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This is a petition for review of the decision of the Court of Tax Appeals of November 20, 1961, which denied
recovery of the sum of P28,629.42, paid by the petitioner, under protest, in the concept of customs duties and
special import tax, as well as the petitioner's alternative remedy to recover the said amount minus one per cent
thereof by way of a drawback under sec. 106(b) of the Tariff and Customs Code.
The petitioner Asturias Sugar Central, Inc. is engaged in the production and milling of centrifugal sugar for
export, the sugar so produced being placed in containers known as jute bags. In 1957 it made two importations
of jute bags. The first shipment consisting of 44,800 jute bags and declared under entry 48 on January 8, 1957,
entered free of customs duties and special import tax upon the petitioner's filing of Re-exportation and Special
Import Tax Bond no. 1 in the amounts of P25,088 and P2,464.50, conditioned upon the exportation of the jute
bags within one year from the date of importation. The second shipment consisting of 75,200 jute bags and
declared under entry 243 on February 8, 1957, likewise entered free of customs duties and special import tax
upon the petitioners filing of Re-exportation and Special Import Tax Bond no. 6 in the amounts of P42,112 and
P7,984.44, with the same conditions as stated in bond no. 1.
Of the 44,800 jute bags declared under entry 48, only 8,647 were exported within one year from the date of
importation as containers of centrifugal sugar. Of the 75,200 jute bags declared under entry 243, only 25,000
were exported within the said period of one year. In other words, of the total number of imported jute bags only
33,647 bags were exported within one year after their importation. The remaining 86,353 bags were exported
after the expiration of the one-year period but within three years from their importation.
On February 6, 1958 the petitioner, thru its agent Theo. H. Davies & Co., Far East, Ltd., requested the
Commissioner of Customs for a week's extension of Re-exportation and Special Import Tax Bond no. 6 which
was to expire the following day, giving the following as the reasons for its failure to export the remaining jute
bags within the period of one year: (a) typhoons and severe floods; (b) picketing of the Central railroad line
from November 6 to December 21, 1957 by certain union elements in the employ of the Philippine Railway
Company, which hampered normal operations; and (c) delay in the arrival of the vessel aboard which the
petitioner was to ship its sugar which was then ready for loading. This request was denied by the Commissioner
per his letter of April 15, 1958.
Due to the petitioner's failure to show proof of the exportation of the balance of 86,353 jute bags within one
year from their importation, the Collector of Customs of Iloilo, on March 17, 1958, required it to pay the
amount of P28,629.42 representing the customs duties and special import tax due thereon, which amount the
petitioner paid under protest.
In its letter of April 10, 1958, supplemented by its letter of May 12, 1958, the petitioner demanded the refund of
the amount it had paid, on the ground that its request for extension of the period of one year was filed on time,
and that its failure to export the jute bags within the required one-year period was due to delay in the arrival of
the vessel on which they were to be loaded and to the picketing of the Central railroad line. Alternatively, the
petitioner asked for refund of the same amount in the form of a drawback under section 106(b) in relation to
section 105(x) of the Tariff and Customs Code.
After hearing, the Collector of Customs of Iloilo rendered judgment on January 21, 1960 denying the claim for
refund. From his action, appeal was taken to the Commissioner of Customs who upheld the decision of the
Collector. Upon a petition for review the Court of Tax Appeals affirmed the decision of the Commissioner of
The petitioner imputes three errors to the Court of Tax Appeals, namely:
"1. In not declaring that force majeure and/or fortuitous event is a sufficient justification for the failure of the
petitioner to export the jute bags in question within the time required by the bonds.

"2. In not declaring that it is within the power of the Collector of Customs and/or the Commissioner of
Customs to extend the period of one (1) year within which the jute bags should be exported.

"3. In not declaring that the petitioner is entitled to a refund by way of a drawback under the provisions of
section 106, par. (b), of the Tariff and Customs Code."

1. The basic issue tendered for resolution is whether the Commissioner of Customs is vested, under the
Philippine Tariff Act of 1909, the then applicable law, with discretion to extend the period of one year provided
for in section 23 of the Act. Section 23 reads:
"Sec. 23. That containers, such as casks, large metal, glass, or other receptacles which are, in the opinion of the
collector of customs, of such a character as to be readily identifiable may be delivered to the importer thereof
upon identification and the giving of a bond with sureties satisfactory to the collector of customs in an amount
equal to double the estimated duties thereon, conditioned for the exportation thereof or payment of the
corresponding duties thereon within one year from the date of importation, under such rules and regulations as
the Insular Collector of Customs shall provide."[1]

To implement the said section 23 Customs Administrative Order 389 dated December 6, 1940 was
promulgated, paragraph XXVIII of which provides that "bonds for the re-exportation of cylinders and other
containers are good for 12 months without extension," and paragraph XXXI, that "bonds for customs brokers,
commercial samples, repairs and those filed to guarantee the re-exportation of cylinders and other containers are
not extendable."
And insofar as jute bags as containers are concerned, Customs Administrative Order 66 dated August 25, 1948
was issued, prescribing rules and regulations governing the importation, exportation and identification thereof
under section 23 of the Philippine Tariff Act of 1909. Said administrative order provides:
"That importation of jute bags intended for use as containers of Philippine products for exportation to foreign
countries shall be declared in a regular import entry supported by a surety bond in an amount equal to double
the estimated duties, conditioned for the exportation or payment of the corresponding duties thereon within one
year from the date of importation."

It will be noted that section 23 of the Philippine Tariff Act of 1909 and the superseding sec. 105(x) of the Tariff
and Customs Code, while fixing at one year the period within which the containers therein mentioned must be
exported, are silent as to whether the said period may be extended. It was surely by reason of this silence that
the Bureau of Customs issued Administrative Orders 389 and 66, already adverted to, to eliminate confusion
and provide a guide as to how it shall apply the law,[2] and, more specifically, to make officially known its
policy to consider the one-year period mentioned in the law as non-extendible.
Considering that the statutory provisions in question have not been the subject of previous judicial
interpretation, then the application of the doctrine of "judicial respect for administrative construction,"[3] would,
initially, be in order.
"Only where the court of last resort has not previously interpreted the statute is the rule applicable that courts
will give consideration to construction by administrative or executive departments of the state."[4]

"The formal or informal interpretation or practical construction of an ambiguous or uncertain statute or law by
the executive department or other agency charged with its administration or enforcement is entitled to
consideration and the highest respect from the courts, and must be accorded appropriate weight in determining
the meaning of the law, especially when the construction or interpretation is long continued and uniform or is
contemporaneous with the first workings of the statute, or when the enactment of the statute was suggested by
such agency."[5]

The administrative orders in question appear to be in consonance with the intention of the legislature to limit the
period within which to export imported containers to one year, without extension, from the date of
importation. Otherwise, in enacting the Tariff and Customs Code to supersede the Philippine Tariff Act of
1909, Congress would have amended section 23 of the latter law so as to overrule the long-standing view of the
Commissioner of Customs that the one-year period therein mentioned is not extendible.
"Implied legislative approval by failure to change a long-standing administrative construction is not essential to
judicial respect for the construction but is an element which greatly increases the weight given such

"The correctness of the interpretation given a statute by the agency charged with administering its provision is
indicated where it appears that Congress, with full knowledge of the agency's interpretation, has made
significant additions to the statute without amending it to depart from the agency's view."[7]

Considering that the Bureau of Customs is the office charged with implementing and enforcing the provisions
of our tariff and customs code, the construction placed by it thereon should be given controlling weight.
"In applying the doctrine or principle of respect for administrative or practical construction, the courts often
refer to several factors which may be regarded as bases of the principle, as factors leading the courts to give the
principle controlling weight in particular instances, or as independent rules in themselves. These factors are the
respect due the governmental agencies charged with administration, their competence, expertness, experience,
and informed judgment and the fact that they frequently are the drafters of the law they interpret; that the
agency is the one on which the legislature must rely to advise it as to the practical working out of the statute,
and practical application of the statute presents the agency with unique opportunity and experiences for
discovering efficiencies, inaccuracies, or improvements in the statute; x x x"[8]

If it is further considered that exemptions from taxation are not favored,[9] and that tax statutes are to be
construed in strictissimi jurisagainst the taxpayer and liberally in favor of the taxing authority,[10] then we are
hard put to sustain the petitioner's stand that it was entitled to an extension of time within which to export the
jute bags and, consequently, to a refund of the amount it had paid as customs duties.
In the light of the foregoing, it is our considered view that the one-year period prescribed in section 23 of the
Philippine Tariff Act of 1909 is non-extendible and compliance therewith is mandatory.
The petitioner's argument that force majeure and/or fortuitous events prevented it from exporting the jute bags
within the one-year period cannot be accorded credit, for several reasons. In the first place, in its decision of
November 20, 1961, the Court of Tax Appeals made absolutely no mention of or reference to this argument of
the petitioner, which can only be interpreted to mean that the court did not believe that the "typhoons, floods
and picketing" adverted to by the petitioner in its brief were of such magnitude or nature as to effectively
prevent the exportation of the jute bags within the required one-year period. In point of fact nowhere in the
record does the petitioner convincingly show that the so-called fortuitous events or force majeure referred to by
it precluded the timely exportation of the jute bags. In the second place, assuming, arguendo, that the one-year
period is extendible, the jute bags were not actually exported within the one-week extension the petitioner
sought. The record shows that although of the remaining 86,353 jute bags 21,944 were exported within the
period of one week after the request for extension was filed, the rest of the bags, amounting to a total of 64,409,
were actually exported only during the period from February 16 to May 24, 1958, long after the expiration of
the ore-week extension sought by the petitioner. Finally, it is clear from the record that the typhoons and floods
which, according to the petitioner, helped render impossible the fulfillment of its obligation to export within the
one-year period, assuming that they may be placed in the category of fortuitous events or force majeure, all
occurred prior to the execution of the bonds in question, or prior to the commencement of the one-year period
within which the petitioner was in law required to export the jute bags.
2. The next argument of the petitioner is that granting that Customs Administrative Order 389 is valid and
binding, yet "jute bags" cannot be included in the phrase "cylinders and other containers" mentioned therein. It
will be noted, however, that the Philippine Tariff Act of 1909 and the Tariff and Customs Code, which
Administrative Order 389 seeks to implement, speak of "containers" in general. The enumeration following the
word "containers" in the said statutes serves merely to give examples of containers and not to specify the
particular kinds thereof. Thus sec. 23 of the Philippine Tariff Act states, "containers such as casks, large metals,
glass or other receptacles," and sec. 105(x) of the Tariff and Customs Code mentions "large containers," giving
as examples "demijohn, cylinders, drums, casks and other similar receptacles of metal, glass or other materials."
(emphasis supplied) There is, therefore, no reason to suppose that the customs authorities had intended, in
Customs Administrative Order 389, to circumscribe the scope of the word "container," anymore than the sta-
tutes sought to be implemented actually intended to do.
3. Finally, the petitioner claims entitlement to a drawback of the duties it had paid, by virtue of section 106(b)
of the Tariff and Customs Code,[11] which reads:
"Sec. 106. Drawbacks: x x x

"b. On Articles Made from Imported Materials or Similar Domestic Materials and Wastes Thereof. - Upon the
exportation of articles manufactured or produced in the Philippines, including the packing, covering, putting up,
marking or labeling thereof, either in whole or in part of imported materials, or from similar domestic materials
of equal quantity and productive manufacturing quality and value, such question to be determined by the
Collector of Customs, there shall be allowed a drawback equal in amount to the duties paid on the imported
materials so used, or where similar domestic materials are used, to the duties paid on the equivalent imported
similar materials, less one per cent thereof: Provided, That the exportation shall be made within three years
after the importation of the foreign material used or constituting the basis for drawback x x x"

The petitioner argues that not having availed itself of the full exemption granted by sec. 105(x) of the Tariff and
Customs Code due to its failure to export the jute bags within one year, it is nevertheless, by authority of the
above-quoted provision, entitled to a 99% drawback of the duties it had paid, averring further that sec. 106(b)
does not presuppose immediate payment of duties and taxes at the time of importation.
This contention is palpably devoid of merit.
The provisions invoked by the petitioner (to sustain his claim for refund) offer two options to an importer. The
first, under sec. 105(x), gives him the privilege of importing, free from import duties, the containers mentioned
therein as long as he exports them within one year from the date of acceptance of the import entry, which
period, as shown above, is not extendible. The second, presented by sec. 106(b), contemplates a case where im-
port duties are first paid, subject to refund to the extent of 99% of the amount paid, provided the articles
mentioned therein are exported within three years from importation.
It would seem then that the Government would forego collecting duties on the articles mentioned in section
105(x) of the Tariff and Customs Code as long as it is assured, by the filing of a bond, that the same shall be
exported within the relatively short period of one year from the date of acceptance of the import entry. Where
an importer cannot provide such assurance, then the Government, under sec. 106(b) of said Code, would require
payment of the corresponding duties first. The basic purpose of the two provisions is the same, which is, to
enable a local manufacturer to compete in foreign markets, by relieving him of the disadvantages resulting from
having to pay duties on imported merchandise, thereby building up export trade and encouraging manufacture
in the country.[12] But there is a difference, and it is this: under section 105(x) full exemption is granted to an
importer who justifies the grant of exemption by exporting within one year. The petitioner, having opted to take
advantage of the provisions of section 105(x), may not, after having failed to comply with the conditions
imposed thereby, avoid the consequences of such failure by being allowed a drawback under section 106(b) of
the same Act without having complied with the conditions of the latter section.
For it is not to be supposed that the legislature had intended to defeat compliance with the terms of section
105(x) thru a refuge under the provisions of section 106(b). A construction should be avoided which affords an
opportunity to defeat compliance with the terms of a statute.[13] Rather courts should proceed on the theory that
parts of a statute may be harmonized and reconciled with each other.
"A construction of a statute which creates an inconsistency should be avoided when a reasonable interpretation
can be adopted which will not do violence to the plain words of the act and will carry out the intention of

"In the construction of statutes, the courts start with the assumption that the legislature intended to enact an
effective law, and the legislature is not to be presumed to have done a vain thing in the enactment of a
statute. Hence, it is a general principle, embodied in the maxim, 'ut res magis valeat quam pereat,' that the
courts should, if reasonably possible to do so without violence to the spirit and language of an act, so interpret
the statute to give it efficient operation and effect as a whole. An interpretation should, if possible, be avoided,
under which a statute or provision being construed is defeated, or as otherwise expressed, nullified, destroyed,
emasculated, repealed, explained away, or rendered insignificant, meaningless, inoperative, or nugatory."[14]

ACCORDINGLY, the judgment of the Court of Tax Appeals of November 20, 1961 is affirmed, at petitioner's
Concepcion, C.J., Dizon, Zaldivar, Fernando, Capistrano, Teehankee, and Barredo, JJ., concur.
Makalintal and Sanchez, JJ., did not take part.
Reyes, JBL, J., on official leave.

This section was superseded by sec. 105(x) of the Tariff and Customs Code which took effect on July 1,
1957. Section 105(x) provides:
"Large containers (e.g. demijohns, cylinders, drums, casks and other similar receptacles of metal, glass or other
material) which are, in the opinion of the Collector of Customs, of such a character as to be readily identifiable
may be delivered to the importer thereof upon identification and the giving of a bond in an amount equal to one
and one-half times the ascertained duties, taxes and other charges thereon, conditioned for the exportation
thereof or payment of the corresponding duties, taxes and other charges within one year from the date of
acceptance of the import entry."
Magruder v. W.B. & A. Realty Corp., 316 U.S. 69; Skidmore v. Swift & Co., 323 U.S. 134; see 2 Am. Jur. 2d
61, 63.
In applying this doctrine courts often refer generally to the "administrative practice," a term taken to include
any formal or informal act of the administrative agency by which it construes, interprets, or applies the law (2
Am. Jur. 2d 69).
Ahlers v. Farmers Mut. Ins. Co., 264 NW 894.
Am. Jur. 2d, 66-67.
2 Am. Jur. 2d, 70, footnote 11, par. 2
2 Am. Jur. 2d 70, footnote 11, par. 3; see also Phil. Sugar Centrals Agency v. Collector of Customs, 51 Phil.
131, cited in Cia. Gen. de Tabacos de Filipinas v. Actg. Commissioner of Customs, 23 SCRA 600, wherein this
Court held that the very fact that Congress has not seen fit to repeal or change the law is a very potent argument
in favor of sustaining a construction given to it by courts.
2 Am. Jur. 2d 69-70.
Com. of Int. Rev. v. Visayan Electric Co., 23 SCRA 715, 726, citing Esso Standard Eastern, Inc. v. Actg.
Comm. of Customs, 18 SCRA 488; Farm Implement & Machinery Co. v. Corn. of Customs, 24 SCRA 905.
Esso Standard Eastern, Inc. v. Actg. Com. of Customs, supra; La Carlota Sugar Central v. Jimenez, L-12436,
May 31, 1961; Phil. Int'l Fair, v. Collector, L-12928 & L- 12932, March 31, 1962.
Which is a substantial reproduction of sec. 22 of the Philippine Tariff Act of 1909, the law in force at the
time the importations of the jute bags in question were made.
25 C.J.S. 530-531; U.S. v. Passavert, 169 U.S. 16; U.S. v. Whidden, 28 F. Cas. No. 10, 670 cited in 25 C.J.S.
530; Tidewater Oil v. U.S., 171 U.S. 210, 219; U. S. Code Congressioal News, Vol. 2, p. 3577 (85th Congress,
2nd Session).
State v. Lipkin, 84 SE 340, LRA 1915F 1018, cited in 50 Am. Jur. 366.
50 Am. Jur. 358-359.
Republic of the Philippines

G.R. No. 96681 December 2, 1991

HON. ISIDRO CARIÑO, in his capacity as Secretary of the Department of Education, Culture & Sports,
DR. ERLINDA LOLARGA, in her capacity as Superintendent of City Schools of Manila, petitioners,
APOLINARIO ESBER, respondents.

The issue raised in the special civil action of certiorari and prohibition at bar, instituted by the Solicitor
General, may be formulated as follows: where the relief sought from the Commission on Human Rights by a
party in a case consists of the review and reversal or modification of a decision or order issued by a court of
justice or government agency or official exercising quasi-judicial functions, may the Commission take
cognizance of the case and grant that relief? Stated otherwise, where a particular subject-matter is placed by law
within the jurisdiction of a court or other government agency or official for purposes of trial and adjudgment,
may the Commission on Human Rights take cognizance of the same subject-matter for the same purposes of
hearing and adjudication?
The facts narrated in the petition are not denied by the respondents and are hence taken as substantially correct
for purposes of ruling on the legal questions posed in the present action. These facts, 1 together with others
involved in related cases recently resolved by this Court 2 or otherwise undisputed on the record, are hereunder
set forth.
1. On September 17, 1990, a Monday and a class day, some 800 public school teachers, among them members
of the Manila Public School Teachers Association (MPSTA) and Alliance of Concerned Teachers (ACT)
undertook what they described as “mass concerted actions” to “dramatize and highlight” their plight resulting
from the alleged failure of the public authorities to act upon grievances that had time and again been brought to
the latter’s attention. According to them they had decided to undertake said “mass concerted actions” after the
protest rally staged at the DECS premises on September 14, 1990 without disrupting classes as a last call for the
government to negotiate the granting of demands had elicited no response from the Secretary of Education. The
“mass actions” consisted in staying away from their classes, converging at the Liwasang Bonifacio, gathering in
peaceable assemblies, etc. Through their representatives, the teachers participating in the mass actions were
served with an order of the Secretary of Education to return to work in 24 hours or face dismissal, and a
memorandum directing the DECS officials concerned to initiate dismissal proceedings against those who did
not comply and to hire their replacements. Those directives notwithstanding, the mass actions continued into the
week, with more teachers joining in the days that followed. 3
Among those who took part in the “concerted mass actions” were the eight (8) private respondents herein,
teachers at the Ramon Magsaysay High School, Manila, who had agreed to support the non-political demands
of the MPSTA. 4
2. For failure to heed the return-to-work order, the CHR complainants (private respondents) were
administratively charged on the basis of the principal’s report and given five (5) days to answer the charges.
They were also preventively suspended for ninety (90) days “pursuant to Section 41 of P.D. 807” and
temporarily replaced (unmarked CHR Exhibits, Annexes F, G, H). An investigation committee was
consequently formed to hear the charges in accordance with P.D. 807. 5
3. In the administrative case docketed as Case No. DECS 90-082 in which CHR complainants Graciano Budoy,
Jr., Julieta Babaran, Luz del Castillo, Apolinario Esber were, among others, named respondents, 6 the latter filed
separate answers, opted for a formal investigation, and also moved “for suspension of the administrative
proceedings pending resolution by . . (the Supreme) Court of their application for issuance of an injunctive
writ/temporary restraining order.” But when their motion for suspension was denied by Order dated November
8, 1990 of the Investigating Committee, which later also denied their motion for reconsideration orally made at
the hearing of November 14, 1990, “the respondents led by their counsel staged a walkout signifying their intent
to boycott the entire proceedings.” 7 The case eventually resulted in a Decision of Secretary Cariño dated
December 17, 1990, rendered after evaluation of the evidence as well as the answers, affidavits and documents
submitted by the respondents, decreeing dismissal from the service of Apolinario Esber and the suspension for
nine (9) months of Babaran, Budoy and del Castillo. 8
4. In the meantime, the “MPSTA filed a petition for certiorari before the Regional Trial Court of Manila against
petitioner (Cariño), which was dismissed (unmarked CHR Exhibit, Annex I). Later, the MPSTA went to the
Supreme Court (on certiorari, in an attempt to nullify said dismissal, grounded on the) alleged violation of the
striking teachers” right to due process and peaceable assembly docketed as G.R. No. 95445, supra. The ACT
also filed a similar petition before the Supreme Court . . . docketed as G.R. No. 95590.” 9 Both petitions in this
Court were filed in behalf of the teacher associations, a few named individuals, and “other teacher-members so
numerous similarly situated” or “other similarly situated public school teachers too numerous to be
5. In the meantime, too, the respondent teachers submitted sworn statements dated September 27, 1990 to the
Commission on Human Rights to complain that while they were participating in peaceful mass actions, they
suddenly learned of their replacements as teachers, allegedly without notice and consequently for reasons
completely unknown to them. 10
6. Their complaints — and those of other teachers also “ordered suspended by the . . . (DECS),” all numbering
forty-two (42) — were docketed as “Striking Teachers CHR Case No. 90775.” In connection therewith the
Commission scheduled a “dialogue” on October 11, 1990, and sent a subpoena to Secretary Cariño requiring his
attendance therein. 11
On the day of the “dialogue,” although it said that it was “not certain whether he (Sec. Cariño) received the
subpoena which was served at his office, . . . (the) Commission, with the Chairman presiding, and
Commissioners Hesiquio R. Mallilin and Narciso C. Monteiro, proceeded to hear the case;” it heard the
complainants’ counsel (a) explain that his clients had been “denied due process and suspended without formal
notice, and unjustly, since they did not join the mass leave,” and (b) expatiate on the grievances which were
“the cause of the mass leave of MPSTA teachers, (and) with which causes they (CHR complainants)
sympathize.” 12 The Commission thereafter issued an Order 13 reciting these facts and making the following
To be properly apprised of the real facts of the case and be accordingly guided in its investigation and resolution
of the matter, considering that these forty two teachers are now suspended and deprived of their wages, which
they need very badly, Secretary Isidro Cariño, of the Department of Education, Culture and Sports, Dr. Erlinda
Lolarga, school superintendent of Manila and the Principal of Ramon Magsaysay High School, Manila, are
hereby enjoined to appear and enlighten the Commission en banc on October 19, 1990 at 11:00 A.M. and to
bring with them any and all documents relevant to the allegations aforestated herein to assist the Commission in
this matter. Otherwise, the Commission will resolve the complaint on the basis of complainants’ evidence.
xxx xxx xxx
7. Through the Office of the Solicitor General, Secretary Cariño sought and was granted leave to file a motion
to dismiss the case. His motion to dismiss was submitted on November 14, 1990 alleging as grounds therefor,
“that the complaint states no cause of action and that the CHR has no jurisdiction over the case.” 14
8. Pending determination by the Commission of the motion to dismiss, judgments affecting the “striking
teachers” were promulgated in two (2) cases, as aforestated, viz.:
a) The Decision dated December l7, 1990 of Education Secretary Cariño in Case No. DECS 90-082, decreeing
dismissal from the service of Apolinario Esber and the suspension for nine (9) months of Babaran, Budoy and
del Castillo; 15 and
b) The joint Resolution of this Court dated August 6, 1991 in G.R. Nos. 95445 and 95590 dismissing the
petitions “without prejudice to any appeals, if still timely, that the individual petitioners may take to the Civil
Service Commission on the matters complained of,” 16 and inter alia “ruling that it was prima facie lawful for
petitioner Cariño to issue return-to-work orders, file administrative charges against recalcitrants, preventively
suspend them, and issue decision on those charges.” 17
9. In an Order dated December 28, 1990, respondent Commission denied Sec. Cariño’s motion to dismiss and
required him and Superintendent Lolarga “to submit their counter-affidavits within ten (10) days . . . (after
which) the Commission shall proceed to hear and resolve the case on the merits with or without respondents
counter affidavit.” 18 It held that the “striking teachers” “were denied due process of law; . . . they should not
have been replaced without a chance to reply to the administrative charges;” there had been a violation of their
civil and political rights which the Commission was empowered to investigate; and while expressing its “utmost
respect to the Supreme Court . . . the facts before . . . (it) are different from those in the case decided by the
Supreme Court” (the reference being unmistakably to this Court’s joint Resolution of August 6, 1991 in G.R.
Nos. 95445 and 95590, supra).
It is to invalidate and set aside this Order of December 28, 1990 that the Solicitor General, in behalf of
petitioner Cariño, has commenced the present action of certiorari and prohibition.
The Commission on Human Rights has made clear its position that it does not feel bound by this Court’s joint
Resolution in G.R. Nos. 95445 and 95590, supra. It has also made plain its intention “to hear and resolve the
case (i.e., Striking Teachers HRC Case No. 90-775) on the merits.” It intends, in other words, to try and decide
or hear and determine, i.e., exercise jurisdiction over the following general issues:
1) whether or not the striking teachers were denied due process, and just cause exists for the imposition of
administrative disciplinary sanctions on them by their superiors; and
2) whether or not the grievances which were “the cause of the mass leave of MPSTA teachers, (and) with which
causes they (CHR complainants) sympathize,” justify their mass action or strike.
The Commission evidently intends to itself adjudicate, that is to say, determine with character of finality and
definiteness, the same issues which have been passed upon and decided by the Secretary of Education, Culture
& Sports, subject to appeal to the Civil Service Commission, this Court having in fact, as aforementioned,
declared that the teachers affected may take appeals to the Civil Service Commission on said matters, if still
The threshold question is whether or not the Commission on Human Rights has the power under the
Constitution to do so; whether or not, like a court of justice, 19 or even a quasi-judicial agency, 20 it has
jurisdiction or adjudicatory powers over, or the power to try and decide, or hear and determine, certain specific
type of cases, like alleged human rights violations involving civil or political rights.
The Court declares the Commission on Human Rights to have no such power; and that it was not meant by the
fundamental law to be another court or quasi-judicial agency in this country, or duplicate much less take over
the functions of the latter.
The most that may be conceded to the Commission in the way of adjudicative power is that it
may investigate, i.e., receive evidence and make findings of fact as regards claimed human rights violations
involving civil and political rights. But fact finding is not adjudication, and cannot be likened to the judicial
function of a court of justice, or even a quasi-judicial agency or official. The function of receiving evidence and
ascertaining therefrom the facts of a controversy is not a judicial function, properly speaking. To be considered
such, the faculty of receiving evidence and making factual conclusions in a controversy must be accompanied
by the authority of applying the law to those factual conclusions to the end that the controversy may be decided
or determined authoritatively, finally and definitively, subject to such appeals or modes of review as may be
provided by law. 21 This function, to repeat, the Commission does not have. 22
The proposition is made clear by the constitutional provisions specifying the powers of the Commission on
Human Rights.
The Commission was created by the 1987 Constitution as an independent office. 23 Upon its constitution, it
succeeded and superseded the Presidential Committee on Human Rights existing at the time of the effectivity of
the Constitution. 24 Its powers and functions are the following 25
(1) Investigate, on its own or on complaint by any party, all forms of human rights violations involving civil and
political rights;
(2) Adopt its operational guidelines and rules of procedure, and cite for contempt for violations thereof in
accordance with the Rules of Court;
(3) Provide appropriate legal measures for the protection of human rights of all persons within the Philippines,
as well as Filipinos residing abroad, and provide for preventive measures and legal aid services to the
underprivileged whose human rights have been violated or need protection;
(4) Exercise visitorial powers over jails, prisons, or detention facilities;
(5) Establish a continuing program of research, education, and information to enhance respect for the primacy
of human rights;
(6) Recommend to the Congress effective measures to promote human rights and to provide for compensation
to victims of violations of human rights, or their families;
(7) Monitor the Philippine Government’s compliance with international treaty obligations on human rights;
(8) Grant immunity from prosecution to any person whose testimony or whose possession of documents or
other evidence is necessary or convenient to determine the truth in any investigation conducted by it or under its
(9) Request the assistance of any department, bureau, office, or agency in the performance of its functions;
(10) Appoint its officers and employees in accordance with law; and
(11) Perform such other duties and functions as may be provided by law.
As should at once be observed, only the first of the enumerated powers and functions bears any resemblance to
adjudication or adjudgment. The Constitution clearly and categorically grants to the Commission the power
to investigate all forms of human rights violations involving civil and political rights. It can exercise that power
on its own initiative or on complaint of any person. It may exercise that power pursuant to such rules of
procedure as it may adopt and, in cases of violations of said rules, cite for contempt in accordance with the
Rules of Court. In the course of any investigation conducted by it or under its authority, it may grant immunity
from prosecution to any person whose testimony or whose possession of documents or other evidence is
necessary or convenient to determine the truth. It may also request the assistance of any department, bureau,
office, or agency in the performance of its functions, in the conduct of its investigation or in extending such
remedy as may be required by its findings. 26
But it cannot try and decide cases (or hear and determine causes) as courts of justice, or even quasi-judicial
bodies do. To investigate is not to adjudicate or adjudge. Whether in the popular or the technical sense, these
terms have well understood and quite distinct meanings.
“Investigate,” commonly understood, means to examine, explore, inquire or delve or probe into, research on,
study. The dictionary definition of “investigate” is “to observe or study closely: inquire into systematically. “to
search or inquire into: . . . to subject to an official probe . . .: to conduct an official inquiry.” 27 The purpose of
investigation, of course, is to discover, to find out, to learn, obtain information. Nowhere included or intimated
is the notion of settling, deciding or resolving a controversy involved in the facts inquired into by application of
the law to the facts established by the inquiry.
The legal meaning of “investigate” is essentially the same: “(t)o follow up step by step by patient inquiry or
observation. To trace or track; to search into; to examine and inquire into with care and accuracy; to find out by
careful inquisition; examination; the taking of evidence; a legal inquiry;” 28 “to inquire; to make an
investigation,” “investigation” being in turn describe as “(a)n administrative function, the exercise of which
ordinarily does not require a hearing. 2 Am J2d Adm L Sec. 257; . . . an inquiry, judicial or otherwise, for the
discovery and collection of facts concerning a certain matter or matters.” 29
“Adjudicate,” commonly or popularly understood, means to adjudge, arbitrate, judge, decide, determine,
resolve, rule on, settle. The dictionary defines the term as “to settle finally (the rights and duties of the parties to
a court case) on the merits of issues raised: . . . to pass judgment on: settle judicially: . . . act as judge.” 30 And
“adjudge” means “to decide or rule upon as a judge or with judicial or quasi-judicial powers: . . . to award or
grant judicially in a case of controversy . . . .” 31
In the legal sense, “adjudicate” means: “To settle in the exercise of judicial authority. To determine finally.
Synonymous with adjudge in its strictest sense;” and “adjudge” means: “To pass on judicially, to decide, settle
or decree, or to sentence or condemn. . . . Implies a judicial determination of a fact, and the entry of a
judgment.” 32
Hence it is that the Commission on Human Rights, having merely the power “to investigate,” cannot and should
not “try and resolve on the merits” (adjudicate) the matters involved in Striking Teachers HRC Case No. 90-
775, as it has announced it means to do; and it cannot do so even if there be a claim that in the administrative
disciplinary proceedings against the teachers in question, initiated and conducted by the DECS, their human
rights, or civil or political rights had been transgressed. More particularly, the Commission has no power to
“resolve on the merits” the question of (a) whether or not the mass concerted actions engaged in by the teachers
constitute and are prohibited or otherwise restricted by law; (b) whether or not the act of carrying on and taking
part in those actions, and the failure of the teachers to discontinue those actions, and return to their classes
despite the order to this effect by the Secretary of Education, constitute infractions of relevant rules and
regulations warranting administrative disciplinary sanctions, or are justified by the grievances complained of by
them; and (c) what where the particular acts done by each individual teacher and what sanctions, if any, may
properly be imposed for said acts or omissions.
These are matters undoubtedly and clearly within the original jurisdiction of the Secretary of Education, being
within the scope of the disciplinary powers granted to him under the Civil Service Law, and also, within the
appellate jurisdiction of the Civil Service Commission.
Indeed, the Secretary of Education has, as above narrated, already taken cognizance of the issues and resolved
them, 33 and it appears that appeals have been seasonably taken by the aggrieved parties to the Civil Service
Commission; and even this Court itself has had occasion to pass upon said issues. 34
Now, it is quite obvious that whether or not the conclusions reached by the Secretary of Education in
disciplinary cases are correct and are adequately based on substantial evidence; whether or not the proceedings
themselves are void or defective in not having accorded the respondents due process; and whether or not the
Secretary of Education had in truth committed “human rights violations involving civil and political rights,” are
matters which may be passed upon and determined through a motion for reconsideration addressed to the
Secretary Education himself, and in the event of an adverse verdict, may be reviewed by the Civil Service
Commission and eventually the Supreme Court.
The Commission on Human Rights simply has no place in this scheme of things. It has no business intruding
into the jurisdiction and functions of the Education Secretary or the Civil Service Commission. It has no
business going over the same ground traversed by the latter and making its own judgment on the questions
involved. This would accord success to what may well have been the complaining teachers’ strategy to abort,
frustrate or negate the judgment of the Education Secretary in the administrative cases against them which they
anticipated would be adverse to them.
This cannot be done. It will not be permitted to be done.
In any event, the investigation by the Commission on Human Rights would serve no useful purpose. If its
investigation should result in conclusions contrary to those reached by Secretary Cariño, it would have no
power anyway to reverse the Secretary’s conclusions. Reversal thereof can only be done by the Civil Service
Commission and lastly by this Court. The only thing the Commission can do, if it concludes that Secretary
Cariño was in error, is to refer the matter to the appropriate Government agency or tribunal for assistance; that
would be the Civil Service Commission. 35 It cannot arrogate unto itself the appellate jurisdiction of the Civil
Service Commission.
WHEREFORE, the petition is granted; the Order of December 29, 1990 is ANNULLED and SET ASIDE,
and the respondent Commission on Human Rights and the Chairman and Members thereof are prohibited “to
hear and resolve the case (i.e., Striking Teachers HRC Case No. 90-775) on the merits.”
Melencio-Herrera, Cruz, Feliciano, Bidin, Griño-Aquino, Medialdea, Regalado, Davide, Jr. and Romero, JJ,


1 Rollo, pp. 6-13.
2 G.R. No. 95445 (Manila Public School Teachers Association, et al. v. Hon. Perfecto Laguio, Jr., etc., et al)
and G.R. No. 95590 (Alliance of Concerned Teachers [ACT], et al. v. Hon. Isidro Cariño, etc., et al.).
3 (Joint) Resolution, G.R. Nos. 95445 and 95590, prom. Aug. 6, 1991, pp. 3-4.
4 Rollo, p. 7.
5 Id., p. 7.
6 Also impleaded as respondents were other teachers, Adelaida dela Cruz, Ma. Teresa Rizardo, Rita Atabelo
and Digna Operiano (Rollo, p. 77).
7 Rollo, pp. 77-78.
8 Id., pp. 77-81.
9 Id., pp. 7-8, and 47-50 (Annex “I,” petition: Decision of Judge Perfecto A.S. Laguio in Civil Case No. 90-
54468 of the RTC of Manila [Branch 18] entitled Manila Public School Teachers Association, et al. v. Hon.
Isidro Cariño and Hon. Erlinda Lolarga).
10 Id., pp. 8; 51-52 (Annex J, Petition: Pinagsamang Sinumpaang Salaysay of 7 affiants including respondents
Budoy, Babaran, and del Castillo), and 53-54 (Annex K, petition: sworn statement given by Apolinario Esber
under questioning by Nicanor S. Agustin, CHR).
11 Id., p. 56: Order in Striking Teachers CHR Case No. 90-775, 1st par., p. 1.
12 Id., 1st and 2nd pars., p. 1.
13 Id., pp, 56-57.
14 Id., pp, 11-58-76 (Annex M, petition).
15 SEE footnote 8 and related text, supra.
16 SEE footnote 3, supra.
17 Rollo, p. 11.
18 Id., pp. 12-13.
19 Including Regional Trial Courts designated and acting as Special Agrarian Courts, and the Court of Tax
Appeals. SEE Supreme Court Circular No. 1-91 eff. April 1, 1991.
20 Vested with judicial authority or quasi-judicial powers are such agencies, boards or officers like the
Securities & Exchange Commission, Land Registration Authority, Social Security Commission, Civil
Aeronautics Board, Bureau of Patents, Trademarks and Technology Transfer, National Electrification
Administration, Energy Regulatory Board, National Telecommunications Commission, Department of Agrarian
Reform, Government Service Insurance System, Employees’ Compensation Commission, Philippine Atomic
Energy Commission. SEE Circular No. 1-91, supra. Also possessed of quasi-judicial authorities are department
heads and heads of office under the Civil Service Law, and the Ombudsman.
21 The nature of a “judicial function” was inter alia described in Republic of the Philippines (PCGG) v.
Sandiganbayan, et al., G.R. No. 90478 as follows: “The resolution of controversies is, as everyone knows,
the raison d’etre of courts. This essential function is accomplished by first, the ascertainment of all the material
and relevant facts from the pleadings and from the evidence adduced by the parties, and second after that
determination of the facts has been completed, by the application of the law thereto to the end that the
controversy may be settled authoritatively, definitively and finally.”
. . . “It may be said generally that the exercise of judicial functions is to determine what the law is, and what the
legal rights of parties are, with respect to a matter in controversy; and whenever an officer is clothed with that
authority, and undertakes to determine those questions, he acts judicially.” . . . Mun. Council of Lemery v. Prov.
Board of Batangas, 56 Phil. 260, 270, citing State ex rel. Boards of Commrs. v. Dunn, 86 Minn. 301, 304.
It has been held that a special civil action of certiorari “would not lie to challenge action of the “Integrity
Board” set up by Executive
Order No. 318 of May 25, 1950, because that board, like the later Presidential Complaints and Action
Commission, was not invested with judicial functions but only with power to investigate charges of graft and
corruption in office and to submit the record, together with findings and recommendations, to the
President.” Ruperto v. Torres G.R. No. L-8785, Feb. 25, 1957 (Unrep., 100 Phil. 1098) (Rep. of the Phil.
Digest, Vol. 1, Certiorari, Sec. 22, p. 430).
Ballentine’s Law Dictionary, 3rd Ed., treating of “jurisdiction” in relation to a criminal case, states it to be “the
power of a court to inquire into the fact, to apply the law, and to declare the punishment, in a regular course of
judicial proceeding . . .” In Black’s Law Dictionary 5th Ed., “adjudge” is defined as: “To pass on judicially, to
decide, settle or decree, or to sentence or condemn. . . . Implies a judicial determination of a fact, and the entry
of a judgment (emphasis supplied).
22 A distinguished Member of the Constitutional Commission that drew up the 1987 Constitution, Fr. Joaquin
Bernas, S.J., citing the Commission’s official records, states that the “principal function of the Commission (on
Human Rights) is investigatory. In fact, in terms of law enforcement, this pretty much is the limit of its
function. Beyond investigation, it will have to rely on the Justice Department which has full control over
prosecutions. Thus, under Section 18 (9) it can only request assistance from executive offices.” (Bernas, The
Constitution of the Republic of the Philippines, a Commentary, 1988 ed., Vol. II p. 503/).
23 Art. XIII, Sec. 17. (1).
24 Id., Sec. 17. (3).
25 Id., Sec. 18.
26 E.g.: the prosecution of persons guilty of crimes, or institution of civil or administrative proceedings;
exercise of visitorial powers over jails, prisons, or detention facilities; the submission of recommendations to
the Congress of measures to promote human rights provide for compensation to victims of violations thereof,
27 Webster’s Third New International Dictionary. The Oxford English Dictionary (2d ed., 1961) definition is:
“To search or inquire into; to examine (a matter) systematically or in detail; to make an inquiry or examination
into.” The American College Encyclopedic Dictionary (1959 ed.) defines (a) “investigate” as “to search or
examine into the particulars of; examine in detail;” and (b) “investigation,” an act or process of investigating; a
searching inquiry in order to ascertain facts; a detailed or careful examination.
28 Black’s Law Dictionary, 5th ed.
29 Ballentine’s Law Dictionary, 3rd Ed.
30 Webster’s Third New International Dictionary. The Oxford English Dictionary (2d ed., 1961) definition is
“To adjudge; to award; “to give something controverted to one of the litigants, by a sentence or decision. . . . To
try and determine judicially; to pronounce by sentence of court. . . . To sit in judgment and pronounce sentence;
to act as a judge, or court of judgment.”
31 Id., the Oxford English Dictionary (2d ed., 1961) definition is “To settle, determine, or decide judicially; to
adjudicate upon; . . . To pronounce or decree by judicial sentence . . . To award judicially; to grant, bestow, or
impose by judicial sentence . . . .”
32 Black’s Law Dictionary, 5th ed.; in Ballentine’s Law Dictionary, “adjudicate” is defined as: “To give
judgment; to render or award judgment,” and “adjudge” as: “To give judgment; to decide, to sentence.” In
Bouvier’s Law Dictionary Third Revision (8th Ed.), “adjudication” is defined as “A judgment; giving or
pronouncing judgment in a case. Determination in the exercise of judicial power.”
G.R. No. 153310 March 2, 2004


ASSURANCE, INC., respondents.



Before this Court is a Petition for Review on Certiorari assailing the Decision dated February 14, 2002, of the Court of Appeals
in CA G.R. SP No. 67432,1 which affirmed the Decision2 of the Construction Industry Arbitration Commission (CIAC)3 dated
September 8, 2001, in CIAC Case No. 22-2000 finding petitioner Megaworld Globus Asia, Inc., liable to DSM Construction in
the amount of ₱62,760,558.49.

The antecedents are as follows:

Relative to the construction of a condominium project called "The Salcedo Park," located at H.V. dela Costa St., Salcedo
Village, Makati City, the project owner, Megaworld, entered into three separate contracts with DSM Construction, namely: (1)
Contract for Architectural Finishing Works; (2) Contract for Interior Finishing Works; and (3) Contract for Supply and
Installation of Kitchen Cabinets and Closets. The total contract price, which was initially placed at ₱300 Million, was later
reduced to ₱240 Million when the items for kitchen cabinets and walk-in closets were deleted.4 The contracts also contain a
stipulation for Retention Money, which is a portion of the total contract price (usually, as in this case, 10%) set aside by the
project owner from all approved billings and retained for a certain period to guarantee the performance by the contractor of all
corrective works during the defect-liability period which, in this case, is twelve months from the issuance of the Taking Over
Certificate of Works.5

The Letter of Award for Architectural Finishing Works provides that the period for commencement and completion shall be
twelve months, from August 1, 1997 to July 31, 1998. However, on February 21, 2000, representatives of both Megaworld and
DSM Construction entered into an Interim Agreement whereby they agreed on a new schedule of the turnover of units from the
26th floor to the 40th floor, which was the last of the contracted works.6 The consideration agreed upon in the Interim
Agreement was ₱53,000,000.00. Of this amount, ₱3,000,000.00 was to be released immediately while five (5) equal
installments of ₱7,000,000.00 were to be released depending on the turn-over of units from the 26th floor to the 40th floor. The
remaining amount of ₱15,000,000.00 of the ₱53,000,000.00 consisted of half of the retention money.7

Because of the differences that arose from the billings, DSM Construction filed on August 21, 2002, a Complaint before the
CIAC for compulsory arbitration, claiming payment of ₱97,743,808.33 for the outstanding balance of the three construction
contracts, variation works, labor escalation, preliminaries loss and expense, earned retention money, interests, and attorney’s
fees.8 DSM Construction alleged that it already commenced the finishing works on the existing 12 floors on August 1, 1997,
instead of waiting for the entire 40-floor structure to be completed. At one time, DSM Construction worked with other
contractors whose work often depended on, interfered or conflicted with said contractors. Delay by a trade contractor would
start a chain reaction by delaying or putting off other works.9

Interposing mainly the defense of delay in the turn-over of units and the poor quality of work of DSM Construction, Megaworld
filed its Answer and made a counter-claim for loss of profits, liquidated damages, costs of take-over and rectification works,
administration expenses, interests, attorney’s fees and cost of arbitration in the total amount of ₱85,869,870.28.10

Prudential Guarantee and Assurance, Inc. (PGAI), which issued a Performance Bond to guarantee Megaworld’s contractual
obligation on the project, was impleaded by Megaworld as a third-party respondent.11

On March 28, 2001, the parties signed before the members of the Arbitral Tribunal the Terms of Reference12 (TOR) where they
setforth their admitted facts,13 respective documentary evidence,14 summary of claims15 and issues to be resolved by the
tribunal.16 After presenting their evidence in the form of affidavits of witnesses,17 the parties submitted their respective
memoranda/draft decisions.18
On October 19, 2001, the Arbitral Tribunal promulgated its Decision dated September 28, 2001, awarding ₱62,760,558.49 to
DSM Construction and ₱9,473,799.46 to Megaworld.19

Megaworld filed a Petition for Review under Rule 43 of the Rules of Civil Procedure before the Court of Appeals. It faulted the
Arbitral Tribunal for finding that DSM Construction achieved a 95.56% level of accomplishment as of February 14, 2000; for
absolving DSM Corporation of the consequences of the alleged delay in the performance of its work; and for ruling that DSM
Construction had complied with the contractual requirements for filing requests for extension. Megaworld likewise questioned
the sufficiency of evidence to justify the awards for liquidated damages; the balance of the contract price; the balance of
amounts payable on account of the Interim Agreement of February 21, 2000; the amount of ₱6,596,675.55 for variation orders;
the amount of ₱29,380,902.35 as reimbursement for preliminaries/loss and expense; the amount of ₱413,041.52 for labor
escalation costs; and the balance of the retention money in the amount of ₱14,700,000.00 despite its award of ₱11,820,000.00
under the February 21, 2000, Interim Agreement. Finally, Megaworld claimed that the Arbitral Tribunal erred in denying its
claim for liquidated damages, expenses incurred for the cost of take-over work, administrative expenses, and its recourse against
PGAI and for limiting its recovery for rectification work to only ₱9,197,863.55.20

On February 14, 2002, the Court of Appeals promulgated its Decision21 affirming that of the Arbitral Tribunal. The court
pointed out that only questions of law may be raised before it on appeal from an award of the CIAC.22 That pronouncement
notwithstanding, the Court of Appeals proceeded to review the decision of the Arbitral Tribunal and found the same to be amply
supported by evidence.23

Megaworld sought reconsideration of the Court of Appeals’ Decision arguing, among other things, that the appellate court
ignored the ruling in Metro Construction, Inc. v. Chatham Properties24 that the review of the CIAC award may involve either
questions of fact, law, or both fact and law.

The Court of Appeals denied the motion for reconsideration in its Resolution25 dated April 25, 2002. While acknowledging that
the findings of fact of the CIAC may be questioned in line with Metro Construction,26 the appellate court stressed that the
tribunal’s decision is not devoid of factual or evidentiary support.

Megaworld elevated the case to this Court through the present Petition, advancing the following grounds, viz:

Metro Construction, INC. vs. Chatham properties, inc. case when it dismissed mgai’s petition despite the grave questions of
both fact and law brought before it by the petitioner.


the finding of the appellate court that the decision was based on substantial evidence adduced by both parties sans any review of
the record or of attachments of dsm is fatally wrong, such finding being merely an adoption of the tribunal’s decision which, as
earlier pointed out, was not supported by competent, credible and admissible evidence.


the court of appeals seriously erred in giving blanket approval of all the unfounded claims and conclusions of the ciac arbitral
tribunal’s SEPTEMBER 28, 2001 decision to the detriment of petitioner’s cardinal right to due process, particularly to its right
to administrative due process.


the findings and conclusions made by a highly partisan ciac arbitral tribunal have no basis on the evidence on record. hence, the
exception to the rule that only questions of law may be brought to the honorable court is applicable in the case AT bar.27

Although Megaworld, at the outset,28 intimates that the case involves grave questions of both fact and law, a cursory reading of
the Petition reveals that, except for the amorphous advertence to administrative due process, the alleged errors fundamentally
involve only questions of fact. Megaworld’s plea for the Court to pass upon the findings of facts of the Arbitral Tribunal, which
were upheld by the appellate court, must perforce fail.
To jumpstart its bid, Megaworld exploits the Court of Appeals’ pronouncement in the assailed decision that only questions of
law may be raised before it from an award of the CIAC. The appellate court did so, Megaworld continues, in evident disregard
of Metro Construction.29

Under Section 19 of Executive Order No. 1008,30 the CIAC’s arbitral award "shall be final and inappealable except on questions
of law which shall be appealable to the Supreme Court." In Metro Construction, however, this Court held that, with the
modification of E.O. No. 1008 by subsequent laws and issuances,31 decisions of the CIAC may be appealed to the Court of
Appeals not only on questions of law but also on questions of fact and mixed questions of law and fact.

Of such subsequent laws and issuances, only Section 1,32 Rule 43 of the 1997 Rules of Civil Procedure expressly mentions the
CIAC. While an argument may be made that procedural rules cannot modify substantive law, adding in support thereof that
Section 1, Rule 43 has increased the jurisdiction of the Court of Appeals by expanding the scope of review of CIAC awards, or
that it contravenes the rationale for arbitration, extant from the record is the fact that no party raised such argument.
Consequently, the matter need not be delved into.

In any case, the attack against the merits of the Court of Appeals’ Decision must fail. Although Metro Construction may have
been unbeknownst to the appellate court when it promulgated its Decision, the fact remains that, as noted therein,33 it reviewed
the findings of facts of the CIAC and ruled that the findings are amply supported by the evidence.

The Court of Appeals is presumed to have reviewed the case based on the Petition and its annexes, and weighed them against
the Comment of DSM Construction and the Decision of the Arbitral Tribunal to arrive at the conclusion that the said Decision is
based on substantial evidence. In administrative or quasi-judicial bodies like the CIAC, a fact may be established if supported
by substantial evidence or that amount of relevant evidence which a reasonable mind might accept as adequate to justify a

The tenability of the assailed Decision is clear from the following discussion of the arguments raised by Megaworld before the
Court of Appeals which significantly are the same arguments it has raised before this Court.

Issue of Accomplishment Level

Megaworld contested the finding of 95.56% level of accomplishment by the Arbitral Tribunal, alleging that the receipts DSM
Construction issued for payments under the Interim Agreement show that the latter only achieved 90% accomplishment up to
the 31st floor while the 32nd to the 34th floors were only 60% completed.35 Megaworld insisted, therefore, that the level of
accomplishment was nowhere near 90%.

DSM Construction countered that Megaworld, in claiming a level of accomplishment of only 90%, contradicted its own Project
Manager, TCGI,36 which came up with a different percentage of accomplishment that are notably higher than Megaworld’s

In resolving this issue, the Arbitral Tribunal relied on the computation of Davis Langdon & Seah (DLS), the project’s
independent surveyor,38 which found the level of accomplishment as of February 14, 2000, to be 95.56%. DLS’s computation is
recited in Exhibit "NN",39 thus:

Architectural Finishing :40

The 24th
Progress Billing
evaluated by
DLS covering
the period
November 15, =
1999 to 95.62%
December 15,
1999 over the
Contract Price
Kitchen Cabinets & Bedroom Closets:43
The 9th
Progress Billing
evaluated by
DLS covering
the period
December 1,
1999 to =
December 9, 91.84%
1999 over the
contract price
for Kitchen
Cabinet and
Interior Finishing Works:46
The 13th
Progress Billing
evaluated by
DLS covering
the period
January 8, 2000
to February 7,
2000 for the Php49,383,114.6747Php50,685,416.5548
Works over the
contract price
for Interior

Php213,658,888.77 + Php26,228,091.72 + Php49,383,114.67 = 289,270,295.17=95.56%

Php223,456,756.68 Php 28,556,915.17 Php50,685,416.55 302,699,097.40

Clearly, thus, CIAC’s finding that the level of accomplishment of DSM Construction as of February 12, 2002, stood at 95.56%
was affirmed by the Court of Appeals because it is supported by substantial evidence.

The Court of Appeals also noted that the Arbitral Tribunal did not give due course to all of DSM Construction’s claims. Indeed,
the Arbitral Tribunal rejected the construction company’s demand for payment for subsequent works done after February 12,
2000, because Exhibit "OO," on which DSM Construction’s demand was based, does not bear any mark that it had been
received by Megaworld. Thus, the Arbitral Tribunal concluded that subsequent works up to September 22, 2000, when DSM
Construction supposedly stopped working on the project, had not been established.49

This Court observes that between the two contrasting claims of Megaworld and DSM Construction on the percentage of work
accomplishment, the Arbitral Tribunal instead accorded weight to the assessment of DLS which is the project surveyor. Apart
from being reasonable, DLS’s evaluation is impartial. Thus, as correctly pointed out by the Arbitral Tribunal, DLS rejected
DSM Construction’s 99% accomplishment claim when it limited its evaluation to only 95.56%.

Issues of Delay and Liquidated Damages

Next, Megaworld attributed the delay in the completion of the construction project solely to DSM Construction. The latter
countered that among the causes of delay was the lack of coordination among trade contractors and the absence of a general
contractor.50 Although the contract purportedly contains a provision for the coordination of trade contractors, the lack of privity
among them prevented coordination such that DSM Construction could not require compliance on the part of the other trade

The Arbitral Tribunal decided this question by turning to Section 2.01 of the General Conditions of the Contract, which states:


The Contractor shall accept the Site as found on the date for possession and at their own expense clear the site of any debris
which may have been left by the preceding occupants/contractors.

The Arbitral Tribunal held that Section 2.01 presupposes that on the date of possession by DSM Construction of the work
premises, the preceding contractor had already left the same.51 The tribunal explained that the delay incurred by other trade
contractors also resulted in the delay of the work of DSM Construction.

It also pointed out that under Section 5.3 (1)52 of the Interim Agreement,53 Megaworld is required to complete and turn over to
DSM Construction preceding works for the latter to complete their works in accordance with the Revised Work Schedule.
Section 5.3 (1), the Arbitral Tribunal noted, even allows DSM Construction to recover losses incurred on account of the standby
time of DSM’s personnel/manpower or workers mobilized while Megaworld is not ready to turn over the preceding works. The
Arbitral Tribunal further held that, in accordance with Section 5.3 (2)54of the Interim Agreement, DSM Construction was
entitled to an extension of time corresponding to the number of days of delay reckoned from the time the preceding work item
or area should have been turned over to DSM Construction. Consequently, such delay, which is not exclusively imputable to
DSM Construction, negates the claim for liquidated damages by Megaworld.55

In affirming the Arbitral Tribunal’s disposition of the issues of delay and payment of liquidated damages, the appellate court
noted that the Arbitral Tribunal narrated the claims and defenses of both DSM Construction and Megaworld before making an
evaluation thereof and arriving at its conclusion.56 Clearly, the evidence and arguments were carefully weighed to justify the
said disposition.

The Tribunal’s finding that the project had already been delayed even before DSM Construction commenced its work is borne
out by the evidence. In his letter, Exhibit X-2,57 Project Management Consultant Eduardo C. Arrojado, conceded that the
previous contractors had delayed the project, at the same time faulting DSM Construction for incurring its own delay.
Furthermore, the work of DSM Construction pertaining as it did to the architectural and interior finishing stages as well as the
supply and installation of kitchen cabinets and closets, obviously related to the final details and completion stage of the project.
Thus, commencement of its task had to depend on the turn over of the complete work of the prior contractors. Hence, the delay
of the previous contractors resulted in the delay of DSM Construction’s work.

Issues of the Contract Price Balance and Retention Money

Megaworld also questioned the Arbitral Tribunal’s awards of ₱7,129,825.19 corresponding to the balance of the contract price,
and ₱11,820,000.00 pursuant to the Interim Agreement.58 Megaworld alleged that DSM Construction was no longer entitled to
the balance of the contract price and the retention money after the latter received payments pursuant to the Interim Agreement in
the amounts of ₱5,444,553.18 for the 26th to the 28th floors, another ₱5,444,553.18 for the 29th to the 31st floors at a 90%
completion rate, and ₱4,161,818.18 for the 32nd to the 34thfloors which were 60% completed. Megaworld also contended that
since it spent more money to complete the scope of work of DSM Construction, the latter was no longer entitled to any of the

On the other hand, DSM Construction argued that the award was justified in view of the failure of Megaworld to controvert the
amount of ₱7,129,825.19 included in the Account Overview of DLS. DSM Construction also emphasized that it was not
claiming the entire ₱53 Million under the Interim Agreement but only the amount corresponding to the actual work done. Even
based on DLS’s computation, a total of ₱11,820,000.00 of retention money is still unpaid out of the 50% agreed to be released
under the Interim Agreement (₱15,000,000.00 less ₱3,180,000.00 retention money or ₱11,820,000.00 for the paid billings).59

The Arbitral Tribunal ruled that the balance claimed under the three contracts was based on what DSM Construction had
actually accomplished less the payments it had previously received. Considering that the remaining works which were
performed by another trade contractor, Deticio and Isabedra Builders, were paid directly by Megaworld, no other cost for work
accomplished in the Interim Agreement is due DSM Construction except the retention money of ₱11,820,000.00.60

The Court of Appeals affirmed the award of the Arbitral Tribunal regarding the balance of the contract price of ₱7,129,825.19
and the retention money of ₱11,820,000.00 to DSM Construction. The Court of Appeals noted that the Arbitral Tribunal again
narrated the claims and defenses of both DSM Construction and Megaworld before arriving at its conclusion. The appellate
court further stated that the mere fact that the tribunal did not award the whole amount claimed by DSM Construction
(₱12,820,000.00) and instead awarded only ₱11,820,000.00 belies Megaworld’s allegation that the tribunal adopted "hook, line
and sinker" DSM Construction’s claims.61

This Court finds the award of the balance of the contract price of ₱7,129,825.20 justified in view of DLS’ explanation in Exhibit
MM-362 that the amount of ₱7,129,825.20 represented the unpaid billing for architectural, interior and kitchen billings before
Megaworld and DSM Construction drafted the Interim Agreement.

Issue of Variation Works

Megaworld also disputed before the Court of Appeals the ₱6,686,675.5563 award by the Arbitral Tribunal for variation works.
Variation works consist of the addition, omission or alteration to the kind, quality or quantity of the works.64 DSM Construction
originally claimed a total of ₱26,208,639.00 for variation works done but, of this claim, the Arbitral Tribunal only awarded
₱6,686,675.55 in line with the evaluation of DLS.

Megaworld conceded that DSM Construction performed additional works to the extent of ₱5,036,252.81. However, Megaworld
claimed that since it incurred expenses when it hired another trade contractor to take over the works left uncompleted by DSM
Construction, the latter lost its right to claim such amount especially since DSM Construction did not comply with the
documentation when claiming variation works.65

DSM Construction asserted that the Arbitral Tribunal, in fact, should have awarded ₱26,208,639.00 instead of limiting the
award to only ₱6,686,675.55 because it was not even disputed that variation works were performed. It also contended that it
cannot be faulted for the lack of documentation because the fault lay on Megaworld’s project manager who failed to forward the
variation orders to DLS.66

The Arbitral Tribunal ruled in favor of DSM Construction, holding that there was enough evidence to prove that the contractor
made a request for change or variation orders. The Arbitral Tribunal also found the testimony of Engineer Eduardo C. Arrojado
convincing, factual and balanced despite Megaworld’s attempt to discredit him. However, while the amount claimed for
variation works was ₱26,208,639.00, the Arbitral Tribunal limited the awarded to only ₱6,686,675.5567 since a closer scrutiny
of the other items indicated that some works were not performed.68

The appellate court upheld the award of the Arbitral Tribunal because the award was based not only on the documentary
exhibits prepared by DLS but on the testimony of Engineer Eduardo C. Arrojado, as well.69

This Court is convinced that payments for variation works is due. Undoubtedly, variation works were performed by DSM
Construction. This was confirmed by Engineer Eduardo C. Arrojado who testified that he recommended the payment for
substantial additional works to DSM Construction. He further stated that since time was of the essence in the completion of the
project, there were variation orders which were performed without the prior approval of the owner. However, he explained that
this was a common construction practice. Finally, he stated that he agreed with the evaluation of DLS.70

The testimony justified the Arbitral Tribunal’s reliance on the evaluation made by DLS which limited the claim for variation
works to ₱6,596,675.55.

Issue of Preliminaries/Loss and Expense

Megaworld also disputed the award of ₱29,380,902.35 for preliminaries/losses and expense.

The provision for preliminaries/loss and expense in the contract assumes a direct loss and/or expense incurred in the regular
progress of work for which the contractor would not be reimbursed under any other provision of the contract.71 DSM
Construction’s claim for preliminaries/loss and expense in the amount of ₱36,603,192.82 covered the loss and expense incurred
on payroll, equipment rental, materials and site clearing on account of such factors as delay in the execution of the works for
causes not attributable to DSM Construction.72

Megaworld refused to recognize DSM Construction’s claim because the latter allegedly failed to comply with Clause 6.16 of
the Conditions of Contract, which imposes a two-month deadline for submission of claims for preliminaries reckoned from "the
happening of the event giving rise to the loss and expense."73 DSM Construction, however, argued that the documentary
evidence shows that out of the four claims for preliminaries, only one (Exhibit MM-5with an evaluation of ₱17,552,722.47),
covering the period August 1, 1998 to April 1999, was submitted beyond the two-months requirement.74 DSM Construction also
pointed out that the two-month requirement for this claim was waived by Megaworld through DLS when the latter recognized
the validity of claims by coming up with an evaluation of ₱17,552,722.47 for the period covered in Exhibit MM-5.75

The Arbitral Tribunal ruled that DSM Construction was entitled to extended preliminaries considering that delay was not
attributable to DSM Construction. The Arbitral Tribunal observed that Megaworld did not present evidence to refute the claim
for extended preliminaries which were previously evaluated by DLS. However, after assessing the two previous evaluations by
DLS, the tribunal ruled that the claims for hauling and disposal and cleaning and clearing of debris should not be included in the
extended preliminaries. Hence, the Arbitral Tribunal reduced the amount of ₱44,051.62 from the claim of ₱2,655,879.89
per Exhibit "MM-7," and ₱3,883,309.54 from the claim of ₱5,651,235.24 per Exhibit "MM-8," such amounts being

The appellate court affirmed the award, stressing the fact that the Arbitral Tribunal denied some of the claims which it did not
find valid.77

DSM Construction’s entitlement to the payment for preliminaries was explained by Engineer Eduardo C. Arrojado to be the
necessary result of the extension of the contract between DSM Construction and Megaworld.78 Notably, majority of the claims
of DSM Construction was reduced by the Arbitral Tribunal on the basis of Exhibit MM-479 or the Summary of Variation Order
Status Report prepared by DLS.

Although the Arbitral Tribunal ruled that DSM Construction was entitled to claim for preliminaries, the award was not based on
the claim of DSM Construction but on the evaluation made by DLS.

The foregoing disquisition adequately shows that the evidence on record supports the findings of facts of the Arbitral Tribunal
on which the Court of Appeals based its decision. In fact, although not all the exhibits in the Arbitral Tribunal were presented
before the Court of Appeals, the record of the appellate court contains the operative facts and the substance of said exhibits, thus
enabling the intelligent disposition of the issues presented before it. This Court went over all the records, including the exhibits,
to ascertain whether the appellate court missed any crucial point. It did not.

The alleged undue favor accorded by the Arbitral Tribunal to DSM Construction is belied by the fact that the Arbitral Tribunal
did not grant all of DSM Construction’s claims. In majority of DSM Construction’s claims, the Arbitral Tribunal awarded
amounts lower than what DSM Construction demanded. The Arbitral Tribunal also granted some of Megaworld’s claims.80

Neither did the Court of Appeals merely "swallow hook, line and sinker" the award of the Arbitral Tribunal. While the appellate
court affirmed the decision of the Arbitral Tribunal, it also ruled in favor of Megaworld when it limited DSM Construction’s
lien to only six units instead of all the condominium units to which DSM was entitled under the Contract, rationalizing that the
₱62 Million award can be covered by the value of the six units of the condominium project.81

Considering that the computations, as well as the propriety of the awards of the Arbitral Tribunal, are unquestionably factual
issues that have been discussed and ruled upon by Arbitral Tribunal and affirmed by the Court of Appeals, we cannot depart
from such findings. Findings of fact of administrative agencies and quasi-judicial bodies, which have acquired expertise
because their jurisdiction is confined to specific matters, are generally accorded not only respect, but finality when affirmed by
the Court of Appeals.82

Megaworld, however, adamantly contends that the present case constitutes an exception to the above rule because: (1) there is
grave abuse of discretion in the appreciation of facts; (2) the judgment is premised on misapprehension of facts; and, (3) the
findings of fact of the Court of Appeals is premised on the supposed absence of evidence and is contradicted by the evidence on
We disagree. None of these flaws appear in this case. Grave abuse of discretion means the capricious or whimsical exercise of
judgment that is so patent and gross as to amount to an evasion of positive duty or a virtual refusal to perform a duty enjoined
by law, or to act at all in contemplation of law, as where the power is exercised in an arbitrary and despotic manner by reason of
passion or hostility.84 No abuse of discretion was established by Megaworld. On the contrary, what is apparent is Megaworld’s
effort to attribute grave abuse of discretion to the Arbitral Tribunal simply because of the unfavorable judgment against it.
Megaworld’s assertion that there was misapprehension of facts and that the evidence is insufficient to support the decision is
also untenable. The Decisions of the Arbitral Tribunal and the Court of Appeals adequately explain the reasons therefor and are
supported by substantial evidence.

Likewise unmeritorious is Megaworld’s assertion that it was deprived of administrative due process. The Arbitral Tribunal
considered the arguments and the evidence submitted by both parties. That it accorded greater weight to DSM Construction’s
evidence, by itself, does not constitute a denial of due process.

WHEREFORE, the Petition is DENIED. The Decision dated February 14, 2001, of the Court of Appeals is AFFIRMED. The
Temporary Restraining Order issued by this Court on July 12, 2002, is hereby LIFTED. Costs against Petitioner.

[G.R. No. 148318. November 22, 2004]


Presiding Judge, RTC of Quezon City, Branch 99, JOSE MARTINEZ, Deputy Sheriff, RTC of
Quezon City, CARMELO V. SISON, Chairman, Arbitration Board, and FIRST UNITED


National Power Corporation (NPC) filed the instant Petition for Review[1] dated July 19, 2001, assailing
the Decision[2] of the Court of Appeals dated May 28, 2001 which affirmed with modification
the Order[3] and Writ of Execution[4] respectively dated May 22, 2000 and June 9, 2000 issued by the Regional
Trial Court. In its assailed Decision, the appellate court declared respondent First United Constructors
Corporation (FUCC) entitled to just compensation for blasting works it undertook in relation to a contract for
the construction of power facilities it entered into with petitioner. The Court of Appeals, however, deleted the
award for attorneys fees having found no basis therefor.
The facts culled from the Decision of the Court of Appeals are undisputed:

On April 14, 1992, NPC and FUCC entered into a contract for the construction of power facilities (civil works)
Schedule 1 1x20 MW Bacon-Manito II Modular Geothermal Power Plant (Cawayan area) and Schedule 1A
1x20 MW Bacon-Manito II Modular Geothermal Power Plant (Botong area) in Bacon, Sorsogon (BACMAN
II). The total contract price for the two schedules is P108,493,966.30, broken down as follows:

1 Cawayan area P52,081,421.00
1A Botong area P56,412,545.30

Appended with the Contract is the contract price schedule which was submitted by the respondent FUCC during
the bidding. The price for grading excavation was P76.00 per cubic meter.

Construction activities commenced in August 1992. In the latter part of September 1992 and after excavating
5.0 meters above the plant elevation, FUCC requested NPC that it be allowed to blast to the design grade of 495
meters above sea level as its dozers and rippers could no longer excavate. It further requested that it be
paid P1,346.00 per cubic meter similar to the rate of NPCs project in Palinpinon.

While blasting commenced on October 6, 1992, NPC and FUCC were discussing the propriety of an extra work
order and if such is in order, at what price should FUCC be paid.

Sometime in March 1993, NPC Vice President for Engineering Construction, Hector Campos, created a task
force to review FUCCs blasting works. The technical task force recommended that FUCC be paid P458.07 per
cubic meter as such being the price agreed upon by FUCC.

The matter was further referred to the Department of Public [W]orks and Highways (DPWH), which in a letter
dated May 19, 1993, recommended the price range of P500.00 to P600.00 per cubic meter as reasonable. It
further opined that the price of P983.75 per cubic meter proposed by Lauro R. Umali, Project Manager of
BACMAN II was high. A copy of the DPWH letter is attached as Annex C, FUCCs Exhibit EEE-Arbitration.
In a letter dated June 28, 1993, FUCC formally informed NPC that it is accepting the proposed price of P458.07
per cubic meter. A copy of the said letter is attached as Annex D, FUCCs Exhibit L Arbitration.

In the meantime, by March 1993, the works in Botong area were in considerable delay. By May 1993, civil
works in Botong were kept at a minimum until on November 1, 1993, the entire operation in the area
completely ceased and FUCC abandoned the project.

Several written and verbal warnings were given by NPC to FUCC. On March 14, 1994, NPCs Board of
Directors passed Resolution No. 94-63 approving the recommendation of President Francisco L. Viray to take
over the contract. President Virays recommendation to take over the project was compelled by the need to
stave-off huge pecuniary and non-monetary losses, namely:

(a) Generation loss estimated to be at P26,546,400/month;

(b) Payment of steam penalties to PNOC-EDC the amount estimated to be at P10,206,048.00/month;
(c) Payment of liquidated damages due to the standby of electromechanical contractor;
(d) Loss of guaranteed protection (warranties) of all delivered plant equipment and accessories as
Mitsubishi Corporation, electromechanical contractor, will not be liable after six months of

To prevent NPC from taking over the project, on March 28, 1994, FUCC filed an action for Specific
Performance and Damages with Preliminary Injunction and Temporary Restraining Order before Branch 99,
Regional Trial Court, Quezon City.

Under paragraph 19 of its Complaint, FUCC admitted that it agreed to pay the price of P458.07 per cubic meter.

On April 5, 1994, Judge de Guzman issued a temporary restraining order and on April 21, 1994, the trial court
resolved to grant the application for issuance of a writ of preliminary injunction.

On July 7, 1994, NPC filed a Petition for Certiorari with Prayer for Temporary Restraining Order and
Preliminary Injunction before the First Division of the Court of Appeals asserting that no injunction may issue
against any government projects pursuant to Presidential Decree 1818.

On July 8, 1994, the Court of Appeals through then Associate Justice Bernardo Pardo issued a temporary
restraining order and on October 20, 1994, the said court rendered a Decision granting NPCs Petition
for Certiorari and setting aside the lower courts Order dated April 21, 1994 and the Writ of Preliminary
Injunction dated May 5, 1994.

However, notwithstanding the dissolution by the Court of Appeals of the said injunction, on July 15, 1995,
FUCC filed a Complaint before the Office of the Ombudsman against several NPC employees for alleged
violation of Republic Act No. 3019, otherwise known as the Anti-Graft and Corrupt Practices Act. Together
with the complaint was an Urgent Ex-Parte Motion for the issuance of a cease and [d]esist [o]rder to restrain
NPC and other NPC officials involved in the BACMAN II project from canceling and/or from taking over
FUCCs contract for civil works of said project.

Then on November 16, 1994, FUCC filed before the Supreme Court a Petition for Review assailing the
Decision of the Court of [A]ppeals dated October 20, 1994. In its Comment, NPC raised the issue that FUCC
resorted to forum shopping as it applied for a cease and desist order before the National Ombudsman despite the
dissolution of the injunction by the Court of Appeals.
Pending the petition filed by FUCC before the Supreme Court, on April 20, 1995 the NPC and FUCC entered
into a Compromise Agreement.

Under the Compromise Agreement, the parties agreed on the following:

1. Defendant shall process and pay the undisputed unpaid billings of Plaintiff in connection with the
entire project fifteen (15) days after a reconciliation of accounts by both Plaintiff and Defendant or
thirty (30) days from the date of approval of this Compromise Agreement by the Court whichever
comes first. Both parties agree to submit and include those accounts which could not be reconciled
among the issues to be arbitrated as hereunder provided;
2. Plaintiff accepts and acknowledges that Defendant shall have the right to proceed with the works by
re-bidding or negotiating the project immediately upon the signing of herein Compromise
3. This Compromise Agreement shall serve as the Supplemental Agreement for payment of plaintiffs
blasting works at the Botong site;
4. Upon approval of this Compromise Agreement by the Court or Plaintiffs receipt of payment of this
undisputed unpaid billings from Defendant whichever comes first, the parties shall immediately file
a Joint Manifestation and Motion for the withdrawal of the following Plaintiffs petition from the
Supreme Court, Plaintiffs Complaint from the National Ombudsman, the Complaint and Amended
Complaint from the RTC, Br. 99 of Quezon City;
5. Upon final resolution of the Arbitration, as hereunder prescribed, the parties shall immediately
execute the proper documents mutually terminating Plaintiffs contract for the civil works of the
BACMAN II Project (Contract No. Sp90DLM-918 (I & A);
6. Such mutual termination of Plaintiffs contract shall have the following effects and/or consequences:
(a) the construction works of Plaintiff at the Kawayan and Bolong sites, at its present stage of
completion, shall be accepted and/or deemed to have been accepted by defendant; (b) Plaintiff shall
have no more obligation to Defendant in respect of the BACMAN II Project except as provided in
clause (e) below; (c) Defendant shall release all retention moneys of plaintiff within a maximum
period of thirty (30) days from the date of final Resolution of the Arbitration; (d) no retention
money shall thenceforth be withheld by Defendant in its payment to Plaintiff under this
Compromise Agreement, and (e) Plaintiff shall put up a one-year guaranty bond for its completed
civil works at the Kawayan site, retroactive to the date of actual use of the plant by defendant;
7. Plaintiffs blasting works claims and other unresolved claims, as well as the claims of damages of
both parties shall be settled through a two stage process to wit:
7.1 Plaintiff and Defendant shall execute and sign this Compromise Agreement which they will
submit for approval by this Court. Under this Compromise Agreement both parties agree
xxx xxx
7.1 The parties shall submit for arbitration to settle: (a) the price of blasting, (b) both parties
claims for damages, delays, interests, and (c) all other unresolved claims of both parties,
including the exact volume of blasted rocks;
7.2 The arbitration shall be through a three-member commission to be appointed by the
Honorable Court. Each party shall nominate one member. The Chairman of the Arbitration
Board shall be [a] person mutually acceptable to both parties, preferably from the academe;
7.3 The parties shall likewise agree upon the terms under which the arbitrable issues shall be
referred to the Arbitration Board. The terms of reference shall form part of the Compromise
Agreement and shall be submitted by the parties to the Honorable Court within a period of
seven (7) days from the signing of the Compromise Agreement;
7.4 The Arbitration Board shall have a non-extendible period of three (3) months within which
to complete the arbitration process and submit its Decision to the Honorable Court;
7.5 The parties agree that the Decision of the Arbitration Board shall be final and executory;
7.6 By virtue of this Compromise Agreement, except as herein provided, the parties shall
mutually waive, forgo and dismiss all of their other claims and/or counterclaim in this case.
Plaintiff and defendant warrant that after approval by the Court of this Compromise
Agreement neither party shall file Criminal or Administrative cases or suits against each
other or its Board or member of its officials on grounds arising from the case.

The Compromise Agreement was subsequently approved by the Court on May 24, 1995.

The case was subsequently referred by the parties to the arbitration board pursuant to their Compromise
Agreement. On December 9, 1999 the Arbitration Board rendered its ruling the dispositive portion of which

WHEREFORE, claimant is hereby declared entitled to an award of P118,681,328.28 as just compensation for
blasting works, plus ten percent (10%) thereof for attorneys fees and expenses of litigation.

Considering that payment in the total amount of P36,550,000.00 had previously been made, respondent is
hereby ordered to pay claimant the remaining sum of P82,131,328.28 for attorneys fees and expenses of

Pursuant to the Compromise Agreement approved by this Honorable Court, the parties have agreed that the
decision of the Arbitration Board shall be final and executory.


On December 10, 1999 plaintiff FUCC filed a Motion for Execution while defendant NPC filed a Motion to
Vacate Award by the Arbitration Board on December 20, 1999.

On May 22, 2000 Presiding Judge Rose Marie Alonzo Legasto issued an order the dispositive portion of which

WHEREFORE, the Arbitration Award issued by the Arbitration Board is hereby APPROVED and the Motion
for Execution filed by plaintiff hereby GRANTED. The Motion to Vacate Award filed by defendant is hereby
DENIED for lack of merit.

Accordingly, let a writ of execution be issued to enforce the Arbitration Award.

SO ORDERED.[5] (Bracketed words supplied)

NPC went to the Court of Appeals on the lone issue of whether respondent judge acted with grave abuse of
discretion in issuing the Order dated May 22, 2000 and directing the issuance of a Writ of Execution.
In its assailed Decision, the appellate court declared that the court a quo did not commit grave abuse of
discretion considering that the Arbitration Board acted pursuant to its powers under the Compromise Agreement
and that its award has factual and legal bases.
The Court of Appeals gave primacy to the court-approved Compromise Agreement entered into by the
parties and concluded that they intended the decision of the arbitration panel to be final and executory. Said the

For one, what the price agreed to be submitted for arbitration are pure issues of fact (i.e., the price of blasting;
both parties claims for damages, delay, interests and all other unresolved claims of both parties, including the
exact volume of blasted rocks). Also, the manner by which the Arbitration Board was formed and the terms
under which the arbitrable issues were referred to said Board are specified in the agreement. Clearly, the parties
had left to the Arbitration Board the final adjudication of their remaining claims and waived their right to
question said Decision of the Board. Hence, they agreed in clear and unequivocal terms in the Compromise
Agreement that said Decision would be immediately final and executory. Plaintiff relied upon this stipulation in
complying with its various obligations under the agreement. To allow defendant to now go back on its word and
start questioning the Decision would be grossly unfair considering that the latter was also a party to the
Compromise Agreement entered into part of which dealt with the creation of the Arbitration Board.[6]

The appellate court likewise held that petitioner failed to present evidence to prove its claim of bias and
partiality on the part of the Chairman of the Arbitration Board, Mr. Carmelo V. Sison (Mr. Sison).
Further, the Court of Appeals found that blasting is not part of the unit price for grading and structural
excavation provided for in the contract for the BACMAN II Project, and that there was no perfected contract
between the parties for an extra work order for blasting. Nonetheless, since FUCC relied on the representation
of petitioners officials that the extra work order would be submitted to its Board of Directors for approval and
that the blasting works would be paid, the Court of Appeals ruled that FUCC is entitled to just compensation on
grounds of equity and promissory estoppel.
Anent the issue of just compensation, the appellate court took into account the estimate prepared by a
certain Mr. Lauro R. Umali (Mr. Umali), Project Manager of the BACMAN II Project, which itemized the
various costs involved in blasting works and came up with P1,310.82 per cubic meter, consisting of the direct
cost for drilling, blasting excavation, stockpiling and hauling, and a 30% mark up for overhead, contractors tax
and contingencies. This estimate was later changed to P983.75 per cubic meter to which FUCC agreed. The
Court of Appeals, however, held that just compensation should cover only the direct costs plus 10% for
overhead expenses. Thus, it declared that the amount of P763.00[7] per cubic meter is sufficient. Since the total
volume of blasted rocks as computed by Dr. Benjamin Buensuceso, Jr.[8] of the U.P. College of Engineering is
97,032.16 cubic meters, FUCC is entitled to the amount of P74,035,503.50 as just compensation.
Although the Court of Appeals adjudged FUCC entitled to interest,[9] the dispositive portion of the
assailed Decision[10] did not provide for the payment of interest. Moreover, the award of attorneys fees was
deleted as there was no legal and factual ground for its imposition.
Petitioner, represented by the Office of the Solicitor General in the instant Petition, rehashes its
submissions before the Court of Appeals. It claims that the appellate court failed to pass upon the following
1. The Chairman of the Arbitration Board showed extreme bias in prejudging the case.
2. The Chairman of the Arbitration Board greatly exceeded his powers when he mediated for
settlement in the court of arbitration proceedings.
3. The Chairman of the Arbitration Board committed serious irregularity in hastily convening the
Board in two days, which thereafter released its report.
4. The Arbitration Board Committed manifest injustice prejudicial to petitioner based on the following:
a. It rendered an award based on equity despite the mandatory provision of the law.
b. The Boards decision to justify that equity applies herein despite the fact that FUCC never
submitted its own actual costs for blasting and PHESCO, INC., the succeeding contractor,
did not employ blasting but used ordinary excavation method at P75.59 per cubic meter
which is approximately the same unit price of plaintiff (FUCC).
c. It gravely erred when the Board claimed that an award of just compensation must be given to
respondent FUCC for what it has actually spent and yet instead of using as basis P458.07
which is the price agreed upon by FUCC, it chose an estimate made by an NPC employee.
d. It gravely erred when it relied heavily on the purported letter of NPC Project Manager Lauro
R. Umali, when the same has not been identified nor were the handwritten entries in Annex ii
established to be made by him.
5. The Arbitration Board gravely erred in computing interest at 12% and from the time of plaintiffs
extrajudicial claim despite the fact that herein case is an action for specific performance and not for
payment of loan or forbearance of money, and despite the fact that it has resolved that there was no
perfected contract and there was no bad faith on the part of defendant.
6. On June 25, 2000, NPC discovered the Sub-Contract Agreement of FUCC with a unit price of
only P430/per cubic meter.[11] [Emphasis in the original]
Specifically, petitioner asserts that Mr. Sison exhibited bias and prejudgment when he exhorted it to pay
FUCC for the blasting works after concluding that the latter was allowed to blast. Moreover, Mr. Sison
allegedly attempted to mediate the conflict between the parties in violation of Section 20, [12] paragraph 2 of
Republic Act No. 876 (R.A. 876) otherwise known as the Arbitration Law. Petitioner also questions the abrupt
manner by which the decision of the Arbitration Board was released.
Petitioner avers that FUCCs claim for blasting works was not approved by authorized officials in
accordance with Presidential Decree No. 1594 (P.D. 1594) and its implementing rules which specifically
require the approval of the extra work by authorized officials before an extra work order may be issued in favor
of the contractor. Thus, it should not be held liable for the claim. If at all, only the erring officials should be held
liable. Further, FUCC did not present evidence to prove the actual expenses it incurred for the blasting works.
What the Arbitration Board relied upon was the memorandum of Mr. Umali which was neither identified or
authenticated during the arbitration proceedings nor marked as evidence for FUCC. Moreover, the figures
indicated in Mr. Umalis memorandum were allegedly mere estimates and were recommendatory at most.
Petitioner likewise claims that its succeeding contractor, Phesco, Inc. (Phesco), was able to excavate the
same rock formation without blasting.
Finally, it asserts that the award of P763.00 per cubic meter has no factual and legal basis as the sub-
contract between FUCC and its blasting sub-contractor, Dynamic Blasting Specialists of the Philippines
(Dynamic), was only P430.00 per cubic meter.
In its Comment[13] dated October 15, 2001, FUCC points out that petitioners arguments are exactly the
same as the ones it raised before the Arbitration Board, the trial court and the Court of Appeals. Moreover, in
the Compromise Agreement between the parties, petitioner committed to abide by the decision of the
Arbitration Board. It should not now be allowed to question the decision.
FUCC likewise notes that Atty. Jose G. Samonte (Atty. Samonte), one of the members of the Arbitration
Board, was nominated by petitioner itself. If there was any irregularity in its proceedings such as the bias and
prejudgment petitioner imputes upon Mr. Sison, Atty. Samonte would have complained. As it is, Atty. Samonte
concurred in the decision of the Arbitration Board and dissented only as to the award of attorneys fees.
As regards the issue of interest, FUCC claims that the case involves forbearance of money and not a claim
for damages for breach of an obligation in which case interest on the amount of damages awarded may be
imposed at the rate of six percent (6%) per annum.
Finally, FUCC asserts that its sub-contract agreement with Dynamic is not newly-discovered evidence.
Petitioners lawyers allegedly had a copy of the sub-contract in their possession. In any event, the unit price
of P430.00 per cubic meter appearing in the sub-contract represents only a fraction of the costs incurred by
FUCC for the blasting works.
Petitioner filed a Reply[14] dated March 18, 2002 reiterating its earlier submissions.
The parties in the present case mutually agreed to submit to arbitration the settlement of the price of
blasting, the parties claims for damages, delay and interests and all other unresolved claims including the exact
volume of blasted rocks.[15] They further mutually agreed that the decision of the Arbitration Board shall be
final and immediately executory.[16]
A stipulation submitting an ongoing dispute to arbitration is valid. As a rule, the arbitrators award cannot be
set aside for mere errors of judgment either as to the law or as to the facts. Courts are generally without power
to amend or overrule merely because of disagreement with matters of law or facts determined by the arbitrators.
They will not review the findings of law and fact contained in an award, and will not undertake to substitute
their judgment for that of the arbitrators. A contrary rule would make an arbitration award the commencement,
not the end, of litigation. Errors of law and fact, or an erroneous decision on matters submitted to the judgment
of the arbitrators, are insufficient to invalidate an award fairly and honestly made. Judicial review of an
arbitration award is, thus, more limited than judicial review of a trial.[17]
However, an arbitration award is not absolute and without exceptions. Where the conditions described in
Articles 2038, 2039 and 2040 of the Civil Code[18] applicable to both compromises and arbitrations are
obtaining, the arbitrators award may be annulled or rescinded.[19] Additionally, judicial review of an arbitration
award is warranted when the complaining party has presented proof of the existence of any of the grounds for
vacating, modifying or correcting an award outlined under Sections 24 and 25 of R.A. 876, viz:

Section 24. Grounds for vacating an award. In any of the following cases, the court must make an order
vacating the award upon the petition of any party to the controversy when such party proves affirmatively that
in the arbitration proceedings:

(a) The award was procured by corruption, fraud, or other undue means; or
(b) That there was evident partiality or corruption in the arbitrators or any of them; or
(c) That the arbitrators were guilty of misconduct in refusing to postpone the hearing upon sufficient
cause shown, or in refusing to hear evidence pertinent and material to the controversy; that one or
more of the arbitrators was disqualified to act as such under section nine hereof, and willfully
refrained from disclosing such disqualifications or of any other misbehavior by which the rights of
any party have been materially prejudiced; or
(d) That the arbitrators exceeded their powers, or so imperfectly executed them, that a mutual, final
and definite award upon the subject matter submitted to them was not made.

When an award is vacated, the court, in its discretion, may direct a new hearing either before the same
arbitrators or before a new arbitrator or arbitrators to be chosen in the manner provided in the submission or
contract for the selection of the original arbitrator or arbitrators, and any provision limiting the time in which
the arbitrators may make a decision shall be deemed applicable to the new arbitration to commence from the
date of the courts order.
Where the court vacates an award, costs not exceeding fifty pesos and disbursements may be awarded to the
prevailing party and the payment thereof may be enforced in like manner as the payment of costs upon the
motion in an action.

Section 25. Grounds for modifying or correcting an award. In any one of the following cases, the court must
make an order modifying or correcting the award, upon the application of any party to the controversy which
was arbitrated:

(a) Where there was an evident miscalculation of figures, or an evident mistake in the description of
any person, thing or property referred to in the award; or
(b) Where the arbitrators have awarded upon a matter not submitted to them, not affecting the merits of
the decision upon the matter submitted; or
(c) Where the award is imperfect in a matter of form not affecting the merits of the controversy, and if
it had been a commissioners report, the defect could have been amended or disregarded by the

The order may modify and correct the award so as to effect the intent thereof and promote justice between the

In this case, petitioner does not specify which of the foregoing grounds it relies upon for judicial review.
Petitioner avers that if and when the factual circumstances referred to in the provisions aforementioned are
present, judicial review of the award is warranted.[20] From its presentation of issues, however, it appears that
the alleged evident partiality of Mr. Sison is singled out as a ground to vacate the boards decision.
We note, however, that the Court of Appeals found that petitioner did not present any proof to back up its
claim of evident partiality on the part of Mr. Sison. Its averments to the effect that Mr. Sison was biased and had
prejudged the case do not suffice to establish evident partiality. Neither does the fact that a party was
disadvantaged by the decision of the arbitration committee prove evident partiality.[21]
According to the appellate court, [p]etitioner was never deprived of the right to present evidence nor was
there any showing that the Board showed signs of any bias in favor of FUCC. As correctly found by the trial
court, this Court cannot find its way to support petitioners contention that there was evident partiality in the
assailed Award of the Arbitrator in favor of the respondent because the conclusion of the Board, which the
Court found to be well-founded, is fully supported by substantial evidence.[22]
There is no reason to depart from this conclusion.
However, we take exception to the arbitrators determination that based on promissory estoppel per se or
alone, FUCC is entitled to just compensation for blasting works for the reasons discussed hereunder.
Section 9 of P.D. No. 1594, entitled Prescribing Policies, Guidelines, Rules and Regulations for
Government Infrastructure Contracts, provides:

SECTION 9. Change Order and Extra Work Order.A change order or extra work order may be issued only for
works necessary for the completion of the project and, therefore, shall be within the general scope of the
contract as bid[ded] and awarded. All change orders and extra work orders shall be subject to the approval of
the Minister of Public Works, Transportation and Communications, the Minister of Public Highways, or the
Minister of Energy, as the case may be.

The pertinent portions of the Implementing Rules and Regulations of P.D. 1594 provide:
CI - Contract Implementation:
These Provisions Refer to Activities During Project Construction, i.e., After Contract Award Until
Completion, Except as May Otherwise be Specifically Referred to Provisions Under Section II. IB -
Instructions to Bidders.
CI 1 - Variation Orders - Change Order/Extra Work Order/Supplemental Agreement
4. An Extra Work Order may be issued by the implementing official to cover the introduction of
new work items after the same has been found to strictly comply with Section CI-1-1 and
approved by the appropriate official if the amount of the Extra Work Order is within the limits of
the former's authority to approve original contracts and under the following conditions:
a. Where there are additional works needed and necessary for the completion, improvement or
protection of the project which were not included as items of work in the original contract.
b. Where there are subsurface or latent physical conditions at the site differing materially from those
indicated in the contract.
c. Where there are duly unknown physical conditions at the site of an unusual nature differing
materially from those ordinarily encountered and generally recognized as inherent in the work or
character provided for in the contract.
d. Where there are duly approved construction drawings or any instruction issued by the implementing
office/agency during the term of contract which involve extra cost.
6. A separate Supplemental Agreement may be entered into for all Change Orders and Extra
Work Orders if the aggregate amount exceeds 25% of the escalated original contract price. All
change orders/extra work orders beyond 100% of the escalated original contract cost shall be
subject to public bidding except where the works involved are inseparable from the original scope
of the project in which case negotiation with the incumbent contractor may be allowed, subject to
approval by the appropriate authorities.
7. Any Variation Order (Change Order, Extra Work Order or Supplemental Agreement) shall be subject
to the escalation formula used to adjust the original contract price less the cost of mobilization. In
claiming for any Variation Order, the contractor shall, within seven (7) calendar days after such work
has been commenced or after the circumstances leading to such condition(s) leading to the extra cost,
and within 28 calendar days deliver a written communication giving full and detailed particulars of any
extra cost in order that it may be investigated at that time. Failure to provide either of such notices in
the time stipulated shall constitute a waiver by the contractor for any claim. The preparation and
submission of Change Orders, Extra Work Orders or Supplemental Agreements are as follows:
a. If the Project Engineer believes that a Change Order, Extra Work Order or Supplemental Agreement
should be issued, he shall prepare the proposed Order or Supplemental Agreement accompanied with
the notices submitted by the contractor, the plans therefore, his computations as to the quantities of the
additional works involved per item indicating the specific stations where such works are needed, the
date of his inspections and investigations thereon, and the log book thereof, and a detailed estimate of
the unit cost of such items of work, together with his justifications for the need of such Change Order,
Extra Work Order or Supplemental Agreement, and shall submit the same to the Regional Director of
office/agency/corporation concerned.
b. The Regional Director concerned, upon receipt of the proposed Change Order, Extra Work Order or
Supplemental Agreement shall immediately instruct the technical staff of the Region to conduct an on-
the-spot investigation to verify the need for the work to be prosecuted. A report of such verification
shall be submitted directly to the Regional Director concerned.
c. The Regional Director concerned after being satisfied that such Change Order, Extra Work Order or
Supplemental Agreement is justified and necessary, shall review the estimated quantities and prices and
forward the proposal with the supporting documentation to the head of office/agency/corporation for
d. If, after review of the plans, quantities and estimated unit cost of the items of work involved, the
proper office/agency/corporation committee empowered to review and evaluate Change Orders, Extra
Work Orders or Supplemental Agreements recommends approval thereof, the head of
office/agency/corporation, believing the Change Order, Extra Work Order or Supplemental Agreement
to be in order, shall approve the same. The limits of approving authority for any individual, and the
aggregate of, Change Orders, Extra Work Orders or Supplemental Agreements for any project of the
head of office/agency/corporation shall not be greater than those granted for an original project.
CI 3 - Conditions under which Contractor is to Start Work under Variation Orders and Receive
1. Under no circumstances shall a contractor proceed to commence work under any Change
Order, Extra Work Order or Supplemental Agreement unless it has been approved by the
Secretary or his duly authorized representative. Exceptions to the preceding rule are the following:
a. The Regional Director, or its equivalent position in agencies/offices/corporations without plantilla
position for the same, may, subject to the availability of funds, authorize the immediate start of work
under any Change or Extra Work Order under any or all of the following conditions:
(1) In the event of an emergency where the prosecution of the work is urgent to avoid detriment to
public service, or damage to life and/or property; and/or
(2) When time is of the essence; provided, however, that such approval is valid on work done up to the
point where the cumulative increase in value of work on the project which has not yet been duly fully
approved does not exceed five percent (5%) of the adjusted original contract price, or P500,000
whichever is less; provided, further, that immediately after the start of work, the corresponding
Change/Extra Work Order shall be prepared and submitted for approval in accordance with the above
rules herein set. Payments for works satisfactorily accomplished on any Change/Extra Work Order may
be made only after approval of the same by the Secretary or his duly authorized representative.
b. For a Change/Extra Work Order involving a cumulative amount exceeding five percent (5%)
of the original contract price or original adjusted contract price no work thereon may be
commenced unless said Change/Extra Work Order has been approved by the Secretary or his
duly authorized representative. [Emphasis supplied]
It is petitioners submission, and FUCC does not deny, that the claim for payment of blasting works in
Botong alone was approximately P170,000,000.00, a figure which far exceeds the original contract price
of P80,000,000.00 for two (2) project sites. Under the foregoing implementing rules, for an extra work order
which exceeds 5% of the original contract price, no blasting work may be commenced without the approval of
the Secretary or his duly authorized representative. Moreover, the procedure for the preparation and approval of
the extra work order outlined under Contract Implementation (CI) 1(7) above should have been complied with.
Accordingly, petitioners officials should not have authorized the commencement of blasting works nor should
FUCC have proceeded with the same.
The following events, culled from the decision of the Arbitration Board and the assailed Decision, are made
the bases for the finding of promissory estoppel on the part of petitioner:

1. After claimant [respondent herein] encountered what it claimed to be massive hard rock
formation (Testimony of witness Dumaliang, TSN, 28 October 1996, pp. 41-42; Testimony of witness
Lataquin, 28 November 1996, pp. 2-3; 20-23; Exh. JJJ and sub-markings) and informed respondent [petitioner
herein] about it, respondents own geologists went to the Botong site to investigate and confirmed the rock
formation and recommended blasting (Cf. Memorandum of Mr. Petronilo E. Pana, Acting Manager of the
Geoscience Services Department and the report of the geologists who conducted the site investigation; Exhs. F
and F-1).

2. Claimant asked for clearance to blast the rock formation to the design grade (Letter dated 28 September
1992; Exh. UU). The engineers of respondent at the project site advised claimant to proceed with its
suggested method of extraction (Order/Instruction given by Mr. Reuel R. Declaro and Mr. Francis A. Paderna
dated 29 September 1992; Exh. C).

3. Claimant requested that the intended blasting works be confirmed as extra work order by responsible
officials of respondent directly involved in the BACMAN II Project (i.e., then BACMAN II Project Manager,
Mr. Lauro R. Umali and Mr. Angelito G. Senga, Section Chief, Civil Engineering Design of respondents Design
Department which bidded the project). These officials issued verbal instructions to the effect: (a) that
claimant could blast the rock formation down to the design grade of 495 masl; (b) that said blasting
works would be an extra work order; and (c) that claimant would be paid for said blasting works using
the price per cubic meter for similar blasting works at Palinpinon, or at P1,346.00 per cubic meter.

4. Claimant sent two (2) confirmatory letters to respondent, both addressed to its President, one dated 30
September 1992, and sent through Mr. Angelito Senga, Chief Civil Design Thermal, the other dated 02 October
1992, and sent through Mr. Lauro R. Umali, Project ManagerBacMan II (Exhs. D and E; Testimony of witness
Dumaliang, TSN, 28 October 1996, pp. 43-49). The identical letters read:

We wish to confirm your instruction for us to proceed with the blasting of the Botong Plant site to the design
grade pending issuance of the relevant variation order. This is to avoid delay in the implementation of this
critical project due to the urgent need to blast rocks on the plant site.

We are confirming further your statement that the said blasting works is an extra work order and that we will be
paid using the price established in your Palinpinon contract with Phesco.

Thank you for your timely action and we look forward to the immediate issuance of the extra work order.

We are now mobilizing equipment and manpower for the said work and hope to start blasting next week.

5. Respondent received the letters but did not reply thereto nor countermand the earlier instructions
given to claimant to proceed with the blasting works. The due execution and authenticity of these letters
(Exhs. D-1 and E-1) and the fact of receipt (Exhs. D-2 and E-2) were duly proved by claimant (Testimony of
witness Dumaliang, TSN, 28 October 1996, 43-49).

6. In mid-October 1992, three (3) Vice-Presidents of respondent visited the project site and were informed
of claimants blasting activities. While respondent claims that one of the Vice-Presidents, Mr. Rodrigo
Falcon, raised objections to claimants blasting works as an extra work order, they instructed claimant to
speed up the works because of the power crisis then hounding the country.Stipulation no. 24 of the Joint
Stipulation of Facts of the parties which reads: 24. In mid-October 1992, three (3) Vice-Presidents of
respondent, namely: Mr. Hector N. Campos, Sr., of Engineering Construction, Mr. C.A. Pastoral of Engineering
Design, and Mr. Rodrigo P. Falcon, visited the project site and were likewise apprised of claimants blasting
activities. They never complained about the blasting works, much less ordered its cessation. In fact, no
official of respondent ever ordered that the blasting works be stopped.

7. After visiting Botong, Mr. Hector N. Campos, Sr., then Vice President of Engineering Construction,
instructed Mr. Fernando A. Magallanes then Manager of the Luzon Engineering Projects Department, to
evaluate claimants blasting works and to submit his recommendations on the proper price therefor. In a
memorandum dated 17 November 1992 (Exh. G and sub-markings), Mr. Magallanes confirmed that
claimants blasting works was an extra work order and recommended that it be paid at the price for
similar blasting works at Palinpinon, or at P1,346.00 per cubic meter. Mr. Campos concurred with the
findings and recommendations of Mr. Magallanes and instructed Mr. Lauro R. Umali, then Project
Manager of BacMan II, to implement the same as shown by his instructions scribbled on the

8. Mr. Umali and the project team prepared proposed Extra Work Order No. 2 Blasting (Exh. DDD
Memorandum of Mr. Umali to Mr. Campos dated 20 January 1993 forwarding proposed Extra Work
Order No. 2), recommending a price of P983.75 per cubic meter for claimants blasting works. Claimant
agreed to this price (Testimony of witness Dumaliang, 7 November 1996, p. 48).

9. On 19 February 1993, claimant brought the matter of its unpaid blasting works to the attention of the then
NPC Chairman [also Secretary of the Department of Energy then] Delfin L. Lazaro during a meeting with the
multi-sectoral task force monitoring the implementation of power plant projects, who asked then NPC President
Pablo B. Malixi what he was doing about the problem. President Malixi thereafter convened respondents
vice-presidents and ordered them to quickly document the variation order and pay claimant. The vice-
president, and specifically Mr. Campos, pledged that the variation order for claimants blasting works
would be submitted for the approval of the NPC Board during the first week of March 1993. Claimant
thereafter sent respondent a letter dated 22 February 1993 (Ex. K) to confirm this pledge (Testimony of
witness Dumaliang, 7 November 1996, pp. 28-30).

10. Mr. Campos created a task force (i.e., the Technical Task Force on the Study and Review of Extra Work
Order No. 2; Exh. FFF) to review claimants blasting works. After several meetings with the task force,
claimant agreed to the lower price of P458.07 per cubic meter, in exchange for quick payment (Testimony
of witness Dumaliang, 7 November 1996, p. 30).

11. However, no variation order was issued and no payment came, although it appears from two (2)
radiograms sent by Mr. Campos to Mr. Paderna at the project site that the variation order was being
processed and that payment to claimant was forthcoming (Exhs. AAA and BBB).

12. Respondent asked the Department of Public Works and Highways (DPWH) about the standard prices for
blasting in the projects of the DPWH. The DPWH officially replied to respondents query in a letter dated 19
May 1993 but the task force still failed to seek Board approval for claimants variation order. The task force
eventually recommended that the issue of grading excavation and structural excavation and the unit prices
therefor be brought into voluntary arbitration (Testimony of witness Dumaliang, 7 November 1996, pp. 30-57).

13. Claimant thereafter saw Mr. Francisco L. Viray, the new NPC President, who proposed that claimant
accept the price of P458.07 per cubic meter for its blasting works with the balance of its claim to be the
subject of arbitration. Claimant accepted the offer and sent the letter dated 28 September 1993 (Exh. O)
to formalize said acceptance. However, no variation order was issued and the promised payment never
came. (Testimony of witness Dumaliang, 7 November 1996, p. 58).

14. After some time, claimant met Mr. Viray on 19 October 1993 at the project site, and with some NPC
officers in attendance, particularly Mr. Gilberto A. Pastoral, Vice-President for Engineering Design, who
was instructed by Mr. Viray to prepare the necessary memorandum (i.e., that claimant would be
paid P458.07 per cubic meter with the balance of its claim to be the subject of arbitration) for the
approval of the NPC Board. Claimant formalized what transpired during this meeting in its letter to Mr.
Pastoral dated 22 October 1993 (Exhibit R). But no action was taken by Mr. Pastoral and no variation
order was issued by respondent (Testimony of witness Dumaliang, 7 November 1996, pp. 57-
58).[23] [Emphasis supplied and bracketed words]

Promissory estoppel may arise from the making of a promise, even though without consideration, if it was
intended that the promise should be relied upon and in fact it was relied upon, and if a refusal to enforce it
would be virtually to sanction the perpetration of fraud or would result in other injustice.[24] Promissory estoppel
presupposes the existence of a promise on the part of one against whom estoppel is claimed. The promise must
be plain and unambiguous and sufficiently specific so that the court can understand the obligation assumed and
enforce the promise according to its terms.[25]
In the present case, the foregoing events clearly evince that the promise that the blasting works would be
paid was predicated on the approval of the extra work order by petitioners Board. Even FUCC acknowledged
that the blasting works should be an extra work order and requested that the extra work order be confirmed as
such and approved by the appropriate officials. Notably, even as the extra work order allegedly promised to it
was not yet forthcoming, FUCC commenced blasting.
The alleged promise to pay was therefore conditional and up to this point, promissory estoppel cannot be
established as the basis of petitioners liability especially in light of P.D. 1594 and its implementing rules of
which both parties are presumed to have knowledge. In Mendoza v. Court of Appeals, supra, we ruled that [a]
cause of action for promissory estoppel does not lie where an alleged oral promise was conditional, so that
reliance upon it was not reasonable. It does not operate to create liability where it does not otherwise exist.
Petitioners argument that it is not bound by the acts of its officials who acted beyond the scope of their
authority in allowing the blasting works is correct. Petitioner is a government agency with a juridical
personality separate and distinct from the government. It is not a mere agency of the government but a corporate
entity performing proprietary functions. It has its own assets and liabilities and exercises corporate powers,
including the power to enter into all contracts, through its Board of Directors.
In this case, petitioners officials exceeded the scope of their authority when they authorized FUCC to
commence blasting works without an extra work order properly approved in accordance with P.D. 1594. Their
acts cannot bind petitioner unless it has ratified such acts or is estopped from disclaiming them.[26]
However, the Compromise Agreement entered into by the parties, petitioner being represented by its
President, Mr. Guido Alfredo A. Delgado, acting pursuant to its Board Resolution No. 95-54 dated April 3,
1995, is a confirmatory act signifying petitioners ratification of all the prior acts of its officers. Significantly, the
parties agreed that [t]his Compromise Agreement shall serve as the Supplemental Agreement for the payment of
plaintiffs blasting works at the Botong site[27] in accordance with CI 1(6) afore-quoted. In other words, it is
primarily by the force of this Compromise Agreement that the Court is constrained to declare FUCC entitled to
payment for the blasting works it undertook.
Moreover, since the blasting works were already rendered by FUCC and accepted by petitioner and in the
absence of proof that the blasting was done gratuitously, it is but equitable that petitioner should make
compensation therefor, pursuant to the principle that no one should be permitted to enrich himself at the
expense of another.[28]
This brings us to the issue of just compensation.
The parties proposed in the terms of reference jointly submitted to the Arbitration Board that should FUCC
be adjudged entitled to just compensation for its blasting works, the price therefor should be determined based
on the payment for blasting works in similar projects of FUCC and the amount it paid to its blasting
subcontractor.[29] They agreed further that the price of the blasting at the Botong site . . . shall range from
Defendants position of P76.00 per cubic meter as per contract to a maximum of P1,144.00[30]
Petitioner contends that the Arbitration Board, trial court and the appellate court unduly relied on the
memorandum of Mr. Umali which was allegedly not marked as an exhibit. We note, however, that this
memorandum actually forms part of the record of the case as Exhibit DDD.[31] Moreover, both the Arbitration
Board and the Court of Appeals found that Mr. Umalis proposal is the best evidence on record as it is supported
by detailed cost estimates that will serve as basis to determine just compensation.
While the Arbitration Board found that FUCC did not present evidence showing the amount it paid to its
blasting sub-contractor, it did present testimony to the effect that it incurred other costs and expenses on top of
the actual blasting cost. Hence, the amount of P430.00 per cubic meter indicated in FUCCs Contract of
Agreement with Dynamic is not controlling.
Moreover, FUCC presented evidence showing that in two (2) other projects where blasting works were
undertaken, petitioner paid the contractors P1,346 per cubic meter for blasting and disposal of solid rocks in the
Palinpinon project and P1,144.51 per cubic meter for rock excavation in the Hermosa Balintawak project.
Besides, while petitioner claims that in a contract with Wilper Construction for the construction of the Tayabas
sub-station, the price agreed for blasting was only P96.13, petitioner itself did not present evidence in support of
this claim.[32]
Parenthetically, the point raised by petitioner that its subsequent contractor, Phesco, did not undertake
blasting works in excavating the same rock formation is extraneous and irrelevant. The fact is that petitioner
allowed FUCC to blast and undertook to pay for the blasting works.
At this point, we hearken to the rule that the findings of the Arbitration Board, affirmed by the trial court
and the Court of Appeals and supported as they are by substantial evidence, should be accorded not only respect
but finality.[33] Accordingly, the amount of P763.00 per cubic meter fixed by the Arbitration Board and affirmed
by the appellate court as just compensation should stand.
As regards the issue of interest, while the appellate court declared in the body of its Decision that interest
which would represent the cost of the money spent be imposed on the money actually spent by claimant for the
blasting works,[34] there is no pronouncement as to the payment of interest in the dispositive portion of
the Decision even as it specifically deleted the award of attorneys fees.
Despite its knowledge of the appellate courts omission, FUCC did not file a motion for reconsideration or
appeal from its Decision. In failing to do so, FUCC allowed the Decision to become final as to it.
In Edwards v. Arce,[35] we ruled that in a case decided by a court, the true judgment of legal effect is that
entered by the clerk of said court pursuant to the dispositive part of its decision. The only portion of the decision
that may be the subject of execution is that which is ordained or decreed in the dispositive portion. Whatever
may be found in the body of the decision can only be considered as part of the reasons or conclusions of the
court and serve only as guides to determine the ratio decidendi.[36]
Even so, the Court allows a judgment which had become final and executory to be clarified when there is
an ambiguity caused by an omission or mistake in the dispositive portion of the decision. [37] In Reinsurance
Company of the Orient, Inc. v. Court of Appeals,[38] we held:

In Republic Surety and Insurance Company, Inc. v. Intermediate Appellate Court, the Court applying the above
doctrine said:

xxx We clarify, in other words, what we did affirm. What is involved here is not what is ordinarily regarded as a
clerical error in the dispositive part of the decision of the Court of First Instance, which type of error is perhaps
best typified by an error in arithmetical computation. At the same time, what is involved here is not a correction
of an erroneous judgment or dispositive portion of a judgment. What we believe is involved here is in the nature
of an inadvertent omission on the part of the Court of First Instance (which should have been noticed by private
respondents counsel who had prepared the complaint), of what might be described as a logical follow-through of
something set forth both in the body of the decision and in the dispositive portion thereof: the inevitable follow-
through, or translation into, operational or behavioral terms, of the annulment of the Deed of Sale with
Assumption of Mortgage, from which petitioners title or claim of title embodied in TCT 133153 flows. (Italics

In this case, the omission of the award of interest was obviously inadvertent. Correction is therefore in
order. However, we do not agree with the Arbitration Board that the interest should be computed at 12%. Since
the case does not involve a loan or forbearance of money, goods or credit and court judgments thereon, the
interest due shall be computed at 6% per annum computed from the time the claim was made in 1992 as
determined by the Arbitration Board and in accordance with Articles 2209 and 1169 of the Civil Code. The
actual base for the computation of legal interest shall be on the amount finally adjudged.[40] Further, when the
judgment awarding a sum of money becomes final and executory, the rate of legal interest shall be 12% per
annum from such finality until its satisfaction, this interim period being deemed to be by then an equivalent to a
forbearance of credit.[41]
WHEREFORE, the petition is GRANTED in part. The appealed decision is MODIFIED in that the
amount of P74,035,503.50 shall earn legal interest of six percent (6%) from 1992. A twelve percent (12%)
interest, in lieu of six percent (6%), shall be imposed on such amount upon finality of this decision until the
payment thereof.
Lupangco vs CA Case Digest
Lupangco vs Court of Appeals
G.R. No. 77372 April 29, 1988

Facts: PRC issued Resolution No. 105 as parts of its "Additional Instructions to Examiness," to all those
applying for admission to take the licensure examinations in accountancy.

Petitioners, all reviewees preparing to take the licensure examinations in accountancy, filed with the RTC a
complaint for injunction with a prayer with the issuance of a writ of a preliminary injunction against respondent
PRC to restrain the latter from enforcing the above-mentioned resolution and to declare the same

Issue: Can the Professional Regulation Commission lawfully prohibit the examiness from attending review
classes, receiving handout materials, tips, or the like 3 days before the date of the examination?

Ruling: We realize that the questioned resolution was adopted for a commendable purpose which is "to
preserve the integrity and purity of the licensure examinations." However, its good aim cannot be a cloak to
conceal its constitutional infirmities. On its face, it can be readily seen that it is unreasonable in that an
examinee cannot even attend any review class, briefing, conference or the like, or receive any hand-out, review
material, or any tip from any school, college or university, or any review center or the like or any reviewer,
lecturer, instructor, official or employee of any of the aforementioned or similar institutions.

The unreasonableness is more obvious in that one who is caught committing the prohibited acts even without
any ill motives will be barred from taking future examinations conducted by the respondent PRC. Furthermore,
it is inconceivable how the Commission can manage to have a watchful eye on each and every examinee during
the three days before the examination period.

It is an aixiom in administrative law that administrative authorities should not act arbitrarily and capriciously in
the issuance of rules and regulations. To be valid, such rules and regulations must be reasonable and fairly
adapted to the end in view. If shown to bear no reasonable relation to the purposes for which they are authorized
to be issued, then they must be held to be invalid.

Resolution No. 105 is not only unreasonable and arbitrary, it also infringes on the examinees' right to liberty
guaranteed by the Constitution. Respondent PRC has no authority to dictate on the reviewees as to how they
should prepare themselves for the licensure examinations. They cannot be restrained from taking all the lawful
steps needed to assure the fulfillment of their ambition to become public accountants. They have every right to
make use of their faculties in attaining success in their endeavors