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212081 February 23, 2015 Regional Trial Court of Quezon City, Branch 222
(RTC), docketed as Case No. Q-07-60321.12
DEPARTMENT OF ENVIRONMENT AND
NATURAL RESOURCES (DENR), Petitioner, Upon motion of respondent, the case was
vs. subsequently referred to arbitration pursuant to
UNITED PLANNERS CONSULTANTS , INC. the arbitration clause of the Consultancy
(UPCI), Respondent. Agreement,13 which petitioner did not
oppose.14 As a result, Atty. Alfredo F. Tadiar,
DECISION Architect Armando N. Alli, and Construction
Industry Arbitration Commission (CIAC)
PERLAS-BERNABE, J.: Accredited Arbitrator Engr. Ricardo B. San Juan
were appointed as members of the Arbitral
Assailed in this petition for review on certiorari1 is Tribunal. The court-referred arbitration was then
the Decision2 dated March 26, 2014 of the Court docketed as Arbitration Case No. A-001.15
of Appeals (CA) in CA-G.R. SP No. 126458
which dismissed the petition for certiorari filed by During the preliminary conference, the parties
petitioner the Department of Environment and agreed to adopt the CIAC Revised Rules
Natural Resources (petitioner). Governing Construction Arbitration16 (CIAC
Rules) to govern the arbitration
17
proceedings. They further agreed to submit
The Facts
their respective draft decisions in lieu of
On July 26, 1993, petitioner, through the Land memoranda of arguments on or before April 21,
Management Bureau (LMB), entered into an 2010, among others.18
Agreement for Consultancy
Services3 (Consultancy Agreement) with On the due date for submission of the draft
respondent United Planners Consultants, Inc. decisions, however, only respondent complied
(respondent) in connection with the LMB' s Land with the given deadline,19while petitioner moved
Resource Management Master Plan Project for the deferment of the deadline which it
(LRMMP).4 Under the Consultancy Agreement, followed with another motion for extension of
petitioner committed to pay a total contract price time, asking that it be given until May 11, 2010
of ₱4,337,141.00, based on a predetermined to submit its draft decision.20
percentage corresponding to the particular stage
of work accomplished.5 In an Order21 dated April 30, 2010, the Arbitral
Tribunal denied petitioner’s motions and
In December 1994, respondent completed the deemed its non-submission as a waiver, but
work required, which petitioner formally declared that it would still consider petitioner’s
accepted on December 27, 1994.6 However, draft decision if submitted before May 7, 2010, or
petitioner was able to pay only 47% of the total the expected date of the final award’s
contract price in the amount of ₱2,038,456.30.7 promulgation.22 Petitioner filed its draft
23
decision only on May 7, 2010.
On October 25, 1994, the Commission on Audit
(COA) released the Technical Services Office The Arbitral Tribunal rendered its Award24 dated
Report8 (TSO) finding the contract price of the May 7, 2010 (Arbitral Award) in favor of
Agreement to be 84.14% excessive.9 This respondent, directing petitioner to pay the latter
notwithstanding, petitioner, in a letter dated the amount of (a) ₱2,285,089.89 representing
December 10, 1998, acknowledged its liability to the unpaid progress billings, with interest at the
respondent in the amount of ₱2,239,479.60 and rate of 12% per annum from the date of finality
assured payment at the soonest possible time.10 of the Arbitral Award upon confirmation by the
RTC until fully paid; (b) ₱2,033,034.59 as
For failure to pay its obligation under the accrued interest thereon; (c) ₱500,000.00 as
Consultancy Agreement despite repeated exemplary damages; and (d) ₱150,000.00 as
demands, respondent instituted a attorney’s fees.25 It also ordered petitioner to
Complaint11 against petitioner before the reimburse respondent its proportionate share in
the arbitration costs as agreed upon in the since the RTC should have first resolved its May
amount of ₱182,119.44.26 19, 2010 Motion for Reconsideration and June 1,
2010 Manifestation and Motion, and not merely
Unconvinced, petitioner filed a motion for noted them, thereby violating its right to due
reconsideration,27 which the Arbitral Tribunal process.40
merely noted without any action, claiming that it
had already lost jurisdiction over the case after it The RTC Ruling
had submitted to the RTC its Report together
with a copy of the Arbitral Award.28 In an Order41 dated July 9, 2012, the RTC denied
petitioner’s motion to quash.
Consequently, petitioner filed before the RTC a
Motion for Reconsideration29 dated May 19, It found no merit in petitioner’s contention that it
2010 (May 19, 2010 Motion for was denied due process, ruling that its May 19,
Reconsideration)and a Manifestation and 2010 Motion for Reconsideration was a
Motion30 dated June 1, 2010 (June 1, 2010 prohibited pleading under Section 17.2,42 Rule
Manifestation and Motion), asserting that it was 17 of the CIAC Rules. It explained that the
denied the opportunity to be heard when the available remedy to assail an arbitral award was
Arbitral Tribunal failed to consider its draft to file a motion for correction of final award
decision and merely noted its motion for pursuant to Section 17.143 of the CIAC Rules,
reconsideration.31 It also denied receiving a copy and not a motion for reconsideration of the said
of the Arbitral Award by either electronic or award itself.44 On the other hand, the RTC found
registered mail.32 For its part, respondent filed petitioner’s June 1, 2010 Manifestation and
an opposition thereto and moved for the Motion seeking the resolution of its May 19, 2010
confirmation33 of the Arbitral Award in Motion for Reconsideration to be defective for
accordance with the Special Rules of Court on petitioner’s failure to observe the three day
Alternative Dispute Resolution (Special ADR notice rule.45 Having then failed to avail of the
Rules).34 remedies attendant to an order of confirmation,
the Arbitral Award had become final and
In an Order35 dated March 30, 2011, the RTC executory.46
merely noted petitioner’s aforesaid motions,
finding that copies of the Arbitral Award appear On July 12, 2012, petitioner received the RTC’s
to have been sent to the parties by the Arbitral Order dated July 9, 2012 denying its motion to
Tribunal, including the OSG, contrary to quash.47
petitioner’s claim. Onthe other hand, the RTC
confirmed the Arbitral Award pursuant to Rule Dissatisfied, it filed on September 10, 2012a
11.2 (A)36 of the Special ADR Rules and ordered petition for certiorari48 before the CA, docketed
petitioner to pay respondent the costs of as CA-G.R. SP No. 126458, averring in the main
confirming the award, as prayed for, in the total that the RTC acted with grave abuse of
amount of ₱50,000.00. From this order, discretion in confirming and ordering the
petitioner did not file a motion for execution of the Arbitral Award.
reconsideration.
The CA Ruling
Thus, on June 15, 2011, respondent moved for
the issuance of a writ of execution, to which no In a Decision49 dated March 26, 2014, the CA
comment/opposition was filed by petitioner dismissed the certiorari petition on two (2)
despite the RTC’s directive therefor. In an grounds, namely: (a) the petition essentially
Order37 dated September 12, 2011, the RTC assailed the merits of the Arbitral Award which is
granted respondent’s motion.38 prohibited under Rule 19.750 of the Special ADR
Rules;51 and (b) the petition was filed out of time,
Petitioner moved to quash39 the writ of having been filed way beyond 15 days from
execution, positing that respondent was not notice of the RTC’s July 9, 2012 Order, in
entitled to its monetary claims. It also claimed violation of Rule 19.2852 in relation to Rule
that the issuance of said writ was premature 19.853 of said Rules which provide that a special
civil action for certiorari must be filed before the Enforcement of a Foreign Arbitral Award; (k)
CA within 15 days from notice of the judgment, Confidentiality/Protective Orders; and (l) Deposit
order, or resolution sought to be annulled or set and Enforcement of Mediated Settlement
aside (or until July 27, 2012). Aggrieved, Agreements."58
petitioner filed the instant petition.
Notably, the Special ADR Rules do not
The Issue Before the Court automatically govern the arbitration proceedings
itself. A pivotal feature of arbitration as an
The core issue for the Court’s resolution is alternative mode of dispute resolution is that it is
whether or not the CA erred in applying the a product of party autonomy or the freedom of
provisions of the Special ADR Rules, resulting in the parties to make their own arrangements to
the dismissal of petitioner’s special civil action for resolve their own disputes.59 Thus, Rule 2.3 of
certiorari. the Special ADR Rules explicitly provides that
"parties are free to agree on the procedure to be
The Court’s Ruling followed in the conduct of arbitral proceedings.
Failing such agreement, the arbitral tribunal may
The petition lacks merit. conduct arbitration in the manner it considers
appropriate."60
I.
In the case at bar, the Consultancy Agreement
Republic Act No. (RA) 9285,54 otherwise known contained an arbitration clause.61 Hence,
as the Alternative Dispute Resolution Act of respondent, after it filed its complaint, moved for
2004," institutionalized the use of an Alternative its referral to arbitration62 which was not objected
Dispute Resolution System (ADR System)55 in to by petitioner.63 By its referral to arbitration, the
the Philippines. The Act, however, was without case fell within the coverage of the Special ADR
prejudice to the adoption by the Supreme Court Rules. However, with respect to the arbitration
of any ADR system as a means of achieving proceedings itself, the parties had agreed to
speedy and efficient means of resolving cases adopt the CIAC Rules before the Arbitral
pending before all courts in the Philippines.56 Tribunal in accordance with Rule 2.3 of the
Special ADR Rules.
Accordingly, A.M. No. 07-11-08-SC was created
setting forth the Special Rules of Court on On May 7, 2010, the Arbitral Tribunal rendered
Alternative Dispute Resolution (referred herein the Arbitral Award in favor of respondent. Under
as Special ADR Rules) that shall govern the Section 17.2, Rule 17 of the CIAC Rules, no
procedure to be followed by the courts whenever motion for reconsideration or new trial may be
judicial intervention is sought in ADR sought, but any of the parties may file a motion
proceedings in the specific cases where it is for correction64 of the final award, which shall
allowed.57 interrupt the running of the period for
appeal,65 based on any of the following grounds,
Rule 1.1 of the Special ADR Rules lists down the to wit: a. an evident miscalculation of figures, a
instances when the said rules shall apply, typographical or arithmetical error;
namely: "(a) Relief on the issue of Existence,
Validity, or Enforceability of the Arbitration b. an evident mistake in the description of
Agreement; (b) Referral to Alternative Dispute any party, person, date, amount, thing or
Resolution ("ADR"); (c) Interim Measures of property referred to in the award;
Protection; (d) Appointment of Arbitrator; (e)
Challenge to Appointment of Arbitrator; (f) c. where the arbitrators have awarded
Termination of Mandate of Arbitrator; (g) upon a matter not submitted to them, not
Assistance in Taking Evidence; (h) Confirmation, affecting the merits of the decision upon
Correction or Vacation of Award in Domestic the matter submitted;
Arbitration; (i) Recognition and Enforcement or
Setting Aside of an Award in International d. where the arbitrators have failed or
Commercial Arbitration; (j) Recognition and omitted to resolve certain issue/s
formulated by the parties in the Terms of 11.2 (D)71 of the Special ADR Rules. Neither did
Reference (TOR) and submitted to them it seek reconsideration of the confirmation order
for resolution, and in accordance with Rule 19.1 (h) thereof.
Instead, petitioner filed only on September 10,
e. where the award is imperfect in a 2012 a special civil action for certiorari before the
matter of form not affecting the merits of CA questioning the propriety of (a) the RTC
the controversy. Order dated September 12, 2011 granting
respondent’s motion for issuance of a writ of
The motion shall be acted upon by the Arbitral execution, and (b) Order dated July 9,2012
Tribunal or the surviving/remaining members.66 denying its motion to quash. Under Rule 19.26
of the Special ADR Rules, "[w]hen the Regional
Moreover, the parties may appeal the final award Trial Court, in making a ruling under the Special
to the CA through a petition for review under ADR Rules, has acted without or in excess of its
Rule43 of the Rules of Court.67 jurisdiction, or with grave abuse of discretion
amounting to lack or excess of jurisdiction, and
Records do not show that any of the foregoing there is no appeal or any plain, speedy, and
remedies were availed of by petitioner. Instead, adequate remedy in the ordinary course of law,
it filed the May 19, 2010 Motion for a party may file a special civil action for certiorari
Reconsideration of the Arbitral Award, which to annul or set aside a ruling of the Regional Trial
was a prohibited pleading under the Section Court." Thus, for failing to avail of the foregoing
17.2,68Rule 17 of the CIAC Rules, thus rendering remedies before resorting to certiorari, the CA
the same final and executory. correctly dismissed its petition.
As above-mentioned, the petition for certiorari SEC. 26. General jurisdiction. The authority and
permitted under the Special ADR Rules must be powers of the Commission shall extend to and
filed within a period of fifteen (15) days from comprehend all matters relating to auditing
notice of the judgment, order or resolution procedures, systems and controls, the keeping
sought to be annulled or set aside.80 Hence, of the general accounts of the Government, the
since petitioner’s filing of its certiorari petition in preservation of vouchers pertaining thereto for a
CA-G.R. SP No. 126458 was made nearly two period of ten years, the examination and
months after its receipt of the RTC’s Order dated inspection of the books, records, and papers
July 9, 2012,or on September 10, 2012,81 said relating to those accounts; and the audit and
petition was clearly dismissible.82 settlement of the accounts of all persons
respecting funds or property received or held by
III. them in an accountable capacity, as well as the
examination, audit, and settlement of all debts
Discounting the above-discussed procedural and claims of any sort due from or owing to the
considerations, the Court still finds that the Government or any of its subdivisions, agencies
certiorari petition had no merit. and instrumentalities. The said jurisdiction
extends to all government-owned or controlled
Indeed, petitioner cannot be said to have been corporations, including their subsidiaries, and
denied due process as the records undeniably other self-governing boards, commissions, or
show that it was accorded ample opportunity to agencies of the Government, and as herein
ventilate its position. There was clearly nothing prescribed, including non-governmental entities
out of line when the Arbitral Tribunal denied subsidized by the government, those funded by
donation through the government, those under a performance bond — is connected to a
required to pay levies or government share, and construction contract and, therefore, falls under
those for which the government has put up a the exclusive jurisdiction of the CIAC.
counterpart fund or those partly funded by the
government. (Emphases supplied) Spouses Rune and Lea Stroem (Spouses
Stroem) entered into an Owners-Contractor
From the foregoing, the settlement of Agreement4 with Asis-Leif & Company, Inc.
respondent’s money claim is still subject to the (Asis-Leif) for the construction of a two-storey
primary jurisdiction of the COA despite finality of house on the lot owned by Spouses Stroem. The
the confirmed arbitral award by the RTC lot was located at Lot 4A, Block 24, Don Celso
pursuant to the Special ADR Rules.85 Hence, the Tuason Street, Valley Golf Subdivision,
respondent has to first seek the approval of the Barangay Mayamot, Antipolo, Rizal.5
COA of their monetary claim. This appears to
have been complied with by the latter when it On November 15, 1999, pursuant to the
filed a "Petition for Enforcement and Payment of agreement, Asis-Leif secured Performance
Final and Executory Arbitral Award"86before the Bond No. LP/G(13)83056 in the amount of
COA. Accordingly, it is now the COA which has ₱4,500,000.00 from Stronghold Insurance
the authority to rule on this latter petition. Company, Inc. (Stronghold).6 Stronghold and
WHEREFORE, the petition is DENIED. The Asis-Leif, through Ms. Ma. Cynthia Asis-Leif,
Decision dated March 26, 2014 of the Court of bound themselves jointly and severally to pay
Appeals in CA-G.R. SP No. 126458 which the Spouses Stroem the agreed amount in the
dismissed the petition for certiorari filed by event that the construction project is not
petitioner the Department of Environment and completed.7
Natural Resources is hereby AFFIRMED.
Asis-Leif failed to finish the projecton time
SO ORDERED. despite repeated demands of the Spouses
Stroem.8
G.R. No. 204689 January 21, 2015
Spouses Stroem subsequently rescinded the
STRONGHOLD INSURANCE COMPANY, agreement.9 They then hired an independent
INC., Petitioner, appraiser to evaluate the progress of the
vs. construction project.10
SPOUSES RUNE and LEA
STROEM, Respondents. Appraiser Asian Appraisal Company, Inc.’s
evaluation resulted in the following percentage
DECISION of completion: 47.53% of the residential building,
65.62% of the garage, and 13.32% of the
LEONEN, J.: swimming pool, fence, gate, and land
development.11
For resolution is a Petition for Review1 under
Rule 45 of the Rules of Court assailing the On April 5, 2001, Stronghold sent a letter to Asis-
Decision2 dated November 20, 2012 of the Court Leif requesting that the company settle its
of Appeals in CA-G.R. CV No. 96017. The Court obligations withthe Spouses Stroem. No
of Appeals ;iffirmed the Decision3 of the response was received from Asis-Leif.12
Regional Trial Court of Makati, Branch 133 in
Civil Case No. 02-1108 for collection of a sum of On September 12, 2002, the Spouses Stroem
money. filed a Complaint (with Prayer for Preliminary
Attachment)13 for breach of contract and for sum
This case involves the proper invocation of the of money with a claim for damages against Asis-
Construction Industry Arbitration Committee's Leif, Ms. Cynthia Asis-Leif, and
(CIAC) jurisdiction through an arbitration clause Stronghold.14 Only Stronghold was served
in a construction contract. The main issue here summons. Ms. Cynthia Asis-Leif allegedly
is whether the dispute — liability of a surety absconded and moved out of the country.15
On July 13, 2010, the Regional Trial Court Comment on July 31, 2013.22 We also required
rendered a judgment in favor of the Spouses Stronghold to file its Reply to the
Stroem. The trial court ordered Stronghold to pay Comment,23which was noted on December 9,
the Spouses Stroem ₱4,500,000.00 with 6% 2013.24
legal interest from the time of first demand.16The
dispositive portion of the trial court Decision Stronghold argues that the trial court did not
reads: acquire jurisdiction over the case and, therefore,
the Court of Appeals committed reversible error
WHEREFORE, finding plaintiffs’ cause of action when it upheld the Decision of the Regional Trial
to be sufficiently established being supported by Court.25 The lower courts should have dismissed
evidence on records, judgement is hereby the case in viewof the arbitration clause in the
rendered in favor of the plaintiff spouses Rune agreement and considering that "[Republic Act
and Lea Stroem and against the defendant No. 876] explicitly confines the court’s authority
Stronghold Insurance Company Incorporated only to pass upon the issue of whether there is
ordering the latter topay the plaintiff the sums of: [an] agreement . . . providing for arbitration. In
the affirmative, the statute ordains that the court
1) Php4,500,000.00 with six (6%) percent shall issue an order ‘summarily directing the
legal interest from the time of first demand parties to proceed with the arbitration in
and interest due shall earn legal interest accordance with the terms thereof.’"26 Moreover,
from the time of judicial demand until fully "the stipulations in said Agreement are part and
paid. parcel of the conditions in the bond. Were it not
for such stipulations in said agreement,
2) Php35,000.00 by way of attorney’s fees [Stronghold] would not have agreed to issue a
and other litigation expenses. bond in favor of the Spouses Stroem. The parties
tothe bond are ALB/Ms. Asis-[L]eif, Spouses
Defendant is further ordered topay the costs of Stroem and [Stronghold] suchthat ALB/Ms. Asis-
this suit. [L]eif never ceased to be a party to the surety
agreement."27
SO ORDERED.17
In any case, Stronghold’s liability under the
Both Stronghold and the Spouses Stroem performance bond is limited only to additional
appealed to the Court of Appeals.18 costs for the completion of the project.28 In
addition, the Court of Appeals erred inholding
The Court of Appeals affirmed with modification that Stronghold changed its theory with regard to
the trial court’s Decision. It increased the amount the notice requirement29 and in modifying the
of attorney’s fees to ₱50,000.00.19 trial court’s award of attorney’s fees.30
The dispositive portion of the Court of Appeals On the other hand, the Spouses Stroem argue
Decision reads: that Stronghold committed forum shopping
warranting dismissal of the case.31 According to
WHEREFORE,the appeal of Stronghold the Spouses Stroem, Stronghold deliberately
Company, Inc[.] is DISMISSED, while the appeal committed forum shopping when it filed the
of spouses Rune and Lea Stroem is PARTLY present petition despite the pendency of the
GRANTED. The November 27, 2009 Decision of Spouses Stroem’s Motion for Partial
the Regional Trial Court of Makati City is Reconsideration of the Court of Appeals
AFFIRMED with MODIFICATION that the award Decision dated November 20, 2012.32
of attorney’s fees is increased to ₱50,000.00
More importantly, the Owners-Contractor
SO ORDERED.20 Agreement is "separate and distinct from the
Bond. The parties to the Agreement are ALB/Ms.
On March 20, 2013, this court required the Asis-Leif and Spouses Stroem, while the parties
Spouses Stroem to submit their Comment on the to the Bond are Spouses Stroem and
Petition.21 We noted the Spouses Stroem’s Stronghold. The considerations for the two
contracts are likewise distinct. Thus, the Motion for Reconsideration of the assailed
arbitration clause in the Agreement is binding Decision. It filed before this court a Motion for
only on the parties thereto, specifically ALB/Ms. Extension of Time To File Petition for Review
Asis-Leif and Spouses Stroem[.]"33 requesting an additional period of 30 days from
December 20, 2012 or until January 19, 2013 to
Contrary to Stronghold’s argument, Spouses file the Petition.37
Stroem argues that stronghold is liable for the full
amountof the performance bond. The terms of Respondents filed their Motion for Partial
the bond clearly show that Stronghold is liable as Reconsideration of the Court of Appeals
surety.34 Verily, notice to Stronghold is not Decision on December 11, 2012.38 They sought
required for its liability to attach.35 the modification of the Decision as to the
amounts of moral damages, exemplary
The issues for consideration are: damages, attorney’s fees, and costs of the suit.39
(1) Whether the dispute involves a Respondents alleged in their Comment that as
construction contract; early as January 9, 2013, petitioner received a
copy of the Court of Appeals’ Resolution
(2) Whether the CIAC has exclusive requiring Comment on the Motion for Partial
jurisdiction over the controversy between Reconsideration.40 Still, petitioner did not
the parties; disclose in its Verification and Certification
Against Forum Shopping the pendency of
(3) Whether the Regional Trial Court respondents’ Motion for Partial
should have dismissed the petition Reconsideration.41
outright as required by law and
jurisprudence and referred the matter to For its part, petitioner claims that it did not
the CIAC; and commit forum shopping. It fully disclosed in its
Petition that what it sought to be reviewed was
(4) Whether petitioner Stronghold the Decision dated November 20, 2012 of the
Insurance Company, Inc. is liable under Court of Appeals. "Petitioner merely exercised
Performance Bond No. LP/G(13)83056. its available remedy with respect to the Decision
of the Court of Appeals by filing [the]
(a) Whether petitioner Stronghold Petition."42 What the rules mandate to be stated
Insurance Company, Inc. is only liable as in the Certification Against Forum Shopping is
to the extent of any additional cost for the the status of "any other action." This other action
completion of the project due toany involves the same issues and parties but is an
increase in prices for labor and materials. entirely different case.
(b) Whether the case involves ordinary Indeed, petitioner is guilty of forum shopping.
suretyship or corporate suretyship.
There is forum shopping when:
After considering the parties’ arguments and the
records of this case, this court resolves to deny as a result of an adverse opinion in one forum, a
the Petition. party seeks a favorable opinion (other than by
appeal or certiorari) in another. The principle
On forum-shopping applies not only with respect to suits filed in the
courts but also in connection with litigations
Respondents argue that petitioner committed commenced in the courts while an administrative
forum shopping; hence, the case should have proceeding is pending[.]43 (Citation omitted)
been dismissed outright.
This court has enumerated the elements of
Records show that petitioner received a copy of forum-shopping: "(a) identity of parties, or at
the Decision of the Court of Appeals on least such parties as represent the same
December 5, 2012.36Petitioner did not file a interests in both actions; (b) identity of rights
asserted and reliefs prayed for, the reliefs being creating the possibility of conflicting decisions
founded on the same facts; and (c) the identity being rendered by the different fora upon the
with respect to the two preceding particulars in same issue.49 (Emphasis supplied)
the two cases issuch that any judgment rendered
in the pending cases, regardless of which party On this basis, this case should be dismissed.
is successful, amount to res judicatain the other
case."44 Rule 42, Section 245 in relation to Rule On arbitration and the CIAC’s jurisdiction
45, Section 4 of the Rules of Court mandates
petitioner to submit a Certification Against Forum Petitioner changed the theory of its case since
Shopping and promptly inform this court about its participation in the trial court proceedings. It
the pendency of any similar action or proceeding raised the issue of lack of jurisdiction in view of
before other courts or tribunals. The rule’s an arbitration agreement for the first time.
purpose is to deter the unethical practice of Generally, parties may not raise issues for the
pursuing simultaneous remedies in different first time on appeal.50 Such practice is violative
forums, which "wreaks havoc upon orderly of the rules and due process and is frowned
judicial procedure."46 Failure to comply with the upon by the courts. However, it is also well-
rule is a sufficient ground for the dismissal of the settled that jurisdiction can never be waived or
petition.47 acquired by estoppel.51 Jurisdiction is conferred
by the Constitution or by law.52 "Lack of
Records show that petitioner’s duly authorized jurisdiction of the court over an action or the
officer certified the following on January 21, subject matter of an action cannot be cured by
2013: 4. I further certify that: (a) I have not the silence, by acquiescence, or even by
commenced any other action or proceeding express consent of the parties."53
involving the same issues in the Supreme Court,
Court of Appeals, or any other tribunal or Section 4 of Executive Order No. 100854 is clear
agency; (b) to the best of my knowledge, no such in defining the exclusive jurisdiction of the CIAC:
action or proceeding is pending in the Supreme
Court, the Court of Appeals or different Divisions SECTION 4. Jurisdiction – The CIAC shall have
thereof, or any tribunal or agency; (c) if I should original and exclusive jurisdiction over disputes
thereafter learn that a similar action or arising from, or connected with, contracts
proceeding has been filed or is pending before entered into by parties involved in construction in
the Supreme Court, the Court of Appeals, or the Philippines, whether the dispute arises
different Divisions thereof, or any other tribunal before or after the completion of the contract, or
or agency, I undertake to promptly inform the after the abandonment or breach thereof. These
aforesaid courts and such tribunal or agency of disputes may involve government or private
the fact within five (5) days therefrom.48 contracts. For the Board to acquire jurisdiction,
the parties to a dispute must agree to submit the
Petitioner failed to carry out its duty of promptly same to voluntary arbitration.
informing this court of any pending action or
proceeding before this court,the Court of The jurisdiction of the CIAC may include but is
Appeals, or any other tribunal or agency. This not limited to violation of specifications for
court cannot countenance petitioner’s disregard materials and workmanship; violation of the
of the rules. terms of agreement; interpretation and/or
application of contractual timeand delays;
This court has held before that: maintenance and defects; payment, default of
employer or contractor and changes in contract
[u]ltimately, what is truly important to consider in cost.
determining whether forum-shopping exists or
not is the vexation caused the courts and parties- Excluded from the coverage of thislaw are
litigant by a party who asks different courts disputes arising from employer-employee
and/or administrative agencies to rule on the relationships which shall continue to be covered
same or related causes and/or to grant the same by the Labor Code of the Philippines. (Emphasis
or substantially the same reliefs, in the process supplied)
Similarly, Section 35 of RepublicAct No. 9285 or respondent and Asis-Leif thatmay invoke the
the Alternative Dispute Resolution Act of 2004 arbitration clause in the contract.
states:
This court has previously held that a
SEC. 35. Coverage of the Law. - Construction performance bond, which is meant "to guarantee
disputes which fall within the original and the supply of labor,materials, tools, equipment,
exclusive jurisdiction of the Construction and necessary supervision to complete the
Industry Arbitration Commission (the project[,]"59 is significantly and substantially
"Commission") shall include those between or connected to the construction contract and,
among parties to, or who are otherwise bound therefore, falls under the jurisdiction of the
by, an arbitration agreement, directly or by CIAC.60
reference whether such parties are project
owner, contractor, subcontractor, quantity Prudential Guarantee and Assurance Inc. v.
surveyor, bondsman or issuer of an insurance Anscor Land, Inc.61 involved circumstances
policy in a construction project. similar to the present case. In Prudential,
property owner Anscor Land, Inc. (ALI) entered
The Commission shall continue to exercise into a contract for the construction of an eight-
original and exclusive jurisdiction over unit townhouse located inCapitol Hills, Quezon
construction disputes although the arbitration is City with contractor Kraft Realty and
"commercial" pursuant to Section 21 of this Act. Development Corporation (KRDC).62KRDC
(Emphasis supplied) secured the completion of the construction
project through a surety and performance bond
In Heunghwa Industry Co., Ltd., v. DJ Builders issued by Prudential Guarantee and Assurance
Corporation,55 this court held that "there are two Inc. (PGAI).63
acts which may vest the CIAC with jurisdiction
over a construction dispute. One is the presence The delay in the construction project resulted in
of an arbitration clause in a construction ALI’s termination of the contract and claim
contract, and the other is the agreement by the against the performance bond.64 "ALI
parties to submit the dispute to the CIAC."56 [subsequently] commenced arbitration
proceedings against KRDC and PGAI in the
This court has ruled that when a dispute arises CIAC."65 PGAI, however, argued that it was not
from a construction contract, the CIAC has a party to the construction contract.66
exclusive and original
jurisdiction.57 Construction has been defined as The CIAC ruled that PGAI was not liable under
referring to "all on-site works on buildings or the performance bond.67 Upon review, the Court
altering structures, from land clearance through of Appeals held that PGAI was jointly and
completion including excavation, erection and severally liable with KRDC under the
assembly and installation of components and performance bond.68
equipment."58
PGAI appealed the Court of Appeals Decision
In this case, there is no dispute asto whether the and claimed that CIAC did not have jurisdiction
Owners-Contractor Agreement between Asis- over the performance bond.69 This court ruled:
Leif and respondents is a construction contract.
Petitioner and respondents recognize that CIAC A guarantee or a surety contract under Article
has jurisdiction over disputes arising from the 2047 of the Civil Code of the Philippines is an
agreement. accessory contract because it is dependent for
its existence upon the principal obligation
What is at issue in this case is the parties’ guaranteed by it.
agreement, or lack thereof, to submit the case to
arbitration. Respondents argue that petitioner is In fact, the primary and only reason behind the
not a party to the arbitration agreement. acquisition of the performance bond by KRDC
Petitioner did not consent to arbitration. It is only was to guarantee to ALI that the construction
project would proceed in accordance with the
contract terms and conditions. In effect, the to be direct, primary and absolute; in other
performance bond becomes liable for the words, he is directly and equally bound with the
completion of the construction project in the principal."74
event KRDC fails in its contractual undertaking.
Because of the performance bond, the Verily, "[i]n enforcing a surety contract, the
construction contract between ALI and KRDC is ‘complementary contracts-construed-together’
guaranteed to be performed even if KRDC fails doctrine finds application. According to this
in its obligation. In practice, a performance bond principle, an accessory contract must beread in
is usually a condition or a necessary component its entirety and together with the principal
of construction contracts. In the case at bar, the agreement."75 Article 1374 of the Civil Code
performance bond was so connected with the provides:
construction contract that the former was agreed
by the parties to be a condition for the latter to ART. 1374. The various stipulations of a contract
push through and at the same time, the former is shall be interpreted together, attributing to the
reliant on the latter for its existence as an doubtful ones that sense which may result from
accessory contract. all of them taken jointly.
Although not the construction contract itself, the Applying the "complementary-contracts-
performance bond is deemed as an associate of construed-together" doctrine, this court in
the main construction contract that it cannot be Prudential held that the surety willingly acceded
separated or severed from its principal. The to the terms of the construction contract despite
Performance Bond is significantly and the silence of the performance bond as to
substantially connected to the construction arbitration:
contract that there can be no doubt it is the CIAC,
under Section 4 of EO No. 1008, which has In the case at bar, the performance bond was
jurisdiction over any dispute arising from or silent with regard to arbitration. On the other
connected with it.70 (Emphasis supplied, hand, the construction contract was clear as to
citations omitted) arbitration in the event of disputes. Applying the
said doctrine, we rule that the silence of the
At first look, the Owners-Contractor Agreement accessory contract in this case could only be
and the performance bond reference each other; construed as acquiescence to the main contract.
the performance bond was issued pursuant to The construction contract breathes life into the
the construction agreement. performance bond. We are not ready to assume
that the performance bond contains reservations
A performance bond is a kind of suretyship with regard to some of the terms and conditions
agreement. A suretyship agreement is an in the construction contract where in fact it is
agreement "whereby a party, called the surety, silent. On the other hand, it is more reasonable
guarantees the performance by another party, to assume that the party who issued the
called the principal or obligor, of an obligation or performance bond carefully and meticulously
undertaking in favor of another party, called the studied the construction contract that it
obligee."71 In the same vein, a performance guaranteed, and if it had reservations, it would
bond is "designed to afford the project owner have and should have mentioned them in the
security that the . . . contractor, will faithfully surety contract.76 (Emphasis supplied)
comply with the requirements of the contract . . .
and make good [on the] damages sustained by This court, however, cannot apply the ruling in
the project owner in case of the contractor’s Prudential to the present case. Several factors
failure to so perform."72 militate against petitioner’s claim.
It is settled that the surety’s solidary obligation The contractual stipulations in this case and in
for the performance of the principal debtor’s Prudential are different. The relevant provisions
obligation is indirect and merely of the Owners-Contractor Agreement in this case
secondary.73 Nevertheless, the surety’s liability state:
tothe "creditor or promisee of the principal is said
ARTICLE 5. THE CONTRACT DOCUMENTS 1.1 The following shall form part of this
Contractand together with this Contract, are
The following documents prepared by the known as the "Contract Documents":
CONTRACTOR shall constitute an integral part
of this contract as fully as if hereto attached or a. Bid Proposal
herein stated, except asotherwise modified by
mutual agreement of parties, and attached to this ....
agreement.
d. Notice to proceed
Attachment 5.1 Working Drawings
....
Attachment 5.2 Outline Specifications
j. Appendices A & B (respectively, Surety
Attachment 5.3 Bill of Quantities Bond for Performance and, Supply of
Materials by the Developer)78(Emphasis
Attachment 5.4 CONTRACTOR Business supplied)
License
This court in Prudential held that the construction
.... contract expressly incorporated the performance
bond into the contract.79 In the present case,
ARTICLE 7. PERFORMANCE (SURETY) Article 7 of the Owners-Contractor Agreement
BOND merely stated that a performance bond shall be
issued in favor of respondents, in which case
7.1 Within 30 days of the signing of this petitioner and Asis-Leif Builders and/or Ms. Ma.
agreement, CONTRACTOR shall provide Cynthia Asis-Leif shall pay ₱4,500,000.00 in the
to OWNERS a performance bond, issued event that Asis-Leif fails to perform its duty under
by a duly licensed authority acceptable to the Owners-Contractor
80
Agreement. Consequently, the performance
the OWNERS, and equal to the amount of
PHP 4,500,000.00 (Four Million and Five bond merely referenced the contract entered into
Hundred Thousand Philippine by respondents and Asis-Leif, which pertained to
Pesos),with the OWNERS as beneficiary. Asis-Leif’s duty toconstruct a two-storey
residence building with attic, pool, and
7.2 The performance bond will guarantee landscaping over respondents’ property.81
the satisfactory and faithful performance
by the CONTRACTOR of all provisions To be clear, it is in the Owners-Contractor
stated within this contract. Agreement that the arbitration clause is
found.1âwphi1 The construction agreement was
ARTICLE 8. ARBITRATION signed only by respondents and the contractor,
Asis-Leif, as represented by Ms. Ma. Cynthia
8.1 Any dispute between the parties hereto Asis-Leif. It is basic that "[c]ontracts take effect
which cannot be amicably settled shall be finally only between the parties, their assigns and
settled by arbitration in accordance with the heirs[.]"82 Not being a party to the construction
provision of Republic Act 876, of The Philippines, agreement, petitioner cannot invoke the
as amended by the Executive Order 1008 dated arbitration clause. Petitioner, thus, cannot invoke
February 4, 1985.77 (Emphasis in the original) the jurisdiction of the CIAC.
SEC. 25. Interpretation of the Act.- In interpreting 2. Of succession by its corporate name for
the Act, the court shall have due regard to the the period of time stated in the articles of
policy of the law in favor of arbitration.Where incorporation and the certificate
action is commenced by or against multiple ofincorporation;
parties, one or more of whomare parties who are
bound by the arbitration agreement although the 3. To adopt and use a corporate seal;
civil action may continue as to those who are not
bound by such arbitration agreement. (Emphasis 4. To amend its articles of incorporation in
supplied) accordance with the provisions of this
Code;
Thus, if there is an interpretation that would
render effective an arbitration clause for 5. To adopt by-laws, not contrary to law,
purposes ofavoiding litigation and expediting morals, or public policy, and to amend or
resolution of the dispute, that interpretation shall repeal the same in accordance with this
be adopted. Petitioners’ main argument arises Code;
from the separate personality given to juridical
persons vis-à-vis their directors, officers, 6. In case of stock corporations, to issue
stockholders, and agents. Since they did not sign or sell stocks to subscribers and to sell
the arbitration agreement in any capacity, they treasury stocks in accordance with the
cannot be forced to submit to the jurisdiction of provisions of this Code; and to admit
the Arbitration Tribunal in accordance with the members to the corporation if it be a non-
arbitration agreement. Moreover, they had stock corporation;
already resigned as directors of Shangri-Laat the
time of the alleged default. 7. To purchase, receive, take or grant,
hold, convey, sell, lease, pledge,
Indeed, as petitioners point out, their mortgage and otherwise deal with such
personalities as directors of Shangri-La are real and personal property, including
separate and distinct from Shangri-La. securities and bonds of other
corporations, as the transaction of the
A corporation is an artificial entity created by lawful business of the corporation may
fiction of law.76 This means that while it is not a reasonably and necessarily require,
person, naturally, the law gives it a distinct
subject to the limitations prescribed by apply to persons who were neither parties to the
law and the Constitution; contract nor assignees of previous parties, thus:
SO ORDERED.