HI-PRECISION STEEL CENTER, INC., PETITIONER, VS. LIM KIM STEEL BUILDERS, INC., AND CONSTRUCTION INDUSTRY ARBITRATION COMMISSION, RESPONDENTS.

On 18 June 1993, a “Petition
for Extension to File Petition for Review”^[1] was filed before the Court, petitioner
Hi-Precision Steel Center, Inc. (“Hi-Precision”) stating that it
intended to file a Petition for Review on Certiorari in respect of the
13 November 1992 Award^[2] and 13 May 1993 Order^[3] of public respondent Construction Industry
Arbitration Commission (“CIAC”) in Arbitration Case No. 13-­90. The Petition (really a Motion) prayed for an
extension of thirty (30) days or until 21 July 1993 within which to file
a Petition for Review.

An Opposition^[4] to
the Motion was filed by private respondent Lim Kim Steel Builders, Inc.
(“Steel Builders”) on 5 July 1993. On the same day, however, the Court issued a Resolution^[5]
granting the Motion with a warning that no further extension would be given.

The Opposition, the subsequent Reply^[6] of
petitioner filed on 20 July 1993 and the Petition for Review^[7]
dated 21 July 1993, were noted
by the Court in its Resolution^[8] of 28 July 1993. The Court also required private respondent
Steel Builders to file a Comment on the Petition for Review and Steel Builders
complied.

The Petition prays for issuance of a temporary restraining order^[9]
to stay the execution of the assailed Order and Award in favor of Steel
Builders, which application the Court merely noted, as it did subsequent Urgent
Motions for a temporary restraining order.^[10]

Petitioner Hi-Precision entered into a contract with private
respondent Steel Builders under which the latter as Contractor was to complete a P21 Million construction project
owned by the former within a period of 153 days, i.e. from 8 May 1990 to 8
October 1990. The project completion
date was first moved to 4 November 1990. On that date, however,
only 75.8674% of the project was actually completed. Petitioner attributed this non-completion to Steel Builders which
allegedly had frequently incurred delays during the original contract period
and the extension period. Upon the
other hand, Steel Builders insisted that
the delays in the project were either excusable or due to Hi-Precision’s
own fault and issuance of change orders. The project was taken
over on 7 November 1990, and eventually completed on February 1991, by
Hi-Precision.

Steel Builders filed a “Request for Adjudication” with public respondent CIAC. In its Complaint filed with the CIAC, Steel
Builders sought payment of its unpaid progress billings, alleged unearned
profits and other receivables. Hi-Precision, upon the other hand, in its Answer and Amended Answer, claimed actual and
liquidated damages, reimbursement of alleged additional costs it had incurred
in order to complete the project and attorney’s fees.

The CIAC formed an Arbitral Tribunal with three (3) members, two
(2) being appointed upon nomination of Hi-Precision and Steel Builders,
respectively; the third member (the Chairman) was appointed by the CIAC as a
common nominee of the two (2) parties. Only the Chairman was a lawyer. After the arbitration proceeding, the Arbitral Tribunal rendered a
unanimous Award dated 13 November 1992, the dispositive portion of which reads
as follows:

“WHEREFORE, premises considered, the Owner [petitioner
Hi-Precision] is ordered to pay the Contractor [private respondent Steel
Builders] the amount of P6,400,717.83 and all other claims of the parties
against each other are deemed compensated and offset. No pronouncement as to costs.

The Parties are enjoined to abide by the award.”^[11]

Upon motions for reconsideration filed,
respectively, by Hi-Precision and Steel Builders, the Arbitral Tribunal issued
an Order dated 13 May 1993 which reduced the net amount due to contractor Steel
Builders to P6,115,285.83.^[12]

In its Award, the Arbitral Tribunal stated that it was guided by
Articles 1169, 1192 and 2215 of the Civil Code. With such guidance, the
arbitrators concluded that (a) both parties were at fault, though the Tribunal
could not point out which of the parties was the first infractor; and (b) the
breaches by one party affected the discharge of the reciprocal obligations of
the other party. With mutual fault as a
principal premise, the Arbitral Tribunal denied (a) petitioner’s claims for the
additional costs allegedly incurred to complete the project; and (b) private
respondent’s claim for profit it had failed to earn because of petitioner’s
take over of the project.

The Tribunal then
proceeded to resolve the remaining specific claims of the parties. In disposing of these multiple, detailed
claims, the Arbitral Tribunal, in respect of one or more of the respective
claims of the parties: (a) averaged out
the conflicting amounts and percentages claimed by the parties;^[13] (b) found neither basis nor justifica­tion
for a particular claim;^[14] (c) found the evidence submitted in support
of particular claims either weak or non-existent;^[15] (d) took account of the admissions of
liability in respect of particular claims;^[16] (e) relied on its own expertise in
resolving particular claims;^[17] and (f) applied a “principle of equity”
in requiring each party to bear its own loss resulting or arising from mutual
fault or delay (compensatio morae).^[18]

Petitioner Hi-Precision
now asks this Court to set aside the Award, contending basically that it
was the contractor Steel Builders who had defaulted on its contractual undertakings and so could not be
the injured party and should not be allowed to recover any losses it may have
incurred in the project. Petitioner
Hi-Precision insists it is entitled to damages, and claims that the Arbitral
Tribunal committed grave abuse of discretion when it allowed certain claims by
Steel Builders and offset them against claims of Hi-Precision.

A preliminary point needs
to be made. We note that the Arbitral
Tribunal has not been impleaded as a respondent in the Petition at bar. The CIAC has indeed been impleaded; however,
the Arbitral Award was not rendered by the CIAC, but rather by the Arbitral
Tribunal. Moreover, under Section 20 of
Executive Order No. 1008, dated 4 February 1985, as amended, it is the Arbitral
Tribunal, or the single Arbitrator, with the concurrence of the CIAC, which
issues the writ of execution requiring any sheriff or other proper officer to
execute the award. We consider that the
Arbitral Tribunal which rendered the Award sought to be reviewed and set aside,
should be impleaded even though the defense of its Award would presumably have
to be carried by the prevailing party.

Petitioner Hi-Precision
apparently seeks review both under Rule 45 and Rule 65 of the Rules of Court.^[19] We do not find it necessary to rule which of
the two: a petition for review under
Rule 45 or a petition for certiorari under Rule 65 — is necessary under
Executive Order No. 1008, as amended; this issue was, in any case, not squarely
raised by either party and has not been properly and adequately litigated.

In its Petition,
Hi-Precision purports to raise “legal issues,” and in presenting
these issues, prefaced each with a creative formula:

(1)

“The public respondent [should be the ‘Arbitral Tribunal’] committed
serious error in law, if not grave abuse of discretion, when it failed to
strictly apply Article 1191, New Civil Code, against the contractor x x
x”;

(2)

“The public respondent committed serious error in law, if
not grave abuse of discretion, when it failed to rule in favor of the
owner, now petitioner herein, all the awards it claimed on arbitration,
and when it nonetheless persisted in its awards of damages in favor of the
respondent. x x x;”

(3)

“The public respondent committed serious error in law, if
not grave abuse of discretion, for its abject failure to apply the doctrine
of waiver, or estoppel against the contractor, the private respondent herein,
when it agreed on November 16, 1990 to award termination of the contract and
the owner’s takeover of the project x x x;”

(4)

“The public respondent committed serious error in law, if
not grave abuse of discretion, when it did not enforce the law between
the parties, the ‘technical specification[s]’ which is one of the contract
documents, particularly to par. (a), sub–part 3.01, part 3, Sec. 2b, which
expressly requires that major site work activities like stripping, removal and
stockpiling of top soil shall be done ‘prior to the start of regular excavation
or backfilling work’, the principal issue in arbitration being non–compliance
with the contract documents;”

(5)

“The public respondent committed serious error in law, if
not grave abuse of discretion,
when it found, in the May 13, 1993 Order, the petitioner ‘guilty of estoppel’
although it is claimed that the legal doctrine of estoppel does not apply with
respect to the required written formalities in the issuance of a change order x
x x;”

(6)

“The exceptional circumstances in Remalante vs. Tibe,
158 SCRA 138, where the Honorable Supreme Court may review findings of
facts, are present in the instant case, namely; (a) when the inference made
is manifestly absurd, mistaken or impossible (Luna vs. Linatoc, 74 Phil.
15); (2) when there is grave abuse of discretion in the appreciation of facts (Buyco
v. People, 95 Phil. 253); (3) when the judgment is premised on a misapprehension
of facts (De la Cruz v. Sosing,
94 Phil. 26, and Castillo vs. CA, 124 SCRA 808); (4) when the findings of fact are
conflicting (Casica v. Villaseca, 101 Phil. 1205); (5) when the findings
are contrary to the admissions of the parties (Evangelista v. Alto Surety,
103 Phil. 401), and therefore, the findings of facts of the public respondent
in the instant case may be reviewed by the Honorable Supreme Court.”^[20]
(Underscoring partly supplied and partly in the original)

From
the foregoing, petitioner Hi-Precision may be seen to be making two (2) basic
arguments:

(a)   Petitioner asks this Court to correct legal
errors committed by the Arbitral Tribunal, which at the same time constitute
grave abuse of discretion amounting to lack of jurisdiction on the part of the
Arbitral Tribunal; and

(b)   Should the supposed errors petitioner asks us
to correct be characterized as errors of fact, such factual errors should
nonetheless be reviewed because there was “grave abuse of discretion”
in the appreciation of facts and because there was misapprehension of facts on
the part of the Arbitral Tribunal.

Executive Order No. 1008, as amended, provides, in
its Section 19, as follows:

“Sec. 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.”

Section 19 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
inappealable.

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.^[21]

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.^[22]
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.^[23] 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.

Examination of the
Petition at bar reveals that it is essentially an attempt to re-assert and
re-litigate before this Court the detailed or itemized factual claims made
before the Arbitral Tribunal under a general averment that the Arbitral
Tribunal had “misapprehended the facts” submitted to it. In the present Petition, too, Hi-Precision
claims that the Arbitral Tribunal had committed grave abuse of discretion
amounting to lack of jurisdiction in reaching its factual and legal
conclusions.

The first “legal
issue” submitted by the Petition is the claimed misapplication by the
Arbitral Tribunal of the first and second paragraphs of Article 1191 of the
Civil Code.^[24] Article 1191 reads:

“Art. 1191. The power
to rescind obligations is implied in reciprocal ones, in case one of the
obligors should not comply with what is incumbent upon him.

The injured party may choose between the fulfillment and the
rescission of the obligation, with the payment of damages in either case. He may also seek rescission, even after he
has chosen fulfillment, if the latter should become impossible.

The court shall decree the rescission claimed, unless there be just
cause authorizing the fixing of a period.

This is understood to be without prejudice to the rights of third
persons who have acquired the thing, in accordance with articles 1385 and 1388
and the Mortgage Law.”

Hi-Precision contends energetically that
it is the injured party and that Steel Builders was the obligor who did not
comply with what was incumbent upon it, such that Steel Builders was the party
in default and the entity guilty of negligence and delay. As the injured party, Hi-Precision maintains
that it may choose between the fulfillment or rescission of the obligation in
accordance with Article 1191, and is entitled to damages in either case. Thus, Hi-Precision continues, when the
contractor Steel Builders defaulted on the 153rd day of the original contract
period, Hi-Precision opted for specific performance and gave Steel Builders a
30-day extension period with which to complete the project.

What petitioner Hi-Precision, in its above argument, disregards
is that the determination of whether Hi-Precision or Steel Builders was the
“injured party” is not to be resolved by an application of Article
1191. That determination is eminently a
question of fact, for it requires ascertainment and identification of which of
the two (2) contending parties had first failed to comply with what was
incumbent upon it. In other words, the
supposed misapplication of Article 1191, while ostensibly a “legal
issue,” is ultimately a question of fact, i.e., the determination of the
existence or non-existence of a fact or set of facts in respect of which
Article 1191 may be properly applied. Thus, to ask this Court to correct a claimed misapplication or
non-application of Article 1191 is to compel this Court to determine which of the two (2) contending parties was the “injured party” or the
“first infractor.” As
noted earlier, the Arbitral Tribunal after the prolonged arbitration
proceeding, was unable to make that
factual determination and instead concluded that both parties had committed breaches of
their respective obligations. We will not review, and much less
reverse, that basic factual
finding of the Arbitral Tribunal.

A second “legal
issue” sought to be raised by petitioner
Hi-Precision relates to the supposed failure of the Arbitral Tribunal to apply the doctrines of estoppel and waiver as against Steel Builders.^[25] The
Arbitral Tribunal, after
declaring that the parties were mutually at fault, proceeded to enumerate the
faults of each of the parties. One of
the faults attributed to petitioner Hi-Precision is that it had failed to give the
contractor Steel Builders the required 15-day notice for termination of the contract.^[26] This was clearly a finding of fact on the part of the Tribunal, supported by
the circumstance that per the record,
petitioner had offered no proof that it had complied with such 15-day notice required under Article 28.01 of the General Conditions of
Contract forming part of the Contract Documents. Petitioner Hi-Precision’s argument is that a written Agreement dated 16
November 1990 with Steel Builders concerning
the take over of the project by Hi-Precision,
constituted waiver on the part of the latter of its right to a 15-day notice of contract termination. Whether
or not that Agreement dated 16 November 1990 (a document not submitted to this Court) is properly characterized as constituting waiver
on the part of Steel Builders, may be conceded
to be prima facie a question of law;
but, if it is, and assuming arguendo that the Arbitral Tribunal had erred in resolving it,
that error clearly did not constitute a grave
abuse of discretion resulting in lack or
loss of jurisdiction on the part of the Tribunal.

A
third “legal issue”
posed by Hi-Precision relates to the
supposed failure on the part of the Arbitral Tribunal “to uphold the supremacy of ‘the
law between the parties’ and enforce it
against private respondent [Steel Builders].”^[27] The
“law between that parties” here involved is the “Technical Specifications” forming part
of the Contract Documents. Hi-Precision
asserts that the Arbitral Tribunal did not uphold the “law between the parties,” but instead substituted
the same with “its [own] absurd inference
and ‘opinion’ on mud.” Here again, petitioner is merely disguising a factual question as a “legal issue,” since
petitioner is in reality asking this Court
to review the physical operations relating, e.g., to site preparation carried out by the
contractor Steel Builders and to
determine whether such operations were in accordance with the Technical Specifications of the project. The
Arbitral Tribunal resolved Hi-Precision’s claim by finding that Steel Builders
had complied substantially with the Technical Specifications. This Court will not pretend that it has the
technical and engineering capability to review the resolution of that factual
issue by the Arbitral Tribunal.

Finally, the Petition
asks this Court to “review serious errors in the findings of fact of the
[Arbitral Tribunal].”^[28] In this section of its Petition,
Hi-Precision asks us to examine each item of its own claims which the Arbitral
Tribunal had rejected in its Award, and each claim of the contractor Steel
Builders which the Tribunal had granted. In respect of each item of the owner’s claims and each item of the
contractor’s claims, Hi-Precision sets out its arguments, to all appearances
the same arguments it had raised before the Tribunal. As summarized in the Arbitral Award, Contractor’s Claims were as
follows:

Upon the other hand, the petitioner’s claims
we are asked to review and grant are summarized as follows:

We consider that in
asking this Court to go over each individual claim submitted by it and each
individual countering claim submitted by Steel Builders to the Arbitral
Tribunal, petitioner Hi-Precision is asking this Court to pass upon claims
which are either clearly and directly factual in nature or require previous
determination of factual issues. This
upon the one hand. Upon the other hand,
the Court considers that petitioner Hi-Precision has failed to show any serious
errors of law amounting to grave abuse of discretion resulting in lack of
jurisdiction on the part of the Arbitral Tribunal, in either the methods
employed or the results reached by the Arbitral Tribunal, in disposing of the
detailed claims of the respective parties.

WHEREFORE, for all the foregoing, the Petition
is hereby DISMISSED for lack of
merit. Costs against petitioner.

SO ORDERED.

Bidin, Romero, Melo, and
Vitug, JJ., concur.

^[1]
Rollo, pp. 2-9.

^[2]
Id., pp. 137-181.

^[3]
Id., pp. 11-23.

^[4]
Id., pp. 24-26.

^[5]
Id., p. 23-a.

^[6]
Id., pp. 29-32.

^[7]
Id., pp. 42-136.

^[8]
Id., p. 181-a

^[9]
Id., p. 89; Rollo, p. 131.

^[10]
Urgent Motions for the Issuance of a Temporary Restraining Order dated 5 August
1993; 25 August 1993; 20 September 1993; 21 October 1993.

^[11]
Rollo, pp. 180-181.

^[12]
Id., p. 23.

^[13]
Claims concerning Contractor’s Claim No. 1; Owner’s Claim No. 1; Unpaid
Progressive Billing; Change Order No. 6; Change Order No. 8.

^[14]
Claims concerning Change Order No. 1.

^[15]
Claims concerning Change Order No. 2; Change Order No. 3; Change Order No. 4;
Change Order No. 5; Change Order No. 11; Change Order No. 16.

^[16]
Claims concerning Change Order No. 9; Change Order No. 10; Change Order No. 17.

^[17]
Claims concerning Change Order No. 7; Change Order No. 12; Change Order No. 13;
Change Order No. 14.

^[18]
Claims concerning Contractor’s Claim No. 19; Contractor’s Claim No. 20;
Contractor’s Claim No. 21; Contractor’s Claim No. 22; Contractor’s Claim No.
23; Contractor’s Claim No. 24; Contractor’s Claim No. 25; Contractor’s Claim
No. 27; Contractor’s Claim No. 28; Contractor’s Claim No. 29; Contractor’s
Claim No. 30; Owner’s Claim No. 3.

^[19]
The Petition said, inter alia: “[t]he prevalence of grave abuse
of discretion in the May 13, 1993 Order on appeal in this Petition under
Rule 45 is made more manifest in the November 13, 1992 Arbitral Award,
the principal resolution subject of the motion for reconsideration denied by
the May 13, 1993 Order, and thus, it becomes procedurally Appropriate and
necessary, in the interest of truth and justice, to respectfully pray the Honorable Court to likewise
review on certiorari under Rule 65, the November 13, 1992 award.”
(Underscoring supplied)

^[20]
Rollo, pp. 74-76.

^[21]
See first three (3) Whereas clauses and Section 2 of Executive Order No. 1008,
as amended.

^[22]
See: Asian Construction and Development Corporation v. Construction
Industry Arbitration Commission, et al, 218 SCRA 529 (1993); Chung Fu v.
Court of Appeals, 206 SCRA 545 (1992); Primary Structures Corp. v.
Victor P. Lazatin, etc., et al., G.R. No. 101258, July 13, 1992 (unsigned
resolution); A.C. Enterprises, Inc. v. Construction Industry Arbitration
Commission, et al., G.R. No. 101444, February 10, 1992 (unsigned
resolution); and Sime Darby Pilipinas, Inc. v. Magsalin, 180 SCRA 177
(1989).

^[23]
It is noteworthy that Section 24 of R.A. No. 876 known as “An Act to
Authorize the Making of Arbitration and Submission Agreements, to Provide for
the Appointment of Arbitrators
and the Procedure for Arbitration in Civil Controversies, and for Other
Purposes” (approved on 29 June 1953)
sets out the following grounds for vacating an arbitral award:

“Sec. 24. Grounds for
vacating award. — In any one of the following cases, the court must make an order vacating award upon the
petition of any party to the controversy when such party proved affirmatively
that in the arbitration proceedings;

(a)    
The award was procured by corruption, fraud or other undue
means; or

(b)    
That there was evident partiality or corruption in the
arbitrators or any of them; or

(c)     That
the arbitrators were guilty of misconduct in refusing to postpone the hearing
upon sufficient cause shown, or in refusing to hear evidence pertinent and
material to the controversy; that one or more of the arbitrators was
disqualified to act as such under section nine hereof, and willfully refrained
from disclosing such disqualifications or of any other misbehavior by which the
rights of any party have been materially prejudiced; or

(d)     That
the arbitrators exceeded their powers, or so imperfectly executed them, that a
mutual, final and definite award upon the subject matter submitted to them was
not made.

x x x                                         x
x x                                         x
x x”

^[24]
Petition, Rollo, pp. 93-97.

^[25]
Id., Rollo, pp. 77-80.

^[26]
Arbitral Award, Rollo, p. 153.

^[27]
Petition, Rollo, pp.
80-90.

^[28]
Id., Rollo, p. 97 et seq.

^[29]
Rollo, pp. 111-112.

^[30]
Id., pp. 131-133.