China Chang Jiang Energy Corp. (Philippines) v. Rosal Infrastructure Builders

THIRD DIVISION

[G.R. No. 125706. September 30, 1996.]

CHINA CHANG JIANG ENERGY CORPORATION (PHILIPPINES), petitioner, vs.ROSAL INFRASTRUCTURE BUILDERS, REPRESENTED BY ITS GENERAL MANAGER, ALBERTO S. SURLA, CONSTRUCTION INDUSTRY ARBITRATION COMMISSION, PRUDENCIO F. BARANDA, AND THE COURT OF APPEALS, respondents.

NOTICE

Gentlemen :

Quoted hereunder, for your information, is a resolution of the Third Division of this Court dated September 30, 1996.

"G.R. No. 125706 — CHINA CHANG JIANG ENERGY CORPORATION (PHILIPPINES) versus ROSAL INFRASTRUCTURE BUILDERS, represented by its General Manager, ALBERTO S. SURLA, CONSTRUCTION INDUSTRY ARBITRATION COMMISSION, PRUDENCIO F. BARANDA, and the COURT OF APPEALS.

Petitioner questions the validity of Construction Industry Arbitration Commission (CIAC) Resolution 3-93 amending Section 1, Article III of CIAC Rules of Procedure Governing Construction Arbitration promulgated by CIAC pursuant to its rule-making power granted under Section 21 of Executive Order No. 1008, which pertinently provides as follows:

ARTICLE III

EFFECT OF THE AGREEMENT TO ARBITRATE

SECTION 1. Submission to CIAC Jurisdiction. — An arbitration clause in a construction contract or a submission to arbitration of a construction dispute shall be deemed an agreement to submit an existing or future controversy to CIAC jurisdiction, notwithstanding the reference to a different arbitral instruction or arbitral body in such contract or submission. . . .

Petitioner is the operator of the Binga Hydroelectric Plant in Itogon, Benguet under a Rehabilitate Operate and Leaseback Contract ("ROL Contract") with the National Power Corporation whereby it is mandated to engage in the rehabilitation of the power plant, including the construction of check dams. On February 21, 1994, petitioner engaged the services of respondent Rosal Infrastructure Builders ("RIB") as sub-contractor, executing a contract for the construction of Check Dam No. 1 along Sadyo River, Binga, Itogon, Benguet. In this contract the parties agreed to submit disputes arising therefrom to arbitration before the Arbitration of the International Chamber of Commerce. aScITE

When a dispute arose between the parties, respondent RIB filed a complaint before respondent CIAC for arbitration. Petitioner filed its answer with compulsory counterclaim and raised therein the issue of lack of jurisdiction on the part of CIAC. In its order dated August 1, 1995, respondent CIAC considered the question of jurisdiction merely as a special defense which can be included as part of the issues in the Terms of Reference. Petitioner filed a motion for reconsideration which was denied by respondent CIAC in its order dated October 4, 1995.

Petitioner raised the sole issue of lack of jurisdiction in a petition for certiorari and prohibition, with a prayer for a temporary restraining order and writ of preliminary injunction with respondent Court of Appeals. In a decision dated February 27, 1996, respondent court dismissed the petition. Petitioner filed a motion for reconsideration but the same was denied by respondent court in a resolution dated July 22, 1996.

Hence, the instant petition.

We find no meritorious basis in the petition to sustain a reversal of the ruling of respondent court upholding the jurisdiction of the CIAC in this case. Executive Order No. 1008, otherwise known as the "Construction Industry Arbitration Law," defines the jurisdiction of CIAC thusly:

Section 4. Jurisdiction. — The CIAC shall have original and exclusive jurisdiction over disputes arising from, or connected with, contracts entered into by parties involved in construction in the Philippines, whether the dispute arises before or after the completion of the contract, or after the abandonment or breach thereof. These disputes may involve government or private contracts. For the Board to acquire jurisdiction, the parties to a dispute must agree to submit the same to voluntary arbitration. . . .

Petitioner contends that this Court had already interpreted this particular provision of the law in the case of Tesco Service, Incorporated vs. Vera, 209 SCRA 440 [1992] to mean that respondent CIAC can acquire jurisdiction over the dispute only when the parties have agreed to submit their dispute to voluntary arbitration before respondent CIAC itself. HEITAD

This contention is erroneous.

The ruling of this Court in the above-cited Tesco case must be read in the light of facts obtaining and the governing law in relation to the applicable rules in force during that period. When we ruled in Tesco that CIAC had no jurisdiction over the dispute, we were applying the prevailing rules of procedure duly promulgated by the CIAC pursuant to its rule-making power provided in Section 21 of its enabling law. Section 1 of the said rules specifically required that a party to a construction contract wishing to have recourse to arbitration by the CIAC shall submit its Request for Arbitration in sufficient copies to the Secretariat of the CIAC. Since the Court found that there was no Request for Arbitration filed with the Secretariat of the CIAC because private respondent LAROSA in the case filed a petition for injunction with the Regional Trial Court of Quezon City, the inevitable conclusion had to be that CIAC did not acquire jurisdiction over the disputes arising from the sub-contract agreement between TESCO and LAROSA in said case. Accordingly, this Court sustained the jurisdiction of the regular court in that particular instance.

The Tesco ruling is not binding in the case at bench.

Significantly, the 1988 CIAC rules of procedure before the CIAC which were applied by this Court in Tesco had been duly amended by CIAC Resolution Nos. 2-91 and 3-93 to now read as follows:

SECTION 1. Submission to CIAC Jurisdiction. — An arbitration clause in a construction contract or a submission to arbitration of a construction dispute shall be deemed an agreement to submit an existing or future controversy to CIAC jurisdiction, notwithstanding the reference to a different arbitral institution or arbitral body in such contract or submission. When a contract contains a clause for the submission of a future controversy to arbitration, it is not necessary for the parties to enter into a submission agreement before the claimant may invoke the jurisdiction of the CIAC.

Petitioner submits that CIAC Resolution No. 3-93 is null and void insofar as it prohibits the parties from submitting the dispute for arbitration to an arbitral body other than respondent CIAC because, so it is contended, it goes beyond the basic law it seeks to implement, E.O. No. 1008 (Rollo, p. 26).

We do not agree.

A mere cursory reading of Section 1, Article III of the CIAC Rules, as amended by Resolution No. 3-93 revels no restriction whatsoever on any party from submitting a dispute for arbitration to an arbitral body other than the CIAC. On the contrary, the new rule, as amended, merely implements the letter and the spirit of its enabling law, E.O. No. 1008, which vests jurisdiction upon the CIAC in the following manner:

Section 4. Jurisdiction. — The CIAC shall have original and exclusive jurisdiction over disputes arising from, or connected with contracts entered into by parties involved in construction in the Philippines, whether the dispute arises before or after the completion of the contract, or after the abandonment or breach thereof. These disputes may involve government or private contracts. For the Board to acquire jurisdiction, the parties to a dispute must agree to submit the same to voluntary arbitration. . . . (Emphasis supplied.) ATICcS

What the law merely requires for a particular construction contract to fall within the jurisdiction of CIAC is for the parties to agree to submit the same to voluntary arbitration. Unlike in the original version of Section 1, as applied in the Tesco case, the law does not mention that the parties should agree to submit disputes arising from their agreement specifically to the CIAC for the latter to acquire jurisdiction over such disputes. Rather, it is plain and clear that as long as the parties agree to submit to voluntary arbitration, regardless of what forum they may choose, their agreement will fall within the jurisdiction of the CIAC, such that, even if they specifically choose another forum, the parties will not be precluded from electing to submit their dispute before the CIAC because this right has been vested upon each party by law, i.e., E.O. No. 1008.

This Court's pronouncement in the case of Hi-Precision Steel Center, Inc. vs. Lim Kim Steel Builders, Inc., 228 SCRA 397 [1993] find relevance, to wit:

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

These noble objectives are what Resolution Nos. 2-91 and 3-93 seek to implement, which Section 1, prior to its amendment, effectively curtailed. Rather unfortunately, this particular provision of CIAC Rules was not the one at issue in the Tesco case. Thus, no ruling on that point could be passed upon.

Now that Section 1, Article III, as amended, is submitted to test in the present petition, we rule to uphold its validity will full certainty. However, this should not be understood to mean that the parties may no longer stipulate to submit their disputes to a different forum or arbitral body. Parties may continue to stipulate as regards their preferred forum in case of voluntary arbitration, but in so doing, they may not divest the CIAC of jurisdiction as provided by law. Under the elementary principle on the law on contracts that laws obtaining in a jurisdiction form part of all agreements, when the law provides that the Board acquires jurisdiction when the parties to the contract agree to submit the same to voluntary arbitration, the law in effect, automatically gives the parties an alternative forum before whom they may submit their disputes. That alternative forum is the CIAC. This, to the mind of the Court, is the real spirit of E.O. No. 1008, as implemented by Section 1, Article III of the CIAC Rules.

The herein interpretation is not, in its strict sense, a reversal of a previous pronouncement in the Tesco case necessitating a ruling by the Court En Banc, considering the variance in the factual circumstances, as well as the governing procedural rules applicable to the two distinct cases.

The Court also takes this opportunity to dispel any mistaken notion that substantial rights were created or modified by the CIAC in its Resolution Nos. 2-91 and 3-93, as regards matters of jurisdiction, We would also like to clarify that such rights were vested as early as of the time E.O. No. 1008 which took effect in February 1985. However, said provision had not been properly implemented in the original version of Section 1 of the CIAC Rules. Thus, amendments through Resolution Nos. 2-91 and 3-93 were called for.

WHEREFORE, premises considered, the instant petition is hereby DISMISSED and the appealed decision is hereby AFFIRMED. TIADCc

SO ORDERED."

Very truly yours,

(SGD.) JULIETA Y. CARREONClerk of CourtBy:LUCITA A. SORIANOAsst. Div. Clerk of Court