ADR CASES 02-07-17
were discussing the propriety of an extra work order and if such
SECOND DIVISION
[G.R. No. 148318. November 22, 2004.]
NATIONAL POWER CORPORATION, petitioner, vs. HON.
ROSE MARIE ALONZO-LEGASTO, as Presiding Judge, RTC
of Quezon City, Branch 99, JOSE MARTINEZ, Deputy
Sheriff, RTC of Quezon City, CARMELO V. SISON, Chairman,
Arbitration Board, and FIRST UNITED
CONSTRUCTORSCORPORATION, respondents.
DECISION
TINGA, J p:
National Power Corporation (NPC) filed the instant Petition for
Review 1 dated July 19, 2001, assailing the Decision 2 of the
Court of Appeals dated May 28, 2001 which affirmed with
modification the Order 3 and Writ of Execution 4 respectively
dated May 22, 2000 and June 9, 2000 issued by the Regional
Trial Court. In its assailedDecision, the appellate court declared
respondent First United Constructors Corporation (FUCC)
entitled to just compensation for blasting works it undertook in
relation to a contract for the construction of power facilities it
entered into with petitioner. The Court of Appeals, however,
deleted the award for attorney's fees having found no basis
therefor.
The facts culled from the Decision of the Court of Appeals are
undisputed:
On April 14, 1992, NPC and FUCC entered into a contract for the
construction of power facilities (civil works) Schedule 1
1x20 MW Bacon-Manito II Modular Geothermal Power Plant
(Cawayan area) and Schedule 1A 1x20 MW Bacon-Manito II
Modular Geothermal Power Plant (Botong area) in Bacon,
Sorsogon (BACMAN II). The total contract price for the two
schedules is P108,493,966.30, broken down as follows:
SCHEDULE
1 Cawayan area P52,081,421.00
1A Botong area P56,412,545.30
P108,493,966.30
Appended with the Contract is the contract price schedule which
was submitted by the respondent FUCC during the bidding. The
price for grading excavation was P76.00 per cubic meter.
Construction activities commenced in August 1992. In the latter
part of September 1992 and after excavating 5.0 meters above
the plant elevation, FUCC requested NPC that it be allowed to
blast to the design grade of 495 meters above sea level as its
dozers and rippers could no longer excavate. It further requested
that it be paid P1,346.00 per cubic meter similar to the rate of
NPC's project in Palinpinon.
While blasting commenced on October 6, 1992, NPC and FUCC
is in order, at what price should FUCC be paid.
Sometime in March 1993, NPC Vice President for Engineering
Construction, Hector Campos, created a task force to review
FUCC's blasting works. The technical task force recommended
that FUCC be paid P458.07 per cubic meter as such being the
price agreed upon by FUCC.
The matter was further referred to the Department of Public
[W]orks and Highways (DPWH), which in a letter dated May 19,
1993, recommended the price range of P500.00 to P600.00 per
cubic meter as reasonable. It further opined that the price of
P983.75 per cubic meter proposed by Lauro R. Umali, Project
Manager of BACMAN II was high. A copy of the DPWH letter is
attached as Annex "C", FUCC's Exhibit EEE-Arbitration.
In a letter dated June 28, 1993, FUCC formally informed NPC
that it is accepting the proposed price of P458.07 per cubic
meter. A copy of the said letter is attached as Annex "D", FUCC's
Exhibit L Arbitration.
In the meantime, by March 1993, the works in Botong area were
in considerable delay. By May 1993, civil works in Botong were
kept at a minimum until on November 1, 1993, the entire
operation in the area completely ceased and FUCC abandoned
the project.
Several written and verbal warnings were given by NPC to
FUCC. On March 14, 1994, NPC's Board of Directors passed
Resolution No. 94-63 approving the recommendation of
President Francisco L. Viray to take over the contract. President
Viray's recommendation to take over the project was compelled
by the need to stave-off huge pecuniary and non-monetary
losses, namely:
(a) Generation loss estimated to be at P26,546,400/month;
(b) Payment of steam penalties to PNOC-EDC the amount
estimated to be at P10,206,048.00/month;
(c) Payment of liquidated damages due to the standby of
electromechanical contractor;
(d) Loss of guaranteed protection (warranties) of all delivered
plant equipment and accessories as Mitsubishi Corporation,
electromechanical contractor, will not be liable after six months
of delivery.
To prevent NPC from taking over the project, on March 28, 1994,
FUCC filed an action for Specific Performance and Damages
with Preliminary Injunction and Temporary Restraining Order
before Branch 99, Regional Trial Court, Quezon City.
Under paragraph 19 of its Complaint, FUCC admitted that it
agreed to pay the price of P458.07 per cubic meter.
On April 5, 1994, Judge de Guzman issued a temporary
restraining order and on April 21, 1994, the trial court resolved to
grant the application for issuance of a writ of preliminary
injunction.
On July 7, 1994, NPC filed a Petition for Certiorari with Prayer for
Temporary Restraining Order and Preliminary Injunction before
the First Division of the Court of Appeals asserting that no
injunction may issue against any government projects pursuant
to Presidential Decree 1818. HCITAS
On July 8, 1994, the Court of Appeals through then Associate
Justice Bernardo Pardo issued a temporary restraining order and
on October 20, 1994, the said court rendered a Decision
granting NPC's Petition for Certiorari and setting aside the lower
court's Order dated April 21, 1994 and the Writ of Preliminary
Injunction dated May 5, 1994.
However, notwithstanding the dissolution by the Court of Appeals
of the said injunction, on July 15, 1995, FUCC filed a Complaint
before the Office of the Ombudsman against several NPC
employees for alleged violation of Republic Act No. 3019,
otherwise known as the Anti-Graft and Corrupt Practices Act.
Together with the complaint was an Urgent Ex-Parte Motion for
the issuance of a cease and [d]esist [o]rder to restrain NPC and
other NPC officials involved in the BACMAN II project from
canceling and/or from taking over FUCC's contract for civil works
of said project.
Then on November 16, 1994, FUCC filed before the Supreme
Court a Petition for Review assailing the Decision of the Court of
[A]ppeals dated October 20, 1994. In its Comment, NPC raised
the issue that FUCC resorted to forum shopping as it applied for
a cease and desist order before the National Ombudsman
despite the dissolution of the injunction by the Court of Appeals.
Pending the petition filed by FUCC before the Supreme Court,
on April 20, 1995 the NPC and FUCC entered into a
Compromise Agreement.
Under the Compromise Agreement, the parties agreed on the
following:
1. Defendant shall process and pay the undisputed unpaid
billings of Plaintiff in connection with the entire project fifteen (15)
days after a reconciliation of accounts by both Plaintiff and
Defendant or thirty (30) days from the date of approval of this
Compromise Agreement by the Court whichever comes first.
Both parties agree to submit and include those accounts which
could not be reconciled among the issues to be arbitrated as
hereunder provided;
2. Plaintiff accepts and acknowledges that Defendant shall have
the right to proceed with the works by re-bidding or negotiating
the project immediately upon the signing of herein Compromise
Agreement;
3. This Compromise Agreement shall serve as the Supplemental
Agreement for payment of plaintiff's blasting works at the Botong
site;
4. Upon approval of this Compromise Agreement by the Court or
Plaintiff's receipt of payment of this undisputed unpaid billings
from Defendant whichever comes first, the parties shall
immediately file a Joint Manifestation and Motion for the
withdrawal of the following Plaintiff's petition from the Supreme
Court, Plaintiff's Complaint from the National Ombudsman, the
Complaint and Amended Complaint from the RTC, Br. 99 of
Quezon City;
5. Upon final resolution of the Arbitration, as hereunder
prescribed, the parties shall immediately execute the proper
documents mutually terminating Plaintiff's contract for the civil
works of the BACMAN II Project (Contract No. Sp90DLM-918 (I
& A);
6. Such mutual termination of Plaintiff's contract shall have the
following effects and/or consequences: (a) the construction
works of Plaintiff at the Kawayan and Bolong sites, at its present
stage of completion, shall be accepted and/or deemed to have
been accepted by defendant; (b) Plaintiff shall have no more
obligation to Defendant in respect of the BACMAN II Project
except as provided in clause (e) below; (c) Defendant shall
release all retention moneys of plaintiff within a maximum period
of thirty (30) days from the date of final Resolution of the
Arbitration; (d) no retention money shall thenceforth be withheld
by Defendant in its payment to Plaintiff under this Compromise
Agreement, and (e) Plaintiff shall put up a one-year guaranty
bond for its completed civil works at the Kawayan site,
retroactive to the date of actual use of the plant by defendant;
7. Plaintiff's blasting works claims and other unresolved claims,
as well as the claims of damages of both parties shall be settled
through a two stage process to wit:
STAGE 1
7.1 Plaintiff and Defendant shall execute and sign this
Compromise Agreement which they will submit for approval by
this Court. Under this Compromise Agreement both parties
agree that:
xxx xxx xxx
STAGE 2
7.1 The parties shall submit for arbitration to settle: (a) the price
of blasting, (b) both parties' claims for damages, delays,
interests, and (c) all other unresolved claims of both parties,
including the exact volume of blasted rocks;
7.2 The arbitration shall be through a three-member commission
to be appointed by the Honorable Court. Each party shall
nominate one member. The Chairman of the Arbitration Board
shall be [a] person mutually acceptable to both parties,
preferably from the academe;
7.3 The parties shall likewise agree upon the terms under which
the arbitrable issues shall be referred to the Arbitration Board.
The terms of reference shall form part of the Compromise
Agreement and shall be submitted by the parties to the
Honorable Court within a period of seven (7) days from the
signing of the Compromise Agreement;
7.4 The Arbitration Board shall have a non-extendible period of
three (3) months within which to complete the arbitration process
and submit its Decision to the Honorable Court;
7.5 The parties agree that the Decision of the Arbitration Board
shall be final and executory;
7.6 By virtue of this Compromise Agreement, except as herein
provided, the parties shall mutually waive, forego and dismiss all
of their other claims and/or counterclaim in this case. Plaintiff
and defendant warrant that after approval by the Court of this
Compromise Agreement neither party shall file Criminal or
Administrative cases or suits against each other or its Board or
member of its officials on grounds arising from the case.
The Compromise Agreement was subsequently approved by the
Court on May 24, 1995.
The case was subsequently referred by the parties to the
arbitration board pursuant to their Compromise Agreement. On
December 9, 1999 the Arbitration Board rendered its ruling the
dispositive portion of which states:
WHEREFORE, claimant is hereby declared entitled to an award
of P118,681,328.28 as just compensation for blasting works, plus
ten percent (10%) thereof for attorney's fees and expenses of
litigation.
Considering that payment in the total amount of P36,550,000.00
had previously been made, respondent is hereby ordered to pay
claimant the remaining sum of P82,131,328.28 for attorney's
fees and expenses of litigation.
Pursuant to the Compromise Agreement approved by this
Honorable Court, the parties have agreed that the decision of the
Arbitration Board shall be final and executory.
SO ORDERED.
On December 10, 1999 plaintiff FUCC filed a Motion for
Execution while defendant NPC filed a Motion to Vacate Award
by the Arbitration Board on December 20, 1999.
On May 22, 2000 Presiding Judge Rose Marie Alonzo Legasto
issued an order the dispositive portion of which states:
"WHEREFORE, the Arbitration Award issued by the Arbitration
Board is hereby APPROVED and the Motion for Execution filed
by plaintiff hereby GRANTED. The Motion to Vacate Award filed
by defendant is hereby DENIED for lack of merit.
Accordingly, let a writ of execution be issued to enforce the
Arbitration Award.
SO ORDERED." 5 (Bracketed words supplied)
NPC went to the Court of Appeals on the lone issue of whether
respondent judge acted with grave abuse of discretion in issuing
the Order dated May 22, 2000 and directing the issuance of
a Writ of Execution.
In its assailed Decision, the appellate court declared that the
court a quo did not commit grave abuse of discretion considering
that the Arbitration Board acted pursuant to its powers under the
Compromise Agreement and that its award has factual and legal
bases.
The Court of Appeals gave primacy to the court-approved
Compromise Agreement entered into by the parties and
concluded that they intended the decision of the arbitration panel
to be final and executory. Said the court:
For one, what the price agreed to be submitted for arbitration are
pure issues of fact (i.e., the price of blasting; both parties' claims
for damages, delay, interests and all other unresolved claims of
both parties, including the exact volume of blasted rocks). Also,
the manner by which the Arbitration Board was formed and the
terms under which the arbitrable issues were referred to said
Board are specified in the agreement. Clearly, the parties had left
to the Arbitration Board the final adjudication of their remaining
claims and waived their right to question said Decision of the
Board. Hence, they agreed in clear and unequivocal terms in the
Compromise Agreement that said Decision would be
immediately final and executory. Plaintiff relied upon this
stipulation in complying with its various obligations under the
agreement. To allow defendant to now go back on its word and
start questioning the Decision would be grossly unfair
considering that the latter was also a party to the Compromise
Agreement entered into part of which dealt with the creation of
the Arbitration Board. 6
The appellate court likewise held that petitioner failed to present
evidence to prove its claim of bias and partiality on the part of
the Chairman of the Arbitration Board, Mr. Carmelo V. Sison (Mr.
Sison). aIcCTA
Further, the Court of Appeals found that blasting is not part of the
unit price for grading and structural excavation provided for in
the contract for the BACMAN II Project, and that there was no
perfected contract between the parties for an extra work order for
blasting. Nonetheless, since FUCC relied on the representation
of petitioner's officials that the extra work order would be
submitted to its Board of Directors for approval and that the
blasting works would be paid, the Court of Appeals ruled that
FUCC is entitled to just compensation on grounds of equity and
promissory estoppel.
Anent the issue of just compensation, the appellate court took
into account the estimate prepared by a certain Mr. Lauro R.
Umali (Mr. Umali), Project Manager of the BACMAN II Project,
which itemized the various costs involved in blasting works and
came up with P1,310.82 per cubic meter, consisting of the direct
cost for drilling, blasting excavation, stockpiling and hauling, and
a 30% mark up for overhead, contractor's tax and contingencies.
This estimate was later changed to P983.75 per cubic meter to
which FUCC agreed. The Court of Appeals, however, held that
just compensation should cover only the direct costs plus 10%
for overhead expenses. Thus, it declared that the amount of
P763.00 7 per cubic meter is sufficient. Since the total volume of
blasted rocks as computed by Dr. Benjamin Buensuceso, Jr. 8 of
the U.P. College of Engineering is 97,032.16 cubic meters,
FUCC is entitled to the amount of P74,035,503.50 as just
compensation.
Although the Court of Appeals adjudged FUCC entitled to
interest, 9 the dispositive portion of the assailed Decision 10 did
not provide for the payment of interest. Moreover, the award of
attorney's fees was deleted as there was no legal and factual
ground for its imposition.
Petitioner, represented by the Office of the Solicitor General in
the instant Petition, rehashes its submissions before the Court of
Appeals. It claims that the appellate court failed to pass upon the
following issues:
1. The Chairman of the Arbitration Board showed extreme bias in
prejudging the case.
2. The Chairman of the Arbitration Board greatly exceeded his
powers when he mediated for settlement in the court of
arbitration proceedings.
3. The Chairman of the Arbitration Board committed serious
irregularity in hastily convening the Board in two days, which
thereafter released its report.
4. The Arbitration Board Committed manifest injustice prejudicial
to petitioner based on the following:
a. It rendered an award based on equity despite the mandatory
provision of the law.
b. The Board's decision to justify that equity applies herein
despite the fact that FUCC never submitted its own actual costs
for blasting and PHESCO, INC., the succeeding contractor, did
not employ blasting but used ordinary excavation method at
P75.59 per cubic meter which is approximately the same unit
price of plaintiff (FUCC).
c. It gravely erred when the Board claimed that an award of just
compensation must be given to respondent FUCC for what it has
actually spent and yet instead of using as basis P458.07 which is
the price agreed upon by FUCC, it chose an estimate made by
an NPC employee.
d. It gravely erred when it relied heavily on the purported letter of
NPC Project Manager Lauro R. Umali, when the same has not
been identified nor were the handwritten entries in Annex ii
established to be made by him.
5. The Arbitration Board gravely erred in computing interest at
12% and from the time of plaintiff's extrajudicial claim despite the
fact that herein case is an action for specific performance and
not for payment of loan or forbearance of money, and despite the
fact that it has resolved that there was no perfected contract and
there was no bad faith on the part of defendant.
6. On June 25, 2000, NPC discovered the Sub-Contract
Agreement of FUCC with a unit price of only P430/per cubic
meter. 11 [Emphasis in the original]
Specifically, petitioner asserts that Mr. Sison exhibited bias and
prejudgment when he exhorted it to pay FUCC for the blasting
works after concluding that the latter was allowed to blast.
Moreover, Mr. Sison allegedly attempted to mediate the conflict
between the parties in violation of Section 20, 12 paragraph 2
of Republic Act No. 876 (R.A. 876) otherwise known as the
Arbitration Law. Petitioner also questions the abrupt manner by
which the decision of the Arbitration Board was released.
Petitioner avers that FUCC's claim for blasting works was not
approved by authorized officials in accordance with Presidential
Decree No. 1594 (P.D. 1594) and its implementing rules which
specifically require the approval of the extra work by authorized
officials before an extra work order may be issued in favor of the
contractor. Thus, it should not be held liable for the claim. If at all,
only the erring officials should be held liable. Further, FUCC did
not present evidence to prove the actual expenses it incurred for
the blasting works. What the Arbitration Board relied upon was
the memorandum of Mr. Umali which was neither identified or
authenticated during the arbitration proceedings nor marked as
evidence for FUCC. Moreover, the figures indicated in Mr.
Umali's memorandum were allegedly mere estimates and were
recommendatory at most.
Petitioner likewise claims that its succeeding contractor, Phesco,
Inc. (Phesco), was able to excavate the same rock formation
without blasting.
Finally, it asserts that the award of P763.00 per cubic meter has
no factual and legal basis as the sub-contract between FUCC
and its blasting sub-contractor, Dynamic Blasting Specialists of
the Philippines (Dynamic), was only P430.00 per cubic meter.
In its Comment 13 dated October 15, 2001, FUCC points out
that petitioner's arguments are exactly the same as the ones it
raised before the Arbitration Board, the trial court and the Court
of Appeals. Moreover, in the Compromise Agreement between
the parties, petitioner committed to abide by the decision of the
Arbitration Board. It should not now be allowed to question the
decision.
FUCC likewise notes that Atty. Jose G. Samonte (Atty.
Samonte), one of the members of the Arbitration Board, was
nominated by petitioner itself. If there was any irregularity in its
proceedings such as the bias and prejudgment petitioner
imputes upon Mr. Sison, Atty. Samonte would have complained.
As it is, Atty. Samonte concurred in the decision of the Arbitration
Board and dissented only as to the award of attorney's fees.
As regards the issue of interest, FUCC claims that the case
involves forbearance of money and not a claim for damages for
breach of an obligation in which case interest on the amount of
damages awarded may be imposed at the rate of six percent
(6%) per annum.
Finally, FUCC asserts that its sub-contract agreement with
Dynamic is not newly-discovered evidence. Petitioner's lawyers
allegedly had a copy of the sub-contract in their possession. In
any event, the unit price of P430.00 per cubic meter appearing in
the sub-contract represents only a fraction of the costs incurred
by FUCC for the blasting works.
Petitioner filed a Reply 14 dated March 18, 2002 reiterating its
earlier submissions.
The parties in the present case mutually agreed to submit to
arbitration the settlement of the price of blasting, the parties'
claims for damages, delay and interests and all other unresolved
claims including the exact volume of blasted rocks. 15 They
further mutually agreed that the decision of the Arbitration Board
shall be final and immediately executory. 16
A stipulation submitting an ongoing dispute to arbitration is valid.
As a rule, the arbitrator's award cannot be set aside for mere
errors of judgment either as to the law or as to the facts. Courts
are generally without power to amend or overrule merely
because of disagreement with matters of law or facts determined
by the arbitrators. They will not review the findings of law and
fact contained in an award, and will not undertake to substitute
their judgment for that of the arbitrators. A contrary rule would
make an arbitration award the commencement, not the end, of
litigation. Errors of law and fact, or an erroneous decision on
matters submitted to the judgment of the arbitrators, are
insufficient to invalidate an award fairly and honestly made.
Judicial review of an arbitration award is, thus, more limited than
judicial review of a trial. 17
However, an arbitration award is not absolute and without
exceptions. Where the conditions described in Articles 2038,
2039 and 2040 of the Civil Code 18 applicable to both
compromises and arbitrations are obtaining, the arbitrators'
award may be annulled or rescinded. 19 Additionally, judicial
review of an arbitration award is warranted when the
complaining party has presented proof of the existence of any of
the grounds for vacating, modifying or correcting an award
outlined underSections 24 and 25 of R.A. 876, viz:
Section 24. Grounds for vacating an award. In any of the
following cases, the court must make an order vacating the
award upon the petition of any party to the controversy when
such party proves affirmatively that in the arbitration
proceedings:
(a) The award was procured by corruption, fraud, or other undue
means; or cSATEH
(b) That there was evident partiality or corruption in the
arbitrators or any of them; or
(c) That the arbitrators were guilty of misconduct in refusing to
postpone the hearing upon sufficient cause shown, or in refusing
to hear evidence pertinent and material to the controversy; that
one or more of the arbitrators was disqualified to act as such
under section nine hereof, and willfully refrained from disclosing
such disqualifications or of any other misbehavior by which the
rights of any party have been materially prejudiced; or
(d) That the arbitrators exceeded their powers, or so imperfectly
executed them, that a mutual, final and definite award upon the
subject matter submitted to them was not made.
When an award is vacated, the court, in its discretion, may direct
a new hearing either before the same arbitrators or before a new
arbitrator or arbitrators to be chosen in the manner provided in
the submission or contract for the selection of the original
arbitrator or arbitrators, and any provision limiting the time in
which the arbitrators may make a decision shall be deemed
applicable to the new arbitration to commence from the date of
the court's order.
Where the court vacates an award, costs not exceeding fifty
pesos and disbursements may be awarded to the prevailing
party and the payment thereof may be enforced in like manner
as the payment of costs upon the motion in an action.
Section 25. Grounds for modifying or correcting an award. In
any one of the following cases, the court must make an order
modifying or correcting the award, upon the application of any
party to the controversy which was arbitrated:
(a) Where there was an evident miscalculation of figures, or an
evident mistake in the description of any person, thing or
property referred to in the award; or
(b) Where the arbitrators have awarded upon a matter not
submitted to them, not affecting the merits of the decision upon
the matter submitted; or
(c) Where the award is imperfect in a matter of form not affecting
the merits of the controversy, and if it had been a commissioner's
report, the defect could have been amended or disregarded by
the court.
The order may modify and correct the award so as to effect the
intent thereof and promote justice between the parties.
In this case, petitioner does not specify which of the foregoing
grounds it relies upon for judicial review. Petitioner avers that "if
and when the factual circumstances referred to in the provisions
aforementioned are present, judicial review of the award is
warranted." 20 From its presentation of issues, however, it
appears that the alleged evident partiality of Mr. Sison is singled
out as a ground to vacate the board's decision.
We note, however, that the Court of Appeals found that petitioner
did not present any proof to back up its claim of evident partiality
on the part of Mr. Sison. Its averments to the effect that Mr. Sison
was biased and had prejudged the case do not suffice to
establish evident partiality. Neither does the fact that a party was
disadvantaged by the decision of the arbitration committee prove
evident partiality. 21
According to the appellate court, "[p]etitioner was never deprived
of the right to present evidence nor was there any showing that
the Board showed signs of any bias in favor of FUCC. As
correctly found by the trial court, this Court cannot find its way to
support petitioner's contention that there was evident partiality in
the assailed Award of the Arbitrator in favor of the respondent
because the conclusion of the Board, which the Court found to
be well-founded, is fully supported by substantial evidence." 22
There is no reason to depart from this conclusion.
However, we take exception to the arbitrators' determination that
based on promissory estoppel per se or alone, FUCC is entitled
to just compensation for blasting works for the reasons
discussed hereunder.
Section 9 of P.D. No. 1594, entitled Prescribing Policies,
Guidelines, Rules and Regulations for Government
Infrastructure Contracts, provides:
SECTION 9. Change Order and Extra Work Order. A change
order or extra work order may be issued only for works
necessary for the completion of the project and, therefore, shall
be within the general scope of the contract as bid[ded] and
awarded. All change orders and extra work orders shall be
subject to the approval of the Minister of Public Works,
Transportation and Communications, the Minister of Public
Highways, or the Minister of Energy, as the case may be.
The pertinent portions of the Implementing Rules and
Regulations of P.D. 1594 provide:
CI Contract Implementation:
These Provisions Refer to Activities During Project Construction,
i.e., After Contract Award Until Completion, Except as May
Otherwise be Specifically Referred to Provisions Under Section
II. IB Instructions to Bidders.
CI 1 Variation Orders Change Order/Extra Work
Order/Supplemental Agreement
4. An Extra Work Order may be issued by the implementing
official to cover the introduction of new work items after the
same has been found to strictly comply with Section CI-1-1 and
approved by the appropriate official if the amount of the Extra
Work Order is within the limits of the former's authority to
approve original contracts and under the following conditions:
a. Where there are additional works needed and necessary for
the completion, improvement or protection of the project which
were not included as items of work in the original contract.
b. Where there are subsurface or latent physical conditions at
the site differing materially from those indicated in the contract.
c. Where there are duly unknown physical conditions at the site
of an unusual nature differing materially from those ordinarily
encountered and generally recognized as inherent in the work or
character provided for in the contract.
d. Where there are duly approved construction drawings or any
instruction issued by the implementing office/agency during the
term of contract which involve extra cost.
xxx xxx xxx
6. A separate Supplemental Agreement may be entered into for
all Change Orders and Extra Work Orders if the aggregate
amount exceeds 25% of the escalated original contract price. All
change orders/extra work orders beyond 100% of the escalated
original contract cost shall be subject to public bidding except
where the works involved are inseparable from the original
scope of the project in which case negotiation with the
incumbent contractor may be allowed, subject to approval by the
appropriate authorities.
7. Any Variation Order (Change Order, Extra Work Order or
Supplemental Agreement) shall be subject to the escalation
formula used to adjust the original contract price less the cost of
mobilization. In claiming for any Variation Order, the contractor
shall, within seven (7) calendar days after such work has been
commenced or after the circumstances leading to such
condition(s) leading to the extra cost, and within 28 calendar
days deliver a written communication giving full and detailed
particulars of any extra cost in order that it may be investigated
at that time. Failure to provide either of such notices in the time
stipulated shall constitute a waiver by the contractor for any
claim. The preparation and submission of Change Orders, Extra
Work Orders or Supplemental Agreements are as follows:
a. If the Project Engineer believes that a Change Order, Extra
Work Order or Supplemental Agreement should be issued, he
shall prepare the proposed Order or Supplemental Agreement
accompanied with the notices submitted by the contractor, the
plans therefore, his computations as to the quantities of the
additional works involved per item indicating the specific stations
where such works are needed, the date of his inspections and
investigations thereon, and the log book thereof, and a detailed
estimate of the unit cost of such items of work, together with his
justifications for the need of such Change Order, Extra Work
Order or Supplemental Agreement, and shall submit the same to
the Regional Director of office/agency/corporation concerned.
b. The Regional Director concerned, upon receipt of the
proposed Change Order, Extra Work Order or Supplemental
Agreement shall immediately instruct the technical staff of the
Region to conduct an on-the-spot investigation to verify the need
for the work to be prosecuted. A report of such verification shall
be submitted directly to the Regional Director concerned.
c. The Regional Director concerned after being satisfied that
such Change Order, Extra Work Order or Supplemental
Agreement is justified and necessary, shall review the estimated
quantities and prices and forward the proposal with the
supporting documentation to the head of
office/agency/corporation for consideration. aEDCSI
d. If, after review of the plans, quantities and estimated unit cost
of the items of work involved, the proper
office/agency/corporation committee empowered to review and
evaluate Change Orders, Extra Work Orders or Supplemental
Agreements recommends approval thereof, the head of
office/agency/corporation, believing the Change Order, Extra
Work Order or Supplemental Agreement to be in order, shall
approve the same. The limits of approving authority for any
individual, and the aggregate of, Change Orders, Extra Work
Orders or Supplemental Agreements for any project of the head
of office/agency/corporation shall not be greater than those
granted for an original project.
CI 3 Conditions under which Contractor is to Start Work under
Variation Orders and Receive Payments
1. Under no circumstances shall a contractor proceed to
commence work under any Change Order, Extra Work Order or
Supplemental Agreement unless it has been approved by the
Secretary or his duly authorized representative. Exceptions to
the preceding rule are the following:
a. The Regional Director, or its equivalent position in
agencies/offices/corporations without plantilla position for the
same, may, subject to the availability of funds, authorize the
immediate start of work under any Change or Extra Work Order
under any or all of the following conditions:
(1) In the event of an emergency where the prosecution of the
work is urgent to avoid detriment to public service, or damage to
life and/or property; and/or
(2) When time is of the essence; provided, however, that such
approval is valid on work done up to the point where the
cumulative increase in value of work on the project which has
not yet been duly fully approved does not exceed five percent
(5%) of the adjusted original contract price, or P500,000
whichever is less; provided, further, that immediately after the
start of work, the corresponding Change/Extra Work Order shall
be prepared and submitted for approval in accordance with the
above rules herein set. Payments for works satisfactorily
accomplished on any Change/Extra Work Order may be made
only after approval of the same by the Secretary or his duly
authorized representative.
b. For a Change/Extra Work Order involving a cumulative
amount exceeding five percent (5%) of the original contract price
or original adjusted contract price no work thereon may be
commenced unless said Change/Extra Work Order has been
approved by the Secretary or his duly authorized representative.
[Emphasis supplied]
It is petitioner's submission, and FUCC does not deny, that the
claim for payment of blasting works in Botong alone was
approximately P170,000,000.00, a figure which far exceeds the
original contract price of P80,000,000.00 for two (2) project sites.
Under the foregoing implementing rules, for an extra work order
which exceeds 5% of the original contract price, no blasting work
may be commenced without the approval of the Secretary or his
duly authorized representative. Moreover, the procedure for the
preparation and approval of the extra work order outlined under
Contract Implementation (CI) 1(7) above should have been
complied with. Accordingly, petitioner's officials should not have
authorized the commencement of blasting works nor should
FUCC have proceeded with the same.
The following events, culled from the decision of the Arbitration
Board and the assailed Decision, are made the bases for the
finding of promissory estoppel on the part of petitioner:
1. After claimant [respondent herein] encountered what it
claimed to be massive hard rock formation (Testimony of witness
Dumaliang, TSN, 28 October 1996, pp. 4142; Testimony of
witness Lataquin, 28 November 1996, pp. 23; 2023; Exh. "JJJ"
and sub-markings) and informed respondent [petitioner
herein] about it, respondent's own geologists went to the Botong
site to investigate and confirmed the rock formation and
recommended blasting (Cf. Memorandum of Mr. Petronilo E.
Pana, Acting Manager of the Geoscience Services Department
and the report of the geologists who conducted the site
investigation; Exhs. "F" and "F-1").
2. Claimant asked for clearance to blast the rock formation to the
design grade (Letter dated 28 September 1992; Exh. "UU"). The
engineers of respondent at the project site advised claimant to
proceed with its suggested method of
extraction (Order/Instruction given by Mr. Reuel R. Declaro and
Mr. Francis A. Paderna dated 29 September 1992; Exh. "C").
3. Claimant requested that the intended blasting works be
confirmed as extra work order by responsible officials of
respondent directly involved in the BACMAN II Project (i.e., then
BACMAN II Project Manager, Mr. Lauro R. Umali and Mr.
Angelito G. Senga, Section Chief, Civil Engineering Design of
respondent's Design Department which bidded the
project). These officials issued verbal instructions to the
effect: (a) that claimant could blast the rock formation down to
the design grade of 495 masl;(b) that said blasting works would
be an extra work order; and (c) that claimant would be paid for
said blasting works using the price per cubic meter for similar
blasting works at Palinpinon, or at P1,346.00 per cubic meter.
4. Claimant sent two (2) confirmatory letters to respondent, both
addressed to its President, one dated 30 September 1992, and
sent through Mr. Angelito Senga, Chief Civil Design Thermal,
the other dated 02 October 1992, and sent through Mr. Lauro R.
Umali, Project Manager-BacMan II (Exhs. "D" and "E"; Testimony
of witness Dumaliang, TSN, 28 October 1996, pp. 4349). The
identical letters read:
We wish to confirm your instruction for us to proceed with the
blasting of the Botong Plant site to the design grade pending
issuance of the relevant variation order. This is to avoid delay in
the implementation of this critical project due to the urgent need
to blast rocks on the plant site.
We are confirming further your statement that the said blasting
works is an extra work order and that we will be paid using the
price established in your Palinpinon contract with Phesco.
Thank you for your timely action and we look forward to the
immediate issuance of the extra work order.
We are now mobilizing equipment and manpower for the said
work and hope to start blasting next week.
5. Respondent received the letters but did not reply thereto nor
countermand the earlier instructions given to claimant to proceed
with the blasting works. The due execution and authenticity of
these letters (Exhs. "D-1" and "E-1") and the fact of receipt
(Exhs. "D-2" and "E-2") were duly proved by claimant (Testimony
of witness Dumaliang, TSN, 28 October 1996, 4349).
6. In mid-October 1992, three (3) Vice-Presidents of respondent
visited the project site and were informed of claimant's blasting
activities. While respondent claims that one of the Vice-
Presidents, Mr. Rodrigo Falcon, raised objections to claimant's
blasting works as an extra work order, they instructed claimant to
speed up the works because of the power crisis then hounding
the country. Stipulation no. 24 of the Joint Stipulation of Facts of
the parties which reads: "24. In mid-October 1992, three (3)
Vice-Presidents of respondent, namely: Mr. Hector N. Campos,
Sr., of Engineering Construction, Mr. C.A. Pastoral of
Engineering Design, and Mr. Rodrigo P. Falcon, visited the
project site and were likewise apprised of claimant's blasting
activities. They never complained about the blasting works,
much less ordered its cessation. In fact, no official of respondent
ever ordered that the blasting works be stopped."
7. After visiting Botong, Mr. Hector N. Campos, Sr., then Vice
President of Engineering Construction, instructed Mr. Fernando
A. Magallanes then Manager of the Luzon Engineering Projects
Department, to evaluate claimant's blasting works and to submit
his recommendations on the proper price therefor. In a
memorandum dated 17 November 1992 (Exh. "G" and sub-
markings), Mr. Magallanes confirmed that claimant's blasting
works was an extra work order and recommended that it be paid
at the price for similar blasting works at Palinpinon, or at
P1,346.00 per cubic meter. Mr. Campos concurred with the
findings and recommendations of Mr.Magallanes and instructed
Mr. Lauro R. Umali, then Project Manager of BacMan II, to
implement the same as shown by his instructions scribbled on
the memorandum.
8. Mr. Umali and the project team prepared proposed Extra
Work Order No. 2 Blasting (Exh. "DDD" Memorandum of
Mr. Umali to Mr. Campos dated 20 January 1993 forwarding
proposed Extra Work Order No. 2), recommending a price of
P983.75 per cubic meter for claimant's blasting works. Claimant
agreed to this price (Testimony of witness Dumaliang, 7
November 1996, p. 48).
9. On 19 February 1993, claimant brought the matter of its
unpaid blasting works to the attention of the then NPC Chairman
[also Secretary of the Department of Energy then] Delfin L.
Lazaro during a meeting with the multi-sectoral task force
monitoring the implementation of power plant projects, who
asked then NPC President Pablo B. Malixi what he was doing
about the problem. President Malixi thereafter convened
respondent's vice-presidents and ordered them to quickly
document the variation order and pay claimant. The vice-
president, and specifically Mr. Campos, pledged that the
variation order for claimant's blasting works would be submitted
for the approval of the NPC Board during the first week of March
1993. Claimant thereafter sent respondent a letter dated 22
February 1993 (Ex. "K") to confirm this pledge(Testimony of
witness Dumaliang, 7 November 1996, pp. 2830).
10. Mr. Campos created a task force (i.e., the Technical Task
Force on the Study and Review of Extra Work Order No. 2; Exh.
"FFF") to review claimant's blasting works. After several
meetings with the task force, claimant agreed to the lower price
of P458.07 per cubic meter, in exchange for quick
payment (Testimony of witness Dumaliang, 7 November 1996, p.
30). aSITDC
11. However, no variation order was issued and no payment
came, although it appears from two (2) radiograms sent by
Mr. Campos to Mr. Paderna at the project site that the variation
order was being processed and that payment to claimant was
forthcoming (Exhs. "AAA" and "BBB").
12. Respondent asked the Department of Public Works and
Highways (DPWH) about the standard prices for blasting in the
projects of the DPWH. The DPWH officially replied to
respondent's query in a letter dated 19 May 1993 but the task
force still failed to seek Board approval for claimant's variation
order. The task force eventually recommended that the issue of
grading excavation and structural excavation and the unit prices
therefor be brought into voluntary arbitration (Testimony of
witness Dumaliang, 7 November 1996, pp. 3057).
13. Claimant thereafter saw Mr. Francisco L. Viray, the new NPC
President, who proposed that claimant accept the price of
P458.07 per cubic meter for its blasting works with the balance
of its claim to be the subject of arbitration. Claimant accepted the
offer and sent the letter dated 28 September 1993 (Exh. "O") to
formalize said acceptance. However, no variation order was
issued and the promised payment never came. (Testimony of
witness Dumaliang, 7 November 1996, p. 58).
14. After some time, claimant met Mr. Viray on 19 October 1993
at the project site, and with some NPC officers in attendance,
particularly Mr. Gilberto A. Pastoral, Vice-President for
Engineering Design, who was instructed by Mr. Viray to prepare
the necessary memorandum (i.e., that claimant would be paid
P458.07 per cubic meter with the balance of its claim to be the
subject of arbitration) for the approval of the NPC
Board. Claimant formalized what transpired during this meeting
in its letter to Mr. Pastoral dated 22 October 1993 (Exhibit
"R"). But no action was taken by Mr. Pastoral and no variation
order was issued by respondent (Testimony of witness
Dumaliang, 7 November 1996, pp. 5758). 23 [Emphasis
supplied and bracketed words]
Promissory estoppel "may arise from the making of a promise,
even though without consideration, if it was intended that the
promise should be relied upon and in fact it was relied upon, and
if a refusal to enforce it would be virtually to sanction the
perpetration of fraud or would result in other
injustice." 24 Promissory estoppel presupposes the existence of
a promise on the part of one against whom estoppel is claimed.
The promise must be plain and unambiguous and sufficiently
specific so that the court can understand the obligation assumed
and enforce the promise according to its terms. 25
In the present case, the foregoing events clearly evince that the
promise that the blasting works would be paid was predicated on
the approval of the extra work order by petitioner's Board. Even
FUCC acknowledged that the blasting works should be an extra
work order and requested that the extra work order be confirmed
as such and approved by the appropriate officials. Notably, even
as the extra work order allegedly promised to it was not yet
forthcoming, FUCC commenced blasting.
The alleged promise to pay was therefore conditional and up to
this point, promissory estoppel cannot be established as the
basis of petitioner's liability especially in light of P.D. 1594 and its
implementing rules of which both parties are presumed to have
knowledge. In Mendoza v. Court of Appeals, supra, we ruled that
"[a] cause of action for promissory estoppel does not lie where
an alleged oral promise was conditional, so that reliance upon it
was not reasonable. It does not operate to create liability where
it does not otherwise exist."
Petitioner's argument that it is not bound by the acts of its
officials who acted beyond the scope of their authority in allowing
the blasting works is correct. Petitioner is a government agency
with a juridical personality separate and distinct from the
government. It is not a mere agency of the government but a
corporate entity performing proprietary functions. It has its own
assets and liabilities and exercises corporate powers, including
the power to enter into all contracts, through its Board of
Directors.
In this case, petitioner's officials exceeded the scope of their
authority when they authorized FUCC to commence blasting
works without an extra work order properly approved in
accordance with P.D. 1594. Their acts cannot bind petitioner
unless it has ratified such acts or is estopped from disclaiming
them. 26
However, the Compromise Agreement entered into by the
parties, petitioner, being represented by its President, Mr. Guido
Alfredo A. Delgado, acting pursuant to its Board Resolution No.
95-54 dated April 3, 1995, is a confirmatory act signifying
petitioner's ratification of all the prior acts of its officers.
Significantly, the parties agreed that "[t]his Compromise
Agreement shall serve as the Supplemental Agreement for the
payment of plaintiff's blasting works at the Botong site" 27 in
accordance with CI 1(6) afore-quoted. In other words, it is
primarily by the force of this Compromise Agreement that the
Court is constrained to declare FUCC entitled to payment for the
blasting works it undertook.
Moreover, since the blasting works were already rendered by
FUCC and accepted by petitioner and in the absence of proof
that the blasting was done gratuitously, it is but equitable that
petitioner should make compensation therefor, pursuant to the
principle that no one should be permitted to enrich himself at the
expense of another. 28
This brings us to the issue of just compensation.
The parties proposed in the terms of reference jointly submitted
to the Arbitration Board that should FUCC be adjudged entitled
to just compensation for its blasting works, the price therefor
should be determined based on the payment for blasting works
in similar projects of FUCC and the amount it paid to its blasting
subcontractor. 29 They agreed further that "the price of the
blasting at the Botong site . . . shall range from Defendant's
position of P76.00 per cubic meter as per contract to a maximum
of P1,144.00". 30
Petitioner contends that the Arbitration Board, trial court and the
appellate court unduly relied on the memorandum of Mr. Umali
which was allegedly not marked as an exhibit. We note,
however, that this memorandum actually forms part of the record
of the case as Exhibit "DDD." 31 Moreover, both the Arbitration
Board and the Court of Appeals found that Mr. Umali's proposal
is the best evidence on record as it is supported by detailed cost
estimates that will serve as basis to determine just
compensation.
While the Arbitration Board found that FUCC did not present
evidence showing the amount it paid to its blasting sub-
contractor, it did present testimony to the effect that it incurred
other costs and expenses on top of the actual blasting cost.
Hence, the amount of P430.00 per cubic meter indicated in
FUCC's Contract of Agreement with Dynamic is not controlling.
Moreover, FUCC presented evidence showing that in two (2)
other projects where blasting works were undertaken, petitioner
paid the contractors P1,346 per cubic meter for blasting and
disposal of solid rocks in the Palinpinon project and P1,144.51
per cubic meter for rock excavation in the Hermosa Balintawak
project. Besides, while petitioner claims that in a contract with
Wilper Construction for the construction of the Tayabas sub-
station, the price agreed for blasting was only P96.13, petitioner
itself did not present evidence in support of this claim. 32
Parenthetically, the point raised by petitioner that its subsequent
contractor, Phesco, did not undertake blasting works in
excavating the same rock formation is extraneous and irrelevant.
The fact is that petitioner allowed FUCC to blast and undertook
to pay for the blasting works.
At this point, we hearken to the rule that the findings of the
Arbitration Board, affirmed by the trial court and the Court of
Appeals and supported as they are by substantial evidence,
should be accorded not only respect but finality. 33 Accordingly,
the amount of P763.00 per cubic meter fixed by the Arbitration
Board and affirmed by the appellate court as just compensation
should stand.
As regards the issue of interest, while the appellate court
declared in the body of its Decision "that interest which would
represent the cost of the money spent be imposed on the money
actually spent by claimant for the blasting works," 34 there is no
pronouncement as to the payment of interest in the dispositive
portion of theDecision even as it specifically deleted the award of
attorney's fees.
Despite its knowledge of the appellate court's omission, FUCC
did not file a motion for reconsideration or appeal from
its Decision. In failing to do so, FUCC allowed theDecision to
become final as to it.
In Edwards v. Arce, 35 we ruled that in a case decided by a
court, the true judgment of legal effect is that entered by the clerk
of said court pursuant to the dispositive part of its decision. The
only portion of the decision that may be the subject of execution
is that which is ordained or decreed in the dispositive portion.
Whatever may be found in the body of the decision can only be
considered as part of the reasons or conclusions of the court and
serve only as guides to determine the ratio decidendi. 36
Even so, the Court allows a judgment which had become final
and executory to be clarified when there is an ambiguity caused
by an omission or mistake in the dispositive portion of the
decision. 37 In Reinsurance Company of the Orient, Inc. v. Court
of Appeals, 38 we held:
In Republic Surety and Insurance Company, Inc. v. Intermediate
Appellate Court, the Court applying the above doctrine said:
". . . We clarify, in other words, what we did affirm. What is
involved here is not what is ordinarily regarded as a clerical error
in the dispositive part of the decision of the Court of First
Instance, which type of error is perhaps best typified by an error
in arithmetical computation. At the same time, what is involved
here is not a correction of an erroneous judgment or dispositive
portion of a judgment. What we believe is involved here is in the
nature of an inadvertent omission on the part of the Court of First
Instance (which should have been noticed by private
respondent's counsel who had prepared the complaint), of what
might be described as a logical follow-through of something set
forth both in the body of the decision and in the dispositive
portion thereof : the inevitable follow-through, or translation into,
operational or behavioral terms, of the annulment of the Deed of
Sale with Assumption of Mortgage, from which petitioners' title or
claim of title embodied in TCT 133153 flows." (Italics
supplied) 39
In this case, the omission of the award of interest was obviously
inadvertent. Correction is therefore in order. However, we do not
agree with the Arbitration Board that the interest should be
computed at 12%. Since the case does not involve a loan or
forbearance of money, goods or credit and court judgments
thereon, the interest due shall be computed at 6% per annum
computed from the time the claim was made in 1992 as
determined by the Arbitration Board and in accordance with
Articles 2209 and 1169 of the Civil Code. The actual base for the
computation of legal interest shall be on the amount finally
adjudged. 40 Further, when the judgment awarding a sum of
money becomes final and executory, the rate of legal interest
shall be 12% per annum from such finality until its satisfaction,
this interim period being deemed to be by then an equivalent to a
forbearance of credit. 41
WHEREFORE, the petition is GRANTED in part. The appealed
decision is MODIFIED in that the amount of P74,035,503.50
shall earn legal interest of six percent (6%) from 1992. A twelve
percent (12%) interest, in lieu of six percent (6%), shall be
imposed on such amount upon finality of this decision until the
payment thereof. SIDEaA
SO ORDERED.
||| (National Power Corp. v. Alonzo-Legasto, G.R. No. 148318,
[November 22, 2004], 485 PHIL 732-763)
FIRST DIVISION
[G.R. No. 159586. July 26, 2004.]
EUROPEAN RESOURCES AND TECHNOLOGIES, INC. and
DELFIN J. WENCESLAO, petitioners, vs. INGENIEUBURO
BIRKHAHN + NOLTE, Ingeniurgesellschaft mbh and HEERS
& BROCKSTEDT GMBH & CO., respondents.
DECISION
YNARES-SANTIAGO, J p:
Assailed in this Petition for Review under Rule 45 of the Rules of
Court is the Decision 1 of the Court of Appeals dated May 15,
2003, which sustained the Order of the Regional Trial Court of
Angeles City, Branch 61, dated June 28, 2001, and its
subsequent Resolution dated August 3, 2003 denying petitioner's
motion for reconsideration.
European Resources and Technologies Inc. (hereinafter "ERTI"),
a corporation organized and existing under the laws of the
Republic of the Philippines, is joined by Delfin J. Wenceslao as
petitioner in this case. Ingenieuburo Birkhan + Nolte
Ingiurgesellschaft mbh and Heers & Brockstedt Gmbh & Co. are
German corporations who are respondents in this case and shall
be collectively referred to as the "German Consortium".
The German Consortium tendered and submitted its bid to the
Clark Development Corporation ("CDC") to construct, operate
and manage the Integrated Waste Management Center at the
Clark Special Economic Zone ("CSEZ"). CDC accepted the
German Consortium's bid and awarded the contract to it. On
October 6, 1999, CDC and the German Consortium executed
the Contract for Services 2 which embodies the terms and
conditions of their agreement.
The Contract for Services provides that the German Consortium
shall be empowered to enter into a contract or agreement for the
use of the integrated waste management center by corporations,
local government units, entities, and persons not only within the
CSEZ but also outside. For waste collected within the CSEZ, the
German Consortium may impose a "tipping fee" per ton of waste
collected from locators and residents of the CSEZ, which fees
shall be subject to the schedule agreed upon by the parties and
specified in the Contract for Services. For its operations outside
of the CSEZ, the German Consortium shall pay CDC US$1.50
per ton of non-hazardous solid waste collected. 3 The CDC shall
guarantee that nineteen thousand eighteen hundred (19,800)
tons per year of solid waste volume shall be collected from
inside and outside the CSEZ. 4 The contract has a term of
twenty-five (25) years, 5 during which time the German
Consortium shall operate the waste management center on a
day-to-day basis. 6
Article VIII, Section 7 of the Contract for Services provides that
the German Consortium shall undertake to organize a local
corporation as its representative for this project. On April 18,
2000, the German Consortium entered into a Joint Venture with
D.M. Wenceslao and Associates, Inc. ("DMWAI") and Ma. Elena
B. Villarama (doing business as LBV and Associates), embodied
in a Memorandum of Understanding 7 ("MOU") signed by the
parties. Under the MOU, the parties agreed to jointly form a local
corporation to which the German Consortium shall assign its
rights under the Contract for Services. Pursuant to this
agreement, petitioner European Resources and Technologies,
Inc. was incorporated. The parties likewise agreed to prepare
and finalize a Shareholders' Agreement within one (1) month
from the execution of the MOU, which shall provide that the
German Consortium shall own fifteen percent (15%) of the equity
in the joint venture corporation, DMWAI shall own seventy
percent (70%) and LBV&A shall own fifteen percent (15%). In the
event that the parties fail to execute the Shareholders'
Agreement, the MOU shall be considered null and void. 8
On August 1, 2000, without the Shareholders' Agreement having
been executed, the German Consortium and petitioner ERTI
entered into a Memorandum of Agreement (MOA) 9 whereby the
German Consortium ceded its rights and obligations under the
Contract for Services in favor of ERTI and assigned unto ERTI,
among others, "its license from CDC to engage in the business
of providing environmental services needed in the CSEZ in
connection with the waste management within the CSEZ and
other areas." 10 Likewise, the parties agreed that should there
be a disagreement between or among them relative to the
interpretation or implementation of the MOA and the collateral
documents including but not limited to the Contract for Services
between the German Consortium and CDC, the dispute shall be
referred to a panel of arbitrators. 11
On December 11, 2000, ERTI received a letter from BN
Consultants Philippines, Inc., signed by Mr. Holger Holst for and
on behalf of the German Consortium, 12 stating that the German
Consortium's contract with DMWAI, LBV&A and ERTI has been
terminated or extinguished on the following grounds: (a) the
CDC did not give its approval to the Consortium's request for the
approval of the assignment or transfer by the German
Consortium in favor of ERTI of its rights and interests under the
Contract for Services; (b) the parties failed to prepare and
finalize the Shareholders' Agreement pursuant to the provision of
the MOU; (c) there is no more factual or legal basis for the joint
venture to continue; and (d) with the termination of the MOU, the
MOA is also deemed terminated or extinguished.
Attached to the letter was a copy of the letter of the
CDC, 13 stating that the German Consortium's assignment of an
eighty-five percent (85%) majority interest to another party
violated its representation to undertake both the financial and
technical aspects of the project. The dilution of the Consortium's
interest in ERTI is a substantial modification of the Consortium's
representations which were used as bases for the award of the
project to it. DAEcIS
On February 20, 2001, petitioner ERTI, through counsel, sent a
letter to CDC requesting for the reconsideration of its disapproval
of the agreement between ERTI and the German Consortium.
Before CDC could act upon petitioner ERTI's letter, the German
Consortium filed a complaint for injunction against herein
petitioners before the Regional Trial Court of Angeles City,
Branch 61, docketed as Civil Case No. 10049. The German
Consortium claimed that petitioner ERTI's continued
misrepresentation as to their right to accept solid wastes from
third parties for processing at the waste management center will
cause irreparable damage to the Consortium and its exclusive
right to operate the waste management center at the CSEZ.
Moreover, petitioner ERTI's acts destroy the Consortium's
credibility and undermine customer confidence in it. Hence, the
German Consortium prayed that a writ of temporary restraining
order be issued against petitioner ERTI and, after hearing, a writ
of preliminary injunction be likewise issued ordering petitioner
ERTI to cease and desist from misrepresenting to third parties or
the public that it has any right or interest in the waste
management center at CSEZ. 14
Petitioners filed their Opposition to the application for preliminary
injunction on February 7, 2001. The following day, February 8,
2001, petitioners sent respondents, through Mr. Holger Holst, a
letter demanding that the parties proceed to arbitration in
accordance with Section 17 of the MOA. At the hearings on the
application for injunction, petitioners objected to the presentation
of evidence on the ground that the trial court had no jurisdiction
over the case since the German Consortium was composed of
foreign corporations doing business in the country without a
license. Moreover, the MOA between the parties provides that
the dispute should be referred to arbitration.
The trial court overruled the objection and proceeded with the
hearing. On June 28, 2001, the trial court issued an Order
granting the writ of preliminary injunction. 15Petitioners filed a
motion for reconsideration, which was denied in a Resolution
dated November 21, 2001.
On January 17, 2002, petitioners filed a petition for certiorari and
prohibition under Rule 65 of the Rules of Court before the Court
of Appeals, assailing the trial court's Orders dated June 28, 2001
and November 21, 2001.
Meanwhile, on February 11, 2002, the temporary restraining
order issued was lifted in view of respondents' failure to file
sufficient bond. 16 On September 6, 2002, all proceedings in
Civil Case No. 10049 were suspended until the petition
for certiorari pending before the Court of Appeals shall have
been resolved. 17
On May 15, 2003, the Court of Appeals dismissed the petition
for certiorari. Petitioners' Motion for Reconsideration was denied
in a Resolution dated August 25, 2003.
Hence, this petition arguing that the Court of Appeals committed
reversible error in:
(a) Ruling that petitioners are estopped from assailing the
capacity of the respondents to institute the suit for injunction
(b) Ruling that respondents are entitled to an injunctive writ.
(c) Not holding that the dispute is covered by the arbitration
clause in the memorandum of agreement.
(d) Issuing the writ of preliminary injunction that is tantamount to
a decision of the case on the merits. 18
The petition is partly meritorious.
There is no general rule or governing principle laid down as to
what constitutes "doing" or "engaging in" or "transacting"
business in the Philippines. Thus, it has often been held that a
single act or transaction may be considered as "doing business"
when a corporation performs acts for which it was created or
exercises some of the functions for which it was
organized. 19 We have held that the act of participating in a
bidding process constitutes "doing business" because it shows
the foreign corporation's intention to engage in business in the
Philippines. In this regard, it is the performance by a foreign
corporation of the acts for which it was created, regardless of
volume of business, that determines whether a foreign
corporation needs a license or not. 20
Consequently, the German Consortium is doing business in the
Philippines without the appropriate license as required by our
laws. By participating in the bidding conducted by the CDC for
the operation of the waste management center, the German
Consortium exhibited its intent to transact business in the
Philippines. Although the Contract for Services provided for the
establishment of a local corporation to serve as respondents'
representative, it is clear from the other provisions of the
Contract for Services as well as the letter by the CDC containing
the disapproval that it will be the German Consortium which shall
manage and conduct the operations of the waste management
center for at least twenty-five years. Moreover, the German
Consortium was allowed to transact with other entities outside
the CSEZ for solid waste collection. Thus, it is clear that the local
corporation to be established will merely act as a conduit or
extension of the German Consortium.
As a general rule, unlicensed foreign non-resident corporations
cannot file suits in the Philippines. Section 133 of the
Corporation Code specifically provides:
SECTION 133. No foreign corporation transacting business in
the Philippines without a license, or its successors or assigns,
shall be permitted to maintain or intervene in any action, suit or
proceeding in any court or administrative agency of the
Philippines, but such corporation may be sued or proceeded
against before Philippine courts or administrative tribunals on
any valid cause of action recognized under Philippine laws.
A corporation has legal status only within the state or territory in
which it was organized. For this reason, a corporation organized
in another country has no personality to file suits in the
Philippines. In order to subject a foreign corporation doing
business in the country to the jurisdiction of our courts, it must
acquire a license from the Securities and Exchange Commission
(SEC) and appoint an agent for service of process. Without such
license, it cannot institute a suit in the Philippines. 21
However, there are exceptions to this rule. In a number of
cases, 22 we have declared a party estopped from challenging
or questioning the capacity of an unlicensed foreign corporation
from initiating a suit in our courts. In the case of Communication
Materials and Design, Inc. v. Court of Appeals, 23 a foreign
corporation instituted an action before our courts seeking to
enjoin a local corporation, with whom it had a "Representative
Agreement", from using its corporate name, letter heads,
envelopes, sign boards and business dealings as well as the
foreign corporation's trademark. The case arose when the
foreign corporation discovered that the local corporation has
violated certain contractual commitments as stipulated in their
agreement. In said case, we held that a foreign corporation
doing business in the Philippines without license may sue in
Philippine Courts a Philippine citizen or entity that had
contracted with and benefited from it.
Hence, the party is estopped from questioning the capacity of a
foreign corporation to institute an action in our courts where it
had obtained benefits from its dealings with such foreign
corporation and thereafter committed a breach of or sought to
renege on its obligations. The rule relating to estoppel is deeply
rooted in the axiom ofcommodum ex injuria sua non habere
debet no person ought to derive any advantage from his own
wrong.
In the case at bar, petitioners have clearly not received any
benefit from its transactions with the German Consortium. In
fact, there is no question that petitioners were the ones who
have expended a considerable amount of money and effort
preparatory to the implementation of the MOA. Neither do
petitioners seek to back out from their obligations under both the
MOU and the MOA by challenging respondents' capacity to sue.
The reverse could not be any more accurate. Petitioners are
insisting on the full validity and implementation of their
agreements with the German Consortium.
To rule that the German Consortium has the capacity to institute
an action against petitioners even when the latter have not
committed any breach of its obligation would be tantamount to
an unlicensed foreign corporation gaining access to our courts
for protection and redress. We cannot allow this without violating
the very rationale for the law prohibiting a foreign corporation not
licensed to do business in the Philippines from suing or
maintaining an action in Philippine courts. The object of requiring
a license is not to prevent the foreign corporation from
performing single acts, but to prevent it from acquiring domicile
for the purpose of business without taking the steps necessary to
render it amenable to suits in the local courts. 24 In other words,
the foreign corporation is merely prevented from being in a
position where it takes the good without accepting the bad.
On the issue of whether the respondents were entitled to the
injunctive writ, the petitioners claim that respondents' right is not
in esse but is rather a future right which is contingent upon a
judicial declaration that the MOA has been validly rescinded. The
Court of Appeals, in its decision, held that the MOA should be
deemed subject to a suspensive condition, that is, that CDC's
prior written consent must be obtained for the validity of the
assignment.
This issue must be resolved in a separate proceeding. It must be
noted that the hearing conducted in the trial court was merely a
preliminary hearing relating to the issuance of the injunctive writ.
In order to fully appreciate the facts of this case and the
surrounding circumstances relating to the agreements and
contract involved, further proof should be presented for
consideration of the court. Likewise, corollary matters, such as
whether either of the parties is liable for damages and to what
extent, cannot be resolved with absolute certainty, thus rendering
any decision we might make incomplete as to fully dispose of
this case. HcSaTI
More importantly, it is evident that CDC must be made a proper
party in any case which seeks to resolve the effectivity or
ineffectivity of its disapproval of the assignment made between
petitioners and respondent German Consortium. Where, as in
the instant case, CDC is not impleaded as a party, any decision
of the court which will inevitably affect or involve CDC cannot be
deemed binding on it.
For the same reason, petitioners' assertion that the instant case
should be referred to arbitration pursuant to the provision of the
MOA is untenable.
We have ruled in several cases that arbitration agreements are
valid, binding, enforceable and not contrary to public policy such
that when there obtains a written provision for arbitration which is
not complied with, the trial court should suspend the proceedings
and order the parties to proceed to arbitration in accordance with
the terms of their agreement. 25 In the case at bar, the MOA
between petitioner ERTI and respondent German Consortium
provided:
17. Should there be a disagreement between or among the
Parties relative to the interpretation or implementation of this
Agreement and the collateral documents including but not limited
to the Contract for Services between GERMAN CONSORTIUM
and CDC and the Parties cannot resolve the same by
themselves, the same shall be endorsed to a panel of arbitrators
which shall be convened in accordance with the process
ordained under the Arbitration Law of the Republic of the
Philippines. 26
Indeed, to brush aside a contractual agreement calling for
arbitration in case of disagreement between parties would be a
step backward. 27 But there are exceptions to this rule. Even if
there is an arbitration clause, there are instances when referral
to arbitration does not appear to be the most prudent action. The
object of arbitration is to allow the expeditious determination of a
dispute. Clearly, the issue before us could not be speedily and
efficiently resolved in its entirety if we allow simultaneous
arbitration proceedings and trial, or suspension of trial pending
arbitration. 28
As discussed earlier, the dispute between respondent German
Consortium and petitioners involves the disapproval by the CDC
of the assignment by the German Consortium of its rights under
the Contract for Services to petitioner ERTI. Admittedly, the
arbitration clause is contained in the MOA to which only the
German Consortium and petitioner ERTI were parties. Even if
the case is brought before an arbitration panel, the decision will
not be binding upon CDC who is a non-party to the arbitration
agreement. What is more, the arbitration panel will not be able to
completely dispose of all the issues of this case without including
CDC in its proceedings. Accordingly, the interest of justice would
only be served if the trial court hears and adjudicates the case in
a single and complete proceeding.
Lastly, petitioners question the propriety of the issuance of writ of
preliminary injunction claiming that such is already tantamount to
granting the main prayer of respondents' complaint without the
benefit of a trial. Petitioners point out that the purpose of a
preliminary injunction is to prevent threatened or continuous
irremediable injury to some of the parties before their claims can
be thoroughly studied and decided. It cannot be used to railroad
the main case and seek a judgment without a full-blown trial as
in the instant case.
The Court of Appeals ruled that since petitioners did not raise
this issue during the hearing on the application for preliminary
injunction before the trial court, the same cannot be raised for
the first time on appeal and even in special civil actions
for certiorari as in this case.
At the outset, it must be noted that with the finding that the
German Consortium is without any personality to file the petition
with the trial court, the propriety of the injunction writ issued is
already moot and academic. Even assuming for the sake of
argument that respondents have the capacity to file the petition,
we find merit in the issue raised by petitioners against the
injunction writ issued.
Before an injunctive writ can be issued, it is essential that the
following requisites are present: (1) there must be a right
in esse or the existence of a right to be protected; and (2) the act
against which injunction to be directed is a violation of such
right. 29 The onus probandi is on movant to show that there
exists a right to be protected, which is directly threatened by the
act sought to be enjoined. Further, there must be a showing that
the invasion of the right is material and substantial and that there
is an urgent and paramount necessity for the writ to prevent a
serious damage. 30
Thus, it is clear that for the issuance of the writ of preliminary
injunction to be proper, 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. 31At the time of its application for an injunctive
writ, respondents' right to operate and manage the waste
management center, to the exclusion of or without any
participation by petitioner ERTI, cannot be said to be clear and
unmistakable. The MOA executed between respondents and
petitioner ERTI has not yet been judicially declared as rescinded
when the complaint was lodged in court. 32 Hence, a cloud of
doubt exists over respondent German Consortium's exclusive
right relating to the waste management center.
WHEREFORE, the decision of the Court of Appeals in CA-G.R.
SP No. 68923 dated May 15, 2003 is REVERSED and SET
ASIDE. The Orders of the trial court dated June 28, 2001 and
November 21, 2001 are ANNULLED and SET ASIDE and Civil
Case No. 10049 is DISMISSED for lack of legal capacity of
respondents to institute the action. Costs against respondents.
SO ORDERED.
||| (European Resources and Techologies, Inc. v. Ingenieuburo
Birkhahn + Nolte, G.R. No. 159586, [July 26, 2004], 479 PHIL
114-130)
SECOND DIVISION
[G.R. No. 161957. February 28, 2005.]
JORGE GONZALES and PANEL OF
ARBITRATORS, petitioners, vs. CLIMAX MINING LTD.,
CLIMAX-ARIMCO MINING CORP., and AUSTRALASIAN
PHILIPPINES MINING INC., respondents.
DECISION
TINGA, J p:
Petitioner Jorge Gonzales, as claimowner of mineral deposits
located within the Addendum Area of Influence in Didipio, in the
provinces of Quirino and Nueva Vizcaya, entered into a co-
production, joint venture and/or production-sharing letter-
agreement designated as the May 14, 1987 Letter of Intent with
Geophilippines, Inc, and Inmex Ltd. Under the agreement,
petitioner, as claimowner, granted to Geophilippines, Inc. and
Inmex Ltd. collectively, the exclusive right to explore and survey
the mining claims for a period of thirty-six (36) months within
which the latter could decide to take an operating agreement on
the mining claims and/or develop, operate, mine and otherwise
exploit the mining claims and market any and all minerals that
may be derived therefrom.
On 28 February 1989, the parties to the May 14, 1987 Letter of
Intent renegotiated the same into the February 28, 1989
Agreement whereby the exploration of the mining claims was
extended for another period of three years.
On 9 March 1991, petitioner Gonzales, Arimco Mining
Corporation, Geophilippines Inc., Inmex Ltd., and Aumex
Philippines, Inc. signed a document designated as
theAddendum to the May 14, 1987 Letter of Intent and February
28, 1989 Agreement with Express Adhesion Thereto (hereafter,
the Addendum Contract). 1 Under theAddendum Contract,
Arimco Mining Corporation would apply to the Government of the
Philippines for permission to mine the claims as the
Government's contractor under a Financial and Technical
Assistance Agreement (FTAA). On 20 June 1994, Arimco Mining
Corporation obtained the FTAA 2 and carried out work under the
FTAA.
Respondents executed the Operating and Financial
Accommodation Contract 3 (between Climax-Arimco Mining
Corporation and Climax Mining Ltd., as first parties, and
Australasian Philippines Mining Inc., as second party) dated 23
December 1996 and Assignment, Accession
Agreement 4 (between Climax-Arimco Mining Corporation and
Australasian Philippines Mining Inc.) dated 3 December 1996.
Respondent Climax Mining Corporation (Climax) and respondent
Australasian Philippines Mining Inc. (APMI) entered into
a Memorandum of Agreement 5 dated 1 June 1991 whereby the
former transferred its FTAA to the latter. iatdcjur
On 8 November 1999, petitioner Gonzales filed before the Panel
of Arbitrators, Region II, Mines and Geosciences Bureau of the
Department of Environment and Natural Resources, against
respondents Climax-Arimco Mining Corporation (Climax-Arimco),
Climax, and APMI, 6 a Complaint 7 seeking the declaration of
nullity or termination of the Addendum Contract, the FTAA,
the Operating and Financial Accommodation Contract,
the Assignment, Accession Agreement, and the Memorandum of
Agreement. Petitioner Gonzales prayed for an unspecified
amount of actual and exemplary damages plus attorney's fees
and for the issuance of a temporary restraining order and/or writ
of preliminary injunction to restrain or enjoin respondents from
further implementing the questioned agreements. He sought said
reliefs on the grounds of "FRAUD, OPPRESSION and/or
VIOLATION of Section 2, Article XII of the CONSTITUTION
perpetrated by these foreign RESPONDENTS, conspiring and
confederating with one another and with each other. . . ." 8
On 21 February 2001, the Panel of Arbitrators dismissed
the Complaint for lack of jurisdiction. Petitioner moved for
reconsideration and this was granted on 18 October 2001, the
Panel believing that the case involved a dispute involving rights
to mining areas and a dispute involving surface owners,
occupants and claim owners/concessionaires. According to the
Panel, although the issue raised in the Complaint appeared to be
purely civil in nature and should be within the jurisdiction of the
regular courts, a ruling on the validity of the assailed contracts
would result to the grant or denial of mining rights over the
properties; therefore, the question on the validity of the contract
amounts to a mining conflict or dispute. Hence, the Panel
granted the Motion for Reconsideration with regard to the issues
of nullity, termination, withdrawal or damages, but with regard to
the constitutionality of the Addendum Agreement and FTAA, it
held that it had no jurisdiction. 9
Respondents filed their motion for reconsideration but this was
denied on 25 June 2002. The Panel of Arbitrators maintained
that there was a mining dispute between the parties since the
subject matter of the Complaint arose from contracts between
the parties which involve the exploration and exploitation of
minerals over the disputed area. 10
Respondents assailed the orders of the Panel of Arbitrators via a
petition for certiorari before the Court of Appeals. ECTHIA
On 30 July 2003, the Court of Appeals granted the petition,
declaring that the Panel of Arbitrators did not have jurisdiction
over the complaint filed by petitioner. 11 The jurisdiction of the
Panel of Arbitrators, said the Court of Appeals, is limited only to
the resolution of mining disputes, defined as those which raise a
question of fact or matter requiring the technical knowledge and
experience of mining authorities. It was found that the complaint
alleged fraud, oppression and violation of the Constitution, which
called for the interpretation and application of laws, and did not
involve any mining dispute. The Court of Appeals also observed
that there were no averments relating to particular acts
constituting fraud and oppression. It added that since
the Addendum Contract was executed in 1991, the action to
annul it should have been brought not later than 1995, as the
prescriptive period for an action for annulment is four years from
the time of the discovery of the fraud. 12 When petitioner filed
his complaint before the Panel in 1999, his action had already
prescribed. Also, the Court of Appeals noted that fraud and
duress only make a contract voidable, 13 not inexistent, hence
the contract remains valid until annulled. The Court of Appeals
was of the opinion that the petition should have been settled
through arbitration under Republic Act No. 876 (The Arbitration
Law) as stated in Clause 19.1 of the Addendum Contract. The
Court of Appeals therefore declared as invalid the orders dated
18 October 2001 and 25 June 2002 issued by the Panel of
Arbitrators. On 28 January 2004, the Court of Appeals denied
petitioner's motion for reconsideration for lack of merit. 14
Petitioner filed on 22 March 2004 this Petition for Review on
Certiorari Under Rule 45 assailing the decision and resolution of
the Court of Appeals. Petitioner raises the following issues:
A.
PROCEDURAL GROUND
THE HONORABLE COURT OF APPEALS SHOULD HAVE
SUMMARILY DISMISSED RESPONDENTS' PETITION A
QUO FOR FAILURE TO COMPLY WITH PROCEDURAL
REQUIREMENTS.
i.
WHETHER THE HONORABLE COURT OF APPEALS
DEPARTED FROM THE RULES AND ESTABLISHED
JURISPRUDENCE WHEN IT DID NOT DISMISS THE
PETITION A QUO DESPITE RESPONDENTS' FAILURE TO
COMPLY WITH THE RULES ON DISCLOSURE IN THE
"VERIFICATION AND CERTIFICATION" PORTION OF THEIR
PETITIONA QUO.
ii.
WHETHER THE HONORABLE COURT OF APPEALS
DEPARTED FROM THE RULES AND ESTABLISHED
JURISPRUDENCE WHEN IT DID NOT DISMISS THE
PETITION A QUO FILED BY RESPONDENT CLIMAX DESPITE
THE LACK OF THE REQUISITE AUTHORITY TO FILE THE
PETITION A QUO.
B.
SUBSTANTIVE GROUND
THE HONORABLE COURT OF APPEALS ERRED IN
GRANTING THE PETITION A QUO FILED BY RESPONDENTS
AND IN DENYING MOTION FOR RECONSIDERATION FILED
BY PETITIONER FOR UTTER LACK OF BASIS IN FACT AND
IN LAW.
i.
WHETHER THE HONORABLE COURT OF APPEALS
DEPARTED FROM THE RULES AND ESTABLISHED
JURISPRUDENCE WHEN IT HELD THAT PETITIONER CEDED
HIS CLAIMS OVER THE MINERAL DEPOSITS LOCATED
WITHIN THE ADDENDUM AREA OF INFLUENCE. CHDaAE
ii.
WHETHER THE HONORABLE COURT OF APPEALS
DEPARTED FROM THE RULES AND ESTABLISHED
JURISPRUDENCE WHEN IT HELD THAT THE PANEL OF
ARBITRATORS IS BEREFT OF JURISDICTION OVER THE
SUBJECT MATTER OF CASE NO. 058.
iii.
WHETHER THE HONORABLE COURT OF APPEALS
DEPARTED FROM THE RULES AND ESTABLISHED
JURISPRUDENCE WHEN IT HELD THAT THE COMPLAINT
FILED BY THE PETITIONER FAILED TO ALLEGE ULTIMATE
FACTS OR PARTICULARS OF FRAUD.
iv.
WHETHER THE HONORABLE COURT OF APPEALS
DEPARTED FROM THE RULES AND ESTABLISHED
JURISPRUDENCE WHEN IT HELD THAT PETITIONER AND
RESPONDENTS SHOULD SUBMIT TO ARBITRATION
UNDER R.A. 876.
v.
WHETHER THE HONORABLE COURT OF APPEALS
DEPARTED FROM THE RULES AND ESTABLISHED
JURISPRUDENCE WHEN IT HELD THAT THE ACTION TO
DECLARE THE NULLITY OF THE ADDENDUM CONTRACT,
FTAA, OFAC AND AAAA ON THE GROUND OF FRAUD HAS
PRESCRIBED.
The issues for resolution in this petition for review are:
(a) Whether there was forum-shopping on the part of
respondents for their failure to disclose to this Court their filing of
a Petition to Compel for Arbitration before the Regional Trial
Court of Makati City, Branch 148, which is currently pending.
(b) Whether counsel for respondent Climax had authority to file
the petition for certiorari before the Court of Appeals considering
that the signor of the petition forcertiorari's Verification and
Certification of Non-forum Shopping was not authorized to sign
the same in behalf of respondent Climax.
(c) Whether the complaint filed by petitioner raises a mining
dispute over which the Panel of Arbitrators has jurisdiction, or a
judicial question which should properly be brought before the
regular courts.
(d) Whether the dispute between the parties should be brought
for arbitration under Rep. Act No. 876.
Let us deal first with procedural matters.
Petitioner claims that respondents are guilty of forum-shopping
for failing to disclose before this Court that they had filed
a Petition to Compel for Arbitration before the RTC of Makati
City. However, it cannot be determined from petitioner's mere
allegations in the Petition that the Petition to Compel for
Arbitration instituted by respondent Climax-Arimco, involves
related causes of action and the grant of the same or
substantially the same reliefs as those involved in the instant
case. Petitioner did not attach copies of the Petition to Compel
for Arbitration or any order or resolution of the RTC of Makati
City related to that case. HIAESC
Furthermore, it can be gleaned from the nature of the two
actions that the issues in the case before the RTC of Makati City
and in the petition for certiorari before the Court of Appeals are
different. A petition for certiorari raises the issue of whether or
not there was grave abuse of discretion, while the Petition to
Compel for Arbitration seeks the implementation of the
arbitration clause in the agreement between the parties.
Petitioner next alleges that there was no authority granted by
respondent Climax to the law firm of Sycip Salazar Hernandez &
Gatmaitan to file the petition before the Court of Appeals. There
is allegedly no Secretary's Certificate from respondent Climax
attached to the petition. The Verification and Certification only
contains a statement made by one Marianne M. Manzanas that
she is "also the authorized representative of [respondent
Climax]" without presenting further proof of such authority.
Hence, it is argued that as to respondent Climax, the petition
filed before the Court of Appeals is an unauthorized act and the
assailed orders of the Panel of Arbitrators have become final.
Under Section 3, Rule 46 of the Rules of Court, a petitioner is
required to submit, together with the petition, a sworn
certification of non-forum shopping, and failure to comply with
this requirement is sufficient ground for dismissal of the petition.
The requirement that petitioner should sign the certificate of non-
forum shopping applies even to corporations, the Rules of Court
making no distinction between natural and juridical persons. The
signatory in the case of the corporation should be "a duly
authorized director or officer of the corporation" who has
knowledge of the matter being certified. 15 If, as in this case, the
petitioner is a corporation, a board resolution authorizing a
corporate officer to execute the certification against forum-
shopping is necessary. A certification not signed by a duly
authorized person renders the petition subject to dismissal. 16
On this point, we have to agree with petitioner. There appears to
be no subsequent compliance with the requirement to attach a
board resolution authorizing the signor Marianne M. Manzanas
to file the petition in behalf of respondent Climax. Respondent
also failed to refute this in its Comment. 17 However, this latter
issue becomes irrelevant in the light of our decision to deny this
petition for review for lack of jurisdiction by the Panel of
Arbitrators over the complaint filed by petitioner, as will be
discussed below.
We now come to the meat of the case which revolves mainly
around the question of jurisdiction by the Panel of Arbitrators:
Does the Panel of Arbitrators have jurisdiction over the complaint
for declaration of nullity and/or termination of the subject
contracts on the ground of fraud, oppression and violation of the
Constitution? This issue may be distilled into the more basic
question of whether the Complaint raises a mining dispute or a
judicial question.
A judicial question is a question that is proper for determination
by the courts, as opposed to a moot question or one properly
decided by the executive or legislative branch. 18 A judicial
question is raised when the determination of the question
involves the exercise of a judicial function; that is, the question
involves the determination of what the law is and what the legal
rights of the parties are with respect to the matter in
controversy. 19
On the other hand, a mining dispute is a dispute involving (a)
rights to mining areas, (b) mineral agreements, FTAAs, or
permits, and (c) surface owners, occupants and
claimholders/concessionaires. 20 Under Republic Act No. 7942
(otherwise known as the Philippine Mining Act of 1995), the
Panel of Arbitrators has exclusive and original jurisdiction to hear
and decide these mining disputes. 21 The Court of Appeals, in
its questioned decision, correctly stated that the Panel's
jurisdiction is limited only to those mining disputes which raise
questions of fact or matters requiring the application of
technological knowledge and experience. 22
In Pearson v. Intermediate Appellate Court, 23 this Court
observed that the trend has been to make the adjudication of
mining cases a purely administrative matter. 24Decisions 25 of
the Supreme Court on mining disputes have recognized a
distinction between (1) the primary powers granted by pertinent
provisions of law to the then Secretary of Agriculture and Natural
Resources (and the bureau directors) of an executive or
administrative nature, such as granting of license, permits, lease
and contracts, or approving, rejecting, reinstating or canceling
applications, or deciding conflicting applications, and (2)
controversies or disagreements of civil or contractual nature
between litigants which are questions of a judicial nature that
may be adjudicated only by the courts of justice. This distinction
is carried on even in Rep. Act No. 7942. 2005cdasia
The Complaint charged respondents with disregarding and
ignoring the provisions of the Addendum Contract, violating the
purpose and spirit of the May 14, 1987 Letter of
Intent and February 28, 1989 Agreement, and acting in a
fraudulent and oppressive manner against petitioner and
practicing fraud and deception against the
Government. 26 Petitioner alleged in his Complaint that under
the original agreements (the May 14, 1987 Letter of
Intent and February 28, 1989 Agreement) respondent Climax-
Arimco had committed to complete the Bankable Feasibility
Study by 28 February 1992, but the same was not
accomplished. Instead, respondent Climax-Arimco, through false
and insidious representations and machinations by alleging
technical and financial capacity, induced petitioner to enter into
the Addendum Contract and the FTAA in order to repeatedly
extend the option period within which to conduct the feasibility
study. In essence, petitioner alleges that respondents, conspiring
and confederating with one another, misrepresented under
the Addendum Contract and FTAA that respondent Climax-
Arimco possessed financial and technical capacity to put the
project into commercial production, when in truth it had no such
qualification whatsoever to do so. By so doing, respondents
have allegedly caused damage not only to petitioner but also to
the Republic of the Philippines. 27
It is apparent that the Panel of Arbitrators is bereft of jurisdiction
over the Complaint filed by petitioner. The basic issue in
petitioner's Complaint is the presence of fraud or
misrepresentation allegedly attendant to the execution of
the Addendum Contract and the other contracts emanating from
it, such that the contracts are rendered invalid and not binding
upon the parties. It avers that petitioner was misled by
respondents into agreeing to the Addendum Contract. This
constitutes fraud which vitiated petitioner's consent, and under
Article 1390 of the Civil Code, is one of the grounds for the
annulment of a voidable contract. Voidable or annullable
contracts, before they are set aside, are existent, valid, and
binding, and are effective and obligatory between the
parties. 28 They can be ratified. 29
Petitioner insists that the Complaint is actually one for the
declaration of nullity of void contracts. He argues that
respondents, by their lack of financial and technical competence
to carry out the mining project, do not qualify to enter into a co-
production, joint venture or production sharing agreement with
the Government, in circumvention of and in patent violation of
the spirit and purpose of the Constitution, particularly Section 2,
Article XII thereof. Petitioner relies on the Civil Code for
support: 30
Art. 1409. The following contracts are inexistent and void from
the beginning:
(1) Those whose cause, object or purpose is contrary to law,
morals, good customs, public order or public policy;
xxx xxx xxx
(7) Those expressly prohibited or declared void by law.
xxx xxx xxx
Petitioner asserts that for circumventing and being in patent
violation of the Constitution, the Addendum Contract, the FTAA
and the other contracts are void contracts. As such, they do not
produce any effect and cannot be ratified.
However, whether the case involves void or voidable contracts is
still a judicial question. It may, in some instances, involve
questions of fact especially with regard to the determination of
the circumstances of the execution of the contracts. But the
resolution of the validity or voidness of the contracts remains a
legal or judicial question as it requires the exercise of judicial
function. It requires the ascertainment of what laws are
applicable to the dispute, the interpretation and application of
those laws, and the rendering of a judgment based thereon.
Clearly, the dispute is not a mining conflict. It is essentially
judicial. The complaint was not merely for the determination of
rights under the mining contracts since the very validity of those
contracts is put in issue.
The Complaint is not about a dispute involving rights to mining
areas, nor is it a dispute involving claimholders or
concessionaires. The main question raised was the validity of
the Addendum Contract, the FTAA and the subsequent
contracts. The question as to the rights of petitioner or
respondents to the mining area pursuant to these contracts, as
well as the question of whether or not petitioner had ceded his
mining claims in favor of respondents by way of execution of the
questioned contracts, is merely corollary to the main issue, and
may not be resolved without first determining the main
issue. aCIHcD
The Complaint is also not what is contemplated by Rep. Act No.
7942 when it says the dispute should involve FTAAs.
The Complaint is not exclusively within the jurisdiction of the
Panel of Arbitrators just because, or for as long as, the dispute
involves an FTAA. The Complaint raised the issue of the
constitutionality of the FTAA, which is definitely a judicial
question. The question of constitutionality is exclusively within
the jurisdiction of the courts to resolve as this would clearly
involve the exercise of judicial power. The Panel of Arbitrators
does not have jurisdiction over such an issue since it does not
involve the application of technical knowledge and expertise
relating to mining. This the Panel of Arbitrators has even
conceded in its Orders dated 18 October 2001 and 25 June
2002. At this juncture, it is worthy of note that in a case, 31 which
was resolved only on 1 December 2004, this Court upheld the
validity of the FTAA entered into by the Republic of the
Philippines and WMC (Philippines), Inc. and constitutionality
of Rep. Act No. 7942 and DENR Administrative Order 96-
40. 32 In fact, the Court took the case on an original petition,
recognizing "the exceptional character of the situation and the
paramount public interest involved, as well as the necessity for a
ruling to put an end to the uncertainties plaguing the mining
industry and the affected communities as a result of doubts case
upon the constitutionality and validity of the Mining Act, the
subject FTAA and future FTAAs, and the need to avert a
multiplicity of suits." 33
Arbitration before the Panel of Arbitrators is proper only when
there is a disagreement between the parties as to some
provisions of the contract between them, which needs the
interpretation and the application of that particular knowledge
and expertise possessed by members of that Panel. It is not
proper when one of the parties repudiates the existence or
validity of such contract or agreement on the ground of fraud or
oppression as in this case. The validity of the contract cannot be
subject of arbitration proceedings. Allegations of fraud and
duress in the execution of a contract are matters within the
jurisdiction of the ordinary courts of law. These questions are
legal in nature and require the application and interpretation of
laws and jurisprudence which is necessarily a judicial function.
Petitioner also disagrees with the Court of Appeals' ruling that
the case should be brought for arbitration under Rep. Act 876,
pursuant to the arbitration clause in theAddendum
Contract which states that "[a]ll disputes arising out of or in
connection with the Contract, which cannot be settled amicably
among the Parties, shall finally be settled under R.A. 876." He
points out that respondents Climax and APMI are not parties to
the Addendum Contract and are thus not bound by the
arbitration clause in said contract.
We agree that the case should not be brought under the ambit
of the Arbitration Law, but for a different reason. The question of
validity of the contract containing the agreement to submit to
arbitration will affect the applicability of the arbitration clause
itself. A party cannot rely on the contract and claim rights or
obligations under it and at the same time impugn its existence or
validity. Indeed, litigants are enjoined from taking inconsistent
positions. As previously discussed, the complaint should have
been filed before the regular courts as it involved issues which
are judicial in nature.
WHEREFORE, in view of the foregoing, the Petition for Review
on Certiorari Under Rule 45 is DENIED. The Orders dated 18
October 2001 and 25 June 2002 of the Panel of Arbitrators are
SET ASIDE. Costs against petitioner Jorge Gonzales.
SO ORDERED.
||| (Gonzales v. Climax Mining Ltd., G.R. No. 161957, [February
28, 2005], 492 PHIL 682-697)
525 PHIL 238-251
FIRST DIVISION
[G.R. No. 141818. June 22, 2006.]
INSULAR SAVINGS BANK, petitioner, vs. FAR EAST BANK
AND TRUST COMPANY, respondent.
DECISION
YNARES-SANTIAGO, J p:
This petition for review on certiorari 1 assails the November 9,
1999 Order 2 of the Regional Trial Court of Makati City, Branch
135, in Civil Case No. 92-145 which dismissed the petition for
review for lack of jurisdiction and its February 1, 2000
Order 3 denying reconsideration thereof.
The antecedent facts are as follows:
On December 11, 1991, Far East Bank and Trust Company
(Respondent) filed a complaint against Home Bankers Trust and
Company (HBTC) 4 with the Philippine Clearing House
Corporation's (PCHC) Arbitration Committee docketed as
Arbicom Case No. 91-069. 5Respondent sought to recover from
the petitioner, the sum of P25,200,000.00 representing the total
amount of the three checks drawn and debited against its
clearing account. HBTC sent these checks to respondent for
clearing by operation of the PCHC clearing system. Thereafter,
respondent dishonored the checks for insufficiency of funds and
returned the checks to HBTC. However, the latter refused to
accept them since the checks were returned by respondent after
the reglementary regional clearing period. 6
Meanwhile, on January 17, 1992, before the termination of the
arbitration proceedings, respondent filed another complaint but
this time with the Regional Trial Court (RTC) in Makati City
docketed as Civil Case No. 92-145 for Sum of Money and
Damages with Preliminary Attachment. The complaint was filed
not only against HBTC but also against Robert Young, Eugene
Arriesgado and Victor Tancuan (collectively known as
Defendants), who were the president and depositors of HBTC
respectively. 7 Aware of the arbitration proceedings between
respondent and petitioner, the RTC, in an Omnibus Order dated
April 30, 1992, 8 suspended the proceedings in the case against
all the defendants pending the decision of the Arbitration
Committee, to wit:
WHEREFORE, the Court hereby orders:
(a) Home Bankers & Trust Co. to produce and permit plaintiff to
inspect, copy and/or photograph the checking account deposit
ledger of Victor Tancuan's Account No. 1803-00605-3;
(b) The Motions to Dismiss filed by all defendants denied, for
lack of merit; and ITaCEc
(c) Proceedings in this case against all defendants be
suspended pending award/decision in the arbitration
proceedings against Home Bankers and Trust Co.
SO ORDERED. 9 (Emphasis supplied)
The above Omnibus Order was amended by the trial court in its
October 1, 1992 Order, 10 the dispositive portion of which reads
as follows:
WHEREFORE, the Omnibus Order dated 30 April 1992 is hereby
reconsidered by deleting the phrase "since the complaint also
seeks exemplary damages, attorney's fees, litigation expenses
and costs of suit against HBT," on page 4 thereof and par. C of
its dispositive portion is amended to read:
(c) "Procedings against Home Bankers and Trust Co. are
suspended pending award/decision in the arbitration
proceedings while those against individual defendants be
immediately reinstated and continued."
HBT and Tancuan's separate Motions for Reconsiderations are
hereby denied, for lack of merit.
SO ORDERED. 11
On February 2, 1998, the PCHC Arbitration Committee rendered
its decision in favor of respondent, 12 thus:
IN VIEW OF ALL THE FOREGOING, judgment is hereby
rendered in favor of the plaintiff and against the defendant
sentencing the latter to pay the plaintiff the sum of P25.2 million
as principal. In view of the fact, however, that this amount was
split between the plaintiff and the defendant in the course of the
proceedings, the amount to be paid by the defendant to the
plaintiff should only be P12,600,000.00 plus interest on this latter
amount at the rate of 12% per annum from February 11, 1992,
the date when the total amount of P25.2 Million was split
between plaintiff and defendant up to the date of payment.
In view of the facts found by the committee, no attorney's fees
nor other damages are awarded. cAaTED
SO ORDERED. 13
The motion for reconsideration filed by petitioner was denied by
the Arbitration Committee. 14 Consequently, to appeal the
decision of the Arbitration Committee in Arbicom Case No. 91-
069, petitioner filed a petition for review in the earlier case filed
by respondent in Branch 135 of the RTC of Makati and
docketed as Civil Case No. 92-145. 15 In an order dated
January 20, 1999, the RTC directed both petitioner and
respondent to file their respective memoranda, after which, said
petition would be deemed submitted for resolution.16
Both parties filed several pleadings. On February 8, 1999,
respondent filed a Motion to Dismiss Petition for Review for Lack
of Jurisdiction, 17 which was opposed by the
petitioner. 18 Respondent then filed its Reply to the
opposition, 19 to which petitioner filed a Rejoinder. 20 On August
16, 1999, respondent submitted its Surrejoinder. 21
On November 9, 1999, the RTC rendered the assailed Order
which held, thus:
Acting on plaintiff Far East Bank and Trust Company's "Motion
To Dismiss Petition For Review For Lack Of Jurisdiction",
considering that the petition for review is a separate and distinct
case, the same must comply with all the requirements for filing
initiatory pleadings for civil actions before this Court so that since
the commencement of the subject petition lacks the mandatory
requirements provided for, except the payment of docket fees,
for lack of jurisdiction, the petition for review is hereby dismissed.
SO ORDERED. 22
The RTC denied petitioner's motion for
reconsideration, 23 hence, this petition on the sole ground, to
wit:
THE REGIONAL TRIAL COURT ERRED IN DISMISSING THE
PETITION OF PETITIONER FOR LACK OF JURISDICTION ON
THE GROUND THAT IT SHOULD HAVE BEEN DOCKETED AS
A SEPARATE CASE. 24
Petitioner contends that Civil Case No. 92-145 was merely
suspended to await the outcome of the arbitration case pending
before the PCHC. Thus, any petition questioning the decision of
the Arbitration Committee must be filed in Civil Case No. 92-145
and should not be docketed as a separate action. Likewise,
petitioner avers that had it filed a separate action, "this would
have resulted in a multiplicity of suits, which is abhorred in
procedure." HSDIaC
Meanwhile respondent avers that the RTC correctly dismissed
the appeal from the award of private arbitrators since there is no
statutory basis for such appeal. Respondent argues that
petitioner's claim that the parties by agreement had conferred on
the RTC appellate jurisdiction over decisions of private
arbitrators is erroneous because they cannot confer a non-
existent jurisdiction on the RTC or any court. Furthermore, the
petition for review filed by petitioner violated the rule on
commencing an original action under Section 5, Rule 1, and the
raffle of cases under Section 2, Rule 20 of the Rules of Court,
when it filed the same in Branch 135 of the RTC of Makati where
there was already a pending original action, i.e., Civil Case No.
92-145.
The petition lacks merit.
The Philippine Clearing House Corporation was created to
facilitate the clearing of checks of member banks. Among these
member banks exists a compromissoire, 25 or an arbitration
agreement embedded in their contract wherein they consent that
any future dispute or controversy between its PCHC participants
involving any check would be submitted to the Arbitration
Committee for arbitration. Petitioner and respondent are
members of PCHC, thus they underwent arbitration proceedings.
The PCHC has its own Rules of Procedure for Arbitration (PCHC
Rules). However, this is governed by Republic Act No. 876, also
known as The Arbitration Law 26 and supplemented by the
Rules of Court. 27 Thus, we first thresh out the remedy of
petition for review availed of by the petitioner to appeal the order
of the Arbitration Committee.
Sections 23, 24 and 29 of The Arbitration Law, and Section 13 of
the PCHC Rules, provide:
SEC. 23. Confirmation of award. At any time within one month
after the award is made, any party to the controversy which was
arbitrated may apply to the court having jurisdiction, as
provided in Section 28, for an order confirming the award;
and thereupon the court must grant such order unless the
award is vacated, modified or corrected, as prescribed
herein. Notice of such motion must be served upon the adverse
party or his attorney as prescribed by law for the service of such
notice upon an attorney in action in the same court.
SEC. 24. Grounds for vacating award. In any one of the
following cases, the court must make an order vacating the
award upon the petition of any party to the controversy when
such party proves affirmatively that in the arbitration
proceedings:
(a) The award was procured by corruption, fraud or other undue
means; or
(b) That there was evident partiality or corruption in the
arbitrators or any of them; or
(c) That the arbitrators were guilty of misconduct in refusing to
postpone the hearing upon sufficient cause shown, or in refusing
to hear evidence pertinent and material to the controversy; that
one or more of the arbitrators was disqualified to act as such
under section nine hereof, and willfully refrained from disclosing
such disqualification or of any other misbehavior by which the
rights of any party have been materially prejudiced; or
(d) That the arbitrators exceeded their powers, or so imperfectly
executed them, that a mutual, final and definite award upon the
subject matter submitted to them was not made. IEAaST
xxx xxx xxx
SEC. 25. Grounds for modifying or correcting award. In any
one of the following cases, the court must make an order
modifying or correcting the award, upon the application of any
party to the controversy which was arbitrated:
(a) Where there was an evident miscalculation of figures, or an
evident mistake in the description of any person, thing or
property referred to in the award; or
(b) Where the arbitrators have awarded upon a matter not
submitted to them, not affecting the merits of the decision upon
the matter submitted; or
(c) Where the award is imperfect in a matter of form not affecting
the merits of the controversy, and if it had been a commissioner's
report, the defect could have been amended or disregarded by
the court.
The order may modify and correct the award so as to effect the
intent thereof and promote justice between the parties.
SEC. 29. Appeals. An appeal may be taken from an order
made in a proceeding under this Act, or from judgment entered
upon an award through certiorari proceedings, but such appeals
shall be limited to questions of law. The proceedings upon
such an appeal, including the judgment thereon shall be
governed by the Rules of Court insofar as they are applicable.
AMENDED ARBITRATION RULES OF PROCEDURE OF PCHC
Sec. 13. The findings of facts of the decision or award
rendered by the Arbitration Committee or by the sole
Arbitrator as the case may be shall be final and conclusive
upon all the parties in said arbitration dispute. The decision
or award of the Arbitration Committee or of the Sole Arbitrator or
of the Board of Directors, as the case may be, shall
be appealable only on questions of law to any of the
Regional Trial Courts in the National Capital Region where
the Head Office of any of the parties is located. The appellant
shall perfect his appeal by filing a notice of appeal to the
Arbitration Secretariat and filing a Petition with the Regional Trial
Court of the National Capital Region for the review of the
decision or award of the committee or sole arbitrator or of the
Board of Directors, as the case may be, within a non-extendible
period of fifteen (15) days from and after its receipt of the order
denying or granting said motion for reconsideration or new trial
had been filed, within a non-extendible period of fifteen (15) days
from and after its receipt of the order denying or granting said
motion for reconsideration or of the decision rendered after the
new trial if one had been granted. DEScaT
xxx xxx xxx (Emphasis supplied)
As provided in the PCHC Rules, the findings of facts of the
decision or award rendered by the Arbitration Committee shall be
final and conclusive upon all the parties in said arbitration
dispute. 28 Under Article 2044 29 of the New Civil Code, the
validity of any stipulation on the finality of the arbitrators' award
or decision is recognized. However, where the conditions
described in Articles 2038, 30 2039 31 and 2040 32 applicable to
both compromises and arbitrations are obtaining, the arbitrators'
award may be annulled or rescinded. 33Consequently, the
decision of the Arbitration Committee is subject to judicial review.
Furthermore, petitioner had several judicial remedies available at
its disposal after the Arbitration Committee denied its Motion for
Reconsideration. It may petition the proper RTC to issue an
order vacating the award on the grounds provided for under
Section 24 ofthe Arbitration Law. 34 Petitioner likewise has the
option to file a petition for review under Rule 43 of the Rules of
Court with the Court of Appeals on questions of fact, of law, or
mixed questions of fact and law. 35 Lastly, petitioner may file a
petition for certiorari under Rule 65 of the Rules of Court on the
ground that the Arbitrator Committee acted without or in excess
of its jurisdiction or with grave abuse of discretion amounting to
lack or excess of jurisdiction. Since this case involves acts or
omissions of a quasi-judicial agency, the petition should be filed
in and cognizable only by the Court of Appeals. 36
In this instance, petitioner did not avail of any of the
abovementioned remedies available to it. Instead it filed a
petition for review with the RTC where Civil Case No. 92-145 is
pending pursuant to Section 13 of the PCHC Rules to sustain its
action. Clearly, it erred in the procedure it chose for judicial
review of the arbitral award.
Having established that petitioner failed to avail of the
abovementioned remedies, we now discuss the issue of the
jurisdiction of the trial court with respect to the petition for review
filed by petitioner.
Jurisdiction is the authority to hear and determine a cause the
right to act in a case. 37 Jurisdiction over the subject matter is
the power to hear and determine the general class to which the
proceedings in question belong. Jurisdiction over the subject
matter is conferred by law and not by the consent or
acquiescence of any or all of the parties or by erroneous belief of
the court that it exists. 38
In the instant case, petitioner and respondent have agreed that
the PCHC Rules would govern in case of controversy. However,
since the PCHC Rules came about only as a result of an
agreement between and among member banks of PCHC and
not by law, it cannot confer jurisdiction to the RTC. Thus, the
portion of the PCHC Rules granting jurisdiction to the RTC to
review arbitral awards, only on questions of law, cannot be given
effect. HTDcCE
Consequently, the proper recourse of petitioner from the denial
of its motion for reconsideration by the Arbitration Committee is
to file either a motion to vacate the arbitral award with the RTC, a
petition for review with the Court of Appeals under Rule 43 of the
Rules of Court, or a petition for certiorari under Rule 65 of the
Rules of Court. In the case at bar, petitioner filed a petition for
review with the RTC when the same should have been filed with
the Court of Appeals under Rule 43 of the Rules of Court. Thus,
the RTC of Makati did not err in dismissing the petition for review
for lack of jurisdiction but not on the ground that petitioner should
have filed a separate case from Civil Case No. 92-145 but on the
necessity of filing the correct petition in the proper court. It is
immaterial whether petitioner filed the petition for review in Civil
Case No. 92-145 as an appeal of the arbitral award or whether it
filed a separate case in the RTC, considering that the RTC will
only have jurisdiction over an arbitral award in cases of motions
to vacate the same. Otherwise, as elucidated herein, the Court
of Appeals retains jurisdiction in petitions for review or in
petitions for certiorari. Consequently, petitioner's arguments, with
respect to the filing of separate action from Civil Case No. 92-
145 resulting in a multiplicity of suits, cannot be given due
course.
Alternative dispute resolution methods or ADRs like
arbitration, mediation, negotiation and conciliation are
encouraged by the Supreme Court. By enabling parties to
resolve their disputes amicably, they provide solutions that are
less time-consuming, less tedious, less confrontational, and
more productive of goodwill and lasting relationships. 39 It must
be borne in mind that arbitration proceedings are mainly
governed by the Arbitration Law and suppletorily by the Rules of
Court.
WHEREFORE, in light of the foregoing, the petition is DENIED.
The November 9, 1999 Order of the Regional Trial Court of
Makati City, Branch 135, in Civil Case No. 92-145 which
dismissed the petition for review for lack of jurisdiction and the
February 1, 2000 Order denying its reconsideration, are
AFFIRMED.
SO ORDERED.
||| (Insular Savings Bank v. Far East Bank & Trust Co., G.R. No.
141818, [June 22, 2006], 525 PHIL 238-251)