[19] G.R. No.

211504 construction contracts entered into by parties, and whether such disputes arise before or after the
completion of the contracts. Accordingly, the execution of the contracts and the effect of the agreement
FEDERAL BUILDERS, INC., Petitioner vs POWER FACTORS, INC., Respondent to submit to arbitration are different matters, and the signing or non-signing of one does not necessarily
affect the other. In other words, the formalities of the contract have nothing to do with the jurisdiction
Construction Industry Arbitration Commission; Jurisdiction; Under the Construction Industry of the CIAC.
Arbitration Commission Revised Rules of Procedure Governing Construction
Arbitration (CIAC Revised Rules), all that is required for the CIAC to acquire jurisdiction is for the Civil Law; Contracts; A contract does not need to be in writing in order to be obligatory and
parties of any construction contract to agree to submit their dispute to arbitration.—The need to effective unless the law specifically requires so.—Under Article 1318 of the Civil Code, a valid
establish a proper arbitral machinery to settle disputes expeditiously was recognized by the contract should have the following essential elements, namely: (a) consent of the contracting parties;
Government in order to promote and maintain the development of the country’s construction industry. (b) object certain that is the subject matter of the contract; and (c) cause or consideration. Moreover, a
With such recognition came the creation of the CIAC through Executive Order No. 1008 (E.O. No. contract does not need to be in writing in order to be obligatory and effective unless the law
1008), also known as The Construction Industry Arbitration Law. Section 4 of E.O. No. 1008 specifically requires so. Pursuant to Article 1356 and Article 1357 of the Civil Code, contracts shall be
provides: Sec. 4. Jurisdiction.—The CIAC shall have original and exclusive jurisdiction over disputes obligatory in whatever form they may have been entered into, provided that all the essential requisites
arising from, or connected with, contracts entered into by parties involved in construction in the for their validity are present. Indeed, there was a contract between Federal and Power even if the
Philippines, whether the dispute arises before or after the completion of the contract, or after the Contract of Service was unsigned. Such contract was obligatory and binding between them by virtue of
abandonment or breach thereof. These disputes may involve government or private contracts. For the all the essential elements for a valid contract being present.
Board to acquire jurisdiction, the parties to a dispute must agree to submit the same to voluntary
arbitration. x x x Under the CIAC Revised Rules of Procedure Governing Construction Construction Industry Arbitration Commission; Jurisdiction; Although the agreement to submit
Arbitration (CIAC Revised Rules), all that is required for the CIAC to acquire jurisdiction is for the to arbitration has been expressly required to be in writing and signed by the parties therein by Section
parties of any construction contract to agree to submit their dispute to arbitration.  Also, Section 2.3 of 4 of Republic Act (RA) No. 876 (Arbitration Law), the requirement is conspicuously absent from the
the CIAC Revised Rules states that the agreement may be reflected in an arbitration clause in their Construction Industry Arbitration Commission (CIAC) Revised Rules, which even expressly allows
contract or by subsequently agreeing to submit their dispute to voluntary arbitration. The such agreement not to be signed by the parties therein.—The agreement contemplated in the
CIAC Revised Rules clarifies, however, that the agreement of the parties to submit their dispute to CIAC Revised Rules to vest jurisdiction of the CIAC over the parties’ dispute is not necessarily an
arbitration need not be signed or be formally agreed upon in the contract because it can also be in the arbitration clause to be contained only in a signed and finalized construction contract. The agreement
form of other modes of communication in writing. could also be in a separate agreement, or any other form of written communication, as long as their
intent to submit their dispute to arbitration is clear. The fact that a contract was signed by both parties
Same; Same; Executive Order (EO) No. 1008 emphasizes that the modes of voluntary dispute has nothing to do with the jurisdiction of the CIAC, and this is the explanation why the CIAC Revised
resolution like arbitration are always preferred because they settle disputes in a speedy and amicable Rules itself expressly provides that the written communication or agreement need not be signed by the
manner.—The liberal application of procedural rules as to the form by which the agreement is parties. Although the agreement to submit to arbitration has been expressly required to be in writing
embodied is the objective of the CIAC Revised Rules. Such liberality conforms to the letter and spirit and signed by the parties therein by Section 4 of Republic Act No. 876 (Arbitration Law), the
of E.O. No. 1008 itself which emphasizes that the modes of voluntary dispute resolution like requirement is conspicuously absent from the CIAC Revised Rules, which even expressly allows such
arbitration are always preferred because they settle disputes in a speedy and amicable manner. They agreement not to be signed by the parties therein. Brushing aside the obvious contractual agreement in
likewise help in alleviating or unclogging the judicial dockets. Verily, E.O. No. 1008 recognizes that this case warranting the submission to arbitration is surely a step backward. Consistent with the policy
the expeditious resolution of construction disputes will promote a healthy partnership between the of encouraging alternative dispute resolution methods, therefore, any doubt should be resolved in favor
Government and the private sector as well as aid in the continuous growth of the country considering of arbitration. In this connection, the CA correctly observed that the act of Atty. Albano in manifesting
that the construction industry provides employment to a large segment of the national labor force aside that Federal had agreed to the form of arbitration was unnecessary and inconsequential considering the
from its being a leading contributor to the gross national product. recognition of the value of the Contract of Service despite its being an unsigned draft.

Same; Same; Construction Disputes; Section 2.1, Rule 2 of the Construction Industry Arbitration DECISION
Commission (CIAC) Revised Rules particularly specifies that the CIAC has original and exclusive
jurisdiction over construction disputes, whether such disputes arise from or are merely connected BERSAMIN, J.:
with the construction contracts entered into by parties, and whether such disputes
arise before or after the completion of the contracts.—Worthy to note is that the jurisdiction of the An agreement to submit to voluntary arbitration for purposes of vesting jurisdiction over a
CIAC is over the dispute, not over the contract between the parties. Section 2.1, Rule 2 of the construction dispute in the Construction Industry Arbitration Commission (CIAC) need not be
CIAC Revised Rules particularly specifies that the CIAC has original and exclusive jurisdiction contained in the construction contract, or be signed by the parties. It is enough that the
over construction disputes, whether such disputes arise from or are merely connected with the agreement be in writing.

₯Construction Industry Arbitration Commission- Set III Page 1 of 41

The Case Federal did not thereafter participate in the proceedings until the CIAC rendered the Final
Award dated May 12, 2010,9 disposing:
Federal Builders Inc. (Federal) appeals to reverse the decision promulgated on August 12,
2013,1 whereby the Court of Appeals (CA) affirmed the adverse decision rendered on May In summary: Respondent Federal Builders, Inc. is hereby ordered to pay claimant Power
12, 2010 by the Construction Industry Arbitration Commission (CIAC) with modification of the Factors, Inc. the following sums:
total amount awarded.2
1. Unpaid balance on the original contract ₱4,276,614.75;
Antecedents
2. Unpaid balance on change order nos. 1, 2, 3, 4, 5, 6, 7, 8, & 9 3,006,970.32;
Federal was the general contractor of the Bullion Mall under a construction agreement with 3. Interest to May 13, 2010 1,686,149.94;
Bullion Investment and Development Corporation (BIDC). In 2004, Federal engaged
respondent Power Factors Inc. (Power) as its subcontractor for the electric works at the 4. Attorney's Fees 250,000.00;
Bullion Mall and the Precinct Building for ₱l8,000,000.00. 3
5. Cost of Arbitration 149,503.86;
On February 19, 2008, Power sent a demand letter to Federal claiming the unpaid amount of   ₱9,369 ,238.87
₱ll,444,658.97 for work done by Power for the Bullion Mall and the Precinct Building. Federal
replied that its outstanding balance under the original contract only amounted to  
₱1,641,513.94, and that the demand for payment for work done by Power after June 21,
2005 should be addressed directly to BIDC. 4 Nonetheless, Power made several demands on The foregoing amount shall earn legal interest at the rate of 6% per annum from the date of
Federal to no avail. this Final Award until this award becomes final and executory, Claimant shall then be entitled
to 12% per annum until the entire amount is fully satisfied by Respondent.
On October 29, 2009, Power filed a request for arbitration in the CIAC invoking the arbitration
clause of the Contract of Service reading as follows: Federal appealed the award to the CA insisting that the CIAC had no jurisdiction to hear and
decide the case; and that the amounts thereby awarded to Power lacked legal and factual
15. ARBITRATION COMMITTEE - All disputes, controversies or differences, which may arise bases.
between the parties herein, out of or in relation to or in connection with this Agreement, or for
breach thereof shall be settled by the Construction Industry Arbitration Commission (CIAC) On August 12, 2013, the CA affirmed the CIAC's decision with modification as to the amounts
which shall have original and exclusive jurisdiction over the aforementioned disputes. 5 due to Power,10 viz.:

On November 20, 2009, Atty. Vivencio Albano, the counsel of Federal, submitted a letter to WHEREFORE, the CIAC Final Award dated 12 May 20l0 in CIAC Case No. 31-2009 is
the CIAC manifesting that Federal agreed to arbitration and sought an extension of 15 days hereby AFFIRMED with MODIFICATION. As modified, FEDERAL BUILDERS, INC. is
to file its answer, which request the CIAC granted. ordered to pay POWER FACTORS, INC. the following:

On December 16, 2009, Atty. Albano filed his withdrawal of appearance stating that Federal 1. Unpaid balance on the original contract ₱4,276,614.75;
had meanwhile engaged another counsel.6
2. Unpaid balance on change orders 2,864,113.32;
Federal, represented by new counsel (Domingo, Dizon, Leonardo and Rodillas Law Office), 3. Attorney's Fees 250,000.00;
moved to dismiss the case on the ground that CIAC had no jurisdiction over the case
inasmuch as the Contract of Service between Federal and Power had been a mere draft that 4. Cost of Arbitration 149,503.86;
was never finalized or signed by the parties. Federal contended that in the absence of the
agreement for arbitration, the CIAC had no jurisdiction to hear and decide the case. 7
The interest to be imposed on the net award (unpaid balance on the original contract and
change order) amounting to P.7, 140,728.07 awarded to POWER FACTORS INC. shall be
On February 8, 2010, the CIAC issued an order setting the case for hearing, and directing six (6%) per annum, reckoned from 4 July 2006 until this Decision becomes final and
that Federal's motion to dismiss be resolved after the reception of evidence of the parties. 8 executory. Further, the total award due to POWER FACTORS INC. shall be subjected to an

₯Construction Industry Arbitration Commission- Set III Page 2 of 41

interest of twelve percent (12%) per annum computed from the time this judgment becomes Under the CIAC Revised Rules of Procedure Governing Construction
final and executory, until full satisfaction. SO ORDERED. 11 Arbitration (CIAC Revised Rules), all that is required for the CIAC to acquire jurisdiction is for
the parties of any construction contract to agree to submit their dispute to arbitration. 15 Also,
Anent jurisdiction, the CA explained that the CIAC Revised Rules of Procedure stated that Section 2.3 of the CIAC Revised
the agreement to arbitrate need not be signed by the parties; that the consent to submit to
voluntary arbitration was not necessary in view of the arbitration clause contained in the Rules states that the agreement may be reflected in an arbitration clause in their contract or
Contract of Service; and that Federal's contention that its former counsel's act of manifesting by subsequently agreeing to submit their dispute to voluntary arbitration. The CIAC Revised
its consent to the arbitration stipulated in the draft Contract of Service did not bind it was Rules clarifies, however, that the agreement of the parties to submit their dispute to
inconsequential on the issue of jurisdiction.12 arbitration need not be signed or be formally agreed upon in the contract because it can also
be in the form of other modes of communication in writing, viz.:
Concerning the amounts awarded, the CA opined that the CIAC should not have allowed the
increase based on labor-cost escalation because of the absence of the agreement between RULE 4 - EFFECT OF AGREEMENT TO ARBITRATE
the parties on such escalation and because there was no authorization in writing allowing the
adjustment or increase in the cost of materials and labor. 13 SECTION 4.1. Submission to CIAC jurisdiction - An arbitration clause in a construction
contract or a submission to arbitration of a construction dispute shall be deemed an
After the CA denied Federal's motion for reconsideration on February 19, 2004, 14 Federal has agreement to submit an existing or future controversy to CIAC jurisdiction, notwithstanding
come to the Court on appeal. the reference to a different arbitration institution or arbitral body in such contract or
submission.
Issue
4.1.1 When a contract contains a clause for the submission of a future controversy to
The issues to be resolved are: (a) whether the CA erred in upholding CIAC's jurisdiction over arbitration, it is not necessary for the parties to enter into a submission agreement before the
the present case; and (b) whether the CA erred in holding that Federal was liable to pay Claimant may invoke the jurisdiction of CIAC.
Power the amount of ₱7,140,728.07.
4.1.2 An arbitration agreement or a submission to arbitration shall be in writing, but it need
Ruling of the Court 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, electronic mail
The appeal is bereft of merit.
or any other mode of communication.
1.The parties had an effective agreement to submit to voluntary arbitration; hence, the CIAC
The liberal application of procedural rules as to the form by which the agreement is embodied
had jurisdiction
is the objective of the CIAC Revised Rules.  Such liberality conforms to the letter and spirit of
E.O. No. 1008 itself which emphasizes that the modes of voluntary dispute resolution like
The need to establish a proper arbitral machinery to settle disputes expeditiously was arbitration are always preferred because they settle disputes in a speedy and amicable
recognized by the Government in order to promote and maintain the development of the manner. They likewise help in alleviating or unclogging the judicial dockets. Verily, E.O. No.
country's construction industry. With such recognition came the creation of the CIAC through 1008 recognizes that the expeditious resolution of construction disputes will promote a
Executive Order No. 1008 (E.O. No. 1008), also known as The Construction Industry healthy partnership between the Government and the private sector as well as aid in the
Arbitration Law. Section 4 of E.O. No. 1008 provides: continuous growth of the country considering that the construction industry provides
employment to a large segment of the national labor force aside from its being a leading
Sec. 4. Jurisdiction.  - The CIAC shall have original and exclusive jurisdiction over disputes contributor to the gross national product.16
arising from, or connected with, contracts entered into by parties involved in construction in
the Philippines, whether the dispute arises before or after the completion of the contract, or Worthy to note is that the jurisdiction of the CIAC is over the dispute, not over the contract
after the abandonment or breach thereof. These disputes may involve government or private between the parties.17 Section 2.1, Rule 2 of the CIAC Revised Rules particularly specifies
contracts. For the Board to acquire jurisdiction, the parties to a dispute must agree to submit that the CIAC has original and exclusive jurisdiction over construction disputes,  whether
the same to voluntary arbitration. x x x such disputes arise from or are merely connected with  the construction contracts entered into
by parties, and whether such disputes arise before  or after the completion of the contracts.

₯Construction Industry Arbitration Commission- Set III Page 3 of 41

Accordingly, the execution of the contracts and the effect of the agreement to submit to the Contract of Service that it wanted 30% as the downpayment. Even so, Power did not
arbitration are different matters, and the signing or non-signing of one does not necessarily modify anything else in the draft, and returned the draft to Federal after signing it. It was
affect the other. In other words, the formalities of the contract have nothing to do with the Federal that did not sign the draft because it was not amenable to the amount as modified by
jurisdiction of the CIAC. Power. It is notable that the arbitration clause written in the draft of Federal was unchallenged
by the parties until their dispute arose.
Federal contends that there was no mutual consent and no meeting of the minds between it
and Power as to the operation and binding effect of the arbitration clause because they had Moreover, Federal asserted the original contract to support its claim against Power. If Federal
rejected the draft service contract. would insist that the remaining amount due to Power was only ₱l,641,513.94 based on the
original contract,21 it was really inconsistent for Federal to rely on the draft when it is
The contention of Federal deserves no consideration. beneficial to its side, and to reject its efficacy and existence just to relieve itself from the
CIAC's unfavorable decision.
Under Article 1318 of the Civil Code, a valid contract should have the following essential
elements, namely: (a)  consent of the contracting parties; The agreement contemplated in the CIAC Revised Rules to vest jurisdiction of the CIAC over
the parties' dispute is not necessarily an arbitration clause to be contained only in a signed
and finalized construction contract. The agreement could also be in a separate agreement, or
(b) object certain that is the subject matter of the contract; and (c) cause or consideration.
any other form of written communication, as long as their intent to submit their dispute to
Moreover, a contract does not need to be in writing in order to be obligatory and effective
arbitration is clear. The fact that a contract was signed by both parties has nothing to do with
unless the law specifically requires so.
the jurisdiction of the CIAC, and this is the explanation why the CIAC Revised Rules  itself
expressly provides that the written communication or agreement need not be signed by the
Pursuant to Article 135618 and Article 135719 of the Civil Code,  contracts shall be obligatory in parties.
whatever form they may have been entered into, provided that all the essential requisites for
their validity are present. Indeed, there was a contract between Federal and Power even if
Although the agreement to submit to arbitration has been expressly required to be in writing
the Contract of Service was unsigned. Such contract was obligatory and binding between
and signed by the parties therein by Section 4 22 of Republic Act No. 876 (Arbitration
them by virtue of all the essential elements for a valid contract being present.
Law),23  the requirement is conspicuously absent from the CIAC Revised Rules,  which even
expressly allows such agreement not to be signed by the parties therein. 24 Brushing aside the
It clearly appears that the works promised to be done by Power were already executed albeit obvious contractual agreement in this case warranting the submission to arbitration is surely
still incomplete; that Federal paid Power ₱l ,000,000.00 representing the originally proposed a step backward.25 Consistent with the policy of encouraging alternative dispute resolution
downpayment, and the latter accepted the payment; and that the subject of their dispute methods, therefore, any doubt should be resolved in favor of arbitration. 26 In this connection,
concerned only the amounts still due to Power. The records further show that Federal the CA correctly observed that the act of Atty. Albano in manifesting that Federal had agreed
admitted having drafted the Contract of Services containing the following clause on to the form of arbitration was unnecessary and inconsequential considering the recognition of
submission to arbitration, to wit: the value of the Contract of Service despite its being an unsigned draft.

15. ARBITRATION COMMITTEE -All disputes, controversies or differences, which may arise 2. Amounts as modified by the CA are correct
between the Parties herein, out of or in relation to or in connection with this Agreement, or for
breach thereof shall be settled by the Construction Industry Arbitration Commission (CIAC)
We find no reversible error regarding the amounts as modified by the CA. Power did not
which shall have original and exclusive jurisdiction over the aforementioned disputes. 20
sufficiently establish that the change or increase of the cost of materials and labor was to be
separately determined and approved by both parties as provided under Article 1724 of
With the parties having no issues on the provisions or parts of the Contract of Service other the Civil Code. As such, Federal should not be held liable for the labor cost escalation.
than that pertaining to the downpayment that Federal was supposed to pay, Federal could not
validly insist on the lack of a contract in order to defeat the jurisdiction of the CIAC. As earlier
WHEREFORE, the Court AFFIRMS the decision promulgated on August 12, 2013;
pointed out, the CIAC Revised Rules  specifically allows any written mode of communication
and ORDERS the petitioner to pay the costs of suit.
to show the parties' intent or agreement to submit to arbitration their present or future
disputes arising from or connected with their contract.
SO ORDERED.
The CIAC and the CA both found that the parties had disagreed on the amount of the
downpayment.1âwphi1 On its part, Power indicated after receiving and reviewing the draft of

₯Construction Industry Arbitration Commission- Set III Page 4 of 41

[20] G.R. No. 184295               July 30, 2014 PERLAS-BERNABE, J.:

NATIONAL TRANSMISSION CORPORATION, Petitioner, vs. ALPHAOMEGA Assailed in this petition for review on certiorari 1 are the Decision2 dated April 8, 2008 and the
INTEGRATED CORPORATION, Respondent. Resolution3 dated August 27, 2008 of the Court of Appeals (CA) in CA-G.R. SP No. 99454
affirming with modification the Final Award4 of the Construction Industry Arbitration
Remedial Law; Civil Procedure; Section 1, Rule 45 of the Rules of Court provides that a petition Commission (CIAC) Arbitral Tribunal in favor of respondent Alphaomega Integrated
for review on certiorari under the said rule, as in this case, “shall raise only questions of law which Corporation (AIC) by increasing petitioner National· Transmission Corporation's (TRANSCO)
must be distinctly set forth.”—TRANSCO seeks through this petition a recalibration of the liability from Pl 7,495,117.44 to Pl 8,896,673.31.
evidence presented before the CIAC Arbitral Tribunal, insisting that AIC is not entitled to any
damages not only because it had previously waived all claims for standby fees in case of project delays The Facts
but had eventually failed to perform the workable portions of the projects. This is evidently a factual
question which cannot be the proper subject of the present petition.  Section 1, Rule 45 of the Rules of AIC, a duly licensed transmission line contractor, participated in the public biddings
Court provides that a petition for review on certiorari under the said rule, as in this case, “shall raise conducted by TRANSCO and was awarded six ( 6) government construction projects,
only questions of law which must be distinctly set forth.” Thus, absent any of the existing exceptions namely: (a) Contract .for the Construction & Erection of Batangas Transmission
impelling the contrary, the Court is, as general rule, precluded from delving on factual determinations, Reinforcement Project Schedule III (BTRP Schedule III Project); (b) Contract for the
as what TRANSCO essentially seeks in this case. Construction & Erection of Batangas Transmission Reinforcement Project Schedule I (BTRP
Schedule I Project); (c) Contract for the Construction,Erection & Installation of 230 KV and 69
Same; Same; It is well-settled that findings of fact of quasi-judicial bodies, which have acquired KV S/S Equipment and Various Facilities for Makban Substation under the Batangas
expertise because their jurisdiction is confined to specific matters, are generally accorded not only Transmission Reinforcement Project (Schedule II) (Makban Substation Project); (d) Contract
respect, but also finality, especially when affirmed by the Court of Appeals (CA).—The Court finds no for the Construction, Erection & Installation of 138 & 69 KV S/S Equipment for Bacolod
reason to disturb the factual findings of the CIAC Arbitral Tribunal on the matter of AIC’s entitlement Substation under the Negros III-Panay III Substation Projects (Schedule II) (Bacolod
to damages which the CA affirmed as being well supported by evidence and properly referred to in the Substation Project); (e) Contract for the Construction, Erection & Installation of 138 & 69 KV
record. It is well-settled that findings of fact of quasi-judicial bodies, which have acquired expertise Substation Equipment for the New Bunawan Switching Station Project (Bunawan Substation
because their jurisdiction is confined to specific matters, are generally accorded not only respect, but Project); and (f) Contract for the Construction, Erection & Installation of 138 and 69 KV
also finality, especially when affirmed by the CA. The CIAC possesses that required expertise in the Substation Equipment for Quiot Substation Project (Quiot Substation Project). 5
field of construction arbitration and the factual findings of its construction arbitrators are final and
conclusive, not reviewable by this Court on appeal. In the course of the performance ofthe contracts, AIC encountered difficulties and incurred
losses allegedly due to TRANSCO’s breach of their contracts, prompting it to surrender the
Same; Same; It is well-settled that no relief can be granted a party who does not appeal and that projects to TRANSCO under protest. In accordance with an express stipulation in the
a party who did not appeal the decision may not obtain any affirmative relief from the appellate court contracts that disagreements shall be settled by the parties through arbitration before the
other than what he had obtained from the lower court, if any, whose decision is brought up on appeal. CIAC, AIC submitted a request for arbitration before the CIAC on August 28, 2006, and,
—It must be emphasized that the petition for review before the CA was filed by TRANSCO. AIC thereafter, filed an Amended Complaint against TRANSCO alleging that the latter breached
never elevated before the courts the matter concerning the discrepancy between the amount of the the contracts by its failure to: (a) furnish the required Detailed Engineering; (b) arrange a well-
award stated in the body of the Final Award and the total award shown in its dispositive portion.   The established right-of-way to the project areas; (c) secure the necessary permits and
issue was touched upon by the CA only after AIC raised the same through its Comment (With Motion clearances from the concerned local government units (LGUs); (d) ensure a continuous
to Acknowledge Actual Amount of Award) to TRANSCO’s petition for review. The CA should not supply of construction materials; and (e) carry out AIC’s requests for power shut down. The
have modified the amount of the award to favor AIC because it is well-settled that no relief can be aforementioned transgressions resultedin protracted delays and contract suspensions for
granted a party who does not appeal and that a party who did not appeal the decision may not obtain each project,6 as follows:
any affirmative relief from the appellate court other than what he had obtained from the lower court, if
any, whose decision is brought up on appeal. The disposition, as stated in the fallo of the CIAC
Arbitral Tribunal’s Final Award, should therefore stand. Contract Original Duration of Transco- Percentage (%) of Original
Contract Approved Suspension Contract Duration
DECISION Duration and/or Extensions
1) BTRP Schedule III 560 days 711 days 127%

₯Construction Industry Arbitration Commission- Set III Page 5 of 41

2) BTRP Schedule I 270 days 406 days 170% obligated to furnish under the terms of the contract, among others. 14 The dispositive portion of
the Arbitral Tribunal’s Final Award reads:
3) Makban Substation 365 days 452 days 124%
WHEREFORE, Respondent, National Transmission Corporation [TRANSCO] is hereby
4) Bacolod Substation 360 days 289 days 80% ordered to pay Claimant, Alphaomega Integrated Corporation, the following sums:
5) Bunawan Substation 330 days 130 days 39%
(a) For BTRP Schedule III - ₱6,423,496.67
6) Quiot Substation 300 days 131 days 44%
(b) For BTRP Schedule I - 5,214,202.30
7
2119 days (c) For Makban Substation - 3,075,870.95
(d) For Bacolod Substation - 1,362,936.77
AIC prayed for judgment declaring all six (6) contracts rescinded and ordering TRANSCO to
pay, in addition to what had already been paid under the contracts, moral damages, (e) For Bunawan Substation - 820,481.72
exemplary damages, and attorney’s fees at ₱100,000.00 each, and a total of ₱40,201,467.19
(f) For Quiot Substation - 598, 129.03
as actual and compensatory damages.8
TOTAL ₱17,495,117.44
TRANSCO, for its part, contended that: (a) it had conducted Detailed Engineering prior to the
conduct of the bidding; and (b) it had obtained the necessary government permits and
Each Party shall shoulder its own cost of arbitration.
endorsements from the affected LGUs. It asserted that AIC was guilty of frontloading– that
is,collecting the bulk of the contract price for work accomplished at the early stages of the
project and then abandoning the later stagesof the project which has a lower contract price 9 – The foregoing amount of ₱17,495,117.44 shall earn interest at the rate of six percent (6%)
and that it disregarded the workable portions of the projects not affected by the lack of per annum from the date of promulgation of this Final Award until it becomes final and
supplies and drawings. TRANSCO further argued that AIC was estopped from asking for executory. Thereafter, the Final Award, including accrued interest, shall earn interest at the
standby fees to cover its overhead expenses during project suspensions considering that the rate of 12% per annum until the entire amount due is fully paid. 15 (Emphasis supplied)
delays, such as the unresolved right-of-way issues and non-availability of materials, were
factors already covered by the time extensions and suspensions of work allowed under the Unconvinced, TRANSCO instituted a petition for review16 with the CA.
contracts.10
Before filing its comment17 to the petition, AIC moved for the issuance of a writ of
11
On April 18, 2007, the CIAC Arbitral Tribunal rendered its Final Award  in CIAC Case No. 21- execution,18 not for the amount of 17,495,117.44 awarded in the Final Award, but for the
2006 ordering the payment of actual and compensatory damages which AIC would not have increased amount of 18,967,318.49.19 It sought correction of the discrepancies between the
suffered had it not been for the project delays attributable to TRANSCO. It found ample amount of the award appearing in the dispositive portion 20 and the body of the Final
evidence to support the claim for the increase in subcontract cost in BTRP Schedule I, as well Award.21 The Arbitral Tribunal, however, denied AIC’s motion, holding that while the CIAC
as such items of cost as house and yard rentals, electric bills, water bills, and maintained Revised Rules of Procedure Governing Construction Arbitration (CIAC Rules) would have
personnel, but disallowed the claims for communications bills, maintenance costs for idle allowed the correction of the Final Award for evident miscalculation of figures, typographical
equipment, finance charges, and materials cost increases. 12 According to the Arbitral or arithmetical errors, AIC failed to file its motionfor the purpose within the time limitation of 15
Tribunal, even if AIC itself made the requests for contract time extensions, this did not bar its days from its receipt of the Final Award.22
claim for damages as a result of project delayssince a contrary ruling would allow TRANSCO
to profit from its own negligence and leave AIC to suffer serious material prejudice as a direct The CA Ruling
consequence of that negligence leaving it without any remedy at law. 13 The Arbitral Tribunal
upheld AIC’s right to rescind the contracts in accordancewith Resolution No. 018-2004 of the In the Decision23 dated April 8, 2008, the CAaffirmed the Arbitral Tribunal’s factual findings
Government Procurement Policy Board (GPPB), which explicitly gives the contractor the right that TRANSCOfailed to exercise due diligence in resolving the problems regarding the right-
to terminate the contract if the works are completely stopped for a continuous period of at of-way and the lack of materials before undertaking the bidding process and entering into the
least 60 calendar days, through no fault of its own, due to the failure of the procuring entity to contracts with AIC.24 It found no merit in TRANSCO’s allegation that AIC refused to perform
deliver within a reasonable time, supplied materials, right-of-way, or other items that it is the remaining workable portions of the projects not affected by problems of right-of-way,

₯Construction Industry Arbitration Commission- Set III Page 6 of 41

shutdowns, supplies and drawings, firstly, because the certificates ofaccomplishments issued and computed by the CIAC and the CA. Generally, this would be a question of fact that this
by TRANSCO in the course of project implementation signifying its satisfaction with AIC’s Court would not delve upon. Imperial v. Jauciansuggests as much. There, the Court ruled that
performance negate such claim and, secondly, because all the orders issued by TRANSCO the computation of outstanding obligation is a question of fact:
suspended the contracts not only in part but in their entirety, thus, permitting no work activity
at all during such periods.25 Arguing that she had already fully paid the loan x x x, petitioner alleges that the two lower
courts misappreciated the facts when they ruled that she still had an outstanding balance of
The CA upheld the Arbitral Tribunal’s Final Award as having been sufficiently established by ₱208,430.
evidence but modified the total amount of the award after noting a supposed mathematical
error in the computation. Setting aside TRANSCO’s objections, it ruled that when a case is This issue involves a question of fact. Such question exists when a doubt or difference arises
brought to a superior court on appeal every aspect of the case is thrown open for as to the truth or the falsehood of alleged facts; and when there is need for a calibration of the
review,26 hence, the subject error could be rectified. The CA held that the correct amount of evidence, considering mainly the credibility of witnesses and the existence and the relevancy
the award should be ₱18,896,673.31, and not ₱17,495,117.44 as stated in the Arbitral of specific surrounding circumstances, their relation to each other and to the whole, and the
Tribunal’s Final Award.27 Dissatisfied, TRANSCO moved for reconsideration 28 but was, probabilities of the situation. (G.R. No. 149004, April 14, 2004, 427 SCRA 517, 523-524.)
however, denied by the CA in a Resolution 29 dated August 27, 2008, hence, the instant
petition. The rule, however, precluding the Court from delving on the factual determinations of the CA,
admits of several exceptions. In Fuentes v. Court of Appeals, we held that the findings of
The Issues Before the Court facts of the CA, which are generally deemed conclusive, may admit review by the Court in
any of the following instances, among others:
The essential issues for the Court’s consideration are whether or not the CA erred (a) in
affirming the CIAC Arbitral Tribunal’s findings that AIC was entitled to its claims for damages (1) when the factual findings of the [CA] and the trial court are contradictory;
as a result of project delays, and (b) in increasing the total amount of compensation awarded
in favor of AIC despite the latter’s failure to raise the allegedly erroneous computation of the (2) when the findings are grounded entirely on speculation, surmises, or conjectures;
award before the CIAC in a timely manner, that is, within fifteen (15) days from receipt of the
Final Award as provided under Section 17.1 of the CIAC Rules.
(3) when the inference made bythe [CA] from its findings of fact is manifestly
mistaken, absurd, or impossible;
The Court’s Ruling
(4) when there is grave abuse of discretion in the appreciation of facts;
TRANSCO seeks through this petition a recalibration of the evidencepresented before the
CIAC ArbitralTribunal, insisting that AIC is not entitled to any damages not only because it
had previously waived all claims for standby fees in case of project delays but had eventually (5) when the [CA], in making its findings, goes beyond the issues of the case, and
failed to perform the workable portions of the projects. This is evidently a factual question such findings are contrary to the admissions of both appellant and appellee;
which cannot be the proper subject of the present petition. Section 1, Rule 45 of the Rules of
Court provides that a petition for review on certiorariunder the said rule, as in this case, "shall (6) when the judgment of the [CA] is premised on a misapprehension of facts;
raise only questions of law which must be distinctly set forth." Thus, absent any of the existing
exceptions impelling the contrary, the Court is, as a general rule, precluded from delving on (7) when the [CA] fails to notice certain relevant facts which, if properly considered,
factual determinations, as what TRANSCO essentially seeks in this case. Similar to the will justify a different conclusion;
foregoing is the Court’s ruling in Hanjin Heavy Industries and Construction Co., Ltd. v.
Dynamic Planners and Construction Corp.,30 the pertinent portions ofwhich are hereunder (8) when the findings of fact are themselves conflicting;
quoted:
(9) when the findings of fact are conclusions without citation of the specific evidence
Dynamic maintains that the issues Hanjin raised in its petitions are factual in nature and are, on which they are based; and
therefore, not proper subject of review under Section 1 of Rule 45, prescribing that a petition
under the said rule, like the one at bench, "shall raise only questions of law which must be
(10) when the findings of fact of the [CA] are premised on the absence of evidence
distinctly set forth." Dynamic’s contention is valid topoint as, indeed, the matters raised by
but such findings are contradicted by the evidence on record. (G.R. No. 109849,
Hanjin are factual, revolving as they do on the entitlement of Dynamic to the awards granted
February 26, 1997, 268 SCRA 703, 709)

₯Construction Industry Arbitration Commission- Set III Page 7 of 41

Significantly, jurisprudence teaches that mathematical computations as well as the propriety limitation under the CIAC Rules.36 Clearly, having failed to move for the correction of the Final
of the arbitral awards are factual determinations. And just as significant is that the factual Award and, thereafter, having opted to file insteada motion for execution of the arbitral
findings of the CIAC and CA—in each separate appealed decisions—practically dovetail with tribunal’s unopposed and uncorrected Final Award, AIC cannot now question against the
each other. The perceptible essential difference, at least insofar as the CIAC’s Final Award correctness of the CIAC’s disposition. Notably, while there is jurisprudential authority stating
and the CA Decision in CA-G.R. SP No. 86641 are concerned, rests merely on mathematical that "[a] clerical error in the judgment appealed from may be corrected by the appellate
computations or adjustments of baseline amounts which the CIAC may have inadvertently court,"37 the application of that rule cannot be made in this case considering that the CIAC
utilized.31 (Emphases and underscoring supplied) Rules provides for a specific procedureto deal with particular errors involving "[a]n evident
miscalculation of figures, a typographical or arithmetical error." Indeed, the rule iswell
In any case, the Court finds no reason to disturb the factual findings of the CIAC Arbitral entrenched: Specialis derogat generali. When two rules apply to a particular case, thatwhich
Tribunal on the matter of AIC’s entitlement to damages which the CA affirmed as being well was specially designed for the said case must prevail over the other. 38
supported by evidence and properly referred to in the record. It is well-settled that findings of
fact of quasijudicial bodies, which have acquired expertise because their jurisdiction is Furthermore, it must be emphasized that the petition for review before the CA was filed by
confined to specific matters, are generally accorded not only respect, but also finality, TRANSCO.39 AIC never elevated before the courts the matter concerning the discrepancy
especially when affirmed by the CA. 32 The CIAC possesses that required expertise in the field between the amount of the award stated in the body of the Final Award and the total award
of construction arbitration and the factual findings of its construction arbitrators are final and shown in its dispositive portion. The issue was touched upon bythe CA only after AIC raised
conclusive, not reviewable by this Court on appeal.33 the same through its Comment (With Motion to Acknowledge Actual Amount of Award) 40 to
TRANSCO’s petition for review. The CA should not have modified the amount of the award to
While the CA correctly affirmed infull the CIAC Arbitral Tribunal’s factual determinations, it favor AIC because it is well-settled that no relief can be granted a party who does not
improperly modified the amount of the award in favor of AIC, which modification did not appeal41 and that a party who did not appeal the decision may not obtain any affirmative relief
observe the proper procedure for the correction of an evident miscalculation of figures, from the appellate court other than what he had obtained from the lower court, if any, whose
including typographical or arithmetical errors, in the arbitral award. Section 17.1 of the CIAC decision is brought up on appeal. 42 The disposition, as stated in the fallo of the CIAC Arbitral
Rules mandates the filing of a motion for the foregoing purpose within fifteen (15) days from Tribunal's Final Award, should therefore stand.43
receipt thereof, viz.:
WHEREFORE, the petition is PARTLY GRANTED. The Decision dated April 8, 2008 of the
Section 17.1 Motion for correction of final award– Any of the parties may file a motion for Court of Appeals in CA-G.R. SP No. 99454 is hereby AFFIRMED with MODIFICATION. The
correction of the Final Award within fifteen (15) days from receipt thereof upon any of the compensation awarded in favor of Alphaomega Integrated Corporation in the amount of
following grounds: ₱17,495,117.44, as shown in the fallo of the ·construction Industry Arbitration Commission's
Final Award dated April 18, 2007, stands.
a. An evident miscalculation of figures, a typographical or arithmetical error; (Emphasis
supplied) SO ORDERED.

xxxx

Failure to file said motion would consequentlyrender the award final and executory under
Section 18. 1 of the same rules, viz.:

Section 18.1 Execution of Award – A final arbitral award shall become executory upon the
lapse of fifteen (15) days from receipt thereof by the parties.1âwphi1

AIC admitted that it had ample time to file a motion for correction of the Final Award but
claimed to have purposely sat on its right to seek correction supposedly as a strategic move
against TRANSCO34 and, instead, filed with the CIAC Arbitral Tribunal on June 13, 2007 a
"Motion for Issuance of Writ of Execution for the Total Amount of 18,967,318.49 as Embodied
in the Final Award."35 The Arbitral Tribunal eventually denied AIC’s aforesaid motion for
execution because, despite its merit, the Arbitral Tribunal could not disregard the time-

₯Construction Industry Arbitration Commission- Set III Page 8 of 41

[21] G.R. No. 192725, August 09, 2017 Same; The most recent jurisprudence maintains that the Construction Industry Arbitration
Commission (CIAC) is a quasi-judicial body.—The most recent jurisprudence maintains that the CIAC
CE CONSTRUCTION CORPORATION, PETITIONER, VS. ARANETA CENTER INC., is a quasi-judicial body. This Court’s November 23, 2016 Decision in Fruehauf Electronics v.
RESPONDENT. Technology Electronics Assembly and Management Pacific, 810 SCRA 280, distinguished
construction arbitration, as well as voluntary arbitration pursuant to Article 219(14) of the Labor Code,
Construction Industry Arbitration Commission; The Construction Industry Arbitration from commercial arbitration. It ruled that commercial arbitral tribunals are not quasi-judicial agencies,
Commission (CIAC) was a creation of Executive Order (EO) No. 1008, otherwise known as the as they are purely ad hoc bodies operating through contractual consent and as they intend to serve
Construction Industry Arbitration Law.—The Construction Industry Arbitration Commission was a private, proprietary interests. In contrast, voluntary arbitration under the Labor Code and construction
creation of Executive Order No. 1008, otherwise known as the Construction Industry Arbitration Law. arbitration operate through the statutorily vested jurisdiction of government instrumentalities that exist
At inception, it was under the administrative supervision of the Philippine Domestic Construction independently of the will of contracting parties and to which these parties submit.
Board which, in turn, was an implementing agency of the Construction Industry Authority of the  
Philippines (CIAP). The CIAP is presently attached to the Department of Trade and Industry. Same; Appeals; Petitions for Review; Rule 43, Section 1 explicitly lists Construction Industry
Arbitration Commission (CIAC) as among the quasi-judicial agencies covered by Rule 43. Section 3
Same; Construction Disputes; Alternative Dispute Resolution; Alternative Dispute Resolution indicates that appeals through Petitions for Review under Rule 43 are to “be taken to the Court of
Act of 2004; Arbitration of construction disputes through the Construction Industry Arbitration Appeals (CA) . . . whether the appeal involves questions of fact, of law, or mixed questions of fact and
Commission (CIAC) was formally incorporated into the general statutory framework on alternative law.”—Rule 43 of the 1997 Rules of Civil Procedure standardizes appeals from quasi-judicial
dispute resolution through Republic Act No. 9285, the Alternative Dispute Resolution Act of 2004 agencies. Rule 43, Section 1 explicitly lists CIAC as among the quasi-judicial agencies covered by
(ADR Law).—Republic Act No. 9184 or the Government Procurement Reform Act, enacted on Rule 43. Section 3 indicates that appeals through Petitions for Review under Rule 43 are to “be taken
January 10, 2003, explicitly recognized and confirmed the competence of the CIAC: Section to the Court of Appeals . . . whether the appeal involves questions of fact, of law, or mixed questions of
59. Arbitration.—Any and all disputes arising from the implementation of a contract covered by this fact and law.”
Act shall be submitted to arbitration in the Philippines according to the provisions of Republic Act No.
876, otherwise known as the “Arbitration Law”: Provided, however, That, disputes that are within the Same; Same; Arbitral Tribunals; The Supreme Court’s (SC’s) primordial inclination must be to
competence of the Construction Industry Arbitration Commission to resolve shall be referred uphold the factual findings of arbitral tribunals.—Consistent with this restrictive approach, this Court
thereto. The process of arbitration shall be incorporated as a provision in the contract that will be is duty-bound to be extremely watchful and to ensure that an appeal does not become an ingenious
executed pursuant to the provisions of this Act: Provided, That by mutual agreement, the parties may means for undermining the integrity of arbitration or for conveniently setting aside the conclusions
agree in writing to resort to alternative modes of dispute resolution. Arbitration of construction arbitral processes make. An appeal is not an artifice for the parties to undermine the process they
disputes through the CIAC was formally incorporated into the general statutory framework on voluntarily elected to engage in. To prevent this Court from being a party to such perversion, this
alternative dispute resolution through Republic Act No. 9285, the Alternative Dispute Resolution Act Court’s primordial inclination must be to uphold the factual findings of arbitral tribunals.
of 2004 (ADR Law). Chapter 6, Section 34 of ADR Law made specific reference to the Construction
Industry Arbitration Law, while Section 35 confirmed the CIAC’s jurisdiction. Arbitral Tribunals; Common sense dictates that by the parties’ voluntary submission, they
acknowledge that an arbitral tribunal constituted under the Construction Industry Arbitration
Same; Construction; Words and Phrases; The Construction Industry Arbitration Commission Commission (CIAC) has full competence to rule on the dispute presented to it.—ACI and
(CIAC) has the state’s confidence concerning the entire technical expanse of construction, defined in CECON voluntarily submitted themselves to the CIAC Arbitral Tribunal’s jurisdiction. The
jurisprudence as “referring to all on-site works on buildings or altering structures, from land contending parties’ own volition is at the inception of every construction arbitration proceeding.
clearance through completion including excavation, erection and assembly and installation of Common sense dictates that by the parties’ voluntary submission, they acknowledge that an arbitral
components and equipment.”—The CIAC does not only serve the interest of speedy dispute resolution, tribunal constituted under the CIAC has full competence to rule on the dispute presented to it. They
it also facilitates authoritative dispute resolution. Its authority proceeds not only from juridical concede this not only with respect to the literal issues recited in their terms of reference, as ACI
legitimacy but equally from technical expertise. The creation of a special adjudicatory body for suggests, but also with respect to their necessary incidents. Accordingly, in delineating the authority of
construction disputes presupposes distinctive and nuanced competence on matters that are conceded to arbitrators, the CIAC Rules of Procedure speak not only of the literally recited issues but also of
be outside the innate expertise of regular courts and adjudicatory bodies concerned with other “related matters”: SECTION 21.3.
specialized fields. The CIAC has the state’s confidence concerning the entire technical expanse of
construction, defined in jurisprudence as “referring to all on-site works on buildings or altering Extent of power of arbitrator.—The Arbitral Tribunal shall decide only such issues and related
structures, from land clearance through completion including excavation, erection and assembly and matters as are submitted to them for adjudication. They have no power to add, to subtract from,
installation of components and equipment.” modify, or amend any of the terms of the contract or any supplementary agreement thereto, or any rule,
regulation or policy promulgated by the CIAC. To otherwise be puritanical about cognizable issues
would be to cripple CIAC arbitral tribunals. It would potentially be to condone the parties’ efforts at

₯Construction Industry Arbitration Commission- Set III Page 9 of 41

tying the hands of tribunals through circuitous, trivial recitals that fail to address the complete extent of articulated in Articles 1370 to 1379 of the Civil Code. In so doing, a tribunal does not conjure
their claims and which are ultimately ineffectual in dispensing an exhaustive and dependable its own contractual terms and force them upon the parties.
resolution. Construction arbitration is not a game of guile which may be left to ingenious textual or
technical acrobatics, but an endeavor to ascertain the truth and to dispense justice “by every and all In addressing an iniquitous predicament of a contractor that actually renders services but
reasonable means without regard to technicalities of law or procedure.” remains inadequately compensated, arbitral tribunals of the Construction Industry Arbitration
Commission (CIAC) enjoy a wide latitude consistent with their technical expertise and the
Construction Contracts; Jurisprudence has settled that even in cases where parties enter into arbitral process' inherent inclination to afford the most exhaustive means for dispute
contracts which do not strictly conform to standard formalities or to the typifying provisions of resolution. When their awards become the subject of judicial review, courts must defer to the
nominate contracts, when one renders services to another, the latter must compensate the former for factual findings borne by arbitral tribunals' technical expertise and irreplaceable experience of
the reasonable value of the services rendered.—Jurisprudence has settled that even in cases where presiding over the arbitral process. Exceptions may be availing but only in instances when the
parties enter into contracts which do not strictly conform to standard formalities or to the typifying integrity of the arbitral tribunal itself has been put in jeopardy. These grounds are more
provisions of nominate contracts, when one renders services to another, the latter must compensate the exceptional than those which are regularly sanctioned in Rule 45 petitions.
former for the reasonable value of the services rendered. This amount shall be fixed by a court. This is
a matter so basic, this Court has once characterized it as one that “springs from the fountain of good This resolves a Petition for Review on Certiorari[1] under Rule 45 of the 1997 Rules of Civil
conscience”: As early as 1903, in Perez v. Pomar, this Court ruled that where one has rendered Procedure, praying that the assailed April 28, 2008 Decision[2] and July 1, 2010 Amended
services to another, and these services are accepted by the latter, in the absence of proof that the Decision[3] of the Court of Appeals in CA-G.R. SP No. 96834 be reversed and set aside. It
service was rendered gratuitously, it is but just that he should pay a reasonable remuneration therefore likewise prays that the October 25, 2006 Decision[4] of the CIAC Arbitral Tribunal be
because “it is a well known principle of law, that no one should be permitted to enrich himself to the reinstated.
damage of another.” Similary in 1914, this Court declared that in this jurisdiction, even in the absence
of statute, “. . . under the general principle that one person may not enrich himself at the expense of The CIAC Arbitral Tribunal October 25, 2006 Decision awarded a total sum of
another, a judgment creditor would not be permitted to retain the purchase price of land sold as the P217,428,155.75 in favor of petitioner CE Construction Corporation (CECON). This sum
property of the judgment debtor after it has been made to appear that the judgment debtor had no title represented adjustments in unit costs plus interest, variance in take-out costs, change orders,
to the land and that the purchaser had failed to secure title thereto.” The foregoing equitable principle time extensions, attendance fees, contractor-supplied equipment, and costs of arbitration.
which springs from the fountain of good conscience are applicable to the case at bar. Consistent with This amount was net of the countervailing awards in favor of respondent Araneta Center, Inc.
the Construction Industry Arbitration Law’s declared policy, the CIAC Arbitral Tribunal was (ACI), for defective and incomplete works, permits, licenses and other advances.[5]
specifically charged with “ascertain[ing] the facts in each case by every and all reasonable means.” In
discharging its task, it was permitted to even transcend technical rules on admissibility of evidence. The assailed Court of Appeals April 28, 2008 Decision modified the CIAC Arbitral Tribunal
October 25, 2006 Decision by awarding a net amount of P82,758,358.80 in favor of CECON.
Same; Article 1724 demands two (2) requisites in order that a price may become immutable: [6] The Court of Appeals July 1, 2010 Amended Decision adjusted this amount to
first, there must be an actual, stipulated price; and second, plans and specifications must have P93,896,335.71.
definitely been agreed upon.—Article 1724 demands two (2) requisites in order that a price may
become immutable: first, there must be an actual, stipulated price; and second, plans and specifications Petitioner CECON was a construction contractor, which, for more than 25 years, had been
must have definitely been agreed upon. Neither requisite avails in this case. Yet again, ACI is begging doing business with respondent ACI, the developer of Araneta Center, Cubao, Quezon City.
the question. It is precisely the crux of the controversy that no price has been set. Article 1724 does not [8]
work to entrench a disputed price and make it sacrosanct. Moreover, it was ACI which thrust itself
upon a situation where no plans and specifications were immediately agreed upon and from which no In June 2002, ACI sent invitations to different construction companies, including CECON, for
deviation could be made. It was ACI, not CECON, which made, revised, and deviated from designs them to bid on a project identified as "Package #4 Structure/Mechanical, Electrical, and
and specifications. Plumbing/Finishes (excluding Part A Substructure)," a part of its redevelopment plan for
Araneta Center Complex.[9] The project would eventually be the Gateway Mall. As described
by ACI, "[t]he Project involved the design, coordination, construction and completion of all
DECISION architectural and structural portions of Part B of the Works[;] and the construction of the
LEONEN, J.: architectural and structural portions of Part A of the Works known as Package 4 of the
Araneta Center Redevelopment Project."[10]
A tribunal confronted not only with ambiguous contractual terms but also with the total
absence of an instrument which definitively articulates the contracting parties' agreement As part of its invitation to prospective contractors, ACI furnished bidders with Tender
does not act in excess of jurisdiction when it employs aids in interpretation, such as those Documents, consisting of:

₯Construction Industry Arbitration Commission- Set III Page 10 of 41

Volume I: Tender Invitation, Project Description, Instructions to Tenderers, Form of Tender, for only ninety (90) days, or only until 29 November 2002." This tender proposed a total of
Dayworks, Preliminaries and General Requirements, and Conditions of Contract; 400 days, or until January 10, 2004, for the implementation and completion of the project.

Volume II: Technical Specifications for the Architectural, Structural, Mechanical, Plumbing, CECON offered the lowest tender amount. However, ACI did not award the project to any
Fire Protection and Electrical Works; and bidder, even as the validity of CECON's proposal lapsed on November 29, 2002. ACI only
subsequently informed CECON that the contract was being awarded to it. ACI elected to
Addenda Nos. 1, 2, 3, and 4 relating to modifications to portions of the Tender Documents. inform CECON verbally and not in writing.
[11]
In a phone call on December 7, 2002, ACI instructed CECON to proceed with excavation
The Tender Documents described the project's contract sum to be a "lump sum" or "lump works on the project. ACI, however, was unable to deliver to CECON the entire project site.
sum fixed price" and restricted cost adjustments, as follows: Only half, identified as the Malvar-to-Roxas portion, was immediately available. The other
half, identified as the Roxas to-Coliseum portion, was delivered only about five (5) months
6 TYPE OF CONTRACT later.

6.1 This is a Lump Sum Contract and the price is a fixed price not subject to measurement or As the details of the project had yet to be finalized, ACI and CECON pursued further
recalculation should the actual quantities of work and materials differ from any estimate negotiations. ACI and CECON subsequently agreed to include in the project the construction
available at the time of contracting, except in regard to Cost-Bearing Changes which may be of an office tower atop the portion identified as Part A of the project. This escalated CECON's
ordered by the Owner which shall be valued under the terms of the Contract in accordance project cost to P1,582,810,525.00.
with the Schedule of Rates, and with regard to the Value Engineering Proposals under
Clause 27. The Contract Sum shall not be adjusted for changes in the cost of labour, After further negotiations, the project cost was again adjusted to P1,613,615,244.00. Still
materials or other matters.[12] later, CECON extended to ACI a P73,615,244.00 discount, thereby"reducing its offered
project cost to P1,540,000.00.
TENDER AND CONTRACT
Despite these developments, ACI still failed to formally award the project to CECON. The
Fixed Price Contract parties had yet to execute a formal contract. This prompted CECON to write a letter to ACI,
dated December 27, 2002,[20] emphasizing that the project cost quoted to ACI was "based
The Contract Sum payable to the Contactor is a Lump Sum Fixed Price and will not be upon the prices prevailing at December 26, 2002" price levels.
subject to adjustment, save only where expressly provided for within the Contract Documents
and the Form of Agreement. By January 2003 and with the project yet to be formally awarded, the prices of steel products
had increased by 5% and of cement by P5.00 per bag. On January 8, 2003, CECON again
The Contract Sum shall not be subject to any adjustment "in respect of rise and fall in the cost wrote ACI notifying it of these increasing costs and specifically stating that further delays may
of materials[,] labor, plant, equipment, exchange rates or any other matters affecting the cost affect the contract sum.
of execution of Contract, save only where expressly provided for within the Contract
Documents or the Form of Agreement. Still without a formal award, CECON again wrote to ACI on January 21, 2003[23] indicating
cost and time adjustments to its original proposal. Specifically, it referred to an 11.52%
The Contract Sum shall further not be subject to any change in subsequent legislation, which increase for the cost of steel products, totalling P24,921,418.00 for the project; a P5.00
causes additional or reduced costs to the Contractor.[13] increase per bag of cement, totalling P3,698,540.00 for the project; and costs incurred
because of changes to the project's structural framing, totalling P26,011,460.00. The contract
The bidders' proposals for the project were submitted on August 30, 2002. These were based sum, therefore, needed to be increased to P1,594,631,418.00. CECON also specifically
on "design and construct" bidding.[14] stated that its tender relating to these adjusted prices were valid only until January 31, 2003,
as further price changes may be forthcoming. CECON emphasized that its steel supplier had
CECON submitted its bid, indicating a tender amount of P1,449,089,174.00. This amount was actually already advised it of a forthcoming 10% increase in steel prices by the first week of
inclusive of "both the act of designing the building and executing its construction." Its bid and February 2003. CECON further impressed upon ACI the need to adjust the 400 days allotted
tender were based on schematic drawings, i.e., conceptual designs and suppositions culled for the completion of the project.
from ACI's Tender Documents. CECON's proposal "specifically stated that its bid was valid

₯Construction Industry Arbitration Commission- Set III Page 11 of 41

On February 4, 2003, ACI delivered to CECON the initial tranche of its down payment for the First, on January 30, 2003, ACI issued Change Order No. 11,[37] which shifted the portion
project. By then, prices of steel had been noted to have increased by 24% from December identified as Part B of the project from reinforced concrete framing to structural steel framing.
2002 prices. This increase was validated by ACI. Deleting the cost for reinforced concrete framing meant removing P380,560,300.00 from the
contract sum. Nevertheless, replacing reinforced concrete framing with structural steel
Subsequently, ACI informed CECON that it was taking upon itself the design component of framing "entailed substitute cost of Php217,585,000, an additional Php44,281,100 for the
the project, removing from CECON's scope of work the task of coming up with designs. additional steel frames due to revisions, and another Php1,950,000 for the additional pylon."

On June 2, 2003, ACI finally wrote a letter[27] to CECON indicating its acceptance of Second, instead of leaving it to CECON, ACI opted to purchase on its own certain pieces of
CECON's August 30, 2002 tender for an adjusted contract sum of P1,540,000.00 only: equipment-elevators, escalators, chillers, generator sets, indoor substations, cooling towers,
pumps, and tanks-which were to be installed in the project. This entailed "take-out costs"; that
Araneta Center, Inc. (ACI) hereby accepts the C-E Construction Corporation (CEC) tender is, the value of these pieces of equipment needed to be removed from the total amount due
dated August 30, 2002, submitted to ACI in the adjusted sum of One Billion Five Hundred to CECON. ACI considered a sum totalling P251,443,749.00 to have been removed from the
Forty Million Pesos Only (P1,540,000,000.00), which sum includes all additionally quoted and contract sum due to CECON. This amount of P251,443,749.00 was broken down, as follows:
accepted items within this acceptance letter and attachments, Appendix A, consisting of one
(1) page, and Appendix B, consisting of seven (7) pages plus attachments, which sum of One (a) For elevators/escalators, PhP106,000,000;
Billion Five Hundred Forty Million Pesos Only (P1,540,000,000.00) is inclusive of any
Government Customs Duty and Taxes including Value Added Tax (VAT) and Expanded (b) For Chillers, PhP41,152,900;
Value Added Tax (EVAD, and which sum is hereinafter referred to as the Contract Sum.[28]
(c) For Generator Sets, PhP53,040,000;
Item 4, Appendix B of this acceptance letter explicitly recognized that "all design except
support to excavation sites, is now by ACI."[29] It thereby confirmed that the parties were not (d) For Indoor Substation, PhP23,024,150;
bound by a design-and-construct agreement, as initially contemplated in ACI's June 2002
invitation, but by a construct-only agreement. The letter stated that "[CECON] acknowledge[s] (e) For Cooling Towers, PhP5,472,809; and
that a binding contract is now existing."[30] However, consistent with ACI's admitted changes,
it also expressed ACI's corresponding undertaking: "This notwithstanding, formal contract (f) For Pumps and Tanks, PhP22,753,890.[39]
documents embodying these positions will shortly be prepared and forwarded to you for
execution. CECON avers that in removing the sum of P251,443,749.00, ACI "simply deleted the amount
in the cost breakdown corresponding to each of the items taken out in the contract
Despite ACI's undertaking, no formal contract documents were delivered to CECON or documents."[40] ACI thereby disregarded that the corresponding stipulated costs pertained
otherwise executed between ACI and CECON. not only to the acquisition cost of these pieces of equipment but also to so-called "builder's
works" and other costs relating to their preparation for and installation in the project. Finding it
As it assumed the design aspect of the project, ACI issued to CECON the construction unjust to be performing auxiliary services practically for free, CECON proposed a reduction in
drawings for the project. Unlike schematics, these drawings specified "the kind of work to be the take-out costs claimed by ACI. It instead claimed P26,892,019.00 by way of
done and the kind of material to be used."[33] CECON laments, however, that "ACI issued compensation for the work that it rendered.
the construction drawings in piece-meal fashion at times of its own choosing."[34] From the
commencement of CECON's engagement until its turnover of the project to ACI, ACI issued With many changes to the project and ACI's delays in delivering drawings and specifications,
some 1,675 construction drawings. CECON emphasized that many of these drawings were CECON increasingly found itself unable to complete the project on January 10, 2004. It noted
partial and frequently pertained to revisions of prior items of work.[35] Of these drawings, that it had to file a total of 15 Requests for Time Extension from June 10, 2003 to December
more than 600 were issued by ACI well after the intended completion date of January 10, 15, 2003, all of which ACI failed to timely act on.
2004: Drawing No. 1040 was issued on January 12, 2004, and the latest, Drawing No. 1675,
was issued on November 26, 2004. Exasperated, CECON served notice upon ACI that it would avail of arbitration. On January
29, 2004, it filed with the CIAC its Request for Adjudication.[43] It prayed that a total sum of
Apart from shifting its arrangement with CECON from design-and-construct to construct only, P183,910,176.92 representing adjusted project costs be awarded in its favor.[44]
ACI introduced other changes to its arrangements with CECON. CECON underscored two (2)
of the most notable of these changes which impelled it to seek legal relief. On March 31, 2004, CECON and ACI filed before the CIAC a Joint Manifestation[45]
indicating that some issues between them had already been settled. Proceedings before the

₯Construction Industry Arbitration Commission- Set III Page 12 of 41

CIAC were then suspended to enable CECON and ACI to arrive at an amicable settlement. total of P229,223,318.69 to CECON, inclusive of the costs of arbitration. It completely denied
[46] On October 14, 2004, ACI filed a motion before the CIAC noting that it has validated ACI's claims for liquidated damages, but awarded to ACI a total of P11,795,162.93 on
P85,000,000.00 of the total amount claimed by CECON. It prayed for more time to arrive at a account of defective and rectification works, as well as permits, licenses, and other
settlement. advances.Thus, the net amount due to CECON was determined to be P217,428,155.75.

In the meantime, CECON completed the project and turned over Gateway Mall to ACI.[48] It The CIAC Arbitral Tribunal noted that while ACI's initial invitation to bidders was for a lump-
had its blessing on November 26, 2004. sum design-and-construct arrangement, the way that events actually unfolded clearly
indicated a shift to an arrangement where the designs were contingent upon ACI itself.
As negotiations seemed futile, on December 29, 2004, CECON filed with the CIAC a Motion Considering that the premise for CECON's August 30, 2002 lump-sum offer of P1,540,000.00
to Proceed with arbitration proceedings. ACI filed an Opposition. was no longer availing, CECON was no longer bound by its representations in respect of that
lump-sum amount. It may then claim cost adjustments totalling P16,429,630.74, as well as
After its Opposition was denied, ACI filed its Answer dated January 26, 2005.[51] It attributed values accruing to the various change orders issued by ACI, totalling P159,827,046.94.
liability for delays to CECON and sought to recover counterclaims totalling P180,752 297.84.
This amount covered liquidated damages for CECON's supposed delays, the cost of The CIAC Arbitral Tribunal found ACI liable for the delays. This entitled CECON to extended
defective works which had to be rectified, the cost of procuring permits and licenses, and overhead costs and the ensuing extension cost of its Contractor's All Risk Insurance. For
ACI's other advances. these costs, the CIAC Arbitral Tribunal awarded CECON the total amount of P16,289,623.08.
As it was ACI that was liable for the delays, the CIAC Arbitral Tribunal ruled that ACI was not
On February 8, 2005, ACI filed a Manifestation and Motion seeking the CIAC's clearance for entitled to liquidated damages.
the parties to enter into mediation. Mediation was then instituted with Atty. Sedfrey Ordonez
acting as mediator. The CIAC Arbitral Tribunal ruled that CECON was entitled to a differential in take out costs
representing builder's works and related costs with respect to the equipment purchased by
After mediation failed, an arbitral tribunal was constituted through a March 16, 2005 Order of ACI. This differential cost was in the amount of P15,332,091.47.[63] The CIAC Arbitral
the CIAC. It was to be composed of Dr. Ernesto S. De Castro, who acted as Chairperson with Tribunal further noted that while ACI initially opted to purchase by itself pumps, tanks, and
Engr. Reynaldo T. Viray and Atty. James S. Villafranca as members. cooling towers and removed these from CECON's scope of work, it subsequently elected to
still obtain these through CECON. Considering that the corresponding amount deducted as
ACI filed a Motion for Reconsideration of the CIAC March 16, 2005 Order. This was denied in take-out costs did not encompass the overhead costs and profits under day work, which
the Order dated March 30, 2005. should have accrued to CECON because of these equipment, the CIAC Arbitral Tribunal
ruled that CECON was entitled to 18% day work rate or a total of P21,267,908.00.
In the Order dated April 1, 2005, the CIAC Arbitral Tribunal set the preliminary conference on
April 13, 2005. The CIAC Arbitral Tribunal also found that, apart from adjusted costs incurred on account of
ACI's own activities, it also became necessary for CECON, as main contractor, to continue
At the preliminary conference, CECON indicated that, the total sum it was entitled to recover extending auxiliary services to the project's subcontractors because of the delays. Thus, the
from ACI needed to be adjusted to P324,113,410.08. The CIAC Arbitral Tribunal, thus, CIAC Arbitral Tribunal awarded CECON attendance fees-the main contractor's mark-up for
directed CECON to file an Amended Request for Adjudication/Amended Complaint. auxiliary services extended to subcontractors - totalling P14,335,674.88. This amount was
lower than the original amount prayed for by CECON (i.e., P19,544,667.81)[65] as the CIAC
Following the filing of CECON's Amended Request for Adjudication/Amended Complaint and Arbitral Tribunal ruled that CECON may not claim attendance fees pertaining to
the ensuing responsive pleadings, another preliminary conference was set on May 13, 2005. subcontractors which directly dealt with ACI.
The initial hearing of the case was then set on June 10, 2005.
Considering that CECON's predicament was borne by ACI's fault, the CIAC Arbitral Tribunal
At the initial hearing, the CIAC Arbitral Tribunal resolved to exclude the amount of saw it fit to award to CECON the costs of arbitration totalling P1,083,802.58.
P20,483,505.12 from CECON's claims as these pertained to unpaid accomplishments that
did not relate to the issue of cost adjustments attributed to ACI, as originally pleaded by While mainly ruling in CECON's favor, the CIAC Arbitral Tribunal found CECON liable for
CECON. discolored and mismatched tiles. It noted that CECON had engaged the services of a
subcontractor for the installation of tiles, for which it claimed attendance fees. Thus, it
Following the conduct of hearings, the submission of the parties' memoranda and offers of awarded P7,980,000.00 to ACI.[68] In addition, it found CECON liable to ACI for amounts
exhibits, the CIAC Arbitral Tribunal rendered its Decision on October 25, 2006. It awarded a

₯Construction Industry Arbitration Commission- Set III Page 13 of 41

paid in advance for permits and licenses for the additional office tower, electrical The Court of Appeals noted that CECON was not entitled to time extensions because the
consumption, and garbage collection. Thus, it awarded another P3,815,162.93 to ACI. arrangement between ACI and CECON had never been altered. Consequently, it was not
entitled to acceleration co ts, additional overhead, ru1d reimbursement for extending the
The dispositive portion of the CIAC Arbitral Tribunal Decision read: Contractor's All Risk Insurance.[81] Conversely, the Court of Appeals held CECON liable for
delays thereby entitling ACI to liquidated damages corresponding to 10% of the supposed
WHEREFORE, Respondent is hereby ordered to pay the Claimant the amount of PESOS contract sum of P1,540,000,000.00, or P15,400,000.00.
TWO HUNDRED SEVENTEEN MILLION, FOUR HUNDRED TWENTY-EIGHT THOUSAND,
ONE HUNDRED FIFTY[-]FIVE PESOS AND SEVENTY[-]FIVE CENTAVOS Also on account of the supposed lump-sum arrangement, the Court of Appeals held that
(Php217,428,155.75) within thirty (30) days upon promulgation of the award. Interest 6% per CECON was not entitled to attendance fees on contract amounts increased by change order
annum shall be imposed on the award for any balance remaining from the promulgation of works.[83] It also stated that the rate for attendance fees, overhead, and profit for
the award up to the time the award becomes final and executory. Thereafter, interest of 12% subcontractors' works remained subject to the original contract documents based on ACI's
per annum shall be imposed on any balance of the award until fully paid. SO ORDERED. original invitation to bidders and had never been altered.

On December 4, 2006, ACI filed before the Court of Appeals a Petition for Review[71] under Regarding attendance fees, the Court of Appeals proffered that the work attributed to
Rule 43 of the 1997 Rules of Civil Procedure. subcontractors was merely work done by CECON itself, thereby negating the need for
attendance fees.
In the meantime, on December 28, 2006, the CIAC Arbitral Tribunal issued an Order[72]
acknowledging arithmetical errors in its October 25, 2006 Decision, Thus, it modified its Concerning take-out costs, the Court of Appeals stated that CECON was in no position to
October 25, 2006 Decision, indicating that the net amount due to CECON was propose its own take-out costs as the tender documents issued along with ACI's invitation to
P231,357,136.72, rather than P217,428,155.75. bidders stated that take-out costs must be based exclusively on the rates provided in the
Contract Cost Breakdown. Nevertheless, as ACI had previously undertaken to pay the
In its assailed April28, 2008 Decision,[74] the Court of Appeals reduced the award in favor of variance in takeout costs amounting to P3,811,289.70, the Court of Appeals concluded that
CECON to P114,324,605.00 and increased the award to ACI to P31,566,246.20. an award for take-out costs in that amount was proper.

The Court of Appeals held as inviolable the lump-sum fixed price arrangement between ACI On the CIAC Arbitral Tribunal's award for overhead costs and profits under day work, the
and CECON. It faulted the CIAC Arbitral Tribunal for acting in excess of jurisdiction as it Court of Appeals held that it was improper to grant this award based on stipulations on day
supposedly took it upon itself to unilaterally modify the arrangement between ACI and works pertaining "only to 'materials' and not to equipment."
CECON.
Finally, the Court of Appeals held that CECON was not entitled to costs of litigation
Thus, the Court of Appeals deleted the CIAC Arbitral Tribunal's award representing cost considering that "no premium is to be placed on the right to litigate"[88] and since ACI could
adjustments. However, the Court of Appeals also noted that in ACI's and CECON's March 30, not be faulted for delays.
2004 Joint Ma11ifestation before CIAC, ACI conceded that P10,266,628.00 worth of cost
adjustments was due to CECON and undertook to pay CECON that amount. The Court of The dispositive portion of the assailed Court of Appeals April 28, 2008 Decision read:
Appeals, hence, maintained a P10,266,628.00 award of cost adjustment in favor of CECON.
WHEREFORE, based on all the foregoing, the Decision of the Arbitral Tribunal is modified as
On the cost increases borne by Change Order No. 11-the shift from reinforced concrete to follows:
structural steel framing-and by transitions from schematic diagrams to construction drawings,
the Court of Appeals dismissed the CIAC Arbitral Tribunals award to CECON as arising from a. AWARD TO CECON
"pity" and unwarranted by the lump-sum, fixed-price arrangement.
NO.
The Court of Appeals held ACI liable to CECON for the sum of P12,672,488.36 for
miscellaneous change orders, which it construed to be "separate contracts that have been ISSUE
entered into at the time [ACI] required them."[79] It likewise held ACI liable for P1,132,946.17
representing the balance of 12 other partially paid change orders. Pesos (PHP)

1. Cost Adjustment- 10,266,628.00

₯Construction Industry Arbitration Commission- Set III Page 14 of 41

 2. Take Out Cost of Equipment- 3,811,289.70 The dispositive portion of the assailed Court of Appeals July 1, 2010 Amended Decision read:
3. Change Orders - 99,119,200.09
WHEREFORE, Our Decision dated 28 April 2008 is hereby modified as follows:
a. Approved Change Orders- 1,132,946.17
I - AWARD:
b. [Schematic Drawings] to [Construction Drawings]- 80,108,761.60
a. AWARD TO CE CONSTRUCTION, INC.
c. Miscellaneous Change Orders- 12,672,488.30
NO.
d. Change Order No.- 5,205,004.02
ISSUE
4. Equipment Supplied by Owner- 1,127,486.50
PESOS (PhP)
Total- 114,324,605.00 (sic)
1. Additional costs spent on rebars- 10,266,628.00
b. AWARD TO ARANETA 2. Increase in the costs of cement and formworks falling under cost-bearing change.-
5,205,004.02
NO. 3. Representing undervaluation of respondent's works in the supply and installation of
G.I. sheets- 1,209,782.50
ISSUE 4. Representing Miscellaneous Change Orders- 27,601,469.32
5. Drilling of Holes- 4,543,450.00
Pesos (PHP)
6. [Schematic Drawings] to [Construction Drawings]- 80,108,761.60
5. Liquidated Damages -15,400,000.00 7. Installation of equipment supplied by owner- 1,127,486.50

6. Defective and Incomplete Works- 3,000,000.00 TOTAL- 130,062,581.94

Bookmarking Granite Tiles- 6,980,000.00 b. AWARD TO ARANETA CENTER, INC.

7 Permits, Licenses and Other Advances- 6,186,246.23 1. Liquidated Damage - 20,000,000.00

Total- 31,566,246.20 (sic) 2. Defective and Incomplete Works- 3,000,000.00

In addition, CECON is directed to submit all required. close-out documents within thirty (30) 3. Bookmarking Granite Tiles- 6,980,000.00
days from receipt of this Decision.
4. Permits, Licenses and other Advances- 6,186,246.23
The parties shall bear their own costs of arbitration and litigation.
TOTAL- 36,166,246.23
SO ORDERED.
II - COMPUTATION:
Acting on CECON's Motion for Reconsideration, the Court of Appeals issued its Amended
Decision on July 1, 2010.[90] This Amended Decision increased the award for miscellaneous AWARD TO CE CONSTRUCTION, INC- 130,062,581.94
change orders to P27,601,469.32; reinstated awards for undervalued works in supplying and
installing G.I. sheets worth P1,209,782.50[91] and for the drilling of holes and application of LESS
epoxy worth P4,543,456.00;[92] and deleted the award for takeout costs.

₯Construction Industry Arbitration Commission- Set III Page 15 of 41

 However, this is not merely a matter of applying and deriving conclusions from cut and dried
contractual provisions. More accurately, what is on issue is whether or not the Court of
AWARD TO ARANETA CENTER, INC.- 36,166,246.23 Appeals correctly held that the CIAC Arbitral Tribunal acted beyond its jurisdiction in holding
that the price of P1,540,000,000.00 did not bind the parties as an immutable lump-sum.
BALANCE PAYABLE BY ARANETA TO CECON- 93,896,335.71 Subsumed in this issue is the matter of whether or not the Court of Appeals correctly ruled
that CECON was rightfully entitled to time extensions and that intervening circumstances had
SO ORDERED. made ACI liable for cost adjustments, increases borne by change orders, additional overhead
costs, extended contractor's all risk insurance coverage, increased attendance fees vis-a-vis
Aggrieved at the Court of Appeals' ruling, CECON tiled the present Petition insisting on the subcontractors, and arbitration costs which it awarded to CECON.
propriety of the CIAC Arbitral Tribunal's conclusions and findings.[95] It prays that the
assailed Court of Appeals decisions be reversed and that the CIAC Arbitral Tribunal October This Court limits itself to the legal question of the CIAC Arbitral Tribunal's competence.
25, 2006 Decision, as modified by its December 28, 2006 Order, be reinstated. Unless any of the exceptional circumstances that warrant revisiting the factual matter of the
accuracy of the particulars of every item awarded to the parties is availing, this Court shall not
ACI counters that the Court of Appeals July 1, 2010 Amended Decision must be upheld. embark on its own audit of the amounts owing to each.

ACI insists on the inviolability of its supposed agreement with CECON, as embodied in the I. This Court begins by demarcating the jurisdictional and technical competence of the CIAC
contract documents delivered to contractors alongside the original offer to bid. It cites specific and of its arbitral tribunals.
provisions of these documents such as valuation rules and required notices for extensions
and changes, reckoning of losses and expenses, the ensuing liquidated damages for defects, I.A. The Construction Industry Arbitration Commission was a creation of Executive Order No.
cost-bearing changes and provisional sums,[98] which define parameters for permissible 1008, otherwise known as the Construction Industry Arbitration Law.[105] At inception, it was
changes and for reckoning corresponding costs and liabilities. However, it did not attach any under the administrative supervision of the Philippine Domestic Construction Board[106]
of these documents to its Comment or Memorandum. It also cites statutory provisions-Articles which, in turn, was an implementing agency of the Construction Industry Authority of the
1715[99] and 1724[100] of the Civil Code-on CECON's liabilities and the primacy of stipulated Philippines (CIAP).[107] The CIAP is presently attached to the Department of Trade and
contract prices. Industry.

By the inviolability their agreement, ACI insists on the supposed immutability of the stipulated The CIAC was created with the specific purpose of an "early and expeditious settlement of
contract sum and on the impropriety of the CIAC Arbitral Tribunal in writing its own terms for disputes"[109] cognizant of the exceptional role of construction to "the furtherance of national
ACI and CECON to follow.It faults the CIAC Arbitral Tribunal for erroneously reckoning the development goals."
sums due to CECON, particularly in relying on factual considerations that run afoul of
contractual stipulations and on bases such as industry practices and standards, which Section 4 of the Construction Industry Arbitration Law spells out the jurisdiction of the CIAC:
supposedly should not have even been considered as the parties have already adduced their
respective evidence. It insists upon CECON's fault for delays and defects, making it liable for Section 4. Jurisdiction. - The CIAC shall have original and exclusive jurisdiction over disputes
liquidated damages. arising from, or connected with, contracts entered into by parties involved in construction in
the Philippines, whether the dispute arises before or after the completion of the contract, or
Though nominally modifying the CIAC Arbitral Tribunal October 25, 2006 Decision, the Court after the abandonment or breach thereof. These disputes may involve government or private
of Appeals actually reversed it on the pivotal matter of the characterization of the contract contracts. For the Board to acquire jurisdiction, the parties to a dispute must agree to submit
between CECON and ACI. Upon its characterization of the contract as one for a lump-sum the same to voluntary arbitration.
fixed price, the Court of Appeals deleted much of the CIAC Arbitral Tribunal's monetary
awards to CECON and awarded liquidated damages to ACI. 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
On initial impression, what demands resolution is the issue of whether or not the Court of application of contractual time and delays; maintenance and defects; payment, default of
Appeals erred in characterizing the contractual arrangement between petitioner CE employer or contractor and changes in contract cost.
Construction Corporation and respondent Araneta Center, Inc. as immutably one for a lump-
sum fixed price. Excluded from the coverage of this law are disputes arising from employer-employee
relationships which shall continue to be covered by the Labor Code of the Philippines.

₯Construction Industry Arbitration Commission- Set III Page 16 of 41

Though created by the act of a Chief Executive who then exercised legislative powers other specialized fields. The CIAC has the state's confidence concerning the entire technical
concurrently with the Batasang Pambansa, the creation, continuing existence, and expanse of construction, defined in jurisprudence as "referring to all on-site works on
competence of the CIAC have since been validated by acts of Congress, buildings or altering structures, from land clearance through completion including excavation,
erection and assembly and installation of components and equipment."[111]
Republic Act No. 9184 or the Government Procurement Reform Act, enacted on January 10,
2003, explicitly recognized and confirmed the competence of the CIAC: Jurisprudence has characterized the CIAC as a quasi-judicial, administrative agency
equipped with technical proficiency that enables it to efficiently and promptly resolve conflicts;
Section 59. Arbitration. - Any and all disputes arising from the implementation of a contract
covered by this Act shall be submitted to arbitration in the Philippines according to the [The CIAC] is a quasi-judicial agency. A quasi-judicial agency or body has been defined as an
provisions of Republic Act No. 876, otherwise known as the "Arbitration Law": Provided, organ of government other than a court and other than a legislature, which affects the rights
however, That, disputes that are within the competence of the Construction Industry of private parties through either adjudication or rule-making. The very definition of an
Arbitration Commission to resolve shall be referred thereto. The process of arbitration shall administrative agency includes its being vested with quasi-judicial powers. The ever
be incorporated as a provision in the contract that will be executed pursuant to the provisions increasing variety of powers and functions given to administrative agencies recognizes the
of this Act: Provided, That by mutual agreement, the patties may agree in writing to resort to need for the active intervention of administrative agencies in matters calling for technical
alternative modes of dispute resolution. (Emphasis supplied) knowledge and speed in countless controversies which cannot possibly be handled by
regular courts. The CIAC's primary function is that of a quasi-judicial agency, which is to
Arbitration of construction disputes through the CIAC was formally incorporated into the adjudicate claims and/or determine rights in accordance with procedures set forth in E.O. No.
general statutory framework on alternative dispute resolution through Republic Act No. 9285, 1008.
the Alternative Dispute Resolution Act of 2004 (ADR Law). Chapter 6, Section 34 of ADR Law
made specific reference to the Construction Industry Arbitration Law, while Section 35 The most recent jurisprudence maintains that the CIAC is a quasi-judicial body. This Court's
confirmed the CIAC's jurisdiction: November 23, 2016 Decision in Fruehauf Electronics v. Technology Electronics Assembly
and Management Pacific[113] distinguished construction arbitration, as well as voluntary
CHAPTER 6 arbitration pursuant to Article 219(14) of the Labor Code,[114] from commercial arbitration. It
ruled that commercial arbitral tribunals are not quasi-judicial agencies, as they are purely ad
ARBITRATION OF CONSTRUCTION DISPUTES hoc bodies operating through contractual consent and as they intend to serve private,
proprietary interests.[115] In contrast, voluntary arbitration under the Labor Code and
Section 34. Arbitration of Construction Disputes: Governing Law. - The arbitration of construction arbitration operate through the statutorily vested jurisdiction of government
construction disputes shall be governed by Executive Order No. 1008, otherwise known as instrumentalities that exist independently of the will of contracting parties and to which these
the Construction Industry Arbitration Law. parties submit. They proceed from the public interest imbuing their respective spheres:

Section 35. Coverage of the Law. - Construction disputes which fall within the original and Voluntary Arbitrators resolve labor disputes and grievances arising from the interpretation of
exclusive jurisdiction of the Construction Industry Arbitration Commission (the "Commission") Collective Bargaining Agreements. These disputes were specifically excluded from the
shall include those between or among parties to, or who are otherwise bound by, an coverage of both the Arbitration Law and the ADR Law.
arbitration agreement, directly or by reference whether such parties are project owner,
contractor, subcontractor, fabricator, project manager, design professional, consultant, Unlike purely commercial relationships, the relationship between capital and labor are heavily
quantity surveyor, bondsman or issuer of an insurance policy in a construction project. impressed with public interest. Because of this. Voluntary Arbitrators authorized to resolve
labor disputes have been clothed with quasi-judicial authority.
The Commission shall continue to exercise original and exclusive jurisdiction over
construction disputes although the arbitration is "commercial" pursuant to Section 21 of this On the other hand, commercial relationships covered by our commercial arbitratjon laws are
Act. purely private and contractual in nature. Unlike labor relationships, they do not possess the
same compelling state interest that would justify state interference into the autonomy of
I.B. The CIAC does not only serve the interest of speedy dispute resolution, it also facilitates contracts. Hence, commercial arbitration is a purely private system of adjudication facilitated
authoritative dispute resolution. Its authority proceeds not only from juridical legitimacy but by private citizens instead of government instrumentalities wielding quasi-judicial powers.
equally from technical expertise. The creation of a special adjudicatory body for construction
disputes presupposes distinctive and nuanced competence on matters that are conceded to
be outside the innate expertise of regular courts and adjudicatory bodies concerned with

₯Construction Industry Arbitration Commission- Set III Page 17 of 41

Moreover, judicial or quasi-judicial jurisdiction cannot be conferred upon a tribunal by the II. Consistent with CIAC's technical expertise is the primacy and deference accorded to its
parties alone. The Labor Code itself confers subject-matter jurisdiction to Voluntary decisions. There is only a very narrow room for assailing its rulings.
Arbitrators.
Section 19 of the Construction Industry Arbitration Law establishes that CIAC arbitral awards
Notably, the other arbitration body listed in Rule 43 the Construction Industry Arbitration may not be assailed, except on pure questions of law:
Commission (CIAC) - is also a government agency attached to the Department of Trade and
Industry. Its jurisdiction is likewise conferred by statute. By contrast, the subject matter Section 19. Finality of Awards. - The arbitral award shall be binding upon the parties. It shall
urisdiction of commercial arbitrators is stipulated by the parties. be final and inappealable except on questions of law which shall be appealable to the
Supreme Court.
Consistent with the primacy of technical mastery, Section 14 of the Construction Industry
Arbitration Law on the qualification of arbitrators provides: Rule 43 of the 1997 Rules of Civil Procedure standardizes appeals from quasi-judicial
agencies.[118] Rule 43, Section 1 explicitly lists CIAC as among the quasi judicial agencies
Section 14. Arbitrators. - A sole arbitrator or three arbitrators may settle a dispute covered by Rule 43.[119] Section 3 indicates that appeals through Petitions for Review under
Rule 43 are to "be taken to the Court of Appeals ... whether the affoeal involves questions of
Arbitrators shall be men of distinction in whom the business sector and the government can fact, of law, or mixed questions of fact and law."
have confidence. They shall not be permanently employed with the CIAC. Instead, thy shall
render services only when called to arbitrate. For each dispute they settle, they shall be given This is not to say that factual findings of CIAC arbitral tribunals may now be assailed before
fees. the Court of Appeals. Section 3's statement "whether the appeal involves questions of fact, of
law, or mixed questions of fact and law" merely recognizes variances in the disparate modes
Section 8.1 of the Revised Rules of Procedure Governing Construction Arbitration establishes of appeal that Rule 43 standardizes: there were those that enabled questions of fact; there
that the foremost qualification of arbitrators shall be technical proficiency. It explicitly enables were those that enabled questions of law, and there were those that enabled mixed questions
not only lawyers but also "engineers, architects, construction managers, engineering fact and law. Rule 43 emphasizes that though there may have been variances, all appeals
consultants, and businessmen familiar with the construction industry" to serve as arbitrators: under its scope are to be brought before the Court of Appeals. However, in keeping with the
Construction Industry Arbitration Law, any appeal from CIAC arbitral tribunals must remain
Section 8.1 General Qualification of Arbitrators. - The Arbitrators shall be men of distinction in limited to questions of law.
whom the business sector and the government can have confidence. They shall be
technically qualified to resolve any construction dispute expeditiously and equitably. The Hi-Precision Steel Center, Inc. v. Lim Kim Steel Builders, Inc.[121] explained the wisdom
Arbitrators shall come from different professions. They may include engineers, architects, underlying the limitation of appeals to pure questions of law:
construction managers, engineering consultants, and businessmen familiar with the
construction industry and lawyers who are experienced in construction disputes. Section 19 makes it crystal clear that questions of fact cannot be raised in proceedings before
the Supreme Court - which is not a trier of facts - in respect of an arbitral award rendered
Of the 87 CIAC accredited arbitrators as of January 2017, only 33 are lawyers. The majority under the aegis of the CIAC. Consideration of the animating purpose of voluntary arbitration
are experts from construction-related professions or engaged in related fields. in generaland arbitration under the aegis of the CIAC in particular, requires us to apply
rigorously the above principle embodied in Section 19 that the Arbitral Tribunal's findings of
Apart from arbitrators, technical experts aid the CIAC in dispute resolution. Section 15 of the fact shall be final and unappealable.
Construction Industry Arbitration Law provides:

Section 15. Appointment of Experts. - The services of technical or legal experts may be
utilized in the settlement of disputes if requested by any of the parties or by the Arbitral
Tribunal. If the request for an expert is done by either or by both of the parties, it is necessary
that the appointment of the expert be confirmed by the Arbitral Tribunal.

Whenever the parties request for the services of an expert, they shall equally shoulder the
expert's fees and expenses, half of which shall be deposited with the Secretariat before the
expert renders service. When only one party makes the request, it shall deposit the whole
amount required.

₯Construction Industry Arbitration Commission- Set III Page 18 of 41

Voluntary arbitration involves the reference of a dispute to an impartial body, the members of We reiterate the rule that factual findings of construction arbitrators are final and conclusive
which are chosen by the parties themselves, which parties freely consent in advance to abide and not reviewable by this Court on appeal, except when the petitioner proves affirmatively
by the arbitral award issued after proceedings where both parties had the opportunity to be that: (1) the award was procured by corruption, fraud or other undue means; (2) there was
heard. The basic objective is to provide a speedy and inexpensive method of settling disputes evident partiality or corruption of the arbitrators or of any of them; (3) the arbitrators were
by allowing the parties to avoid the formalities, delay, expense and aggravation which guilty of misconduct in refusing to postpone the hearing upon sufficient cause shown, or in
commonly accompany ordinary litigation, especially litigation which goes through the entire refusing to hear evidence pertinent and material to the controversy; (4) one or more of the
hierarchy of courts. [The Construction Industry Arbitration Law] created an arbitration facility arbitrators were disqualified to act as such under section nine of Republic Act No. 876 and
to which the construction industry in the Philippines can have recourse. The [Construction willfully refrained from disclosing such disqualifications or of any other misbehavior by which
Industry Arbitration Law] was enacted to encourage the early and expeditious settlement of the rights of any party have been materially prejudiced; or (5) the arbitrators exceeded their
disputes in the construction industry, a public policy the implementation of which is necessa powers, or so imperfectly executed them, that a mutual, final and definite award upon the
and important for the realization of national development goals. subject matter submitted to them was not made.

Consistent with this restrictive approach, this Court is duty-bound to be extremely watchful Guided by the primacy of CIAC's technical competence, in exercising this Court's limited
and to ensure that an appeal does not become an ingenious means for und rmining the power of judicial review, this Court proceeds to rule on whether or not the Court of Appeals
integrity of arbitration or for conveniently setting aside the conclusions arbitral processes erred in its assailed decisions.
make. An appeal is not an artifice for the parties to undermine the process they voluntarily
elected to engage in. To prevent this Court from being a party to such perversion, this Court's III. Properly discerning the issues in this case reveals that what is involved is not a mere
primordial inclination must be to uphold the factual finqings of arbitral tribunals: matter of contractual interpretation but a question of the CIAC Arbitral Tribunal's exercise of
its powers.
Aware of the objective of voluntary arbitration in the labor field, in the construction industry,
and in any other area for that matter, the Court will not assist one or the other or even both III.A
parties in any effort to subvert or defeat that objective tbr their private purposes. The Court
will not review the factual findings of an arbitral tribunal upon the artful allegation that such F.F. Cruz v. HR Construction[127] distinguished questions of law, properly cognizable in
body had "misapprehended the facts" and will not pass upon issues which are, at bottom, appeals from CIAC arbitral awards, from questions of fact:
issues of fact, no matter how cleverly disguised they might be as "legal questions." The
parties here had recourse to arbitration and chose the arbitrators themselves; they must have A question of law arises when there is doubt as to what the law is on a certain state of facts,
had confidence in such arbitrators. The Court will not, therefore, permit the parties to relitigate while there is a question of fact when the doubt arises as to the truth or falsity of the alleged
before it the issues of facts previously presented and argued before the Arbitral Tribunal, facts. For a question to be one of law, the same must not involve an examination of the
save only where a very clear showing is made that, in reaching its factual conclusions, the probative value of the evidence presented by the litigants or any of them. The resolution of
Arbitral Tribunal committed an error so egregious and hurtful to one party as to constitute a tbe issue must rest solely on what the law provides on the given set of circumstances. Once it
grave abuse of discretion resulting in lack or loss of jurisdiction. Prototypical examples would is clear that the issue invites a review of the evidence presented, the question posed is one of
be factual conclusions of the Tribunal which resulted in deprivation of one or the other party fact.[128]
of a fair opportunity to present its position before the Arbitral Tribunal, and an award obtained
through fraud or the corruption of arbitrators. Any other, more relaxed, rule would result in It further explained that an inquiry into the true intention of the contracting parties is a legal,
setting at naught the basic objective of a voluntary arbitration and would reduce arbitration to rather than a factual, issue:
a largely inutile institution.
On the surface, the instant petition appears to merely raise factual questions as it mainly puts
Thus, even as exceptions to the highly restrictive nature of appeals may be contemplated, in issue the appropriate amount that is due to HRCC. However, a more thorough analysis of
these exceptions are only on the nanowest of grounds. Factual findings of CIAC arbitral the issues raised by FFCCl would show that it actually asserts questions of law.
tribunals may be revisited not merely because arbitral tribunals may have erred, not even on
the already exceptional grounds traditionally available in Rule 45 Petitions.[124] Rather, FFCCI primarily seeks from this Court a determination of whether [the] amount claimed by
factual findings may be reviewed only in cases where the CIAC arbitral tribunals conducted HRCC in its progress billing may be enforced against it in the absence of a joint
their affairs in a haphazard, immodest manner that the most basic integrity of the arbitral measurement of the former's completed works. Otherwise stated, the main question
process was imperiled. In Spouses David v. Construction Industry and Arbitration advanced by FFCCI is this: in the absence of the joint measurement agreed upon in the
Commission: Subcontract Agreement, how will the completed works of HRCC be verified and the amolfnt
due thereon be computed?

₯Construction Industry Arbitration Commission- Set III Page 19 of 41

The determination of the foregoing question entails an interpretation of the terms of the Documents expressly prohibit any adjustment of the contract sum due to any changes or
Subcontract Agreement vis-a-vis the respective rights of the parties herein. On this point, it fluctuations in the cost of labor, materials or other matters.[133] (Citations omitted)
should be stressed that where an interpretation of the true agreement between the parties is
involved in an appeal, the appeal is in effect an inquiry of the law between the parties, its Upon its characterization of the contract as one for the lump-sum, fixed price of
interpretation necessarily involves a question of law. P1,540,000,000.00, the Court of Appeals faulted the CIAC Arbitral Tribunal for acting in
excess of jurisdiction as it supposedly countermanded the parties' agreement, or worse,
Moreover, we are not called upon to examine the probative value of the evidence presented conjured its own tenns for the parties' compliance.[134]
before the CIAC. Rather, what is actually sought from this Court is an interpretation of the
terms of the Subcontract Agreement as it relates to the dispute between the parties. It was the Court of Appeals, not the CIAC Arbitral Tribunal, that committed serious error.

Though similarly concerned with "an interpretation of the true agreement between the To rule that the CIAC Arbitral Tribunal modified the parties' agreement because it was
parties,"[130] this case is not entirely congruent with F.F. Cruz. indisputably one for a lump-sum, fixed price of P1,540,000,000.00 is begging the question.
The Court of Appeals used a conclusion as a premise to support itself. It erroneously jumped
In F.F. Cruz, the parties' agreement had been clearly set out in writing. There was a definitive to a conclusion only to plead this conclusion in support of points that should have made up its
instrument which needed only to be consulted to ascertain the parties' intent: anterior framework, points that would have been the ones to lead to a conclusion. It then
used this abortive conclusion to injudiciously dispose of the case.
In resolving the dispute as to the proper valuation of the works accomplished by HRCC, the
primordial consideration should be the terms of the Subcontract Agreement. It is basic that if The Court of Appeals took the parties' contractual relation as a revealed and preordained
the tem1s of a contract are clear and leave no doubt upon the intention of the contracting starting point. Then, it dismissed every prior or subsequent detail that contradicted this
parties, the literal meaning of its stipulations shall control.[131] assumption. It thereby conveniently terminated the discussion before it even began.

Thus, this Court concluded: III.C. There was never a meeting of minds on the price of P1,540,000,000.00. Thus, that
stipulation could not have been the basis of any obligation.
Pursuant to the terms of payment agreed upon by the parties, FFCCI obliged itself to pay the
monthly progress billings of HRCC within 30 days from receipt of the same. Additionally, the The only thing that ACI has in its favor is its initial delivery of tender documents to prospective
monthly progress billings of HRCC should indicate the extent of the works completed by it, bidders. Everything that transpired after this delivery militates against ACI's position.
the same beinff essential to the valuation of the amount that FFCCI would pay to HRCC.[132]
Before proceeding to a consideration of the circumstances that negate a meeting of minds,
III.B. In this case, there is no established contract that simply required interpretation and this Court emphasizes that ACI would have this Court sustain claims premised on supposed
application. inviolable documents. Yet, it did not annex copies of these documents either to its Comment
or to its Memorandum.
The assailed Court of Appeals April 28, 2008 Decision implies that all that had to be done to
resolve the present controversy was to apply the supposedly clear and unmistakable terms of ACI leaves this Court compelled to rely purely on their packaged presentation and in a bind,
the contract between ACI and CECON. It even echoes the words of F.F. Cruz: unable to verify even the accuracy of the syntax of its citations. This Court cannot approve of
this predicament. To cursorily acquiesce to ACI's overtures without due diligence and
It is a legal principle of long standing that when the language of the contract is explicit, substantiation is being overly solicitous, even manifestly partisan.
leaving no doubt as to the intention of the parties, the courts may not read into it any other
intention that would contradict its plain import. The clear terms of the contract should never ACI and its counsel must have fully known the importance of equipping this Court with a
be the subject matter of interpretation. Neither abstract justice nor the rule of liberal reliable means of confirmation, especially in a case so steeped in the sway of circumstances.
interpretation justifies the creation of a contract for the parties which they did not make ACI's omission can only work against its cause.
themselves or the imposition upon one party to a contract or obligation not assumed simply or
merely to avoid seeming hardships. Their true meaning must be enforced, as it is to be By delivering tender documents to bidders, ACI made an offer. By these documents, it
presumed that the contracting parties know their scope and effects. specitled its terms and defined the parameters within which bidders could operate. These
tender documents, therefore, guided the bidders in formulating their own offers to ACI, or,
The Contract Documents expressly characterize the construction contract between [ACI] and even more fundamentally, helped them make up their minds if they were even willing to
CECON as "lump-sum" and "fixed price" in nature. As a consequence, the Contract consider undertaking the proposed project. In responding and submitting their bids,

₯Construction Industry Arbitration Commission- Set III Page 20 of 41

contractors, including CECON, did not peremptorily become subservient to ACI's terms. After all these, ACI demurred on the tenns of its own tender documents and changed the
Rather, they made their own representations as to their own willingness and ability. They project from one encompassing both design and construction to one that was limited to
adduced their own counter offers, although these were already tailored to work within ACI's construction.
parameters.
Though not pertaining to the object of the contract itself but only to one (1) of its many facets,
These exchanges were in keeping with Article 1326 of the Civil Code: ACI also removed from CECON's scope of works the acquisition of elevators, escalators,
chillers, generator sets, indoor substations, cooling towers, pumps, and tanks. However,
Article 1326. Advertisements for bidders are simply invitations to make proposals, and the much later, ACI reneged on its own and opted to still obtain pumps, tanks, and cooling towers
advertiser is not bound to accept the highest or lowest bidder, unless the contrary appears. through CECON.

The mere occurrence of these exchanges of offers fails to satisfy the Civil Code's requirement It is ACI's contention that the offered project cost of P1,540,000,000.00 is what binds the
of absolute and unqualified acceptance: parties because its June 2, 2003 letter indicated acceptance of this offered amount.

Article 1319. Consent is manifested by the meeting of the offer and the acceptance upon the This is plain error.
thing and the cause which are to constitute the contract. The offer must be certain and the
acceptance absolute. A qualified acceptance constitutes a counter-offer. CECON was never remiss in impressing upon ACI that the P1,540,000,000.00 offer was not
perpetually availing. WithoutACI's timely acceptance, on December 27, 2002, CECON wrote
Acceptance made by letter or telegram does not bind the offerer except from the time it came to ACI emphasizing that the quoted sum of P1,540,000,000.00 was "based [only] upon the
to his knowledge. The contract, in such a case, is presumed to have been entered into in the prices prevailing at December 26, 2002" levels.[139] On January 8, 2003, CECON notified
place where the offer was made. (Emphasis supplied) ACI of further increases in costs and specifically stated that "[f]urther delay in the acceptance
of the revised offer and release of the down payment may affect the revised lump sum
Subsequent events do not only show that there was no meeting of minds on CECON's initial amount."[140] Finally, on January 21, 2003, CECON wrote again to ACI,[141] stating that the
offered contract sum of P1,449,089,174.00 as stated in its August 30, 2002 bid. They also contract sum had to be increased to P1,594,631,418.00. CECON also specifically stated,
show that there was never any meeting of minds on the contract sum at all. consistent with Article 1321 of the Civil Code, that its tender of this adjusted price was valid
only until January 31, 2003, as further price changes may be forthcoming. CECON also
In accordance with Article 1321 of the Civil Code,[135] an offeror may fix the time of impressed upon ACI that the 400 days allotted for the completion of the project had to be
acceptance. Thus, CECON's August 30, 2002 offer of P1,449,089,174.00 "specifically stated adjusted.
that its bid was valid for only ninety (90) days, or only until 29 November 2002."[136]
November 29, 2002 lapsed and ACI failed to manifest its acceptance of CECON's offered When ACI indicated acceptance, CECON's P1,540,000,000.00 offer had been superseded.
contract sum. Even CECON's subsequent offer of P1,594,631,418.00 had, by then, lapsed by more than
four (4) months. Apparently totally misinformed, ACI's acceptance letter did not even realize
It was only sometime after November 29, 2002 that ACI verbally informed CECON that the or remotely reference CECON's most recent P1,594,631,418.00 stipulation but insisted on
contract was being awarded to it. Through a telephone call on December 7, 2002, ACI the passe offer of P1,540,000,000.00 from the past year.
informed CECON that it may commence excavation works. However, there is no indication
that an agreement was reached on the contract sum in any of these conversations. ACI, ACI's supposed acceptance was not an effective, unqualified acceptance, as contemplated
CECON, the CIAC Arbitral Tribunal, and the Court of Appeals all concede that negotiations by Article 1319 of the Civil Code. At most, it was a counter-offer to revert to
persisted. P1,540,000,000.00.

Still without settling on a contract sum, even the object of the contract was subjected to ACI's June 2, 2003 letter stated an undertaking: "This notwithstanding, formal contract
multiple modifications. Absent a concurrence of consent and object, no contract was documents embodying these positions will shortly be prepared and forwarded to you for
perfected. execution."[143] Through this letter, ACI not only undertook to deliver documents, it also
admitted that the final, definitive terms between the parties had yet to be articulated in writing.
An office tower atop Part A was included in CECON's scope of works and the contract sum
increased to P1,582,810,525.00. Price fluctuations were conceded after this and the project ACI's delivery CECON's review, and both parties' final act of formalizing their respective
cost was again adjusted to P1,613,615,244.00. Thereafter, CECON agreed to extend a consent and affixing their respective signatures would have established a clear point in which
discount and reduced its offered project cost to P1,540,000,000.00.[138] the contract between ACI and CECON has been perfected. These points, i.e. ACI's delivery,

₯Construction Industry Arbitration Commission- Set III Page 21 of 41

CECON's review, and parties' formalization, too, would have validated the Court of Appeals' on the dispute presented to it. They concede this not only with respect to the literal issues
assertion that all that remained to be done was to apply unequivocal contractual provisions. recited in their terms of reference, as ACI suggests,[145] but also with respect to their
necessary incidents. Accordingly, in delineating the authority of arbitrators, the CIAC Rules of
ACI would fail on its own undertaking. Procedure speak not only of the literally recited issues but also of "related matters":

III.D. Without properly executed contract documents, what would have been a straightforward SECTION 21.3 Extent of power of arbitrator - The Arbitral Tribunal shall decide only such
exercise, akin to the experience in F.F. Cruz, became a drawn-out fact-finding affair. The issues and related matters as are submitted to them for adjudication. They have no power to
situation that ACI engendered made it necessary for the CIAC Arbitral Tribunal to unravel the add, to subtract from, modify, or amend any of the terms of the contract or any supplementary
terms binding ACI to CECON from sources other than definitive documents. agreement thereto, or any rule, regulation or policy promulgated by the CIAC.

It is these actions of the CIAC Arbitral Tribunal that raise an issue, purely as a matter of law, To otherwise be puritanical about cognizable issues would be to cripple CIAC arbitral
now the subject of this Court's review; that is, faced with the lacunae confronting it, whether tribunals. It would potentially be to condone the parties' efforts at tying the hands of tribunals
or not the CIAC Arbitral Tribunal acted within its jurisdiction. through circuitous, trivial recitals that fail to address the complete extent of their claims and
which are ultimately ineffectual in dispensing an exhaustive and dependable resolution.
IV. The CIAC Arbitral Tribunal did not act in excess of its jurisdiction. Contrary to the Court of Construction arbitration is not a game of guile which may be left to ingenious textual or
Appeals' and ACI's assertions, it did not draw up its own tenns and force these terms upon technical acrobatics, but an endeavor to ascertain the tluth and to dispense justice "by every
ACI and CECON. and all reasonable means without regard to technicalities of law or proc.edure."

IV.A. The CIAC Arbitral Tribunal was not confronted with a barefaced controversy for which a IV.B. Two (2) guiding principles steered the CIAC Arbitral Tribunal in going about its task.
fom1ulaic resolution sufficed. More pressingly, it was confronted with a state of affairs where First was the basic matter of fairness. Second was effective dispute resolution or the
CECON rendered services to ACI, with neither definitive governing instrwnents nor a overarching principle of arbitration as a mechanism relieved of the encumbrances of litigation.
confirmed, fixed remuneration for its services. Thus, did the CIAC Arbitral Tribunal go about In Section 1.1 of the CIAC Rules of Procedure:
the task of asce1taining the sum properly due to CECON.
SECTION 1.1 Statement of policy and objectives - It is the policy and objective of these Rules
This task was well within its jurisdiction. This determination entailed the full range of subjects to provide a fair and expeditious resolution of construction disputes as an altemative to
expressly stipulated by Section 4 of the Construction Industry Arbitration Law to be within the judicial proceedings, which may restore the disrupted harmonious and friendly relationships
CIAC's subject matter jurisdiction. between or among the parties. (Emphasis supplied)

Section 4. Jurisdiction. - The jurisdiction of the CIAC may include but is not limited to violation CECON's predicament demanded compensation. The precise extent may yet to have been
of specifications for materials and workmanship; violation of the terms of agreement; settled; yet, as the exigencies that prompted CECON to request for arbitration unraveled, it
interpretation and/or application of contractual time and delays; maintenance and defects; became clear that it was not for the CIAC Arbitral Tribunal to turn a blind eye to CECON's just
payment, default of employer or contractor and changes in contract cost. entitlement to compensation.

CECON raised the principal issue of the payment due to it on account, not only of fluctuating Jurisprudence has settled that even in cases where parties enter into contracts which do not
project costs but more so because of ACI's inability to timely act on many contingencies, strictly confmm to standard formalities or to the typifying provisions of nominate contracts,
despite proper notice and communication from and by CECON. Theretbre, at the heart of the when one renders services to another, the latter must compensate the fonner for the
controversy was the "interpretation and/or application of contractual time and delays." ACI's reasonable value of the services rendered. This amount shall be fixed by a court. This is a
counter-arguments, too, directly appealed to CIAC's subject matter jurisdiction. ACI countered matter so basic, this Court has once characterized it as one that "springs from the fountain of
by asserting that sanctioning CECON's claims was tantamount to violating the tem1s of their good conscience":
agreement. It further claimed liability on CECON's part for "maintenance and defects," and for
"violation of specifications for materials and workmanship." As early as 1903, in Perez v. Pomar, this Court mled that where one has rendered services to
another, and these services are accepted by the latter, in the absence of proof that the
ACI and CECON voluntarily submitted themselves to the CIAC Arbitral Tribunal's jurisdiction. service was rendered gratuitously, it is but just that he should pay a reasonable remuneration
The contending parties' own volition is at the inception of every construction arbitration therefore because "it is a well known principle of law, that no one should be permitted to
proceeding.[144] Common sense dictates that by the parties' voluntary submission, they enrich himself to the damage of another." Similary in 1914, this Court declared that in this
acknowledge that an arbitral tribunal constituted under the CIAC has full competence to rule jurisdiction, even in the absence of statute, ". . . under the general principle that one person

₯Construction Industry Arbitration Commission- Set III Page 22 of 41

may not enrich himself at the expense of another, a judgment creditor would not be permitted became susceptible to reasonable adjustment, subject to proof of legitimate costs that
to retain the purchase price of land sold as the property of the judgment debtor after it has CECON can adduce.
been made to appear that the judgment debtor had no title to the land and that the purchaser
had failed to secure title thereto . . ." The foregoing equitable principle which springs from the V. Unravelling the CIAC Arbitral Tribunal's competence and establishing how it acted
fountain of good conscience are applicable to the case at bar.[147] consistent with law resolves the principal legal issue before us. From this threshold, the
inquiry transitions to the matter of whether or not the conclusions made by the CIAC Arbitral
Consistent with the Construction Industry Arbitration Law's declared policy,[148] the CIAC Tribunal were warranted.
Arbitral Tribunal was specifically charged with "ascertain[ing] the facts in each case by every
and all reasonable means."[149] In discharging its task, it was permitted to even transcend They were. Far from being capricious, the CIAC Arbitral Tribunal's conclusions find solid
technical rules on admissibility of evidence.[150] basis in law and evidence.

IV.C. The reality of a vacuum where there were no definite contractual terms, coupled with V.A. The tender documents may have characterized the contract sum as fixed and lump-sum,
the demands of a "fair and expeditious resolution" of a dispute centered on contractual but the premises for this arrangement have undoubtedly been repudiated by intervening
interpretation, called into operation Article 1371 of the Civil Code: circumstances.

Article 1371. In order to judge the intention of the contracting parties, their contemporaneous When CECON made its offer of P1,540,000,000.00, it proceeded from several premises.
and subsequent acts shall be principally considered. (Emphasis supplled) First, ACI would timely respond to the representations made in its bid. Second, CECON could
act on the basis of prices prevailing then. Third, the subject matter of the contract was the
Article 1379 of the Civil Code invokes principles from the Revised Rules on Evidence. By entire expanse of design and construction covering all elements disclosed in the tender
invoking these principles, Article 1379 makes them properly applicable in every instance of documents, nothing more and nothing less. Fourth, the basic specifications for designing and
contractual interpretation, even those where the need for interpretation arises outside of court building the Gateway Mall, as stated in the tender documents, would remain consistent.
proceedings: Lastly, ACI would timely deliver on its concomitant obligations.

Article 1379. The principles of interpretation stated in Rule 123 of the Rules of Court shall Contrary to CECON's reasonable expectations, ACI failed to timely act either on CECON's
likewise be observed in the construction of contracts. bid or on those of its competitors. Negotiations persisted for the better part of two (2) calendar
years, during which the quoted contract sum had to be revised at least five (5) times. The
As with Article 1371, therefore, the following principles from the Revised Rules on Evidence object of the contract and CECON's scope of work widely varied. There were radical changes
equally governed the CIAC Arbitral Tribunal's affairs: like the addition of an entire office tower to the project and the change in the project's
structural framing. There was also the undoing of CECON's freedom to design, thereby
4. Interpretation of Documents rendering it entirely dependent on configurations that ACI was to unilaterally resolve, It turned
out that ACI took its time in delivering construction drawings to CECON, with almost 38% of
Section 12. Interpretation according to intention; general and particular provisions. - In the construction drawings being delivered after the intended completion date. There were many
construction of an instrument, the intention of the parties is to be pursued; and when a other less expansive changes to the project, such as ACI's fickleness on which equipment it
general and a particular provision are inconsistent, the latter is paramount to the former. So a would acquire by itself. ACI even failed to immediately deliver the project site to CECON so
particular intent will control a general one that is inconsistent with it. that CECON may commence excavation, the most basic task in setting up a structure's
foundation. ACI also failed to produce definite instruments articulating its agreement with
Section 13. Interpretation according to circumstances. - For the proper construction of an CECON, the final contract documents.
instrument, the circumstances under which it was made, including the situation of the subject
thereof and of the parties to it, may be shown, so that the judge may be placed in the position With the withering of the premises upon which a lump-sum, fixed price arrangement would
of those whose language he is to interpret. have been founded, such an arrangement must have certainly been negated:

Within its competence and in keeping with basic principles on contractual interpretation, the [T]he contract is fixed and lump sum when it was tendered and contracted as a design and
CIAC Arbitral Tribunal ascertained the trqe and just terms governing ACI and CECON. Thus, constmct package. The contract scope and character significantly changed when the design
the CIAC Arbitral Tribunal did not conjure its own contractual creature out of nothing. In was taken over by the Respondent. At the time of the negotiation and agreement of the
keeping with this, the CIAC Arbitral Tribtmal found it proper to sustain CECON's position. amount of Php1.54 billion, there were no final plans for the change to structural steel, and all
There having been no meeting of minds on the contract sum, the amount due to CECON the [mechanical, electrical and plumbing] drawings were all schematics.

₯Construction Industry Arbitration Commission- Set III Page 23 of 41

[I]t is apparent to the Tribunal that the quantity and materials at the time of the P1.54B Neither requisite avails in this case. Yet again, ACI is begging the question. It is precisely the
agreement are significantly different from the original plans to the finally implemented plans. crux of the controversy that no price has been set. Article 1724 does not work to entrench a
The price increases in the steel products and cement were established to have already disputed price and make it sacrosanct. Moreover, it was ACI which thn1st itself upon a
increased by 11.52% and by P5.00 per bag respectively by January 21, 2003. The Tribunal situation where no plans and specifications were immediately agreed upon and from which no
finds agreement with the Claimant that it is fairer to award the price increase. deviation could be made. It was ACI, not CECON, which made, revised, and deviated from
designs and specifications.
It should also be mentioned that Respondent had changed the scope and character of the
agreement. First, there were major changes in the plans and specifications. Originally, the V.C. The CIAC Arbitral Tribunal also merely held ACI to account for its voluntarily admitted
contract was for design and construct. The design was deleted from the scope of the adjustments. The CIAC Rules of Procedure pennit deviations from technical rules on
Claimant. It was changed to a straight construction contract. As a straight construction evidence, including those on admissions. Still, common sense dictates that the principle that
contract, there were no final plans to speak of at the time of the instructions to change. Then "[t]he act, declaration or omission of a party as to a relevant fact may be given in evidence
there was a verbal change to structural steel frame. No plans were available upon this against him"[153] must equally hold true in administrative or quasi-judicial proceedings as
instruction to change. Next, the [mechanical, electrical and plumbing] plans were all they do in court actions. Certainly, each must be held to account for his or her own voluntary
schematics. It is therefore expected that changes of plans are forthcoming, and that changes declarations. It would have been plainly absurd to disregard ACI's reneging on its own
in costs would follow ... admissions:

It has been established that the original tender, request for proposal and award is for a design Respondent has agreed to the price increase in structural steel and after some negotiation
and construct contract. The contract documents are therefore associated for said system of paid the agreed amount. Respondent also agreed to the price increase in the reinforcing bars
construction. When Respondent decided to change and take over the design, such as the and instructed the Claimant to bill it accordingly. To the Tribunal, such action is an
change from concrete to structural steel framing, "take-out" equipment from the contract and acknowledgment of the price increase. Respondent can make the case that said agreement
modify the [mechanical, electrical and plumbing w]orks, the original scope of work had been is conditional, i.e., the Complaint must be withdrawn. To the Tribunal, the conditionality falls
drastically changed. To tie down the Claimant to the tmit prices for the proposal for a different both ways. The Claimant has as much interest to agree to a negotiated price increase so that
scope of work would be grossly unfair. This Tribunal will hold that unit price adjustment could it can collect payments for the claims. The conditionalities do not change the basis for the
be allowed but only for change orders that were not in the original scope of work, such as the quantity and the amotmt. The process of the negotiation has arrived at the price difference
change order from concrete to structural framing, the [mechanical, electrical and plumbing and quantities. The Tribunal finds the process in arriving at the Joint Manifestation, a fair
w]orks, [schematic drawings to construction drawings] and the Miscellaneous Change Order determination of the unit price increase. This holding will render the discussions on Exhibit
Works. JJJJ, and the demand of the burden of proof of the Respondent superfluous.[154]

V.B. Contrary to ACI's oft-repeated argument,[152] the CIAC Arbitral Tribunal correctly found This absurdity is so patent that the Court of Appeals was still compelled to uphold awards
that ACI had gained no solace in statutory provisions on the immutability of prices stipulated premised on ACI's admissions, even as it reversed the CIAC Arbitral Tribunal decision on the
between a contractor and a landowner. Article 1724 of the Civil Code reads: primordial issue of the characterization of the contractual arrangement between CECON and
ACI:
Article 1724. The contractor who undertakes to build a structure or any other work for a
stipulated price, in conformity with plans and specifications agreed upon with the land-owner, As stated, the contract between [ACI] and CECON has not been amended or revised. The
can neither withdraw from the contract nor demand an increase in the price on account of the Arbitral Tribunal had no power to amend the contract to provide that there be allowed price
higher cost of labor or materials, save when there has been a change in the plans and and/or cost adjustment removing the express stipulation that the Project is for a lump sum or
specifications, provided: fixed price consideration. Accordingly, this Court removes the award for additional costs
spent by CECON on cement and formworks due to price increases or removing the award for
(1) Such change has been authorized by the proprietor in writing; and these items in the total amount of PhP5,598,338.20. Since CECON is not entitled to its claim
for price increase, it is likewise not entitled to the award of the interest rate of 6% per annum.
(2) The additional price to be paid to the contractor has been determined in writing by both
parties. With regard however to the additional costs for the rebars due to price increases. this Court
finds that CECON is entitled to the amount of PhP10,266,628.00 representing the additional
Article 1724 demands two (2) requisites in order that a price may become immutable: first, costs spent by CECON for rebars due to price increases, notwithstanding the Arbitral
there must be an actual, stipulated price; and second, plans and specifications must have Tribunal's excess of jurisdiction in amending the contract between the parties because [ACI]
definitely been agreed upon. and CECON had in fact agreed that CECON was entitled to such an amount and that [ACI]

₯Construction Industry Arbitration Commission- Set III Page 24 of 41

would pay the same. This agreement was made in the parties' Joint Manifestation of interpretation of the change orders, requests, and other communications, which had
Compliance dated March 30, 2004 which they filed with th Arbitral Tribunal ("Joint effectively been surrogates of a single definite instrument executed by the parties.
Manifestation").
From the Civil Code:
No extraordinary technical or legal proficiency is required to see that it would be the height of
absurdity and injustice to insist on the payment of an amount the consideration of which has Article 1375. Words which may have different significations shall be understood in that which
been reduced to a distant memory. ACI's invocation of Article 1724 is useless as the is most in keeping with the nature and object of the contract.
premises for its application are absent. ACI's position is an invitation for this Court to lend its
imprimatur to unjust enrichment enabled by the gradual wilting of what should have been a Article 1376. The usage or custom of the place shall be borne in mind in the interpretation of
reliable contractual relation. Basic decency impels this Court to not give in to ACI's advances the ambiguities of a contract, and shall fill the omission of stipulations which are ordinarily
and instead sustain the CIAC Arbitral Tribunal's conclusion that the amount due to CECON established.
has become susceptible to reasonable adjustment.
From the Revised Rules on Evidence, the following have been made applicable even outside
VI. The Arbitral Tribunal's award must be reinstated. regular litigation by Article 1379 of the Civil Code:

VI.A. With the undoing of the foundation for the Court of Appeal's fallacious, circular Section 14. Peculiar signification of terms. - The terms of a writing are presumed to have
reasoning, its monetary awards must also necessarily give way to the reinstatement of the been used in their primary and general acceptation, but evidence is admissible to show that
CIAC Arbitral Tribunal's awards. they have a local, technical, or otherwise peculiar signification, and were so used and
understood in the particular instance, in which case the agreement must be construed
The inevitable changes borne by ACI's own trifling actions justify, as a consequence, accordingly.
compensation for cost adjustments and the ensuing change orders, additional overhead costs
for the period of extension, extended coverage for contractor's all-risk insurance, and Section 19. Interpretation according to usage. - An instrument may be construed according to
attendance fees for auxiliary services to subcontractors whose functions were also usage, in order to determine its true character.[157] (Emphasis supplied)
necessarily prolonged. ACI's frivolity on the acquisition of elevators, escalators, chillers,
generator sets, indoor substations, cooling towers, pumps, and tanlcs also vindicates Equally availing is the following principle. This is especially tlue of the remuneration due to
compensation for the works that remained under CECON's account. ACI's authorship of the CECON, considering that stipulations for remuneration are devised for the benefit of the
causes of delay supports time extensions favoring CECON and, conversely, discredits person rendering the service:
liquidated damages benefitting ACI.
Section 17. Of two constn.1ctions, which preferred. - When the terms of an agreement have
This Court upholds the Arbitral Tribunal's awards on each of the items due to CECON, as well been intended in a different sense by the different parties to it, that sense is to prevail against
as on its findings relating to CECON's countervailing liabilities. either party in which he supposed the other understood it, and when different constructions of
a provision are otherwise equally proper, that is to be taken which is the most favorable to the
In fulfilling its task, the CIAC Arbitral Tribunal was equipped with its technical competence, party in whose favor the provision was made.[158]
adhered to the rigors demanded by the CIAC Rules of Procedure, and was endowed with the
experience of exclusively presiding over 19 months of arbitral proceedings, examining object VI.C. In appraising the CIAC Arbitral Tribunal's awards, it is not the province of the present
and documentary evidence, and probing witnesses. Rule 45 Petition to supplant this Court's wisdom for the inherent technical competence of and
the insights drawn by the CIAC Arbitral Tribunal throughout the protracted proceedings before
VI.B. Within the CIAC Arbitral Tribunal's technical competence was its reference to prevailing it. The CIAC Arbitral Tribunal perused each of the parties' voluminous pieces of evidence.
industry practices, a much-bewailed point by ACI.[156] This reference was made not only [159] Its members personally heard, observed, tested, and propounded questions to each of
desirable but even necessary by the absence of definitive governing instruments. Moreover, the witnesses. Having been constituted solely and precisely for the purpose of resolving the
this reference was made feasible by the CIAC Arbitral Tribunars inherent expertise in the dispute between ACI and CECON for 19 months, the CIAC Arbitral Tribunal devoted itself to
construction industry. no other task than resolving that controversy. This Court has the benefit neither of the CIAC
Arbitral Tribunal's technical competence nor of its irreplaceable experience of hearing the
This reference was not only borne by practical contingencies and buttressed by recognized case, scrutinizing every piece of evidence, and probing the witnesses.
proficiency, it was also sanctioned by the statutory framework of contractual interpretation
within which the CIAC Arbitral Tribunal operated. Thus, the following principles governed the

₯Construction Industry Arbitration Commission- Set III Page 25 of 41

True, the inhibition that impels this Court admits of exceptions enabling it to embark on its VII. It does not escape this Court's attention that this controversy has dragged on for more
own factual inquiry. Yet, none of these exceptions, which are all anchored on considerations than 13 years since CECON initially sought to avail of arbitration.
of the CIAC Arbitral Tribunal's integrity and not merely on mistake, doubt, or conflict, is
availing. The CIAC Arbitral Tribunal noted that ACI consumed a total of 840 days filing several motions
and manifestations, including at least eight (8) posturings at pursuing settlement.[160] It
This Court finds no basis for casting aspersions on the integrity of the CIAC Arbitral TribunaL added, however, that ACI repeatedly failed to respond to CECON's claims during meetings
There does not appear to have been an undisclosed disqualification for any of its three (3) thereby constraining CECON to file motions to proceed after repeatedly being dangled hope
members or proof of any prejudicial misdemeanor. There is nothing to sustain an allegation of an early resolution.[161] It appeared that ACI was more interested in buying time than in
that the parties' voluntarily selected arbitrators were conupt, fraudulent, manifestly partial, or effecting a consummate voluntary settlement.
otherwise abusive. From all indications, it appears that the CIAC Arbitral Tribunal extended
every possible opportunity for each of the parties to not only plead their case but also to The CIAC Arbitral Tribunal October 25, 2006 Decision should have long brought this matter to
arrive at a mutually beneficial settlement. This Court has ruled, precisely, that the arbitrators an end. This Court does not fault ACI for availing of remedies. Yet, this Court also notes that
acted in keeping with their lawful competencies. This enabled them to come up with an even in proceedings outside of the CIAC Arbitral Tribunal, ACI seems to not have been
otherwise definite and reliable award on the controversy before it. sufficiently conscientious of time.

Inventive, hair-splitting recitals of the supposed imperfections in the CIAC Arbitral Tribunal's In this Court alone, ACI sought extensions to file its Comment no less than five (5) times.[162]
execution of its tasks will not compel this Court to supplant itself as a fact-finding, technical It sought several other extensions in the filing of its Memorandum.[163]
expert.
It also does not escape this Court's attention that while ACI's arguments have perennially
ACI's refutations on each of the specific items claimed by CECON and its counterclaims of pleaded the supposed primacy and itnmutability of stipulations originally articulated in the
sums call for the point by point appraisal of work, progress, defects and rectifications, and tender documents, it never bothered to annex any of these documents either to its Comment
delays and their causes. They are, in truth, invitations for this Court to engage in its own audit or to its Memorandum. Without these and other supporting materials, this Court is left in the
of works and corresponding financial consequences. In the alternative, its refutations insist on uneasy predicament of merely relying on ACI's self-stated assertions and without means of
the application of rates, schedules, and other stipulations in the same tender documents, verifying even the syntax of its citations.
copies of which ACI never adduced and the efficacy of which this Court has previously
discussed to be, at best, doubtful. While presumptions of good faith may be indulged, the repercussions of ACI's vacillation
cannot be denied.
This Court now rectifies the error made by the Court of Appeals. By this rectification, this
Court does not open the doors to an inordinate and overzealous display of this Court's Even if this Court were to ignore the delays borne by ACI's procedural posturing, this Court is
authority as a final arbiter. compelled to hearken to ACI's original faults. These are, after all, what begot these
proceedings. These are the same original faults which so exasperated CECON; it was left
Without a showing of any of the exceptional circumstances justifying factual review, it is with no recourse but to seek the intervention of CIAC.
neither this Court's business nor in this Court's competence to pontificate on technical
matters. These include things such as fluctuations in prices of materials from 2002 to 2004, These faults began as soon as bidders responded to ACI's invitation. In CECON's case, its
the architectural and engineering consequences - with their ensuing financial effects - of communicated time for the validity of its offer lapsed without confinnation from ACI. ACI only
shifting from reinforced concrete to structural steel, the feasibility of rectification works for verbally responded and only after CECON's communicated timeframe. It told CECON to
defective installations and fixtures, the viability of a given schedule of rates as against commence excavation works but failed to completely deliver the project site until five (5)
another, the audit of changes for every schematic drawing as revised by construction months later. It engaged in protracted negotiations, never confirming acceptance until the
drawings, the proper mechanism for examining discolored and mismatched tiles, the minutiae tenth month, after bidders had submitted their offers. By then, ACI's supposed acceptance
of installing G.I. sheets and sealing cracks with epoxy sealants, or even unpaid sums for could not even identify CECON's most recent quoted price. It undertook to process and
garbage collection. deliver formal documents, yet this controversy already reached this Court and not a single
page of those documents has seen the light of day. It has repeatedly added and taken from
The CIAC Arbitral Tribunal acted in keeping with the law, its competence, and the adduced CECONs scope of works but vigorously opposed adjustments that should have at least been
evidence; thus, this Court upholds and reinstates the CIAC Arbitral Tribunal's monetary given reasonable consideration, only to admit and partially stipulate on thern. In taking upon
awards. itself the task of designing, it took its time in delivering as many as 1,675 construction

₯Construction Industry Arbitration Commission- Set III Page 26 of 41

drawings to CECON, more than 600 of which were not delivered until well after the project's
intended completion date.

This Court commenced its discussion by underscoring that arbitration primarily serves the
need of expeditious dispute resolution. This interest takes on an even greater urgency in the
context of construction projects and the national interest so intimately tied with them. ACI's
actions have so bogged down its contractor. Nearing 13 years after the Gateway Mall's
completion, its contractor has yet to be fully and properly compensated. Not only have ACI's
actions begotten this dispute, they have hyper-extended arbitration proceedings and dragged
courts into the controversy. The delays have virtually bastardized the hopes at expeditious
and effective dispute resolution which are supposedly the hallmarks of arbitration
proceedings.

For these, in addition to sustaining each of the awards due to CECON arising from the facets
of the project, this Court also sustains the CIAC Arbitral Tribunal's award to CECON of
arbitration costs. Further, this Court imposes upon respondent Araneta Corporation, Inc. the
burden of bearing the costs of what have mutated into a full-fledged litigation before this
Court and the Court of Appeals.

WHEREFORE, the Petition is GRANTED. The assailed April 28, 2008 Decision and July 1,
2010 Amended Decision of the Court of Appeals in CA-G.R. SP No. 96834 are REVERSED
and SET ASIDE. The Construction Industry Arbitration Commission Arbitral Tribunal October
25, 2006 Decision in CIAC Case No. 01-2004 is REINSTATED.

Legal interest at the rate of six percent (6%) per annum is imposed on the award from the
finality of this Decision until its full satisfaction.

Costs against respondent.

SO ORDERED.

₯Construction Industry Arbitration Commission- Set III Page 27 of 41

[22] G.R. No. 192948, December 07, 2016 intention of the parties; and (3) the failure of the instrument to express the true intention of the parties
is due to mistake, fraud, inequitable conduct or accident.
B.F. CORPORATION AND HONORIO PINEDA, Petitioners, v. FORM-EZE SYSTEMS, INC.,
Respondent. Construction Industry Arbitration Commission; Jurisdiction; Section 4 of Executive Order (EO)
No. 1008 vests jurisdiction on Construction Industry Arbitration Commission (CIAC) over disputes
Construction Contracts; Cases in which Factual Finding of Construction Arbitrators May be arising from, or connected with, contracts entered into by parties involved in construction in the
Reviewed by the Court.—Factual findings of construction arbitrators may be reviewed by the Court in Philippines, whether the dispute arises before or after the completion of the contract, or after the
cases where: 1) the award was procured by corruption, fraud or other undue means; (2) there was abandonment or breach thereof.—Section 4 of Executive Order No. 1008 vests jurisdiction on CIAC
evident partiality or corruption of the arbitrators or any of them; (3) the arbitrators were guilty of over disputes disputes arising from, or connected with, contracts entered into by parties involved in
misconduct in refusing to hear evidence pertinent and material to the controversy; (4) one or more of construction in the Philippines, whether the dispute arises before or after the completion of the
the arbitrators were disqualified to act as such under Section nine of Republic Act (R.A.) No. 876 and contract, or after the abandonment or breach thereof. Moreover, the party involved must agree to
willfully refrained from disclosing such disqualifications or of any other misbehavior by which the submit to voluntary arbitration. In other words, anyone who is not a party to the contract in his
rights of any party have been materially prejudiced; (5) the arbitrators exceeded their powers, or so personal capacity is not subject to the jurisdiction of the CIAC. In this case, Pineda signed the
imperfectly executed them, that a mutual, final and definite award upon the subject matter submitted to challenged contracts in his capacity as President of BFC. There is no indication that he voluntarily
them was not made; (6) when there is a very clear showing of grave abuse of discretion resulting in submitted himself as a party to the arbitration case. In fact, he has been consistently contesting his
lack or loss of jurisdiction as when a party was deprived of a fair opportunity to present its position inclusion as a respondent in the CIAC proceedings. CIAC however considered Pineda as a joint
before the Arbitral Tribunal or when an award is obtained through fraud or the corruption of tortfeasor, thus justifying his joinder as a codefendant.
arbitrators; (7) when the findings of the Court of Appeals are contrary to those of the CIAC, and (8)
when a party is deprived of administrative due process. Attorney’s Fees; Under Article 2208 of the Civil Code, attorney’s fees may, among others, be
recovered where defendant acted in gross and evident bad faith in refusing to satisfy the plaintiff’s
Civil Law; Unjust Enrichment; The principle of unjust enrichment essentially contemplates plainly valid, just and demandable claim.—Under Article 2208 of the Civil Code, attorney’s fees may,
payment when there is no duty to pay, and the person who receives the payment has no right to receive among others, be recovered where defendant acted in gross and evident bad faith in refusing to satisfy
it.—To award the full contract price to Form-Eze in Contract No. 1 is tantamount to unjust enrichment. the plaintiff’s plainly valid, just and demandable claim. We observe that in filing the complaint against
There is unjust enrichment under Article 22 of the Civil Code when (1) a person is unjustly benefited, BFC, Form-Eze was merely seeking payment for its service under the contract. BFC had admitted to
and (2) such benefit is derived at the expense of or with damages to another. The principle of unjust its obligation. The problem lies only on the amount to be paid. This is not tantamount to bad faith.
enrichment essentially contemplates payment when there is no duty to pay, and the person who
receives the payment has no right to receive it. By requiring BFC to pay the full contract price when it DECISION
only supplied deckforms which covered only 5,149.85 contact square meters of formworks, the CIAC PEREZ, J.:
Arbitral Tribunal is essentially unjustly giving unwarranted benefit to Form-Eze by allowing it to earn
more than it legally and contractually deserved. It is also worth mentioning that Form-Eze had in fact This petition for review assails the 15 January 2010 Decision1 and 13 July 2010 Resolution2
only been claiming for the contact area where its equipment was used. of the Court of Appeals in CA-G.R. SP No. 102007 which affirmed the Final Award rendered
by the Construction Industry Arbitration Commission (CIAC) Arbitral Tribunal on 7 December
Same; Contracts; Reformation of Contracts; Reformation is a remedy in equity, whereby a 2007.
written instrument is made or construed so as to express or conform to the real intention of the parties,
where some error or mistake has been committed.—An action for reform a contract is grounded on FACTUAL ANTECEDENTS
Article 1359 of the New Civil Code which provides: ARTICLE 1359. When, there having been a
meeting of the minds of the parties to a contract, their true intention is not expressed in the instrument Petitioner B.F. Corporation (BFC) is a corporation engaged in general engineering and civil
purporting to embody the agreement, by reason of mistake, fraud, inequitable conduct or accident, one works construction. Petitioner Honorio H. Pineda (Pineda) is the President of BFC.
of the parties may ask for the reformation of the instrument to the end that such true intention may be Respondent Form-Eze Systems Inc. (Form-Eze) is a corporation engaged in highway and
expressed. x x x x Reformation is a remedy in equity, whereby a written instrument is made or street construction.
construed so as to express or conform to the real intention of the parties, where some error or mistake
has been committed. In granting reformation, the remedy in equity is not making a new contract for the On 29 August 2006, SM Prime Holdings, Inc. awarded the contract for general construction of
parties, but establishing and perpetuating the real contract between the parties which, under the the SM City-Marikina mall (the Project) to BFC whereby the latter undertook to supply
technical rules of law, could not be enforced but for such reformation. In order that an action for materials, labor, tools, equipment and supervision for the complete construction of the
reformation of instrument may prosper, the following requisites must concur: (1) there must have been Project.3 In turn, BFC engaged Form-Eze for the lease of formwork system and related
a meeting of the minds of the parties to the contract; (2) the instrument does not express the true equipment for and needed by the Project. Accordingly, five (5) contracts and two (2) letter-

₯Construction Industry Arbitration Commission- Set III Page 28 of 41

agreements were executed by the BFC, represented by its President Pineda, and Form-Eze, All equipment purchased by BFC as requested by Form-Eze shall be prorated and deducted
represented by its President, James W. Franklin. These contracts and their salient provisions equally in the first 4-month duration of the equipment lease; and
are provided in the following table:
Monthly progress payments for the equipment lease shall be made timely.
CONTRACT NO. 1: Contract for the Lease of the Equipment for the Beam and Slab
Hardware for the Formwork on SM Marikina Mall Project dated 20 December 20064 CONTRACT NO. 2: Contract for Stripping and Moving Form-Eze Systems Inc. Equipment
from Location to Location on SM Marikina Mall Project dated 20 December 2006 5
Obligations of Form-Eze
Obligations of Form-Eze
Furnish all hardware required in the formwork system for the poured in place beam and slab
concrete decks excluding the scaffoldings and accessories required to support the system; Furnish forklift for the movement of the deck forms and related hardware of the forming
and Provide consumable beam ties and steel accessories needed to maintain the rigidity and system from location to location;
alignment of the plywood formed surfaces.
Strip all formwork from under the poured concrete slab and beam deck. Move all equipment
Obligations of BFC to the next location where it will be reset by BFC; and

Furnish all scaffoldings as required to support the system at no ,cost to Form-Eze; Assist BFC in setting the deck forms to the proper grade and locations provided that BFC has
laid out the grid lines as needed for placing the scaffoldings under the deck forms and
Furnish all plywood and lumber as required in the formwork operation as no cost to Form- provided the scaffoldings is readily available for placement under the deck forms.
Eze;
Obligations of BFC
Purchase materials for the formwork as requested by Form-Eze. The direct cost of materials
shall be deducted from the contract and the balance paid to Form-Eze; and Furnish additional hoisting; and

Responsible for the freight of the equipment to and fro the Marikina jobsite and the Form-Eze Provide all labor requested by Form-Eze and deducted from the contract at P60.00 per
warehouse in Cainta, Rizal. carpenter man-hour.

Work Specifications Contract Price

The amount of hardware to be furnished is sufficient to provide 7,000 contact square meters Total contract amount for moving equipment: 126,000 x P50.00/contact square meter (cost
of formwork. for stripping and movement of the equipment, excluding cost of resetting to grade, cleaning
plywood surfaces and applying release agent) P6,300,000.00.
Contract Price
Terms of Payment
Total contract amount for the equipment: 126,000 contact square meters (equipment to be
used) x P225.00/contact square meter (cost per use of the hardware for forming the elevated 15% down payment or P945,000.00 paid to Form-Eze on or before pick up of equipment; and
beam and slab)= P28,350,000.00.
Monthly progress billing will coincide with the contact square meters formed with the Form-
Terms of Payment Eze equipment.

15% down payment or P4,252,500.00 paid to Form-Eze on or before pick up of equipment; CONTRACT NO. 3: Contract for Column Formwork on the SM Marikina Mall Project dated 20
December 20066
When concrete is placed on the slab forms, the equipment rental per contact square meter is
due and payable to Form-Eze and shall be paid on the first day of the following month; Obligations of Form-Eze

₯Construction Industry Arbitration Commission- Set III Page 29 of 41

Furnish sufficient number of built up column forms as required to complete 6 poured in place Manufacture heavy duty galvanized scaffoldings and certain accessories for Form-Eze. The
full height concrete columns per day provided the installation of the rebar and the placement scaffoldings and accessories will be manufactured exactly as per the drawings and samples
of the concrete can maintain that schedule of performance; given to BFC by Form-Eze, provided the equipment produced is of excellent quality and to
the exact specification specified by Form-Eze;
Provide supervision for the column formwork operation;
The agreement is for 1,500 pieces of heavy duty galvanized 6-ft frames and related
Responsible for bracing the columns to maintain them plumb when poured; accessories (3,000 pcs of 14-inch adjustable u-heads and 3,000 pcs heavy duty base plates);
and
Correct any defects in the poured column due to failure in the formwork. (Not responsible for
air entrapment or aggregate separation caused by improper placement or improper vibration BFC will deduct P6,352,500.00 from Form-Eze equipment leased contract (all equipment
of the concrete; and must be in good condition and turned over to Form-Eze at the end of project). Form-Eze will
own the equipment.
Furnish chamfer and form release agent
Obligations of Form-Eze
Obligations of BFC
Form-Eze will credit BFC with P4,235.00 per frame and related accessories; and
Furnish all hoisting and moving of the columns;
Form-Eze will accept all frames in good condition up to a maximum of 1,500 frames and
Responsible for installation of the rebar and placement of the concrete; related accessories.

Furnish labor as required by Form-Eze for forming columns and will deduct fro Form-Eze Agreement is contingent upon parties entering into an exclusive licensing agreement with
P60.00 per man-hour for each carpenters for the column framework; and BFC for the manufacture of Form-Eze equipment.

Responsible for all column grid lay-out and establishing elevations on the columns CONTRACT NO. 5: Contract for the Purchase and Lease of the Heavy Duty Galvanized X-
Bracing on SM Marikina Mall Project dated 29 January 20078
Terms of Payment
Obligations of BFC
Total Contract Amount: 9,100 contact square meters of formwork x P355.00/contact square
meter= P3,230,500.00; Manufacture heavy duty galvanized x-bracing.

Downpayment of P484,575.00 (15%) on or before pick up of equipment; Obligations of Form-Eze

BFC agrees to purchase all materials for the formwork as required by Form-Eze and the Credit BFC with P400.00 per x-brace. If the x-bracing is not manufactured exactly as
direct cost of those materials will be deducted from this contract and the balance paid to specified by Form-Eze, credit is P300.00 per x-brace.
Form-Eze; and
Agreement is contingent upon parties entering into an exclusive licensing agreement for the
When columns are poured and stripped, P355.00 per contact square meter is due and manufacturing of Form-Eze equipment.
payable at that time. Progress payments will be made for the work completed in a particular
month and paid on the first day of the following month. Any materials or equipment purchased MEMORANDUM OF AGREEMENT dated 5 January 20079
by BFC at the request of Form-Eze shall be deducted from this contract and prorated equally
over a 4-month period. BFC will manufacture Form-Eze equipment and will sell exclusively to Form-Eze.

CONTRACT NO. 4: Contract for the Lease of the Heavy Duty Galvanized Scaffold Frames LETTER-AGREEMENT dated 5 January 200710
and Related Accessories on SM Marikina Mall Project dated 29 January 20077
Changes to Contract No.4
Obligations of BFC

₯Construction Industry Arbitration Commission- Set III Page 30 of 41

The 18-inch adjustable u-head will be changed to a 14-inch adjustable u-head. Under the Terms of Reference, the parties made the following admissions:

The threading of the heavy duty screw will be accomplished in segments and then machined. The existence of five contracts, a memorandum of agreement and a supplemental contract.

Form-Eze will send to the jobsite all 18-inch and 24-inch adjustable u-heads available in its BFC renegotiated Contract #1 but it did not result in a separate written contract.
current stock in order to start forming the project while BFC is fabricating the 14-innch
adjustable u-heads. When the 3.000 pieces 14-inch u-heads are completed and are on the Under Contract #1, BFC is willing and ready to pay Form-Eze the amount of P3,515,003.59,
jobsite, Form-Eze will take back the 18-inch and 24-inch adjustable u-heads that were which amount shall be deducted from the amount of the latter's claim.
temporarily in use at the jobsite.
Under Contract BFC is willing and ready to pay Form-Eze the amount of P675,788.97, which
The creditable amount for the purchase of the 6-foot heavy duty galvanized scaffolding and amount shall be deducted from the amount of the latter's claim.
related accessories is changed to P4,235.00 per 6-foot heavy duty galvanized frames,
adjustable u-heads and heavy duty base plate. BFC admits that it has the obligation to return to Form-Eze equipment furnished them under
Contracts #1, 2, and 3, and all heavy duty galvanized scaffold frames and related
On 30 March 2007, Form-Eze filed a Request for Arbitration11 before the CIAC. In its accessories, heavy duty galvanized x-bracing and adjustable U-heads and base plates
Complaint, Form-Eze alleged that BFC has an unpaid obligation amounting to P9,189,024.58; fabricated and manufactured by BFC under Contracts #4, 5 and letters dated 5 January
that BFC wanted to re-negotiate the equipment leases; and that it was not complying with the 2007.14
contractual and supplemental agreements in effect. Form-Eze prayed for the following relief:
The claims15 of the parties are summarized, as follow:
[For BFC] to pay the current monthly equipment rentals;
FORM-EZE'S CLAIMS As of 7/19/2007 From 7/20/2007 to end of contract based on agreed
Provisions made to guarantee the earned monthly equipment leased amounts are paid minimum contact sq.m. of 126,000
timely;
Arrears on Contract No.1
To legislate provisions to ensure the lease contracts are not breached during the construction
of the SM Marikina Mall; P26,310,476.29

Provisions made to guarantee the performance of [BFC] for the manufacturing of the shoring - 3,515,003.59
equipment purchased by Form-Eze from BFC;
22,795,472.70
Provisions made to guarantee the return of all Form-Eze equipment when the concrete
structure is completed and all lost and damaged equipment has been paid for by [BFC]; and P11,489,523.71

All cost related to Arbitration.12 Arrears on Contract No. 2

In its Amended Answer with Counterclaim, BFC sought for reformation of Contract #1 to 4,771,723.63
incorporate a provision that BFC shall deduct from said billing the cost of labor supplied by it
for the fabrication and assembly of the forming system and for the stripping, cleaning, -675,788.97
resetting thereof at the rate of P60.00 per man-hour. BFC also demanded the refund of
P5,773,440.00 as expenses for the manufacture of additional hardware to complete the 7,000 4,095,934.66
square meters of formwork required in Contract #1. BFC explained that Form-Eze had only
furnished 4,682.4 square meters of formwork.13 1,528,276. 37

The CIAC appointed a 3-member Arbitral Tribunal (CIAC Arbitral Tribunal), composed of Atty. Arrears on Contract No.3 2,099,825.00 1,130,675.00
Custodio O. Parlade, Atty. Alfredo F. Tadiar and Engineer Romeo C. David, to adjudicate
Form-Eze's claims. Arrears on Letter dated 1/5/07 740,600.00 483,000.00

₯Construction Industry Arbitration Commission- Set III Page 31 of 41

 P29,731,832.36 P14,631,475.08 Contracts #4 and 5 - Provision to guarantee the performance of [BFC] for the manufacturing
of the shoring equipment purchased by Form-Eze from BF Corp.;
Attorney's Fees 300,000.00____
Contracts#1, 2, 3, 4 and 5 -Provision for [BFC] to pay for the lost and damaged equipment
TOTAL SUM IN DISPUTE P44,663,307.44 furnished them by the [Form-Eze]; and

BFC's COUNTERCLAIM Contract #1 - Provision in the Contract to include the P75 per contact sq.m. for labor
guarantee.
Cost of labor, helmet & expenses for x-bracing for the assembly of the form
Is [BFC] #1 entitled to the reformation of Contract #1 to include a provision that [BFC] #1 shall
system under Contract #1 P 812,791.09 deduct from [Form-Eze's] billing the cost of labor, helmet and expenses for x-bracing supplied
by it for the assembly of the form system amounting to P812,791.09 , to deduct from the
Cost of stripping, petroleum, oil, & helmet under Contract #2 1,391,086.02 billing under Contract #2 the cost of labor for the stripping thereof, the costs of petroleum, oil
and lubricant and helmet of the said laborers up to the end of the contract in the sum of
Attorney's Fees 300,000.00 P1,391,086.02 and from the billing under Contract #3, the cost of labor for the installation and
forming of the built up column forms from June 19, 2007 up to the end of the project in the
Total Counterclaims P2,503,877.11 sum of P273,240.00?16]

TOTAL SUM IN DISPUTE P46,867,184.55 Is it proper to include Mr. Honorio Pineda as Respondent No. 2?

The total arbitration fees amounted to P616,393.73. Does the Arbitral Tribunal have the jurisdiction to award claims that accrued after the filing of
the Request for Arbitration or does the Claimant have a cause of action for claims that
CIAC Arbitral Tribunal was tasked to resolve the following issues, to wit: accrued during the same period?

Is Claimant entitled to its total claim of P34,284,996.41 representing the alleged arrear on Who between the parties is entitled to attorney's fees?
equipment rental under Contract #1?
Who between the parties should bear the arbitration costs?17
Is Claimant entitled to its claim of P5,624,211.03 representing the alleged arrears under
Contract #2? FINAL AWARD BY CIAC

Is Claimant entitled to its claim of P3,230,500.00 representing the alleged arrears under On 7 December 2007, the CIAC Arbitral Tribunal rendered a Final Award in favor of Form-
Contract #3? Eze. The dispositive portion reads:

Is Claimant entitled to its claim of P1,374,408.00 representing the rental fees under Letter WHEREFORE, award is hereby made in favor of Claimant and against [BFC], ordering the
dated 5 January 2007? latter to pay the former the following amounts:

Is Claimant entitled to its claim for the reformation of the subject Contracts to include the a) On Contracts No. 1
following:
P28,350,000.00
Contract #1 - Provisions to guarantee the earned monthly equipment leased amounts are
paid timely; Less: Payments already made

Contract #1 - Provision to ensure that the lease contracts are not breached during the 7,700,000.00
construction of the SM Marikina Mall;
_____________

₯Construction Industry Arbitration Commission- Set III Page 32 of 41

TOTAL 5,250,000.00

P20,650,000.00 Contract No. 3

b) On Contract No. 2 2,056,751.67

P 6,300,000.00 Letter Agreement of January 5, 2007

Less: Payments already made 560,000.00

990,000.00 ____________

Less: Cost of labor GRAND TOTAL

60,000.00 P28,517,251.67

____________ The Tribunal further awards in favor of [Form-Eze] and against [BFC] and [Pineda] who are
ordered, jointly and severally to pay [Form Eze] P300,00.00 as attorney's fees, and to
TOTAL indemnify [Form-Eze's] cost of arbitration paid to CIAC.

P 5,250,000.00 The Tribunal likewise disposes of the remaining issues as follows:

c) On Contract No.3 a) The claims under Issues No. 5 and 6 for reformation of Contracts No 1, 2, 3, 4 and 5
are denied for lack of merit.
P 2,153,166.67 b) The inclusion of Mr. Honorio Pineda in the Complaint as additional respondent is
proper.
Less: cost of labor
c) The Tribunal has jurisdiction over the claims of [Form-Eze] and finds that the
Complaint states a cause of action as to claims that accrued after the filing of the
96,915.00
Complaint.
____________ d) All other claims and counterclaims submitted pursuant to the definition of issues in
the Terms of Reference, not otherwise disposed of or resolved above, are dismissed
P2,056,751.67 for lack of merit. All claims and counterclaims peripherally discussed in these
proceedings which are outside the scope of the definition of issues in the Terms of
On Letter Agreement of January 5, 2008 to December 8, 2007 Reference are likewise outside the scope of this Final Award.
e) The net award in favor of [Form-Eze] amounting to P28,517,251.67 shall earn
P560,000.00
interest at the rate of 6% per annum fro the date of this Final Award, and 12% from
IN SUM THE FOLLOWING AWARDS ARE MADE: the date the Final Award becomes final and executory until the same is fully paid.18

Contract No. 1 BFC filed a Motion for Correction of the Final Award. Form-Eze asserted that the calculations
made on the total quantity of deckforms supplied to be used under Contract No. 1 is
P 20,650,000.00 erroneous because the quantity of the accessories that were delivered together with the loose
truss chords and assembled trusses that were backloaded were ignored in the computation.
Contract No. 2 BFC explained that the hardware supplied must be assembled first into deckforms since what
is actually rented under Contract No. 1 are the deckforms, and not the hardware, thus:

₯Construction Industry Arbitration Commission- Set III Page 33 of 41

Evidently, in the computation thereof, the total quantity of the accessories that were delivered The CIAC Arbitral Tribunal denied the motion prompting BFC to file a petition for review
together with the said loose truss chords and assembled trusses, both of which are shown in before the Court of Appeals.
the same delivery receipts, and the total length of the loose truss chords and assembled
trusses that were backloaded, were not considered and totally ignored. While the case was pending before the Court of Appeals, Form-Eze filed a Motion with Leave
to Direct BFC to return pieces of equipment on 14 July 2009.
Needless to state, these accessories, such as joist and beam hanger, just like the chords and
the trusses, are component and indispensable parts of a deckform without which it can not be On 15 January 2010, the Court of Appeals dismissed the petition for lack of merit. The Court
completely assembled to be used for the purpose intended. In the case of a deckform 44 ft. in of Appeals heavily relied on factual findings of the CIAC Arbitral Tribunal.
length, it will need, for it to be completely assembled, 34 pieces of joists and 68 pieces of
beam hangers, as shown in the herewith attached Annex "A" hereof. THE PETITION

Therefore, to form 87 completely assembled deckforms of 44 ft. in length out of/from the BFC filed a motion for reconsideration but it was denied by the Court of Appeals in a
delivered chords and trusses, it will require 2,958 pieces of joist and 5,916 pieces of beam Resolution dated 13 July 2010. Hence, the present petition. BFC, in its Memorandum, raised
hangers. the following issues for our resolution:

However, as show in Exhibits "C-9(5)", "C-9(11)", "C-9(15)", "C-9(18)", "C-9(21)", "C-9(25)", I. Whether or not the Court of Appeals committed a reversible error in affirming the
"C-9(27)", "C-9(30)", and "C-9(31)", only 2,512 pieces of joists and in Exhibits "C-9(8)", "C- CIAC's ruling that BFC is liable to pay rent to the [Form Eze] under Contract Nos. 1, 2,
9(15)", "C-9(16)", "C- 9(18)", "C-9(21)", "C-9(27)", "C-9(32)", "C-9(34)", "C-9(35)", "C-9(37)", and 3 even for portions where the latter's supplied formwork system were not used.
"C-9(38)", "C-9(41)", "C-9(35)", "C-9(38)", "C-9(40)", and "C-9(41)", only 3,626 pieces of
II. Whether or not the Court of Appeals committed a reversible error in affirming the
beam hangers, the very documents on which this Commission/Tribunal anchored its finding
now sought to be corrected, were actually delivered by the Claimant. CIAC's conclusion that [Form-Eze] was able to supply BFC with such quantity of
deckforms sufficient to provide the stipulated 7,000 contact square meter of formworks
Accordingly, 87 deckforms of 44 ft. in length can not be completely assembled from the as to entitle said [Form-Eze] to the stipulated minimum contract rental price of
delivered chords and trusses because the quantity of the delivered accessories is insufficient Php28,350,000.00 under Contract No. 1 and consequently to Php6,300,000.00 under
for the purpose. To be precise, only 53 deckforms of 44ft. in length can be completely Contract No. 2, when, based on the quantity of the delivered accessories, which are
assembled out of the total length of the chords and trusses with the use of 1,802 pieces of component pm1s of deck form system, but which the CIAC totally ignored, [Form-Eze]
joists and 3,604 pieces of beam hangers (with an excess of 22 pieces of beam hangers, 710
can only provide 4,441.73 contact square meters of formworks that will entitle it to only
pieces of joist and 2,720 ft of chords and trusses) which are sufficient to provide only
4,441.73 contact sq.m. of formworks. Php17,989,006.05 and Php3,997,557.00, respectively thereunder.
III. Whether or not the Court of Appeals committed reversible error in affirming the CIAC's
To therefore conclude that 87 deckforms of 44 ft. in length can be completely assembled with ruling that [Form-Eze] is entitled to twoOthirds of the stipulated minimum contract
the use of/out of 2,512 pieces of joists and 3,626 pieces of beam hangers, is an evident amount of Php3,230,500.00 or Php2,153,666.67 under Contract No. 3, considering
miscalculation. that CIAC did not state the factual and legal basis of said ruling and despite its
contrary factual finding that [Form-Eze] failed to supply the minimum required
In as much as only 3,626 pieces of beam hangers were actually delivered, which, when used
columnforms.
with the delivered quantity of joists and length of the delivered chords and trusses in
completely assembling 53 deckforms of 44 ft. in length, is sufficient to provide only 4,441.73 IV. Whether or not the Court of Appeals committed a reversible error in affirming the
contact sq.m. of formworks, the minimum rental amount stipulated under Contract No. l CIAC's ruling against the reformation of Contract No. 1 to include a provision that BFC
should correspondingly be reduced to only Php17,989,006.50, less payment of Php shall furnish the labor needed by [Form-Eze] in assembling the deckforms and that it shall
7,700,000.00=Php 10,829,006.50 as the net amout of rent due the Claimant thereunder, as deduct therefrom the agreed cost of labor at Php60.00 per man hour, since it has been
shown in the herewith attached Annex "B" hereof. the true intention and real agreement of the parties thereto.
V. Whether or not the Court of Appeals committed a reversible error in affirming the
On the same ground, the minimum contact amount stipulated under Contract No. 2 should
CIAC when it did not deduct the following costs incurred by BFC from the minimum
also be proportionately reduced to Php 3,997,557.00, less payment of Php 990,000.00 + cost
of labor of Php60,000.00 = Php 2,947,557.00 as the net amount due the Claimant contract amounts due:
thereunder.

₯Construction Industry Arbitration Commission- Set III Page 34 of 41

(1) under Contract No. 1 for the cost of labor in assembling the deckforms, the cost of Payment made on Billing No. 1
helmets of said laborers, and the expenses for x-bracing supplied by BFC for the assembly of
said forms in the total amount ofPhp812,791.09; 487,828.05

(2) under Contract No. 2 for the cost of labor in the stripping of said deckforms, the cost of Cost of labor in assembling Deckforms, expenses for xBracings and cost of helmet
petroleum, oil and lubricant and helmet up to the end of the contract in the sum total of
Php1,391,086.02; and 812,791.90

(3) under Contract No. 3 for the cost of labor in installing and forming the built up 9,000,619.95
columnforms from 25 June 2007 up to the end of the contract in the sum total of
Php273,240.00, when BFC is legally entitled thereto. SUBTOTAL

VI. Whether or not the Court of Appeals committed a reversible error in affirming the Php 8,988,386.55
CIAC in ordering BFC to pay rental fees under letter dated 5 January 2007, covering the
period from 25 June 2007 to 17 December 2007 in the sum total of Php560,000.00 at b. On Contract No. 2- Php 3,997,557.50
Php96,000.00 a month, when the acquisition cost of the pieces of u-heads and plates
referred to therein is allegedly only Php96,000.00, and there is evidence presented to Less: Payments already made- Php 990,000.00
show that these items were purchased at Php96,000.00 and there is on evidence to
show the prevailing rate of rent for the same items. Costs of labor in stripping And moving of the same Deckforms, petroleum, oil And lubricant
and helmet- 1,304,036.82
VI. Whether or not the Court of Appeals committed a reversible error in affirming the
CIAC in ruling that Respondent Pineda can be held as co-respondent (in the arbitration Php 2,294,036.82
case) when he is not a party to the contracts and agreements involved in this case, as
well as the arbitration agreement, and he did not voluntarily submit himself to arbitration SUBTOTAL
in this case.
VII. Whether or not the Court of Appeals committed a reversible error when it Php 1,702,520.68
ruled that the attorney's fees and cost of arbitration shall be for the account of
c. On Contract No. 3 Php 538,417.87
Petitioners, considering that [Form-Eze] failed to supply the minimum required
equipment under the contracts and when the root cause of the dispute is the imprecision Less:
of the language and the incompleteness of the contracts and agreements, which were
prepared by the Respondents.20 Cost of labor in the installation and removal of the Columnforms - 96,915.00

BFC prays for a modification of the Final Award to read: SUBTOTAL

a. On Contract No. 1 Php 441,502.87

Php17,989,006.50 d. On Letter Agreement dated 5 January 2007

Less: Php 70,000.00

Payments already made e. The award of attorney's fees be deleted; and

Php 7,700,000.00 f. The award for cost of arbitration fees be deleted.21

THE COURT'S RULING

₯Construction Industry Arbitration Commission- Set III Page 35 of 41

The Final Award of CIAC is subject to review by the Court of Appeals. blind eye to the evidentiary facts which should have been the basis for an equitable and just
award.
BFC first asserts that the Court of Appeals has the power and the duty to review the factual
findings made by CIAC and that the Court of Appeals should not be bound by the factual While factual findings are not within the purview of a petition for review before this Court, we
findings of the construction arbitrators. take exception in this case on the ground of the appellate court's refusal to delve into the
findings of facts of the CIAC Arbitral Tribunal.
The case of Asian Construction and Dev't. Corp. v. Sumimoto Corporation22 summarized the
development of the principle that the final award of CIAC may be still be subject to judicial Under Contract No. 1, Form-Eze was not able to supply BFC with deckforms sufficient to
review, thus: provide 7,000 contact square meter of formworks.

To begin, Executive Order No. (EO) 1008, which vests upon the CIAC original and exclusive The CIAC Arbitral Tribunal conducted its own study and came up with the following findings:
jurisdiction over disputes arising from, or connected with, contracts entered into by parties
involved in construction in the Philippines, plainly states that the arbitral award "shall be final The receipted hardware deliveries made by [Form-Eze] show that the total length of loose
and inappealable except on questions of law which shall be appealable to the Court." Later, truss chords delivered was 11,912 lineal feet and the length of the truss chords from the
however, the Court, in Revised Administrative Circular (RAC) No. 1-95, modified this rule, assembled trusses delivered was 2,052 lineal feet or a total available length of trusses of
directing that the appeals from the arbitral award of the CIAC be first brought to the CA on 13,964 lineal feet. By an iterative process of selection and elimination, 175 units of 44' long
"questions of fact, law or mixed questions of fact and law." This amendment was eventually trusses could be assembled, equivalent to 87 deckforms of 44 feet in length. The assembled
transposed into the present CIAC Revised Rules which direct that "a petition for review from a 87- 44' deckforms can provide 7,268.58 square meters of contact area, broken down as
final award may be taken by any of the parties within fifteen (15) days from receipt thereof in follows:
accordance with the provisions of Rule 43 of the Rules of Court." Notably, the current
provision is in harmony with the Court's pronouncement that ''despite statutory provisions Contact Area (%)
making the decisions of certain administrative agencies 'final,' the Court still takes cognizance
of petitions showing want of jurisdiction, grave abuse of discretion, violation of due process, Interior & Near Column Slabs = 4,156.89 sq.m. (57.19%)
denial of substantial justice or erroneous interpretation of the law" and that, in particular,
"voluntary arbitrators, by the nature of their functions, act in a quasi-judicial capacity, such Grid Beams (B-1) = 740.37 sq.m. (10.19%)
that their decisions are within the scope of judicial review."23
Interior Beams (B-2) = 1,663.20 sq.m. (22.88%)
Factual findings of construction arbitrators may be reviewed by the Court in cases where: 1)
the award was procured by corruption, fraud or other undue means; (2) there was evident Grid Girders (G-2) = 708.12 sq.m. (9.74%)
partiality or corruption of the arbitrators or any of them; (3) the arbitrators were guilty of
misconduct in refusing to hear evidence pertinent and material to the controversy; (4) one or Total = 7,268.58 sq.m. (100%)
more of the arbitrators were disqualified to act as such under Section nine of Republic Act
(R.A.) No. 876 and willfully refrained from disclosing such disqualifications or of any other The resulting contact area of 7,628.58 sq.m. is 3.84% over the 7,000 sq.m. requirement of
misbehavior by which the rights of any party have been materially prejudiced; (5) the the contract. But the former figure includes the contact area of girders which according to
arbitrators exceeded their powers, or so imperfectly executed them, that a mutual, final and [petitioners] should not be included. As shown in ANNEX "A", sheets 5 & 6 of 6, the contact
definite award upon the subject matter submitted to them was not made; (6) when there is a area contributed by the girders is only 708.12 sq.m., and if this is deducted from the
very clear showing of grave abuse of discretion resulting in lack or loss of jurisdiction as when computed total contact area, the remaining available contact area would be 6,560.46 sq.m. or
a party was deprived of a fair opportunity to present its position before the Arbitral Tribunal or 93.72%. The fact, however, is that the non inclusion of the contact area provided by the
when an award is obtained through fraud or the corruption of arbitrators; (7) when the findings girders would be a violation of the letter-contract dated 8 February 2007, paragraph 9 of
of the Court of Appeals are contrary to those of the CIAC, and (8) when a party is deprived of which provides that: "[Form-Eze] offered to install beam hangers and ledger angles in order to
administrative due process. support the moment beam from from column to column and thereby save BFC considerable
labor and eliminate the use of BFC's light duty scaffolding underneath and beam. By doing
While this rule, which limits the scope of the review of CIAC findings, applies only to the that it will also speed up the forming operation and save BFC labor. The only light duty
Supreme Court, the Court of Appeals nonetheless is not precluded from reviewing findings of scaffolding that BFC will be installing is that under the girder which supports tremendous
facts, it being a reviewer of facts. By conveniently adopting the CIAC's decision as its own loading during the stressing of the beams prior to it being stressed. By forming the girder in
and refusing to delve into its factual findings, the Court of Appeals had effectively turned a this manner, [Form-Eze] is not involved in the tripping or resetting of the girder formwork.

₯Construction Industry Arbitration Commission- Set III Page 36 of 41

However, [Form-Eze] is has purchased and furnished considerable forming hardware and submits that 4,441.73 contact square meters or 63.45% of the 7,000 minimum contact area
consumables (tie rods, pvc sleeves, pvc cones, whaler clips and brackets and wing-nuts) required under Contract No. 1 is a reasonable computation.
which are being used on girders and the beams. [Form-Eze] will give the ownership of this
equipment to BFC and BFC will buy all additional consumables and hardware (as needed) We reverse the finding of the CIAC on this point as it is contrary to the evidence on record.
directly from Comer. In return, [Form-Eze] will include the contact square meters of formwork
in the girders in its billing for both the equipment lease and for the moving contract." This We agree with BFC that the CIAC should not have included the unassembled truss chords in
letter-contract, Exhibit C-12, binds [BFC] to pay Claimant for the girder formworks contact theoretically forming deckforms. We subscribe to BFC's submission that the object of
area for both Contract No. 1 and Contract No. 2. Contract No. 1 is the deckforms and not just the hardware that make up the formwork.
Contract No. 1, in itself, is clear that "F-E has agreed to furnish all hardware required in the
Petitioners argued that the formwork of the girder (or large beam) is independent of the deck formwork system for the poured in place beam and slab concrete decks x x x." In fact, the
form system and so should not be counted in favor of [Form-Eze]. The Tribunal does not equipment rental is only due and payable to Form-Eze when the concrete is placed on the
agree. How could the girder formwork be considered independent from the deckform system slab forms, which provision is based on the premise that the hardware had already been
when both sides of the girder formworks are held stiff together by "tie rods, pvc sleeves (to assembled into deckforms ready for concrete pouring. Moreover, the Proposed SM Marikina
make the tie rods reusable), pvc cones, whaler clips and brackets and wing-nuts" supplied by Mall Project Elevated Beam and Slab Formwork dated 7 December 2006, which document
the [Form-Eze] and pressed between deckforms preparatory to concrete pouring? The girder has been admitted by the parties in the Term of Reference, provides that Form-Eze will
cannot be considered structurally independent of the deck slabs because it is the requirement furnish sufficient deckforms to produce 1/2 floor each month on the project.
of design and the National Building Code and its reference code the American Concrete
Institute Code (ACI Code) that the girders are to be poured monolithically with the slabs and BFC had also explained to our satisfaction that loose truss chords alone could not be
beams up to L/3 or 1/3 of the floor span (the point of infection and location of the construction assembled into deckforms, to wit:
joint where the bending moment is the least or zero), as is clearly shown on the floor concrete
pouring schedule plans. To try to assemble truss chords alone into a deckform is like taking three two-foot round
pegs, trying to stand them upright, then balancing twelve-inch round wooden slab on top, and
Conclusion of Tribunal expect it to be a stool capable of supporting a person. Joist, beam hangers and other
component parts fix the truss chords into place for the structural integrity of a deckform. In the
In view of the above, it is the finding of the Arbitral Tribunal that [Form-Eze] had been able to case of a deckform 44 ft. in length, it will need, for it to be completely assembled, 34 pieces of
furnish the amount of hardware that was sufficient to provide 7,000 contact square meters of joists and 68 pieces of beam hangers as illustrated in the Petitioner's Motion for Correction of
formwork, all in accordance to Contract No. 1. Thus, the remaining question to resolve is the Final Award.
area of the project covered by the formwork equipment in contact square meters.25
Thus, assembling 87 deeckforms of 44 ft. in length would require 2,958 pieces of joist and
BFC accuses the CIAC of coming up with its own biased computation of the contact area of 5,916 pieces of beam hangers to assemble such 87 44-foot deckforms. However, as show in
the hardware supplied by Form-Eze under Contract No. 1. According to BFC, Form-Eze had the same documents that CIAC anchored its theoretical findings, only 2,512 pieces of joists
furnished only 53 completely assembled deckforms of 44 ft. in length which correspond to and only 3,626 pieces of beam hangers were actually delivered by [Form- Eze].
only 4,441.73 contact square meters of formworks, while CIAC found that Form-Eze had
delivered truss chords equivalent to 87 deckforms which can provide 7,268.58 contact square BFC's computation of the total contact area covered by the deckforms furnished by Form-Eze
meters. BFC maintains that Contract No. 1 is clear that the object is the supply of the is backed by delivery receipts of the joists and beam hangers while CIAC's computation is
complete deckform system and not unassembled hardware such as loose truss chords. BFC more theoretical than it is actual.
adds that Form-Eze judicially admitted that it is only claiming equipment rentals for the areas
that its equipment are being used. BFC reiterates that based on the provisions of Contract The inclusion of the additional contact area of the grid girders in the calculation of the total
No. 1 on the contemporaneous and subsequent acts of the parties, as well as application of contact area of the equipment supplied by Form-Eze under Contract No. 1, however, should
principles of contract interpretation, the inclusion of loose truss chords in the computation of be upheld. Paragraph 9 of the Letter dated 8 February 2007, which was also admitted by the
the quantity of hardware supplied by Form-Eze is an erroneous interpretation by CIAC. BFC parties, clearly provides:
also claims that the CIAC wrongfully included the contact area of girders in the computation
of the sufficiency of equipment supplied by Form-Eze. BFC contends that the girders are not [Form-Eze] offered to install beam hangers and ledger angles in order to support the moment
part of the deckforms contemplated in Contract No. 1. BFC offers to compensate Form-Eze to beam fro column to column and thereby save BFC considerable labor and eliminate the use
the extent that its supplied deckforms were used under the principle of quantum meruit. BFC of BFC's light duty scaffolding underneath that beam. By doing that it will also speed up the
forming operation and save BFC labor. The only light duty scaffolding that BFC will be

₯Construction Industry Arbitration Commission- Set III Page 37 of 41

installing is under the girder which supports tremendous loading during the stressing for the 7,000 sq. m.
beams prior to it being stressed. By forming the girder in this manner F-E is not involved in
the stripping or resetting of the girder formwork. However, [Form-Eze] has purchased and 5,149.85 sq. m.
furnished considerable forming hardware and consumables (tie rods, pvc sleeves, pvc cones,
whaler clips and brackets and wing-nuts) which are being used on the girders and the beams. deckforms delivered
[Form-Eze] will give ownership to this equipment toi BFC and BFC will buy all additional
consumables and hardware (as needed) directly from Comer. In return [Form-Eze] will Contract No. 1 be reformed to include a labor guarantee provision.
include the contact square meters of formwork in the girders in its billing for both the
equipment lease and for the moving contract.27 An action for reform a contract is grounded on Article 1359 of the New Civil Code which
provides:
BFC cannot claim that this provision does not refer to Contract No. 1. Said provision mentions
beam hangers and ledger angles which are used to support the beams forming the deckform ARTICLE 1359. When, there having been a meeting of the minds of the parties to a contract,
and to eliminate the use of light duty scaffolding on the part of BFC which it had initially their true intention is not expressed in the instrument purporting to embody the agreement, by
obligated to provide under Contract No. 1. More pertinently, the inclusion of the contact reason of mistake, fraud, inequitable conduct or accident, one of the parties may ask for the
square meters of formwork in the girders is a mere application of one of the provisions in reformation of the instrument to the end that such true intention may be expressed.
Contract No. 1, i.e., "BFC agrees to purchase materials for the formwork as requested by F-E
and the direct cost of those materials will be deducted from this contract and the balance paid Reformation is a remedy in equity, whereby a written instrument is made or construed so as
to [Form-Eze]." Form-Eze is giving ownership of the forming hardware and consumables to express or conform to the real intention of the parties, where some error or mistake has
which are used on the girders and beams to BFC. Instead of deducting the cost of these been committed. In granting reformation, the remedy in equity is not making a new contract
materials from the contract, Form-Eze will instead include the contact square meters of for the parties, but establishing and perpetuating the real contract between the parties which,
formwork in the girder in its billing for the lease of the deckforms. under the technical rules of law, could not be enforced but for such reformation.29

As agreed upon by the parties, the 708.12 sq. m. contact area covered by the grid girders In order that an action for reformation of instrument may prosper, the following requisites
should be included in the billing. Taking into account this contact area corresponding the grid must concur: (1) there must have been a meeting of the minds of the parties to the contract;
girders and the 4,441.73 contact square meter assembled deckforms, the total contact area is (2) the instrument does not express the true intention of the parties; and (3) the failure of the
only 5,149.85, which still falls short of the 7,000 contact area requirement. instrument to express the true intention of the parties is due to mistake, fraud, inequitable
conduct or accident.30
To award the full contract price to Form-Eze in Contract No. 1 is tantamount to unjust
enrichment. There is unjust enrichment under Article 22 of the Civil Code when (1) a person In the instant case, the question to be resolved is whether the contract expressed their true
is unjustly benefited, and (2) such benefit is derived at the expense of or with damages to intention; and, if not, whether it was due to mistake, fraud, inequitable conduct or accident.
another. The principle of unjust enrichment essentially contemplates payment when there is While intentions involve a state of mind which may sometimes be difficult to decipher,
no duty to pay, and the person who receives the payment has no right to receive it.28 By subsequent and contemporaneous acts of the parties as well as the evidentiary facts as
requiring BFC to pay the full contract price when it only supplied deckforms which covered proved and admitted can be reflective of one's intention.31
only 5,149.85 contact square meters of formworks, the CIAC Arbitral Tribunal is essentially
unjustly giving unwarranted benefit to Form-Eze by allowing it to earn more than it legally and BFC relies on the Form-Eze Proposed SM Marikina Mall Project Elevated Beam and Slab
contractually deserved. It is also worth mentioning that Form-Eze had in fact only been Formwork dated 7 December 200632 to support its contention that Contract No. 1 should
claiming for the contact area where its equipment was used. have a provision on the cost of labor. Indeed, in the aforementioned proposal, BFC has
agreed "to furnish the labor required for fabrication and assembly of the forming equipment"
Therefore, using the computation of BFC, the amount of contact square meters that the and that "BFC will deduct from the total contract amount 50.00 per man-hour each carpenter
delivered hardware and deckforms can handle is: or laborer supplied to Form-Eze." Notably, Contracts No. 2 and 3 contain labor-guarantee
provisions considering that BFC has committed to provide the necessary labor for both
126,000 sq. m. x contracts.

= 92,696.40 contact sq. m

₯Construction Industry Arbitration Commission- Set III Page 38 of 41

As initially agreed upon, BFC hired workers for the assembly of the deckforms since Form- labor, helmet and expense for x-bracing supplied by it for the assembly of the form system,
Eze only undertook to supervise the installation of the deckforms. This was evident during the what can you say?
cross-examination of Mr. Romano Clemente (Mr. Clemente) who admitted that no workers of
Form Eze were employed for the installation of the deckforms, thus: A: [BFC] is allowed to deduct the cost of the x-bracing purchase from Comer that was used in
the FORM-EZE deck assemblies. [BFC] is allowed to deduct the cost of the assembly labor
ATTY. D. MORGA, JR. (COUNSEL-RESPONDENT): for the deck forms which is included in the Labor Guarantee. These deductions have been
reflected in all our billings where the P75.00 Labor Guarantee has been applied. The cost of
Since it is the obligation of the Claimant to assemble the hardware into deckform, how many helmet is not included and should not be included. Contract No. 1 is only a lease contract but
workers were employed for the purpose. it was modified to include a Labor Guarantee. For the [BFC] to deduct from our billing the cost
of labor, etc. which allegedly they supplied for the use of our said equipment for the assembly
MR. R.V. CLEMENTE (CLAIMANT): We are only supplier sir. We supervise the guys in the thereof is included in the Labor Guarantee. They should be allowed to do so in conformance
jobsite for tern to install all these deckforms. with the Labor Guarantee but definitely the cost of helmet and their other claims of deductions
would not have any basis at all since these have not been agreed upon both in the original
ATTY. D. MORGA, JR. (COUNSEL-RESPONDENT): Ano? contract and in the subsequent agreement as contain (sic) in the February 8, 2007 signed
letter.
MR. R.V. CLEMENTE (CLAIMANT): To install the guys in the jobsite like for example your
laborers carpenters to install this deckforms. We just only supply one supervisor in the jobsite This admission by Form-Eze bolsters the conclusion that the parties intended to include a
for him to supervise the installation of this form. labor-guarantee provision in Contract No. 1. Both Contracts No. 2 and 3 set the labor rate at
P60.00 per carpenter man-hour. BFC fixed the cost of labor at P453,294.50.
ATTY. D. MORGA, JR. (COUNSEL-RESPONDENT): You mean BF Corporation has the
expertise to assemble this. Considering that both parties admitted that there should be a labor guarantee clause in
Contract No. 1, it can be reasonably inferred that the failure to include said provision was due
MR. R.V. CLEMENTE (CLAIMANT): No, we will supervise your guys for them to assemble to mistake. A reformation is in order to include a cost of labor provision in Contract No. 1.
this.
Expenses for x-bracing and the cost of labor should be deductedunder Contracts No. 2 and 3.
ATTY. D. MORGA, JR. (COUNSEL-RESPONDENT): Do you know if BF has the expertise to
assemble this? Except for the expenses for x-bracing used in deck assemblies which had been admitted by
Form-Eze President James Franklin, BFC is not entitled to be reimbursed for the cost of
MR. R.V. CLEMENTE (CLAIMANT): That is why we were there in your jobsite. If they don't helmets, petroleum, and oil lubricants in the absence of any stipulations in the contracts. The
have really the expertise we are the one who supervise them to install the deckforms. cost of labor, on the other hand, should be deducted pursuant to the labor-guarantee
Supervise them to install the deckforms provisions in Contracts No. 2 and 3.

ATTY. D. MORGA, JR. (COUNSEL-RESPONDENT): You mean no former workers of the The cost for x-bracing amounts to P358,250.00 as evidenced by the receipt issued by
Claimant were employed for the purpose. Comer.35

MR. R.V. CLEMENTE (CLAIMANT): No.33 The costs of labor are as follow:

Obviously, BFC would want to be compensated for the labor it provided to Form-Eze as Contract No. 1 = P453,294.50
shown in Contracts No. 2 and 3.
Contract No. 2 = P1,373,634.60
As a matter of fact, Mr. James Franklin, the President of Form-Eze conceded that Contract
No. 1 should be modified to include a labor-guarantee provision, to wit: Contract No. 3 = P273,240.00

Q: Mr. Witness, respondent [BFC], in their counterlcaims, would like this Commission to Obligation of BFC under Contract No. 1:
reform Contract No. 1 to include a provision that it should deduct from your billing the cost of
92,696.40 contact square meters x P225.00 = P20,856,690.00

₯Construction Industry Arbitration Commission- Set III Page 39 of 41

Less: Amount paid- 7,700,000.00 Cost of Labor- 1,286,377.50

Payment for billing for Pour 1- 487,828.05 ___________

Cost of labor- 453,294.50 SUBTOTAL

Cost of X-bracing- 358,250.00 P2,358,442.50

___________ Obligation of BFC under Contract No. 3.

P11,857,317.45 The CIAC had correctly noted the ambiguity in Contract No. 3, particularly the "sufficient
number of column forms as required to complete six (6) poured in place columns per day."
The Memorandum of Agreement dated 5 January 2007 is an exclusive licensing agreement. For BFC, the sufficient number of column forms is 12 sets a day while Form-Eze considered
its supply of six (6) full height built up column forms as sufficient. The CIAC found that Form-
BFC avers that CIAC erred when it stated the BFC was given the exclusive license to Eze failed to comply with the requirements under Contract No. 3, hence it merely awarded
manufacture Form-Eze's equipment consisting of scaffoldings and accessories and they Form-Eze 2/3 of the minimum contract amount at P2,153,666.67.
became part of that provided by Form Eze to BFC.
We find that the CIAC's award lacked bases. It gave credence to the methodology used by
At the outset, we agree that the subsequent Memorandum of Agreement executed by the Form-Eze and noted that the latter had supplied six (6) full height built-up columforms, albeit
parties on 5 January 2007 is an exclusive licensing agreement. It was signed by both parties insufficient. We hold the contrary. The methodology used by BFC, which involves
wherein BFC has agreed to sell the scaffolding frames and accessories it manufactured to "columnforms with window openings and that from its installation, alignment, bracing,
Form-Eze at the end of the project. This Agreement was incorporated in Contract No. 4 inspection, approval of alignment, verticality and rigidity of the erected columnforms, pouring,
wherein BFC will be allowed to deduct P6,352,500.00 from the equipment lease contract, drying and removal of the forms, it will require twelve (12) column forms a day, should have
which is presumably Contract No. 1. At this point, Contract No. 4 is deemed to have novated been considered. The CIAC itself had already ruled that the ambiguity in Contract No. 3
the obligation of BFC with respect to furnishing all scaffoldings. Contract No. 1 states that should not favor Form-Eze, the party who prepared the contract. Thus, it is only logical that
BFC shall furnish the scaffoldings at no cost to Form-Eze. On the other hand, Contract No. 4 the methodology employed by BFC should be credited.
requires BFC to sell the scaffoldings to Form-Eze at the end of the project and deduct the
cost of the same from the contract price of Contract No. 1. This setup cannot in any way be Using 12 column forms as the minimum requisite and Form-Eze having supplied only four (4)
interpreted as part of the deckform supplied by Form-Eze. As pointed out by BFC, the usable column forms, it can be established that the delivered column forms can only be used
scaffoldings and accessories were the responsibility of BFC under Contract No. 1. Thus, the for 1/3 portion of the 9,100 contact square meters or 3,033.33 contact square meters. It was
manufactured hardware under Contract No. 4 could not have added to the deckform system further proven by BFC that about 50% of the column form requirements of the project were
because they are not the equipment of Form-Eze had obligated itself to supply under already completed with the use of their own equipment. Thus, it is but equitable that the
Contract No. 1. 3,033.33 contact square meters be further reduced by 50% or 1,516.67 contact square
meters. BFC is then liable to pay P441,502.87 broken down as follows:
Obligation of BFC under Contract No.2
1,516.67 X P355.00 = P 538,417.85
BFC maintains that since Form-Eze failed to meet the minimum conditions under Contract
No. 1 where the minimum 126,000 contact square meters were not reached, then the forklifts Less: Cost of Labor 96,915.00
under Contract No. 2 were also not used for a minimum of 126,000 contact square meters.
__________
We agree. BFC is liable only to pay the amount proportionate to 92,696.40 contact square
meters at P50.00 per contact square meter, the rental rate for the forklifts. Thus: SUBTOTAL:

92,696.40 contact square meters x P50.00 = P 4,634,820.00 P 441,502.87

Less: Payments made- 990,000.00 BFC is obliged to pay rental for u-heads under Letter-Agreement dated 5 January 2007.

₯Construction Industry Arbitration Commission- Set III Page 40 of 41

Under the letter dated 8 February 2007, "BFC has completed fabrication on a sufficient just and demandable claim. We observe that in filing the complaint against BFC, Form-Eze
quantity of u-heads with screw assemblies and heavy duty bases so that BFC can was merely seeking payment for its service under the contract. BFC had admitted to its
immediately start returning the 24 inch and 18 inch u-head assemblies (561 pcs) and heavy obligation. The problem lies only on the amount to be paid. This is not tantamount to bad
duty bases (483 pcs) which were on temporary loan to BFC by [Form-Eze] until BFC could faith.
manufacture their own equipment. The temporary loan was expected to be approximately
[two] (2) weeks and the equipment was picked-up January 9th, 2007 and still in used Finally, both parties should equally share the costs of arbitration since their prayers were only
today."36 It is understood that upon expiration of the two-week temporary loan and upon partially granted.39
failure by BFC to return the equipment, it is then liable to pay for rent. We find that the
monthly rental amount of P96,600.00 was substantiated by Form-Eze. 483 pieces of 24 inch WHEREFORE, the petition is PARTIALLY GRANTED. The Decision dated 15 January 2010
and 18 inch galvanized adjustable heads and 483 pieces of galvanized heavy duty plates and Resolution dated 13 July 2010 are MODIFIED. Petitioner B.F. Corporation is ordered to
were indeed delivered to BFC as evidenced by the delivery receipts.37 According to Mr. pay respondent Form-Eze Systems Inc. the following amounts:
Clemente, Form-Eze's Sales Engineer, the rental amount for adjustable u-heads are fixed at
P160.00 per unit, while the galvanized heavy duty plates are at P40.00 per unit.38 By Under Contract No. 1: P11 ,857,317.45
agreeing to the terms of the 8 February 2007 Letter, BFC is deemed to have acquiesced to
the rental fee in case it failed to return the u-heads and plates on time. Therefore, we affirm Under Contract No. 2: 2,358,442.50
the CIAC's ruling that BFC is liable to pay rental of the equipment in the amount of
P96,000.00 per month until the equipment leased is fully returned to Form-Eze. Under Contract No. 3: 441,502.87

BFC President should not be included as party to this case? Under Letter-Agreement dated 7 January 2007: 560,000.00

Section 4 of Executive Order No. 1008 vests jurisdiction on CIAC over disputes disputes _____________
arising from, or connected with, contracts entered into by parties involved in construction in
the Philippines, whether the dispute arises before or after the completion of the contract, or GRAND TOTAL: P15,217,262.82 and 50% of the Cost of Arbitration.
after the abandonment or breach thereof. Moreover, the party involved must agree to submit
to voluntary arbitration. In other words, anyone who is not a party to the contract in his SO ORDERED.
personal capacity is not subject to the jurisdiction of the CIAC. In this case, Pineda signed the
challenged contracts in his capacity as President of BFC. There is no indication that he
voluntarily submitted himself as a party to the arbitration case. In fact, he has been
consistently contesting his inclusion as a respondent in the CIAC proceedings. CIAC however
considered Pineda as a joint tortfeasor, thus justifying his joinder as a co-defendant.

We do not consider the imputed acts of Pineda as an indicia of bad faith to classify him as a
joint tortfeasor. First, it was proven that Form-Eze is not entitled to all its monetary claims
under the contract. Second, we have also subscribed to BFC's position that Contract No. 1
should have included a labor guarantee provision and that it was by mistake that said clause
was excluded. Third, BFC's alleged refusal to return the u-head assemblies and heavy duty
bases was meted with a heavy penalty in the form of a huge rental fee. BFC had, as a matter
of fact, admitted to owing Form-Eze rental payment. Fourth, the claim of threat against Form-
Eze's President is unsubstantiated and uncorroborated.

Attorney's Fees and Costs of Arbitration.

The controversy essentially boils down to the interpretation and factual application of the
existing contracts. Neither party was able to prove bad faith in their dealing with each other.
Under Article 2208 of the Civil Code, attorney's fees may, among others, be recovered where
defendant acted in gross and evident bad faith in refusing to satisfy the plaintiff’s plainly valid,

₯Construction Industry Arbitration Commission- Set III Page 41 of 41