DEPARTMENT OF ENVIRONMENT AND NATURAL RESOURCES (DENR), PETITIONER, VS. HON. EDGAR DALMACIO SANTOS, PRESIDING JUDGE OF REGIONAL TRIAL COURT, BRANCH 222, QUEZON CITY AND UNITED P…

Department of Environment and Natural Resources versus Santos

The Case

This is a petition for certiorari filed by the Department of Environment and Natural Resources against Judge Edgar Dalmacio Santos, Presiding Judge of the Regional Trial Court of Quezon City, Branch 222, and against United Planners and Consultants, Inc. The Department asks the Supreme Court to annul the trial court's orders confirming and enforcing an arbitral award in favor of the private respondent. The case matters because it fixes the boundary between a legitimate challenge to an arbitral award and a prohibited attack on its merits, and because it settles which reglementary period governs — the fifteen days of the Special Rules of Court on Alternative Dispute Resolution, or the sixty days of Rule 65 of the Rules of Court.

Procedural History

The dispute began when United Planners and Consultants sued the Department before the Regional Trial Court of Quezon City, praying that their dispute be referred to arbitration under the arbitration clause of their Consultancy Agreement. The trial court appointed the first two arbitrators, who in turn chose the third, and the court-referred arbitration proceeded. The Arbitral Tribunal rendered its award in favor of United Planners and Consultants. The trial court confirmed the award and later, on motion, ordered the issuance of a writ of execution. The Department moved to quash the writ, and the trial court denied the motion. The Department then went directly to the Supreme Court by petition for certiorari under Rule 65, imputing grave abuse of discretion to the trial court. The Supreme Court dismissed the petition.

Facts

On 26 July 1993, the Department and United Planners and Consultants executed an Agreement for Consultancy Services. Under that agreement, the Department would pay the consultant a predetermined percentage of the contract price corresponding to each stage of work accomplished. In December 1994, the consultant completed the work, and the Department formally accepted it. The Department paid 2,038,456 pesos and 30 centavos, or 47 percent of the contract price.

On 25 October 1994, the Commission on Audit released a Technical Services Office Report stating that the Consultancy Agreement was 84.14 percent excessive. The Department then suspended payment, but it acknowledged its liability to the consultant in the amount of 2,239,479 pesos and 60 centavos and assured the consultant that payment would be made at the soonest possible time.

The consultant filed a complaint praying that the dispute be submitted to arbitration. The Department answered, pleading as a counterclaim that the excess payment of 37.14 percent, amounting to 1,350,585 pesos and 44 centavos, should be returned to the government. The trial court appointed the arbitrators, and the Tribunal rendered its award in favor of the consultant. The Department complained that its draft decision was never considered and that it was not furnished a copy of the award. The trial court confirmed the award, ordered the Department to pay 50,000 pesos as the cost of confirmation, and later directed the issuance of a writ of execution. The Department's motion to quash was denied, and it came to the Supreme Court.

Issues

• Whether or not the petition should be dismissed for assailing the merits of the arbitral award in violation of the Special Rules of Court on Alternative Dispute Resolution.
• Whether or not the petition should be dismissed for having been filed beyond the fifteen-day reglementary period fixed by those Special Rules.

Applicable Provisions

Rule 19.7 of the Special Rules of Court on Alternative Dispute Resolution provides:

Rule 19.7. No appeal or certiorari on the merits of an arbitral award. — An agreement to refer a dispute to arbitration shall mean that the arbitral award is final and binding. Consequently, a party to an arbitration is precluded from filing an appeal or a petition for certiorari questioning the merits of an arbitral award.

This is the provision that bars the Department's attack on the correctness of the award itself.

Rule 19.8 of the same Special Rules provides:

Rule 19.8. Subject matter and governing rules. — The remedy of an appeal through a petition for review or the remedy of a special civil action of certiorari from a decision of the Regional Trial Court made under the Special ADR Rules shall be allowed in the instances, and only in the manner, provided under this Rule.

This confines the remedy of certiorari to the instances and the manner that the Special Rules themselves allow.

Rule 19.28 of the same Special Rules provides:

Rule 19.28. When to file petition. — The petition must be filed with the Court of Appeals within fifteen (15) days from notice of the judgment, order or resolution sought to be annulled or set aside. No extension of time to file petition shall be allowed.

This is the fifteen-day period that the Department failed to observe.

Rule 19.30 of the same Special Rules provides:

Rule 19.30. Court to dismiss petition. — The court shall dismiss the petition if it fails to comply with Rules 19.27 and 19.28 above, or upon consideration of the ground alleged and the legal briefs submitted by the parties, the petition does not appear to be prima facie meritorious.

This commands dismissal for noncompliance with the period just quoted.

Ruling

On the first issue, the Court ruled in the affirmative and dismissed the petition for assailing the merits of the arbitral award. It examined the petition and found that the Department was really questioning the propriety of the consultant's money claim, including the argument that the claim should first have been filed with the Commission on Audit. That question, the Court said, delves into the very merit of the award, because it was one of the issues submitted to the Tribunal. The Court stressed that the State encourages arbitration as a means to achieve speedy and impartial justice and to declog court dockets, and that a party who agreed to arbitrate is precluded from questioning the merits of the award, since to allow it would render the arbitration proceedings nugatory.

On the second issue, the Court also ruled in the affirmative and dismissed the petition as filed out of time. The Department received the order granting execution on 11 November 2011, and the order denying its motion to quash on 12 July 2012. Counting from 12 July 2012, it had fifteen days, or until 27 July 2012, to file its petition with the Court of Appeals. It filed on 10 September 2012, well beyond the period. The Court rejected the argument that the sixty-day period of Rule 65 governed, holding that since the petition assailed the merits and not mere procedural irregularities, it is the Special Rules that apply. It added that when two rules apply to a particular case, that which was specially designed for that case must prevail over the other. Procedural rules, the Court reminded, do not exist simply for the convenience of litigants, and the provisions on reglementary period must be strictly complied with. The Court listed the recognized exceptions to strict observance but found none present, noting that almost twenty years had lapsed since the consultant delivered the expected output, and that further delay would be detrimental to fair play and substantial justice.

Doctrine

First, an agreement to refer a dispute to arbitration means that the arbitral award is final and binding, and a party is precluded from filing an appeal or a petition for certiorari questioning the merits of the award. Second, the remedy of certiorari from a decision of the Regional Trial Court under the Special Rules is allowed only in the instances and only in the manner provided by those Rules. Third, the petition must be filed with the Court of Appeals within fifteen days from notice, with no extension allowed, and failure to comply is a ground for dismissal. Fourth, where the Special Rules and the Rules of Court both apply, the rules specially designed for the case prevail. Fifth, the reglementary period is a jurisdictional caveat that must be strictly observed, and the recognized exceptions apply only upon a reasonable or meritorious explanation.

Disposition

The Supreme Court dismissed the petition, leaving the arbitral award and the trial court's orders confirming and enforcing it in force in favor of United Planners and Consultants, Inc.

Remember This

Memorize this line: an arbitral award is final and binding, and a party may not use certiorari to question its merits, only to raise the specific grounds the Special Rules allow, within fifteen days. Examiners use this case to test the finality of arbitral awards and the conflict between the fifteen-day period of the Special Rules and the sixty-day period of Rule 65.