THIRD
DIVISION
|
HUTAMA-RSEA JOINT OPERATIONS, INC., Petitioner, - versus - CITRA METRO MANILA TOLLWAYS
CORPORATION, Respondent. |
|
G.R.
No. 180640 Present: YNARES-SANTIAGO, J.,
Chairperson, AUSTRIA-MARTINEZ,
CHICO-NAZARIO, NACHURA, and PERALTA,
JJ. Promulgated: April
24, 2009 |
x - - - - - - -
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
- - -x
CHICO-NAZARIO, J.:
Before
Us is a Petition[1] for
Review on Certiorari under Rule 45 of
the Rules of Court seeking to set aside the Decision[2]
dated
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
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
On
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
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
Respondent
filed a Motion for Reconsideration of the CIAC Order dated
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
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
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. 1008[18]
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
Further,
Section 1, Article III of the CIAC Rules of Procedure Governing Construction
Arbitration[19] (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 conditions[20]:
CLAIMS, DISPUTES and ARBITRATION
x
x x x
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.
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 (
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.
x x x x
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
SO
ORDERED.
|
|
MINITA V. CHICO-NAZARIOAssociate
Justice |
WE
CONCUR:
Associate
Justice
Chairperson
MA. ALICIA AUSTRIA-MARTINEZAssociate
Justice |
ANTONIO EDUARDO B. NACHURA Associate
Justice |
|
|
|
|
|
|
|
|
|
DIOSDADO M. PERALTAAssociate
Justice |
|
I attest that the conclusions in the
above Decision were reached in consultation before the case was assigned to the
writer of the opinion of the Court’s Division.
|
|
CONSUELO YNARES-SANTIAGO Associate
Justice Chairperson,
Third Division |
Pursuant to Article VIII, Section 13
of the Constitution, and the Division Chairman’s Attestation, it is hereby
certified that the conclusions in the above Decision were reached in
consultation before the case was assigned to the writer of the opinion of the
Court’s Division.
|
|
REYNATO S. PUNO
Chief Justice |
[1] Rollo, pp. 17-65.
[2] Penned
by Associate Justice Edgardo P. Cruz with Associate Justices Rosalinda Asuncion
Vicente and Sesinando E. Villon, concurring; rollo, pp. 70-83.
[3] Rollo, pp. 115-116.
[4] Construction
Industry Arbitration Commission (CIAC) records, Folder 1, Annex A.
[5] CIAC
records, Folder 2, Annexes I-EE.
[6]
[7]
[8]
[9] Id,,
Folder 3, Annex D.
[10]
[11]
[12]
[13]
[14]
[15] CA
records, pp. 53-56.
[16]
[17] Atty.
Alfredo F. Tadiar, Dean Custodio O. Parlade and Engr. Joel J. Marciano.
[18] Also
known as the Construction Industry Arbitration Law; took effect on
[19] Approved
and promulgated on
[20] Supra,
note 4.
[21] Rollo, pp. 292-344.
[22] See De Guzman v. Sison, 407 Phil. 351, 368 (2001).
[23] Heunghwa Industry Company Limited v. DJ
Builders Corporation, G.R. No. 169095,
[24]
[25]
[26] Buazon v. Court of Appeals, G.R. No.
97749, 19 March 1993, 220 SCRA 182, 187; China
Chang Jiang Energy Corporation (Philippines) v. Rosal Infrastructure Builders,
G.R. No. 125706,
[27]
[28]
[29] 376
Phil. 362, 375 (1999).
[30] Gammon Philippines, Inc. v. Metro Rail
Transit Development Corporation, G.R. No. 144792, 31 January 2006, 481 SCRA
209, 212; Hi-Precision Steel Center, Inc
v. Lim Kim Steel Builders, Inc., G.R. No. 110434, 13 December 1993, 228
SCRA 397.