In 1986, Team Holdings Limited (THL) bought Signetics.

THL later changed its

name to Technology Electronics Assembly and Management Pacific Corp. (TEAM).

In March 1987, Fruehauf filed an unlawful detainer case against TEAM. In an effort
to amicably settle the dispute, both parties executed a Memorandum of
SECOND DIVISION Agreement (MOA)  on June 9, 1988.3 Under the MOA, TEAM undertook to pay
Fruehauf 14.7 million pesos as unpaid rent (for the period of December 1986 to
June 1988).
November 23, 2016
They also entered a 15-year lease contract 4 (expiring on June 9, 2003) that was
G.R. No. 204197 renewable for another 25 years upon mutual agreement. The contract included an
arbitration agreement:5
FRUEHAUF ELECTRONICS PHILIPPINES CORPORATION, Petitioner,
vs. 17. ARBITRATION
TECHNOLOGY ELECTRONICS ASSEMBLY AND MANAGEMENT PACIFIC
CORPORATION, Respondent.
In the event of any dispute o~ disagreement between the parties
hereto involving the interpretation or implementation of any
DECISION provision of this Contract of Lease, the dispute or disagreement
shall be referred to arbitration by a three (3) member arbitration
BRION, J.: committee, one member to be appointed by the LESSOR, another
member to be appointed by the LESSEE, and the third member to
The fundamental importance of this case lies in its delineation of the extent of be appointed by these two members. The arbitration shall be
permissible judicial review over arbitral awards. We make this determination from conducted in accordance with the Arbitration Law (R.A. No. 876).
the prism of our existing laws on the subject and the prevailing state policy to uphold
the autonomy of arbitration proceedings. The contract also authorized TEAM to sublease the property. TEAM subleased the
property to Capitol Publishing House (Capitol) on December 2, 1996 after notifying
This is a petition for review on certiorari  of the Court of Appeals' (CA)  decision Fruehauf.
in CA-G.R. SP. No. 112384 that reversed an arbitral award and dismissed the
arbitral complaint for: lack of merit.1 The CA breached the bounds of its jurisdiction On May 2003, TEAM informed Fruehauf that it would not be renewing the lease. 6
when it reviewed the substance of the arbitral award outside of the permitted
grounds under the Arbitration Law.2 On May 31, 2003, the sublease between TEAM and Capitol expired. However,
Capitol only vacated the premises on March 5, 2005. In the meantime, the master
Brief Factual Antecedents lease between TEAM and Fruehauf expired on June 9, 2003.

In 1978, Fruehauf Electronics Philippines Corp. (Fruehauf) leased several parcels of On March 9, 2004, Fruehauf instituted SPProc. No.11449 before the Regional Trial
land in Pasig City to Signetics Filipinas Corporation (Signetics) for a period of 25 Court (RTC) for "Submission of an Existing Controversy for Arbitration." 7 It alleged:
years (until May 28, 2003). Signetics constructed a semiconductor assembly factory (1) that when the lease expired, the property suffered from damage that required
on the land on its own account. extensive renovation; (2) that when the lease expired, TEAM failed to turn over the
premises and pay rent; and (3) that TEAM did not restore the property to its original
In 1983, Signetics ceased its operations after the Board of condition as required in the contract. Accordingly, the parties are obliged to submit
Investments (BOI)  withdrew the investment incentives granted to electronic the dispute to arbitration pursuant to the stipulation in the lease contract.
industries based in Metro Manila.
The RTC granted the petition and directed the parties to comply with the arbitration The tribunal found that Fruehauf made several demands for the return of the leased
clause of the contract. 8 premises before and after: the expiration of the lease14 and that there was no
express or implied renewal of the lease after June 9, 2003. It recognized that the
Pursuant to the arbitration agreement, the dispute was referred to a three-member sub-lessor, Capitol, remained in possession of the lease. However, relying on the
arbitration tribunal. TEAM and Fruehauf appointed one member each while the commentaries of Arturo Tolentino on the subject, the tribunal held that it was not
Chairman was appointed by the first two members. The tribunal was formally enough for lessor to simply vacate the leased property; it is necessary that he place
constituted ion September 27, 2004 with retired CA Justice Hector L. Hofileña, as the thing at the disposal of the lessor, so that the latter can receive it without any
chairman, retired CA Justice Mariano M. Umali and Atty. Maria Clara B. Tankeh- obstacle.  15
Asuncion as members.9
For failing to return the property' to Fruehauf, TEAM remained liable for the payment
The parties initially submitted the following issues to the tribunal for resolution:  10 of rents. However, if it can prove that Fruehauf received rentals from Capitol, TEAM
can deduct these from its liability. 16 Nevertheless, the award of rent and damages
was without prejudice to TEAM's right to seek redress from its sub-lessee, Capitol. 17
1. Whether or not TEAM had complied with its obligation to return
the leased premises to Fruehauf after the expiration of the lease on
June 9, 2003. With respect to the improvements on the land, the tribunal viewed the situation from
two perspectives:
1.1. What properties should be returned and in what condition?
First,  while the Contract admitted that Fruehauf was only leasing the land and not
the buildings and improvements thereon, it nevertheless obliged TEAM to deliver the
2. Is TEAM liable for payment of rentals after June 9, 2003?
buildings, installations and other improvements existing at the inception of the lease
uponits expiration. 18
2.1. If so, how much and for what period?
The other view,  is that the MOA and the Contract recognized that TEAM owned the
3. Is TEAM liable for payment of real estate taxes, insurance, and existing improvements on the property and considered them as separate from the
other expenses on the leased premises after June 9, 2003? land for the initial 15-year term of the lease. 19 However, Fruehauf had a vested right
to become the owner of these improvements at the end of the 15-year term.
4. Who is liable for payment of damages and how much? Consequently, the contract specifically obligated TEAM not to remove, transfer,
destroy, or in any way alienate or encumber these improvements without prior
5. Who is liable for payment of attorney's fees and how much? written consent from Fruehauf. 20

Subsequently, the following issues were also submitted for resolution after TEAM Either way, TEAM had the obligation to deliver the existing improvements on the
proposed 11 their inclusion: land upon the expiration of the lease. However, there was no obligation under the
lease to return the premises as a "complete, rentable, and fully facilitized electronics
1. Who is liable for the expenses of arbitration, including arbitration fees? plant."21Thus, TEAM's obligation was to vacate the leased property and deliver to
Fruehauf the buildings, improvements, and installations (including the machineries
and equipment existing thereon) in the same condition as when the lease
2. Whether or not TEAM has the obligation to return the premises to Fruehauf as a
commenced, save for what had been lost or impaired by 1the lapse of time, ordinary
"complete, rentable, and fully facilitized electronic plant."
wear and tear, or any other inevitable cause. 22

The Arbitral Award12

The tribunal found TEAM negligent in the maintenance of the premises,
machineries, and equipment it was obliged to deliver to Fruehauf. 23 For this failure
On December 3, 2008, the arbitral tribunal awarded Fruehauf: (1) 8.2 million pesos to conduct the necessary repairs or to notify Fruehauf of their necessity, the tribunal
as (the balance of) unpaid rent from June 9, 2003 until March 5, 2005; and (2) 46.8 held TEAM accountable for damages representing the value of the repairs
million pesos as damages. 13
necessary to restore the premises to a condition "suitable for the use to which it has to instances when it was filed out of time or when the appellant fails to pay the
been devoted'  less their depreciation expense.24 docket fees within the reglementary period.43

On the other issues, the tribunal held that TEAM had no obligation to pay real estate TEAM further maintained that the RTC gravely abused its discretion by confirming
taxes, insurance, and other expenses on the leased premises considering these the Arbitral Tribunal's award when it evidently had legal and factual errors,
obligations can only arise from a renewal of the contract.25 Further, the tribunal miscalculations, and ambiguities. 44
refused: to award attorney's fees, finding no evidence that either party acted in bad
faith. 26 For the same reason, it held both parties equally liable for the expenses of The petition was docketed as CA-G.R. SP. No.112384.
litigation, including the arbitrators' fees. 27
The CA decision  45
TEAM moved for reconsideration28 which the tribunal denied. 29 Thus, TEAM
petitioned the RTC to partially vacate or modify the arbitral award. 30 It argued that The CA initially dismissed the petition. 46 As the RTC did, it cited Section 29 of the
the tribunal failed to properly appreciate the facts and the terms of the lease Arbitration Law:
contract.
Section 29. Appeals. - An appeal may be taken from an order
The RTC Ruling made in a proceeding under this Act, or from a judgment entered
upon an award through certiorari proceedings, but such appeals
On April 29, 2009, the RTC31 found insufficient legal grounds  under Sections 24 shall be limited to questions of law. The proceedings upon such
and 25 of the Arbitration Law to modify or vacate the award.32 It denied the petition appeal, including the judgment thereon shall be governed by the
and CONFIRMED, the arbitral award. 33 TEAM filed a Notice of Appeal. Rules of Court in so far as they are applicable.

On July 3, 2009,34 the RTC refused to give due course to the Notice of Appeal It concluded that the appeal contemplated under the law is an appeal
because according to Section 29 35 of the Arbitration Law, an ordinary appeal under by certiorari  limited only to questions of law.47
Rule 41 is not the proper mode of appeal against an order confirming an arbitral
award. 36 The CA continued that TEAM failed to substantiate its claim as to the "evident
miscalculation of figures." It further held that disagreement with the arbitrators'
TEAM moved for reconsideration but the R TC denied the motion on November 15, factual determinations and legal conclusions does not empower courts to amend or
2009.37 Thus, TEAM filed a petition for certiorari38before the CA arguing that the RTC overrule arbitral judgments.48
gravely abused its discretion in: (1) denying due course to its notice of appeal; and
(2) denying the motion to partially vacate and/or modify the arbitral award.39 However, the CA amended its decision on October 25, 2012 upon a motion for
reconsideration.49
TEAM argued that an ordinary appeal under Rule 41 was the proper remedy against
the RTC's order confirming, modifying, correcting, or vacating an arbitral award. 40 It The CA held that Section 29 of the Arbitration Law does not preclude the aggrieved
argued that Rule 42 was not available because the order denying its motion to party from resorting to other judicial remedies.50 Citing Asset Privatization
vacate was not rendered in the exercise of the RTC's appellate jurisdiction. Further, Trust v. Court of Appeals,51the CA held that the aggrieved party may resort to a
Rule 43 only applies to decisions of quasi-judicial bodies. Finally, an appeal under petition for certiorari  when the R TC to which the award was submitted for
Rule 45 to the Supreme Court would preclude it from raising questions of fact or confirmation Has acted without jurisdiction, or with grave abuse of discretion and
mixed questions of fact and law.41 there is no appeal, nor any plain, speedy remedy in the course of law.52

TEAM maintained that it was appealing the RTC's order denying its petition to The CA further held that the mere filing of a notice of appeal is sufficient as the
partially vacate/modify the award, not the arbitral award itself. 42 Citing Rule 41, issues raised in the appeal were not purely questions of law. 53 It further cited
Section 13 of the Rules of Court, the RTC's authority to dismiss the appeal is limited Section 46 of the Alternative Dispute Resolution
(ADR)  Law:54 Fruehauf argues that courts do riot have the power to substitute their judgment for
that of the arbitrators.61 It also insists that an ordinary appeal is not the proper
SEC. 46. Appeal from Court Decisions on Arbitral Awards. - A remedy against an RTC's order confirming, vacating, correcting or modifying an
decision of the regional trial court confirming, vacating, setting arbitral &ward but a petition for review on certiorari  under Rule 45. 62
aside, modifying or correcting an arbitral award may be appealed to
the Court of Appeals in accordance with the rules of procedure to be Furthermore, TEAM's petition before the CA went beyond the permissible scope
promulgated by the Supreme Court. of certiorari  - the existence of grave abuse of discretion or errors jurisdiction - by
including questions of fact and law that challenged the merits of the arbitral award.63
The losing party who appeals from the judgment of the court
confirming an arbitral award shall be required by the appellant court However, Fruehauf inconsistently argues that the remedies against an arbitral
to post counterbond executed in favor of the prevailing party equal award are (1) a petition to vacate the award, (2) a petition for review under Rule 43
to the amount of the award in accordance with the rules to be raising questions of fact, of law, or mixed questions of fact and law, or (3) a petition
promulgated by the Supreme Court. 55 for certiorari  under Rule 65.64 Fruehauf cites an article from the Philippine Dispute
Resolution Center65 and Insular Savings Bank v. Far East Bank and Trust,  Co.66
However, the CA made no further reference to A.M. No. 07-11-08-SC, the Special
Rules of Court on Alternative Dispute Resolution (Special ADR Rules)  which govern TEAM counters that the CA correctly resolved the substantive issues of the case
the appeal procedure. and that the arbitral tribunal's errors were sufficient grounds to vacate or modify the
award.67 It insists that the RTC's misappreciation of the facts from a patently
The CA further revisited the merits of the arbitral award and found several errors in erroneous award warranted an appeal under Rule 41.68
law and in fact. It held: (1) that TEAM was not obliged to pay rent because it was
Capitol, not TEAM, that remained in possession of the property upon the expiration I
of the lease;56 and (2) that Fruehauf was not entitled to compensation for the repair$
on the buildings because it did not become the owner of the building until after the TEAM reiterates that it "disagreed with the arbitral award mainly on questions
expiration of the lease. 57 of fact and not only on questions of law," specifically, "on factual matters
relating to specific provisions in the contract on ownership of structures and
Also citing Tolentino, the CA opined: (1) that a statement by the lessee that he has improvements thereon, and the improper award of rentals and
abandoned the premises should, as a general rule, constitute sufficient compliance penalties."69Even assuming that it availed of the wrong mode of appeal, TEAM
with his duty to return the leased premises; and (2) that any new arrangement made posits that its appeal should still have been given due course in the interest of
by the lessor with another person, such as the sub-lessor, operates as a resumption substantial justice. 70
of his possession.58
TEAM assails the inconsistencies of Fruehauf’s position as to the available legal
On the issue of damages, the CA held that TEAM can never be liable for the remedies against an arbitral award.71 However, it maintains that Section 29 of the
damages for the repairs of the improvements on the premises because they were Arbitration Law does not foreclose other legal remedies (aside from an appeal
owned by TEAM itself (through its predecessor, Signetics) when the lease by certiorari) against the RTC's order confirming or vacating an arbitral award
commenced. 59 pursuant to Insular Savings Bank WINS) Japan Co., Ltd.  72

The CA REVERSED AND SET ASIDE the arbitral award and DISMISSED the The Issues
arbitral complaint for lack of merit.60
This case raises the following questions:
This CA action prompted Fruehauf to file the present petition for review.
1. What are the remedies or the modes of appeal against an unfavorable arbitral
The Arguments award?
2. What are the available remedies from an RTC decision confirming, vacating, flexibility to arbitration ; proceedings as compared to court I litigation governed by
modifying, or correcting an arbitral award? the Rules of Court.

3. Did the arbitral tribunal err in awarding Fruehauf damages for the repairs of the The parties likewise appoint the arbitrators based on agreement. There are no
building and rental fees from the expiration of the lease? other legal requirements as to the competence or technical qualifications of an
arbitrator. Their only legal qualifications are: (1) being of legal age; (2) full-enjoyment
Our Ruling of their civil rights; and (3) the ability to read and write.77 The parties can tailor-fit
the tribunal's composition to the nature of their dispute. Thus, a specialized
dispute can  be resolved by experts on the subject.
The petition is meritorious.

However, because arbitrators do not necessarily have a background in law, they

Arbitration is an alternative mode of dispute resolution outside of the regular court
cannot be expected to have the legal mastery of a magistrate. There is a greater risk
system. Although adversarial in character, arbitration is technically not litigation. It is
that an arbitrator might misapply the law or misappreciate the facts en route to an
a voluntary process in which one or more arbitrators - appointed according to the
erroneous decision.
parties' agreement or according to the applicable rules of the Alternative Dispute
Resolution (ADR) Law - resolve a dispute by rendering an award. 73 While arbitration
carries many advantages over court litigation, in :many ways these advantages also I
translate into its disadvantages.
This risk of error is compounded by the absence of an effective appeal
Resort to arbitration is voluntary. It requires consent from both parties in the form mechanism. The errors of an; arbitral tribunal are not subject to correction by the
of an arbitration clause that pre-existed the dispute  or a subsequent submission judiciary. As a private alternative to court proceedings, arbitration is meant to be
agreement. This written arbitration agreement is an independent and legally an end, not the beginning,  of litigation. 78Thus, the arbitral award is final and
enforceable contract that must be complied with in good faith. By entering into an binding on the parties by reason of their contract - the arbitration agreement. 79
arbitration agreement, the parties agree to submit their dispute to an arbitrator
(ortribunal) of their own choosing and be bound by the latter's resolution. An Arbitral Tribunal does not exercise
quasi-judicial powers
However, this contractual and consensual character means that the parties cannot
implead a third-party in the proceedings even if the latter's participation is necessary Quasi-judicial or administrative adjudicatory power is the power: (1) to hear and
for a complete settlement of the dispute. The determine questions of fact to which legislative policy is to apply, and (2) to decide
in accordance with the standards laid down by the law itself in enforcing and
tribunal does not have the power to compel a person to participate in the arbitration administering the same law.80Quasi-judicial power is only exercised by
proceedings without that person's consent. It also has no authority to decide on administrative agencies - legal organs of the government.
issues that the parties did not submit (or agree to submit) for its resolution.
Quasi-judicial bodies can only exercise such powers and jurisdiction as are
As a purely private mode of dispute resolution, arbitration proceedings, including expressly or by necessary implication conferred upon them by their enabling
the records, the evidence, and the arbitral award, are confidential 74 unlike court statutes.81 Like courts, a quasi-judicial body's jurisdiction over a subject matter is
proceedings which are generally public. This allows the parties to avoid negative conferred by law and exists independently from the will of the parties. As
publicity and protect their privacy. Our law highly regards the confidentiality of government organs necessary for an effective legal system, a quasi-judicial
arbitration proceedings that it devised a judicial remedy to prevent or prohibit the tribunal's legal existence, continues beyond the resolution of a specific dispute. In
unauthorized disclosure of confidential information obtained therefrom. 75 other words, quasi-judicial bodies are creatures of law.

The contractual nature of arbitral proceedings affords the parties I As a contractual and consensual: body, the arbitral tribunal does not have any
substantial autonomy over the proceedings. The parties are free to agree on the inherent powers over the parties. It has no power to issue coercive writs or
procedure to be observed  during the proceedings. 76 This lends considerable compulsory processes. Thus, there is a need to resort to the regular courts for
interim measures of protection 82 and for the recognition or enforcement of the Citing Insular Savings Bank v. Far East Bank and Trust Co.,  94 the ABS-CBN
arbitral award. 83 Case  pronounced that the losing party in an arbitration proceeding may avail of
three alternative remedies: (1) a petition to vacate the arbitral award before the RTC;
The arbitral tribunal acquires jurisdiction over the parties and the subject matter (2) a petition for review with the CA under Rule 43 of the Rules of Court raising
through stipulation. Upoh the rendition of the final award, the tribunal questions of fact, of law, or of both; and (3) a I petition for certiorari  under Rule 65
becomes functus officio  and - save for a few exceptions84 - ceases to have any should the arbitrator act beyond its jurisdiction or with grave abuse of discretion. 95
further jurisdiction over the dispute.85 The tribunal's powers (or in the case of ad
hoc  tribunals, their very existence) stem from the obligatory force of the arbitration At first glance, the logic of this position appears to be sound. However, a critical
agreement and its ancillary stipulations.86 Simply put, an arbitral tribunal is examination of the supporting authorities would show that the conclusion is wrong.
a creature of contract.
First, the pronouncements made in the ABS-CBN Case and in the Insular Savings
Deconstructing the view that arbitral Bank Case (which served as the authority for the ABS-CBN Case) were both obiter
tribunals are quasi-judicial agencies dicta.

We are aware of the contrary view expressed by the late Chief Justice Renato In the ABS-CBN Case,  we sustained the CA's dismissal of the petition because it
Corona in ABS-CBN Broadcasting Corporation v. World Interactive Network was filed as an "alternative petition for review under Rule 43 or petition
Systems (WINS)Japan Co., Ltd.  87 for  certiorari under Rule 65."  96 We held that it was an inappropriate  mode of appeal
because, a petition for review and a petition for certiorari  are mutually exclusive and
The ABS-CBN Case opined that a voluntary arbitrator is a "quasi-judicial not alternative or successive.
instrumentality" of the government 88 pursuant to Luzon Development Bank v.
Association of Luzon Development Bank Employees,  89 Sevilla Trading Company v. In the Insular Savings Bank case,  the lis mota of the case was the RTC's
Sernana,  90 Manila Midtown Hotel v. Borromeo,  91 and Nippon Paint Employees jurisdiction over an appeal from an arbitral award. The parties to the arbitration
Union-Olalia v. Court of Appeals.  92 Hence, voluntary arbitrators are included in the agreement agreed that the rules of the arbitration provider97 - which stipulated that
Rule 43 jurisdiction of the Court of Appeals: the R TC shall have jurisdiction to review arbitral awards - will govern the
proceedings.98 The Court ultimately held that the RTC does not have jurisdiction to
SECTION 1. Scope.-This  Rule shall apply to appeals from review the merits of the award because legal jurisdiction is conferred by law, not by
judgments or final orders of the Court of Tax Appeals and from mere agreement of the parties.
awards, judgments, final orders or resolutions of or authorized by
any quasi-judicial agency in the exercise of its quasi-judicial In both cases, the pronouncements as to the remedies against an arbitral award
functions. Among these agencies are the Civil Service Commission, were unnecessary for their resolution. Therefore, these are obiter dicta  - judicial
Central: Board of Assessment Appeals, Securities and Exchange comments made, in passing which are not essential to the resolution of the case and
Commission, Office of the President, Land Registration Authority, cannot therefore serve as precedents.99
Social Security Commission, Civil Aeronautics Board, Bureau of
Patents, Trademarks and Technology Transfer, National Second, even if we disregard the obiter dicta character of both pronouncements, a
Electrification Administration, Energy Regulatory Board, National more careful scrutiny deconstructs their legal authority.
Telecommunications Commission, Department of Agrarian Reform
under Republic Act No. 6657, Government Service Insurance The ABS-CBN Case committed the classic fallacy of equivocation.  It equated the
System, Employees Compensation Commission, Agricultural term "voluntary arbitrator" used in Rule 43, Section 1 and in the cases of Luzon
Inventions Board, Insurance Commission, Philippine Atomic Energy Development Bank v. Association of Luzon Development Bank Employees, Sevilla
Commission, Board of Investments, Construction Industry Trading Company v. Semana, Manila Midtown Hotel v. Borromeo,  and Nippon Paint
Arbitration Commission, and voluntary arbitrators authorized by Employees Union-Olalia v. Court of Appeals  with the term "arbitrator/arbitration
law.93 (emphasis supplied) tribunal."
The first rule of legal construction, verba legis, requires that, wherever possible, the Department of Trade and Industry. 108 Its jurisdiction is likewise conferred by
words used in the Constitution or in the statute must be given their ordinary statute. 109 By contrast, the subject-matter jurisdiction of commercial arbitrators is
meaning except where technical terms are employed.  100Notably, all of the cases stipulated by the parties.
cited in the ABS-CBN Case  involved labor disputes.
These account for the legal differences between "ordinary" or "commercial"
The term "Voluntary Arbitrator" does not refer to an ordinary "arbitrator" who arbitrators under the Arbitration Law and the ADR Law, and "voluntary arbitrators"
voluntarily agreed to: resolve a dispute. It is a technical term with a specific definition under the Labor Code. The two terms are not  synonymous with each other.
under the Labor Code: Interchanging them with one another results in the logical fallacy of equivocation -
using the same word with different meanings.
Art. 212 Definitions. xxx
Further,  Rule 43, Section 1 enumerates quasi-judicial tribunals whose decisions are
14. "Voluntary Arbitrator" means any' person accredited by the appealable to the CA instead of the RTC. But where legislation provides for an
Board as such or any person named or designated in the Collective appeal from decisions of certain administrative bodies to the CA, it means that such
Bargaining Agreement by the parties to act as their Voluntary bodies are co-equal with the RTC in terms of rank and stature, logically placing them
Arbitrator, or one chosen with or without the assistance of the beyond the control of the latter.  110
National Conciliation and Mediation Board, pursuant to a selection
procedure agreed upon in the Collective Bargaining Agreement, or However, arbitral tribunals and the RTC are not co-equal bodies because the RTC
any official that may be authorized by the Secretary of Labor and is authorized to confirm or to vacate (but not reverse) arbitral awards. 111 If we were
Employment to act as Voluntary Arbitrator upon the written request to deem arbitrators as included in the scope of Rule 43, we would effectively place it'
and agreement of the parties to a labor dispute. 101 on equal footing with the RTC and remove arbitral awards from the scope of RTC
review.
Voluntary Arbitrators resolve labor disputes and grievances arising from the
interpretation of Collective Bargaining Agreements. 102 These disputes were All things considered, there is no legal authority supporting the position that
specifically excluded: from the coverage of both the Arbitration Law103 and the ADR commercial arbitrators are quasi-judicial bodies.
Law. 104
What are remedies from a final domestic
Unlike purely commercial relationships, the relationship between capital and labor arbitral award?
are heavily impressed with public interest.  105Because of this, Voluntary Arbitrators
authorized to resolve labor disputes have been clothed with quasi-judicial authority. The right to an appeal is neither' a natural right nor an indispensable component of
due process; it is a mere statutory privilege that cannot be invoked in the absence of
On the other hand, commercial relationships covered by our commercial arbitration an enabling statute. Neither the Arbitration Law nor the ADR Law allows a losing
laws are purely private and contractual in nature. Unlike labor relationships, they do party to appeal from the arbitral award. The statutory absence of an appeal
not possess the same compelling state interest that would justify state interference mechanism reflects the State's policy of upholding the autonomy of arbitration
into the autonomy of contracts. Hence, commercial arbitration is a purely private proceedings and their corresponding arbitral awards.
system of adjudication facilitated by private citizens instead of government
instrumentalities wielding quasi-judicial powers. This Court recognized this when we enacted the Special Rules of Court on
Alternative Dispute Resolution  in 2009: 112
Moreover,  judicial or quasi-judicial jurisdiction cannot be conferred upon a tribunal
by the parties alone. The Labor Code itself confers subject-matter jurisdiction to Rule 2.1. General policies.  -- It is the policy of the State to actively
Voluntary Arbitrators. 106 promote the use of various modes of ADR and to respect party
autonomy or the freedom of the parties to make their own
Notably, the other arbitration body listed in Rule 43 - the Construction Industry arrangements in the resolution of disputes with the greatest
Arbitration Commission (CIAC)  - is also a government agency107 attached to the cooperation of and the least intervention from the courts. xxx
 The Court shall exercise the power of judicial review as provided by If the Regional Trial Court is asked to set aside an arbitral award in
these Special ADR Rules. Courts shall intervene only in the a domestic or international arbitration on any ground other than
cases allowed by law or these Special ADR Rules. 113 those provided in the Special ADR Rules, the court shall
entertain such ground for the setting aside or non-recognition of the
xxxx arbitral award only if the same amounts to a violation of public
policy.
Rule 19.7. No appeal or  certiorari on the merits of an arbitral
award - An agreement to refer a dispute to arbitration shall mean The court shall not set aside or vacate the award of the arbitral
that the arbitral award shall be final and binding. Consequently, a tribunal merely on the ground that the arbitral tribunal
party to an arbitration is precluded from filing an appeal or a committed errors of fact, or of law, or of fact and law, as the
petition for certiorari questioning the merits of an arbitral court cannot substitute its judgment for that of the arbitral
award. 114 (emphasis supplied) tribunal.116

More than a decade earlier in Asset  Privatization Trust v. Court of Appeals, we The grounds for vacating a domestic arbitral award under Section 24 of the
likewise defended the autonomy of arbitral awards through our policy of non- Arbitration Law contemplate the following scenarios:
intervention on their substantive merits:
(a) when the award is procured by corruption, fraud, or other undue means; or
As a rule, the award of an arbitrator cannot be set aside for mere
errors of judgment either as to the law or as to the facts. Courts (b) there was evident partiality or corruption in the arbitrators or any of them; or
are without power to amend or overrule merely because of
disagreement with matters of law or facts determined by the (c) the arbitrators were guilty of misconduct that materially prejudiced the rights of
arbitrators. They will not review the findings of law and fact any party; or
contained in an award, and will not undertake to substitute their
judgment for that of the arbitrators, since any other rule would (d) the arbitrators exceeded their powers, or so imperfectly executed them, that a
make an award the commencement, not the end, of litigation. Errors mutual, final and definite award upon the subject matter submitted to them was not
of law and fact, or an erroneous decision of matters submitted to the made. 117
judgment of the arbitrators, are insufficient to invalidate an award
fairly and honestly made. Judicial review of an arbitration is, thus,
more limited than judicial review of a trial. 115 The award may also be vacated if an arbitrator who was disqualified to act willfully
refrained from disclosing his disqualification to the parties. 118 Notably, none of these
grounds pertain to the correctness of the award but relate to the misconduct of
Nonetheless, an arbitral award is not absolute. Rule 19.10 of the Special ADR Rules arbitrators.
- by referring to Section 24 of the Arbitration Law and Article 34 of the 1985 United
Nations Commission on International Trade Law (UNCITRAL) Model Law -
recognizes the very limited exceptions to the autonomy of arbitral awards: The RTC may also set aside the arbitral award based on Article 34 of the
UNCITRAL Model Law. These grounds are reproduced in Chapter 4 of
the Implementing Rules and Regulations (IRR) of the 2004 ADR Act:
Rule 19.10. Rule on judicial review on arbitration in the
Philippines.  - As a general rule, the court can only vacate or set
aside the decision of an arbitral tribunal upon a clear showing' that (i) the party making the application furnishes proof that:
the award suffers from any of the infirmities or grounds for vacating
an arbitral award under Section 24 of Republic Act No. 876 or (aa) a party to the arbitration agreement was under some
under Rule 34 of the Model Law in a domestic arbitration, or for incapacity; or the said agreement is not valid under the law to which
setting aside an award in an international arbitration under Article 34 the parties have subjected it or, failing any indication thereon, under
of the Model Law, or for such other grounds provided under these the law of the Philippines; or
Special Rules.
 (bb) the party making the application was not given proper notice of domestic arbitral award shall be disregarded by the regional
the appointment of an arbitrator or of the arbitral proceedings or was trial court. 121
otherwise unable to present his case; or
Consequently, the winning party can generally expect the enforcement of the award.
(cc) the award deals with a dispute not contemplated by or not This is a stricter rule that makes Article 2044122 of the Civil Code regarding the
falling within the terms of the submission to arbitration, or contains finality of an arbitral award redundant.
decisions on matters beyond the scope of the submission to
arbitration, provided that, if the decisions on matters submitted to As established earlier, an arbitral: award is not appealable via Rule 43 because: (1)
arbitration can be separated from those not so submitted, only the there is no statutory basis for an appeal from the final award of arbitrators; (2)
part of the award which contains decisions on matters not submitted arbitrators are not quasi-judicial bodies; and (3) the Special ADR Rules specifically
to arbitration may be set aside; or prohibit the filing of an appeal to question the merits of an arbitral award.

(dd) the composition of the arbitral tribunal or the arbitral procedure The Special ADR Rules allow, the RTC to correct or modify an arbitral award
was not in accordance with the agreement of the parties, unless pursuant to Section 25 of the Arbitration Law. However, this authority cannot be
such agreement was in conflict with a provision of ADR Act from interpreted as jurisdiction to review the merits of the award. The RTC can modify or
which the parties cannot derogate, or, failing such agreement, was correct the award only in the following cases:
not in accordance with ADR Act; or
a. Where there was an evident miscalculation of figures or an evident mistake in the
(ii) The Court finds that: description of any person, thing or property referred to in the award;

(aa) the subject-matter of the dispute is not capable of settlement b. Where the arbitrators have awarded upon a matter not submitted to them, not
by arbitration under the law of the Philippines; or affecting the merits of the decision upon the matter submitted;

(bb) the award is in conflict with the public policy  of the c. Where the arbitrators have omitted to resolve an issue submitted to them for
Philippines. 119 resolution; or

Chapter 4 of the IRR of the, ADR Act applies particularly to International Commercial d. Where the award is imperfect in a matter of form not affecting the merits of the
Arbitration. However, the abovementioned grounds taken from the UNCITRAL, controversy, and if it had been a commissioner's report, the defect could have been
Model Law are specifically made applicable to domestic arbitration by the Special amended or disregarded by the Court. 123
ADR Rules. 120
A losing party is likewise precluded from resorting to certiorari  under Rule 65 of the
Notably, these grounds are not concerned with the correctness of the award; they go Rules of Court. 124 Certiorari is a prerogative writ designed to correct errors of
into the validity of the arbitration agreement or the regularity of the arbitration jurisdiction committed by a judicial or quasi-judicial body. 125 Because an arbitral
proceedings. tribunal is not a government organ  exercising judicial or quasi-judicial powers, it is
removed from the ambit of Rule 65.
These grounds for vacating an arbitral award are exclusive. Under the ADR Law,
courts are obliged to disregard any other grounds invoked to set aside an award: Not even the Court's expanded certiorari jurisdiction under the Constitution 126 can
justify judicial intrusion into the merits of arbitral awards. While the Constitution
SEC. 41. Vacation Award.  - A party to a domestic arbitration may expanded the scope of certiorari  proceedings, this power remains limited to a
question the arbitral award with the appropriate regional trial court in review' of the acts of "any branch or instrumentality of the Government." As a purely
accordance with the rules of procedure to be promulgated by the private creature of contract, an arbitral tribunal remains outside the scope
Supreme Court only on those grounds enumerated in Section 25 of of certiorari.
Republic Act No. 876. Any other ground raised against a
Lastly, the Special ADR Rules are a self-contained body of rules. The parties cannot The Arbitration Law did not specify which Court had jurisdiction to entertain the
invoke remedies and other provisions from the Rules of Court unless they were appeal but left the matter to be governed by the Rules of Court. As the appeal was
incorporated in the Special ADR Rules: limited to questions of law and was described as "certiorari proceedings," the mode
of appeal can be interpreted as an Appeal By Certiorari to this Court under Rule 45.
Rule 22.1. Applicability of Rules of Court.  - The provisions of the
Rules of Court that are applicable to the proceedings enumerated When the ADR Law was enacted in 2004, it specified that the appeal shall be
in Rule 1.1 of these Special ADR Rules have either been included made to the CA in accordance with the rules of procedure to be promulgated by this
and incorporated in these Special ADR Rules or specifically Court. 131 The Special ADR Rules provided that the mode of appeal from the RTC's
referred to herein. order confirming, vacating, or correcting/modifying a domestic arbitral award was
through a petition for review with the CA. 132 However, the Special ADR Rules only
In Connection with the above proceedings, the Rules of Evidence took effect on October 30, 2009.
shall be liberally construed to achieve the objectives of the Special
ADR Rules. 127 In the present case, the R TC disallowed TEAM' s notice of appeal from the former's
decision confirming the arbitral award on July 3, 2009. TEAM moved for
Contrary to TEAM's position, the Special ADR Rules actually forecloses against reconsideration which was likewise denied on November 15, 2009. In the interim,
other remedies outside of itself. Thus, a losing party cannot assail an arbitral award the Special ADR Rules became effective. Notably, the Special ADR Rules apply
through; a petition for review under Rule 43 or a petition for certiorari under Rule 65 retroactively in light of its procedural character. 133 TEAM filed its petition
because these remedies are not specifically permitted in the Special ADR Rules. for certiorari  soon after.

In sum, the only remedy against; a final domestic arbitral award is to file petition to Nevertheless, whether we apply, Section 29 of the Arbitration Law, Section 46 of the
vacate or to modify/correct the award not later than thirty (30) days from the receipt ADR Law, or Rule 19.12 of the Special ADR Rules, there is no legal basis that an
of the award. 128 Unless a ground to vacate has been established, the RTC must ordinary appeal (via notice of appeal) is the correct remedy from an order
confirm the arbitral award as a matter of course. confirming, vacating, or correcting an arbitral award. Thus, there is no merit in the
CA's ruling that the RTC gravely abused its discretion when it refused to give due
course to the notice of appeal.
The remedies against an order
Confirming, vacating, correcting, or
modifying an arbitral award The correctness or incorrectness
of the arbitral award
Once the RTC orders the confirmation, vacation, or correction/modification of a
domestic arbitral award, the aggrieved party may move for reconsideration within a We have deliberately refrained from passing upon the merits of the arbitral award -
non-extendible period of fifteen (15) days from receipt of the order. 129 The losing not because the award was erroneous - but because it would be improper. None of
party may also opt to appeal from the RTC's ruling instead. the grounds to vacate an arbitral award are present in this case and as already
established, the merits  of the award cannot be reviewed by the courts.
Under the Arbitration Law, the mode of appeal was via petition for review
on certiorari: Our refusal to review the award is not a simple matter of putting procedural
technicalities over the substantive merits of a case; it goes into the very legal
substance of the issues. There is no law granting the judiciary authority to review the
Section 29. Appeals.  - An appeal may be taken from an order
merits of an arbitral award. If we were to insist on reviewing the correctness of the
made in a proceeding under this Act, or from a judgment entered
award: (or consent to the CA's doing so),  it would be tantamount to expanding our
upon an award through certiorari  proceedings, but such
jurisdiction without the benefit of legislation. This translates to judicial legislation - a
appeals shall be limited to questions of law. The proceedings
breach of the fundamental principle of separation of powers.
upon such appeal, including the judgment thereon shall be
governed by, the Rules of Court in so far as they are applicable.130
The CA reversed the arbitral award - an action that it has no power to do  - because that the award suffers from any of the infirmities or grounds for
it disagreed with the tribunal's factual findings and application of the law. However, vacating an arbitral award under Section 24 of Republic Act No.
the alleged incorrectness of the award is insufficient cause to vacate the award, 876 or under Rule 34 of the Model Law in a domestic
given the State's policy of upholding the autonomy of arbitral awards. arbitration, or for setting aside an award in an international
arbitration under Article 34 of the Model Law, or for such other
The CA passed upon questions such as: (1) whether or not TEAM effectively grounds provided under these Special Rules.
returned the property upon the expiration of the lease; (2) whether or not TEAM was
liable to pay rentals after the expiration of the lease; and (3) whether or not TEAM If the Regional Trial Court is asked to set aside an arbitral award in
was liable to pay Fruehauf damages corresponding to the cost of repairs. These a domestic or international arbitration on any ground other than
were the same questions that were specifically submitted to the arbitral tribunal for those provided in the Special ADR Rules, the court shall entertain
its resolution. 134 such ground for the setting aside or non-recognition of the arbitral
award only if thesame amounts to a violation of public policy.
The CA disagreed with the tribunal's factual determinations and legal interpretation
of TEAM's obligations under the contract - particularly, that TEAM's obligation to turn The court shall not set aside or vacate the award of the arbitral
over the improvements on the land at the end of the lease in the same condition as tribunal merely on the ground that the arbitral tribunal
when the lease commenced translated to an obligation to make ordinary repairs committed errors of fact, or of law, or of fact and law, as the
necessary for its preservation. 135 court cannot substitute its judgment for that of the arbitral
tribunal.
Assuming arguendo that the tribunal's interpretation of the contract was incorrect,
the errors would have been simple errors of law.1âwphi1 It was the tribunal - not In other words, simple errors of fact, of law, or of fact and law committed by the
the RTC or the CA - that had jurisdiction and authority over the issue by virtue of the arbitral tribunal are not justiciable errors in this jurisdiction. 139
parties' submissions; the CA's substitution of its own judgment for the arbitral award
cannot be more compelling than the overriding public policy to uphold the autonomy TEAM agreed to submit their disputes to an arbitral tribunal. It understood all the
of arbitral awards. Courts are precluded from disturbing an arbitral tribunal's factual risks - including the absence of an appeal mechanism  - and found that its benefits
findings and interpretations of law. 136 The CA's ruling is an unjustified judicial (both legal and economic) outweighed the disadvantages. Without a showing that
intrusion in excess of its jurisdiction - a judicial overreach. 137 any of the grounds to vacate the award exists or that the same amounts to a
violation of an overriding public policy, the award is subject to confirmation as a
Upholding the CA's ruling would weaken our alternative dispute resolution matter of course. 140
mechanisms by allowing the courts to "throw their weight around" whenever they
disagree with the results. It erodes the obligatory force of arbitration agreements by WHEREFORE, we GRANT the petition. The CA's decision in CA-G. R. SP. No.
allowing the losing parties to "forum shop" for a more favorable ruling from the 112384 is SET ASIDE and the RTC's order CONFIRMING the arbitral award in SP.
judiciary. Proc. No. 11449 is REINSTATED.

Whether or not the arbitral tribunal correctly passed upon the issues is irrelevant. SO ORDERED.
Regardless of the amount, of the sum involved in a case, a simple error of law
remains a simple error of law. Courts are precluded from revising the award in a
particular way, revisiting the tribunal's findings of fact or conclusions of law, or
otherwise encroaching upon the independence of an arbitral tribunal. 138At the risk of
redundancy, we emphasize Rule 19.10 of the Special ADR Rules promulgated by
this Court en banc:

Rule 19.10. Rule on judicial review on arbitration in the

Philippines. - As a general rule, the court can only vacate or set
aside the decision of an arbitral tribunal upon a clear showing
 Program (GSP)  contracts with Air2l, an independent contractor, to primarily
undertake its delivery and pick-up services within the country.4

Under the GSP arrangement, the packages sent by FedEx customers from abroad
would be picked up at a Philippine airport and delivered by Air21 to its respective
consignees. Conversely, packages from Philippine clients would be delivered by
Air21 to the airport and turned over to FedEx for shipment to consignees abroad. As
stipulated in the GSP contracts, Air21 guaranteed that all shipments would be
cleared through customs in accordance with Philippine law. In the implementation of
SECOND DIVISION these contracts, however, several issues relating to money remittance, value-added
taxes, dynamic fuel charge, trucking costs, interests, and penalties ensued between
November 21, 2016 the parties.

G.R. No. 216600 On May 11, 2011, in an effort to settle their commercial dispute, FedEx and Air21
agreed to submit themselves to arbitration before the Philippine Dispute Resolution
Center (PDRC). Thus, on June 24, 2011, FedEx filed its Notice of Arbitration. On
FEDERAL EXPRESS CORPORATION and RHICKE S. JENNINGS, Petitioners
October 3, 2011, the Arbitral Tribunal was constituted.
vs.
AIRFREIGHT 2100, INC. and ALBERTO D. LINA, Respondents
As part of the arbitration proceedings, Jennings, John Lumley Holmes (Holmes), the
Managing Director of SPAC Legal of FedEx; and David John Ross (Ross),  Senior
DECISION
Vice President of Operations, Middle East, India and Africa, executed their
respective statements5 as witnesses for FedEx. Ross and Holmes deposed that
MENDOZA, J.: Federal Express Pacific, Inc., a subsidiary of FedEx, used to have an IFF license to
engage in the business of freight forwarding in the Philippines. This license,
Before the Court is a Petition for Review on Certiorari1 under Rule 45 of the Rules of however, was suspended pending a case in court filed by Merit International,
Court filed by Federal Express Corporation (FedEx)  and Rhicke S. Inc. (Merit) and Ace Logistics, Inc. (Ace), both freight forwarding companies, which
Jennings (Jennings), assailing the January 20, 2015 Decision2 of the Court of questioned the issuance of the IFF to FedEx. Absent the said license, FedEx
Appeals (CA)  in CA-G.R. SP No. 135835, which affirmed the May 7, 2014 Order3 of executed the GSP contracts with Air21 to be able to conduct its business in the
the Regional Trial Court, Branch 70, Pasig City Philippines. Ross and Holmes, in their individual statements, averred that Merit and
Ace were either owned or controlled by Air21 employees or persons connected with
(RTC),  dismissing its petition for the issuance of a confidentiality/protective order. the Lina Group of Companies, which included Air21.

FedEx is a foreign corporation doing business in the Philippines primarily engaged in Jennings, in his cross-examination, was identified as the source of the information
international air carriage, logistics and freight forwarding, while Jennings serves as that Merit and Ace were Air21's proxies and was asked if he had any written proof of
its Managing Director for the Philippines and Indonesia. Respondent Airfreight such proxy relationship.6 He answered in the negative. In his re-direct examination,
2100 (Air21) is a domestic corporation likewise involved in the freight forwarding he was made to expound on the supposed proxy relationship between Merit, Ace
business, while Alberto Lina (Lina)  is the Chairman of its Board of Directors. and Air21.7 He responded that Merit and Ace were just very small companies with
meager resources, yet they were able to finance and file a case to oppose the grant
The Antecedents of IFF license to FedEx. Jennings also disclosed that one of the directors of Ace was
a friend of Lina and that Loma Orbe, the President of Merit, was the former "boss" of
Lito Alvarez, who was also associated with Air21.
FedEx, having lost its International Freight Forwarder's (IFF) license to engage in
international freight forwarding in the Philippines, executed various Global Service
Feeling aggrieved by those statements, Lina for himself and on behalf of Air21, filed On January 20, 2015, the CA denied the petition. In its assailed decision, the CA
a complaint for grave slander against Jennings before the Office of the City explained that the declarations by Jennings were not confidential as they were not at
Prosecutor in Taguig City.8 Lina claimed that the defamatory imputation of Jennings all related to the subject of mediation as the arbitration proceedings revolved around
that Merit and Ace were Air21 's proxies brought dishonor, discredit and contempt to the parties' claims for sum of money.11 Thus, the CA ruled that "statements made
his name and that of Air21. Lina quoted certain portions of the written statements of without any bearing on the subject proceedings are not confidential in nature." It
Holmes and Ross and the Transcript of Stenographic Notes (TSN)  of the April 25, must be emphasized that other declarations given therein, if relative to the subject of
2013 arbitration hearing reflecting Jennings' testimony to support his complaint. mediation or arbitration, are certainly confidential."12

Consequently, FedEx and Jennings (petitioners)  filed their Petition for Issuance of a Hence, this present petition before the Court.
Confidentiality/Protective Order with Application for Temporary Order of Protection
and/or Preliminary Injunction before the RTC alleging that all information and GROUNDS IN SUPPORT OF THE PETITION
documents obtained in, or related to, the arbitration proceedings were
confidential.9 FedEx asserted that the testimony of Jennings, a witness in the A.
arbitration proceedings, should not be divulged and used to bolster the complaint-
affidavit for grave slander as this was inadmissible in evidence.
THE COURT OF APPEALS FAILED TO APPLY, OR OTHERWISE
MISAPPLIED, SECTIONS 3(H) AND 23 OF THE ADR ACT.
On January 16, 2014, the RTC granted petitioners' application for the Temporary
Order of Protection.
B.
Meanwhile, on February 3, 2014, the arbitral tribunal rendered an award in favor of
FedEx. THE COURT OF APPEALS FAILED TO APPLY RULE 10.5 OF
THE SPECIAL ADR RULES.
Subsequently, in the assailed Order, dated May 7, 2014, the RTC denied FedEx's
petition for lack of merit, stating that the statements and arbitration documents were C.
not confidential information. It went on to state that "[t]he statement and 'Arbitration
Documents' which purportedly consists the crime of Grave Slander under Articles THE TEST APPLIED BY THE COURT OF APPEALS FOR
353 and 358 of the Revised Penal Code are not in any way related to the subject DETERMINING CONFIDENTIALITY OF INFORMATION IS NOT
under Arbitration." The RTC further wrote that "a crime cannot be protected by the SANCTIONED BY AND IS INCONSISTENT WITH THE ADR ACT
confidentiality rules under ADR. The said rules should not be used as a shield in the AND THE SPECIAL ADR RULES.
commission of any crime." Thus, it disposed:
D.
WHEREFORE, in view of the foregoing, the Petition for Issuance of
a Confidentiality/Protective Order is hereby DENIED for lack of THE ASSAILED DECISION RESULTS TO SUBSTANTIAL
merit. PREJUDICE TO PETITIONERS.

The case is hereby DISMISSED. E.

SO ORDERED.10 THE ASSAILED DECISION DEFEATS PUBLIC POLICY ON

CONFIDENTIALITY OF THE RECORDS OF AND
Dissatisfied, petitioners challenged the RTC order before the CA via a petition for COMMUNICATIONS MADE IN THE COURSE OF
review. ARBITRATION.13
FedEx argues that the Jennings' statements were part of the (a) records and The crucial issue in this case is whether the testimony of Jennings given during the
evidence of Arbitration (Section 23); (b) witness statements made therein (Section arbitration proceedings falls within the ambit of confidential information and,
3[h][3]); and (c) communication made in a dispute resolution proceedings (Section 3 therefore, covered by the mantle of a confidentiality/protection order.
[h][l]).14 They, thus, averred that Jennings' oral statements made during the April 25,
2013 arbitration hearing and the TSN of the hearings, conducted on April 22 and 25, The Court finds the petition meritorious.
2013, form part of the records of arbitration and must, therefore, be considered
confidential information. Section 3(h) of Republic Act (R.A.) No. 9285 or the Alternative Dispute Resolution of
2004 (ADR Act)  defines confidential information as follows:
For said reason, petitioners assert that Rule 10.5 of the Special Alternative Dispute
Resolution (ADR) Rules, allowing for the issuance of a confidentiality/protective "Confidential information" means any information, relative to the
order, was completely disregarded by the CA when it denied the petition filed by subject of mediation or arbitration, expressly intended by the
FedEx as a result of Lina divulging what were supposed to be confidential source not to be disclosed, or obtained under circumstances that
information from ADR proceedings. would create a reasonable expectation on behalf of the source that
the information shall not be disclosed. It shall include (1)
Petitioners also claim that in ruling that Jennings' statements were not confidential communication, oral or written, made in a dispute resolution
information, by applying the test of relevance that "statements made without any proceedings, including any memoranda, notes or work product of
bearing on the subject proceedings are not confidential in nature," the CA used a the neutral party or non-party participant, as defined in this Act; (2)
"test" that had no basis in law and whose application in its petition amounted to an oral or written statement made or which occurs during mediation
judicial legislation.15 or for purposes of considering, conducting, participating, initiating,
continuing of reconvening mediation or retaining a mediator; and (3)
Respondent Air21 and Lina (respondents),  in their Comment,16 essentially countered pleadings, motions manifestations, witness statements,
that: reports filed or submitted in an arbitration or for expert
evaluation. [Emphases Supplied]
While the Alternative Dispute Resolution Act of 2004 (the "ADR
Law") confers communications made during arbitration the privilege The said list is not exclusive and may include other information as long as they
against disclosure, otherwise known as the confidentiality principle, satisfy the requirements of express confidentiality or implied confidentiality.18
to assist the parties in having a speedy, efficient and impartial
resolution of their disputes, said privilege cannot be invoked to Plainly, Rule 10.1 of A.M. No. 07-11-08-SC or the Special Rules of Court on
shield any party from criminal responsibility. The privilege is not Alternative Dispute Resolution (Special ADR Rules)  allows "[a] party, counsel or
absolute. The ADR Law does not exist in a vacuum without regard witness who disclosed or who was compelled to disclose information relative to the
to other existing jurisprudence and laws, particularly the Revised subject of ADR under circumstances that would create a reasonable expectation, on
Penal Code. Otherwise, we will permit a dangerous situation where behalf of the source, that the information shall be kept confidential xxx the right to
arbitration proceedings will be used by an unscrupulous disputant prevent such information from being further disclosed without the express written
as a venue for the commission of crime, which cannot be punished consent of the source or the party who made the disclosure." Thus, the rules on
by the simple invocation of the privilege. Such an absurd confidentiality and protective orders apply when:
interpretation of our laws cannot be deemed to be the underlying
will of our Congress in framing and enacting our law on arbitration. 1. An ADR proceeding is pending;
To be sure, a crime cannot be protected or extinguished through a
bare invocation of the confidentiality rule.17
2. A party, counsel or witness disclosed information or was
otherwise compelled to disclose information;
The Court's Ruling
 3. The disclosure was made under circumstances that would create Rule 10.8. Court action. - If the court finds the petition or motion
a reasonable expectation, on behalf of the source, that the meritorious, it shall issue an order enjoining a person or persons
information shall be kept confidential; from divulging confidential information.

4. The source of the information or the party who made the In resolving the petition or motion, the courts shall be guided by the
disclosure has the right to prevent such information from being following principles applicable to all ADR proceedings: Confidential
disclosed; information shall not be subject to discovery and shall be
inadmissible in any adversarial proceeding, whether judicial or quasi
5. The source of the information or the party who made the judicial. However, evidence or information that is otherwise
disclosure has not given his express consent to any disclosure; and admissible or subject to discovery does not become inadmissible or
protected from discovery solely by reason of its use therein.
6. The applicant would be materially prejudiced by an unauthorized
disclosure of the information obtained, or to be obtained, during the Article 5.42 of the Implementing Rules and Regulations (JRR)21 of the ADR Act
ADR proceeding. likewise echoes that arbitration proceedings, records, evidence and the arbitral
award and other confidential information are privileged and confidential and shall not
be published except [i] with the consent of the parties; or [ii] for the limited purpose
Gauged by the said parameters, the written statements of witnesses Ross, Holmes
of disclosing to the court relevant documents where resort to the court is allowed.
and Jennings, as well as the latter's oral testimony in the April 25, 2013 arbitration
Given that the witness statements of Ross, Holmes and Jennings, and the latter's
hearing, both fall under Section 3 (h) [1] and [3] of the ADR Act which states
arbitration testimony, fall within the ambit of confidential information, they must, as a
that "communication, oral or written, made in a dispute resolution
general rule, remain confidential. Although there is no unbridled shroud of
proceedings,  including any memoranda, notes or work product of the neutral party
confidentiality on information obtained or disclosed in an arbitration proceeding, the
or non-party participant, as defined in this Act; and (3) pleadings, motions,
presence of the above criteria must be apparent; otherwise, the general rule should
manifestations, witness statements,  reports filed or submitted in an arbitration or for
be applied. Here in this case, only a perceived imputation of a wrongdoing was
expert valuation," constitutes confidential information.
alleged by the respondents.
Notably, both the parties and the Arbitral Tribunal had agreed to the Terms of
In denying the said application for confidentiality/protection order, the RTC and the
Reference (TOR) that "the arbitration proceedings should be kept strictly confidential
CA did not consider the declarations contained in the said witness statements and
as provided in Section 23 of the ADR Act and Article 25-A 19 of the PDRCI Arbitration
arbitration testimony to be related to the subject of arbitration and, accordingly, ruled
Rules (Arbitration Rules)  and that they should all be bound by such confidentiality
that they could not be covered by a confidentiality order.
requirements."

The Court does not agree. Suffice it to say that the phrase "relative to the subject of
The provisions of the ADR Act and the Arbitration Rules repeatedly employ the word
mediation or arbitration" need not be strictly confined to the discussion of the core
"shall" which, in statutory construction, is one of mandatory character in common
issues in the arbitral dispute. By definition, "relative" simply means "connected to,"
parlance and in ordinary signification.20 Thus, the general rule is that information
which means that parties in arbitration proceedings are encouraged to discuss
disclosed by a party or witness in an ADR proceeding is considered privileged and
openly their grievances and explore the circumstances which might have any
confidential.
connection in identifying the source of the conflict in the hope of finding a better
alternative to resolve the parties' dispute. An ADR proceeding is aimed at resolving
In evaluating the merits of the petition, Rule 10.8 of the Special ADR Rules the parties' conflict without court intervention. It was not designed to be strictly
mandates that courts should be guided by the principle that confidential information technical or legally confined at all times. By mutual agreement or consent of the
shall not be subject to discovery and shall be inadmissible in any adversarial parties to a controversy or dispute, they acquiesce to submit their differences to
proceeding, to wit: arbitrators for an informal hearing and extra-judicial determination and resolution.
Usually, an ADR hearing is held in private and the decision of the persons selected
to comprise the tribunal will take the place of a court judgment. This avoids the
formalities, delays and expenses of an ordinary litigation. Arbitration, as envisioned limited purpose of disclosing to the court of relevant documents in
by the ADR Act, must be taken in this perspective. cases where resort to the court is allowed herein. Provided,
however, that the court in which the action or the appeal is pending
Verily, it is imperative that legislative intent or spirit be the controlling factor, the may issue a protective order to prevent or prohibit disclosure of
leading star and guiding light in the application and interpretation of a statute.22 If a documents or information containing secret processes,
statute needs construction, the influence most dominant in that process is the intent developments, research and other information where it is shown
or spirit of the act.23 A thing which is within the intent of the lawmaker is as much that the applicant shall be materially prejudiced by an authorized
within the statute as if within the letter; and a thing which is within the letter of the disclosure thereof.
statute is not within the statute unless within the intent of the lawmakers. 24 In other
words, a statute must be read according to its spirit or intent and legislative intent is If Lina had legal grounds to suspect that Jennings committed slanderous remarks
part and parcel of the statute. It is the controlling factor in interpreting a statute. Any even before the arbitration proceeding commenced, then he must present evidence
interpretation that contradicts the legislative intent is unacceptable. independent and apart from some quoted portions of the arbitration documents.

In the case at bench, the supposed questionable statements surfaced when FedEx's It must be stressed that the very soul of an arbitration proceeding would be rendered
suspended IFF license was discussed during the arbitration hearing. In fact, when useless if it would be simply used as an avenue for evidence gathering or an
Jennings was asked by Arbitrator Panga to expound on how the opposition of Ace entrapment mechanism to lure the other unsuspecting party into conveying
and Merit could be related to the ongoing arbitration, Jennings replied that, to his information that could be potentially used against him in another forum or in court.
mind, it was indicative of the leverage that Air21 had over FedEx as it was able to
withhold large sums of money and siphon their joint plans from being properly Ultimately, the RTC and the CA failed to consider the fact that an arbitration
established. Whether the information disclosed in the arbitration proceeding would proceeding is essentially a unique proceeding that is non-litigious in character where
be given weight by the tribunal in the resolution of their dispute is a separate matter. the parties are bound by a different set of rules as clearly encapsulated under the
Likewise, the relevance or materiality of the said statements should be best left to Special ADR Rules. Inevitably, when Lina cited portions of the said arbitration
the arbitrators' sound appreciation and judgment. Even granting that the weight of documents, he violated their covenant in the TOR to resolve their dispute through
the said statements was not fundamental to the issues in the arbitration process, the arbitration process and to honor the confidentiality of the said proceeding. To
nevertheless, they were still connected to, and propounded by, a witness who relied disregard this commitment would impair the very essence of the ADR proceeding.
upon the confidentiality of the proceedings and expect that his responses be By itself, this would have served as a valid justification for the grant of the
reflected. confidentiality/protection order in favor of FedEx and Jennings.

Arbitration, being an ADR proceeding, was primarily designed to be a prompt, Thus, the claimed slanderous statements by Jennings during the arbitration hearing
economical and amicable forum for the resolution of disputes.1âwphi1 It guarantees are deemed confidential information and the veil of confidentiality over them must
confidentiality in its processes to encourage parties to ventilate their claims or remain.
disputes in a less formal, but spontaneous manner. It should be emphasized that the
law favors settlement of controversies out of court. Thus, a person who participates WHEREFORE, the petition is GRANTED. The January 20, 2015 Decision of the
in an arbitration proceeding is entitled to speak his or her piece without fear of being Court of Appeals (CA), in CA-G.R. SP No. 135835, is REVERSED and SET ASIDE.
prejudiced should the process become unsuccessful. Hence, any communication
made towards that end should be regarded as confidential and privileged.
The Petition for the Issuance of a Confidentiality/Protective Order filed by Federal
Express Corporation and Rhicke S. Jennings is hereby GRANTED.
To restate, the confidential nature of the arbitration proceeding is well-entrenched in
Section 23 of the ADR Act:
SO ORDERED.
SEC. 23. Confidentiality of Arbitration Proceedings. - The
arbitration proceedings, including the records, evidence and the
arbitral award, shall be considered confidential and shall not be
published except (1) with the consent of the parties, or (2) for the
 Steamship was a Bermuda-based Protection and Indemnity Club,
managed outside London, England.6 It insures its members-shipowners
against "third party risks and liabilities" for claims arising from (a) death
or injury to passengers; (b) loss or damage to cargoes; and (c) loss or
damage from collisions.7
THIRD DIVISION
Sulpicio insured its fleet of inter-island vessels with Steamship for
GR. No. 196072, September 20, 2017 Protection & Indemnity risks through local insurance agents, Pioneer
Insurance and Surety Corporation (Pioneer Insurance) or Seaboard-
Eastern Insurance Co., Inc. (Seaboard-Eastern). 8 One (1) of these
STEAMSHIP MUTUAL UNDERWRITING ASSOCIATION (BERMUDA)
vessels was the M/V Princess of the World, evidenced by a Certificate of
LIMITED, Petitioner, v. SULPICIO LINES, INC., Respondent.
Entry and Acceptance issued by Steamship, which provided:
G.R. NO. 208603
CERTIFICATE OF ENTRY AND ACCEPTANCE 
by the Club of your proposal for entering the ship(s)
SULPICIO LINES, INC., Petitioner, v. STEAMSHIP MUTUAL specified below, and of
UNDERWRITING ASSOCIATION (BERMUDA) LIMITED, Respondent. the tonnage set out against each, in:

DECISION Class 1 PROTECTION AND INDEMNITY

of the Club from
LEONEN, J.: Noon 20th February 2005 to Noon 20th February 2006

An insured member may be compelled to arbitration pursuant to the

Rules of the Protection and Indemnity Club, which were incorporated in
or until sold, lost, withdrawn or the entry is terminated in
the insurance policy by reference. Where there are multiple parties, the accordance with the rules, to the extent specified and in
court must refer to arbitration the parties covered by the agreement accordance with the Act, By(e)-Laws and the Rules from time
while proceeding with the civil action against those who were not bound to time in force and the special terms specified overleaf.
by the arbitration agreement.
Your name has been entered in the Register of Members of the
G.R. No. 196072 is a Petition for Review1 seeking to set aside the Club as a  Member.
November 26, 2010 Decision2 and March 10, 2011 Resolution3 of the
Court of Appeals in CA-GR. SP No. 106103. FOR ACCOUNT OF
      Sulpicio Lines Inc., CERTIFICATE
GR. No. 208603 is a Petition for Indirect Contempt4 filed by Sulpicio       1st Floor, Reclamation NUMBER
Lines, Inc. (Sulpicio) against Steamship Mutual Underwriting Association Area,
(Bermuda) Limited (Steamship). It prays, among others, that Steamship       P.O. Box No. 137
be (a) declared guilty of indirect contempt; (b) imposed a fine of       Cebu City, 155,534
P30,000.00; and (c) ordered to restitute to Sulpicio the amount of Philippines.
US$69,570.99 or its equivalent in Philippine currency plus interest,
computed from December 3, 2012 until fully restituted.5 NAME OF SHIP BUILT ENTERED CLASS PORT OF
 GROSS S CAN BE
TONNAGE MADE BY
ORDINARY
"PRINCESS OF THE REGISTRY RESOLUTION
OCEAN" FOLLOWING
Cebu
1975 City A GENERAL
B.V.
6,150 MEETING
"PRINCESS OF THE NOTIFIED TO
UNIVERSE" 1983 ALL
Cebu B.V. MEMBERS.[9
City 13,526

"PRINCESS OF THE 1979

B.V.
CARIBBEAN" Cebu 3,768
City On July 7, 2005, M/V Princess of the World was gutted by fire while on
1972 voyage from Iloilo to Zamboanga City, resulting in total loss of its
B.V.
"PRINCESS OF THE 9,627 cargoes. The fire incident was found by the Department of Interior and
WORLD" Cebu Local Government to be "accidental" in nature.10
1984 (Rebuilt City
X.X. Sulpicio claimed indemnity from Steamship under the Protection &
1990) 19,329
"PRINCESS OF THE Indemnity insurance policy. Steamship denied the claim and
STARS" Cebu subsequently rescinded the insurance coverage of Sulpicio's other vessels
City on the ground that "Sulpicio was grossly negligent in conducting its
business regarding safety, maintaining the seaworthiness of its vessels as
. . . . well as proper training of its crew."11

NOTES   On June 28, 2007, Sulpicio filed a Complaint 12 with the Regional Trial
1. REFERENCE IS 1. THE RULES Court of Makati City against Steamship; one (1) of its directors, Gary
REQUESTED TO ARE PRINTED Rynsard; and its local insurance agents Pioneer Insurance and Seaboard-
THE RULES AS ANNUALLY Eastern for specific performance and damages. This Complaint was
TO THE IN BOOK docketed as Civil Case No. 07-577, was amended on August 10,
CIRCUMSTANCE FORM, 2007,13 and further amended on September 11, 2007.14
S OF ENTRY INCORPORAT
BEING ING ALL Steamship filed its Motion to Dismiss and/or to Refer Case to
CANCELLED AND PREVIOUS Arbitration15 pursuant to Republic Act No. 9285, or the Alternative
AS TO ALTERATION Dispute Resolution Act of 2004 (ADR Law), and to Rule 4716 of the
THE S AND A 2005/2006 Club Rules, which supposedly provided for arbitration in
CIRCUMSTANCE COPY IS London of disputes between Steamship and its members.17 The other
S OF AN SENT TO defendants filed separate motions to dismiss.18
ALTERATION IN EACH
THE RULES OR MEMBER. Branch 149, Regional Trial Court, Makati City denied the motions to
BY(E)-LAWS. ALTERATION dismiss. In its July 11, 2008 Order,19 denying Steamship's motion and
supplemental motion to dismiss and citing20European Resources and
Technologies, Inc. v. Ingenieuburo Birkhann + Nolte, Ingeniurgesellschaft
Gmbh21 the Regional Trial Court held that "arbitration [did] not appear to (b) Without Sulpicio's knowledge or consent, Steamship
be the most prudent action, . . . considering that the other proclaimed itself the "victor" entitled to arbitration costs
defendants . . . ha[d] already filed their [respective] from Sulpicio;
[a]nswers."22 Steamship filed its Motion for Reconsideration,23 but it was
likewise denied in the Order24 dated September 24, 2008. (c) Without Sulpicio's knowledge or consent, Steamship
unceremoniously deducted from the refund due to Sulpicio in
the separate "Unabia Case" the huge amount of U.S.
Steamship assailed trial court orders before the Court of Appeals through
$69,570.99 despite the fact that: (a) Said "Unabia Case" is
a Rule 65 Petition, docketed as CA-G.R. SP No. 106103.25 The Court  of
unrelated to the instant case; (b) The propriety of a London
Appeals dismissed the petition in its November 26, 2010 Decision. 26 It arbitration is still to be resolved in this case by this
found no grave abuse of discretion on the part of the trial court in Honorable Court; (c) Steamship "enforced" by itself said
denying Steamship's Motion to Dismiss and/or to Refer Case to "arbitration costs" against Sulpicio without the courtesy of
Arbitration27 or any convincing evidence to show that a valid arbitration even informing this Honorable Court about it[; and]
agreement existed between the parties.28 Steamship's Motion for
Reconsideration of this Decision was likewise denied in the (d) Without Sulpicio's knowledge or consent, and more
Resolution29 dated March 10, 2011. importantly, without the prior approval of this Honorable
Court, Steamship initiated and "concluded" said London
On April 29, 2011, Steamship filed before this Court this Petition for "arbitration" during the pendency of this G.R. No. 196072
Review, docketed as G.R. No. 196072. In compliance with this Court's and before this Honorable Court could render its ruling or
June 13, 2011 Resolution,30 Sulpicio filed its Comment31 on August 31, decision.38 (Emphasis in the original)
2011 and Steamship filed its Reply32 on October 20, 2011.
Steamship filed its Comment/Opposition39on January 30, 2014, to which
On September 6, 2013, Sulpicio filed with this Court a Petition for Indirect Sulpicio filed its Reply40 on July 2, 2014.
Contempt33 under Rule 71 of the Rules of Court against Steamship. This
Petition was docketed as GR. No. 208603. In its Resolution41 dated January 15, 2014, this Court resolved to
consolidate G.R. Nos. 208603 and 196072.
Sulpicio alleges that sometime in September 2012, it settled its judgment
liability of P4,121,600.00 in Civil Case No. CEB-24783, entitled Verna The issues for this Court's resolution are:
Unabia v. Sulpicio Lines, Inc.34 However, the actual amount reimbursed
by Steamship was not P4,121,600.00, equivalent to US$96,958.47, but First, whether or not the petition in G.R. No. 196072 is proper under the
only US$27,387.48.35 Steamship deducted US$69,570.99, which allegedly Rules of Court;
represented Sulpicio's share in the arbitration costs for the arbitration in
London of the dispute in Civil Case No. 07-577.36 Second, whether or not there is a valid and binding arbitration agreement
between Steamship Mutual Underwriting (Bermuda) Limited and Sulpicio
Sulpicio accuses Steamship of indirect contempt for its "improper conduct Lines, Inc.;
tending directly, or indirectly, to impede, obstruct, or degrade the
administration of justice"37 consisting of the following acts: Third, whether or not the Court of Appeals gravely erred in affirming the
Regional Trial Court Order denying referral of Sulpicio Lines, Inc.'s
(a) Without Sulpicio's knowledge or consent, Steamship complaint to arbitration in London in accordance with the 2005/2006 Club
initiated and "concluded" during the pendency of this case Rules; and
an alleged "arbitration proceeding" in London for the
"Arbitrator" there to "resolve" the very dispute involved in Finally, whether or not Steamship Mutual Underwriting (Bermuda) Limited
this case; is guilty of indirect contempt.
 abuse of discretion of the Court of Appeals.52
This Court addresses first the procedural issue raised by Sulpicio.
This Court finds for Steamship.
I.A
The appeal from a final disposition of the Court of Appeals is a petition for
review under Rule 45 and not a special civil action under Rule 65.53 Rule
Sulpicio contends that Steamship's Petition for Review should be 45, Section 1 is clear that:
dismissed outright on procedural grounds.42
Section 1. Filing of petition with Supreme Court. A patty
First, this Petition, couched as a Rule 45 Petition, is actually a Rule 65 desiring to appeal by certiorari from a judgment or final
Petition because it contained arguments dealing with "grave abuse of order or resolution of the Court of Appeals, the
discretion" allegedly committed by the Court of Appeals.43 Sandiganbayan, the Regional Trial Court or other courts
whenever authorized by law, may file with the Supreme Court
Second, the Petition's Verification and Certification Against Forum a verified petition for review on certiorari. The petition
Shopping is defective because it was signed and executed by Steamship's shall raise only questions of law which must be distinctly
set forth.
lawyer. Additionally, the Power of Attorney appended to the Petition did
not indicate its signatory's name and authority.44
A Rule 45 petition is the proper remedy to reverse a decision or
Third, the issue of whether or not Sulpicio has been furnished with the
resolution of the Court of Appeals even if the error assigned is grave
Club's Rulebook, which contained the arbitration clause, is factual and
abuse of discretion in the findings of fact or of law. "The existence and
beyond the realm of a Rule 45 petition.45
availability of the right of appeal prohibits the resort to certiorari because
one of the requirements for the latter remedy is that there should be no
In its Reply, Steamship avers that its counsel's law firm was duly
appeal."54
authorized to sign its Verification and Certification against Forum
Shopping. Moreover, Sulpicio never assailed this law firm's authority to
Allegations in the petition of grave abuse of discretion on the part of the
represent Steamship before the Regional Trial Court, and therefore, is
Court of Appeals do not ipso facto render the intended remedy that
estopped to deny its authority before this Court.46 Together with its
of certiorari under Rule 65 of the Rules of Court. In Microsoft Corporation
Reply, Steamship submitted a copy of the Secretary's Certificate47 to the
v. Best Deal Computer Center Corporation,55 this Court discussed the
July 24, 2007 Board of Directors' resolution authorizing Scott Davis
distinction between a Petition for Certiorari under Rule 65 and a Petition
(Davis) or his Assistant Secretaries to sign a Power of Attorney on behalf
for Review on Certiorari under Rule 45:
of Steamship. It also appended a Secretary's Certificate48 to the Jvly 26,
2011 Board of Directors' resolution re appointing Davis and John Charles
Significantly, even assuming that the orders were erroneous,
Ross Collis49 to their current positions as Secretary and Assistant
such error would merely be deemed as an error of judgment
Secretary, respectively. that cannot be remedied by certiorari. As long as the
respondent acted with jurisdiction, any error committed by
Steamship further contends that the basic issues raised in the petition are him or it in the exercise thereof will amount to nothing
questions of law that are cognizable by this Court.50 It adds that a more than an error of judgment which may be reviewed or
reversal of some factual findings is warranted because the Court of corrected only by appeal. The distinction is clear: A
Appeals committed a grave abuse of discretion in concluding that Sulpicio petition for certiorari seeks to correct errors of
was ignorant of the 2005/2006 Club Rules and its arbitration clause, jurisdiction while a petition for review seeks to correct
when Steamship had presented ample evidence to establish errors of judgment committed by the court. Errors of
otherwise.51 Steamship submits that this Court may exercise its power of judgment include errors of procedure or mistakes in the
review to reverse errors committed by the lower courts including grave court's findings. Where a court has jurisdiction over the
 person and subject matter, the decision on all other Unfortunately, the Court is not convinced that a valid and
questions arising in the case an exercise of that binding arbitration agreement exists between the Steamship
jurisdiction. Consequently, all errors committed in the and Sulpicio. And even assuming that there is such an
exercise of such jurisdiction are merely errors of judgment. agreement, it does not comply with Section 4 of the
Certiorari under Rule 65 is a remedy designed for the Arbitration Law which provides that "a contract to arbitrate
correction of errors of jurisdiction and not errors of a controversy thereafter arising between the parties, as
judgment.56 (Citations omitted) well as a submission to arbitrate an existing controversy
shall be in writing and subscribed by the party sought to be
charged, or by his lawful agent."
In this case, what Steamship seeks to rectify may be construed as errors
of judgment of the Court of Appeals. These errors pertain to Steamship's As correctly pointed out by Sulpicio, there is no proof that
allegations of the Court of Appeals' failure to rule that a valid arbitration it was served a copy of the Club Rules in question and that
agreement existed between the parties and to refer the case to it signed therein.61 (Emphasis supplied)
arbitration. It does not impute any error with respect to the Court of
Appeals' exercise of jurisdiction, As such, the Petition is simply a
continuation of the appellate process where a case is elevated from the A factual question on whether or not Sulpicio was given a copy of the
trial court of origin, to the Court of Appeals, and to this Court via Rule 45. Club Rulebook must be resolved because it has a bearing on the legal
issue of whether or not a binding arbitration agreement existed between
The basic issues raised in the Petition for Review are: (1) whether or not the parties. Factual review, nonetheless, may be justified: (1) when there
an arbitration agreement may be validly incorporated by reference to a is a grave abuse of discretion in the appreciation of facts;62 (2) when the
contract; and (2) how the trial court should proceed to trial upon its judgment of the Court of Appeals is premised on a misapprehension of
finding "that only some and not all of the defendants are bound by an facts;63 and (3) when the Court of Appeals' findings of fact are premised
arbitration agreement[.]"57 These are questions of law properly on the absence of evidence but such findings are contradicted by the
cognizable in a Rule 45 petition. evidence on record.64

In BCDA v. DMCI Project Developers, Inc..58 citing Villamor v. Balmores59: Here, this Court finds grave abuse of discretion by the Court of Appeals in
its appreciation of facts. As will be discussed later, the evidence on record
[T]here is a question of law "when there is doubt or shows that Sulpicio was furnished a copy of the Club Rulebook and was
controversy as to what the law is on a certain [set] of aware of its provisions. Other pieces of evidence were Sulpicio's
facts." The test is "whether the appellate court can letters65 to Steamship and the affidavits of Director and Head of
determine the issue raised without reviewing or evaluating Underwriting of the Club and In-Charge of Far East membership including
the evidence." Meanwhile, there is a question of fact when the Philippines, Jonathan Andrews;66 Vice-President of Pioneer Insurance
there is "doubt . . . as to the truth or falsehood of who was in charge of Sulpicio's account, Roderick Gil Narvacan;67 and
facts." The question must involve the examination of Manager of Seaboard-Eastern's Marine Department who was in charge of
probative value of the evidence presented.60 Sulpicio's account, Elmer Felipe.68

I.B
Sulpicio denies being bound by the arbitration clause in the Club Rules
since neither the Certificate of Entry and Acceptance, which covers M/V
Princess of the World, mentioned this arbitration agreement, nor was it The Verification and Certification against Forum Shopping signed by
given a copy of the Club Rulebook. Steamship's counsel substantially complied with the  requirements of the
Rules of Court.
In sustaining the denial of Steamship's Motion to Dismiss and/or to Refer
Case to Arbitration, the Court of Appeals ruled:
Under Rule 45 of the Rules of Court, a petition for review must be persons."
verified69 and must contain a sworn certification against forum shopping.70 . . . .
For who else knows of the circumstances required in the
"A pleading is verified by an affidavit that the affiant has read the Certificate but its own retained counsel. Its regular
pleading and that the allegations therein are true and correct of his [or officers, like its board chairman and president may not even
her] personal knowledge or based on authentic records."71 know the details required therein.76

On the other hand, a certification against forum shopping is a

petitioner's, statement "under oath that he [or she] has not . . . In this case, Steamship's Petition's Verification and Certification against
commenced any other action involving the same issues in the Supreme forum shopping was signed by its counsel. A Power of Attorney77 dated
Court, the Court of Appeals or different divisions, or any other tribunal or August 1, 2007 was appended to the Petition, which purportedly
agency[.]72 In this certification, the petitioner must state the status of authorized "Atty. Charles Jay D. Dela Cruz or any of the partners of Del
any other action or proceeding, if there is any, and undertakes to report Rosario & Del Rosario . . . to sign the verification or
to the courts and other tribunal within five (5) days from learning of any certification"78 against forum shopping of petitions and appeals in
similar action or proceeding.73 appellate courts necessary in representing and defending Steamship. It
was notarized, apostilled in accordance with the law of Bermuda and
Failure to comply with the foregoing mandates constitutes a sufficient authenticated by the Philippine consulate in London, United Kingdom.
ground for the denial of the petition.74 However, a closer look into the Power of Attorney reveals that the
signatory of the document was not identified. This was pointed out by
In case the petitioner is a private corporation, the verification and Sulpicio in its Comment.79
certification may be signed, for and on behalf of this corporation, by a
specifically authorized person, including its retained counsel, who has Nonetheless, Steamship subsequent filed its Reply,80 to which it attached
personal knowledge of the facts required to be established by the two (2) Secretary's Certificates81 signed by Davis containing excerpts of
documents.75 The reason is that: the July 24, 2007 and July 26, 2011 board resolutions showing Davis'
authority to execute the Power of Attorney on its behalf, and Davis'
A corporation, such as the petitioner, has no powers except reappointment as Corporate Secretary, respectively. The signature in the
those expressly conferred on it by the Corporation Code and Power of Attorney was similar in form and appearance to Davis' signature
those that are implied by or are incidental to its in the Secretary's Certificates, which lends credence to Steamship's
existence. In turn, a corporation exercises said powers submission that the Power of Attorney was executed and signed by
through its board of directors and/or its duly authorized Davis.82
officers and agents. Physical acts, like the signing of
documents, can be performed only by natural persons duly The rule on verification of a pleading is a formal, not jurisdictional,
authorized for the purpose by corporate bylaws or by a requirement.83 This Court has held that:
specific act of the board of directors. "All acts within the
powers of a corporation may be performed by agents of its Non compliance with the verification requirement does not
selection; and, except so far as limitations or restrictions necessarily render the pleading fatally defective, and is
which may be imposed by special charter, by-law, or substantially complied with when signed by one who has ample
statutory provisions, the same general principles of law knowledge of the truth of the allegations in the complaint
which govern the relation of agency for a natural person or petition, and when matters alleged in the petition have
govern the officer or agent of a corporation, of whatever been made in good faith or are true and correct. 84 (Citation
status or rank, in respect to his power to act for the omitted)
corporation; and agents once appointed, or members acting in
their stead, are subject to the same rules, liabilities and
incapacities as are agents of individuals and private
On the other hand, a certification not signed by a duly authorized person possible.93 These goals would not be circumvented by this Court's
renders the petition subject to dismissal.85 Moreover, the lack of or defect recognition of the authorized counsel's signature in the verification and
in the certification is not generally curable by its subsequent submission certification of non-forum shopping.
or correction.86 However, there are cases where this Court exercised
leniency due to the presence of special circumstances or compelling This Court now proceeds to the substantive issues of whether or not there
reasons, such as the prima facie merits of the petition.87 In some cases, was a valid arbitration agreement between the parties and whether or not
the subsequent submission of proof of authority of the party signing the referral to arbitration was imperative.
certification on behalf of the corporation was considered as substantial
compliance with the rules and the petition was given due course.88 II

In Shipside Incorporated v. Court of Appeals,89 this Court held:

Steamship contends that the arbitration agreement set forth in its Club
Moreover, in Loyola, Roadway, and Uy, the Court excused Rules, which in turn is incorporated by reference in the Certificate of
non-compliance with the requirement as to the certificate of Entry and Acceptance of M/V  Princess of the World,94 is valid and binding
non-forum shopping. With more, reason should we allow the upon Sulpicio,95 pursuant to this Court's ruling in BF Corporation v. Court
instant petition since petitioner herein did submit a of Appeals.96
certification on non-forum shopping, failing only to show
proof that the signatory was authorized to do so. That Steamship further avers that the Court of Appeals' finding that there was
petitioner subsequently submitted a secretary's certificate no proof that Sulpicio was given a copy of the Club Rules was incorrect
attesting that Balbin was authorized to file an action on
and contradicted by the evidence on record.97 Steamship adds that by
behalf of petitioner likewise mitigates this oversight.90
Sulpicio's own declarations in its letter-application98 for membership of its
vessels, Sulpicio acknowledged that it had received a copy of the Club
Rules and that its membership in Steamship is subject to them. 99  It
Likewise, this Court ho1ds that there is substantial compliance with the
contends that Sulpicio was "provided with copies of the Club's Rule books
rules on verification and certification against forum shopping. Steamship's
on an annual basis by Pioneer Insurance and Seaboard-Eastern who
subsequent submission of the Secretary's Certificates showing Davis'
acted as brokers [for Sulpicio's] entry."100 Moreover, throughout Sulpicio's
authority to execute the Power of Attorney in favor of Del Rosario & Del
almost 20 years of membership,101 it has been aware of, and relied upon,
Rosario cured the defect in the verification and certification appended to
the terms of the Club Rules, as revealed in its various correspondences
the petition. Under the circumstances of this case, Steamship's counsel
through its brokers with Steamship.102 Thus, Sulpicio is estopped to deny
would be in the best position to determine the truthfulness of the
that it was aware of, and agreed to be bound by, the Club Rules and their
allegations in the petition and certify on non-forum shopping considering
provisions.103
that "it has handled the case for . . . Steamship since its inception."91 This
Court also considers Steamship's allegations that the same Power of
Steamship argues that a referral of the case to arbitration is imperative
Attorney was used in its Answer Ad Cautelam filed on August 12, 2008
pursuant to the mandates of Republic Act No. 9285 or the ADR Law.104 It
before the Regional Trial Court and in its Petition for Certiorari before the
adds that the trial court's reliance on the ruling in European Resources
Court of Appeals on November 12, 2008. Significantly, Sulpicio never
and Technologies, Inc. v. Ingenieuburo Birkhann + Nolte,
questioned the authority of Del Rosario & Del Rosario to represent
Ingeniurgesellschaft Gmbh105 was misplaced. That case was decided on
Steamship in the proceedings before the lower courts.92
the basis of Republic Act 876 or the Old Arbitration Law, which did not
provide for instances where some of the multiple impleaded parties were
The rules on forum-shopping are "designed . . . to promote and facilitate
not covered by an arbitration agreement.106 It adds that now, Section 25
the orderly administration of justice." They are not to be interpreted with
of the ADR Law specifically provides that "the court shall refer to
"absolute literalness" as to subvert the procedural rules' ultimate
arbitration those parties who are bound by the arbitration agreement
objective of achieving substantial justice as expeditiously as
although the civil action may continue as to those who are not bound by
such arbitration agreement."107 Even from a procedural standpoint, Court.120
Steamship contends that the claim against it may be separated from
Pioneer Insurance and Seaboard-Eastern as these local insurance In its Reply, Steamship maintains that there is a valid arbitration clause
companies were impleaded as solidary obligors/debtors.108 between them and that Sulpicio was well aware of its Club Rules. It adds
that Sulpicio is merely feigning ignorance of the Club Rules to escape the
Steamship further submits that "a Philippine court is an inconvenient obligatory nature of the arbitration agreement. Steamship further
forum to thresh out the issues involved in Sulpicio's claim."109 First, reiterates that Section 25 of the ADR Law is plain and clear that when
Sulpicio's claim is governed by the English Law, as expressly stated in the there are multiple parties in an action, the court must "refer to arbitration
2005/2006 Club Rules.110 Second, a Philippine court would be "an those parties bound by the arbitration agreement and let the action
ineffective venue" to enforce any judgment that may be obtained against remain as to those who are not bound."121 "Moreover, as the relationship
Steamship, a foreign corporation.111 Thus, on the basis of the doctrine between . . . Steamship and . . . Sulpicio are governed by English Law[,]
of forum non conveniens alone, Steamship contends that the claim it may be more prudent to refer the disgute to arbitration in London
against it should be referred to arbitration in London.112 under the doctrine of forum non conveniens."122

Finally, Steamship holds that "Sulpicio should participate in the London Finally, Steamship avers that under Rule 47 of the 2005/2006 Club Rules,
Arbitration as [it] is already progressing . . . [i]nstead of wasting its time it has "the right to pursue legal action against a [m]ember before any
on prosecuting its claim before a Philippine court that is devoid of jurisdiction at its sole discretion."123 Even if there is no such provision,
jurisdiction[.]113 Steamship contends that it may waive its rights to compel arbitration in
individual cases.124 It adds that the waiver of such right in White Gold has
Sulpicio counters that the Court of Appeals was correct in ruling that no effect to this case because Sulpicio is not a party in that case.125
there was no arbitration agreement between the parties.114 The
arbitration clause in the 2005/2006 Club Rules is not valid and binding for II.A
failure to comply with Section 4 of the ADR Law, which requires that an
arbitration agreement be in writing and subscribed by the parties or their
lawful agent.115 Sulpicio adds that "[i]n White Gold Marine Services, Inc. It is the State's policy to promote party autonomy in the mode of
vs. Pioneer Insurance and Surety Corporation, . . . Steamship did not resolving disputes.126 Under the freedom of contract principle, parties to a
invoke arbitration but filed suit before a Philippine court, which . . . contract may stipulate on a particular method of settling any conflict
proves that [the 2005/2006 Club Rules' arbitration clause] is neither between them.127  Arbitration and other alternative dispute resolution
mandatory nor binding" upon the parties.116 methods like mediation, negotiation, and conciliation are favored over
court action. Republic Act No. 9285128 expresses this policy:
Sulpicio further contends that the Certificate of Entry and Acceptance did
not provide for arbitration as a mode of dispute resolution, that the rules Section 2. Declaration of Policy. — It is hereby declared
referred to was not particularly identified or described, and that it never the policy of the State to actively promote party autonomy
received a copy of the Club Rules.117 in the resolution of disputes or the freedom of the parties
to make their own arrangements to resolve their
Assuming there was valid arbitration agreement between them, Sulpicio disputes. Towards this end, the State shall encourage and
submits that the trial court correctly relied on the ruling in European actively promote the use of Alternative Dispute Resolution
Resources in denying the referral of the case to arbitration.118 Arbitration (ADR) as an important means to achieve speedy and impartial
justice and declog court dockets. As such, the State shall
in London would not be the "most prudent action" because the arbitral
provide means for the use of ADR as an efficient tool and an
decision will not be binding on Pioneer Insurance and Seaboard-Eastern
alternative procedure for the resolution of appropriate
and it would result in a "split jurisdiction."119 Sulpicio further contends cases. Likewise, the State shall enlist active private
that the exception laid down in European Resources still applies because sector participation in the settlement of disputes through
the ADR Law was already in effect when the case was decided by this
 ADR. This Act shall be without prejudice to the adoption by association, described in White Gold Marine Services, Inc. v. Pioneer
the Supreme Court of any ADR system, such as mediation, Insurance and Surety Corp.136 as follows:
conciliation, arbitration, or any combination thereof as a
means of achieving speedy and efficient means of resolving [A] mutual insurance company is a cooperative enterprise
cases pending before all courts in the Philippines which where the members are both the insurer and insured. In it,
shall be governed by such rules as the Supreme Court may the members all contribute, by a system of premiums or
approve from time to time. (Emphasis supplied) assessments, to the creation of a fund from which all losses
and liabilities are paid, and where the profits are divided
among themselves, in proportion to their interest.
Arbitration, as a mode of settling disputes, was already recognized in the Additionally, mutual insurance associations, or clubs,
Civil Code.129 In 1953, Republic Act No. 876 was passed, which reinforced provide three types of coverage, namely, protection and
domestic arbitration as a process of dispute resolution. Foreign arbitration indemnity, war risks, and defense costs.137
was likewise recognized through the Philippines' adherence to the United
Nations Convention on the Recognition and Enforcement of Foreign
Arbitral Awards of 1958, otherwise known as the New York A shipowner wishing to enter its fleet of vessels to Steamship must fill in
Convention.130 Republic Act No. 9285 sets the basic principles in the an application for entry form, which states:
enforcement of foreign arbitral awards in the Philippines.131
PLEASE ENTER IN THE ASSOCIATION, SUBJECT TO THE RULES,
Consistent with State policy, "arbitration agreements are liberally RECEIPT OF WHICH WE ACKNOWLEDGE, THE UNDERMENTIONED
construed in favor of proceeding to arbitration."132 Every reasonable VESSEL(S).138
interpretation is indulged to give effect to arbitration agreements. Thus,
courts must give effect to the arbitration clause as much as the terms of
the agreement would allow.133 "Any doubt should be resolved in favor of The application form is signed by the shipowner or its authorized
arbitration."134 representative.

II.B Steamship then issues a Certificate of Entry and Acceptance of the

vessels, showing its acceptance of the entry. The Certificate of Entry and
Acceptance for M/V Princess of the World states:
Sulpicio contends that there was no valid arbitration agreement between
them, and if there were, it was not aware of it. CERTIFICATE OF ENTRY AND ACCEPTANCE

by the Club of your proposal for entering the ship(s)

This Court rules against Sulpicio's submission.
specified below, and of the tonnage set out against each,
in:
The contract between Sulpicio and Steamship is more than a contract of
insurance between a marine insurer and a shipowner. By entering its Class 1 PROTECTION AND INDEMNITY
vessels in Steamship, Sulpicio not only obtains insurance coverage for its of the Club from
vessels but also becomes a member of Steamship. Noon 20th February 2005 to Noon 20th February 2006

A protection and indemnity club, like Steamship, is an association

composed of shipowners generally formed for the specific purpose of
providing insurance cover against third-party liabilities of its or until sold, lost, withdrawn or the entry is terminated in
members.135 A protection and indemnity club is a mutual insurance accordance with the rules, to the extent specified and in
accordance with the Act, By(e)-Laws and the Rules from time
 to time in force and the special terms specified overleaf. ANNUALLY
IN BOOK
Your name has been entered in the Register of Members of the
FORM,
Club as a Member.
INCORPORAT
ING ALL
FOR ACCOUNT OF PREVIOUS
      Sulpicio Lines Inc., THE RULES AS
CERTIFICATE ALTERATION
      1st Floor, Reclamation NUMBER
TO THE
S AND A
Area, CIRCUMSTANCE
COPY IS
      P.O. Box No. 137 S OF ENTRY
      Cebu City, 155,534 SENT TO
BEING
Philippines. EACH
CANCELLED AND
MEMBER.
AS TO
ENTERED ALTERATION
THE
NAME OF SHIP GROSS S CAN BE
CIRCUMSTANCE
TONNAGE MADE BY
S OF AN
BUILT PORT OF ORDINARY
CLASS ALTERATION IN
"PRINCESS OF THE REGISTRY RESOLUTION
THE RULES OR
OCEAN" Cebu FOLLOWING
BY(E)-LAWS.
1975 City A GENERAL
B.V. MEETING
6,150
NOTIFIED TO
"PRINCESS OF THE
ALL
UNIVERSE" 1983 Cebu
B.V. MEMBERS.
City 13,526 [139

"PRINCESS OF THE 1979

B.V.
CARIBBEAN" Cebu 3,768
City
1972 Thus, a contract of insurance is perfected between the parties upon
B.V. Steamship's issuance of the Certificate of Entry and Acceptance.
"PRINCESS OF THE 9,627
WORLD" Cebu
City [A] contract of insurance, like other contracts, must be
1984 (Rebuilt
X.X. assented to by both parties either in person or by their
1990) 19,329
agents. So long as an application for insurance has not been
"PRINCESS OF THE
either accepted or rejected, it is merely an offer or
STARS" Cebu
proposal to make a contract. The contract, to be binding
City
from the date of application, must have been a completed
contract, one that leaves nothing to be done, nothing to be
. . . .
completed, nothing to be passed upon, or determined, before
NOTES   it shall take effect. There can be no contract of insurance
unless the minds of the parties have met in agreement.140
1. REFERENCE IS 1. THE RULES
REQUESTED TO ARE PRINTED
Title VI, Section 49 of Presidential Decree No. 612141 or the Insurance Policy Year of the Club, the Directors may in
Code defines an insurance policy as "the written instrument in which a their discretion determine that any ports,
contract of insurance is set forth." Section 50 of this Code provides that places, countries, zones or areas (whether of
the policy, which is required to be in printed form, "may contain blank land or sea) be excluded from the insurance
spaces; and any word, phrase, clause, mark, sign, symbol, signature, provided by this [Protection and Indemnity]
number, or word necessary to complete the contract of insurance shall be war risks cover. Save as otherwise provided by
written on the blank spaces." Any rider, clause, warranty, or the Directors, this [Protection and Indemnity]
war risks cover shall cease in respect of such
endorsement attached and referred to in the policy by its descriptive title
ports, places, countries, zones or areas at
or name is considered part of this policy or contract of insurance and
midnight on the seventh day following the
binds the insured. issue to the Members of notice of such
detem1ination in accordance with the terms of
Section 51 of the Insurance Code prescribes the information that must be the cover provided pursuant to Rule 21 of the
stated in the policy, namely: the parties in the insurance contract, Club's Rules
amount insured, premium, property or life insured, risks insured against, . . . .
and period of insurance. However, there is nothing in the law that
prohibits the parties from agreeing to other terms and conditions that Notwithstanding any other term or condition of
would govern their relationship, in which case the general rules of the this insurance, the Directors may in their
Civil Code regulating contracts will apply.142 discretion cancel this special cover giving 7
days' notice to the Members (such cancellation
The Certificate of Entry and Acceptance plainly provides that the Class 1 becoming effective on the expiry of 7 days
protection and indemnity coverage would be to the extent specified and from midnight of the day on which notice of
in accordance with the Act, the By-Laws, and the Rules of the Club in cancellation is issued by the Club and the
Directors may at any time after the issue of
force at the time of the coverage. The "Notes" in the bottom portion of
notice of such cancellation resolve to
the Certificate states that these Rules "are printed annually in book form"
reinstate special cover pursuant to the
and disseminated to all members. M/V Princess of the World was insured proviso to the terms of the cover issued
from February 20, 2005 to February 20, 2006. Hence, the 2005/2006 pursuant to Rule 21 on such terms and
Club Rules apply. conditions and subject to such limit as the
Directors in their discretion may determine.
Moreover, attached to the Certificate of Entry and Acceptance is a War
Risk Extension clause and Bio-Chem clause which refer to Rule 21 of the When either a Demise, Time, Voyage, Space or
2005/2006 Club Rules relating to war risk insurance. Slot Charterer and/or the Owner of the Entered
Ship are separately insured for losses,
WAR RISK EXTENSION liabilities, or the costs and expenses
incidental thereto covered under Rule 21 of
the Club and/or the equivalent Rule of any
Cover excluded under Rule 21 is hereby other Association which participates in the
reinstated subject to the terms set out in Pooling Agreement and General Excess Loss
this Certificate of Entry and any Endorsement Reinsurance Contract, the aggregate of claims
thereto, and to the following conditions. in respect of such losses, liabilities, or the
. . . . costs and expenses incidental thereto covered
under Rule 21 of the Club and/or the
At any time or times before, or at the equivalent Rule of such other Association(s),
commencement of, or during the currency of any shall be limited to the amount set out in the
 Certificate of Entry in respect of any one 1. The provisions of this Rule apply throughout the
ship, any one incident or occurrence.143 period of entry of the Ship in the Club . . .

. . . .
Sulpicio's acceptance of the Certificate of Entry and Acceptance manifests
its acquiescence to all its provisions. There is no showing in the records 8 Members
or in Sulpicio's contentions that it objected to any of the terms in this
Certificate. Its acceptance, likewise, operated as an acceptance of the 1. Every Owner who enters any ship in the Club shall (if
entire provisions of the Club Rules. not already a Member) be and become a Member of the
Club as from the date of the commencement of such
When a contract is embodied in two (2) or more writings, the writings of entry. Each Member is bound by the Act and By(e)-Laws
the parties should be read and interpreted together in such a way as to of the Club and by these Rules.
render their intention effective.144
. . . .
With the exception of the War Risk Extension clause, the Bio-chem
clause, and a succinct statement of the limits of liability, warranties, 1. All contracts of insurance with the Club shall be
exclusion, and deductibles, the Certificate of Entry and Acceptance does deemed to be subject to and incorporate all the
not contain the details of the insurance coverage. A person would have to provisions of these Rules except to the extent
refer to the Club Rules to have a complete understanding of the contract otherwise expressly agreed in writing with the
between the parties. Managers.
2. Each Member or other person whose application for
The Club Rules contain the terms and conditions of the relationship insurance or reinsurance is accepted shall be deemed
between the Steamship and its members including the scope, nature, and to have agreed both for itself and its successors and
extent of insurance coverage of its members' vessels. The 2005/2006 each of them that both it and they and each and all
Club Rules145 of Class 1, which cover protection and indemnity risks of them will be subject to and bound by and will
provide, insofar as relevant: perform their obligations under the Rules, Act and
By(e)-Laws of the Club and any contract of insurance
3 Scope of Cover with the Club.

1. The terms upon which a Member is entered in the Club . . . .

are set out in the Rules and any Certificate of Entry
for that Member. 45 Amendments to Rules
2. The risks against which a Member is insured by entry
The Rules of this Class may be altered or
in the Club are set out in Rule 25 and are always
added to by Ordinary Resolution passed at a
subject to the conditions, exceptions, limitations
separate meeting of the Members of this Class
and other terms set out in the remainder of these
provided that no such alterations shall be
Rules and any Certificate of Entry for that Member.
effective unless and until the same shall be
sanctioned by the Directors.146
. . . .

6 Entry The 2005/2006 Club Rules also provide the nature of Steamship's
. . . .
Protection and Indemnity cover and the terms on which it is provided. In
particular, Rule 25(i) to (xxi) identify a member's liabilities, costs, and
expenses covered by the insurance, Rules 18 to 24 set out the general such default be made, unless and until the difference
exclusions and limitations, Rule 26 provides the requirements for or dispute shall have been referred to arbitration in
classification and condition surveys, and Rule 28 addresses general terms the manner provided in this Rule, and the Award shall
and conditions for recovery of claims. The 2005/2006 Club Rules also have been published; and then only for such sum as
contain provisions on double insurance (Rule 23), claims handling (Rules the Award may direct to be paid by the Club. And the
30 and 31), cessation of membership (Rule 35), cessation of insurance of sole obligation of the Club to the Member under these
individual vessels (Rule 36) deduction and set-off (Rule 40), and Rules or otherwise howsoever in respect of any
disputed claim made by the Member shall be to pay
assignment and subrogation (Rules 41 and 42).
such sum as may be directed by such an Award.
4. In any event no request for adjudication by the
The arbitration clause is found in Rule 47 of the 2005/2006 Club Rules:
Member shall be made to the Directors in respect of
any difference or dispute between, or matter
47 dispute resolution, Adjudication affecting, the Member and the Club more than two
years from the date when that dispute, difference or
1. in the event of any difference or dispute whatsoever, matter arose unless, prior to the expiry of this
between or affecting a Member and the Club and limitation period, the Managers have agreed in
concerning the insurance afforded by the Club under writing to extend the same.
these rules or any amounts due from the Club to the 5. Nothing in this Rule 47 including paragraph i, or
Member or the Member to the Club, such difference or in any other Rule or otherwise shall preclude the
dispute shall in the first instance be referred to Club from taking any legal action of whatsoever
adjudication by the Directors. That adjudication nature in any jurisdiction at its absolute discretion
shall be on the basis of documents and written in order to pursue or enforce any of its rights
submissions alone. Notwithstanding the terms of this whatsoever and howsoever arising including but not
Rule 47i, the Managers shall be entitled to refer limited to: -
any difference or dispute to arbitration in
accordance with sub-paragraph ii below without 1. Recovering sums it considers to be due from
prior adjudication by the Directors.
the Member to the Club;
2. If the Member does not accept the decision of the
2. Obtaining security for such sums; and/or
Directors, or if the Managers, in their absolute
3. Enforcement of its right of lien whether
discretion, so decide, the difference or dispute
shall be referred to the arbitration of three arising by law or under these rules.
arbitrators, one to be appointed by each of the
parties and the third by the two arbitrators so
chosen, in London. The submission to arbitration and
all the proceedings therein shall be subject to the 6. These rules and any contract of insurance between the
provisions of the English Arbitration Act, 1996 and Club and the Member shall be governed by and
the schedules thereto or any statutory modifications construed in accordance with English
or re-enactment thereof. law.147 (Emphasis in the original)
3. No Member shall be entitled to maintain any action,
suit or other legal proceedings against the Club upon
any such difference or dispute unless and until the
same has been submitted to the Directors and they Under Rule 47, any dispute concerning the insurance afforded by
shall have given their decision thereon, or shall
Steamship must first be brought by a claiming member to the Directors
have made default for three months in so doing; and,
for adjudication. If this member disagrees with the decision of the
if such decision be not accepted by the Member or
Director, the dispute must be referred to arbitration in London. Despite
the member's disagreement, the Managers of Steamship may refer the In BF Corp. v. Court of Appeals,154 one (1) of the parties denied the
dispute to arbitration without adjudication of the Directors. This existence of the arbitration cause on the ground that it did not sign the
procedure must be complied with before the member can pursue legal Conditions of Contract that contained the clause. This Court held that the
proceedings against Steamship. arbitration clause was nonetheless binding because the Conditions of
Contract were expressly made an integral part of the principal contract
There is no ambiguity in the terms and clauses of the Certificate of Entry between the parties. The formal requirements of the law were deemed
Acceptance. Contrary to the ruling of the Court of Appeals, the Certificate complied with because "the subscription of the principal agreement
clearly incorporates the entire Club Rules—not only those provisions effectively covered the other documents incorporated by reference [to
relating to cancellation and alteration of the policy.148 them]."155 In, arriving at this ruling, this Court explained:

"[W]hen the text of a contract is explicit and leaves no doubt as to its A contract need not be contained in a single writing. It may
intention, the court may not read into it any other intention that would be collected from several different writings which do not
contradict its plain import."149 conflict with each other and which, when connected, show the
parties, subject matter, terms and consideration, as in
The incorporation of the Club Rules in the insurance policy is without any contracts entered into by correspondence. A contract may be
qualification. This includes the arbitration clause even if not particularly encompassed in several instruments even though every
stipulated. A basic rule in construction is that the entire contract, and instrument is not signed by the parties, since it is
sufficient if the unsigned instruments are clearly
each and all of its parts, must be read together and given effect, with all
identified or referred to and made part of the signed
its clauses and provisions harmomonized with one another.150
instrument or instruments. Similarly, a written agreement
of which there are two copies, one signed by each of the
II.C parties, is binding on both to the same extent as though
there had been only one copy of the agreement and both had
signed it.156 (Emphasis supplied)
The Court of Appeals ruled that the arbitration agreement in the
2005/2006 Club Rules is not valid because it was not signed by the
parties. Thus, an arbitration agreement that was not embodied in the main
agreement but set forth in another document is binding upon the parties,
In domestic arbitration, the formal requirements of an arbitration where the document was incorporated by reference to the main
agreement are that it must "be in writing and subscribed by the party agreement. The arbitration agreement contained in the Club Rules, which
sought to be charged, or by his lawful agent."151 In international in turn was referred to in the Certificate of Entry and Acceptance, is
commercial arbitration,152 it is likewise required that the arbitration binding upon Sulpicio even though there was no specific stipulation on
agreement must be in writing. dispute resolution in this Certificate.

An arbitration agreement is in writing if it is contained (1) in a document Furthermore, as stated earlier, Sulpicio became a member of Steamship
signed by the parties, (2) in an exchange of letters, telex, telegrams or by the very act of making a contract of insurance with it. The Certificate
other means of telecommunication which provide a record of the of Entry and Acceptance issued by Steamship states that "[its] name has
agreement, or (3) in an exchange of statements of claim and defense in been entered in the Register of Members of the Club as a
which the existence of an agreement is alleged by a party and not denied Member."157 Sulpicio admits its membership and the entry of its vessels
by another. The reference in a contract to a document containing an to Steamship.
arbitration clause constitutes an arbitration agreement provided that the
contract is in writing and the reference is such as to make that clause Rule 8(v) of the 2005/2006 Club Rules provides that:
part of the contract.153
 Each Member or other person whose application for insurance on the coattails of a private claim and in the guise of a
or reinsurance is accepted shall be deemed to have agreed third party complaint without first having obtained a
both for itself and its successors and each of them that decision adverse to its claim from the said body. lt cannot
both it and they and each and all of them will be subject to bypass the arbitration process on the basis of its averment
and bound by and will perform their obligations under the that its third party complaint is inextricably linked to the
Rules, Act and By(e)-Laws of the Club and any contract of original complaint in the Regional Trial Court.
insurance with the Club.
. . . .
Sulpicio's agreement to abide by Steamship's Club Rules, including its
arbitration clause, can be reasonably inferred from its submission of an Section 36.6 is even more emphatic:
application for entry of its vessels to Steamship "subject to the Rules,
receipt of which we acknowledge."158 36.6 The fact that a bank participates in the
clearing operations of PCHC shall be deemed
The ruling of this Court in Associated Bank v. Court of Appeals159 is its written and subscribed consent to the
applicable by analogy to this case. binding effect of this arbitration agreement
as if it had done so in accordance with
Section 4 of the Republic Act No. 876
In that case, plaintiffs sought to recover the amount of 16 checks that
otherwise known as the Arbitration Law.
were honored by Associated Bank despite the apparent alterations in the
name of the payee. Associated Bank filed a Third-Party Complaint against Thus, not only do the parties manifest by mere participation
Philippine Commercial International Bank, Far East Bank & Trust their consent to these rules, but such participation is
Company, Security Bank and Trust Company, and Citytrust Banking deemed (their) written and subscribed consent to the binding
Corporation for reimbursement, contribution, and indemnity. This effect of arbitration agreements under the PCHC rules.
Complaint was based on their being the collecting banks and by virtue of Moreover, a participant subject to the Clearing House Rules
their bank guarantee for all checks sent for clearing to the Philippine and Regulations of the PCHC may go on appeal to any of the
Clearing House Corporation (PCHC). The trial court dismissed the Third- Regional Trial Courts in the National Capital Region where
Party Complaint for lack of jurisdiction, citing Section 36 of the Clearing the head office of any of the parties is located only after
House Rules and Regulations of the PCHC, which provides for arbitration. a decision or award has been rendered by the arbitration
This Court, in affirming the dismissal, held: committee or arbitrator on questions of law.160 (Emphasis
supplied, citation omitted)
Under the rules and regulations of the Philippine Clearing
House Corporation (PCHC), the mere act of participation of
the parties concerned in its operations in effect amounts to This Court held that mere participation by the banks in the clearing
a manifestation of agreement by the parties to abide by its operations of the PCHC manifest their consent to the PCHC Rules,
rules and regulations. As a consequence of such including the binding effect of the arbitration agreements under these
participation, a party cannot invoke the jurisdiction of the Rules.
courts over disputes and controversies which fall under the
PCHC Rules and Regulations without first going through the In this case, by its act of entering its fleet of vessels to Steamship and
arbitration processes laid out by the body. Since claims accepting without objection the Certificate of Entry and Acceptance
relating to the regularity of checks cleared by banking covering its vessels, Sulpicio manifests its consent to be bound by the
institutions are among those claims which should first be Club Rules. The contract between Sulpicio and Steamship gives rise to
submitted for resolution by the PCHC's Arbitration reciprocal rights and obligations. Steamship undertakes to provide
Committee, petitioner Associated Bank, having voluntarily protection and indemnity cover to Sulpicio's fleet. On the other hand,
bound itself to abide by such rules and regulations, is
estopped from seeking relief from the Regional Trial Court
Sulpicio, as a member, agrees to observe Steamship's rules and 2.
regulations, including its provisions on arbitration.
    . . . .
III.A
1. The Club's policy year runs from noon on
20th February of each year until noon on
The Court of Appeals' finding that there was no proof that Sulpicio was 20th February of the year following . . . The Rule
given a copy of the 2005/2006 Club Rules is contradicted by the evidence book is published on an annual basis prior to the
on record. commencement of the Policy year to which it applies.
Although the Rules can be amended pursuant to Rule
In its Comment, Sulpicio contends that it "was never given or sent a 45, the dispute resolution provisions of the Rules
copy" of the Rulebook as stated in the affidavits of its Executive Vice have provided for arbitration in London since well
President, Atty. Eusebio S. Go and its Safety and Quality Assurance before the Plaintiff's entry in the Club.
Manager, Engr. Ernelson P. Morales.161 It also quoted a portion of the
Affidavit of its Executive Vice President and Chief Executive Officer, Carlos     . . . .
S. Go, who declared that "[Sulpicio] and Steamship have not signed any
arbitration agreement" and "[n]o such agreement exists."162 1. In addition, it is quite clear
that throughout their lengthy
Sulpicio cannot feign ignorance of the arbitration clause since it was membership of the Club, the
already charged with notice of the Club Rules due to an appropriate Plaintiffs were aware of, and
reference to it in the Certificate of Entry and Acceptance. Assuming its relied upon, the terms of the
contentions were true that it was not furnished a copy of the 2005/2006 Club's Rules. Produced and
Club Rules, by the exercise of ordinary diligence, it could have easily shown to me, marked "JHDA 4",
obtained a copy of them from Pioneer Insurance or Seaboard-Eastern. is a copy of a letter164 from
the Plaintiffs, dated 4th June,
1993, seeking a refund of
In any case, Sulpicio's bare denials cannot succeed in light of the
premium for the "SURIGAO
preponderance of evidence submitted by Steamship.
PRINCESS" on the grounds that
the vessel was laid up. That
The Affidavit163 dated August 29, 2007 of Jonathan Andrews, Director and letter's enclosures consist of:
Head of Underwriting of the Eastern Syndicate of the Managers of
Steamship and in charge of Steamship's Far East membership, including
The Club's printed form for returns of premium when a vessel is laid-
the Philippines, stated: (a)
up . . . signed by Mr. Carlos S. Go on behalf of the Plaintiffs;

1. The contract of insurance A photocopy of the relevant provision in the Club's Rules dealing with
(b)
between the Club and a Member laid-up returns, Rule 29; and
is contained in, and evidenced
(c) A Certificate from the Philippines Port Authority . . .
by:

The Rules of the Club for whichever Class or Classes the vessel is 2.
a)
entered, for the time being in force; and
The fact that Sulpicio's
b) A Certificate of Entry. application for a laid up
return attached a photocopy of
 the Club's Rule book surveyors to the club are
demonstrates both that this was inaccurate and after relating
physically in their possession such findings to the club rules
and that they were familiar owners find no basis for club's
with its contents. decision to suspend action on
the claim.165
1. Throughout the lengthy period of this entry, as might
be anticipated, there was a considerable volume of
correspondence between the Plaintiffs and the Club Roderick Gil Narvacan, Vice-President of the Hull Unit of Pioneer
via the former's brokers. Examples of that Insurance which handled Sulpicio's account, also narrated in his
correspondence are produced and shown to me, marked Affidavit[166 dated September 4, 2007:
"JHDA 5". As the Court will note from that
correspondence, it contains numerous and frequent 7. I know for a fact that Sulpicio received a copy of the
references to various of the Club's Rules, e.g.: Club's Rule Book and had full knowledge of the Club's Rules
during the length of time that it was a member of the Club.
 Rule 22, dealing with double insurance
 Rule 25 xix, dealing with towage 8. [I]n all Entry Forms signed and submitted by Sulpicio to
 Rule 23 i, dealing with classification the Club throughout its years of membership in the Club,
 Rule 23 v b and c, dealing with defect Sulpicio always acknowledged that it received a copy of
Club's Rule Book. A sample of Sulpicio's duly signed Entry
warranties
Form submitted to the Club on 6 February 1997 is hereto
 Rule 23 iv, dealing with safety
attached as Annex "1."
audits.
9. The Company, through my department, also makes it a point
1. The fact that Plaintiffs possessed and were fully to remind all the Club's Members including Sulpicio to
conversant with the Club's Rules is most clearly familiarize themselves with the Club's Rulebook as the rules
demonstrated by the correspondence provided and shown therein provided are applied to all Club related matters
to me, marked "JHDA 6". After the grounding of the including claims procedures. A copy of Ms. May Valles'
"PRINCESS OF THE PACIFIC", due to the concerns email167 to Sulpicio dated 27 August 2002 is hereto attached
arising out of this casualty, the Club initially as Annex "2" and her letter168 to Sulpicio dated 17 October
reserved cover pending further investigation and 2002 is hereto attached as Annex "3." Ms. Valles was a
required an independent audit of the Plaintiffs former member of the Company's Hull Department and in both
Safety Management System. When this decision was written communications, she reminded Sulpicio through its
conveyed to the Plaintiffs via their brokers, Executive Vice-President and CFO Mr. Carlos S. Go of certain
Seaboard-Eastern, they replied: Club Rules such as the prescriptive period to claim for lay-
up premium refund.
As expected, Carlos Go was so
upset and expressed 10. In reply to the 27 August 2002 email, Mr. Carlos S. Go,
disappointment when the by a 28 August 2002 email169 to Ms. Valles, explained his
undersigned spoke to him about understanding of the provision on the prescriptive period to
the report of Noble Denton and claim for lay-up premium refund under the Club's Rules,
the club's decision to suspend thereby clearly showing that Sulpicio was  aware of the
any action on the claim Club's Rules. A copy of the 28 August 2002 email of Mr. Go
especially so since owners is hereto attached as Annex "4."
believe the findings of the
 11. To further prove Sulpicio's knowledge of Club's Rules, I
hereto attach the following copies of letters from Sulpicio 13. The other transmittal letters proving distribution of
addressed to the Company with attached letter by Sulpicio to the Club's Rulebook to Sulpicio in its other years of
the Club: membership with the Club were among those discarded by the
Company when it moved . . . to a smaller office . . .
 Letter-request170 for refund of lay-up premiums for
the vessel M/V Surigao Princess dated 4 June 1993 as 14. [Sulpicio is presumed to] know the Club's Rules as it
Annex "5"; was provided with copies of the Rulebook on an annual basis.
 Letter-request171 for refund of lay-up premiums for
the vessel M/V Manila Princess dated 10 June 1998 as 15. In fact, in a 8 May 2004 letter addressed to the
Annex '"6"; Company, Sulpicio claimed for refund of lay-up premiums from
 Letter request172 for refund of lay-up premiums for the Club in connection with the vessel M/V Princess of the
World and in Sulpicio's letter to the Club attached to the
the vessel M/V Filipina Princess dated 21 June 1999
said 8 May 2004 letter, Sulpicio declared that "(w)e shall
as Annex  "7";
therefore be glad to receive a credit note for the return of
 Letter-request173 for refund of lay-up premiums for
premium under the Rules of the Association." This was
the vessel M/V Manila Princess dated 17 May 2001 as
followed by December 2004 letter for refund of lay-up
Annex "8"; and
returns for the vessel M/V Princess of the World where
 Letter-request174 for refund of lay-up premiums for
Sulpicio also invoked the Club Rules. A copy of the 8 May
the vessel M/V Nasipit Princess dated 16 August 2002 2004 letter177 with attachment is hereto attached as Annex
as Annex "9"; "2" and a copy of the 8 December 2004 letter 178 is hereto
attached as Annex "3."
. . . .
In each of the above letters, Sulpicio declared to both the
Company and the Club that "(w)e shall therefore be glad to 18. More importantly, after the Club denied cover for the
receive a credit note for the return of premium under the vessel M/V Princess of the World and prior to the date when
Rules of the Association."175 (Emphasis in the original) the termination of Sulpicio's entry in the Club took effect,
our EVP, Mr. Jose G. Banzon, Jr. sent an emai1 179 dated 30
November 2005 to Mr. Carlos Go reminding Sulpicio of the
Finally, Elmer Felipe, Manager of Marine Department of Seaboard-Eastern remedy of voluntary arbitration under Rule 47 of the Club's
in charge of Sulpicio's account, also narrated: Rulebook and attaching a copy of Rule 47. Copies of these
documents are attached as Annex "4."180
11. As insurers for the Hull & Machinery of Sulpicio's
Fleet, the Company, through my department, assisted Sulpicio These foregoing affidavits and the attached supporting documents
in regard to its [Protection and Indemnity] cover by sending consistently declared that Sulpicio was given copies of the Rulebook on
copy of the Club's Rulebook while it was an active Member of an annual basis and had even invoked its provisions in making a claim
the Club. from Steamship. Sulpicio's previous letters to Steamship referring to
provisions of the Club Rules show its knowledge. Sulpicio was also
12. By way of example, in the year 2002, the Company sent reminded of the arbitration clause during the negotiations preceding the
five (5) copies of the Club's Rulebook to Mr. Carlos S. Go, institution of the present case.
Executive Vice-President and CEO of Sulpicio as evidenced by
a transmittal letter dated 11 April 2002 duly signed by the
"[A] party is not relieved of the duty to exercise the ordinary care and
Company's First Vice-President Joli Co-Wu. A copy of said
prudence that would be exacted in relation to other contracts. The
transmittal letter176 dated 11 April 2002 is hereto attached
as Annex "1." conformity of the insured to the terms of the policy is implied from [its]
failure to express any disagreement with what is provided for."181 The
agreement to submit all disputes to arbitration is a long standing Hence, this Court finds a preponderance of evidence showing that
provision in the Club Rules. It was incumbent upon Sulpicio to familiarize Sulpicio was given a copy and had knowledge of the 2005/2006 Club
itself with the Club Rules, under the presumption that a person takes due Rules. Moreover, the 2005/2006 Club Rules' provision on arbitration is
care of its concerns. Being a member of Steamship for 20 years,182 it has valid and binding upon Sulpicio.
been bound by its Rules and has been expected to abide by them in good
faith. III.B

In Development Bank of the Philippines v. National Merchandising The Regional Trial Court should suspend proceedings to give way to
Corp.,183 the parties, who were acute businessmen of experience, were arbitration. Even if there are other defendants who are not parties to the
presumed to have assented to the assailed documents with full arbitration agreement, arbitration is still proper.
knowledge:
Republic Act No. 9285 was approved on April 2, 2004 and was the
The principal stockholders and officers of NAMERCO, controlling law at the time the original and amended complaints were
particularly the Sycips who co-signed the promissory notes filed.
in question, were, as the lower court found, businessmen of
experience and intelligence . . . We might say — Section 25 of Republic Act No. 9285 is explicit that:
paraphrasing Tin Tua Sia vs. Yu Biao Sontua, 56 Phil. 707
— that they being of age and businessmen of experience, it [W]here action is commenced by or against multiple parties,
must be presumed that they had acted with due care and to one or more of whom are parties to an arbitration agreement,
have signed the documents in question with full knowledge of the court shall refer to arbitration those parties who are
their import and the obligations they were assuming thereby; bound by the arbitration agreement although the civil action
that this presumption of law may not be overcome by the mere may continue as to those who are not bound by such
testimony of the obligor or obligors; that, to permit a arbitration agreement.
party, when, sued upon a contract, to admit that he signed
it but to deny that it expresses the agreement he had made,
or to allow him to admit that he signed it solely on the
Rule 4.7 of the Special Rules on Alternative Dispute Resolution187 (2009
verbal assurance given by one party, however high his
Special ADR Rules) further expresses:
station may be, that he would not be held liable thereon,
would destroy the value of all contracts. Indeed, it would
be disastrous to give more weight and reliability to the The court shall not decline to refer some or all of the
self-serving testimony of a party bound by the contract than parties to arbitration for any of the following reasons:
to the contents thereof. Verba volant, scripta manent.184
1. Not all of the disputes subject of the civil action
may be referred to arbitration;
Sulpicio is estopped from denying knowledge of the Rulebook by its own 2. Not all of the parties to the civil action are bound
acts and representations, as evidenced by its various letters to by the arbitration agreement and referral to
Steamship, showing its familiarity with the Rulebook and its provisions. arbitration would result in multiplicity of suits;
3. The issues raised in the civil action could be
"In estoppel, a person, who by his [or her] deed or conduct has induced speedily and efficiently resolved in its entirety by
another to act in a particular manner, is barred from adopting an the court rather than in arbitration;
inconsistent position, attitude or course of conduct that thereby causes 4. Referral to arbitration does not appear to be the
loss or injury to another."185 It further bars a party from denying or most prudent action; or
disproving a fact, which has become settled by its acts.186
 5. The stay of the action would prejudice the rights of Thus, the Regional Trial Court went beyond its authority of determining
the parties to the civil action who are not bound by only the issue of whether or not there was a valid arbitration agreement
the arbitration agreement. between the parties when it denied Steamship's Motion to Dismiss and/or
to Refer Case to Arbitration solely on the ground that it would not be the
most prudent action under the circumstances of the case. The Regional
Trial Court went against the express mandate of Republic Act No. 9285.
The present rule on multiple parties manifests due regard to the policy of Consequently, the Court of Appeals erred in finding no grave abuse of
the law in favor of arbitration. In light of the express mandate of Republic discretion on the part of the trial court in denying referral to arbitration.
Act No. 9285 and the subsequent 2009 Special ADR Rules, this Court's
ruling in European Resources and Technologies, Inc.  v. Ingenieuburo IV
Birkhann + Nolte, Ingeniurgesellschaft Gmbh188 is deemed abrogated.

Notably, the Regional Trial Court did not rule on whether or not a valid In G.R. No. 208603, Sulpicio contends that Steamship's acts were
and existing arbitration .agreement existed between the parties. It contumacious because they were intended to defeat Civil Case No. 07-
merely stated in its Order. citing European Resources, that: 577 and oust the Regional Trial Court of its jurisdiction, without the
approval of this Court.
["]Even if there is an arbitration clause, there are
instances when referral to arbitration does not appear to be Sulpicio further contends that there was no valid off-setting of the
the most prudent action. The object of arbitration is to amount of US$69,570.99 from the refund payable to it in the Unabia case
allow the expeditious determination of a dispute. Clearly, because the issue on the propriety of the referral to arbitration had yet to
the issue before us could not be speedily and efficiently be resolved by this Court.190 It adds that the "arbitration – anti-suit
resolved in its entirety if we allow simultaneous injuction" cost was not a debt of Sulpicio but a unilateral charge arising
arbitration proceedings and trial, or suspension of trial from an arbitration that it had not participated in, or was enforceable in
pending arbitration." the Philippines.191
Moreover, it is noted that defendants Seaboard-Eastern
In its Comment/Opposition192 to the Petition for Indirect Contempt,
Insurance Co. Inc. and Pioneer Insurance and Surety
Corporation already filed their respective Answers to the Steamship contends that it "exercised its right to set-off in good
second amended complaint.189 faith"193 and that the amount set-off represents costs of obtaining the
Anti-Suit Injunction awarded to it by the English Commercial Court and
are not arbitration costs as contended by Sulpicio.194 It also holds that
On this basis, the Regional Trial Court denied Steamship's Motion to  Sulpicio's prayer for restitution of the offset amount was improper in a
Dismiss and/or to Refer Case to Arbitration and directed it to file an petition for indirect contempt.195
answer.
Steamship emphasizes that even before the denial of its Motion to
This Court finds that the Regional Trial Court acted in excess of its Dismiss in Civil Case No. 07-577 on July 11, 2008, it already commenced
jurisdiction. arbitration in London196 on July 31, 2007.197 It had also "obtained a
permanent Anti-Suit Injunction [with interim award for costs]198 from the
Where a motion is filed in court for the referral of a dispute to arbitration, English Commercial Court on 4th April 2008[.]"199 The April 4, 2008 Order
Section 24 of Republic Act No. 9285 ordains that the dispute shall be enjoined Sulpicio from proceeding with Civil Case No. 07-577 and to refer
referred "to arbitration unless it finds that the arbitration agreement is the dispute to arbitration in London.200
null and void, inoperative or incapable of being performed."
Steamship further avers that "Sulpicio was served a copy of an Order to
file Claims Submissions in the London arbitration and a copy of the Anti-
Suit Injunction but it refused to participate in the London dignity. It signifies not only a willful disregard or
Arbitration."201 It also did not pay the costs of the Anti-Suit Injunction. disobedience of the court's orders, but such conduct as
Sulpicio refused "service of all orders, notices, pleadings and documents tends to bring the authority of the court and the
related to the London arbitration and the Commercial Court administration of law into disrepute or in some manner to
proceedings."202 impede the due administration of justice . . .

Steamship adds that in 2012, Sulpicio filed a claim for reimbursement of This Court has thus repeatedly declared that the power to
punish for contempt is inherent in all courts and is
US$96,958.47 representing passenger liabilities arising from the
essential to the preservation of order in judicial
capsizing of one (1) of Sulpicio's fleet in 1998.203 Pursuant to Rule 32 of
proceedings and to the enforcement of judgments, orders, and
the Club Rules for the 1998 policy, which gave Steamship "the right to mandates of the court, and consequently, to the due
make deduction 'from any claims . . . due to a Member' of 'any liabilities administration of justice . . .211
of such Member to the Club,'"204 Steamship set-off the costs awarded by
the English Commercial Court from the amount reimbursed to Sulpicio.
Sulpicio's brokers and lawyers were informed of the set-off through an The court's contempt power should be exercised with restraint and for a
email dated December 3, 2012.205 preservative, and not a vindictive, purpose. "Only in cases of clear and
contumacious refusal to obey should the power be exercised."212
Steamship contends that there was no legal impediment when it initiated
arbitration proceedings in London.206 The action was taken in good faith In Lorenzo Shipping Corporation v. Distribution Management Association
to preserve its rights while defending its position that Sulpicio's filing of of the Philippines,213 this Court held that:
Civil Case No. 07-577 constituted a breach of the Club Rules.207 On the
other hand, Sulpicio's acts were far from desirable for it did not only fail
to participate in the London arbitration proceedings but also evaded There is no question that in contempt the intent goes to the
service of all notices so that it could feign ignorance of the existence of gravamen of the offense. Thus, the good faith, or lack of
arbitration proceedings."208 it, of the alleged contemnor should be considered. Where the
act complained of is ambiguous or does not clearly show on
This Court finds Sulpicio's arguments to be untenable. its face that it is contempt, and is one which, if the party
is acting in good faith, is within his rights, the presence
Steamship's commencement of arbitration even before the Regional Trial or absence of a contumacious intent is, in some instances,
Court had ruled on its motion to dismiss and suspend proceedings does held to be determinative of its character. A person should
not constitute an "improper conduct" that "impede[s], obstruct[s] or not be condemned for contempt where he contends for what he
degrade[s] the administration of justice."209 believes to be right and in good faith institutes
proceedings for the purpose, however erroneous may be his
conclusion as to his rights. To constitute contempt, the act
In Heirs of Trinidad de Leon vda. de Roxas v. Court of Appeals,210 this
must be done willfully and for an illegitimate or improper
Court explained the concept of contempt of court:
purpose.214 (Citations omitted)
Contempt of court is a defiance of the authority, justice or
dignity of the court; such conduct as tends to bring the
In Lim Lua v. Lua,215 the father's deferral in giving monthly
authority and administration of the law into disrespect or
support pendente lite granted by the trial court was held not
to interfere with or prejudice parties litigant or their
witnesses during litigation . . . contumacious, considering that "he had not been remiss in actually
providing for the needs of his children." It was also taken into account
Contempt of court is defined as a disobedience to the Court that he "believed in good faith that the trial and appellate courts, upon
by acting in opposition to its authority, justice and
equitable grounds, would allow him to offset the substantial amounts he due it the alleged "arbitration costs," indicates its lack of sincerity and
had spent or paid directly to his children." This Court explained: good faith.

Contempt of court is defined as a disobedience to the court Finally, this Court finds Sulpicio's claim for damages to be improperly
by acting in opposition to its authority, justice, and raised. It should be addressed in an ordinary civil action. Its petition for
dignity. It signifies not only a willful disregard or indirect contempt is not the proper action to determine the validity of the
disobedience of the court's order, but such conduct which set-off and to make a factual determination relating to the propriety of
tends to bring the authority of the court and the ordering restitution.
administration of law into disrepute or, in some manner, to
impede the due administration of justice. To constitute WHEREFORE, the Petition for Review in G.R. No.
contempt, the act must be done willfully and for an
196072 is GRANTED. The Decision dated November 26, 2010 of the
illegitimate or improper purpose. The good faith, or lack of
Court of Appeals in CA-G.R. SP No. 106103 and the Order dated July 11,
it, of the alleged contemnor should be considered.216
2008 of the Regional Trial Court, Branch 149, Makati City in Civil Case
No. 07-577 are SET ASIDE. The dispute between Sulpicio Lines, Inc. and
This Court finds no dear and contumacious conduct on the part of Steamship Mutual Underwriting (Bermuda) Limited is referred to
Steamship. It does not appear that Steamship was motivated by bad faith arbitration in London in accordance with Rule 47 of the 2005/2006 Club
in initiating the arbitration proceedings. Rather, its act of commencing Rules.
arbitration in London is but a bona fide attempt to preserve and enforce
its rights under the Club Rules. The Petition for Indirect Contempt in G.R. No.
208603 is DISMISSED for lack of merit.
There was no legal impediment at the time Steamship initiated London
arbitration proceedings. Steamship commenced arbitration on July 31, SO ORDERED
2007 even before the Regional Trial Court denied its Motion to Dismiss
and/or Refer Case to Arbitration on July 11, 2008. There was no order
from the Regional Trial Court enjoining Steamship from initiating
arbitration proceedings in London. Besides, the 2009 Special ADR Rules
specifically provided that arbitration proceedings may be commenced or
continued and an award may be made, while the motion for the stay of
civil action and for referral to arbitration is pending resolution by the
court.217

This Court notes that while the arbitration proceeding was commenced as
early as July 31, 2007, it is only six (6) years later that Sulpicio filed its
Petition218 to cite Steamship for indirect contempt. Sulpicio cannot invoke
lack of knowledge of the London arbitration proceedings due to several
reasons. First, it received and replied219 to the notice of commencement
of arbitration proceedings220 dated July 31, 2007. Second, Steamship
presented evidence showing Sulpicio's refusal to receive any notices,
orders, or communications related to the arbitration proceedings. Lastly,
the pendency of the London arbitration was made known to the Court of
Appeals and this Court through Steamship's petitions. Sulpicio's belated
filing of its Petition, only after Steamship has deducted from the refund
 On February 19, 2008, Power sent a demand letter to Federal claiming the unpaid
amount of ₱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 Federal to no avail.

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:
THIRD DIVISION
15. ARBITRATION COMMITTEE - All disputes, controversies or
March 8, 2017 differences, which may arise between the parties herein, out of or in
relation to or in connection with this Agreement, or for breach
G.R. No. 211504 thereof shall be settled by the Construction Industry Arbitration
Commission (CIAC) which shall have original and exclusive
jurisdiction over the aforementioned disputes.5
FEDERAL BUILDERS, INC., Petitioner
vs
POWER FACTORS, INC., Respondent On November 20, 2009, Atty. Vivencio Albano, the counsel of Federal, submitted a
letter to the CIAC manifesting that Federal agreed to arbitration and sought an
extension of 15 days to file its answer, which request the CIAC granted.
DECISION

On December 16, 2009, Atty. Albano filed his withdrawal of appearance stating that
BERSAMIN, J.:
Federal had meanwhile engaged another counsel.6
An agreement to submit to voluntary arbitration for purposes of vesting jurisdiction
Federal, represented by new counsel (Domingo, Dizon, Leonardo and Rodillas Law
over a construction dispute in the Construction Industry Arbitration Commission
Office), moved to dismiss the case on the ground that CIAC had no jurisdiction over
(CIAC) need not be contained in the construction contract, or be signed by the
the case inasmuch as the Contract of Service between Federal and Power had been
parties. It is enough that the agreement be in writing.
a mere draft that 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
The Case hear and decide the case.7

Federal Builders Inc. (Federal) appeals to reverse the decision promulgated on On February 8, 2010, the CIAC issued an order setting the case for hearing, and
August 12, 2013,1 whereby the Court of Appeals (CA) affirmed the adverse decision directing that Federal's motion to dismiss be resolved after the reception of evidence
rendered on May 12, 2010 by the Construction Industry Arbitration Commission of the parties.8
(CIAC) with modification of the total amount awarded.2
Federal did not thereafter participate in the proceedings until the CIAC rendered the
Antecedents Final Award dated May 12, 2010,9 disposing:

Federal was the general contractor of the Bullion Mall under a construction In summary: Respondent Federal Builders, Inc. is hereby ordered to
agreement with Bullion Investment and Development Corporation (BIDC). In 2004, pay claimant Power Factors, Inc. the following sums:
Federal engaged respondent Power Factors Inc. (Power) as its subcontractor for the
electric works at the Bullion Mall and the Precinct Building for ₱l8,000,000.00.3
 1. Unpaid balance on the original contract ₱4,276,614.75; executory. Further, the total award due to POWER FACTORS INC.
shall be subjected to an interest of twelve percent (12%) per
2. Unpaid balance on change order nos. 1, 2, 3, annum computed from the time this judgment becomes final and
4, 5, 6, 7, 8, & 9 3,006,970.32; executory, until full satisfaction.
3. Interest to May 13, 2010 1,686,149.94;
SO ORDERED.11
4. Attorney's Fees 250,000.00;
Anent jurisdiction, the CA explained that the CIAC Revised Rules of
5. Cost of Arbitration 149,503.86;
Procedure  stated that the agreement to arbitrate need not be signed by the parties;
  ₱9 ,369 ,238.87 that the consent to submit to voluntary arbitration was not necessary in view of the
arbitration clause contained in the Contract of Service; and that Federal's contention
 
that its former counsel's act of manifesting its consent to the arbitration stipulated in
the draft Contract of Service did not bind it was inconsequential on the issue of
The foregoing amount shall earn legal interest at the rate of 6% per jurisdiction.12
annum from the date of this Final Award until this award becomes
final and executory, Claimant shall then be entitled to 12% per
Concerning the amounts awarded, the CA opined that the CIAC should not have
annum until the entire amount is fully satisfied by Respondent.
allowed the increase based on labor-cost escalation because of the absence of the
agreement between the parties on such escalation and because there was no
Federal appealed the award to the CA insisting that the CIAC had no jurisdiction to authorization in writing allowing the adjustment or increase in the cost of materials
hear and decide the case; and that the amounts thereby awarded to Power lacked and labor.13
legal and factual bases.
After the CA denied Federal's motion for reconsideration on February 19,
On August 12, 2013, the CA affirmed the CIAC's decision with modification as to the 2004,14 Federal has come to the Court on appeal.
amounts due to Power,10 viz.:
Issue
WHEREFORE, the CIAC Final Award dated 12 May 20l0 in CIAC
Case No. 31-2009 is hereby AFFIRMED with MODIFICATION. As
The issues to be resolved are: (a) whether the CA erred in upholding CIAC's
modified, FEDERAL BUILDERS, INC. is ordered to pay POWER
jurisdiction over the present case; and (b) whether the CA erred in holding that
FACTORS, INC. the following:
Federal was liable to pay Power the amount of ₱7,140,728.07.

1. Unpaid balance on the Ruling of the Court

₱4,276,614.75;
original contract
2. Unpaid balance on change The appeal is bereft of merit.
2,864,113.32;
orders
1.
3. Attorney's Fees 250,000.00;
4. Cost of Arbitration 149,503.86; The parties had an effective agreement to submit to voluntary arbitration; hence, the
CIAC had jurisdiction
The interest to be imposed on the net award (unpaid balance on the
The need to establish a proper arbitral machinery to settle disputes expeditiously
original contract and change order) amounting to P.7, 140,728.07
was recognized by the Government in order to promote and maintain the
awarded to POWER FACTORS INC. shall be six (6%) per annum,
development of the country's construction industry. With such recognition came the
reckoned from 4 July 2006 until this Decision becomes final and
creation of the CIAC through Executive Order No. 1008 (E.O. No. 1008), also known sent by post or by telefax, telexes, telegrams, electronic mail or any
as The Construction Industry Arbitration Law. Section 4 of E.O. No. 1008 provides: other mode of communication.

Sec. 4. Jurisdiction. - The CIAC shall have original and exclusive The liberal application of procedural rules as to the form by which the agreement is
jurisdiction over disputes arising from, or connected with, contracts embodied is the objective of the CIAC Revised Rules.  Such liberality conforms to
entered into by parties involved in construction in the Philippines, the letter and spirit of E.O. No. 1008 itself which emphasizes that the modes of
whether the dispute arises before or after the completion of the voluntary dispute resolution like arbitration are always preferred because they settle
contract, or after the abandonment or breach thereof. These disputes in a speedy and amicable manner. They likewise help in alleviating or
disputes may involve government or private contracts. For the unclogging the judicial dockets. Verily, E.O. No. 1008 recognizes that the
Board to acquire jurisdiction, the parties to a dispute must agree to expeditious resolution of construction disputes will promote a healthy partnership
submit the same to voluntary arbitration. x x x between the Government and the private sector as well as aid in the continuous
growth of the country considering that the construction industry provides
Under the CIAC Revised Rules of Procedure Governing Construction employment to a large segment of the national labor force aside from its being a
Arbitration (CIAC Revised Rules), all that is required for the CIAC to acquire leading contributor to the gross national product.16
jurisdiction is for the parties of any construction contract to agree to submit their
dispute to arbitration.15 Also, Section 2.3 of the CIAC Revised Worthy to note is that the jurisdiction of the CIAC is over the dispute, not over the
contract between the parties.17 Section 2.1, Rule 2 of the CIAC Revised
Rules states that the agreement may be reflected in an arbitration clause in their Rules  particularly specifies that the CIAC has original and exclusive jurisdiction
contract or by subsequently agreeing to submit their dispute to voluntary arbitration. over construction disputes,  whether such disputes arise  from or are
The CIAC Revised Rules clarifies, however, that the agreement of the parties to merely connected with  the construction contracts entered into by parties, and
submit their dispute to arbitration need not be signed or be formally agreed upon in whether such disputes arise before or after  the completion of the contracts.
the contract because it can also be in the form of other modes of communication in Accordingly, the execution of the contracts and the effect of the agreement to submit
writing, viz.: 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 of the CIAC.
RULE 4 - EFFECT OF AGREEMENT TO ARBITRATE

Federal contends that there was no mutual consent and no meeting of the minds
SECTION 4.1. Submission to CIAC jurisdiction - An arbitration
between it and Power as to the operation and binding effect of the arbitration clause
clause in a construction contract or a submission to arbitration of a
because they had rejected the draft service contract.
construction dispute shall be deemed an agreement to submit an
existing or future controversy to CIAC jurisdiction, notwithstanding
the reference to a different arbitration institution or arbitral body in The contention of Federal deserves no consideration.
such contract or submission.
Under Article 1318 of the Civil Code, a valid contract should have the following
4.1.1 When a contract contains a clause for the submission of a essential elements, namely: (a)  consent of the contracting parties;
future controversy to arbitration, it is not necessary for the parties to
enter into a submission agreement before the Claimant may invoke (b)  object certain that is the subject matter of the contract; and (c) cause or
the jurisdiction of CIAC. consideration. Moreover, a contract does not need to be in writing in order to be
obligatory and effective unless the law specifically requires so.
4.1.2 An arbitration agreement or a submission to arbitration
shall be in writing, but it need not be signed by the parties, as Pursuant to Article 135618 and Article 135719 of the Civil Code,  contracts shall be
long as the intent is clear that the parties agree to submit a obligatory in whatever form they may have been entered into, provided that all the
present or future controversy arising from a construction essential requisites for their validity are present. Indeed, there was a contract
contract to arbitration. It may be in the form of exchange of letters between Federal and Power even if the Contract of Service was unsigned. Such
contract was obligatory and binding between them by virtue of all the essential long as their intent to submit their dispute to arbitration is clear. The fact that a
elements for a valid contract being present. contract was signed by both parties has nothing to do with the jurisdiction of the
CIAC, and this is the explanation why the CIAC  Revised Rules  itself expressly
It clearly appears that the works promised to be done by Power were already provides that the written communication or agreement need not be signed by the
executed albeit still incomplete; that Federal paid Power ₱l ,000,000.00 representing parties.
the originally proposed downpayment, and the latter accepted the payment; and that
the subject of their dispute concerned only the amounts still due to Power. The Although the agreement to submit to arbitration has been expressly required to be in
records further show that Federal admitted having drafted the Contract of Services writing and signed by the parties therein by Section 422 of Republic Act No.
containing the following clause on submission to arbitration, to wit: 876 (Arbitration Law),23  the requirement is conspicuously absent from the
CIAC Revised Rules, which even expressly allows such agreement not to be signed
15. ARBITRATION COMMITTEE -All disputes, controversies or by the parties therein.24 Brushing aside the obvious contractual agreement in this
differences, which may arise between the Parties herein, out of or in case warranting the submission to arbitration is surely a step backward. 25 Consistent
relation to or in connection with this Agreement, or for breach with the policy of encouraging alternative dispute resolution methods, therefore, any
thereof shall be settled by the Construction Industry Arbitration doubt should be resolved in favor of arbitration. 26 In this connection, the CA correctly
Commission (CIAC) which shall have original and exclusive observed that the act of Atty. Albano in manifesting that Federal had agreed to the
jurisdiction over the aforementioned disputes.20 form of arbitration was unnecessary and inconsequential considering the recognition
of the value of the Contract of Service despite its being an unsigned draft.
With the parties having no issues on the provisions or parts of the Contract of
Service other than that pertaining to the downpayment that Federal was supposed to 2.
pay, Federal could not validly insist on the lack of a contract in order to defeat the
jurisdiction of the CIAC. As earlier pointed out, the CIAC Revised Rules  specifically Amounts as modified by the CA are correct
allows any written mode of communication to show the parties' intent or agreement
to submit to arbitration their present or future disputes arising from or connected with We find no reversible error regarding the amounts as modified by the CA. Power did
their contract. not 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
The CIAC and the CA both found that the parties had disagreed on the amount of under Article 1724 of the Civil Code.  As such, Federal should not be held liable for
the downpayment.1âwphi1 On its part, Power indicated after receiving and the labor cost escalation.
reviewing the draft of the Contract of Service that it wanted 30% as the
downpayment. Even so, Power did not modify anything else in the draft, and WHEREFORE, the Court AFFIRMS the decision promulgated on August 12, 2013;
returned the draft to Federal after signing it. It was Federal that did not sign the draft and ORDERS the petitioner to pay the costs of suit.
because it was not amenable to the amount as modified by Power. It is notable that
the arbitration clause written in the draft of Federal was unchallenged by the parties SO ORDERED.
until their dispute arose.

Moreover, Federal asserted the original contract to support its claim against Power.
If Federal 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 beneficial to its side, and to reject its efficacy and
existence just to relieve itself from the CIAC's unfavorable decision.

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 any other form of written communication, as
 Republic of the Philippines In the course of the performance ofthe contracts, AIC encountered difficulties and
SUPREME COURT incurred losses allegedly due to TRANSCO’s breach of their contracts, prompting it
Manila to surrender the projects to TRANSCO under protest. In accordance with an express
stipulation in the contracts that disagreements shall be settled by the parties through
SECOND DIVISION arbitration before the CIAC, AIC submitted a request for arbitration before the CIAC
on August 28, 2006, and, thereafter, filed an Amended Complaint against
TRANSCO alleging that the latter breached the contracts by its failure to: (a) furnish
G.R. No. 184295               July 30, 2014
the required Detailed Engineering; (b) arrange a well-established right-of-way to the
project areas; (c) secure the necessary permits and clearances from the concerned
NATIONAL TRANSMISSION CORPORATION, Petitioner, local government units (LGUs); (d) ensure a continuous supply of construction
vs. materials; and (e) carry out AIC’s requests for power shut down. The
ALPHAOMEGA INTEGRATED CORPORATION, Respondent. aforementioned transgressions resultedin protracted delays and contract
suspensions for each project,6 as follows:
DECISION
Duration of Percentage (%)
PERLAS-BERNABE, J.: Original
Transco-Approved of Original
Contract Contract
Suspension and/or Contract
1 2
Assailed in this petition for review on certiorari  are the Decision  dated April 8, 2008 Duration
Extensions Duration
and the 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 1) BTRP Schedule III 560 days 711 days 127%
Industry Arbitration Commission (CIAC) Arbitral Tribunal in favor of respondent
2) BTRP Schedule I 270 days 406 days 170%
Alphaomega Integrated Corporation (AIC) by increasing petitioner National·
Transmission Corporation's (TRANSCO) liability from Pl 7,495,117.44 to Pl 3) Makban Substation 365 days 452 days 124%
8,896,673.31.
4) Bacolod Substation 360 days 289 days 80%
The Facts 5) Bunawan Substation 330 days 130 days 39%

AIC, a duly licensed transmission line contractor, participated in the public biddings 131 days
conducted by TRANSCO and was awarded six ( 6) government construction 6) Quiot Substation 300 days 44%
projects, namely: (a) Contract .for the Construction & Erection of Batangas 2119 days7
Transmission Reinforcement Project Schedule III (BTRP Schedule III Project); (b)
Contract for the Construction & Erection of Batangas Transmission Reinforcement AIC prayed for judgment declaring all six (6) contracts rescinded and ordering
Project Schedule I (BTRP Schedule I Project); (c) Contract for the TRANSCO to pay, in addition to what had already been paid under the contracts,
Construction,Erection & Installation of 230 KV and 69 KV S/S Equipment and moral damages, exemplary damages, and attorney’s fees at ₱100,000.00 each, and
Various Facilities for Makban Substation under the Batangas Transmission a total of ₱40,201,467.19 as actual and compensatory damages.8
Reinforcement Project (Schedule II) (Makban Substation Project); (d) Contract for
the Construction, Erection & Installation of 138 & 69 KV S/S Equipment for Bacolod
TRANSCO, for its part, contended that: (a) it had conducted Detailed Engineering
Substation under the Negros III-Panay III Substation Projects (Schedule II) (Bacolod
prior to the conduct of the bidding; and (b) it had obtained the necessary
Substation Project); (e) Contract for the Construction, Erection & Installation of 138
government permits and endorsements from the affected LGUs. It asserted that AIC
& 69 KV Substation Equipment for the New Bunawan Switching Station Project
was guilty of frontloading– that is,collecting the bulk of the contract price for work
(Bunawan Substation Project); and (f) Contract for the Construction, Erection &
accomplished at the early stages of the project and then abandoning the later
Installation of 138 and 69 KV Substation Equipment for Quiot Substation Project
stagesof the project which has a lower contract price9 –and that it disregarded the
(Quiot Substation Project).5
workable portions of the projects not affected by the lack of supplies and drawings.
TRANSCO further argued that AIC was estopped from asking for standby fees to The foregoing amount of ₱17,495,117.44 shall earn interest at the rate of six percent
cover its overhead expenses during project suspensions considering that the delays, (6%) per annum from the date of promulgation of this Final Award until it becomes
such as the unresolved right-of-way issues and non-availability of materials, were final and executory. Thereafter, the Final Award, including accrued interest, shall
factors already covered by the time extensions and suspensions of work allowed earn interest at the rate of 12% per annum until the entire amount due is fully
under the contracts.10 paid.15 (Emphasis supplied)

On April 18, 2007, the CIAC Arbitral Tribunal rendered its Final Award11 in CIAC Unconvinced, TRANSCO instituted a petition for review16 with the CA.
Case No. 21-2006 ordering the payment of actual and compensatory damages
which AIC would not have suffered had it not been for the project delays attributable Before filing its comment17 to the petition, AIC moved for the issuance of a writ of
to TRANSCO. It found ample evidence to support the claim for the increase in execution,18 not for the amount of 17,495,117.44 awarded in the Final Award, but for
subcontract cost in BTRP Schedule I, as well as such items of cost as house and the increased amount of 18,967,318.49.19 It sought correction of the discrepancies
yard rentals, electric bills, water bills, and maintained personnel, but disallowed the between the amount of the award appearing in the dispositive portion 20 and the body
claims for communications bills, maintenance costs for idle equipment, finance of the Final Award.21 The Arbitral Tribunal, however, denied AIC’s motion, holding
charges, and materials cost increases.12 According to the Arbitral Tribunal, even if that while the CIAC Revised Rules of Procedure Governing Construction Arbitration
AIC itself made the requests for contract time extensions, this did not bar its claim (CIAC Rules) would have allowed the correction of the Final Award for evident
for damages as a result of project delayssince a contrary ruling would allow miscalculation of figures, typographical or arithmetical errors, AIC failed to file its
TRANSCO to profit from its own negligence and leave AIC to suffer serious material motionfor the purpose within the time limitation of 15 days from its receipt of the
prejudice as a direct consequence of that negligence leaving it without any remedy Final Award.22
at law.13 The Arbitral Tribunal upheld AIC’s right to rescind the contracts in
accordancewith Resolution No. 018-2004 of the Government Procurement Policy The CA Ruling
Board (GPPB), which explicitly gives the contractor the right to terminate the
contract if the works are completely stopped for a continuous period of at least 60
calendar days, through no fault of its own, due to the failure of the procuring entity to In the Decision23 dated April 8, 2008, the CAaffirmed the Arbitral Tribunal’s factual
deliver within a reasonable time, supplied materials, right-of-way, or other items that findings that TRANSCOfailed to exercise due diligence in resolving the problems
it is obligated to furnish under the terms of the contract, among others.14 The regarding the right-of-way and the lack of materials before undertaking the bidding
dispositive portion of the Arbitral Tribunal’s Final Award reads: process and entering into the contracts with AIC.24 It found no merit in TRANSCO’s
allegation that AIC refused to perform the remaining workable portions of the
projects not affected by problems of right-of-way, shutdowns, supplies and drawings,
WHEREFORE, Respondent, National Transmission Corporation [TRANSCO] is firstly, because the certificates ofaccomplishments issued by TRANSCO in the
hereby ordered to pay Claimant, Alphaomega Integrated Corporation, the following course of project implementation signifying its satisfaction with AIC’s performance
sums: negate such claim and, secondly, because all the orders issued by TRANSCO
suspended the contracts not only in part but in their entirety, thus, permitting no work
(a) For BTRP Schedule III - ₱6,423,496.67 activity at all during such periods.25

(b) For BTRP Schedule I - 5,214,202.30

The CA upheld the Arbitral Tribunal’s Final Award as having been sufficiently
(c) For Makban Substation - 3,075,870.95 established by evidence but modified the total amount of the award after noting a
supposed mathematical error in the computation. Setting aside TRANSCO’s
(d) For Bacolod Substation - 1,362,936.77 objections, it ruled that when a case is brought to a superior court on appeal every
aspect of the case is thrown open for review,26 hence, the subject error could be
(e) For Bunawan Substation - 820,481.72
rectified. The CA held that the correct amount of the award should be
(f) For Quiot Substation - 598, 129.03 ₱18,896,673.31, and not ₱17,495,117.44 as stated in the Arbitral Tribunal’s Final
Award.27 Dissatisfied, TRANSCO moved for reconsideration28 but was, however,
TOTAL ₱17,495,117.44 denied by the CA in a Resolution29 dated August 27, 2008, hence, the instant
petition.
Each Party shall shoulder its own cost of arbitration.
 The Issues Before the Court relation to each other and to the whole, and the probabilities of the situation. (G.R.
No. 149004, April 14, 2004, 427 SCRA 517, 523-524.)
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 The rule, however, precluding the Court from delving on the factual determinations
claims for damages as a result of project delays, and (b) in increasing the total of the CA, admits of several exceptions. In Fuentes v. Court of Appeals, we held that
amount of compensation awarded in favor of AIC despite the latter’s failure to raise the findings of facts of the CA, which are generally deemed conclusive, may admit
the allegedly erroneous computation of the award before the CIAC in a timely review by the Court in any of the following instances, among others:
manner, that is, within fifteen (15) days from receipt of the Final Award as provided
under Section 17.1 of the CIAC Rules. (1) when the factual findings of the [CA] and the trial court are contradictory;

The Court’s Ruling (2) when the findings are grounded entirely on speculation, surmises, or conjectures;

TRANSCO seeks through this petition a recalibration of the evidencepresented (3) when the inference made bythe [CA] from its findings of fact is manifestly
before the CIAC ArbitralTribunal, insisting that AIC is not entitled to any damages mistaken, absurd, or impossible;
not only because it had previously waived all claims for standby fees in case of
project delays but had eventually failed to perform the workable portions of the (4) when there is grave abuse of discretion in the appreciation of facts;
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 Court provides that a petition
for review on certiorariunder the said rule, as in this case, "shall raise only questions (5) when the [CA], in making its findings, goes beyond the issues of the case, and
of law which must be distinctly set forth." Thus, absent any of the existing exceptions such findings are contrary to the admissions of both appellant and appellee;
impelling the contrary, the Court is, as a general rule, precluded from delving on
factual determinations, as what TRANSCO essentially seeks in this case. Similar to (6) when the judgment of the [CA] is premised on a misapprehension of facts;
the 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 (7) when the [CA] fails to notice certain relevant facts which, if properly considered,
are hereunder quoted: will justify a different conclusion;

Dynamic maintains that the issues Hanjin raised in its petitions are factual in nature (8) when the findings of fact are themselves conflicting;
and are, 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 (9) when the findings of fact are conclusions without citation of the specific evidence
questions of law which must be distinctly set forth." Dynamic’s contention is valid on which they are based; and
topoint as, indeed, the matters raised by Hanjin are factual, revolving as they do on
the entitlement of Dynamic to the awards granted and computed by the CIAC and
(10) when the findings of fact of the [CA] are premised on the absence of evidence
the CA. Generally, this would be a question of fact that this Court would not delve
but such findings are contradicted by the evidence on record. (G.R. No. 109849,
upon. Imperial v. Jauciansuggests as much. There, the Court ruled that the
February 26, 1997, 268 SCRA 703, 709)
computation of outstanding obligation is a question of fact:

Significantly, jurisprudence teaches that mathematical computations as well as the

Arguing that she had already fully paid the loan x x x, petitioner alleges that the two
propriety of the arbitral awards are factual determinations. And just as significant is
lower courts misappreciated the facts when they ruled that she still had an
that the factual findings of the CIAC and CA—in each separate appealed decisions
outstanding balance of ₱208,430.
—practically dovetail with each other. The perceptible essential difference, at least
insofar as the CIAC’s Final Award and the CA Decision in CA-G.R. SP No. 86641
This issue involves a question of fact. Such question exists when a doubt or are concerned, rests merely on mathematical computations or adjustments of
difference arises as to the truth or the falsehood of alleged facts; and when there is baseline amounts which the CIAC may have inadvertently utilized.31 (Emphases and
need for a calibration of the evidence, considering mainly the credibility of witnesses underscoring supplied)
and the existence and the relevancy of specific surrounding circumstances, their
In any case, the Court finds no reason to disturb the factual findings of the CIAC stating that "[a] clerical error in the judgment appealed from may be corrected by the
Arbitral Tribunal on the matter of AIC’s entitlement to damages which the CA appellate court,"37 the application of that rule cannot be made in this case
affirmed as being well supported by evidence and properly referred to in the record. considering that the CIAC Rules provides for a specific procedureto deal with
It is well-settled that findings of fact of quasijudicial bodies, which have acquired particular errors involving "[a]n evident miscalculation of figures, a typographical or
expertise because their jurisdiction is confined to specific matters, are generally arithmetical error." Indeed, the rule iswell entrenched: Specialis derogat generali.
accorded not only respect, but also finality, especially when affirmed by the When two rules apply to a particular case, thatwhich was specially designed for the
CA.32 The CIAC possesses that required expertise in the field of construction said case must prevail over the other.38
arbitration and the factual findings of its construction arbitrators are final and
conclusive, not reviewable by this Court on appeal.33 Furthermore, it must be emphasized that the petition for review before the CA was
filed by TRANSCO.39 AIC never elevated before the courts the matter concerning the
While the CA correctly affirmed infull the CIAC Arbitral Tribunal’s factual discrepancy between the amount of the award stated in the body of the Final Award
determinations, it improperly modified the amount of the award in favor of AIC, which and the total award shown in its dispositive portion. The issue was touched upon
modification did not observe the proper procedure for the correction of an evident bythe CA only after AIC raised the same through its Comment (With Motion to
miscalculation of figures, including typographical or arithmetical errors, in the arbitral Acknowledge Actual Amount of Award)40 to TRANSCO’s petition for review. The CA
award. Section 17.1 of the CIAC Rules mandates the filing of a motion for the should not have modified the amount of the award to favor AIC because it is well-
foregoing purpose within fifteen (15) days from receipt thereof, viz.: settled that no relief can be granted a party who does not appeal41 and that a party
who did not appeal the decision may not obtain any affirmative relief from the
Section 17.1 Motion for correction of final award– Any of the parties may file a appellate court other than what he had obtained from the lower court, if any, whose
motion for correction of the Final Award within fifteen (15) days from receipt thereof decision is brought up on appeal.42 The disposition, as stated in the fallo of the CIAC
upon any of the following grounds: Arbitral Tribunal's Final Award, should therefore stand.43

a. An evident miscalculation of figures, a typographical or arithmetical error; WHEREFORE, the petition is PARTLY GRANTED. The Decision dated April 8, 2008
(Emphasis supplied) of the Court of Appeals in CA-G.R. SP No. 99454 is hereby AFFIRMED with
MODIFICATION. The compensation awarded in favor of Alphaomega Integrated
Corporation in the amount of ₱17,495,117.44, as shown in the fallo of the
xxxx
·construction Industry Arbitration Commission's Final Award dated April 18, 2007,
stands.
Failure to file said motion would consequentlyrender the award final and executory
under Section 18. 1 of the same rules, viz.:
SO ORDERED.
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-limitation under the CIAC
Rules.36 Clearly, having failed to move for the correction of the Final Award and,
thereafter, having opted to file insteada motion for execution of the arbitral tribunal’s
unopposed and uncorrected Final Award, AIC cannot now question against the
correctness of the CIAC’s disposition. Notably, while there is jurisprudential authority
 favor of CECON.[6] The Court of Appeals July 1, 2010 Amended Decision adjusted
SECOND DIVISION this amount to P93,896,335.71.[7]
[ G.R. No. 192725, August 09, 2017 ] Petitioner CECON was a construction contractor, which, for more than 25 years, had
CE CONSTRUCTION CORPORATION, PETITIONER, VS. ARANETA been doing business with respondent ACI, the developer of Araneta Center, Cubao,
CENTER INC., RESPONDENT. Quezon City.[8]

DECISION In June 2002, ACI sent invitations to different construction companies, including
CECON, for them to bid on a project identified as "Package #4
LEONEN, J.:
Structure/Mechanical, Electrical, and Plumbing/Finishes (excluding Part A
Substructure)," a part of its redevelopment plan for Araneta Center Complex.[9] The
A tribunal confronted not only with ambiguous contractual terms but also with the project would eventually be the Gateway Mall. As described by ACI, "[t]he Project
total absence of an instrument which definitively articulates the contracting parties' involved the design, coordination, construction and completion of all architectural
agreement does not act in excess of jurisdiction when it employs aids in and structural portions of Part B of the Works[;] and the construction of the
interpretation, such as those articulated in Articles 1370 to 1379 of the Civil Code. In architectural and structural portions of Part A of the Works known as Package 4 of
so doing, a tribunal does not conjure its own contractual terms and force them upon the Araneta Center Redevelopment Project."[10]
the parties.
As part of its invitation to prospective contractors, ACI furnished bidders with Tender
In addressing an iniquitous predicament of a contractor that actually renders Documents, consisting of:
services but remains inadequately compensated, arbitral tribunals of the
Construction Industry Arbitration Commission (CIAC) enjoy a wide latitude Volume I: Tender Invitation, Project Description, Instructions to Tenderers, Form of
consistent with their technical expertise and the arbitral process' inherent inclination Tender, Dayworks, Preliminaries and General Requirements, and Conditions of
to afford the most exhaustive means for dispute resolution. When their awards Contract;
become the subject of judicial review, courts must defer to the factual findings borne
by arbitral tribunals' technical expertise and irreplaceable experience of presiding Volume II: Technical Specifications for the Architectural, Structural, Mechanical,
over the arbitral process. Exceptions may be availing but only in instances when the Plumbing, Fire Protection and Electrical Works; and
integrity of the arbitral tribunal itself has been put in jeopardy. These grounds are
more exceptional than those which are regularly sanctioned in Rule 45 petitions. Addenda Nos. 1, 2, 3, and 4 relating to modifications to portions of the Tender
Documents.[11]
This resolves a Petition for Review on Certiorari[1] under Rule 45 of the 1997 Rules
of Civil Procedure, praying that the assailed April 28, 2008 Decision [2] and July 1, The Tender Documents described the project's contract sum to be a "lump sum" or
2010 Amended Decision[3] of the Court of Appeals in CA-G.R. SP No. 96834 be "lump sum fixed price" and restricted cost adjustments, as follows:
reversed and set aside. It likewise prays that the October 25, 2006 Decision [4] of the 6 TYPE OF CONTRACT
CIAC Arbitral Tribunal be reinstated.  
This is a Lump Sum Contract and the price is a fixed price not subject
The CIAC Arbitral Tribunal October 25, 2006 Decision awarded a total sum of to measurement or recalculation should the actual quantities of work
P217,428,155.75 in favor of petitioner CE Construction Corporation (CECON). This and materials differ from any estimate available at the time of
sum represented adjustments in unit costs plus interest, variance in take-out costs, contracting, except in regard to Cost-Bearing Changes which may be
change orders, time extensions, attendance fees, contractor-supplied equipment, 6.1 ordered by the Owner which shall be valued under the terms of the
and costs of arbitration. This amount was net of the countervailing awards in favor of Contract in accordance with the Schedule of Rates, and with regard to
respondent Araneta Center, Inc. (ACI), for defective and incomplete works, permits, the Value Engineering Proposals under Clause 27. The Contract Sum shall
licenses and other advances.[5] not be adjusted for changes in the cost of labour, materials or other
matters.[12]
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 TENDER AND CONTRACT
 Fixed Price Contract Despite these developments, ACI still failed to formally award the project to CECON.
1. The Contract Sum payable to the Contactor is a Lump Sum The parties had yet to execute a formal contract. This prompted CECON to write a
Fixed Price and will not be subject to adjustment, save letter to ACI, dated December 27, 2002,[20] emphasizing that the project cost quoted
only where expressly provided for within the Contract to ACI was "based upon the prices prevailing at December 26, 2002" price levels.[21]
Documents and the Form of Agreement.
2. The Contract Sum shall not be subject to any adjustment By January 2003 and with the project yet to be formally awarded, the prices of steel
"in respect of rise and fall in the cost of materials[,] products had increased by 5% and of cement by P5.00 per bag. On January 8,
labor, plant, equipment, exchange rates or any other 2003, CECON again wrote ACI notifying it of these increasing costs and specifically
matters affecting the cost of execution of Contract, save stating that further delays may affect the contract sum.[22]
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,
3. The Contract Sum shall further not be subject to any 2003[23] indicating cost and time adjustments to its original proposal. Specifically, it
change in subsequent legislation, which causes additional referred to an 11.52% increase for the cost of steel products, totalling
or reduced costs to the Contractor.[13] P24,921,418.00 for the project; a P5.00 increase per bag of cement, totalling
The bidders' proposals for the project were submitted on August 30, 2002. These P3,698,540.00 for the project; and costs incurred because of changes to the
were based on "design and construct" bidding.[14] project's structural framing, totalling P26,011,460.00. The contract sum, therefore,
needed to be increased to P1,594,631,418.00. CECON also specifically stated that
CECON submitted its bid, indicating a tender amount of P1,449,089,174.00. This its tender relating to these adjusted prices were valid only until January 31, 2003, as
amount was inclusive of "both the act of designing the building and executing its further price changes may be forthcoming. CECON emphasized that its steel
construction." Its bid and tender were based on schematic drawings, i.e., conceptual supplier had actually already advised it of a forthcoming 10% increase in steel prices
designs and suppositions culled from ACI's Tender Documents. CECON's proposal by the first week of February 2003. CECON further impressed upon ACI the need to
"specifically stated that its bid was valid for only ninety (90) days, or only until 29 adjust the 400 days allotted for the completion of the project.[24]
November 2002." This tender proposed a total of 400 days, or until January 10,
2004, for the implementation and completion of the project.[15] On February 4, 2003, ACI delivered to CECON the initial tranche of its down
payment for the project. By then, prices of steel had been noted to have increased
CECON offered the lowest tender amount. However, ACI did not award the project by 24% from December 2002 prices. This increase was validated by ACI.[25]
to any 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 Subsequently, ACI informed CECON that it was taking upon itself the design
to it. ACI elected to inform CECON verbally and not in writing.[16] component of the project, removing from CECON's scope of work the task of coming
up with designs.[26]
In a phone call on December 7, 2002, ACI instructed CECON to proceed with
excavation works on the project. ACI, however, was unable to deliver to CECON the On June 2, 2003, ACI finally wrote a letter[27] to CECON indicating its acceptance of
entire project site. Only half, identified as the Malvar-to-Roxas portion, was CECON's August 30, 2002 tender for an adjusted contract sum of P1,540,000.00
immediately available. The other half, identified as the Roxas to-Coliseum portion, only:
was delivered only about five (5) months later.[17] Araneta Center, Inc. (ACI) hereby accepts the C-E
Construction Corporation (CEC) tender dated August 30, 2002,
As the details of the project had yet to be finalized, ACI and CECON pursued further submitted to ACI in the adjusted sum of One Billion Five
negotiations. ACI and CECON subsequently agreed to include in the project the Hundred Forty Million Pesos Only (P1,540,000,000.00), which
construction of an office tower atop the portion identified as Part A of the project. sum includes all additionally quoted and accepted items
This escalated CECON's project cost to P1,582,810,525.00.[18] within this acceptance letter and attachments, Appendix A,
consisting of one (1) page, and Appendix B, consisting of
After further negotiations, the project cost was again adjusted to P1,613,615,244.00. seven (7) pages plus attachments, which sum of One Billion
Still later, CECON extended to ACI a P73,615,244.00 discount, thereby"reducing its Five Hundred Forty Million Pesos Only (P1,540,000,000.00) is
offered project cost to P1,540,000.00.[19] inclusive of any Government Customs Duty and Taxes including
 Value Added Tax (VAT) and Expanded Value Added Tax (EVAD, needed to be removed from the total amount due to CECON. ACI considered a sum
and which sum is hereinafter referred to as the Contract totalling P251,443,749.00 to have been removed from the contract sum due to
Sum.[28] CECON. This amount of P251,443,749.00 was broken down, as follows:
Item 4, Appendix B of this acceptance letter explicitly recognized that "all design (a) For elevators/escalators, PhP106,000,000;
except support to excavation sites, is now by ACI."[29] It thereby confirmed that the (b) For Chillers, PhP41,152,900;
parties were not bound by a design-and-construct agreement, as initially (c) For Generator Sets, PhP53,040,000;
contemplated in ACI's June 2002 invitation, but by a construct-only agreement. The (d) For Indoor Substation, PhP23,024,150;
letter stated that "[CECON] acknowledge[s] that a binding contract is now (e) For Cooling Towers, PhP5,472,809; and
existing."[30] However, consistent with ACI's admitted changes, it also expressed (f) For Pumps and Tanks, PhP22,753,890.[39]
ACI's corresponding undertaking: "This notwithstanding, formal contract documents CECON avers that in removing the sum of P251,443,749.00, ACI "simply deleted
embodying these positions will shortly be prepared and forwarded to you for the amount in the cost breakdown corresponding to each of the items taken out in
execution."[31] the contract documents."[40] ACI thereby disregarded that the corresponding
stipulated costs pertained not only to the acquisition cost of these pieces of
Despite ACI's undertaking, no formal contract documents were delivered to CECON equipment but also to so-called "builder's works" and other costs relating to their
or otherwise executed between ACI and CECON.[32] preparation for and installation in the project. Finding it unjust to be performing
auxiliary services practically for free, CECON proposed a reduction in the take-out
As it assumed the design aspect of the project, ACI issued to CECON the costs claimed by ACI. It instead claimed P26,892,019.00 by way of compensation
construction drawings for the project. Unlike schematics, these drawings specified for the work that it rendered.[41]
"the kind of work to be done and the kind of material to be used."[33] CECON
laments, however, that "ACI issued the construction drawings in piece-meal fashion With many changes to the project and ACI's delays in delivering drawings and
at times of its own choosing."[34] From the commencement of CECON's engagement specifications, CECON increasingly found itself unable to complete the project on
until its turnover of the project to ACI, ACI issued some 1,675 construction drawings. January 10, 2004. It noted that it had to file a total of 15 Requests for Time
CECON emphasized that many of these drawings were partial and frequently Extension from June 10, 2003 to December 15, 2003, all of which ACI failed to
pertained to revisions of prior items of work.[35] Of these drawings, more than 600 timely act on.[42]
were issued by ACI well after the intended completion date of January 10, 2004:
Drawing No. 1040 was issued on January 12, 2004, and the latest, Drawing No. Exasperated, CECON served notice upon ACI that it would avail of arbitration. On
1675, was issued on November 26, 2004.[36] January 29, 2004, it filed with the CIAC its Request for Adjudication.[43] It prayed that
a total sum of P183,910,176.92 representing adjusted project costs be awarded in
Apart from shifting its arrangement with CECON from design-and-construct to its favor.[44]
construct only, ACI introduced other changes to its arrangements with CECON.
CECON underscored two (2) of the most notable of these changes which impelled it On March 31, 2004, CECON and ACI filed before the CIAC a Joint
to seek legal relief. Manifestation[45] indicating that some issues between them had already been settled.
Proceedings before the CIAC were then suspended to enable CECON and ACI to
First, on January 30, 2003, ACI issued Change Order No. 11,[37] which shifted the arrive at an amicable settlement.[46] On October 14, 2004, ACI filed a motion before
portion identified as Part B of the project from reinforced concrete framing to the CIAC noting that it has validated P85,000,000.00 of the total amount claimed by
structural steel framing. Deleting the cost for reinforced concrete framing meant CECON. It prayed for more time to arrive at a settlement.[47]
removing P380,560,300.00 from the contract sum. Nevertheless, replacing
reinforced concrete framing with structural steel framing "entailed substitute cost of In the meantime, CECON completed the project and turned over Gateway Mall to
Php217,585,000, an additional Php44,281,100 for the additional steel frames due to ACI.[48] It had its blessing on November 26, 2004.[49]
revisions, and another Php1,950,000 for the additional pylon."[38]
As negotiations seemed futile, on December 29, 2004, CECON filed with the CIAC a
Second, instead of leaving it to CECON, ACI opted to purchase on its own certain Motion to Proceed with arbitration proceedings. ACI filed an Opposition.[50]
pieces of equipment-elevators, escalators, chillers, generator sets, indoor
substations, cooling towers, pumps, and tanks-which were to be installed in the After its Opposition was denied, ACI filed its Answer dated January 26, 2005.[51] It
project. This entailed "take-out costs"; that is, the value of these pieces of equipment attributed liability for delays to CECON and sought to recover counterclaims totalling
P180,752 297.84. This amount covered liquidated damages for CECON's supposed ACI itself. Considering that the premise for CECON's August 30, 2002 lump-sum
delays, the cost of defective works which had to be rectified, the cost of procuring offer of P1,540,000.00 was no longer availing, CECON was no longer bound by its
permits and licenses, and ACI's other advances.[52] representations in respect of that lump-sum amount. It may then claim cost
adjustments totalling P16,429,630.74, as well as values accruing to the various
On February 8, 2005, ACI filed a Manifestation and Motion seeking the CIAC's change orders issued by ACI, totalling P159,827,046.94.[61]
clearance for the parties to enter into mediation. Mediation was then instituted with
Atty. Sedfrey Ordonez acting as mediator.[53] The CIAC Arbitral Tribunal found ACI liable for the delays. This entitled CECON to
extended overhead costs and the ensuing extension cost of its Contractor's All Risk
After mediation failed, an arbitral tribunal was constituted through a March 16, 2005 Insurance. For these costs, the CIAC Arbitral Tribunal awarded CECON the total
Order of the CIAC. It was to be composed of Dr. Ernesto S. De Castro, who acted amount of P16,289,623.08. As it was ACI that was liable for the delays, the CIAC
as Chairperson with Engr. Reynaldo T. Viray and Atty. James S. Villafranca as Arbitral Tribunal ruled that ACI was not entitled to liquidated damages.[62]
members.[54]
The CIAC Arbitral Tribunal ruled that CECON was entitled to a differential in take out
ACI filed a Motion for Reconsideration of the CIAC March 16, 2005 Order. This was costs representing builder's works and related costs with respect to the equipment
denied in the Order dated March 30, 2005.[55] purchased by ACI. This differential cost was in the amount of P15,332,091.47.
[63]
 The CIAC Arbitral Tribunal further noted that while ACI initially opted to purchase
In the Order dated April 1, 2005, the CIAC Arbitral Tribunal set the preliminary by itself pumps, tanks, and cooling towers and removed these from CECON's scope
conference on April 13, 2005.[56] of work, it subsequently elected to still obtain these through CECON. Considering
that the corresponding amount deducted as take-out costs did not encompass the
At the preliminary conference, CECON indicated that, the total sum it was entitled to overhead costs and profits under day work, which should have accrued to CECON
recover from ACI needed to be adjusted to P324,113,410.08. The CIAC Arbitral because of these equipment, the CIAC Arbitral Tribunal ruled that CECON was
Tribunal, thus, directed CECON to file an Amended Request for entitled to 18% day work rate or a total of P21,267,908.00.[64]
Adjudication/Amended Complaint.[57]
The CIAC Arbitral Tribunal also found that, apart from adjusted costs incurred on
Following the filing of CECON's Amended Request for Adjudication/Amended account of ACI's own activities, it also became necessary for CECON, as main
Complaint and the ensuing responsive pleadings, another preliminary conference contractor, to continue extending auxiliary services to the project's subcontractors
was set on May 13, 2005. The initial hearing of the case was then set on June 10, because of the delays. Thus, the CIAC Arbitral Tribunal awarded CECON
2005.[58] attendance fees-the main contractor's mark-up for auxiliary services extended to
subcontractors - totalling P14,335,674.88. This amount was lower than the original
At the initial hearing, the CIAC Arbitral Tribunal resolved to exclude the amount of amount prayed for by CECON (i.e., P19,544,667.81)[65] as the CIAC Arbitral Tribunal
P20,483,505.12 from CECON's claims as these pertained to unpaid ruled that CECON may not claim attendance fees pertaining to subcontractors which
accomplishments that did not relate to the issue of cost adjustments attributed to directly dealt with ACI.[66]
ACI, as originally pleaded by CECON.[59]
Considering that CECON's predicament was borne by ACI's fault, the CIAC Arbitral
Following the conduct of hearings, the submission of the parties' memoranda and Tribunal saw it fit to award to CECON the costs of arbitration totalling
offers of exhibits, the CIAC Arbitral Tribunal rendered its Decision on October 25, P1,083,802.58.[67]
2006. It awarded a total of P229,223,318.69 to CECON, inclusive of the costs of
arbitration. It completely denied ACI's claims for liquidated damages, but awarded to While mainly ruling in CECON's favor, the CIAC Arbitral Tribunal found CECON
ACI a total of P11,795,162.93 on account of defective and rectification works, as liable for discolored and mismatched tiles. It noted that CECON had engaged the
well as permits, licenses, and other advances.[60] Thus, the net amount due to services of a subcontractor for the installation of tiles, for which it claimed
CECON was determined to be P217,428,155.75. attendance fees. Thus, it awarded P7,980,000.00 to ACI.[68] In addition, it found
CECON liable to ACI for amounts paid in advance for permits and licenses for the
The CIAC Arbitral Tribunal noted that while ACI's initial invitation to bidders was for a additional office tower, electrical consumption, and garbage collection. Thus, it
lump-sum design-and-construct arrangement, the way that events actually unfolded awarded another P3,815,162.93 to ACI.[69]
clearly indicated a shift to an arrangement where the designs were contingent upon
 miscellaneous change orders, which it construed to be "separate contracts that have
The dispositive portion of the CIAC Arbitral Tribunal Decision read: been entered into at the time [ACI] required them."[79] It likewise held ACI liable for
WHEREFORE, Respondent is hereby ordered to pay the Claimant P1,132,946.17 representing the balance of 12 other partially paid change orders.[80]
the amount of PESOS TWO HUNDRED SEVENTEEN MILLION, FOUR
HUNDRED TWENTY-EIGHT THOUSAND, ONE HUNDRED FIFTY[-]FIVE The Court of Appeals noted that CECON was not entitled to time extensions
PESOS AND SEVENTY[-]FIVE CENTAVOS (Php217,428,155.75) within because the arrangement between ACI and CECON had never been altered.
thirty (30) days upon promulgation of the award. Interest 6% Consequently, it was not entitled to acceleration co ts, additional overhead, ru1d
per annum shall be imposed on the award for any balance reimbursement for extending the Contractor's All Risk Insurance.[81] Conversely, the
remaining from the promulgation of the award up to the time Court of Appeals held CECON liable for delays thereby entitling ACI to liquidated
the award becomes final and executory. Thereafter, interest damages corresponding to 10% of the supposed contract sum of
of 12% per annum shall be imposed on any balance of the P1,540,000,000.00, or P15,400,000.00.[82]
award until fully paid.
Also on account of the supposed lump-sum arrangement, the Court of Appeals held
SO ORDERED.[70] that CECON was not entitled to attendance fees on contract amounts increased by
On December 4, 2006, ACI filed before the Court of Appeals a Petition for change order works.[83] It also stated that the rate for attendance fees, overhead, and
Review[71] under Rule 43 of the 1997 Rules of Civil Procedure. profit for subcontractors' works remained subject to the original contract documents
based on ACI's original invitation to bidders and had never been altered.[84]
In the meantime, on December 28, 2006, the CIAC Arbitral Tribunal issued an
Order[72] acknowledging arithmetical errors in its October 25, 2006 Decision, Regarding attendance fees, the Court of Appeals proffered that the work attributed
Thus, it modified its October 25, 2006 Decision, indicating that the net amount to subcontractors was merely work done by CECON itself, thereby negating the
due to CECON was P231,357,136.72, rather than P217,428,155.75.[73] need for attendance fees.[85]

In its assailed April28, 2008 Decision,[74] the Court of Appeals reduced the award in Concerning take-out costs, the Court of Appeals stated that CECON was in no
favor of CECON to P114,324,605.00 and increased the award to ACI to position to propose its own take-out costs as the tender documents issued along
P31,566,246.20.[75] with ACI's invitation to bidders stated that take-out costs must be based exclusively
on the rates provided in the Contract Cost Breakdown. Nevertheless, as ACI had
The Court of Appeals held as inviolable the lump-sum fixed price arrangement previously undertaken to pay the variance in takeout costs amounting to
between ACI and CECON. It faulted the CIAC Arbitral Tribunal for acting in excess P3,811,289.70, the Court of Appeals concluded that an award for take-out costs in
of jurisdiction as it supposedly took it upon itself to unilaterally modify the that amount was proper.[86]
arrangement between ACI and CECON.[76]
On the CIAC Arbitral Tribunal's award for overhead costs and profits under day
Thus, the Court of Appeals deleted the CIAC Arbitral Tribunal's award representing work, the Court of Appeals held that it was improper to grant this award based on
cost adjustments. However, the Court of Appeals also noted that in ACI's and stipulations on day works pertaining "only to 'materials' and not to equipment."[87]
CECON's March 30, 2004 Joint Ma11ifestation before CIAC, ACI conceded that
P10,266,628.00 worth of cost adjustments was due to CECON and undertook to pay Finally, the Court of Appeals held that CECON was not entitled to costs of litigation
CECON that amount. The Court of Appeals, hence, maintained a P10,266,628.00 considering that "no premium is to be placed on the right to litigate"[88] and since ACI
award of cost adjustment in favor of CECON.[77] could not be faulted for delays.

On the cost increases borne by Change Order No. 11-the shift from reinforced The dispositive portion of the assailed Court of Appeals April 28, 2008 Decision
concrete to structural steel framing-and by transitions from schematic diagrams to read:
construction drawings, the Court of Appeals dismissed the CIAC Arbitral Tribunals WHEREFORE, based on all the foregoing, the Decision of the
award to CECON as arising from "pity" and unwarranted by the lump-sum, fixed- Arbitral Tribunal is modified as follows:
price arrangement.[78]
a. AWARD TO CECON
The Court of Appeals held ACI liable to CECON for the sum of P12,672,488.36 for
 P1,209,782.50[91] and for the drilling of holes and application of epoxy worth
NO. ISSUE Pesos (PHP) P4,543,456.00;[92] and deleted the award for takeout costs.[93]
1 Cost Adjustment 10,266,628.00
The dispositive portion of the assailed Court of Appeals July 1, 2010 Amended
Decision read:
2 Take Out Cost of Equipment 3,811,289.70
WHEREFORE, Our Decision dated 28 April 2008 is hereby
3 Change Orders 99,119,200.09 modified as follows:

a. Approved Change Orders 1,132,946.17 I - AWARD:

b. [Schematic Drawings] to a. AWARD TO CE CONSTRUCTION, INC.

80,108,761.60
[Construction Drawings]
NO. ISSUE PESOS (PhP)
c. Miscellaneous Change
12,672,488.30
Orders 1 Additional costs spent on rebars. 10,266,628.00
d. Change Order No. 11 5,205,004.02 Increase in the costs of cement and formworks
2 5,205,004.02
[4] falling under cost-bearing change.
Equipment Supplied by Owner 1,127,486.50
Representing undervaluation of respondent's
114,324,605.00 3 works in the supply and installation of G.I. 1,209,782.50
  Total
(sic) sheets.
b. AWARD TO ARANETA
4 Representing Miscellaneous Change Orders. 27,601,469.32
NO. ISSUE Pesos (PHP)
5 Drilling of Holes 4,543,450.00
[5]
Liquidated Damages   15,400,000.00
6 [Schematic Drawings] to [Construction Drawings] 80,108,761.60
[6] Defective and Incomplete
  3,000,000.00
Works [7]
Installation of equipment supplied by owner. 1,127,486.50
Bookmarking Granite Tiles   6,980,000.00
TOTAL 130,062,581.94
[7] Permits, Licenses and Other
  6,186,246.23 b. AWARD TO ARANETA CENTER, INC.
Advances
31,566,246.20 1 Liquidated Damage (sic) 20,000,000.00
  Total  
(sic)
In addition, CECON is directed to submit all required. 2 Defective and Incomplete Works 3,000,000.00
close-out documents within thirty (30) days from receipt of
this Decision. 3 Bookmarking Granite Tiles 6,980,000.00

The parties shall bear their own costs of arbitration and 4 Permits, Licenses and other Advances 6,186,246.23
litigation.
  TOTAL 36,166,246.23
SO ORDERED.[89]
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 change orders to P27,601,469.32; reinstated awards for AWARD TO CE CONSTRUCTION, INC. 130,062,581.94
undervalued works in supplying and installing G.I. sheets worth
 On initial impression, what demands resolution is the issue of whether or not the
LESS Court of Appeals erred in characterizing the contractual arrangement between
petitioner CE Construction Corporation and respondent Araneta Center, Inc. as
AWARD TO ARANETA CENTER, INC. 36,166,246.23
immutably one for a lump-sum fixed price.
BALANCE PAYABLE BY ARANETA TO CECON 93,896,335.71
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
SO ORDERED.[94] the Court of Appeals correctly held that the CIAC Arbitral Tribunal acted beyond its
Aggrieved at the Court of Appeals' ruling, CECON tiled the present Petition insisting jurisdiction in holding that the price of P1,540,000,000.00 did not bind the parties as
on the propriety of the CIAC Arbitral Tribunal's conclusions and findings.[95] It prays an immutable lump-sum. Subsumed in this issue is the matter of whether or not the
that the assailed Court of Appeals decisions be reversed and that the CIAC Arbitral Court of Appeals correctly ruled that CECON was rightfully entitled to time
Tribunal October 25, 2006 Decision, as modified by its December 28, 2006 Order, extensions and that intervening circumstances had made ACI liable for cost
be reinstated.[96] adjustments, increases borne by change orders, additional overhead costs,
extended contractor's all risk insurance coverage, increased attendance fees vis-a-
ACI counters that the Court of Appeals July 1, 2010 Amended Decision must be vis subcontractors, and arbitration costs which it awarded to CECON.
upheld.[97]
This Court limits itself to the legal question of the CIAC Arbitral Tribunal's
ACI insists on the inviolability of its supposed agreement with CECON, as embodied competence. Unless any of the exceptional circumstances that warrant revisiting the
in the contract documents delivered to contractors alongside the original offer to bid. factual matter of the accuracy of the particulars of every item awarded to the parties
It cites specific provisions of these documents such as valuation rules and required is availing, this Court shall not embark on its own audit of the amounts owing to
notices for extensions and changes, reckoning of losses and expenses, the ensuing each.
liquidated damages for defects, cost-bearing changes and provisional sums,
[98]
 which define parameters for permissible changes and for reckoning I
corresponding costs and liabilities. However, it did not attach any of these
documents to its Comment or Memorandum. It also cites statutory provisions- This Court begins by demarcating the jurisdictional and technical competence of the
Articles 1715[99] and 1724[100] of the Civil Code-on CECON's liabilities and the CIAC and of its arbitral tribunals.
primacy of stipulated contract prices.[101]
I.A
By the inviolability their agreement, ACI insists on the supposed immutability of the
stipulated contract sum and on the impropriety of the CIAC Arbitral Tribunal in The Construction Industry Arbitration Commission was a creation of Executive Order
writing its own terms for ACI and CECON to follow.[102] It faults the CIAC Arbitral No. 1008, otherwise known as the Construction Industry Arbitration Law.[105] At
Tribunal for erroneously reckoning the sums due to CECON, particularly in relying inception, it was under the administrative supervision of the Philippine Domestic
on factual considerations that run afoul of contractual stipulations and on bases such Construction Board[106] which, in turn, was an implementing agency of the
as industry practices and standards, which supposedly should not have even been Construction Industry Authority of the Philippines (CIAP).[107] The CIAP is presently
considered as the parties have already adduced their respective evidence.[103] It attached to the Department of Trade and Industry.[108]
insists upon CECON's fault for delays and defects, making it liable for liquidated
damages.[104] The CIAC was created with the specific purpose of an "early and expeditious
settlement of disputes"[109] cognizant of the exceptional role of construction to "the
Though nominally modifying the CIAC Arbitral Tribunal October 25, 2006 Decision, furtherance of national development goals."[110]
the Court of Appeals actually reversed it on the pivotal matter of the characterization
of the contract between CECON and ACI. Upon its characterization of the contract Section 4 of the Construction Industry Arbitration Law spells out the jurisdiction of
as one for a lump-sum fixed price, the Court of Appeals deleted much of the CIAC the CIAC:
Arbitral Tribunal's monetary awards to CECON and awarded liquidated damages to Section 4. Jurisdiction. - The CIAC shall have original and
ACI. exclusive jurisdiction over disputes arising from, or
connected with, contracts entered into by parties involved
 in construction in the Philippines, whether the dispute Disputes: Governing Law. - The arbitration of
arises before or after the completion of the contract, or construction disputes shall be governed by
after the abandonment or breach thereof. These disputes may Executive Order No. 1008, otherwise known as
involve government or private contracts. For the Board to the Construction Industry Arbitration Law.
acquire jurisdiction, the parties to a dispute must agree to
submit the same to voluntary arbitration. Section 35. Coverage of the Law. -
Construction disputes which fall within the
The jurisdiction of the CIAC may include but is not limited original and exclusive jurisdiction of the
to violation of specifications for materials and Construction Industry Arbitration Commission
workmanship; violation of the terms of agreement; (the "Commission") shall include those between
interpretation and/or application of contractual time and or among parties to, or who are otherwise
delays; maintenance and defects; payment, default of bound by, an arbitration agreement, directly
employer or contractor and changes in contract cost. or by reference whether such parties are
project owner, contractor, subcontractor,
Excluded from the coverage of this law are disputes arising fabricator, project manager, design
from employer-employee relationships which shall continue to professional, consultant, quantity surveyor,
be covered by the Labor Code of the Philippines. bondsman or issuer of an insurance policy in a
Though created by the act of a Chief Executive who then exercised legislative construction project.
powers concurrently with the Batasang Pambansa, the creation, continuing
existence, and competence of the CIAC have since been validated by acts of The Commission shall continue to exercise
Congress, original and exclusive jurisdiction over
construction disputes although the arbitration
Republic Act No. 9184 or the Government Procurement Reform Act, enacted on is "commercial" pursuant to Section 21 of this
January 10, 2003, explicitly recognized and confirmed the competence of the CIAC: Act.
Section 59. Arbitration. - Any and all disputes arising from I.B
the implementation of a contract covered by this Act shall
be submitted to arbitration in the Philippines according to The CIAC does not only serve the interest of speedy dispute resolution, it also
the provisions of Republic Act No. 876, otherwise known as facilitates authoritative dispute resolution. Its authority proceeds not only from
the "Arbitration Law": Provided, however, That, disputes juridical legitimacy but equally from technical expertise. The creation of a special
that are within the competence of the Construction Industry adjudicatory body for construction disputes presupposes distinctive and nuanced
Arbitration Commission to resolve shall be referred thereto . competence on matters that are conceded to be outside the innate expertise of
The process of arbitration shall be incorporated as a regular courts and adjudicatory bodies concerned with other specialized fields. The
provision in the contract that will be executed pursuant to CIAC has the state's confidence concerning the entire technical expanse of
the provisions of this Act: Provided, That by mutual construction, defined in jurisprudence as "referring to all on-site works on buildings
agreement, the patties may agree in writing to resort to or altering structures, from land clearance through completion including excavation,
alternative modes of dispute resolution. (Emphasis supplied) erection and assembly and installation of components and equipment."[111]
Arbitration of construction disputes through the CIAC was formally incorporated into
the general statutory framework on alternative dispute resolution through Republic Jurisprudence has characterized the CIAC as a quasi-judicial, administrative agency
Act No. 9285, the Alternative Dispute Resolution Act of 2004 (ADR Law). Chapter 6, equipped with technical proficiency that enables it to efficiently and promptly resolve
Section 34 of ADR Law made specific reference to the Construction Industry conflicts;
Arbitration Law, while Section 35 confirmed the CIAC's jurisdiction: [The CIAC] is a quasi-judicial agency. A quasi-judicial
CHAPTER 6 agency or body has been defined as an organ of government
ARBITRATION OF CONSTRUCTION DISPUTES other than a court and other than a legislature, which
affects the rights of private parties through either
Section 34. Arbitration of Construction adjudication or rule-making. The very definition of an
 administrative agency includes its being vested with quasi-
judicial powers. The ever increasing variety of powers and Notably, the other arbitration body listed in Rule 43 the
functions given to administrative agencies recognizes the Construction Industry Arbitration Commission (CIAC) - is
need for the active intervention of administrative agencies also a government agency attached to the Department of Trade
in matters calling for technical knowledge and speed in and Industry. Its jurisdiction is likewise conferred by
countless controversies which cannot possibly be handled by statute. By contrast, the subject matter urisdiction of
regular courts. The CIAC's primary function is that of a commercial arbitrators is stipulated by the parties.
[116]
quasi-judicial agency, which is to adjudicate claims and/or  (Emphasis supplied, citations omitted)
determine rights in accordance with procedures set forth in Consistent with the primacy of technical mastery, Section 14 of the Construction
E.O. No. 1008.[112] Industry Arbitration Law on the qualification of arbitrators provides:
The most recent jurisprudence maintains that the CIAC is a quasi-judicial body. This Section 14. Arbitrators. - A sole arbitrator or three
Court's November 23, 2016 Decision in Fruehauf Electronics v. Technology arbitrators may settle a dispute.
Electronics Assembly and Management Pacific[113] distinguished construction
arbitration, as well as voluntary 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 hoc bodies operating through Arbitrators shall be men of distinction in whom the business
contractual consent and as they intend to serve private, proprietary interests.[115] In sector and the government can have confidence. They shall
contrast, voluntary arbitration under the Labor Code and construction arbitration not be permanently employed with the CIAC. Instead, thy
operate through the statutorily vested jurisdiction of government instrumentalities shall render services only when called to arbitrate. For
that exist independently of the will of contracting parties and to which these parties each dispute they settle, they shall be given fees.
submit. They proceed from the public interest imbuing their respective spheres: Section 8.1 of the Revised Rules of Procedure Governing Construction Arbitration
Voluntary Arbitrators resolve labor disputes and grievances establishes that the foremost qualification of arbitrators shall be technical
arising from the interpretation of Collective Bargaining proficiency. It explicitly enables not only lawyers but also "engineers, architects,
Agreements. These disputes were specifically excluded from construction managers, engineering consultants, and businessmen familiar with the
the coverage of both the Arbitration Law and the ADR Law. construction industry" to serve as arbitrators:
Section 8.1 General Qualification of Arbitrators. - The
Unlike purely commercial relationships, the relationship Arbitrators shall be men of distinction in whom the business
between capital and labor are heavily impressed with public sector and the government can have confidence. They shall
interest. Because of this. Voluntary Arbitrators authorized be technically qualified to resolve any construction dispute
to resolve labor disputes have been clothed with quasi- expeditiously and equitably. The Arbitrators shall come
judicial authority. from different professions. They may include engineers,
architects, construction managers, engineering consultants,
On the other hand, commercial relationships covered by our and businessmen familiar with the construction industry and
commercial arbitratjon laws are purely private and lawyers who are experienced in construction disputes.
contractual in nature. Unlike labor relationships, they do (Emphasis supplied)
not possess the same compelling state interest that would Of the 87 CIAC accredited arbitrators as of January 2017, only 33 are lawyers. The
justify state interference into the autonomy of contracts. majority are experts from construction-related professions or engaged in related
Hence, commercial arbitration is a purely private system of fields.[117]
adjudication facilitated by private citizens instead of
government instrumentalities wielding quasi-judicial powers. Apart from arbitrators, technical experts aid the CIAC in dispute resolution. Section
15 of the Construction Industry Arbitration Law provides:
Moreover, judicial or quasi-judicial jurisdiction cannot be Section 15. Appointment of Experts. - The services of
conferred upon a tribunal by the parties alone. The Labor technical or legal experts may be utilized in the settlement
Code itself confers subject-matter jurisdiction to Voluntary of disputes if requested by any of the parties or by the
Arbitrators. Arbitral Tribunal. If the request for an expert is done by
 either or by both of the parties, it is necessary that the arbitration under the aegis of the CIAC in particular,
appointment of the expert be confirmed by the Arbitral requires us to apply rigorously the above principle embodied
Tribunal. in Section 19 that the Arbitral Tribunal's findings of fact
shall be final and unappealable.
Whenever the parties request for the services of an expert,
they shall equally shoulder the expert's fees and expenses, Voluntary arbitration involves the reference of a dispute to
half of which shall be deposited with the Secretariat before an impartial body, the members of which are chosen by the
the expert renders service. When only one party makes the parties themselves, which parties freely consent in advance
request, it shall deposit the whole amount required. to abide by the arbitral award issued after proceedings
II where both parties had the opportunity to be heard. The
basic objective is to provide a speedy and inexpensive
Consistent with CIAC's technical expertise is the primacy and deference accorded to method of settling disputes by allowing the parties to avoid
its decisions. There is only a very narrow room for assailing its rulings. the formalities, delay, expense and aggravation which
commonly accompany ordinary litigation, especially
Section 19 of the Construction Industry Arbitration Law establishes that CIAC arbitral litigation which goes through the entire hierarchy of
awards may not be assailed, except on pure questions of law: courts. [The Construction Industry Arbitration Law] created
Section 19. Finality of Awards. - The arbitral award shall an arbitration facility to which the construction industry
be binding upon the parties. It shall be final and in the Philippines can have recourse. The [Construction
inappealable except on questions of law which shall be Industry Arbitration Law] was enacted to encourage the early
appealable to the Supreme Court. and expeditious settlement of disputes in the construction
Rule 43 of the 1997 Rules of Civil Procedure standardizes appeals from quasi- industry, a public policy the implementation of which is
judicial agencies.[118] Rule 43, Section 1 explicitly lists CIAC as among the quasi necessa and important for the realization of national
judicial agencies covered by Rule 43.[119] Section 3 indicates that appeals through development goals.[122]
Petitions for Review under Rule 43 are to "be taken to the Court of Appeals ... Consistent with this restrictive approach, this Court is duty-bound to be extremely
whether the affoeal involves questions of fact, of law, or mixed questions of fact and watchful and to ensure that an appeal does not become an ingenious means for und
law."[120] rmining the integrity of arbitration or for conveniently setting aside the conclusions
arbitral processes make. An appeal is not an artifice for the parties to undermine the
This is not to say that factual findings of CIAC arbitral tribunals may now be assailed process they voluntarily elected to engage in. To prevent this Court from being a
before the Court of Appeals. Section 3's statement "whether the appeal involves party to such perversion, this Court's primordial inclination must be to uphold the
questions of fact, of law, or mixed questions of fact and law" merely recognizes factual finqings of arbitral tribunals:
variances in the disparate modes of appeal that Rule 43 standardizes: there were Aware of the objective of voluntary arbitration in the labor
those that enabled questions of fact; there were those that enabled questions of law, field, in the construction industry, and in any other area
and there were those that enabled mixed questions fact and law. Rule 43 for that matter, the Court will not assist one or the other
emphasizes that though there may have been variances, all appeals under its scope or even both parties in any effort to subvert or defeat that
are to be brought before the Court of Appeals. However, in keeping with the objective tbr their private purposes. The Court will not
Construction Industry Arbitration Law, any appeal from CIAC arbitral tribunals must review the factual findings of an arbitral tribunal upon the
remain limited to questions of law. artful allegation that such body had "misapprehended the
facts" and will not pass upon issues which are, at bottom,
Hi-Precision Steel Center, Inc. v. Lim Kim Steel Builders, Inc.[121] explained the issues of fact, no matter how cleverly disguised they might
wisdom underlying the limitation of appeals to pure questions of law: be as "legal questions." The parties here had recourse to
Section 19 makes it crystal clear that questions of fact arbitration and chose the arbitrators themselves; they must
cannot be raised in proceedings before the Supreme Court - have had confidence in such arbitrators. The Court will
which is not a trier of facts - in respect of an arbitral not, therefore, permit the parties to relitigate before it
award rendered under the aegis of the CIAC. Consideration of the issues of facts previously presented and argued before
the animating purpose of voluntary arbitration in generaland the Arbitral Tribunal, save only where a very clear showing
 is made that, in reaching its factual conclusions, the
Arbitral Tribunal committed an error so egregious and Properly discerning the issues in this case reveals that what is involved is not a
hurtful to one party as to constitute a grave abuse of mere matter of contractual interpretation but a question of the CIAC Arbitral
discretion resulting in lack or loss of jurisdiction. Tribunal's exercise of its powers.
Prototypical examples would be factual conclusions of the
Tribunal which resulted in deprivation of one or the other III.A
party of a fair opportunity to present its position before
the Arbitral Tribunal, and an award obtained through fraud F.F. Cruz v. HR Construction[127] distinguished questions of law, properly cognizable
or the corruption of arbitrators. Any other, more relaxed, in appeals from CIAC arbitral awards, from questions of fact:
rule would result in setting at naught the basic objective A question of law arises when there is doubt as to what the
of a voluntary arbitration and would reduce arbitration to a law is on a certain state of facts, while there is a
largely inutile institution.[123] (Emphasis supplied, question of fact when the doubt arises as to the truth or
citations omitted) falsity of the alleged facts. For a question to be one of
Thus, even as exceptions to the highly restrictive nature of appeals may be law, the same must not involve an examination of the
contemplated, these exceptions are only on the nanowest of grounds. Factual probative value of the evidence presented by the litigants
findings of CIAC arbitral tribunals may be revisited not merely because arbitral or any of them. The resolution of tbe issue must rest solely
tribunals may have erred, not even on the already exceptional grounds traditionally on what the law provides on the given set of circumstances.
available in Rule 45 Petitions.[124] Rather, factual findings may be reviewed only in Once it is clear that the issue invites a review of the
cases where the CIAC arbitral tribunals conducted their affairs in a haphazard, evidence presented, the question posed is one of fact.[128]
immodest manner that the most basic integrity of the arbitral process was imperiled. It further explained that an inquiry into the true intention of the contracting parties is
In Spouses David v. Construction Industry and Arbitration Commission:[125] a legal, rather than a factual, issue:
We reiterate the rule that factual findings of construction On the surface, the instant petition appears to merely raise
arbitrators are final and conclusive and not reviewable by factual questions as it mainly puts in issue the appropriate
this Court on appeal, except when the petitioner proves amount that is due to HRCC. However, a more thorough
affirmatively that: (1) the award was procured by analysis of the issues raised by FFCCl would show that it
corruption, fraud or other undue means; (2) there was actually asserts questions of law.
evident partiality or corruption of the arbitrators or of
any of them; (3) the arbitrators were guilty of misconduct FFCCI primarily seeks from this Court a determination of
in refusing to postpone the hearing upon sufficient cause whether [the] amount claimed by HRCC in its progress billing
shown, or in refusing to hear evidence pertinent and may be enforced against it in the absence of a joint
material to the controversy; (4) one or more of the measurement of the former's completed works. Otherwise
arbitrators were disqualified to act as such under section stated, the main question advanced by FFCCI is this: in the
nine of Republic Act No. 876 and willfully refrained from absence of the joint measurement agreed upon in the
disclosing such disqualifications or of any other Subcontract Agreement, how will the completed works of HRCC
misbehavior by which the rights of any party have been be verified and the amolfnt due thereon be computed?
materially prejudiced; or (5) the arbitrators exceeded their
powers, or so imperfectly executed them, that a mutual, The determination of the foregoing question entails an
final and definite award upon the subject matter submitted interpretation of the terms of the Subcontract
to them was not made.[126] (Citation omitted) Agreement vis-a-vis the respective rights of the parties
Guided by the primacy of CIAC's technical competence, in exercising this Court's herein. On this point, it should be stressed that where an
limited power of judicial review, this Court proceeds to rule on whether or not the interpretation of the true agreement between the parties is
Court of Appeals erred in its assailed decisions. involved in an appeal, the appeal is in effect an inquiry of
the law between the parties, its interpretation necessarily
III involves a question of law.
 Moreover, we are not called upon to examine the probative seeming hardships. Their true meaning must be enforced, as
value of the evidence presented before the CIAC. it is to be presumed that the contracting parties know their
Rather, what is actually sought from this Court is an scope and effects.
interpretation of the terms of the Subcontract Agreement as
it relates to the dispute between the parties.[129] (Emphasis ....
supplied)
Though similarly concerned with "an interpretation of the true agreement between The Contract Documents expressly characterize the
the parties,"[130] this case is not entirely congruent with F.F. Cruz. construction contract between [ACI] and CECON as "lump-sum"
and "fixed price" in nature. As a consequence, the Contract
In F.F. Cruz, the parties' agreement had been clearly set out in writing. There was a Documents expressly prohibit any adjustment of the contract
definitive instrument which needed only to be consulted to ascertain the parties' sum due to any changes or fluctuations in the cost of labor,
intent: materials or other matters.[133] (Citations omitted)
In resolving the dispute as to the proper valuation of the Upon its characterization of the contract as one for the lump-sum, fixed price of
works accomplished by HRCC, the primordial consideration P1,540,000,000.00, the Court of Appeals faulted the CIAC Arbitral Tribunal for
should be the terms of the Subcontract Agreement. It is acting in excess of jurisdiction as it supposedly countermanded the parties'
basic that if the tem1s of a contract are clear and leave no agreement, or worse, conjured its own tenns for the parties' compliance.[134]
doubt upon the intention of the contracting parties, the
literal meaning of its stipulations shall control.[131] It was the Court of Appeals, not the CIAC Arbitral Tribunal, that committed serious
Thus, this Court concluded: error.
Pursuant to the terms of payment agreed upon by the parties,
FFCCI obliged itself to pay the monthly progress billings of To rule that the CIAC Arbitral Tribunal modified the parties' agreement because it
HRCC within 30 days from receipt of the same. Additionally, was indisputably one for a lump-sum, fixed price of P1,540,000,000.00 is begging
the monthly progress billings of HRCC should indicate the the question. The Court of Appeals used a conclusion as a premise to support itself.
extent of the works completed by it, the same beinff It erroneously jumped to a conclusion only to plead this conclusion in support of
essential to the valuation of the amount that FFCCI would points that should have made up its anterior framework, points that would have been
pay to HRCC.[132] the ones to lead to a conclusion. It then used this abortive conclusion to injudiciously
III.B dispose of the case.

In this case, there is no established contract that simply required interpretation and The Court of Appeals took the parties' contractual relation as a revealed and
application. preordained starting point. Then, it dismissed every prior or subsequent detail that
contradicted this assumption. It thereby conveniently terminated the discussion
The assailed Court of Appeals April 28, 2008 Decision implies that all that had to be before it even began.
done to resolve the present controversy was to apply the supposedly clear and
unmistakable terms of the contract between ACI and CECON. It even echoes the III.C
words of F.F. Cruz:
It is a legal principle of long standing that when the There was never a meeting of minds on the price of P1,540,000,000.00. Thus, that
language of the contract is explicit, leaving no doubt as to stipulation could not have been the basis of any obligation.
the intention of the parties, the courts may not read into
it any other intention that would contradict its plain The only thing that ACI has in its favor is its initial delivery of tender documents to
import. The clear terms of the contract should never be the prospective bidders. Everything that transpired after this delivery militates against
subject matter of interpretation. Neither abstract justice ACI's position.
nor the rule of liberal interpretation justifies the
creation of a contract for the parties which they did not Before proceeding to a consideration of the circumstances that negate a meeting of
make themselves or the imposition upon one party to a minds, this Court emphasizes that ACI would have this Court sustain claims
contract or obligation not assumed simply or merely to avoid premised on supposed inviolable documents. Yet, it did not annex copies of these
documents either to its Comment or to its Memorandwn. In accordance with Article 1321 of the Civil Code,[135] an offeror may fix the time of
acceptance. Thus, CECON's August 30, 2002 offer of P1,449,089,174.00
ACI leaves this Court compelled to rely purely on their packaged presentation and in "specifically stated that its bid was valid for only ninety (90) days, or only until 29
a bind, unable to verify even the accuracy of the syntax of its citations. This Court November 2002."[136] November 29, 2002 lapsed and ACI failed to manifest its
cannot approve of this predicament. To cursorily acquiesce to ACI's overtures acceptance of CECON's offered contract sum.
without due diligence and substantiation is being overly solicitous, even manifestly
partisan. It was only sometime after November 29, 2002 that ACI verbally informed CECON
that the contract was being awarded to it. Through a telephone call on December 7,
ACI and its counsel must have fully known the importance of equipping this Court 2002, ACI informed CECON that it may commence excavation works. However,
with a reliable means of confirmation, especially in a case so steeped in the sway of there is no indication that an agreement was reached on the contract sum in any of
circumstances. ACI's omission can only work against its cause. these conversations. ACI, CECON, the CIAC Arbitral Tribunal, and the Court of
Appeals all concede that negotiations persisted.
By delivering tender documents to bidders, ACI made an offer. By these documents,
it specitled its terms and defined the parameters within which bidders could operate. Still without settling on a contract sum, even the object of the contract was subjected
These tender documents, therefore, guided the bidders in formulating their own to multiple modifications. Absent a concurrence of consent and object, no contract
offers to ACI, or, even more fundamentally, helped them make up their minds if they was perfected.[137]
were even willing to consider undertaking the proposed project. In responding and
submitting their bids, contractors, including CECON, did not peremptorily become An office tower atop Part A was included in CECON's scope of works and the
subservient to ACI's terms. Rather, they made their own representations as to their contract sum increased to P1,582,810,525.00. Price fluctuations were conceded
own willingness and ability. They adduced their own counter offers, although these after this and the project cost was again adjusted to P1,613,615,244.00. Thereafter,
were already tailored to work within ACI's parameters. CECON agreed to extend a discount and reduced its offered project cost to
P1,540,000,000.00.[138]
These exchanges were in keeping with Article 1326 of the Civil Code:
Article 1326. Advertisements for bidders are simply After all these, ACI demurred on the tenns of its own tender documents and
invitations to make proposals, and the advertiser is not changed the project from one encompassing both design and construction to one
bound to accept the highest or lowest bidder, unless the that was limited to construction.
contrary appears.
The mere occurrence of these exchanges of offers fails to satisfy the Civil Code's Though not pertaining to the object of the contract itself but only to one (1) of its
requirement of absolute and unqualified acceptance: many facets, ACI also removed from CECON's scope of works the acquisition of
Article 1319. Consent is manifested by the meeting of the elevators, escalators, chillers, generator sets, indoor substations, cooling towers,
offer and the acceptance upon the thing and the cause which pumps, and tanks. However, much later, ACI reneged on its own and opted to still
are to constitute the contract. The offer must be certain obtain pumps, tanks, and cooling towers through CECON.
and the acceptance absolute. A qualified acceptance
constitutes a counter-offer. It is ACI's contention that the offered project cost of P1,540,000,000.00 is what binds
the parties because its June 2, 2003 letter indicated acceptance of this offered
Acceptance made by letter or telegram does not bind the amount.
offerer except from the time it came to his knowledge. The
contract, in such a case, is presumed to have been entered This is plain error.
into in the place where the offer was made. (Emphasis
supplied) CECON was never remiss in impressing upon ACI that the P1,540,000,000.00 offer
Subsequent events do not only show that there was no meeting of minds on was not perpetually availing. WithoutACI's timely acceptance, on December 27,
CECON's initial offered contract sum of P1,449,089,174.00 as stated in its August 2002, CECON wrote to ACI emphasizing that the quoted sum of P1,540,000,000.00
30, 2002 bid. They also show that there was never any meeting of minds on the was "based [only] upon the prices prevailing at December 26, 2002" levels.[139] On
contract sum at all. January 8, 2003, CECON notified 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 amount."[140] Finally, on January 21, IV
2003, CECON wrote again to ACI,[141] stating that the contract sum had to be
increased to P1,594,631,418.00. CECON also specifically stated, consistent with The CIAC Arbitral Tribunal did not act in excess of its jurisdiction. Contrary to the
Article 1321 of the Civil Code, that its tender of this adjusted price was valid only Court of Appeals' and ACI's assertions, it did not draw up its own tenns and force
until January 31, 2003, as further price changes may be forthcoming. CECON also these terms upon ACI and CECON.
impressed upon ACI that the 400 days allotted for the completion of the project had
to be adjusted.[142] IV.A

When ACI indicated acceptance, CECON's P1,540,000,000.00 offer had been The CIAC Arbitral Tribunal was not confronted with a barefaced controversy for
superseded. Even CECON's subsequent offer of P1,594,631,418.00 had, by then, which a fom1ulaic resolution sufficed. More pressingly, it was confronted with a state
lapsed by more than four (4) months. Apparently totally misinformed, ACI's of affairs where CECON rendered services to ACI, with neither definitive governing
acceptance letter did not even realize or remotely reference CECON's most recent instrwnents nor a confirmed, fixed remuneration for its services. Thus, did the CIAC
P1,594,631,418.00 stipulation but insisted on the passe offer of P1,540,000,000.00 Arbitral Tribunal go about the task of asce1taining the sum properly due to CECON.
from the past year.
This task was well within its jurisdiction. This determination entailed the full range of
ACI's supposed acceptance was not an effective, unqualified acceptance, as subjects expressly stipulated by Section 4 of the Construction Industry Arbitration
contemplated by Article 1319 of the Civil Code. At most, it was a counter-offer to Law to be within the CIAC's subject matter jurisdiction.
revert to P1,540,000,000.00. Section 4. Jurisdiction. - ....

ACI's June 2, 2003 letter stated an undertaking: "This notwithstanding, formal The jurisdiction of the CIAC may include but is not limited
contract documents embodying these positions will shortly be prepared and to violation of specifications for materials and
forwarded to you for execution."[143] Through this letter, ACI not only undertook to workmanship; violation of the terms of agreement;
deliver documents, it also admitted that the final, definitive terms between the parties interpretation and/or application of contractual time and
had yet to be articulated in writing. delays; maintenance and defects; payment, default of
employer or contractor and changes in contract cost.
ACI's delivery CECON's review, and both parties' final act of formalizing their CECON raised the principal issue of the payment due to it on account, not only of
respective consent and affixing their respective signatures would have established a fluctuating project costs but more so because of ACI's inability to timely act on many
clear point in which the contract between ACI and CECON has been perfected. contingencies, despite proper notice and communication from and by CECON.
These points, i.e. ACI's delivery, CECON's review, and parties' formalization, too, Theretbre, at the heart of the controversy was the "interpretation and/or application
would have validated the Court of Appeals' assertion that all that remained to be of contractual time and delays." ACI's counter-arguments, too, directly appealed to
done was to apply unequivocal contractual provisions. CIAC's subject matter jurisdiction. ACI countered by asserting that sanctioning
CECON's claims was tantamount to violating the tem1s of their agreement. It further
ACI would fail on its own undertaking. claimed liability on CECON's part for "maintenance and defects," and for "violation of
specifications for materials and workmanship."
III.D
ACI and CECON voluntarily submitted themselves to the CIAC Arbitral Tribunal's
Without properly executed contract documents, what would have been a jurisdiction. The contending parties' own volition is at the inception of every
straightforward exercise, akin to the experience in F.F. Cruz, became a drawn-out construction arbitration proceeding.[144] Common sense dictates that by the parties'
fact-finding affair. The situation that ACI engendered made it necessary for the CIAC voluntary submission, they acknowledge that an arbitral tribunal constituted under
Arbitral Tribunal to unravel the terms binding ACI to CECON from sources other the CIAC has full competence to rule on the dispute presented to it. They concede
than definitive documents. this not only with respect to the literal issues recited in their terms of reference, as
ACI suggests,[145] but also with respect to their necessary incidents. Accordingly, in
It is these actions of the CIAC Arbitral Tribunal that raise an issue, purely as a delineating the authority of arbitrators, the CIAC Rules of Procedure speak not only
matter of law, now the subject of this Court's review; that is, faced with the lacunae of the literally recited issues but also of "related matters":
confronting it, whether or not the CIAC Arbitral Tribunal acted within its jurisdiction.
 SECTION 21.3 Extent of power of arbitrator - The Arbitral should be permitted to enrich himself to the damage of
Tribunal shall decide only such issues and related matters another." Similary in 1914, this Court declared that in this
as are submitted to them for adjudication. They have no jurisdiction, even in the absence of statute, ". . . under
power to add, to subtract from, modify, or amend any of the the general principle that one person may not enrich himself
terms of the contract or any supplementary agreement at the expense of another, a judgment creditor would not be
thereto, or any rule, regulation or policy promulgated by permitted to retain the purchase price of land sold as the
the CIAC. property of the judgment debtor after it has been made to
To otherwise be puritanical about cognizable issues would be to cripple CIAC appear that the judgment debtor had no title to the land and
arbitral tribunals. It would potentially be to condone the parties' efforts at tying the that the purchaser had failed to secure title thereto . . ."
hands of tribunals through circuitous, trivial recitals that fail to address the complete The foregoing equitable principle which springs from the
extent of their claims and which are ultimately ineffectual in dispensing an fountain of good conscience are applicable to the case at
exhaustive and dependable resolution. Construction arbitration is not a game of bar.[147]
guile which may be left to ingenious textual or technical acrobatics, but an endeavor Consistent with the Construction Industry Arbitration Law's declared policy,[148] the
to ascertain the tluth and to dispense justice "by every and all reasonable means CIAC Arbitral Tribunal was specifically charged with "ascertain[ing] the facts in each
without regard to technicalities of law or proc.edure."[146] case by every and all reasonable means."[149] In discharging its task, it was permitted
to even transcend technical rules on admissibility of evidence.[150]
IV.B
IV.C
Two (2) guiding principles steered the CIAC Arbitral Tribunal in going about its task.
First was the basic matter of fairness. Second was effective dispute resolution or the The reality of a vacuum where there were no definite contractual terms, coupled with
overarching principle of arbitration as a mechanism relieved of the encumbrances of the demands of a "fair and expeditious resolution" of a dispute centered on
litigation. In Section 1.1 of the CIAC Rules of Procedure: contractual interpretation, called into operation Article 1371 of the Civil Code:
SECTION 1.1 Statement of policy and objectives - It is the Article 1371. In order to judge the intention of the
policy and objective of these Rules to provide a fair and contracting parties, their contemporaneous and subsequent
expeditious resolution of construction disputes as an acts shall be principally considered. (Emphasis supplled)
altemative to judicial proceedings, which may restore the Article 1379 of the Civil Code invokes principles from the Revised Rules on
disrupted harmonious and friendly relationships between or Evidence. By invoking these principles, Article 1379 makes them properly applicable
among the parties. (Emphasis supplied) in every instance of contractual interpretation, even those where the need for
CECON's predicament demanded compensation. The precise extent may yet to interpretation arises outside of court proceedings:
have been settled; yet, as the exigencies that prompted CECON to request for Article 1379. The principles of interpretation stated in
arbitration unraveled, it became clear that it was not for the CIAC Arbitral Tribunal to Rule 123 of the Rules of Court shall likewise be observed in
turn a blind eye to CECON's just entitlement to compensation. the construction of contracts.
As with Article 1371, therefore, the following principles from the Revised Rules on
Jurisprudence has settled that even in cases where parties enter into contracts Evidence equally governed the CIAC Arbitral Tribunal's affairs:
which do not strictly confmm to standard formalities or to the typifying provisions of 4. Interpretation of Documents
nominate contracts, when one renders services to another, the latter must
compensate the fonner for the reasonable value of the services rendered. This Section 12. Interpretation according to
amount shall be fixed by a court. This is a matter so basic, this Court has once intention; general and particular provisions.
characterized it as one that "springs from the fountain of good conscience": - In the construction of an instrument, the
As early as 1903, in Perez v. Pomar, this Court mled that intention of the parties is to be pursued; and
where one has rendered services to another, and these when a general and a particular provision are
services are accepted by the latter, in the absence of proof inconsistent, the latter is paramount to the
that the service was rendered gratuitously, it is but just former. So a particular intent will control a
that he should pay a reasonable remuneration therefore general one that is inconsistent with it.
because "it is a well known principle of law, that no one
 Section 13. Interpretation according to varied. There were radical changes like the addition of an entire office tower to the
circumstances. - For the proper construction project and the change in the project's structural framing. There was also the
of an instrument, the circumstances under undoing of CECON's freedom to design, thereby rendering it entirely dependent on
which it was made, including the situation of configurations that ACI was to unilaterally resolve, It turned out that ACI took its time
the subject thereof and of the parties to it, in delivering construction drawings to CECON, with almost 38% of construction
may be shown, so that the judge may be placed drawings being delivered after the intended completion date. There were many other
in the position of those whose language he is less expansive changes to the project, such as ACI's fickleness on which equipment
to interpret. it would acquire by itself. ACI even failed to immediately deliver the project site to
Within its competence and in keeping with basic principles on contractual CECON so that CECON may commence excavation, the most basic task in setting
interpretation, the CIAC Arbitral Tribunal ascertained the trqe and just terms up a structure's foundation. ACI also failed to produce definite instruments
governing ACI and CECON. Thus, the CIAC Arbitral Tribunal did not conjure its own articulating its agreement with CECON, the final contract documents.
contractual creature out of nothing. In keeping with this, the CIAC Arbitral Tribtmal
found it proper to sustain CECON's position. There having been no meeting of With the withering of the premises upon which a lump-sum, fixed price arrangement
minds on the contract sum, the amount due to CECON became susceptible to would have been founded, such an arrangement must have certainly been negated:
reasonable adjustment, subject to proof of legitimate costs that CECON can adduce. [T]he contract is fixed and lump sum when it was tendered
and contracted as a design and constmct package. The
V contract scope and character significantly changed when the
design was taken over by the Respondent. At the time of the
Unravelling the CIAC Arbitral Tribunal's competence and establishing how it acted negotiation and agreement of the amount of Php1.54 billion,
consistent with law resolves the principal legal issue before us. From this threshold, there were no final plans for the change to structural
the inquiry transitions to the matter of whether or not the conclusions made by the steel, and all the [mechanical, electrical and plumbing]
CIAC Arbitral Tribunal were warranted. drawings were all schematics.

They were. Far from being capricious, the CIAC Arbitral Tribunal's conclusions find [I]t is apparent to the Tribunal that the quantity and
solid basis in law and evidence. materials at the time of the P1.54B agreement are
significantly different from the original plans to the
V.A finally implemented plans. The price increases in the steel
products and cement were established to have already
The tender documents may have characterized the contract sum as fixed and lump- increased by 11.52% and by P5.00 per bag respectively by
sum, but the premises for this arrangement have undoubtedly been repudiated by January 21, 2003. The Tribunal finds agreement with the
intervening circumstances. Claimant that it is fairer to award the price increase.

When CECON made its offer of P1,540,000,000.00, it proceeded from several ....
premises. 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 It should also be mentioned that Respondent had changed the
matter of the contract was the entire expanse of design and construction covering all scope and character of the agreement. First, there were
elements disclosed in the tender documents, nothing more and nothing less. Fourth, major changes in the plans and specifications. Originally,
the basic specifications for designing and building the Gateway Mall, as stated in the the contract was for design and construct. The design was
tender documents, would remain consistent. Lastly, ACI would timely deliver on its deleted from the scope of the Claimant. It was changed to a
concomitant obligations. straight construction contract. As a straight construction
contract, there were no final plans to speak of at the time
Contrary to CECON's reasonable expectations, ACI failed to timely act either on of the instructions to change. Then there was a verbal
CECON's bid or on those of its competitors. Negotiations persisted for the better part change to structural steel frame. No plans were available
of two (2) calendar years, during which the quoted contract sum had to be revised at upon this instruction to change. Next, the [mechanical,
least five (5) times. The object of the contract and CECON's scope of work widely electrical and plumbing] plans were all schematics. It is
 therefore expected that changes of plans are forthcoming, Neither requisite avails in this case. Yet again, ACI is begging the question. It is
and that changes in costs would follow ... precisely the crux of the controversy that no price has been set. Article 1724 does
not work to entrench a disputed price and make it sacrosanct. Moreover, it was ACI
.... which thn1st itself upon a situation where no plans and specifications were
immediately agreed upon and from which no deviation could be made. It was ACI,
It has been established that the original tender, request not CECON, which made, revised, and deviated from designs and specifications.
for proposal and award is for a design and construct
contract. The contract documents are therefore associated V.C
for said system of construction. When Respondent decided to
change and take over the design, such as the change from The CIAC Arbitral Tribunal also merely held ACI to account for its voluntarily
concrete to structural steel framing, "take-out" equipment admitted adjustments. The CIAC Rules of Procedure pennit deviations from
from the contract and modify the [mechanical, electrical and technical rules on evidence, including those on admissions. Still, common sense
plumbing w]orks, the original scope of work had been dictates that the principle that "[t]he act, declaration or omission of a party as to a
drastically changed. To tie down the Claimant to the tmit relevant fact may be given in evidence against him"[153] must equally hold true in
prices for the proposal for a different scope of work would administrative or quasi-judicial proceedings as they do in court actions. Certainly,
be grossly unfair. This Tribunal will hold that unit price each must be held to account for his or her own voluntary declarations. It would
adjustment could be allowed but only for change orders that have been plainly absurd to disregard ACI's reneging on its own admissions:
were not in the original scope of work, such as the change Respondent has agreed to the price increase in structural
order from concrete to structural framing, the [mechanical, steel and after some negotiation paid the agreed amount.
electrical and plumbing w]orks, [schematic drawings to Respondent also agreed to the price increase in the
construction drawings] and the Miscellaneous Change Order reinforcing bars and instructed the Claimant to bill it
Works.[151] accordingly. To the Tribunal, such action is an
V.B acknowledgment of the price increase. Respondent can make
the case that said agreement is conditional, i.e., the
Contrary to ACI's oft-repeated argument,[152] the CIAC Arbitral Tribunal correctly Complaint must be withdrawn. To the Tribunal, the
found that ACI had gained no solace in statutory provisions on the immutability of conditionality falls both ways. The Claimant has as much
prices stipulated between a contractor and a landowner. Article 1724 of the Civil interest to agree to a negotiated price increase so that it
Code reads: can collect payments for the claims. The conditionalities do
Article 1724. The contractor who undertakes to build a not change the basis for the quantity and the amotmt. The
structure or any other work for a stipulated price, in process of the negotiation has arrived at the price
conformity with plans and specifications agreed upon with difference and quantities. The Tribunal finds the process in
the land-owner, can neither withdraw from the contract nor arriving at the Joint Manifestation, a fair determination of
demand an increase in the price on account of the higher the unit price increase. This holding will render the
cost of labor or materials, save when there has been a discussions on Exhibit JJJJ, and the demand of the burden of
change in the plans and specifications, provided: proof of the Respondent superfluous.[154]
This absurdity is so patent that the Court of Appeals was still compelled to uphold
(1) Such change has been authorized by the proprietor in awards premised on ACI's admissions, even as it reversed the CIAC Arbitral
writing; and Tribunal decision on the primordial issue of the characterization of the contractual
arrangement between CECON and ACI:
(2) The additional price to be paid to the contractor has As stated, the contract between [ACI] and CECON has not been
been determined in writing by both parties. amended or revised. The Arbitral Tribunal had no power to
Article 1724 demands two (2) requisites in order that a price may become amend the contract to provide that there be allowed price
immutable: first, there must be an actual, stipulated price; and second, plans and and/or cost adjustment removing the express stipulation that
specifications must have definitely been agreed upon. the Project is for a lump sum or fixed price consideration.
Accordingly, this Court removes the award for additional
 costs spent by CECON on cement and formworks due to price favoring CECON and, conversely, discredits liquidated damages benefitting ACI.
increases or removing the award for these items in the total
amount of PhP5,598,338.20. Since CECON is not entitled to This Court upholds the Arbitral Tribunal's awards on each of the items due to
its claim for price increase, it is likewise not entitled to CECON, as well as on its findings relating to CECON's countervailing liabilities.
the award of the interest rate of 6% per annum.
In fulfilling its task, the CIAC Arbitral Tribunal was equipped with its technical
With regard however to the additional costs for the rebars competence, adhered to the rigors demanded by the CIAC Rules of Procedure, and
due to price increases. this Court finds that CECON is was endowed with the experience of exclusively presiding over 19 months of arbitral
entitled to the amount of PhP10,266,628.00 representing the proceedings, examining object and documentary evidence, and probing witnesses.
additional costs spent by CECON for rebars due to price
increases, notwithstanding the Arbitral Tribunal's excess of VI.B
jurisdiction in amending the contract between the parties
because [ACI] and CECON had in fact agreed that CECON was Within the CIAC Arbitral Tribunal's technical competence was its reference to
entitled to such an amount and that [ACI] would pay the prevailing industry practices, a much-bewailed point by ACI.[156] This reference was
same. This agreement was made in the parties' Joint made not only desirable but even necessary by the absence of definitive governing
Manifestation of Compliance dated March 30, 2004 which they instruments. Moreover, this reference was made feasible by the CIAC Arbitral
filed with th Arbitral Tribunal ("Joint Manifestation").[155] Tribunars inherent expertise in the construction industry.
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 This reference was not only borne by practical contingencies and buttressed by
consideration of which has been reduced to a distant memory. ACI's invocation of recognized proficiency, it was also sanctioned by the statutory framework of
Article 1724 is useless as the premises for its application are absent. ACI's position contractual interpretation within which the CIAC Arbitral Tribunal operated. Thus, the
is an invitation for this Court to lend its imprimatur to unjust enrichment enabled by following principles governed the interpretation of the change orders, requests, and
the gradual wilting of what should have been a reliable contractual relation. Basic other communications, which had effectively been surrogates of a single definite
decency impels this Court to not give in to ACI's advances and instead sustain the instrument executed by the parties.
CIAC Arbitral Tribunal's conclusion that the amount due to CECON has become
susceptible to reasonable adjustment. From the Civil Code:
Article 1375. Words which may have different significations
VI shall be understood in that which is most in keeping with
the nature and object of the contract.
The Arbitral Tribunal's award must be reinstated.
Article 1376. The usage or custom of the place shall be
VI.A borne in mind in the interpretation of the ambiguities of a
contract, and shall fill the omission of stipulations which
With the undoing of the foundation for the Court of Appeal's fallacious, circular are ordinarily established.
reasoning, its monetary awards must also necessarily give way to the reinstatement From the Revised Rules on Evidence, the following have been made applicable
of the CIAC Arbitral Tribunal's awards. even outside regular litigation by Article 1379 of the Civil Code:
Section 14. Peculiar signification of terms. - The terms of
The inevitable changes borne by ACI's own trifling actions justify, as a consequence, a writing are presumed to have been used in their primary
compensation for cost adjustments and the ensuing change orders, additional and general acceptation, but evidence is admissible to show
overhead costs for the period of extension, extended coverage for contractor's all- that they have a local, technical, or otherwise peculiar
risk insurance, and attendance fees for auxiliary services to subcontractors whose signification, and were so used and understood in the
functions were also necessarily prolonged. ACI's frivolity on the acquisition of particular instance, in which case the agreement must be
elevators, escalators, chillers, generator sets, indoor substations, cooling towers, construed accordingly.
pumps, and tanlcs also vindicates compensation for the works that remained under
CECON's account. ACI's authorship of the causes of delay supports time extensions ....
 Inventive, hair-splitting recitals of the supposed imperfections in the CIAC Arbitral
Section 19. Interpretation according to usage. - An Tribunal's execution of its tasks will not compel this Court to supplant itself as a fact-
instrument may be construed according to usage, in order to finding, technical expert.
determine its true character.[157] (Emphasis supplied)
Equally availing is the following principle. This is especially tlue of the remuneration ACI's refutations on each of the specific items claimed by CECON and its
due to CECON, considering that stipulations for remuneration are devised for the counterclaims of sums call for the point by point appraisal of work, progress, defects
benefit of the person rendering the service: and rectifications, and delays and their causes. They are, in truth, invitations for this
Section 17. Of two constn.1ctions, which preferred. - When Court to engage in its own audit of works and corresponding financial
the terms of an agreement have been intended in a different consequences. In the alternative, its refutations insist on the application of rates,
sense by the different parties to it, that sense is to schedules, and other stipulations in the same tender documents, copies of which
prevail against either party in which he supposed the other ACI never adduced and the efficacy of which this Court has previously discussed to
understood it, and when different constructions of a be, at best, doubtful.
provision are otherwise equally proper, that is to be taken
which is the most favorable to the party in whose favor the This Court now rectifies the error made by the Court of Appeals. By this rectification,
provision was made.[158] this Court does not open the doors to an inordinate and overzealous display of this
VI.C Court's authority as a final arbiter.

In appraising the CIAC Arbitral Tribunal's awards, it is not the province of the present Without a showing of any of the exceptional circumstances justifying factual review,
Rule 45 Petition to supplant this Court's wisdom for the inherent technical it is neither this Court's business nor in this Court's competence to pontificate on
competence of and the insights drawn by the CIAC Arbitral Tribunal throughout the technical matters. These include things such as fluctuations in prices of materials
protracted proceedings before it. The CIAC Arbitral Tribunal perused each of the from 2002 to 2004, the architectural and engineering consequences - with their
parties' voluminous pieces of evidence.[159] Its members personally heard, observed, ensuing financial effects - of shifting from reinforced concrete to structural steel, the
tested, and propounded questions to each of the witnesses. Having been constituted feasibility of rectification works for defective installations and fixtures, the viability of
solely and precisely for the purpose of resolving the dispute between ACI and a given schedule of rates as against another, the audit of changes for every
CECON for 19 months, the CIAC Arbitral Tribunal devoted itself to no other task schematic drawing as revised by construction drawings, the proper mechanism for
than resolving that controversy. This Court has the benefit neither of the CIAC examining discolored and mismatched tiles, the minutiae of installing G.I. sheets and
Arbitral Tribunal's technical competence nor of its irreplaceable experience of sealing cracks with epoxy sealants, or even unpaid sums for garbage collection.
hearing the case, scrutinizing every piece of evidence, and probing the witnesses.
The CIAC Arbitral Tribunal acted in keeping with the law, its competence, and the
True, the inhibition that impels this Court admits of exceptions enabling it to embark adduced evidence; thus, this Court upholds and reinstates the CIAC Arbitral
on its own factual inquiry. Yet, none of these exceptions, which are all anchored on Tribunal's monetary awards.
considerations of the CIAC Arbitral Tribunal's integrity and not merely on mistake,
doubt, or conflict, is availing. VII

This Court finds no basis for casting aspersions on the integrity of the CIAC Arbitral It does not escape this Court's attention that this controversy has dragged on for
TribunaL There does not appear to have been an undisclosed disqualification for more than 13 years since CECON initially sought to avail of arbitration.
any of its three (3) members or proof of any prejudicial misdemeanor. There is
nothing to sustain an allegation that the parties' voluntarily selected arbitrators were The CIAC Arbitral Tribunal noted that ACI consumed a total of 840 days filing
conupt, fraudulent, manifestly partial, or otherwise abusive. From all indications, it several motions and manifestations, including at least eight (8) posturings at
appears that the CIAC Arbitral Tribunal extended every possible opportunity for each pursuing settlement.[160] It added, however, that ACI repeatedly failed to respond to
of the parties to not only plead their case but also to arrive at a mutually beneficial CECON's claims during meetings thereby constraining CECON to file motions to
settlement. This Court has ruled, precisely, that the arbitrators acted in keeping with proceed after repeatedly being dangled hope of an early resolution.[161] It appeared
their lawful competencies. This enabled them to come up with an otherwise definite that ACI was more interested in buying time than in effecting a consummate
and reliable award on the controversy before it. voluntary settlement.
The CIAC Arbitral Tribunal October 25, 2006 Decision should have long brought this properly compensated. Not only have ACI's actions begotten this dispute, they have
matter to an end. This Court does not fault ACI for availing of remedies. Yet, this hyper-extended arbitration proceedings and dragged courts into the controversy.
Court also notes that even in proceedings outside of the CIAC Arbitral Tribunal, ACI The delays have virtually bastardized the hopes at expeditious and effective dispute
seems to not have been sufficiently conscientious of time. resolution which are supposedly the hallmarks of arbitration proceedings.

In this Court alone, ACI sought extensions to file its Comment no less than five (5) For these, in addition to sustaining each of the awards due to CECON arising from
times.[162] It sought several other extensions in the filing of its Memorandum.[163] 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
It also does not escape this Court's attention that while ACI's arguments have Corporation, Inc. the burden of bearing the costs of what have mutated into a full-
perennially pleaded the supposed primacy and itnmutability of stipulations originally fledged litigation before this Court and the Court of Appeals.
articulated in the tender documents, it never bothered to annex any of these
documents either to its Comment or to its Memorandum. Without these and other WHEREFORE, the Petition is GRANTED. The assailed April 28, 2008 Decision and
supporting materials, this Court is left in the uneasy predicament of merely relying July 1, 2010 Amended Decision of the Court of Appeals in CA-G.R. SP No. 96834
on ACI's self-stated assertions and without means of verifying even the syntax of its are REVERSED and SET ASIDE. The Construction Industry Arbitration
citations. Commission Arbitral Tribunal October 25, 2006 Decision in CIAC Case No. 01-2004
is REINSTATED.
While presumptions of good faith may be indulged, the repercussions of ACI's
vacillation cannot be denied. 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.
Even if this Court were to ignore the delays borne by ACI's procedural posturing, this
Court is compelled to hearken to ACI's original faults. These are, after all, what Costs against respondent.
begot these proceedings. These are the same original faults which so exasperated
CECON; it was left with no recourse but to seek the intervention of CIAC. SO ORDERED.

These faults began as soon as bidders responded to ACI's invitation. In CECON's

case, its communicated time for the validity of its offer lapsed without confinnation
from ACI. ACI only verbally responded and only after CECON's communicated
timeframe. It told CECON to commence excavation works but failed to completely
deliver the project site until five (5) months later. It engaged in protracted
negotiations, never confirming acceptance until the tenth month, after bidders had
submitted their offers. By then, ACI's supposed acceptance could not even identify
CECON's most recent quoted price. It undertook to process and 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
CECONs scope of works but vigorously opposed adjustments that should have at
least been given reasonable consideration, only to admit and partially stipulate on
thern. In taking upon itself the task of designing, it took its time in delivering as many
as 1,675 construction 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
 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

THIRD DIVISION

G.R. No. 192948, December 07, 2016

B.F. CORPORATION AND HONORIO PINEDA, Petitioners, v. FORM-

EZE SYSTEMS, INC., Respondent.

DECISION

PEREZ, J.:

This petition for review assails the 15 January 2010 Decision1 and 13 July
2010 Resolution2 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 2007.

FACTUAL ANTECEDENTS

Petitioner B.F. Corporation (BFC) is a corporation engaged in general

engineering and civil works construction. Petitioner Honorio H. Pineda
(Pineda) is the President of BFC. Respondent Form-Eze Systems Inc.
(Form-Eze) is a corporation engaged in highway and street construction.

On 29 August 2006, SM Prime Holdings, Inc. awarded the contract for

general construction of the SM City-Marikina mall (the Project) to BFC
whereby the latter undertook to supply materials, labor, tools, equipment
and supervision for the complete construction of the Project.3 In turn,
BFC engaged Form-Eze for the lease of formwork system and related
equipment for and needed by the Project. Accordingly, five (5) contracts
and two (2) letter-agreements were executed by the BFC, represented by
its President Pineda, and Form-Eze, represented by its President, James
W. Franklin. These contracts and their salient provisions are provided in
the following table:
 1. Furnish all hardware required in the formwork system for December 2006 5
the poured in place beam and slab concrete decks excluding
1. Furnish forklift for the movement of the deck forms and
the scaffoldings and accessories required to support the
related hardware of the forming system from location to
Obligations of system; and
location;
Form-Eze 2. Provide consumable beam ties and steel accessories needed
2. Strip all formwork from under the poured concrete slab and
to maintain the rigidity and alignment of the plywood
beam deck. Move all equipment to the next location where
formed surfaces.
Obligations of it will be reset by BFC; and
Form-Eze 3. Assist BFC in setting the deck forms to the proper grade and
1. Furnish all scaffoldings as required to support the system at locations provided that BFC has laid out the grid lines as
no ,cost to Form-Eze; needed for placing the scaffoldings under the deck forms
2. Furnish all plywood and lumber as required in the formwork and provided the scaffoldings is readily available for
operation as no cost to Form-Eze; placement under the deck forms.
3. Purchase materials for the formwork as requested by Form-
Obligations of BFC Eze. The direct cost of materials shall be deducted from the
1. Furnish additional hoisting; and
contract and the balance paid to Form-Eze; and
2. Provide all labor requested by Form-Eze and deducted from
4. Responsible for the freight of the equipment to and fro the Obligations of BFC the contract at P60.00 per carpenter man-hour.
Marikina jobsite and the Form-Eze warehouse in Cainta,
Rizal.
Total contract amount for moving equipment: 126,000 x
P50.00/contact square meter (cost for stripping and
Work The amount of hardware to be furnished is sufficient to
Contract Price movement of the equipment, excluding cost of resetting
Specifications provide 7,000 contact square meters of formwork.
to grade, cleaning plywood surfaces and applying release
Total contract amount for the equipment: 126,000 contact agent) P6,300,000.00.
square meters (equipment to be used) x P225.00/contact
Contract Price 1. 15% down payment or P945,000.00 paid to Form-Eze on or
square meter (cost per use of the hardware for forming
before pick up of equipment; and
the elevated beam and slab)= P28,350,000.00.
Terms of Payment 2. Monthly progress billing will coincide with the contact
1. 15% down payment or P4,252,500.00 paid to Form-Eze on square meters formed with the Form-Eze equipment.
or before pick up of equipment;
2. When concrete is placed on the slab forms, the equipment
rental per contact square meter is due and payable to Form- CONTRACT NO. 3: Contract for Column Formwork on the SM Marikina Mall Project
Eze and shall be paid on the first day of the following dated 20 December 20066
month; Obligations of 1. Furnish sufficient number of built up column forms as
Terms of Payment 3. All equipment purchased by BFC as requested by Form-Eze Form-Eze required to complete 6 poured in place full height concrete
shall be prorated and deducted equally in the first 4-month columns per day provided the installation of the rebar and
duration of the equipment lease; and the placement of the concrete can maintain that schedule
4. Monthly progress payments for the equipment lease shall of performance;
be made timely. 2. Provide supervision for the column formwork operation;
3. Responsible for bracing the columns to maintain them
plumb when poured;
CONTRACT NO. 2: Contract for Stripping and Moving Form-Eze Systems Inc.
4. Correct any defects in the poured column due to failure in
Equipment from Location to Location on SM Marikina Mall Project dated 20
 the formwork. (Not responsible for air entrapment or 2. The agreement is for 1,500 pieces of heavy duty galvanized
aggregate separation caused by improper placement or 6-ft frames and related accessories (3,000 pcs of 14-inch
improper vibration of the concrete; and adjustable u-heads and 3,000 pcs heavy duty base plates);
5. Furnish chamfer and form release agent and
3. BFC will deduct P6,352,500.00 from Form-Eze equipment
leased contract (all equipment must be in good condition
1. Furnish all hoisting and moving of the columns; and turned over to Form-Eze at the end of project). Form-
2. Responsible for installation of the rebar and placement of Eze will own the equipment.
the concrete;
3. Furnish labor as required by Form-Eze for forming columns
Obligations of BFC and will deduct fro Form-Eze P60.00 per man-hour for each 1. Form-Eze will credit BFC with P4,235.00 per frame and
carpenters for the column framework; and related accessories; and
4. Responsible for all column grid lay-out and establishing Obligations of 2. Form-Eze will accept all frames in good condition up to a
elevations on the columns Form-Eze maximum of 1,500 frames and related accessories.

1. Total Contract Amount: 9,100 contact square meters of Agreement is contingent upon parties entering into an exclusive licensing
formwork x P355.00/contact square meter= P3,230,500.00; agreement with BFC for the manufacture of Form-Eze equipment.
2. Downpayment of P484,575.00 (15%) on or before pick up of
CONTRACT NO. 5: Contract for the Purchase and Lease of the Heavy Duty
equipment;
Galvanized X-Bracing on SM Marikina Mall Project dated 29 January 20078
3. BFC agrees to purchase all materials for the formwork as
required by Form-Eze and the direct cost of those materials Obligations of BFC Manufacture heavy duty galvanized x-bracing.
will be deducted from this contract and the balance paid to
Credit BFC with P400.00 per x-brace. If the x-bracing is
Form-Eze; and Obligations of
Terms of Payment not manufactured exactly as specified by Form-Eze,
4. When columns are poured and stripped, P355.00 per Form-Eze
credit is P300.00 per x-brace.
contact square meter is due and payable at that time.
Progress payments will be made for the work completed in Agreement is contingent upon parties entering into an exclusive licensing
a particular month and paid on the first day of the following agreement for the manufacturing of Form-Eze equipment.
month. Any materials or equipment purchased by BFC at
MEMORANDUM OF AGREEMENT dated 5 January 20079
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 LETTER-AGREEMENT dated 5 January 200710
Frames and Related Accessories on SM Marikina Mall Project dated 29 January Changes to Contract No.4
20077
1. The 18-inch adjustable u-head will be changed to a 14-inch adjustable u-head.
Obligations of BFC 1. Manufacture heavy duty galvanized scaffoldings and certain 2. The threading of the heavy duty screw will be accomplished in segments and then
accessories for Form-Eze. The scaffoldings and accessories machined.
will be manufactured exactly as per the drawings and 3. Form-Eze will send to the jobsite all 18-inch and 24-inch adjustable u-heads available
samples given to BFC by Form-Eze, provided the equipment in its current stock in order to start forming the project while BFC is fabricating the
produced is of excellent quality and to the exact 14-innch adjustable u-heads. When the 3.000 pieces 14-inch u-heads are completed
specification specified by Form-Eze; and are on the jobsite, Form-Eze will take back the 18-inch and 24-inch adjustable u-
 heads that were temporarily in use at the jobsite. Under the Terms of Reference, the parties made the following
4. The creditable amount for the purchase of the 6-foot heavy duty galvanized admissions:
scaffolding and related accessories is changed to P4,235.00 per 6-foot heavy duty
galvanized frames, adjustable u-heads and heavy duty base plate. 1. The existence of five contracts, a memorandum of agreement and
a supplemental contract.
2. BFC renegotiated Contract #1 but it did not result in a separate
written contract.
On 30 March 2007, Form-Eze filed a Request for Arbitration 11 before the 3. Under Contract #1, BFC is willing and ready to pay Form-Eze the
CIAC. In its Complaint, Form-Eze alleged that BFC has an unpaid amount of P3,515,003.59, which amount shall be deducted from
obligation amounting to P9,189,024.58; that BFC wanted to re-negotiate the amount of the latter's claim.
the equipment leases; and that it was not complying with the contractual 4. Under Contract BFC is willing and ready to pay Form-Eze the
and supplemental agreements in effect. Form-Eze prayed for the amount of P675,788.97, which amount shall be deducted from the
following relief: amount of the latter's claim.
5. BFC admits that it has the obligation to return to Form-Eze
1. [For BFC] to pay the current monthly equipment rentals; equipment furnished them under Contracts #1, 2, and 3, and all
2. Provisions made to guarantee the earned monthly equipment heavy duty galvanized scaffold frames and related accessories,
leased amounts are paid timely; heavy duty galvanized x-bracing and adjustable U-heads and base
3. To legislate provisions to ensure the lease contracts are not plates fabricated and manufactured by BFC under Contracts #4, 5
breached during the construction of the SM Marikina Mall; and letters dated 5 January 2007.14
4. Provisions made to guarantee the performance of [BFC] for the
manufacturing of the shoring equipment purchased by Form-Eze The claims15 of the parties are summarized, as follow:
from BFC;
5. Provisions made to guarantee the return of all Form-Eze
equipment when the concrete structure is completed and all lost From 7/20/2007 to end
and damaged equipment has been paid for by [BFC]; and of contract based on
FORM-EZE'S CLAIMS As of 7/19/2007
agreed minimum contact
6. All cost related to Arbitration.12
sq.m. of 126,000

In its Amended Answer with Counterclaim, BFC sought for reformation of P26,310,476.29
Contract #1 to incorporate a provision that BFC shall deduct from said Arrears on Contract No.1 - 3,515,003.59 P11,489,523.71
billing the cost of labor supplied by it for the fabrication and assembly of 22,795,472.70
the forming system and for the stripping, cleaning, resetting thereof at 4,771,723.63
the rate of P60.00 per man-hour. BFC also demanded the refund of Arrears on Contract No. 2 -675,788.97 1,528,276. 37
P5,773,440.00 as expenses for the manufacture of additional hardware to 4,095,934.66
complete the 7,000 square meters of formwork required in Contract #1.
BFC explained that Form-Eze had only furnished 4,682.4 square meters Arrears on Contract No.3 2,099,825.00 1,130,675.00
of formwork.13 Arrears on Letter dated
740,600.00 483,000.00
1/5/07
The CIAC appointed a 3-member Arbitral Tribunal (CIAC Arbitral
Tribunal), composed of Atty. Custodio O. Parlade, Atty. Alfredo F. Tadiar   P29,731,832.36 P14,631,475.08
and Engineer Romeo C. David, to adjudicate Form-Eze's claims. Attorney's Fees   300,000.00____
TOTAL SUM IN DISPUTE   P44,663,307.44
   4. Contracts#1, 2, 3, 4 and 5 -Provision for [BFC] to pay for
the lost and damaged equipment furnished them by the
BFC's COUNTERCLAIM   [Form-Eze]; and
5. Contract #1 - Provision in the Contract to include the P75
Cost of labor, helmet & expenses for x-bracing for per contact sq.m. for labor guarantee.
the assembly of the form P 812,791.09
system under Contract #1 6. Is [BFC] #1 entitled to the reformation of Contract #1 to include a
Cost of stripping, petroleum, oil, & helmet under provision that [BFC] #1 shall deduct from [Form-Eze's] billing the
1,391,086.02 cost of labor, helmet and expenses for x-bracing supplied by it for
Contract #2
the assembly of the form system amounting to P812,791.09 , to
Attorney's Fees 300,000.00 deduct from the billing under Contract #2 the cost of labor for the
Total Counterclaims P2,503,877.11 stripping thereof, the costs of petroleum, oil and lubricant and
helmet of the said laborers up to the end of the contract in the
TOTAL SUM IN DISPUTE P46,867,184.55 sum of 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
The total arbitration fees amounted to P616,393.73. forms from June 19, 2007 up to the end of the project in the sum
of P273,240.00?16]
CIAC Arbitral Tribunal was tasked to resolve the following issues, to wit: 7. Is it proper to include Mr. Honorio Pineda as Respondent No. 2?
8. Does the Arbitral Tribunal have the jurisdiction to award claims
1. Is Claimant entitled to its total claim of P34,284,996.41 that accrued after the filing of the Request for Arbitration or does
the Claimant have a cause of action for claims that accrued during
representing the alleged arrear on equipment rental under
the same period?
Contract #1?
9. Who between the parties is entitled to attorney's fees?
2. Is Claimant entitled to its claim of P5,624,211.03 representing the
10. Who between the parties should bear the arbitration costs?17
alleged arrears under Contract #2?
3. Is Claimant entitled to its claim of P3,230,500.00 representing the
alleged arrears under Contract #3? FINAL AWARD BY CIAC
4. Is Claimant entitled to its claim of P1,374,408.00 representing the
rental fees under Letter dated 5 January 2007? On 7 December 2007, the CIAC Arbitral Tribunal rendered a Final Award
5. Is Claimant entitled to its claim for the reformation of the subject in favor of Form-Eze. The dispositive portion reads:
Contracts to include the following:cralawlawlibrary
WHEREFORE, award is hereby made in favor of Claimant and
1. Contract #1 - Provisions to guarantee the earned monthly against [BFC], ordering the latter to pay the former the
equipment leased amounts are paid timely; following amounts:
2. Contract #1 - Provision to ensure that the lease contracts
are not breached during the construction of the SM a) On Contracts No. 1 P28,350,000.00
Marikina Mall;
Less: Payments already made 7,700,000.00
3. 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.;
TOTAL   P20,650,000.00
 
b) On Contract No. 2 P 6,300,000.00 The Tribunal likewise disposes of the remaining issues as
follows:
Less: Payments already made 990,000.00
Less: Cost of labor 60,000.00 The claims under Issues No. 5 and 6 for reformation of Contracts No 1,
a) 2, 3, 4 and 5 are denied for lack of merit.
  ____________
TOTAL   P 5,250,000.00 The inclusion of Mr. Honorio Pineda in the Complaint as additional
  b) respondent is proper.

c) On Contract No.3 P 2,153,166.67

The Tribunal has jurisdiction over the claims of [Form-Eze] and finds
Less: cost of labor 96,915.00 that the Complaint states a cause of action as to claims that accrued
c)
after the filing of the Complaint.
  ____________
  P2,056,751.67 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 for lack of merit. All claims and
On Letter Agreement of January 5, 2008 to December 8, 2007 d) counterclaims peripherally discussed in these proceedings which are
outside the scope of the definition of issues in the Terms of Reference
  P560,000.00 are likewise outside the scope of this Final Award.
 
IN SUM THE FOLLOWING AWARDS ARE MADE: The net award in favor of [Form-Eze] amounting to P28,517,251.67 shall
earn interest at the rate of 6% per annum fro the date of this Final
e)
  Award, and 12% from the date the Final Award becomes final and
executory until the same is fully paid.18
Contract No. 1 P 20,650,000.00
Contract No. 2 5,250,000.00 BFC filed a Motion for Correction of the Final Award. Form-Eze asserted
Contract No. 3 2,056,751.67 that the calculations made on the total quantity of deckforms supplied to
be used under Contract No. 1 is erroneous because the quantity of the
Letter Agreement of January 5, 2007 560,000.00 accessories that were delivered together with the loose truss chords and
assembled trusses that were backloaded were ignored in the
  ____________
computation. BFC explained that the hardware supplied must be
GRAND TOTAL P28,517,251.67 assembled first into deckforms since what is actually rented under
Contract No. 1 are the deckforms, and not the hardware, thus:
The Tribunal further awards in favor of [Form-Eze] and
against [BFC] and [Pineda] who are ordered, jointly and Evidently, in the computation thereof, the total quantity of
severally to pay [Form Eze] P300,00.00 as attorney's fees, the accessories that were delivered together with the said
and to indemnify [Form-Eze's] cost of arbitration paid to loose truss chords and assembled trusses, both of which are
CIAC. shown in 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.
Needless to state, these accessories, such as joist and beam In as much as only 3,626 pieces of beam hangers were
hanger, just like the chords and the trusses, are component actually delivered, which, when used with the delivered
and indispensable parts of a deckform without which it can quantity of joists and length of the delivered chords and
not be completely assembled to be used for the purpose trusses in completely assembling 53 deckforms of 44 ft. in
intended. In the case of a deckform 44 ft. in length, it length, is sufficient to provide only 4,441.73 contact sq.m.
will need, for it to be completely assembled, 34 pieces of of formworks, the minimum rental amount stipulated under
joists and 68 pieces of beam hangers, as shown in the Contract No. l should correspondingly be reduced to only
herewith attached Annex "A" hereof. Php17,989,006.50, less payment of Php 7,700,000.00=Php
10,829,006.50 as the net amout of rent due the Claimant
Therefore, to form 87 completely assembled deckforms of 44 thereunder, as shown in the herewith attached Annex "B"
ft. in length out of/from the delivered chords and trusses, hereof.
it will require 2,958 pieces of joist and 5,916 pieces of
beam hangers. On the same ground, the minimum contact amount stipulated
under Contract No. 2 should also be proportionately reduced
However, as show in Exhibits "C-9(5)", "C-9(11)", "C-9(15)", to Php 3,997,557.00, less payment of Php 990,000.00 + cost
"C-9(18)", "C-9(21)", "C-9(25)", "C-9(27)", "C-9(30)", and of labor of Php60,000.00 = Php 2,947,557.00 as the net
"C-9(31)", only 2,512 pieces of joists and in Exhibits "C- amount due the Claimant thereunder.19
9(8)", "C-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)", "C- The CIAC Arbitral Tribunal denied the motion prompting BFC to file a
9(38)", "C-9(41)", "C-9(35)", "C-9(38)", "C-9(40)", and "C- petition for review before the Court of Appeals.
9(41)", only 3,626 pieces of beam hangers, the very
documents on which this Commission/Tribunal anchored its While the case was pending before the Court of Appeals, Form-Eze filed a
finding now sought to be corrected, were actually delivered Motion with Leave to Direct BFC to return pieces of equipment on 14 July
by the Claimant.
2009.
Accordingly, 87 deckforms of 44 ft. in length can not be
On 15 January 2010, the Court of Appeals dismissed the petition for lack
completely assembled from the delivered chords and trusses
because the quantity of the delivered accessories is of merit. The Court of Appeals heavily relied on factual findings of the
insufficient for the purpose. To be precise, only 53 CIAC Arbitral Tribunal.
deckforms of 44ft. in length can be completely assembled out
of the total length of the chords and trusses with the use THE PETITION
of 1,802 pieces of joists and 3,604 pieces of beam hangers
(with an excess of 22 pieces of beam hangers, 710 pieces of BFC filed a motion for reconsideration but it was denied by the Court of
joist and 2,720 ft of chords and trusses) which are Appeals in a Resolution dated 13 July 2010. Hence, the present petition.
sufficient to provide only 4,441.73 contact sq.m. of BFC, in its Memorandum, raised the following issues for our resolution:
formworks.
I.
To therefore conclude that 87 deckforms of 44 ft. in length
can be completely assembled with the use of/out of 2,512
pieces of joists and 3,626 pieces of beam hangers, is an Whether or not the Court of Appeals committed a reversible
evident miscalculation. error in affirming the CIAC's ruling that BFC is liable to
pay rent to the [Form Eze] under Contract Nos. 1, 2, and 3
even for portions where the latter's supplied formwork
xxxx
system were not used.
 II. under Contract No. 1 for the cost of labor in assembling the
deckforms, the cost of helmets of said laborers, and the expenses for
Whether or not the Court of Appeals committed a reversible (1)
x-bracing supplied by BFC for the assembly of said forms in the total
error in affirming the CIAC's conclusion that [Form-Eze] was amount ofPhp812,791.09;
able to supply BFC with such quantity of deckforms
sufficient to provide the stipulated 7,000 contact square under Contract No. 2 for the cost of labor in the stripping of said
meter of formworks as to entitle said [Form-Eze] to the (2) deckforms, the cost of petroleum, oil and lubricant and helmet up to
stipulated minimum contract rental price of Php28,350,000.00 the end of the contract in the sum total of Php1,391,086.02; and
under Contract No. 1 and consequently to Php6,300,000.00 under Contract No. 3 for the cost of labor in installing and forming
under Contract No. 2, when, based on the quantity of the the built up columnforms from 25 June 2007 up to the end of the
delivered accessories, which are component pm1s of deck form (3)
contract in the sum total of Php273,240.00, when BFC is legally
system, but which the CIAC totally ignored, [Form-Eze] can entitled thereto.
only provide 4,441.73 contact square meters of formworks
that will entitle it to only Php17,989,006.05 and
Php3,997,557.00, respectively thereunder. VI.

III. Whether or not the Court of Appeals committed a reversible

error in affirming the CIAC in ordering BFC to pay rental
Whether or not the Court of Appeals committed reversible fees under letter dated 5 January 2007, covering the period
error in affirming the CIAC's ruling that [Form-Eze] is from 25 June 2007 to 17 December 2007 in the sum total of
entitled to twoOthirds of the stipulated minimum contract Php560,000.00 at Php96,000.00 a month, when the acquisition
amount of Php3,230,500.00 or Php2,153,666.67 under Contract cost of the pieces of u-heads and plates referred to therein
No. 3, considering that CIAC did not state the factual and is allegedly only Php96,000.00, and there is evidence
legal basis of said ruling and despite its contrary factual presented to show that these items were purchased at
finding that [Form-Eze] failed to supply the minimum Php96,000.00 and there is on evidence to show the prevailing
required columnforms. rate of rent for the same items.

IV. VII.

Whether or not the Court of Appeals committed a reversible Whether or not the Court of Appeals committed a reversible
error in affirming the CIAC's ruling against the reformation error in affirming the CIAC in ruling that Respondent Pineda
of Contract No. 1 to include a provision that BFC shall can be held as co-respondent (in the arbitration case) when
furnish the labor needed by [Form-Eze] in assembling the he is not a party to the contracts and agreements involved
deckforms and that it shall deduct therefrom the agreed cost in this case, as well as the arbitration agreement, and he
of labor at Php60.00 per man hour, since it has been the did not voluntarily submit himself to arbitration in this
true intention and real agreement of the parties thereto. case.

V. VIII.

Whether or not the Court of Appeals committed a reversible Whether or not the Court of Appeals committed a reversible
error in affirming the CIAC when it did not deduct the error when it ruled that the attorney's fees and cost of
following costs incurred by BFC from the minimum contract arbitration shall be for the account of Petitioners,
amounts due: 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 of the language and SUBTOTAL   Php 441,502.87
the incompleteness of the contracts and agreements, which
were prepared by the Respondents.20        
On Letter Agreement dated 5
BFC prays for a modification of the Final Award to read: d.
January 2007
  Php 70,000.00

The award of attorney's fees be

a. On Contract No. 1   Php17,989,006.50 e.    
deleted; and
      The award for cost of
f.
Less:   arbitration fees be deleted.21

  Payments already made Php 7,700,000.00

THE COURT'S RULING
  Payment made on Billing No. 1 487,828.05
The Final Award of CIAC is subject
Cost of labor in assembling
to review by the Court of Appeals.
  Deckforms, expenses for x- 812,791.90 9,000,619.95
Bracings and cost of helmet
BFC first asserts that the Court of Appeals has the power and the duty to
SUBTOTAL Php 8,988,386.55 review the factual findings made by CIAC and that the Court of Appeals
should not be bound by the factual findings of the construction
   
arbitrators.
b. On Contract No. 2 Php 3,997,557.50
The case of Asian Construction and Dev't. Corp. v. Sumimoto
    Corporation22 summarized the development of the principle that the final
Less: award of CIAC may be still be subject to judicial review, thus:

  Payments already made Php 990,000.00 To begin, Executive Order No. (EO) 1008, which vests upon
Costs of labor in stripping And the CIAC original and exclusive jurisdiction over disputes
moving of the same Deckforms, arising from, or connected with, contracts entered into by
  1,304,036.82 Php 2,294,036.82 parties involved in construction in the Philippines, plainly
petroleum, oil And lubricant and
helmet states that the arbitral award "shall be final and
inappealable except on questions of law which shall be
SUBTOTAL Php 1,702,520.68 appealable to the Court." Later, however, the Court, in
Revised Administrative Circular (RAC) No. 1-95, modified
    this rule, directing that the appeals from the arbitral
award of the CIAC be first brought to the CA on "questions
c. On Contract No. 3   Php 538,417.87
of fact, law or mixed questions of fact and law." This
      amendment was eventually transposed into the present CIAC
Revised Rules which direct that "a petition for review from
Less:     a final award may be taken by any of the parties within
fifteen (15) days from receipt thereof in accordance with
Cost of labor in the
the provisions of Rule 43 of the Rules of Court." Notably,
  installation and removal of the   96,915.00
the current provision is in harmony with the Court's
Columnforms
 pronouncement that ''despite statutory provisions making the Under Contract No. 1, Form-Eze
decisions of certain administrative agencies 'final,' the was not able to supply BFC with
Court still takes cognizance of petitions showing want of deckforms sufficient to provide
jurisdiction, grave abuse of discretion, violation of due 7,000 contact square meter of
process, denial of substantial justice or erroneous formworks.
interpretation of the law" and that, in particular,
"voluntary arbitrators, by the nature of their functions,
The CIAC Arbitral Tribunal conducted its own study and came up with the
act in a quasi-judicial capacity, such that their decisions
are within the scope of judicial review."23 following findings:

Factual findings of construction arbitrators may be reviewed by the Court The receipted hardware deliveries made by [Form-Eze] show
in cases where: 1) the award was procured by corruption, fraud or other that the total length of loose truss chords delivered was
11,912 lineal feet and the length of the truss chords from
undue means; (2) there was evident partiality or corruption of the
the assembled trusses delivered was 2,052 lineal feet or a
arbitrators or any of them; (3) the arbitrators were guilty of misconduct
total available length of trusses of 13,964 lineal feet. By
in refusing to hear evidence pertinent and material to the controversy; an iterative process of selection and elimination, 175 units
(4) one or more of the arbitrators were disqualified to act as such under of 44' long trusses could be assembled, equivalent to 87
Section nine of Republic Act (R.A.) No. 876 and willfully refrained from deckforms of 44 feet in length. The assembled 87- 44'
disclosing such disqualifications or of any other misbehavior by which the deckforms can provide 7,268.58 square meters of contact
rights of any party have been materially prejudiced; (5) the arbitrators area, broken down as follows:
exceeded their powers, or so imperfectly executed them, that a mutual,
final and definite award upon the subject matter submitted to them was
    Contact Area (%)
not made; (6) when there is a very clear showing of grave abuse of
discretion resulting in lack or loss of jurisdiction as when a party was      
deprived of a fair opportunity to present its position before the Arbitral
Tribunal or when an award is obtained through fraud or the corruption of Interior & Near Column Slabs = 4,156.89 sq.m. (57.19%)
arbitrators; (7) when the findings of the Court of Appeals are contrary to Grid Beams (B-1) = 740.37 sq.m. (10.19%)
those of the CIAC, and (8) when a party is deprived of administrative due
process.24 Interior Beams (B-2) = 1,663.20 sq.m. (22.88%)
Grid Girders (G-2) = 708.12 sq.m. (9.74%)
While this rule, which limits the scope of the review of CIAC findings,
applies only to the Supreme Court, the Court of Appeals nonetheless is Total = 7,268.58 sq.m. (100%)
not precluded from reviewing findings of facts, it being a reviewer of
facts. By conveniently adopting the CIAC's decision as its own and The resulting contact area of 7,628.58 sq.m. is 3.84% over
refusing to delve into its factual findings, the Court of Appeals had the 7,000 sq.m. requirement of the contract. But the former
effectively turned a blind eye to the evidentiary facts which should have figure includes the contact area of girders which according
been the basis for an equitable and just award. to [petitioners] should not be included. As shown in ANNEX
"A", sheets 5 & 6 of 6, the contact area contributed by the
While factual findings are not within the purview of a petition for review girders is only 708.12 sq.m., and if this is deducted from
before this Court, we take exception in this case on the ground of the the computed total contact area, the remaining available
contact area would be 6,560.46 sq.m. or 93.72%. The fact,
appellate court's refusal to delve into the findings of facts of the CIAC
however, is that the non inclusion of the contact area
Arbitral Tribunal.
provided by the girders would be a violation of the letter-
contract dated 8 February 2007, paragraph 9 of which
provides that: "[Form-Eze] offered to install beam hangers In view of the above, it is the finding of the Arbitral
and ledger angles in order to support the moment beam from Tribunal that [Form-Eze] had been able to furnish the amount
from column to column and thereby save BFC considerable of hardware that was sufficient to provide 7,000 contact
labor and eliminate the use of BFC's light duty scaffolding square meters of formwork, all in accordance to Contract No.
underneath and beam. By doing that it will also speed up the 1. Thus, the remaining question to resolve is the area of
forming operation and save BFC labor. The only light duty the project covered by the formwork equipment in contact
scaffolding that BFC will be installing is that under the square meters.25
girder which supports tremendous loading during the
stressing of the beams prior to it being stressed. By BFC accuses the CIAC of coming up with its own biased computation of
forming the girder in this manner, [Form-Eze] is not the contact area of the hardware supplied by Form-Eze under Contract
involved in the tripping or resetting of the girder No. 1. According to BFC, Form-Eze had furnished only 53 completely
formwork. However, [Form-Eze] is has purchased and furnished assembled deckforms of 44 ft. in length which correspond to only
considerable forming hardware and consumables (tie rods, pvc
4,441.73 contact square meters of formworks, while CIAC found that
sleeves, pvc cones, whaler clips and brackets and wing-nuts)
Form-Eze had delivered truss chords equivalent to 87 deckforms which
which are being used on girders and the beams. [Form-Eze]
will give the ownership of this equipment to BFC and BFC can provide 7,268.58 contact square meters. BFC maintains that Contract
will buy all additional consumables and hardware (as needed) No. 1 is clear that the object is the supply of the complete deckform
directly from Comer. In return, [Form-Eze] will include the system and not unassembled hardware such as loose truss chords. BFC
contact square meters of formwork in the girders in its adds that Form-Eze judicially admitted that it is only claiming equipment
billing for both the equipment lease and for the moving rentals for the areas that its equipment are being used. BFC reiterates
contract." This letter-contract, Exhibit C-12, binds [BFC] that based on the provisions of Contract No. 1 on the contemporaneous
to pay Claimant for the girder formworks contact area for and subsequent acts of the parties, as well as application of principles of
both Contract No. 1 and Contract No. 2. contract interpretation, the inclusion of loose truss chords in the
computation of the quantity of hardware supplied by Form-Eze is an
Petitioners argued that the formwork of the girder (or large erroneous interpretation by CIAC. BFC also claims that the CIAC
beam) is independent of the deck form system and so should wrongfully included the contact area of girders in the computation of the
not be counted in favor of [Form-Eze]. The Tribunal does not sufficiency of equipment supplied by Form-Eze. BFC contends that the
agree. How could the girder formwork be considered girders are not part of the deckforms contemplated in Contract No. 1.
independent from the deckform system when both sides of the BFC offers to compensate Form-Eze to the extent that its supplied
girder formworks are held stiff together by "tie rods, pvc deckforms were used under the principle of quantum meruit. BFC submits
sleeves (to make the tie rods reusable), pvc cones, whaler that 4,441.73 contact square meters or 63.45% of the 7,000 minimum
clips and brackets and wing-nuts" supplied by the [Form-Eze]
contact area required under Contract No. 1 is a reasonable computation.
and pressed between deckforms preparatory to concrete
pouring? The girder cannot be considered structurally
independent of the deck slabs because it is the requirement We reverse the finding of the CIAC on this point as it is contrary to the
of design and the National Building Code and its reference evidence on record.
code the American Concrete Institute Code (ACI Code) that
the girders are to be poured monolithically with the slabs We agree with BFC that the CIAC should not have included the
and beams up to L/3 or 1/3 of the floor span (the point of unassembled truss chords in theoretically forming deckforms. We
infection and location of the construction joint where the subscribe to BFC's submission that the object of Contract No. 1 is the
bending moment is the least or zero), as is clearly shown on deckforms and not just the hardware that make up the formwork.
the floor concrete pouring schedule plans. Contract No. 1, in itself, is clear that "F-E has agreed to furnish all
hardware required in the formwork system for the poured in place beam
Conclusion of Tribunal and slab concrete decks x x x." In fact, the equipment rental is only due
and payable to Form-Eze when the concrete is placed on the slab forms,
which provision is based on the premise that the hardware had already BFC's light duty scaffolding underneath that beam. By doing
been assembled into deckforms ready for concrete pouring. Moreover, that it will also speed up the forming operation and save
the Proposed SM Marikina Mall Project Elevated Beam and Slab Formwork BFC labor. The only light duty scaffolding that BFC will be
dated 7 December 2006, which document has been admitted by the installing is under the girder which supports tremendous
parties in the Term of Reference, provides that Form-Eze will furnish loading during the stressing for the beams prior to it being
sufficient deckforms to produce 1/2 floor each month on the project. 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 furnished
BFC had also explained to our satisfaction that loose truss chords alone considerable forming hardware and consumables (tie rods, pvc
could not be assembled into deckforms, to wit: sleeves, pvc cones, whaler clips and brackets and wing-nuts)
which are being used on the girders and the beams. [Form-
To try to assemble truss chords alone into a deckform is Eze] will give ownership to this equipment toi BFC and BFC
like taking three two-foot round pegs, trying to stand them will buy all additional consumables and hardware (as needed)
upright, then balancing twelve-inch round wooden slab on directly from Comer. In return [Form-Eze] will include the
top, and expect it to be a stool capable of supporting a contact square meters of formwork in the girders in its
person. Joist, beam hangers and other component parts fix billing for both the equipment lease and for the moving
the truss chords into place for the structural integrity of contract.27
a deckform. In the case of a deckform 44 ft. in length, it
will need, for it to be completely assembled, 34 pieces of BFC cannot claim that this provision does not refer to Contract No. 1.
joists and 68 pieces of beam hangers as illustrated in the Said provision mentions beam hangers and ledger angles which are used
Petitioner's Motion for Correction of Final Award. to support the beams forming the deckform and to eliminate the use of
light duty scaffolding on the part of BFC which it had initially obligated to
Thus, assembling 87 deeckforms of 44 ft. in length would provide under Contract No. 1. More pertinently, the inclusion of the
require 2,958 pieces of joist and 5,916 pieces of beam contact square meters of formwork in the girders is a mere application of
hangers to assemble such 87 44-foot deckforms. However, as one of the provisions in Contract No. 1, i.e., "BFC agrees to purchase
show in the same documents that CIAC anchored its
materials for the formwork as requested by F-E and the direct cost of
theoretical findings, only 2,512 pieces of joists and only
those materials will be deducted from this contract and the balance paid
3,626 pieces of beam hangers were actually delivered by
[Form- Eze].26 to [Form-Eze]." Form-Eze is giving ownership of the forming hardware
and consumables which are used on the girders and beams to BFC.
Instead of deducting the cost of these materials from the contract, Form-
BFC's computation of the total contact area covered by the deckforms
Eze will instead include the contact square meters of formwork in the
furnished by Form-Eze is backed by delivery receipts of the joists and
girder in its billing for the lease of the deckforms.
beam hangers while CIAC's computation is more theoretical than it is
actual.
As agreed upon by the parties, the 708.12 sq. m. contact area covered
by the grid girders should be included in the billing. Taking into account
The inclusion of the additional contact area of the grid girders in the
this contact area corresponding the grid girders and the 4,441.73 contact
calculation of the total contact area of the equipment supplied by Form-
square meter assembled deckforms, the total contact area is only
Eze under Contract No. 1, however, should be upheld. Paragraph 9 of the
5,149.85, which still falls short of the 7,000 contact area requirement.
Letter dated 8 February 2007, which was also admitted by the parties,
clearly provides:
To award the full contract price to Form-Eze in Contract No. 1 is
tantamount to unjust enrichment. There is unjust enrichment under
[Form-Eze] offered to install beam hangers and ledger angles
in order to support the moment beam fro column to column and Article 22 of the Civil Code when (1) a person is unjustly benefited, and
thereby save BFC considerable labor and eliminate the use of (2) such benefit is derived at the expense of or with damages to another.
The principle of unjust enrichment essentially contemplates payment In order that an action for reformation of instrument may prosper, the
when there is no duty to pay, and the person who receives the payment following requisites must concur: (1) there must have been a meeting of
has no right to receive it.28 By requiring BFC to pay the full contract price the minds of the parties to the contract; (2) the instrument does not
when it only supplied deckforms which covered only 5,149.85 contact express the true intention of the parties; and (3) the failure of the
square meters of formworks, the CIAC Arbitral Tribunal is essentially instrument to express the true intention of the parties is due to mistake,
unjustly giving unwarranted benefit to Form-Eze by allowing it to earn fraud, inequitable conduct or accident.30
more than it legally and contractually deserved. It is also worth
mentioning that Form-Eze had in fact only been claiming for the contact In the instant case, the question to be resolved is whether the contract
area where its equipment was used. expressed their true intention; and, if not, whether it was due to mistake,
fraud, inequitable conduct or accident. While intentions involve a state of
Therefore, using the computation of BFC, the amount of contact square mind which may sometimes be difficult to decipher, subsequent and
meters that the delivered hardware and deckforms can handle is: contemporaneous acts of the parties as well as the evidentiary facts as
proved and admitted can be reflective of one's intention.31
126,000 sq. m. x Y = 92,696.40 contact sq. m
BFC relies on the Form-Eze Proposed SM Marikina Mall Project Elevated
5,149.85 sq. m. Beam and Slab Formwork dated 7 December 2006 32 to support its
7,000 sq. m.      
deckforms delivered contention that Contract No. 1 should have a provision on the cost of
labor. Indeed, in the aforementioned proposal, BFC has agreed "to
Contract No. 1 be reformed to include furnish the labor required for fabrication and assembly of the forming
a labor guarantee provision. equipment" and that "BFC will deduct from the total contract amount
50.00 per man-hour each carpenter or laborer supplied to Form-Eze."
An action for reform a contract is grounded on Article 1359 of the New Notably, Contracts No. 2 and 3 contain labor-guarantee provisions
Civil Code which provides: considering that BFC has committed to provide the necessary labor for
both contracts.
ARTICLE 1359. When, there having been a meeting of the minds
of the parties to a contract, their true intention is not As initially agreed upon, BFC hired workers for the assembly of the
expressed in the instrument purporting to embody the deckforms since Form-Eze only undertook to supervise the installation of
agreement, by reason of mistake, fraud, inequitable conduct the deckforms. This was evident during the cross-examination of Mr.
or accident, one of the parties may ask for the reformation Romano Clemente (Mr. Clemente) who admitted that no workers of
of the instrument to the end that such true intention may be Form Eze were employed for the installation of the deckforms, thus:
expressed.
ATTY. D. MORGA, JR. (COUNSEL-RESPONDENT):
x x x x
Since it is the obligation of the Claimant to assemble the
Reformation is a remedy in equity, whereby a written instrument is made hardware into deckform, how many workers were employed for
or construed so as to express or conform to the real intention of the the purpose.
parties, where some error or mistake has been committed. In granting
reformation, the remedy in equity is not making a new contract for the MR. R.V. CLEMENTE (CLAIMANT):
parties, but establishing and perpetuating the real contract between the
parties which, under the technical rules of law, could not be enforced but We are only supplier sir. We supervise the guys in the
for such reformation.29 jobsite for tern to install all these deckforms.
 ATTY. D. MORGA, JR. (COUNSEL-RESPONDENT): 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-
Ano? guarantee provision, to wit:

MR. R.V. CLEMENTE (CLAIMANT): Mr. Witness, respondent [BFC], in their counterlcaims, would like this
Commission to reform Contract No. 1 to include a provision that it
To install the guys in the jobsite like for example your Q: should deduct from your billing the cost of labor, helmet and expense
laborers carpenters to install this deckforms. We just only for x-bracing supplied by it for the assembly of the form system, what
supply one supervisor in the jobsite for him to supervise can you say?
the installation of this form.

ATTY. D. MORGA, JR. (COUNSEL-RESPONDENT): [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
You mean BF Corporation has the expertise to assemble this. to deduct the cost of the assembly labor for the deck forms which is
included in the Labor Guarantee. These deductions have been reflected
MR. R.V. CLEMENTE (CLAIMANT): in all our billings where the P75.00 Labor Guarantee has been applied.
The cost of helmet is not included and should not be included. Contract
No. 1 is only a lease contract but it was modified to include a Labor
No, we will supervise your guys for them to assemble this.
A: 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
ATTY. D. MORGA, JR. (COUNSEL-RESPONDENT): for the assembly thereof is included in the Labor Guarantee. They
should be allowed to do so in conformance with the Labor Guarantee but
Do you know if BF has the expertise to assemble this? 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
MR. R.V. CLEMENTE (CLAIMANT): both in the original contract and in the subsequent agreement as
contain (sic) in the February 8, 2007 signed letter.34
That is why we were there in your jobsite. If they don't
have really the expertise we are the one who supervise them This admission by Form-Eze bolsters the conclusion that the parties
to install the deckforms. Supervise them to install the intended to include a labor-guarantee provision in Contract No. 1. Both
deckforms 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):
Considering that both parties admitted that there should be a labor
You mean no former workers of the Claimant were employed for guarantee clause in Contract No. 1, it can be reasonably inferred that the
the purpose. failure to include said provision was due to mistake. A reformation is in
order to include a cost of labor provision in Contract No. 1.
MR. R.V. CLEMENTE (CLAIMANT):
Expenses for x-bracing gand the
No.33 cost of labor should be deducted
under Contracts No. 2 and 3.
Obviously, BFC would want to be compensated for the labor it provided to
Form-Eze as shown in Contracts No. 2 and 3.
Except for the expenses for x-bracing used in deck assemblies which had At the outset, we agree that the subsequent Memorandum of Agreement
been admitted by Form-Eze President James Franklin, BFC is not entitled executed by the parties on 5 January 2007 is an exclusive licensing
to be reimbursed for the cost of helmets, petroleum, and oil lubricants in agreement. It was signed by both parties wherein BFC has agreed to sell
the absence of any stipulations in the contracts. The cost of labor, on the the scaffolding frames and accessories it manufactured to Form-Eze at
other hand, should be deducted pursuant to the labor-guarantee the end of the project. This Agreement was incorporated in Contract No.
provisions in Contracts No. 2 and 3. 4 wherein BFC will be allowed to deduct P6,352,500.00 from the
equipment lease contract, which is presumably Contract No. 1. At this
The cost for x-bracing amounts to P358,250.00 as evidenced by the point, Contract No. 4 is deemed to have novated the obligation of BFC
receipt issued by Comer.35 with respect to furnishing all scaffoldings. Contract No. 1 states that BFC
shall furnish the scaffoldings at no cost to Form-Eze. On the other hand,
The costs of labor are as follow: Contract No. 4 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 interpreted as
Contract No. 1 = P453,294.50
Contract No. 2 = P1,373,634.60 part of the deckform supplied by Form-Eze. As pointed out by BFC, the
Contract No. 3 = P273,240.00 scaffoldings and accessories were the responsibility of BFC under Contract
No. 1. Thus, the manufactured hardware under Contract No. 4 could not
have added to the deckform system because they are not the equipment
Obligation of BFC under Contract No. 1:
of Form-Eze had obligated itself to supply under Contract No. 1.

92,696.40 contact square meters x P225.00 = P20,856,690.00 Obligation of BFC under Contract
        No.2

Less: Amount paid   7,700,000.00 BFC maintains that since Form-Eze failed to meet the minimum
  Payment for billing for Pour 1   487,828.05 conditions under Contract No. 1 where the minimum 126,000 contact
square meters were not reached, then the forklifts under Contract No. 2
  Cost of labor   453,294.50 were also not used for a minimum of 126,000 contact square meters.
  Cost of X-bracing   358,250.00
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,
    P11,857,317.45 the rental rate for the forklifts. Thus:

The Memorandum of Agreement 92,696.40 contact square meters x P50.00 = P 4,634,820.00

dated 5 January 2007 is an exclusive    
licensing agreement.
Less: Payments made   990,000.00
BFC avers that CIAC erred when it stated the BFC was given the exclusive Cost of Labor   1,286,377.50
license to manufacture Form-Eze's equipment consisting of scaffoldings
and accessories and they became part of that provided by Form Eze to     ___________
BFC.
SUBTOTAL   P2,358,442.50
Obligation of BFC under Contract BFC is obliged to pay rental
No. 3. for u-heads under Letter-Agreement
dated 5 January 2007.
The CIAC had correctly noted the ambiguity in Contract No. 3,
particularly the "sufficient number of column forms as required to Under the letter dated 8 February 2007, "BFC has completed fabrication
complete six (6) poured in place columns per day." For BFC, the sufficient on a sufficient quantity of u-heads with screw assemblies and heavy duty
number of column forms is 12 sets a day while Form-Eze considered its bases so that BFC can immediately start returning the 24 inch and 18
supply of six (6) full height built up column forms as sufficient. The CIAC inch u-head assemblies (561 pcs) and heavy duty bases (483 pcs) which
found that Form-Eze failed to comply with the requirements under were on temporary loan to BFC by [Form-Eze] until BFC could
Contract No. 3, hence it merely awarded Form-Eze 2/3 of the minimum manufacture their own equipment. The temporary loan was expected to
contract amount at P2,153,666.67. be approximately [two] (2) weeks and the equipment was picked-up
January 9th, 2007 and still in used today."36 It is understood that upon
We find that the CIAC's award lacked bases. It gave credence to the expiration of the two-week temporary loan and upon failure by BFC to
methodology used by Form-Eze and noted that the latter had supplied six return the equipment, it is then liable to pay for rent. We find that the
(6) full height built-up columforms, albeit insufficient. We hold the monthly rental amount of P96,600.00 was substantiated by Form-Eze.
contrary. The methodology used by BFC, which involves "columnforms 483 pieces of 24 inch and 18 inch galvanized adjustable heads and 483
with window openings and that from its installation, alignment, bracing, pieces of galvanized heavy duty plates were indeed delivered to BFC as
inspection, approval of alignment, verticality and rigidity of the erected evidenced by the delivery receipts.37 According to Mr. Clemente, Form-
columnforms, pouring, drying and removal of the forms, it will require Eze's Sales Engineer, the rental amount for adjustable u-heads are fixed
twelve (12) column forms a day, should have been considered. The CIAC at P160.00 per unit, while the galvanized heavy duty plates are at P40.00
itself had already ruled that the ambiguity in Contract No. 3 should not per unit.38 By agreeing to the terms of the 8 February 2007 Letter, BFC is
favor Form-Eze, the party who prepared the contract. Thus, it is only deemed to have acquiesced to the rental fee in case it failed to return the
logical that the methodology employed by BFC should be credited. u-heads and plates on time. Therefore, we affirm the CIAC's ruling that
BFC is liable to pay rental of the equipment in the amount of P96,000.00
Using 12 column forms as the minimum requisite and Form-Eze having per month until the equipment leased is fully returned to Form-Eze.
supplied only four (4) usable column forms, it can be established that the
delivered column forms can only be used for 1/3 portion of the 9,100 BFC President should not be included
contact square meters or 3,033.33 contact square meters. It was further as party to this case?
proven by BFC that about 50% of the column form requirements of the
project were already completed with the use of their own equipment. Section 4 of Executive Order No. 1008 vests jurisdiction on CIAC over
Thus, it is but equitable that the 3,033.33 contact square meters be disputes disputes arising from, or connected with, contracts entered into
further reduced by 50% or 1,516.67 contact square meters. BFC is then by parties involved in construction in the Philippines, whether the dispute
liable to pay P441,502.87 broken down as follows: arises before or after the completion of the contract, or 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
1,516.67 X P355.00 = P 538,417.85
party to the contract in his personal capacity is not subject to the
Less: Cost of Labor   96,915.00 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
SUBTOTAL:   P 441,502.87 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 and 50% of the Cost of Arbitration.
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 SO ORDERED.
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, just and demandable claim. We observe that in filing the
complaint against BFC, Form-Eze was merely seeking payment for its
service under the contract. BFC had admitted to its obligation. The
problem lies only on the amount to be paid. This is not tantamount to bad
faith.

Finally, both parties should equally share the costs of arbitration since
their prayers were only partially granted.39

WHEREFORE, the petition is PARTIALLY GRANTED. The Decision dated

15 January 2010 and Resolution dated 13 July 2010 are MODIFIED.
Petitioner B.F. Corporation is ordered to pay respondent Form-Eze
Systems Inc. the following amounts:

Under Contract No. 1: P11 ,857,317.45

Under Contract No. 2: 2,358,442.50
Under Contract No. 3: 441,502.87
Under Letter-Agreement dated 7 January 2007: 560,000.00
  _____________
GRAND TOTAL: P15,217,262.82