Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION

G.R. No. 168384 August 18, 2006

CHARLES BERNARD H. REYES doing business under the name and style CBH REYES
ARCHITECTS, Petitioner,
vs.
ANTONIO YULO BALDE II, PAULINO M. NOTO and ERNESTO J. BATTAD, SR., in their capacities as
Arbitrators of the CONSTRUCTION INDUSTRY ARBITRATION COMMISSION, SPOUSES CESAR and
CARMELITA ESQUIG and ROSEMARIE PAPAS, Respondents.

RESOLUTION

YNARES-SANTIAGO, J.:

Before the Court is a "Motion to Inhibit the Honorable Chief Justice and Motion to Refer Case to the
Court En Banc," dated August 4, 2006, filed by Atty. Francisco I. Chavez.

I.

According to the movant, the Motion to Inhibit the Chief Justice "is not an accusation of wrongdoing on
the part of the Honorable Chief Justice. Rather it is impelled by Atty. Chavez’s perception that in this
case, the Honorable Chief Justice has not acted in an objective, impartial and neutral manner in disposing
of incidental issues and motions presented by the parties."

The movant adds that "the dizzying pace by which private respondents’ motions have been received and
favorably acted upon in record time supports Atty. Chavez’s perception that private respondents’ motions
– without as much as requiring petitioner to respond thereto – have been granted special attention and
favor by the Honorable Chief Justice." (bold types in original)

Atty. Chavez’s perception about the alleged "closeness and the good relationship between Atty. Ordoñez
and the Chief Justice" to impair the latter’s objectivity and impartiality has no basis, for the following
reasons:

(1) The actions taken on the various motions and incidents enumerated by the movant were made by the
entire membership of the First Division. Not being the ponente, the Chief Justice did not initiate or
propose any of the actions and rulings made by the Court. Like the three other Division members, he
merely concurred with the actions/rulings proposed by the ponente. While some orders and actions,
especially temporary restraining orders, are issued in the name of the Division chairman (who in this case
is the Chief Justice), they are really collective actions of the entire Division, not merely those of the
Chair. This is the normal procedure in all Divisions, not just in the First.

(2) The alleged "unpleasant interaction these past 19 years between Atty. Chavez and Atty. Sedfrey
Ordoñez with whom Chief Justice worked either as associate or partner sometime ago" has nothing to do
at all with the concurrences made by the Chief Justice on this case. These concurrences were given on the
basis only of legal merit, and on nothing else.
(3) True, the Chief Justice was an associate (not a partner) in 1961 to 1963 in the Salonga, Ordoñez and
Associates, which incidentally had been dissolved in 1987. True also, he has had a close personal and
professional relationship with the principal partner in that law firm, Sen. Jovito R. Salonga. That is the
reason the Chief Justice has inhibited himself from cases in which Sen. Salonga was/is a party or a
counsel. 1

However, he had no similar closeness with Atty. Ordoñez. That is why he has not inhibited himself from
cases involving Atty. Ordoñez. In fact, he has not hesitated, on several occasions, to vote against
parties/causes represented by the former Secretary of Justice.

(4) In fairness to all concerned, Atty. Ordoñez has never spoken, directly or indirectly, with the Chief
Justice on any matter pending in the Supreme Court and in any other court. He has never attempted,
directly or indirectly, personally or through others, to influence the Chief Justice in any manner
whatsoever. In fact, the Chief Justice understands that Atty. Ordoñez has been seriously ill, going in and
out of the hospital, over the past several months. And yet the Chief Justice has not even visited or spoken
with him during such period.

(5) On the other hand, the Chief Justice, when so warranted by the facts and law, has voted in favor of
causes and parties represented by Atty. Chavez. One outstanding example is Chavez v. PCGG (360 Phil.
133, December 9, 1998; 366 Phil. 863, May 19, 1999), which was written by then Associate Justice
Artemio V. Panganiban. Atty. Chavez knows that he has won the vote of the Chief Justice without his
having to speak with or influence him in any manner.

(6) Movant’s perception "that Atty. Ordoñez’s concern for and interest in upholding the CIAC jurisdiction
must have somehow been relayed to the Honorable Chief Justice" is completely baseless. As already
stated, there had been no conversation or communication, directly or indirectly, personally or through
others, between the Chief Justice and Atty. Ordoñez (or anyone representing him) about any matter
related to any case in this, or any other, court. Neither is the Chief Justice aware of any alleged personal
interest of Atty. Ordoñez to uphold the CIAC.

(7) In a few months, the incumbent Chief Justice is scheduled to retire from the judiciary. It is totally
inconceivable that he will smear his eleven year record of integrity, independence and ethical conduct in
the Supreme Court with any action that is less than "objective, impartial and neutral." On the other hand,
he assures movant (and all concerned) that he will continue with his vow "to lead a judiciary
characterized by four Ins: independence, integrity, industry and intelligence."

II.

Following his misperception of "closeness and bonding between Atty. Ordoñez and the Chief Justice," the
movant assailed certain "proceedings in this Honorable Court’s First Division." However, these
proceedings can easily be explained, thus:

(1) Respondents’ Motion to Include Hon. Pedro Sabundayo, Jr., Presiding Judge, Regional Trial Court of
Muntinlupa City, Branch 203, as public respondent was denied because Section 4, Rule 45 of the Rules of
Court provides that in a petition for review on certiorari to the Supreme Court, there is no need to implead
the lower courts or judges thereof either as petitioners or respondents. There is no irregularity when the
Resolution denying respondents’ motion was issued when the Chief Justice was on official leave. The
remaining Members of the Division can proceed with official business despite the absence of the Chief
Justice as long as the required majority is present. This is in accordance with Section 4(3), Article VIII of
the Constitution which provides that "cases or matters heard by a division shall be decided or resolved
with the concurrence of a majority of the Members who actually took part in the deliberations on the
issues in the case and voted thereon, and in no case, without the concurrence of at least three of such
Members."

(2) The issuance of a TRO enjoining the Presiding Judge of Muntinlupa City, Branch 203 from
continuing with any of the proceedings in Civil Case No. 03-110 and from enforcing the Order of the trial
court dated June 29, 2006 ordering the sheriff to implement the writ of execution dated May 17, 2006, is
in order. Respondents satisfactorily established that they are entitled to the injunction.

It appears from the records that petitioner filed a complaint against respondents with the Regional Trial
Court of Muntinlupa City which was docketed as Civil Case No. 03-110 praying that an accounting be
rendered to determine the cost of the materials purchased by respondent Papas; that respondents be
ordered to pay the cost of the additional works done on the property; that the Design-Build Construction
Agreement be ordered rescinded because respondents breach the same; and that respondents be ordered to
pay moral and exemplary damages. Based on the same Design-Build Construction Agreement,
respondents filed with the Construction Industry Arbitration Commission (CIAC) a complaint praying
that petitioner be ordered to finish the project or, in the alternative, to pay the cost to finish the same; to
reimburse the overpayments made by respondents; and to pay liquidated damages, attorney’s fees and
costs of the suit.

On June 8, 2005, 2 the CIAC rendered a decision on the merits of the case awarding in favor of
respondents the sum of P4,419,094.98. The case is presently on appeal with the Court of
Appeals 3 docketed as CA-G.R. SP No. 90136. 4

Meanwhile, on July 29, 2005, the trial court rendered judgment in Civil Case No. 03-110 in favor of
petitioner ordering the respondents to pay P840,300.00 representing the cost of the additional works;
P296,658.95 representing the balance of the contract price; P500,000.00 by way of moral damages;
P500,000.00 as exemplary damages; P500,000.00 as attorney’s fees and costs of the suit. In an Order
dated May 17, 2006, Judge Sabundayo, Jr. directed Sheriff Melvin T. Bagabaldo to implement the writ of
execution by causing the respondents to "render an accounting of all the construction materials they
bought for the construction of the project x x x; to levy the goods and chattels of the [respondents] x x x
and to make the sale thereof x x x." 5

In their Second Manifestation with Prayer for Issuance of a Temporary Restraining

Order/Injunction 6 filed with this Court on July 10, 2006, respondents averred that from July 7, 2006 until
4 o’clock in the morning of July 8, 2006, Sheriff Bagabaldo went to the residence of respondent Papas
and levied several of her personal properties. 7Respondents bewailed that despite the pronouncement of
the Court of Appeals that the CIAC, not the Regional Trial Court, which has jurisdiction over the case,
and despite the pendency of the instant case before us, the Regional Trial Court still proceeded with the
implementation of the writ.

It is important to mention that in both cases, the parties insist that the other breached their obligation
under the Design-Build Construction Agreement. Petitioner however argues that the Regional Trial Court
properly took cognizance of the case while respondents claim that CIAC has the exclusive and original
jurisdiction on the subject matter. Otherwise stated, if we rule in the instant case that CIAC has
jurisdiction over the controversy, then it would necessarily follow that the Regional Trial Court does not
have jurisdiction. Since it did not acquire jurisdiction over the controversy, then the writ of execution that
it issued was void. If we allow the RTC Judge and the Sheriff to continue with the proceedings in Civil
Case No. 03-110, then, whatever judgment that would be rendered in the instant case would be rendered
nugatory. In view of the above circumstances, respondents clearly established that they are entitled to the
issuance of a TRO.

Thus on July 12, 2006, the Court issued a Resolution that reads:

Acting on the prayer for issuance of a temporary restraining order/injunction, the Court further resolves to
issue a TEMPORARY RESTRAINING ORDER enjoining the Presiding Judge, Regional Trial Court,
Branch 203, Muntinlupa City, from continuing with any of the proceedings in Civil Case No. 03-110
entitled "Charles Bernard H. Reyes, doing business under the name and style of ‘CBH Reyes Architects’
vs. Spouses Mely and Cesar Esquig, et al." [subject matter of the assailed Court of Appeals decision and
resolution dated February 18, 2005 and May 20, 2005, respectively, in CA-G.R. SP No. 83816 entitled
"Charles Bernard H. Reyes, doing business under the name and style CBH REYES ARCHITECTS vs.
Antonio Yulo Balde II, et al"] and from enforcing the Order dated June 29, 2006 ordering the designated
sheriff to implement the writ of execution dated May 17, 2006 to enforce the decision dated July 29, 2005
in Civil Case No. 03-110, upon the private respondents’ filing of a bond in the amount of Three Hundred
Thousand Pesos (P300,000.00) within a period of five (5) days from notice hereof x x x.

(3) Thereafter, respondents filed an Urgent Motion for Clarification of the above resolution. Accordingly,
on July 19, 2006, we issued a resolution which is a clarification of the TRO issued on July 12, 2006. Both
the July 12, 2006 and July 19, 2006 Resolutions are covered by the same bond in the amount of
P300,000.00.

(4) A petition review under Rule 45 of the Rules of Court is not a matter of right but of sound judicial
discretion. 8 For purposes of determining whether the petition should be dismissed or denied, or where the
petition is given due course, the Supreme Court may require or allow the filing of such pleadings, briefs,
memoranda or documents as it may deem necessary within such periods and under such conditions as it
may consider appropriate, and impose the corresponding sanctions in case of non-filing or unauthorized
filing of such pleadings and documents or non-compliance with the conditions therefor. 9 This Court
exercised its discretion when it did not require petitioner to file comment on respondents’ Manifestation
with Urgent Motion to Resolve with Prayer for Injunction, Second Manifestation with Prayer for Issuance
of a Temporary Restraining Order/Injunction, Urgent Motion for Clarification,and Compliance.

(5) The Court did not exceed its jurisdiction; neither did it encroach on the jurisdiction of the Court of
Appeals or of the lower court when it issued the Resolution dated July 12, 2006. As discussed, there is
compelling reason to issue a TRO as the respondents satisfactorily established they are entitled to the
relief demanded. It may further be said that the issuance of a TRO on July 12, 2006 is not a final
determination of the matter. It was a remedy intended to avoid any irreparable injury that might be caused
to the parties. It may be recalled that the CIAC and the trial court each asserted its jurisdiction over the
controversy to the exclusion of the other.

(6) There is no truth or basis to the allegation that the case has been given "special attention." All actions
on the motions and incidents have been performed regularly.

WHEREFORE, the Motion to Inhibit the Honorable Chief Justice is DENIED. The Motion to Refer Case to the Court En Banc is
GRANTED.

SO ORDERED.

CONSUELO YNARES-SANTIAGO

Associate Justice
 Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION

G.R. No. 141818 June 22, 2006

INSULAR SAVINGS BANK, Petitioner,

vs.
FAR EAST BANK AND TRUST COMPANY, Respondent.

DECISION

YNARES-SANTIAGO, J.:

This petition for review on certiorari1 assails the November 9, 1999 Order2 of the Regional Trial Court of
Makati City, Branch 135, in Civil Case No. 92-145 which dismissed the petition for review for lack of
jurisdiction and its February 1, 2000 Order3 denying reconsideration thereof.

The antecedent facts are as follows:

On December 11, 1991, Far East Bank and Trust Company (Respondent) filed a complaint against Home
Bankers Trust and Company (HBTC)4 with the Philippine Clearing House Corporation’s (PCHC)
Arbitration Committee docketed as Arbicom Case No. 91-069.5 Respondent sought to recover from the
petitioner, the sum of P25,200,000.00 representing the total amount of the three checks drawn and debited
against its clearing account. HBTC sent these checks to respondent for clearing by operation of the PCHC
clearing system. Thereafter, respondent dishonored the checks for insufficiency of funds and returned the
checks to HBTC. However, the latter refused to accept them since the checks were returned by respondent
after the reglementary regional clearing period.6

Meanwhile, on January 17, 1992, before the termination of the arbitration proceedings, respondent filed
another complaint but this time with the Regional Trial Court (RTC) in Makati City docketed as Civil
Case No. 92-145 for Sum of Money and Damages with Preliminary Attachment. The complaint was filed
not only against HBTC but also against Robert Young, Eugene Arriesgado and Victor Tancuan
(collectively known as Defendants), who were the president and depositors of HBTC
respectively.7 Aware of the arbitration proceedings between respondent and petitioner, the RTC, in an
Omnibus Order dated April 30, 1992,8 suspended the proceedings in the case against all the defendants
pending the decision of the Arbitration Committee, to wit:

WHEREFORE, the Court hereby orders:

(a) Home Bankers & Trust Co. to produce and permit plaintiff to inspect, copy and/or photograph
the checking account deposit ledger of Victor Tancuan’s Account No. 1803-00605-3;

(b) The Motions to Dismiss filed by all defendants denied, for lack of merit; and

(c) Proceedings in this case against all defendants be suspended pending award/decision in
the arbitration proceedings against Home Bankers and Trust Co.

SO ORDERED.9 (Emphasis supplied)

The above Omnibus Order was amended by the trial court in its October 1, 1992 Order,10 the dispositive
portion of which reads as follows:

WHEREFORE, the Omnibus Order dated 30 April 1992 is hereby reconsidered by deleting the phrase
"since the complaint also seeks exemplary damages, attorney’s fees, litigation expenses and costs of suit
against HBT," on page 4 thereof and par. C of its dispositive portion is amended to read:

(c) "Procedings against Home Bankers and Trust Co. are suspended pending award/decision in the
arbitration proceedings while those against individual defendants be immediately reinstated and
continued."

HBT and Tancuan’s separate Motions for Reconsiderations are hereby denied, for lack of merit.

SO ORDERED.11

On February 2, 1998, the PCHC Arbitration Committee rendered its decision in favor of
respondent,12 thus:

IN VIEW OF ALL THE FOREGOING, judgment is hereby rendered in favor of the plaintiff and against
the defendant sentencing the latter to pay the plaintiff the sum of P25.2 million as principal. In view of the
fact, however, that this amount was split between the plaintiff and the defendant in the course of the
proceedings, the amount to be paid by the defendant to the plaintiff should only be P12,600,000.00 plus
interest on this latter amount at the rate of 12% per annum from February 11, 1992, the date when the
total amount of P25.2 Million was split between plaintiff and defendant up to the date of payment.

In view of the facts found by the committee, no attorney’s fees nor other damages are awarded.

SO ORDERED.13

The motion for reconsideration filed by petitioner was denied by the Arbitration
Committee.14 Consequently, to appeal the decision of the Arbitration Committee in Arbicom Case No. 91-
069, petitioner filed a petition for review in the earlier case filed by respondent in Branch 135 of the RTC
of Makati and docketed as Civil Case No. 92-145.15 In an order dated January 20, 1999, the RTC directed
both petitioner and respondent to file their respective memoranda, after which, said petition would be
deemed submitted for resolution.16

Both parties filed several pleadings. On February 8, 1999, respondent filed a Motion to Dismiss Petition
for Review for Lack of Jurisdiction,17 which was opposed by the petitioner.18 Respondent then filed its
Reply to the opposition,19 to which petitioner filed a Rejoinder.20 On August 16, 1999, respondent
submitted its Surrejoinder.21

On November 9, 1999, the RTC rendered the assailed Order which held, thus:

Acting on plaintiff Far East Bank and Trust Company’s "Motion To Dismiss Petition For Review For
Lack Of Jurisdiction", considering that the petition for review is a separate and distinct case, the same
must comply with all the requirements for filing initiatory pleadings for civil actions before this Court so
that since the commencement of the subject petition lacks the mandatory requirements provided for,
except the payment of docket fees, for lack of jurisdiction, the petition for review is hereby dismissed.
SO ORDERED.22

The RTC denied petitioner’s motion for reconsideration,23 hence, this petition on the sole ground, to wit:

THE REGIONAL TRIAL COURT ERRED IN DISMISSING THE PETITION OF PETITIONER FOR
LACK OF JURISDICTION ON THE GROUND THAT IT SHOULD HAVE BEEN DOCKETED AS A
SEPARATE CASE.24

Petitioner contends that Civil Case No. 92-145 was merely suspended to await the outcome of the
arbitration case pending before the PCHC. Thus, any petition questioning the decision of the Arbitration
Committee must be filed in Civil Case No. 92-145 and should not be docketed as a separate action.
Likewise, petitioner avers that had it filed a separate action, "this would have resulted in a multiplicity of
suits, which is abhorred in procedure."

Meanwhile respondent avers that the RTC correctly dismissed the appeal from the award of private
arbitrators since there is no statutory basis for such appeal. Respondent argues that petitioner’s claim that
the parties by agreement had conferred on the RTC appellate jurisdiction over decisions of private
arbitrators is erroneous because they cannot confer a non-existent jurisdiction on the RTC or any court.
Furthermore, the petition for review filed by petitioner violated the rule on commencing an original action
under Section 5, Rule 1, and the raffle of cases under Section 2, Rule 20 of the Rules of Court, when it
filed the same in Branch 135 of the RTC of Makati where there was already a pending original action,
i.e., Civil Case No. 92-145.

The petition lacks merit.

The Philippine Clearing House Corporation was created to facilitate the clearing of checks of member
banks. Among these member banks exists a compromissoire,25 or an arbitration agreement embedded in
their contract wherein they consent that any future dispute or controversy between its PCHC participants
involving any check would be submitted to the Arbitration Committee for arbitration. Petitioner and
respondent are members of PCHC, thus they underwent arbitration proceedings.

The PCHC has its own Rules of Procedure for Arbitration (PCHC Rules). However, this is governed by
Republic Act No. 876, also known as The Arbitration Law26 and supplemented by the Rules of
Court.27 Thus, we first thresh out the remedy of petition for review availed of by the petitioner to appeal
the order of the Arbitration Committee.

Sections 23, 24 and 29 of The Arbitration Law, and Section 13 of the PCHC Rules, provide:

SEC. 23. Confirmation of award. – At any time within one month after the award is made, any party to
the controversy which was arbitrated may apply to the court having jurisdiction, as provided in Section
28, for an order confirming the award; and thereupon the court must grant such order unless the
award is vacated, modified or corrected, as prescribed herein. Notice of such motion must be served
upon the adverse party or his attorney as prescribed by law for the service of such notice upon an attorney
in action in the same court.

SEC. 24. Grounds for vacating award. – In any one 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 disqualification 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.

xxxx

SEC. 25. Grounds for modifying or correcting 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 commissioner’s report, the defect could have been amended or disregarded by
the court.

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

SEC. 29. Appeals. – An appeal may be taken from an order made in a proceeding under this Act, or
from judgment entered upon an award through certiorari proceedings, but such appeals shall be limited to
questions of law. The proceedings upon such an appeal, including the judgment thereon shall be
governed by the Rules of Court insofar as they are applicable.

AMENDED ARBITRATION RULES OF PROCEDURE OF PCHC

Sec. 13. – The findings of facts of the decision or award rendered by the Arbitration Committee or
by the sole Arbitrator as the case may be shall be final and conclusive upon all the parties in said
arbitration dispute. The decision or award of the Arbitration Committee or of the Sole Arbitrator or of
the Board of Directors, as the case may be, shall be appealable only on questions of law to any of the
Regional Trial Courts in the National Capital Region where the Head Office of any of the parties is
located. The appellant shall perfect his appeal by filing a notice of appeal to the Arbitration Secretariat
and filing a Petition with the Regional Trial Court of the National Capital Region for the review of the
decision or award of the committee or sole arbitrator or of the Board of Directors, as the case may be,
within a non-extendible period of fifteen (15) days from and after its receipt of the order denying or
granting said motion for reconsideration or new trial had been filed, within a non-extendible period of
fifteen (15) days from and after its receipt of the order denying or granting said motion for
reconsideration or of the decision rendered after the new trial if one had been granted.
x x x x. (Emphasis supplied)

As provided in the PCHC Rules, the findings of facts of the decision or award rendered by the Arbitration
Committee shall be final and conclusive upon all the parties in said arbitration dispute.28 Under Article
204429 of the New Civil Code, the validity of any stipulation on the finality of the arbitrators’ award or
decision is recognized. However, where the conditions described in Articles 2038,30 203931 and
204032 applicable to both compromises and arbitrations are obtaining, the arbitrators’ award may be
annulled or rescinded.33 Consequently, the decision of the Arbitration Committee is subject to judicial
review.

Furthermore, petitioner had several judicial remedies available at its disposal after the Arbitration
Committee denied its Motion for Reconsideration. It may petition the proper RTC to issue an order
vacating the award on the grounds provided for under Section 24 of the Arbitration Law.34 Petitioner
likewise has the option to file a petition for review under Rule 43 of the Rules of Court with the Court of
Appeals on questions of fact, of law, or mixed questions of fact and law.35 Lastly, petitioner may file a
petition for certiorari under Rule 65 of the Rules of Court on the ground that the Arbitrator Committee
acted without or in excess of its jurisdiction or with grave abuse of discretion amounting to lack or excess
of jurisdiction. Since this case involves acts or omissions of a quasi-judicial agency, the petition should be
filed in and cognizable only by the Court of Appeals.36

In this instance, petitioner did not avail of any of the abovementioned remedies available to it. Instead it
filed a petition for review with the RTC where Civil Case No. 92-145 is pending pursuant to Section 13
of the PCHC Rules to sustain its action. Clearly, it erred in the procedure it chose for judicial review of
the arbitral award.

Having established that petitioner failed to avail of the abovementioned remedies, we now discuss the
issue of the jurisdiction of the trial court with respect to the petition for review filed by petitioner.

Jurisdiction is the authority to hear and determine a cause - the right to act in a case.37 Jurisdiction over
the subject matter is the power to hear and determine the general class to which the proceedings in
question belong. Jurisdiction over the subject matter is conferred by law and not by the consent or
acquiescence of any or all of the parties or by erroneous belief of the court that it exists.38

In the instant case, petitioner and respondent have agreed that the PCHC Rules would govern in case of
controversy. However, since the PCHC Rules came about only as a result of an agreement between and
among member banks of PCHC and not by law, it cannot confer jurisdiction to the RTC. Thus, the
portion of the PCHC Rules granting jurisdiction to the RTC to review arbitral awards, only on questions
of law, cannot be given effect.

Consequently, the proper recourse of petitioner from the denial of its motion for reconsideration by the
Arbitration Committee is to file either a motion to vacate the arbitral award with the RTC, a petition for
review with the Court of Appeals under Rule 43 of the Rules of Court, or a petition for certiorari under
Rule 65 of the Rules of Court. In the case at bar, petitioner filed a petition for review with the RTC when
the same should have been filed with the Court of Appeals under Rule 43 of the Rules of Court. Thus, the
RTC of Makati did not err in dismissing the petition for review for lack of jurisdiction but not on the
ground that petitioner should have filed a separate case from Civil Case No. 92-145 but on the necessity
of filing the correct petition in the proper court. It is immaterial whether petitioner filed the petition for
review in Civil Case No. 92-145 as an appeal of the arbitral award or whether it filed a separate case in
the RTC, considering that the RTC will only have jurisdiction over an arbitral award in cases of motions
to vacate the same. Otherwise, as elucidated herein, the Court of Appeals retains jurisdiction in petitions
for review or in petitions for certiorari. Consequently, petitioner’s arguments, with respect to the filing of
separate action from Civil Case No. 92-145 resulting in a multiplicity of suits, cannot be given due
course.

Alternative dispute resolution methods or ADRs – like arbitration, mediation, negotiation and conciliation
– are encouraged by the Supreme Court. By enabling parties to resolve their disputes amicably, they
provide solutions that are less time-consuming, less tedious, less confrontational, and more productive of
goodwill and lasting relationships.39 It must be borne in mind that arbitration proceedings are mainly
governed by the Arbitration Law and suppletorily by the Rules of Court.

WHEREFORE, in light of the foregoing, the petition is DENIED. The November 9, 1999 Order of the
Regional Trial Court of Makati City, Branch 135, in Civil Case No. 92-145 which dismissed the petition
for review for lack of jurisdiction and the February 1, 2000 Order denying its reconsideration, are
AFFIRMED.

SO ORDERED.

CONSUELO YNARES-SANTIAGO
Associate Justice
 Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION

G.R. No. 159795 July 30, 2004

SPOUSES ROBERTO & EVELYN DAVID and COORDINATED GROUP, INC., petitioners,
vs.
CONSTRUCTION INDUSTRY AND ARBITRATION COMMISSION and SPS. NARCISO & AIDA
QUIAMBAO,respondents.

DECISION

PUNO, J.:

This is a petition for review on certiorari under Rule 45 of the Revised Rules of Court, assailing the
Decision and Resolution of the Court of Appeals, dated June 30, 2003 and August 27, 2003, respectively,
in CA-G.R. SP No. 72736.

Petitioner COORDINATED GROUP, INC. (CGI) is a corporation engaged in the construction business,
with petitioner-spouses ROBERTO and EVELYN DAVID as its President and Treasurer, respectively.

The records reveal that on October 7, 1997, respondent-spouses NARCISO and AIDA QUIAMBAO
engaged the services of petitioner CGI to design and construct a five-storey concrete office/residential
building on their land in Tondo, Manila. The Design/Build Contract of the parties provided that: (a)
petitioner CGI shall prepare the working drawings for the construction project; (b) respondents shall pay
petitioner CGI the sum of Seven Million Three Hundred Nine Thousand Eight Hundred Twenty-One and
51/100 Pesos (P7,309,821.51) for the construction of the building, including the costs of labor, materials
and equipment, and Two Hundred Thousand Pesos (P200,000.00) for the cost of the design; and (c) the
construction of the building shall be completed within nine (9) months after securing the building permit.

The completion of the construction was initially scheduled on or before July 16, 1998 but was extended to
November 15, 1998 upon agreement of the parties. It appears, however, that petitioners failed to follow
the specifications and plans as previously agreed upon. Respondents demanded the correction of the
errors but petitioners failed to act on their complaint. Consequently, respondents rescinded the contract on
October 31, 1998, after paying 74.84% of the cost of construction.

Respondents then engaged the services of another contractor, RRA and Associates, to inspect the project
and assess the actual accomplishment of petitioners in the construction of the building. It was found that
petitioners revised and deviated from the structural plan of the building without notice to or approval by
the respondents.1

Respondents filed a case for breach of contract against petitioners before the Regional Trial Court (RTC)
of Manila. At the pre-trial conference, the parties agreed to submit the case for arbitration to the
CONSTRUCTION INDUSTRY ARBITRATION COMMISSION (CIAC). Respondents filed a
request2 for arbitration with the CIAC and nominated Atty. Custodio O. Parlade as arbitrator. Atty.
Parlade was appointed by the CIAC as sole arbitrator to resolve the dispute. With the agreement of the
parties, Atty. Parlade designated Engr. Loreto C. Aquino to assist him in assessing the technical aspect of
the case. The RTC of Manila then dismissed the case and transmitted its records to the CIAC.3
After conducting hearings and two (2) ocular inspections of the construction site, the arbitrator rendered
judgment against petitioners, thus:

AWARD

In summary, award is hereby made in favor of the Quiambaos against the Respondents, jointly and
severally, as follows:

Lost Rentals - P1,680,000.00

Cost to Complete, Rectification, etc. - 2,281,028.71

Damages due to erroneous staking - 117,000.00

Professional fees for geodetic surveys, etc. - 72,500.00

Misc. expenses/ professional fees of engineers - 118,642.50

Bills for water and electricity, PLDT - 15,247.68

Attorney’s Fees - 100,000.00

Moral Damages - 250,000.00

Exemplary Damages - 250,000.00

TOTAL P4,884,418.89

There is likewise an award in favor of the Respondents (petitioners herein) and against the Claimants
(respondents herein) for the value of the materials and equipment left at (the) site (in) the amount of
P238,372.75. Respondent CGI is likewise credited with an 80% accomplishment having a total value of
P5,847,857.20.

All other claims and counterclaims are hereby dismissed for lack of merit.

To recapitulate:

Payments already made to CGI - P5,275,041.00

Amount awarded above to Claimants - 4,864,418.89

Total 10,159,459.89

Payments due CGI for 80% work

accomplishment P5,847,857.20 -
 Cost of materials and equipment 238,372.75 -

Total : P6,086,299.95

Deducting this amount of P6,086,229.95 from P10,159,459.89, the result is a net award in favor the
Claimants of (sic) the amount of P4,073,229.94.

WHEREFORE, the Respondents are hereby ordered to pay, jointly and severally, the Claimants the
amount of P4,073,229.94 with interest at 6% per annum from the date of the promulgation of this Award,
and 12% per annum of the net award, including accrued interest, from the time it becomes final and
executory until it is fully paid.

Each party is hereby directed to pay to the Commission P15,000.00 as such party’s share in the expert’s
fees paid to Engr. Loreto C. Aquino.

SO ORDERED.4

Petitioners appealed to the Court of Appeals which affirmed the arbitrator’s Decision but deleted the
award for lost rentals.5

Unsatisfied, petitioners filed this petition for review on certiorari, raising the following issues:

I. THERE WAS NO BASIS, IN FACT AND IN LAW, TO ALLOW RESPONDENTS TO

UNILATERALLY RESCIND THE DESIGN/BUILT CONTRACT, AFTER PETITIONERS
HAVE (SIC) SUBSTANTIALLY PERFORMED THEIR OBLIGATION UNDER THE SAID
CONTRACT.

II. THE HONORABLE COURT OF APPEALS ERRED IN FINDING PETITIONERS

JOINTLY AND SEVERALLY LIABLE WITH CO-PETITIONER COORDINATED (GROUP,
INC.), IN CLEAR VIOLATION OF THE DOCTRINE OF SEPARATE JURIDICAL
PERSONALITY.

We find no merit in the petition.

Executive Order No. 1008 entitled, "Construction Industry Arbitration Law" provided for an arbitration
mechanism for the speedy resolution of construction disputes other than by court litigation. It recognized
the role of the construction industry in the country’s economic progress as it utilizes a large segment of
the labor force and contributes substantially to the gross national product of the country.6 Thus, E.O. No.
1008 vests on the Construction Industry Arbitration Commission (CIAC) original and exclusive
jurisdiction over disputes arising from or connected with construction contracts entered into by parties
who have agreed to submit their case to voluntary arbitration. Section 19 of E.O. No. 1008 provides that
its arbitral award shall be appealable to the Supreme Court only on questions of law.7

There is a question of law when the doubt or difference in a given case arises as to what the law is on a
certain set of facts, and there is a question of fact when the doubt arises as to the truth or falsity of the
alleged facts.8 Thus, for a question to be one of law, it must not involve an examination of the probative
value of the evidence presented by the parties and there must be no doubt as to the veracity or falsehood
of the facts alleged.9
In the case at bar, it is readily apparent that petitioners are raising questions of fact. In their first
assigned error, petitioners claim that at the time of rescission, they had completed 80% of the construction
work and still have 15 days to finish the project. They likewise insist that they constructed the building in
accordance with the contract and any modification on the plan was with the consent of the respondents.

These claims of petitioners are refuted by the evidence on record. In holding that respondents were
justified in rescinding the contract, the Court of Appeals upheld the factual findings of the sole
arbitrator, thus:

xxx

(A)s the Building was taking shape, they noticed deviations from the approved plans and
specifications for the Building. Most noticeable were two (2) concrete columns in the middle
of the basement which effectively and permanently obstructed the basement for the parking
of vehicles x x x. In addition, three (3) additional concrete columns were constructed from
the ground floor to the roof deck x x x which affected the overall dimension of the building
such as altering the specified beam depths, passageways and windows. In addition, Mrs.
Quiambao provided a virtual litany of alleged defects, to wit: (a) the Building was not vertically
plumbed xxx; (b) provisions for many architectural members were not provided for, such as, (i)
the recesses for window plant boxes are lacking xxx, (ii) provisions for precast molding are
lacking xxx, (iii) canopies are also lacking x x x; (c) misaligned walls, ugly discrepancies and
gaps; (d) skewed walls to floors/landings; (e) low head clearances and truncated beams x x x; (f)
narrow and disproportionate stairs xxx one (1) instead of two (2) windows at the fire exit x x x,
(g) absence of water-proofing along the basement wall x x x and at the roof deck which caused
leaks that damages the mezzanine floor x x x; (h) the use of smaller diagonal steel trusses at the
penthouse. x x x There were others which were shown during the site inspection such as: (1) L-
shaped kitchen counters instead of the required U-shaped counters x x x; (2) failure to provide
marble tops for the kitchen counters; (3) installation of single-tub sinks where the plans called for
double-type stainless kitchen sinks x x x; (4) installation of much smaller windows than those
required; (5) misaligned window easements to wall, (6) floors were damaged by roof leaks, (6)
poor floor finish, misaligned tiles, floors with "kapak" and disproportionate drawers and cabinets.
A more comprehensive list of alleged defects, deviations and complaints of the Quiambaos is
found in a report marked Exhibit C-144. Many of these defects were seen during the site
inspection and the only defense and comment of CGI was that these were punch-list items
which could have been corrected prior to completion and turn-over of the Building had the
Contract not been terminated by the Claimants (respondents here). x x x Thus, x x x
(petitioner) CGI argued that: "In any construction work, before a contractor turns-over the
project to the owner, punchlisting of defects is done so as to ensure compliance and satisfaction
of both the contractor and the owner. Punch listing means that the contractor will list all major
and minor defects and rectifies them before the turnover of the project to the owner. After all
defects had been arranged, the project is now turned over to the owner. For this particular
project, no turn over was made by the contractor to the owner yet. Actually, we were already
pinpointing these defects for punch listing before we were terminated illegally. As alleged by the
owner, the deficiencies mentioned are stubouts of water closets at toilets, roofing and framing,
doors, cabinets, ceiling and stairs and other were not yet completed and rectified by us. In fact we
were counting on our project engineer in charge x x x to do this in as much as this is one of his
duties to do for the company. x x x" Confirmatory of this assertion of CGI that it was willing to
undertake the appropriate corrective works (whether or not the items are punch-list items) is
Exhibit C-88 which is a letter prepared by CGI’s Windell F. Vizconde, checked by CGI’s Gary
M. Garcia and noted by CGI’s Benjie Lipardo, addressed to the Quiambaos which stated that:
"As per our discussion during the last meeting dated Sept. 28, 1998 the following items was (sic)
confirmed and clarified. These are described as follows:

"1. All ceiling cornices shall be installed as per plan specification which is 1" x 4" in size.

"2. All baseboards shall be installed as per plan specification which is wood 1" x 4" in size.

"3. Electrical Meter center and main panel breaker should be retained to its present location.

"4. Elevation of office, dining and stair lobby of ground floor shall be 4" higher than the
elevation of parking area (subject for verification).

"5. All door jambs at C.R. has (sic) to be replaced with concrete framing jambs.

"6. All ceilings mailers should be 2 x 2 in size.

"7. All plywood ceiling that was damaged by rain water shall be replaced.

"8. Provide a pipe chase for the enclosure of soil stack pipe and water line pipe at the ground
floor level between grid line 3-4 along the light well area.

"9. Front side elevation view shall be follow (sic) as per plan specialy (sic) at 4th flr.

"10. One column at basement floor along grid line 2# B has to be verified by the structural
designer if ever it is safe to removed (sic) the column and what will be their (sic) recommendation
to support the load.

"11. Existing doors D-2 and D-3 shall be replaced a (sic) new one."

While Mrs. Quiambao appeared not to have given her conformity, this document from CGI is
an admission by CGI of the deficiencies in the construction of the Building which needed to
be corrected.

It appears that concrete samples taken from the basement, ground floor, mezzanine and
2nd floor of the Building were subjected to a concrete core test by Geotesting International,
Inc., geotechnical and materials testing engineers. A report dated January 20, 1999 x x x
showed x x x that (5) samples x x x failed the test. Sample S2 while it showed a comprehensive
strength of 3147 psi, the corrective strength in psi was below the specified comprehensive
strength of 3000 psi. CGI failed to produce evidence of similar tests during the construction of the
Building although it is normal construction practice for the contractor to provide samples for
concrete core tests.

Deformed reinforcing steel bar specimens from the building were subjected to physical
tests. These tests were conducted at the Materials Testing Laboratory of the Department of Civil
Engineering, College of Engineering, University of the Philippines. x x x There were 18 samples
and x x x 8 failed the test although all of them passed the cold bend test. x x x CGI submitted
Quality Test Certificates issued by Steel Asia certifying to the mechanical test results and
chemical composition of the steel materials tested x x x. However, the samples were provided by
the manufacturer, not by CGI, to Steel Asia, and there is no showing that the materials supplied
by the manufacturer to CGI for the Building formed part of the steel materials, part of which was
tested.

xxx

Regarding the additional columns at the basement and at the first floor to the roof deck of
the Building, which effectively restricted the use of the basement as a parking area, and
likewise reduced the area which could be used by the Quiambaos in the different floors of
the Building, Engr. Roberto J. David admitted that these represented a design change
which was made and implemented by CGI without the conformnity of the Claimants. The
Contract specifically provided in Article II that "the CONTRACTOR shall submit to the OWNER
all designs for the OWNER’S approval." This implies necessarily that all changes in the approved
design shall likewise be submitted to the OWNER for approval. This change, in my view, is the
single most serious breach of the Contract committed by CGI which justified the decision of
the Claimants to terminate the Contract. x x x (T)here is no evidence to show that the
Quiambaos approved the revision of the structural plans to provide for the construction of the
additional columns. x x x

x x x Engr. Villasenor defended his structural design as adequate. He admitted that the revision
of the plans which resulted in the construction of additional columns was in pursuance of
the request of Engr. David to revise the structural plans to provide for a significant
reduction of the cost of construction. When Engr. David was asked for the justification for
the revision for the plans, he confirmed that he wanted to reduce the cost of construction. In
any case, whether the cause of revision of the plans was the under-design of the foundation
or for reasons of economy, it is CGI which is at fault. CGI prepared the structural plans
and quoted the price for constructing the Building. The Quiambaos accepted both the plans
and the price. If CGI made a mistake in designing the foundation or in estimating the cost
of construction, it was at fault. It cannot correct that mistake by revising the plans and
implementing the revisions without informing the Quiambaos and obtaining their
unequivocal approval of such changes.

In addition, CGI admitted that no relocation survey was made by it prior to the construction of the
Building. Consequently, a one-meter portion of the Building was constructed beyond the property
line. In justification, Engr. Barba V. Santos declared that CGI made the layout of the proposed
structure based on the existing fence. x x x (I)t is understood that a contractor, in constructing a
building, must first conduct a relocation survey before construction precisely to avoid the
situation which developed here, that the Building was not properly constructed within the owner’s
property line. x x x This resulted in the under-utilization of the property, small as it is, and the
exposure of the Quiambaos to substantial damages to the owner of the adjoining property
encroached upon.

A third major contested issue concerned the construction of the cistern. x x x A cistern is an
underground tank used to collect water for drinking purposes. The contentious points
regarding the construction of the cistern are: first, that the cistern was designed to accumulate
up to 10,000 gallons of water; as constructed, its capacity was less than the design capacity.
Second, there is no internal partition separating the cistern from the sump pit. x x x

Considering that the cistern is a receptacle for the collection of drinking water, it is
incomprehensible why the Respondents (herein petitioners), in the design and construction
 of the cistern, has (sic) not taken the necessary measures to make certain that the water in
the cistern will be free from contamination. x x x

Thus, granting the arguments of the Respondents (herein petitioners) that the observed defects in
the Building could be corrected before turn-over and acceptance of the Building if CGI had been
allowed to complete its construction, the construction of additional columns, the construction
of the Building such that part of it is outside the property line established a sufficient legal
and factual basis for the decision of the Quiambaos to terminate the Contract. The fact that
five (5) of nine (9) the (sic) concrete samples subjected to a core test, and eight (8) of
eighteen (18) deformed reinforcing steel bar specifics subjected to physical tests failed the
tests and the under-design of the cistern was established after the Contract was terminated
also served to confirm the justified suspicion of the Quiambaos that the Building was
defective or was not constructed according to approved plans and specifications.10 (emphases
supplied)

These are technical findings of fact made by expert witnesses and affirmed by the arbitrator. They were
also affirmed by the Court of Appeals. We find no reason to revise them.

The second assigned error likewise involves a question of fact. It is contended that petitioner-spouses
David cannot be held jointly and severally liable with petitioner CGI in the payment of the arbitral award
as they are merely its corporate officers.

At first glance, the issue may appear to be a question of law as it would call for application of the law on
the separate liability of a corporation. However, the law can be applied only after establishing a factual
basis, i.e., whether petitioner-spouses as corporate officers were grossly negligent in ordering the
revisions on the construction plan without the knowledge and consent of the respondent-spouses. On this
issue, the Court of Appeals again affirmed the factual findings of the arbitrator, thus:

As a general rule, the officers of a corporation are not personally liable for their official acts
unless it is shown that they have exceeded their authority. However, the personal liability of a
corporate director, trustee or officer, along with corporation, may so validly attach when he
assents to a patently unlawful act of the corporation or for bad faith or gross negligence in
directing its affairs.

The following findings of public respondent (CIAC) would support its ruling in holding
petitioners severally and jointly liable with the Corporation:

" x x x When asked whether the Building was underdesigned considering the poor quality
of the soil, Engr. Villasenor defended his structural design as adequate. He admitted
that the revision of the plans which resulted in the construction of additional
columns was in pursuance of the request of Engr. David to revise the structural
plans to provide for a significant reduction of the cost of construction. When Engr.
David was asked for the justification for the revision of the plans, he confirmed that
he wanted to reduce the cost of construction. x x x" (emphases supplied)11

Clearly, the case at bar does not raise any genuine issue of law. We reiterate the rule that factual findings
of construction arbitrators are final and conclusive and not reviewable by this Court on appeal, except
when the petitioner proves affirmatively that: (1) the award was procured by corruption, fraud or other
undue means; (2) there was evident partiality or corruption of the arbitrators or of any of them; (3) 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; (4) one or more of the arbitrators
were disqualified to act as such under section nine of Republic Act No. 876 and willfully refrained from
disclosing such disqualifications or of any other misbehavior by which the rights of any party have been
materially prejudiced; or (5) 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.12Petitioners
failed to show that any of these exceptions applies to the case at bar.

Finally, it bears to remind petitioners of this Court’s ruling in the 1993 case of Hi-Precision Steel
Center, Inc. vs. Lim Kim Steel Builders, Inc.13 which emphasized the rationale for limiting appeal to
legal questions in construction cases resolved through arbitration, thus:

x x x Consideration of the animating purpose of voluntary arbitration in general, and arbitration

under the aegis of the CIAC in particular, requires us to apply rigorously the above principle
embodied in Section 19 that the Arbitral Tribunal’s findings of fact shall be final and
inappealable (sic).

Voluntary arbitration involves the reference of a dispute to an impartial body, the members of
which are chosen by the parties themselves, which parties freely consent in advance to abide by
the arbitral award issued after proceedings where both parties had the opportunity to be
heard. The basic objective is to provide a speedy and inexpensive method of settling disputes
by allowing the parties to avoid the formalities, delay, expense and aggravation which
commonly accompany ordinary litigation, especially litigation which goes through the entire
hierarchy of courts. Executive Order No. 1008 created an arbitration facility to which the
construction industry in the Philippines can have recourse. The Executive Order was enacted to
encourage the early and expeditious settlement of disputes in the construction industry, a public
policy the implementation of which is necessary and important for the realization of the national
development goals.

Aware of the objective of voluntary arbitration in the labor field, in the construction industry, and
in other area for that matter, the Court will not assist one or the other or even both parties in any
effort to subvert or defeat that objective for their private purposes. The Court will not review the
factual findings of an arbitral tribunal upon the artful allegation that such body had
"misapprehended facts" and will not pass upon issues which are, at bottom, issues of fact, no
matter how cleverly disguised they might be as "legal questions." The parties here had recourse to
arbitration and chose the arbitrators themselves; they must have had confidence in such
arbitrators. The Court will not, therefore, permit the parties to relitigate before it the issues
of facts previously presented and argued before the Arbitral Tribunal, save only where a
clear showing is made that, in reaching its factual conclusions, the Arbitral Tribunal
committed an error so egregious and hurtful to one party as to constitute a grave abuse of
discretion resulting in lack or loss of jurisdiction. Prototypical examples would be factual
conclusions of the Tribunal which resulted in deprivation of one or the other party of a fair
opportunity to present its position before the Arbitral Tribunal, and an award obtained through
fraud or the corruption of arbitrators. Any other more relaxed rule would result in setting at
naught the basic objective of a voluntary arbitration and would reduce arbitration to a largely
inutile institution. (emphases supplied)

IN VIEW WHEREOF, the petition is DISMISSED for lack of merit. Costs against petitioners.

SO ORDERED.

Austria-Martinez, Callejo, Sr., Tinga, and Chico-Nazario, JJ., concur.