THIRD DIVISION [ G.R. No. 220045-48, June 22, 2020 ] WYETH PHILIPPINES, INC., PETITIONER, VS. CONSTRUCTION INDUSTRY ARBITRATION COMMISSION (“CIAC”), CIAC ARBITRATORS VICTOR P. LAZATIN, SALVADOR P. CASTRO, JR. AND MARIO E. VALDERRAMA; SKI CONSTRUCTION GROUP, INC.; AND MAPFRE INSULAR INSURANCE CORPORATION, RESPONDENTS.
When the award of the Construction Industry Arbitration Commission Arbitral Tribunal becomes the subject of judicial review, courts must defer to its factual findings by reason of its “technical expertise and irreplaceable experience of presiding over the arbitral process."[1] A stringent exception would be when the integrity of the arbitral tribunal itself has been jeopardized[2] which is not present in this case.
This is a Petition for Review on Certiorari[3] filed by petitioner Wyeth Philippines, Inc. assailing the Consolidated Decision/Resolution[4] and Resolution[5] of the Court of Appeals in CA-G.R. SP Nos. 117924, 117925, 117929 & 125648, which modified the Award[6] of the Construction Industry Arbitration Commission Arbitral Tribunal in CIAC Case No. 18-2009.
Petitioner Wyeth Philippines, Inc. (Wyeth) is the project owner of the “Dryer 3 and Wet Process Superstructure Works”[7] located at Canlubang Industrial Estate, Bo. Pittland, Cabuyao, Laguna. In 2007, Wyeth invited bidders to submit proposals for its project through its consultant, Jacobs Engineering Singapore Pte. Ltd.[8]
Respondent SKI Construction Group, Inc. (SKI) submitted its qualified proposal to undertake the project for P242,800,000.00.[9]
On June 29, 2007, SKI was awarded the bid provided it executes the superstructure works in accordance with a Notice to Proceed issued by Wyeth. The Notice to Proceed conformed to by SKI President and CEO Albert Altura provided for the completion of the project on February 23, 2008, and the possession of the site on June 29, 2007. It also designated Jacob Constructors Singapore Pte. Ltd. as Project Manager.[10]
After signing the Notice to Proceed, SKI was given an advance payment of P72,840,000.00.[11]
As required under the Contract, SKI caused respondent Mapfre Insular Insurance Corp. (Mapfre) to issue the following bonds in favor of Wyeth: 12.1. Surety Bond No. MAIC/G(25) 9995 (the “Payments Bond”), in the amount of P48,560,000.00 under which [SKI], as principal, and Mapfre, as surety, bound themselves unto [Wyeth] to jointly and severally pay claims for all labor and materials used or reasonably required for use in the performance of the Contract.
12.2. Surety Bond No. MAIC/G(25) 9994 (the “Advance Payment Bond”), in the amount of P72,840,000.00 under which [SKI], as principal, and Mapfre, as surety, bound themselves unto [Wyeth] to indemnify [Wyeth] for its failure to recoup the Advance Payment granted to [SKI] by [Wyeth] in connection with the Contract.
12.3. Performance Bond No. MAIC/G(13)4104 (the “Performance Bond”), in the amount of P48,560,000.00 under which [SKI], as principal, and Mapfre, as surety, bound themselves unto [Wyeth] to indemnify [Wyeth] for any loss or damage that [it] may suffer as a consequence of [SKI’s] failure to perform its obligations and comply with the terms and conditions of the Contract.[12] On January 25, 2008, the Project Manager directed the cessation of all construction activities starting from January 26, 2008 until further notice to give SKI ample time to address internal issues regarding its workforce.[13]
In a letter dated February 6, 2008, Wyeth notified Mapfre that it might need to call upon the bonds.[14]
On February 8, 2008, Wyeth, through its managing director informed SKI of the termination of the contract.[15] On February 11, 2008, SKI replied saying the termination was done without giving them 14 days to address the problems, pursuant to Clause 8 of the Conditions of the Contract: “if in the opinion of the Project Manager… the Contractor fails to proceed regularly and diligently with the Works… then the Project Manager shall give them Notice by registered post or hand delivery specifying the defaults and if the Contractor either shall continue such default for fourteen (14) days after receipt of such notice… then the Owner… may within ten (10) days after such continuance or repetition… terminate the Employment of the Contractor."[16] SKI claimed they essentially only had three days to complete the project from the time they were informed of their default on January 23, 2008, until the Project Manager suspended all the construction activities starting January 26, 2008, even if they supposedly had until February 6, 2008 to complete it.[17]
On February 19, 2008, Wyeth wrote a letter to Mapfre, calling on the performance of the bonds they issued.[18]
On February 29, 2008, Wyeth wrote another letter to Mapfre, requesting confirmation that it will not be barred from claiming on the bonds pending settlement with SKI.[19] On March 4, 2008, Mapfre confirmed that Wyeth will not be barred from pursuing its claims against the bonds. However, Mapfre stated that it will only act on the bonds after SKI’s liability has been clearly established.[20]
In a Letter dated January 14, 2009, Mapfre refused to pay the amount under the payments bond.[21]
On February 10, 2009, Wyeth wrote to Mapfre demanding payment of P47,371,855.91 representing the unrecouped amount from the advance payment of P72,840,000.00 given to SKI.[22]
When the parties failed to arrive at an amicable settlement on the claims after various meetings, they agreed to refer the dispute to arbitration pursuant to Article 10 of their contract.[23]
After the parties still failed to reach a settlement, Wyeth filed a Complaint before the Regional Trial Court of Makati to recover the amount under the payments bond. However, the parties eventually agreed to resolve the dispute through arbitration before the Construction Industry Arbitration Commission (Commission).
On June 2, 2009, SKI filed a Complaint against Wyeth before the Commission for the adjudication of its claims.[24] On June 29, 2009, Wyeth filed an Answer with Compulsory Counterclaims. On July 21, 2009, SKI filed a Reply to Counterclaim.[25]
In its Order dated July 23, 2009, the Commission apprised the parties of the composition[26] of the Arbitral Tribunal and the setting of the preliminary conference on August 6, 2010.[27]
During the preliminary conference, Wyeth filed an Omnibus Motion to implead Mapfre pursuant to the bonds it issued in favor of Wyeth.[28]
On October 19, 2009, Mapfre filed an Answer[29] claiming that Wyeth was not entitled to recover anything. It claimed to have acted in good faith in rejecting Wyeth’s claim, because the same had been extinguished by judicial compensation. However, should it be held liable to Wyeth, Mapfre prayed to be indemnified by SKI. On November 6, 2009, Wyeth filed its Reply.[30]
On November 11, 2009, the Commission denied the motion filed by Wyeth seeking to recall the appointment of two members of the tribunal.[31] On November 17, 2009, SKI, Wyeth, and Mapfre signed the Terms of Reference,[32] stating admitted facts, positions, claims and counterclaims, issues to be determined, and amount of arbitration fees.
In its Order dated December 22, 2009, the Arbitral Tribunal granted Wyeth’s Motion for Reconsideration by recalling the appointment of Jose F. Mabanta from the tribunal, and directing the two members to choose a replacement from the list of accredited arbitrators who is not a nominee of any of the parties.[33]
On February 1, 2010, the Arbitral Tribunal promulgated its Order denying Wyeth’s prayer to declare all proceedings, including the conduct of preliminary conference, preparation, and signing of Terms of Reference, as vacated.[34] On April 14, 2010, Wyeth filed a Manifestation and Motion on the Appointment of Felisberto G.L. Reyes (Reyes), claiming that he was an original nominee of SKI.[35] On April 19, 2010, Reyes resigned as member of the tribunal.[36] On April 27, 2010, the Commission appointed Salvador P. Castro, Jr. to replace Reyes.[37]
After the conduct of hearings, submission of parties’ memoranda and offers of exhibits, the Arbitral Tribunal issued its December 23, 2010 Award,[38] finding that Wyeth validly terminated the contract because SKI incurred delay in the construction of the project. SKI was held liable for the payment of additional costs incurred by reason of the delay in the performance of its obligation. However, it awarded SKI the cost of rebars, formworks, safety equipment and repairs it had made.[39]
In finding SKI liable, the Arbitral Tribunal reasoned out that: (1) the agreed commitments under various construction programs were not met;[40] (2) the notes from the project meetings and Wyeth’s letters raising causes of delays were not disputed and some were even acknowledged by SKI;[41] and (3) while SKI’s delays were justified, they failed to raise a timely objection to Wyeth’s Variation Order indicating that the problems they encountered had no time impact to the project’s completion.[42] The Arbitral Tribunal further held that SKI is not entitled to an extension of time as its justifications were afterthoughts to escape its liability for the delays. Lastly, its failure to assert its entitlement to damages within the period allowed under the contract barred it from claiming them.[43]
The Arbitral Tribunal held that Wyeth, as project owner, had a wide latitude in exercising its prerogative to terminate the contract and that the termination was valid because SKI could further prejudice the completion of the project should it be given another chance to discharge its contractual obligations.[44]
The Arbitral Tribunal awarded SKI its valid claims, specifically: (1) the value of rebars considering that Wyeth had already agreed to SKI’s entitlement to this; (2) the value of safety harness used by Wyeth; (3) the cost of repair of the damaged tower crane; and (4) the value of the damaged tower crane collar.[45]
However, the Arbitral Tribunal denied SKI’s following claims: (1) the additional labor costs to catch up with the works as it was SKI who caused the delay;[46] (2) the additional costs due to change in the formworks system because it was SKI’s contractual obligation to supply them;[47] (3) the cost for complying with additional safety requirements because SKI failed to observe the strict safety requirements stipulated in the contract;[48] and (4) the additional cost for a Load Moment Indicator (LMI) which aids in inspecting and certifying the worthiness of the crane.[49]
The Arbitral Tribunal also denied for lack of merit the other claims of SKI considering that the termination of the contract was valid: (1) Additional overhead expenses from March 2008 to December 2008(2) Loss of profit for undue termination(3) Loss of profit for deleted items(4) Standby cost of equipment, formworks, crane, Generator set and other materials; and(5) Moral and exemplary damagesOn the other hand, the Arbitral Tribunal found the need to evaluate Wyeth’s counterclaims, considering that it far exceed the value of the contract sum of the project in dispute.[50] Particularly, it held that Wyeth’s claim of payment to various contractors in the amount of P167,588,306.67 is questionable since the total contract sum is P214,944,802.30 and P108,326,018.64 was already paid to SKI, leaving only P106,618,783.70 or 49.60% of the total contract sum.[51]
The Arbitral Tribunal held that while Wyeth suffered pecuniary loss, the evidence it submitted were not clear and convincing as to establish actual damages. Hence, the Tribunal applied Article 2224 of the Civil Code[52] and the parties’ agreement on liquidated damages[53] as measure for temperate damages. It awarded Wyeth temperate damages amounting to P24,280,000.00, the maximum amount permitted under the contract.[54]
The Arbitral Tribunal held that Wyeth failed to present clear and convincing evidence on the scope, details, costing and reasonableness of some of their claims, specifically: (1) costs incurred for labor and materials; (2) additional cost of labor; (3) payment to various contractors; (4) rectification works; (5) additional cost to retain the site establishment; and (6) payment to other contractors. However, it found Wyeth’s claim of payment to various suppliers in the amount of P6,852,678.71 as valid and undisputed.[55]
The Arbitral Tribunal further held that the unrecouped down payment is deemed included in Wyeth’s “global” or excess claim after lumping all the cost it allegedly incurred (including all payments to SKI as well as all other contractors/suppliers) less the contract price, and granted the unrecouped amount of P42,293,679.02 in addition to the Temperate Damages.[56]
The Arbitral Tribunal ruled that the cost of arbitration should be equally shouldered by SKI and Wyeth, Mapfre should shoulder its own costs, and no party may recover attorney’s fees from each other.[57] It further held Mapfre jointly and severally liable with SKI, on its: (1) Advance Payment Bond, for the unrecouped down payment; (2) Payment Bond; and (3) Performance Bond equal to the Temperate Damages awarded.[58] The Arbitral Tribunal held that the right to file claim on the Payment Bond is not “time-barred” and the referral to arbitration is based on the agreement between Wyeth and Mapfre, without objection from SKI.[59] Lastly, it held that Mapfre should be indemnified by SKI in case it is made to pay Wyeth.[60]
The Award’s dispositive portion read: WHEREFORE, AWARD is hereby made as follows:
A. FOR CLAIMANT
Rebar PhP12,298,307.68 2. Formworks 2,787,795.20 3. Safety Harness 157,500.01 4. Repair of Damaged Tower Crane 1,172,384.00 5. Damage Tower Crane Collar 1,890,518.28 Total PhP18,306,505.17 B. FOR RESPONDENT
Temperate Damages for the following Claims: PhP24,280,000.00 a) Cost incurred for Labor and Materials b) Additional Cost for Labor c) Additional Site Management d) Payment to Various Contractors e) Rectification Work f) Payment to Other Contractors2. Payment to Various Suppliers PhP6,852,678.71
Unrecouped Down Payment PhP42,293,670.02
Claimant PhP18,306,505.17
Respondent Temperate Damages PhP24,280,000.00 Payment to Various Suppliers 6,852,678.71
Recoupment of Down Payment PhP42,293,679.02 (PhP73,426,357.73) ———————— Due to Respondent PhP 55,119,852.56 =============
This amount of Php55,119,852.56 due to Respondent from Claimant shall earn legal interest from the date of this Award until fully paid.
On the Third Party Complaint, the Arbitral Tribunal awards to Respondent against MAPFRE the maximum amounts as follows:
- On the Advance Payment bond- PhP42,293,679.02 2. On the Payment Bond- 6,852,678.71 3. On the Performance Bond - 24,280,000.00 but [sic] MAPFRE’s liability cannot exceed the net liability of Claimant, its principal, in the amount of Php55,119,852.56. Moreover, on the Cross-Claims against Claimant, MAPFRE is awarded the right of indemnification for any amounts that it may pay to Respondent, with legal interest from the time of Notice of Payment is served on the Claimant, [sic]
SO ORDERED.[61] On February 18, 2011, Wyeth filed a Petition for Review,[62] docketed as CA-G.R. SP No. 117929, before the Court of Appeals, praying for the deletion of the award to SKI of the value of rebars, formworks, safety equipment, and costs of the damaged tower crane and tower crane collar. It also prayed that its net award be increased from P55,119,852.56 to P348,573,877.08. Lastly, it prayed that Mapfre be held solidarily liable with SKI for the entire amount of P348,573,877.08. On the same day, Mapfre filed a separate Petition for Review,[63] docketed as CA-G.R. SP No. 117924. On February 21, 2011, SKI filed its Petition for Review,[64] docketed as CA G.R. SP No. 117925, before the Court of Appeals.
On May 25, 2011, Wyeth filed a Motion for Execution of the Award[65] before the Commission.
In its March 6, 2012 Resolution,[66] the Arbitral Tribunal denied the motion for execution on the basis of CIAC Resolution No. 06-2002 or “Policy Guidelines to Clarify the Policy Guidelines Regarding Execution of a Final Award During Appeal”[67] and further explained that “allowing [Wyeth] to move for the execution of the CIAC award as well as question the same award on appeal results to an absurd and conflicting scenario of a party seeking enforcement of a final and executory judgment while also seeking the reversal or modification of the same judgment."[68]
The Arbitral Tribunal ratiocinated that since the Revised Rules[69] is substantially a reenacted rule regarding the Rule on Execution of Final Award, it can be regarded that the present rule adopts the interpretation of the previous rule which under CIAC Resolution No. 06-2002 is that “no execution shall issue where both parties appeal[ed]."[70]
In its May 25, 2012 Order,[71] the Arbitral Tribunal denied the motion for reconsideration filed by Wyeth.
On July 16, 2012, Wyeth filed a Petition for Mandamus,[72] docketed as CA-GR. SP No. 125648 before the Court of Appeals, questioning the March 6, 2012 Resolution and May 25, 2012 Order of the CIAC.
In a May 15, 2014 Resolution,[73] the Court of Appeals granted Wyeth’s Motion for Consolidation of Cases filed on June 7, 2013. Thus, the Petitions for Review filed by Wyeth and SKI were consolidated with the Petition for Review filed by Mapfre. Subsequently, Wyeth’s Petition for Mandamus was also consolidated with the three (3) other petitions.[74]
In its January 23, 2015 Consolidated Decision/Resolution,[75] the Court of Appeals held that SKI is liable for the delay, as it is undisputed that SKI did not achieve the milestones stated in the Conditions of the Contract, and failed to ask for an extension of time if the delays were indeed not attributable to it.[76]
The Court of Appeals also affirmed the Arbitral Tribunal’s ruling that Wyeth validly terminated its contract with SKI, because SKI did not proceed regularly and diligently with the project when it failed to supply equipment and materials, adequate manpower, and sufficient supervision over the project.[77]
The Court of Appeals also found that Wyeth served a Notice of Default to SKI on January 23, 2008 and the latter had until February 6, 2008, or 14 days from notice within which to remedy the defaults. However, when asked for an update on February 5, 2008, SKI said it was still addressing the issues with its workforce prompting Wyeth to terminate the contract.[78]
The Court of Appeals affirmed the Arbitral Tribunal’s findings that SKI’s claims for the following are baseless, since SKI was responsible for the delays in the construction of the project: (1) Additional labor cost; (2) Additional cost due to change in formworks system; (3) Additional cost due to additional safety requirements; (4) Additional cost due to use of cranes with LMI; (5) Additional overhead expenses from March 2008 to December 2008; (6) Loss of profit for undue termination; (7) Loss of profit for deleted items; (8) Standby cost; and (9) Moral and exemplary damages.[79] It also held that while SKI is entitled to the value of rebars, formworks, and costs of repair, the amount cannot be established with certainty.[80] Thus, the Court of Appeals only awarded SKI temperate damages amounting P4,500,000.00 and P157,500.01, for the value of safety harnesses, as the claim was undisputed.[81]
The Court of Appeals held that the Arbitral Tribunal erred in awarding temperate damages to Wyeth, and instead awarded actual damages amounting to P90,717,632.06,[82] broken down as follows: (1) Payment of P5,507,726.50 to Precision Ready Mix, P28,985,790.00 to Capitol Steel and P3,844,481.14 to Unitan, considering that SKI agreed to such amounts; (2) Payment to Chittick of P2,110,763.67, or to the extent covered by official receipt; (3) Payment to SMCC of P9,794,372.29, or to the extent covered by official receipt; (4) Payment to EEI of the total amount of P21,959,311.60, for being supported by official receipt; (5) Payment to Cape East of P12,301,474.21, or only to the extent covered by official receipt; (6) Payment to Freyssinet of P477,105.35 or to the extent covered by official receipt; (7) Payment of P5,357,143.00 to RMD, for being covered by an official receipt; (8) Payment of P111,607.14 to BCA for being covered by an official receipt; and (9) Payment of P122,767.86 to T-Shuttle.[83] However, it held that the following claims were not proven by Wyeth: (1) payment to Tetra Pak of P32,572,301.44; (2) additional project costs in the amount of P101,923,163.14; and (3) payment to Unitan for termination-related cost of P20,767,401.12.[84]
For Wyeth’s claim on the bonds, the Court of Appeals held that: (1) Wyeth’s claim against the Payment Bond is not time-barred because it filed its claim within a year from the time of its denial. This made Mapfre liable to perform the Payment Bond amounting to P38,337,997.14; (2) Wyeth’s claim against the Advance Payment Bond is not extinguished and it is entitled to the unrecouped downpayment of P42,293,679.02; and (3) Mapfre is liable under the Performance Bond up to the extent of P48,560,000.00, due to SKI’s delay.[85] The Court of Appeals also found it inappropriate to award attorney’s fees in favor of either party and held that each party shall bear its own arbitration cost.[86]
The Court of Appeals held that the Arbitral Tribunal did not err in refusing to execute its Award, considering that the 2010 CIAC Rules is silent as to whether a party may ask for the execution of the award it also assails, and Wyeth failed to state good reasons why judgment should be executed pending appeal pursuant to Rule 39, Section 2(a) of the Rules of Court.[87]
The dispositive portion of the Consolidated Decision/Resolution read: WHEREFORE, this Court hereby disposes and orders that in CA-G.R. SP No. 117924, the Decision promulgated on 22 April 2013 is hereby MODIFIED as will be stated hereunder; in CA-G.R. SP No. 117925, SKI’s Petition for Review is PARTLY GRANTED; in CA-G.R. SP No. 117929, Wyeth’s Petition for Review is PARTLY GRANTED; and in CA-G.R. SP No. 125648, Wyeth’s Petition for Mandamus is DENIED.
Wyeth is ordered to pay SKI the total amount of PhP4,500,000.00 as temperate damages and PhP157,500.01 for the value of the safety harness or a total of PhP4,657,500.01;
In addition to the award of unrecouped downpayment in the amount of PhP42,293,670.02, Wyeth is awarded the amount of PhP90,717,632.06 as actual damages. Hence, SKI is ordered to pay Wyeth the total amount of PhP133,011,302.08;
The above award to SKI and Wyeth shall earn interest at the rate of 6% per annum computed from the date of the assailed Award until fully paid;
Mapfre’s liability under the Bonds shall be as follows: under the Advance Payment Bond, PhP42,293,670.02; under the Payment Bond, PhP38,337,997.64 and under the Performance Bond, PhP48,560,000.00. Mapfre is awarded the right of indemnification for any amount it may pay to Wyeth, with interest at the rate of 6% per annum, from time of Notice of Payment is served to SKI until fully paid; and
SO ORDERED.[88] In an August 3, 2015 Resolution,[89] the Court of Appeals denied the respective motions for reconsideration filed by Wyeth and SKI.
On October 2, 2015, petitioner filed the present Petition for Review on Certiorari.
On January 13, 2016, the Court required respondents to file a comment.[90] On March 30, 2016, private respondent SKI filed its Comment.[91] Subsequently, private respondent Mapfre filed also filed its Comment on April 11, 2016.[92]
On June 20, 2016, this Court granted the motions for extension of time filed by private respondents, noted their separate comments, and required petitioner to file a consolidated reply.[93] Petitioner filed a Manifestation and Motion to Admit Consolidated Reply[94] and a Consolidated Reply[95] on September 22, 2016.
Petitioner avers that whether it is entitled to an execution pending appeal is a question of law, properly determinable under its Petition for Review filed under Rule 45 of the Rules of Court and the factual issues raised would fall under the exceptions. Specifically, petitioner claims that the Arbitral Tribunal and the Court of Appeals have conflicting findings of fact, and manifestly overlooked certain relevant and undisputed details which, if properly considered, would justify a different conclusion. Also, it claimed that the Court of Appeals’ findings as to the parties’ entitlement to claims are contradicted by the evidence on record.
Petitioner argues that it proved and substantiated all of its monetary claims, entitling it to an additional award of P377,269,282.64, inclusive of VAT. It claimed that aside from the official receipts, it proved payment by unrefuted testimonies of witnesses, parole evidence, and tabular summaries. Petitioner argues that respondent SKI is not entitled to an award for the value of rebars, formworks, and costs of repair.
Petitioner also maintains that the liability of respondent Mapfre under the Advance Payment Bond should be P47,368,910.42, and P48,560,000.00 for the Payment Bond. Furthermore, petitioner posits that respondents SKI and Mapfre should be solidarily liable to pay attorney’s fees and arbitration costs.
Lastly, Petitioner claims that it is entitled to an execution pending appeal under the 2010 CIAC Revised Rules of Procedure Governing Construction Arbitration. It counters that CIAC Resolution No. 06-2002 is not applicable because: (1) it deals with entry of judgment and not execution of judgment; (2) it was not published in the Official Gazette; (3) it was expressly repealed under the 2005 Revised Rules of Procedure Governing Construction Arbitration; and (4) it was not part of the 2010 CIAC Revised Rules of Procedure Governing Construction Arbitration.
In its Comment, private respondent SKI claims that it is entitled to exemplary damages, considering that there is substantial evidence that petitioner agreed to its other claims.
As for petitioner’s monetary claims, private respondent SKI maintains that this Court, not being a trier of facts, is not expected to review the evidence, especially that a specialized body like the Arbitral Tribunal, and the Court of Appeals had already evaluated them and ruled that they were not proven with a reasonable degree of certainty.[96]
In any event, respondent SKI claims that petitioners’ claim of P417,845,459.62, which is almost twice of the total contract sum, was neither substantiated by evidence nor proven with reasonable certainty.[97]
Respondent SKI posits that both the Arbitral Tribunal and the Court of Appeals correctly denied the motion for execution filed by the petitioner, being consistent with the standing policy of the Commission of not granting motions for execution if parties appealed the decision.[98]
Finally, respondent SKI argues that petitioner failed to justify why it should be awarded attorney’s fees and arbitration costs.[99]
In its Comment, respondent Mapfre avers that petitioner is not entitled to an award of actual damages considering that its claims were without proof of official receipts.[100]
Respondent Mapfre maintains that it is not liable under the Payment Bond because when petitioner terminated the contract, it already paid respondent SKI P129,590,429.08, and any claim of petitioner for labor and materials should be deducted from the unspent balance. Similarly, it argues that its liability under the Advance Payment Bond was extinguished by compensation, because the unrecovered amount was applied as payment for unpaid billings of respondent SKI.[101] Furthermore, respondent Mapfre claims that it is not liable for variations of work only relayed to it after February 23, 2008.[102] It also claims that it cannot be liable for the alleged cost of rectification works and additional management costs as these were fraudulent.[103]
Lastly, Respondent Mapfre maintains that petitioner is not entitled to an execution pending appeal considering that it cannot approve and reject parts of the award for temperate damages in its favor. As petitioner is not entitled to recover anything, respondent Mapfre argues that petitioner is likewise not entitled to recover attorney’s fees and costs of arbitration.[104]
In rebuttal, petitioner argues that since both respondents SKI and Mapfre did not appeal the decision of the Court of Appeals, then they are bound to pay the award ordered by it at the least. Petitioner avers that the issue of respondent Mapfre’s liability under the bonds is already settled, and the only issue remaining is the amount of its liability.[105]
Petitioner reiterates that it has proven and substantiated its monetary claims, and respondent SKI is not entitled to temperate damages because it failed to prove the cost of its repair and the damage is attributable to petitioner.[106] Petitioner counters that its monetary claims are not unreasonable, considering that respondent SKI caused the delay, which, in turn, resulted in delay-related claims by contractors, and additional costs for engaging other contractors and suppliers to complete and rectify respondent SKI’s defective works.[107]
Petitioner further reiterates that it is entitled to execution pending appeal considering that the Arbitral Tribunal’s award of P55,119,852.56 has already become final and executory.[108]
The issues for this Court’s resolution are as follows:
(1) Whether or not the issues petitioner raised are properly determinable under the present Petition for Review before the Court;
(2) Whether or not respondent SKI is entitled to temperate damages;
(3) Whether or not petitioner is entitled to a total of P327,127,827.49 as additional costs incurred to complete the construction project due to the delay of respondent SKI;
(4) Whether or not the Court of Appeals correctly determined the amount of liability of respondent Mapfre under the Advance Payment Bond and Payment Bond; and
(5) Whether or not petitioner is entitled to an execution pending appeal of the Arbitral Tribunal’s Award.
“[T]o encourage the early and expeditious settlement of disputes in the Philippine construction industry[,]"[109] Executive Order No. 1008, otherwise known as the Construction Industry Arbitration Law created the Construction Industry Arbitration Commission (Commission). Section 4 of the Construction Industry Arbitration Law lays down the jurisdiction of the Commission, as follows: 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.
The jurisdiction of the CIAC may include but is not limited to violation of specifications for materials and workmanship; violation of the terms of agreement; interpretation and/or application of contractual time and delays; maintenance and defects; payment, default of employer or contractor and changes in contract cost.
Excluded from the coverage of this law are disputes arising from employer-employee relationships which shall continue to be covered by the Labor Code of the Philippines. Cognizant of the competence of the Commission, Republic Act No. 9184 or the Government Procurement Reform Act, affirms its jurisdiction and states that, “disputes that are within the competence of the [Commission] to resolve shall be referred thereto."[110] Similarly, Republic Act No. 9285 or the Alternative Dispute Resolution Act of 2004, Section 35 provides that the Commission “shall continue to exercise original and exclusive jurisdiction over construction disputes although the arbitration is ‘commercial’ pursuant to Section 21 of this Act."[111]
The authority of the Commission proceeds from its technical expertise. The Construction Industry Arbitration Law states that arbitrators shall be persons of distinction in whom the business sector, “particularly the stake holders [sic] of the construction industry[,]"[112] and the government can have confidence.[113] “They shall possess the competence, integrity, and leadership qualities to resolve any construction dispute expeditiously and equitably. The Arbitrators shall come from different professions. They may include engineers, architects, construction managers, engineering consultants, and businessmen familiar with the construction industry and lawyers who are experienced in construction disputes."[114] Technical experts may also aid the arbitrators in resolving the disputes if requested by the parties, as stated in Section 15 of the Construction Industry Arbitration Law: SECTION 15. Appointment of Experts. — The services of technical or legal experts may be utilized in the settlement of disputes if requested by any of the parties or by the Arbitral Tribunal. If the request for an expert is done by either or by both of the parties, it is necessary that the appointment of the expert be confirmed by the Arbitral Tribunal.
Whenever the parties request for the services of an expert, they shall equally shoulder the expert’s fees and expenses, half of which shall be deposited with the Secretariat before the expert renders service. When only one party makes the request, it shall deposit the whole amount required. The Commission’s authority is expounded in CE Construction Corp. v. Araneta Center, Inc.:[115] The CIAC does not only serve the interest of speedy dispute resolution, it also facilitates authoritative dispute resolution. Its authority proceeds not only from juridical legitimacy but equally from technical expertise. The creation of a special adjudicatory body for construction disputes presupposes distinctive and nuanced competence on matters that are conceded to be outside the innate expertise of regular courts and adjudicatory bodies concerned with other specialized fields. The CIAC has the state’s confidence concerning the entire technical expanse of construction, defined in jurisprudence as “referring to all on-site works on buildings or altering structures, from land clearance through completion including excavation, erection and assembly and installation of components and equipment."[116] (Emphasis in the original, citation omitted) II
Due to the highly “technical nature of the proceedings” before the Commission, and the voluntariness of the parties to submit to its proceedings, “the Construction Industry Arbitration Law provides for a narrow ground by which the arbitral award can be questioned[.]"[117] The Construction Industry Arbitration Law provides that arbitral awards are final and inappealable, except only on pure questions of law: SECTION 19. Finality of Awards. — The arbitral award shall be binding upon the parties. It shall be final and inappealable except on questions of law which shall be appealable to the Supreme Court. In keeping with the Construction Industry Arbitration Law, any appeal from the Commission’s arbitral tribunals must remain limited to questions of law. Its rationale is explained in Hi-Precision Steel Center, Inc. v. Lim Kim Steel Builders, Inc.:[118] Section 19 [of Executive Order No. 1008] makes it crystal clear that questions of fact cannot be raised in proceedings before the Supreme Court — which is not a trier of facts — in respect of an arbitral award rendered under the aegis of the CIAC. Consideration of the animating purpose of voluntary arbitration in general, and arbitration under the aegis of the CIAC in particular, requires us to apply rigorously the above principle embodied in Section 19 that the Arbitral Tribunal’s findings of fact shall be final and unappealable.
Voluntary arbitration involves the reference of a dispute to an impartial body, the members of which are chosen by the parties themselves, which parties freely consent in advance to abide by the arbitral award issued after proceedings where both parties had the opportunity to be heard. The basic objective is to provide a speedy and inexpensive method of settling disputes by allowing the parties to avoid the formalities, delay, expense and aggravation which commonly accompany ordinary litigation, especially litigation which goes through the entire hierarchy of courts. Executive Order No. 1008 created an arbitration facility to which the construction industry in the Philippines can have recourse. The Executive Order was enacted to encourage the early and expeditious settlement of disputes in the construction industry, a public policy the implementation of which is necessary and important for the realization of national development goals.
Aware of the objective of voluntary arbitration in the labor field, in the construction industry, and in any other area for that matter, the Court will not assist one or the other or even both parties in any effort to subvert or defeat that objective for their private purposes. The Court will not review the factual findings of an arbitral tribunal upon the artful allegation that such body had “misapprehended the facts” and will not pass upon issues which are, at bottom, issues of fact, no matter how cleverly disguised they might be as ‘’legal questions.” The parties here had recourse to arbitration and chose the arbitrators themselves; they must have had confidence in such arbitrators. The Court will not, therefore, permit the parties to relitigate before it the issues of facts previously presented and argued before the Arbitral Tribunal, save only where a very clear showing is made that, in reaching its factual conclusions, the Arbitral Tribunal committed an error so egregious and hurtful to one party as to constitute a grave abuse of discretion resulting in lack or loss of jurisdiction. Prototypical examples would be factual conclusions of the Tribunal which resulted in deprivation of one or the other party of a fair opportunity to present its position before the Arbitral Tribunal, and an award obtained through fraud or the corruption of arbitrators. Any other, more relaxed, rule would result in setting at naught the basic objective of a voluntary arbitration and would reduce arbitration to a largely inutile institution.[119] (Citations omitted) The general rule then is that the awards of the Arbitral Tribunal may be appealed only on pure questions of law, and its factual findings should be respected and upheld. Since the Construction Industry Arbitration Law does not provide when an arbitral award may be vacated, we can glean the exceptions from Spouses David v. Construction Industry and Arbitration Commission:[120] We reiterate the rule that factual findings of construction arbitrators are final and conclusive and not reviewable by this Court on appeal, except when the petitioner proves affirmatively that: (1) the award was procured by corruption, fraud or other undue means; (2) there was evident partiality or corruption of the arbitrators or of any of them; (3) the arbitrators were guilty of misconduct in refusing to postpone the hearing upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy; (4) one or more of the arbitrators were disqualified to act as such under Section nine of Republic Act No. 876 and willfully refrained from disclosing such disqualifications or of any other misbehavior by which the rights of any party have been materially prejudiced; or (5) the arbitrators exceeded their powers, or so imperfectly executed them, that a mutual, final and definite award upon the subject matter submitted to them was not made.[121] (Citation omitted) Accordingly, there is a need to determine whether the issues raised by petitioner involve questions of law or fact. A question of law arises when there is “doubt. . . as to what the law is on a certain set of facts[,]” while there is a “question of fact when the doubt arises as to the truth or falsity of the alleged facts."[122] For a question to be one of law, there must be no doubt as to the veracity or falsehood of the facts alleged, but if it involves an “examination of the probative value of the evidence presented[,]” then the question posed is one of fact.[123]
In the present case, petitioner urges us to resolve the following issues in its favor: (1) Whether it is entitled to execution pending appeal and the writ of mandamus can compel the Commission to execute the award pending appeal; (2) Whether or not the award of temperate damages amounting to P4,500,000.00 in favor of respondent SKI is supported by the evidence on record; (3) Whether it proved and substantiated its monetary claims entitling it to an additional award of P327,127,827.49, broken down as: (a) Payment to Tetra Pak Processing System of P32,572,301.44; (b) Additional amount of P47,818,032.88 for payments to SMCC Philippines, Inc.; (c) Additional amount of P2,700,486.33 for payments to Chittick Fire & Security Corporation; (d) Additional project management costs in the amount of P101,923,163.14; (e) P20,767,401.12 for termination-related costs paid to Unitan Construction and Development Corporation; (f) Additional amount of P14,403,210.44 for payment to Cape East Philippines, Inc.; and (g) Additional payment of P6,943,232.14 to Freyssinet Filipinas, Corp.;[124] (4) Whether it is entited to the full amounts of liability of respondent Mapfre under the Advance Payment Bond and the Payment Bond; and (5) Whether it is entitled to recovery of attorney’s fees and costs of arbitration. Petitioner further submits that: (1) The issue concerning its entitlement to a motion for execution pending appeal involves question of law; (2) The other issues raised involve the resolution of conflicting findings of fact by the Arbitral Tribunal and the Court of Appeals; (3) The Arbitral Tribunal and Court of Appeals manifestly overlooked certain relevant and undisputed facts that, if properly considered, would justify a different conclusion; and (4) The findings of the Court of Appeals are contradicted by the presence of evidence on record.[125] Except for the first issue, which involves a question of law, the other issues raised by petitioner, as admitted by it, are questions of fact, which necessitates a reexamination of the probative value of the evidence presented by the parties. In asking this Court to go over each claim submitted by the parties to the Arbitral Tribunal, petitioner is asking this Court to pass upon claims which are either clearly factual or require previous determination of factual issues.[126] Petitioner therefore attempts to re-litigate before us the detailed factual claims it already made before the Arbitral Tribunal and asserts that its review falls within the exceptions. However, the reasons raised by petitioner are not among the exceptional grounds to review the factual findings of the Arbitral Tribunal.
Exceptions allowed in the review of Rule 45 petitions, such as the lower court’s misapprehension of facts or a conflict in factual findings, do not apply to reviews of the Arbitral Tribunal’s decisions.[127] In reviewing factual findings of the Arbitral Tribunal, exceptions must pertain to its conduct and the qualifications of the arbitrator, and not to its errors of fact and law, misappreciation of evidence, or conflicting findings of fact.[128] It is only when “the most basic integrity of the arbitral process was imperiled” that a factual review of the findings of the arbitral tribunal may be reviewed.[129] This, the petitioner did not allege or prove in the present case.
Courts should thus defer to the factual findings of the Arbitral Tribunal as held in CE Construction Corp. v. Araneta Center, Inc.:[130] 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 inherent technical competence of and the insights drawn by the CIAC Arbitral Tribunal throughout the protracted proceedings before it. The CIAC Arbitral Tribunal perused each of the parties’ voluminous pieces of evidence. Its members personally heard, observed, tested, and propounded questions to each of the witnesses. Having been constituted solely and precisely for the purpose of resolving the dispute between ACI and CECON for 19 months, the CIAC Arbitral Tribunal devoted itself to no other task than resolving that controversy. This Court has the benefit neither of the CIAC Arbitral Tribunal’s technical competence nor of its irreplaceable experience of hearing the case, scrutinizing every piece of evidence, and probing the witnesses.
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 all anchored on considerations of the CIAC Arbitral Tribunal’s integrity and not merely on mistake, doubt, or conflict, is availing.
This Court finds no basis for casting aspersions on the integrity of the CIAC Arbitral Tribunal. There does not appear to have been an undisclosed disqualification for any of its three (3) members or proof of any prejudicial misdemeanor. There is nothing to sustain an allegation that the parties’ voluntarily selected arbitrators were corrupt, fraudulent, manifestly partial, or otherwise abusive. From all indications, it appears that the CIAC Arbitral Tribunal extended every possible opportunity for each of the parties to not only plead their case but also to arrive at a mutually beneficial settlement. This Court has ruled, precisely, that the arbitrators acted in keeping with their lawful competencies. This enabled them to come up with an otherwise definite and reliable award on the controversy before it.
Inventive, hair-splitting recitals of the supposed imperfections in the CIAC Arbitral Tribunal’s execution of its tasks will not compel this Court to supplant itself as a fact-finding, technical expert.
ACI’s refutations on each of the specific items claimed by CECON and its counterclaims of sums call for the point by point appraisal of work, progress, defects and rectifications, and delays and their causes. They are, in truth, invitations for this Court to engage in its own audit of works and corresponding financial consequences. In the alternative, its refutations insist on the application of rates, schedules, and other stipulations in the same tender documents, copies of which ACI never adduced and the efficacy of which this Court has previously discussed to be, at best, doubtful.
This Court now rectifies the error made by the Court of Appeals. By this rectification, this Court does not open the doors to an inordinate and overzealous display of this Court’s authority as a final arbiter.
Without a showing of any of the exceptional circumstances justifying factual review, it is neither this Court’s business nor in this Court’s competence to pontificate on technical matters. These include things such as fluctuations in prices of materials from 2002 to 2004, the architectural and engineering consequences — with their ensuing financial effects — of shifting from reinforced concrete to structural steel, the feasibility of rectification works for defective installations and fixtures, the viability of a given schedule of rates as against another, the audit of changes for every schematic drawing as revised by construction drawings, the proper mechanism for examining discolored and mismatched tiles, the minutiae of installing G.I. sheets and sealing cracks with epoxy sealants, or even unpaid sums for garbage collection.
The CIAC Arbitral Tribunal acted in keeping with the law, its competence, and the adduced evidence; thus, this Court upholds and reinstates the CIAC Arbitral Tribunal’s monetary awards.[131] (Citation omitted) Moreover, the parties voluntarily submitted to arbitration any dispute arising from their contract and acknowledged that an Arbitral Tribunal constituted under the Commission has full competence to rule on the dispute presented to it. “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[.]"[132]
Article 6 of the Articles of Agreement of the parties provides that: If any dispute or difference shall arise as to:
(1) The interpretation of the Contract Documents, or;
(2) Any dispute on any matter or thing of any nature arising out of or in connection with this Contract between the Owner (or Project Manager on the Owner’s behalf) and the Contractor either during the progress or after the completion or abandonment of The Works or after the termination of the employment of the Contractor, it shall be referred to arbitration in accordance with Clause 10 of the Conditions of the Contract.[133] Clause 10.1 of the Conditions of the Contract provides that: Provided always that in case any dispute or difference shall arise between the Owner (or the Project Manager on the Owner’s behalf) and the Contractor, either during the progress or after the completion or abandonment of The Works as to the construction of this Contract or as to any matter of whatsoever nature arising thereunder or in connection therewi