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WILLIAM GOLANGCO CONSTRUCTION

CORPORATION,

PERALTA, J.:

Petitioner,

- versus

RAY BURTON DEVELOPMENT


CORPORATION,
Respondent.
G.R. No. 163582

Present:

CARPIO, J., Chairperson,


NACHURA,
PERALTA
ABAD, and
MENDOZA, JJ.

Promulgated:

August 9, 2010
x---------------------------------------------------------------------------------------x

DECISION

This resolves the Petition for


Review on Certiorari under Rule 45 of
the Rules of Court, praying that the
Decision[1] of the Court of Appeals
(CA) dated December 19, 2003,
holding that the Construction Industry
Arbitration Commission (CIAC) had no
jurisdiction over the dispute between
herein parties, and the CA
Resolution[2] dated May 24, 2004,
denying herein petitioner's motion for
reconsideration, be reversed and set
aside.

The undisputed facts, as


accurately narrated in the CA
Decision, are as follows.
On July 20, 1995, petitioner Ray
Burton Development Corporation
[herein respondent] (RBDC for brevity)
and private respondent William
Golangco Construction Corporation
[herein petitioner] (WGCC) entered
into a Contract for the construction of
the Elizabeth Place (Office/Residential
Condominium).

On March 18, 2002, private


respondent WGCC filed a complaint
with a request for arbitration with the
Construction Industry Arbitration
Commission (hereinafter referred to as
CIAC). In its complaint, private
respondent prayed that CIAC render
judgment ordering petitioner to pay
private respondent the amount of, to
wit:

1.
P24,703,132.44 for the
unpaid balance on the contract price;
2.
P10,602,670.25 for the
unpaid balance on the labor cost
adjustment;
3.
P9,264,503.70 for the
unpaid balance of additive works;
4.
P2,865,615.10 for
extended overhead expenses;
5.
P1,395,364.01 for
materials cost adjustment and trade
contractors' utilities expenses;
6.
P4,835,933.95 for interest
charges on unpaid overdue billings on
labor cost adjustment and change
orders.

or for a total of Fifty Three Million Six


Hundred Sixty-Seven Thousand Two
Hundred Nineteen and 45/xx
(P53,667,219.45) and interest charges
based on the prevailing bank rates on
the foregoing amount from March 1,
2002 and until such time as the same
shall be fully paid.

On April 12, 2002, petitioner


RBDC filed a Motion to Dismiss the
aforesaid complaint on the ground of
lack of jurisdiction. It is petitioner's
contention that the CIAC acquires
jurisdiction over disputes arising from
or connected with construction
contracts only when the parties to the
contract agree to submit the same to
voluntary arbitration. In the contract
between petitioner and private
respondent, petitioner claimed that
only disputes by reason of differences
in interpretation of the contract

documents shall be deemed subject to


arbitration.

Private respondent filed a


Comment and Opposition to the
aforesaid Motion dated April 15, 2002.
Private respondent averred that the
claims set forth in the complaint
require contract interpretation and are
thus cognizable by the CIAC pursuant
to the arbitration clause in the
construction contract between the
parties. Moreover, even assuming
that the claims do not involve differing
contract interpretation, they are still
cognizable by the CIAC as the
arbitration clause mandates their
direct filing therewith.

On May 6, 2002, the CIAC


rendered an Order the pertinent
portion of which reads as follows:

The Commission has taken note


of the foregoing arguments of the
parties. After due deliberations, the
Commission resolved to DENY
Respondent's motion on the following
grounds:

[1] Clause 17.2 of Art. XVII of


the Contract Agreement explicitly
provides that any dispute arising
under the construction contract shall
be submitted to the Construction
Arbitration Authority created by the
Government. Even without this
provision, the bare agreement to
submit a construction dispute to
arbitration vests in the Commission
original and exclusive jurisdiction by
virtue of Sec. 4 of Executive Order No.

1008, whether or not a dispute


involves a collection of sum of money
or contract interpretation as long as
the same arises from, or in connection
with, contracts entered into by the
parties involved. The Supreme Court
jurisprudence on Tesco vs. Vera case
referred to by respondent is no longer
controlling as the same was based on
the old provision of Article III, Sec. 1 of
the CIAC Rules which has long been
amended.

[2] The issue raised by


Respondent in its Motion to Dismiss is
similar to the issue set forth in CA-G.R.
Sp. No. 67367, Continental Cement
Corporation vs. CIAC and EEI
Corporation, where the appellate court
upheld the ruling of the CIAC thereon
that since the parties agreed to submit
to arbitration any dispute, the same
does not exclude disputes relating to
claims for payment in as much as the
said dispute originates from execution
of the works. As such, the subject
dispute falls within the original and
exclusive jurisdiction of the CIAC.

WHEREFORE, in view of the


foregoing, Respondent's Motion to
Dismiss is DENIED for lack of merit.
Respondent is given anew an
inextendible period of ten (10) days
from receipt hereof within which to file
its Answer and nominees for the
Arbitral Tribunal. If Respondent shall
fail to comply within the prescribed
period, the Commission shall proceed
with arbitration in accordance with its
Rules. x x x

Thereafter, petitioner filed a


Motion to Suspend Proceedings

praying that the CIAC order a


suspension of the proceedings in Case
No. 13-2002 until the resolution of the
negotiations between the parties, and
consequently, that the period to file an
Answer be held in abeyance.

Private respondent filed an


Opposition to the aforesaid Motion and
a Counter-Motion to Declare
respondent to Have Refused to
Arbitrate and to Proceed with
Arbitration Ex Parte.

On May 24, 2002 the CIAC


issued an Order, the pertinent portion
of which reads:

In view of the foregoing, Respondent's


(petitioner's) Motion to Suspend
Proceedings is DENIED. Accordingly,
respondent is hereby given a nonextendible period of five (5) days from
receipt thereof within which to submit
its Answer and nominees for the
Arbitral Tribunal. In default thereof,
claimant's (private respondent's)
Counter-Motion is deemed granted
and arbitration shall proceed in
accordance with the CIAC Rules
Governing Construction Arbitration.

SO ORDERED. x x x

On June 3, 2002, petitioner RBDC filed


[with the Court of Appeals (CA)] a
petition for Certiorari and Prohibition
with prayer for the issuance of a
temporary restraining order and a writ
of preliminary injunction. Petitioner

contended that CIAC acted without or


in excess of its jurisdiction when it
issued the questioned order despite
the clear showing that there is lack of
jurisdiction on the issue submitted by
private respondent for arbitration.[3]

On December 19, 2003, the CA


rendered the assailed Decision
granting the petition for certiorari,
ruling that the CIAC had no jurisdiction
over the subject matter of the case
because the parties agreed that only
disputes regarding differences in
interpretation of the contract
documents shall be submitted for
arbitration, while the allegations in the
complaint make out a case for
collection of sum of money. Petitioner
moved for reconsideration of said
ruling, but the same was denied in a
Resolution dated May 24, 2004.

II.
THE COURT OF APPEALS ERRED
GRAVELY IN NOT RULING THAT THE
CIAC HAS JURISDICTION OVER WGCC'S
CLAIMS, WHICH ARE IN THE NATURE
OF ARBITRABLE DISPUTES COVERED
BY CLAUSE 17.1 OF ARTICLE XVII
INVOLVING CONTRACT
INTERPRETATION.

xxxx

III.
THE COURT OF APPEALS ERRED
GRAVELY IN FAILING TO DISCERN THAT
CLAUSE 17.2 OF ARTICLE XVII CANNOT
BE TREATED AS BEING LIMITED TO
DISPUTES ARISING FROM
INTERPRETATION OF THE CONTRACT.

Hence, this petition where it is


alleged that:

xxxx

I.

IV.

THE COURT OF APPEALS ACTED WITH


GRAVE ABUSE OF DISCRETION IN
FAILING TO DISMISS PRIVATE
RESPONDENT RBDC'S PETITION IN CAG.R. SP NO. 70959 OUTRIGHT IN VIEW
OF RBDC'S FAILURE TO FILE A MOTION
FOR RECONSIDERATION OF THE CIAC'S
ORDER, AS WELL AS FOR RBDC'S
FAILURE TO ATTACH TO THE PETITION
THE RELEVANT PLEADINGS IN CIAC
CASE NO. 13-2002, IN VIOLATION OF
THE REQUIREMENT UNDER RULE 65,
SECTIONS 1 AND 2, PARAGRAPH 2
THEREOF, AND RULE 46, SECTION 3,
PARAGRAPH 2 THEREOF.

THE COURT OF APPEALS ERRED


GRAVELY IN NOT RULING THAT RBDC
IS ESTOPPED FROM DISPUTING THE
JURISDICTION OF THE CIAC.

xxxx

V.
FINALLY, THE COURT OF APPEALS
COMMITTED GRAVE ABUSE OF
DISCRETION IN REFUSING TO PAY
HEED TO THE DECLARATION IN
EXECUTIVE ORDER NO. 1008 THAT

THE POLICY OF THE STATE IS IN FAVOR


OF ARBITRATION OF CONSTRUCTION
DISPUTES, WHICH POLICY HAS BEEN
REINFORCED FURTHER BY THE RECENT
PASSAGE OF THE ALTERNATIVE
DISPUTE RESOLUTION ACT OF
2004(R.A. NO. 9285).[4]

petition for certiorari and held as


follows:

x x x Sec. 1, Rule 65, in relation to


Sec. 3, Rule 46, of the Revised Rules of
Court. Sec. 1 of Rule 65 reads:

The petition is meritorious.

The aforementioned issues boil


down to (1) whether the CA acted with
grave abuse of discretion in failing to
dismiss the petition for certiorari filed
by herein respondent, in view of the
latter's failure to file a motion for
reconsideration of the assailed CIAC
Order and for failure to attach to the
petition the relevant pleadings in CIAC
Case No. 13-2002; and (2) whether the
CA gravely erred in not upholding the
jurisdiction of the CIAC over the
subject complaint.

Petitioner is correct that it was grave


error for the CA to have given due
course to respondent's petition for
certiorari despite its failure to attach
copies of relevant pleadings in CIAC
Case No. 13-2002. In Tagle v.
Equitable PCI Bank,[5] the party filing
the petition for certiorari before the CA
failed to attach the Motion to Stop Writ
of Possession and the Order denying
the same. On the ground of noncompliance with the rules, the CA
dismissed said petition for certiorari.
When the case was elevated to this
Court via a petition for certiorari, the
same was likewise dismissed. In said
case, the Court emphasized the
importance of complying with the
formal requirements for filing a

SECTION 1. Petition for certiorari.


When any tribunal, board or officer
exercising judicial or quasi-judicial
functions has acted without or in
excess of its or his jurisdiction, or with
grave abuse of discretion amounting
to lack or excess of [its or his]
jurisdiction, and there is no appeal, or
any plain, speedy, and adequate
remedy in the ordinary course of law,
a person aggrieved thereby may file a
verified petition in the proper court,
alleging the facts with certainty and
praying that judgment be rendered
annulling or modifying the
proceedings of such tribunal, board or
officer, and granting such incidental
reliefs as law and justice may require.

The petition shall be accompanied by


a certified true copy of the judgment,
order or resolution subject thereof,
copies of all pleadings and documents
relevant and pertinent thereto, and a
sworn certification of non-forum
shopping as provided in the third
paragraph of Section 3, Rule 46.
(Emphasis supplied.)

And Sec. 3 of Rule 46 provides:

SEC. 3. Contents and filing of petition;


effect of non-compliance with
requirements. The petition shall
contain the full names and actual
addresses of all the petitioners and
respondents, a concise statement of
the matters involved, the factual
background of the case, and the
grounds relied upon for the relief
prayed for.

In actions filed under Rule 65, the


petition shall further indicate the
material dates showing when notice of
the judgment or final order or
resolution subject thereof was
received, when a motion for new trial
or reconsideration, if any, was filed
and when notice of the denial thereof
was received.

It shall be filed in seven (7) clearly


legible copies together with proof of
service thereof on the respondent with
the original copy intended for the
court indicated as such by the
petitioner and shall be accompanied
by a clearly legible duplicate original
or certified true copy of the judgment,
order, resolution, or ruling subject
thereof, such material portions of the
record as are referred to therein, and
other documents relevant or pertinent
thereto. The certification shall be
accomplished by the proper clerk of
court or by his duly-authorized
representative, or by the proper officer
of the court, tribunal, agency or office
involved or by his duly authorized
representative. The other requisite
number of copies of the petition shall
be accompanied by clearly legible
plain copies of all documents attached
to the original.

xxxx

The failure of the petitioner to comply


with any of the foregoing requirements
shall be sufficient ground for the
dismissal of the petition. (Emphasis
supplied.)

The afore-quoted provisions are


plain and unmistakable. Failure to
comply with the requirement that the
petition be accompanied by a
duplicate original or certified true copy
of the judgment, order, resolution or
ruling being challenged is sufficient
ground for the dismissal of said
petition. Consequently, it cannot be
said that the Court of Appeals acted
with grave abuse of discretion
amounting to lack or excess of
jurisdiction in dismissing the petition x
x x for non-compliance with Sec. 1,
Rule 65, in relation to Sec. 3, Rule 46,
of the Revised Rules of Court.[6]

In the present case, herein petitioner


(private respondent below) strongly
argued against the CA's granting due
course to the petition, pointing out
that pertinent pleadings such as the
Complaint before the CIAC, herein
respondent's Motion to Dismiss, herein
petitioner's Comment and Opposition
(Re: Motion to Dismiss), and the
Motion to Suspend Proceedings, have
not been attached to the petition.
Herein respondent (petitioner before
the CA) argued in its Reply[7] before
the CA that it did not deem such
pleadings or documents germane to
the petition. However, in the CA
Resolution[8] dated July 4, 2002, the

appellate court itself revealed the


necessity of such documents by
ordering the submission of copies of
pleadings relevant to the petition.
Indeed, such pleadings are necessary
for a judicious resolution of the issues
raised in the petition and should have
been attached thereto. As mandated
by the rules, the failure to do so is
sufficient ground for the dismissal of
the petition. The CA did not give any
convincing reason why the rule
regarding requirements for filing a
petition should be relaxed in favor of
herein respondent. Therefore, it was
error for the CA to have given due
course to the petition for certiorari
despite herein respondent's failure to
comply with the requirements set forth
in Section 1, Rule 65, in relation to
Section 3, Rule 46, of the Revised
Rules of Court.

Even on the main issue regarding the


CIAC's jurisdiction, the CA erred in
ruling that said arbitration body had
no jurisdiction over the complaint filed
by herein petitioner. There is no
question that, as provided under
Section 4 of Executive Order No. 1008,
also known as the Construction
Industry Arbitration Law, the CIAC
has original and exclusive jurisdiction
over disputes arising from, or
connected with, contracts entered into
by parties involved in construction in
the Philippines and all that is needed
for the CIAC to acquire jurisdiction is
for the parties to agree to submit the
same to voluntary arbitration.
Nevertheless, respondent insists that
the only disputes it agreed to submit
to voluntary arbitration are those
arising from interpretation of contract
documents. It argued that the claims
alleged in petitioner's complaint are

not disputes arising from


interpretation of contract documents;
hence, the CIAC cannot assume
jurisdiction over the case.

Respondent's contention is tenuous.

The contract between herein parties


contained an arbitration clause which
reads as follows:

17.1.1. Any dispute arising in the


course of the execution of this
Contract by reason of differences in
interpretation of the Contract
Documents which the OWNER and the
CONTRACTOR are unable to resolve
between themselves, shall be
submitted by either party for
resolution or decision, x x x to a
Board of Arbitrators composed of three
(3) members, to be chosen as follows:

One (1) member each shall be chosen


by the OWNER and the CONTRACTOR.
The said two (2) members, in turn,
shall select a third member acceptable
to both of them. The decision of the
Board of Arbitrators shall be rendered
within fifteen (15) days from the first
meeting of the Board. The decision of
the Board of Arbitrators when reached
through the affirmative vote of at least
two (2) of its members shall be final
and binding upon the OWNER and the
CONTRACTOR.

17.2
Matters not otherwise
provided for in this Contract or by
special agreement of the parties shall
be governed by the provisions of the

Construction Arbitration Law of the


Philippines. As a last resort, any
dispute which is not resolved by the
Board of Arbitrators shall be submitted
to the Construction Arbitration
Authority created by the government.
[9]

In gist, the foregoing provisions mean


that herein parties agreed to submit
disputes arising by reason of
differences in interpretation of the
contract to a Board of Arbitrators the
composition of which is mutually
agreed upon by the parties, and, as a
last resort, any other dispute which
had not been resolved by the Board of
Arbitrators shall be submitted to the
Construction Arbitration Authority
created by the government, which is
no other than the CIAC. Moreover,
other matters not dealt with by
provisions of the contract or by special
agreements shall be governed by
provisions of the Construction Industry
Arbitration Law, or Executive Order No.
1008.

The Court finds that petitioner's claims


that it is entitled to payment for
several items under their contract,
which claims are, in turn, refuted by
respondent, involves a dispute arising
from differences in interpretation of
the contract. Verily, the matter of
ascertaining the duties and obligations
of the parties under their contract all
involve interpretation of the provisions
of the contract. Therefore, if the
parties cannot see eye to eye
regarding each others obligations,
i.e., the extent of work to be expected
from each of the parties and the

valuation thereof, this is properly a


dispute arising from differences in the
interpretation of the contract.

Note, further, that in respondent's


letter[10] dated February 14, 2000, it
stated that disputed items of work
such as Labor Cost Adjustment and
interest charges, retention, processing
of payment on Cost Retained by
WGCC, Determination of Cost of
Deletion for miscellaneous Finishing
Works, are considered unresolved
dispute[s] as to the proper
interpretation of our respective
obligations under the Contract, which
should be referred to the Board of
Arbitrators. Even if the dispute
subject matter of said letter had been
satisfactorily settled by herein parties,
the contents of the letter evinces
respondent's frame of mind that the
claims being made by petitioner in the
complaint subject of this petition, are
indeed matters involving disputes
arising from differences in
interpretation.

Clearly, the subject matter of


petitioner's claims arose from
differences in interpretation of the
contract, and under the terms thereof,
such disputes are subject to voluntary
arbitration. Since, under Section 4 of
Executive Order No. 1008 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 and all that is
needed for the CIAC to acquire
jurisdiction is for the parties to agree
to submit the same to voluntary
arbitration, there can be no other
conclusion but that the CIAC had

jurisdiction over petitioner's complaint.


Furthermore, Section 1, Article III of
the CIAC Rules of Procedure Governing
Construction Arbitration (CIAC Rules)
further provide that [a]n arbitration
clause in a construction contract or a
submission to arbitration of a
construction dispute shall be deemed
an agreement to submit an existing or
future controversy to CIAC jurisdiction,
notwithstanding the reference to a
different arbitration institution or
arbitral body in such contract or
submission. Thus, even if there is no
showing that petitioner previously
brought its claims before a Board of
Arbitrators constituted under the
terms of the contract, this
circumstance would not divest the
CIAC of jurisdiction. In HUTAMA-RSEA
Joint Operations, Inc. v. Citra Metro
Manila Tollways Corporation,[11] the
Court held that:

clause in the construction contract


ipso facto vested the CIAC with
jurisdiction. This rule applies,
regardless of whether the parties
specifically choose another forum or
make reference to another arbitral
body. Since the jurisdiction of CIAC is
conferred by law, it cannot be
subjected to any condition; nor can it
be waived or diminished by the
stipulation, act or omission of the
parties, as long as the parties agreed
to submit their construction contract
dispute to arbitration, or if there is an
arbitration clause in the construction
contract. The parties will not be
precluded from electing to submit
their dispute to CIAC, because this
right has been vested in each party by
law.

Under Section 1, Article III of the CIAC


Rules, an arbitration clause in a
construction contract shall be deemed
as an agreement to submit an existing
or future controversy to CIAC
jurisdiction, notwithstanding the
reference to a different arbitration
institution or arbitral body in such
contract x x x. Elementary is the rule
that when laws or rules are clear, it is
incumbent on the court to apply them.
When the law (or rule) is unambiguous
and unequivocal, application, not
interpretation thereof, is imperative.

It bears to emphasize that the mere


existence of an arbitration clause in
the construction contract is considered
by law as an agreement by the parties
to submit existing or future
controversies between them to CIAC
jurisdiction, without any qualification
or condition precedent. To affirm a
condition precedent in the
construction contract, which would
effectively suspend the jurisdiction of
the CIAC until compliance therewith,
would be in conflict with the
recognized intention of the law and
rules to automatically vest CIAC with
jurisdiction over a dispute should the
construction contract contain an
arbitration clause.

Hence, the bare fact that the parties


herein incorporated an arbitration
clause in the EPCC is sufficient to vest
the CIAC with jurisdiction over any
construction controversy or claim
between the parties. The arbitration

xxxx

Moreover, the CIAC was created in


recognition of the contribution of the

construction industry to national


development goals. Realizing that
delays in the resolution of construction
industry disputes would also hold up
the development of the country,
Executive Order No. 1008 expressly
mandates the CIAC to expeditiously
settle construction industry disputes
and, for this purpose, vests in the CIAC
original and exclusive jurisdiction over
disputes arising from, or connected
with, contracts entered into by the
parties involved in construction in the
Philippines.[12]

Thus, there is no question that in this


case, the CIAC properly took
cognizance of petitioner's complaint
as it had jurisdiction over the same.

IN VIEW OF THE FOREGOING, the


Petition is GRANTED. The Decision of
the Court of Appeals, dated December
19, 2003, and its Resolution dated May
24, 2004 in CA-G.R. SP No. 70959 are
REVERSED and SET ASIDE. The Order
of the Construction Industry
Arbitration Commission is
REINSTATED.

DEPARTMENT OF FOREIGN AFFAIRS


and BANGKO SENTRAL NG PILIPINAS,

Petitioners,

- versus -

DECISION

HON. FRANCO T. FALCON, IN HIS


CAPACITY AS THE PRESIDING JUDGE
OF BRANCH 71 OF THE REGIONAL
TRIAL COURT IN PASIG CITY and BCA
INTERNATIONAL CORPORATION,

LEONARDO-DE CASTRO, J.:

Respondents.

G.R. No. 176657

Present:

CORONA, C.J.,
Chairperson,
VELASCO, JR.,
LEONARDO-DE CASTRO,
DEL CASTILLO, and
PEREZ, JJ.

Promulgated:

September 1, 2010
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

Before the Court is


a Petition for Certiorari and prohibition
under Rule 65 of the Rules of Court
with a prayer for the issuance of a
temporary restraining order and/or a
writ of preliminary injunction filed by
petitioners Department of Foreign
Affairs (DFA) and Bangko Sentral ng
Pilipinas (BSP). Petitioners pray that
the Court declare as null and void the
Order[1] dated February 14, 2007 of
respondent Judge Franco T. Falcon
(Judge Falcon) in Civil Case No. 71079,
which granted the application for
preliminary injunction filed by
respondent BCA International
Corporation (BCA). Likewise,
petitioners seek to prevent respondent
Judge Falcon from implementing the
corresponding Writ of Preliminary
Injunction dated February 23, 2007[2]
issued pursuant to the aforesaid Order.

The facts of this


case, as culled from the records, are
as follows:

Being a member
state of the International Civil Aviation
Organization (ICAO),[3] the Philippines
has to comply with the commitments
and standards set forth in ICAO

Document No. 9303[4] which requires


the ICAO member states to issue
machine readable travel documents
(MRTDs)[5] by April 2010.

Thus, in line with


the DFAs mandate to improve the
passport and visa issuance system, as
well as the storage and retrieval of its
related application records, and
pursuant to our governments ICAO
commitments, the DFA secured the
approval of the President of the
Philippines, as Chairman of the Board
of the National Economic and
Development Authority (NEDA), for the
implementation of the Machine
Readable Passport and Visa Project
(the MRP/V Project) under the BuildOperate-and-Transfer (BOT) scheme,
provided for by Republic Act No. 6957,
as amended by Republic Act No. 7718
(the BOT Law), and its Implementing
Rules and Regulations (IRR). Thus, a
Pre-qualification, Bids and Awards
Committee (PBAC) published an
invitation to pre-qualify and bid for the
supply of the needed machine
readable passports and visas, and
conducted the public bidding for the
MRP/V Project on January 10, 2000.
Several bidders responded and BCA
was among those that pre-qualified
and submitted its technical and
financial proposals. On June 29,
2000, the PBAC found BCAs bid to
be the sole complying bid; hence, it
permitted the DFA to engage in direct
negotiations with BCA. On even
date, the PBAC recommended to the
DFA Secretary the award of the MRP/V
Project to BCA on a BOT
arrangement.

In compliance with
the Notice of Award dated September
29, 2000 and Section 11.3, Rule 11 of
the IRR of the BOT Law,[6] BCA
incorporated a project company, the
Philippine Passport Corporation (PPC)
to undertake and implement the
MRP/V Project.

On February 8,
2001, a Build-Operate-Transfer
Agreement[7] (BOT Agreement)
between the DFA and PPC was signed
by DFA Acting Secretary Lauro L. Baja,
Jr. and PPC President Bonifacio
Sumbilla. Under the BOT Agreement,
the MRP/V Project was defined as
follows:

Section 1.02 MRP/V Project refers to


all the activities and services
undertaken in the fulfillment of the
Machine Readable Passport and Visa
Project as defined in the Request for
Proposals (RFP), a copy of which is
hereto attached as Annex A, including
but not limited to project financing,
systems development, installation and
maintenance in the Philippines and
Foreign Service Posts (FSPs), training
of DFA personnel, provision of all
project consumables (related to the
production of passports and visas,
such as printer supplies, etc.),
scanning of application and citizenship
documents, creation of data bases,
issuance of machine readable
passports and visas, and site
preparation in the Central Facility and
Regional Consular Offices (RCOs)
nationwide.[8]

On April 5, 2002, former DFA Secretary


Teofisto T. Guingona and Bonifacio
Sumbilla, this time as BCA President,
signed an Amended BOT
Agreement[9] in order to reflect the
change in the designation of the
parties and to harmonize Section 11.3
with Section 11.8[10] of the IRR of the
BOT Law. The Amended BOT
Agreement was entered into by the
DFA and BCA with the conformity of
PPC.

The two BOT Agreements (the original


version signed on February 8, 2001
and the amended version signed April
5, 2002) contain substantially the
same provisions except for seven
additional paragraphs in the whereas
clauses and two new provisions
Section 9.05 on Performance and
Warranty Securities and Section 20.15
on Miscellaneous Provisions. The two
additional provisions are quoted
below:

Section 9.05. The PPC has posted in


favor of the DFA the performance
security required for Phase 1 of the
MRP/V Project and shall be deemed,
for all intents and purposes, to be full
compliance by BCA with the provisions
of this Article 9.

to this Amended BOT Agreement,


provided however that BCA shall
nonetheless be jointly and severally
liable with PPC for the performance of
all the obligations and liabilities under
this Amended BOT Agreement.[11]

Also modified in the Amended BOT


Agreement was the Project Completion
date of the MRP/V Project which set
the completion of the implementation
phase of the project within 18 to 23
months from the date of effectivity of
the Amended BOT Agreement as
opposed to the previous period found
in the original BOT Agreement which
set the completion within 18 to 23
months from receipt of the NTP (Notice
to Proceed) in accordance with the
Project Master Plan.

On April 12, 2002, an Assignment


Agreement[12] was executed by BCA
and PPC, whereby BCA assigned and
ceded its rights, title, interest and
benefits arising from the Amended
BOT Agreement to PPC.

As set out in Article 8 of the original


and the Amended BOT Agreement, the
MRP/V Project was divided into six
phases:

xxxx

Section 20.15 It is clearly and


expressly understood that BCA may
assign, cede and transfer all of its
rights and obligations under this
Amended BOT Agreement to PPC, as
fully as if PPC is the original signatory

Phase 1. Project Planning Phase


The Project Proponent [BCA] shall
prepare detailed plans and
specifications in accordance with
Annex A of this [Amended] BOT
Agreement within three (3) months
from issuance of the NTP (Notice to
Proceed) [from the date of effectivity

of this Amended BOT Agreement].


This phase shall be considered
complete upon the review, acceptance
and approval by the DFA of these
plans and the resulting Master Plan,
including the Master Schedule, the
business process specifications, the
acceptance criteria, among other
plans.

implemented, evaluated, and finally


approved by DFA as described in
Phase 1. The Project Proponent
[BCA] will be permitted to begin site
preparation and the scanning and
database building operations in all
offices as soon as the plans are agreed
upon and accepted. This includes
site preparation and database building
operations in these Phase-3 offices.

x x x x

The DFA must


approve all detailed plans as a
condition precedent to the issuance of
the CA [Certificate of Acceptance] for
Phase 1.

Phase 2. Implementation of the


MRP/V Project at the Central Facility
Within six (6) months from issuance of
the CA for Phase 1, the PROJECT
PROPONENT [BCA] shall complete the
implementation of the MRP/V Project
in the DFA Central Facility, and
establish the network design between
the DFA Central Facility, the ten (10)
RCOs [Regional Consular Offices] and
the eighty (80) FSPs [Foreign Service
Posts].

x x x x

Phase 3. Implementation of the


MRP/V Project at the Regional Consular
Offices This phase represents the
replication of the systems as approved
from the Central Facility to the RCOs
throughout the country, as identified
in the RFP [Request for Proposal]. The
approved systems are those

Within six (6)


months from issuance of CA for Phase
2, the Project Proponent [BCA] shall
complete site preparation and
implementation of the approved
systems in the ten (10) RCOs,
including a fully functional network
connection between all equipment at
the Central Facility and the RCOs.

Phase 4. Full Implementation,


including all Foreign Service Posts
Within three (3) to eight (8) months
from issuance of the CA for Phase-3,
the Project Proponent [BCA] shall
complete all preparations and fully
implement the approved systems in
the eighty (80) FSPs, including a fully
functional network connection
between all equipment at the Central
Facility and the FSPs. Upon
satisfactory completion of Phase 4, a
CA shall be issued by the DFA.

Phase 5. In Service Phase


Operation and maintenance of the
complete MRP/V Facility to provide
machine readable passports and visas
in all designated locations around the
world.

Phase 6. Transition/Turnover
Transition/Turnover to the DFA of all
operations and equipment, to include
an orderly transfer of ownership of all
hardware, application system software
and its source code and/or licenses
(subject to Section 5.02 [H]),
peripherals, leasehold improvements,
physical and computer security
improvements, Automated Fingerprint
Identification Systems, and all other
MRP/V facilities shall commence at
least six (6) months prior to the end of
the [Amended] BOT Agreement. The
transition will include the training of
DFA personnel who will be taking over
the responsibilities of system
operation and maintenance from the
Project Proponent [BCA]. The Project
Proponent [BCA] shall bear all costs
related to this transfer.[13] (Words in
brackets appear in the Amended BOT
Agreement)

To place matters in the proper


perspective, it should be pointed out
that both the DFA and BCA impute
breach of the Amended BOT
Agreement against each other.

According to the DFA, delays in the


completion of the phases permeated
the MRP/V Project due to the
submission of deficient documents as
well as intervening issues regarding
BCA/PPCs supposed financial
incapacity to fully implement the
project.

On the other hand, BCA contends that


the DFA failed to perform its reciprocal
obligation to issue to BCA a Certificate

of Acceptance of Phase 1 within 14


working days of operation purportedly
required by Section 14.04 of the
Amended BOT Agreement. BCA
bewailed that it took almost three
years for the DFA to issue the said
Certificate allegedly because every
appointee to the position of DFA
Secretary wanted to review the award
of the project to BCA. BCA further
alleged that it was the DFAs refusal
to approve the location of the DFA
Central Facility which prevented BCA
from proceeding with Phase 2 of the
MRP/V Project.

Later, the DFA sought the opinion of


the Department of Finance (DOF) and
the Department of Justice (DOJ)
regarding the appropriate legal actions
in connection with BCAs alleged
delays in the completion of the MRP/V
Project. In a Letter dated February
21, 2005,[14] the DOJ opined that the
DFA should issue a final demand upon
BCA to make good on its obligations,
specifically on the warranties and
responsibilities regarding the
necessary capitalization and the
required financing to carry out the
MRP/V Project. The DOJ used as
basis for said recommendation, the
Letter dated April 19, 2004[15] of DOF
Secretary Juanita Amatong to then DFA
Secretary Delia Albert stating, among
others, that BCA may not be able to
infuse more capital into PPC to use for
the completion of the MRP/V Project.

Thus, on February 22, 2005, DFA sent


a letter[16] to BCA, through its project
company PPC, invoking BCAs
financial warranty under Section
5.02(A) of the Amended BOT
Agreement.[17] The DFA required

BCA to submit (a) proof of adequate


capitalization (i.e., full or substantial
payment of stock subscriptions); (b) a
bank guarantee indicating the
availability of a credit facility of P700
million; and (c) audited financial
statements for the years 2001 to
2004.

In reply to DFAs
letter, BCA, through PPC, informed the
former of its position that its financial
capacity was already passed upon
during the prequalification process
and that the Amended BOT Agreement
did not call for any additional financial
requirements for the implementation
of the MRP/V Project. Nonetheless,
BCA submitted its financial statements
for the years 2001 and 2002 and
requested for additional time within
which to comply with the other
financial requirements which the DFA
insisted on.[18]

According to the DFA, BCAs financial


warranty is a continuing warranty
which requires that it shall have the
necessary capitalization to finance the
MRP/V Project in its entirety and not on
a per phase basis as BCA
contends. Only upon sufficient proof
of its financial capability to complete
and implement the whole project will
the DFAs obligation to choose and
approve the location of its Central
Facility arise. The DFA asserted that
its approval of a Central Facility site
was not ministerial and upon its
review, BCAs proposed site for the
Central Facility was purportedly
unacceptable in terms of security and
facilities. Moreover, the DFA allegedly
received conflicting official letters and
notices[19] from BCA and PPC

regarding the true ownership and


control of PPC. The DFA implied that
the disputes among the shareholders
of PPC and between PPC and BCA
appeared to be part of the reason for
the hampered implementation of the
MRP/V Project.

BCA, in turn,
submitted various letters and
documents to prove its financial
capability to complete the MRP/V
Project.[20] However, the DFA
claimed these documents were
unsatisfactory or of dubious
authenticity. Then on August 1, 2005,
BCA terminated its Assignment
Agreement with PPC and notified the
DFA that it would directly implement
the MRP/V Project.[21] BCA further
claims that the termination of the
Assignment Agreement was upon the
instance, or with the conformity, of the
DFA, a claim which the DFA disputed.

On December 9, 2005, the DFA sent a


Notice of Termination[22] to BCA and
PPC due to their alleged failure to
submit proof of financial capability to
complete the entire MRP/V Project in
accordance with the financial warranty
under Section 5.02(A) of the Amended
BOT Agreement. The Notice states:

After a careful evaluation and


consideration of the matter, including
the reasons cited in your letters dated
March 3, May 3, and June 20, 2005,
and upon the recommendation of the
Office of the Solicitor General (OSG),
the Department is of the view that
your continuing default in complying
with the requisite bank guarantee
and/or credit facility, despite repeated

notice and demand, is legally


unjustified.

In light of the foregoing considerations


and upon the instruction of the
Secretary of Foreign Affairs, the
Department hereby formally
TERMINATE (sic) the Subject Amended
BOT Agreement dated 5 April 2005
(sic)[23] effective 09 December
2005. Further, and as a
consequence of this termination, the
Department formally DEMAND (sic)
that you pay within ten (10) days from
receipt hereof, liquidated damages
equivalent to the corresponding
performance security bond that you
had posted for the MRP/V Project.

Please be guided accordingly.

On December 14,
2005, BCA sent a letter[24] to the DFA
demanding that it immediately
reconsider and revoke its previous
notice of termination, otherwise, BCA
would be compelled to declare the DFA
in default pursuant to the Amended
BOT Agreement. When the DFA
failed to respond to said letter, BCA
issued its own Notice of Default dated
December 22, 2005[25] against the
DFA, stating that if the default is not
remedied within 90 days, BCA will be
constrained to terminate the MRP/V
Project and hold the DFA liable for
damages.

BCAs request for


mutual discussion under Section 19.01
of the Amended BOT Agreement[26]

was purportedly ignored by the DFA


and left the dispute unresolved
through amicable means within 90
days. Consequently, BCA filed its
Request for Arbitration dated April 7,
2006[27] with the Philippine Dispute
Resolution Center, Inc. (PDRCI),
pursuant to Section 19.02 of the
Amended BOT Agreement which
provides:

Section 19.02 Failure to Settle


Amicably If the Dispute cannot be
settled amicably within ninety (90)
days by mutual discussion as
contemplated under Section 19.01
herein, the Dispute shall be settled
with finality by an arbitrage tribunal
operating under International Law,
hereinafter referred to as the
Tribunal, under the UNCITRAL
Arbitration Rules contained in
Resolution 31/98 adopted by the
United Nations General Assembly on
December 15, 1976, and entitled
Arbitration Rules on the United
Nations Commission on the
International Trade Law. The DFA
and the BCA undertake to abide by
and implement the arbitration
award. The place of arbitration shall
be Pasay City, Philippines, or such
other place as may mutually be
agreed upon by both parties. The
arbitration proceeding shall be
conducted in the English language.
[28]

As alleged in
BCAs Request for Arbitration, PDRCI
is a non-stock, non-profit organization
composed of independent arbitrators
who operate under its own

Administrative Guidelines and Rules of


Arbitration as well as under the United
Nations Commission on the
International Trade Law (UNCITRAL)
Model Law on International
Commercial Arbitration and other
applicable laws and rules. According
to BCA, PDRCI can act as an arbitration
center from whose pool of accredited
arbitrators both the DFA and BCA may
select their own nominee to become a
member of the arbitral tribunal which
will render the arbitration award.

BCAs Request for


Arbitration filed with the PDRCI sought
the following reliefs:

1. A judgment
nullifying and setting aside the Notice
of Termination dated December 9,
2005 of Respondent [DFA], including
its demand to Claimant [BCA] to pay
liquidated damages equivalent to the
corresponding performance security
bond posted by Claimant [BCA];

2. A judgment (a)
confirming the Notice of Default dated
December 22, 2005 issued by
Claimant [BCA] to Respondent [DFA];
and (b) ordering Respondent [DFA] to
perform its obligation under the
Amended BOT Agreement dated April
5, 2002 by approving the site of the
Central Facility at the Star Mall
Complex on Shaw Boulevard,
Mandaluyong City, within five days
from receipt of the Arbitral Award; and

3. A judgment
ordering respondent [DFA] to pay

damages to Claimant [BCA],


reasonably estimated at
P50,000,000.00 as of this date,
representing lost business
opportunities; financing fees, costs
and commissions; travel expenses;
legal fees and expenses; and costs of
arbitration, including the fees of the
arbitrator/s.[29]

PDRCI, through a letter dated April 26,


2006,[30] invited the DFA to submit its
Answer to the Request for Arbitration
within 30 days from receipt of said
letter and also requested both the DFA
and BCA to nominate their chosen
arbitrator within the same period of
time.

Initially, the DFA,


through a letter dated May 22, 2006,
[31] requested for an extension of
time to file its answer, without
prejudice to jurisdictional and other
defenses and objections available to it
under the law. Subsequently,
however, in a letter dated May 29,
2006,[32] the DFA declined the
request for arbitration before the
PDRCI. While it expressed its
willingness to resort to arbitration, the
DFA pointed out that under Section
19.02 of the Amended BOT
Agreement, there is no mention of a
specific body or institution that was
previously authorized by the parties to
settle their dispute. The DFA further
claimed that the arbitration of the
dispute should be had before an ad
hoc arbitration body, and not before
the PDRCI which has as its accredited
arbitrators, two of BCAs counsels of
record. Likewise, the DFA insisted

that PPC, allegedly an indispensable


party in the instant case, should also
participate in the arbitration.

The DFA then


sought the opinion of the DOJ on the
Notice of Termination dated December
9, 2005 that it sent to BCA with regard
to the MRP/V Project.

In DOJ Opinion No.


35 (2006) dated May 31, 2006,[33] the
DOJ concurred with the steps taken by
the DFA, stating that there was basis
in law and in fact for the termination
of the MRP/V Project. Moreover, the
DOJ recommended the immediate
implementation of the project
(presumably by a different contractor)
at the soonest possible time.

Thereafter, the DFA


and the BSP entered into a
Memorandum of Agreement for the
latter to provide the former passports
compliant with international
standards. The BSP then solicited
bids for the supply, delivery,
installation and commissioning of a
system for the production of Electronic
Passport Booklets or e-Passports.[34]

For BCA, the BSPs


invitation to bid for the supply and
purchase of e-Passports (the ePassport Project) would only further
delay the arbitration it requested from
the DFA. Moreover, this new ePassport Project by the BSP and the
DFA would render BCAs remedies
moot inasmuch as the e-Passport
Project would then be replacing the

MRP/V Project which BCA was carrying


out for the DFA.

Thus, BCA filed a


Petition for Interim Relief[35] under
Section 28 of the Alternative Dispute
Resolution Act of 2004 (R.A. No. 9285),
[36] with the Regional Trial Court (RTC)
of Pasig City, Branch 71, presided over
by respondent Judge Falcon. In that
RTC petition, BCA prayed for the
following:

WHEREFORE,
BCA respectfully prays that this
Honorable Court, before the
constitution of the arbitral tribunal in
PDRCI Case No. 30-2006/BGF, grant
petitioner interim relief in the following
manner:

(a) upon filing of this


Petition, immediately issue an order
temporarily restraining Respondents
[DFA and BSP], their agents,
representatives, awardees, suppliers
and assigns (i) from awarding a new
contract to implement the Project, or
any similar electronic passport or visa
project; or (ii) if such contract has
been awarded, from implementing
such Project or similar projects until
further orders from this Honorable
Court;

(b) after notice and


hearing, issue a writ of preliminary
injunction ordering Respondents [DFA
and BSP], their agents,
representatives, awardees, suppliers

and assigns to desist (i) from awarding


a new contract to implement the
Project or any similar electronic
passport or visa project; or (ii) if such
contract has been awarded, from
implementing such Project or similar
projects, and to maintain the status
quo ante pending the resolution on the
merits of BCAs Request for
Arbitration; and

(c) render judgment


affirming the interim relief granted to
BCA until the dispute between the
parties shall have been resolved with
finality.

BCA also prays


for such other relief, just and equitable
under the premises.[37]

BCA alleged, in
support for its application for a
Temporary Restraining Order (TRO),
that unless the DFA and the BSP were
immediately restrained, they would
proceed to undertake the project
together with a third party to defeat
the reliefs BCA sought in its Request
for Arbitration, thus causing BCA to
suffer grave and irreparable injury
from the loss of substantial
investments in connection with the
implementation of the MRP/V
Project.

Thereafter, the DFA


filed an Opposition (to the Application
for Temporary Restraining Order
and/or Writ of Preliminary Injunction)

dated January 18, 2007,[38] alleging


that BCA has no cause of action
against it as the contract between
them is for machine readable
passports and visas which is not the
same as the contract it has with the
BSP for the supply of electronic
passports. The DFA also pointed out
that the Filipino people and the
governments international standing
would suffer great damage if a TRO
would be issued to stop the e-Passport
Project. The DFA mainly anchored its
opposition on Republic Act No. 8975,
which prohibits trial courts from
issuing a TRO, preliminary injunction
or mandatory injunction against the
bidding or awarding of a contract or
project of the national government.

On January 23,
2007, after summarily hearing the
parties oral arguments on BCAs
application for the issuance of a TRO,
the trial court ordered the issuance of
a TRO restraining the DFA and the
BSP, their agents, representatives,
awardees, suppliers and assigns from
awarding a new contract to implement
the Project or any similar electronic
passport or visa project, or if such
contract has been awarded, from
implementing such or similar projects.
[39] The trial court also set for
hearing BCAs application for
preliminary injunction.

Consequently, the
DFA filed a Motion for
Reconsideration[40] of the January 23,
2007 Order. The BSP, in turn, also
sought to lift the TRO and to dismiss
the petition. In its Urgent Omnibus
Motion dated February 1, 2007,[41]
the BSP asserted that BCA is not

entitled to an injunction, as it does not


have a clear right which ought to be
protected, and that the trial court has
no jurisdiction to enjoin the
implementation of the e-Passport
Project which, the BSP alleged, is a
national government project under
Republic Act No. 8975.

In the hearings set


for BCAs application for preliminary
injunction, BCA presented as
witnesses, Mr. Bonifacio Sumbilla, its
President, Mr. Celestino Mercader, Jr.
from the Independent Verification and
Validation Contractor commissioned
by the DFA under the Amended BOT
Agreement, and DFA Assistant
Secretary Domingo Lucenario, Jr. as
adverse party witness.

The DFA and the


BSP did not present any witness
during the hearings for BCAs
application for preliminary
injunction. According to the DFA and
the BSP, the trial court did not have
any jurisdiction over the case
considering that BCA did not pay the
correct docket fees and that only the
Supreme Court could issue a TRO on
the bidding for a national government
project like the e-Passport Project
pursuant to the provisions of Republic
Act No. 8975. Under Section 3 of
Republic Act No. 8975, the RTC could
only issue a TRO against a national
government project if it involves a
matter of extreme urgency involving a
constitutional issue, such that unless a
TRO is issued, grave injustice and
irreparable injury will arise.

Thereafter, BCA
filed an Omnibus Comment [on
Opposition and Supplemental
Opposition (To the Application for
Temporary Restraining Order and/or
Writ of Preliminary Injunction)] and
Opposition [to Motion for
Reconsideration (To the Temporary
Restraining Order dated January 23,
2007)] and Urgent Omnibus Motion [(i)
To Lift Temporary Restraining Order;
and (ii) To Dismiss the Petition] dated
January 31, 2007.[42] The DFA and
the BSP filed their separate Replies (to
BCAs Omnibus Comment) dated
February 9, 2007[43] and February 13,
2007,[44] respectively.

On February 14,
2007, the trial court issued an Order
granting BCAs application for
preliminary injunction, to wit:

WHEREFORE, in view of the above, the


court resolves that it has jurisdiction
over the instant petition and to issue
the provisional remedy prayed for, and
therefore, hereby GRANTS
petitioners [BCAs] application for
preliminary injunction. Accordingly,
upon posting a bond in the amount of
Ten Million Pesos (P10,000,000.00), let
a writ of preliminary injunction issue
ordering respondents [DFA and BSP],
their agents, representatives,
awardees, suppliers and assigns to
desist (i) from awarding a new
contract to implement the project or
any similar electronic passport or visa
project or (ii) if such contract has been
awarded from implementing such
project or similar projects.

The motion to dismiss is denied for


lack of merit. The motions for
reconsideration and to lift temporary
restraining Order are now moot and
academic by reason of the expiration
of the TRO.[45]

On February 16,
2007, BCA filed an Amended Petition,
[46] wherein paragraphs 3.3(b) and
4.3 were modified to add language to
the effect that unless petitioners were
enjoined from awarding the e-Passport
Project, BCA would be deprived of its
constitutionally-protected right to
perform its contractual obligations
under the original and amended BOT
Agreements without due process of
law. Subsequently, on February 26,
2007, the DFA and the BSP received
the Writ of Preliminary Injunction
dated February 23, 2007.

Hence, on March 2,
2007, the DFA and the BSP filed the
instant Petition for Certiorari[47] and
prohibition under Rule 65 of the Rules
of Court with a prayer for the issuance
of a temporary restraining order
and/or a writ of preliminary injunction,
imputing grave abuse of discretion on
the trial court when it granted interim
relief to BCA and issued the assailed
Order dated February 14, 2007 and
the writ of preliminary injunction dated
February 23, 2007.

The DFA and the


BSP later filed an Urgent Motion for
Issuance of a Temporary Restraining
Order and/or Writ of Preliminary
Injunction dated March 5, 2007.[48]

On March 12, 2007,


the Court required BCA to file its
comment on the said petition within
ten days from notice and granted the
Office of the Solicitor Generals
urgent motion for issuance of a TRO
and/or writ of preliminary injunction,
[49] thus:

After deliberating on the petition for


certiorari and prohibition with
temporary restraining order and/or
writ of preliminary injunction assailing
the Order dated 14 February 2007 of
the Regional Trial Court, Branch 71,
Pasig City, in Civil Case No. 71079, the
Court, without necessarily giving due
course thereto, resolves to require
respondents to COMMENT thereon (not
to file a motion to dismiss) within ten
(10) days from notice.

The Court further resolves to GRANT


the Office of the Solicitor Generals
urgent motion for issuance of a
temporary restraining order and/or
writ of preliminary injunction dated 05
March 2007 and ISSUE a TEMPORARY
RESTRAINING ORDER, as prayed for,
enjoining respondents from
implementing the assailed Order
dated 14 February 2007 and the Writ
of Preliminary Injunction dated 23
February 2007, issued by respondent
Judge Franco T. Falcon in Civil Case No.
71079 entitled BCA International
Corporation vs. Department of Foreign
Affairs and Bangko Sentral ng
Pilipinas, and from conducting further
proceedings in said case until further
orders from this Court.

BCA filed on April 2,


2007 its Comment with Urgent Motion
to Lift TRO,[50] to which the DFA and
the BSP filed their Reply dated August
14, 2007.[51]

In a Resolution
dated June 4, 2007,[52] the Court
denied BCAs motion to lift TRO.
BCA filed another Urgent Omnibus
Motion dated August 17, 2007, for the
reconsideration of the Resolution
dated June 4, 2007, praying that the
TRO issued on March 12, 2007 be
lifted and that the petition be denied.

In a Resolution
dated September 10, 2007,[53] the
Court denied BCAs Urgent Omnibus
Motion and gave due course to the
instant petition. The parties were
directed to file their respective
memoranda within 30 days from
notice of the Courts September 10,
2007 Resolution.

Petitioners DFA and


BSP submit the following issues for our
consideration:

ISSUED THE ASSAILED ORDER, WHICH


EFFECTIVELY ENJOINED THE
IMPLEMENTATION OF THE E-PASSPORT
PROJECT -- A NATIONAL GOVERNMENT
PROJECT UNDER REPUBLIC ACT NO.
8975.

II

WHETHER OR NOT THE RESPONDENT


JUDGE ACTED WITH GRAVE ABUSE OF
DISCRETION AMOUNTING TO LACK OR
EXCESS OF JURISDICTION IN
GRANTING RESPONDENT BCAS
INTERIM RELIEF INASMUCH AS:

(I)
RESPONDENT BCA HAS
NOT ESTABLISHED A CLEAR RIGHT
THAT CAN BE PROTECTED BY AN
INJUNCTION; AND

(II)
RESPONDENT BCA HAS NOT
SHOWN THAT IT WILL SUSTAIN GRAVE
AND IRREPARABLE INJURY THAT MUST
BE PROTECTED BY AN INJUNCTION.
ON THE CONTRARY, IT IS THE FILIPINO
PEOPLE, WHO PETITIONERS PROTECT,
THAT WILL SUSTAIN SERIOUS AND
SEVERE INJURY BY THE INJUNCTION.
[54]

ISSUES

WHETHER OR NOT THE RESPONDENT


JUDGE GRAVELY ABUSED HIS
DISCRETION AMOUNTING TO LACK OR
EXCESS OF JURISDICTION WHEN HE

At the outset, we dispose of the


procedural objections of BCA to the
petition, to wit: (a) petitioners did not
follow the hierarchy of courts by filing
their petition directly with this Court,
without filing a motion for
reconsideration with the RTC and
without filing a petition first with the
Court of Appeals; (b) the person who

verified the petition for the DFA did not


have personal knowledge of the facts
of the case and whose appointment to
his position was highly irregular; and
(c) the verification by the Assistant
Governor and General Counsel of the
BSP of only selected paragraphs of the
petition was with the purported intent
to mislead this Court.

Although the direct filing of petitions


for certiorari with the Supreme Court
is discouraged when litigants may still
resort to remedies with the lower
courts, we have in the past overlooked
the failure of a party to strictly adhere
to the hierarchy of courts on highly
meritorious grounds. Most recently,
we relaxed the rule on court hierarchy
in the case of Roque, Jr. v. Commission
on Elections,[55] wherein we held:

The policy on the hierarchy of courts,


which petitioners indeed failed to
observe, is not an iron-clad rule. For
indeed the Court has full discretionary
power to take cognizance and assume
jurisdiction of special civil actions for
certiorari and mandamus filed directly
with it for exceptionally compelling
reasons or if warranted by the nature
of the issues clearly and specifically
raised in the petition.[56] (Emphases
ours.)

The Court deems it proper to adopt a


similarly liberal attitude in the present
case in consideration of the
transcendental importance of an issue
raised herein. This is the first time
that the Court is confronted with the
question of whether an information

and communication technology


project, which does not conform to our
traditional notion of the term
infrastructure, is covered by the
prohibition on the issuance of court
injunctions found in Republic Act No.
8975, which is entitled An Act to
Ensure the Expeditious
Implementation and Completion of
Government Infrastructure Projects by
Prohibiting Lower Courts from Issuing
Temporary Restraining Orders,
Preliminary Injunctions or Preliminary
Mandatory Injunctions, Providing
Penalties for Violations Thereof, and
for Other Purposes. Taking into
account the current trend of
computerization and modernization of
administrative and service systems of
government offices, departments and
agencies, the resolution of this issue
for the guidance of the bench and bar,
as well as the general public, is both
timely and imperative.

Anent BCAs claim that Mr. Edsel T.


Custodio (who verified the Petition on
behalf of the DFA) did not have
personal knowledge of the facts of the
case and was appointed to his position
as Acting Secretary under purportedly
irregular circumstances, we find that
BCA failed to sufficiently prove such
allegations. In any event, we have
previously held that [d]epending on
the nature of the allegations in the
petition, the verification may be based
either purely on personal knowledge,
or entirely on authentic records, or on
both sources.[57] The alleged lack
of personal knowledge of Mr. Custodio
(which, as we already stated, BCA
failed to prove) would not necessarily
render the verification defective for he
could have verified the petition purely
on the basis of authentic records.

As for the assertion that the partial


verification of Assistant Governor and
General Counsel Juan de Zuniga, Jr.
was for the purpose of misleading this
Court, BCA likewise failed to adduce
evidence on this point. Good faith is
always presumed. Paragraph 3 of Mr.
Zunigas verification indicates that
his partial verification is due to the
fact that he is verifying only the
allegations in the petition peculiar to
the BSP. We see no reason to doubt
that this is the true reason for his
partial or selective verification.

In sum, BCA failed to successfully


rebut the presumption that the official
acts (of Mr. Custodio and Mr. Zuniga)
were done in good faith and in the
regular performance of official duty.
[58] Even assuming the verifications
of the petition suffered from some
defect, we have time and again ruled
that [t]he ends of justice are better
served when cases are determined on
the merits after all parties are given
full opportunity to ventilate their
causes and defenses rather than on
technicality or some procedural
imperfections.[59] In other words,
the Court may suspend or even
disregard rules when the demands of
justice so require.[60]

In their petition, the DFA and the BSP


argue that respondent Judge Falcon
gravely abused his discretion
amounting to lack or excess of
jurisdiction when he issued the
assailed orders, which effectively
enjoined the bidding and/or
implementation of the e-Passport
Project. According to petitioners, this
violated the clear prohibition under
Republic Act No. 8975 regarding the
issuance of TROs and preliminary
injunctions against national
government projects, such as the ePassport Project.

The prohibition invoked by petitioners


is found in Section 3 of Republic Act
No. 8975, which reads:

Section 3. Prohibition on the


Issuance of Temporary Restraining
Orders, Preliminary Injunctions and
Preliminary Mandatory Injunctions.
No court, except the Supreme Court,
shall issue any temporary restraining
order, preliminary injunction or
preliminary mandatory injunction
against the government, or any of its
subdivisions, officials or any person or
entity, whether public or private,
acting under the governments
direction, to restrain, prohibit or
compel the following acts:

We now come to the substantive


issues involved in this case.

On whether the trial court had


jurisdiction to issue a writ of
preliminary injunction in the present
case

(a) Acquisition, clearance and


development of the right-of-way
and/or site or location of any national
government project;

(b) Bidding or awarding of


contract/project of the national
government as defined under Section
2 hereof;

(c) Commencement, prosecution,


execution, implementation, operation
of any such contract or project;

(d) Termination or rescission of any


such contract/project; and

(e) The undertaking or authorization


of any other lawful activity necessary
for such contract/project.

This prohibition
shall apply in all cases, disputes or
controversies instituted by a private
party, including but not limited to
cases filed by bidders or those
claiming to have rights through such
bidders involving such
contract/project. This prohibition shall
not apply when the matter is of
extreme urgency involving a
constitutional issue, such that unless a
temporary restraining order is issued,
grave injustice and irreparable injury
will arise. The applicant shall file a
bond, in an amount to be fixed by the
court, which bond shall accrue in favor
of the government if the court should
finally decide that the applicant was
not entitled to the relief sought.

If after due
hearing the court finds that the award
of the contract is null and void, the
court may, if appropriate under the
circumstances, award the contract to

the qualified and winning bidder or


order a rebidding of the same, without
prejudice to any liability that the guilty
party may incur under existing laws.

From the foregoing, it is indubitable


that no court, aside from the Supreme
Court, may enjoin a national
government project unless the
matter is one of extreme urgency
involving a constitutional issue such
that unless the act complained of is
enjoined, grave injustice or irreparable
injury would arise.

What then are the national


government projects over which the
lower courts are without jurisdiction to
issue the injunctive relief as mandated
by Republic Act No. 8975?

Section 2(a) of Republic Act No. 8975


provides:

Section 2. Definition of Terms.

(a) National government projects


shall refer to all current and future
national government infrastructure,
engineering works and service
contracts, including projects
undertaken by government-owned and
-controlled corporations, all projects
covered by Republic Act No. 6975, as
amended by Republic Act No. 7718,
otherwise known as the Build-Operateand-Transfer Law, and other related
and necessary activities, such as site
acquisition, supply and/or installation
of equipment and materials,

implementation, construction,
completion, operation, maintenance,
improvement, repair and
rehabilitation, regardless of the source
of funding.

As petitioners themselves pointed out,


there are three types of national
government projects enumerated in
Section 2(a), to wit:

(a)
current and future
national government infrastructure
projects, engineering works and
service contracts, including projects
undertaken by government-owned and
controlled corporations;

(b)
all projects covered by
R.A. No. 6975, as amended by R.A. No.
7718, or the Build-Operate-andTransfer ( BOT) Law; and

(c)
other related and
necessary activities, such as site
acquisition, supply and/or installation
of equipment and materials,
implementation, construction,
completion, operation, maintenance,
improvement repair and rehabilitation,
regardless of the source of funding.

Under Section 2(a) of the BOT Law as


amended by Republic Act No. 7718,
[61] private sector infrastructure or
development projects are those
normally financed and operated by the
public sector but which will now be

wholly or partly implemented by the


private sector, including but not
limited to, power plants, highways,
ports, airports, canals, dams,
hydropower projects, water supply,
irrigation, telecommunications,
railroads and railways, transport
systems, land reclamation projects,
industrial estates or townships,
housing, government buildings,
tourism projects, markets,
slaughterhouses, warehouses, solid
waste management, information
technology networks and database
infrastructure, education and health
facilities, sewerage, drainage,
dredging, and other infrastructure and
development projects as may be
authorized by the appropriate
agency.

In contrast,
Republic Act No. 9184,[62] also known
as the Government Procurement
Reform Act, defines infrastructure
projects in Section 5(k) thereof in this
manner:

(k) Infrastructure Projects - include the


construction, improvement,
rehabilitation, demolition, repair,
restoration or maintenance of roads
and bridges, railways, airports,
seaports, communication facilities,
civil works components of information
technology projects, irrigation, flood
control and drainage, water supply,
sanitation, sewerage and solid waste
management systems, shore
protection, energy/power and
electrification facilities, national
buildings, school buildings, hospital
buildings and other related
construction projects of the
government. (Emphasis supplied.)

In the present petition, the DFA and


the BSP contend that the bidding for
the supply, delivery, installation and
commissioning of a system for the
production of Electronic Passport
Booklets, is a national government
project within the definition of Section
2 of Republic Act No. 8975.
Petitioners also point to the Senate
deliberations on Senate Bill No.
2038[63] (later Republic Act No. 8975)
which allegedly show the legislatives
intent to expand the scope and
definition of national government
projects to cover not only the
infrastructure projects enumerated in
Presidential Decree No. 1818, but also
future projects that may likewise be
considered national government
infrastructure projects, like the ePassport Project, to wit:

Senator Cayetano. x x x Mr. President,


the present bill, the Senate Bill No.
2038, is actually an improvement of
P.D. No. 1818 and definitely not a
repudiation of what I have earlier said,
as my good friend clearly stated. But
this is really an effort to improve both
the scope and definition of the term
government projects and to
ensure that lower court judges obey
and observe this prohibition on the
issuance of TROs on infrastructure
projects of the government.

xxxx

Senator Cayetano. That is why, Mr.


President, I did try to explain why I

would accept the proposed


amendment, meaning the totality of
the repeal of P.D. 1818 which is not
found in the original version of the bill,
because of my earlier explanation that
the definition of the term
government infrastructure project
covers all of those enumerated in
Section 1 of P.D. No. 1818. And the
reason for that, as we know, is we do
not know what else could be
considered government infrastructure
project in the next 10 or 20 years.

x x x So, using the Latin maxim of


expression unius est exclusion
alterius, which means what is
expressly mentioned is tantamount to
an express exclusion of the others,
that is the reason we did not include
particularly an enumeration of certain
activities of the government found in
Section 1 of P.D. No. 1818. Because
to do that, it may be a good excuse for
a brilliant lawyer to say Well, you
know, since it does not cover this
particular activity, ergo, the Regional
Trial Court may issue TRO.

Using the foregoing


discussions to establish that the intent
of the framers of the law was to
broaden the scope and definition of
national government projects and
national infrastructure projects, the
DFA and the BSP submit that the said
scope and definition had since evolved
to include the e-Passport Project.
They assert that the concept of
infrastructure must now refer to
any and all elements that provide
support, framework, or structure for a
given system or organization,

including information technology, such


as the e-Passport Project.

Interestingly,
petitioners represented to the trial
court that the e-Passport Project is a
BOT project but in their petition with
this Court, petitioners simply claim
that the e-Passport Project is a
national government project under
Section 2 of Republic Act No. 8975.
This circumstance is significant, since
relying on the claim that the ePassport Project is a BOT project, the
trial court ruled in this wise:

The prohibition
against issuance of TRO and/or writ of
preliminary injunction under RA 8975
applies only to national government
infrastructure project covered by the
BOT Law, (RA 8975, Sec 3[b] in
relation to Sec. 2).

The national
government projects covered under
the BOT are enumerated under Sec. 2
of RA6957, as amended, otherwise
known as the BOT Law. Notably, it
includes information technology
networks and database
infrastructure.

In relation to
information technology projects,
infrastructure projects refer to the
civil works components thereof.
(R.A. No. 9184 [2003], Sec. 5[c]{sic}).
[64]

Respondent
BSPs request for bid, for the supply,
delivery, installation and
commissioning of a system for the
production of Electronic Passport
Booklets appears to be beyond the
scope of the term civil works.
Respondents did not present evidence
to prove otherwise.[65] (Emphases
ours.)

From the foregoing,


it can be gleaned that the trial court
accepted BCAs reasoning that,
assuming the e-Passport Project is a
project under the BOT Law, Section 2
of the BOT Law must be read in
conjunction with Section 5(c) of
Republic Act No. 9184 or the
Government Procurement Reform Act
to the effect that only the civil works
component of information technology
projects are to be considered
infrastructure. Thus, only said
civil works component of an
information technology project cannot
be the subject of a TRO or writ of
injunction issued by a lower court.

Although the Court


finds that the trial court had
jurisdiction to issue the writ of
preliminary injunction, we cannot
uphold the theory of BCA and the trial
court that the definition of the term
infrastructure project in Republic
Act No. 9184 should be applied to the
BOT Law.

Section 5 of
Republic Act No. 9184 prefaces the
definition of the terms therein,

including the term infrastructure


project, with the following phrase:
For purposes of this Act, the
following terms or words and phrases
shall mean or be understood as
follows x x x.

This Court has


stated that the definition of a term in a
statute is not conclusive as to the
meaning of the same term as used
elsewhere.[66] This is evident when
the legislative definition is expressly
made for the purposes of the statute
containing such definition.[67]

There is no legal or
rational basis to apply the definition of
the term infrastructure project in
one statute to another statute enacted
years before and which already
defined the types of projects it
covers. Rather, a reading of the two
statutes involved will readily show that
there is a legislative intent to treat
information technology projects
differently under the BOT Law and the
Government Procurement Reform Act.

In the BOT Law as


amended by Republic Act No. 7718,
the national infrastructure and
development projects covered by said
law are enumerated in Section 2(a) as
follows:

SEC. 2. Definition of Terms. - The


following terms used in this Act shall
have the meanings stated below:

(a)
Private sector
infrastructure or development projects
- The general description of
infrastructure or development projects
normally financed and operated by the
public sector but which will now be
wholly or partly implemented by the
private sector, including but not
limited to, power plants, highways,
ports, airports, canals, dams,
hydropower projects, water supply,
irrigation, telecommunications,
railroads and railways, transport
systems, land reclamation projects,
industrial estates of townships,
housing, government buildings,
tourism projects, markets,
slaughterhouses, warehouses, solid
waste management, information
technology networks and database
infrastructure, education and health
facilities, sewerage, drainage,
dredging, and other infrastructure and
development projects as may be
authorized by the appropriate agency
pursuant to this Act. Such projects
shall be undertaken through
contractual arrangements as defined
hereunder and such other variations
as may be approved by the President
of the Philippines.

For the construction stage of these


infrastructure projects, the project
proponent may obtain financing from
foreign and/or domestic sources
and/or engage the services of a
foreign and/or Filipino contractor:
Provided, That, in case an
infrastructure or a development
facility's operation requires a public
utility franchise, the facility operator
must be a Filipino or if a corporation, it
must be duly registered with the
Securities and Exchange Commission
and owned up to at least sixty percent

(60%) by Filipinos: Provided, further,


That in the case of foreign contractors,
Filipino labor shall be employed or
hired in the different phases of
construction where Filipino skills are
available: Provided, finally, That
projects which would have difficulty in
sourcing funds may be financed partly
from direct government appropriations
and/or from Official Development
Assistance (ODA) of foreign
governments or institutions not
exceeding fifty percent (50%) of the
project cost, and the balance to be
provided by the project proponent.
(Emphasis supplied.)

A similar provision
appears in the Revised IRR of the BOT
Law as amended, to wit:

SECTION 1.3 - DEFINITION OF TERMS

For purposes of these Implementing


Rules and Regulations, the terms and
phrases hereunder shall be
understood as follows:

x x x x

v. Private Sector Infrastructure or


Development Projects - The general
description of infrastructure or
Development Projects normally
financed, and operated by the public
sector but which will now be wholly or
partly financed, constructed and
operated by the private sector,
including but not limited to, power
plants, highways, ports, airports,

canals, dams, hydropower projects,


water supply, irrigation,
telecommunications, railroad and
railways, transport systems, land
reclamation projects, industrial estates
or townships, housing, government
buildings, tourism projects, public
markets, slaughterhouses,
warehouses, solid waste management,
information technology networks and
database infrastructure, education and
health facilities, sewerage, drainage,
dredging, and other infrastructure and
development projects as may
otherwise be authorized by the
appropriate Agency/LGU pursuant to
the Act or these Revised IRR. Such
projects shall be undertaken through
Contractual Arrangements as defined
herein, including such other variations
as may be approved by the President
of the Philippines.

x x x x

SECTION 2.2 - ELIGIBLE TYPES OF


PROJECTS

The Construction, rehabilitation,


improvement, betterment, expansion,
modernization, operation, financing
and maintenance of the following
types of projects which are normally
financed and operated by the public
sector which will now be wholly or
partly financed, constructed and
operated by the private sector,
including other infrastructure and
development projects as may be
authorized by the appropriate
agencies, may be proposed under the
provisions of the Act and these
Revised IRR, provided however that
such projects have a cost recovery

component which covers at least 50%


of the Project Cost, or as determined
by the Approving Body:

xxxx

h. Information technology (IT) and


data base infrastructure, including
modernization of IT, geo-spatial
resource mapping and cadastral
survey for resource accounting and
planning. (Underscoring supplied.)

Undeniably, under
the BOT Law, wherein the projects are
to be privately funded, the entire
information technology project,
including the civil works component
and the technological aspect thereof,
is considered an infrastructure or
development project and treated
similarly as traditional
infrastructure projects. All the
rules applicable to traditional
infrastructure projects are also
applicable to information technology
projects. In fact, the MRP/V Project
awarded to BCA under the BOT Law
appears to include both civil works
(i.e., site preparation of the Central
Facility, regional DFA offices and
foreign service posts) and non-civil
works aspects (i.e., development,
installation and maintenance in the
Philippines and foreign service posts of
a computerized passport and visa
issuance system, including creation of
databases, storage and retrieval
systems, training of personnel and
provision of consumables).

In contrast, under
Republic Act No. 9184 or the
Government Procurement Reform Act,
which contemplates projects to be
funded by public funds, the term
infrastructure project was limited
to only the civil works component
of information technology projects.
The non-civil works component of
information technology projects would
be treated as an acquisition of goods
or consulting services as the case may
be.

This limited
definition of infrastructure project
in relation to information technology
projects under Republic Act No. 9184
is significant since the IRR of Republic
Act No. 9184 has some provisions that
are particular to infrastructure projects
and other provisions that are
applicable only to procurement of
goods or consulting services.[68]

Implicitly, the civil


works component of information
technology projects are subject to the
provisions on infrastructure projects
while the technological and other
components would be covered by the
provisions on procurement of goods or
consulting services as the
circumstances may warrant.

When Congress
adopted a limited definition of what is
to be considered infrastructure in
relation to information technology
projects under the Government
Procurement Reform Act, legislators
are presumed to have taken into
account previous laws concerning
infrastructure projects (the BOT Law

and Republic Act No. 8975) and


deliberately adopted the limited
definition. We can further presume
that Congress had written into law a
different treatment for information
technology projects financed by public
funds vis-a-vis privately funded
projects for a valid legislative purpose.

The idea that the


definitions of terms found in the
Government Procurement Reform Act
were not meant to be applied to
projects under the BOT Law is further
reinforced by the following provision in
the IRR of the Government
Procurement Reform Act:

Section 1. Purpose and General


Coverage

This Implementing Rules and


Regulations (IRR) Part A, hereinafter
called IRR-A, is promulgated
pursuant to Section 75 of Republic Act
No. 9184 (R.A. 9184), otherwise known
as the Government Procurement
Reform Act (GPRA), for the purpose
of prescribing the necessary rules and
regulations for the modernization,
standardization, and regulation of the
procurement activities of the
government. This IRR-A shall cover all
fully domestically-funded procurement
activities from procurement planning
up to contract implementation and
termination, except for the following:

a) Acquisition of real property which


shall be governed by Republic Act No.
8974 (R.A. 8974), entitled An Act to
Facilitate the Acquisition of Right-of-

Way Site or Location for National


Government Infrastructure Projects
and for Other Purposes, and other
applicable laws; and

b) Private sector infrastructure or


development projects and other
procurement covered by Republic Act
No. 7718 (R.A. 7718), entitled An Act
Authorizing the Financing,
Construction, Operation and
Maintenance of Infrastructure Projects
by the Private Sector, and for Other
Purposes, as amended: Provided,
however, That for the portions
financed by the Government, the
provisions of this IRR-A shall apply.

The IRR-B for foreign-funded


procurement activities shall be the
subject of a subsequent issuance.
(Emphases supplied.)

The foregoing
provision in the IRR can be taken as an
administrative interpretation that the
provisions of Republic Act No. 9184
are inapplicable to a BOT project
except only insofar as such portions of
the BOT project that are financed by
the government.

Taking into account


the different treatment of information
technology projects under the BOT
Law and the Government Procurement
Reform Act, petitioners contention
the trial court had no jurisdiction to
issue a writ of preliminary injunction in
the instant case would have been
correct if the e-Passport Project was a

project under the BOT Law as they


represented to the trial court.

However,
petitioners presented no proof that the
e-Passport Project was a BOT
project. On the contrary, evidence
adduced by both sides tended to show
that the e-Passport Project was a
procurement contract under Republic
Act No. 9184.

The BSPs on-line


request for expression of interest and
to bid for the e-Passport Project[69]
from the BSP website and the
newspaper clipping[70] of the same
request expressly stated that [t]he
two stage bidding procedure under
Section 30.4 of the Implementing
Rules and Regulation (sic) Part-A of
Republic Act No. 9184 relative to the
bidding and award of the contract
shall apply. During the testimony
of DFA Assistant Secretary Domingo
Lucenario, Jr. before the trial court, he
admitted that the e-Passport Project is
a BSP procurement project and that it
is the BSP that will pay the
suppliers.[71] In petitioners
Manifestation dated July 29, 2008[72]
and the Erratum[73] thereto,
petitioners informed the Court that a
contract for the supply of a
complete package of systems design,
technology, hardware, software, and
peripherals, maintenance and
technical support, ecovers and
datapage security laminates for the
centralized production and
personalization of Machine Readable
Electronic Passport was awarded to
Francois Charles Oberthur Fiduciaire.
In the Notice of Award dated July 2,
2008[74] attached to petitioners

pleading, it was stated that the failure


of the contractor/supplier to submit
the required performance bond would
be sufficient ground for the imposition
of administrative penalty under
Section 69 of the IRR-A of Republic Act
No. 9184.

Being a
government procurement contract
under Republic Act No. 9184, only the
civil works component of the ePassport Project would be considered
an infrastructure project that may not
be the subject of a lower court-issued
writ of injunction under Republic Act
No. 8975.

Could the ePassport Project be considered as


engineering works or a service
contract or as related and
necessary activities under Republic
Act No. 8975 which may not be
enjoined?

We hold in the
negative. Under Republic Act No.
8975, a service contract refers to
infrastructure contracts entered into
by any department, office or agency of
the national government with private
entities and nongovernment
organizations for services related or
incidental to the functions and
operations of the department, office or
agency concerned. On the other
hand, the phrase other related and
necessary activities obviously refers
to activities related to a government
infrastructure, engineering works,
service contract or project under the
BOT Law. In other words, to be
considered a service contract or

related activity, petitioners must show


that the e-Passport Project is an
infrastructure project or necessarily
related to an infrastructure project.
This, petitioners failed to do for they
saw fit not to present any evidence on
the details of the e-Passport Project
before the trial court and this Court.
There is nothing on record to indicate
that the e-Passport Project has a civil
works component or is necessarily
related to an infrastructure project.

Indeed, the
reference to Section 30.4[75] of the
IRR of Republic Act No. 9184 (a
provision specific to the procurement
of goods) in the BSPs request for
interest and to bid confirms that the ePassport Project is a procurement of
goods and not an infrastructure
project. Thus, within the context of
Republic Act No. 9184 which is the
governing law for the e-Passport
Project the said Project is not an
infrastructure project that is protected
from lower court issued injunctions
under Republic Act No. 8975, which, to
reiterate, has for its purpose the
expeditious and efficient
implementation and completion of
government infrastructure projects.

We note that under Section 28,


Republic Act No. 9285 or the
Alternative Dispute Resolution Act of
2004,[76] the grant of an interim
measure of protection by the proper
court before the constitution of an
arbitral tribunal is allowed:

Sec. 28. Grant of Interim Measure of


Protection. (a) It is not
incompatible with an arbitration

agreement for a party to request,


before constitution of the tribunal,
from a Court an interim measure of
protection and for the Court to grant
such measure. After constitution of
the arbitral tribunal and during arbitral
proceedings, a request for an interim
measure of protection, or modification
thereof, may be made with the arbitral
tribunal or to the extent that the
arbitral tribunal has no power to act or
is unable to act effectively, the
request may be made with the
Court. The arbitral tribunal is
deemed constituted when the sole
arbitrator or the third arbitrator, who
has been nominated, has accepted the
nomination and written
communication of said nomination and
acceptance has been received by the
party making the request.

(a)
The following rules on
interim or provisional relief shall be
observed:

(1)
Any party may request
that provisional relief be granted
against the adverse party.

(2)
granted:

Such relief may be

(i)
to prevent irreparable
loss or injury;

(ii)
to provide security for
the performance of any obligation;

(iii)
to produce or preserve any
evidence; or
(iv)
to compel any other
appropriate act or omission.

(3)
The order granting
provisional relief may be conditioned
upon the provision of security or any
act or omission specified in the order.

(4)
Interim or provisional
relief is requested by written
application transmitted by reasonable
means to the Court or arbitral tribunal
as the case may be and the party
against whom the relief is sought,
describing in appropriate detail the
precise relief, the party against whom
the relief is requested, the grounds for
the relief, and the evidence supporting
the request.

(5)
The order shall be binding
upon the parties.

(6)
Either party may apply
with the Court for assistance in
implementing or enforcing an interim
measure ordered by an arbitral
tribunal.

(7)
A party who does not
comply with the order shall be liable
for all damages resulting from
noncompliance, including all expenses
and reasonable attorneys fees, paid
in obtaining the orders judicial
enforcement.

Section 3(h) of the same statute


provides that the "Court" as referred
to in Article 6 of the Model Law shall
mean a Regional Trial Court.

Republic Act No. 9285 is a general law


applicable to all matters and
controversies to be resolved through
alternative dispute resolution
methods. This law allows a Regional
Trial Court to grant interim or
provisional relief, including preliminary
injunction, to parties in an arbitration
case prior to the constitution of the
arbitral tribunal. This general
statute, however, must give way to a
special law governing national
government projects, Republic Act No.
8975 which prohibits courts, except
the Supreme Court, from issuing TROs
and writs of preliminary injunction in
cases involving national government
projects.

However, as discussed above, the


prohibition in Republic Act No. 8975 is
inoperative in this case, since
petitioners failed to prove that the ePassport Project is national
government project as defined
therein. Thus, the trial court had
jurisdiction to issue a writ of
preliminary injunction against the ePassport Project.

On whether the trial courts issuance


of a writ of injunction was proper

Given the above ruling that the trial


court had jurisdiction to issue a writ of
injunction and going to the second
issue raised by petitioners, we answer
the question: Was the trial courts
issuance of a writ of injunction
warranted under the circumstances of
this case?

Petitioners attack on the propriety of


the trial courts issuance of a writ of
injunction is two-pronged: (a) BCA
purportedly has no clear right to the
injunctive relief sought; and (b) BCA
will suffer no grave and irreparable
injury even if the injunctive relief were
not granted.

To support their claim that BCA has no


clear right to injunctive relief,
petitioners mainly allege that the
MRP/V Project and the e-Passport
Project are not the same project.
Moreover, the MRP/V Project
purportedly involves a technology (the
2D optical bar code) that has been
rendered obsolete by the latest ICAO
developments while the e-Passport
Project will comply with the latest
ICAO standards (the contactless
integrated circuit). Parenthetically,
and not as a main argument,
petitioners imply that BCA has no clear
contractual right under the Amended
BOT Agreement since BCA had
previously assigned all its rights and
obligations under the said Agreement
to PPC.

BCA, on the other hand, claims that


the Amended BOT Agreement also
contemplated the supply and/or
delivery of e-Passports with the
integrated circuit technology in the

future and not only the machine


readable passport with the 2D optical
bar code technology. Also, it is
BCAs assertion that the integrated
circuit technology is only optional
under the ICAO issuances. On the
matter of its assignment of its rights to
PPC, BCA counters that it had already
terminated (purportedly at DFAs
request) the assignment agreement in
favor of PPC and that even assuming
the termination was not valid, the
Amended BOT Agreement expressly
stated that BCA shall remain solidarily
liable with its assignee, PPC.

Most of these factual allegations and


counter-allegations already touch
upon the merits of the main
controversy between the DFA and
BCA, i.e., the validity and propriety of
the termination of the Amended BOT
Agreement (the MRP/V Project)
between the DFA and BCA. The
Court deems it best to refrain from
ruling on these matters since they
should be litigated in the appropriate
arbitration or court proceedings
between or among the concerned
parties.

One preliminary point, however, that


must be settled here is whether BCA
retains a right to seek relief against
the DFA under the Amended BOT
Agreement in view of BCAs previous
assignment of its rights to PPC.
Without preempting any factual
finding that the appropriate court or
arbitral tribunal on the matter of the
validity of the assignment agreement
with PPC or its termination, we agree
with BCA that it remained a party to
the Amended BOT Agreement,
notwithstanding the execution of the

assignment agreement in favor of PPC,


for it was stipulated in the Amended
BOT Agreement that BCA would be
solidarily liable with its assignee. For
convenient reference, we reproduce
the relevant provision of the Amended
BOT Agreement here:

Section 20.15. It is clearly and


expressly understood that BCA may
assign, cede and transfer all of its
rights and obligations under this
Amended BOT Agreement to PPC
[Philippine Passport Corporation], as
fully as if PPC is the original signatory
to this Amended BOT Agreement,
provided however that BCA shall
nonetheless be jointly and severally
liable with PPC for the performance of
all the obligations and liabilities under
this Amended BOT Agreement.
(Emphasis supplied.)

Furthermore, a review of the records


shows that the DFA continued to
address its correspondence regarding
the MRP/V Project to both BCA and
PPC, even after the execution of the
assignment agreement. Indeed, the
DFAs Notice of Termination dated
December 9, 2005 was addressed to
Mr. Bonifacio Sumbilla as President of
both BCA and PPC and referred to the
Amended BOT Agreement executed
between the Department of Foreign
Affairs (DFA), on one hand, and the
BCA International Corporation and/or
the Philippine Passport Corporation
(BCA/PPC). At the very least, the
DFA is estopped from questioning the
personality of BCA to bring suit in
relation to the Amended BOT
Agreement since the DFA continued to

deal with both BCA and PPC even after


the signing of the assignment
agreement. In any event, if the DFA
truly believes that PPC is an
indispensable party to the action, the
DFA may take necessary steps to
implead PPC but this should not
prejudice the right of BCA to file suit or
to seek relief for causes of action it
may have against the DFA or the BSP,
for undertaking the e-Passport Project
on behalf of the DFA.

With respect to petitioners


contention that BCA will suffer no
grave and irreparable injury so as to
justify the grant of injunctive relief, the
Court finds that this particular
argument merits consideration.

The BOT Law as amended by Republic


Act No. 7718, provides:

SEC. 7.
Contract Termination. - In the event
that a project is revoked, cancelled or
terminated by the Government
through no fault of the project
proponent or by mutual agreement,
the Government shall compensate the
said project proponent for its actual
expenses incurred in the project plus a
reasonable rate of return thereon not
exceeding that stated in the contract
as of the date of such revocation,
cancellation or termination: Provided,
That the interest of the Government in
this instances shall be duly insured
with the Government Service
Insurance System [GSIS] or any other
insurance entity duly accredited by
the Office of the Insurance
Commissioner: Provided, finally, That
the cost of the insurance coverage

shall be included in the terms and


conditions of the bidding referred to
above.

In the event
that the government defaults on
certain major obligations in the
contract and such failure is not
remediable or if remediable shall
remain unremedied for an
unreasonable length of time, the
project proponent/contractor may, by
prior notice to the concerned national
government agency or local
government unit specifying the turnover date, terminate the contract. The
project proponent/contractor shall be
reasonably compensated by the
Government for equivalent or
proportionate contract cost as defined
in the contract. (Emphases supplied.)

In addition, the Amended BOT


Agreement, which is the law between
and among the parties to it,
pertinently provides:

Section 17.01 Default In case a


party commits an act constituting an
event of default, the non-defaulting
party may terminate this Amended
BOT Agreement by serving a written
notice to the defaulting party
specifying the grounds for termination
and giving the defaulting party a
period of ninety (90) days within which
to rectify the default. If the default is
not remedied within this period to the
satisfaction of the non-defaulting
party, then the latter will serve upon
the former a written notice of

termination indicating the effective


date of termination.

Section 17.02 Proponents Default If


this Amended BOT Agreement is
terminated by reason of the BCAs
default, the DFA shall have the
following options:

A.
Allow the BCAs unpaid
creditors who hold a lien on the MRP/V
Facility to foreclose on the MRP/V
Facility. The right of the BCAs unpaid
creditors to foreclose on the MRP/V
Facility shall be valid for the duration
of the effectivity of this Amended BOT
Agreement; or,

B.
Allow the BCAs unpaid
creditors who hold a lien on the MRP/V
Facility to designate a substitute BCA
for the MRP/V Project, provided the
designated substitute BCA is qualified
under existing laws and acceptable to
the DFA. This substitute BCA shall
hereinafter be referred to as the
Substitute BCA. The Substitute
BCA shall assume all the BCAs rights
and privileges, as well as the
obligations, duties and responsibilities
hereunder; provided, however, that
the DFA shall at all times and its sole
option, have the right to invoke and
exercise any other remedy which may
be available to the DFA under any
applicable laws, rules and/or
regulations which may be in effect at
any time and from time to time. The
DFA shall cooperate with the creditors
with a view to facilitating the choice of
a Substitute BCA, who shall take-over
the operation, maintenance and
management of the MRP/V Project,
within three (3) months from the

BCAs receipt of the notice of


termination from the DFA. The
Substituted BCA shall have all the
rights and obligations of the previous
BCA as contained in this Amended
BOT Agreement; or

C.
Take-over the MRP/V
Facility and assume all attendant
liabilities thereof.

D.
In all cases of termination
due to the default of the BCA, it shall
pay DFA liquidated damages
equivalent to the applicable the (sic)
Performance Security.

Section 17.03 DFAs Default If this


Amended BOT Agreement is
terminated by the BCA by reason of
the DFAs Default, the DFA shall:

A.
Be obligated to take over
the MRP/V Facility on an as is, where
is basis, and shall forthwith assume
attendant liabilities thereof; and

B.
Pay liquidated damages
to the BCA equivalent to the following
amounts, which may be charged to
the insurance proceeds referred to in
Article 12:

(1)
In the event of
termination prior to completion of the
implementation of the MRP/V Project,
damages shall be paid equivalent to
the value of completed
implementation, minus the aggregate
amount of the attendant liabilities

assumed by the DFA, plus ten percent


(10%) thereof. The amount of such
compensation shall be determined as
of the date of the notice of termination
and shall become due and
demandable ninety (90) days after the
date of this notice of termination.
Under this Amended BOT Agreement,
the term Value of the Completed
Implementation shall mean the
aggregate of all reasonable costs and
expenses incurred by the BCA in
connection with, in relation to and/or
by reason of the MRP/V Project,
excluding all interest and capitalized
interest, as certified by a reputable
and independent accounting firm to be
appointed by the BCA and subject to
the approval by the DFA, such
approval shall not be unreasonably
withheld.

(2)
In the event of
termination after completion of
design, development, and installation
of the MRP/V Project, just
compensation shall be paid equivalent
to the present value of the net income
which the BCA expects to earn or
realize during the unexpired or
remaining term of this Amended BOT
Agreement using the internal rate of
return on equity (IRRe) defined in the
financial projections of the BCA and
agreed upon by the parties, which is
attached hereto and made as an
integral part of this Amended BOT
Agreement as Schedule 1.
(Emphases supplied.)

The validity of the DFAs termination


of the Amended BOT Agreement and
the determination of the party or

parties in default are issues properly


threshed out in arbitration
proceedings as provided for by the
agreement itself. However, even if
we hypothetically accept BCAs
contention that the DFA terminated
the Amended BOT Agreement without
any default or wrongdoing on BCAs
part, it is not indubitable that BCA is
entitled to injunctive relief.

The BOT Law expressly allows the


government to terminate a BOT
agreement, even without fault on the
part of the project proponent, subject
to the payment of the actual expenses
incurred by the proponent plus a
reasonable rate of return.

Under the BOT Law and the Amended


BOT Agreement, in the event of
default on the part of the government
(in this case, the DFA) or on the part of
the proponent, the non-defaulting
party is allowed to terminate the
agreement, again subject to proper
compensation in the manner set forth
in the agreement.

Time and again,


this Court has held that to be entitled
to injunctive relief the party seeking
such relief must be able to show
grave, irreparable injury that is not
capable of compensation.

In Lopez v. Court of Appeals, [77] we


held:

Generally, injunction is a preservative


remedy for the protection of one's

substantive right or interest. It is not


a cause of action in itself but merely a
provisional remedy, an adjunct to a
main suit. It is resorted to only when
there is a pressing necessity to avoid
injurious consequences which cannot
be remedied under any standard
compensation. The application of
the injunctive writ rests upon the
existence of an emergency or of a
special reason before the main case
can be regularly heard. The
essential conditions for granting such
temporary injunctive relief are that the
complaint alleges facts which appear
to be sufficient to constitute a proper
basis for injunction and that on the
entire showing from the contending
parties, the injunction is reasonably
necessary to protect the legal rights of
the plaintiff pending the litigation. Two
requisites are necessary if a
preliminary injunction is to issue,
namely, the existence of a right to be
protected and the facts against which
the injunction is to be directed are
violative of said right. In particular,
for a writ of preliminary injunction to
issue, the existence of the right and
the violation must appear in the
allegation of the complaint and a
preliminary injunction is proper only
when the plaintiff (private respondent
herein) appears to be entitled to the
relief demanded in his complaint.
(Emphases supplied.)

We reiterated this
point in Transfield Philippines, Inc. v.
Luzon Hydro Corporation,[78] where
we likewise opined:

Before a writ of
preliminary injunction may be issued,
there must be a clear showing by the
complaint that there exists a right to
be protected and that the acts against
which the writ is to be directed are
violative of the said right. It must be
shown that the invasion of the right
sought to be protected is material and
substantial, that the right of
complainant is clear and unmistakable
and that there is an urgent and
paramount necessity for the writ to
prevent serious damage. Moreover,
an injunctive remedy may only be
resorted to when there is a pressing
necessity to avoid injurious
consequences which cannot be
remedied under any standard
compensation. (Emphasis supplied.)

As the Court
explained previously in Philippine
Airlines, Inc. v. National Labor
Relations Commission[79]:

An injury is considered irreparable if it


is of such constant and frequent
recurrence that no fair and reasonable
redress can be had therefor in a court
of law, or where there is no standard
by which their amount can be
measured with reasonable accuracy,
that is, it is not susceptible of
mathematical computation. It is
considered irreparable injury when it
cannot be adequately compensated in
damages due to the nature of the
injury itself or the nature of the right
or property injured or when there
exists no certain pecuniary standard
for the measurement of damages.
(Emphases supplied.)

It is still contentious
whether this is a case of termination
by the DFA alone or both the DFA and
BCA. The DFA contends that BCA, by
sending its own Notice of Default,
likewise terminated or abandoned
the Amended BOT Agreement. Still,
whether this is a termination by the
DFA alone without fault on the part of
BCA or a termination due to default on
the part of either party, the BOT Law
and the Amended BOT Agreement lay
down the measure of compensation to
be paid under the appropriate
circumstances.

Significantly, in
BCAs Request for Arbitration with
the PDRCI, it prayed for, among
others, a judgment ordering
respondent [DFA] to pay damages to
Claimant [BCA], reasonably estimated
at P50,000,000.00 as of [the date of
the Request for Arbitration],
representing lost business
opportunities; financing fees, costs
and commissions; travel expenses;
legal fees and expenses; and costs of
arbitration, including the fees of the
arbitrator/s.[80] All the purported
damages that BCA claims to have
suffered by virtue of the DFAs
termination of the Amended BOT
Agreement are plainly determinable in
pecuniary terms and can be
reasonably estimated according to
BCAs own words.

Indeed, the right of


BCA, a party which may or may not
have been in default on its BOT
contract, to have the termination of its

BOT contract reversed is not


guaranteed by the BOT Law. Even
assuming BCAs innocence of any
breach of contract, all the law provides
is that BCA should be adequately
compensated for its losses in case of
contract termination by the
government.

There is one point


that none of the parties has
highlighted but is worthy of
discussion. In seeking to enjoin the
government from awarding or
implementing a machine readable
passport project or any similar
electronic passport or visa project and
praying for the maintenance of the
status quo ante pending the resolution
on the merits of BCAs Request for
Arbitration, BCA effectively seeks to
enjoin the termination of the Amended
BOT Agreement for the MRP/V Project.

There is no doubt
that the MRP/V Project is a project
covered by the BOT Law and, in turn,
considered a national government
project under Republic Act No.
8795. Under Section 3(d) of that
statute, trial courts are prohibited from
issuing a TRO or writ of preliminary
injunction against the government to
restrain or prohibit the termination or
rescission of any such national
government project/contract.

The rationale for


this provision is easy to understand.
For if a project proponent that the
government believes to be in default
is allowed to enjoin the termination
of its contract on the ground that it is
contesting the validity of said

termination, then the government will


be unable to enter into a new contract
with any other party while the
controversy is pending litigation.
Obviously, a courts grant of
injunctive relief in such an instance is
prejudicial to public interest since
government would be indefinitely
hampered in its duty to provide vital
public goods and services in order to
preserve the private proprietary rights
of the project proponent. On the
other hand, should it turn out that the
project proponent was not at fault, the
BOT Law itself presupposes that the
project proponent can be adequately
compensated for the termination of
the contract. Although BCA did not
specifically pray for the trial court to
enjoin the termination of the Amended
BOT Agreement and thus, there is no
direct violation of Republic Act No.
8795, a grant of injunctive relief as
prayed for by BCA will indirectly
contravene the same statute.

Verily, there is valid


reason for the law to deny preliminary
injunctive relief to those who seek to
contest the governments
termination of a national government
contract. The only circumstance
under which a court may grant
injunctive relief is the existence of a
matter of extreme urgency involving a
constitutional issue, such that unless a
TRO or injunctive writ is issued, grave
injustice and irreparable injury will
result.

Now, BCA likewise


claims that unless it is granted
injunctive relief, it would suffer grave
and irreparable injury since the
bidding out and award of the e-

Passport Project would be tantamount


to a violation of its right against
deprivation of property without due
process of law under Article III, Section
1 of the Constitution. We are
unconvinced.

Article III, Section 1


of the Constitution provides [n]o
person shall be deprived of life,
liberty, or property without due
process of law, nor shall any person be
denied the equal protection of the
laws. Ordinarily, this constitutional
provision has been applied to the
exercise by the State of its sovereign
powers such as, its legislative power,
[81] police power,[82] or its power of
eminent domain.[83]

In the instant case,


the State action being assailed is the
DFAs termination of the Amended
BOT Agreement with BCA. Although
the said agreement involves a public
service that the DFA is mandated to
provide and, therefore, is imbued with
public interest, the relationship of DFA
to BCA is primarily contractual and
their dispute involves the adjudication
of contractual rights. The propriety
of the DFAs acts, in relation to the
termination of the Amended BOT
Agreement, should be gauged against
the provisions of the contract itself
and the applicable statutes to such
contract. These contractual and
statutory provisions outline what
constitutes due process in the present
case. In all, BCA failed to
demonstrate that there is a
constitutional issue involved in this
case, much less a constitutional issue
of extreme urgency.

As for the DFAs


purported failure to appropriate
sufficient amounts in its budget to pay
for liquidated damages to BCA, this
argument does not support BCAs
position that it will suffer grave and
irreparable injury if it is denied
injunctive relief. The DFAs liability
to BCA for damages is contingent on
BCA proving that it is entitled to such
damages in the proper proceedings.
The DFA has no obligation to set aside
funds to pay for liquidated damages,
or any other kind of damages, to BCA
until there is a final and executory
judgment in favor of BCA. It is
illogical and impractical for the DFA to
set aside a significant portion of its
budget for an event that may never
happen when such idle funds should
be spent on providing necessary
services to the populace. For if it
turns out at the end of the arbitration
proceedings that it is BCA alone that is
in default, it would be the one liable
for liquidated damages to the DFA
under the terms of the Amended BOT
Agreement.

With respect to
BCAs allegation that the e-Passport
Project is grossly disadvantageous to
the Filipino people since it is the
government that will be spending for
the project unlike the MRP/V Project
which would have been privately
funded, the same is immaterial to the
issue at hand. If it is true that the
award of the e-Passport Project is
inimical to the public good or tainted
with some anomaly, it is indeed a
cause for grave concern but it is a
matter that must be investigated and
litigated in the proper forum. It has

no bearing on the issue of whether


BCA would suffer grave and
irreparable injury such that it is
entitled to injunctive relief from the
courts.

jurisdiction, in view of the lack of


agreement between the parties to
arbitrate before the PDRCI.[84] In
Philippine National Bank v. Ritratto
Group, Inc.,[85] we held:

In all, we agree
with petitioners DFA and BSP that the
trial courts issuance of a writ of
preliminary injunction, despite the lack
of sufficient legal justification for the
same, is tantamount to grave abuse of
discretion.

A writ of preliminary injunction is an


ancillary or preventive remedy that
may only be resorted to by a litigant to
protect or preserve his rights or
interests and for no other purpose
during the pendency of the principal
action. The dismissal of the principal
action thus results in the denial of the
prayer for the issuance of the writ. x x
x. (Emphasis supplied.)

To be very clear,
the present decision touches only on
the twin issues of (a) the jurisdiction of
the trial court to issue a writ of
preliminary injunction as an interim
relief under the factual milieu of this
case; and (b) the entitlement of BCA
to injunctive relief. The merits of the
DFA and BCAs dispute regarding the
termination of the Amended BOT
Agreement must be threshed out in
the proper arbitration proceedings.
The civil case pending before the trial
court is purely for the grant of interim
relief since the main case is to be the
subject of arbitration proceedings.

BCAs petition for


interim relief before the trial court is
essentially a petition for a provisional
remedy (i.e., preliminary injunction)
ancillary to its Request for Arbitration
in PDRCI Case No. 30-2006/BGF. BCA
specifically prayed that the trial court
grant it interim relief pending the
constitution of the arbitral tribunal in
the said PDRCI case. Unfortunately,
during the pendency of this case,
PDRCI Case No. 30-2006/BGF was
dismissed by the PDRCI for lack of

In view of intervening circumstances,


BCA can no longer be granted
injunctive relief and the civil case
before the trial court should be
accordingly dismissed. However, this
is without prejudice to the parties
litigating the main controversy in
arbitration proceedings, in accordance
with the provisions of the Amended
BOT Agreement, which should proceed
with dispatch.

It does not escape


the attention of the Court that the
delay in the submission of this
controversy to arbitration was caused
by the ambiguity in Section 19.02 of
the Amended BOT Agreement
regarding the proper body to which a
dispute between the parties may be
submitted and the failure of the
parties to agree on such an arbitral
tribunal. However, this Court cannot
allow this impasse to continue
indefinitely. The parties involved

must sit down together in good faith


and finally come to an understanding
regarding the constitution of an
arbitral tribunal mutually acceptable
to them.

WHEREFORE, the
instant petition is hereby GRANTED.
The assailed Order dated February 14,
2007 of the Regional Trial Court of
Pasig in Civil Case No. 71079 and the
Writ of Preliminary Injunction dated
February 23, 2007 are REVERSED and
SET ASIDE. Furthermore, Civil Case
No. 71079 is hereby DISMISSED.

ELPIDIO S. UY, doing business


under the name and style of EDISON
DEVELOPMENT & CONSTRUCTION,
Petitioner,

versus -

No pronouncement
as to costs.

PUBLIC ESTATES AUTHORITY ,


Respondent.

SO ORDERED.

G.R. Nos. 147925-26

Present:

CORONA, C.J.*
VELASCO, JR.,**
NACHURA,
Chairperson,
BRION,***and
PERALTA, JJ.

Promulgated:

July 7, 2010

x--------------------------------------------------------------------------------x

RESOLUTION

SO ORDERED.
[1]

Uy seeks partial reconsideration of our


Decision. He argues that:

NACHURA, J.:
I
Before us are (i) the Motion for Partial
Reconsideration filed by petitioner
Elpidio S. Uy (Uy), doing business
under the name and style of Edison
Development & Construction (EDC),
and (ii) the Motion for Reconsideration
filed by respondent Public Estates
Authority (PEA) of our June 8, 2009
Decision, the fallo of which reads:

WHEREFORE, the
petition is PARTIALLY GRANTED. The
assailed Joint Decision and Joint
Resolution of the Court of Appeals in
CA-G.R. SP Nos. 59308 and 59849 are
AFFIRMED with MODIFICATIONS.
Respondent Public Estates Authority is
ordered to pay Elpidio S. Uy, doing
business under the name and style
Edison Development and Construction,
P55,680,492.38 for equipment rentals
on standby; P2,275,721.00 for the cost
of idle manpower; and P6,050,165.05
for the construction of the nursery
shade net area; plus interest at 6% per
annum to be computed from the date
of the filing of the complaint until
finality of this Decision and 12% per
annum thereafter until full payment.
Respondent PEA is further ordered to
pay petitioner Uy 10% of the total
award as attorneys fees.

x x x THE HONORABLE COURT ERRED


IN THE COMPUTATION OF THE
DAMAGES DUE THE PETITIONER FOR
THE STANDBY EQUIPMENT COST.

II

x x x PETITIONER SHOULD BE
REIMBURSED FOR COSTS INCURRED
FOR ADDITIONAL HAULING DISTANCE
OF TOPSOIL ALSO BECAUSE THE
EVIDENCE ON RECORD CONFIRMS THE
EXISTENCE OF RESPONDENT PEAS
WRITTEN CONSENT, AND THE FACT
THAT IT IS INDESPENSABLE TO
COMPLETING THE PROJECT.
WITHOUT SUCH ASSURANCE OF
REIMBURSEMENT, PETITIONER WOULD
NOT HAVE TAKEN SUCH PRUDENT
ACTION.

III

x x x PETITIONER SHOULD BE
ALLOWED TO RECOVER THE COSTS HE
INCURRED FOR THE MOBILIZATION OF
WATER TRUCKS ALSO BECAUSE

RESPONDENT BREACHED ITS


OBLIGATIONS UNDER THE CONTRACT.

SEPTEMBER 2000, WRIT OF


EXECUTION DATED 31 AUGUST 2001
AND SUPPLEMENTAL WRIT OF
EXECUTION DATED 10 APRIL 2002.[3]

IV

WITH REGARD TO THE COURT OF


APPEALS ILLEGAL INJUNCTION
PREVENTING PETITIONER FROM
RECOVERING HIS CLAIMS AGAINST
RESPONDENT PEA IN CIAC CASE NO.
03-2001, THIS SHOULD HAVE BEEN
LIFTED SINCE IT INVOLVES CLAIMS
SEPARATE AND DISTINCT FROM THE
CASE A QUO.[2]

PEA, on the other


hand, assails the Decision on the
following grounds:

I.

We will deal first


with Uys motion.

Uy objects to the factor rate used in


the computation of the award for
standby equipment costs. He points
out that the actual number of
equipment deployed and which
remained on standby, occasioned by
the delay in delivery of work areas,
has not been considered in the
computation. The Association of
Carriers and Equipment Lessors (ACEL)
rate or the factor rate used was only
the total average rate, without regard
to the actual number of equipment
deployed. He, therefore, insists
that an increase in the award is in
order.

THE FACTUAL FINDINGS AND


CONCLUSIONS OF THE CONSTRUCTION
INDUSTRY ARBITRATION COMMISSION
(CIAC) INSOFAR AS THE ARBITRAL
AWARD TO PETITIONER IS
CONCERNED, WHICH THE COURT OF
APPEALS AND THE FIRST DIVISION OF
THIS HONORABLE COURT AFFIRMED,
HAS LONG BECOME FINAL AND
EXECUTORY.

We find Uys argument on this point


meritorious; and this Court is swayed
to modify the formula used in the
computation of the award.

II.

Description

The Certification,[4] dated December


6, 1996, shows that EDC mobilized the
following equipment for the Heritage
Park Project, viz.:

Number
THE CIAC ARBITRAL AWARD HAD
ALREADY BEEN IMPLEMENTED UNDER
WRIT OF EXECUTION DATED 19

Road
Grader

Bulldozer

Pay
Loader

Concrete Cutter

Dump Trucks

Plate
Compactor

10

Tractor with
attachments

Compressor/Jack
Hammer

Backhoe

Genset 5KVA

Delivery Trucks

Electric drill/
Holesaw

3
Rolotiller
0

Concrete Mixer
4
Bar
Cutter
2

Welding Machine
2
Roller
1

These equipment remained in the


project site on the days that EDC was
waiting for the turnover of additional
work areas.[5] Thus, we agree with
Uy that the actual number of
equipment mobilized should be
included in computing the award for
standby equipment cost. The award
must, therefore, be modified using the
following formula:

Actual period of delay (18.2 months) x


average rate per ACEL x number of
equipment

However, we
cannot simply accept in full Uys
claim that he is entitled to
P71,009,557.95 as standby equipment
cost. The records show that not all of
the equipment were operational;
several were under repair.[6]
Accordingly, we find it necessary to
remand the records of the case to the
Construction Industry Arbitration
Commission (CIAC), which decided the
case in the first instance, for the
proper computation of the award of
standby equipment cost based on the
foregoing formula.

On the claim for


costs for additional hauling distance of
topsoil and for mobilization of water
truck, we maintain our ruling that a
written approval of PEAs general
manager was indispensable before the
claim for additional cost can be
granted. In this case, the additional
costs were incurred without the
written approval of PEA. The denial
of Uys claims was, therefore,
appropriate.

We cannot sustain this claim that is


premised mainly on the principle of
unjust enrichment. We stress that
the principle of unjust enrichment
cannot be validly invoked by a party
who, through his own act or omission,
took the risk of being denied payment
for additional costs by not giving the
other party prior notice of such costs
and/or by not securing their written
consent thereto, as required by law
and their contract.[7]

No. 03-2001. We are not persuaded


by Uys argument that the claims
under CIAC Case No. 03-2001 are
different from his claims in CIAC Case
No. 02-2000. As we explained in our
Decision, there is only one cause of
action running through Uys
undertakings the violation of his
alleged right under the Landscaping
and Construction Agreement.
Therefore, the landscaping agreement
is indispensable in the prosecution of
his claims in both CIAC Cases No. 022000 and No. 03-2001. We reiterate
that a party, either by varying the
form or action or by bringing forward
in a second case additional parties or
arguments, cannot escape the effects
of res judicata when the facts remain
the same, at least where such new
parties or matter could have been
impleaded or pleaded in the prior
action.

In fine, except for the claim for


standby equipment costs, this Court
finds no cogent reason to depart from
our June 8, 2009 Decision.

We now go to PEAs motion.

PEA insists that our Decision in this


case transgresses the principle of res
judicata. It asserts that the propriety
of Uys monetary claims against PEA
had already been considered and
passed upon by this Court in G.R. Nos.
147933-34.

The argument is specious.


Similarly, we find no cogent reason to
lift the injunction issued in CIAC Case

In G.R. Nos. 147933-34, this Court was


very explicit in its declaration that its
Decision was independent of, and
without prejudice to, the appeal filed
by Uy, viz.:

the formula herein specified. The


CIAC is DIRECTED to compute the
award and effect payment thereof
within thirty (30) days from receipt of
the records of this case.

However, in order not to prejudice the


deliberations of the Courts Second
Division in G.R. Nos. 147925-26, it
should be stated that the findings
made in this case, especially as
regards the correctness of the findings
of the CIAC, are limited to the arbitral
awards granted to respondent Elpidio
S. Uy and to the denial of the
counterclaims of petitioner Public
Estates Authority. Our decision in
this case does not affect the other
claims of respondent Uy which were
not granted by the CIAC in its
questioned decision, the merits of
which were not submitted to us for
determination in the instant petition.
[8]

Indubitably, this Courts Decision in


G.R. Nos. 147933-34 will not bar the
grant of additional award to Uy.

SHINRYO (PHILIPPINES) COMPANY,


INC.,

Petitioner,

WHEREFORE, Uys
Motion for Partial Reconsideration is
PARTLY GRANTED. PEAs Motion for
Reconsideration, on the other hand, is
DENIED with FINALITY. The assailed
Decision dated June 8, 2009 is
AFFIRMED with MODIFICATION as to
the award of standby equipment cost.
The case is hereby REMANDED to the
Construction Industry Arbitration
Commission solely for the purpose of
computing the exact amount of
standby equipment cost pursuant to

- versus -

RRN INCORPORATED,*

Respondent.
G.R. No. 172525

denying herein petitioner's motion for


reconsideration, be reversed and set
aside.
The facts, as
accurately narrated in the CA
Decision, are as follows.

Present:

CARPIO, J., Chairperson,


VELASCO, JR.,**
LEONARDO-DE CASTRO,***
PERALTA, and

Petitioner Shinryo
(Philippines) Company, Inc.
(hereinafter petitioner) is a domestic
corporation organized under Philippine
laws. Private respondent RRN
Incorporated (hereinafter respondent)
is likewise a domestic corporation
organized under Philippine laws.

MENDOZA, JJ.

Promulgated:

October 20, 2010


x----------------------------------------------------------------------------------------x

DECISION

PERALTA, J.:

This resolves the


Petition for Review on Certiorari under
Rule 45 of the Rules of Court,
praying that the Decision[1] of the
Court of Appeals (CA) dated February
22, 2006, affirming the Decision of the
Construction Industry Arbitration
Commission (CIAC), and the CA
Resolution[2] dated April 26, 2006,

Respondent
filed a claim for arbitration against
petitioner before CIAC for recovery of
unpaid account which consists of
unpaid portions of the sub-contract,
variations and unused materials in the
total sum of P5,275,184.17 and legal
interest in the amount of
P442,014.73. Petitioner filed a
counterclaim for overpayment in the
amount of P2,512,997.96.

The parties
admitted several facts before the
CIAC. It was shown that petitioner
and respondent executed an
Agreement and Conditions of Subcontract (hereafter Agreement signed
on June 11, 1996 and June 14, 1996,
respectively. Respondent signified its
willingness to accept and perform for
petitioner in any of its projects, a part
or the whole of the works more
particularly described in Conditions of
Sub-Contract and other Sub-contract
documents.

On June 11,
2002, the parties executed a Supply
of Manpower, Tools/Equipment,
Consumables for the Electrical WorksPower and Equipment Supply, Bus
Duct Installation for the Phillip Morris
Greenfield Project (hereafter Project)
covered by Purchase Order Nos.
4501200300-000274 and
4501200300-000275 amounting to
P15,724,000.00 and P9,276,000.00
respectively, or a total amount of
P25,000,000.00. The parties also
agreed that respondent will perform
variation orders in the Project. In
connection with the Project, petitioner
supplied manpower chargeable
against respondent.

Respondent
was not able to finish the entire works
with petitioner due to financial
difficulties. Petitioner paid
respondent a total amount of
P26,547,624.76. On June 25, 2005
[should read 2003], respondent,
through its former counsel sent a
letter to petitioner demanding for the
payment of its unpaid balance
amounting to P5,275,184.17.
Petitioner claimed material back
charges in the amount of
P4,063,633.43. On September 26,
2003, respondent only acknowledged
P2,371,895.33 as material back
charges. Thereafter, on October 16,
2003, respondent sent another letter
to petitioner for them to meet and
settle their dispute.

On January 8,
2004, respondent sent another letter
to petitioner regarding the cost of

equipment rental and the use of


scaffolding. Thereafter, on August
12, 2004, petitioner sent a letter to
respondent denying any unpaid
account and the failure in their
negotiations for amicable settlement.

On September
3, 2004, respondent, through its new
counsel, advised petitioner of their
intention to submit the matter to
arbitration. Thereafter, their dispute
was submitted to arbitration. During
the preliminary conference, the parties
agreed in their Terms of Reference to
resolve eight issues, to wit:

1.
What should be the basis
in evaluating the variation cost?

1.1 How much is the variation


cost?

2.
Is the Respondent
(petitioner in the instant case) justified
in charging claimant (herein
respondent) the equipment rental fee
and for the use of the scaffoldings?
If so, how much should be charged to
Claimant?

3.
What should be the basis
in evaluating the total cost of
materials supplied by Respondent to
the Project which is chargeable to
Claimant?

3.1 How much is the total


cost of materials supply chargeable to
Claimant?

representing claimant's share of the


arbitration cost which respondent
should reimburse.

4.
How much is the value of
the remaining works left undone by
the Claimant in the project?

SO ORDERED.]

5.
Is the Claimant's claim for
inventory of excess materials valid?
If so, how much is the value thereof?

6.
Is the Respondent entitled
to its claim for an overpayment in the
amount of P2,512,997.96?

7.
Is Claimant entitled to its
claim for interest? If so, how much?

8.
Who between the parties
shall bear the cost of Arbitration?

The CIAC
rendered the assailed decision after
the presentation of the parties'
evidence. [The dispositive portion of
said decision reads as follows:

WHEREFORE,
judgment is hereby rendered in favor
of the claimant and respondent is
ordered to pay claimant its unpaid
account in the sum of P3,728,960.54
plus legal interest of 6% reckoned
from June 25, 2003 up to the filing of
the case on October 11, 2004 and
12% of P3,728,960.54 from the finality
of the judgment until fully paid and
arbitration cost of P104,333.82

Petitioner accepts the ruling of the


CIAC only in Issue No. 1 and Sub-Issue
No. 1.1 and in Issue No. 2 in so far as
the amount of P440,000.00 awarded
as back charges for the use of
scaffoldings. x x x[3]

On February 22,
2006, the CA promulgated the assailed
Decision affirming the decision of the
CIAC. The CA upheld the CIAC ruling
that petitioner failed to adduce
sufficient proof that the parties had an
agreement regarding charges for
respondent's use of the manlift. As
to the other charges for materials, the
CA held that the evidence on record
amply supports the CIAC findings.
Petitioner moved for reconsideration of
said ruling, but the same was denied
per Resolution dated April 26, 2006.

Hence, this petition


where it is alleged that:

I.
THE HONORABLE COURT
OF APPEALS COMMITTED GRAVE
REVERSIBLE ERROR WHEN IT DENIED
PETITIONER'S CLAIM FOR MANLIFT
EQUIPMENT RENTAL IN THE AMOUNT
OF P511,000.00 DESPITE EVIDENCE
ON RECORD THAT RESPONDENT RRN
ACTUALLY USED AND BENEFITED
FROM THE MANLIFT EQUIPMENT.

II.
IN RENDERING THE
QUESTIONED DECISION AND
QUESTIONED RESOLUTION, THE
HONORABLE COURT OF APPEALS HAS
DECIDED A QUESTION OF SUBSTANCE
NOT IN ACCORD WITH LAW AND/OR
WITH THE APPLICABLE DECISIONS OF
THE HONORABLE SUPREME COURT.

III.
THE COURT OF APPEALS
COMMITTED A GRAVE REVERSIBLE
ERROR IN AFFIRMING THE CIAC
AWARD FOR THE VALUE OF
INVENTORIED MATERIALS
CONSIDERING THAT:

A. RESPONDENT RRN ADMITTED THE


VALIDITY OF THE DEDUCTIONS ON
ACCOUNT OF MATERIAL SUPPLY,
WHICH INCLUDED THE INVENTORIED
MATERIALS.

B. RESPONDENT RRN HAS NO BASIS


TO CLAIM BECAUSE ENGR. BONIFACIO
ADMITTED THAT RESPONDENT RRN
FAILED TO ESTABLISH WHETHER THE
MATERIALS CAME FROM RESPONDENT
RRN OR FROM PETITIONER AND THAT
IT WAS PETITIONER THAT ACTUALLY
INSTALLED THE SAID MATERIALS AS
PART OF REMAINING WORKS THAT
PETITIONER TOOK OVER FROM
RESPONDENT RRN.

C. THE CLAIM FOR THE VALUE OF


INVENTORIED MATERIALS IS A DOUBLE
CLAIM OR DOUBLE ENTRY BECAUSE IN
THE COMPUTATION OF THE FINAL
ACCOUNT, RESPONDENT RRN WAS
CREDITED THE FULL CONTRACT PRICE
AND THE COST OF VARIATIONS,

WHICH INCLUDED THE INVENTORIED


MATERIALS.

IV.
IN RENDERING THE
QUESTIONED DECISION AND
QUESTIONED RESOLUTION, THE
COURT OF APPEALS COMMITTED A
GRAVE REVERSIBLE ERROR IN THAT IT
COMPLETELY DISREGARDED THE
PROVISION OF THE SUBCONTRACT,
WHICH ALLOWED PAYMENT OF ACTUAL
COST INCURRED BY PETITIONER IN
COMPLETING THE REMAINING WORKS
THAT PRIVATE RESPONDENT
ADMITTEDLY FAILED TO COMPLETE.

V.
THE COURT OF APPEALS
COMMITTED A GRAVE REVERSIBLE
ERROR WHEN IT COMPLETELY
DISREGARDED THE EVIDENCE ON
ACTUAL COST INCURRED BY
PETITIONER IN COMPLETING THE
REMAINING WORKS.

VI.
THE COURT OF APPEALS
COMMITTED GRAVE REVERSIBLE
ERROR WHEN IT AFFIRMED THE CIAC
AWARD FOR INTERESTS AND
ARBITRATION COSTS IN FAVOR OF
RESPONDENT RRN.[4]

The petition is bereft of merit.

Despite petitioner's attempts to make


it appear that it is advancing questions
of law, it is quite clear that what
petitioner seeks is for this Court to
recalibrate the evidence it has
presented before the CIAC. It insists
that its evidence sufficiently proves
that it is entitled to payment for

respondent's use of its manlift


equipment, and even absent proof of
the supposed agreement on the
charges petitioner may impose on
respondent for the use of said
equipment, respondent should be
made to pay based on the principle of
unjust enrichment. Petitioner also
questions the amounts awarded by
the CIAC for inventoried materials, and
costs incurred by petitioner for
completing the work left unfinished by
respondent.

As reiterated by the Court in IBEX


International, Inc. v. Government
Service Insurance System,[5] to wit:

It is settled that findings of fact of


quasi-judicial bodies, which have
acquired expertise because their
jurisdiction is confined to specific
matters, are generally accorded not
only respect, but also finality,
especially when affirmed by the Court
of Appeals. In particular, factual
findings of construction arbitrators are
final and conclusive and not
reviewable by this Court on appeal.

This rule,
however, admits of certain exceptions.
In Uniwide Sales Realty and Resources
Corporation v. Titan-Ikeda Construction
and Development Corporation, we
said:

In David v.
Construction Industry and Arbitration

Commission, we ruled that, as


exceptions, factual findings of
construction arbitrators may be
reviewed by this Court when the
petitioner proves affirmatively that: (1)
the award was procured by corruption,
fraud or other undue means; (2) there
was evident partiality or corruption of
the arbitrators or any of them; (3) the
arbitrators were guilty of misconduct
in refusing to hear evidence pertinent
and material to the controversy; (4)
one or more of the arbitrators were
disqualified to act as such under
Section nine of Republic Act No. 876
and willfully refrained from disclosing
such disqualifications or of any other
misbehavior by which the rights of any
party have been materially prejudiced;
or (5) the arbitrators exceeded their
powers, or so imperfectly executed
them, that a mutual, final and definite
award upon the subject matter
submitted to them was not made.

Other recognized
exceptions are as follows: (1) when
there is a very clear showing of grave
abuse of discretion resulting in lack or
loss of jurisdiction as when a party
was deprived of a fair opportunity to
present its position before the Arbitral
Tribunal or when an award is obtained
through fraud or the corruption of
arbitrators, (2) when the findings of
the Court of Appeals are contrary to
those of the CIAC, and (3) when a
party is deprived of administrative due
process.[6]

A perusal of the records would reveal


that none of the aforementioned
circumstances, which would justify

exemption of this case from the


general rule, are present here. Such
being the case, the Court, not being a
trier of facts, is not duty-bound to
examine, appraise and analyze anew
the evidence presented before the
arbitration body.[7]

Petitioner's reliance on the principle of


unjust enrichment is likewise
misplaced. The ruling of the Court in
University of the Philippines v. Philab
Industries, Inc.[8] is highly instructive,
thus:

Unjust enrichment claims do not lie


simply because one party benefits
from the efforts or obligations of
others, but instead it must be shown
that a party was unjustly enriched in
the sense that the term unjustly could
mean illegally or unlawfully.

Moreover, to
substantiate a claim for unjust
enrichment, the claimant must
unequivocally prove that another
party knowingly received something of
value to which he was not entitled and
that the state of affairs are such that it
would be unjust for the person to keep
the benefit. Unjust enrichment is a
term used to depict result or effect of
failure to make remuneration of or for
property or benefits received under
circumstances that give rise to legal or
equitable obligation to account for
them; to be entitled to remuneration,
one must confer benefit by mistake,
fraud, coercion, or request. Unjust
enrichment is not itself a theory of
reconvey. Rather, it is a prerequisite
for the enforcement of the doctrine of
restitution.

Article 22 of
the New Civil Code reads:

Every person
who, through an act of performance by
another, or any other means, acquires
or comes into possession of something
at the expense of the latter without
just or legal ground, shall return the
same to him.

In order that
accion in rem verso may prosper, the
essential elements must be present:
(1) that the defendant has been
enriched, (2) that the plaintiff has
suffered a loss, (3) that the
enrichment of the defendant is without
just or legal ground, and (4) that the
plaintiff has no other action based on
contract, quasi-contract, crime or
quasi-delict.

An accion in
rem verso is considered merely an
auxiliary action, available only when
there is no other remedy on contract,
quasi-contract, crime, and quasidelict. If there is an obtainable
action under any other institution of
positive law, that action must be
resorted to, and the principle of accion
in rem verso will not lie.[9]

As found by both the CIAC and


affirmed by the CA, petitioner failed to
prove that respondent's free use of the
manlift was without legal ground
based on the provisions of their

contract. Thus, the third requisite,


i.e., that the enrichment of respondent
is without just or legal ground, is
missing. In addition, petitioner's
claim is based on contract, hence, the
fourth requisite that the plaintiff has
no other action based on contract,
quasi-contract, crime or quasi-delict
is also absent. Clearly, the principle
of unjust enrichment is not applicable
in this case.

The other issues raised by petitioner


all boil down to whether the CIAC or
the CA erred in rejecting its claims for
costs of some materials.

Again, these issues


are purely factual and cannot be
properly addressed in this petition for
review on certiorari. In Hanjin Heavy
Industries and Construction Co., Ltd. v.
Dynamic Planners and Construction
Corp.,[10] it was emphasized that
mathematical computations, the
propriety of arbitral awards, claims for
other costs and abandonment
are factual questions. Since the
discussions of the CIAC and the CA in
their respective Decisions show that
its factual findings are supported by
substantial evidence, there is no
reason why this Court should not
accord finality to said findings.
Verily, to accede to petitioner's
request for a recalibration of its
evidence, which had been thoroughly
studied by both the CIAC and the CA
would result in negating the objective
of Executive Order No. 1008, which
created an arbitration body to ensure
the prompt and efficient settlement of
disputes in the construction
industry. Thus, the Court held in
Uniwide Sales Realty and Resources

Corporation v. Titan-Ikeda Construction


and Development Corporation,[11]
that:

x x x The Court will not review the


factual findings of an arbitral tribunal
upon the artful allegation that such
body had "misapprehended facts" and
will not pass upon issues which are, at
bottom, issues of fact, no matter how
cleverly disguised they might be as
"legal questions." The parties here had
recourse to arbitration and chose the
arbitrators themselves; they must
have had confidence in such
arbitrators. The Court will not,
therefore, permit the parties to
relitigate before it the issues of facts
previously presented and argued
before the Arbitral Tribunal, save only
where a clear showing is made that, in
reaching its factual conclusions, the
Arbitral Tribunal committed an error so
egregious and hurtful to one party as
to constitute a grave abuse of
discretion resulting in lack or loss of
jurisdiction.[12]

As discussed above, there is nothing in


the records that point to any grave
abuse of discretion committed by the
CIAC.

The awards for


interests and arbitration costs are,
likewise, correct as they are in keeping
with prevailing jurisprudence.[13]

IN VIEW OF THE
FOREGOING, the Petition is DENIED.
The Decision of the Court of Appeals

dated February 22, 2006 and its


Resolution dated April 26, 2006 are
AFFIRMED.

San Fernando Regala Trading filed


before the trial court a complaint for
rescission of contract with damages
against Cargill Philippines, Inc. In its
complaint, San Fernando Regala
Trading alleged that it was engaged in
buying and selling molasses and that
Cargill was one of its suppliers. San
Fernando Regala Trading alleged that
it purchased from Cargill, and the
latter had agreed to sell, 12,000 tons
of cane blackstrap molasses
originating from Thailand at the price
of $192 per metric ton, and that
delivery would be made in April or May
1997. After San Fernando Regala
Trading delivered the letter of credit, it
claimed that Cargill failed to comply
with its obligations under the contract,
which included an arbitration clause as
follows:

"Any dispute which the Buyer and


Seller may not be able to settle by
mutual agreement shall be settled by
arbitration in the City of New York
before the American Arbitration
Association. The Arbitration Award
shall be final and binding on both
parties."
In Cargill Phils Inc v San Fernando
Regala Trading, Inc the Supreme Court
ruled that while actions for rescission
and damages are ordinarily judicial
matters, the dispute at hand was to be
referred to arbitration because the
contract which the plaintiff sought to
have rescinded included an arbitration
agreement.(1)

Facts

Cargill moved to dismiss and/or


suspend the court proceedings citing
the arbitration clause. San Fernando
Regala Trading argued that since it
was seeking rescission of the contract,
it was in effect repudiating the
contract which included the arbitration
clause. Further, it argued that
rescission constitutes a judicial issue,
which requires the exercise of judicial
function and cannot be the subject of
arbitration.

Decision

The Supreme Court held that the


provision to submit to arbitration any
dispute arising between the parties is
part of the contract and is itself a
contract. The arbitration agreement is
to be treated as a separate agreement
and does not automatically terminate
when the contract of which it is a part
comes to an end. To reiterate a
contrary ruling would suggest that a
party's mere repudiation of the main
contract is sufficient to avoid
arbitration; that is exactly the
situation that the separability doctrine
seeks to avoid.

San Fernando Regala Trading filed a


complaint for rescission of contract
and damages with the trial court. In so
doing, it alleged that a contract
existed. It was that contract which
provided for an arbitration clause
which expressed the parties' intention
that any dispute to arise between
them, as buyer and seller, should be
referred to arbitration. It is for the
arbitrator and not the court to decide
whether a contract between the
parties exists or is valid. Under the
circumstances, the argument that
rescission is judicial in nature is
misplaced

G.R. No. 177556


2010

December 8,

TRANSCEPT CONSTRUCTION AND


MANAGEMENT PROFESSIONALS, INC.,
Petitioner,
vs.
TERESA C. AGUILAR, Respondent.

DECISION

CARPIO, J.:

The Case

Before the Court is a petition for


review assailing the 24 January 2007
Decision1 and the 20 April 2007
Resolution2 of the Court of Appeals in
CA-G.R. SP No. 93021.

The Antecedent Facts

From the decisions of the Court of


Appeals and the Construction Industry
Arbitration Commission (CIAC), we
gathered the following facts:

On 18 August 2004, Teresa C. Aguilar


(Aguilar) entered into an OwnerGeneral Contractor Agreement (First
Contract) with Transcept Construction
and Management Professionals, Inc.
(Transcept) for the construction of a
two-storey split level vacation house
(the Project) located at Phase 3, Block
3, Lot 7, Canyon Woods, Laurel,
Batangas. Under the First Contract,
the Project would cost P3,486,878.64

and was to be completed within 2103


working days from the date of the First
Contract or on 7 June 2005. Aguilar
paid a downpayment of P1 million on
27 August 2004.

On 30 November 2004, Transcept


submitted its First Billing to Aguilar for
work accomplishments from start to
15 November 2004, in accordance
with the Progressive Billing payment
scheme. Aguilar paid P566,356.

On 1 February 2005, Aguilar received


the Second Billing amounting to
P334,488 for the period of 16
November 2004 to 15 December
2004. Transcept informed Aguilar that
non-payment would force them to halt
all works on the Project. Aguilar
questioned the Second Billing as
unusual for being 45 days ahead of
actual accomplishment. Aguilar did
not pay and on 2 February 2005,
Transcept stopped working on the
Project.

Thereafter, Aguilar hired ASTEC, a duly


accredited testing laboratory, to test
Transcepts quality of work. The test
showed substandard works done by
Transcept. In a letter dated 7 March
2005, Transcept outlined its program
to reinforce or redo the substandard
works discovered by ASTEC. On 28
March 2005, ASTEC, through Engr.
Jaime E. Rioflorido (Engr. Rioflorido),
sent Aguilar an Evaluation of
Contractors Performance which
showed that aside from the
substandard workmanship and use of
substandard materials, Transcept was
unreasonably and fraudulently billing
Aguilar. Of the downpayment

amounting to P1,632,436.29, Engr.


Riofloridos reasonable assessment of
Transcepts accomplishment
amounted only to P527,875.94. Engr.
Rioflorido recommended the partial
demolition of Transcepts work.

On 30 May 2005, Transcept and


Aguilar entered into a Construction
Contract (Second Contract) to extend
the date of completion from 7 June
2005 to 29 July 2005 and to use up the
P1.6 million downpayment paid by
Aguilar. Aguilar hired the services of
Engr. Edgardo Anonuevo (Engr.
Anonuevo) to ensure that the works
would comply with the plans in the
Second Contract.

Transcept failed to finish the Project on


29 July 2005, alleging that the delay
was due to additional works ordered
by Aguilar. Transcept also asked for
payment of the additional amount of
P290,824.96. Aguilar countered that
the Second Contract did not provide
for additional works.

On 2 September 2005, Aguilar sent a


demand letter to Transcept asking for
payment of P581,844.54 for refund
and damages. Transcept ignored the
demand letter. On 6 September 2005,
Aguilar filed a complaint against
Transcept before CIAC.

The Decision of the CIAC

CIAC assessed the work accomplished


with the corresponding costs, as
against the downpayment of

P1,632,436.29 which was the contract


price in the Second Contract. On 16
January 2006, the CIAC promulgated
its Decision.4

For Labor and Materials of the Scope


of Work, the CIAC credited the
accomplishment to be P1,110,440.13
representing Aguilars estimate which
was reassessed by the CIAC after the
ocular inspection conducted by the
parties. For indirect costs for General
Requirements of the Scope of Work,
the CIACs computation was
P275,355.50. The CIAC noted that
Aguilar did not submit any evidence
on indirect costs and her counsel did
not cross-examine Transcepts
witnesses on the matter. For the
Septic Tank, which the CIAC found to
be part of the Second Contract, the
CIAC assessed the accomplishment to
amount to P7,300. The CIAC added 5%
Contingencies and 10% Contractors
Profit which are the minimum factors
in making estimates practiced in the
construction industry. The CIAC thus
estimated that the total
accomplishment amounted to
P1,602,359.97 which was P30,076.72
below the contract price of
P1,632,436.29. The tabulated amount
shows:

Direct Costs for Labor and Materials


P1,110,440.13
Indirect Costs for General
Requirements
275,355.50

Add 10% of Sub-Total for Contractor's


Profit 139,309.56
Total P1,602,359.97
The CIAC ruled that the
accomplishment of P1,602,359.97 was
98.16% of P1,632,436.29, which was
way above 95% and should therefore
be considered as substantial
completion of the Project. As such, the
CIAC ruled that liquidated damages
could not be awarded to Aguilar. The
CIAC, however, ruled that Aguilar was
entitled to P75,000 as Consultancy
Expenses.

The CIAC also found that Aguilar


demanded extra works which entailed
additional working days. The CIAC
computed that the additional works
performed over and above the Second
Contract amounted to P189,909.91.

The dispositive portion of the CIACs


decision reads:

In view of all the foregoing, it is hereby


ordered that:

1. Respondent [Transcept] shall pay


Claimant [Aguilar] the amount of
P30,076.72, representing the
unaccomplished works in the contract,
plus 6% interests from the date of the
promulgation of this case, until fully
paid.

Septic Tank 7,300.00


Sub-Total

P1,393,095.63

Plus 5% Contingencies

69,654.78

2. Respondent shall pay Claimant the


amount of P75,000.00, representing
the cost of Consultancy Services, plus
6% interests from the date of the

promulgation of this case, until fully


paid.

3. Claimant shall pay Respondent the


amount of P189,909.91, representing
the cost of work performed over &
above the scope of work in the
contract.

4. The cost for liquidated damages


and cost representing interests of
construction bond, prayed for the
Claimant, are denied for being without
merit.

to the indirect costs for General


Requirements. However, the Court of
Appeals made a recomputation of the
indirect costs for General
Requirements based on P1,632,436.29
and made the following findings:

Direct Costs for Labor and Materials


P1,110,440.13
Indirect Costs for General
Requirements
128,799.22
Septic Tank 7,300.00
Sub-Total

P1,246,539.35

Plus 5% Contingencies
5. Attorneys fees prayed for by both
parties are denied for being without
merit.

6. Cost of Arbitration shall be shared


equally by the parties.

SO ORDERED.5

Aguilar assailed the CIACs decision


before the Court of Appeals.

62,326.96

Add 10% of Sub-Total for Contractor's


Profit 124,653.93
Total P1,433,520.24
The Court of Appeals then deducted
P1,433,520.24 from P1,632,436.29
and concluded that Aguilar is entitled
to P198,916.05 instead of P30,076.72.

From the above computation, the


Court of Appeals ruled that Transcept
only accomplished 87.81% of the
contract price thus entitling Aguilar to
liquidated damages equivalent to 10%
of P1,632,436.29 or P163,243.63.

The Decision of the Court of Appeals

In its 24 January 2007 Decision, the


Court of Appeals reversed the CIACs
decision.

The Court of Appeals agreed with the


CIAC that Aguilar did not allege in her
complaint the amount corresponding

The Court of Appeals further ruled that


Transcept was not entitled to payment
for additional works because they
were in fact only rectifications of the
works poorly done by Transcept.
Finally, the Court of Appeals ruled that
Aguilar was able to prove that she
paid P135,000 for consultancy
services.

The dispositive portion of the Court of


Appeals decision reads:

Hence, the petition before this Court.

The Issues
WHEREFORE, the foregoing
considered, the instant petition is
hereby GRANTED and the assailed
decision REVERSED AND SET ASIDE.
Accordingly, a new one is entered
ordering respondent to pay petitioner
the following:

1) P198,916.02 for unaccomplished


works in the second contract, plus 6%
interest from the date of the filing of
the case, until fully paid;

2) P135,000.00, representing the cost


of consultancy services, plus 6%
interest from the filing of the case,
until fully paid; and

3) P163,243.63 as and by way of


liquidated damages.

The award of P189,909.91 in favor of


Aguilar for additional works is hereby
deleted.

No costs.

SO ORDERED.6

Transcept filed a motion for


reconsideration. In its 20 April 2007
Resolution, the Court of Appeals
denied the motion.

The issues in this case are the


following:

1. Whether the Court of Appeals erred


in holding that Aguilar is entitled to
P198,916.02 instead of P30,076.72 for
unaccomplished works;

2. Whether the Court of Appeals erred


in awarding Aguilar liquidated
damages;

3. Whether the Court of Appeals erred


in deleting the CIACs award of
P189,909.91 to Transcept representing
additional works done under the
Second Contract; and

4. Whether the Court of Appeals erred


in awarding Aguilar the amount of
P135,000 for consultancy services.

The Ruling of this Court

The petition is partly meritorious.

Refund for Unaccomplished Works

The Court of Appeals ruled that CIAC


erred in adopting Transcepts
computation of unaccomplished

works. The Court of Appeals agreed


with Aguilar that the CIACs
computation was based on what
Transcept submitted which was based
on the original contract price of
P3,486,878.64 instead of the contract
price of P1,632,436.29 under the
Second Contract.

Sub-Total

However, the Court of Appeals failed


to consider the CIACs as well as its
own finding that Aguilar did not
present any evidence on indirect costs
for General Requirements. In addition,
Aguilars counsel did not crossexamine Transcepts witnesses. In
short, Aguilar did not dispute but
merely accepted Transcepts
computation on indirect expenses.
Aguilar did not interpose any objection
to the computation until after the CIAC
ruled that Transcept substantially
complied with the Project. We also
note Transcepts explanation, as well
as the CIACs finding, that General
Requirements refer to mobilization,
overhead, insurance, hoarding and
protection, temporary facilities,
equipment, materials testing, line set
out, as-built drawings, and clean out.
They had been used up at the start of
the Project. Hence, costs for General
Requirements are not dependent on
the amount of the contract because
they were incurred at the beginning of
the Project. We should therefore revert
to the computation made by the CIAC,
as follows:

Section 20.11(A)(a) of the


Construction Industry Authority of the
Philippines (CIAP) Document No. 102
provides that "[t]here is substantial
completion when the Contractor
completes 95% of the Work, provided
that the remaining work and the
performance of the work necessary to
complete the Work shall not prevent
the normal use of the completed
portion."

Direct Costs for Labor and Materials


P1,110,440.13
Indirect Costs for General
Requirements
275,355.50
Septic Tank 7,300.00

P1,393,095.63

Plus 5% Contingencies

69,654.78

Add 10% of Sub-Total for Contractor's


Profit 139,309.56
Total P1,602,359.97
Liquidated Damages

According to CIACs computation,


Transcepts accomplishment
amounted to 98.16% of the contract
price. It is beyond the 95% required
under CIAP Document No. 102 and is
considered a substantial completion of
the Project. We thus agree with CIACs
application of Article 1234 of the Civil
Code, which provides that "[i]f the
obligation had been substantially
performed in good faith, the obligor
may recover as though there had been
a strict and complete fulfillment, less
damages suffered by the
obligee."7lavvphil

There being a substantial completion


of the Project, Aguilar is not entitled to
liquidated damages but only to actual
damages of P30,076.72, representing
the unaccomplished works in the
Second Contract as found by the CIAC,

which is the difference between the


contract price of P1,632,436.29 and
the accomplishment of P1,602,359.97.

Additional Works

The Second Contract excluded the


construction of the following works:

1. Architectural Works - - Roofing


System

2. Interior Fit-Out
Works/Glass/Windows/CAB/CARP

The CIAC found that Aguilar demanded


additional works from Transcept. The
CIAC found that the additional works
include the balcony, lifting of roof
beams, and extra fast walls which are
not covered by the Second Contract.
However, we agree with the Court of
Appeals that the works done were just
for correction of the substandard
works done under the First Contract.
During the ocular inspection, Aguilar
pointed out that the lifting of the roof
beam was done because the
construction was three meters short of
that specified in the First Contact.9
Hence, while the roofing system is
excluded from the Second Contract, it
could not be said that the lifting of the
roof beam is an additional work on the
part of Transcept.

3. Truss System

4. Supply and Installation of Plumbing


Fixtures and Bathroom Accessories

5. Supply and Installation of


Downspout System

The Court notes that the Second


Contract was entered into by the
parties precisely to correct the
substandard works discovered by
ASTEC. Hence, Aguilar should not be
made to pay for works done to correct
these substandard works.

Consultancy Services
6. Electrical Roughing-in and Wiring
Works

7. Supply and Installation of Wiring


Devices

8. Supply and Installation of Circuit


Breakers

9. Testing and Commissioning.8

The Court of Appeals correctly


awarded Aguilar the cost of
consultancy services amounting to
P135,000. While Engr. Rioflorido was
not presented as a witness, it was
established that Aguilar hired ASTEC, a
duly accredited testing laboratory, to
test Transcepts quality of work, and
that Engr. Rioflorido represented
ASTEC. As found by the Court of
Appeals, Aguilar paid Engr. Rioflorido
the amount of P65,000 for the
services, which should be added to the

P75,000 consultancy services awarded


to Aguilar.10

WHEREFORE, we AFFIRM the 24


January 2007 Decision and the 20 April
2007 Resolution of the Court of
Appeals in CA-G.R. SP No. 93021, with
the MODIFICATION that the award of
P198,916.02 for unaccomplished
works is reduced to P30,076.72, and
the award of P163,243.63 for
liquidated damages is deleted.

SO ORDERED.

ANTONIO T. CARPIO
Associate Justice

G.R. No. 167022

April 4, 2011

LICOMCEN INCORPORATED, Petitioner,


vs.

FOUNDATION SPECIALISTS, INC.,


Respondent.

thereafter, required to turn over the


ownership and operation to the City
Government.1

x - - - - - - - - - - - - - - - - - - - - - - -x

G.R. No. 169678

FOUNDATION SPECIALISTS, INC.,


Petitioner,
vs.
LICOMCEN INCORPORATED,
Respondent.

DECISION

BRION, J.:

For the Citimall project, LICOMCEN


hired E.S. de Castro and Associates
(ESCA) to act as its engineering
consultant. Since the Citimall was
envisioned to be a high-rise structure,
LICOMCEN contracted respondent
Foundation Specialists, Inc. (FSI) to do
initial construction works, specifically,
the construction and installation of
bored piles foundation.2 LICOMCEN
and FSI signed the Construction
Agreement,3 and the accompanying
Bid Documents4 and General
Conditions of Contract5 (GCC) on
September 1, 1997. Immediately
thereafter, FSI purchased the
materials needed for the Citimall6
project and began working in order to
meet the 90-day deadline set by
LICOMCEN.

THE FACTS

The petitioner, LICOMCEN


Incorporated (LICOMCEN), is a
domestic corporation engaged in the
business of operating shopping malls
in the country.

In March 1997, the City Government of


Legaspi awarded to LICOMCEN, after a
public bidding, a lease contract over a
lot located in the central business
district of the city. Under the contract,
LICOMCEN was obliged to finance the
construction of a commercial
complex/mall to be known as the LCC
Citimall (Citimall). It was also granted
the right to operate and manage
Citimall for 50 years, and was,

On December 16, 1997, LICOMCEN


sent word to FSI that it was
considering major design revisions and
the suspension of work on the Citimall
project. FSI replied on December 18,
1997, expressing concern over the
revisions and the suspension, as it had
fully mobilized its manpower and
equipment, and had ordered the
delivery of steel bars. FSI also asked
for the payment of accomplished work
amounting to P3,627,818.00.7 A series
of correspondence between LICOMCEN
and FSI then followed.

ESCA wrote FSI on January 6, 1998,


stating that the revised design
necessitated a change in the bored
piles requirement and a substantial

reduction in the number of piles. Thus,


ESCA proposed to FSI that only 50% of
the steel bars be delivered to the
jobsite and the rest be shipped back to
Manila.8 Notwithstanding this
instruction, all the ordered steel bars
arrived in Legaspi City on January 14,
1998.9

On January 15, 1998, LICOMCEN


instructed FSI to "hold all construction
activities on the project,"10 in view of
a pending administrative case against
the officials of the City Government of
Legaspi and LICOMCEN filed before the
Ombudsman (OMB-ADM-1-97-0622).11
On January 19, 1998, ESCA formalized
the suspension of construction
activities and ordered the
constructions demobilization until the
case was resolved.12 In response, FSI
sent ESCA a letter, dated February 3,
1998, requesting payment of costs
incurred on account of the suspension
which totaled P22,667,026.97.13 FSI
repeated its demand for payment on
March 3, 1998.14

ESCA replied to FSIs demands for


payment on March 24, 1998, objecting
to some of the claims.15 It denied the
claim for the cost of the steel bars that
were delivered, since the delivery was
done in complete disregard of its
instructions. It further disclaimed
liability for the other FSI claims based
on the suspension, as its cause was
not due to LICOMCENs fault. FSI
rejected ESCAs evaluation of its
claims in its April 15, 1998 letter.16

On March 14, 2001, FSI sent a final


demand letter to LICOMCEN for
payment of P29,232,672.83.17 Since

LICOMCEN took no positive action on


FSIs demand for payment,18 FSI filed
a petition for arbitration with the
Construction Industry Arbitration
Commission (CIAC) on October 2,
2002, docketed as CIAC Case No. 372002.19 In the arbitration petition, FSI
demanded payment of the following
amounts:

a. Unpaid accomplished work


billings. P 1,264,404.12
b. Material costs at
site..
15,143,638.51
c. Equipment and labor standby
costs..
3,058,984.34
d. Unrealized gross
profit..
9,023,575.29
e. Attorneys
fees..
300,000.00
f. Interest expenses ...
equivalent to 15%
of the total claim
LICOMCEN again denied liability for
the amounts claimed by FSI. It justified
its decision to indefinitely suspend the
Citimall project due to the cases filed
against it involving its Lease Contract
with the City Government of Legaspi.
LICOMCEN also assailed the CIACs
jurisdiction, contending that FSIs
claims were matters not subject to
arbitration under GC-61 of the GCC,
but one that should have been filed
before the regular courts of Legaspi
City pursuant to GC-05.20

During the preliminary conference of


January 28, 2003, LICOMCEN
reiterated its objections to the CIACs
jurisdiction, which the arbitrators
simply noted. Both FSI and LICOMCEN
then proceeded to draft the Terms of
Reference.21

On February 4, 2003, LICOMCEN,


through a collaborating counsel, filed
its Ex Abundati Ad Cautela Omnibus
Motion, insisting that FSIs petition
before the CIAC should be dismissed
for lack of jurisdiction; thus, it prayed
for the suspension of the arbitration
proceedings until the issue of
jurisdiction was finally settled. The
CIAC denied LICOMCENs motion in its
February 20, 2003 order,22 finding
that the question of jurisdiction
depends on certain factual conditions
that have yet to be established by
ample evidence. As the CIACs
February 20, 2003 order stood
uncontested, the arbitration
proceedings continued, with both
parties actively participating.

The CIAC issued its decision on July 7,


2003,23 ruling in favor of FSI and
awarding the following amounts:

LICOMCEN was also required to bear


the costs of arbitration in the total
amount of P474,407.95.

LICOMCEN appealed the CIACs


decision before the Court of Appeals
(CA). On November 23, 2004, the CA
upheld the CIACs decision, modifying
only the amounts awarded by (a)
reducing LICOMCENs liability for
material costs at site to
P5,694,939.87, and (b) deleting its
liability for equipment and labor
standby costs and unrealized gross
profit; all the other awards were
affirmed.24 Both parties moved for the
reconsideration of the CAs Decision;
LICOMCENs motion was denied in the
CAs February 4, 2005 Resolution,
while FSIs motion was denied in the
CAs September 13, 2005 Resolution.
Hence, the parties filed their own
petition for review on certiorari before
the Court.25

LICOMCENs Arguments

LICOMCEM principally raises the


question of the CIACs jurisdiction,
insisting that FSIs claims are nonarbitrable. In support of its position,
LICOMCEN cites GC-61 of the GCC:

a. Unpaid accomplished work


billings. P 1,264,404.12
b. Material costs at
site
14,643,638.51
c. Equipment and labor standby
costs
2,957,989.94
d. Unrealized gross
profit
5,120,000.00

GC-61. DISPUTES AND ARBITRATION

Should any dispute of any kind arise


between the LICOMCEN
INCORPORATED and the Contractor
[referring to FSI] or the Engineer
[referring to ESCA] and the Contractor
in connection with, or arising out of

the execution of the Works, such


dispute shall first be referred to and
settled by the LICOMCEN,
INCORPORATED who shall within a
period of thirty (30) days after being
formally requested by either party to
resolve the dispute, issue a written
decision to the Engineer and
Contractor.

Such decision shall be final and


binding upon the parties and the
Contractor shall proceed with the
execution of the Works with due
diligence notwithstanding any
Contractor's objection to the decision
of the Engineer. If within a period of
thirty (30) days from receipt of the
LICOMCEN, INCORPORATED's decision
on the dispute, either party does not
officially give notice to contest such
decision through arbitration, the said
decision shall remain final and binding.
However, should any party, within
thirty (30) days from receipt of the
LICOMCEN, INCORPORATED's decision,
contest said decision, the dispute shall
be submitted for arbitration under the
Construction Industry Arbitration Law,
Executive Order 1008. The arbitrators
appointed under said rules and
regulations shall have full power to
open up, revise and review any
decision, opinion, direction, certificate
or valuation of the LICOMCEN,
INCORPORATED. Neither party shall be
limited to the evidence or arguments
put before the LICOMCEN,
INCORPORATED for the purpose of
obtaining his said decision. No
decision given by the LICOMCEN,
INCORPORATED shall disqualify him
from being called as a witness and
giving evidence in the arbitration. It is
understood that the obligations of the
LICOMCEN, INCORPORATED, the

Engineer and the Contractor shall not


be altered by reason of the arbitration
being conducted during the progress
of the Works.26

LICOMCEN posits that only disputes "in


connection with or arising out of the
execution of the Works" are subject to
arbitration. LICOMCEN construes the
phrase "execution of the Works" as
referring to the physical construction
activities, since "Works" under the
GCC specifically refer to the
"structures and facilities" required to
be constructed and completed for the
Citimall project.27 It considers FSIs
claims as mere contractual monetary
claims that should be litigated before
the courts of Legaspi City, as provided
in GC-05 of the GCC:

GC-05. JURISDICTION

Any question between the contracting


parties that may arise out of or in
connection with the Contract, or
breach thereof, shall be litigated in the
courts of Legaspi City except where
otherwise specifically stated or except
when such question is submitted for
settlement thru arbitration as provided
herein.28

LICOMCEN also contends that FSI


failed to comply with the condition
precedent for arbitration laid down in
GC-61 of the GCC. An arbitrable
dispute under GC-61 must first be
referred to and settled by LICOMCEN,
which has 30 days to resolve it. If
within a period of 30 days from receipt
of LICOMCENs decision on the

dispute, either party does not officially


give notice to contest such decision
through arbitration, the said decision
shall remain final and binding.
However, should any party, within 30
days from receipt of LICOMCENs
decision, contest said decision, the
dispute shall be submitted for
arbitration under the Construction
Industry Arbitration Law.

2nd initial rebar requirements


purchased from Pag-Asa Steel Works,
Inc..
P
799,506.83
Reinforcing steel bars purchased from
ARCA Industrial Sales (total net weight
of 744,197.66 kilograms) 50% of net
amount due.
5,395,433.04
Subtotal
.

LICOMCEN considers its March 24,


1998 letter as its final decision on
FSIs claims, but declares that FSIs
reply letter of April 15, 1998 is not the
"notice to contest" required by GC-61
that authorizes resort to arbitration
before the CIAC. It posits that nothing
in FSIs April 15, 1998 letter states
that FSI will avail of arbitration as a
mode to settle its dispute with
LICOMCEN. While FSIs final demand
letter of March 14, 2001 mentioned its
intention to refer the matter to
arbitration, LICOMCEN declares that
the letter was made three years after
its March 24, 1998 letter, hence, long
after the 30-day period provided in
GC-61. Indeed, FSI filed the petition for
arbitration with the CIAC only on
October 2, 2002.29 Considering FSIs
delays in asserting its claims,
LICOMCEN also contends that FSIs
action is barred by laches.

With respect to the monetary claims of


FSI, LICOMCEM alleges that the CA
erred in upholding its liability for
material costs at site for the
reinforcing steel bars in the amount of
P5,694,939.87, computed as
follows30:

6,194,939.87
Less
Purchase cost of steel bars by Ramon
Quinquileria
..
(500,000.00)
TOTAL LIABILITY OF LICOMCEN TO FSI
FOR MATERIAL COSTS AT
SITE...
5,694,939.87
Citing GC-42(2) of the GCC, LICOMCEN
says it shall be liable to pay FSI "[t]he
cost of materials or goods reasonably
ordered for the Permanent or
Temporary Works which have been
delivered to the Contractor but not yet
used, and which delivery has been
certified by the Engineer."31 None of
these requisites were allegedly
complied with. It contends that FSI
failed to establish that the steel bars
delivered in Legaspi City, on January
14, 1998, were for the Citimall project.
In fact, the steel bars were delivered
not at the site of the Citimall project,
but at FSIs batching plant called
Tuanzon compound, a few hundred
meters from the site. Even if delivery
to Tuanzon was allowed, the delivery
was done in violation of ESCAs
instruction to ship only 50% of the
materials. Advised as early as

December 1997 to suspend the works,


FSI proceeded with the delivery of the
steel bars in January 1998. LICOMCEN
declared that it should not be made to
pay for costs that FSI willingly incurred
for itself.32

Assuming that LICOMCEN is liable for


the costs of the steel bars, it argues
that its liability should be minimized
by the fact that FSI incurred no actual
damage from the purchase and
delivery of the steel bars. During the
suspension of the works, FSI sold
125,000 kg of steel bars for
P500,000.00 to a third person (a
certain Ramon Quinquileria).
LICOMCEN alleges that FSI sold the
steel bars for a ridiculously low price
of P 4.00/kilo, when the prevailing rate
was P20.00/kilo. The sale could have
garnered a higher price that would
offset LICOMCENs liability. LICOMCEN
also wants FSI to account for and
deliver to it the remaining 744 metric
tons of steel bars not sold. Otherwise,
FSI would be unjustly enriched at
LICOMCENs expense, receiving
payment for materials not delivered to
LICOMCEN.33

LICOMCEN also disagrees with the CA


ruling that declared it solely liable to
pay the costs of arbitration. The ruling
was apparently based on the finding
that LICOMCENs "failure or refusal to
meet its obligations, legal, financial,
and moral, caused FSI to bring the
dispute to arbitration."34 LICOMCEN
asserts that it was FSIs decision to
proceed with the delivery of the steel
bars that actually caused the dispute;
it insists that it is not the party at fault
which should bear the arbitration
costs.35

FSIs Arguments

FSI takes exception to the CA ruling


that modified the amount for material
costs at site, and deleted the awards
for equipment and labor standby costs
and unrealized profits.

Proof of damage to FSI is not required


for LICOMCEN to be liable for the
material costs of the steel bars. Under
GC-42, it is enough that the materials
were delivered to the contractor,
although not used. FSI said that the
744 metric tons of steel bars were
ordered and paid for by it for the
Citimall project as early as November
1997. If LICOMCEN contends that
these were procured for other projects
FSI also had in Legaspi City, it should
have presented proof of this claim, but
it failed to do so.36

ESCAs January 6, 1998 letter simply


suggested that only 50% of the steel
bars be shipped to Legaspi City; it was
not a clear and specific directive. Even
if it was, the steel bars were ordered
and paid for long before the notice to
suspend was given; by then, it was too
late to stop the delivery. FSI also
claims that since it believed in good
faith that the Citimall project was
simply suspended, it expected work to
resume soon after and decided to
proceed with the shipment.37

Contrary to LICOMCENs arguments,


GC-42 of the GCC does not require
delivery of the materials at the site of
the Citimall project; it only requires

delivery to the contractor, which is FSI.


Moreover, the Tuanzon compound,
where the steel bars were actually
delivered, is very close to the Citimall
project site. FSI contends that it is a
normal construction practice for
contractors to set up a "staging site,"
to prepare the materials and
equipment to be used, rather than
stock them in the crowded job/project
site. FSI also asserts that it was
useless to have the delivery certified
by ESCA because by then the Citimall
project had been suspended. It would
be unfair to demand FSI to perform an
act that ESCA and LICOMCEN
themselves had prevented from
happening.38

The CA deleted the awards for


equipment and labor standby costs on
the ground that FSIs documentary
evidence was inadequate. FSI finds the
ruling erroneous, since LICOMCEN
never questioned the list of employees
and equipments employed and rented
by FSI for the duration of the
suspension.39

FSI also alleges that LICOMCEN


maliciously and unlawfully suspended
the Citimall project. While LICOMCEN
cited several other cases in its petition
for review on certiorari as grounds for
suspending the works, its
letters/notices of suspension only
referred to one case, OMB-ADM-1-970622, an administrative case before
the Ombudsman that was dismissed
as early as October 12, 1998.
LICOMCEN never notified FSI of the
dismissal of this case. More
importantly, no restraining order or
injunction was issued in any of these
cases to justify the suspension of the

Citimall project.40 FSI posits that


LICOMCENs true intent was to
terminate its contract with it, but, to
avoid paying damages for breach of
contract, simply declared it as
"indefinitely suspended." That
LICOMCEN conducted another public
bidding for the "new designs" is a
telling indication of LICOMCENs intent
to ease out FSI.41 Thus, FSI states that
LICOMCENs bad faith in indefinitely
suspending the Citimall project
entitles it to claim unrealized profit.
The restriction under GC-41 that "[t]he
contractor shall have no claim for
anticipated profits on the work thus
terminated,"42 will not apply because
the stipulation refers to a contract
lawfully and properly terminated. FSI
seeks to recover unrealized profits
under Articles 1170 and 2201 of the
Civil Code.

THE COURTS RULING

The jurisdiction of the CIAC

The CIAC was created through


Executive Order No. 1008 (E.O. 1008),
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 with the construction
industry was considered of necessary
and vital for the fulfillment of national
development goals, as the
construction industry provides
employment to a large segment of the
national labor force and is a leading
contributor to the gross national
product.43 Section 4 of E.O. 1008
states:

Sec. 4. Jurisdiction. The CIAC shall


have original and exclusive jurisdiction
over disputes arising from, or
connected with, contracts entered into
by parties involved in construction in
the Philippines, whether the dispute
arises before or after the completion
of the contract, or after the
abandonment or breach thereof. These
disputes may involve government or
private contracts. For the Board to
acquire jurisdiction, the parties to a
dispute must agree to submit the
same to voluntary arbitration.

The jurisdiction of the CIAC may


include but is not limited to violation
of specifications for materials and
workmanship; violation of the terms of
agreement; interpretation and/or
application of contractual time and
delays; maintenance and defects;
payment, default of employer or
contractor and changes in contract
cost.

Excluded from the coverage of this law


are disputes arising from employeremployee relationships which shall
continue to be covered by the Labor
Code of the Philippines.

The jurisdiction of courts and quasijudicial bodies is determined by the


Constitution and the law.44 It cannot
be fixed by the will of the parties to a
dispute;45 the parties can neither
expand nor diminish a tribunals
jurisdiction by stipulation or
agreement. The text of Section 4 of
E.O. 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.46
Considering the intent behind the law
and the broad language adopted,
LICOMCEN erred in insisting on its
restrictive interpretation of GC-61. The
CIACs jurisdiction cannot be limited
by the parties stipulation that only
disputes in connection with or arising
out of the physical construction
activities (execution of the works) are
arbitrable before it.

In fact, all that is required for the CIAC


to acquire jurisdiction is for the parties
to a construction contract to agree to
submit their dispute to arbitration.
Section 1, Article III of the 1988 CIAC
Rules of Procedure (as amended by
CIAC Resolution Nos. 2-91 and 3-93)
states:

Section 1. Submission to CIAC


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

An arbitration agreement or a
submission to arbitration shall be in
writing, but it need not be signed by

the parties, as long as the intent is


clear that the parties agree to submit
a present or future controversy arising
from a construction contract to
arbitration.

payment, on the other hand, are costs


directly incidental to the dispute.
Hence, the scope of the arbitration
clause, as worded, covers all the
disputed items.

In HUTAMA-RSEA Joint Operations, Inc.


v. Citra Metro Manila Tollways
Corporation,47 the Court declared that
"the bare fact that the parties x x x
incorporated an arbitration clause in
[their contract] is sufficient to vest the
CIAC with jurisdiction over any
construction controversy or claim
between the parties. The arbitration
clause in the construction contract
ipso facto vested the CIAC with
jurisdiction."

Second and more importantly, in


insisting that contractual money
claims can be resolved only through
court action, LICOMCEN deliberately
ignores one of the exceptions to the
general rule stated in GC-05:

Under GC-61 and GC-05 of the GCC,


read singly and in relation with one
another, the Court sees no intent to
limit resort to arbitration only to
disputes relating to the physical
construction activities.

First, consistent with the intent of the


law, an arbitration clause pursuant to
E.O. 1008 should be interpreted at its
widest signification. Under GC-61, the
voluntary arbitration clause covers
any dispute of any kind, not only
arising of out the execution of the
works but also in connection
therewith. The payments, demand and
disputed issues in this case namely,
work billings, material costs,
equipment and labor standby costs,
unrealized profits all arose because
of the construction activities and/or
are connected or related to these
activities. In other words, they are
there because of the construction
activities. Attorneys fees and interests

GC-05. JURISDICTION

Any question between the contracting


parties that may arise out of or in
connection with the Contract, or
breach thereof, shall be litigated in the
courts of Legaspi City except where
otherwise specifically stated or except
when such question is submitted for
settlement thru arbitration as provided
herein.

The second exception clause


authorizes the submission to
arbitration of any dispute between
LICOMCEM and FSI, even if the dispute
does not directly involve the execution
of physical construction works. This
was precisely the avenue taken by FSI
when it filed its petition for arbitration
with the CIAC.

If the CIACs jurisdiction can neither be


enlarged nor diminished by the
parties, it also cannot be subjected to
a condition precedent. GC-61 requires
a party disagreeing with LICOMCENs
decision to "officially give notice to

contest such decision through


arbitration" within 30 days from
receipt of the decision. However, FSIs
April 15, 1998 letter is not the notice
contemplated by GC-61; it never
mentioned FSIs plan to submit the
dispute to arbitration and instead
requested LICOMCEN to reevaluate its
claims. Notwithstanding FSIs failure to
make a proper and timely notice,
LICOMCENs decision (embodied in its
March 24, 1998 letter) cannot become
"final and binding" so as to preclude
resort to the CIAC arbitration. To
reiterate, all that is required for the
CIAC to acquire jurisdiction is for the
parties to agree to submit their
dispute to voluntary arbitration:

[T]he mere existence of an arbitration


clause in the construction contract is
considered by law as an agreement by
the parties to submit existing or future
controversies between them to CIAC
jurisdiction, without any qualification
or condition precedent. To affirm a
condition precedent in the
construction contract, which would
effectively suspend the jurisdiction of
the CIAC until compliance therewith,
would be in conflict with the
recognized intention of the law and
rules to automatically vest CIAC with
jurisdiction over a dispute should the
construction contract contain an
arbitration clause.48

The CIAC is given the original and


exclusive jurisdiction over disputes
arising from, or connected with,
contracts entered into by parties
involved in construction in the
Philippines.49 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.

The jurisdiction of the CIAC to resolve


the dispute between LICOMCEN and
FSI is, therefore, affirmed.

The validity of the indefinite


suspension of the works on the
Citimall project

Before the Court rules on each of FSIs


contractual monetary claims, we deem
it important to discuss the validity of
LICOMCENs indefinite suspension of
the works on the Citimall project. We
quote below two contractual
stipulations relevant to this issue:

GC-38. SUSPENSION OF WORKS

The Engineer [ESCA] through the


LICOMCEN, INCORPORATED shall have
the authority to suspend the Works
wholly or partly by written order for
such period as may be deemed
necessary, due to unfavorable
weather or other conditions
considered unfavorable for the
prosecution of the Works, or for failure
on the part of the Contractor to correct
work conditions which are unsafe for
workers or the general public, or
failure or refusal to carry out valid
orders, or due to change of plans to
suit field conditions as found
necessary during construction, or to
other factors or causes which, in the
opinion of the Engineer, is necessary

in the interest of the Works and to the


LICOMCEN, INCORPORATED. The
Contractor [FSI] shall immediately
comply with such order to suspend the
work wholly or partly directed.

In case of total suspension or


suspension of activities along the
critical path of the approved PERT/CPM
network and the cause of which is not
due to any fault of the Contractor, the
elapsed time between the effective
order for suspending work and the
order to resume work shall be allowed
the Contractor by adjusting the time
allowed for his execution of the
Contract Works.

The Engineer through LICOMCEN,


INCORPORATED shall issue the order
lifting the suspension of work when
conditions to resume work shall have
become favorable or the reasons for
the suspension have been duly
corrected.50

GC-41 LICOMCEN, INCORPORATED's


RIGHT TO SUSPEND WORK OR
TERMINATE THE CONTRACT

xxxx

2. For Convenience of LICOMCEN,


INCORPORATED

If any time before completion of work


under the Contract it shall be found by
the LICOMCEN, INCORPORATED that
reasons beyond the control of the
parties render it impossible or against

the interest of the LICOMCEN,


INCORPORATED to complete the work,
the LICOMCEN, INCORPORATED at any
time, by written notice to the
Contractor, may discontinue the work
and terminate the Contract in whole or
in part. Upon the issuance of such
notice of termination, the Contractor
shall discontinue to work in such
manner, sequence and at such time as
the LICOMCEN,
INCORPORATED/Engineer may direct,
continuing and doing after said notice
only such work and only until such
time or times as the LICOMCEN,
INCORPORATED/Engineer may
direct.51

Under these stipulations, we consider


LICOMCENs initial suspension of the
works valid. GC-38 authorizes the
suspension of the works for factors or
causes which ESCA deems necessary
in the interests of the works and
LICOMCEN. The factors or causes of
suspension may pertain to a change or
revision of works, as cited in the
December 16, 1997 and January 6,
1998 letters of ESCA, or to the
pendency of a case before the
Ombudsman (OMB-ADM-1-97-0622),
as cited in LICOMCENs January 15,
1998 letter and ESCAs January 19,
1998 and February 17, 1998 letters. It
was not necessary for ESCA/LICOMCEN
to wait for a restraining or injunctive
order to be issued in any of the cases
filed against LICOMCEN before it can
suspend the works. The language of
GC-38 gives ESCA/LICOMCEN sufficient
discretion to determine whether the
existence of a particular situation or
condition necessitates the suspension
of the works and serves the interests
of LICOMCEN.1avvphi1

Although we consider the initial


suspension of the works as valid, we
find that LICOMCEN wrongfully
prolonged the suspension of the works
(or "indefinite suspension" as
LICOMCEN calls it). GC-38 requires
ESCA/LICOMCEN to "issue an order
lifting the suspension of work when
conditions to resume work shall have
become favorable or the reasons for
the suspension have been duly
corrected." The Ombudsman case
(OMB-ADM-1-97-0622), which ESCA
and LICOMCEN cited in their letters to
FSI as a ground for the suspension,
was dismissed as early as October 12,
1998, but neither ESCA nor LICOMCEN
informed FSI of this development. The
pendency of the other cases52 may
justify the continued suspension of the
works, but LICOMCEN never bothered
to inform FSI of the existence of these
cases until the arbitration proceedings
commenced. By May 28, 2002, the
City Government of Legaspi sent
LICOMCEN a notice instructing it to
proceed with the Citimall project;53
again, LICOMCEN failed to relay this
information to FSI. Instead, LICOMCEN
conducted a rebidding of the Citimall
project based on the new design.54
LICOMCENs claim that the rebidding
was conducted merely to get cost
estimates for the new design goes
against the established practice in the
construction industry. We find the
CIACs discussion on this matter
relevant:

This Arbitral Tribunal finds said act of


asking for bids, without any intention
of awarding the project to the lowest
and qualified bidder, if true, to be
extremely irresponsible and highly
unprofessional. It might even be
branded as fraudulent x x x [since] the
invited bidders [were required] to pay
P2,000.00 each for a set of the new
plans, which amount was nonrefundable. The presence of x x x
deceit makes the whole story
repugnant and unacceptable.55

LICOMCENs omissions and the


imprudent rebidding of the Citimall
project are telling indications of
LICOMCENs intent to ease out FSI and
terminate their contract. As with GC31, GC-42(2) grants LICOMCEN ample
discretion to determine what reasons
render it against its interest to
complete the work in this case, the
pendency of the other cases and the
revised designs for the Citimall
project. Given this authority, the Court
fails to the see the logic why
LICOMCEN had to resort to an
"indefinite suspension" of the works,
instead of outrightly terminating the
contract in exercise of its rights under
GC-42(2).

We now proceed to discuss the effects


of these findings with regard to FSIs
monetary claims against LICOMCEN.

The claim for material costs at site


But what is more appalling and
disgusting is the allegation x x x that
the x x x invitation to bid was issued x
x x solely to gather cost estimates on
the redesigned [Citimall project] x x x.

GC-42 of the GCC states:

GC-42 PAYMENT FOR TERMINATED


CONTRACT

If the Contract is terminated as


aforesaid, the Contractor will be paid
for all items of work executed,
satisfactorily completed and accepted
by the LICOMCEN, INCORPORATED up
to the date of termination, at the rates
and prices provided for in the Contract
and in addition:

1. The cost of partially accomplished


items of additional or extra work
agreed upon by the LICOMCEN,
INCORPORATED and the Contractor.

2. The cost of materials or goods


reasonably ordered for the Permanent
or Temporary Works which have been
delivered to the Contractor but not yet
used and which delivery has been
certified by the Engineer.

3. The reasonable cost of


demobilization

For any payment due the Contractor


under the above conditions, the
LICOMCEN, INCORPORATED, however,
shall deduct any outstanding balance
due from the Contractor for advances
in respect to mobilization and
materials, and any other sum the
LICOMCEN, INCORPORATED is entitled
to be credited.56

For LICOMCEN to be liable for the cost


of materials or goods, item two of GC42 requires that

a. the materials or goods were


reasonably ordered for the Permanent
or Temporary Works;

b. the materials or goods were


delivered to the Contractor but not yet
used; and

c. the delivery was certified by the


Engineer.

Both the CIAC and the CA agreed that


these requisites were met by FSI to
make LICOMCEN liable for the cost of
the steel bars ordered for the Citimall
project; the two tribunals differed only
to the extent of LICOMCENs liability
because the CA opined that it should
be limited only to 50% of the cost of
the steel bars. A review of the records
compels us to uphold the CAs finding.

Prior to the delivery of the steel bars,


ESCA informed FSI of the suspension
of the works; ESCAs January 6, 1998
letter reads:

As per our information to you on


December 16, 1997, a major revision
in the design of the Legaspi Citimall
necessitated a change in the bored
piles requirement of the project. The
change involved a substantial
reduction in the number and length of
piles.

We expected that you would have


suspended the deliveries of the steel

bars until the new design has been


approved.

According to you[,] the steel bars had


already been paid and loaded and out
of Manila on said date.

In order to avoid double handling,


storage, security problems, we
suggest that only 50% of the total
requirement of steel bars be delivered
at jobsite. The balance should be
returned to Manila where storage and
security is better.

In order for us to consider additional


cost due to the shipping of the excess
steel bars, we need to know the actual
dates of purchase, payments and
loading of the steel bars. Obviously,
we cannot consider the additional cost
if you have had the chance to delay
the shipping of the steel bars.57

From the above, it appears that FSI


was informed of the necessity of
suspending the works as early as
December 16, 1997. Pursuant to GC38 of the GCC, FSI was expected to
immediately comply with the order to
suspend the work.58 Though ESCAs
December 16, 1997 notice may not
have been categorical in ordering the
suspension of the works, FSIs reply
letter of December 18, 1997 indicated
that it actually complied with the
notice to suspend, as it said, "We hope
for the early resolution of the new
foundation plan and the resumption of
work."59 Despite the suspension, FSI
claimed that it could not stop the
delivery of the steel bars (nor found

the need to do so) because (a) the


steel bars were ordered as early as
November 1997 and were already
loaded in Manila and expected to
arrive in Legaspi City by December 23,
1997, and (b) it expected immediate
resumption of work to meet the 90day deadline.60

Records, however, disclose that these


claims are not entirely accurate. The
memorandum of agreement and sale
covering the steel bars specifically
stated that these would be withdrawn
from the Cagayan de Oro depot, not
Manila61; indeed, the bill of lading
stated that the steel bars were loaded
in Cagayan de Oro on January 11,
1998, and arrived in Legaspi City
within three days, on January 14,
1998.62 The loading and delivery of
the steel bar thus happened after FSI
received ESCAs December 16, 1997
and January 6, 1998 letters days
after the instruction to suspend the
works. Also, the same stipulation that
authorizes LICOMCEN to suspend the
works allows the extension of the
period to complete the works. The
relevant portion of
GC-38 states:

In case of total suspension x x x and


the cause of which is not due to any
fault of the Contractor [FSI], the
elapsed time between the effective
order for suspending work and the
order to resume work shall be allowed
the Contractor by adjusting the time
allowed for his execution of the
Contract Works.63

The above stipulation, coupled with


the short period it took to ship the
steel bars from Cagayan de Oro to
Legaspi City, thus negates both FSIs

argument and the CIACs ruling64 that


there was no necessity to stop the
shipment so as to meet the 90-day
deadline. These circumstances prove
that FSI acted imprudently in
proceeding with the delivery, contrary
to LICOMCENs instructions. The CA
was correct in holding LICOMCEN
liable for only 50% of the costs of the
steel bars delivered.

site during the suspension of the work.


x x x [FSI] should have presented the
lease contracts or any similar
documents such as receipts of
payments x x x. Likewise, the list of
employees does not in anyway prove
that those employees in the list were
indeed at the construction site or were
required to be on call should their
services be needed and were being
paid their salaries during the
suspension of the project. Thus, in the
absence of sufficient evidence, We
deny the claim for equipment and
labor standby costs.65

The claim for unrealized profit


The claim for equipment and
labor standby costs

The Court upholds the CAs ruling


deleting the award for equipment and
labor standby costs. We quote in
agreement pertinent portions of the
CA decision:

The CIAC relied solely on the list of 37


pieces of equipment respondent
allegedly rented and maintained at the
construction site during the
suspension of the project with the
prorated rentals incurred x x x. To the
mind of this Court, these lists are not
sufficient to establish the fact that
indeed [FSI] incurred the said
expenses. Reliance on said lists is
purely speculative x x x the list of
equipments is a mere index or catalog
of the equipments, which may be
utilized at the construction site. It is
not the best evidence to prove that
said equipment were in fact rented
and maintained at the construction

FSI contends that it is not barred from


recovering unrealized profit under GC41(2), which states:

GC-41. LICOMCEN, INCORPORATEDs


RIGHT TO SUSPEND WORK OR
TERMINATE THE CONTRACT

xxxx

2. For Convenience of the LICOMCEN,


INCORPORATED

x x x. The Contractor [FSI] shall not


claim damages for such
discontinuance or termination of the
Contract, but the Contractor shall
receive compensation for reasonable
expenses incurred in good faith for the
performance of the Contract and for
reasonable expenses associated with
termination of the Contract. The

LICOMCEN, INCORPORATED will


determine the reasonableness of such
expenses. The Contractor [FSI] shall
have no claim for anticipated profits
on the work thus terminated, nor any
other claim, except for the work
actually performed at the time of
complete discontinuance, including
any variations authorized by the
LICOMCEN, INCORPORATED/Engineer
to be done.

The prohibition, FSI posits, applies only


where the contract was properly and
lawfully terminated, which was not the
case at bar. FSI also took pains in
differentiating its claim for "unrealized
profit" from the prohibited claim for
"anticipated profits"; supposedly,
unrealized profit is "one that is built-in
in the contract price, while anticipated
profit is not." We fail to see the
distinction, considering that the
contract itself neither defined nor
differentiated the two terms. [A]
contract must be interpreted from the
language of the contract itself,
according to its plain and ordinary
meaning."66 If the terms of a contract
are clear and leave no doubt upon the
intention of the contracting parties,
the literal meaning of the stipulations
shall control.67

Nonetheless, on account of our earlier


discussion of LICOMCENs failure to
observe the proper procedure in
terminating the contract by declaring
that it was merely indefinitely
suspended, we deem that FSI is
entitled to the payment of nominal
damages. Nominal damages may be
awarded to a plaintiff whose right has
been violated or invaded by the
defendant, for the purpose of

vindicating or recognizing that right,


and not for indemnifying the plaintiff
for any loss suffered by him.68 Its
award is, thus, not for the purpose of
indemnification for a loss but for the
recognition and vindication of a right.
A violation of the plaintiffs right, even
if only technical, is sufficient to
support an award of nominal
damages.69 FSI is entitled to recover
the amount of P100,000.00 as nominal
damages.

The liability for costs of arbitration

Under the parties Terms of Reference,


executed before the CIAC, the costs of
arbitration shall be equally divided
between them, subject to the CIACs
determination of which of the parties
shall eventually shoulder the
amount.70 The CIAC eventually ruled
that since LICOMCEN was the party at
fault, it should bear the costs. As the
CA did, we agree with this finding.
Ultimately, it was LICOMCENs
imprudent declaration of indefinitely
suspending the works that caused the
dispute between it and FSI. LICOMCEN
should bear the costs of arbitration.

WHEREFORE, premises considered,


the petition for review on certiorari of
LICOMCEN INCORPORATED, docketed
as G.R. No. 167022, and the petition
for review on certiorari of
FOUNDATION SPECIALISTS, INC.,
docketed as G.R. No. 169678, are
DENIED. The November 23, 2004
Decision of the Court of Appeals in CAG.R. SP No. 78218 is MODIFIED to
include the award of nominal damages
in favor of FOUNDATION SPECIALISTS,
INC. Thus, LICOMCEN INCORPORATED

is ordered to pay FOUNDATION


SPECIALISTS, INC. the following
amounts:

a. P1,264,404.12 for unpaid balance


on FOUNDATION SPECIALISTS, INC.
billings;

b. P5,694,939.87 for material costs at


site; and

c. P100,000.00 for nominal damages.

LICOMCEN INCORPORATED is also


ordered to pay the costs of arbitration.
No costs.

SO ORDERED.
G.R. No. 185582 (February 29, 2012)

PEREZ, J.:

FACTS:

Kanemitsu Yamaoka, co-patentee of a


US Patent, Philippine Letters Patent,
and an Indonesian Patent, entered into
a Memorandum of Agreement (MOA)
with five Philippine tuna processors
including Respondent Philippine
Kingford, Inc. (KINGFORD). The MOA
provides for the enforcing of the
abovementioned patents, granting
licenses under the same, and
collecting royalties, and for the

establishment of herein Petitioner


Tuna Processors, Inc. (TPI).

Due to a series of events not


mentioned in the Petition, the tuna
processors, including Respondent
KINGFORD, withdrew from Petitioner
TPI and correspondingly reneged on
their obligations. Petitioner TPI
submitted the dispute for arbitration
before the International Centre for
Dispute Resolution in the State of
California, United States and won the
case against Respondent KINGFORD.

To enforce the award, Petitioner TPI


filed a Petition for Confirmation,
Recognition, and Enforcement of
Foreign Arbitral Award before the RTC
of Makati City. Respondent KINGFORD
filed a Motion to Dismiss, which the
RTC denied for lack of merit.
Respondent KINGFORD then sought for
the inhibition of the RTC judge, Judge
Alameda, and moved for the
reconsideration of the order denying
the Motion. Judge Alameda inhibited
himself notwithstanding [t]he
unfounded allegations and
unsubstantiated assertions in the
motion. Judge Ruiz, to which the
case was re-raffled, in turn, granted
Respondent KINGFORDSs Motion for
Reconsideration and dismissed the
Petition on the ground that Petitioner
TPI lacked legal capacity to sue in the
Philippines. Petitioner TPI is a
corporation established in the State of
California and not licensed to do
business in the Philippines.

Hence, the present Petition for Review


on Certiorari under Rule 45.

ISSUE:

Whether or not a foreign corporation


not licensed to do business in the
Philippines, but which collects
royalties from entities in the
Philippines, sue here to enforce a
foreign arbitral award?

ARGUMENT:

Petitioner TPI contends that it is


entitled to seek for the recognition and
enforcement of the subject foreign
arbitral award in accordance with RA
No. 9285 (Alternative Dispute
Resolution Act of 2004), the
Convention on the Recognition and
Enforcement of Foreign Arbitral
Awards drafted during the United
Nations Conference on International
Commercial Arbitration in 1958 (New
York Convention), and the UNCITRAL
Model Law on International
Commercial Arbitration (Model Law),
as none of these specifically requires
that the party seeking for the
enforcement should have legal
capacity to sue.

RULING:

YES. Petitioner TPI, although not


licensed to do business in the
Philippines, may seek recognition and
enforcement of the foreign arbitral
award in accordance with the
provisions of the Alternative Dispute
Resolution Act of 2004. A foreign
corporations capacity to sue in the

Philippines is not material insofar as


the recognition and enforcement of a
foreign arbitral award is concerned.

b. The party against whom the award


is invoked was not given proper notice
of the appointment of the arbitrator or
of the arbitration proceedings or was
otherwise unable to present his case;

The Resolution of the RTC is


REVERSED and SET ASIDE.

RATIO DECIDENDI:

Sec. 45 of the Alternative Dispute


Resolution Act of 2004 provides that
the opposing party in an application
for recognition and enforcement of the
arbitral award may raise only those
grounds that were enumerated under
Article V of the New York Convention,
to wit:

Article V

1. Recognition and enforcement of the


award may be refused, at the request
of the party against whom it is
invoked, only if that party furnishes to
the competent authority where the
recognition and enforcement is
sought, proof that:

a. The parties to the agreement


referred to in Article II were, under the
law applicable to them, under some
incapacity, or the said agreement is
not valid under the law to which the
parties have subjected it or, failing any
indication thereon, under the law of
the country where the award was
made;

c. The award deals with a difference


not contemplated by or not falling
within the terms of the submission to
arbitration, or it contains decisions on
matters beyond the scope of the
submission to arbitration, provided
that, if the decisions on matters
submitted to arbitration can be
separated from those not so
submitted, that part of the award
which contains decisions on matters
submitted to arbitration may be
recognized and enforced;

d. The composition of the arbitral


authority or the arbitral procedure was
not in accordance with the agreement
of the parties, or, failing such
agreement, was not in accordance
with the law of the country where the
arbitration took place; or

e. The award has not yet become


binding on the parties, or has been set
aside or suspended by a competent
authority of the country in which, or
under the law of which, that award
was made.

2. Recognition and enforcement of an


arbitral award may also be refused if
the competent authority in the country
where recognition and enforcement is
sought finds that:

a. The subject matter of the difference


is not capable of settlement by
arbitration under the law of that
country; or

b. The recognition or enforcement of


the award would be contrary to the
public policy of that country.

Not one of the abovementioned


exclusive grounds touched on the
capacity to sue of the party seeking
the recognition and enforcement of
the award.

Pertinent provisions of the Special


Rules of Court on Alternative Dispute
Resolution, which was promulgated by
the Supreme Court, likewise support
this position.

Rule 13.1 of the Special Rules provides


that [a]ny party to a foreign
arbitration may petition the court to
recognize and enforce a foreign
arbitral award. The contents of such
petition are enumerated in Rule 13.5.
Capacity to sue is not included.
Oppositely, in the rule on local arbitral
awards or arbitrations in instances
where the place of arbitration is in
the Philippines, it is specifically
required that a petition to determine
any question concerning the
existence, validity and enforceability
of such arbitration agreement
available to the parties before the
commencement of arbitration and/or a
petition for judicial relief from the
ruling of the arbitral tribunal on a
preliminary question upholding or
declining its jurisdiction after

arbitration has already commenced


should state [t]he facts showing that
the persons named as petitioner or
respondent have legal capacity to sue
or be sued.

Indeed, it is in the best interest of


justice that in the enforcement of a
foreign arbitral award, the Court deny
availment by the losing party of the
rule that bars foreign corporations not
licensed to do business in the
Philippines from maintaining a suit
in Philippine courts. When a party
enters into a contract containing a
foreign arbitration clause and, as in
this case, in fact submits itself to
arbitration, it becomes bound by the
contract, by the arbitration and by the
result of arbitration, conceding
thereby the capacity of the other
party to enter into the contract,
participate in the arbitration and
cause the implementation of the
result. Although not on all fours with
the instant case, also worthy to
consider is the wisdom of then
Associate Justice Flerida Ruth P.
Romero in her Dissenting Opinion in
Asset Privatization Trust v. Court of
Appeals [1998], to wit:

xxx Arbitration, as an alternative


mode of settlement, is gaining
adherents in legal and judicial circles
here and abroad. If its tested
mechanism can simply be ignored by
an aggrieved party, one who, it must
be stressed, voluntarily and actively
participated in the arbitration
proceedings from the very beginning,
it will destroy the very essence of
mutuality inherent in consensual
contracts.

Clearly, on the matter of capacity to


sue, a foreign arbitral award should be
respected not because it is favored
over domestic laws and procedures,
but because Republic Act No. 9285 has
certainly erased any conflict of law
question.

Finally, even assuming, only for the


sake of argument, that the RTC
correctly observed that the Model Law,
not the New York Convention, governs
the subject arbitral award, Petitioner
TPI may still seek recognition and
enforcement of the award in Philippine
court, since the Model Law prescribes
substantially identical exclusive
grounds for refusing recognition or
enforcement.

The ruling was rendered in the


consolidated case of Licomcen, Inc. vs.
Foundation Specialists, Inc., G.R. Nos.
167022 and 169678. The dispute
arose between mall developer
Licomcen, Inc. and contractor
Foundation Specialists, Inc. (FSI) over
the suspension of certain works and
the payment of billings and other
amounts. Licomcen and FSI had a
Construction Agreement, with General
Conditions of Contract (GCC), whereby
FSI undertook to construct and install
bored piles foundation for the LCC
Citimall project in Legazpi City.
Immediately after signing the
agreement, FSI began work on the
project but in January 1998, Licomcen
ordered it to halt construction due to
an administrative case filed against
officials of the City Government of
Legazpi and Licomcen before the
Ombudsman. The suspension was
formalized through a letter of
Licomcens engineering consultant,
E.S. de Castro & Associates (ESCA), to
FSI on January 19, 1998. In its reply
letters, FSI claimed payment for work
and materials. ESCA rejected FSIs
claims in a letter dated March 24,
1998.
Three years later, FSI sent a final
demand letter to Licomcen for
payment of its claims. As this letter
was ignored, FSI filed a request for

arbitration with the CIAC in October


2002, claiming upaid billings, costs,
unrealized profit, attorneys fees and
interest. Licomcen contested the
request, arguing, among others, that
(a) the claims were non-arbitrable
because the arbitration clause
provides for the arbitration of disputes
in connection with, or arising out of
the execution of the Works, but FSIs
money claims do not involve a dispute
as to the execution of the Works since
they do not involve an issue as to
physical construction activities; and
(b) FSI failed to comply with the
condition precedent that a
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dispute must first be referred to
Licomcen for resolution, and such
resolution may only be assailed within
30 days from receipt thereof through a
notice to contest through arbitration.
The CIAC ruled in favor of FSI, which
decision was upheld with some

modification by the Court of Appeals.


Both parties moved for
reconsideration, which was denied. On
appeal, the Supreme Court upheld the
Court of Appeals decision with
modification and affirmed that the
CIAC properly acquired jurisdiction
over the parties dispute.
Expansive interpretation of arbitration
clause
The Supreme Court ruled that the
CIACs jurisdiction cannot be limited
by the parties stipulation that only
disputes in connection with or arising
out of the execution of the Works are
arbitrable before the said agency.
According to the Supreme Court, the
mere fact that the parties incorporated
an arbitration clause in their contract
ipso facto vested the CIAC with
jurisdiction over any construction
controversy or claim between the
parties.
The Supreme Court also added that
the parties did not intend to limit
resort to arbitration only to disputes
relating to physical construction
activities, holding that an arbitration
clause pursuant to E.O 1008
[Construction Industry Arbitration Law]
should be interpreted at its widest
signification. The Tribunal liberally
applied the parties arbitration clause
so that FSIs money claims were
considered connected with or arising
out of construction activities, thereby
making such claims arbitrable.
CIAC jurisdiction not subject to
condition precedent
On the principle that the CIACs
jurisdiction can neither be enlarged
nor diminished by the parties, the
Supreme Court also held that such
jurisdiction cannot be subject to a

condition precedent. Hence, even if


FSI failed to timely contest Licomcens
denial of its money claims by filing a
proper notice of arbitration within 30
days from the denial, the Supreme
Court ruled that the CIAC acquired
jurisdiction of the parties dispute due
to the mere presence of an arbitration
clause in their construction contract.

Spouses Roberto and Aida Amurao


(Sps. Amurao) entered into a
Construction Contract Agreement
(CCA) with Aegean Construction and
Development Corp. (Aegean) for the
construction of a six-storey
commercial building. To guarantee its
obligation, Aegean posted
performance bonds secured by
petitioner Manila Insurance Company,
Inc. (Manila Insurance) and Intra
Strata Assurance Corporation (Intra
Strata). Aegean failed to comply with
its obligation. Hence, the spouses filed
a complaint before the RTC to enforce
its claim against the sureties.

During the pre-trial, Manila Insurance


and Intra Strata discovered that the
CCA contained an arbitration clause.
Consequently, they filed a Motion to
Dismiss on the grounds of lack of
cause of action and lack of jurisdiction.
The RTC denied the motion to dismiss.

Manila Insurance appealed to the


Court of Appeals. The CA dismissed
the petition.
The Manila Insurance vs. Spouses
Amurao Digest
G.R. No. 179628 : January 16, 2013

THE MANILA INSURANCE COMPANY,


INC., Petitioner, v. SPOUSES ROBERTO
and AIDA AMURAO, Respondents.

DEL CASTILLO, J.:

Hence, Manila Insurance elevated the


matter to the Supreme Court.

Manila Insurance argues that it cannot


be held liable as a surety because the
claim of Sps. Amurao is premature.
Manila Insurance contends that the
dispute between the spouses and
Aegean should be brought first before
the CIAC for arbitration.

FACTS:
ISSUES:

REMEDIAL LAW: arbitration


I. Whether or not Manila Insurance can
be held liable as surety of Aegean?

II. Whether or not the RTC has


jurisdiction over the dispute?

HELD:

CIVIL LAW: suretys liability

FIRST ISSUE: Manila Insurance is liable


as surety.

SECOND ISSUE: The CIAC has


jurisdiction over the case and not the
RTC.

In order for the CIAC to acquire


jurisdiction two requisites must
concur: first, the dispute must be
somehow connected to a construction
contract; and second, the parties must
have agreed to submit the dispute to
arbitration proceedings. In this case,
both requisites are present.

DISMISSED.
A contract of suretyship is defined as
an agreement whereby a party,
called the surety, guarantees the
performance by another party, called
the principal or obligor, of an
obligation or undertaking in favor of a
third party, called the obligee.

The Court has consistently held that a


suretys liability is joint and several,
limited to the amount of the bond, and
determined strictly by the terms of
contract of suretyship in relation to the
principal contract between the obligor
and the obligee.It bears stressing,
however, that although the contract of
suretyship is secondary to the
principal contract, the suretys liability
to the obligee is nevertheless direct,
primary, and absolute. But while there
is a cause of action against Manila
Insurance, the complaint must still be
dismissed for lack of jurisdiction.

Petitioner J Plus Asia Development


Corporation and Martin E. Mabunay
entered into a Construction Agreement
on December 24, 2007 whereby the
latter undertook to build the formers
72-room condominium/hotel located in
Boracay Island.

The project, costing P42M, was to be


completed within one year or 365 days
reckoned from the first calendar day
after signing of the Notice of Award
and Notice to Proceed and receipt of
down payment (20% of contract
price). The P8.4M down payment was
fully paid on January 14, 2008.
Payment of the balance of the contract
price will be based on actual work
finished within 15 days from receipt of
the monthly progress billings. Per the
agreed work schedule, the completion
date of the project was December
2008. Mabunay also submitted the
required Performance Bond issued by
Respondent Utility Assurance
Corporation in the amount equivalent
to 20% down payment or P8.4M.

G.R. No. 199650 (June 26, 2013)

VILLARAMA, JR., J.:

FACTS:

Mabunay commenced work at the


project site on January 7, 2008.
Petitioner paid up to the 7th monthly
progress billing sent by Mabunay. As
of September 16, 2008, Petitioner had
paid the total amount of P15.98M
inclusive of the 20% down payment.
However, as of said date, Mabunay
had accomplished only 27.5% of the
project. It was later found out by the
joint inspection and evaluation by the
Petitioner and Mabunay that, as of
November 14, 2008, the project was
only 31.39% complete and that the
uncompleted portion was 68.61%.

On November 19, 2008, Petitioner


terminated the contract and sent
Demand Letters to Mabunay and
Respondent surety. As its demands
went unheeded, Petitioner filed a
Request for Arbitration before the
Construction Industry Arbitration
Commission (CIAC).

In his Answer, Mabunay claimed that


the delay was caused by retrofitting
and other revision works ordered by
Petitioner. He asserted that he
actually had until April 30, 2009 to
finish the project since the 365 days
period of completion started only on
May 2, 2008 after clearing the
retrofitted old structure. Hence, the
termination of the contract by
Petitioner was premature and the filing
of the Complaint against him was
baseless, malicious and in bad faith.

Respondent, on the other hand, filed a


Motion to Dismiss on the ground that
Petitioner has no cause of action and
the complaint states no cause of
action against it. The CIAC denied the
Motion to Dismiss.

In its Answer Ex Abundante Ad


Cautelam with Compulsory
Counterclaims and Cross-claims,
Respondent argued that the
Performance Bond merely guaranteed
the 20% down payment and not the
entire obligation of Mabunay under the
Construction Agreement. Since the
value of the projects accomplishment
already exceeded the said amount,
Respondents obligation under the
Performance Bond had been fully
extinguished. As to the claim for
alleged overpayment to Mabunay,

Respondent contended that it should


not be credited against the 20% down
payment which was already exhausted
and such application by Petitioner is
tantamount to reviving an obligation
that had been legally extinguished by
payment. Respondent also set up a
cross-claim against Mabunay who
executed in its favor an Indemnity
Agreement whereby Mabunay
undertook to indemnify Respondent
for whatever amounts it may be
adjudged liable to pay Petitioner under
the surety bond.

On February 2, 2010, CIAC rendered


its Decision and made Awards in favor
of Petitioner. CIAC ruled that Mabunay
had incurred delay which entitled
Petitioner to the stipulated liquidated
damages and unrecouped down
payment.

Dissatisfied, Respondent filed in the


CA a Petition for Review under Rule 43
of the 1997 Rules of Civil Procedure,
as amended, which reversed the
CIACs ruling.

Hence, the present Petition for Review


on Certiorari under Rule 45 seeking to
reverse the CA insofar as it denied its
claims under the Performance Bond
and to reinstate in its entirety the
February 2, 2010 CIAC Decision.

ISSUE:

Whether or not the Alternative Dispute


Resolution Act of 2004 and the Special

ADR Rules have stripped the CA of


jurisdiction to review arbitral awards?

ARGUMENT:

Petitioner contends that that with the


institutionalization of alternative
dispute resolution under RA No. 9285,
otherwise known as the Alternative
Dispute Resolution Act of 2004, the CA
was divested of jurisdiction to review
the decisions or awards of the CIAC.

RULING:

NO. The Petitioners contention is


without merit. Petitioner erroneously
relied on the provision in RA No. 9285
allowing any party to a domestic
arbitration to file in the RTC a petition
either to confirm, correct or vacate a
domestic arbitral award.

The Petition is GRANTED. The assailed


decision of the CA is REVERSED and
SET ASIDE. The Award made in the
Decision rendered by CIAC dated
February 2, 2010 is REINSTATED with
MODIFICATIONS.

RATIO DECIDENDI:

SC holds that RA No. 9285 did not


confer on RTCs jurisdiction to review
awards or decisions of the CIAC in
construction disputes. On the
contrary, Section 40 thereof expressly
declares that confirmation by the RTC
is NOT required, thus:

SEC. 40. Confirmation of Award. The


confirmation of a domestic arbitral
award shall be governed by Section 23
of R.A. 876.

A domestic arbitral award when


confirmed shall be enforced in the
same manner as final and executory
decisions of the Regional Trial Court.

The confirmation of a domestic award


shall be made by the regional trial
court in accordance with the Rules of
Procedure to be promulgated by the
Supreme Court.

A CIAC arbitral award need not be


confirmed by the regional trial court to
be executory as provided under E.O.
No. 1008. (Emphasis supplied.)

EO No. 1008 vests upon the CIAC


original and exclusive jurisdiction over
disputes arising from, or connected
with, contracts entered into by parties
involved in construction in the
Philippines, whether the dispute arises
before or after the completion of the
contract, or after the abandonment or
breach thereof. By express provision
of Section 19 thereof, the arbitral
award of the CIAC is final and
unappealable, except on questions of
law, which are appealable to the
Supreme Court. With the amendments
introduced by RA No. 7902 and
promulgation of the 1997 Rules of Civil
Procedure, as amended, the CIAC was
included in the enumeration of quasijudicial agencies whose decisions or
awards may be appealed to the CA in

a Petition for Review under Rule 43.


Such review of the CIAC award may
involve either questions of fact, of law,
or of fact and law.

Petitioner misread the provisions of


A.M. No. 07-11-08-SC (Special ADR
Rules) promulgated by the SC and
which took effect on October 30, 2009.
Since RA No. 9285 explicitly excluded
CIAC awards from domestic arbitration
awards that need to be confirmed to
be executory, said awards are
therefore not covered by Rule 11 of
the Special ADR Rules, as they
continue to be governed by EO No.
1008, as amended and the rules of
procedure of the CIAC. The CIAC
Revised Rules of Procedure Governing
Construction Arbitration provide for
the manner and mode of appeal from

CIAC decisions or awards in Section 18


thereof, which reads:

SECTION 18.2 Petition for review. A


petition for review from a final award
may be taken by any of the parties
within fifteen (15) days from receipt
thereof in accordance with the
provisions of Rule 43 of the Rules of
Court.