G.R. No.

211504 to a large segment of the national labor force aside from its being a leading
contributor to the gross national product.
FEDERAL BUILDERS, INC., Petitioner vs POWER FACTORS, INC.,
Respondent Same; Same; Construction Disputes; Section 2.1, Rule 2 of the
Construction Industry Arbitration Commission (CIAC)  Revised
Rules particularly specifies that the CIAC has original and exclusive
Construction Industry Arbitration Commission; Jurisdiction;
jurisdiction over construction disputes,  whether such  disputes
Under the Construction Industry Arbitration Commission  Revised
arise from or are merely connected with  the construction contracts
Rules of Procedure Governing Construction Arbitration (CIAC  Revised
entered into by parties, and whether such disputes
Rules), all that is required for the CIAC to acquire jurisdiction is for the
arise before or  after the completion of the contracts.—Worthy to note is
parties of any construction contract to agree to submit their dispute to
that the jurisdiction of the CIAC is over the dispute, not over the contract
arbitration.—The need to establish a proper arbitral machinery to settle
between the parties. Section 2.1, Rule 2 of the CIAC Revised
disputes expeditiously was recognized by the Government in order to
Rules particularly specifies that the CIAC has original and exclusive
promote and maintain the development of the country’s construction industry.
jurisdiction over construction disputes, whether such disputes arise from or
With such recognition came the creation of the CIAC through Executive
are merely connected with the construction contracts entered into by parties,
Order No. 1008 (E.O. No. 1008), also known as The Construction Industry
and whether such disputes arise before or after  the completion of the
Arbitration Law. Section 4 of E.O. No. 1008 provides: Sec. 4. Jurisdiction.—
contracts. Accordingly, the execution of the contracts and the effect of the
The CIAC shall have original and exclusive jurisdiction over disputes arising
agreement to submit to arbitration are different matters, and the signing or
from, or connected with, contracts entered into by parties involved in
non-signing of one does not necessarily affect the other. In other words, the
construction in the Philippines, whether the dispute arises before or after the
formalities of the contract have nothing to do with the jurisdiction of the CIAC.
completion of the contract, or after the abandonment or breach thereof.
These disputes may involve government or private contracts. For the Board
Civil Law; Contracts; A contract does not need to be in writing in
to acquire jurisdiction, the parties to a dispute must agree to submit the same
order to be obligatory and effective unless the law specifically requires
to voluntary arbitration. x x x Under the CIAC Revised Rules of Procedure
so.—Under Article 1318 of the Civil Code,  a valid contract should have the
Governing Construction Arbitration  (CIAC Revised Rules), all that is required
following essential elements, namely: (a)  consent of the contracting parties;
for the CIAC to acquire jurisdiction is for the parties of any construction
(b) object certain that is the subject matter of the contract; and (c) cause or
contract to agree to submit their dispute to arbitration.  Also, Section 2.3 of
consideration. Moreover, a contract does not need to be in writing in order to
the CIAC Revised Rules  states that the agreement may be reflected in an
be obligatory and effective unless the law specifically requires so. Pursuant
arbitration clause in their contract or by subsequently agreeing to submit their
to Article 1356 and Article 1357 of the Civil Code, contracts shall be
dispute to voluntary arbitration. The CIAC Revised Rules  clarifies, however,
obligatory in whatever form they may have been entered into, provided that
that the agreement of the parties to submit their dispute to arbitration need
all the essential requisites for their validity are present. Indeed, there was a
not be signed or be formally agreed upon in the contract because it can also
contract between Federal and Power even if the Contract of Service was
be in the form of other modes of communication in writing.
unsigned. Such contract was obligatory and binding between them by virtue
of all the essential elements for a valid contract being present.
Same; Same; Executive Order (EO) No. 1008 emphasizes that the
modes of voluntary dispute resolution like arbitration are
Construction Industry Arbitration Commission; Jurisdiction;
always  preferred because they settle disputes in a speedy and
Although the agreement to submit to arbitration has been expressly
amicable manner.—The liberal application of procedural rules as to the form
required to be in writing and signed by the parties therein by Section
by which the agreement is embodied is the objective of the CIAC Revised
4 of Republic Act (RA) No. 876  (Arbitration Law), the requirement is
Rules. Such liberality conforms to the letter and spirit of E.O. No. 1008 itself
conspicuously absent from the Construction Industry Arbitration
which emphasizes that the modes of voluntary dispute resolution like
Commission (CIAC)  Revised Rules, which even expressly allows such
arbitration are always preferred because they settle disputes in a speedy and
agreement not to be signed by the parties therein.—The agreement
amicable manner. They likewise help in alleviating or unclogging the judicial
contemplated in the CIAC Revised Rules  to vest jurisdiction of the CIAC over
dockets. Verily, E.O. No. 1008 recognizes that the expeditious resolution of
the parties’ dispute is not necessarily an arbitration clause to be contained
construction disputes will promote a healthy partnership between the
only in a signed and finalized construction contract. The agreement could
Government and the private sector as well as aid in the continuous growth of
also be in a separate agreement, or any other form of written communication,
the country considering that the construction industry provides employment

Page 1 of 46
as long as their intent to submit their dispute to arbitration is clear. The fact and the Precinct Building. Federal replied that its outstanding balance under
that a contract was signed by both parties has nothing to do with the the original contract only amounted to ₱1,641,513.94, and that the demand
jurisdiction of the CIAC, and this is the explanation why the CIAC Revised for payment for work done by Power after June 21, 2005 should be
Rules itself expressly provides that the written communication or agreement addressed directly to BIDC.4 Nonetheless, Power made several demands on
need not be signed by the parties. Although the agreement to submit to Federal to no avail.
arbitration has been expressly required to be in writing and signed by the
parties therein by Section 4 of Republic Act No. 876 (Arbitration Law), the On October 29, 2009, Power filed a request for arbitration in the CIAC
requirement is conspicuously absent from the CIAC Revised Rules, which invoking the arbitration clause of the Contract of Service reading as follows:
even expressly allows such agreement not to be signed by the parties
therein. Brushing aside the obvious contractual agreement in this case 15. ARBITRATION COMMITTEE - All disputes, controversies or differences,
warranting the submission to arbitration is surely a step which may arise between the parties herein, out of or in relation to or in
backward. Consistent with the policy of encouraging alternative dispute connection with this Agreement, or for breach thereof shall be settled by the
resolution methods, therefore, any doubt should be resolved in favor of Construction Industry Arbitration Commission (CIAC) which shall have
arbitration. In this connection, the CA correctly observed that the act of Atty. original and exclusive jurisdiction over the aforementioned disputes.5
Albano in manifesting that Federal had agreed to the form of arbitration was
unnecessary and inconsequential considering the recognition of the value of
the Contract of Service despite its being an unsigned draft. On November 20, 2009, Atty. Vivencio Albano, the counsel of Federal,
submitted a letter to the CIAC manifesting that Federal agreed to arbitration
and sought an extension of 15 days to file its answer, which request the
DECISION CIAC granted.

BERSAMIN, J.: On December 16, 2009, Atty. Albano filed his withdrawal of appearance
stating that Federal had meanwhile engaged another counsel.6
An agreement to submit to voluntary arbitration for purposes of vesting
jurisdiction over a construction dispute in the Construction Industry Arbitration Federal, represented by new counsel (Domingo, Dizon, Leonardo and
Commission (CIAC) need not be contained in the construction contract, or be Rodillas Law Office), moved to dismiss the case on the ground that CIAC had
signed by the parties. It is enough that the agreement be in writing. no jurisdiction over the case inasmuch as the Contract of Service between
Federal and Power had been a mere draft that was never finalized or signed
The Case by the parties. Federal contended that in the absence of the agreement for
arbitration, the CIAC had no jurisdiction to hear and decide the case.7
Federal Builders Inc. (Federal) appeals to reverse the decision promulgated
on August 12, 2013,1 whereby the Court of Appeals (CA) affirmed the On February 8, 2010, the CIAC issued an order setting the case for hearing,
adverse decision rendered on May 12, 2010 by the Construction Industry and directing that Federal's motion to dismiss be resolved after the reception
Arbitration Commission (CIAC) with modification of the total amount of evidence of the parties.8
awarded.2
Federal did not thereafter participate in the proceedings until the CIAC
Antecedents rendered the Final Award dated May 12, 2010,9 disposing:

Federal was the general contractor of the Bullion Mall under a construction In summary: Respondent Federal Builders, Inc. is hereby ordered to pay
agreement with Bullion Investment and Development Corporation (BIDC). In claimant Power Factors, Inc. the following sums:
2004, Federal engaged respondent Power Factors Inc. (Power) as its
subcontractor for the electric works at the Bullion Mall and the Precinct
1. Unpaid balance on the original contract ₱4,276,614.75;
Building for ₱l8,000,000.00.3
2. Unpaid balance on change order nos. 1, 2, 3, 4, 5, 6, 7, 3,006,970.32;
8, & 9
On February 19, 2008, Power sent a demand letter to Federal claiming the 3. Interest to May 13, 2010 1,686,149.94;
unpaid amount of ₱ll,444,658.97 for work done by Power for the Bullion Mall

Page 2 of 46
4. Attorney's Fees 250,000.00; Concerning the amounts awarded, the CA opined that the CIAC should not
5. Cost of Arbitration 149,503.86; have allowed the increase based on labor-cost escalation because of the
  ₱9,369 ,238.87 absence of the agreement between the parties on such escalation and
  because there was no authorization in writing allowing the adjustment or
increase in the cost of materials and labor.13
The foregoing amount shall earn legal interest at the rate of 6% per
annum from the date of this Final Award until this award becomes final and After the CA denied Federal's motion for reconsideration on February 19,
executory, Claimant shall then be entitled to 12% per annum until the entire 2004,14 Federal has come to the Court on appeal.
amount is fully satisfied by Respondent.
Issue
Federal appealed the award to the CA insisting that the CIAC had no
jurisdiction to hear and decide the case; and that the amounts thereby The issues to be resolved are: (a) whether the CA erred in upholding CIAC's
awarded to Power lacked legal and factual bases. jurisdiction over the present case; and (b) whether the CA erred in holding
that Federal was liable to pay Power the amount of ₱7,140,728.07.
On August 12, 2013, the CA affirmed the CIAC's decision with modification
as to the amounts due to Power,10 viz.: Ruling of the Court

WHEREFORE, the CIAC Final Award dated 12 May 20l0 in CIAC Case No. The appeal is bereft of merit.
31-2009 is hereby AFFIRMED with MODIFICATION. As modified, FEDERAL
BUILDERS, INC. is ordered to pay POWER FACTORS, INC. the following: 1.The parties had an effective agreement to submit to voluntary arbitration;
hence, the CIAC had jurisdiction
1. Unpaid balance on the original ₱4,276,614.75;
contract The need to establish a proper arbitral machinery to settle disputes
2. Unpaid balance on change orders 2,864,113.32; expeditiously was recognized by the Government in order to promote and
3. Attorney's Fees 250,000.00; maintain the development of the country's construction industry. With such
4. Cost of Arbitration 149,503.86; recognition came the creation of the CIAC through Executive Order No. 1008
(E.O. No. 1008), also known as The Construction Industry Arbitration
The interest to be imposed on the net award (unpaid balance on the original Law.  Section 4 of E.O. No. 1008 provides:
contract and change order) amounting to P.7, 140,728.07 awarded to
POWER FACTORS INC. shall be six (6%) per annum, reckoned from 4 July Sec. 4. Jurisdiction.  - The CIAC shall have original and exclusive jurisdiction
2006 until this Decision becomes final and executory. Further, the total award over disputes arising from, or connected with, contracts entered into by
due to POWER FACTORS INC. shall be subjected to an interest of twelve parties involved in construction in the Philippines, whether the dispute arises
percent (12%) per annum computed from the time this judgment becomes before or after the completion of the contract, or after the abandonment or
final and executory, until full satisfaction. SO ORDERED.11 breach thereof. These disputes may involve government or private contracts.
For the Board to acquire jurisdiction, the parties to a dispute must agree to
Anent jurisdiction, the CA explained that the CIAC Revised Rules of submit the same to voluntary arbitration. x x x
Procedure stated that the agreement to arbitrate need not be signed by the
parties; that the consent to submit to voluntary arbitration was not necessary Under the CIAC Revised Rules of Procedure Governing Construction
in view of the arbitration clause contained in the Contract of Service; and that Arbitration (CIAC Revised Rules),  all that is required for the CIAC to acquire
Federal's contention that its former counsel's act of manifesting its consent to jurisdiction is for the parties of any construction contract to agree to submit
the arbitration stipulated in the draft Contract of Service did not bind it was their dispute to arbitration.15 Also, Section 2.3 of the CIAC Revised
inconsequential on the issue of jurisdiction.12
Rules states that the agreement may be reflected in an arbitration clause in
their contract or by subsequently agreeing to submit their dispute to voluntary

Page 3 of 46
arbitration. The CIAC Revised Rules  clarifies, however, that the agreement agreement to submit to arbitration are different matters, and the signing or
of the parties to submit their dispute to arbitration need not be signed or be non-signing of one does not necessarily affect the other. In other words, the
formally agreed upon in the contract because it can also be in the form of formalities of the contract have nothing to do with the jurisdiction of the CIAC.
other modes of communication in writing, viz.:
Federal contends that there was no mutual consent and no meeting of the
RULE 4 - EFFECT OF AGREEMENT TO ARBITRATE minds between it and Power as to the operation and binding effect of the
arbitration clause because they had rejected the draft service contract.
SECTION 4.1. Submission to CIAC jurisdiction - An arbitration clause in a
construction contract or a submission to arbitration of a construction dispute The contention of Federal deserves no consideration.
shall be deemed an agreement to submit an existing or future controversy to
CIAC jurisdiction, notwithstanding the reference to a different arbitration Under Article 1318 of the Civil Code, a valid contract should have the
institution or arbitral body in such contract or submission. following essential elements, namely: (a)  consent of the contracting parties;

4.1.1 When a contract contains a clause for the submission of a future (b) object certain that is the subject matter of the contract; and (c) cause or
controversy to arbitration, it is not necessary for the parties to enter into a consideration. Moreover, a contract does not need to be in writing in order to
submission agreement before the Claimant may invoke the jurisdiction of be obligatory and effective unless the law specifically requires so.
CIAC.
Pursuant to Article 135618 and Article 135719 of the Civil Code, contracts shall
4.1.2 An arbitration agreement or a submission to arbitration shall be in be obligatory in whatever form they may have been entered into, provided
writing, but it need not be signed by the parties, as long as the intent is clear that all the essential requisites for their validity are present. Indeed, there was
that the parties agree to submit a present or future controversy arising from a a contract between Federal and Power even if the Contract of Service was
construction contract to arbitration. It may be in the form of exchange of unsigned. Such contract was obligatory and binding between them by virtue
letters sent by post or by telefax, telexes, telegrams, electronic mail or any of all the essential elements for a valid contract being present.
other mode of communication.
It clearly appears that the works promised to be done by Power were already
The liberal application of procedural rules as to the form by which the executed albeit still incomplete; that Federal paid Power ₱l ,000,000.00
agreement is embodied is the objective of the CIAC Revised Rules. Such representing the originally proposed downpayment, and the latter accepted
liberality conforms to the letter and spirit of E.O. No. 1008 itself which the payment; and that the subject of their dispute concerned only the
emphasizes that the modes of voluntary dispute resolution like arbitration are amounts still due to Power. The records further show that Federal admitted
always preferred because they settle disputes in a speedy and amicable having drafted the Contract of Services containing the following clause on
manner. They likewise help in alleviating or unclogging the judicial dockets. submission to arbitration, to wit:
Verily, E.O. No. 1008 recognizes that the expeditious resolution of
construction disputes will promote a healthy partnership between the 15. ARBITRATION COMMITTEE -All disputes, controversies or differences,
Government and the private sector as well as aid in the continuous growth of which may arise between the Parties herein, out of or in relation to or in
the country considering that the construction industry provides employment connection with this Agreement, or for breach thereof shall be settled by the
to a large segment of the national labor force aside from its being a leading Construction Industry Arbitration Commission (CIAC) which shall have
contributor to the gross national product.16 original and exclusive jurisdiction over the aforementioned disputes.20

Worthy to note is that the jurisdiction of the CIAC is over the dispute, not over With the parties having no issues on the provisions or parts of the Contract of
the contract between the parties.17 Section 2.1, Rule 2 of the CIAC Revised Service other than that pertaining to the downpayment that Federal was
Rules particularly specifies that the CIAC has original and exclusive supposed to pay, Federal could not validly insist on the lack of a contract in
jurisdiction over construction disputes, whether such disputes arise from or order to defeat the jurisdiction of the CIAC. As earlier pointed out, the
are merely connected with the construction contracts entered into by parties, CIAC Revised Rules specifically allows any written mode of communication
and whether such disputes arise before or after  the completion of the to show the parties' intent or agreement to submit to arbitration their present
contracts. Accordingly, the execution of the contracts and the effect of the or future disputes arising from or connected with their contract.

Page 4 of 46
The CIAC and the CA both found that the parties had disagreed on the parties as provided under Article 1724 of the Civil Code.  As such, Federal
amount of the downpayment.1âwphi1 On its part, Power indicated after should not be held liable for the labor cost escalation.
receiving and reviewing the draft of the Contract of Service that it wanted
30% as the downpayment. Even so, Power did not modify anything else in WHEREFORE, the Court AFFIRMS the decision promulgated on August 12,
the draft, and returned the draft to Federal after signing it. It was Federal that 2013; and ORDERS the petitioner to pay the costs of suit.
did not sign the draft because it was not amenable to the amount as modified
by Power. It is notable that the arbitration clause written in the draft of SO ORDERED.
Federal was unchallenged by the parties until their dispute arose.

Moreover, Federal asserted the original contract to support its claim against
Power. If Federal would insist that the remaining amount due to Power was
only ₱l,641,513.94 based on the original contract, 21 it was really inconsistent
for Federal to rely on the draft when it is beneficial to its side, and to reject its
efficacy and existence just to relieve itself from the CIAC's unfavorable
decision.

The agreement contemplated in the CIAC Revised Rules to vest jurisdiction

of the CIAC over the parties' dispute is not necessarily an arbitration clause
to be contained only in a signed and finalized construction contract. The
agreement could also be in a separate agreement, or any other form of
written communication, as long as their intent to submit their dispute to
arbitration is clear. The fact that a contract was signed by both parties has
nothing to do with the jurisdiction of the CIAC, and this is the explanation why
the CIAC Revised Rules  itself expressly provides that the written
communication or agreement need not be signed by the parties.

Although the agreement to submit to arbitration has been expressly required

to be in writing and signed by the parties therein by Section 422 of Republic
Act No. 876 (Arbitration Law),23 the requirement is conspicuously absent
from the CIAC Revised Rules, which even expressly allows such agreement
not to be signed by the parties therein.24 Brushing aside the obvious
contractual agreement in this case warranting the submission to arbitration is
surely a step backward.25 Consistent with the policy of encouraging
alternative dispute resolution methods, therefore, any doubt should be
resolved in favor of arbitration.26 In this connection, the CA correctly observed
that the act of Atty. Albano in manifesting that Federal had agreed to the form
of arbitration was unnecessary and inconsequential considering the
recognition of the value of the Contract of Service despite its being an
unsigned draft.

2. Amounts as modified by the CA are correct

We find no reversible error regarding the amounts as modified by the CA.

Power did not sufficiently establish that the change or increase of the cost of
materials and labor was to be separately determined and approved by both

Page 5 of 46
 G.R. No. 184295               July 30, 2014 Amount of Award) to TRANSCO’s petition for review. The CA should not
have modified the amount of the award to favor AIC because it is well-settled
NATIONAL TRANSMISSION CORPORATION, Petitioner, vs. that no relief can be granted a party who does not appeal and that a party
ALPHAOMEGA INTEGRATED CORPORATION, Respondent. who did not appeal the decision may not obtain any affirmative relief from the
appellate court other than what he had obtained from the lower court, if
any, whose decision is brought up on appeal. The disposition, as stated in
Remedial Law; Civil Procedure; Section 1, Rule 45 of the Rules of
the fallo of the CIAC Arbitral Tribunal’s Final Award, should therefore stand.
Court provides that a petition for review on certiorari under the said
rule, as in this case, “shall raise only questions of law which must be
distinctly set forth.”—TRANSCO seeks through this petition DECISION
a recalibration of the evidence presented before the CIAC Arbitral Tribunal,
insisting that AIC is not entitled to any damages not only because it had PERLAS-BERNABE, J.:
previously waived all claims for standby fees in case of project delays but
had eventually failed to perform the workable portions of the projects. This is Assailed in this petition for review on certiorari 1 are the Decision2 dated April
evidently a factual question which cannot be the proper subject of the present 8, 2008 and the Resolution3 dated August 27, 2008 of the Court of Appeals
petition.  Section 1, Rule 45 of the Rules of Court provides that a petition for (CA) in CA-G.R. SP No. 99454 affirming with modification the Final Award4 of
review on certiorari under the said rule, as in this case, “shall raise only the Construction Industry Arbitration Commission (CIAC) Arbitral Tribunal in
questions of law which must be distinctly set forth.” Thus, absent any of the favor of respondent Alphaomega Integrated Corporation (AIC) by increasing
existing exceptions impelling the contrary, the Court is, as general rule, petitioner National· Transmission Corporation's (TRANSCO) liability from Pl
precluded from delving on factual determinations, as what TRANSCO 7,495,117.44 to Pl 8,896,673.31.
essentially seeks in this case.
The Facts
Same; Same; It is well-settled that findings of fact of quasi-judicial
bodies, which have acquired expertise because their jurisdiction is
confined to specific matters, are generally accorded not only respect, AIC, a duly licensed transmission line contractor, participated in the public
but also finality, especially when affirmed by the Court of Appeals (CA). biddings conducted by TRANSCO and was awarded six ( 6) government
—The Court finds no reason to disturb the factual findings of the CIAC construction projects, namely: (a) Contract .for the Construction & Erection of
Arbitral Tribunal on the matter of AIC’s entitlement to damages which the CA Batangas Transmission Reinforcement Project Schedule III (BTRP Schedule
affirmed as being well supported by evidence and properly referred to in the III Project); (b) Contract for the Construction & Erection of Batangas
record. It is well-settled that findings of fact of quasi-judicial bodies, which Transmission Reinforcement Project Schedule I (BTRP Schedule I Project);
have acquired expertise because their jurisdiction is confined to specific (c) Contract for the Construction,Erection & Installation of 230 KV and 69 KV
matters, are generally accorded not only respect, but also finality, especially S/S Equipment and Various Facilities for Makban Substation under the
when affirmed by the CA. The CIAC possesses that required expertise in the Batangas Transmission Reinforcement Project (Schedule II) (Makban
field of construction arbitration and the factual findings of its construction Substation Project); (d) Contract for the Construction, Erection & Installation
arbitrators are final and conclusive, not reviewable by this Court on appeal. of 138 & 69 KV S/S Equipment for Bacolod Substation under the Negros III-
Panay III Substation Projects (Schedule II) (Bacolod Substation Project); (e)
Same; Same; It is well-settled that no relief can be granted a party Contract for the Construction, Erection & Installation of 138 & 69 KV
who does not appeal  and that a party who did not appeal the decision Substation Equipment for the New Bunawan Switching Station Project
may not obtain any affirmative relief from the appellate court other than (Bunawan Substation Project); and (f) Contract for the Construction, Erection
what he had obtained from the lower court, if any, whose decision is & Installation of 138 and 69 KV Substation Equipment for Quiot Substation
brought up on appeal.—It must be emphasized that the petition for review Project (Quiot Substation Project).5
before the CA was filed by TRANSCO. AIC never elevated before the courts
the matter concerning the discrepancy between the amount of the award In the course of the performance ofthe contracts, AIC encountered difficulties
stated in the body of the Final Award and the total award shown in its and incurred losses allegedly due to TRANSCO’s breach of their contracts,
dispositive portion.  The issue was touched upon by the CA only after AIC prompting it to surrender the projects to TRANSCO under protest. In
raised the same through its Comment (With Motion to Acknowledge Actual accordance with an express stipulation in the contracts that disagreements

Page 6 of 46
shall be settled by the parties through arbitration before the CIAC, AIC expenses during project suspensions considering that the delays, such as
submitted a request for arbitration before the CIAC on August 28, 2006, and, the unresolved right-of-way issues and non-availability of materials, were
thereafter, filed an Amended Complaint against TRANSCO alleging that the factors already covered by the time extensions and suspensions of work
latter breached the contracts by its failure to: (a) furnish the required Detailed allowed under the contracts.10
Engineering; (b) arrange a well-established right-of-way to the project areas;
(c) secure the necessary permits and clearances from the concerned local On April 18, 2007, the CIAC Arbitral Tribunal rendered its Final Award 11 in
government units (LGUs); (d) ensure a continuous supply of construction CIAC Case No. 21-2006 ordering the payment of actual and compensatory
materials; and (e) carry out AIC’s requests for power shut down. The damages which AIC would not have suffered had it not been for the project
aforementioned transgressions resultedin protracted delays and contract delays attributable to TRANSCO. It found ample evidence to support the
suspensions for each project,6 as follows: claim for the increase in subcontract cost in BTRP Schedule I, as well as
such items of cost as house and yard rentals, electric bills, water bills, and
Contract Original Duration of Transco- Percentage (%) of maintained personnel, but disallowed the claims for communications bills,
Contrac Approved Suspension Original Contract maintenance costs for idle equipment, finance charges, and materials cost
t and/or Extensions Duration increases.12 According to the Arbitral Tribunal, even if AIC itself made the
Duratio requests for contract time extensions, this did not bar its claim for damages
n as a result of project delayssince a contrary ruling would allow TRANSCO to
1) BTRP 560 711 days 127% profit from its own negligence and leave AIC to suffer serious material
Schedule III days prejudice as a direct consequence of that negligence leaving it without any
2) BTRP 270 406 days 170% remedy at law.13 The Arbitral Tribunal upheld AIC’s right to rescind the
Schedule I days contracts in accordancewith Resolution No. 018-2004 of the Government
3) Makban 365 452 days 124% Procurement Policy Board (GPPB), which explicitly gives the contractor the
Substation days right to terminate the contract if the works are completely stopped for a
4) Bacolod 360 289 days 80% continuous period of at least 60 calendar days, through no fault of its own,
Substation days due to the failure of the procuring entity to deliver within a reasonable time,
5) Bunawan 330 130 days 39% supplied materials, right-of-way, or other items that it is obligated to furnish
Substation days under the terms of the contract, among others.14 The dispositive portion of
6) Quiot 300 131 days 44% the Arbitral Tribunal’s Final Award reads:
Substation days
2119 days7 WHEREFORE, Respondent, National Transmission Corporation [TRANSCO]
is hereby ordered to pay Claimant, Alphaomega Integrated Corporation, the
following sums:
AIC prayed for judgment declaring all six (6) contracts rescinded and
ordering TRANSCO to pay, in addition to what had already been paid under
the contracts, moral damages, exemplary damages, and attorney’s fees at (a) For BTRP Schedule III - ₱6,423,496.67
₱100,000.00 each, and a total of ₱40,201,467.19 as actual and (b) For BTRP Schedule I - 5,214,202.30
compensatory damages.8 (c) For Makban Substation - 3,075,870.95
(d) For Bacolod Substation - 1,362,936.77
TRANSCO, for its part, contended that: (a) it had conducted Detailed (e) For Bunawan Substation - 820,481.72
Engineering prior to the conduct of the bidding; and (b) it had obtained the (f) For Quiot Substation - 598, 129.03
necessary government permits and endorsements from the affected LGUs. It TOTAL ₱17,495,117.44
asserted that AIC was guilty of frontloading– that is,collecting the bulk of the
contract price for work accomplished at the early stages of the project and Each Party shall shoulder its own cost of arbitration.
then abandoning the later stagesof the project which has a lower contract
price9 –and that it disregarded the workable portions of the projects not The foregoing amount of ₱17,495,117.44 shall earn interest at the rate of six
affected by the lack of supplies and drawings. TRANSCO further argued that percent (6%) per annum from the date of promulgation of this Final Award
AIC was estopped from asking for standby fees to cover its overhead until it becomes final and executory. Thereafter, the Final Award, including

Page 7 of 46
accrued interest, shall earn interest at the rate of 12% per annum until the The essential issues for the Court’s consideration are whether or not the CA
entire amount due is fully paid.15 (Emphasis supplied) erred (a) in affirming the CIAC Arbitral Tribunal’s findings that AIC was
entitled to its claims for damages as a result of project delays, and (b) in
Unconvinced, TRANSCO instituted a petition for review16 with the CA. increasing the total amount of compensation awarded in favor of AIC despite
the latter’s failure to raise the allegedly erroneous computation of the award
before the CIAC in a timely manner, that is, within fifteen (15) days from
Before filing its comment17 to the petition, AIC moved for the issuance of a
receipt of the Final Award as provided under Section 17.1 of the CIAC Rules.
writ of execution,18 not for the amount of 17,495,117.44 awarded in the Final
Award, but for the increased amount of 18,967,318.49.19 It sought correction
of the discrepancies between the amount of the award appearing in the The Court’s Ruling
dispositive portion20 and the body of the Final Award.21 The Arbitral Tribunal,
however, denied AIC’s motion, holding that while the CIAC Revised Rules of TRANSCO seeks through this petition a recalibration of the
Procedure Governing Construction Arbitration (CIAC Rules) would have evidencepresented before the CIAC ArbitralTribunal, insisting that AIC is not
allowed the correction of the Final Award for evident miscalculation of figures, entitled to any damages not only because it had previously waived all claims
typographical or arithmetical errors, AIC failed to file its motionfor the purpose for standby fees in case of project delays but had eventually failed to perform
within the time limitation of 15 days from its receipt of the Final Award.22 the workable portions of the projects. This is evidently a factual question
which cannot be the proper subject of the present petition. Section 1, Rule 45
The CA Ruling of the Rules of Court provides that a petition for review on certiorariunder the
said rule, as in this case, "shall raise only questions of law which must be
distinctly set forth." Thus, absent any of the existing exceptions impelling the
In the Decision23 dated April 8, 2008, the CAaffirmed the Arbitral Tribunal’s
contrary, the Court is, as a general rule, precluded from delving on factual
factual findings that TRANSCOfailed to exercise due diligence in resolving
determinations, as what TRANSCO essentially seeks in this case. Similar to
the problems regarding the right-of-way and the lack of materials before
the foregoing is the Court’s ruling in Hanjin Heavy Industries and
undertaking the bidding process and entering into the contracts with AIC. 24 It
Construction Co., Ltd. v. Dynamic Planners and Construction Corp.,30 the
found no merit in TRANSCO’s allegation that AIC refused to perform the
pertinent portions ofwhich are hereunder quoted:
remaining workable portions of the projects not affected by problems of right-
of-way, shutdowns, supplies and drawings, firstly, because the certificates
ofaccomplishments issued by TRANSCO in the course of project Dynamic maintains that the issues Hanjin raised in its petitions are factual in
implementation signifying its satisfaction with AIC’s performance negate such nature and are, therefore, not proper subject of review under Section 1 of
claim and, secondly, because all the orders issued by TRANSCO suspended Rule 45, prescribing that a petition under the said rule, like the one at bench,
the contracts not only in part but in their entirety, thus, permitting no work "shall raise only questions of law which must be distinctly set forth."
activity at all during such periods.25 Dynamic’s contention is valid topoint as, indeed, the matters raised by Hanjin
are factual, revolving as they do on the entitlement of Dynamic to the awards
granted and computed by the CIAC and the CA. Generally, this would be a
The CA upheld the Arbitral Tribunal’s Final Award as having been sufficiently
question of fact that this Court would not delve upon. Imperial v.
established by evidence but modified the total amount of the award after
Jauciansuggests as much. There, the Court ruled that the computation of
noting a supposed mathematical error in the computation. Setting aside
outstanding obligation is a question of fact:
TRANSCO’s objections, it ruled that when a case is brought to a superior
court on appeal every aspect of the case is thrown open for review, 26 hence,
the subject error could be rectified. The CA held that the correct amount of Arguing that she had already fully paid the loan x x x, petitioner alleges that
the award should be ₱18,896,673.31, and not ₱17,495,117.44 as stated in the two lower courts misappreciated the facts when they ruled that she still
the Arbitral Tribunal’s Final Award.27 Dissatisfied, TRANSCO moved for had an outstanding balance of ₱208,430.
reconsideration28 but was, however, denied by the CA in a Resolution29 dated
August 27, 2008, hence, the instant petition. This issue involves a question of fact. Such question exists when a doubt or
difference arises as to the truth or the falsehood of alleged facts; and when
The Issues Before the Court there is need for a calibration of the evidence, considering mainly the
credibility of witnesses and the existence and the relevancy of specific
surrounding circumstances, their relation to each other and to the whole, and

Page 8 of 46
the probabilities of the situation. (G.R. No. 149004, April 14, 2004, 427 SCRA which have acquired expertise because their jurisdiction is confined to
517, 523-524.) specific matters, are generally accorded not only respect, but also finality,
especially when affirmed by the CA.32 The CIAC possesses that required
The rule, however, precluding the Court from delving on the factual expertise in the field of construction arbitration and the factual findings of its
determinations of the CA, admits of several exceptions. In Fuentes v. Court construction arbitrators are final and conclusive, not reviewable by this Court
of Appeals, we held that the findings of facts of the CA, which are generally on appeal.33
deemed conclusive, may admit review by the Court in any of the following
instances, among others: While the CA correctly affirmed infull the CIAC Arbitral Tribunal’s factual
determinations, it improperly modified the amount of the award in favor of
(1) when the factual findings of the [CA] and the trial court are AIC, which modification did not observe the proper procedure for the
contradictory; correction of an evident miscalculation of figures, including typographical or
(2) when the findings are grounded entirely on speculation, surmises, arithmetical errors, in the arbitral award. Section 17.1 of the CIAC Rules
or conjectures; mandates the filing of a motion for the foregoing purpose within fifteen (15)
(3) when the inference made bythe [CA] from its findings of fact is days from receipt thereof, viz.:
manifestly mistaken, absurd, or impossible;
(4) when there is grave abuse of discretion in the appreciation of Section 17.1 Motion for correction of final award– Any of the parties may file
facts; a motion for correction of the Final Award within fifteen (15) days from receipt
(5) when the [CA], in making its findings, goes beyond the issues of thereof upon any of the following grounds:
the case, and such findings are contrary to the admissions of both
appellant and appellee; a. An evident miscalculation of figures, a typographical or arithmetical error;
(6) when the judgment of the [CA] is premised on a misapprehension (Emphasis supplied)
of facts;
(7) when the [CA] fails to notice certain relevant facts which, if xxxx
properly considered, will justify a different conclusion;
(8) when the findings of fact are themselves conflicting;
(9) when the findings of fact are conclusions without citation of the Failure to file said motion would consequentlyrender the award final and
specific evidence on which they are based; and executory under Section 18. 1 of the same rules, viz.:
(10) when the findings of fact of the [CA] are premised on the
absence of evidence but such findings are contradicted by the Section 18.1 Execution of Award – A final arbitral award shall become
evidence on record. (G.R. No. 109849, February 26, 1997, 268 executory upon the lapse of fifteen (15) days from receipt thereof by the
SCRA 703, 709) parties.

Significantly, jurisprudence teaches that mathematical computations as well AIC admitted that it had ample time to file a motion for correction of the Final
as the propriety of the arbitral awards are factual determinations. And just as Award but claimed to have purposely sat on its right to seek correction
significant is that the factual findings of the CIAC and CA—in each separate supposedly as a strategic move against TRANSCO34 and, instead, filed with
appealed decisions—practically dovetail with each other. The perceptible the CIAC Arbitral Tribunal on June 13, 2007 a "Motion for Issuance of Writ of
essential difference, at least insofar as the CIAC’s Final Award and the CA Execution for the Total Amount of 18,967,318.49 as Embodied in the Final
Decision in CA-G.R. SP No. 86641 are concerned, rests merely on Award."35 The Arbitral Tribunal eventually denied AIC’s aforesaid motion for
mathematical computations or adjustments of baseline amounts which the execution because, despite its merit, the Arbitral Tribunal could not disregard
CIAC may have inadvertently utilized.31 (Emphases and underscoring the time-limitation under the CIAC Rules.36 Clearly, having failed to move for
supplied) the correction of the Final Award and, thereafter, having opted to file insteada
motion for execution of the arbitral tribunal’s unopposed and uncorrected
In any case, the Court finds no reason to disturb the factual findings of the Final Award, AIC cannot now question against the correctness of the CIAC’s
CIAC Arbitral Tribunal on the matter of AIC’s entitlement to damages which disposition. Notably, while there is jurisprudential authority stating that "[a]
the CA affirmed as being well supported by evidence and properly referred to clerical error in the judgment appealed from may be corrected by the
in the record. It is well-settled that findings of fact of quasijudicial bodies, appellate court,"37 the application of that rule cannot be made in this case

Page 9 of 46
considering that the CIAC Rules provides for a specific procedureto deal with
particular errors involving "[a]n evident miscalculation of figures, a
typographical or arithmetical error." Indeed, the rule iswell entrenched:
Specialis derogat generali. When two rules apply to a particular case,
thatwhich was specially designed for the said case must prevail over the
other.38

Furthermore, it must be emphasized that the petition for review before the CA
was filed by TRANSCO.39 AIC never elevated before the courts the matter
concerning the discrepancy between the amount of the award stated in the
body of the Final Award and the total award shown in its dispositive portion.
The issue was touched upon bythe CA only after AIC raised the same
through its Comment (With Motion to Acknowledge Actual Amount of
Award)40 to TRANSCO’s petition for review. The CA should not have
modified the amount of the award to favor AIC because it is well-settled that
no relief can be granted a party who does not appeal41 and that a party who
did not appeal the decision may not obtain any affirmative relief from the
appellate court other than what he had obtained from the lower court, if any,
whose decision is brought up on appeal.42 The disposition, as stated in the
fallo of the CIAC Arbitral Tribunal's Final Award, should therefore stand.43

WHEREFORE, the petition is PARTLY GRANTED. The Decision dated April

8, 2008 of the Court of Appeals in CA-G.R. SP No. 99454 is hereby
AFFIRMED with MODIFICATION. The compensation awarded in favor of
Alphaomega Integrated Corporation in the amount of ₱17,495,117.44, as
shown in the fallo of the ·construction Industry Arbitration Commission's Final
Award dated April 18, 2007, stands.

SO ORDERED.

Page 10 of 46
 G.R. No. 192725, August 09, 2017 equipment.”—The CIAC does not only serve the interest of speedy dispute
resolution, it also facilitates authoritative dispute resolution. Its authority
CE CONSTRUCTION CORPORATION, PETITIONER, VS. ARANETA proceeds not only from juridical legitimacy but equally from technical
CENTER INC., RESPONDENT. expertise. The creation of a special adjudicatory body for construction
disputes presupposes distinctive and nuanced competence on matters that
Construction Industry Arbitration Commission; The Construction are conceded to be outside the innate expertise of regular courts and
Industry Arbitration Commission (CIAC) was a creation of Executive adjudicatory bodies concerned with other specialized fields. The CIAC has
Order (EO) No. 1008, otherwise known as the Construction Industry the state’s confidence concerning the entire technical expanse of
Arbitration Law.—The Construction Industry Arbitration Commission was a construction, defined in jurisprudence as “referring to all on-site works on
creation of Executive Order No. 1008, otherwise known as the Construction buildings or altering structures, from land clearance through completion
Industry Arbitration Law. At inception, it was under the administrative including excavation, erection and assembly and installation of components
supervision of the Philippine Domestic Construction Board which, in turn, was and equipment.”
an implementing agency of the Construction Industry Authority of the
Philippines (CIAP). The CIAP is presently attached to the Department of Same; The most recent jurisprudence maintains that the
Trade and Industry. Construction Industry Arbitration Commission (CIAC) is a quasi-judicial
body.—The most recent jurisprudence maintains that the CIAC is a quasi-
Same; Construction Disputes; Alternative Dispute Resolution; judicial body. This Court’s November 23, 2016 Decision in Fruehauf
Alternative Dispute Resolution Act of 2004; Arbitration of construction Electronics v. Technology Electronics Assembly and Management Pacific,
disputes  through the Construction Industry Arbitration Commission 810 SCRA 280, distinguished construction arbitration, as well as voluntary
(CIAC) was formally incorporated into the general statutory framework arbitration pursuant to Article 219(14) of the Labor Code, from commercial
on alternative dispute resolution through Republic Act No. 9285, the arbitration. It ruled that commercial arbitral tribunals are not quasi-judicial
Alternative Dispute Resolution Act of 2004 (ADR Law).—Republic Act No. agencies, as they are purely ad hoc bodies operating through contractual
9184 or the Government Procurement Reform Act, enacted on January 10, consent and as they intend to serve private, proprietary interests. In contrast,
2003, explicitly recognized and confirmed the competence of the CIAC: voluntary arbitration under the Labor Code and construction arbitration
Section 59. Arbitration.—Any and all disputes arising from the operate through the statutorily vested jurisdiction of government
implementation of a contract covered by this Act shall be submitted to instrumentalities that exist independently of the will of contracting parties and
arbitration in the Philippines according to the provisions of Republic Act No. to which these parties submit.
876, otherwise known as the “Arbitration Law”: Provided,  
however,  That, disputes that are within the competence of the Construction Same; Appeals; Petitions for Review; Rule 43, Section 1 explicitly
Industry Arbitration Commission to resolve shall be referred thereto. The lists Construction Industry Arbitration Commission (CIAC) as among
process of arbitration shall be incorporated as a provision in the contract that the quasi-judicial agencies covered by Rule 43. Section 3 indicates that
will be executed pursuant to the provisions of this Act: Provided, That by appeals through Petitions for Review under Rule 43 are to “be taken to
mutual agreement, the parties may agree in writing to resort to alternative the Court of Appeals (CA)  . .  . whether the appeal involves questions of
modes of dispute resolution. Arbitration of construction disputes through the fact, of law, or mixed questions of fact and law.”—Rule 43 of the 1997
CIAC was formally incorporated into the general statutory framework on Rules of Civil Procedure standardizes appeals from quasi-judicial agencies.
alternative dispute resolution through Republic Act No. 9285, the Alternative Rule 43, Section 1 explicitly lists CIAC as among the quasi-judicial agencies
Dispute Resolution Act of 2004 (ADR Law). Chapter 6, Section 34 of ADR covered by Rule 43. Section 3 indicates that appeals through Petitions for
Law made specific reference to the Construction Industry Arbitration Law, Review under Rule 43 are to “be taken to the Court of Appeals . . . whether
while Section 35 confirmed the CIAC’s jurisdiction. the appeal involves questions of fact, of law, or mixed questions of fact and
law.”
Same; Construction; Words and Phrases; The Construction
Industry Arbitration Commission (CIAC) has the state’s confidence Same; Same; Arbitral Tribunals; The Supreme Court’s (SC’s)
concerning the entire technical expanse of construction, defined in primordial inclination must be to uphold the factual findings of arbitral
jurisprudence as “referring to all on-site works on buildings or altering tribunals.—Consistent with this restrictive approach, this Court is duty-bound
structures, from land clearance through completion including to be extremely watchful and to ensure that an appeal does not become an
excavation, erection and assembly and installation of components and ingenious means for undermining the integrity of arbitration or for

Page 11 of 46
conveniently setting aside the conclusions arbitral processes make. An fountain of good conscience”: As early as 1903, in Perez v. Pomar, this Court
appeal is not an artifice for the parties to undermine the process they ruled that where one has rendered services to another, and these services
voluntarily elected to engage in. To prevent this Court from being a party to are accepted by the latter, in the absence of proof that the service was
such perversion, this Court’s primordial inclination must be to uphold the rendered gratuitously, it is but just that he should pay a reasonable
factual findings of arbitral tribunals. remuneration therefore because “it is a well known principle of law, that no
one should be permitted to enrich himself to the damage of another.” Similary
Arbitral Tribunals; Common sense dictates that by the parties’ in 1914, this Court declared that in this jurisdiction, even in the absence of
voluntary submission, they acknowledge that an arbitral tribunal statute, “. . . under the general principle that one person may not enrich
constituted under the Construction Industry Arbitration Commission himself at the expense of another, a judgment creditor would not be
(CIAC) has full competence to rule on the dispute presented to it.—ACI permitted to retain the purchase price of land sold as the property of the
and CECON voluntarily submitted themselves to the CIAC Arbitral Tribunal’s judgment debtor after it has been made to appear that the judgment debtor
jurisdiction. The contending parties’ own volition is at the inception of every had no title to the land and that the purchaser had failed to secure title
construction arbitration proceeding. Common sense dictates that by the thereto.” The foregoing equitable principle which springs from the fountain of
parties’ voluntary submission, they acknowledge that an arbitral tribunal good conscience are applicable to the case at bar. Consistent with the
constituted under the CIAC has full competence to rule on the dispute Construction Industry Arbitration Law’s declared policy, the CIAC Arbitral
presented to it. They concede this not only with respect to the literal issues Tribunal was specifically charged with “ascertain[ing] the facts in each case
recited in their terms of reference, as ACI suggests, but also with respect to by every and all reasonable means.” In discharging its task, it was permitted
their necessary incidents. Accordingly, in delineating the authority of to even transcend technical rules on admissibility of evidence.
arbitrators, the CIAC Rules of Procedure speak not only of the literally recited
issues but also of “related matters”: SECTION 21.3. Same; Article 1724 demands two (2) requisites in order that a price
may become immutable: first, there must be an actual, stipulated price;
Extent of power of arbitrator.—The Arbitral Tribunal shall decide only and second, plans and specifications must have definitely been agreed
such issues and related matters as are submitted to them for adjudication. upon.—Article 1724 demands two (2) requisites in order that a price may
They have no power to add, to subtract from, modify, or amend any of the become immutable: first, there must be an actual, stipulated price;
terms of the contract or any supplementary agreement thereto, or any rule, and second, plans and specifications must have definitely been agreed upon.
regulation or policy promulgated by the CIAC. To otherwise be puritanical Neither requisite avails in this case. Yet again, ACI is begging the question. It
about cognizable issues would be to cripple CIAC arbitral tribunals. It would is precisely the crux of the controversy that no price has been set. Article
potentially be to condone the parties’ efforts at tying the hands of tribunals 1724 does not work to entrench a disputed price and make it sacrosanct.
through circuitous, trivial recitals that fail to address the complete extent of Moreover, it was ACI which thrust itself upon a situation where no plans and
their claims and which are ultimately ineffectual in dispensing an exhaustive specifications were immediately agreed upon and from which no deviation
and dependable resolution. Construction arbitration is not a game of guile could be made. It was ACI, not CECON, which made, revised, and deviated
which may be left to ingenious textual or technical acrobatics, but an from designs and specifications.
endeavor to ascertain the truth and to dispense justice “by every and all
reasonable means without regard to technicalities of law or procedure.”
DECISION
Construction Contracts; Jurisprudence has settled that even in LEONEN, J.:
cases where parties enter into contracts which do not strictly conform
to standard formalities or to the typifying provisions of nominate A tribunal confronted not only with ambiguous contractual terms but also with
contracts, when one renders services to another, the latter must the total absence of an instrument which definitively articulates the
compensate the former for the reasonable value of the services contracting parties' agreement does not act in excess of jurisdiction when it
rendered.—Jurisprudence has settled that even in cases where parties enter employs aids in interpretation, such as those articulated in Articles 1370 to
into contracts which do not strictly conform to standard formalities or to the 1379 of the Civil Code. In so doing, a tribunal does not conjure its own
typifying provisions of nominate contracts, when one renders services to contractual terms and force them upon the parties.
another, the latter must compensate the former for the reasonable value of
the services rendered. This amount shall be fixed by a court. This is a matter In addressing an iniquitous predicament of a contractor that actually renders
so basic, this Court has once characterized it as one that “springs from the services but remains inadequately compensated, arbitral tribunals of the

Page 12 of 46
Construction Industry Arbitration Commission (CIAC) enjoy a wide latitude Volume I: Tender Invitation, Project Description, Instructions to Tenderers,
consistent with their technical expertise and the arbitral process' inherent Form of Tender, Dayworks, Preliminaries and General Requirements, and
inclination to afford the most exhaustive means for dispute resolution. When Conditions of Contract;
their awards become the subject of judicial review, courts must defer to the
factual findings borne by arbitral tribunals' technical expertise and Volume II: Technical Specifications for the Architectural, Structural,
irreplaceable experience of presiding over the arbitral process. Exceptions Mechanical, Plumbing, Fire Protection and Electrical Works; and
may be availing but only in instances when the integrity of the arbitral tribunal
itself has been put in jeopardy. These grounds are more exceptional than Addenda Nos. 1, 2, 3, and 4 relating to modifications to portions of the
those which are regularly sanctioned in Rule 45 petitions. Tender Documents.[11]

This resolves a Petition for Review on Certiorari[1] under Rule 45 of the 1997 The Tender Documents described the project's contract sum to be a "lump
Rules of Civil Procedure, praying that the assailed April 28, 2008 Decision[2] sum" or "lump sum fixed price" and restricted cost adjustments, as follows:
and July 1, 2010 Amended Decision[3] of the Court of Appeals in CA-G.R.
SP No. 96834 be reversed and set aside. It likewise prays that the October 6 TYPE OF CONTRACT
25, 2006 Decision[4] of the CIAC Arbitral Tribunal be reinstated.
6.1 This is a Lump Sum Contract and the price is a fixed price not subject to
The CIAC Arbitral Tribunal October 25, 2006 Decision awarded a total sum of measurement or recalculation should the actual quantities of work and
P217,428,155.75 in favor of petitioner CE Construction Corporation materials differ from any estimate available at the time of contracting, except
(CECON). This sum represented adjustments in unit costs plus interest, in regard to Cost-Bearing Changes which may be ordered by the Owner
variance in take-out costs, change orders, time extensions, attendance fees, which shall be valued under the terms of the Contract in accordance with the
contractor-supplied equipment, and costs of arbitration. This amount was net Schedule of Rates, and with regard to the Value Engineering Proposals
of the countervailing awards in favor of respondent Araneta Center, Inc. under Clause 27. The Contract Sum shall not be adjusted for changes in the
(ACI), for defective and incomplete works, permits, licenses and other cost of labour, materials or other matters.[12]
advances.[5]
TENDER AND CONTRACT
The assailed Court of Appeals April 28, 2008 Decision modified the CIAC
Arbitral Tribunal October 25, 2006 Decision by awarding a net amount of Fixed Price Contract
P82,758,358.80 in favor of CECON.[6] The Court of Appeals July 1, 2010
Amended Decision adjusted this amount to P93,896,335.71. The Contract Sum payable to the Contactor is a Lump Sum Fixed Price and
will not be subject to adjustment, save only where expressly provided for
Petitioner CECON was a construction contractor, which, for more than 25 within the Contract Documents and the Form of Agreement.
years, had been doing business with respondent ACI, the developer of
Araneta Center, Cubao, Quezon City.[8] The Contract Sum shall not be subject to any adjustment "in respect of rise
and fall in the cost of materials[,] labor, plant, equipment, exchange rates or
In June 2002, ACI sent invitations to different construction companies, any other matters affecting the cost of execution of Contract, save only where
including CECON, for them to bid on a project identified as "Package #4 expressly provided for within the Contract Documents or the Form of
Structure/Mechanical, Electrical, and Plumbing/Finishes (excluding Part A Agreement.
Substructure)," a part of its redevelopment plan for Araneta Center Complex.
[9] The project would eventually be the Gateway Mall. As described by ACI, The Contract Sum shall further not be subject to any change in subsequent
"[t]he Project involved the design, coordination, construction and completion legislation, which causes additional or reduced costs to the Contractor.[13]
of all architectural and structural portions of Part B of the Works[;] and the
construction of the architectural and structural portions of Part A of the Works The bidders' proposals for the project were submitted on August 30, 2002.
known as Package 4 of the Araneta Center Redevelopment Project."[10] These were based on "design and construct" bidding.[14]

As part of its invitation to prospective contractors, ACI furnished bidders with CECON submitted its bid, indicating a tender amount of P1,449,089,174.00.
Tender Documents, consisting of: This amount was inclusive of "both the act of designing the building and

Page 13 of 46
executing its construction." Its bid and tender were based on schematic CECON also specifically stated that its tender relating to these adjusted
drawings, i.e., conceptual designs and suppositions culled from ACI's Tender prices were valid only until January 31, 2003, as further price changes may
Documents. CECON's proposal "specifically stated that its bid was valid for be forthcoming. CECON emphasized that its steel supplier had actually
only ninety (90) days, or only until 29 November 2002." This tender proposed already advised it of a forthcoming 10% increase in steel prices by the first
a total of 400 days, or until January 10, 2004, for the implementation and week of February 2003. CECON further impressed upon ACI the need to
completion of the project. adjust the 400 days allotted for the completion of the project.

CECON offered the lowest tender amount. However, ACI did not award the On February 4, 2003, ACI delivered to CECON the initial tranche of its down
project to any bidder, even as the validity of CECON's proposal lapsed on payment for the project. By then, prices of steel had been noted to have
November 29, 2002. ACI only subsequently informed CECON that the increased by 24% from December 2002 prices. This increase was validated
contract was being awarded to it. ACI elected to inform CECON verbally and by ACI.
not in writing.
Subsequently, ACI informed CECON that it was taking upon itself the design
In a phone call on December 7, 2002, ACI instructed CECON to proceed with component of the project, removing from CECON's scope of work the task of
excavation works on the project. ACI, however, was unable to deliver to coming up with designs.
CECON the entire project site. Only half, identified as the Malvar-to-Roxas
portion, was immediately available. The other half, identified as the Roxas to- On June 2, 2003, ACI finally wrote a letter[27] to CECON indicating its
Coliseum portion, was delivered only about five (5) months later. acceptance of CECON's August 30, 2002 tender for an adjusted contract
sum of P1,540,000.00 only:
As the details of the project had yet to be finalized, ACI and CECON pursued
further negotiations. ACI and CECON subsequently agreed to include in the Araneta Center, Inc. (ACI) hereby accepts the C-E Construction Corporation
project the construction of an office tower atop the portion identified as Part A (CEC) tender dated August 30, 2002, submitted to ACI in the adjusted sum of
of the project. This escalated CECON's project cost to P1,582,810,525.00. One Billion Five Hundred Forty Million Pesos Only (P1,540,000,000.00),
which sum includes all additionally quoted and accepted items within this
After further negotiations, the project cost was again adjusted to acceptance letter and attachments, Appendix A, consisting of one (1) page,
P1,613,615,244.00. Still later, CECON extended to ACI a P73,615,244.00 and Appendix B, consisting of seven (7) pages plus attachments, which sum
discount, thereby"reducing its offered project cost to P1,540,000.00. of One Billion Five Hundred Forty Million Pesos Only (P1,540,000,000.00) is
inclusive of any Government Customs Duty and Taxes including Value
Despite these developments, ACI still failed to formally award the project to Added Tax (VAT) and Expanded Value Added Tax (EVAD, and which sum is
CECON. The parties had yet to execute a formal contract. This prompted hereinafter referred to as the Contract Sum.[28]
CECON to write a letter to ACI, dated December 27, 2002,[20] emphasizing
that the project cost quoted to ACI was "based upon the prices prevailing at Item 4, Appendix B of this acceptance letter explicitly recognized that "all
December 26, 2002" price levels. design except support to excavation sites, is now by ACI."[29] It thereby
confirmed that the parties were not bound by a design-and-construct
By January 2003 and with the project yet to be formally awarded, the prices agreement, as initially contemplated in ACI's June 2002 invitation, but by a
of steel products had increased by 5% and of cement by P5.00 per bag. On construct-only agreement. The letter stated that "[CECON] acknowledge[s]
January 8, 2003, CECON again wrote ACI notifying it of these increasing that a binding contract is now existing."[30] However, consistent with ACI's
costs and specifically stating that further delays may affect the contract sum. admitted changes, it also expressed ACI's corresponding undertaking: "This
notwithstanding, formal contract documents embodying these positions will
Still without a formal award, CECON again wrote to ACI on January 21, shortly be prepared and forwarded to you for execution.
2003[23] indicating cost and time adjustments to its original proposal.
Specifically, it referred to an 11.52% increase for the cost of steel products, Despite ACI's undertaking, no formal contract documents were delivered to
totalling P24,921,418.00 for the project; a P5.00 increase per bag of cement, CECON or otherwise executed between ACI and CECON.
totalling P3,698,540.00 for the project; and costs incurred because of
changes to the project's structural framing, totalling P26,011,460.00. The As it assumed the design aspect of the project, ACI issued to CECON the
contract sum, therefore, needed to be increased to P1,594,631,418.00. construction drawings for the project. Unlike schematics, these drawings

Page 14 of 46
specified "the kind of work to be done and the kind of material to be costs relating to their preparation for and installation in the project. Finding it
used."[33] CECON laments, however, that "ACI issued the construction unjust to be performing auxiliary services practically for free, CECON
drawings in piece-meal fashion at times of its own choosing."[34] From the proposed a reduction in the take-out costs claimed by ACI. It instead claimed
commencement of CECON's engagement until its turnover of the project to P26,892,019.00 by way of compensation for the work that it rendered.
ACI, ACI issued some 1,675 construction drawings. CECON emphasized
that many of these drawings were partial and frequently pertained to With many changes to the project and ACI's delays in delivering drawings
revisions of prior items of work.[35] Of these drawings, more than 600 were and specifications, CECON increasingly found itself unable to complete the
issued by ACI well after the intended completion date of January 10, 2004: project on January 10, 2004. It noted that it had to file a total of 15 Requests
Drawing No. 1040 was issued on January 12, 2004, and the latest, Drawing for Time Extension from June 10, 2003 to December 15, 2003, all of which
No. 1675, was issued on November 26, 2004. ACI failed to timely act on.

Apart from shifting its arrangement with CECON from design-and-construct Exasperated, CECON served notice upon ACI that it would avail of
to construct only, ACI introduced other changes to its arrangements with arbitration. On January 29, 2004, it filed with the CIAC its Request for
CECON. CECON underscored two (2) of the most notable of these changes Adjudication.[43] It prayed that a total sum of P183,910,176.92 representing
which impelled it to seek legal relief. adjusted project costs be awarded in its favor.[44]

First, on January 30, 2003, ACI issued Change Order No. 11,[37] which On March 31, 2004, CECON and ACI filed before the CIAC a Joint
shifted the portion identified as Part B of the project from reinforced concrete Manifestation[45] indicating that some issues between them had already
framing to structural steel framing. Deleting the cost for reinforced concrete been settled. Proceedings before the CIAC were then suspended to enable
framing meant removing P380,560,300.00 from the contract sum. CECON and ACI to arrive at an amicable settlement.[46] On October 14,
Nevertheless, replacing reinforced concrete framing with structural steel 2004, ACI filed a motion before the CIAC noting that it has validated
framing "entailed substitute cost of Php217,585,000, an additional P85,000,000.00 of the total amount claimed by CECON. It prayed for more
Php44,281,100 for the additional steel frames due to revisions, and another time to arrive at a settlement.
Php1,950,000 for the additional pylon."
In the meantime, CECON completed the project and turned over Gateway
Second, instead of leaving it to CECON, ACI opted to purchase on its own Mall to ACI.[48] It had its blessing on November 26, 2004.
certain pieces of equipment-elevators, escalators, chillers, generator sets,
indoor substations, cooling towers, pumps, and tanks-which were to be As negotiations seemed futile, on December 29, 2004, CECON filed with the
installed in the project. This entailed "take-out costs"; that is, the value of CIAC a Motion to Proceed with arbitration proceedings. ACI filed an
these pieces of equipment needed to be removed from the total amount due Opposition.
to CECON. ACI considered a sum totalling P251,443,749.00 to have been
removed from the contract sum due to CECON. This amount of After its Opposition was denied, ACI filed its Answer dated January 26, 2005.
P251,443,749.00 was broken down, as follows: [51] It attributed liability for delays to CECON and sought to recover
counterclaims totalling P180,752 297.84. This amount covered liquidated
(a) For elevators/escalators, PhP106,000,000; damages for CECON's supposed delays, the cost of defective works which
(b) For Chillers, PhP41,152,900; had to be rectified, the cost of procuring permits and licenses, and ACI's
(c) For Generator Sets, PhP53,040,000; other advances.
(d) For Indoor Substation, PhP23,024,150;
(e) For Cooling Towers, PhP5,472,809; and On February 8, 2005, ACI filed a Manifestation and Motion seeking the
(f) For Pumps and Tanks, PhP22,753,890. CIAC's clearance for the parties to enter into mediation. Mediation was then
instituted with Atty. Sedfrey Ordonez acting as mediator.
CECON avers that in removing the sum of P251,443,749.00, ACI "simply
deleted the amount in the cost breakdown corresponding to each of the items After mediation failed, an arbitral tribunal was constituted through a March
taken out in the contract documents."[40] ACI thereby disregarded that the 16, 2005 Order of the CIAC. It was to be composed of Dr. Ernesto S. De
corresponding stipulated costs pertained not only to the acquisition cost of Castro, who acted as Chairperson with Engr. Reynaldo T. Viray and Atty.
these pieces of equipment but also to so-called "builder's works" and other James S. Villafranca as members.

Page 15 of 46
ACI filed a Motion for Reconsideration of the CIAC March 16, 2005 Order. The CIAC Arbitral Tribunal ruled that CECON was entitled to a differential in
This was denied in the Order dated March 30, 2005. take out costs representing builder's works and related costs with respect to
the equipment purchased by ACI. This differential cost was in the amount of
In the Order dated April 1, 2005, the CIAC Arbitral Tribunal set the P15,332,091.47.[63] The CIAC Arbitral Tribunal further noted that while ACI
preliminary conference on April 13, 2005. initially opted to purchase by itself pumps, tanks, and cooling towers and
removed these from CECON's scope of work, it subsequently elected to still
At the preliminary conference, CECON indicated that, the total sum it was obtain these through CECON. Considering that the corresponding amount
entitled to recover from ACI needed to be adjusted to P324,113,410.08. The deducted as take-out costs did not encompass the overhead costs and
CIAC Arbitral Tribunal, thus, directed CECON to file an Amended Request for profits under day work, which should have accrued to CECON because of
Adjudication/Amended Complaint. these equipment, the CIAC Arbitral Tribunal ruled that CECON was entitled
to 18% day work rate or a total of P21,267,908.00.
Following the filing of CECON's Amended Request for Adjudication/Amended
Complaint and the ensuing responsive pleadings, another preliminary The CIAC Arbitral Tribunal also found that, apart from adjusted costs incurred
conference was set on May 13, 2005. The initial hearing of the case was then on account of ACI's own activities, it also became necessary for CECON, as
set on June 10, 2005. main contractor, to continue extending auxiliary services to the project's
subcontractors because of the delays. Thus, the CIAC Arbitral Tribunal
At the initial hearing, the CIAC Arbitral Tribunal resolved to exclude the awarded CECON attendance fees-the main contractor's mark-up for auxiliary
amount of P20,483,505.12 from CECON's claims as these pertained to services extended to subcontractors - totalling P14,335,674.88. This amount
unpaid accomplishments that did not relate to the issue of cost adjustments was lower than the original amount prayed for by CECON (i.e.,
attributed to ACI, as originally pleaded by CECON. P19,544,667.81)[65] as the CIAC Arbitral Tribunal ruled that CECON may not
claim attendance fees pertaining to subcontractors which directly dealt with
Following the conduct of hearings, the submission of the parties' memoranda ACI.
and offers of exhibits, the CIAC Arbitral Tribunal rendered its Decision on
October 25, 2006. It awarded a total of P229,223,318.69 to CECON, Considering that CECON's predicament was borne by ACI's fault, the CIAC
inclusive of the costs of arbitration. It completely denied ACI's claims for Arbitral Tribunal saw it fit to award to CECON the costs of arbitration totalling
liquidated damages, but awarded to ACI a total of P11,795,162.93 on P1,083,802.58.
account of defective and rectification works, as well as permits, licenses, and
other advances.Thus, the net amount due to CECON was determined to be While mainly ruling in CECON's favor, the CIAC Arbitral Tribunal found
P217,428,155.75. CECON liable for discolored and mismatched tiles. It noted that CECON had
engaged the services of a subcontractor for the installation of tiles, for which
The CIAC Arbitral Tribunal noted that while ACI's initial invitation to bidders it claimed attendance fees. Thus, it awarded P7,980,000.00 to ACI.[68] In
was for a lump-sum design-and-construct arrangement, the way that events addition, it found CECON liable to ACI for amounts paid in advance for
actually unfolded clearly indicated a shift to an arrangement where the permits and licenses for the additional office tower, electrical consumption,
designs were contingent upon ACI itself. Considering that the premise for and garbage collection. Thus, it awarded another P3,815,162.93 to ACI.
CECON's August 30, 2002 lump-sum offer of P1,540,000.00 was no longer
availing, CECON was no longer bound by its representations in respect of The dispositive portion of the CIAC Arbitral Tribunal Decision read:
that lump-sum amount. It may then claim cost adjustments totalling
P16,429,630.74, as well as values accruing to the various change orders WHEREFORE, Respondent is hereby ordered to pay the Claimant the
issued by ACI, totalling P159,827,046.94. amount of PESOS TWO HUNDRED SEVENTEEN MILLION, FOUR
HUNDRED TWENTY-EIGHT THOUSAND, ONE HUNDRED FIFTY[-]FIVE
The CIAC Arbitral Tribunal found ACI liable for the delays. This entitled PESOS AND SEVENTY[-]FIVE CENTAVOS (Php217,428,155.75) within
CECON to extended overhead costs and the ensuing extension cost of its thirty (30) days upon promulgation of the award. Interest 6% per annum shall
Contractor's All Risk Insurance. For these costs, the CIAC Arbitral Tribunal be imposed on the award for any balance remaining from the promulgation of
awarded CECON the total amount of P16,289,623.08. As it was ACI that was the award up to the time the award becomes final and executory. Thereafter,
liable for the delays, the CIAC Arbitral Tribunal ruled that ACI was not entitled interest of 12% per annum shall be imposed on any balance of the award
to liquidated damages. until fully paid. SO ORDERED.

Page 16 of 46
On December 4, 2006, ACI filed before the Court of Appeals a Petition for Also on account of the supposed lump-sum arrangement, the Court of
Review[71] under Rule 43 of the 1997 Rules of Civil Procedure. Appeals held that CECON was not entitled to attendance fees on contract
amounts increased by change order works.[83] It also stated that the rate for
In the meantime, on December 28, 2006, the CIAC Arbitral Tribunal issued attendance fees, overhead, and profit for subcontractors' works remained
an Order[72] acknowledging arithmetical errors in its October 25, 2006 subject to the original contract documents based on ACI's original invitation
Decision, Thus, it modified its October 25, 2006 Decision, indicating that the to bidders and had never been altered.
net amount due to CECON was P231,357,136.72, rather than
P217,428,155.75. Regarding attendance fees, the Court of Appeals proffered that the work
attributed to subcontractors was merely work done by CECON itself, thereby
In its assailed April28, 2008 Decision,[74] the Court of Appeals reduced the negating the need for attendance fees.
award in favor of CECON to P114,324,605.00 and increased the award to
ACI to P31,566,246.20. Concerning take-out costs, the Court of Appeals stated that CECON was in
no position to propose its own take-out costs as the tender documents issued
The Court of Appeals held as inviolable the lump-sum fixed price along with ACI's invitation to bidders stated that take-out costs must be
arrangement between ACI and CECON. It faulted the CIAC Arbitral Tribunal based exclusively on the rates provided in the Contract Cost Breakdown.
for acting in excess of jurisdiction as it supposedly took it upon itself to Nevertheless, as ACI had previously undertaken to pay the variance in take-
unilaterally modify the arrangement between ACI and CECON. out costs amounting to P3,811,289.70, the Court of Appeals concluded that
an award for take-out costs in that amount was proper.
Thus, the Court of Appeals deleted the CIAC Arbitral Tribunal's award
representing cost adjustments. However, the Court of Appeals also noted On the CIAC Arbitral Tribunal's award for overhead costs and profits under
that in ACI's and CECON's March 30, 2004 Joint Ma11ifestation before day work, the Court of Appeals held that it was improper to grant this award
CIAC, ACI conceded that P10,266,628.00 worth of cost adjustments was due based on stipulations on day works pertaining "only to 'materials' and not to
to CECON and undertook to pay CECON that amount. The Court of Appeals, equipment."
hence, maintained a P10,266,628.00 award of cost adjustment in favor of
CECON. Finally, the Court of Appeals held that CECON was not entitled to costs of
litigation considering that "no premium is to be placed on the right to
On the cost increases borne by Change Order No. 11-the shift from litigate"[88] and since ACI could not be faulted for delays.
reinforced concrete to structural steel framing-and by transitions from
schematic diagrams to construction drawings, the Court of Appeals The dispositive portion of the assailed Court of Appeals April 28, 2008
dismissed the CIAC Arbitral Tribunals award to CECON as arising from "pity" Decision read:
and unwarranted by the lump-sum, fixed-price arrangement.
WHEREFORE, based on all the foregoing, the Decision of the Arbitral
The Court of Appeals held ACI liable to CECON for the sum of Tribunal is modified as follows:
P12,672,488.36 for miscellaneous change orders, which it construed to be
"separate contracts that have been entered into at the time [ACI] required a. AWARD TO CECON
them."[79] It likewise held ACI liable for P1,132,946.17 representing the
balance of 12 other partially paid change orders. NO.

The Court of Appeals noted that CECON was not entitled to time extensions ISSUE
because the arrangement between ACI and CECON had never been altered.
Consequently, it was not entitled to acceleration co ts, additional overhead, Pesos (PHP)
ru1d reimbursement for extending the Contractor's All Risk Insurance.[81] 1. Cost Adjustment- 10,266,628.00
Conversely, the Court of Appeals held CECON liable for delays thereby 2. Take Out Cost of Equipment- 3,811,289.70
entitling ACI to liquidated damages corresponding to 10% of the supposed 3. Change Orders - 99,119,200.09
contract sum of P1,540,000,000.00, or P15,400,000.00. a. Approved Change Orders- 1,132,946.17
b. [Schematic Drawings] to [Construction Drawings]- 80,108,761.60

Page 17 of 46
c. Miscellaneous Change Orders- 12,672,488.30 PESOS (PhP)
d. Change Order No.- 5,205,004.02 1. Additional costs spent on rebars- 10,266,628.00
4. Equipment Supplied by Owner- 1,127,486.50 2. Increase in the costs of cement and formworks falling under cost-
Total- 114,324,605.00 (sic) bearing change.- 5,205,004.02
3. Representing undervaluation of respondent's works in the supply and
b. AWARD TO ARANETA installation of G.I. sheets- 1,209,782.50
4. Representing Miscellaneous Change Orders- 27,601,469.32
NO. 5. Drilling of Holes- 4,543,450.00
6. [Schematic Drawings] to [Construction Drawings]- 80,108,761.60
ISSUE 7. Installation of equipment supplied by owner- 1,127,486.50
TOTAL- 130,062,581.94
Pesos (PHP)
5. Liquidated Damages -15,400,000.00 b. AWARD TO ARANETA CENTER, INC.
6. Defective and Incomplete Works- 3,000,000.00 1. Liquidated Damage - 20,000,000.00
Bookmarking Granite Tiles- 6,980,000.00 2. Defective and Incomplete Works- 3,000,000.00
7 Permits, Licenses and Other Advances- 6,186,246.23 3. Bookmarking Granite Tiles- 6,980,000.00
Total- 31,566,246.20 (sic) 4. Permits, Licenses and other Advances- 6,186,246.23
TOTAL- 36,166,246.23
In addition, CECON is directed to submit all required. close-out documents
within thirty (30) days from receipt of this Decision.
II - COMPUTATION:
The parties shall bear their own costs of arbitration and litigation.
AWARD TO CE CONSTRUCTION, INC- 130,062,581.94
SO ORDERED. LESS
AWARD TO ARANETA CENTER, INC.- 36,166,246.23
Acting on CECON's Motion for Reconsideration, the Court of Appeals issued BALANCE PAYABLE BY ARANETA TO CECON- 93,896,335.71
its Amended Decision on July 1, 2010.[90] This Amended Decision increased
the award for miscellaneous change orders to P27,601,469.32; reinstated
awards for undervalued works in supplying and installing G.I. sheets worth SO ORDERED.
P1,209,782.50[91] and for the drilling of holes and application of epoxy worth
P4,543,456.00;[92] and deleted the award for takeout costs. Aggrieved at the Court of Appeals' ruling, CECON tiled the present Petition
insisting on the propriety of the CIAC Arbitral Tribunal's conclusions and
The dispositive portion of the assailed Court of Appeals July 1, 2010 findings.[95] It prays that the assailed Court of Appeals decisions be reversed
Amended Decision read: and that the CIAC Arbitral Tribunal October 25, 2006 Decision, as modified
by its December 28, 2006 Order, be reinstated.
WHEREFORE, Our Decision dated 28 April 2008 is hereby modified as
follows: ACI counters that the Court of Appeals July 1, 2010 Amended Decision must
be upheld.
I - AWARD:
ACI insists on the inviolability of its supposed agreement with CECON, as
a. AWARD TO CE CONSTRUCTION, INC. embodied in the contract documents delivered to contractors alongside the
original offer to bid. It cites specific provisions of these documents such as
NO. valuation rules and required notices for extensions and changes, reckoning
of losses and expenses, the ensuing liquidated damages for defects, cost-
ISSUE bearing changes and provisional sums,[98] which define parameters for
permissible changes and for reckoning corresponding costs and liabilities.

Page 18 of 46
However, it did not attach any of these documents to its Comment or I. This Court begins by demarcating the jurisdictional and technical
Memorandum. It also cites statutory provisions-Articles 1715[99] and competence of the CIAC and of its arbitral tribunals.
1724[100] of the Civil Code-on CECON's liabilities and the primacy of
stipulated contract prices. I.A. The Construction Industry Arbitration Commission was a creation of
Executive Order No. 1008, otherwise known as the Construction Industry
By the inviolability their agreement, ACI insists on the supposed immutability Arbitration Law.[105] At inception, it was under the administrative supervision
of the stipulated contract sum and on the impropriety of the CIAC Arbitral of the Philippine Domestic Construction Board[106] which, in turn, was an
Tribunal in writing its own terms for ACI and CECON to follow.It faults the implementing agency of the Construction Industry Authority of the Philippines
CIAC Arbitral Tribunal for erroneously reckoning the sums due to CECON, (CIAP).[107] The CIAP is presently attached to the Department of Trade and
particularly in relying on factual considerations that run afoul of contractual Industry.
stipulations and on bases such as industry practices and standards, which
supposedly should not have even been considered as the parties have The CIAC was created with the specific purpose of an "early and expeditious
already adduced their respective evidence. It insists upon CECON's fault for settlement of disputes"[109] cognizant of the exceptional role of construction
delays and defects, making it liable for liquidated damages. to "the furtherance of national development goals."

Though nominally modifying the CIAC Arbitral Tribunal October 25, 2006 Section 4 of the Construction Industry Arbitration Law spells out the
Decision, the Court of Appeals actually reversed it on the pivotal matter of the jurisdiction of the CIAC:
characterization of the contract between CECON and ACI. Upon its
characterization of the contract as one for a lump-sum fixed price, the Court Section 4. Jurisdiction. - The CIAC shall have original and exclusive
of Appeals deleted much of the CIAC Arbitral Tribunal's monetary awards to jurisdiction over disputes arising from, or connected with, contracts entered
CECON and awarded liquidated damages to ACI. into by parties involved in construction in the Philippines, whether the dispute
arises before or after the completion of the contract, or after the
On initial impression, what demands resolution is the issue of whether or not abandonment or breach thereof. These disputes may involve government or
the Court of Appeals erred in characterizing the contractual arrangement private contracts. For the Board to acquire jurisdiction, the parties to a
between petitioner CE Construction Corporation and respondent Araneta dispute must agree to submit the same to voluntary arbitration.
Center, Inc. as immutably one for a lump-sum fixed price.
The jurisdiction of the CIAC may include but is not limited to violation of
However, this is not merely a matter of applying and deriving conclusions specifications for materials and workmanship; violation of the terms of
from cut and dried contractual provisions. More accurately, what is on issue agreement; interpretation and/or application of contractual time and delays;
is whether or not the Court of Appeals correctly held that the CIAC Arbitral maintenance and defects; payment, default of employer or contractor and
Tribunal acted beyond its jurisdiction in holding that the price of changes in contract cost.
P1,540,000,000.00 did not bind the parties as an immutable lump-sum.
Subsumed in this issue is the matter of whether or not the Court of Appeals Excluded from the coverage of this law are disputes arising from employer-
correctly ruled that CECON was rightfully entitled to time extensions and that employee relationships which shall continue to be covered by the Labor
intervening circumstances had made ACI liable for cost adjustments, Code of the Philippines.
increases borne by change orders, additional overhead costs, extended
contractor's all risk insurance coverage, increased attendance fees vis-a-vis Though created by the act of a Chief Executive who then exercised
subcontractors, and arbitration costs which it awarded to CECON. legislative powers concurrently with the Batasang Pambansa, the creation,
continuing existence, and competence of the CIAC have since been
This Court limits itself to the legal question of the CIAC Arbitral Tribunal's validated by acts of Congress,
competence. Unless any of the exceptional circumstances that warrant
revisiting the factual matter of the accuracy of the particulars of every item Republic Act No. 9184 or the Government Procurement Reform Act, enacted
awarded to the parties is availing, this Court shall not embark on its own audit on January 10, 2003, explicitly recognized and confirmed the competence of
of the amounts owing to each. the CIAC:

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Section 59. Arbitration. - Any and all disputes arising from the implementation entire technical expanse of construction, defined in jurisprudence as
of a contract covered by this Act shall be submitted to arbitration in the "referring to all on-site works on buildings or altering structures, from land
Philippines according to the provisions of Republic Act No. 876, otherwise clearance through completion including excavation, erection and assembly
known as the "Arbitration Law": Provided, however, That, disputes that are and installation of components and equipment."
within the competence of the Construction Industry Arbitration Commission to
resolve shall be referred thereto. The process of arbitration shall be Jurisprudence has characterized the CIAC as a quasi-judicial, administrative
incorporated as a provision in the contract that will be executed pursuant to agency equipped with technical proficiency that enables it to efficiently and
the provisions of this Act: Provided, That by mutual agreement, the patties promptly resolve conflicts;
may agree in writing to resort to alternative modes of dispute resolution.
(Emphasis supplied) [The CIAC] is a quasi-judicial agency. A quasi-judicial agency or body has
been defined as an organ of government other than a court and other than a
Arbitration of construction disputes through the CIAC was formally legislature, which affects the rights of private parties through either
incorporated into the general statutory framework on alternative dispute adjudication or rule-making. The very definition of an administrative agency
resolution through Republic Act No. 9285, the Alternative Dispute Resolution includes its being vested with quasi-judicial powers. The ever increasing
Act of 2004 (ADR Law). Chapter 6, Section 34 of ADR Law made specific variety of powers and functions given to administrative agencies recognizes
reference to the Construction Industry Arbitration Law, while Section 35 the need for the active intervention of administrative agencies in matters
confirmed the CIAC's jurisdiction: calling for technical knowledge and speed in countless controversies which
cannot possibly be handled by regular courts. The CIAC's primary function is
CHAPTER 6 that of a quasi-judicial agency, which is to adjudicate claims and/or determine
rights in accordance with procedures set forth in E.O. No. 1008.
ARBITRATION OF CONSTRUCTION DISPUTES
The most recent jurisprudence maintains that the CIAC is a quasi-judicial
Section 34. Arbitration of Construction Disputes: Governing Law. - The body. This Court's November 23, 2016 Decision in Fruehauf Electronics v.
arbitration of construction disputes shall be governed by Executive Order No. Technology Electronics Assembly and Management Pacific[113]
1008, otherwise known as the Construction Industry Arbitration Law. distinguished construction arbitration, as well as voluntary arbitration
pursuant to Article 219(14) of the Labor Code,[114] from commercial
Section 35. Coverage of the Law. - Construction disputes which fall within the arbitration. It ruled that commercial arbitral tribunals are not quasi-judicial
original and exclusive jurisdiction of the Construction Industry Arbitration agencies, as they are purely ad hoc bodies operating through contractual
Commission (the "Commission") shall include those between or among consent and as they intend to serve private, proprietary interests.[115] In
parties to, or who are otherwise bound by, an arbitration agreement, directly contrast, voluntary arbitration under the Labor Code and construction
or by reference whether such parties are project owner, contractor, arbitration operate through the statutorily vested jurisdiction of government
subcontractor, fabricator, project manager, design professional, consultant, instrumentalities that exist independently of the will of contracting parties and
quantity surveyor, bondsman or issuer of an insurance policy in a to which these parties submit. They proceed from the public interest imbuing
construction project. their respective spheres:

The Commission shall continue to exercise original and exclusive jurisdiction Voluntary Arbitrators resolve labor disputes and grievances arising from the
over construction disputes although the arbitration is "commercial" pursuant interpretation of Collective Bargaining Agreements. These disputes were
to Section 21 of this Act. specifically excluded from the coverage of both the Arbitration Law and the
ADR Law.
I.B. The CIAC does not only serve the interest of speedy dispute resolution, it
also facilitates authoritative dispute resolution. Its authority proceeds not only Unlike purely commercial relationships, the relationship between capital and
from juridical legitimacy but equally from technical expertise. The creation of labor are heavily impressed with public interest. Because of this. Voluntary
a special adjudicatory body for construction disputes presupposes distinctive Arbitrators authorized to resolve labor disputes have been clothed with quasi-
and nuanced competence on matters that are conceded to be outside the judicial authority.
innate expertise of regular courts and adjudicatory bodies concerned with
other specialized fields. The CIAC has the state's confidence concerning the

Page 20 of 46
On the other hand, commercial relationships covered by our commercial Of the 87 CIAC accredited arbitrators as of January 2017, only 33 are
arbitratjon laws are purely private and contractual in nature. Unlike labor lawyers. The majority are experts from construction-related professions or
relationships, they do not possess the same compelling state interest that engaged in related fields.
would justify state interference into the autonomy of contracts. Hence,
commercial arbitration is a purely private system of adjudication facilitated by Apart from arbitrators, technical experts aid the CIAC in dispute resolution.
private citizens instead of government instrumentalities wielding quasi- Section 15 of the Construction Industry Arbitration Law provides:
judicial powers.
Section 15. Appointment of Experts. - The services of technical or legal
Moreover, judicial or quasi-judicial jurisdiction cannot be conferred upon a experts may be utilized in the settlement of disputes if requested by any of
tribunal by the parties alone. The Labor Code itself confers subject-matter the parties or by the Arbitral Tribunal. If the request for an expert is done by
jurisdiction to Voluntary Arbitrators. either or by both of the parties, it is necessary that the appointment of the
expert be confirmed by the Arbitral Tribunal.
Notably, the other arbitration body listed in Rule 43 the Construction Industry
Arbitration Commission (CIAC) - is also a government agency attached to the Whenever the parties request for the services of an expert, they shall equally
Department of Trade and Industry. Its jurisdiction is likewise conferred by shoulder the expert's fees and expenses, half of which shall be deposited
statute. By contrast, the subject matter urisdiction of commercial arbitrators is with the Secretariat before the expert renders service. When only one party
stipulated by the parties. makes the request, it shall deposit the whole amount required.

Consistent with the primacy of technical mastery, Section 14 of the II. Consistent with CIAC's technical expertise is the primacy and
Construction Industry Arbitration Law on the qualification of arbitrators deference accorded to its decisions. There is only a very narrow room
provides: for assailing its rulings.

Section 14. Arbitrators. - A sole arbitrator or three arbitrators may settle a Section 19 of the Construction Industry Arbitration Law establishes that CIAC
dispute arbitral awards may not be assailed, except on pure questions of law:

Arbitrators shall be men of distinction in whom the business sector and the Section 19. Finality of Awards. - The arbitral award shall be binding upon the
government can have confidence. They shall not be permanently employed parties. It shall be final and inappealable except on questions of law which
with the CIAC. Instead, thy shall render services only when called to shall be appealable to the Supreme Court.
arbitrate. For each dispute they settle, they shall be given fees.
Rule 43 of the 1997 Rules of Civil Procedure standardizes appeals from
Section 8.1 of the Revised Rules of Procedure Governing Construction quasi-judicial agencies.[118] Rule 43, Section 1 explicitly lists CIAC as
Arbitration establishes that the foremost qualification of arbitrators shall be among the quasi judicial agencies covered by Rule 43.[119] Section 3
technical proficiency. It explicitly enables not only lawyers but also indicates that appeals through Petitions for Review under Rule 43 are to "be
"engineers, architects, construction managers, engineering consultants, and taken to the Court of Appeals ... whether the affoeal involves questions of
businessmen familiar with the construction industry" to serve as arbitrators: fact, of law, or mixed questions of fact and law."

Section 8.1 General Qualification of Arbitrators. - The Arbitrators shall be This is not to say that factual findings of CIAC arbitral tribunals may now be
men of distinction in whom the business sector and the government can have assailed before the Court of Appeals. Section 3's statement "whether the
confidence. They shall be technically qualified to resolve any construction appeal involves questions of fact, of law, or mixed questions of fact and law"
dispute expeditiously and equitably. The Arbitrators shall come from different merely recognizes variances in the disparate modes of appeal that Rule 43
professions. They may include engineers, architects, construction managers, standardizes: there were those that enabled questions of fact; there were
engineering consultants, and businessmen familiar with the construction those that enabled questions of law, and there were those that enabled
industry and lawyers who are experienced in construction disputes. mixed questions fact and law. Rule 43 emphasizes that though there may
have been variances, all appeals under its scope are to be brought before
the Court of Appeals. However, in keeping with the Construction Industry

Page 21 of 46
Arbitration Law, any appeal from CIAC arbitral tribunals must remain limited arbitrators themselves; they must have had confidence in such arbitrators.
to questions of law. The Court will not, therefore, permit the parties to relitigate before it the
issues of facts previously presented and argued before the Arbitral Tribunal,
Hi-Precision Steel Center, Inc. v. Lim Kim Steel Builders, Inc.[121] explained save only where a very clear showing is made that, in reaching its factual
the wisdom underlying the limitation of appeals to pure questions of law: 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
Section 19 makes it crystal clear that questions of fact cannot be raised in loss of jurisdiction. Prototypical examples would be factual conclusions of the
proceedings before the Supreme Court - which is not a trier of facts - in Tribunal which resulted in deprivation of one or the other party of a fair
respect of an arbitral award rendered under the aegis of the CIAC. opportunity to present its position before the Arbitral Tribunal, and an award
Consideration of the animating purpose of voluntary arbitration in generaland obtained through fraud or the corruption of arbitrators. Any other, more
arbitration under the aegis of the CIAC in particular, requires us to apply relaxed, rule would result in setting at naught the basic objective of a
rigorously the above principle embodied in Section 19 that the Arbitral voluntary arbitration and would reduce arbitration to a largely inutile
Tribunal's findings of fact shall be final and unappealable. institution.

Voluntary arbitration involves the reference of a dispute to an impartial body, Thus, even as exceptions to the highly restrictive nature of appeals may be
the members of which are chosen by the parties themselves, which parties contemplated, these exceptions are only on the nanowest of grounds.
freely consent in advance to abide by the arbitral award issued after Factual findings of CIAC arbitral tribunals may be revisited not merely
proceedings where both parties had the opportunity to be heard. The basic because arbitral tribunals may have erred, not even on the already
objective is to provide a speedy and inexpensive method of settling disputes exceptional grounds traditionally available in Rule 45 Petitions.[124] Rather,
by allowing the parties to avoid the formalities, delay, expense and factual findings may be reviewed only in cases where the CIAC arbitral
aggravation which commonly accompany ordinary litigation, especially tribunals conducted their affairs in a haphazard, immodest manner that the
litigation which goes through the entire hierarchy of courts. [The Construction most basic integrity of the arbitral process was imperiled. In Spouses David
Industry Arbitration Law] created an arbitration facility to which the v. Construction Industry and Arbitration Commission:
construction industry in the Philippines can have recourse. The [Construction
Industry Arbitration Law] was enacted to encourage the early and expeditious We reiterate the rule that factual findings of construction arbitrators are final
settlement of disputes in the construction industry, a public policy the and conclusive and not reviewable by this Court on appeal, except when the
implementation of which is necessa and important for the realization of petitioner proves affirmatively that: (1) the award was procured by corruption,
national development goals. 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
Consistent with this restrictive approach, this Court is duty-bound to be in refusing to postpone the hearing upon sufficient cause shown, or in
extremely watchful and to ensure that an appeal does not become an refusing to hear evidence pertinent and material to the controversy; (4) one
ingenious means for und rmining the integrity of arbitration or for conveniently or more of the arbitrators were disqualified to act as such under section nine
setting aside the conclusions arbitral processes make. An appeal is not an of Republic Act No. 876 and willfully refrained from disclosing such
artifice for the parties to undermine the process they voluntarily elected to disqualifications or of any other misbehavior by which the rights of any party
engage in. To prevent this Court from being a party to such perversion, this have been materially prejudiced; or (5) the arbitrators exceeded their powers,
Court's primordial inclination must be to uphold the factual finqings of arbitral or so imperfectly executed them, that a mutual, final and definite award upon
tribunals: the subject matter submitted to them was not made.

Aware of the objective of voluntary arbitration in the labor field, in the Guided by the primacy of CIAC's technical competence, in exercising this
construction industry, and in any other area for that matter, the Court will not Court's limited power of judicial review, this Court proceeds to rule on
assist one or the other or even both parties in any effort to subvert or defeat whether or not the Court of Appeals erred in its assailed decisions.
that objective tbr their private purposes. The Court will not review the factual
findings of an arbitral tribunal upon the artful allegation that such body had III. Properly discerning the issues in this case reveals that what is involved is
"misapprehended the facts" and will not pass upon issues which are, at not a mere matter of contractual interpretation but a question of the CIAC
bottom, issues of fact, no matter how cleverly disguised they might be as Arbitral Tribunal's exercise of its powers.
"legal questions." The parties here had recourse to arbitration and chose the

Page 22 of 46
III.A In F.F. Cruz, the parties' agreement had been clearly set out in writing. There
was a definitive instrument which needed only to be consulted to ascertain
F.F. Cruz v. HR Construction[127] distinguished questions of law, properly the parties' intent:
cognizable in appeals from CIAC arbitral awards, from questions of fact:
In resolving the dispute as to the proper valuation of the works accomplished
A question of law arises when there is doubt as to what the law is on a by HRCC, the primordial consideration should be the terms of the
certain state of facts, while there is a question of fact when the doubt arises Subcontract Agreement. It is basic that if the tem1s of a contract are clear
as to the truth or falsity of the alleged facts. For a question to be one of law, and leave no doubt upon the intention of the contracting parties, the literal
the same must not involve an examination of the probative value of the meaning of its stipulations shall control.[131]
evidence presented by the litigants or any of them. The resolution of tbe
issue must rest solely on what the law provides on the given set of Thus, this Court concluded:
circumstances. Once it is clear that the issue invites a review of the evidence
presented, the question posed is one of fact.[128] Pursuant to the terms of payment agreed upon by the parties, FFCCI obliged
itself to pay the monthly progress billings of HRCC within 30 days from
It further explained that an inquiry into the true intention of the contracting receipt of the same. Additionally, the monthly progress billings of HRCC
parties is a legal, rather than a factual, issue: should indicate the extent of the works completed by it, the same beinff
essential to the valuation of the amount that FFCCI would pay to HRCC.[132]
On the surface, the instant petition appears to merely raise factual questions
as it mainly puts in issue the appropriate amount that is due to HRCC. III.B. In this case, there is no established contract that simply required
However, a more thorough analysis of the issues raised by FFCCl would interpretation and application.
show that it actually asserts questions of law.
The assailed Court of Appeals April 28, 2008 Decision implies that all that
FFCCI primarily seeks from this Court a determination of whether [the] had to be done to resolve the present controversy was to apply the
amount claimed by HRCC in its progress billing may be enforced against it in supposedly clear and unmistakable terms of the contract between ACI and
the absence of a joint measurement of the former's completed works. CECON. It even echoes the words of F.F. Cruz:
Otherwise stated, the main question advanced by FFCCI is this: in the
absence of the joint measurement agreed upon in the Subcontract It is a legal principle of long standing that when the language of the contract
Agreement, how will the completed works of HRCC be verified and the is explicit, leaving no doubt as to the intention of the parties, the courts may
amolfnt due thereon be computed? not read into it any other intention that would contradict its plain import. The
clear terms of the contract should never be the subject matter of
The determination of the foregoing question entails an interpretation of the interpretation. Neither abstract justice nor the rule of liberal interpretation
terms of the Subcontract Agreement vis-a-vis the respective rights of the justifies the creation of a contract for the parties which they did not make
parties herein. On this point, it should be stressed that where an themselves or the imposition upon one party to a contract or obligation not
interpretation of the true agreement between the parties is involved in an assumed simply or merely to avoid seeming hardships. Their true meaning
appeal, the appeal is in effect an inquiry of the law between the parties, its must be enforced, as it is to be presumed that the contracting parties know
interpretation necessarily involves a question of law. their scope and effects.

Moreover, we are not called upon to examine the probative value of the The Contract Documents expressly characterize the construction contract
evidence presented before the CIAC. Rather, what is actually sought from between [ACI] and CECON as "lump-sum" and "fixed price" in nature. As a
this Court is an interpretation of the terms of the Subcontract Agreement as it consequence, the Contract Documents expressly prohibit any adjustment of
relates to the dispute between the parties. the contract sum due to any changes or fluctuations in the cost of labor,
materials or other matters.[133] (Citations omitted)
Though similarly concerned with "an interpretation of the true agreement
between the parties,"[130] this case is not entirely congruent with F.F. Cruz. Upon its characterization of the contract as one for the lump-sum, fixed price
of P1,540,000,000.00, the Court of Appeals faulted the CIAC Arbitral Tribunal
for acting in excess of jurisdiction as it supposedly countermanded the

Page 23 of 46
parties' agreement, or worse, conjured its own tenns for the parties' By delivering tender documents to bidders, ACI made an offer. By these
compliance. documents, it specitled its terms and defined the parameters within which
bidders could operate. These tender documents, therefore, guided the
It was the Court of Appeals, not the CIAC Arbitral Tribunal, that committed bidders in formulating their own offers to ACI, or, even more fundamentally,
serious error. helped them make up their minds if they were even willing to consider
undertaking the proposed project. In responding and submitting their bids,
To rule that the CIAC Arbitral Tribunal modified the parties' agreement contractors, including CECON, did not peremptorily become subservient to
because it was indisputably one for a lump-sum, fixed price of ACI's terms. Rather, they made their own representations as to their own
P1,540,000,000.00 is begging the question. The Court of Appeals used a willingness and ability. They adduced their own counter offers, although
conclusion as a premise to support itself. It erroneously jumped to a these were already tailored to work within ACI's parameters.
conclusion only to plead this conclusion in support of points that should have
made up its anterior framework, points that would have been the ones to lead These exchanges were in keeping with Article 1326 of the Civil Code:
to a conclusion. It then used this abortive conclusion to injudiciously dispose
of the case. Article 1326. Advertisements for bidders are simply invitations to make
proposals, and the advertiser is not bound to accept the highest or lowest
The Court of Appeals took the parties' contractual relation as a revealed and bidder, unless the contrary appears.
preordained starting point. Then, it dismissed every prior or subsequent detail
that contradicted this assumption. It thereby conveniently terminated the The mere occurrence of these exchanges of offers fails to satisfy the Civil
discussion before it even began. Code's requirement of absolute and unqualified acceptance:

III.C. There was never a meeting of minds on the price of Article 1319. Consent is manifested by the meeting of the offer and the
P1,540,000,000.00. Thus, that stipulation could not have been the basis acceptance upon the thing and the cause which are to constitute the
of any obligation. contract. The offer must be certain and the acceptance absolute. A qualified
acceptance constitutes a counter-offer.
The only thing that ACI has in its favor is its initial delivery of tender
documents to prospective bidders. Everything that transpired after this Acceptance made by letter or telegram does not bind the offerer except from
delivery militates against ACI's position. the time it came to his knowledge. The contract, in such a case, is presumed
to have been entered into in the place where the offer was made. (Emphasis
Before proceeding to a consideration of the circumstances that negate a supplied)
meeting of minds, this Court emphasizes that ACI would have this Court
sustain claims premised on supposed inviolable documents. Yet, it did not Subsequent events do not only show that there was no meeting of minds on
annex copies of these documents either to its Comment or to its CECON's initial offered contract sum of P1,449,089,174.00 as stated in its
Memorandum. August 30, 2002 bid. They also show that there was never any meeting of
minds on the contract sum at all.
ACI leaves this Court compelled to rely purely on their packaged presentation
and in a bind, unable to verify even the accuracy of the syntax of its citations. In accordance with Article 1321 of the Civil Code,[135] an offeror may fix the
This Court cannot approve of this predicament. To cursorily acquiesce to time of acceptance. Thus, CECON's August 30, 2002 offer of
ACI's overtures without due diligence and substantiation is being overly P1,449,089,174.00 "specifically stated that its bid was valid for only ninety
solicitous, even manifestly partisan. (90) days, or only until 29 November 2002."[136] November 29, 2002 lapsed
and ACI failed to manifest its acceptance of CECON's offered contract sum.
ACI and its counsel must have fully known the importance of equipping this
Court with a reliable means of confirmation, especially in a case so steeped It was only sometime after November 29, 2002 that ACI verbally informed
in the sway of circumstances. ACI's omission can only work against its CECON that the contract was being awarded to it. Through a telephone call
cause. on December 7, 2002, ACI informed CECON that it may commence
excavation works. However, there is no indication that an agreement was
reached on the contract sum in any of these conversations. ACI, CECON, the

Page 24 of 46
CIAC Arbitral Tribunal, and the Court of Appeals all concede that When ACI indicated acceptance, CECON's P1,540,000,000.00 offer had
negotiations persisted. been superseded. Even CECON's subsequent offer of P1,594,631,418.00
had, by then, lapsed by more than four (4) months. Apparently totally
Still without settling on a contract sum, even the object of the contract was misinformed, ACI's acceptance letter did not even realize or remotely
subjected to multiple modifications. Absent a concurrence of consent and reference CECON's most recent P1,594,631,418.00 stipulation but insisted
object, no contract was perfected. on the passe offer of P1,540,000,000.00 from the past year.

An office tower atop Part A was included in CECON's scope of works and the ACI's supposed acceptance was not an effective, unqualified acceptance, as
contract sum increased to P1,582,810,525.00. Price fluctuations were contemplated by Article 1319 of the Civil Code. At most, it was a counter-
conceded after this and the project cost was again adjusted to offer to revert to P1,540,000,000.00.
P1,613,615,244.00. Thereafter, CECON agreed to extend a discount and
reduced its offered project cost to P1,540,000,000.00.[138] ACI's June 2, 2003 letter stated an undertaking: "This notwithstanding, formal
contract documents embodying these positions will shortly be prepared and
After all these, ACI demurred on the tenns of its own tender documents and forwarded to you for execution."[143] Through this letter, ACI not only
changed the project from one encompassing both design and construction to undertook to deliver documents, it also admitted that the final, definitive terms
one that was limited to construction. between the parties had yet to be articulated in writing.

Though not pertaining to the object of the contract itself but only to one (1) of ACI's delivery CECON's review, and both parties' final act of formalizing their
its many facets, ACI also removed from CECON's scope of works the respective consent and affixing their respective signatures would have
acquisition of elevators, escalators, chillers, generator sets, indoor established a clear point in which the contract between ACI and CECON has
substations, cooling towers, pumps, and tanks. However, much later, ACI been perfected. These points, i.e. ACI's delivery, CECON's review, and
reneged on its own and opted to still obtain pumps, tanks, and cooling towers parties' formalization, too, would have validated the Court of Appeals'
through CECON. assertion that all that remained to be done was to apply unequivocal
contractual provisions.
It is ACI's contention that the offered project cost of P1,540,000,000.00 is
what binds the parties because its June 2, 2003 letter indicated acceptance ACI would fail on its own undertaking.
of this offered amount.
III.D. Without properly executed contract documents, what would have
This is plain error. been a straightforward exercise, akin to the experience in F.F. Cruz,
became a drawn-out fact-finding affair. The situation that ACI
CECON was never remiss in impressing upon ACI that the engendered made it necessary for the CIAC Arbitral Tribunal to unravel
P1,540,000,000.00 offer was not perpetually availing. WithoutACI's timely the terms binding ACI to CECON from sources other than definitive
acceptance, on December 27, 2002, CECON wrote to ACI emphasizing that documents.
the quoted sum of P1,540,000,000.00 was "based [only] upon the prices
prevailing at December 26, 2002" levels.[139] On January 8, 2003, CECON It is these actions of the CIAC Arbitral Tribunal that raise an issue, purely as
notified ACI of further increases in costs and specifically stated that "[f]urther a matter of law, now the subject of this Court's review; that is, faced with the
delay in the acceptance of the revised offer and release of the down payment lacunae confronting it, whether or not the CIAC Arbitral Tribunal acted within
may affect the revised lump sum amount."[140] Finally, on January 21, 2003, its jurisdiction.
CECON wrote again to ACI,[141] stating that the contract sum had to be
increased to P1,594,631,418.00. CECON also specifically stated, consistent IV. The CIAC Arbitral Tribunal did not act in excess of its jurisdiction.
with Article 1321 of the Civil Code, that its tender of this adjusted price was Contrary to the Court of Appeals' and ACI's assertions, it did not draw up its
valid only until January 31, 2003, as further price changes may be own tenns and force these terms upon ACI and CECON.
forthcoming. CECON also impressed upon ACI that the 400 days allotted for
the completion of the project had to be adjusted. IV.A. The CIAC Arbitral Tribunal was not confronted with a barefaced
controversy for which a fom1ulaic resolution sufficed. More pressingly, it was
confronted with a state of affairs where CECON rendered services to ACI,

Page 25 of 46
with neither definitive governing instrwnents nor a confirmed, fixed dispensing an exhaustive and dependable resolution. Construction arbitration
remuneration for its services. Thus, did the CIAC Arbitral Tribunal go about is not a game of guile which may be left to ingenious textual or technical
the task of asce1taining the sum properly due to CECON. acrobatics, but an endeavor to ascertain the tluth and to dispense justice "by
every and all reasonable means without regard to technicalities of law or
This task was well within its jurisdiction. This determination entailed the full proc.edure."
range of subjects expressly stipulated by Section 4 of the Construction
Industry Arbitration Law to be within the CIAC's subject matter jurisdiction. IV.B. Two (2) guiding principles steered the CIAC Arbitral Tribunal in going
about its task. First was the basic matter of fairness. Second was effective
Section 4. Jurisdiction. - The jurisdiction of the CIAC may include but is not dispute resolution or the overarching principle of arbitration as a mechanism
limited to violation of specifications for materials and workmanship; violation relieved of the encumbrances of litigation. In Section 1.1 of the CIAC Rules of
of the terms of agreement; interpretation and/or application of contractual Procedure:
time and delays; maintenance and defects; payment, default of employer or
contractor and changes in contract cost. SECTION 1.1 Statement of policy and objectives - It is the policy and
objective of these Rules to provide a fair and expeditious resolution of
CECON raised the principal issue of the payment due to it on account, not construction disputes as an altemative to judicial proceedings, which may
only of fluctuating project costs but more so because of ACI's inability to restore the disrupted harmonious and friendly relationships between or
timely act on many contingencies, despite proper notice and communication among the parties. (Emphasis supplied)
from and by CECON. Theretbre, at the heart of the controversy was the
"interpretation and/or application of contractual time and delays." ACI's CECON's predicament demanded compensation. The precise extent may yet
counter-arguments, too, directly appealed to CIAC's subject matter to have been settled; yet, as the exigencies that prompted CECON to request
jurisdiction. ACI countered by asserting that sanctioning CECON's claims for arbitration unraveled, it became clear that it was not for the CIAC Arbitral
was tantamount to violating the tem1s of their agreement. It further claimed Tribunal to turn a blind eye to CECON's just entitlement to compensation.
liability on CECON's part for "maintenance and defects," and for "violation of
specifications for materials and workmanship." Jurisprudence has settled that even in cases where parties enter into
contracts which do not strictly confmm to standard formalities or to the
ACI and CECON voluntarily submitted themselves to the CIAC Arbitral typifying provisions of nominate contracts, when one renders services to
Tribunal's jurisdiction. The contending parties' own volition is at the inception another, the latter must compensate the fonner for the reasonable value of
of every construction arbitration proceeding.[144] Common sense dictates the services rendered. This amount shall be fixed by a court. This is a matter
that by the parties' voluntary submission, they acknowledge that an arbitral so basic, this Court has once characterized it as one that "springs from the
tribunal constituted under the CIAC has full competence to rule on the fountain of good conscience":
dispute presented to it. They concede this not only with respect to the literal
issues recited in their terms of reference, as ACI suggests,[145] but also with As early as 1903, in Perez v. Pomar, this Court mled that where one has
respect to their necessary incidents. Accordingly, in delineating the authority rendered services to another, and these services are accepted by the latter,
of arbitrators, the CIAC Rules of Procedure speak not only of the literally in the absence of proof that the service was rendered gratuitously, it is but
recited issues but also of "related matters": just that he should pay a reasonable remuneration therefore because "it is a
well known principle of law, that no one should be permitted to enrich himself
SECTION 21.3 Extent of power of arbitrator - The Arbitral Tribunal shall to the damage of another." Similary in 1914, this Court declared that in this
decide only such issues and related matters as are submitted to them for jurisdiction, even in the absence of statute, ". . . under the general principle
adjudication. They have no power to add, to subtract from, modify, or amend that one person may not enrich himself at the expense of another, a
any of the terms of the contract or any supplementary agreement thereto, or judgment creditor would not be permitted to retain the purchase price of land
any rule, regulation or policy promulgated by the CIAC. sold as the property of the judgment debtor after it has been made to appear
that the judgment debtor had no title to the land and that the purchaser had
To otherwise be puritanical about cognizable issues would be to cripple CIAC failed to secure title thereto . . ." The foregoing equitable principle which
arbitral tribunals. It would potentially be to condone the parties' efforts at tying springs from the fountain of good conscience are applicable to the case at
the hands of tribunals through circuitous, trivial recitals that fail to address the bar.[147]
complete extent of their claims and which are ultimately ineffectual in

Page 26 of 46
Consistent with the Construction Industry Arbitration Law's declared policy, became susceptible to reasonable adjustment, subject to proof of legitimate
[148] the CIAC Arbitral Tribunal was specifically charged with "ascertain[ing] costs that CECON can adduce.
the facts in each case by every and all reasonable means."[149] In
discharging its task, it was permitted to even transcend technical rules on V. Unravelling the CIAC Arbitral Tribunal's competence and establishing how
admissibility of evidence.[150] it acted consistent with law resolves the principal legal issue before us. From
this threshold, the inquiry transitions to the matter of whether or not the
IV.C. The reality of a vacuum where there were no definite contractual terms, conclusions made by the CIAC Arbitral Tribunal were warranted.
coupled with the demands of a "fair and expeditious resolution" of a dispute
centered on contractual interpretation, called into operation Article 1371 of They were. Far from being capricious, the CIAC Arbitral Tribunal's
the Civil Code: conclusions find solid basis in law and evidence.

Article 1371. In order to judge the intention of the contracting parties, their V.A. The tender documents may have characterized the contract sum as
contemporaneous and subsequent acts shall be principally considered. fixed and lump-sum, but the premises for this arrangement have undoubtedly
(Emphasis supplled) been repudiated by intervening circumstances.

Article 1379 of the Civil Code invokes principles from the Revised Rules on When CECON made its offer of P1,540,000,000.00, it proceeded from
Evidence. By invoking these principles, Article 1379 makes them properly several premises. First, ACI would timely respond to the representations
applicable in every instance of contractual interpretation, even those where made in its bid. Second, CECON could act on the basis of prices prevailing
the need for interpretation arises outside of court proceedings: then. Third, the subject matter of the contract was the entire expanse of
design and construction covering all elements disclosed in the tender
Article 1379. The principles of interpretation stated in Rule 123 of the Rules documents, nothing more and nothing less. Fourth, the basic specifications
of Court shall likewise be observed in the construction of contracts. for designing and building the Gateway Mall, as stated in the tender
documents, would remain consistent. Lastly, ACI would timely deliver on its
As with Article 1371, therefore, the following principles from the Revised concomitant obligations.
Rules on Evidence equally governed the CIAC Arbitral Tribunal's affairs:
Contrary to CECON's reasonable expectations, ACI failed to timely act either
4. Interpretation of Documents on CECON's bid or on those of its competitors. Negotiations persisted for the
better part of two (2) calendar years, during which the quoted contract sum
Section 12. Interpretation according to intention; general and particular had to be revised at least five (5) times. The object of the contract and
provisions. - In the construction of an instrument, the intention of the parties CECON's scope of work widely varied. There were radical changes like the
is to be pursued; and when a general and a particular provision are addition of an entire office tower to the project and the change in the project's
inconsistent, the latter is paramount to the former. So a particular intent will structural framing. There was also the undoing of CECON's freedom to
control a general one that is inconsistent with it. design, thereby rendering it entirely dependent on configurations that ACI
was to unilaterally resolve, It turned out that ACI took its time in delivering
Section 13. Interpretation according to circumstances. - For the proper construction drawings to CECON, with almost 38% of construction drawings
construction of an instrument, the circumstances under which it was made, being delivered after the intended completion date. There were many other
including the situation of the subject thereof and of the parties to it, may be less expansive changes to the project, such as ACI's fickleness on which
shown, so that the judge may be placed in the position of those whose equipment it would acquire by itself. ACI even failed to immediately deliver
language he is to interpret. the project site to CECON so that CECON may commence excavation, the
most basic task in setting up a structure's foundation. ACI also failed to
Within its competence and in keeping with basic principles on contractual produce definite instruments articulating its agreement with CECON, the final
interpretation, the CIAC Arbitral Tribunal ascertained the trqe and just terms contract documents.
governing ACI and CECON. Thus, the CIAC Arbitral Tribunal did not conjure
its own contractual creature out of nothing. In keeping with this, the CIAC With the withering of the premises upon which a lump-sum, fixed price
Arbitral Tribtmal found it proper to sustain CECON's position. There having arrangement would have been founded, such an arrangement must have
been no meeting of minds on the contract sum, the amount due to CECON certainly been negated:

Page 27 of 46
[T]he contract is fixed and lump sum when it was tendered and contracted as upon with the land-owner, can neither withdraw from the contract nor
a design and constmct package. The contract scope and character demand an increase in the price on account of the higher cost of labor or
significantly changed when the design was taken over by the Respondent. At materials, save when there has been a change in the plans and
the time of the negotiation and agreement of the amount of Php1.54 billion, specifications, provided:
there were no final plans for the change to structural steel, and all the
[mechanical, electrical and plumbing] drawings were all schematics. (1) Such change has been authorized by the proprietor in writing; and

[I]t is apparent to the Tribunal that the quantity and materials at the time of (2) The additional price to be paid to the contractor has been determined in
the P1.54B agreement are significantly different from the original plans to the writing by both parties.
finally implemented plans. The price increases in the steel products and
cement were established to have already increased by 11.52% and by P5.00 Article 1724 demands two (2) requisites in order that a price may become
per bag respectively by January 21, 2003. The Tribunal finds agreement with immutable: first, there must be an actual, stipulated price; and second, plans
the Claimant that it is fairer to award the price increase. and specifications must have definitely been agreed upon.

It should also be mentioned that Respondent had changed the scope and Neither requisite avails in this case. Yet again, ACI is begging the question. It
character of the agreement. First, there were major changes in the plans and is precisely the crux of the controversy that no price has been set. Article
specifications. Originally, the contract was for design and construct. The 1724 does not work to entrench a disputed price and make it sacrosanct.
design was deleted from the scope of the Claimant. It was changed to a Moreover, it was ACI which thn1st itself upon a situation where no plans and
straight construction contract. As a straight construction contract, there were specifications were immediately agreed upon and from which no deviation
no final plans to speak of at the time of the instructions to change. Then there could be made. It was ACI, not CECON, which made, revised, and deviated
was a verbal change to structural steel frame. No plans were available upon from designs and specifications.
this instruction to change. Next, the [mechanical, electrical and plumbing]
plans were all schematics. It is therefore expected that changes of plans are V.C. The CIAC Arbitral Tribunal also merely held ACI to account for its
forthcoming, and that changes in costs would follow ... voluntarily admitted adjustments. The CIAC Rules of Procedure pennit
deviations from technical rules on evidence, including those on admissions.
It has been established that the original tender, request for proposal and Still, common sense dictates that the principle that "[t]he act, declaration or
award is for a design and construct contract. The contract documents are omission of a party as to a relevant fact may be given in evidence against
therefore associated for said system of construction. When Respondent him"[153] must equally hold true in administrative or quasi-judicial
decided to change and take over the design, such as the change from proceedings as they do in court actions. Certainly, each must be held to
concrete to structural steel framing, "take-out" equipment from the contract account for his or her own voluntary declarations. It would have been plainly
and modify the [mechanical, electrical and plumbing w]orks, the original absurd to disregard ACI's reneging on its own admissions:
scope of work had been drastically changed. To tie down the Claimant to the
tmit prices for the proposal for a different scope of work would be grossly Respondent has agreed to the price increase in structural steel and after
unfair. This Tribunal will hold that unit price adjustment could be allowed but some negotiation paid the agreed amount. Respondent also agreed to the
only for change orders that were not in the original scope of work, such as price increase in the reinforcing bars and instructed the Claimant to bill it
the change order from concrete to structural framing, the [mechanical, accordingly. To the Tribunal, such action is an acknowledgment of the price
electrical and plumbing w]orks, [schematic drawings to construction increase. Respondent can make the case that said agreement is conditional,
drawings] and the Miscellaneous Change Order Works. i.e., the Complaint must be withdrawn. To the Tribunal, the conditionality falls
both ways. The Claimant has as much interest to agree to a negotiated price
V.B. Contrary to ACI's oft-repeated argument,[152] the CIAC Arbitral Tribunal increase so that it can collect payments for the claims. The conditionalities do
correctly found that ACI had gained no solace in statutory provisions on the not change the basis for the quantity and the amotmt. The process of the
immutability of prices stipulated between a contractor and a landowner. negotiation has arrived at the price difference and quantities. The Tribunal
Article 1724 of the Civil Code reads: finds the process in arriving at the Joint Manifestation, a fair determination of
the unit price increase. This holding will render the discussions on Exhibit
Article 1724. The contractor who undertakes to build a structure or any other JJJJ, and the demand of the burden of proof of the Respondent superfluous.
work for a stipulated price, in conformity with plans and specifications agreed [154]

Page 28 of 46
This absurdity is so patent that the Court of Appeals was still compelled to services to subcontractors whose functions were also necessarily prolonged.
uphold awards premised on ACI's admissions, even as it reversed the CIAC ACI's frivolity on the acquisition of elevators, escalators, chillers, generator
Arbitral Tribunal decision on the primordial issue of the characterization of the sets, indoor substations, cooling towers, pumps, and tanlcs also vindicates
contractual arrangement between CECON and ACI: compensation for the works that remained under CECON's account. ACI's
authorship of the causes of delay supports time extensions favoring CECON
As stated, the contract between [ACI] and CECON has not been amended or and, conversely, discredits liquidated damages benefitting ACI.
revised. The Arbitral Tribunal had no power to amend the contract to provide
that there be allowed price and/or cost adjustment removing the express This Court upholds the Arbitral Tribunal's awards on each of the items due to
stipulation that the Project is for a lump sum or fixed price consideration. CECON, as well as on its findings relating to CECON's countervailing
Accordingly, this Court removes the award for additional costs spent by liabilities.
CECON on cement and formworks due to price increases or removing the
award for these items in the total amount of PhP5,598,338.20. Since CECON In fulfilling its task, the CIAC Arbitral Tribunal was equipped with its technical
is not entitled to its claim for price increase, it is likewise not entitled to the competence, adhered to the rigors demanded by the CIAC Rules of
award of the interest rate of 6% per annum. Procedure, and was endowed with the experience of exclusively presiding
over 19 months of arbitral proceedings, examining object and documentary
With regard however to the additional costs for the rebars due to price evidence, and probing witnesses.
increases. this Court finds that CECON is entitled to the amount of
PhP10,266,628.00 representing the additional costs spent by CECON for VI.B. Within the CIAC Arbitral Tribunal's technical competence was its
rebars due to price increases, notwithstanding the Arbitral Tribunal's excess reference to prevailing industry practices, a much-bewailed point by ACI.
of jurisdiction in amending the contract between the parties because [ACI] [156] This reference was made not only desirable but even necessary by the
and CECON had in fact agreed that CECON was entitled to such an amount absence of definitive governing instruments. Moreover, this reference was
and that [ACI] would pay the same. This agreement was made in the parties' made feasible by the CIAC Arbitral Tribunars inherent expertise in the
Joint Manifestation of Compliance dated March 30, 2004 which they filed with construction industry.
th Arbitral Tribunal ("Joint Manifestation").
This reference was not only borne by practical contingencies and buttressed
No extraordinary technical or legal proficiency is required to see that it would by recognized proficiency, it was also sanctioned by the statutory framework
be the height of absurdity and injustice to insist on the payment of an amount of contractual interpretation within which the CIAC Arbitral Tribunal operated.
the consideration of which has been reduced to a distant memory. ACI's Thus, the following principles governed the interpretation of the change
invocation of Article 1724 is useless as the premises for its application are orders, requests, and other communications, which had effectively been
absent. ACI's position is an invitation for this Court to lend its imprimatur to surrogates of a single definite instrument executed by the parties.
unjust enrichment enabled by the gradual wilting of what should have been a
reliable contractual relation. Basic decency impels this Court to not give in to From the Civil Code:
ACI's advances and instead sustain the CIAC Arbitral Tribunal's conclusion
that the amount due to CECON has become susceptible to reasonable Article 1375. Words which may have different significations shall be
adjustment. understood in that which is most in keeping with the nature and object of the
contract.
VI. The Arbitral Tribunal's award must be reinstated.
Article 1376. The usage or custom of the place shall be borne in mind in the
VI.A. With the undoing of the foundation for the Court of Appeal's fallacious, interpretation of the ambiguities of a contract, and shall fill the omission of
circular reasoning, its monetary awards must also necessarily give way to the stipulations which are ordinarily established.
reinstatement of the CIAC Arbitral Tribunal's awards.
From the Revised Rules on Evidence, the following have been made
The inevitable changes borne by ACI's own trifling actions justify, as a applicable even outside regular litigation by Article 1379 of the Civil Code:
consequence, compensation for cost adjustments and the ensuing change
orders, additional overhead costs for the period of extension, extended Section 14. Peculiar signification of terms. - The terms of a writing are
coverage for contractor's all-risk insurance, and attendance fees for auxiliary presumed to have been used in their primary and general acceptation, but

Page 29 of 46
evidence is admissible to show that they have a local, technical, or otherwise lawful competencies. This enabled them to come up with an otherwise
peculiar signification, and were so used and understood in the particular definite and reliable award on the controversy before it.
instance, in which case the agreement must be construed accordingly.
Inventive, hair-splitting recitals of the supposed imperfections in the CIAC
Section 19. Interpretation according to usage. - An instrument may be Arbitral Tribunal's execution of its tasks will not compel this Court to supplant
construed according to usage, in order to determine its true character.[157] itself as a fact-finding, technical expert.
(Emphasis supplied)
ACI's refutations on each of the specific items claimed by CECON and its
Equally availing is the following principle. This is especially tlue of the counterclaims of sums call for the point by point appraisal of work, progress,
remuneration due to CECON, considering that stipulations for remuneration defects and rectifications, and delays and their causes. They are, in truth,
are devised for the benefit of the person rendering the service: invitations for this Court to engage in its own audit of works and
corresponding financial consequences. In the alternative, its refutations insist
Section 17. Of two constn.1ctions, which preferred. - When the terms of an on the application of rates, schedules, and other stipulations in the same
agreement have been intended in a different sense by the different parties to tender documents, copies of which ACI never adduced and the efficacy of
it, that sense is to prevail against either party in which he supposed the other which this Court has previously discussed to be, at best, doubtful.
understood it, and when different constructions of a provision are otherwise
equally proper, that is to be taken which is the most favorable to the party in This Court now rectifies the error made by the Court of Appeals. By this
whose favor the provision was made.[158] rectification, this Court does not open the doors to an inordinate and
overzealous display of this Court's authority as a final arbiter.
VI.C. In appraising the CIAC Arbitral Tribunal's awards, it is not the province
of the present Rule 45 Petition to supplant this Court's wisdom for the Without a showing of any of the exceptional circumstances justifying factual
inherent technical competence of and the insights drawn by the CIAC Arbitral review, it is neither this Court's business nor in this Court's competence to
Tribunal throughout the protracted proceedings before it. The CIAC Arbitral pontificate on technical matters. These include things such as fluctuations in
Tribunal perused each of the parties' voluminous pieces of evidence.[159] Its prices of materials from 2002 to 2004, the architectural and engineering
members personally heard, observed, tested, and propounded questions to consequences - with their ensuing financial effects - of shifting from
each of the witnesses. Having been constituted solely and precisely for the reinforced concrete to structural steel, the feasibility of rectification works for
purpose of resolving the dispute between ACI and CECON for 19 months, defective installations and fixtures, the viability of a given schedule of rates
the CIAC Arbitral Tribunal devoted itself to no other task than resolving that as against another, the audit of changes for every schematic drawing as
controversy. This Court has the benefit neither of the CIAC Arbitral Tribunal's revised by construction drawings, the proper mechanism for examining
technical competence nor of its irreplaceable experience of hearing the case, discolored and mismatched tiles, the minutiae of installing G.I. sheets and
scrutinizing every piece of evidence, and probing the witnesses. sealing cracks with epoxy sealants, or even unpaid sums for garbage
collection.
True, the inhibition that impels this Court admits of exceptions enabling it to
embark on its own factual inquiry. Yet, none of these exceptions, which are The CIAC Arbitral Tribunal acted in keeping with the law, its competence,
all anchored on considerations of the CIAC Arbitral Tribunal's integrity and and the adduced evidence; thus, this Court upholds and reinstates the CIAC
not merely on mistake, doubt, or conflict, is availing. Arbitral Tribunal's monetary awards.

This Court finds no basis for casting aspersions on the integrity of the CIAC VII. It does not escape this Court's attention that this controversy has
Arbitral TribunaL There does not appear to have been an undisclosed dragged on for more than 13 years since CECON initially sought to avail of
disqualification for any of its three (3) members or proof of any prejudicial arbitration.
misdemeanor. There is nothing to sustain an allegation that the parties'
voluntarily selected arbitrators were conupt, fraudulent, manifestly partial, or The CIAC Arbitral Tribunal noted that ACI consumed a total of 840 days filing
otherwise abusive. From all indications, it appears that the CIAC Arbitral several motions and manifestations, including at least eight (8) posturings at
Tribunal extended every possible opportunity for each of the parties to not pursuing settlement.[160] It added, however, that ACI repeatedly failed to
only plead their case but also to arrive at a mutually beneficial settlement. respond to CECON's claims during meetings thereby constraining CECON to
This Court has ruled, precisely, that the arbitrators acted in keeping with their file motions to proceed after repeatedly being dangled hope of an early

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resolution.[161] It appeared that ACI was more interested in buying time than 600 of which were not delivered until well after the project's intended
in effecting a consummate voluntary settlement. completion date.

The CIAC Arbitral Tribunal October 25, 2006 Decision should have long This Court commenced its discussion by underscoring that arbitration
brought this matter to an end. This Court does not fault ACI for availing of primarily serves the need of expeditious dispute resolution. This interest
remedies. Yet, this Court also notes that even in proceedings outside of the takes on an even greater urgency in the context of construction projects and
CIAC Arbitral Tribunal, ACI seems to not have been sufficiently conscientious the national interest so intimately tied with them. ACI's actions have so
of time. bogged down its contractor. Nearing 13 years after the Gateway Mall's
completion, its contractor has yet to be fully and properly compensated. Not
In this Court alone, ACI sought extensions to file its Comment no less than only have ACI's actions begotten this dispute, they have hyper-extended
five (5) times.[162] It sought several other extensions in the filing of its arbitration proceedings and dragged courts into the controversy. The delays
Memorandum.[163] have virtually bastardized the hopes at expeditious and effective dispute
resolution which are supposedly the hallmarks of arbitration proceedings.
It also does not escape this Court's attention that while ACI's arguments have
perennially pleaded the supposed primacy and itnmutability of stipulations For these, in addition to sustaining each of the awards due to CECON arising
originally articulated in the tender documents, it never bothered to annex any from the facets of the project, this Court also sustains the CIAC Arbitral
of these documents either to its Comment or to its Memorandum. Without Tribunal's award to CECON of arbitration costs. Further, this Court imposes
these and other supporting materials, this Court is left in the uneasy upon respondent Araneta Corporation, Inc. the burden of bearing the costs of
predicament of merely relying on ACI's self-stated assertions and without what have mutated into a full-fledged litigation before this Court and the
means of verifying even the syntax of its citations. Court of Appeals.

While presumptions of good faith may be indulged, the repercussions of WHEREFORE, the Petition is GRANTED. The assailed April 28, 2008
ACI's vacillation cannot be denied. Decision and July 1, 2010 Amended Decision of the Court of Appeals in CA-
G.R. SP No. 96834 are REVERSED and SET ASIDE. The Construction
Even if this Court were to ignore the delays borne by ACI's procedural Industry Arbitration Commission Arbitral Tribunal October 25, 2006 Decision
posturing, this Court is compelled to hearken to ACI's original faults. These in CIAC Case No. 01-2004 is REINSTATED.
are, after all, what begot these proceedings. These are the same original
faults which so exasperated CECON; it was left with no recourse but to seek Legal interest at the rate of six percent (6%) per annum is imposed on the
the intervention of CIAC. award from the finality of this Decision until its full satisfaction.

These faults began as soon as bidders responded to ACI's invitation. In Costs against respondent.
CECON's case, its communicated time for the validity of its offer lapsed
without confinnation from ACI. ACI only verbally responded and only after SO ORDERED.
CECON's communicated timeframe. It told CECON to commence excavation
works but failed to completely deliver the project site until five (5) months
later. It engaged in protracted negotiations, never confirming acceptance until
the tenth month, after bidders had submitted their offers. By then, ACI's
supposed acceptance could not even identify CECON's most recent quoted
price. It undertook to process and deliver formal documents, yet this
controversy already reached this Court and not a single page of those
documents has seen the light of day. It has repeatedly added and taken from
CECONs scope of works but vigorously opposed adjustments that should
have at least been given reasonable consideration, only to admit and partially
stipulate on thern. In taking upon itself the task of designing, it took its time in
delivering as many as 1,675 construction drawings to CECON, more than

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 G.R. No. 192948, December 07, 2016 ARTICLE 1359. When, there having been a meeting of the minds of the
parties to a contract, their true intention is not expressed in the instrument
B.F. CORPORATION AND HONORIO PINEDA, Petitioners, v. FORM-EZE purporting to embody the agreement, by reason of mistake, fraud, inequitable
SYSTEMS, INC., Respondent. conduct or accident, one of the parties may ask for the reformation of the
instrument to the end that such true intention may be expressed. x x x x
Construction Contracts; Cases in which Factual Finding of Reformation is a remedy in equity, whereby a written instrument is made or
Construction Arbitrators May be Reviewed by the Court.—Factual construed so as to express or conform to the real intention of the parties,
findings of construction arbitrators may be reviewed by the Court in cases where some error or mistake has been committed. In granting reformation,
where: 1) the award was procured by corruption, fraud or other undue the remedy in equity is not making a new contract for the parties, but
means; (2) there was evident partiality or corruption of the arbitrators or any establishing and perpetuating the real contract between the parties which,
of them; (3) the arbitrators were guilty of misconduct in refusing to hear under the technical rules of law, could not be enforced but for such
evidence pertinent and material to the controversy; (4) one or more of the reformation. In order that an action for reformation of instrument may
arbitrators were disqualified to act as such under Section nine of Republic prosper, the following requisites must concur: (1) there must have been a
Act (R.A.) No. 876 and willfully refrained from disclosing such meeting of the minds of the parties to the contract; (2) the instrument does
disqualifications or of any other misbehavior by which the rights of any party not express the true intention of the parties; and (3) the failure of the
have been materially prejudiced; (5) the arbitrators exceeded their powers, or instrument to express the true intention of the parties is due to mistake, fraud,
so imperfectly executed them, that a mutual, final and definite award upon inequitable conduct or accident.
the subject matter submitted to them was not made; (6) when there is a very
clear showing of grave abuse of discretion resulting in lack or loss of Construction Industry Arbitration Commission; Jurisdiction;
jurisdiction as when a party was deprived of a fair opportunity to present its Section 4 of Executive Order (EO) No. 1008 vests jurisdiction on
position before the Arbitral Tribunal or when an award is obtained through Construction Industry Arbitration Commission (CIAC) over disputes
fraud or the corruption of arbitrators; (7) when the findings of the Court of arising from, or connected with, contracts entered into by parties
Appeals are contrary to those of the CIAC, and (8) when a party is deprived involved in construction in the Philippines, whether the dispute arises
of administrative due process. before or after the completion of the contract, or after the abandonment
or breach thereof.—Section 4 of Executive Order No. 1008 vests jurisdiction
Civil Law; Unjust Enrichment; The principle of unjust enrichment on CIAC over disputes disputes arising from, or connected with, contracts
essentially contemplates payment when there is no duty to pay, and the entered into by parties involved in construction in the Philippines, whether the
person who receives the payment has no right to receive it.—To award dispute arises before or after the completion of the contract, or after the
the full contract price to Form-Eze in Contract No. 1 is tantamount to unjust abandonment or breach thereof. Moreover, the party involved must agree to
enrichment. There is unjust enrichment under Article 22 of the Civil Code submit to voluntary arbitration. In other words, anyone who is not a party to
when (1) a person is unjustly benefited, and (2) such benefit is derived at the the contract in his personal capacity is not subject to the jurisdiction of the
expense of or with damages to another. The principle of unjust enrichment CIAC. In this case, Pineda signed the challenged contracts in his capacity as
essentially contemplates payment when there is no duty to pay, and the President of BFC. There is no indication that he voluntarily submitted himself
person who receives the payment has no right to receive it. By requiring BFC as a party to the arbitration case. In fact, he has been consistently contesting
to pay the full contract price when it only supplied deckforms which covered his inclusion as a respondent in the CIAC proceedings. CIAC however
only 5,149.85 contact square meters of formworks, the CIAC Arbitral Tribunal considered Pineda as a joint tortfeasor, thus justifying his joinder as a
is essentially unjustly giving unwarranted benefit to Form-Eze by allowing it to codefendant.
earn more than it legally and contractually deserved. It is also worth
mentioning that Form-Eze had in fact only been claiming for the contact area Attorney’s Fees; Under Article 2208 of the Civil Code, attorney’s
where its equipment was used. fees may, among others, be recovered where defendant acted in gross
and evident bad faith in refusing to satisfy the plaintiff’s plainly valid,
Same; Contracts; Reformation of Contracts; Reformation is a just and demandable claim.—Under Article 2208 of the Civil Code,
remedy in equity, whereby a written instrument is made or construed attorney’s fees may, among others, be recovered where defendant acted in
so as to express or conform to the real intention of the parties, where gross and evident bad faith in refusing to satisfy the plaintiff’s plainly valid,
some error or mistake has been committed.—An action for reform a just and demandable claim. We observe that in filing the complaint against
contract is grounded on Article 1359 of the New Civil Code which provides: BFC, Form-Eze was merely seeking payment for its service under the

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contract. BFC had admitted to its obligation. The problem lies only on the 2. Furnish all plywood and lumber as required in the formwork
amount to be paid. This is not tantamount to bad faith. operation as no cost to Form-Eze;
3. Purchase materials for the formwork as requested by Form-Eze. The
DECISION
direct cost of materials shall be deducted from the contract and the
PEREZ, J.:
balance paid to Form-Eze; and
This petition for review assails the 15 January 2010 Decision1 and 13 July 4. Responsible for the freight of the equipment to and fro the Marikina
2010 Resolution2 of the Court of Appeals in CA-G.R. SP No. 102007 which jobsite and the Form-Eze warehouse in Cainta, Rizal.
affirmed the Final Award rendered by the Construction Industry Arbitration
Commission (CIAC) Arbitral Tribunal on 7 December 2007. Work Specifications

FACTUAL ANTECEDENTS The amount of hardware to be furnished is sufficient to provide 7,000 contact
square meters of formwork.
Petitioner B.F. Corporation (BFC) is a corporation engaged in general
engineering and civil works construction. Petitioner Honorio H. Pineda Contract Price
(Pineda) is the President of BFC. Respondent Form-Eze Systems Inc. (Form-
Eze) is a corporation engaged in highway and street construction. Total contract amount for the equipment: 126,000 contact square meters
(equipment to be used) x P225.00/contact square meter (cost per use of the
On 29 August 2006, SM Prime Holdings, Inc. awarded the contract for hardware for forming the elevated beam and slab)= P28,350,000.00.
general construction of the SM City-Marikina mall (the Project) to BFC
whereby the latter undertook to supply materials, labor, tools, equipment and Terms of Payment
supervision for the complete construction of the Project.3 In turn, BFC
engaged Form-Eze for the lease of formwork system and related equipment 1. 15% down payment or P4,252,500.00 paid to Form-Eze on or before
for and needed by the Project. Accordingly, five (5) contracts and two (2) pick up of equipment;
letter-agreements were executed by the BFC, represented by its President
2. When concrete is placed on the slab forms, the equipment rental per
Pineda, and Form-Eze, represented by its President, James W. Franklin.
These contracts and their salient provisions are provided in the following contact square meter is due and payable to Form-Eze and shall be
table: paid on the first day of the following month;
3. All equipment purchased by BFC as requested by Form-Eze shall be
CONTRACT NO. 1: Contract for the Lease of the Equipment for the Beam prorated and deducted equally in the first 4-month duration of the
and Slab Hardware for the Formwork on SM Marikina Mall Project dated 20 equipment lease; and
December 20064 4. Monthly progress payments for the equipment lease shall be made
timely.
Obligations of Form-Eze
CONTRACT NO. 2: Contract for Stripping and Moving Form-Eze Systems
1. Furnish all hardware required in the formwork system for the poured
Inc. Equipment from Location to Location on SM Marikina Mall Project dated
in place beam and slab concrete decks excluding the scaffoldings 20 December 2006 5
and accessories required to support the system; and
2. Provide consumable beam ties and steel accessories needed to Obligations of Form-Eze
maintain the rigidity and alignment of the plywood formed surfaces.
1. Furnish forklift for the movement of the deck forms and related
Obligations of BFC hardware of the forming system from location to location;
2. Strip all formwork from under the poured concrete slab and beam
1. Furnish all scaffoldings as required to support the system at no ,cost deck. Move all equipment to the next location where it will be reset
to Form-Eze; by BFC; and

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 3. Assist BFC in setting the deck forms to the proper grade and Obligations of BFC
locations provided that BFC has laid out the grid lines as needed for
placing the scaffoldings under the deck forms and provided the 1. Furnish all hoisting and moving of the columns;
scaffoldings is readily available for placement under the deck forms. 2. Responsible for installation of the rebar and placement of the
concrete;
Obligations of BFC 3. Furnish labor as required by Form-Eze for forming columns and will
deduct fro Form-Eze P60.00 per man-hour for each carpenters for
1. Furnish additional hoisting; and the column framework; and
2. Provide all labor requested by Form-Eze and deducted from the 4. Responsible for all column grid lay-out and establishing elevations on
contract at P60.00 per carpenter man-hour. the columns

Contract Price Terms of Payment

Total contract amount for moving equipment: 126,000 x P50.00/contact 1. Total Contract Amount: 9,100 contact square meters of formwork x
square meter (cost for stripping and movement of the equipment, excluding P355.00/contact square meter= P3,230,500.00;
cost of resetting to grade, cleaning plywood surfaces and applying release 2. Downpayment of P484,575.00 (15%) on or before pick up of
agent) P6,300,000.00.
equipment;
Terms of Payment 3. BFC agrees to purchase all materials for the formwork as required by
Form-Eze and the direct cost of those materials will be deducted
1. 15% down payment or P945,000.00 paid to Form-Eze on or before from this contract and the balance paid to Form-Eze; and
pick up of equipment; and 4. When columns are poured and stripped, P355.00 per contact square
2. Monthly progress billing will coincide with the contact square meters meter is due and payable at that time. Progress payments will be
formed with the Form-Eze equipment. made for the work completed in a particular month and paid on the
first day of the following month. Any materials or equipment
CONTRACT NO. 3: Contract for Column Formwork on the SM Marikina Mall purchased by BFC at the request of Form-Eze shall be deducted
Project dated 20 December 20066 from this contract and prorated equally over a 4-month period.

Obligations of Form-Eze CONTRACT NO. 4: Contract for the Lease of the Heavy Duty Galvanized
Scaffold Frames and Related Accessories on SM Marikina Mall Project dated
1. Furnish sufficient number of built up column forms as required to 29 January 20077
complete 6 poured in place full height concrete columns per day
provided the installation of the rebar and the placement of the Obligations of BFC
concrete can maintain that schedule of performance;
2. Provide supervision for the column formwork operation; 1. Manufacture heavy duty galvanized scaffoldings and certain
3. Responsible for bracing the columns to maintain them plumb when accessories for Form-Eze. The scaffoldings and accessories will be
poured; manufactured exactly as per the drawings and samples given to BFC
4. Correct any defects in the poured column due to failure in the by Form-Eze, provided the equipment produced is of excellent
formwork. (Not responsible for air entrapment or aggregate quality and to the exact specification specified by Form-Eze;
separation caused by improper placement or improper vibration of 2. The agreement is for 1,500 pieces of heavy duty galvanized 6-ft
the concrete; and frames and related accessories (3,000 pcs of 14-inch adjustable u-
5. Furnish chamfer and form release agent heads and 3,000 pcs heavy duty base plates); and

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 3. BFC will deduct P6,352,500.00 from Form-Eze equipment leased 3) Form-Eze will send to the jobsite all 18-inch and 24-inch adjustable
contract (all equipment must be in good condition and turned over to u-heads available in its current stock in order to start forming the
Form-Eze at the end of project). Form-Eze will own the equipment. project while BFC is fabricating the 14-innch adjustable u-heads.
When the 3.000 pieces 14-inch u-heads are completed and are on
Obligations of Form-Eze the jobsite, Form-Eze will take back the 18-inch and 24-inch
adjustable u-heads that were temporarily in use at the jobsite.
1. Form-Eze will credit BFC with P4,235.00 per frame and related 4) The creditable amount for the purchase of the 6-foot heavy duty
accessories; and galvanized scaffolding and related accessories is changed to
2. Form-Eze will accept all frames in good condition up to a maximum P4,235.00 per 6-foot heavy duty galvanized frames, adjustable u-
of 1,500 frames and related accessories. heads and heavy duty base plate.
3. Agreement is contingent upon parties entering into an exclusive
licensing agreement with BFC for the manufacture of Form-Eze On 30 March 2007, Form-Eze filed a Request for Arbitration11 before the
equipment. CIAC. In its Complaint, Form-Eze alleged that BFC has an unpaid obligation
amounting to P9,189,024.58; that BFC wanted to re-negotiate the equipment
CONTRACT NO. 5: Contract for the Purchase and Lease of the Heavy Duty leases; and that it was not complying with the contractual and supplemental
Galvanized X-Bracing on SM Marikina Mall Project dated 29 January 20078 agreements in effect. Form-Eze prayed for the following relief:

Obligations of BFC 1) [For BFC] to pay the current monthly equipment rentals;
2) Provisions made to guarantee the earned monthly equipment leased
1. Manufacture heavy duty galvanized x-bracing. amounts are paid timely;
3) To legislate provisions to ensure the lease contracts are not
Obligations of Form-Eze breached during the construction of the SM Marikina Mall;
4) Provisions made to guarantee the performance of [BFC] for the
1. Credit BFC with P400.00 per x-brace. If the x-bracing is not
manufacturing of the shoring equipment purchased by Form-Eze
manufactured exactly as specified by Form-Eze, credit is P300.00
from BFC;
per x-brace.
5) Provisions made to guarantee the return of all Form-Eze equipment
when the concrete structure is completed and all lost and damaged
Agreement is contingent upon parties entering into an exclusive licensing
agreement for the manufacturing of Form-Eze equipment. equipment has been paid for by [BFC]; and
6) All cost related to Arbitration.
MEMORANDUM OF AGREEMENT dated 5 January 20079
In its Amended Answer with Counterclaim, BFC sought for reformation of
BFC will manufacture Form-Eze equipment and will sell exclusively to Form- Contract #1 to incorporate a provision that BFC shall deduct from said billing
Eze. the cost of labor supplied by it for the fabrication and assembly of the forming
system and for the stripping, cleaning, resetting thereof at the rate of P60.00
LETTER-AGREEMENT dated 5 January 2007 per man-hour. BFC also demanded the refund of P5,773,440.00 as expenses
for the manufacture of additional hardware to complete the 7,000 square
Changes to Contract No. 4 meters of formwork required in Contract #1. BFC explained that Form-Eze
had only furnished 4,682.4 square meters of formwork.13
1) The 18-inch adjustable u-head will be changed to a 14-inch
adjustable u-head. The CIAC appointed a 3-member Arbitral Tribunal (CIAC Arbitral Tribunal),
composed of Atty. Custodio O. Parlade, Atty. Alfredo F. Tadiar and Engineer
2) The threading of the heavy duty screw will be accomplished in
Romeo C. David, to adjudicate Form-Eze's claims.
segments and then machined.

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Under the Terms of Reference, the parties made the following admissions: Cost of labor, helmet & expenses for x-bracing for the P 812,791.09
assembly of the form
1) The existence of five contracts, a memorandum of agreement and a system under Contract #1
supplemental contract. Cost of stripping, petroleum, oil, & helmet under Contract 1,391,086.02
2) BFC renegotiated Contract #1 but it did not result in a separate #2
written contract. Attorney's Fees 300,000.00
Total Counterclaims P2,503,877.11
3) Under Contract #1, BFC is willing and ready to pay Form-Eze the
TOTAL SUM IN DISPUTE P46,867,184.55
amount of P3,515,003.59, which amount shall be deducted from the
amount of the latter's claim.
4) Under Contract BFC is willing and ready to pay Form-Eze the The total arbitration fees amounted to P616,393.73.
amount of P675,788.97, which amount shall be deducted from the
amount of the latter's claim. CIAC Arbitral Tribunal was tasked to resolve the following issues, to wit:
5) BFC admits that it has the obligation to return to Form-Eze
equipment furnished them under Contracts #1, 2, and 3, and all 1) Is Claimant entitled to its total claim of P34,284,996.41 representing
heavy duty galvanized scaffold frames and related accessories, the alleged arrear on equipment rental under Contract #1?
heavy duty galvanized x-bracing and adjustable U-heads and base 2) Is Claimant entitled to its claim of P5,624,211.03 representing the
plates fabricated and manufactured by BFC under Contracts #4, 5 alleged arrears under Contract #2?
and letters dated 5 January 2007. 3) Is Claimant entitled to its claim of P3,230,500.00 representing the
alleged arrears under Contract #3?
The claims15 of the parties are summarized, as follow: 4) Is Claimant entitled to its claim of P1,374,408.00 representing the
rental fees under Letter dated 5 January 2007?
FORM-EZE'S CLAIMS As of 7/19/2007 From 7/20/2007 to 5) Is Claimant entitled to its claim for the reformation of the subject
end of contract based Contracts to include the following:
on agreed minimum a) Contract #1 - Provisions to guarantee the earned monthly
contact sq.m. of
equipment leased amounts are paid timely;
126,000
Arrears on Contract P26,310,476.29 P11,489,523.71 b) Contract #1 - Provision to ensure that the lease contracts are not
No.1 - 3,515,003.59 breached during the construction of the SM Marikina Mall;
22,795,472.70 c) Contracts #4 and 5 - Provision to guarantee the performance of
Arrears on Contract No. 4,771,723.63 1,528,276. 37 [BFC] for the manufacturing of the shoring equipment purchased
2 -675,788.97 by Form-Eze from BF Corp.;
4,095,934.66 d) Contracts#1, 2, 3, 4 and 5 -Provision for [BFC] to pay for the lost
Arrears on Contract 2,099,825.00 1,130,675.00 and damaged equipment furnished them by the [Form-Eze]; and
No.3
e) Contract #1 - Provision in the Contract to include the P75 per
Arrears on Letter dated 740,600.00 483,000.00
1/5/07 contact sq.m. for labor guarantee.
  P29,731,832.36 P14,631,475.08 6) Is [BFC] #1 entitled to the reformation of Contract #1 to include a
Attorney's Fees   300,000.00____ provision that [BFC] #1 shall deduct from [Form-Eze's] billing the cost
TOTAL SUM IN   P44,663,307.44 of labor, helmet and expenses for x-bracing supplied by it for the
DISPUTE assembly of the form system amounting to P812,791.09 , to deduct
from the billing under Contract #2 the cost of labor for the stripping
thereof, the costs of petroleum, oil and lubricant and helmet of the
BFC's COUNTERCLAIM said laborers up to the end of the contract in the sum of

Page 36 of 46
 P1,391,086.02 and from the billing under Contract #3, the cost of Letter Agreement of January 5, 2007 560,000.00
labor for the installation and forming of the built up column forms   ____________
from June 19, 2007 up to the end of the project in the sum of GRAND TOTAL P28,517,251.67
P273,240.00?
7) Is it proper to include Mr. Honorio Pineda as Respondent No. 2?
The Tribunal further awards in favor of [Form-Eze] and against [BFC] and
8) Does the Arbitral Tribunal have the jurisdiction to award claims that
[Pineda] who are ordered, jointly and severally to pay [Form Eze] P300,00.00
accrued after the filing of the Request for Arbitration or does the as attorney's fees, and to indemnify [Form-Eze's] cost of arbitration paid to
Claimant have a cause of action for claims that accrued during the CIAC.
same period?
9) Who between the parties is entitled to attorney's fees? The Tribunal likewise disposes of the remaining issues as follows:
10) Who between the parties should bear the arbitration costs?17
a) The claims under Issues No. 5 and 6 for reformation of Contracts No
FINAL AWARD BY CIAC 1, 2, 3, 4 and 5 are denied for lack of merit.
b) The inclusion of Mr. Honorio Pineda in the Complaint as additional
On 7 December 2007, the CIAC Arbitral Tribunal rendered a Final Award in respondent is proper.
favor of Form-Eze. The dispositive portion reads: c) The Tribunal has jurisdiction over the claims of [Form-Eze] and finds
that the Complaint states a cause of action as to claims that accrued
WHEREFORE, award is hereby made in favor of Claimant and against after the filing of the Complaint.
[BFC], ordering the latter to pay the former the following amounts:
d) All other claims and counterclaims submitted pursuant to the
a) On Contracts No. 1 P28,350,000.00 definition of issues in the Terms of Reference, not otherwise
Less: Payments already made 7,700,000.00 disposed of or resolved above, are dismissed for lack of merit. All
  _____________ claims and counterclaims peripherally discussed in these
TOTAL   P20,650,000.00 proceedings which are outside the scope of the definition of issues in
  the Terms of Reference are likewise outside the scope of this Final
b) On Contract No. 2 P 6,300,000.00 Award.
Less: Payments already made 990,000.00 e) The net award in favor of [Form-Eze] amounting to P28,517,251.67
Less: Cost of labor 60,000.00 shall earn interest at the rate of 6% per annum fro the date of this
  ____________
Final Award, and 12% from the date the Final Award becomes final
TOTAL   P 5,250,000.00
and executory until the same is fully paid.18
 
c) On Contract No.3 P 2,153,166.67
Less: cost of labor 96,915.00 BFC filed a Motion for Correction of the Final Award. Form-Eze asserted that
  ____________ the calculations made on the total quantity of deckforms supplied to be used
under Contract No. 1 is erroneous because the quantity of the accessories
  P2,056,751.67
that were delivered together with the loose truss chords and assembled
 
trusses that were backloaded were ignored in the computation. BFC
On Letter Agreement of January 5, 2008 to December 8, 2007
explained that the hardware supplied must be assembled first into deckforms
  P560,000.00 since what is actually rented under Contract No. 1 are the deckforms, and not
  the hardware, thus:
IN SUM THE FOLLOWING AWARDS ARE MADE:
  Evidently, in the computation thereof, the total quantity of the accessories
Contract No. 1 P 20,650,000.00 that were delivered together with the said loose truss chords and assembled
Contract No. 2 5,250,000.00 trusses, both of which are shown in the same delivery receipts, and the total
Contract No. 3 2,056,751.67

Page 37 of 46
length of the loose truss chords and assembled trusses that were On the same ground, the minimum contact amount stipulated under Contract
backloaded, were not considered and totally ignored. No. 2 should also be proportionately reduced to Php 3,997,557.00, less
payment of Php 990,000.00 + cost of labor of Php60,000.00 = Php
Needless to state, these accessories, such as joist and beam hanger, just 2,947,557.00 as the net amount due the Claimant thereunder.
like the chords and the trusses, are component and indispensable parts of a
deckform without which it can not be completely assembled to be used for The CIAC Arbitral Tribunal denied the motion prompting BFC to file a petition
the purpose intended. In the case of a deckform 44 ft. in length, it will need, for review before the Court of Appeals.
for it to be completely assembled, 34 pieces of joists and 68 pieces of beam
hangers, as shown in the herewith attached Annex "A" hereof. While the case was pending before the Court of Appeals, Form-Eze filed a
Motion with Leave to Direct BFC to return pieces of equipment on 14 July
Therefore, to form 87 completely assembled deckforms of 44 ft. in length out 2009.
of/from the delivered chords and trusses, it will require 2,958 pieces of joist
and 5,916 pieces of beam hangers. On 15 January 2010, the Court of Appeals dismissed the petition for lack of
merit. The Court of Appeals heavily relied on factual findings of the CIAC
However, as show in Exhibits "C-9(5)", "C-9(11)", "C-9(15)", "C-9(18)", "C- Arbitral Tribunal.
9(21)", "C-9(25)", "C-9(27)", "C-9(30)", and "C-9(31)", only 2,512 pieces of
joists and in Exhibits "C-9(8)", "C-9(15)", "C-9(16)", "C- 9(18)", "C-9(21)", "C- THE PETITION
9(27)", "C-9(32)", "C-9(34)", "C-9(35)", "C-9(37)", "C-9(38)", "C-9(41)", "C-
9(35)", "C-9(38)", "C-9(40)", and "C-9(41)", only 3,626 pieces of beam BFC filed a motion for reconsideration but it was denied by the Court of
hangers, the very documents on which this Commission/Tribunal anchored Appeals in a Resolution dated 13 July 2010. Hence, the present petition.
its finding now sought to be corrected, were actually delivered by the BFC, in its Memorandum, raised the following issues for our resolution:
Claimant.
I. Whether or not the Court of Appeals committed a reversible error in
Accordingly, 87 deckforms of 44 ft. in length can not be completely affirming the CIAC's ruling that BFC is liable to pay rent to the [Form
assembled from the delivered chords and trusses because the quantity of the Eze] under Contract Nos. 1, 2, and 3 even for portions where the
delivered accessories is insufficient for the purpose. To be precise, only 53
latter's supplied formwork system were not used.
deckforms of 44ft. in length can be completely assembled out of the total
length of the chords and trusses with the use of 1,802 pieces of joists and II. Whether or not the Court of Appeals committed a reversible error in
3,604 pieces of beam hangers (with an excess of 22 pieces of beam affirming the CIAC's conclusion that [Form-Eze] was able to supply
hangers, 710 pieces of joist and 2,720 ft of chords and trusses) which are BFC with such quantity of deckforms sufficient to provide the
sufficient to provide only 4,441.73 contact sq.m. of formworks. stipulated 7,000 contact square meter of formworks as to entitle said
[Form-Eze] to the stipulated minimum contract rental price of
To therefore conclude that 87 deckforms of 44 ft. in length can be completely Php28,350,000.00 under Contract No. 1 and consequently to
assembled with the use of/out of 2,512 pieces of joists and 3,626 pieces of
Php6,300,000.00 under Contract No. 2, when, based on the quantity
beam hangers, is an evident miscalculation.
of the delivered accessories, which are component pm1s of deck form
In as much as only 3,626 pieces of beam hangers were actually delivered, system, but which the CIAC totally ignored, [Form-Eze] can only
which, when used with the delivered quantity of joists and length of the provide 4,441.73 contact square meters of formworks that will entitle it
delivered chords and trusses in completely assembling 53 deckforms of 44 ft. to only Php17,989,006.05 and Php3,997,557.00, respectively
in length, is sufficient to provide only 4,441.73 contact sq.m. of formworks, thereunder.
the minimum rental amount stipulated under Contract No. l should III. Whether or not the Court of Appeals committed reversible error in
correspondingly be reduced to only Php17,989,006.50, less payment of Php
affirming the CIAC's ruling that [Form-Eze] is entitled to twoOthirds of
7,700,000.00=Php 10,829,006.50 as the net amout of rent due the Claimant
thereunder, as shown in the herewith attached Annex "B" hereof. the stipulated minimum contract amount of Php3,230,500.00 or
Php2,153,666.67 under Contract No. 3, considering that CIAC did not
state the factual and legal basis of said ruling and despite its contrary

Page 38 of 46
 factual finding that [Form-Eze] failed to supply the minimum required the root cause of the dispute is the imprecision of the language and the
columnforms. incompleteness of the contracts and agreements, which were prepared
IV. Whether or not the Court of Appeals committed a reversible error in by the Respondents.20
affirming the CIAC's ruling against the reformation of Contract No. 1 to
include a provision that BFC shall furnish the labor needed by [Form- BFC prays for a modification of the Final Award to read:
Eze] in assembling the deckforms and that it shall deduct therefrom the
agreed cost of labor at Php60.00 per man hour, since it has been the a On Contract No. 1   Php17,989,006.50
.
true intention and real agreement of the parties thereto.
     
V. Whether or not the Court of Appeals committed a reversible error in
Less:  
affirming the CIAC when it did not deduct the following costs incurred by   Payments already made Php
BFC from the minimum contract amounts due: 7,700,000.00
  Payment made on Billing No. 1 487,828.05
(1) under Contract No. 1 for the cost of labor in assembling the deckforms,   Cost of labor in assembling 812,791.90 9,000,619.95
the cost of helmets of said laborers, and the expenses for x-bracing supplied Deckforms, expenses for x-
by BFC for the assembly of said forms in the total amount ofPhp812,791.09; Bracings and cost of helmet
SUBTOTAL Php 8,988,386.55
(2) under Contract No. 2 for the cost of labor in the stripping of said    
deckforms, the cost of petroleum, oil and lubricant and helmet up to the end b On Contract No. 2 Php 3,997,557.50
of the contract in the sum total of Php1,391,086.02; and .
   
(3) under Contract No. 3 for the cost of labor in installing and forming the built Less:
up columnforms from 25 June 2007 up to the end of the contract in the sum   Payments already made Php 990,000.00
total of Php273,240.00, when BFC is legally entitled thereto.   Costs of labor in stripping And 1,304,036.82 Php 2,294,036.82
moving of the same Deckforms,
VI. Whether or not the Court of Appeals committed a reversible error in petroleum, oil And lubricant and
affirming the CIAC in ordering BFC to pay rental fees under letter dated helmet
5 January 2007, covering the period from 25 June 2007 to 17 December SUBTOTAL Php 1,702,520.68
2007 in the sum total of Php560,000.00 at Php96,000.00 a month, when    
the acquisition cost of the pieces of u-heads and plates referred to c. On Contract No. 3   Php 538,417.87
therein is allegedly only Php96,000.00, and there is evidence presented
     
to show that these items were purchased at Php96,000.00 and there is
Less:    
on evidence to show the prevailing rate of rent for the same items.
  Cost of labor in the installation   96,915.00
and removal of the Columnforms
VI. Whether or not the Court of Appeals committed a reversible error in
SUBTOTAL   Php 441,502.87
affirming the CIAC in ruling that Respondent Pineda can be held as co-
       
respondent (in the arbitration case) when he is not a party to the d On Letter Agreement dated 5   Php 70,000.00
contracts and agreements involved in this case, as well as the . January 2007
arbitration agreement, and he did not voluntarily submit himself to e The award of attorney's fees be    
arbitration in this case. . deleted; and
VII. Whether or not the Court of Appeals committed a reversible f. The award for cost of arbitration
error when it ruled that the attorney's fees and cost of arbitration shall fees be deleted.
be for the account of Petitioners, considering that [Form-Eze] failed to
supply the minimum required equipment under the contracts and when
THE COURT'S RULING

Page 39 of 46
The Final Award of CIAC is subject to review by the Court of Appeals. Appeals are contrary to those of the CIAC, and (8) when a party is deprived
of administrative due process.
BFC first asserts that the Court of Appeals has the power and the duty to
review the factual findings made by CIAC and that the Court of Appeals While this rule, which limits the scope of the review of CIAC findings, applies
should not be bound by the factual findings of the construction arbitrators. only to the Supreme Court, the Court of Appeals nonetheless is not
precluded from reviewing findings of facts, it being a reviewer of facts. By
The case of Asian Construction and Dev't. Corp. v. Sumimoto Corporation22 conveniently adopting the CIAC's decision as its own and refusing to delve
summarized the development of the principle that the final award of CIAC into its factual findings, the Court of Appeals had effectively turned a blind
may be still be subject to judicial review, thus: eye to the evidentiary facts which should have been the basis for an
equitable and just award.
To begin, Executive Order No. (EO) 1008, which vests upon the CIAC
original and exclusive jurisdiction over disputes arising from, or connected While factual findings are not within the purview of a petition for review before
with, contracts entered into by parties involved in construction in the this Court, we take exception in this case on the ground of the appellate
Philippines, plainly states that the arbitral award "shall be final and court's refusal to delve into the findings of facts of the CIAC Arbitral Tribunal.
inappealable except on questions of law which shall be appealable to the
Court." Later, however, the Court, in Revised Administrative Circular (RAC) Under Contract No. 1, Form-Eze was not able to supply BFC with
No. 1-95, modified this rule, directing that the appeals from the arbitral award deckforms sufficient to provide 7,000 contact square meter of
of the CIAC be first brought to the CA on "questions of fact, law or mixed formworks.
questions of fact and law." This amendment was eventually transposed into
the present CIAC Revised Rules which direct that "a petition for review from The CIAC Arbitral Tribunal conducted its own study and came up with the
a final award may be taken by any of the parties within fifteen (15) days from following findings:
receipt thereof in accordance with the provisions of Rule 43 of the Rules of
Court." Notably, the current provision is in harmony with the Court's The receipted hardware deliveries made by [Form-Eze] show that the total
pronouncement that ''despite statutory provisions making the decisions of length of loose truss chords delivered was 11,912 lineal feet and the length of
certain administrative agencies 'final,' the Court still takes cognizance of the truss chords from the assembled trusses delivered was 2,052 lineal feet
petitions showing want of jurisdiction, grave abuse of discretion, violation of or a total available length of trusses of 13,964 lineal feet. By an iterative
due process, denial of substantial justice or erroneous interpretation of the process of selection and elimination, 175 units of 44' long trusses could be
law" and that, in particular, "voluntary arbitrators, by the nature of their assembled, equivalent to 87 deckforms of 44 feet in length. The assembled
functions, act in a quasi-judicial capacity, such that their decisions are within 87- 44' deckforms can provide 7,268.58 square meters of contact area,
the scope of judicial review."23 broken down as follows:

Factual findings of construction arbitrators may be reviewed by the Court in Contact Area (%)
cases where: 1) the award was procured by corruption, fraud or other undue      
means; (2) there was evident partiality or corruption of the arbitrators or any Interior & Near Column Slabs = 4,156.89 sq.m. (57.19%)
of them; (3) the arbitrators were guilty of misconduct in refusing to hear
Grid Beams (B-1) = 740.37 sq.m. (10.19%)
evidence pertinent and material to the controversy; (4) one or more of the
Interior Beams (B-2) = 1,663.20 sq.m. (22.88%)
arbitrators were disqualified to act as such under Section nine of Republic
Grid Girders (G-2) = 708.12 sq.m. (9.74%)
Act (R.A.) No. 876 and willfully refrained from disclosing such
disqualifications or of any other misbehavior by which the rights of any party Total = 7,268.58 sq.m. (100%)
have been materially prejudiced; (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; (6) when there is a very The resulting contact area of 7,628.58 sq.m. is 3.84% over the 7,000 sq.m.
clear showing of grave abuse of discretion resulting in lack or loss of requirement of the contract. But the former figure includes the contact area of
jurisdiction as when a party was deprived of a fair opportunity to present its girders which according to [petitioners] should not be included. As shown in
position before the Arbitral Tribunal or when an award is obtained through ANNEX "A", sheets 5 & 6 of 6, the contact area contributed by the girders is
fraud or the corruption of arbitrators; (7) when the findings of the Court of only 708.12 sq.m., and if this is deducted from the computed total contact
area, the remaining available contact area would be 6,560.46 sq.m. or

Page 40 of 46
93.72%. The fact, however, is that the non inclusion of the contact area BFC accuses the CIAC of coming up with its own biased computation of the
provided by the girders would be a violation of the letter-contract dated 8 contact area of the hardware supplied by Form-Eze under Contract No. 1.
February 2007, paragraph 9 of which provides that: "[Form-Eze] offered to According to BFC, Form-Eze had furnished only 53 completely assembled
install beam hangers and ledger angles in order to support the moment beam deckforms of 44 ft. in length which correspond to only 4,441.73 contact
from from column to column and thereby save BFC considerable labor and square meters of formworks, while CIAC found that Form-Eze had delivered
eliminate the use of BFC's light duty scaffolding underneath and beam. By truss chords equivalent to 87 deckforms which can provide 7,268.58 contact
doing that it will also speed up the forming operation and save BFC labor. square meters. BFC maintains that Contract No. 1 is clear that the object is
The only light duty scaffolding that BFC will be installing is that under the the supply of the complete deckform system and not unassembled hardware
girder which supports tremendous loading during the stressing of the beams such as loose truss chords. BFC adds that Form-Eze judicially admitted that
prior to it being stressed. By forming the girder in this manner, [Form-Eze] is it is only claiming equipment rentals for the areas that its equipment are
not involved in the tripping or resetting of the girder formwork. However, being used. BFC reiterates that based on the provisions of Contract No. 1 on
[Form-Eze] is has purchased and furnished considerable forming hardware the contemporaneous and subsequent acts of the parties, as well as
and consumables (tie rods, pvc sleeves, pvc cones, whaler clips and application of principles of contract interpretation, the inclusion of loose truss
brackets and wing-nuts) which are being used on girders and the beams. chords in the computation of the quantity of hardware supplied by Form-Eze
[Form-Eze] will give the ownership of this equipment to BFC and BFC will is an erroneous interpretation by CIAC. BFC also claims that the CIAC
buy all additional consumables and hardware (as needed) directly from wrongfully included the contact area of girders in the computation of the
Comer. In return, [Form-Eze] will include the contact square meters of sufficiency of equipment supplied by Form-Eze. BFC contends that the
formwork in the girders in its billing for both the equipment lease and for the girders are not part of the deckforms contemplated in Contract No. 1. BFC
moving contract." This letter-contract, Exhibit C-12, binds [BFC] to pay offers to compensate Form-Eze to the extent that its supplied deckforms
Claimant for the girder formworks contact area for both Contract No. 1 and were used under the principle of quantum meruit. BFC submits that 4,441.73
Contract No. 2. contact square meters or 63.45% of the 7,000 minimum contact area
required under Contract No. 1 is a reasonable computation.
Petitioners argued that the formwork of the girder (or large beam) is
independent of the deck form system and so should not be counted in favor We reverse the finding of the CIAC on this point as it is contrary to the
of [Form-Eze]. The Tribunal does not agree. How could the girder formwork evidence on record.
be considered independent from the deckform system when both sides of the
girder formworks are held stiff together by "tie rods, pvc sleeves (to make the We agree with BFC that the CIAC should not have included the unassembled
tie rods reusable), pvc cones, whaler clips and brackets and wing-nuts" truss chords in theoretically forming deckforms. We subscribe to BFC's
supplied by the [Form-Eze] and pressed between deckforms preparatory to submission that the object of Contract No. 1 is the deckforms and not just the
concrete pouring? The girder cannot be considered structurally independent hardware that make up the formwork. Contract No. 1, in itself, is clear that "F-
of the deck slabs because it is the requirement of design and the National E has agreed to furnish all hardware required in the formwork system for the
Building Code and its reference code the American Concrete Institute Code poured in place beam and slab concrete decks x x x." In fact, the equipment
(ACI Code) that the girders are to be poured monolithically with the slabs and rental is only due and payable to Form-Eze when the concrete is placed on
beams up to L/3 or 1/3 of the floor span (the point of infection and location of the slab forms, which provision is based on the premise that the hardware
the construction joint where the bending moment is the least or zero), as is had already been assembled into deckforms ready for concrete pouring.
clearly shown on the floor concrete pouring schedule plans. Moreover, the Proposed SM Marikina Mall Project Elevated Beam and Slab
Formwork dated 7 December 2006, which document has been admitted by
Conclusion of Tribunal the parties in the Term of Reference, provides that Form-Eze will furnish
sufficient deckforms to produce 1/2 floor each month on the project.
In view of the above, it is the finding of the Arbitral Tribunal that [Form-Eze]
had been able to furnish the amount of hardware that was sufficient to BFC had also explained to our satisfaction that loose truss chords alone
provide 7,000 contact square meters of formwork, all in accordance to could not be assembled into deckforms, to wit:
Contract No. 1. Thus, the remaining question to resolve is the area of the
project covered by the formwork equipment in contact square meters.25 To try to assemble truss chords alone into a deckform is like taking three two-
foot round pegs, trying to stand them upright, then balancing twelve-inch
round wooden slab on top, and expect it to be a stool capable of supporting a

Page 41 of 46
person. Joist, beam hangers and other component parts fix the truss chords requested by F-E and the direct cost of those materials will be deducted from
into place for the structural integrity of a deckform. In the case of a deckform this contract and the balance paid to [Form-Eze]." Form-Eze is giving
44 ft. in length, it will need, for it to be completely assembled, 34 pieces of ownership of the forming hardware and consumables which are used on the
joists and 68 pieces of beam hangers as illustrated in the Petitioner's Motion girders and beams to BFC. Instead of deducting the cost of these materials
for Correction of Final Award. from the contract, Form-Eze will instead include the contact square meters of
formwork in the girder in its billing for the lease of the deckforms.
Thus, assembling 87 deeckforms of 44 ft. in length would require 2,958
pieces of joist and 5,916 pieces of beam hangers to assemble such 87 44- As agreed upon by the parties, the 708.12 sq. m. contact area covered by the
foot deckforms. However, as show in the same documents that CIAC grid girders should be included in the billing. Taking into account this contact
anchored its theoretical findings, only 2,512 pieces of joists and only 3,626 area corresponding the grid girders and the 4,441.73 contact square meter
pieces of beam hangers were actually delivered by [Form- Eze]. assembled deckforms, the total contact area is only 5,149.85, which still falls
short of the 7,000 contact area requirement.
BFC's computation of the total contact area covered by the deckforms
furnished by Form-Eze is backed by delivery receipts of the joists and beam To award the full contract price to Form-Eze in Contract No. 1 is tantamount
hangers while CIAC's computation is more theoretical than it is actual. to unjust enrichment. There is unjust enrichment under Article 22 of the Civil
Code when (1) a person is unjustly benefited, and (2) such benefit is derived
The inclusion of the additional contact area of the grid girders in the at the expense of or with damages to another. The principle of unjust
calculation of the total contact area of the equipment supplied by Form-Eze enrichment essentially contemplates payment when there is no duty to pay,
under Contract No. 1, however, should be upheld. Paragraph 9 of the Letter and the person who receives the payment has no right to receive it.28 By
dated 8 February 2007, which was also admitted by the parties, clearly requiring BFC to pay the full contract price when it only supplied deckforms
provides: which covered only 5,149.85 contact square meters of formworks, the CIAC
Arbitral Tribunal is essentially unjustly giving unwarranted benefit to Form-
[Form-Eze] offered to install beam hangers and ledger angles in order to Eze by allowing it to earn more than it legally and contractually deserved. It is
support the moment beam fro column to column and thereby save BFC also worth mentioning that Form-Eze had in fact only been claiming for the
considerable labor and eliminate the use of BFC's light duty scaffolding contact area where its equipment was used.
underneath that beam. By doing that it will also speed up the forming
operation and save BFC labor. The only light duty scaffolding that BFC will Therefore, using the computation of BFC, the amount of contact square
be installing is under the girder which supports tremendous loading during meters that the delivered hardware and deckforms can handle is:
the stressing for the beams prior to it being stressed. By forming the girder in
this manner F-E is not involved in the stripping or resetting of the girder 126,000 sq. m. x Y = 92,696.40 contact sq. m
formwork. However, [Form-Eze] has purchased and furnished considerable
forming hardware and consumables (tie rods, pvc sleeves, pvc cones, whaler 7,000 sq. m.   5,149.85 sq. m.    
clips and brackets and wing-nuts) which are being used on the girders and deckforms delivered
the beams. [Form-Eze] will give ownership to this equipment toi BFC and Contract No. 1 be reformed to include a labor guarantee provision.
BFC will buy all additional consumables and hardware (as needed) directly
from Comer. In return [Form-Eze] will include the contact square meters of An action for reform a contract is grounded on Article 1359 of the New Civil
formwork in the girders in its billing for both the equipment lease and for the Code which provides:
moving contract.27
ARTICLE 1359. When, there having been a meeting of the minds of the
BFC cannot claim that this provision does not refer to Contract No. 1. Said parties to a contract, their true intention is not expressed in the instrument
provision mentions beam hangers and ledger angles which are used to purporting to embody the agreement, by reason of mistake, fraud, inequitable
support the beams forming the deckform and to eliminate the use of light duty conduct or accident, one of the parties may ask for the reformation of the
scaffolding on the part of BFC which it had initially obligated to provide under instrument to the end that such true intention may be expressed.
Contract No. 1. More pertinently, the inclusion of the contact square meters
of formwork in the girders is a mere application of one of the provisions in Reformation is a remedy in equity, whereby a written instrument is made or
Contract No. 1, i.e., "BFC agrees to purchase materials for the formwork as construed so as to express or conform to the real intention of the parties,

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where some error or mistake has been committed. In granting reformation, MR. R.V. CLEMENTE (CLAIMANT): To install the guys in the jobsite like for
the remedy in equity is not making a new contract for the parties, but example your laborers carpenters to install this deckforms. We just only
establishing and perpetuating the real contract between the parties which, supply one supervisor in the jobsite for him to supervise the installation of this
under the technical rules of law, could not be enforced but for such form.
reformation.29
ATTY. D. MORGA, JR. (COUNSEL-RESPONDENT): You mean BF
In order that an action for reformation of instrument may prosper, the Corporation has the expertise to assemble this.
following requisites must concur: (1) there must have been a meeting of the
minds of the parties to the contract; (2) the instrument does not express the MR. R.V. CLEMENTE (CLAIMANT): No, we will supervise your guys for them
true intention of the parties; and (3) the failure of the instrument to express to assemble this.
the true intention of the parties is due to mistake, fraud, inequitable conduct
or accident.30 ATTY. D. MORGA, JR. (COUNSEL-RESPONDENT): Do you know if BF has
the expertise to assemble this?
In the instant case, the question to be resolved is whether the contract
expressed their true intention; and, if not, whether it was due to mistake, MR. R.V. CLEMENTE (CLAIMANT): That is why we were there in your
fraud, inequitable conduct or accident. While intentions involve a state of jobsite. If they don't have really the expertise we are the one who supervise
mind which may sometimes be difficult to decipher, subsequent and them to install the deckforms. Supervise them to install the deckforms
contemporaneous acts of the parties as well as the evidentiary facts as
proved and admitted can be reflective of one's intention.31 ATTY. D. MORGA, JR. (COUNSEL-RESPONDENT): You mean no former
workers of the Claimant were employed for the purpose.
BFC relies on the Form-Eze Proposed SM Marikina Mall Project Elevated
Beam and Slab Formwork dated 7 December 200632 to support its MR. R.V. CLEMENTE (CLAIMANT): No.33
contention that Contract No. 1 should have a provision on the cost of labor.
Indeed, in the aforementioned proposal, BFC has agreed "to furnish the labor Obviously, BFC would want to be compensated for the labor it provided to
required for fabrication and assembly of the forming equipment" and that Form-Eze as shown in Contracts No. 2 and 3.
"BFC will deduct from the total contract amount 50.00 per man-hour each
carpenter or laborer supplied to Form-Eze." Notably, Contracts No. 2 and 3 As a matter of fact, Mr. James Franklin, the President of Form-Eze conceded
contain labor-guarantee provisions considering that BFC has committed to that Contract No. 1 should be modified to include a labor-guarantee
provide the necessary labor for both contracts. provision, to wit:

As initially agreed upon, BFC hired workers for the assembly of the Q: Mr. Witness, respondent [BFC], in their counterlcaims, would like this
deckforms since Form-Eze only undertook to supervise the installation of the Commission to reform Contract No. 1 to include a provision that it should
deckforms. This was evident during the cross-examination of Mr. Romano deduct from your billing the cost of labor, helmet and expense for x-bracing
Clemente (Mr. Clemente) who admitted that no workers of Form Eze were supplied by it for the assembly of the form system, what can you say?
employed for the installation of the deckforms, thus:
A: [BFC] is allowed to deduct the cost of the x-bracing purchase from Comer
ATTY. D. MORGA, JR. (COUNSEL-RESPONDENT): that was used in the FORM-EZE deck assemblies. [BFC] is allowed to deduct
the cost of the assembly labor for the deck forms which is included in the
Since it is the obligation of the Claimant to assemble the hardware into Labor Guarantee. These deductions have been reflected in all our billings
deckform, how many workers were employed for the purpose. where the P75.00 Labor Guarantee has been applied. The cost of helmet is
not included and should not be included. Contract No. 1 is only a lease
MR. R.V. CLEMENTE (CLAIMANT): We are only supplier sir. We supervise contract but it was modified to include a Labor Guarantee. For the [BFC] to
the guys in the jobsite for tern to install all these deckforms. deduct from our billing the cost of labor, etc. which allegedly they supplied for
the use of our said equipment for the assembly thereof is included in the
ATTY. D. MORGA, JR. (COUNSEL-RESPONDENT): Ano? Labor Guarantee. They should be allowed to do so in conformance with the
Labor Guarantee but definitely the cost of helmet and their other claims of

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deductions would not have any basis at all since these have not been agreed The Memorandum of Agreement dated 5 January 2007 is an exclusive
upon both in the original contract and in the subsequent agreement as licensing agreement.
contain (sic) in the February 8, 2007 signed letter.
BFC avers that CIAC erred when it stated the BFC was given the exclusive
This admission by Form-Eze bolsters the conclusion that the parties intended license to manufacture Form-Eze's equipment consisting of scaffoldings and
to include a labor-guarantee provision in Contract No. 1. Both Contracts No. accessories and they became part of that provided by Form Eze to BFC.
2 and 3 set the labor rate at P60.00 per carpenter man-hour. BFC fixed the
cost of labor at P453,294.50. At the outset, we agree that the subsequent Memorandum of Agreement
executed by the parties on 5 January 2007 is an exclusive licensing
Considering that both parties admitted that there should be a labor guarantee agreement. It was signed by both parties wherein BFC has agreed to sell the
clause in Contract No. 1, it can be reasonably inferred that the failure to scaffolding frames and accessories it manufactured to Form-Eze at the end
include said provision was due to mistake. A reformation is in order to include of the project. This Agreement was incorporated in Contract No. 4 wherein
a cost of labor provision in Contract No. 1. BFC will be allowed to deduct P6,352,500.00 from the equipment lease
contract, which is presumably Contract No. 1. At this point, Contract No. 4 is
Expenses for x-bracing and the cost of labor should be deductedunder deemed to have novated the obligation of BFC with respect to furnishing all
Contracts No. 2 and 3. scaffoldings. Contract No. 1 states that BFC shall furnish the scaffoldings at
no cost to Form-Eze. On the other hand, Contract No. 4 requires BFC to sell
Except for the expenses for x-bracing used in deck assemblies which had the scaffoldings to Form-Eze at the end of the project and deduct the cost of
been admitted by Form-Eze President James Franklin, BFC is not entitled to the same from the contract price of Contract No. 1. This setup cannot in any
be reimbursed for the cost of helmets, petroleum, and oil lubricants in the way be interpreted as part of the deckform supplied by Form-Eze. As pointed
absence of any stipulations in the contracts. The cost of labor, on the other out by BFC, the scaffoldings and accessories were the responsibility of BFC
hand, should be deducted pursuant to the labor-guarantee provisions in under Contract No. 1. Thus, the manufactured hardware under Contract No.
Contracts No. 2 and 3. 4 could not have added to the deckform system because they are not the
equipment of Form-Eze had obligated itself to supply under Contract No. 1.
The cost for x-bracing amounts to P358,250.00 as evidenced by the receipt
issued by Comer. Obligation of BFC under Contract No.2

The costs of labor are as follow: BFC maintains that since Form-Eze failed to meet the minimum conditions
under Contract No. 1 where the minimum 126,000 contact square meters
Contract No. 1 = P453,294.50 were not reached, then the forklifts under Contract No. 2 were also not used
for a minimum of 126,000 contact square meters.
Contract No. 2 = P1,373,634.60
Contract No. 3 = P273,240.00 We agree. BFC is liable only to pay the amount proportionate to 92,696.40
contact square meters at P50.00 per contact square meter, the rental rate for
Obligation of BFC under Contract No. 1: the forklifts. Thus:

92,696.40 contact square meters x P225.00 = P20,856,690.00 92,696.40 contact square meters x P50.00 = P 4,634,820.00
       
Less: Amount paid   7,700,000.00  
  Payment for billing for Pour 1   487,828.05
Less: Payments made   990,000.00
  Cost of labor   453,294.50
  Cost of X-bracing   358,250.00 Cost of Labor   1,286,377.50
    ___________
    P11,857,317.45     ___________
SUBTOTAL   P2,358,442.50

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Obligation of BFC under Contract No. 3. Under the letter dated 8 February 2007, "BFC has completed fabrication on a
sufficient quantity of u-heads with screw assemblies and heavy duty bases
The CIAC had correctly noted the ambiguity in Contract No. 3, particularly the so that BFC can immediately start returning the 24 inch and 18 inch u-head
"sufficient number of column forms as required to complete six (6) poured in assemblies (561 pcs) and heavy duty bases (483 pcs) which were on
place columns per day." For BFC, the sufficient number of column forms is temporary loan to BFC by [Form-Eze] until BFC could manufacture their own
12 sets a day while Form-Eze considered its supply of six (6) full height built equipment. The temporary loan was expected to be approximately [two] (2)
up column forms as sufficient. The CIAC found that Form-Eze failed to weeks and the equipment was picked-up January 9th, 2007 and still in used
comply with the requirements under Contract No. 3, hence it merely awarded today."36 It is understood that upon expiration of the two-week temporary
Form-Eze 2/3 of the minimum contract amount at P2,153,666.67. loan and upon failure by BFC to return the equipment, it is then liable to pay
for rent. We find that the monthly rental amount of P96,600.00 was
We find that the CIAC's award lacked bases. It gave credence to the substantiated by Form-Eze. 483 pieces of 24 inch and 18 inch galvanized
methodology used by Form-Eze and noted that the latter had supplied six (6) adjustable heads and 483 pieces of galvanized heavy duty plates were
full height built-up columforms, albeit insufficient. We hold the contrary. The indeed delivered to BFC as evidenced by the delivery receipts.37 According
methodology used by BFC, which involves "columnforms with window to Mr. Clemente, Form-Eze's Sales Engineer, the rental amount for
openings and that from its installation, alignment, bracing, inspection, adjustable u-heads are fixed at P160.00 per unit, while the galvanized heavy
approval of alignment, verticality and rigidity of the erected columnforms, duty plates are at P40.00 per unit.38 By agreeing to the terms of the 8
pouring, drying and removal of the forms, it will require twelve (12) column February 2007 Letter, BFC is deemed to have acquiesced to the rental fee in
forms a day, should have been considered. The CIAC itself had already ruled case it failed to return the u-heads and plates on time. Therefore, we affirm
that the ambiguity in Contract No. 3 should not favor Form-Eze, the party the CIAC's ruling that BFC is liable to pay rental of the equipment in the
who prepared the contract. Thus, it is only logical that the methodology amount of P96,000.00 per month until the equipment leased is fully returned
employed by BFC should be credited. to Form-Eze.

Using 12 column forms as the minimum requisite and Form-Eze having BFC President should not be included as party to this case?
supplied only four (4) usable column forms, it can be established that the
delivered column forms can only be used for 1/3 portion of the 9,100 contact Section 4 of Executive Order No. 1008 vests jurisdiction on CIAC over
square meters or 3,033.33 contact square meters. It was further proven by disputes disputes arising from, or connected with, contracts entered into by
BFC that about 50% of the column form requirements of the project were parties involved in construction in the Philippines, whether the dispute arises
already completed with the use of their own equipment. Thus, it is but before or after the completion of the contract, or after the abandonment or
equitable that the 3,033.33 contact square meters be further reduced by 50% breach thereof. Moreover, the party involved must agree to submit to
or 1,516.67 contact square meters. BFC is then liable to pay P441,502.87 voluntary arbitration. In other words, anyone who is not a party to the contract
broken down as follows: in his personal capacity is not subject to the jurisdiction of the CIAC. In this
case, Pineda signed the challenged contracts in his capacity as President of
1,516.67 X P355.00= BFC. There is no indication that he voluntarily submitted himself as a party to
P 538,417.85 the arbitration case. In fact, he has been consistently contesting his inclusion
Less: Cost of Labor  as a respondent in the CIAC proceedings. CIAC however considered Pineda
96,915.00 as a joint tortfeasor, thus justifying his joinder as a co-defendant.
  
___________ We do not consider the imputed acts of Pineda as an indicia of bad faith to
SUBTOTAL:  classify him as a joint tortfeasor. First, it was proven that Form-Eze is not
P 441,502.87 entitled to all its monetary claims under the contract. Second, we have also
subscribed to BFC's position that Contract No. 1 should have included a
labor guarantee provision and that it was by mistake that said clause was
BFC is obliged to pay rental for u-heads under Letter-Agreement dated excluded. Third, BFC's alleged refusal to return the u-head assemblies and
5 January 2007. heavy duty bases was meted with a heavy penalty in the form of a huge
rental fee. BFC had, as a matter of fact, admitted to owing Form-Eze rental

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payment. Fourth, the claim of threat against Form-Eze's President is
unsubstantiated and uncorroborated.

Attorney's Fees and Costs of Arbitration.

The controversy essentially boils down to the interpretation and factual

application of the existing contracts. Neither party was able to prove bad faith
in their dealing with each other. Under Article 2208 of the Civil Code,
attorney's fees may, among others, be recovered where defendant acted in
gross and evident bad faith in refusing to satisfy the plaintiff’s plainly valid,
just and demandable claim. We observe that in filing the complaint against
BFC, Form-Eze was merely seeking payment for its service under the
contract. BFC had admitted to its obligation. The problem lies only on the
amount to be paid. This is not tantamount to bad faith.

Finally, both parties should equally share the costs of arbitration since their
prayers were only partially granted.39

WHEREFORE, the petition is PARTIALLY GRANTED. The Decision dated

15 January 2010 and Resolution dated 13 July 2010 are MODIFIED.
Petitioner B.F. Corporation is ordered to pay respondent Form-Eze Systems
Inc. the following amounts:

Under Contract No. 1:

P11 ,857,317.45
Under Contract No. 2:
2,358,442.50
Under Contract No. 3:
441,502.87
Under Letter-Agreement dated 7 January 2007:
560,000.00
 
_____________
GRAND TOTAL:
P15,217,262.82

SO ORDERED.

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