THIRD DIVISION
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FORT BONIFACIO DEVELOPMENT CORPORATION, Petitioner, -
versus - MANUEL N. DOMINGO, Respondent. |
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G.R. No. 180765 Present: QUISUMBING, J.,* CARPIO,** CHICO-NAZARIO, Acting Chairperson, NACHURA, and PERALTA, JJ. Promulgated: February 27, 2009 |
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CHICO-NAZARIO, J.:
Before this Court is a Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court, filed by
petitioner Fort Bonifacio Development Corporation, seeking to reverse and set
aside the Decision dated
Petitioner, a domestic
corporation duly organized under Philippine laws, is engaged in the real estate
development business. Respondent is the
assignee of L and M Maxco Specialist Engineering Construction (LMM
Construction) of its receivables from petitioner.
On
Due to the defect and delay in
the work of LMM Construction on the condominium project, petitioner
unilaterally terminated the Trade Contract[5]
and hired another contractor to finish the rest of the work left undone by LMM
Construction. Despite the
pre-termination of the Trade Contract, petitioner was liable to pay LMM
Construction a fraction of the contract price in proportion to the works
already performed by the latter.[6]
On 30 July 2004, petitioner
received the first Notice of Garnishment against the receivables of LMM
Construction issued by the Construction Industry Arbitration Commission (CIAC) in
connection with CIAC Case No. 11-2002 filed by Asia-Con Builders against LMM
Construction, wherein LMM Construction was adjudged liable to Asia-Con Builders
for the amount of P5,990,927.77.
On 30 April 2005, petitioner
received a letter dated 18 April 2005 from respondent inquiring on the
retention money supposedly due to LMM Construction and informing petitioner
that a portion of the amount receivable by LMM Construction therefrom was
already assigned to him as evidenced by the Deed of Assignment executed by LMM
Construction in respondent’s favor on 28 February 2005. LMM Construction assigned its receivables
from petitioner to respondent to settle the alleged unpaid obligation of LMM
Construction to respondent amounting to P804,068.21.
Through its letter dated 11
October 2005, addressed to respondent, petitioner acknowledged that LMM
Construction did have receivables still with petitioner, consisting of the
retention money; but petitioner also advised respondent that the retention
money was not yet due and demandable and may be ascertained only after the
completion of the corrective works undertaken by the new contractor on the condominium
project. Petitioner also notified
respondent that part of the receivables was also being garnished by the other
creditors of LMM Construction.
Unsatisfied with the reply of
petitioner, respondent sent another letter dated 14 October 2005 asserting his ownership
over a portion of the retention money assigned to him and maintaining that the amount
thereof pertaining to him can no longer be garnished to satisfy the obligations
of LMM Construction to other persons since it already ceased to be the property
of LMM Construction by virtue of the Deed of Assignment. Attached to respondent’s letter was the
endorsement of LMM Construction dated 17 January 2005 approving respondent’s
claim upon petitioner in the amount of P804,068.21 chargeable against
the retention money that may be received by LMM Construction from the
petitioner.
Before respondent’s claim could
be fully addressed, petitioner, on 6 June 2005, received the second Notice of
Garnishment against the receivables of LMM Construction, this time, issued by
the National Labor Relations Commission (NLRC) to satisfy the liability of LMM
Construction to Nicolas Consigna in NLRC Case No. 00-07-05483-2003.
On P5,990,227.77
belonging to LMM Construction. In compliance
with the said Order, petitioner was able to deliver to Asia-Con Builders on 22 July
2005 and on 11 August 2005 partial payments
amounting to P1,170,601.81, covered by the appropriate Acknowledgement
Receipts.
A third Notice of Garnishment
against the receivables of LMM Construction, already accompanied by an Order of
Delivery of Money, both issued by the RTC of Makati, Branch 133, was served upon
petitioner on P558,448.27 to the Sheriff to answer
for the favorable judgment obtained by Concrete Masters, Inc. (Concrete
Masters) against LMM Construction in Civil Case No. 05-164.
Petitioner, in a letter dated 31 January 2006, categorically denied
respondent’s claim on the retention money, reasoning that after the completion
of the rectification works on the condominium project and satisfaction of the
various garnishment orders, there was no more left of the retention money of LMM
Construction.
It would appear, however, that petitioner
fully satisfied the first Notice of Garnishment in the amount of P5,110,833.44
only on 31 January 2006,[7]
the very the same date that it expressly denied respondent’s claim. Also, petitioner complied with the Notice of
Garnishment and its accompanying Order of Delivery of Money in the amount of P558,448.27
on
The foregoing events prompted respondent
to file a Complaint for collection of sum of money, against both LMM
Construction and petitioner, docketed as Civil Case No. 06-0200-CFM before the
RTC of Pasay City, Branch 109.
Instead
of filing an Answer, petitioner filed a Motion to Dismiss Civil Case No.
06-0200-CFM on the ground of lack of jurisdiction over the subject matter. Petitioner argued that since respondent
merely stepped into the shoes of LMM Construction as its assignor, it was the
CIAC and not the regular courts that had jurisdiction over the dispute as provided
in the Trade Contract.
On
Petitioner
sought remedy from the Court of Appeals by filing a Petition for Certiorari, docketed as CA-G.R. SP No. 97731,
challenging the RTC Order dated
In its Decision promulgated on
Similarly
ill-fated was petitioner’s Motion for Reconsideration, which was denied by the
Court of Appeals in its Resolution dated
Petitioner
now comes to this Court via this
instant Petition for Review on Certiorari
praying for the reversal of the 19 July 2007 Decision of the Court of Appeals and
6 June 2006 Order of the RTC and, ultimately, for the dismissal of Civil Case
No. 06-0200-CFM pending before the RTC.
For the resolution of this
Court is the sole issue of:
WHETHER OR
NOT THE RTC HAS JURISDICTION OVER CIVIL CASE NO.
06-0200-CFM.
The
jurisdiction of CIAC is defined under Executive Order No. 1008 as follows:
SECTION 4. Jurisdiction.—The CIAC shall have
original and exclusive jurisdiction over disputes arising from, or connected
with, contracts entered into by parties involved in construction in the
Philippines, whether the disputes arises before or after the completion of the
contract, or after the abandonment or breach thereof. These disputes may
involve government or private contracts. For the Board to acquire jurisdiction,
the parties to a dispute must agree to submit the same to voluntary
arbitration.
The
jurisdiction of the CIAC may include but is not limited to violation of
specifications for materials and workmanship; violation of the terms of
agreement; interpretation and/or application of contractual provisions; amount
of damages and penalties; commencement time and delays; maintenance and
defects; payment default of employer or contractor and changes in contract cost.
Excluded
from the coverage of this law are disputes arising from employer-employee
relationships which shall continue to be covered by the Labor Code of the
In assailing the
Respondent counters that the CIAC is devoid of
jurisdiction over money claims of third persons against the contractor, developer
or owner of the project. The jurisdiction
of the CIAC is limited to settling disputes arising among contractors,
developers and/or owners of construction projects. It does not include the determination of who
among the many creditors of the contractor should enjoy preference in payment
of its receivables from the developer/owner.
It is an elementary rule of procedural law that
jurisdiction of the court over the subject matter is determined by the
allegations of the complaint, irrespective of whether or not the plaintiff is
entitled to recover upon all or some of the claims asserted therein. As a necessary consequence, the jurisdiction
of the court cannot be made to depend upon the defenses set up in the answer or
upon the motion to dismiss; for otherwise, the question of jurisdiction would
almost entirely depend upon the defendant. What determines the jurisdiction of
the court is the nature of the action pleaded as appearing from the allegations
in the complaint. The averments therein
and the character of the relief sought are the ones to be consulted.[9]
Accordingly, the issues in the instant
case can only be properly resolved by an examination and evaluation of respondent’s
allegations in his Complaint in Civil Case No. 06-0200-CFM.
The allegations in respondent’s Complaint are
clear and simple: That LMM Construction had an outstanding obligation to
respondent in the amount of P804,068.21; that in payment of the said
amount, LMM Construction assigned to respondent its receivables from petitioner,
which assignment was properly made known to petitioner as early as 18 April
2005; that despite due notice of such assignment, petitioner still refused to
deliver the amount assigned to respondent, giving preference, instead, to the
garnishing creditors of LMM Construction; that at the time petitioner was
notified of the assignment, only one notice of garnishment, the first Notice of
Garnishment, was received by it; that had petitioner properly recognized
respondent’s right as an assignee of a portion of the receivables of LMM
Construction, there could have been sufficient residual amounts to satisfy respondent’s
claim; and that, uncertain over which one between LMM Construction and petitioner
he may resort to for payment, respondent named them both as defendants in Civil
Case No. 06-0200-CFM. A scrupulous
examination of the aforementioned allegations in respondent’s Complaint unveils
the fact that his cause of action springs not from a violation of the
provisions of the Trade Contract, but from the non-payment of the monetary
obligation of LMM Construction to him.
A cause
of action is a party’s act or omission that violates the rights of the other.[10] The right of the respondent that was violated,
prompting him to initiate Civil Case No. 06-0200-CFM, was his right to receive
payment for the financial obligation incurred by LMM Construction and to be
preferred over the other creditors of LMM Construction, a right which
pre-existed and, thus, was separate and distinct from the right to payment of LMM
Construction under the Trade Contract.
Petitioner’s unceasing reliance on Article 1311[11]
of the Civil Code on relativity of contracts is unavailing. It is true that respondent, as the assignee
of the receivables of LMM Construction from petitioner under the Trade Contract,
merely stepped into the shoes of LMM Construction. However, it bears to emphasize that the right
of LMM Construction to such receivables from petitioner under the Trade
Contract is not even in dispute in Civil Case No. 06-0200-CFM. What respondent puts in issue before the RTC is
the purportedly arbitrary exercise of discretion by the petitioner in giving
preference to the claims of the other creditors of LMM Construction over the receivables
of the latter.
It is encouraged that disputes arising from
construction contracts be referred first to the CIAC for their arbitration and
settlement, since such cases would often require expertise and technical knowledge
in construction. Hence, some of the
matters over which the CIAC may exercise jurisdiction, upon agreement of the
parties to the construction contract, “include but [are] not limited to violation
of specifications for materials and workmanship; violation of the terms of
agreement; interpretation and/or application of contractual provisions; amount
of damages and penalties; commencement time and delays; maintenance and
defects; payment default of employer or contractor and changes in contract
cost.”[12] Although the jurisdiction of the CIAC is not
limited to the afore-stated enumeration, other issues which it could take
cognizance of must be of the same or a closely related kind or species applying
the principle of ejusdem generis in
statutory construction.
Respondent’s claim is not even construction-related
at all. Construction is defined as referring to all on-site works on
buildings or altering structures, from land clearance through completion
including excavation, erection and assembly and installation of components and
equipment.[13] Petitioner’s insistence on the application of
the arbitration clause of the Trade Contract to respondent is clearly anchored
on an erroneous premise that respondent is seeking to enforce a right under the
same. Again, the right to the
receivables of LMM Construction from petitioner under the Trade Contract is not
being impugned herein. In fact,
petitioner readily conceded that LMM Construction still had receivables due
from petitioner, and respondent did not even have to refer to a single
provision in the Trade Contract to assert his claim. What respondent is demanding is that a
portion of such receivables amounting to P804,068.21 should have been
paid to him first before the other creditors of LMM Construction, which,
clearly, does not require the CIAC’s expertise and technical knowledge of construction.
The adjudication of Civil Case No. 06-0200-CFM
necessarily involves the application of pertinent statutes and jurisprudence to
matters such as obligations, contracts of assignment, and, if appropriate, even
preference of credits, a task more suited for a trial court to carry out after
a full-blown trial, than an arbitration body specifically devoted to
construction contracts.
This Court recognizes the laudable objective of
voluntary arbitration to provide a speedy and inexpensive method of
settling disputes by allowing the parties to avoid the formalities, delay,
expense and aggravation which commonly accompany ordinary litigation,
especially litigation which goes through the entire hierarchy of courts. It cannot, however, altogether surrender to
arbitration those cases, such as the one at bar, the extant facts of which
plainly call for the exercise of jurisdiction by the regular courts for their
resolution.
WHEREFORE, premises considered, the instant Petition is DENIED.
The Decision dated
SO
ORDERED.
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MINITA V.
CHICO-NAZARIO
Associate Justice Acting Chairperson |
WE CONCUR:
LEONARDO A. QUISUMBING
Associate Justice
DIOSDADO M. PERALTA
Associate Justice
ATTESTATION
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.
MINITA V. CHICO-NAZARIO
Associate Justice
Acting Chairperson, Third Division
CERTIFICATION
Pursuant to Section 13, Article VIII
of the Constitution, and the Division Acting Chairperson’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
* Per Special Order No. 564, dated
** Per Special Order No. 568, dated
[1] Penned by Associate Justice Josefina Guevara-Salonga with Associate Justices Vicente Q. Roxas and Ramon A. Garcia, concurring. Rollo, pp. 104-114.
[2]
[3] Penned by Judge Tingaraan U. Guling; rollo, pp. 234-235.
[4] Megaworld Globus Asia, Inc. v. DSM Construction and Development Corporation, 468 Phil. 305, 321 (2004).
[5] It was not shown on the records when the Trade Contract was terminated.
[6] Records do not show the estimated amount of receivables of LMM Construction.
[7] Official Receipt Nos. 3292786-A, 3293457-A and 21270426; records, Vol. IV, pp. 95-97.
[8]
[9] Serdoncillo v. Benolirao, 358 Phil. 83, 95 (1998).
[10] Revived Rules of Court, Rule 2.
[11] Art. 1311. Contracts take effect only between the parties, their assigns and heirs, except in cases where the rights and obligations arising from the contract are not transmissible by their nature, or by stipulation or by provision of law. The heir is not liable beyond the value of the property he received from the decedent.
If a contract should contain some stipulation in favor of a third person, he may demand its fulfillment provided he communicated his acceptance to the obligor before its revocation. A mere incidental benefit or interest of a person is not sufficient. The contracting parties must have clearly and deliberately conferred a favor upon a third person.
[12] Second paragraph, Section 4 of
Executive Order No. 1008.
[13] Gammon Philippines, Inc. v. Metro Rail Transit Development Corporation, G.R. No. 144792, 31 January 2006, 481 SCRA 209, 218-219.