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1. G.R. No.

169095
HEUNGHWA INDUSTRY CO.,LTD., vs DJ BUILDERS On October 24, 2000, respondent filed with CIAC a Request for
CORPORATION, Adjudication[11] accompanied by a Complaint. Petitioner, in
December 8, 2008 turn filed a Reply/ Manifestation informing the CIAC that it was
abandoning the submission to CIAC and pursuing the case
DECISION before the RTC. In respondent's Comment on petitioner's
AUSTRIA-MARTINEZ, J.: Manifestation, it prayed for CIAC to declare petitioner in
Before this Court is a Petition for Review on Certiorari[1] under default.
Rule 45 of the Rules of Court, seeking to set aside the August
20, 2004 Decision[2] and August 1, 2005 Resolution[3] of the CIAC then issued an Order[12] dated November 27, 2000
Court of Appeals (CA) in CA-G.R. SP Nos. 70001 and 71621. ordering respondent to move for the dismissal of Civil Case No.
3421 pending before the RTC of Palawan and directing
The facts of the case, as aptly presented by the CA, are as petitioner to file anew its answer. The said Order also denied
follows: respondent's motion to declare petitioner in default.

Heunghwa Industry Co., Ltd. (petitioner) is a Korean Respondent filed a Motion for Partial Reconsideration of the
corporation doing business in the Philippines, while DJ Builders November 27, 2000 Order while petitioner moved to suspend
Corporation (respondent) is a corporation duly organized under the proceeding before the CIAC until the RTC had dismissed
the laws of the Philippines. Petitioner was able to secure a Civil Case No. 3421.
contract with the Department of Public Works and Highways
(DPWH) to construct the Roxas-Langogan Road in Palawan. On January 8, 2000, CIAC issued an Order[13] setting aside its
Order of November 27, 2000 by directing the dismissal of Civil
Petitioner entered into a subcontract agreement with Case No. 3421 only insofar as the five issues referred to it
respondent to do earthwork, sub base course and box culvert were concerned. It also directed respondent to file a request for
of said project in the amount of Php113, 228, 918.00. The adjudication. In compliance, respondent filed anew a Revised
agreement contained an arbitration clause. The agreed price Complaint[14] which increased the amount of the claim from
was not fully paid; hence, on January 19, 2000, respondent Php23,391,654.22 to Php65,393,773.42.
filed before the Regional Trial Court (RTC) of Puerto Princesa,
Branch 51, a Complaint for Breach of Contract, Collection of On February 22 2001, petitioner, through its new counsel, filed
Sum of Money with Application for Preliminary Injunction, with the RTC a motion to withdraw the Order dated September
Preliminary Attachment, and Prayer for Temporary Restraining 27, 2000 which referred the case to the CIAC, claiming it never
Order and Damages docketed as Civil Case No. 3421.[4] authorized the referral. Respondent opposed the motion[15]
contending that petitioner was already estopped from asking
Petitioner's Amended Answer[5] averred that it was not obliged for the recall of the Order.
to pay respondent because the latter caused the stoppage of
work. Petitioner further claimed that it failed to collect from the Petitioner filed in the CIAC its opposition to the second motion
DPWH due to respondent's poor equipment performance. The to declare it in default, with a motion to dismiss informing the
Amended Answer also contained a counterclaim for CIAC that it was abandoning the submission of the case to it
Php24,293,878.60. and asserting that the RTC had original and exclusive
On September 27, 2000, parties through their respective jurisdiction over Civil Case No. 3421, including the five issues
counsels, filed a Joint Motion to Submit Specific Issues To The referred to the CIAC.
Construction Industry Arbitration Commission[6] (CIAC), to wit:
On March 5, 2001, the CIAC denied petitioner's motion to
5. Parties would submit only specific issues to the CIAC for dismiss on the ground that the November 27, 2000 Order had
arbitration, leaving other claims to this Honorable Court for already been superseded by its Order of January 8, 2001.[16]
further hearing and adjudication. Specifically, the issues to be
submitted to the CIAC are as follows: On March 13, 2001, the CIAC issued an Order setting the
preliminary conference on April 10, 2001.[17]
a. Manpower and equipment standby time;
b. Unrecouped mobilization expenses; On March 23, 2001 petitioner filed with the CIAC a motion for
c. Retention; reconsideration of the March 5, 2001 Order.
d. Discrepancy of billings; and
e. Price escalation for fuel and oil usage.[7] For clarity, the succeeding proceedings before the RTC and
CIAC are presented in graph form in chronological order.
On the same day, the RTC issued an Order[8] granting the
motion. RTC
CIAC
On October 9, 2000, petitioner, through its counsel, filed an
Urgent Manifestation[9] praying that additional matters be April 5, 2001 Petitioner filed a Motion to Suspend proceedings
referred to CIAC for arbitration, to wit: because of the Motion to Recall it filed with the RTC.

1. Additional mobilization costs incurred by [petitioner] April 6, 2001 CIAC granted petitioner's motion and suspended
for work abandoned by [respondent]; the hearings dated April 10 and 17, 2001.
2. Propriety of liquidated damages in favor of May 16, 2001 the RTC issued a Resolution[18] granting
[petitioner] for delay incurred by [respondent]; petitioner's Motion to Recall.[19]
3. Propriety of downtime costs on a daily basis during
the period of the existence of the previous temporary June 1, 2001- Respondent moved for a reconsideration of the
restraining order against [petitioner].[10] May 16, 2001 Resolution and prayed for the dismissal of the
1
case without prejudice to the filing of a complaint with the March 26, 2002 CIAC ordered respondent to file a reply to
CIAC.[20] petitioner's March 21, 2002 Manifestation.
June 17, 2002 RTC denied respondent's Motion for
June 11, 2001- Petitioner opposed respondent's motion for Reconsideration.
reconsideration and also prayed for the dismissal of the case
but with prejudice.[21] The parties, without waiting for the reply required by the
CIAC,[32] filed two separate petitions for certiorari: petitioner,
July 6, 2001 - The RTC denied respondent's motion for on April 5, 2002, docketed as CA-G.R. SP No. 70001; and
reconsideration but stated that respondent may file a formal respondent, on July 5, 2002, docketed as CA-G.R. SP No.
motion to dismiss if it so desired.[22] 71621 with the CA.

July 16, 2001- Respondent filed with the RTC a Motion to In CA-G.R. SP No. 70001, petitioner assailed the denial by the
Dismiss[23] Civil Case No. 3421 praying for the dismissal of CIAC of its motion to dismiss and sought to enjoin the CIAC
the complaint without prejudice to the filing of the proper from proceeding with the case.
complaint with the CIAC.
In CA-G.R. SP No. 71621, respondent questioned the March
On the same day, the RTC granted the motion without 13, 2002 Order of the RTC which reinstated Civil Case No.
prejudice to petitioner's counterclaim.[24] 3421 as well as the Order dated June 17, 2002 which denied
respondent's motion for reconsideration. Respondent also
sought to restrain the RTC from further proceeding with the
August 1, 2001- Petitioner moved for a reconsideration of the civil case.
July 16, 2001 Order claiming it was denied due process.[25]
In other words, petitioner is questioning the jurisdiction of the
August 7, 2001 Respondent filed with the CIAC a motion for CIAC; while respondent is questioning the jurisdiction of the
the resumption of the proceedings claiming that the dismissal RTC over the case.
of Civil Case No. 3421 became final on August 3, 2001.
Both cases were consolidated by the CA.
August 15, 2001 - Petitioner filed a counter-manifestation[26]
asserting that the RTC Order dated July 16, 2001 was not yet The CA ruled against petitioner on procedural and substantive
final. Petitioner reiterated the prayer to dismiss the case. grounds.

August 27, 2001 CIAC issued an Order maintaining the On matters of procedure, the CA took note of the fact that
suspension but did not rule on petitioner's Motion to Dismiss. petitioner did not file a motion for reconsideration of the March
22, 2002 Order of the CIAC and held that it is in violation of the
January 22, 2002 CIAC issued an Order setting the case for well-settled rule that a motion for reconsideration should be
Preliminary Conference on February 7, 2002. filed to allow the respondent tribunal to correct its error before
a petition can be entertained.[33] Moreover, the CA ruled that it
February 1, 2002 - Petitioner filed a Motion for Reconsideration is well-settled that a denial of a motion to dismiss, being an
of the January 22, 2002 Order which also included a prayer to interlocutory order, is not the proper subject for a petition for
resolve the Motion for Reconsideration of the July 16, 2001 certiorari.[34]
Order.
Moreover, the CA ruled against petitioner's main argument that
February 5, 2002 CIAC denied petitioner's Motion for the arbitration clause found in the subcontract agreement
Reconsideration. between the parties did not refer to CIAC as the arbitral body.
The CA held that the CIAC had jurisdiction over the
February 7, 2002 CIAC conducted a preliminary controversy because the construction agreement contained a
conference.[27] provision to submit any dispute for arbitration, and there was a
March 13, 2002 the RTC issued a Resolution[28] declaring the joint motion to submit certain issues to the CIAC for
July 16, 2001 Order which dismissed the case without force arbitration.[35]
and effect and set the case for hearing on May 30, 2002.
Anent petitioner's argument that its previous lawyer was not
March 15, 2002 Petitioner filed a Manifestation before the authorized to submit the case for arbitration, the CA held that
CIAC that the CIAC had no authority to hear the case. what is required for a dispute to fall under the jurisdiction of the
CIAC is for the parties to agree to submit to voluntary
March 18, 2002 CIAC issued an Order setting the hearing on arbitration. Since the parties agreed to submit to voluntary
April 2, 2002. arbitration in the construction contract, the authorization
insisted upon by petitioner was a mere superfluity.[36]
March 21, 2002 Petitioner filed a Manifestation/Motion that the
RTC had recalled the July 16, 2001 Order and had asserted The CA further cited National Irrigation Administration v. Court
jurisdiction over the entire case and praying for the dismissal of of Appeals[37] (NIA), where this Court ruled that active
the pending case.[29] participation in the arbitration proceedings serves to estop a
party from denying that it had in fact agreed to submit the
March 22, 2002 CIAC issued an Order[30] denying the Motion dispute for arbitration.
to Dismiss filed by petitioner and holding that the CIAC had
jurisdiction over the case. Lastly, the CA found no merit in petitioner's prayer to remand
March 25, 2002- Respondent moved for a reconsideration[31] the case to the CIAC.
of the March 13, 2002 Order recalling the July 16, 2001 Order
which petitioner opposed.
2
Petitioner's Motion for Reconsideration was denied by the CA.
Hence, herein petition raising the following assignment of Anent the second issue, petitioner argues that when its motion
errors: to dismiss was denied by the CIAC, the latter acted without
jurisdiction or with grave abuse of discretion amounting to lack
A. or excess of jurisdiction; thus, the same is the proper subject of
THE COURT OF APPEALS COMMITTED SERIOUS ERROR a petition for certiorari.
WHEN IT RULED THAT THE PETITION SUFFERED FROM As a general rule, an order denying a motion to dismiss cannot
PROCEDURAL INFIRMITIES WHEN PETITIONER be the subject of a petition for certiorari. However, this Court
HEUNGHWA, IN VIEW OF THE QUESTIONS OF LAW has provided exceptions thereto:
INVOLVED IN THE CASE, IMMEDIATELY INVOKED ITS AID
BY WAY OF PETITION FOR CERTIORARI WITHOUT FIRST Under certain situations, recourse to certiorari or mandamus is
FILING A MOTION FOR RECONSIDERATION OF THE considered appropriate, i.e., (a) when the trial court issued the
CIAC'S ORDER DATED 22 MARCH 2002. THE COURT OF order without or in excess of jurisdiction; (b) where there is
APPEALS FURTHER ERRED IN RULING THAT A DENIAL patent grave abuse of discretion by the trial court; or (c) appeal
OF A MOTION TO DISMISS (IN REFERENCE TO THE would not prove to be a speedy and adequate remedy as when
ORDER DATED 22 MARCH 2002), BEING AN appeal would not promptly relieve a defendant from the
INTERLOCUTORY ORDER, IS NOT THE PROPER SUBJECT injurious effects of the patently mistaken order maintaining the
OF A PETITION FOR CERTIORARI. plaintiff's baseless action and compelling the defendant
needlessly to go through a protracted trial and clogging the
B. court dockets by another futile case.[41] (Emphasis supplied)
THE HONORABLE COURT OF APPEALS SERIOUSLY
ERRED IN CONFIRMING THE JURISDICTION OF THE CIAC The term grave abuse of discretion in its judicial sense
OVER THE CASE. ITS RELIANCE ON THE NATIONAL connotes a capricious, despotic, oppressive or whimsical
IRRIGATION AUTHORITY VS. COURT OF APPEALS (NIA exercise of judgment as is equivalent to lack of jurisdiction. The
VS. CA) WAS MISPLACED AS THE FACTS OF THE word capricious, usually used in tandem with the term arbitrary,
INSTANT CASE ARE SERIOUSLY AND SUBSTANTIALLY conveys the notion of willful and unreasoning action.[42]
DIFFERENT FROM THOSE OF NIA VS. CA.
The question then is: Did the denial by the CIAC of the motion
C. to dismiss constitute a patent grave abuse of discretion?
THE HONORABLE COURT OF APPEALS SERIOUSLY
ERRED IN DISREGARDING PETITIONER'S REQUEST TO Records show that the CIAC acted within its jurisdiction and it
AT LEAST REMAND THE CASE TO THE CIAC FOR did not commit patent grave abuse of discretion when it issued
FURTHER RECEPTION OF EVIDENCE IN THE INTEREST the assailed Order denying petitioner's motion to dismiss.
OF JUSTICE AND EQUITY AS PETITIONER COULD NOT Thus, this Court rules in the negative.
HAVE AVAILED OF ITS OPPORTUNITY TO PRESENT ITS
SIDE ON ACCOUNT OF ITS JURISDICTIONAL Based on law and jurisprudence, the CIAC has jurisdiction over
OBJECTION.[38] the present dispute.

The petition is devoid of merit. The CIAC, in its assailed Order, correctly applied the doctrine
laid down in Philrock, Inc. v. Construction Industry Arbitration
The first assignment of error raises two issues: first, whether or Commission[43] (Philrock) where this Court held that what
not the non-filing of a motion for reconsideration was fatal to vested in the CIAC original and exclusive jurisdiction over the
the petition for certiorari filed before the CA; and second, construction dispute was the agreement of the parties and not
whether or not a petition for certiorari is the proper remedy to the Court's referral order. The CIAC aptly ruled that the recall
assail an order denying a motion to dismiss as in the case at of the referral order by the RTC did not deprive the CIAC of the
bar . jurisdiction it had already acquired,[44] thus:
x x x The position of CIAC is anchored on Executive Order No.
As a general rule, a petition for certiorari before a higher court 1008 (1985) which created CIAC and vested in it original and
will not prosper unless the inferior court has been given, exclusive jurisdiction over construction disputes in construction
through a motion for reconsideration, a chance to correct the projects in the Philippines provided the parties agreed to
errors imputed to it. This rule, though, has certain exceptions: submit such disputes to arbitration. The basis of the Court
(1) when the issue raised is purely of law, (2) when public referral is precisely the agreement of the parties in court, and
interest is involved, or (3) in case of urgency. As a fourth that, by this agreement as well as by the court referral of the
exception, it has been held that the filing of a motion for specified issues to arbitration, under Executive Order No. 1008
reconsideration before availment of the remedy of certiorari is (1985), the CIAC had in fact acquired original and exclusive
not a condition sine qua non when the questions raised are the jurisdiction over these issues.[45]
same as those that have already been squarely argued and
exhaustively passed upon by the lower court.[39] In the case at bar, the RTC was indecisive of its authority and
capacity to hear the case. Respondent first sought redress
The Court agrees with petitioner that the main issue of the from the RTC for its claim against petitioner. Thereafter, upon
petition for certiorari filed before the CA undoubtedly involved a motion by both counsels for petitioner and respondent, the
question of jurisdiction as to which between the RTC and the RTC allowed the referral of five specific issues to the CIAC.
CIAC had authority to hear the case. Whether the subject However, the RTC later recalled the case from the CIAC
matter falls within the exclusive jurisdiction of a quasi-judicial because of the alleged lack of authority of the counsel for
agency is a question of law.[40] Thus, given the circumstances petitioner to submit the case for arbitration. The RTC recalled
present in the case at bar, the non-filing of a motion for the case even if it already admitted its lack of expertise to deal
reconsideration by petitioner to the CIAC Order should have with the intricacies of the construction business.[46]
been recognized as an exception to the rule.
3
Afterwards, the RTC issued a Resolution recommending that NIA's reliance with the ruling on the case of Tesco Services
respondent file a motion to dismiss without prejudice to the Incorporated v. Vera, is misplaced.
counterclaim of petitioner, so that it could pursue arbitration
proceedings under the CIAC.[47] Respondent complied with The 1988 CIAC Rules of Procedure which were applied by this
the recommendation of the RTC and filed a motion to dismiss Court in Tesco case had been duly amended by CIAC
which was granted by the said court.[48] Later, however, the Resolutions No. 2-91 and 3-93, Section 1 of Article III of which
RTC again asserted jurisdiction over the dispute because it reads as follows:
apparently made a mistake in granting respondents motion to Submission to CIAC Jurisdiction - An arbitration clause in a
dismiss without conducting any hearing on the motion.[49] construction contract or a submission to arbitration of a
construction dispute shall be deemed an agreement to submit
On the other hand, the CIAC's assertion of its jurisdiction over an existing or future controversy to CIAC jurisdiction,
the dispute was consistent from the moment the RTC allowed notwithstanding the reference to a different arbitration
the referral of specific issues to it. institution or arbitral body in such contract or submission.
When a contract contains a clause for the submission of a
Executive Order 1008[50] grants to the CIAC original and future controversy to arbitration, it is not necessary for the
exclusive jurisdiction over disputes arising from, or connected parties to enter into a submission agreement before the
with, contracts entered into by parties involved in construction claimant may invoke the jurisdiction of CIAC.
in the Philippines. In the case at the bar, it is undeniable that
the controversy involves a construction dispute as can be seen Under the present Rules of Procedure, for a particular
from the issues referred to the CIAC, to wit: construction contract to fall within the jurisdiction of CIAC, it is
merely required that the parties agree to submit the same to
1. Manpower and equipment standby time; voluntary arbitration. Unlike in the original version of Section 1,
2. Unrecouped mobilization expenses; as applied in the Tesco case, the law as it now stands does not
3. Retention; provide that the parties should agree to submit disputes arising
4. Discrepancy of billings; and from their agreement specifically to the CIAC for the latter to
5. Price escalation for fuel and oil usage.[51] acquire jurisdiction over the same. Rather, it is plain and clear
that as long as the parties agree to submit to voluntary
xxxx arbitration, regardless of what forum they may choose, their
agreement will fall within the jurisdiction of the CIAC, such that,
The Court notes that the Subcontract Agreement[52] between even if they specifically choose another forum, the parties will
the parties provides an arbitration clause, to wit: not be precluded from electing to submit their dispute before
the CIAC because this right has been vested upon each party
Article 7 by law, i.e., E.O. No. 1008.[56] (Emphasis and underscoring
Arbitration supplied)
Based on the foregoing, there are two acts which may vest the
7. Any controversy or claim between the Contractor CIAC with jurisdiction over a construction dispute. One is the
and the Subcontractor arising out of or related to this presence of an arbitration clause in a construction contract,
Subcontract, or the breach thereof, shall be settled by and the other is the agreement by the parties to submit the
arbitration, which shall be conducted in the same manner and dispute to the CIAC.
under the same procedure as provided in the Prime Contract
with Respect to claims between the Owner and the Contractor, The first act is applicable to the case at bar. The bare fact that
except that a decision by the Owner or Consultant shall not be the parties incorporated an arbitration clause in their contract is
a condition precedent to arbitration. If the Prime Contract does sufficient to vest the CIAC with jurisdiction over any
not provide for arbitration or fails to specify the manner and construction controversy or claim between the parties. The rule
procedure for arbitration, it shall be conducted in accordance is explicit that the CIAC has jurisdiction notwithstanding any
with the law of the Philippines currently in effect unless the reference made to another arbitral body.
Parties mutually agree otherwise.[53] (Emphasis supplied) It is well-settled that jurisdiction is conferred by law and cannot
be waived by agreement or acts of the parties. Thus, the
However, petitioner insists that the General Conditions which contention of petitioner that it never authorized its lawyer to
form part of the Prime Contract provide for a specific venue for submit the case for arbitration must likewise fail. Petitioner
arbitration, to wit: argues that notwithstanding the presence of an arbitration
clause, there must be a subsequent consent by the parties to
5.19.3. Any dispute shall be settled under the Rules of submit the case for arbitration. To stress, the CIAC was
Conciliation and Arbitration of the International Chamber of already vested with jurisdiction the moment both parties agreed
Commerce by one or more arbitrators appointed under such to incorporate an arbitration clause in the sub-contract
Rules.[54] agreement. Thus, a subsequent consent by the parties would
be superfluous and unnecessary.
The claim of petitioner is not plausible.
In National Irrigation Administration v. Court of Appeals[55] this It must be noted however that the reliance of the CIAC in it's
Court recognized the new procedure in the arbitration of assailed Order on Philrock[57] is inaccurate. In Philrock, the
disputes before the CIAC, in this wise: Court ruled that the CIAC had jurisdiction over the case
because of the agreement of the parties to refer the case to
It is undisputed that the contracts between HYDRO and NIA arbitration. In the case at bar, the agreement to refer specific
contained an arbitration clause wherein they agreed to submit issues to the CIAC is disputed by petitioner on the ground that
to arbitration any dispute between them that may arise before such agreement was entered into by its counsel who was not
or after the termination of the agreement. Consequently, the authorized to do so. In addition, in Philrock, the petitioner
claim of HYDRO having arisen from the contract is arbitrable. therein had actively participated in the arbitration proceedings,
while in the case at bar there where only two instances wherein
4
petitioner participated, to wit: 1) the referral of five specific Petitioner cannot presume that it would have been estopped
issues to the CIAC; and 2) the subsequent manifestation that from questioning the jurisdiction of the CIAC had it participated
additional matters be referred to the CIAC. in the proceedings. In fact, estoppel is a matter for the court to
consider. The doctrine of laches or of stale demands is based
The foregoing notwithstanding, CIAC has jurisdiction over the upon grounds of public policy which requires, for the peace of
construction dispute because of the mere presence of the society, the discouragement of stale claims and, unlike the
arbitration clause in the subcontract agreement. statute of limitations, is not a mere question of time but is
principally a question of the inequity or unfairness of permitting
Thus, the CIAC did not commit any patent grave abuse of a right or claim to be enforced or asserted.[62] The Court
discretion, nor did it act without jurisdiction when it issued the always looks into the attendant circumstances of the case so
assailed Order denying petitioner's motion to dismiss. as not to subvert public policy.[63] Given that petitioner
Accordingly, there is no compelling reason for this Court to questioned the jurisdiction of the CIAC from the beginning, it
deviate from the rule that a denial of a motion to dismiss, was not remiss in enforcing its right. Hence, petitioner's claim
absent a showing of lack of jurisdiction or grave abuse of that it would have been estopped is premature.
discretion amounting to lack of or excess jurisdiction, being an The Court finds the last assigned error to be without merit.
interlocutory order, is not the proper subject of a petition for
certiorari. It is well to note that in its petition for certiorari[64] filed with the
CA on April 9, 2002, petitioner prayed for the issuance of a
Anent the second assigned error, the Court notes that the temporary restraining order and a writ of preliminary injunction
reliance of the CA on NIA is inaccurate. In NIA,[58] this Court to enjoin the CIAC from hearing the case. On September 27,
observed: 2002, the CIAC promulgated its decision awarding
Php31,119,465.81 to respondent. It is unfortunate for petitioner
Moreover, it is undeniable that NIA agreed to submit the that the CA did not timely act on its petition. Records show that
dispute for arbitration to the CIAC. NIA through its counsel the temporary restraining order[65] was issued only on October
actively participated in the arbitration proceedings by filing an 15, 2002 and a writ of preliminary injunction[66] was granted
answer with counterclaim, as well as its compliance wherein it on December 11, 2002, long after the CIAC had concluded its
nominated arbitrators to the proposed panel, participating in proceedings. The only effect of the writ was to enjoin
the deliberations on, and the formulation of the Terms of temporarily the enforcement of the award of the CIAC.
Reference of the arbitration proceeding, and examining the
documents submitted by HYDRO after NIA asked for originals The Court notes that had the CA performed its duty promptly,
of the said documents.[59] then this present petition could have been avoided as the CIAC
rules allow for the reopening of hearings, to wit:
In the case at bar, the only participation that can be attributed SECTION 13.14 Reopening of hearing - The hearing may be
to petitioner is the joint referral of specific issues to the CIAC reopened by the Arbitral Tribunal on their own motion or upon
and the manifestation praying that additional matters be the request of any party, upon good cause shown, at any time
referred to the CIAC. Both acts, however, have been disputed before the award is rendered. When hearings are thus
by petitioner because said acts were performed by their lawyer reopened, the effective date for the closing of the hearing shall
who was not authorized to submit the case for arbitration. And be the date of closing of the reopened hearing. (Emphasis
even if these were duly authorized, this would still not change supplied)
the correct finding of the CA that the CIAC had jurisdiction over
the dispute because, as has been earlier stressed, the But because of the belated action of the CA, the CIAC had to
arbitration clause in the subcontract agreement ipso facto proceed with the hearing notwithstanding the non-participation
vested the CIAC with jurisdiction. of petitioner.
Under the CIAC rules, even without the participation of
In passing, even the RTC in its Resolution recognized the petitioner in the proceedings, the CIAC was still required to
authority of the CIAC to hear the case, to wit: proceed with the hearing of the construction dispute. Section
4.2 of the CIAC rules provides:
Courts cannot and will not resolve a controversy involving a
question which is within the jurisdiction of an administrative SECTION 4.2 Failure or refusal to arbitrate - Where the
tribunal, especially where the question demands the exercise jurisdiction of CIAC is properly invoked by the filing of a
of sound administrative discretion requiring the special Request for Arbitration in accordance with these Rules, the
knowledge, experience and services of the administrative failure despite due notice which amounts to a refusal of the
tribunal to determine technical and intricate matters of fact. And Respondent to arbitrate, shall not stay the proceedings
undoubtedly in this case, the CIAC it cannot be denied, is that notwithstanding the absence or lack of participation of the
administrative tribunal.[60] (Emphasis supplied) Respondent. In such case, CIAC shall appoint the arbitrator/s
It puzzles this Court why petitioner would insist that the RTC in accordance with these Rules. Arbitration proceedings shall
should hear the case when the CIAC has the required skill and continue, and the award shall be made after receiving the
expertise in addressing construction disputes. Records will evidence of the Claimant. (Emphasis and underscoring
bear out the fact that petitioner refused to and did not supplied)
participate in the CIAC proceedings. In its defense, petitioner
cited jurisprudence to the effect that active participation before This Court finds that the CIAC simply followed its rules when it
a quasi-judicial body would be tantamount to an invocation of proceeded with the hearing of the dispute notwithstanding that
the latter bodies' jurisdiction and a willingness to abide by the petitioner refused to participate therein.
resolution of the case.[61] Pursuant to such doctrine, petitioner To reiterate, the proceedings before the CIAC were valid, for
argued that had it participated in the CIAC proceedings, it the same had been conducted within its authority and
would have been barred from impugning the jurisdiction of the jurisdiction and in accordance with the rules of procedure
CIAC. provided by Section 4.2 of the CIAC Rules.

5
The ruling of the Supreme Court in Lastimoso v. Asayo[67] is
instructive:

xxxx

In addition, it is also understandable why respondent


immediately resorted to the remedy of certiorari instead of
pursuing his motion for reconsideration of the PNP Chief's
decision as an appeal before the National Appellate Board
(NAB). It was quite easy to get confused as to which body had
jurisdiction over his case. The complaint filed against
respondent could fall under both Sections 41 and 42 of HEUNGHWA INDUSTRY CO., LTD., petitioner, vs. DJ
Republic Act (R.A.) No. 6975 or the Department of Interior and BUILDERS CORPORATION, respondent
Local Government Act of 1990. Section 41 states that citizens'
complaints should be brought before the People's Law Incidentally, in the recent case of Heunghwa Industry
Enforcement Board (PLEB), while Section 42 states that it is Co., Ltd. v. DJ Builders Corporation (G.R. No. 169095, 8
the PNP Chief who has authority to immediately remove or December 2008), the Supreme Court (SC) laid down important
dismiss a PNP member who is guilty of conduct unbecoming of guidelines in the interpretation of an arbitration clause
a police officer. contained in a construction contract and, in effect, further
clarified the jurisdiction of the Construction Industry Arbitration
It was only in Quiambao v. Court of Appeals, promulgated in Commission (CIAC).
2005 or after respondent had already filed the petition for The SC ruled that an arbitration clause in a
certiorari with the trial court, when the Court resolved the issue construction contract or the submission to arbitration of a
of which body has jurisdiction over cases that fall under both construction dispute shall be deemed an agreement to submit
Sections 41 and 42 of R.A. No. 6975. x x x an existing or future controversy to the CIAC jurisdiction,
notwithstanding the reference to a different arbitration
With the foregoing peculiar circumstances in this case, institution or arbitral body in such contract or submission.
respondent should not be deprived of the opportunity to fully Thus, for a particular construction contract to fall
ventilate his arguments against the factual findings of the PNP within the jurisdiction of the CIAC, it is merely required that the
Chief. x x x parties agree to submit the same to voluntary arbitration. It is
not necessary that the parties specifically name the CIAC for
xxxx the latter to acquire jurisdiction over the contract. As long as
the parties stipulate on voluntary arbitration, regardless of what
Thus, the opportunity to pursue an appeal before the NAB forum they choose, their agreement will fall within the
should be deemed available to respondent in the higher jurisdiction of the CIAC, such that, even if they specifically
interest of substantial justice.[68] (Emphasis supplied) choose another forum, the parties will not be precluded from
electing to submit their dispute before the CIAC because this
In Lastimoso, this Court allowed respondent to appeal his case right has been vested upon each party by law, i.e., E.O. No.
before the proper agency because of the confusion as to which 1008 (National Irrigation Administration v. Court of Appeals,
agency had jurisdiction over the case. In the case at bar, law G.R. No. 129169, 17 November 1999, citing the 1988 CIAC
and supporting jurisprudence are clear and leave no room for Rules of Procedure, as amended by CIAC Resolution Nos. 2-
interpretation that the CIAC has jurisdiction over the present 91 and 3-93).
controversy. It can be gleaned from the foregoing that there are
two (2) acts which may vest the CIAC with jurisdiction over a
The proceedings cannot then be voided merely because of the construction dispute, to wit:
non-participation of petitioner. Section 4.2 of the CIAC Rules is (a) The presence of an arbitration clause in a
clear and it leaves no room for interpretation. Therefore, construction contract; or
petitioners prayer that the case be remanded to CIAC in order (b) In the absence of such arbitration clause, the
that it may be given an opportunity to present evidence is agreement by the parties to submit the construction
untenable. Petitioner had its chance and lost it, more dispute to arbitration.
importantly so, by its own choice. This Court will not afford a
relief that is apparently inconsistent with the law. If any of the abovementioned acts exists, the CIAC
has jurisdiction over the dispute. Jurisdiction is conferred by
WHEREFORE, the petition is denied for lack of merit. The law and cannot be waived by agreement or acts of the parties.
August 20, 2004 Decision and August 1, 2005 Resolution of
the Court of Appeals in CA-G.R. SP Nos. 70001 and 71621 are
AFFIRMED.
Double costs against petitioner.

SO ORDERED.

6
2. [G.R. Nos. 132848-49. June 26, 2001] mistaken premise that 'the proceedings in the CIAC fell through
Philrock, Inc. v. Construction Industry Arbitration because of the refusal of [Petitioner] Philrock to include the
Commission, 412 Phil. 236, 246 issue of damages therein,' whereas the true reason for the
withdrawal of the case from the CIAC was due to Philrock's
DECISION opposition to the inclusion of its seven officers and engineers,
PANGANIBAN, J.: who did not give their consent to arbitration, as party
Courts encourage the use of alternative methods of defendants. On the other hand, private respondent Nelia Cid
dispute resolution. When parties agree to settle their disputes manifested that she was willing to exclude the seven officers
arising from or connected with construction contracts, the and engineers of Philrock as parties to the case so as to
Construction Industry Arbitration Commission (CIAC) acquires facilitate or expedite the proceedings. With such manifestation
primary jurisdiction. It may resolve not only the merits of such from the Cid spouses, the Arbitral Tribunal denied Philrock's
controversies; when appropriate, it may also award damages, request for the suspension of the proceedings. Philrock's
interests, attorneys fees and expenses of litigation. counsel agreed to the continuation of the proceedings but
The Case reserved the right to file a pleading elucidating the position he
Before us is a Petition for Review under Rule 45 of the [had] raised regarding the Court's Order dated June 13,
Rules of Court. The Petition seeks the reversal of the July 9, 1995. The parties then proceeded to finalize, approve and sign
1997 Decision[1] and the February 24, 1998 Resolution of the the Terms of Reference. Philrock's counsel and representative,
Court of Appeals (CA) in the consolidated cases docketed as Atty. Pericles C. Consunji affixed his signature to said Terms of
CA-GR SP Nos. 39781 and 42443. The assailed Decision Reference which stated that 'the parties agree that their
disposed as follows: differences be settled by an Arbitral Tribunal x x x x' (p. 9,
WHEREFORE, judgment is hereby rendered DENYING the Terms of Reference, p. 200, Rollo).
petitions and, accordingly, AFFIRMING in toto the CIACs On September 12, 1995, [P]etitioner Philrock filed its Motion to
decision. Costs against petitioner.[2] Dismiss, alleging therein that the CIAC had lost jurisdiction to
The assailed Resolution ruled in this wise: hear the arbitration case due to the parties' withdrawal of their
Considering that the matters raised and discussed in the consent to arbitrate. The motion was denied by x x x CIAC per
motion for reconsideration filed by appellants counsel are Order dated September 22, 1995. On November 8, public
substantially the same arguments which the Court had passed respondent ordered the parties to appear before it on
upon and resolved in the decision sought to be reconsidered, November 28, 1995 for the continuation of the arbitral
and there being no new issue raised, the subject motion is proceedings, and on February 7, 1996, public respondent
hereby DENIED.[3] directed [P]etitioner Philrock to set two hearing dates in the
The Facts month of February to present its evidence and to pay all fees
The undisputed facts of the consolidated cases are assessed by it, otherwise x x x Philrock would be deemed to
summarized by the CA as follows: have waived its right to present evidence.
"On September 14, 1992, the Cid spouses, herein private Hence, petitioner instituted the petition for certiorari but while
respondents, filed a Complaint for damages against Philrock said petition was pending, the CIAC rendered its Decision
and seven of its officers and engineers with the Regional Trial dated September 24, 1996, the dispositive portion of which
Court of Quezon City, Branch 82. reads, as follows:
On December 7, 1993, the initial trial date, the trial court issued 'WHEREFORE, judgment is hereby rendered in favor of the
an Order dismissing the case and referring the same to the Claimant, directing Respondent to pay Claimant as follows:
CIAC because the Cid spouses and Philrock had filed an 1. P23,276.25 representing the excess cash
Agreement to Arbitrate with the CIAC. payment for materials ordered by the Claimants,
Thereafter, preliminary conferences were held among the (No. 7 of admitted facts) plus interests thereon at
parties and their appointed arbitrators. At these conferences, the rate of 6% per annum from September 26,
disagreements arose as to whether moral and exemplary 1995 to the date payment is made.
damages and tort should be included as an issue along with 2. P65,000.00 representing retrofitting costs.
breach of contract, and whether the seven officers and 3. P13,404.54 representing refund of the value of
engineers of Philrock who are not parties to the Agreement to delivered but unworkable concrete mix that was
Arbitrate should be included in the arbitration proceedings.No laid to waste.
common ground could be reached by the parties, hence, on 4. P50,000.00 representing moral damages.
April 2, 1994, both the Cid spouses and Philrock requested that 5. P50,000.00 representing nominal damages.
the case be remanded to the trial court. On April 13, 1994, the 6. P50,000.00 representing attorney's fees and
CIAC issued an Order stating, thus: expenses of litigation.
'x x x the Arbitral Tribunal hereby formally dismisses the 7. P144,756.80 representing arbitration fees, minus
above-captioned case for referral to Branch 82 of the Regional such amount that may already have been paid to
Trial Court, Quezon City where it first originated. CIAC by respondent.
SO ORDERED.' Let a copy of this Decision be furnished the Honorable
The Cid spouses then filed with said Branch of the Regional Salvador C. Ceguera, presiding judge, Branch 82 of Regional
Trial Court of Quezon City a Motion To Set Case for Hearing Trial Court of Quezon City who referred this case to the
which motion was opposed by Philrock. Construction Industry Arbitration Commission for arbitration
On June 13, 1995, the trial court declared that it no longer had and proper disposition.' (pp. 44-45, Rollo, CA-G.R. SP No.
jurisdiction over the case and ordered the records of the case 42443) "[4]
to be remanded anew to the CIAC for arbitral proceedings. Before the CA, petitioner filed a Petition for Review,
Pursuant to the aforementioned Order of the Regional Trial docketed as CA-GR SP No. 42443, contesting the jurisdiction
C[o]urt of Quezon City, the CIAC resumed conducting of the CIAC and assailing the propriety of the monetary awards
preliminary conferences. On August 21, 1995, herein in favor of respondent spouses. This Petition was consolidated
[P]etitioner Philrock requested to suspend the proceedings until by the CA with CA-GR SP No. 39781, a Petition for Certiorari
the court clarified its ruling in the Order dated June 13, earlier elevated by petitioner questioning the jurisdiction of the
1995. Philrock argued that said Order was based on a CIAC.
7
Ruling of the Court of Appeals ruling that respondent spouses had a cause of action against
The CA upheld the jurisdiction of the CIAC[5] over the petitioner, and (3) for sustaining the award of damages.
dispute between petitioner and private respondent. Under
Executive Order No. 1008, the CIAC acquires jurisdiction when This Courts Ruling
the parties agree to submit their dispute to voluntary The Petition has no merit.
arbitration. Thus, in the present case, its jurisdiction continued
despite its April 13, 1994 Order referring the case back to the First Issue: Jurisdiction
Regional Trial Court (RTC) of Quezon City, Branch 82, the Petitioner avers that the CIAC lost jurisdiction over the
court of origin. The CIACs action was based on the principle arbitration case after both parties had withdrawn their consent
that once acquired, jurisdiction remains until the full termination to arbitrate. The June 13, 1995 RTC Order remanding the case
of the case unless a law provides the contrary. No such full to the CIAC for arbitration was allegedly an invalid mode of
termination of the case was evident in the said Order; nor did referring a case for arbitration.
the CIAC or private respondents intend to put an end to the We disagree. Section 4 of Executive Order 1008
case. expressly vests in the CIAC original and exclusive jurisdiction
Besides, according to Section 3 of the Rules of Procedure over disputes arising from or connected with construction
Governing Construction Arbitration, technical rules of law or contracts entered into by parties that have agreed to submit
procedure are not applicable in a single arbitration or arbitral their dispute to voluntary arbitration.[8]
tribunal. Thus, the dismissal could not have divested the CIAC It is undisputed that the parties submitted themselves to
of jurisdiction to ascertain the facts of the case, arrive at a the jurisdiction of the Commission by virtue of their Agreement
judicious resolution of the dispute and enforce its award or to Arbitrate dated November 24, 1993. Signatories to the
decision. Agreement were Atty. Ismael J. Andres and Perry Y. Uy
Since the issues concerning the monetary awards were (president of Philippine Rock Products, Inc.) for petitioner, and
questions of fact, the CA held that those awards were Nelia G. Cid and Atty. Esteban A. Bautista for respondent
inappropriate in a petition for certiorari. Such questions are spouses.[9]
final and not appealable according to Section 19 of EO 1008, Petitioner claims, on the other hand, that this Agreement
which provides that arbitral awards shall be x x x final and was withdrawn by respondents on April 8, 1994, because of
[u]nappealable except on questions of law which shall be the exclusion of the seven engineers of petitioners in the
appealable to the Supreme Court x x x. Nevertheless, the CA arbitration case. This withdrawal became the basis for the April
reviewed the records and found that the awards were 13, 1994 CIAC Order dismissing the arbitration case and
supported by substantial evidence. In matters falling under the referring the dispute back to the RTC. Consequently, the CIAC
field of expertise of quasi-judicial bodies, their findings of fact was divested of its jurisdiction to hear and decide the case.
are accorded great respect when supported by substantial This contention is untenable. First, private respondents
evidence. removed the obstacle to the continuation of the arbitration,
Hence, this Petition.[6] precisely by withdrawing their objection to the exclusion of the
Issues seven engineers.Second, petitioner continued participating in
The petitioner, in its Memorandum, raises the following the arbitration even after the CIAC Order had been issued. It
issues: even concluded and signed the Terms of Reference [10] on
A. August 21, 1995, in which the parties stipulated the
Whether or not the CIAC could take jurisdiction over the circumstances leading to the dispute; summarized their
case of Respondent Cid spouses against Petitioner respective positions, issues, and claims; and identified the
Philrock after the case had been dismissed by both the composition of the tribunal of arbitrators. The document clearly
RTC and the CIAC. confirms both parties intention and agreement to submit the
B. dispute to voluntary arbitration. In view of this fact, we fail to
Whether or not Respondent Cid spouses have a cause of see how the CIAC could have been divested of its jurisdiction.
action against Petitioner Philrock. Finally, as pointed out by the solicitor general, petitioner
C. maneuvered to avoid the RTCs final resolution of the dispute
Whether or not the awarding of the amount of P23,276.75 by arguing that the regular court also lost jurisdiction after the
for materials ordered by Respondent Spouses Cid plus arbitral tribunals April 13, 1994 Order referring the case back to
interest thereon at the rate of 6% from 26 September the RTC. In so doing, petitioner conceded and estopped itself
1995 is proper. from further questioning the jurisdiction of the CIAC. The Court
D. will not countenance the effort of any party to subvert or defeat
Whether or not the awarding of the amount of P65,000.00 as the objective of voluntary arbitration for its own private
retrofitting costs is proper. motives. After submitting itself to arbitration proceedings and
E. actively participating therein, petitioner is estopped from
Whether or not the awarding of the amount of P1,340,454 assailing the jurisdiction of the CIAC, merely because the latter
for the value of the delivered but the allegedly rendered an adverse decision.[11]
unworkable concrete which was wasted is proper.
F. Second Issue: Cause of Action
Whether or not the awarding o[f] moral and nominal Petitioner contends that respondent spouses were
damages and attorney's fees and expenses of litigation in negligent in not engaging the services of an engineer or
favor of respondents is proper. architect who should oversee their construction, in violation of
G. Section 308 of the National Building Code. It adds that even if
Whether or not Petitioner Philrock should be held liable the concrete it delivered was defective, respondent spouses
for the payment of arbitration fees.[7] should bear the loss arising from their illegal operation. In
In sum, petitioner imputes reversible error to the CA (1) short, it alleges that they had no cause of action against it.
for upholding the jurisdiction of the CIAC after the latter had We disagree. Cause of action is defined as an act or
dismissed the case and referred it to the regular court, (2) for omission by which a party violates the right of another. [12] A
complaint is deemed to have stated a cause of action provided
8
it has indicated the following: (1) the legal right of the plaintiff, of it, a memorandum having been submitted
(2) the correlative obligation of the defendant, and (3) the act or citing all the demands of [c]laimants. This
the omission of the defendant in violation of the said legal assurance was made on July 31, 1992 when
right.[13] The cause of action against petitioner was clearly Respondents Secillano, Martillano and Lomibao
established. Respondents were purchasers of ready-mix came to see Claimant Nelia Cid and offered to
concrete from petitioner. The concrete delivered by the latter refund P23,276.25, [t]he difference between the
turned out to be of substandard quality. As a result, billing by Philrocks Marketing Department in the
respondents sustained damages when the structures they built amount of P125,586.25 and the amount charged
using such cement developed cracks and by Philrock's Batching Plant Department in the
honeycombs. Consequently, the construction of their residence amount of only P102,586.25, which [c]laimant
had to be stopped. refused to accept by saying, Saka na lang.[18]
Further, the CIAC Decision clearly spelled out The same issue was discussed during the hearing before
respondents cause of action against petitioner, as follows: the arbitration tribunal on December 19, 1995.[19] It was also
Accordingly, this Tribunal finds that the mix was of the right mentioned in that tribunals Decision dated September 24,
proportions at the time it left the plant. This, however, does not 1996.[20]
necessarily mean that all of the concrete mix delivered had The payment of interest is based on Article 2209 of the
remained workable when it reached the jobsite. It should be Civil Code, which provides that if the obligation consists of the
noted that there is no evidence to show that all the transit payment of a sum of money, and the debtor incurs delay, the
mixers arrived at the site within the allowable time that would indemnity for damages shall be the payment of legal interest
ensure the workability of the concrete mix delivered. which is six per cent per annum, in the absence of a stipulation
On the other hand, there is sufficiently strong evidence to show of the rate.
that difficulties were encountered in the pouring of concrete mix
from certain transit mixers necessitating the [addition] of water Awards for Retrofitting Costs, Wasted Unworkable But
and physically pushing the mix, obviously because the same Delivered Concrete, and Arbitration Fees
[was] no longer workable. This Tribunal holds that the Petitioner maintains that the defects in the concrete
unworkability of said concrete mix has been firmly established. structure were due to respondent spouses failure to secure the
There is no dispute, however, to the fact that there are defects services of an engineer or architect to supervise their
in some areas of the poured structures. In this regard, this project. Hence, it claims that the award for retrofitting cost was
Tribunal holds that the only logical reason is that the without legal basis. It also denies liability for the wasted
unworkable concrete was the one that was poured in the unworkable but delivered concrete, for which the arbitral court
defective sections.[14] awarded P13,404.54. Finally, it complains against the award of
litigation expenses, inasmuch as the case should not have
Third Issue: Monetary Awards been instituted at all had respondents complied with the
Petitioner assails the monetary awards given by the requirements of the National Building Code.
arbitral tribunal for alleged lack of basis in fact and in law. The We are unconvinced. Not only did respondents disprove
solicitor general counters that the basis for petitioners assigned the contention of petitioner; they also showed that they
errors with regard to the monetary awards is purely factual and sustained damages due to the defective concrete it had
beyond the review of this Court. Besides, Section 19, EO 1008, delivered. These were items of actual damages they sustained
expressly provides that monetary awards by the CIAC are final due to its breach of contract.
and unappealable.
We disagree with the solicitor general. As pointed out Moral and Nominal Damages, Attorneys Fees and Costs
earlier, factual findings of quasi-judicial bodies that have Petitioner assails the award of moral damages, claiming
acquired expertise are generally accorded great respect and no malice or bad faith on its part.
even finality, if they are supported by substantial We disagree. Respondents were deprived of the comfort
evidence.[15] The Court, however, has consistently held that and the safety of a house and were exposed to the agony of
despite statutory provisions making the decisions of certain witnessing the wastage and the decay of the structure for more
administrative agencies final, it still takes cognizance of than seven years. In her Memorandum, Respondent Nelia G.
petitions showing want of jurisdiction, grave abuse of Cid describes her familys sufferings arising from the
discretion, violation of due process, denial of substantial justice unreasonable delay in the construction of their residence, as
or erroneous interpretation of the law.[16] Voluntary arbitrators, follows: The family lives separately for lack of space to stay
by the nature of their functions, act in a quasi-judicial capacity, in. Mrs. Cid is staying in a small dingy bodega, while her son
such that their decisions are within the scope of judicial occupies another makeshift room. Their only daughter stayed
review.[17] with her aunt from 1992 until she got married in 1996. x x
Petitioner protests the award to respondent spouses x.[21] The Court also notes that during the pendency of the
of P23,276.25 as excess payment with six percent interest case, Respondent Vicente Cid died without seeing the
beginning September 26, 1995. It alleges that this item was completion of their home.[22] Under the circumstances, the
neither raised as an issue by the parties during the arbitration award of moral damages is proper.
case, nor was its justification discussed in the CIAC Decision. It Petitioner also contends that nominal damages should
further contends that it could not be held liable for interest, not have been granted, because it did not breach its obligation
because it had earlier tendered a check in the same amount to to respondent spouses.
respondent spouses, who refused to receive it. Nominal damages are recoverable only if no actual or
Petitioners contentions are completely substantial damages resulted from the breach, or no damage
untenable. Respondent Nelia G. Cid had already raised the was or can be shown.[23] Since actual damages have been
issue of overpayment even prior to the formal arbitration. In proven by private respondents for which they were amply
paragraph 9 of the Terms of Reference, she stated: compensated, they are no longer entitled to nominal damages.
9. Claimants were assured that the problem and her Petitioner protests the grant of attorneys fees, arguing
demands had been the subject of several staff that respondent spouses did not engage the services of legal
meetings and that Arteche was very much aware counsel. Also, it contends that attorneys fees and litigation
9
expenses are awarded only if the opposing party acted in gross 3. G.R. No. 185582 February 29, 2012
and evident bad faith in refusing to satisfy plaintiffs valid, just TUNA PROCESSING, INC., vs PHILIPPINE KINGFORD,
and demandable claim. INC.,
We disagree. The award is not only for attorneys fees, but
also for expenses of litigation. Hence, it does not matter if DECISION
respondents represented themselves in court, because it is PEREZ, J.:
obvious that they incurred expenses in pursuing their action Can a foreign corporation not licensed to do business in the
before the CIAC, as well as the regular and the appellate Philippines, but which collects royalties from entities in the
courts. We find no reason to disturb this award. Philippines, sue here to enforce a foreign arbitral award?
WHEREFORE, the Petition is DENIED and the assailed
Decision AFFIRMED; however, the award of nominal damages In this Petition for Review on Certiorari under Rule 45,[1]
is DELETED for lack of legal basis. Costs against petitioner. petitioner Tuna Processing, Inc. (TPI), a foreign corporation not
SO ORDERED. licensed to do business in the Philippines, prays that the
Resolution[2] dated 21 November 2008 of the Regional Trial
Court (RTC) of Makati City be declared void and the case be
remanded to the RTC for further proceedings. In the assailed
Resolution, the RTC dismissed petitioners Petition for
Confirmation, Recognition, and Enforcement of Foreign Arbitral
Award[3] against respondent Philippine Kingford, Inc.
(Kingford), a corporation duly organized and existing under the
laws of the Philippines,[4] on the ground that petitioner lacked
legal capacity to sue.[5]

The Antecedents
On 14 January 2003, Kanemitsu Yamaoka (hereinafter referred
to as the licensor), co-patentee of U.S. Patent No. 5,484,619,
Philippine Letters Patent No. 31138, and Indonesian Patent
No. ID0003911 (collectively referred to as the Yamaoka
Patent),[6] and five (5) Philippine tuna processors, namely,
Angel Seafood Corporation, East Asia Fish Co., Inc., Mommy
Gina Tuna Resources, Santa Cruz Seafoods, Inc., and
respondent Kingford (collectively referred to as the
sponsors/licensees)[7] entered into a Memorandum of
Agreement (MOA),[8] pertinent provisions of which read:

1. Background and objectives. The Licensor, co-owner of


U.S.Patent No. 5,484,619, Philippine Patent No. 31138, and
Indonesian Patent No. ID0003911 xxx wishes to form an
alliance with Sponsors for purposes of enforcing his three
aforementioned patents, granting licenses under those patents,
and collecting royalties.

The Sponsors wish to be licensed under the aforementioned


patents in order to practice the processes claimed in those
patents in the United States, the Philippines, and Indonesia,
enforce those patents and collect royalties in conjunction with
Licensor.
xxx
4. Establishment of Tuna Processors, Inc. The parties hereto
agree to the establishment of Tuna Processors, Inc. (TPI), a
corporation established in the State of California, in order to
implement the objectives of this Agreement.
5. Bank account. TPI shall open and maintain bank accounts in
the United States, which will be used exclusively to deposit
funds that it will collect and to disburse cash it will be obligated
to spend in connection with the implementation of this
Agreement.

6. Ownership of TPI. TPI shall be owned by the Sponsors and


Licensor. Licensor shall be assigned one share of TPI for the
purpose of being elected as member of the board of directors.
The remaining shares of TPI shall be held by the Sponsors
according to their respective equity shares. [9]
xxx
The parties likewise executed a Supplemental Memorandum
of Agreement[10] dated 15 January 2003 and an Agreement to
Amend Memorandum of Agreement[11] dated 14 July 2003.

10
Due to a series of events not mentioned in the petition, the
licensees, including respondent Kingford, withdrew from The Corporation Code of the Philippines expressly provides:
petitioner TPI and correspondingly reneged on their
obligations.[12] Petitioner submitted the dispute for arbitration Sec. 133. Doing business without a license. - No foreign
before the International Centre for Dispute Resolution in the corporation transacting business in the Philippines without a
State of California, United States and won the case against license, or its successors or assigns, shall be permitted to
respondent.[13] Pertinent portions of the award read: maintain or intervene in any action, suit or proceeding in any
court or administrative agency of the Philippines; but such
13.1 Within thirty (30) days from the date of transmittal of this corporation may be sued or proceeded against before
Award to the Parties, pursuant to the terms of this award, the Philippine courts or administrative tribunals on any valid cause
total sum to be paid by RESPONDENT KINGFORD to of action recognized under Philippine laws.
CLAIMANT TPI, is the sum of ONE MILLION SEVEN
HUNDRED FIFTY THOUSAND EIGHT HUNDRED FORTY It is pursuant to the aforequoted provision that the court a quo
SIX DOLLARS AND TEN CENTS ($1,750,846.10). dismissed the petition. Thus:
(A) For breach of the MOA by not paying past due Herein plaintiff TPIs Petition, etc. acknowledges that it is a
assessments, RESPONDENT KINGFORD shall pay foreign corporation established in the State of California and
CLAIMANT the total sum of TWO HUNDRED TWENTY NINE was given the exclusive right to license or sublicense the
THOUSAND THREE HUNDRED AND FIFTY FIVE DOLLARS Yamaoka Patent and was assigned the exclusive right to
AND NINETY CENTS ($229,355.90) which is 20% of MOA enforce the said patent and collect corresponding royalties in
assessments since September 1, 2005[;] the Philippines. TPI likewise admits that it does not have a
license to do business in the Philippines.
(B) For breach of the MOA in failing to cooperate with
CLAIMANT TPI in fulfilling the objectives of the MOA, There is no doubt, therefore, in the mind of this Court that TPI
RESPONDENT KINGFORD shall pay CLAIMANT the total has been doing business in the Philippines, but sans a license
sum of TWO HUNDRED SEVENTY ONE THOUSAND FOUR to do so issued by the concerned government agency of the
HUNDRED NINETY DOLLARS AND TWENTY CENTS Republic of the Philippines, when it collected royalties from five
($271,490.20)[;][14] and (5) Philippine tuna processors[,] namely[,] Angel Seafood
Corporation, East Asia Fish Co., Inc., Mommy Gina Tuna
(C) For violation of THE LANHAM ACT and infringement of the Resources, Santa Cruz Seafoods, Inc. and respondent
YAMAOKA 619 PATENT, RESPONDENT KINGFORD shall Philippine Kingford, Inc. This being the real situation, TPI
pay CLAIMANT the total sum of ONE MILLION TWO cannot be permitted to maintain or intervene in any action, suit
HUNDRED FIFTY THOUSAND DOLLARS AND NO CENTS or proceedings in any court or administrative agency of the
($1,250,000.00). xxx Philippines. A priori, the Petition, etc. extant of the plaintiff TPI
should be dismissed for it does not have the legal personality
xxx to sue in the Philippines.[21]

To enforce the award, petitioner TPI filed on 10 October 2007 a The petitioner counters, however, that it is entitled to seek for
Petition for Confirmation, Recognition, and Enforcement of the recognition and enforcement of the subject foreign arbitral
Foreign Arbitral Award before the RTC of Makati City. The award in accordance with Republic Act No. 9285 (Alternative
petition was raffled to Branch 150 presided by Judge Elmo M. Dispute Resolution Act of 2004),[22] the Convention on the
Alameda. Recognition and Enforcement of Foreign Arbitral Awards
drafted during the United Nations Conference on International
At Branch 150, respondent Kingford filed a Motion to Commercial Arbitration in 1958 (New York Convention), and
Dismiss.[16] After the court denied the motion for lack of the UNCITRAL Model Law on International Commercial
merit,[17] respondent sought for the inhibition of Judge Arbitration (Model Law),[23] as none of these specifically
Alameda and moved for the reconsideration of the order requires that the party seeking for the enforcement should
denying the motion.[18] Judge Alameda inhibited himself have legal capacity to sue. It anchors its argument on the
notwithstanding [t]he unfounded allegations and following:
unsubstantiated assertions in the motion.[19] Judge Cedrick O.
Ruiz of Branch 61, to which the case was re-raffled, in turn, In the present case, enforcement has been effectively refused
granted respondents Motion for Reconsideration and on a ground not found in the [Alternative Dispute Resolution
dismissed the petition on the ground that the petitioner lacked Act of 2004], New York Convention, or Model Law. It is for this
legal capacity to sue in the Philippines.[20] reason that TPI has brought this matter before this most
Honorable Court, as it [i]s imperative to clarify whether the
Petitioner TPI now seeks to nullify, in this instant Petition for Philippines international obligations and State policy to
Review on Certiorari under Rule 45, the order of the trial court strengthen arbitration as a means of dispute resolution may be
dismissing its Petition for Confirmation, Recognition, and defeated by misplaced technical considerations not found in
Enforcement of Foreign Arbitral Award. the relevant laws.[24]
Simply put, how do we reconcile the provisions of the
Issue Corporation Code of the Philippines on one hand, and the
Alternative Dispute Resolution Act of 2004, the New York
The core issue in this case is whether or not the court a quo Convention and the Model Law on the other?
was correct in so dismissing the petition on the ground of
petitioners lack of legal capacity to sue. In several cases, this Court had the occasion to discuss the
nature and applicability of the Corporation Code of the
Our Ruling Philippines, a general law, viz-a-viz other special laws. Thus, in
Koruga v. Arcenas, Jr.,[25] this Court rejected the application
The petition is impressed with merit.
11
of the Corporation Code and applied the New Central Bank of the Alternative Dispute Resolution Act of 2004? We answer
Act. It ratiocinated: in the affirmative.

Korugas invocation of the provisions of the Corporation Code is Sec. 45 of the Alternative Dispute Resolution Act of 2004
misplaced. In an earlier case with similar antecedents, we ruled provides that the opposing party in an application for
that: recognition and enforcement of the arbitral award may raise
The Corporation Code, however, is a general law applying to only those grounds that were enumerated under Article V of
all types of corporations, while the New Central Bank Act the New York Convention, to wit:
regulates specifically banks and other financial institutions,
including the dissolution and liquidation thereof. As between a Article V
general and special law, the latter shall prevail generalia 1. Recognition and enforcement of the award may be refused,
specialibus non derogant. (Emphasis supplied)[26] at the request of the party against whom it is invoked, only if
that party furnishes to the competent authority where the
Further, in the recent case of Hacienda Luisita, Incorporated v. recognition and enforcement is sought, proof that:
Presidential Agrarian Reform Council,[27] this Court held: (a) The parties to the agreement referred to in article II were,
under the law applicable to them, under some incapacity, or
Without doubt, the Corporation Code is the general law the said agreement is not valid under the law to which the
providing for the formation, organization and regulation of parties have subjected it or, failing any indication thereon,
private corporations. On the other hand, RA 6657 is the special under the law of the country where the award was made; or
law on agrarian reform. As between a general and special law, (b) The party against whom the award is invoked was not given
the latter shall prevailgeneralia specialibus non derogant.[28] proper notice of the appointment of the arbitrator or of the
arbitration proceedings or was otherwise unable to present his
Following the same principle, the Alternative Dispute case; or
Resolution Act of 2004 shall apply in this case as the Act, as its (c) The award deals with a difference not contemplated by or
title - An Act to Institutionalize the Use of an Alternative Dispute not falling within the terms of the submission to arbitration, or it
Resolution System in the Philippines and to Establish the contains decisions on matters beyond the scope of the
Office for Alternative Dispute Resolution, and for Other submission to arbitration, provided that, if the decisions on
Purposes - would suggest, is a law especially enacted to matters submitted to arbitration can be separated from those
actively promote party autonomy in the resolution of disputes not so submitted, that part of the award which contains
or the freedom of the party to make their own arrangements to decisions on matters submitted to arbitration may be
resolve their disputes.[29] It specifically provides exclusive recognized and enforced; or
grounds available to the party opposing an application for (d) The composition of the arbitral authority or the arbitral
recognition and enforcement of the arbitral award.[30] procedure was not in accordance with the agreement of the
parties, or, failing such agreement, was not in accordance with
Inasmuch as the Alternative Dispute Resolution Act of 2004, a the law of the country where the arbitration took place; or
municipal law, applies in the instant petition, we do not see the (e) The award has not yet become binding on the parties, or
need to discuss compliance with international obligations under has been set aside or suspended by a competent authority of
the New York Convention and the Model Law. After all, both the country in which, or under the law of which, that award was
already form part of the law. made.
2. Recognition and enforcement of an arbitral award may also
In particular, the Alternative Dispute Resolution Act of 2004 be refused if the competent authority in the country where
incorporated the New York Convention in the Act by recognition and enforcement is sought finds that:
specifically providing: (a) The subject matter of the difference is not capable of
settlement by arbitration under the law of that country; or
SEC. 42. Application of the New York Convention. - The New (b) The recognition or enforcement of the award would be
York Convention shall govern the recognition and enforcement contrary to the public policy of that country.
of arbitral awards covered by the said Convention.
Clearly, not one of these exclusive grounds touched on the
xxx capacity to sue of the party seeking the recognition and
SEC. 45. Rejection of a Foreign Arbitral Award. - A party to a enforcement of the award.
foreign arbitration proceeding may oppose an application for
recognition and enforcement of the arbitral award in Pertinent provisions of the Special Rules of Court on
accordance with the procedural rules to be promulgated by the Alternative Dispute Resolution,[31] which was promulgated by
Supreme Court only on those grounds enumerated under the Supreme Court, likewise support this position.
Article V of the New York Convention. Any other ground raised
shall be disregarded by the regional trial court. Rule 13.1 of the Special Rules provides that [a]ny party to a
foreign arbitration may petition the court to recognize and
It also expressly adopted the Model Law, to wit: enforce a foreign arbitral award. The contents of such petition
are enumerated in Rule 13.5.[32] Capacity to sue is not
Sec. 19. Adoption of the Model Law on International included. Oppositely, in the Rule on local arbitral awards or
Commercial Arbitration. International commercial arbitration arbitrations in instances where the place of arbitration is in the
shall be governed by the Model Law on International Philippines,[33] it is specifically required that a petition to
Commercial Arbitration (the Model Law) adopted by the United determine any question concerning the existence, validity and
Nations Commission on International Trade Law on June 21, enforceability of such arbitration agreement[34] available to the
1985 xxx. parties before the commencement of arbitration and/or a
Now, does a foreign corporation not licensed to do business in petition for judicial relief from the ruling of the arbitral tribunal
the Philippines have legal capacity to sue under the provisions on a preliminary question upholding or declining its
jurisdiction[35] after arbitration has already commenced should
12
state [t]he facts showing that the persons named as petitioner
or respondent have legal capacity to sue or be sued.[36] [I]t must be remembered that [the principle of hierarchy of
courts] generally applies to cases involving conflicting factual
Indeed, it is in the best interest of justice that in the allegations. Cases which depend on disputed facts for decision
enforecement of a foreign arbitral award, we deny availment by cannot be brought immediately before us as we are not triers of
the losing party of the rule that bars foreign corporations not facts.[44] A strict application of this rule may be excused when
licensed to do business in the Philippines from maintaining a the reason behind the rule is not present in a case, as in the
suit in our courts. When a party enters into a contract present case, where the issues are not factual but purely legal.
containing a foreign arbitration clause and, as in this case, in In these types of questions, this Court has the ultimate say so
fact submits itself to arbitration, it becomes bound by the that we merely abbreviate the review process if we, because of
contract, by the arbitration and by the result of arbitration, the unique circumstances of a case, choose to hear and decide
conceding thereby the capacity of the other party to enter into the legal issues outright.[45]
the contract, participate in the arbitration and cause the
implementation of the result. Although not on all fours with the Moreover, the novelty and the paramount importance of the
instant case, also worthy to consider is the issue herein raised should be seriously considered.[46] Surely,
wisdom of then Associate Justice Flerida Ruth P. Romero in there is a need to take cognizance of the case not only to guide
her Dissenting Opinion in Asset Privatization Trust v. Court of the bench and the bar, but if only to strengthen arbitration as a
Appeals,[37] to wit: means of dispute resolution, and uphold the policy of the State
embodied in the Alternative Dispute Resolution Act of 2004, to
xxx Arbitration, as an alternative mode of settlement, is gaining wit:
adherents in legal and judicial circles here and abroad. If its
tested mechanism can simply be ignored by an aggrieved Sec. 2. Declaration of Policy. - It is hereby declared the policy
party, one who, it must be stressed, voluntarily and actively of the State to actively promote party autonomy in the
participated in the arbitration proceedings from the very resolution of disputes or the freedom of the party to make their
beginning, it will destroy the very essence of mutuality inherent own arrangements to resolve their disputes. Towards this end,
in consensual contracts.[38] the State shall encourage and actively promote the use of
Clearly, on the matter of capacity to sue, a foreign arbitral Alternative Dispute Resolution (ADR) as an important means to
award should be respected not because it is favored over achieve speedy and impartial justice and declog court dockets.
domestic laws and procedures, but because Republic Act No. xxx
9285 has certainly erased any conflict of law question.
Fourth. As regards the issue on the validity and enforceability
Finally, even assuming, only for the sake of argument, that the of the foreign arbitral award, we leave its determination to the
court a quo correctly observed that the Model Law, not the court a quo where its recognition and enforcement is being
New York Convention, governs the subject arbitral award,[39] sought.
petitioner may still seek recognition and enforcement of the
award in Philippine court, since the Model Law prescribes Fifth. Respondent claims that petitioner failed to furnish the
substantially identical exclusive grounds for refusing court of origin a copy of the motion for time to file petition for
recognition or enforcement.[40] review on certiorari before the petition was filed with this
Premises considered, petitioner TPI, although not licensed to Court.[47] We, however, find petitioners reply in order. Thus:
do business in the Philippines, may seek recognition and
enforcement of the foreign arbitral award in accordance with 26. Admittedly, reference to Branch 67 in petitioner TPIs
the provisions of the Alternative Dispute Resolution Act of Motion for Time to File a Petition for Review on Certiorari under
2004. Rule 45 is a typographical error. As correctly pointed out by
respondent Kingford, the order sought to be assailed originated
II from Regional Trial Court, Makati City, Branch 61.
The remaining arguments of respondent Kingford are likewise
unmeritorious. 27. xxx Upon confirmation with the Regional Trial Court, Makati
City, Branch 61, a copy of petitioner TPIs motion was received
First. There is no need to consider respondents contention that by the Metropolitan Trial Court, Makati City, Branch 67. On 8
petitioner TPI improperly raised a question of fact when it January 2009, the motion was forwarded to the Regional Trial
posited that its act of entering into a MOA should not be Court, Makati City, Branch 61.[48]
considered doing business in the Philippines for the purpose of
determining capacity to sue. We reiterate that the foreign All considered, petitioner TPI, although a foreign corporation
corporations capacity to sue in the Philippines is not material not licensed to do business in the Philippines, is not, for that
insofar as the recognition and enforcement of a foreign arbitral reason alone, precluded from filing the Petition for
award is concerned. Confirmation, Recognition, and Enforcement of Foreign Arbitral
Award before a Philippine court.
Second. Respondent cannot fault petitioner for not filing a
motion for reconsideration of the assailed Resolution dated 21 WHEREFORE, the Resolution dated 21 November 2008 of the
November 2008 dismissing the case. We have, time and again, Regional Trial Court, Branch 61, Makati City in Special
ruled that the prior filing of a motion for reconsideration is not Proceedings No. M-6533 is hereby REVERSED and SET
required in certiorari under Rule 45.[41] ASIDE. The case is REMANDED to Branch 61 for further
proceedings.
Third. While we agree that petitioner failed to observe the
principle of hierarchy of courts, which, under ordinary SO ORDERED.
circumstances, warrants the outright dismissal of the case,[42]
we opt to relax the rules following the pronouncement in Chua
v. Ang,[43] to wit:
13

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