G.R. No.

169095             December 8, 2008

HEUNGHWA INDUSTRY CO., LTD., petitioner,

vs.
DJ BUILDERS CORPORATION, respondent.

DECISION

AUSTRIA-MARTINEZ, J.:

Before this Court is a Petition for Review on Certiorari1 under Rule 45 of the Rules of Court, seeking to set aside the August 20, 2004
Decision2 and August 1, 2005 Resolution3 of the Court of Appeals (CA) in CA-G.R. SP Nos. 70001 and 71621.

The facts of the case, as aptly presented by the CA, are as follows:

Heunghwa Industry Co., Ltd. (petitioner) is a Korean corporation doing business in the Philippines, while DJ Builders Corporation
(respondent) is a corporation duly organized under the laws of the Philippines. Petitioner was able to secure a contract with the
Department of Public Works and Highways (DPWH) to construct the Roxas-Langogan Road in Palawan.

Petitioner entered into a subcontract agreement with respondent to do earthwork, sub base course and box culvert of said project in the
amount of Php113, 228, 918.00. The agreement contained an arbitration clause. The agreed price was not fully paid; hence, on
January 19, 2000, respondent filed before the Regional Trial Court (RTC) of Puerto Princesa, Branch 51, a Complaint for "Breach of
Contract, Collection of Sum of Money with Application for Preliminary Injunction, Preliminary Attachment, and Prayer for Temporary
Restraining Order and Damages" docketed as Civil Case No. 3421.4

Petitioner's Amended Answer5 averred that it was not obliged to pay respondent because the latter caused the stoppage of work.
Petitioner further claimed that it failed to collect from the DPWH due to respondent's poor equipment performance. The Amended
Answer also contained a counterclaim for Php24,293,878.60.

On September 27, 2000, parties through their respective counsels, filed a "Joint Motion to Submit Specific Issues To The Construction
Industry Arbitration Commission"6 (CIAC), to wit:

5. Parties would submit only specific issues to the CIAC for arbitration, leaving other claims to this Honorable Court for further
hearing and adjudication. Specifically, the issues to be submitted to the CIAC are as follows:

a. Manpower and equipment standby time;

b. Unrecouped mobilization expenses;

c. Retention;

d. Discrepancy of billings; and

e. Price escalation for fuel and oil usage.7

On the same day, the RTC issued an Order8 granting the motion.

On October 9, 2000, petitioner, through its counsel, filed an "Urgent Manifestation"9 praying that additional matters be referred to CIAC
for arbitration, to wit:

1. Additional mobilization costs incurred by [petitioner] for work abandoned by [respondent];

2. Propriety of liquidated damages in favor of [petitioner] for delay incurred by [respondent];

3. Propriety of downtime costs on a daily basis during the period of the existence of the previous temporary restraining order
against [petitioner].10

On October 24, 2000, respondent filed with CIAC a Request for Adjudication11 accompanied by a Complaint. Petitioner, in turn filed a
"Reply/ Manifestation" informing the CIAC that it was abandoning the submission to CIAC and pursuing the case before the RTC. In
respondent's Comment on petitioner's Manifestation, it prayed for CIAC to declare petitioner in default.
CIAC then issued an Order12 dated November 27, 2000 ordering respondent to move for the dismissal of Civil Case No. 3421 pending
before the RTC of Palawan and directing petitioner to file anew its answer. The said Order also denied respondent's motion to declare
petitioner in default.

Respondent filed a Motion for Partial Reconsideration of the November 27, 2000 Order while petitioner moved to suspend the
proceeding before the CIAC until the RTC had dismissed Civil Case No. 3421.

On January 8, 2000, CIAC issued an Order13 setting aside its Order of November 27, 2000 by directing the dismissal of Civil Case No.
3421 only insofar as the five issues referred to it were concerned. It also directed respondent to file a request for adjudication. In
compliance, respondent filed anew a "Revised Complaint"14 which increased the amount of the claim from Php23,391,654.22 to
Php65,393,773.42.

On February 22 2001, petitioner, through its new counsel, filed with the RTC a motion to withdraw the Order dated September 27, 2000
which referred the case to the CIAC, claiming it never authorized the referral. Respondent opposed the motion15 contending that
petitioner was already estopped from asking for the recall of the Order.

Petitioner filed in the CIAC its opposition to the second motion to declare it in default, with a motion to dismiss informing the CIAC that it
was abandoning the submission of the case to it and asserting that the RTC had original and exclusive jurisdiction over Civil Case No.
3421, including the five issues referred to the CIAC.

On March 5, 2001, the CIAC denied petitioner's motion to dismiss on the ground that the November 27, 2000 Order had already been
superseded by its Order of January 8, 2001.16

On March 13, 2001, the CIAC issued an Order setting the preliminary conference on April 10, 2001.17

On March 23, 2001 petitioner filed with the CIAC a motion for reconsideration of the March 5, 2001 Order.

For clarity, the succeeding proceedings before the RTC and CIAC are presented in graph form in chronological order.

RTC CIAC
  April 5, 2001 - Petitioner filed a Motion to Suspend
proceedings because of the Motion to Recall it filed
with the RTC.
  April 6, 2001 - CIAC granted petitioner's motion and
suspended the hearings dated April 10 and 17, 2001.
May 16, 2001 - the RTC issued a  
Resolution18 granting petitioner's Motion to Recall.19
June 1, 2001- Respondent moved for a  
reconsideration of the May 16, 2001 Resolution and
prayed for the dismissal of the case without
prejudice to the filing of a complaint with the CIAC.20
June 11, 2001- Petitioner opposed respondent's  
motion for reconsideration and also prayed for the
dismissal of the case but with prejudice.21
July 6, 2001 - The RTC denied respondent's motion  
for reconsideration but stated that respondent may
file a formal motion to dismiss if it so desired.22
July 16, 2001- Respondent filed with the RTC a  
Motion to Dismiss23 Civil Case No. 3421 praying for
the dismissal of the complaint without prejudice to
the filing of the proper complaint with the CIAC.

On the same day, the RTC granted the motion

without prejudice to petitioner's counterclaim.24
August 1, 2001- Petitioner moved for a  
reconsideration of the July 16, 2001 Order claiming
it was denied due process.25
  August 7, 2001 - Respondent filed with the CIAC a
motion for the resumption of the proceedings claiming
that the dismissal of Civil Case No. 3421 became final
on August 3, 2001.
  August 15, 2001 - Petitioner filed a counter-
manifestation26 asserting that the RTC Order dated
July 16, 2001 was not yet final. Petitioner reiterated

 
 
 
 
 
March 13, 2002 - the RTC issued a
Resolution28 declaring the July 16, 2001 Order
which dismissed the case "without force and
effect" and set the case for hearing on May 30,
2002.
 
 
 
 
March 25, 2002- Respondent moved for a
reconsideration31 of the March 13, 2002 Order
recalling the July 16, 2001 Order which petitioner
opposed.
June 17, 2002 - RTC denied respondent's Motion  
for Reconsideration.
the prayer to dismiss the case.
August 27, 2001 - CIAC issued an Order maintaining
the suspension but did not rule on petitioner's Motion
to Dismiss.
January 22, 2002 - CIAC issued an Order setting the
case for Preliminary Conference on February 7, 2002.
February 1, 2002 - Petitioner filed a Motion for
Reconsideration of the January 22, 2002 Order which
also included a prayer to resolve the Motion for
Reconsideration of the July 16, 2001 Order.
February 5, 2002 - CIAC denied petitioner's Motion for
Reconsideration.
February 7, 2002 - CIAC conducted a preliminary
conference.27
 
March 15, 2002 - Petitioner filed a Manifestation
before the CIAC that the CIAC had no authority to hear
the case.
March 18, 2002 - CIAC issued an Order setting the
hearing on April 2, 2002.
March 21, 2002 - Petitioner filed a
Manifestation/Motion that the RTC had recalled the
July 16, 2001 Order and had asserted jurisdiction over
the entire case and praying for the dismissal of the
pending case.29
March 22, 2002 - CIAC issued an Order30 denying
the Motion to Dismiss filed by petitioner and
holding that the CIAC had jurisdiction over the
case.
March 26, 2002 - CIAC ordered respondent to file a
reply to petitioner's March 21, 2002 Manifestation.

The parties, without waiting for the reply required by the CIAC,32 filed two separate petitions for certiorari: petitioner, on April 5, 2002,
docketed as CA-G.R. SP No. 70001; and respondent, on July 5, 2002, docketed as CA-G.R. SP No. 71621 with the CA.

In CA-G.R. SP No. 70001, petitioner assailed the denial by the CIAC of its motion to dismiss and sought to enjoin the CIAC from
proceeding with the case.

In CA-G.R. SP No. 71621, respondent questioned the March 13, 2002 Order of the RTC which reinstated Civil Case No. 3421 as well
as the Order dated June 17, 2002 which denied respondent's motion for reconsideration. Respondent also sought to restrain the RTC
from further proceeding with the civil case.

In other words, petitioner is questioning the jurisdiction of the CIAC; while respondent is questioning the jurisdiction of the RTC over the
case.

Both cases were consolidated by the CA.

The CA ruled against petitioner on procedural and substantive grounds.

On matters of procedure, the CA took note of the fact that petitioner did not file a motion for reconsideration of the March 22, 2002
Order of the CIAC and held that it is in violation of the well-settled rule that a motion for reconsideration should be filed to allow the
respondent tribunal to correct its error before a petition can be entertained.33 Moreover, the CA ruled that it is well-settled that a denial
of a motion to dismiss, being an interlocutory order, is not the proper subject for a petition for certiorari.34

Moreover, the CA ruled against petitioner's main argument that the arbitration clause found in the subcontract agreement between the
parties did not refer to CIAC as the arbitral body. The CA held that the CIAC had jurisdiction over the controversy because the
construction agreement contained a provision to submit any dispute for arbitration, and there was a joint motion to submit certain issues
to the CIAC for arbitration.35

Anent petitioner's argument that its previous lawyer was not authorized to submit the case for arbitration, the CA held that what is
required for a dispute to fall under the jurisdiction of the CIAC is for the parties to agree to submit to voluntary arbitration. Since the
parties agreed to submit to voluntary arbitration in the construction contract, the authorization insisted upon by petitioner was a mere
superfluity.36

The CA further cited National Irrigation Administration v. Court of Appeals37 (NIA), where this Court ruled that active participation in the
arbitration proceedings serves to estop a party from denying that it had in fact agreed to submit the dispute for arbitration.

Lastly, the CA found no merit in petitioner's prayer to remand the case to the CIAC.

Petitioner's Motion for Reconsideration was denied by the CA. Hence, herein petition raising the following assignment of errors:

A.

THE COURT OF APPEALS COMMITTED SERIOUS ERROR WHEN IT RULED THAT THE PETITION SUFFERED FROM
PROCEDURAL INFIRMITIES WHEN PETITIONER HEUNGHWA, IN VIEW OF THE QUESTIONS OF LAW INVOLVED IN
THE CASE, IMMEDIATELY INVOKED ITS AID BY WAY OF PETITION FOR CERTIORARI WITHOUT FIRST FILING A
MOTION FOR RECONSIDERATION OF THE CIAC'S ORDER DATED 22 MARCH 2002. THE COURT OF APPEALS
FURTHER ERRED IN RULING THAT A DENIAL OF A MOTION TO DISMISS (IN REFERENCE TO THE ORDER DATED 22
MARCH 2002), BEING AN INTERLOCUTORY ORDER, IS NOT THE PROPER SUBJECT OF A PETITION FOR
CERTIORARI.

B.

THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN CONFIRMING THE JURISDICTION OF THE CIAC
OVER THE CASE. ITS RELIANCE ON THE NATIONAL IRRIGATION AUTHORITY VS. COURT OF APPEALS ("NIA VS.
CA") WAS MISPLACED AS THE FACTS OF THE INSTANT CASE ARE SERIOUSLY AND SUBSTANTIALLY DIFFERENT
FROM THOSE OF NIA VS. CA.

C.

THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN DISREGARDING PETITIONER'S REQUEST TO AT

LEAST REMAND THE CASE TO THE CIAC FOR FURTHER RECEPTION OF EVIDENCE IN THE INTEREST OF JUSTICE
AND EQUITY AS PETITIONER COULD NOT HAVE AVAILED OF ITS OPPORTUNITY TO PRESENT ITS SIDE ON
ACCOUNT OF ITS JURISDICTIONAL OBJECTION.38

The petition is devoid of merit.

The first assignment of error raises two issues: first, whether or not the non-filing of a motion for reconsideration was fatal to the petition
for certiorari filed before the CA; and second, whether or not a petition for certiorari is the proper remedy to assail an order denying a
motion to dismiss as in the case at bar .

As a general rule, a petition for certiorari before a higher court will not prosper unless the inferior court has been given, through a
motion for reconsideration, a chance to correct the errors imputed to it. This rule, though, has certain exceptions: (1) when the issue
raised is purely of law, (2) when public interest is involved, or (3) in case of urgency. As a fourth exception, it has been held that the
filing of a motion for reconsideration before availment of the remedy of certiorari is not a condition sine qua non when the questions
raised are the same as those that have already been squarely argued and exhaustively passed upon by the lower court.39

The Court agrees with petitioner that the main issue of the petition for certiorari filed before the CA undoubtedly involved a question of
jurisdiction as to which between the RTC and the CIAC had authority to hear the case. Whether the subject matter falls within the
exclusive jurisdiction of a quasi-judicial agency is a question of law.40 Thus, given the circumstances present in the case at bar, the non-
filing of a motion for reconsideration by petitioner to the CIAC Order should have been recognized as an exception to the rule.

Anent the second issue, petitioner argues that when its motion to dismiss was denied by the CIAC, the latter acted without jurisdiction
or with grave abuse of discretion amounting to lack or excess of jurisdiction; thus, the same is the proper subject of a petition
for certiorari.

As a general rule, an order denying a motion to dismiss cannot be the subject of a petition for certiorari. However, this Court has
provided exceptions thereto:
 Under certain situations, recourse to certiorari or mandamus is considered appropriate, i.e., (a) when the trial court issued
the order without or in excess of jurisdiction; (b) where there is patent grave abuse of discretion by the trial court; or
(c) appeal would not prove to be a speedy and adequate remedy as when appeal would not promptly relieve a defendant from
the injurious effects of the patently mistaken order maintaining the plaintiff's baseless action and compelling the defendant
needlessly to go through a protracted trial and clogging the court dockets by another futile case."41 (Emphasis supplied)

The term "grave abuse of discretion" in its judicial sense connotes a capricious, despotic, oppressive or whimsical exercise of judgment
as is equivalent to lack of jurisdiction. The word "capricious," usually used in tandem with the term "arbitrary," conveys the notion of
willful and unreasoning action.42

The question then is: "Did the denial by the CIAC of the motion to dismiss constitute a patent grave abuse of discretion?"

Records show that the CIAC acted within its jurisdiction and it did not commit patent grave abuse of discretion when it issued the
assailed Order denying petitioner's motion to dismiss. Thus, this Court rules in the negative.

Based on law and jurisprudence, the CIAC has jurisdiction over the present dispute.

The CIAC, in its assailed Order, correctly applied the doctrine laid down in Philrock, Inc. v. Construction Industry Arbitration
Commission43 (Philrock) where this Court held that what vested in the CIAC original and exclusive jurisdiction over the construction
dispute was the agreement of the parties and not the Court's referral order. The CIAC aptly ruled that the recall of the referral order by
the RTC did not deprive the CIAC of the jurisdiction it had already acquired,44 thus:

x x x The position of CIAC is anchored on Executive Order No. 1008 (1985) which created CIAC and vested in it "original and
exclusive jurisdiction" over construction disputes in construction projects in the Philippines provided the parties agreed to
submit such disputes to arbitration. The basis of the Court referral is precisely the agreement of the parties in court, and that,
by this agreement as well as by the court referral of the specified issues to arbitration, under Executive Order No. 1008 (1985),
the CIAC had in fact acquired original and exclusive jurisdiction over these issues.45

In the case at bar, the RTC was indecisive of its authority and capacity to hear the case. Respondent first sought redress from the RTC
for its claim against petitioner. Thereafter, upon motion by both counsels for petitioner and respondent, the RTC allowed the referral of
five specific issues to the CIAC. However, the RTC later recalled the case from the CIAC because of the alleged lack of authority of the
counsel for petitioner to submit the case for arbitration. The RTC recalled the case even if it already admitted its lack of expertise to
deal with the intricacies of the construction business.46

Afterwards, the RTC issued a Resolution recommending that respondent file a motion to dismiss without prejudice to the counterclaim
of petitioner, so that it could pursue arbitration proceedings under the CIAC.47 Respondent complied with the recommendation of the
RTC and filed a motion to dismiss which was granted by the said court.48 Later, however, the RTC again asserted jurisdiction over the
dispute because it apparently made a mistake in granting respondent's motion to dismiss without conducting any hearing on the
motion.49

On the other hand, the CIAC's assertion of its jurisdiction over the dispute was consistent from the moment the RTC allowed the referral
of specific issues to it.

Executive Order 100850 grants to the CIAC original and exclusive jurisdiction over disputes arising from, or connected with, contracts
entered into by parties involved in construction in the Philippines. In the case at the bar, it is undeniable that the controversy involves a
construction dispute as can be seen from the issues referred to the CIAC, to wit:

1. Manpower and equipment standby time;

2. Unrecouped mobilization expenses;

3. Retention;

4. Discrepancy of billings; and

5. Price escalation for fuel and oil usage.51

xxxx

The Court notes that the Subcontract Agreement52 between the parties provides an arbitration clause, to wit:

Article 7
 Arbitration

7. Any controversy or claim between the Contractor and the Subcontractor arising out of or related to this Subcontract, or the
breach thereof, shall be settled by arbitration, which shall be conducted in the same manner and under the same
procedure as provided in the Prime Contract with Respect to claims between the Owner and the Contractor, except that a
decision by the Owner or Consultant shall not be a condition precedent to arbitration. If the Prime Contract does not provide
for arbitration or fails to specify the manner and procedure for arbitration, it shall be conducted in accordance with the law of
the Philippines currently in effect unless the Parties mutually agree otherwise.53 (Emphasis supplied)

However, petitioner insists that the General Conditions which form part of the Prime Contract provide for a specific venue for arbitration,
to wit:

5.19.3. Any dispute shall be settled under the Rules of Conciliation and Arbitration of the International Chamber of Commerce
by one or more arbitrators appointed under such Rules.54

The claim of petitioner is not plausible.

In National Irrigation Administration v. Court of Appeals55 this Court recognized the new procedure in the arbitration of disputes before
the CIAC, in this wise:

It is undisputed that the contracts between HYDRO and NIA contained an arbitration clause wherein they agreed to submit to
arbitration any dispute between them that may arise before or after the termination of the agreement. Consequently, the claim
of HYDRO having arisen from the contract is arbitrable. NIA's reliance with the ruling on the case of Tesco Services
Incorporated v. Vera, is misplaced.

The 1988 CIAC Rules of Procedure which were applied by this Court in Tesco case had been duly amended by CIAC
Resolutions No. 2-91 and 3-93, Section 1 of Article III of which reads as follows:

Submission to CIAC Jurisdiction - An arbitration clause in a construction contract or a submission to arbitration of a

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

Under the present Rules of Procedure, for a particular construction contract to fall within the jurisdiction of CIAC, it is merely
required that the parties agree to submit the same to voluntary arbitration. Unlike in the original version of Section 1, as
applied in the Tesco case, the law as it now stands does not provide that the parties should agree to submit disputes arising
from their agreement specifically to the CIAC for the latter to acquire jurisdiction over the same. Rather, it is plain and clear
that as long as the parties agree to submit to voluntary arbitration, regardless of what forum they may choose, their
agreement will fall within the jurisdiction of the CIAC, such that, even if they specifically choose another forum, the
parties will not be precluded from electing to submit their dispute before the CIAC because this right has been vested
upon each party by law, i.e., E.O. No. 1008.56 (Emphasis and underscoring supplied)

Based on the foregoing, there are two acts which may vest the CIAC with jurisdiction over a construction dispute. One is the presence
of an arbitration clause in a construction contract, and the other is the agreement by the parties to submit the dispute to the CIAC.

The first act is applicable to the case at bar. The bare fact that the parties incorporated an arbitration clause in their contract is sufficient
to vest the CIAC with jurisdiction over any construction controversy or claim between the parties. The rule is explicit that the CIAC has
jurisdiction notwithstanding any reference made to another arbitral body.

It is well-settled that jurisdiction is conferred by law and cannot be waived by agreement or acts of the parties. Thus, the contention of
petitioner that it never authorized its lawyer to submit the case for arbitration must likewise fail. Petitioner argues that notwithstanding
the presence of an arbitration clause, there must be a subsequent consent by the parties to submit the case for arbitration. To stress,
the CIAC was already vested with jurisdiction the moment both parties agreed to incorporate an arbitration clause in the sub-contract
agreement. Thus, a subsequent consent by the parties would be superfluous and unnecessary.

It must be noted however that the reliance of the CIAC in it's assailed Order on Philrock57is inaccurate. In Philrock, the Court ruled that
the CIAC had jurisdiction over the case because of the agreement of the parties to refer the case to arbitration. In the case at bar, the
agreement to refer specific issues to the CIAC is disputed by petitioner on the ground that such agreement was entered into by its
counsel who was not authorized to do so. In addition, in Philrock, the petitioner therein had actively participated in the arbitration
proceedings, while in the case at bar there where only two instances wherein petitioner participated, to wit: 1) the referral of five specific
issues to the CIAC; and 2) the subsequent manifestation that additional matters be referred to the CIAC.
The foregoing notwithstanding, CIAC has jurisdiction over the construction dispute because of the mere presence of the arbitration
clause in the subcontract agreement.

Thus, the CIAC did not commit any patent grave abuse of discretion, nor did it act without jurisdiction when it issued the assailed Order
denying petitioner's motion to dismiss. Accordingly, there is no compelling reason for this Court to deviate from the rule that a denial of
a motion to dismiss, absent a showing of lack of jurisdiction or grave abuse of discretion amounting to lack of or excess jurisdiction,
being an interlocutory order, is not the proper subject of a petition for certiorari.

Anent the second assigned error, the Court notes that the reliance of the CA on NIA  is inaccurate. In NIA,58this Court observed:

Moreover, it is undeniable that NIA agreed to submit the dispute for arbitration to the CIAC. NIA through its counsel actively
participated in the arbitration proceedings by filing an answer with counterclaim, as well as its compliance wherein it nominated
arbitrators to the proposed panel, participating in the deliberations on, and the formulation of the Terms of Reference of the
arbitration proceeding, and examining the documents submitted by HYDRO after NIA asked for originals of the said
documents."59

In the case at bar, the only participation that can be attributed to petitioner is the joint referral of specific issues to the CIAC and the
manifestation praying that additional matters be referred to the CIAC. Both acts, however, have been disputed by petitioner because
said acts were performed by their lawyer who was not authorized to submit the case for arbitration. And even if these were duly
authorized, this would still not change the correct finding of the CA that the CIAC had jurisdiction over the dispute because, as has been
earlier stressed, the arbitration clause in the subcontract agreement ipso facto vested the CIAC with jurisdiction.

In passing, even the RTC in its Resolution recognized the authority of the CIAC to hear the case, to wit:

Courts cannot and will not resolve a controversy involving a question which is within the jurisdiction of an administrative
tribunal, especially where the question demands the exercise of sound administrative discretion requiring the special
knowledge, experience and services of the administrative tribunal to determine technical and intricate matters of fact. And
undoubtedly in this case, the CIAC it cannot be denied, is that administrative tribunal. 60(Emphasis supplied)

It puzzles this Court why petitioner would insist that the RTC should hear the case when the CIAC has the required skill and expertise in
addressing construction disputes. Records will bear out the fact that petitioner refused to and did not participate in the CIAC
proceedings. In its defense, petitioner cited jurisprudence to the effect that active participation before a quasi-judicial body would be
tantamount to an invocation of the latter bodies' jurisdiction and a willingness to abide by the resolution of the case.61 Pursuant to such
doctrine, petitioner argued that had it participated in the CIAC proceedings, it would have been barred from impugning the jurisdiction of
the CIAC.

Petitioner cannot presume that it would have been estopped from questioning the jurisdiction of the CIAC had it participated in the
proceedings. In fact, estoppel is a matter for the court to consider. The doctrine of laches or of stale demands is based upon grounds of
public policy which requires, for the peace of society, the discouragement of stale claims and, unlike the statute of limitations, is not a
mere question of time but is principally a question of the inequity or unfairness of permitting a right or claim to be enforced or
asserted.62 The Court always looks into the attendant circumstances of the case so as not to subvert public policy.63 Given that
petitioner questioned the jurisdiction of the CIAC from the beginning, it was not remiss in enforcing its right. Hence, petitioner's claim
that it would have been estopped is premature.

The Court finds the last assigned error to be without merit.

It is well to note that in its petition for certiorari64 filed with the CA on April 9, 2002, petitioner prayed for the issuance of a temporary
restraining order and a writ of preliminary injunction to enjoin the CIAC from hearing the case. On September 27, 2002, the CIAC
promulgated its decision awarding Php31,119,465.81 to respondent. It is unfortunate for petitioner that the CA did not timely act on its
petition. Records show that the temporary restraining order65 was issued only on October 15, 2002 and a writ of preliminary
injunction66 was granted on December 11, 2002, long after the CIAC had concluded its proceedings. The only effect of the writ was to
enjoin temporarily the enforcement of the award of the CIAC.

The Court notes that had the CA performed its duty promptly, then this present petition could have been avoided as the CIAC rules
allow for the reopening of hearings, to wit:

SECTION 13.14 Reopening of hearing - The hearing may be reopened by the Arbitral Tribunal on their own motion or
upon the request of any party, upon good cause shown, at any time before the award is rendered. When hearings are
thus reopened, the effective date for the closing of the hearing shall be the date of closing of the reopened hearing. (Emphasis
supplied)

But because of the belated action of the CA, the CIAC had to proceed with the hearing notwithstanding the non-participation of
petitioner.
Under the CIAC rules, even without the participation of petitioner in the proceedings, the CIAC was still required to proceed with the
hearing of the construction dispute. Section 4.2 of the CIAC rules provides:

SECTION 4.2 Failure or refusal to arbitrate - Where the jurisdiction of CIAC is properly invoked by the filing of a Request
for Arbitration in accordance with these Rules, the failure despite due notice which amounts to a refusal of the
Respondent to arbitrate, shall not stay the proceedings notwithstanding the absence or lack of participation of the
Respondent. In such case, CIAC shall appoint the arbitrator/s in accordance with these Rules. Arbitration proceedings shall
continue, and the award shall be made after receiving the evidence of the Claimant. (Emphasis and underscoring supplied)

This Court finds that the CIAC simply followed its rules when it proceeded with the hearing of the dispute notwithstanding that petitioner
refused to participate therein.

To reiterate, the proceedings before the CIAC were valid, for the same had been conducted within its authority and jurisdiction and in
accordance with the rules of procedure provided by Section 4.2 of the CIAC Rules.

The ruling of the Supreme Court in Lastimoso v. Asayo67 is instructive:

xxxx

In addition, it is also understandable why respondent immediately resorted to the remedy of certiorari instead of pursuing his
motion for reconsideration of the PNP Chief's decision as an appeal before the National Appellate Board (NAB). It was quite
easy to get confused as to which body had jurisdiction over his case. The complaint filed against respondent could
fall under both Sections 41 and 42 of Republic Act (R.A.) No. 6975 or the Department of Interior and Local
Government Act of 1990. Section 41 states that citizens' complaints should be brought before the People's Law Enforcement
Board (PLEB), while Section 42 states that it is the PNP Chief who has authority to immediately remove or dismiss a PNP
member who is guilty of conduct unbecoming of a police officer.

It was only in Quiambao v. Court of Appeals, promulgated in 2005 or after respondent had already filed the petition
for certiorari with the trial court, when the Court resolved the issue of which body has jurisdiction over cases that fall
under both Sections 41 and 42 of R.A. No. 6975. x x x

With the foregoing peculiar circumstances in this case, respondent should not be deprived of the opportunity to fully ventilate
his arguments against the factual findings of the PNP Chief. x x x

xxxx

Thus, the opportunity to pursue an appeal before the NAB should be deemed available to respondent in the higher interest of
substantial justice.68 (Emphasis supplied)

In Lastimoso, this Court allowed respondent to appeal his case before the proper agency because of the confusion as to which agency
had jurisdiction over the case. In the case at bar, law and supporting jurisprudence are clear and leave no room for interpretation that
the CIAC has jurisdiction over the present controversy.

The proceedings cannot then be voided merely because of the non-participation of petitioner. Section 4.2 of the CIAC Rules is clear
and it leaves no room for interpretation. Therefore, petitioner's prayer that the case be remanded to CIAC in order that it may be given
an opportunity to present evidence is untenable. Petitioner had its chance and lost it, more importantly so, by its own choice. This Court
will not afford a relief that is apparently inconsistent with the law.

WHEREFORE, the petition is denied for lack of merit. The August 20, 2004 Decision and August 1, 2005 Resolution of the Court of
Appeals in CA-G.R. SP Nos. 70001 and 71621 are AFFIRMED.

Double costs against petitioner.

SO ORDERED.

G.R. No. 167022               April 4, 2011

LICOMCEN INCORPORATED, Petitioner,
vs.
FOUNDATION SPECIALISTS, INC., Respondent.

x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. No. 169678

FOUNDATION SPECIALISTS, INC., Petitioner,

vs.
LICOMCEN INCORPORATED, Respondent.

DECISION

BRION, J.:

THE FACTS

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

In March 1997, the City Government of Legaspi awarded to LICOMCEN, after a public bidding, a lease contract over a lot located in the
central business district of the city. Under the contract, LICOMCEN was obliged to finance the construction of a commercial
complex/mall to be known as the LCC Citimall (Citimall). It was also granted the right to operate and manage Citimall for 50 years, and
was, thereafter, required to turn over the ownership and operation to the City Government.1

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

On December 16, 1997, LICOMCEN sent word to FSI that it was considering major design revisions and the suspension of work on the
Citimall project. FSI replied on December 18, 1997, expressing concern over the revisions and the suspension, as it had fully mobilized
its manpower and equipment, and had ordered the delivery of steel bars. FSI also asked for the payment of accomplished work
amounting to ₱3,627,818.00.7 A series of correspondence between LICOMCEN and FSI then followed.

ESCA wrote FSI on January 6, 1998, stating that the revised design necessitated a change in the bored piles requirement and a
substantial reduction in the number of piles. Thus, ESCA proposed to FSI that only 50% of the steel bars be delivered to the jobsite and
the rest be shipped back to Manila.8 Notwithstanding this instruction, all the ordered steel bars arrived in Legaspi City on January 14,
1998.9

On January 15, 1998, LICOMCEN instructed FSI to "hold all construction activities on the project,"10 in view of a pending administrative
case against the officials of the City Government of Legaspi and LICOMCEN filed before the Ombudsman (OMB-ADM-1-97-0622).11 On
January 19, 1998, ESCA formalized the suspension of construction activities and ordered the construction’s demobilization until the
case was resolved.12 In response, FSI sent ESCA a letter, dated February 3, 1998, requesting payment of costs incurred on account of
the suspension which totaled ₱22,667,026.97.13 FSI repeated its demand for payment on March 3, 1998.14

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

On March 14, 2001, FSI sent a final demand letter to LICOMCEN for payment of ₱29,232,672.83.17 Since LICOMCEN took no positive
action on FSI’s demand for payment,18 FSI filed a petition for arbitration with the Construction Industry Arbitration Commission (CIAC)
on October 2, 2002, docketed as CIAC Case No. 37-2002.19 In the arbitration petition, FSI demanded payment of the following
amounts:

a. Unpaid accomplished work billings……………. P 1,264,404.12

b. Material costs at site…………………………….. 15,143,638.51
c. Equipment and labor standby
3,058,984.34
costs……………..
d. Unrealized gross profit………………………….. 9,023,575.29
e. Attorney’s fees………………………………….. 300,000.00
f. Interest expenses …………... equivalent to 15%
 of the total claim

LICOMCEN again denied liability for the amounts claimed by FSI. It justified its decision to indefinitely suspend the Citimall project due
to the cases filed against it involving its Lease Contract with the City Government of Legaspi. LICOMCEN also assailed the CIAC’s
jurisdiction, contending that FSI’s claims were matters not subject to arbitration under GC-61 of the GCC, but one that should have
been filed before the regular courts of Legaspi City pursuant to GC-05.20

During the preliminary conference of January 28, 2003, LICOMCEN reiterated its objections to the CIAC’s jurisdiction, which the
arbitrators simply noted. Both FSI and LICOMCEN then proceeded to draft the Terms of Reference.21

On February 4, 2003, LICOMCEN, through a collaborating counsel, filed its Ex Abundati Ad Cautela Omnibus Motion, insisting that
FSI’s petition before the CIAC should be dismissed for lack of jurisdiction; thus, it prayed for the suspension of the arbitration
proceedings until the issue of jurisdiction was finally settled. The CIAC denied LICOMCEN’s motion in its February 20, 2003
order,22 finding that the question of jurisdiction depends on certain factual conditions that have yet to be established by ample evidence.
As the CIAC’s February 20, 2003 order stood uncontested, the arbitration proceedings continued, with both parties actively
participating.

The CIAC issued its decision on July 7, 2003,23 ruling in favor of FSI and awarding the following amounts:

a. Unpaid accomplished work

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

LICOMCEN was also required to bear the costs of arbitration in the total amount of ₱474,407.95.

LICOMCEN appealed the CIAC’s decision before the Court of Appeals (CA). On November 23, 2004, the CA upheld the CIAC’s
decision, modifying only the amounts awarded by (a) reducing LICOMCEN’s liability for material costs at site to ₱5,694,939.87, and (b)
deleting its liability for equipment and labor standby costs and unrealized gross profit; all the other awards were affirmed.24 Both parties
moved for the reconsideration of the CA’s Decision; LICOMCEN’s motion was denied in the CA’s February 4, 2005 Resolution, while
FSI’s motion was denied in the CA’s September 13, 2005 Resolution. Hence, the parties filed their own petition for review on certiorari
before the Court.25

LICOMCEN’s Arguments

LICOMCEM principally raises the question of the CIAC’s jurisdiction, insisting that FSI’s claims are non-arbitrable. In support of its
position, LICOMCEN cites GC-61 of the GCC:

GC-61. DISPUTES AND ARBITRATION

Should any dispute of any kind arise between the LICOMCEN INCORPORATED and the Contractor [referring to FSI] or the Engineer
[referring to ESCA] and the Contractor in connection with, or arising out of the execution of the Works, such dispute shall first be
referred to and settled by the LICOMCEN, INCORPORATED who shall within a period of thirty (30) days after being formally requested
by either party to resolve the dispute, issue a written decision to the Engineer and Contractor.

Such decision shall be final and binding upon the parties and the Contractor shall proceed with the execution of the Works with due
diligence notwithstanding any Contractor's objection to the decision of the Engineer. If within a period of thirty (30) days from receipt of
the LICOMCEN, INCORPORATED's decision on the dispute, either party does not officially give notice to contest such decision through
arbitration, the said decision shall remain final and binding. However, should any party, within thirty (30) days from receipt of the
LICOMCEN, INCORPORATED's decision, contest said decision, the dispute shall be submitted for arbitration under the Construction
Industry Arbitration Law, Executive Order 1008. The arbitrators appointed under said rules and regulations shall have full power to open
up, revise and review any decision, opinion, direction, certificate or valuation of the LICOMCEN, INCORPORATED. Neither party shall
be limited to the evidence or arguments put before the LICOMCEN, INCORPORATED for the purpose of obtaining his said decision.
No decision given by the LICOMCEN, INCORPORATED shall disqualify him from being called as a witness and giving evidence in the
arbitration. It is understood that the obligations of the LICOMCEN, INCORPORATED, the Engineer and the Contractor shall not be
altered by reason of the arbitration being conducted during the progress of the Works.26

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

GC-05. JURISDICTION

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

LICOMCEN also contends that FSI failed to comply with the condition precedent for arbitration laid down in GC-61 of the GCC. An
arbitrable dispute under GC-61 must first be referred to and settled by LICOMCEN, which has 30 days to resolve it. If within a period of
30 days from receipt of LICOMCEN’s decision on the dispute, either party does not officially give notice to contest such decision
through arbitration, the said decision shall remain final and binding. However, should any party, within 30 days from receipt of
LICOMCEN’s decision, contest said decision, the dispute shall be submitted for arbitration under the Construction Industry Arbitration
Law.

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

With respect to the monetary claims of FSI, LICOMCEM alleges that the CA erred in upholding its liability for material costs at site for
the reinforcing steel bars in the amount of ₱5,694,939.87, computed as follows30:

2nd initial rebar requirements purchased from Pag-Asa Steel Works,

Inc……………………………….. ₱ 799,506.83
Reinforcing steel bars purchased from ARCA Industrial Sales (total net weight of
744,197.66 kilograms) – 50% of net amount due………………. 5,395,433.04

Subtotal……………………………………………. 6,194,939.87
Less  
Purchase cost of steel bars by Ramon Quinquileria…………………………………….. (500,000.00)
TOTAL LIABILITY OF LICOMCEN TO FSI FOR MATERIAL COSTS AT
SITE……………... 5,694,939.87

Citing GC-42(2) of the GCC, LICOMCEN says it shall be liable to pay FSI "[t]he cost of materials or goods reasonably ordered for the
Permanent or Temporary Works which have been delivered to the Contractor but not yet used, and which delivery has been certified by
the Engineer."31 None of these requisites were allegedly complied with. It contends that FSI failed to establish that the steel bars
delivered in Legaspi City, on January 14, 1998, were for the Citimall project. In fact, the steel bars were delivered not at the site of the
Citimall project, but at FSI’s batching plant called Tuanzon compound, a few hundred meters from the site. Even if delivery to Tuanzon
was allowed, the delivery was done in violation of ESCA’s instruction to ship only 50% of the materials. Advised as early as December
1997 to suspend the works, FSI proceeded with the delivery of the steel bars in January 1998. LICOMCEN declared that it should not
be made to pay for costs that FSI willingly incurred for itself.32

Assuming that LICOMCEN is liable for the costs of the steel bars, it argues that its liability should be minimized by the fact that FSI
incurred no actual damage from the purchase and delivery of the steel bars. During the suspension of the works, FSI sold 125,000 kg of
steel bars for ₱500,000.00 to a third person (a certain Ramon Quinquileria). LICOMCEN alleges that FSI sold the steel bars for a
ridiculously low price of ₱ 4.00/kilo, when the prevailing rate was ₱20.00/kilo. The sale could have garnered a higher price that would
offset LICOMCEN’s liability. LICOMCEN also wants FSI to account for and deliver to it the remaining 744 metric tons of steel bars not
sold. Otherwise, FSI would be unjustly enriched at LICOMCEN’s expense, receiving payment for materials not delivered to
LICOMCEN.33

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

FSI’s Arguments
FSI takes exception to the CA ruling that modified the amount for material costs at site, and deleted the awards for equipment and labor
standby costs and unrealized profits.

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

ESCA’s January 6, 1998 letter simply suggested that only 50% of the steel bars be shipped to Legaspi City; it was not a clear and
specific directive. Even if it was, the steel bars were ordered and paid for long before the notice to suspend was given; by then, it was
too late to stop the delivery. FSI also claims that since it believed in good faith that the Citimall project was simply suspended, it
expected work to resume soon after and decided to proceed with the shipment.37

Contrary to LICOMCEN’s arguments, GC-42 of the GCC does not require delivery of the materials at the site of the Citimall project; it
only requires delivery to the contractor, which is FSI. Moreover, the Tuanzon compound, where the steel bars were actually delivered,
is very close to the Citimall project site. FSI contends that it is a normal construction practice for contractors to set up a "staging site," to
prepare the materials and equipment to be used, rather than stock them in the crowded job/project site. FSI also asserts that it was
useless to have the delivery certified by ESCA because by then the Citimall project had been suspended. It would be unfair to demand
FSI to perform an act that ESCA and LICOMCEN themselves had prevented from happening.38

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

FSI also alleges that LICOMCEN maliciously and unlawfully suspended the Citimall project. While LICOMCEN cited several other
cases in its petition for review on certiorari as grounds for suspending the works, its letters/notices of suspension only referred to one
case, OMB-ADM-1-97-0622, an administrative case before the Ombudsman that was dismissed as early as October 12, 1998.
LICOMCEN never notified FSI of the dismissal of this case. More importantly, no restraining order or injunction was issued in any of
these cases to justify the suspension of the Citimall project.40 FSI posits that LICOMCEN’s true intent was to terminate its contract with
it, but, to avoid paying damages for breach of contract, simply declared it as "indefinitely suspended." That LICOMCEN conducted
another public bidding for the "new designs" is a telling indication of LICOMCEN’s intent to ease out FSI.41 Thus, FSI states that
LICOMCEN’s bad faith in indefinitely suspending the Citimall project entitles it to claim unrealized profit. The restriction under GC-41
that "[t]he contractor shall have no claim for anticipated profits on the work thus terminated,"42 will not apply because the stipulation
refers to a contract lawfully and properly terminated. FSI seeks to recover unrealized profits under Articles 1170 and 2201 of the Civil
Code.

THE COURT’S RULING

The jurisdiction of the CIAC

The CIAC was created through Executive Order No. 1008 (E.O. 1008), in recognition of the need to establish an arbitral machinery that
would expeditiously settle construction industry disputes. The prompt resolution of problems arising from or connected with the
construction industry was considered of necessary and vital for the fulfillment of national development goals, as the construction
industry provides employment to a large segment of the national labor force and is a leading contributor to the gross national
product.43 Section 4 of E.O. 1008 states:

Sec. 4. Jurisdiction. The CIAC shall have original and exclusive jurisdiction over disputes arising from, or connected with, contracts
entered into by parties involved in construction in the Philippines, whether the dispute arises before or after the completion of the
contract, or after the abandonment or breach thereof. These disputes may involve government or private contracts. For the Board to
acquire jurisdiction, the parties to a dispute must agree to submit the same to voluntary arbitration.

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

Excluded from the coverage of this law are disputes arising from employer-employee relationships which shall continue to be covered
by the Labor Code of the Philippines.

The jurisdiction of courts and quasi-judicial bodies is determined by the Constitution and the law.44 It cannot be fixed by the will of the
parties to a dispute;45 the parties can neither expand nor diminish a tribunal’s jurisdiction by stipulation or agreement. The text of
Section 4 of E.O. 1008 is broad enough to cover any dispute arising from, or connected with construction contracts, whether these
involve mere contractual money claims or execution of the works.46 Considering the intent behind the law and the broad language
adopted, LICOMCEN erred in insisting on its restrictive interpretation of GC-61. The CIAC’s jurisdiction cannot be limited by the parties’
stipulation that only disputes in connection with or arising out of the physical construction activities (execution of the works) are
arbitrable before it.
In fact, all that is required for the CIAC to acquire jurisdiction is for the parties to a construction contract to agree to submit their dispute
to arbitration. Section 1, Article III of the 1988 CIAC Rules of Procedure (as amended by CIAC Resolution Nos. 2-91 and 3-93) states:

Section 1. Submission to CIAC Jurisdiction. – An arbitration clause in a construction contract or a submission to arbitration of a
construction dispute shall be deemed an agreement to submit an existing or future controversy to CIAC jurisdiction, notwithstanding the
reference to a different arbitration institution or arbitral body in such contract or submission. When a contract contains a clause for the
submission of a future controversy to arbitration, it is not necessary for the parties to enter into a submission agreement before the
claimant may invoke the jurisdiction of CIAC.

An arbitration agreement or a submission to arbitration shall be in writing, but it need not be signed by the parties, as long as the intent
is clear that the parties agree to submit a present or future controversy arising from a construction contract to arbitration.

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

Under GC-61 and GC-05 of the GCC, read singly and in relation with one another, the Court sees no intent to limit resort to arbitration
only to disputes relating to the physical construction activities.

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

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

GC-05. JURISDICTION

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

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

If the CIAC’s jurisdiction can neither be enlarged nor diminished by the parties, it also cannot be subjected to a condition precedent.
GC-61 requires a party disagreeing with LICOMCEN’s decision to "officially give notice to contest such decision through arbitration"
within 30 days from receipt of the decision. However, FSI’s April 15, 1998 letter is not the notice contemplated by GC-61; it never
mentioned FSI’s plan to submit the dispute to arbitration and instead requested LICOMCEN to reevaluate its claims. Notwithstanding
FSI’s failure to make a proper and timely notice, LICOMCEN’s decision (embodied in its March 24, 1998 letter) cannot become "final
and binding" so as to preclude resort to the CIAC arbitration. To reiterate, all that is required for the CIAC to acquire jurisdiction is for
the parties to agree to submit their dispute to voluntary arbitration:

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

The CIAC is given the original and exclusive jurisdiction over disputes arising from, or connected with, contracts entered into by parties
involved in construction in the Philippines.49 This jurisdiction cannot be altered by stipulations restricting the nature of construction
disputes, appointing another arbitral body, or making that body’s decision final and binding.

The jurisdiction of the CIAC to resolve the dispute between LICOMCEN and FSI is, therefore, affirmed.

The validity of the indefinite

suspension of the works on the
Citimall project
Before the Court rules on each of FSI’s contractual monetary claims, we deem it important to discuss the validity of LICOMCEN’s
indefinite suspension of the works on the Citimall project. We quote below two contractual stipulations relevant to this issue:

GC-38. SUSPENSION OF WORKS

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

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

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

GC-41 LICOMCEN, INCORPORATED's RIGHT TO SUSPEND WORK OR TERMINATE THE CONTRACT

xxxx

2. For Convenience of LICOMCEN, INCORPORATED

If any time before completion of work under the Contract it shall be found by the LICOMCEN, INCORPORATED that reasons beyond
the control of the parties render it impossible or against the interest of the LICOMCEN, INCORPORATED to complete the work, the
LICOMCEN, INCORPORATED at any time, by written notice to the Contractor, may discontinue the work and terminate the Contract in
whole or in part. Upon the issuance of such notice of termination, the Contractor shall discontinue to work in such manner, sequence
and at such time as the LICOMCEN, INCORPORATED/Engineer may direct, continuing and doing after said notice only such work and
only until such time or times as the LICOMCEN, INCORPORATED/Engineer may direct.51

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

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

But what is more appalling and disgusting is the allegation x x x that the x x x invitation to bid was issued x x x solely to gather cost
estimates on the redesigned [Citimall project] x x x. This Arbitral Tribunal finds said act of asking for bids, without any intention of
awarding the project to the lowest and qualified bidder, if true, to be extremely irresponsible and highly unprofessional. It might even be
branded as fraudulent x x x [since] the invited bidders [were required] to pay P2,000.00 each for a set of the new plans, which amount
was non-refundable. The presence of x x x deceit makes the whole story repugnant and unacceptable.55

LICOMCEN’s omissions and the imprudent rebidding of the Citimall project are telling indications of LICOMCEN’s intent to ease out FSI
and terminate their contract. As with GC-31, GC-42(2) grants LICOMCEN ample discretion to determine what reasons render it against
its interest to complete the work – in this case, the pendency of the other cases and the revised designs for the Citimall project. Given
this authority, the Court fails to the see the logic why LICOMCEN had to resort to an "indefinite suspension" of the works, instead of
outrightly terminating the contract in exercise of its rights under GC-42(2).
We now proceed to discuss the effects of these findings with regard to FSI’s monetary claims against LICOMCEN.

The claim for material costs at site

GC-42 of the GCC states:

GC-42 PAYMENT FOR TERMINATED CONTRACT

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

1. The cost of partially accomplished items of additional or extra work agreed upon by the LICOMCEN, INCORPORATED and
the Contractor.

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

3. The reasonable cost of demobilization

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

For LICOMCEN to be liable for the cost of materials or goods, item two of GC-42 requires that

a. the materials or goods were reasonably ordered for the Permanent or Temporary Works;

b. the materials or goods were delivered to the Contractor but not yet used; and

c. the delivery was certified by the Engineer.

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

Prior to the delivery of the steel bars, ESCA informed FSI of the suspension of the works; ESCA’s January 6, 1998 letter reads:

As per our information to you on December 16, 1997, a major revision in the design of the Legaspi Citimall necessitated a change in
the bored piles requirement of the project. The change involved a substantial reduction in the number and length of piles.

We expected that you would have suspended the deliveries of the steel bars until the new design has been approved.

According to you[,] the steel bars had already been paid and loaded and out of Manila on said date.

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

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

From the above, it appears that FSI was informed of the necessity of suspending the works as early as December 16, 1997. Pursuant
to GC-38 of the GCC, FSI was expected to immediately comply with the order to suspend the work.58 Though ESCA’s December 16,
1997 notice may not have been categorical in ordering the suspension of the works, FSI’s reply letter of December 18, 1997 indicated
that it actually complied with the notice to suspend, as it said, "We hope for the early resolution of the new foundation plan and the
resumption of work."59 Despite the suspension, FSI claimed that it could not stop the delivery of the steel bars (nor found the need to do
so) because (a) the steel bars were ordered as early as November 1997 and were already loaded in Manila and expected to arrive in
Legaspi City by December 23, 1997, and (b) it expected immediate resumption of work to meet the 90-day deadline.60

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

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

The above stipulation, coupled with the short period it took to ship the steel bars from Cagayan de Oro to Legaspi City, thus negates
both FSI’s

argument and the CIAC’s ruling64 that there was no necessity to stop the shipment so as to meet the 90-day deadline. These
circumstances prove that FSI acted imprudently in proceeding with the delivery, contrary to LICOMCEN’s instructions. The CA was
correct in holding LICOMCEN liable for only 50% of the costs of the steel bars delivered.

The claim for equipment and

labor standby costs

The Court upholds the CA’s ruling deleting the award for equipment and labor standby costs. We quote in agreement pertinent portions
of the CA decision:

The CIAC relied solely on the list of 37 pieces of equipment respondent allegedly rented and maintained at the construction site during
the suspension of the project with the prorated rentals incurred x x x. To the mind of this Court, these lists are not sufficient to establish
the fact that indeed [FSI] incurred the said expenses. Reliance on said lists is purely speculative x x x the list of equipments is a mere
index or catalog of the equipments, which may be utilized at the construction site. It is not the best evidence to prove that said
equipment were in fact rented and maintained at the construction site during the suspension of the work. x x x [FSI] should have
presented the lease contracts or any similar documents such as receipts of payments x x x. Likewise, the list of employees does not in
anyway prove that those employees in the list were indeed at the construction site or were required to be on call should their services
be needed and were being paid their salaries during the suspension of the project. Thus, in the absence of sufficient evidence, We
deny the claim for equipment and labor standby costs.65

The claim for unrealized profit

FSI contends that it is not barred from recovering unrealized profit under GC-41(2), which states:

GC-41. LICOMCEN, INCORPORATED’s RIGHT TO SUSPEND WORK OR TERMINATE THE CONTRACT

xxxx

2. For Convenience of the LICOMCEN, INCORPORATED

x x x. The Contractor [FSI] shall not claim damages for such discontinuance or termination of the Contract, but the Contractor shall
receive compensation for reasonable expenses incurred in good faith for the performance of the Contract and for reasonable expenses
associated with termination of the Contract. The LICOMCEN, INCORPORATED will determine the reasonableness of such expenses.
The Contractor [FSI] shall have no claim for anticipated profits on the work thus terminated, nor any other claim, except for the work
actually performed at the time of complete discontinuance, including any variations authorized by the LICOMCEN,
INCORPORATED/Engineer to be done.

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

Nonetheless, on account of our earlier discussion of LICOMCEN’s failure to observe the proper procedure in terminating the contract by
declaring that it was merely indefinitely suspended, we deem that FSI is entitled to the payment of nominal damages. Nominal damages
may be awarded to a plaintiff whose right has been violated or invaded by the defendant, for the purpose of vindicating or recognizing
that right, and not for indemnifying the plaintiff for any loss suffered by him.68 Its award is, thus, not for the purpose of indemnification for
a loss but for the recognition and vindication of a right. A violation of the plaintiff’s right, even if only technical, is sufficient to support an
award of nominal damages.69 FSI is entitled to recover the amount of ₱100,000.00 as nominal damages.
The liability for costs of arbitration

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

WHEREFORE, premises considered, the petition for review on certiorari of LICOMCEN INCORPORATED, docketed as G.R. No.
167022, and the petition for review on certiorari of FOUNDATION SPECIALISTS, INC., docketed as G.R. No. 169678, are DENIED.
The November 23, 2004 Decision of the Court of Appeals in CA-G.R. SP No. 78218 is MODIFIED to include the award of nominal
damages in favor of FOUNDATION SPECIALISTS, INC. Thus, LICOMCEN INCORPORATED is ordered to pay FOUNDATION
SPECIALISTS, INC. the following amounts:

a. ₱1,264,404.12 for unpaid balance on FOUNDATION SPECIALISTS, INC. billings;

b. ₱5,694,939.87 for material costs at site; and

c. ₱100,000.00 for nominal damages.

LICOMCEN INCORPORATED is also ordered to pay the costs of arbitration. No costs.

SO ORDERED.

G.R. No. 180640               April 24, 2009

HUTAMA-RSEA JOINT OPERATIONS, INC., Petitioner,

vs.
CITRA METRO MANILA TOLLWAYS CORPORATION, Respondent.

DECISION

CHICO-NAZARIO, J.:

Before Us is a Petition1 for Review on Certiorari under Rule 45 of the Rules of Court seeking to set aside the Decision2 dated 23 May
2007 and Resolution3 dated 16 November 2007 of the Court of Appeals in CA-G.R. SP No. 92504.

The facts, culled from the records, are as follows:

Petitioner HUTAMA-RSEA Joint Operations Incorporation and respondent Citra Metro Manila Tollways Corporation are corporations
organized and existing under Philippine laws. Petitioner is a sub-contractor engaged in engineering and construction works.
Respondent, on the other hand, is the general contractor and operator of the South Metro Manila Skyway Project (Skyway Project).

On 25 September 1996, petitioner and respondent entered into an Engineering Procurement Construction Contract (EPCC) whereby
petitioner would undertake the construction of Stage 1 of the Skyway Project, which stretched from the junction of Buendia Avenue,
Makati City, up to Bicutan Interchange, Taguig City. As consideration for petitioner’s undertaking, respondent obliged itself under the
EPCC to pay the former a total amount of US$369,510,304.00.4

During the construction of the Skyway Project, petitioner wrote respondent on several occasions requesting payment of the former’s
interim billings, pursuant to the provisions of the EPCC. Respondent only partially paid the said interim billings, thus, prompting
petitioner to demand that respondent pay the outstanding balance thereon, but respondent still failed to do so.5

The Skyway Project was opened on 15 December 1999 for public use, and toll fees were accordingly collected. After informing
respondent that the construction of the Skyway Project was already complete, petitioner reiterated its demand that respondent pay the
outstanding balance on the interim billings, as well as the "Early Completion Bonus" agreed upon in the EPCC. Respondent refused to
comply with petitioner’s demands.6

On 24 May 2004, petitioner, through counsel, sent a letter to respondent demanding payment of the following: (1) the outstanding
balance on the interim billings; (2) the amount of petitioner’s final billing; (3) early completion bonus; and (4) interest charges on the
delayed payment. Thereafter, petitioner and respondent, through their respective officers and representatives, held several meetings to
discuss the possibility of amicably settling the dispute. Despite several meetings and continuous negotiations, lasting for a period of
almost one year, petitioner and respondent failed to reach an amicable settlement.7
Petitioner finally filed with the Construction Industry Arbitration Commission (CIAC) a Request for Arbitration, seeking to enforce its
money claims against respondent.8 Petitioner’s Request was docketed as CIAC Case No. 17-2005.

In its Answer ad cautelam with Motion to Dismiss, respondent averred that the CIAC had no jurisdiction over CIAC Case No. 17-2005.
Respondent argued that the filing by petitioner of said case was premature because a condition precedent, i.e., prior referral by the
parties of their dispute to the Dispute Adjudication Board (DAB), required by Clause 20.4 of the EPCC, had not been satisfied or
complied with. Respondent asked the CIAC to dismiss petitioner’s Request for Arbitration in CIAC Case No. 17-2005 and to direct the
parties to comply first with Clause 20.4 of the EPCC.9

After submission by the parties of the necessary pleadings on the matter of jurisdiction, the CIAC issued on 30 August 2005, an Order
in CIAC Case No. 17-2005, favoring petitioner. The CIAC ruled that it had jurisdiction over CIAC Case No. 17-2005, and that the
determination of whether petitioner had complied with Clause 20.4 of the EPCC was a factual issue that may be resolved during the
trial. It then ordered respondent to file an Answer to petitioner’s Request for Arbitration.10

After respondent and petitioner filed an Answer and a Reply, respectively, in CIAC Case No. 17-2005, the CIAC conducted a
preliminary conference, wherein petitioner and respondent signed the "Terms of Reference" outlining the issues to be resolved, viz:

(1) Is prior resort to the DAB a precondition to submission of the dispute to arbitration considering that the DAB was not
constituted?;

(2) Is [herein petitioner] entitled to the balance of the principal amount of the contract? If so, how much?;

(3) Is [petitioner] entitled to the early compensation bonus net of VAT due thereon? If so, how much?;

(4) Was there delay in the completion of the project? If so, is [herein respondent] entitled to its counterclaim for liquidated
damages?;

(5) Is [petitioner] entitled to payment of interest on the amounts of its claims for unpaid billings and early completion bonus? If
so, at what rate and for what period?;

(6) Which of the parties is entitled to reimbursement of the arbitration costs incurred? 11

Respondent, however, subsequently filed an Urgent Motion requesting that CIAC refrain from proceeding with the trial proper of CIAC
Case No. 17-2005 until it had resolved the issue of whether prior resort by the parties to DAB was a condition precedent to the
submission of the dispute to CIAC.12 Respondent’s Urgent Motion was denied by the CIAC in its Order dated 6 December 2005.13

Respondent filed a Motion for Reconsideration of the CIAC Order dated 6 December 2005.14 The CIAC issued, on 12 December 2005,
an Order denying respondent’s Motion for Reconsideration.15 It held that prior resort by the parties to DAB was not a condition
precedent for it to assume jurisdiction over CIAC Case No. 17-2005. Aggrieved, respondent assailed the CIAC Order dated 12
December 2005 by filing a special civil action for certiorari and prohibition with the Court of Appeals,16 docketed as CA-G.R. SP No.
92504.

On 23 May 2007, the Court of Appeals rendered its Decision in CA-G.R. SP No. 92504, annulling the 12 December 2005 Order of the
CIAC, and enjoining the said Commission from proceeding with CIAC Case No. 17-2005 until the dispute between petitioner and
respondent had been referred to and decided by the DAB, to be constituted by the parties pursuant to Clause 20.4 of the EPCC. The
appellate court, thus, found that the CIAC exceeded its jurisdiction in taking cognizance of petitioner’s Request for Arbitration in CIAC
Case No. 17-2005 despite the latter’s failure to initially refer its dispute with respondent to the DAB, as directed by Clause 20.4 of the
EPCC.

The dispositive portion of the 23 May 2007 Decision of the Court of Appeals reads:

WHEREFORE, the instant petition is GRANTED and the order of the Arbitration Tribunal of the Construction Industry Arbitration
Commission dated December 12, 2005 is hereby ANNULED and SET ASIDE and, instead, [CIAC, members of the Arbitral
Tribunal,17 and herein petitioner], their agents or anybody acting in their behalf, are enjoined from further proceeding with CIAC Case
No. 17-2005, promulgating a decision therein, executing the same if one has already been promulgated or otherwise enforcing said
order of December 12, 2005 until the dispute has been referred to and decided by the Dispute Adjudication Board to be constituted by
the parties in accordance with Sub-Clause 20.4 of the Engineering Procurement Construction Contract dated September 25, 1996.

Petitioner filed a Motion for Reconsideration of the afore-mentioned Decision but this was denied by the Court of Appeals in a
Resolution dated 16 November 2007.

Hence, petitioner filed the instant Petition for Review before us raising the sole issue of whether CIAC has jurisdiction over CIAC Case
No. 17-2005.
Section 4 of Executive Order No. 100818 defines the jurisdiction of CIAC, thus:

SECTION 4. Jurisdiction. - The CIAC shall have original and exclusive jurisdiction over disputes arising from, or connected with,
contracts entered into by parties involved in construction in the Philippines, whether the disputes arises before or after the completion of
the contract, or after the abandonment or breach thereof. These disputes may involve government or private contracts. For the Board to
acquire jurisdiction, the parties to a dispute must agree to submit the same to voluntary arbitration.

The jurisdiction of the CIAC may include but is not limited to violation of specifications for materials and workmanship; violation of the
terms of agreement; interpretation and/or application of contractual provisions; amount of damages and penalties; commencement time
and delays; maintenance and defects; payment default of employer or contractor and changes in contract cost.

Excluded from the coverage of this law are disputes arising from employer-employee relationships which shall continue to be covered
by the Labor Code of the Philippines. (Emphasis ours.)

Further, Section 1, Article III of the CIAC Rules of Procedure Governing Construction Arbitration19 (CIAC Rules), provides:

SECTION 1. Submission to CIAC Jurisdiction. – An arbitration clause in a construction contract or a submission to arbitration of a
construction dispute shall be deemed an agreement to submit an existing or future controversy to CIAC jurisdiction, notwithstanding the
reference to a different arbitration institution or arbitral body in such contract or submission. When a contract contains a clause for the
submission of a future controversy to arbitration, it is not necessary for the parties to enter into a submission agreement before the
claimant may invoke the jurisdiction of CIAC.

An arbitration agreement or a submission to arbitration shall be in writing, but it need not be signed by the parties, as long as the intent
is clear that the parties agree to submit a present or future controversy arising from a construction contract to arbitration.

It may be in the form of exchange of letters sent by post or by telefax, telexes, telegrams or any other modes of communication.
(Emphasis ours.)

Based on the foregoing provisions, the CIAC shall have jurisdiction over a dispute involving a construction contract if said contract
contains an arbitration clause (nothwithstanding any reference by the same contract to another arbitration institution or arbitral body);
or, even in the absence of such a clause in the construction contract, the parties still agree to submit their dispute to arbitration.

It is undisputed that in the case at bar, the EPCC contains an arbitration clause in which the petitioner and respondent explicitly agree
to submit to arbitration any dispute between them arising from or connected with the EPCC, under the following terms and conditions20 :

CLAIMS, DISPUTES and ARBITRATION

xxxx

20.3 Unless the member or members of the Dispute Adjudication Board have been previously mutually agreed upon by the parties and
named in the Contract, the parties shall, within 28 days of the Effective Date, jointly ensure the appointment of a Dispute Adjudication
Board. Such Dispute Adjudication Board shall comprise suitably qualified persons as members, the number of members being either
one or three, as stated in the Appendix to Tender. If the Dispute Adjudication Board is to comprise three members, each party shall
nominate one member for the approval of the other party, and the parties shall mutually agree upon and appoint the third member (who
shall act as chairman).

The terms of appointment of the Dispute Adjudication Board shall:

(a) incorporate the model terms published by the Fédération Internationale des Ingénieurs-Conseils (FIDIC),

(b) require each member of the Dispute Adjudication Board to be, and to remain throughout the appointment, independent of
the parties,

(c) require the Dispute Adjudication Board to act impartially and in accordance with the Contract, and

(d) include undertakings by the parties (to each other and to the Dispute Adjudication Board) that the members of the Dispute
Adjudication Board shall in no circumstances be liable for breach of duty or of contract arising out of their appointment; the
parties shall indemnify the members against such claims.

The terms of the remuneration of the Dispute Adjudication Board, including the remuneration of each member and of any specialist
from whom the Dispute Adjudication Board may require to seek advice, shall be mutually agreed upon by the Employer, the Contractor
and each member of the Dispute Adjudication Board when agreeing such terms of appointment. In the event of disagreement, the
remuneration of each member shall include reimbursement for reasonable expenses, a daily fee in accordance with the daily fee
established from time to time for arbitrators under the administrative and financial regulations of the International Centre for Settlement
of Investment Disputes, and a retainer fee per calendar month equivalent to three times such daily fee.

The Employer and the Contractor shall each pay one-half of the Dispute Adjudication Board’s remuneration in accordance with its terms
of remuneration. If, at any time, either party shall fail to pay its due proportion of such remuneration, the other party shall be entitled to
make payment on his behalf and recover if from the party in default.

The Dispute Adjudication Board’s appointment may be terminated only by mutual agreement of the Employer and the Contractor. The
Dispute Adjudication Board’s appointment shall expire when the discharge referred to in Sub-Clause 13.12 shall have become
effective, or at such other time as the parties may mutually agree.

It, at any time, the parties so agree, they may appoint a suitably qualified person to replace (or to be available to replace) any or all
members of the Dispute Adjudication Board. The appointment will come into effect if a member of the Dispute Adjudication Board
declines to act or is unable to act as a result of death, disability, resignation or termination of appointment. If a member so declines or is
unable to act, and no such replacement is available to act, the member shall be replaced in the same manner as such member was to
have been nominated.

If any of the following conditions apply, namely:

(a) the parties fail to agree upon the appointment of the sole member of a one-person Dispute Adjudication Board within 28
days of the Effective Date,

(b) either party fails to nominate an acceptable member, for the Dispute Adjudication Board of three members, within 28 days
of the Effective Date,

(c) the parties fail to agree upon the appointment of the third member (to act as chairman) within 28 days of the Effective Date,
or

(d) the parties fail to agree upon the appointment of a replacement member of the Dispute Adjudication Board within 28 days
of the date on which a member of the Dispute Adjudication Board declines to act or is unable to act as a result of death,
disability, resignation or termination of appointment,

then the person or administration named in the Appendix to the Tender shall, after due consultation with the parties, nominate such
member of the Dispute Adjudication Board, and such nomination shall be final and conclusive.

20.4 If a dispute arises between the Employer and the Contractor in connection with, or arising out of, the Contract or the execution of
the Works, including any dispute as to any opinion, instruction, determination, certification or valuation of the Employer’s
Representative, the dispute shall initially be referred in writing to the Dispute Adjudication Board for its decision, with a copy to the other
party. Such reference shall state that it is made under this Sub-Clause. The parties shall promptly make available to the Dispute
Adjudication Board all such information, access to the Site, and appropriate facilities, as the Dispute Adjudication Board may require for
the purposes of rendering its decision. No later than the fifty-sixth day after the day on which it received such reference, the Dispute
Adjudication Board, acting as a panel of expert(s) and not as arbitrator(s), shall give notice of its decision to the parties. Such notice
shall include reasons and shall state that it is given under this Sub-Clause.1awphi1.zw+

Unless the Contract has already been repudiated or terminated, the Contractor shall, in every case, continue to proceed with the Works
with all due diligence, and the Contractor and the Employer shall give effect forthwith to every decision of the Dispute Adjudication
Board, unless and until the same shall be revised, as hereinafter provided, in an amicable settlement or an arbitral award.

If either party is dissatisfied with the Dispute Adjudication Board’s decision, then either party, on or before the twenty-eighth day after
the day on which it received notice of such decision, may notify the other party of its dissatisfaction. If the Dispute Adjudication Board
fails to give notice of its decision on or before the fifty-sixth day after the day on which it received the reference, then either party, on or
before the twenty-eighth day after the day on which the said period of fifty-six days has expired, may notify the other party of its
dissatisfaction. In either event, such notice of dissatisfaction shall state that it is given under this Sub-Clause, such notice shall set out
the matters in dispute and the reason(s) for dissatisfaction and, subject to Sub-Clauses 20.7 and 20.8, no arbitration in respect of such
dispute may be commenced unless such notice is given.

If the Dispute Adjudication Board has given notice of its decision as to a matter in dispute to the Employer and the Contractor and no
notice of dissatisfaction has been given by either party on or before the twenty-eighth day after the day on which the parties received
the Dispute Adjudication Board’s decision, then the Dispute Adjudication Board’s decision shall become final and binding upon the
Employer and the Contractor.

20.5 Where notice of dissatisfaction has been given under Sub-Clause 20.4, the parties shall attempt to settle such dispute amicably
before the commencement of arbitration. Provided that unless the parties agree otherwise, arbitration may be commenced on or after
the fifty-sixth day after the day on which notice of dissatisfaction was given, even if no attempt at amicable settlement has been made.
20.6 Any dispute in respect of which:

(a) the decision, if any, of the Dispute Adjudication Board has not become final and binding pursuant to Sub-Clause 20.4, and

(b) amicable settlement has not been reached, shall be finally decided by international arbitration. The arbitration rules under
which the arbitration is conducted, the institution to nominate the arbitrator(s) or to administer the arbitration rules (unless
named therein), the number of arbitrators, and the language and place of such arbitration shall be as set out in the Appendix
to Tender. The arbitrator(s) shall have full power to open up, review and revise any decision of the Dispute Adjudication Board.

Neither party shall be limited, in the proceedings before such arbitrator(s), to the evidence or arguments previously put before the
Dispute Adjudication Board to obtain its decision.

Arbitration may be commenced prior to or after completion of the Works. The obligations of the parties and the Dispute Adjudication
Board shall not be altered by reason of the arbitration being conducted during the progress of the Works.

20.7 Where neither party has given notice of dissatisfaction within the period stated in Sub-Clause 20.4 and the Dispute Adjudication
Board’s related decision, if any, has become final and binding, either party may, if the other party fails to comply with such decision, and
without prejudice to any other rights it may have, refer the failure itself to arbitration under Sub-Clause 20.6. The provisions of Sub-
Clauses 20.4 and 20.5 shall not apply to any such reference.

20.8 When the appointment of the Dispute Adjudication Board and of any replacement has expired, any such dispute referred to in
Sub-Clause 20.4 shall be finally settled by arbitration pursuant to Sub-Clause 20.6. The provisions of Sub-Clauses 20.4 and 20.5 shall
not apply to any such reference. (Emphasis ours.)

Despite the presence of the afore-quoted arbitration clause in the EPCC, it is respondent’s position, upheld by the Court of Appeals,
that the CIAC still cannot assume jurisdiction over CIAC Case No. 17-2005 (petitioner’s Request for Arbitration) because petitioner has
not yet referred its dispute with respondent to the DAB, as directed by Clause 20.4 of the EPCC. Prior resort of the dispute to DAB is a
condition precedent and an indispensable requirement for the CIAC to acquire jurisdiction over CIAC Case No. 17-2005.21

It is true that Clause 20.4 of the EPCC states that a dispute between petitioner and respondent as regards the EPCC shall be initially
referred to the DAB for decision, and only when the parties are dissatisfied with the decision of the DAB should arbitration commence.
This does not mean, however, that the CIAC is barred from assuming jurisdiction over the dispute if such clause was not complied with.

Under Section 1, Article III of the CIAC Rules, an arbitration clause in a construction contract shall be deemed as an agreement to
submit an existing or future controversy to CIAC jurisdiction, "notwithstanding the reference to a different arbitration institution or arbitral
body in such contract x x x." Elementary is the rule that when laws or rules are clear, it is incumbent on the court to apply them. When
the law (or rule) is unambiguous and unequivocal, application, not interpretation thereof, is imperative.22

Hence, the bare fact that the parties herein incorporated an arbitration clause in the EPCC is sufficient to vest the CIAC with jurisdiction
over any construction controversy or claim between the parties.23 The arbitration clause in the construction contract ipso facto vested
the CIAC with jurisdiction.24 This rule applies, regardless of whether the parties specifically choose another forum or make reference to
another arbitral body.25 Since the jurisdiction of CIAC is conferred by law, it cannot be subjected to any condition; nor can it be waived
or diminished by the stipulation, act or omission of the parties, as long as the parties agreed to submit their construction contract
dispute to arbitration, or if there is an arbitration clause in the construction contract.26 The parties will not be precluded from electing to
submit their dispute to CIAC, because this right has been vested in each party by law.27

In China Chang Jiang Energy Corporation (Philippines) v. Rosal Infrastructure Builders,28 we elucidated thus:

What the law merely requires for a particular construction contract to fall within the jurisdiction of CIAC is for the parties to agree to
submit the same to voluntary arbitration. Unlike in the original version of Section 1, as applied in the Tesco case, the law does not
mention that the parties should agree to submit disputes arising from their agreement specifically to the CIAC for the latter to acquire
jurisdiction over such disputes. Rather, it is plain and clear that as long as the parties agree to submit to voluntary arbitration,
regardless of what forum they may choose, their agreement will fall within the jurisdiction of the CIAC, such that, even if they specially
choose another forum, the parties will not be precluded from electing to submit their dispute before the CIAC because this right has
been vested upon each party by law, i.e., E.O. No. 1008.

xxxx

Now that Section 1, Article III [CIAC Rules of Procedure Governing Construction Arbitration], as amended, is submitted to test in the
present petition, we rule to uphold its validity with full certainty. However, this should not be understood to mean that the parties may no
longer stipulate to submit their disputes to a different forum or arbitral body. Parties may continue to stipulate as regards their preferred
forum in case of voluntary arbitration, but in so doing, they may not divest the CIAC of jurisdiction as provided by law. Under the
elementary principle on the law on contracts that laws obtaining in a jurisdiction form part of all agreements, when the law provides that
the Board acquires jurisdiction when the parties to the contract agree to submit the same to voluntary arbitration, the law in effect,
automatically gives the parties an alternative forum before whom they may submit their disputes. That alternative forum is the CIAC.
This, to the mind of the Court, is the real spirit of E.O. No. 1008, as implemented by Section 1, Article III of the CIAC Rules. (Emphases
ours.)

Likewise, in National Irrigation Administration v. Court of Appeals,29 we pronounced that:

Under the present Rules of Procedure [CIAC Rules of Procedure Governing Construction Arbitration], for a particular construction
contract to fall within the jurisdiction of CIAC, it is merely required that the parties agree to submit the same to voluntary arbitration.
Unlike in the original version of Section 1, as applied in the Tesco case, the law as it now stands does not provide that the parties
should agree to submit disputes arising from their agreement specifically to the CIAC for the latter to acquire jurisdiction over the same.
Rather, it is plain and clear that as long as the parties agree to submit to voluntary arbitration, regardless of what forum they may
choose, their agreement will fall within the jurisdiction of the CIAC, such that, even if they specifically choose another forum, the parties
will not be precluded from electing to submit their dispute before the CIAC because this right has been vested upon each party by law,
i.e., E.O. No. 1008.

We note that this is not a case wherein the arbitration clause in the construction contract named another forum, not the CIAC, which
shall have jurisdiction over the dispute between the parties; rather, the said clause requires prior referral of the dispute to the DAB.
Nonetheless, we still hold that this condition precedent, or more appropriately, non-compliance therewith, should not deprive CIAC of its
jurisdiction over the dispute between the parties.

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

Moreover, the CIAC was created in recognition of the contribution of the construction industry to national development goals. Realizing
that delays in the resolution of construction industry disputes would also hold up the development of the country, Executive Order No.
1008 expressly mandates the CIAC to expeditiously settle construction industry disputes and, for this purpose, vests in the CIAC
original and exclusive jurisdiction over disputes arising from, or connected with, contracts entered into by the parties involved in
construction in the Philippines.30

The dispute between petitioner and respondent has been lingering for almost five years now. Despite numerous meetings and
negotiations between the parties, which took place prior to petitioner’s filing with the CIAC of its Request for Arbitration, no amicable
settlement was reached. A ruling requiring the parties to still appoint a DAB, to which they should first refer their dispute before the
same could be submitted to the CIAC, would merely be circuitous and dilatory at this point. It would entail unnecessary delays and
expenses on both parties, which Executive Order No. 1008 precisely seeks to prevent. It would, indeed, defeat the purpose for which
the CIAC was created.

WHEREFORE, the Petition is hereby GRANTED. The Decision, dated 23 May 2007, and Resolution, dated 16 November 2007, of the
Court of Appeals in CA-G.R. SP No. 92504 are hereby REVERSED and SET ASIDE. The instant case is hereby REMANDED for
further proceedings to the CIAC which is DIRECTED to resolve the same with dispatch.

SO ORDERED.

G.R. No. 180765               February 27, 2009

FORT BONIFACIO DEVELOPMENT CORPORATION, Petitioner,

vs.
MANUEL N. DOMINGO, Respondent.

DECISION

CHICO-NAZARIO, J.:

Before this Court is a Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court, filed by petitioner Fort Bonifacio
Development Corporation, seeking to reverse and set aside the Decision dated 19 July 20071 and the Resolution dated 10 December
20072 of the Court of Appeals in CA-G.R. SP No. 97731. The appellate court, in its assailed Decision, affirmed the Order3 of the
Regional Trial Court (RTC) of Pasay City, Branch 109, in Civil Case No. 06-2000-CFM, denying the Motion to Dismiss of petitioner; and
in its assailed Resolution, refused to reconsider its decision.

Petitioner, a domestic corporation duly organized under Philippine laws, is engaged in the real estate development business.
Respondent is the assignee of L and M Maxco Specialist Engineering Construction (LMM Construction) of its receivables from
petitioner.
On 5 July 2000, petitioner entered into a Trade Contract with LMM Construction for partial structural and architectural works on one of
its projects, the Bonifacio Ridge Condominium. According to the said Contract, petitioner had the right to withhold the retention money
equivalent to 5% of the contract price for a period of one year after the completion of the project. Retention money is a portion of the
contract price, set aside by the project owner, from all approved billings and retained for a certain period to guarantee the performance
by the contractor of all corrective works during the defect-liability period.4

Due to the defect and delay in the work of LMM Construction on the condominium project, petitioner unilaterally terminated the Trade
Contract5 and hired another contractor to finish the rest of the work left undone by LMM Construction. Despite the pre-termination of the
Trade Contract, petitioner was liable to pay LMM Construction a fraction of the contract price in proportion to the works already
performed by the latter.6

On 30 July 2004, petitioner received the first Notice of Garnishment against the receivables of LMM Construction issued by the
Construction Industry Arbitration Commission (CIAC) in connection with CIAC Case No. 11-2002 filed by Asia-Con Builders against
LMM Construction, wherein LMM Construction was adjudged liable to Asia-Con Builders for the amount of ₱5,990,927.77.

On 30 April 2005, petitioner received a letter dated 18 April 2005 from respondent inquiring on the retention money supposedly due to
LMM Construction and informing petitioner that a portion of the amount receivable by LMM Construction therefrom was already
assigned to him as evidenced by the Deed of Assignment executed by LMM Construction in respondent’s favor on 28 February 2005.
LMM Construction assigned its receivables from petitioner to respondent to settle the alleged unpaid obligation of LMM Construction to
respondent amounting to ₱804,068.21.

Through its letter dated 11 October 2005, addressed to respondent, petitioner acknowledged that LMM Construction did have
receivables still with petitioner, consisting of the retention money; but petitioner also advised respondent that the retention money was
not yet due and demandable and may be ascertained only after the completion of the corrective works undertaken by the new
contractor on the condominium project. Petitioner also notified respondent that part of the receivables was also being garnished by the
other creditors of LMM Construction.

Unsatisfied with the reply of petitioner, respondent sent another letter dated 14 October 2005 asserting his ownership over a portion of
the retention money assigned to him and maintaining that the amount thereof pertaining to him can no longer be garnished to satisfy
the obligations of LMM Construction to other persons since it already ceased to be the property of LMM Construction by virtue of the
Deed of Assignment. Attached to respondent’s letter was the endorsement of LMM Construction dated 17 January 2005 approving
respondent’s claim upon petitioner in the amount of ₱804,068.21 chargeable against the retention money that may be received by LMM
Construction from the petitioner.

Before respondent’s claim could be fully addressed, petitioner, on 6 June 2005, received the second Notice of Garnishment against the
receivables of LMM Construction, this time, issued by the National Labor Relations Commission (NLRC) to satisfy the liability of LMM
Construction to Nicolas Consigna in NLRC Case No. 00-07-05483-2003.

On 13 July 2005, petitioner received an Order of Delivery of Money issued by the Office of the Clerk of Court and Ex-Officio Sheriff
enforcing the first Notice of Garnishment and directing petitioner to deliver to Asia-Con Builders, through the Sheriff, the amount of
₱5,990,227.77 belonging to LMM Construction. In compliance with the said Order, petitioner was able to deliver to Asia-Con Builders
on 22 July 2005 and on 11 August 2005 partial payments amounting to ₱1,170,601.81, covered by the appropriate Acknowledgement
Receipts.

A third Notice of Garnishment against the receivables of LMM Construction, already accompanied by an Order of Delivery of Money,
both issued by the RTC of Makati, Branch 133, was served upon petitioner on 26 January 2006. The Order enjoined petitioner to
deliver the amount of ₱558,448.27 to the Sheriff to answer for the favorable judgment obtained by Concrete Masters, Inc. (Concrete
Masters) against LMM Construction in Civil Case No. 05-164.

Petitioner, in a letter dated 31 January 2006, categorically denied respondent’s claim on the retention money, reasoning that after the
completion of the rectification works on the condominium project and satisfaction of the various garnishment orders, there was no more
left of the retention money of LMM Construction.

It would appear, however, that petitioner fully satisfied the first Notice of Garnishment in the amount of ₱5,110,833.44 only on 31
January 2006,7 the very the same date that it expressly denied respondent’s claim. Also, petitioner complied with the Notice of
Garnishment and its accompanying Order of Delivery of Money in the amount of ₱558,448.27 on 8 February 2006, a week after its
denial of respondent’s claim.8

The foregoing events prompted respondent to file a Complaint for collection of sum of money, against both LMM Construction and
petitioner, docketed as Civil Case No. 06-0200-CFM before the RTC of Pasay City, Branch 109.

Instead of filing an Answer, petitioner filed a Motion to Dismiss Civil Case No. 06-0200-CFM on the ground of lack of jurisdiction over
the subject matter. Petitioner argued that since respondent merely stepped into the shoes of LMM Construction as its assignor, it was
the CIAC and not the regular courts that had jurisdiction over the dispute as provided in the Trade Contract.
On 6 June 2006, the RTC issued an Order denying the Motion to Dismiss of petitioner, ruling that a full-blown trial was necessary to
determine which one between LMM Construction and petitioner should be made accountable for the sum due to respondent.

Petitioner sought remedy from the Court of Appeals by filing a Petition for Certiorari, docketed as CA-G.R. SP No. 97731, challenging
the RTC Order dated 6 June 2006 for having been rendered by the trial court with grave abuse of discretion.

In its Decision promulgated on 19 July 2007, the Court of Appeals dismissed the Petition for Certiorari and affirmed the 6 June 2006
Order of the RTC denying the Motion to Dismiss of petitioner. The appellate court rejected the argument of petitioner that respondent,
as the assignee of LMM Construction, was bound by the stipulation in the Trade Contract that disputes arising therefrom should be
brought before the CIAC. The Court of Appeals declared that respondent was not privy, but a third party, to the Trade Contract; and
money claims of third persons against the contractor, developer, or owner of the project are lodged in the regular courts and not in the
CIAC.

Similarly ill-fated was petitioner’s Motion for Reconsideration, which was denied by the Court of Appeals in its Resolution dated 10
December 2007.

Petitioner now comes to this Court via this instant Petition for Review on Certiorari praying for the reversal of the 19 July 2007 Decision
of the Court of Appeals and 6 June 2006 Order of the RTC and, ultimately, for the dismissal of Civil Case No. 06-0200-CFM pending
before the RTC.

For the resolution of this Court is the sole issue of:

WHETHER OR NOT THE RTC HAS JURISDICTION OVER CIVIL CASE NO. 06-0200-CFM.

The jurisdiction of CIAC is defined under Executive Order No. 1008 as follows:

SECTION 4. Jurisdiction.—The CIAC shall have original and exclusive jurisdiction over disputes arising from, or connected with,
contracts entered into by parties involved in construction in the Philippines, whether the disputes arises before or after the completion of
the contract, or after the abandonment or breach thereof. These disputes may involve government or private contracts. For the Board to
acquire jurisdiction, the parties to a dispute must agree to submit the same to voluntary arbitration.

The jurisdiction of the CIAC may include but is not limited to violation of specifications for materials and workmanship; violation of the
terms of agreement; interpretation and/or application of contractual provisions; amount of damages and penalties; commencement time
and delays; maintenance and defects; payment default of employer or contractor and changes in contract cost.

Excluded from the coverage of this law are disputes arising from employer-employee relationships which shall continue to be covered
by the Labor Code of the Philippines.

In assailing the 19 July 2007 Decision of the Court of Appeals, petitioner invoked Article 1311 of the Civil Code on relativity of contracts.
According to said provision, all contracts shall only take effect between the contracting parties, their assigns and heirs except when the
rights and obligations arising from the contract are not transmissible. Petitioner argues that the appellate court, in recognizing the
existence of the Deed of Assignment executed by LMM Construction -- in favor of respondent -- of its receivables under the Trade
Contract, should have considered the concomitant result thereof, i.e., that respondent became a party to the Trade Contract and,
therefore, bound by the arbitral clause therein.

Respondent counters that the CIAC is devoid of jurisdiction over money claims of third persons against the contractor, developer or
owner of the project. The jurisdiction of the CIAC is limited to settling disputes arising among contractors, developers and/or owners of
construction projects. It does not include the determination of who among the many creditors of the contractor should enjoy preference
in payment of its receivables from the developer/owner.

It is an elementary rule of procedural law that jurisdiction of the court over the subject matter is determined by the allegations of the
complaint, irrespective of whether or not the plaintiff is entitled to recover upon all or some of the claims asserted therein. As a
necessary consequence, the jurisdiction of the court cannot be made to depend upon the defenses set up in the answer or upon the
motion to dismiss; for otherwise, the question of jurisdiction would almost entirely depend upon the defendant. What determines the
jurisdiction of the court is the nature of the action pleaded as appearing from the allegations in the complaint. The averments therein
and the character of the relief sought are the ones to be consulted.9 Accordingly, the issues in the instant case can only be properly
resolved by an examination and evaluation of respondent’s allegations in his Complaint in Civil Case No. 06-0200-CFM.

The allegations in respondent’s Complaint are clear and simple: That LMM Construction had an outstanding obligation to respondent in
the amount of ₱804,068.21; that in payment of the said amount, LMM Construction assigned to respondent its receivables from
petitioner, which assignment was properly made known to petitioner as early as 18 April 2005; that despite due notice of such
assignment, petitioner still refused to deliver the amount assigned to respondent, giving preference, instead, to the garnishing creditors
of LMM Construction; that at the time petitioner was notified of the assignment, only one notice of garnishment, the first Notice of
Garnishment, was received by it; that had petitioner properly recognized respondent’s right as an assignee of a portion of the
receivables of LMM Construction, there could have been sufficient residual amounts to satisfy respondent’s claim; and that, uncertain
over which one between LMM Construction and petitioner he may resort to for payment, respondent named them both as defendants in
Civil Case No. 06-0200-CFM. A scrupulous examination of the aforementioned allegations in respondent’s Complaint unveils the fact
that his cause of action springs not from a violation of the provisions of the Trade Contract, but from the non-payment of the monetary
obligation of LMM Construction to him.

A cause of action is a party’s act or omission that violates the rights of the other.10 The right of the respondent that was violated,
prompting him to initiate Civil Case No. 06-0200-CFM, was his right to receive payment for the financial obligation incurred by LMM
Construction and to be preferred over the other creditors of LMM Construction, a right which pre-existed and, thus, was separate and
distinct from the right to payment of LMM Construction under the Trade Contract.

Petitioner’s unceasing reliance on Article 131111 of the Civil Code on relativity of contracts is unavailing. It is true that respondent, as the
assignee of the receivables of LMM Construction from petitioner under the Trade Contract, merely stepped into the shoes of LMM
Construction. However, it bears to emphasize that the right of LMM Construction to such receivables from petitioner under the Trade
Contract is not even in dispute in Civil Case No. 06-0200-CFM. What respondent puts in issue before the RTC is the purportedly
arbitrary exercise of discretion by the petitioner in giving preference to the claims of the other creditors of LMM Construction over the
receivables of the latter.

It is encouraged that disputes arising from construction contracts be referred first to the CIAC for their arbitration and settlement, since
such cases would often require expertise and technical knowledge in construction. Hence, some of the matters over which the CIAC
may exercise jurisdiction, upon agreement of the parties to the construction contract, "include but [are] not limited to violation of
specifications for materials and workmanship; violation of the terms of agreement; interpretation and/or application of contractual
provisions; amount of damages and penalties; commencement time and delays; maintenance and defects; payment default of
employer or contractor and changes in contract cost."12 Although the jurisdiction of the CIAC is not limited to the afore-stated
enumeration, other issues which it could take cognizance of must be of the same or a closely related kind or species applying the
principle of ejusdem generis in statutory construction.

Respondent’s claim is not even construction-related at all. Construction is defined as referring to all on-site works on buildings or
altering structures, from land clearance through completion including excavation, erection and assembly and installation of components
and equipment.13 Petitioner’s insistence on the application of the arbitration clause of the Trade Contract to respondent is clearly
anchored on an erroneous premise that respondent is seeking to enforce a right under the same. Again, the right to the receivables of
LMM Construction from petitioner under the Trade Contract is not being impugned herein. In fact, petitioner readily conceded that LMM
Construction still had receivables due from petitioner, and respondent did not even have to refer to a single provision in the Trade
Contract to assert his claim. What respondent is demanding is that a portion of such receivables amounting to ₱804,068.21 should
have been paid to him first before the other creditors of LMM Construction, which, clearly, does not require the CIAC’s expertise and
technical knowledge of construction.

The adjudication of Civil Case No. 06-0200-CFM necessarily involves the application of pertinent statutes and jurisprudence to matters
such as obligations, contracts of assignment, and, if appropriate, even preference of credits, a task more suited for a trial court to carry
out after a full-blown trial, than an arbitration body specifically devoted to construction contracts.

This Court recognizes the laudable objective of voluntary arbitration to provide a speedy and inexpensive method of settling disputes by
allowing the parties to avoid the formalities, delay, expense and aggravation which commonly accompany ordinary litigation, especially
litigation which goes through the entire hierarchy of courts. It cannot, however, altogether surrender to arbitration those cases, such as
the one at bar, the extant facts of which plainly call for the exercise of jurisdiction by the regular courts for their resolution.

WHEREFORE, premises considered, the instant Petition is DENIED. The Decision dated 19 July 2007 and the Resolution dated 10
December 2007 of the Court of Appeals in CA-G.R. SP No. 97731 are hereby AFFIRMED in toto. Costs against the petitioner.

SO ORDERED.

G.R. Nos. 152505-06             September 13, 2007

PRUDENTIAL GUARANTEE and ASSURANCE, INC., petitioner,

vs.
EQUINOX LAND CORPORATION, respondent.

DECISION

SANDOVAL-GUTIERREZ, J.:

Before us for resolution is the instant Petition for Review on Certiorari assailing the Decision1 of the Court of Appeals (Third Division)
dated November 23, 2001 in CA-G.R. SP No. 56491 and CA-G.R. SP No. 57335.
The undisputed facts of the case, as established by the Construction Industry Arbitration Commission (CIAC) and affirmed by the Court
of Appeals, are:

Sometime in 1996, Equinox Land Corporation (Equinox), respondent, decided to construct five (5) additional floors to its existing
building, the Eastgate Centre, located at 169 EDSA, Mandaluyong City. It then sent invitations to bid to various building contractors.
Four (4) building contractors, including J’Marc Construction & Development Corporation (J’Marc), responded.

Finding the bid of J’Marc to be the most advantageous, Equinox offered the construction project to it. On February 22, 1997, J’Marc
accepted the offer. Two days later, Equinox formally awarded to J’Marc the contract to build the extension for a consideration
of P37,000,000.00.

On February 24, 1997, J’Marc submitted to Equinox two (2) bonds, namely: (1) a surety bond issued by Prudential Guarantee and
Assurance, Inc. (Prudential), herein petitioner, in the amount of P9,250,000.00 to guarantee the unliquidated portion of the advance
payment payable to J’Marc; and (2) a performance bond likewise issued by Prudential in the amount of P7,400,000.00 to guarantee
J’Marc’s faithful performance of its obligations under the construction agreement.

On March 17, 1997, Equinox and J’Marc signed the contract and related documents. Under the terms of the contract, J’Marc would
supply all the labor, materials, tools, equipment, and supervision required to complete the project.

In accordance with the terms of the contract, Equinox paid J’Marc a downpayment of P9,250,000.00 equivalent to 25% of the contract
price.

J’Marc did not adhere to the terms of the contract. It failed to submit the required monthly progress billings for the months of March and
April 1997. Its workers neglected to cover the drainpipes, hence, they were clogged by wet cement. This delayed the work on the
project.

On May 23, 1997, J’Marc requested an unscheduled cash advance of P300,000.00 from Equinox, explaining it had encountered cash
problems. Equinox granted J’Marc’s request to prevent delay.

On May 31, 1997, J’Marc submitted its first progress billing showing that it had accomplished only 7.3825% of the construction work
estimated at P2,731,535.00. After deducting the advanced payments, the net amount payable to J’Marc was only P1,285,959.12. Of
this amount, Equinox paid J’Marc only P697,005.12 because the former paid EXAN P588,954.00 for concrete mix.

Shortly after Equinox paid J’Marc based on its first progress billing, the latter again requested an advanced payment of P150,000.00.
Again Equinox paid J’Marc this amount. Eventually, Equinox found that the amount owing to J’Marc’s laborers was only P121,000.00,
not P150,000.00.

In June 1997, EXAN refused to deliver concrete mix to the project site due to J’Marc’s recurring failure to pay on time. Faced with a
looming delay in the project schedule, Equinox acceded to EXAN’s request that payments for the concrete mix should be remitted to it
directly.

On June 30, 1997, J’Marc submitted its second progress billing showing that it accomplished only 16.0435% of the project after 4
months of construction work. Based on the contract and its own schedule, J’Marc should have accomplished at least 37.70%.

Faced with the problem of delay, Equinox formally gave J’Marc one final chance to take remedial steps in order to finish the project on
time. However, J’Marc failed to undertake any corrective measure. Consequently, on July 10, 1997, Equinox terminated its contract with
J’Marc and took over the project. On the same date, Equinox sent Prudential a letter claiming relief from J’Marc’s violations of the
contract.

On July 11, 1997, the work on the project stopped. The personnel of both Equinox and J’Marc jointly conducted an inventory of all
materials, tools, equipment, and supplies at the construction site. They also measured and recorded the amount of work actually
accomplished. As of July 11, 1997, J’Marc accomplished only 19.0573% of the work or a shortage of 21.565% in violation of the
contract.

The cost of J’Marc’s accomplishment was only P7,051,201.00. In other words, Equinox overpaid J’Marc in the sum of P3,974,300.25
inclusive of the 10% retention on the first progress billing amounting to P273,152.50. In addition, Equinox also paid the wages of
J’Marc’s laborers, the billings for unpaid supplies, and the amounts owing to subcontractors of J’Marc in the total sum of P664,998.09.

On August 25, 1997, Equinox filed with the Regional Trial Court (RTC), Branch 214, Mandaluyong City a complaint for sum of money
and damages against J’Marc and Prudential. Equinox prayed that J’Marc be ordered to reimburse the amounts corresponding to its
(Equinox) advanced payments and unliquidated portion of its downpayment; and to pay damages. Equinox also prayed that Prudential
be ordered to pay its liability under the bonds.
In its answer, J’Marc alleged that Equinox has no valid ground for terminating their contract. For its part, Prudential denied Equinox’s
claims and instituted a cross-claim against J’Marc for any judgment that might be rendered against its bonds.

During the hearing, Prudential filed a motion to dismiss the complaint on the ground that pursuant to Executive Order No. 1008, it is the
CIAC which has jurisdiction over it.

On February 12, 1999, the trial court granted Prudential’s motion and dismissed the case.

On May 19, 1999, Equinox filed with the CIAC a request for arbitration, docketed as CIAC Case No. 17-99. Prudential submitted a
position paper contending that the CIAC has no jurisdiction over it since it is not a privy to the construction contract between Equinox
and J’Marc; and that its surety and performance bonds are not construction agreements, thus, any action thereon lies exclusively with
the proper court.

On December 21, 1999, the CIAC rendered its Decision in favor of Equinox and against J’Marc and Prudential, thus:

AWARD

After considering the evidence and the arguments of the parties, we find that:

1. J’Marc has been duly notified of the filing and pendency of the arbitration proceeding commenced by Equinox against
J’Marc and that CIAC has acquired jurisdiction over J’Marc;

2. The construction Contract was validly terminated by Equinox due to J’Marc’s failure to provide a timely supply of adequate
labor, materials, tools, equipment, and technical services and to remedy its inability to comply with the construction schedule;

3. Equinox is not entitled to claim liquidated damages, although under the circumstances, in the absence of adequate proof of
actual and compensatory damages, we award to Equinox nominal or temperate damages in the amount of P500,000.00;

4. The percentage of accomplishment of J’Marc at the time of the termination of the Contract was 19.0573% of the work
valued at P7,051,201.00. This amount should be credited to J’Marc. On the other hand, Equinox [i] had paid J’Marc 25% of the
contract price as down or advance payment, [ii] had paid J’Marc its first progress billing, [iii] had made advances for payroll of
the workers, and for unpaid supplies and the works of J’Marc’s subcontractors, all in the total sum of P11,690,483.34.
Deducting the value of J’Marc’s accomplishment from these advances and payment, there is due from J’Marc to Equinox the
amount of P4,639,285.34. We hold J’Marc liable to pay Equinox this amount of P4,639,285.34.

5. If J’Marc had billed Equinox for its accomplishment as of July 11, 1997, 25% of the P7,051,201.00 would have been
recouped as partial payment of the advanced or down payment. This would have resulted in reducing Prudential’s liability on
the Surety Bond from P8,250,000.00 to P7,487,199.80. We, therefore, find that Prudential is liable to Equinox on its Surety
Bond the amount of P7,487,199.80;

6. Prudential is furthermore liable on its Performance Bond for the following amounts: the advances made by Equinox on
behalf of J’Marc to the workers, suppliers, and subcontractors amounting to P664,985.09, the nominal damages of
P500,000.00 and attorney’s fees of P100,000.00 or a total amount of P1,264,985.00;

7. All other claims and counterclaims are denied;

8. J’Marc shall pay the cost of arbitration and shall indemnify Equinox the total amount paid by Equinox as expenses of
arbitration;

9. The total liability of J’Marc to Equinox is determined to be P5,139,285.34 plus attorney’s fees of P100,000.00. The surety’s
liability cannot exceed that of the principal debtor [Art. 2054, Civil Code}. We hold that, notwithstanding our finding in Nos. 5
and 6 of this Award, Prudential is liable to Equinox on the Surety Bond and Performance Bond an amount not to
exceed P5,239,285.34. The cost of arbitration shall be paid by J’Marc alone.

The amount of P5,239,285.34 shall be paid by respondent J’Marc and respondent Prudential, jointly and severally, with
interest at six percent [6%] per annum from promulgation of this award. This amount, including accrued interest, shall earn
interest at the rate of 12% per annum from the time this decision becomes final and executory until the entire amount is fully
paid or judgment fully satisfied. The expenses of arbitration, which shall be paid by J’Marc alone, shall likewise earn interest at
6% per annum from the date of promulgation of the award, and 12% from the date the award becomes final until this amount
including accrued interest is fully paid.

SO ORDERED.
Thereupon, Prudential filed with the Court of Appeals a petition for review, docketed as CA-G.R. SP No. 56491. Prudential alleged that
the CIAC erred in ruling that it is bound by the terms of the construction contract between Equinox and J’Marc and that it is solidarily
liable with J’Marc under its bonds.

Equinox filed a motion for reconsideration on the ground that there is an error in the computation of its claim for unliquidated damages;
and that it is entitled to an award of liquidated damages.

On February 2, 2000, the CIAC amended its Award by reducing the total liability of J’Marc to Equinox to P4,060,780.21, plus attorney’s
fees of P100,000 or P4,160,780.21, and holding that Prudential’s liability to Equinox on the surety and performance bonds should not
exceed the said amount of P4,160,780.21, payable by J’Marc and Prudential jointly and severally.

Dissatisfied, Equinox filed with the Court of Appeals a petition for review, docketed as CA-G.R. SP No. 57335. This case was
consolidated with CA-G.R. SP No. 56491 filed by Prudential.

On November 23, 2001, the Court of Appeals rendered its Decision in CA-G.R. SP No. 57335 and CA-G.R. SP No. 56491, the
dispositive portion of which reads:

WHEREFORE, the Amended Decision dated February 2, 2000 is AFFIRMED with MODIFICATION in paragraph 4 in the
Award by holding J’Marc liable for unliquidated damages to Equinox in the amount of P5,358,167.09 and in paragraph 9
thereof by increasing the total liability of J’Marc to Equinox to P5,958,167.09 (in view of the additional award of P500,000.00
as nominal and temperate damages and P100,000.00 in attorney’s fees), and AFFIRMED in all other respects.

SO ORDERED.

Prudential seasonably filed a motion for reconsideration but it was denied by the Court of Appeals.

The issue raised before us is whether the Court of Appeals erred in (1) upholding the jurisdiction of the CIAC over the case; and (2)
finding Prudential solidarily liable with J’Marc for damages.

On the first issue, basic is the rule that administrative agencies are tribunals of limited jurisdiction and as such, can only wield such
powers as are specifically granted to them by their enabling statutes.2

Section 4 of Executive Order No. 1008,3 provides:

SEC. 4. Jurisdiction. – The CIAC shall have original and exclusive jurisdiction over disputes arising from, or connected with
contracts entered into by parties involved in construction in the Philippines, whether the dispute arises before or after the
completion of the contract, or after the abandonment or breach thereof. These disputes may involve government or private
contracts. For the Board to acquire jurisdiction, the parties to a dispute must agree to submit the same to voluntary arbitration.

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

Excluded from the coverage of the law are disputes arising from employer-employee relationships which continue to be
covered by the Labor Code of the Philippines.

In David v. Construction Industry and Arbitration Commission,4 we ruled that Section 4 vests upon the CIAC original and exclusive
jurisdiction over disputes arising from or connected with construction contracts entered into by parties who have agreed to submit their
case for voluntary arbitration.

As earlier mentioned, when Equinox lodged with the RTC its complaint for a sum of money against J’Marc and Prudential, the latter
filed a motion to dismiss on the ground of lack of jurisdiction, contending that since the case involves a construction dispute, jurisdiction
lies with CIAC. Prudential’s motion was granted. However, after the CIAC assumed jurisdiction over the case, Prudential again moved
for its dismissal, alleging that it is not a party to the construction contract between Equinox and J’Marc; and that the surety and
performance bonds it issued are not construction agreements.

After having voluntarily invoked before the RTC the jurisdiction of CIAC, Prudential is estopped to question its jurisdiction. As we
held in Lapanday Agricultural & Development Corporation v. Estita,5 the active participation of a party in a case pending against him
before a court or a quasi-judicial body is tantamount to a recognition of that court’s or quasi-judicial body’s jurisdiction and a willingness
to abide by the resolution of the case and will bar said party from later on impugning the court’s or quasi-judicial body’s jurisdiction.

Moreover, in its Reply to Equinox’s Opposition to the Motion to Dismiss before the RTC, Prudential, citing Philippine National Bank v.
Pineda6 and Finman General Assurance Corporation v. Salik,7 argued that as a surety, it is considered under the law to be the same
party as the obligor in relation to whatever is adjudged regarding the latter’s obligation. Therefore, it is the CIAC which has jurisdiction
over the case involving a construction contract between Equinox and J’Marc. Such an admission by Prudential binds it and it cannot
now claim otherwise.

Anent the second issue, it is not disputed that Prudential entered into a suretyship contract with J’Marc. Section 175 of the Insurance
Code defines a suretyship as "a contract or agreement whereby a party, called the suretyship, guarantees the performance by another
party, called the principal or obligor, of an obligation or undertaking in favor of a third party, called the obligee. It includes official
recognizances, stipulations, bonds, or undertakings issued under Act 5368, as amended." Corollarily, Article 2047 of the Civil Code
provides that suretyship arises upon the solidary binding of a person deemed the surety with the principal debtor for the purpose of
fulfilling an obligation.

In Castellvi de Higgins and Higgins v. Seliner,9 we held that while a surety and a guarantor are alike in that each promises to answer for
the debt or default of another, the surety assumes liability as a regular party to the undertaking and hence its obligation is
primary.

In Security Pacific Assurance Corporation v. Tria-Infante,10 we reiterated the rule that while a contract of surety is secondary only to a
valid principal obligation, the surety’s liability to the creditor is said to be direct, primary, and absolute. In other words, the surety is
directly and equally bound with the principal. Thus, Prudential is barred from disclaiming that its liability with J’Marc is solidary.

WHEREFORE, we DENY the petition. The assailed Decision of the Court of Appeals (Third Division) dated November 23, 2001 in CA-
G.R. SP No. 56491 and CA-G.R. SP No. 57355 is AFFIRMED in toto. Costs against petitioner.

SO ORDERED.