1. G.R. No. 169095 HEUNGHWA INDUSTRY CO.,LTD., vs DJ BUILDERS CORPORATION, December 8, 2008
On October 24, 2000, respondent filed with CIAC a Request for Adjudication[11] 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.
DECISION AUSTRIA-MARTINEZ, J.: Before this Court is a Petition for Review on Certiorari[1] under Rule 45 of the Rules of Court, seeking to set aside the August 20, 2004 Decision[2] and August 1, 2005 Resolution[3] of the Court of Appeals (CA) in CA-G.R. SP Nos. 70001 and 71621.
CIAC then issued an Order[12] 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.
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 Ph ilippines, 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.
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 Order[13] 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.
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]
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 motion[15] contending that petitioner was already estopped from asking for the recall of the Order.
Petitioner's Amended Answer[5] 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:
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]
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:
On March 13, 2001, the CIAC issued an Order setting the preliminary conference on April 10, 2001.[17]
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 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.
On the same day, the RTC issued an Order[8] granting the motion.
RTC CIAC
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:
April 5, 2001 Petitioner filed a Motion to Suspend proceedings because of the Motion to Recall it filed with the RTC.
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]
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 Resolution[18] 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 1
case without prejudice to the filing of a complaint with the CIAC.[20]
March 26, 2002 CIAC ordered respondent to file a reply to petitioner's March 21, 2002 Manifestation. June 17, 2002 RTC denied respondent's Motion for Reconsideration.
June 11, 2001- Petitioner opposed respondent's motion for reconsideration and also prayed for the dismissal of the case but with prejudice.[21]
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.
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 Dismiss[23] Civil Case No. 3421 praying for the dismissal of the complaint without prejudice to the filing of the proper complaint with the CIAC.
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.
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]
In other words, petitioner is questioning the jurisdiction of the CIAC; while respondent is questioning the jurisdiction of the RTC over the case.
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.
Both cases were consolidated by the CA. August 15, 2001 - Petitioner filed a counter-manifestation[26] asserting that the RTC Order dated July 16, 2001 was not yet final. Petitioner reiterated the prayer to dismiss the case.
The CA ruled against petitioner on procedural and substantive grounds.
August 27, 2001 CIAC issued an Order maintaining the suspension but did not rule on petitioner's Motion to Dismiss.
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]
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.
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]
February 5, 2002 CIAC denied petitioner's Motion for Reconsideration. February 7, 2002 CIAC conducted a preliminary conference.[27] March 13, 2002 the RTC issued a Resolution[28] declaring the July 16, 2001 Order which dismissed the case without force and effect and set the case for hearing on May 30, 2002.
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]
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]
The CA further cited National Irrigation Administration v. Court of Appeals[37] (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.
March 22, 2002 CIAC issued an Order[30] denying the Motion to Dismiss filed by petitioner and holding that the CIAC had jurisdiction over the case. March 25, 2002- Respondent moved for a reconsideration[31] of the March 13, 2002 Order recalling the July 16, 2001 Order which petitioner opposed.
Lastly, the CA found no merit in petitioner's prayer to remand the case to the CIAC.
2
Petitioner's Motion for Reconsideration was denied by the CA. Hence, herein petition raising the following assignment of errors:
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:
A. THE COURT OF APPEALS COMMITTED SERIOUS ERROR WHEN IT RULED THAT THE PETI TION 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 W ITHOUT 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 S UBJECT OF A PETITION FOR CERTIORARI.
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)
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.
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?
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]
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 petition is devoid of merit.
The CIAC, in its assailed Order, correctly applied the doctrine laid down in Philrock, Inc. v. Construction Industry Arbitration Commission[43] (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]
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]
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]
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. 3
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 respondents motion to dismiss without conducting any hearing on the motion.[49]
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.
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 1008[50] 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. 2. 3. 4. 5.
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.
Manpower and equipment standby time; Unrecouped mobilization expenses; Retention; Discrepancy of billings; and Price escalation for fuel and oil usage.[51]
xxxx The Court notes that the Subcontract Agreement[52] 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)
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.
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 Appeals[55] this Court recognized the new procedure in the arbitration of disputes before the CIAC, in this wise:
It must be noted however that the reliance of the CIAC in it's assailed Order on Philrock[57] is 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
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. 4
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.
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.
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.
It is well to note that in its petition for certiorari[64] 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 order[65] was issued only on October 15, 2002 and a writ of preliminary injunction[66] 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.
Anent the second assigned error, the Court notes that the reliance of the CA on NIA is inaccurate. In NIA,[58] this 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]
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)
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.
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:
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.
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. 5
The ruling of the Supreme Court in Lastimoso v. Asayo[67] 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.
HEUNGHWA INDUSTRY CO., LTD., petitioner, vs. DJ BUILDERS CORPORATION, respondent
Incidentally, in the recent case of Heunghwa Industry Co., Ltd. v. DJ Builders Corporation (G.R. No. 169095, 8 December 2008), the Supreme Court (SC) laid down important guidelines in the interpretation of an arbitration clause contained in a construction contract and, in effect, further clarified the jurisdiction of the Construction Industry Arbitration Commission (CIAC). The SC ruled that an arbitration clause in a construction contract or the submission to arbitration of a construction dispute shall be deemed an agreement to submit an existing or future controversy to the CIAC jurisdiction, notwithstanding the reference to a different arbitration institution or arbitral body in such contract or submission. Thus, for a particular construction contract to fall within the jurisdiction of the CIAC, it is merely required that the parties agree to submit the same to voluntary arbitration. It is not necessary that the parties specifically name the CIAC for the latter to acquire jurisdiction over the contract. As long as the parties stipulate on voluntary arbitration, regardless of what forum they 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 (National Irrigation Administration v. Court of Appeals, G.R. No. 129169, 17 November 1999, citing the 1988 CIAC Rules of Procedure, as amended by CIAC Resolution Nos. 291 and 3-93). It can be gleaned from the foregoing that there are two (2) acts which may vest the CIAC with jurisdiction over a construction dispute, to wit: (a) The presence of an arbitration clause in a construction contract; or (b) In the absence of such arbitration clause, the agreement by the parties to submit the construction dispute to arbitration.
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, petitioners 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.
If any of the abovementioned acts exists, the CIAC has jurisdiction over the dispute. Jurisdiction is conferred by law and cannot be waived by agreement or acts of the parties.
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.
6
mistaken premise that 'the proceedings in the CIAC fell through because of the refusal of [Petitioner] Philrock to include the issue of damages therein,' whereas the true reason for the withdrawal of the case from the CIAC was due to Philrock's opposition to the inclusion of its seven officers and engineers, who did not give their consent to arbitration, as party defendants. On the other hand, private respondent Nelia Cid manifested that she was willing to exclude the seven officers and engineers of Philrock as parties to the case so as to facilitate or expedite the proceedings. With such manifestation from the Cid spouses, the Arbitral Tribunal denied Philrock's request for the suspension of the proceedings. Philrock's counsel agreed to the continuation of the proceedings but reserved the right to file a pleading elucidating the position he [had] raised regarding the Court's Order dated June 13, 1995. The parties then proceeded to finalize, approve and sign the Terms of Reference. Philrock's counsel and representative, Atty. Pericles C. Consunji affixed his signature to said Terms of Reference which stated that 'the parties agree that their differences be settled by an Arbitral Tribunal x x x x' (p. 9, Terms of Reference, p. 200, Rollo). On September 12, 1995, [P]etitioner Philrock filed its Motion to Dismiss, alleging therein that the CIAC had lost jurisdiction to hear the arbitration case due to the parties' withdrawal of their consent to arbitrate. The motion was denied by x x x CIAC per Order dated September 22, 1995. On November 8, public respondent ordered the parties to appear before it on November 28, 1995 for the continuation of the arbitral proceedings, and on February 7, 1996, public respondent directed [P]etitioner Philrock to set two hearing dates in the month of February to present its evidence and to pay all fees assessed by it, otherwise x x x Philrock would be deemed to have waived its right to present evidence. Hence, petitioner instituted the petition for certiorari but while said petition was pending, the CIAC rendered its Decision dated September 24, 1996, the dispositive portion of which reads, as follows: 'WHEREFORE, judgment is hereby rendered in favor of the Claimant, directing Respondent to pay Claimant as follows: 1. P23,276.25 representing the excess cash payment for materials ordered by the Claimants, (No. 7 of admitted facts) plus interests thereon at the rate of 6% per annum from September 26, 1995 to the date payment is made. 2. P65,000.00 representing retrofitting costs. 3. P13,404.54 representing refund of the value of delivered but unworkable concrete mix that was laid to waste. 4. P50,000.00 representing moral damages. 5. P50,000.00 representing nominal damages. 6. P50,000.00 representing attorney's fees and expenses of litigation. 7. P144,756.80 representing arbitration fees, minus such amount that may already have been paid to CIAC by respondent. Let a copy of this Decision be furnished the Honorable Salvador C. Ceguera, presiding judge, Branch 82 of Regional Trial Court of Quezon City who referred this case to the Construction Industry Arbitration Commission for arbitration and proper disposition.' (pp. 44-45, Rollo, CA-G.R. SP No. 42443) "[4] Before the CA, petitioner filed a Petition for Review, docketed as CA-GR SP No. 42443, contesting the jurisdiction of the CIAC and assailing the propriety of the monetary awards in favor of respondent spouses. This Petition was consolidated by the CA with CA-GR SP No. 39781, a Petition for Certiorari earlier elevated by petitioner questioning the jurisdiction of the CIAC.
2. [G.R. Nos. 132848-49. June 26, 2001] Philrock, Inc. v. Construction Industry Arbitration Commission, 412 Phil. 236, 246 DECISION PANGANIBAN, J .: Courts encourage the use of alternative methods of dispute resolution. When parties agree to settle their disputes arising from or connected with construction contracts, the Construction Industry Arbitration Commission (CIAC) acquires primary jurisdiction. It may resolve not only the merits of such controversies; when appropriate, it may also award damages, interests, attorneys fees and expenses of litigation. The Case Before us is a Petition for Review under Rule 45 of the Rules of Court. The Petition seeks the reversal of the July 9, 1997 Decision[1] and the February 24, 1998 Resolution of the Court of Appeals (CA) in the consolidated cases docketed as CA-GR SP Nos. 39781 and 42443. The assailed Decision disposed as follows: WHEREFORE, judgment is hereby rendered DENYING the petitions and, accordingly, AFFIRMING in toto the CIACs decision. Costs against petitioner .[2] The assailed Resolution ruled in this wise: Considering that the matters raised and discussed in the motion for reconsideration filed by appellants counsel are substantially the same arguments which the Court had passed upon and resolved in the decision so ught to be reconsidered, and there being no new issue raised, the subject motion is hereby DENIED.[3] The Facts The undisputed facts of the consolidated cases are summarized by the CA as follows: "On September 14, 1992, the Cid spouses, herein private respondents, filed a Complaint for damages against Philrock and seven of its officers and engineers with the Regional Trial Court of Quezon City, Branch 82. On December 7, 1993, the initial trial date, the trial court issued an Order dismissing the case and referring the same to the CIAC because the Cid spouses and Philrock had filed an Agreement to Arbitrate with the CIAC. Thereafter, preliminary conferences were held among the parties and their appointed arbitrators. At these conferences, disagreements arose as to whether moral and exemplary damages and tort should be included as an issue along with breach of contract, and whether the seven officers and engineers of Philrock who are not parties to the Agreement to Arbitrate should be included in the arbitration proceedings.No common ground could be reached by the parties, hence, on April 2, 1994, both the Cid spouses and Philrock requested that the case be remanded to the trial court. On April 13, 1994, the CIAC issued an Order stating, thus: 'x x x the Arbitral Tribunal hereby formally dismisses the above-captioned case for referral to Branch 82 of the Regional Trial Court, Quezon City where it first originated. SO ORDERED.' The Cid spouses then filed with said Branch of the Regional Trial Court of Quezon City a Motion To Set Case for Hearing which motion was opposed by Philrock. On June 13, 1995, the trial court declared that it no longer had jurisdiction over the case and ordered the records of the case to be remanded anew to the CIAC for arbitral proceedings. Pursuant to the aforementioned Order of the Regional Trial C[o]urt of Quezon City, the CIAC resumed conducting preliminary conferences. On August 21, 1995, herein [P]etitioner Philrock requested to suspend the proceedings until the court clarified its ruling in the Order dated June 13, 1995. Philrock argued that said Order was based on a 7
ruling that respondent spouses had a cause of action against petitioner, and (3) for sustaining the award of damages.
Ruling of the Court of Appeals The CA upheld the jurisdiction of the CIAC [5] over the dispute between petitioner and private respondent. Under Executive Order No. 1008, the CIAC acquires jurisdiction when the parties agree to submit their dispute to voluntary arbitration. Thus, in the present case, its jurisdiction continued despite its April 13, 1994 Order referring the case back to the Regional Trial Court (RTC) of Quezon City, Branch 82, the court of origin. The CIACs action was based on the principle that once acquired, jurisdiction remains until the full termination of the case unless a law provides the contrary. No such full termination of the case was evident in the said Order; nor did the CIAC or private respondents intend to put an end to the case. Besides, according to Section 3 of the Rules of Procedure Governing Construction Arbitration, technical rules of law or procedure are not applicable in a single arbitration or arbitral tribunal. Thus, the dismissal could not have divested the CIAC of jurisdiction to ascertain the facts of the case, arrive at a judicious resolution of the dispute and enforce its award or decision. Since the issues concerning the monetary awards were questions of fact, the CA held that those awards were inappropriate in a petition for certiorari. Such questions are final and not appealable according to Section 19 of EO 1008, which provides that arbitral awards shall be x x x final and [u]nappealable except on questions of law which shall be appealable to the Supreme Court x x x. Nevertheless, the CA reviewed the records and found that the awards were supported by substantial evidence. In matters falling under the field of expertise of quasi-judicial bodies, their findings of fact are accorded great respect when supported by substantial evidence. Hence, this Petition.[6] Issues The petitioner, in its Memorandum, raises the following issues: A. Whether or not the CIAC could take jurisdiction over the case of Respondent Cid spouses against Petitioner Philrock after the case had been dismissed by both the RTC and the CIAC. B. Whether or not Respondent Cid spouses have a cause of action against Petitioner Philrock. C. Whether or not the awarding of the amount of P23,276.75 for materials ordered by Respondent Spouses Cid plus interest thereon at the rate of 6% from 26 September 1995 is proper. D. Whether or not the awarding of the amount of P65,000.00 as retrofitting costs is proper. E. Whether or not the awarding of the amount of P1,340,454 for the value of the delivered but the allegedly unworkable concrete which was wasted is proper. F. Whether or not the awarding o[f] moral and nominal damages and attorney's fees and expenses of litigation in favor of respondents is proper. G. Whether or not Petitioner Philrock should be held liable for the payment of arbitration fees.[7] In sum, petitioner imputes reversible error to the CA (1) for upholding the jurisdiction of the CIAC after the latter had dismissed the case and referred it to the regular court, (2) for
This Courts Ruling The Petition has no merit. First Issue: J uri s dic tion Petitioner avers that the CIAC lost jurisdiction over the arbitration case after both parties had withdrawn their consent to arbitrate. The June 13, 1995 RTC Order remanding the case to the CIAC for arbitration was allegedly an invalid mode of referring a case for arbitration. We disagree. Section 4 of Executive Order 1008 expressly vests in the CIAC original and exclusive jurisdiction over disputes arising from or connected with construction contracts entered into by parties that have agreed to submit their dispute to voluntary arbitration.[8] It is undisputed that the parties submitted themselves to the jurisdiction of the Commission by virtue of their Agreement to Arbitrate dated November 24, 1993. Signatories to the Agreement were Atty. Ismael J. Andres and Perry Y. Uy (president of Philippine Rock Products, Inc.) for petitioner, and Nelia G. Cid and Atty. Esteban A. Bautista for respondent spouses.[9] Petitioner claims, on the other hand, that this Agreement was withdrawn by respondents on April 8, 1994, because of the exclusion of the seven engineers of petitioners in the arbitration case. This withdrawal became the basis for the April 13, 1994 CIAC Order dismissing the arbitration case and referring the dispute back to the RTC. Consequently, the CIAC was divested of its jurisdiction to hear and decide the case. This contention is untenable. First , private respondents removed the obstacle to the continuation of the arbitration, precisely by withdrawing their objection to the exclusion of the seven engineers.Second , petitioner continued participating in the arbitration even after the CIAC Order had been issued. It even concluded and signed the Terms of Reference [10] on August 21, 1995, in which the parties stipulated the circumstances leading to the dispute; summarized their respective positions, issues, and claims; and identified the composition of the tribunal of arbitrators. The document clearly confirms both parties intention and agreement to submit the dispute to voluntary arbitration. In view of this fact, we fail to see how the CIAC could have been divested of its jurisdiction. Finally , as pointed out by the solicitor general, petitioner maneuvered to avoid the RTCs final resolution of the dispute by arguing that the regular court also lost jurisdiction after the arbitral tribunals April 13, 1994 Order referring the case back to the RTC. In so doing, petitioner conceded and estopped itself from further questioning the jurisdiction of the CIAC. The Court will not countenance the effort of any party to subvert or defeat the objective of voluntary arbitration for its own private motives. After submitting itself to arbitration proceedings and actively participating therein, petitioner is estopped from assailing the jurisdiction of the CIAC, merely because the latter rendered an adverse decision.[11] Second Issue: Cause of Ac tion Petitioner contends that respondent spouses were negligent in not engaging the services of an engineer or architect who should oversee their construction, in violation of Section 308 of the National Building Code. It adds that even if the concrete it delivered was defective, respondent spouses should bear the loss arising from their illegal operation. In short, it alleges that they had no cause of action against it. We disagree. Cause of action is defined as an act or omission by which a party violates the right of another .[12] A complaint is deemed to have stated a cause of action provided 8
it has indicated the following: (1) the legal right of the plaintiff, (2) the correlative obligation of the defendant, and (3) the act or the omission of the defendant in violation of the said legal right.[13] The cause of action against petitioner was clearly established. Respondents were purchasers of ready-mix concrete from petitioner. The concrete delivered by the latter turned out to be of substandard quality. As a result, respondents sustained damages when the structures they built using such cement developed cracks and honeycombs. Consequently, the construction of their residence had to be stopped. Further, the CIAC Decision clearly spelled out respondents cause of action against petitioner, as follows: Accordingly, this Tribunal finds that the mix was of the right proportions at the time it left the plant. This, however, does not necessarily mean that all of the concrete mix delivered had remained workable when it reached the jobsite. It should be noted that there is no evidence to show that all the transit mixers arrived at the site within the allowable time that would ensure the workability of the concrete mix delivered. On the other hand, there is sufficiently strong evidence to show that difficulties were encountered in the pouring of concrete mix from certain transit mixers necessitating the [addition] of water and physically pushing the mix, obviously because the same [was] no longer workable. This Tribunal holds that the unworkability of said concrete mix has been firmly established. There is no dispute, however, to the fact that there are defects in some areas of the poured structures. In this regard, this Tribunal holds that the only logical reason is that the unworkable concrete was the one that was poured in the defective sections.[14]
of it, a memorandum having been submitted citing all the demands of [c]laimants. This assurance was made on July 31, 1992 when Respondents Secillano, Martillano and Lomibao came to see Claimant Nelia Cid and offered to refund P23,276.25, [t]he difference between the billing by Philrocks Marketing Department in the amount of P125,586.25 and the amount charged by Philrock's Batching Plant Department in the amount of only P102,586.25, which [c]laimant refused to accept by saying, Saka na lang. [18] The same issue was discussed during the hearing before the arbitration tribunal on December 19, 1995.[19] It was also mentioned in that tribunals Decision dated September 24, 1996.[20] The payment of interest is based on Article 2209 of the Civil Code, which provides that if the obligation consists of the payment of a sum of money, and the debtor incurs delay, the indemnity for damages shall be the payment of legal interest which is six per cent per annum, in the absence of a stipulation of the rate.
A wards for R etrofi tting Cos ts, Was ted Unwork able B ut Delivered C oncrete, and A rbitration F ees Petitioner maintains that the defects in the concrete structure were due to respondent spouses failure to secure the services of an engineer or architect to supervise their project. Hence, it claims that the award for retrofitting cost was without legal basis. It also denies liability for the wasted unworkable but delivered concrete, for which the arbitral court awarded P13,404.54. Finally, it complains against the award of litigation expenses, inasmuch as the case should not have been instituted at all had respondents complied with the requirements of the National Building Code. We are unconvinced. Not only did respondents disprove the contention of petitioner; they also showed that they sustained damages due to the defective concrete it had delivered. These were items of actual damages they sustained due to its breach of contract.
Third Issue: Monetary A wards Petitioner assails the monetary awards given by the arbitral tribunal for alleged lack of basis in fact and in law. The solicitor general counters that the basis for petitioners assigned errors with regard to the monetary awards is purely factual and beyond the review of this Court. Besides, Section 19, EO 1008, expressly provides that monetary awards by the CIAC are final and unappealable. We disagree with the solicitor general. As pointed out earlier, factual findings of quasi-judicial bodies that have acquired expertise are generally accorded great respect and even finality, if they are supported by substantial evidence.[15] The Court, however, has consistently held that despite statutory provisions making the decisions of certain administrative agencies final, it still takes cognizance of petitions showing want of jurisdiction, grave abuse of discretion, violation of due process, denial of substantial justice or erroneous interpretation of the law. [16] Voluntary arbitrators, by the nature of their functions, act in a quasi-judicial capacity, such that their decisions are within the scope of judicial review.[17] Petitioner protests the award to respondent spouses of P23,276.25 as excess payment with six percent interest beginning September 26, 1995. It alleges that this item was neither raised as an issue by the parties during the arbitration case, nor was its justification discussed in the CIAC Decision. It further contends that it could not be held liable for interest, because it had earlier tendered a check in the same amount to respondent spouses, who refused to receive it. Petitioners contentions are completely untenable. Respondent Nelia G. Cid had already raised the issue of overpayment even prior to the formal arbitration. In paragraph 9 of the Terms of Reference, she stated: 9. Claimants were assured that the problem and her demands had been the subject of several staff meetings and that Arteche was very much aware
Moral and Nomi nal Damag es , A ttorneys Fees and C os ts Petitioner assails the award of moral damages, claiming no malice or bad faith on its part. We disagree. Respondents were deprived of the comfort and the safety of a house and were exposed to the agony of witnessing the wastage and the decay of the structure for more than seven years. In her Memorandum, Respondent Nelia G. Cid describes her familys sufferings arising from the unreasonable delay in the construction of their residence, as follows: The family lives separately for lack of space to stay in. Mrs. Cid is staying in a small dingy bodega, while her son occupies another makeshift room. Their only daughter stayed with her aunt from 1992 until she got married in 1996. x x x.[21] The Court also notes that during the pendency of the case, Respondent Vicente Cid died without seeing the completion of their home.[22] Under the circumstances, the award of moral damages is proper. Petitioner also contends that nominal damages should not have been granted, because it did not breach its obligation to respondent spouses. Nominal damages are recoverable only if no actual or substantial damages resulted from the breach, or no damage was or can be shown.[23] Since actual damages have been proven by private respondents for which they were amply compensated, they are no longer entitled to nominal damages. Petitioner protests the grant of attorneys fees, arguing that respondent spouses did not engage the services of legal counsel. Also, it contends that attorneys fees and litigation 9
expenses are awarded only if the opposing party acted in gross and evident bad faith in refusing to satisfy plaintiffs valid, just and demandable claim. We disagree. The award is not only for attorneys fees, but also for expenses of litigation. Hence, it does not matter if respondents represented themselves in court, because it is obvious that they incurred expenses in pursuing their action before the CIAC, as well as the regular and the appellate courts. We find no reason to disturb this award. WHEREFORE, the Petition is DENIED and the assailed Decision AFFIRMED; however, the award of nominal damages is DELETED for lack of legal basis. Costs against petitioner. SO ORDERED.
3. G.R. No. 185582 February 29, 2012 TUNA PROCESSING, INC., vs PHILIPPINE KINGFORD, INC.,
DECISION PEREZ, J.: Can a foreign corporation not licensed to do business in the Philippines, but which collects royalties from entities in the Philippines, sue here to enforce a foreign arbitral award? In this Petition for Review on Certiorari under Rule 45,[1] petitioner Tuna Processing, Inc. (TPI), a foreign corporation not licensed to do business in the Philippines, prays that the Resolution[2] dated 21 November 2008 of the Regional Trial Court (RTC) of Makati City be declared void and the case be remanded to the RTC for further proceedings. In the assailed Resolution, the RTC dismissed petitioners Petition for Confirmation, Recognition, and Enforcement of Foreign Arbitral Award[3] against respondent Philippine Kingford, Inc. (Kingford), a corporation duly organized and existing under the laws of the Philippines,[4] on the ground that petitioner lacked legal capacity to sue.[5] The Antecedents On 14 January 2003, Kanemitsu Yamaoka (hereinafter referred to as the licensor), co-patentee of U.S. Patent No. 5,484,619, Philippine Letters Patent No. 31138, and Indonesian Patent No. ID0003911 (collectively referred to as the Yamaoka Patent),[6] and five (5) Philippine tuna processors, namely, Angel Seafood Corporation, East Asia Fish Co., Inc., Mommy Gina Tuna Resources, Santa Cruz Seafoods, Inc., and respondent Kingford (collectively referred to as the sponsors/licensees)[7] entered into a Memorandum of Agreement (MOA),[8] pertinent provisions of which read: 1. Background and objectives. The Licensor, co-owner of U.S.Patent No. 5,484,619, Philippine Patent No. 31138, and Indonesian Patent No. ID0003911 xxx wishes to form an alliance with Sponsors for purposes of enforcing his three aforementioned patents, granting licenses under those patents, and collecting royalties. The Sponsors wish to be licensed under the aforementioned patents in order to practice the processes claimed in those patents in the United States, the Philippines, and Indonesia, enforce those patents and collect royalties in conjunction with Licensor. xxx 4. Establishment of Tuna Processors, Inc. The parties hereto agree to the establishment of Tuna Processors, Inc. (TPI), a corporation established in the State of California, in order to implement the objectives of this Agreement. 5. Bank account. TPI shall open and maintain bank accounts in the United States, which will be used exclusively to deposit funds that it will collect and to disburse cash it will be obligated to spend in connection with the implementation of this Agreement. 6. Ownership of TPI. TPI shall be owned by the Sponsors and Licensor. Licensor shall be assigned one share of TPI for the purpose of being elected as member of the board of directors. The remaining shares of TPI shall be held by the Sponsors according to their respective equity shares. [9] xxx The parties likewise executed a Supplemental Memorandum of Agreement[10] dated 15 January 2003 and an Agreement to Amend Memorandum of Agreement[11] dated 14 July 2003. 10
Due to a series of events not mentioned in the petition, the licensees, including respondent Kingford, withdrew from petitioner TPI and correspondingly reneged on their obligations.[12] Petitioner submitted the dispute for arbitration before the International Centre for Dispute Resolution in the State of California, United States and won the case against respondent.[13] Pertinent portions of the award read:
The Corporation Code of the Philippines expressly provides: Sec. 133. Doing business without a license. - No foreign corporation transacting business in the Philippines without a license, or its successors or assigns, shall be permitted to maintain or intervene in any action, suit or proceeding in any court or administrative agency of the Philippines; but such corporation may be sued or proceeded against before Philippine courts or administrative tribunals on any valid cause of action recognized under Philippine laws.
13.1 Within thirty (30) days from the date of transmittal of this Award to the Parties, pursuant to the terms o f this award, the total sum to be paid by RESPONDENT KINGFORD to CLAIMANT TPI, is the sum of ONE MILLION SEVEN HUNDRED FIFTY THOUSAND EIGHT HUNDRED FORTY SIX DOLLARS AND TEN CENTS ($1,750,846.10). (A) For breach of the MOA by not paying past due assessments, RESPONDENT KINGFORD shall pay CLAIMANT the total sum of TWO HUNDRED TWENTY NINE THOUSAND THREE HUNDRED AND FIFTY FIVE DOLLARS AND NINETY CENTS ($229,355.90) which is 20% of MOA assessments since September 1, 2005[;]
It is pursuant to the aforequoted provision that the court a quo dismissed the petition. Thus: Herein plaintiff TPIs Petition, etc. acknowledges that it is a foreign corporation established in the State of California and was given the exclusive right to license or sublicense the Yamaoka Patent and was assigned the exclusive right to enforce the said patent and collect corresponding royalties in the Philippines. TPI likewise admits that it does not have a license to do business in the Philippines.
(B) For breach of the MOA in failing to cooperate with CLAIMANT TPI in fulfilling the objectives of the MOA, RESPONDENT KINGFORD shall pay CLAIMANT the total sum of TWO HUNDRED SEVENTY ONE THOUSAND FOUR HUNDRED NINETY DOLLARS AND TWENTY CENTS ($271,490.20)[;][14] and
There is no doubt, therefore, in the mind of this Court that TPI has been doing business in the Philippines, but sans a license to do so issued by the concerned government agency of the Republic of the Philippines, when it collected royalties from five (5) Philippine tuna processors[,] namely[,] Angel Seafood Corporation, East Asia Fish Co., Inc., Mommy Gina Tuna Resources, Santa Cruz Seafoods, Inc. and respondent Philippine Kingford, Inc. This being the real situation, TPI cannot be permitted to maintain or intervene in any action, suit or proceedings in any court or administrative agency of the Philippines. A priori, the Petition, etc. extant of the plaintiff TPI should be dismissed for it does not have the legal personality to sue in the Philippines.[21]
(C) For violation of THE LANHAM ACT and infringement of the YAMAOKA 619 PATENT, RESPONDENT KINGFORD shall pay CLAIMANT the total sum of ONE MILLION TWO HUNDRED FIFTY THOUSAND DOLLARS AND NO CENTS ($1,250,000.00). xxx xxx To enforce the award, petitioner TPI filed on 10 October 2007 a Petition for Confirmation, Recognition, and Enforcement of Foreign Arbitral Award before the RTC of Makati City. The petition was raffled to Branch 150 presided by Judge Elmo M. Alameda.
The petitioner counters, however, that it is entitled to seek for the recognition and enforcement of the subject foreign arbitral award in accordance with Republic Act No. 9285 (Alternative Dispute Resolution Act of 2004),[22] the Convention on the Recognition and Enforcement of Foreign Arbitral Awards drafted during the United Nations Conference on International Commercial Arbitration in 1958 (New York Convention), and the UNCITRAL Model Law on International Commercial Arbitration (Model Law),[23] as none of these specifically requires that the party seeking for the enforcement should have legal capacity to sue. It anchors its argument on the following:
At Branch 150, respondent Kingford filed a Motion to Dismiss.[16] After the court denied the motion for lack of merit,[17] respondent sought for the inhibition of Judge Alameda and moved for the reconsideration of the order denying the motion.[18] Judge Alameda inhibited himself notwithstanding [t]he unfounded allegations and unsubstantiated assertions in the motion.[19] Judge Cedrick O. Ruiz of Branch 61, to which the case was re-raffled, in turn, granted respondents Motion for Reconsideration and dismissed the petition on the ground that the petitioner lacked legal capacity to sue in the Philippines.[20]
In the present case, enforcement has been effectively refused on a ground not found in the [Alternative Dispute Resolution Act of 2004], New York Convention, or Model Law. It is for this reason that TPI has brought this matter before this most Honorable Court, as it [i]s imperative to clarify whether the Philippines international obligations and State policy to strengthen arbitration as a means of dispute resolution may be defeated by misplaced technical considerations not found in the relevant laws.[24] Simply put, how do we reconcile the provisions of the Corporation Code of the Philippines on one hand, and the Alternative Dispute Resolution Act of 2004, the New York Convention and the Model Law on the other?
Petitioner TPI now seeks to nullify, in this instant Petition for Review on Certiorari under Rule 45, the order of the trial court dismissing its Petition for Confirmation, Recognition, and Enforcement of Foreign Arbitral Award. Issue The core issue in this case is whether or not the court a quo was correct in so dismissing the petition on the ground of petitioners lack of legal capacity to sue.
In several cases, this Court had the occasion to discuss the nature and applicability of the Corporation Code of the Philippines, a general law, viz-a-viz other special laws. Thus, in Koruga v. Arcenas, Jr.,[25] this Court rejected the application
Our Ruling The petition is impressed with merit. 11
of the Corporation Code and applied the New Central Bank Act. It ratiocinated:
of the Alternative Dispute Resolution Act of 2004? We answer in the affirmative.
Korugas invocation of the provisions of the Corporation Code is misplaced. In an earlier case with similar antecedents, we ruled that: The Corporation Code, however, is a general law applying to all types of corporations, while the New Central Bank Act regulates specifically banks and other financial institutions, including the dissolution and liquidation thereof. As between a general and special law, the latter shall prevail generalia specialibus non derogant. (Emphasis supplied)[26]
Sec. 45 of the Alternative Dispute Resolution Act of 2004 provides that the opposing party in an application for recognition and enforcement of the arbitral award may raise only those grounds that were enumerated under Article V of the New York Convention, to wit: Article V 1. Recognition and enforcement of the award may be refused, at the request of the party against whom it is invoked, only if that party furnishes to the competent authority where the recognition and enforcement is sought, proof that: (a) The parties to the agreement referred to in article II were, under the law applicable to them, under some incapacity, or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the country where the award was made; or (b) The party against whom the award is invoked was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to present his case; or (c) The award deals with a difference not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration, provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, that part of the award which contains decisions on matters submitted to arbitration may be recognized and enforced; or (d) The composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties, or, failing such agreement, was not in accordance with the law of the country where the arbitration took place; or (e) The award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made. 2. Recognition and enforcement of an arbitral award may also be refused if the competent authority in the country where recognition and enforcement is sought finds that: (a) The subject matter of the difference is not capable of settlement by arbitration under the law of that country; or (b) The recognition or enforcement of the award would be contrary to the public policy of that country.
Further, in the recent case of Hacienda Luisita, Incorporated v. Presidential Agrarian Reform Council,[27] this Court held: Without doubt, the Corporation Code is the general law providing for the formation, organization and regulation of private corporations. On the other hand, RA 6657 is the special law on agrarian reform. As between a general and special law, the latter shall prevailgeneralia specialibus non derogant.[28] Following the same principle, the Alternative Dispute Resolution Act of 2004 shall apply in this case as the Act, as its title - An Act to Institutionalize the Use of an Alternative Dispute Resolution System in the Philippines and to Establish the Office for Alternative Dispute Resolution, and for Other Purposes - would suggest, is a law especially enacted to actively promote party autonomy in the resolution of disputes or the freedom of the party to make their own arrangements to resolve their disputes.[29] It specifically provides exclusive grounds available to the party opposing an application for recognition and enforcement of the arbitral award.[30] Inasmuch as the Alternative Dispute Resolution Act of 2004, a municipal law, applies in the instant petition, we do not see the need to discuss compliance with international obligations under the New York Convention and the Model Law. After all, both already form part of the law. In particular, the Alternative Dispute Resolution Act of 2004 incorporated the New York Convention in the Act by specifically providing: SEC. 42. Application of the New York Convention. - The New York Convention shall govern the recognition and enforcement of arbitral awards covered by the said Convention.
Clearly, not one of these exclusive grounds touched on the capacity to sue of the party seeking the recognition and enforcement of the award.
xxx SEC. 45. Rejection of a Foreign Arbitral Award. - A party to a foreign arbitration proceeding may oppose an application for recognition and enforcement of the arbitral award in accordance with the procedural rules to be promulgated by the Supreme Court only on those grounds enumerated under Article V of the New York Convention. Any other ground raised shall be disregarded by the regional trial court.
Pertinent provisions of the Special Rules of Court on Alternative Dispute Resolution,[31] which was promulgated by the Supreme Court, likewise support this position. Rule 13.1 of the Special Rules provides that [a]ny party to a foreign arbitration may petition the court to recognize and enforce a foreign arbitral award. The contents of such petition are enumerated in Rule 13.5.[32] Capacity to sue is not included. Oppositely, in the Rule on local arbitral awards or arbitrations in instances where the place of arbitration is in the Philippines,[33] it is specifically required that a petition to determine any question concerning the existence, validity and enforceability of such arbitration agreement[34] available to the parties before the commencement of arbitration and/or a petition for judicial relief from the ruling of the arbitral tribunal on a preliminary question upholding or declining its jurisdiction[35] after arbitration has already commenced should
It also expressly adopted the Model Law, to wit: Sec. 19. Adoption of the Model Law on International Commercial Arbitration. International commercial arbitration shall be governed by the Model Law on International Commercial Arbitration (the Model Law) adopted by the United Nations Commission on International Trade Law on June 21, 1985 xxx. Now, does a foreign corporation not licensed to do business in the Philippines have legal capacity to sue under the provisions 12
state [t]he facts showing that the persons named as petitioner or respondent have legal capacity to sue or be sued.[36]
[I]t must be remembered that [the principle of hierarchy of courts] generally applies to cases involving conflicting factual allegations. Cases which depend on disputed facts for decision cannot be brought immediately before us as we are not triers of facts.[44] A strict application of this rule may be excused when the reason behind the rule is not present in a case, as in the present case, where the issues are not factual but purely legal. In these types of questions, this Court has the ultimate say so that we merely abbreviate the review process if we, because of the unique circumstances of a case, choose to hear and decide the legal issues outright.[45]
Indeed, it is in the best interest of justice that in the enforecement of a foreign arbitral award, we deny availment by the losing party of the rule that bars foreign corporations not licensed to do business in the Philippines from maintaining a suit in our courts. When a party enters into a contract containing a foreign arbitration clause and, as in this case, in fact submits itself to arbitration, it becomes bound by the contract, by the arbitration and by the result of arbitration, conceding thereby the capacity of the other party to enter into the contract, participate in the arbitration and cause the implementation of the result. Although not on all fours with the instant case, also worthy to consider is the wisdom of then Associate Justice Flerida Ruth P. Romero in her Dissenting Opinion in Asset Privatization Trust v. Court of Appeals,[37] to wit:
Moreover, the novelty and the paramount importance of the issue herein raised should be seriously considered.[46] Surely, there is a need to take cognizance of the case not only to guide the bench and the bar, but if only to strengthen arbitration as a means of dispute resolution, and uphold the policy of the State embodied in the Alternative Dispute Resolution Act of 2004, to wit:
xxx Arbitration, as an alternative mode of settlement, is gaining adherents in legal and judicial circles here and abroad. If its tested mechanism can simply be ignored by an aggrieved party, one who, it must be stressed, voluntarily and actively participated in the arbitration proceedings from the very beginning, it will destroy the very essence of mutuality inherent in consensual contracts.[38] Clearly, on the matter of capacity to sue, a foreign arbitral award should be respected not because it is favored over domestic laws and procedures, but because Republic Act No. 9285 has certainly erased any conflict of law question.
Sec. 2. Declaration of Policy. - It is hereby declared the policy of the State to actively promote party autonomy in the resolution of disputes or the freedom of the party to make their own arrangements to resolve their disputes. Towards this end, the State shall encourage and actively promote the use of Alternative Dispute Resolution (ADR) as an important means to achieve speedy and impartial justice and declog court dockets. xxx Fourth. As regards the issue on the validity and enforceability of the foreign arbitral award, we leave its determination to the court a quo where its recognition and enforcement is being sought.
Finally, even assuming, only for the sake of argument, that the court a quo correctly observed that the Model Law, not the New York Convention, governs the subject arbitral award,[39] petitioner may still seek recognition and enforcement of the award in Philippine court, since the Model Law prescribes substantially identical exclusive grounds for refusing recognition or enforcement.[40] Premises considered, petitioner TPI, although not licensed to do business in the Philippines, may seek recognition and enforcement of the foreign arbitral award in accordance with the provisions of the Alternative Dispute Resolution Act of 2004.
Fifth. Respondent claims that petitioner failed to furnish the court of origin a copy of the motion for time to file petition for review on certiorari before the petition was filed with this Court.[47] We, however, find petitioners reply in order. Thus: 26. Admittedly, reference to Branch 67 in petitioner TPIs Motion for Time to File a Petition for Review on Certiorari under Rule 45 is a typographical error. As correctly pointed out by respondent Kingford, the order sought to be assailed originated from Regional Trial Court, Makati City, Branch 61.
II The remaining arguments of respondent Kingford are likewise unmeritorious.
27. xxx Upon confirmation with the Regional Trial Court, Makati City, Branch 61, a copy of petitioner TPIs motion was received by the Metropolitan Trial Court, Makati City, Branch 67. On 8 January 2009, the motion was forwarded to the Regional Trial Court, Makati City, Branch 61.[48]
First. There is no need to consider respondents contention that petitioner TPI improperly raised a question of fact when it posited that its act of entering into a MOA should not be considered doing business in the Philippines for the purpose of determining capacity to sue. We reiterate that the foreign corporations capacity to sue in the Philippines is not material insofar as the recognition and enforcement of a foreign arbitral award is concerned.
All considered, petitioner TPI, although a foreign corporation not licensed to do business in the Philippines, is not, for that reason alone, precluded from filing the Petition for Confirmation, Recognition, and Enforcement of Foreign Arbitral Award before a Philippine court.
Second. Respondent cannot fault petitioner for not filing a motion for reconsideration of the assailed Resolution dated 21 November 2008 dismissing the case. We have, time and again, ruled that the prior filing of a motion for reconsideration is not required in certiorari under Rule 45.[41]
WHEREFORE, the Resolution dated 21 November 2008 of the Regional Trial Court, Branch 61, Makati City in Special Proceedings No. M-6533 is hereby REVERSED and SET ASIDE. The case is REMANDED to Branch 61 for f urther proceedings.
Third. While we agree that petitioner failed to observe the principle of hierarchy of courts, which, under ordinary circumstances, warrants the outright dismissal of the case,[42] we opt to relax the rules following the pronouncement in Chua v. Ang,[43] to wit:
SO ORDERED.
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