ELPIDIO S. UY, DOING BUSINESS UNDER THE NAME AND STYLE EDISON DEVELOPMENT & CONSTRUCTION, PETITIONER, VS. HONORABLE COURT OF APPEALS AND THE HERITAGE PARK MANAGEMENT CORPORATION…

Uy versus Heritage Park Management Corporation

The Case

This is a petition for review brought by Elpidio Uy, a sole proprietor doing business as Edison Development and Construction, against the Heritage Park Management Corporation, the corporation formed by the certificate holders of the Heritage Memorial Park project in Fort Bonifacio. Uy had won a money judgment from the Construction Industry Arbitration Commission against the Public Estates Authority for unpaid progress billings and other costs under two construction contracts. The Heritage Park Management Corporation, which was never impleaded in the arbitration, went to the Court of Appeals and obtained a ruling voiding the arbitral award and the writs of execution and garnishment insofar as its interests were concerned. The case matters because it teaches the bar candidate two enduring lessons: who is an indispensable party in construction arbitration, and how the absence of that party affects the jurisdiction of the Construction Industry Arbitration Commission.

Procedural History

Uy filed a complaint against the Public Estates Authority before the Construction Industry Arbitration Commission, seeking payment for progress billings on the landscaping and terrasoleum projects. The Commission rendered judgment in his favor, awarding monetary claims plus interest and attorney's fees. An alias writ of execution was issued, and a notice of garnishment was served on the Heritage Park Management Corporation. That corporation then filed a petition for injunction and prohibition before the Court of Appeals, arguing that the Commission had no jurisdiction over the subject matter because it had not been impleaded and was deprived of its right to be heard. The Court of Appeals granted the petition and declared the Commission's rulings void from the beginning insofar as the corporation's interests were concerned. Uy elevated the matter to the Supreme Court by petition for review.

Facts

The Heritage Memorial Park is a flagship project of the Bases Conversion Development Authority in Fort Bonifacio. To implement it, the Authority entered into a Pool Formation Trust Agreement with the Philippine National Bank and the Public Estates Authority. The Authority was the project owner, the Public Estates Authority was the project manager, and the Philippine National Bank was the trustee. Under the agreement, the Public Estates Authority was tasked to implement and complete the engineering works and improvements of the park.

On November 20, 1996, the Public Estates Authority and Uy executed a Landscaping and Construction Agreement whereby Uy undertook the landscaping and the construction of a terrasoleum. The agreement was approved by the Heritage Park Executive Committee in May 1997. Pursuant to the trust agreement, the certificate holders organized themselves in April 1999 into a non-stock, non-profit corporation, the Heritage Park Management Corporation. In October 1999, the Executive Committee terminated the two construction contracts, citing delay and a huge discrepancy between the accomplishment report and the actual physical accomplishment.

On March 17, 2000, the corporation assumed all the functions, duties, and responsibilities of the Public Estates Authority under the trust agreement, and the Authority turned over to it all documents and equipment relating to the project. Uy was informed of these incidents by letter. On May 31, 2001, Uy filed his complaint before the Construction Industry Arbitration Commission against the Public Estates Authority alone. The Commission ruled in his favor, and when execution and garnishment followed, the corporation challenged the proceedings before the Court of Appeals.

Issues

• Whether or not the Heritage Park Management Corporation is a real party in interest or an indispensable party to the arbitration case.
• Whether or not the Construction Industry Arbitration Commission had jurisdiction over the dispute despite the non-joinder of the corporation.
• Whether or not the grant of the writs of injunction and prohibition was proper.

Applicable Provisions

Section 4 of Executive Order Number 1008, creating the arbitration machinery for the Philippine construction industry, provides:

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 disputes 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.

This provision makes the Commission's jurisdiction over a party depend on that party's agreement and consent to submit the dispute to arbitration.

Section 7 of Rule 3 of the Rules of Court, on the compulsory joinder of indispensable parties, provides:

Parties in interest without whom no final determination can be had of an action shall be joined either as plaintiffs or defendants.

This rule supplies the consequence of the corporation's absence: without it, no final determination of the case can be had.

Ruling

On the first issue, the Court held that the Heritage Park Management Corporation is an indispensable party. An indispensable party is one whose interest will be affected by the court's action in the litigation, and without whom no final determination of the case can be had; the party's interest in the subject matter and in the relief sought are so inextricably intertwined with the other parties' that legal presence is an absolute necessity. The Court reasoned that the Public Estates Authority entered the construction agreement in its capacity as project manager under the trust agreement, and that upon the formation of the corporation, the Authority would turn over to it all contracts relating to the park. By a deed of assignment, the Authority assigned its interests in all existing contracts to the corporation, and as early as March 2000 it had turned over all documents and equipment, of which Uy was duly informed. By the time the arbitration case was filed, the Authority was no longer a party in interest; it was the corporation, as assignee, that stood to be benefited or injured by the judgment.

On the second issue, the Court held that while both parties had agreed to submit the dispute to arbitration, the Commission should have dismissed the case because the corporation, an indispensable party, was not impleaded. The Court stressed that the responsibility of impleading all indispensable parties rests on the plaintiff, and that the absence of an indispensable party renders all subsequent actuations of the court null and void for want of authority to act, not only as to the absent parties but even as to those present.

On the third issue, the Court held that the question of the propriety of the writs of injunction and prohibition had been mooted by its dispositions on the first two issues and had become academic.

Doctrine

An indispensable party is one whose interest will be affected by the court's action in the litigation, and without whom no final determination of the case can be had. The test is whether the party's interest in the subject matter and in the relief sought is so inextricably intertwined with the other parties' that legal presence is an absolute necessity. Under Section 4 of Executive Order Number 1008, the jurisdiction of the Construction Industry Arbitration Commission over a party depends on that party's agreement and consent to submit the dispute to voluntary arbitration; absent such consent, the Commission cannot validly proceed against that party for lack of jurisdiction. The duty to implead indispensable parties rests on the plaintiff, and the absence of an indispensable party renders all subsequent actuations of the court null and void for want of authority to act, not only as to the absent parties but even as to those present.

Disposition

The petition was denied, without prejudice to the re-filing of the case against the proper party in interest, with costs against Uy.

Remember This

Memorize this line: the absence of an indispensable party renders all subsequent actuations of the court null and void, even as to those present. Examiners use this case to test indispensable parties, the consent requirement for Construction Industry Arbitration Commission jurisdiction, and the consequences of non-joinder in construction arbitration.