MCWD in its reply, however, the dispositive portion of the CIAC decision reforming the price
escalation formula is inconsistent with what was stated in the body of the decision. The formula contained in the
body of the decision is as follows:
PRICE ADJUSTMENT COMPUTATION
Based on Reformed Clause 17 of the Water Supply Contract

1.

Power Cost Adjustment:

xxx

Current Power Rate Base Power Rate x 30% of Base Selling Price of water

Base Power Rate

xxx

2.

Operating Cost Adjustment - Local

xxx

Current CPI Base CPI x 30% of 40% of Base Selling Price of Water
Base CPI

xxx

3.

Operating Cost Adjustment Foreign

xxx

Current Forex Base Forex x 70% of 40% of Base Selling Price of Water
Base Forex

xxx

4.

Capital Cost Adjustment Local

xxx

Current CPI Base CPI x 30% of 30% of Base Selling Price of Water
Base CPI

xxx

5.

Capital Cost Adjustment Foreign

xxx

Current Forex Base Forex x 70% of 30% of Base Selling Price of Water
Base Forex

xxx[64]

The dispositive portion of the decision, however, reads:


WHEREFORE[,] premises considered, judgment is hereby rendered as follows:

1.

Ordering the reformation of Clause 17 of the Water Supply Contract to read:

17[.] Price Escalation and/or De-Escalation shall be based on the parametric formula:

17.1

Power Rate Price Adjustment/Power Cost Adjustment

Current Power Rate Base Power Rate x 30% of Base Selling Price of water
Base Power Rate

17.2

Consumer Price Index (CPI) Adjustment/Operatiing (sic) Cost Adjustment:

Current CPI Base CPI x 40% of Base Selling Price of Water


Base CPI

17.3

Capital Cost Recovery Adjustment:

Current Peso to

Base Peso to US$

US$ Exchange Rate Exchange Rate x 30% of base selling price of water
Base Peso to US $ Exchange Rate

The general rule is that where there is a conflict between the fallo, or the dispositive part, and the body of the
decision or order, the fallo prevails on the theory that the fallo is the final order and becomes the subject of
execution, while the body of the decision merely contains the reasons or conclusions of the court ordering
nothing. However, where one can clearly and unquestionably conclude from the body of the decision that there
was a mistake in the dispositive portion, the body of the decision will prevail.[65]

Following the reasoning of the CIAC in this case, there are three components to price adjustment: (1) Power
Cost Adjustment (30% of the base selling price of water); (2) Operating Cost Adjustment (40% of the base
selling price of water); and (3) Capital Cost Adjustment (30% of the base selling price of water).

In turn, the second componentOperating Cost Adjustmentis computed based on Local Operating Cost
Adjustment (30%), and Foreign Operating Cost Adjustment (70%).

Capital Cost Adjustment, on the other hand, is composed of Local Capital Cost Adjustment (30%), and Foreign
Capital Cost Adjustment (70%).

This is consistent with the formula set forth in the body of the CIAC decision. If the formula in the dispositive
portion were to be followed, Operating Cost Adjustment would be computed with the Local Operating Cost
Adjustment representing the entire 40% of the base selling price of water instead of just 30% of the Operating
Cost Adjustment. Moreover, if the Capital Cost Recovery Adjustment were to be computed based solely on
Foreign Capital Cost Recovery Adjustment, it would represent the entire 30% of the base selling price of water,
and not just 70% of the Capital Cost Recovery Adjustment. The omission of the marked portions of the formula
as stated in the body of the CIAC decision represents substantial changes to the formula for price escalation. It
is thus clear that the formula as stated in the body of the decision should govern.

WHEREFORE, the petition is DENIED. The Decision and Resolution of the Court of Appeals in C.A.-G.R.
CEB SP. No. 00623 are AFFIRMEDwith the modification that the formula for the computation of the Capital
Cost Recovery Adjustment in the fallo of the CIAC decision should be amended to read as follows:

WHEREFORE, premises considered, judgment is hereby rendered as follows:

1.

Ordering the reformation of Clause 17 of the Water Supply Contract to read:

17. Price Escalation and/or De-Escalation shall be based on the parametric formula:

17.1.

Power Rate Price Adjustment/Power Cost Adjustment

Current Power Rate - Base Power Rate x 30% of base selling price of water

Base Power Rate

17.2

Consumer Price Index (CPI) Adjustment/Operating Cost Adjustment:

Current CPI Base CPI x 30% of 40% of base selling price of water
Base CPI

17.3

Capital Cost Recovery Adjustment:

Current Peso to

Base Peso to US$

US$ Exchange Rate Exchange Rate x 70% of 30% of base selling price of water
Base Peso to US $ Exchange Rate

Price escalation shall be reckoned from January 1999 when the water was first delivered by Mactan Rock
Industries, Inc. to the MCWD facilities in Mactan. The base CPI, base US$ Exchange Rate and the Base Power
Rate shall be the prevailing rate in January 1999, while the Base Selling Price of water shall mean the 1996 rate
per cubic meter of water as provided for in the Water Supply Contract.

2. Ordering Respondent Metropolitan Cebu Water District to pay Claimant, Mactan Rock Industries, Inc.
under the reformed Clause 17 of the Water Supply Contract, the net amount of Php12,126,296.70 plus legal
interest of six percent (6%) per annum from March 15, 2004, the date of filing of the case with the Construction
Industry Arbitration Commission, and twelve percent (12%) per annum from the date this Decision becomes
final and executory, until the foregoing amounts shall have been fully paid.

3. Claimant Mactan Rock Industries, Inc. and Metropolitan Cebu Water District shall share the cost of
arbitration equally.

SO ORDERED.

THIRD DIVISION
[G.R. No. 120105. March 27, 1998]
BF CORPORATION, petitioner, vs. COURT OF APPEALS, SHANGRI-LA PROPERTIES,
COLAYCO, ALFREDO C. RAMOS, INC., RUFO B. MAXIMO G. LICAUCO III and BENJAMIN
C. RAMOS, respondents.
DECISION
ROMERO, J.:
The basic issue in this petition for review on certiorari is whether or not the contract for the construction of the
EDSA Plaza between petitioner BF Corporation and respondent Shangri-la Properties, Inc. embodies an
arbitration clause in case of disagreement between the parties in the implementation of contractual provisions.
Petitioner and respondent Shangri-la Properties, Inc. (SPI) entered into an agreement whereby the latter engaged
the former to construct the main structure of the EDSA Plaza Project, a shopping mall complex in the City of
Mandaluyong.
The construction work was in progress when SPI decided to expand the project by engaging the services of
petitioner again. Thus, the parties entered into an agreement for the main contract works after which
construction work began.
However, petitioner incurred delay in the construction work that SPI considered as serious and
substantial.[1] On the other hand, according to petitioner, the construction works progressed in faithful
compliance with the First Agreement until a fire broke out on November 30, 1990 damaging Phase I of the
Project.[2] Hence, SPI proposed the re-negotiation of the agreement between them.
Consequently, on May 30, 1991, petitioner and SPI entered into a written agreement denominated as
Agreement for the Execution of Builders Work for the EDSA Plaza Project. Said agreement would cover the
construction work on said project as of May 1, 1991 until its eventual completion.
According to SPI, petitioner failed to complete the construction works and abandoned the project.[3] This
resulted in disagreements between the parties as regards their respective liabilities under the contract. On July
12, 1993, upon SPIs initiative, the parties respective representatives met in conference but they failed to come
to an agreement.[4]
Barely two days later or on July 14, 1993, petitioner filed with the Regional Trial Court of Pasig a complaint for
collection of the balance due under the construction agreement. Named defendants therein were SPI and
members of its board of directors namely, Alfredo C. Ramos, Rufo B. Colayco, Antonio B. Olbes, Gerardo O.
Lanuza, Jr., Maximo G. Licauco III and Benjamin C. Ramos.
On August 3, 1993, SPI and its co-defendants filed a motion to suspend proceedings instead of filing an
answer. The motion was anchored on defendants allegation that the formal trade contract for the construction
of the project provided for a clause requiring prior resort to arbitration before judicial intervention could be

invoked in any dispute arising from the contract. The following day, SPI submitted a copy of the conditions of
the contract containing the arbitration clause that it failed to append to its motion to suspend proceedings.
Petitioner opposed said motion claiming that there was no formal contract between the parties although they
entered into an agreement defining their rights and obligations in undertaking the project. It emphasized that
the agreement did not provide for arbitration and therefore the court could not be deprived of jurisdiction
conferred by law by the mere allegation of the existence of an arbitration clause in the agreement between the
parties.
In reply to said opposition, SPI insisted that there was such an arbitration clause in the existing contract between
petitioner and SPI. It alleged that suspension of proceedings would not necessarily deprive the court of its
jurisdiction over the case and that arbitration would expedite rather than delay the settlement of the parties
respective claims against each other.
In a rejoinder to SPIs reply, petitioner reiterated that there was no arbitration clause in the contract between the
parties. It averred that granting that such a clause indeed formed part of the contract, suspension of the
proceedings was no longer proper. It added that defendants should be declared in default for failure to file their
answer within the reglementary period.
In its sur-rejoinder, SPI pointed out the significance of petitioners admission of the due execution of the
Articles of Agreement. Thus, on page D/6 thereof, the signatures of Rufo B. Colayco, SPI president, and
Bayani Fernando, president of petitioner appear, while page D/7 shows that the agreement is a public document
duly notarized on November 15, 1991 by Notary Public Nilberto R. Briones as document No. 345, page 70,
book No. LXX, Series of 1991 of his notarial register.[5]
Thereafter, upon a finding that an arbitration clause indeed exists, the lower court[6] denied the motion to
suspend proceedings, thus:
It appears from the said document that in the letter-agreement dated May 30, 1991 (Annex C, Complaint),
plaintiff BF and defendant Shangri-La Properties, Inc. agreed upon the terms and conditions of the Builders
Work for the EDSA Plaza Project (Phases I, II and Carpark), subject to the execution by the parties of a formal
trade contract. Defendants have submitted a copy of the alleged trade contract, which is entitled `Contract
Documents For Builders Work Trade Contractor dated 01 May 1991, page 2 of which is entitled `Contents of
Contract Documents with a list of the documents therein contained, and Section A thereof consists of the
abovementioned Letter-Agreement dated May 30, 1991. Section C of the said Contract Documents is entitled
`Articles of Agreement and Conditions of Contract which, per its Index, consists of Part A (Articles of
Agreement) and B (Conditions of Contract). The said Articles of Agreement appears to have been duly signed
by President Rufo B. Colayco of Shangri-La Properties, Inc. and President Bayani F. Fernando of BF and their
witnesses, and was thereafter acknowledged before Notary Public Nilberto R. Briones of Makati, Metro Manila
on November 15, 1991. The said Articles of Agreement also provides that the `Contract Documents' therein
listed `shall be deemed an integral part of this Agreement, and one of the said documents is the `Conditions of
Contract which contains the Arbitration Clause relied upon by the defendants in their Motion to Suspend
Proceedings.
This Court notes, however, that the `Conditions of Contract referred to, contains the following provisions:

`3. Contract Document.


Three copies of the Contract Documents referred to in the Articles of Agreement shall be signed by the parties
to the contract and distributed to the Owner and the Contractor for their safe keeping. (underscoring supplied)
And it is significant to note further that the said `Conditions of Contract is not duly signed by the parties on any
page thereof --- although it bears the initials of BFs representatives (Bayani F. Fernando and Reynaldo M. de la
Cruz) without the initials thereon of any representative of Shangri-La Properties, Inc.
Considering the insistence of the plaintiff that the said Conditions of Contract was not duly executed or signed
by the parties, and the failure of the defendants to submit any signed copy of the said document, this Court
entertains serious doubt whether or not the arbitration clause found in the said Conditions of Contract is binding
upon the parties to the Articles of Agreement. (Underscoring supplied.)
The lower court then ruled that, assuming that the arbitration clause was valid and binding, still, it was too late
in the day for defendants to invoke arbitration. It quoted the following provision of the arbitration clause:
Notice of the demand for arbitration of a dispute shall be filed in writing with the other party to the contract
and a copy filed with the Project Manager. The demand for arbitration shall be made within a reasonable time
after the dispute has arisen and attempts to settle amicably have failed; in no case, however, shall the demand he
made be later than the time of final payment except as otherwise expressly stipulated in the contract.
Against the above backdrop, the lower court found that per the May 30, 1991 agreement, the project was to be
completed by October 31, 1991. Thereafter, the contractor would pay P80,000 for each day of delay counted
from November 1, 1991 with liquified (sic) damages up to a maximum of 5% of the total contract price.
The lower court also found that after the project was completed in accordance with the agreement that contained
a provision on progress payment billing, SPI took possession and started operations thereof by opening the
same to the public in November, 1991. SPI, having failed to pay for the works, petitioner billed SPI in the
total amount of P110,883,101.52, contained in a demand letter sent by it to SPI on February 17, 1993. Instead
of paying the amount demanded, SPI set up its own claim ofP220,000,000.00 and scheduled a conference on
that claim for July 12, 1993. The conference took place but it proved futile.
Upon the above facts, the lower court concluded:
Considering the fact that under the supposed Arbitration Clause invoked by defendants, it is required that
`Notice of the demand for arbitration of a dispute shall be filed in writing with the other party x x x x in no case
x x x x later than the time of final payment x x x x which apparently, had elapsed, not only because defendants
had taken possession of the finished works and the plaintiffs billings for the payment thereof had remained
pending since November, 1991 up to the filing of this case on July 14, 1993, but also for the reason that
defendants have failed to file any written notice of any demand for arbitration during the said long period of one
year and eight months, this Court finds that it cannot stay the proceedings in this case as required by Sec. 7 of
Republic Act No. 876, because defendants are in default in proceeding with such arbitration.
The lower court denied SPIs motion for reconsideration for lack of merit and directed it and the other
defendants to file their responsive pleading or answer within fifteen (15) days from notice.

Instead of filing an answer to the complaint, SPI filed a petition for certiorari under Rule 65 of the Rules of
Court before the Court of Appeals. Said appellate court granted the petition, annulled and set aside the orders
and stayed the proceedings in the lower court. In so ruling, the Court of Appeals held:
The reasons given by the respondent Court in denying petitioners motion to suspend proceedings are
untenable.
1. The notarized copy of the articles of agreement attached as Annex A to petitioners reply dated August 26,
1993, has been submitted by them to the respondent Court (Annex G, petition). It bears the signature of
petitioner Rufo B. Colayco, president of petitioner Shangri-La Properties, Inc., and of Bayani Fernando,
president of respondent Corporation (Annex G-1, petition). At page D/4 of said articles of agreement it is
expressly provided that the conditions of contract are `deemed an integral part thereof (page 188, rollo). And it
is at pages D/42 to D/44 of the conditions of contract that the provisions for arbitration are found (Annexes G-3
to G-5, petition, pp. 227-229). Clause No. 35 on arbitration specifically provides:
Provided always that in case any dispute or difference shall arise between the Owner or the Project Manager on
his behalf and the Contractor, either during the progress or after the completion or abandonment of the Works as
to the construction of this Contract or as to any matter or thing of whatsoever nature arising thereunder or in
connection therewith (including any matter or being left by this Contract to the discretion of the Project
Manager or the withholding by the Project Manager of any certificate to which the Contractor may claim to be
entitled or the measurement and valuation mentioned in clause 30 (5) (a) of these Conditions or the rights and
liabilities of the parties under clauses 25, 26, 32 or 33 of these Conditions), the Owner and the Contractor
hereby agree to exert all efforts to settle their differences or dispute amicably. Failing these efforts then such
dispute or difference shall be referred to Arbitration in accordance with the rules and procedures of the
Philippine Arbitration Law.
The fact that said conditions of contract containing the arbitration clause bear only the initials of respondent
Corporations representatives, Bayani Fernando and Reynaldo de la Cruz, without that of the representative of
petitioner Shangri-La Properties, Inc. does not militate against its effectivity. Said petitioner having
categorically admitted that the document, Annex A to its reply dated August 26, 1993 (Annex G, petition), is the
agreement between the parties, the initial or signature of said petitioners representative to signify conformity to
arbitration is no longer necessary. The parties, therefore, should be allowed to submit their dispute to arbitration
in accordance with their agreement.
2. The respondent Court held that petitioners `are in default in proceeding with such arbitration. It took note of
`the fact that under the supposed Arbitration Clause invoked by defendants, it is required that Notice of the
demand for arbitration of a dispute shall be filed in writing with the other party x x x in no case x x x later than
the time of final payment, which apparently, had elapsed, not only because defendants had taken possession of
the finished works and the plaintiffs billings for the payment thereof had remained pending since November,
1991 up to the filing of this case on July 14, 1993, but also for the reason that defendants have failed to file any
written notice of any demand for arbitration during the said long period of one year and eight months, x x x.
Respondent Court has overlooked the fact that under the arbitration clause
Notice of the demand for arbitration dispute shall be filed in writing with the other party to the contract and a
copy filed with the Project Manager. The demand for arbitration shall be made within a reasonable time after

the dispute has arisen and attempts to settle amicably had failed; in no case, however, shall the demand be made
later than the time of final payment except as otherwise expressly stipulated in the contract (underscoring
supplied)
quoted in its order (Annex A, petition). As the respondent Court there said, after the final demand to pay the
amount of P110,883,101.52, instead of paying, petitioners set up its own claim against respondent Corporation
in the amount of P220,000,000.00 and set a conference thereon on July 12, 1993. Said conference proved futile.
The next day, July 14, 1993, respondent Corporation filed its complaint against petitioners. On August 13, 1993,
petitioners wrote to respondent Corporation requesting arbitration. Under the circumstances, it cannot be said
that petitioners resort to arbitration was made beyond reasonable time. Neither can they be considered in
default of their obligation to respondent Corporation.
Hence, this petition before this Court. Petitioner assigns the following errors:
A.
THE COURT OF APPEALS ERRED IN ISSUING THE EXTRAORDINARY WRIT
OF CERTIORARI ALTHOUGH THE REMEDY OF APPEAL WAS AVAILABLE TO RESPONDENTS.
B.
THE COURT OF APPEALS ERRED IN FINDING GRAVE ABUSE OF DISCRETION IN THE FACTUAL
FINDINGS OF THE TRIAL COURT THAT:
(i)

THE PARTIES DID NOT ENTER INTO AN AGREEMENT TO ARBITRATE.

(ii)
ASSUMING THAT THE PARTIES DID ENTER INTO THE AGREEMENT TO ARBITRATE,
RESPONDENTS ARE ALREADY IN DEFAULT IN INVOKING THE AGREEMENT TO ARBITRATE.
On the first assigned error, petitioner contends that the Order of the lower court denying the motion to suspend
proceedings is a resolution of an incident on the merits. As such, upon the continuation of the proceedings,
the lower court would appreciate the evidence adduced in their totality and thereafter render a decision on the
merits that may or may not sustain the existence of an arbitration clause. A decision containing a finding that
the contract has no arbitration clause can then be elevated to a higher court in an ordinary appeal where an
adequate remedy could be obtained. Hence, to petitioner, the Court of Appeals should have dismissed the
petition for certioraribecause the remedy of appeal would still be available to private respondents at the proper
time.[7]
The above contention is without merit.
The rule that the special civil action of certiorari may not be invoked as a substitute for the remedy of appeal is
succinctly reiterated in Ongsitco v. Court of Appeals[8]as follows:
x x x. Countless times in the past, this Court has held that `where appeal is the proper remedy, certiorari will
not lie. The writs of certiorari and prohibition are remedies to correct lack or excess of jurisdiction or grave
abuse of discretion equivalent to lack of jurisdiction committed by a lower court. `Where the proper remedy is

appeal, the action for certiorari will not be entertained. x x x. Certiorari is not a remedy for errors of judgment.
Errors of judgment are correctible by appeal, errors of jurisdiction are reviewable by certiorari.
Rule 65 is very clear. The extraordinary remedies of certiorari, prohibition and mandamus are available only
when `there is no appeal or any plain, speedy and adequate remedy in the ordinary course of law x x x. That is
why they are referred to as `extraordinary. x x x.
The Court has likewise ruled that certiorari will not be issued to cure errors in proceedings or correct
erroneous conclusions of law or fact. As long as a court acts within its jurisdiction, any alleged errors committed
in the exercise of its jurisdiction will amount to nothing more than errors of judgment which are reviewable by
timely appeal and not by a special civil action of certiorari.[9]v. Court of Appeals, 327 Phil. 1, 41-42 (1996).9
This is not exactly so in the instant case. While this Court does not deny the eventual jurisdiction of the lower
court over the controversy, the issue posed basically is whether the lower court prematurely assumed
jurisdiction over it. If the lower court indeed prematurely assumed jurisdiction over the case, then it becomes
an error of jurisdiction which is a proper subject of a petition for certiorari before the Court of Appeals. And if
the lower court does not have jurisdiction over the controversy, then any decision or order it may render may be
annulled and set aside by the appellate court.
However, the question of jurisdiction, which is a question of law depends on the determination of the existence
of the arbitration clause, which is a question of fact. In the instant case, the lower court found that there exists
an arbitration clause. However, it ruled that in contemplation of law, said arbitration clause does not exist.
The issue, therefore, posed before the Court of Appeals in a petition for certiorari is whether the Arbitration
Clause does not in fact exist. On its face, the question is one of fact which is not proper in a petition
for certiorari.
The Court of Appeals found that an Arbitration Clause does in fact exist. In resolving said question of fact, the
Court of Appeals interpreted the construction of the subject contract documents containing the Arbitration
Clause in accordance with Republic Act No. 876 (Arbitration Law) and existing jurisprudence which will be
extensively discussed hereunder. In effect, the issue posed before the Court of Appeals was likewise a
question of law. Being a question of law, the private respondents rightfully invoked the special civil action
of certiorari.
It is that mode of appeal taken by private respondents before the Court of Appeals that is being questioned by
the petitioners before this Court. But at the heart of said issue is the question of whether there exists an
Arbitration Clause because if an Arbitration Clause does not exist, then private respondents took the wrong
mode of appeal before the Court of Appeals.
For this Court to be able to resolve the question of whether private respondents took the proper mode of appeal,
which, incidentally, is a question of law, then it has to answer the core issue of whether there exists an
Arbitration Clause which, admittedly, is a question of fact.
Moreover, where a rigid application of the rule that certiorari cannot be a substitute for appeal will result in a
manifest failure or miscarriage of justice, the provisions of the Rules of Court which are technical rules may be
relaxed.[10] As we shall show hereunder, had the Court of Appeals dismissed the petition for certiorari, the issue

of whether or not an arbitration clause exists in the contract would not have been resolved in accordance with
evidence extant in the record of the case. Consequently, this would have resulted in a judicial rejection of a
contractual provision agreed by the parties to the contract.
In the same vein, this Court holds that the question of the existence of the arbitration clause in the contract
between petitioner and private respondents is a legal issue that must be determined in this petition for review on
certiorari.
Petitioner, while not denying that there exists an arbitration clause in the contract in question, asserts that in
contemplation of law there could not have been one considering the following points. First, the trial court found
that the conditions of contract embodying the arbitration clause is not duly signed by the parties. Second,
private respondents misrepresented before the Court of Appeals that they produced in the trial court a notarized
duplicate original copy of the construction agreement because what were submitted were mere photocopies
thereof. The contract(s) introduced in court by private respondents were therefore of dubious authenticity
because: (a) the Agreement for the Execution of Builders Work for the EDSA Plaza Project does not contain an
arbitration clause, (b) private respondents surreptitiously attached as Annexes `G-3 to `G-5 to their petition
before the Court of Appeals but these documents are not parts of the Agreement of the parties as there was no
formal trade contract executed, (c) if the entire compilation of documents is indeed a formal trade contract,
then it should have been duly notarized, (d) the certification from the Records Management and Archives Office
dated August 26, 1993 merely states that the notarial record of Nilberto Briones x x x is available in the files of
(said) office asNotarial Registry Entry only, (e) the same certification attests that the document entered in the
notarial registry pertains to the Articles of Agreement only without any other accompanying documents, and
therefore, it is not a formal trade contract, and (f) the compilation submitted by respondents are a mere hodgepodge of documents and do not constitute a single intelligible agreement.
In other words, petitioner denies the existence of the arbitration clause primarily on the ground that the
representatives of the contracting corporations did not sign the Conditions of Contract that contained the said
clause. Its other contentions, specifically that insinuating fraud as regards the alleged insertion of the arbitration
clause, are questions of fact that should have been threshed out below.
This Court may as well proceed to determine whether the arbitration clause does exist in the parties
contract. Republic Act No. 876 provides for the formal requisites of an arbitration agreement as follows:
Section 4. Form of arbitration agreement. A contract to arbitrate a controversy thereafter arising between the
parties, as well as a submission to arbitrate an existing controversy, shall be in writing and subscribed by the
party sought to be charged, or by his lawful agent.
The making of a contract or submission for arbitration described in section two hereof, providing for arbitration
of any controversy, shall be deemed a consent of the parties of the province or city where any of the parties
resides, to enforce such contract of submission. (Underscoring supplied.)
The formal requirements of an agreement to arbitrate are therefore the following: (a) it must be in writing and
(b) it must be subscribed by the parties or their representatives. There is no denying that the parties entered into
a written contract that was submitted in evidence before the lower court. To subscribe means to write
underneath, as ones name; to sign at the end of a document.[11] That word may sometimes be construed to mean
to give consent to or to attest.[12]

The Court finds that, upon a scrutiny of the records of this case, these requisites were complied with in the
contract in question. The Articles of Agreement, which incorporates all the other contracts and agreements
between the parties, was signed by representatives of both parties and duly notarized. The failure of the private
respondents representative to initial the `Conditions of Contract would therefor not affect compliance with the
formal requirements for arbitration agreements because that particular portion of the covenants between the
parties was included by reference in the Articles of Agreement.
Petitioners contention that there was no arbitration clause because the contract incorporating said provision is
part of a hodge-podge document, is therefore untenable. A contract need not be contained in a single
writing. It may be collected from several different writings which do not conflict with each other and which,
when connected, show the parties, subject matter, terms and consideration, as in contracts entered into by
correspondence.[13] A contract may be encompassed in several instruments even though every instrument is not
signed by the parties, since it is sufficient if the unsigned instruments are clearly identified or referred to and
made part of the signed instrument or instruments. Similarly, a written agreement of which there are two
copies, one signed by each of the parties, is binding on both to the same extent as though there had been only
one copy of the agreement and both had signed it.[14]
The flaw in petitioners contentions therefore lies in its having segmented the various components of the whole
contract between the parties into several parts. This notwithstanding, petitioner ironically admits the execution
of the Articles of Agreement. Notably, too, the lower court found that the said Articles of Agreement also
provides that the `Contract Documents therein listed `shall be deemed an integral part of this Agreement, and
one of the said documents is the `Conditions of Contract which contains the Arbitration Clause. It is this
Articles of Agreement that was duly signed by Rufo B. Colayco, president of private respondent SPI, and
Bayani F. Fernando, president of petitioner corporation. The same agreement was duly subscribed before notary
public Nilberto R. Briones. In other words, the subscription of the principal agreement effectively covered the
other documents incorporated by reference therein.
This Court likewise does not find that the Court of Appeals erred in ruling that private respondents were not in
default in invoking the provisions of the arbitration clause which states that (t)he demand for arbitration shall
be made within a reasonable time after the dispute has arisen and attempts to settle amicably had failed. Under
the factual milieu, private respondent SPI should have paid its liabilities under the contract in accordance with
its terms. However, misunderstandings appeared to have cropped up between the parties ostensibly brought
about by either delay in the completion of the construction work or by force majeure or the fire that partially
gutted the project. The almost two-year delay in paying its liabilities may not therefore be wholly ascribed to
private respondent SPI.
Besides, private respondent SPIs initiative in calling for a conference between the parties was a step towards
the agreed resort to arbitration. However, petitioner posthaste filed the complaint before the lower court. Thus,
while private respondent SPIs request for arbitration on August 13, 1993 might appear an afterthought as it was
made after it had filed the motion to suspend proceedings, it was because petitioner also appeared to act hastily
in order to resolve the controversy through the courts.
The arbitration clause provides for a reasonable time within which the parties may avail of the relief under
that clause. Reasonableness is a relative term and the question of whether the time within which an act has to
be done is reasonable depends on attendant circumstances.[15] This Court finds that under the circumstances
obtaining in this case, a one-month period from the time the parties held a conference on July 12, 1993 until

private respondent SPI notified petitioner that it was invoking the arbitration clause, is a reasonable time.
Indeed, petitioner may not be faulted for resorting to the court to claim what was due it under the
contract. However, we find its denial of the existence of the arbitration clause as an attempt to cover up its
misstep in hurriedly filing the complaint before the lower court.
In this connection, it bears stressing that the lower court has not lost its jurisdiction over the case. Section 7 of
Republic Act No. 876 provides that proceedings therein have only been stayed. After the special proceeding of
arbitration[16] has been pursued and completed, then the lower court may confirm the award[17] made by the
arbitrator.
It should be noted that in this jurisdiction, arbitration has been held valid and constitutional. Even before the
approval on June 19, 1953 of Republic Act No. 876, this Court has countenanced the settlement of disputes
through arbitration.[18] Republic Act No. 876 was adopted to supplement the New Civil Codes provisions on
arbitration.[19] Its potentials as one of the alternative dispute resolution methods that are now rightfully vaunted
as the wave of the future in international relations, is recognized worldwide. To brush aside a contractual
agreement calling for arbitration in case of disagreement between the parties would therefore be a step
backward.
WHEREFORE, the questioned Decision of the Court of Appeals is hereby AFFIRMED and the petition
for certiorari DENIED. This Decision is immediately executory. Costs against petitioner.
SO ORDERED.
Narvasa, C.J., (Chairman), Kapunan, and Purisima, JJ., concur.