METRO CONSTRUCTION, INC., petitioner, vs. CHATHAM PROPERTIES, INC.

,
respondent. G.R. No. 141897 September 24, 2001

FACTS :
Respondent Chatham Properties, Inc. (CHATHAM) and petitioner Metro
Construction, Inc. (MCI) entered into a contract for the construction of a multi-storey
building known as the Chatham House. In April 1998, MCI sought to collect from
CHATHAM a sum of money for unpaid progress billings and other charges and
instituted a request for adjudication of its claims with the CIAC. The preliminary
conference before the CIAC started in June 1998 and was concluded a month after with
the signing of the Terms of Reference (TOR) of the Case. In the meantime, the TOR
was amended and finalized on 19 August 1998. The facts, as admitted by the parties
before the CIAC and incorporated in the original TOR, are as follows:
1. On 21 April 1994, the parties formally entered into a contract for the construction of
the "Chatham House" . . . for the contract price of price of P50,000,000.00
2. On 12 July 1994, a Supplemental Contract was executed by and between the parties
whereby CHATHAM authorized MCI to procure in behalf of the former materials,
equipment, etc.
3. Under Section I.04 of the Supplemental Contract, the total amount of procurement
and transportation cost[s] and expenses which may be reimbursed by MCI from
CHATHAM shall not exceed the amount of P75, 000,000.00.
4. In the course of the construction, Change Orders No. 1, 4, 8A, 11, 12 and 13 were
implemented,
5. CHATHAM reimbursed MCI the amount of P60,000.00 corresponding to bonuses
advanced to its workers by the latter for the 14th, 16th, and 17th floors.
6. CHATHAM's payments to MCI totaled P104,875,792.37, representing payments for
portions of MCI's progress billings and x x x additional charges..
The CIAC discovered significant data which were not explicit in the documents
but otherwise revealed or elicited during the hearings, which the CIAC deemed material
and relevant to the complete adjudication of the case.
The CIAC disposed of the specific money claims by either granting or reducing
them. On Issue No. 9, i.e., whether CHATHAM failed to complete and/or deliver the
project within the approved completion period and, if so, whether CHATHAM is liable for

liquidated damages and how much. CIAC rendered JUdgement in favor of the Claimant
[MCI] directing Respondent [CHATHAM] to pay Claimant [MCI] the net sum of SIXTEEN
MILLION ONE HUNDRED TWENTY SIX THOUSAND NINE HUNDRED TWENTY TWO
& 91/100 (16,126,922.91) PESOS. Impugning the decision of the CIAC, CHATHAM
instituted a petition for review with the Court of Appeals.
In upholding the decision of the CIAC, the Court of Appeals confirmed the
jurisprudential principle that absent any showing of arbitrariness, the CIAC's findings as
an administrative agency and quasi judicial body should not only be accorded great
respect but also given the stamp of finality. However the Court of Appeals found
exception in the CIAC's disquisition of Issue No.9 on the matter of liquidated damages.

ISSUE :
Whether or not under existing law and rules the Court of Appeals can also
review findings of facts of the Construction Industry Arbitration Commission (CIAC)

HELD :
EO. No. 1008 vest upon the CIAC original and exclusive jurisdiction over
disputes arising from, or connected with, contracts entered into by parties involved in
construction in the Philippines, whether the dispute arises before or after the completion
of the contract, or after the abandonment or breach thereof. By express provision of
Section 19 thereof, the arbitral award of the CIAC is final and unappealable, except on
questions of law, which are appealable to the Supreme Court.
Through Circular No. 1-91, the Supreme Court intended to establish a uniform
procedure for the review of the final orders or decisions of the Court of Tax Appeals and
other quasi judicial. The Circular designated the Court of Appeals as the reviewing body
to resolve questions of fact or of law or mixed questions of fact and law.
It is clear that Circular No. 1-91 covers the CIAC. In the first place, it is a quasi
judicial agency. In the second place, the language of Section 1 of Circular No. 1-91
emphasizes the obvious inclusion of the CIAC even if it is not named in the enumeration
of quasi-judicial agencies. In sum, under Circular No. 1-91, appeals from the arbitral
awards of the CIAC may be brought to the Court of Appeals, and not to the Supreme
Court alone. The grounds for the appeal are likewise broadened to include appeals on
questions of facts and appeals involving mixed questions of fact and law
The jurisdiction of the Court of Appeals over appeals from final orders or
decisions of the CIAC is further fortified by the amendments to B.P. Blg. 129, as
introduced by RA. No. 7902. With the amendments, the Court of Appeals is vested with
appellate jurisdiction over all final judgments, decisions, resolutions, orders or awards of

Regional Trial Courts and quasi-judicial agencies, instrumentalities, boards or

commissions, except "those within the appellate jurisdiction of the Supreme Court in
accordance with the Constitution, the Labor Code of the Philippines under Presidential
Decree No. 442, as amended, the provisions of this Act, and of subparagraph (1) of the
third paragraph and subparagraph (4) of the fourth paragraph of Section 17 of the
Judiciary Act of 1948.".

FIESTA WORLD MALL CORP v. LINDBERG PHILS Inc.

G.R 152471; August 18, 2006

FACTS:
Fiesta World Mall Corporation, petitioner, owns and operates Fiesta World Mall
located at Barangay Maraouy, Lipa City; while Linberg Philippines,Inc., respondent, is a
corporation that builds and operates power plants. On January 19, 2000, respondent
filed with the Regional Trial Court (RTC), Branch 267, Pasig City, a Complaint for Sum
of Money against petitioner. The complaint alleges that on November 12, 1997,
petitioner and respondent executed a build-own-operate agreement, entitled Contract
Agreement for Power Supply Services, 3.8 MW Base Load Power Plant (the Contract).
Under this Contract, respondent will construct, at its own cost, and operate as
owner a power plant, and to supply petitioner power/electricity at its shopping mall in
Lipa City. Petitioner, on the other hand, will pay respondent energy fees to be
computed in accordance with the Seventh Schedule of the Contract. The complaint
further alleges that respondent constructed the power plant in Lipa City at a cost of
about P130,000,000.00. In November 1997, the power plant became operational and
started supplying power/electricity to petitioners shopping mall in Lipa City.
In
December 1997, respondent started billing petitioner. As of May 21, 1999, petitioners
unpaid obligation amounted to P15,241,747.58, exclusive of interest.
However,
petitioner questioned the said amount and refused to pay despite respondents repeated
demands.
In its Answer with Compulsory Counterclaim, petitioner specifically denied the
allegations in the complaint, claiming that respondent failed to fulfill its obligations under
the Contract by failing to supply all its power/fuel needs. From November 10, 1998 until
May 21, 1999, petitioner personally shouldered the cost of fuel.
Petitioner also
disputed the amount of energy fees specified in the billings made by respondent
because the latter failed to monitor, measure, and record the quantities of electricity
delivered by taking photographs of the electricity meter reading prior to the issuance of
its invoices and billings, also in violation of the Contract.
Moreover, in the computation of the electrical billings, the minimum off-take of
energy (E2) was based solely on the projected consumption as computed by
respondent. However, based onpetitioners actual experience, it could not consume the
energy pursuant to the minimum off-take even if it kept open all its lights and operated
all its machinery and equipment for twenty-four hours a day for a month. This fact was

admitted by respondent. While both parties had discussions on the questioned billings,
however, there were no earnest efforts to resolve the differences in accordance with
the arbitration clause provided for in the Contract.
Finally, as a special affirmative defense in its answer, petitioner alleged that
respondents filing of the complaint is premature and should be dismissed on the ground
of non-compliance with paragraph 7.4 of the Contract which provides:
7.4
Disputes
If FIESTA WORLD disputes the amount specified by any invoice, it shall pay the
undisputed amount on or before such date(s), and the disputed amount shall be
resolved by arbitration of three (3) persons, one (1) by mutual choice, while the other
two (2) to be each chosen by the parties themselves, within fourteen (14) days after the
due date for such invoice and all or any part of the disputed amount paid to LINBERG
shall be paid together with interest pursuant to Article XXV from the due date of the
invoice. It is agreed, however, that both parties must resolve the disputes within thirty
(30) days, otherwise any delay in payment resulting to loss to LINBERG when
converted to $US as a result of depreciation of the Pesos shall be for the account of
FIESTA WORLD. Corollarily, in case of erroneous billings, however, LINBERG shall be
liable to pay FIESTA WORLD for the cost of such deterioration, plus interest computed
pursuantto Art. XXV from the date FIESTA WORLD paid for the erroneous billing.
(Underscoring supplied)
Thereafter, petitioner filed a Motion to Set Case for Preliminary Hearing on the ground
that respondent violated the arbitration clause provided in the Contract, thereby
rendering its cause of action premature.
This was opposed by respondent, claiming that paragraph 7.4 of the Contract on
arbitration is not the provision applicable to this case; and that since the parties failed to
settle their dispute, then respondent may resort to court action pursuant to paragraph
17.2 of the same Contract which provides:
17.2
Amicable
Settlement
The parties hereto agree that in the event there is any dispute or difference between
them arising out of this Agreement or in the interpretation of any of the provisions
hereto, they shall endeavor to meet together in an effort to resolve such dispute by
discussion between them but failing such resolution the Chief Executives of LINBERG
and FIESTA WORLD shall meet to resolve such dispute or difference and the joint
decision of such shall be binding upon the parties hereto, and in the event that a
settlement of any such dispute or difference is not reached, then the provisions of Article

XXI

shall

apply.

In its Order dated October 3, 2000, the trial court denied petitioners motion for lack of
merit.
Petitioner then filed a Motion for Reconsideration but it was denied in an Order dated
January 11, 2001.
Dissatisfied, petitioner elevated the matter to the Court of Appeals via a Petition for
Certiorari. On December 12, 2001, the appellate court rendered its Decision dismissing
the petition and affirming the challenged Orders of the trial court. Petitioners Motion for
Reconsideration of the above Decision was likewise denied by the appellate.
Hence, the instant Petition for Review on Certiorari.

ISSUE:
Whether the filing with the trial court of respondents complaint is premature

HELD:
YES, the filing with the trial court of the complaint is premature.
Paragraph 7.4 of the Contract, quoted earlier, mandates that should petitioner dispute
any amount of energy fees in the invoice and billings made by respondent, the
sameshall be resolved by arbitration of three (3) persons, one (1) by mutual choice,
while the other two (2) to be each chosen by the parties themselves. The parties, in
incorporating such agreement in their Contract, expressly intended that the said matter
in dispute must first be resolved by an arbitration panel before it reaches the court. They
made such arbitration mandatory.
It is clear from the records that petitioner disputed the amount of energy fees
demanded by respondent. However, respondent, without prior recourse to arbitration as
required in the Contract, filed directly with the trial court its complaint, thus violating the
arbitration clause in the Contract. It bears stressing that such arbitration agreement is
the law between the parties. Since that agreement is binding between them, they are
expected to abide by it in good faith. And because it covers the dispute between them
in the present case, either of them may compel the other to arbitrate. Thus, it is well
within petitioners right to demand recourse to arbitration.