WILLIAM GOLANGCO CONSTRUCTION CORPORATION, PETITIONER, VS. RAY BURTON DEVELOPMENT CORPORATION, RESPONDENT.

William Golangco Construction versus Ray Burton Development

The Case

This is a petition for review on certiorari brought by William Golangco Construction Corporation against Ray Burton Development Corporation, arising from a construction contract for a condominium project and a claim for unpaid sums running to tens of millions of pesos. The construction firm filed its money claims before the Construction Industry Arbitration Commission, and the owner moved to dismiss on the ground that the parties had agreed to arbitrate only disputes over the interpretation of contract documents. The case matters because it settles two things a reviewee must know: the mandatory character of the formal requirements for a petition for certiorari, and the breadth of the Construction Industry Arbitration Commission's jurisdiction once a construction contract contains an arbitration clause.

Procedural History

The construction firm filed a complaint with a request for arbitration before the Construction Industry Arbitration Commission. The owner filed a motion to dismiss for lack of jurisdiction. The Commission denied the motion, holding that the arbitration clause covered any dispute arising under the contract and that, in any event, the bare agreement to submit a construction dispute to arbitration vested it with original and exclusive jurisdiction. The owner then moved to suspend proceedings, and the Commission denied that motion as well, giving the owner a short, non-extendible period to file its answer and to nominate arbitrators.

The owner went to the Court of Appeals on a petition for certiorari and prohibition with a prayer for a temporary restraining order and a writ of preliminary injunction, insisting that the Commission had acted without or in excess of jurisdiction. The Court of Appeals granted the petition, ruling that the Commission had no jurisdiction because the parties had agreed to arbitrate only disputes regarding differences in interpretation of the contract documents, while the complaint made out a case for collection of a sum of money. The construction firm's motion for reconsideration was denied. Hence, the construction firm elevated the matter to the Supreme Court by petition for review on certiorari under Rule 45.

Facts

On July 20, 1995, Ray Burton Development Corporation, as owner, and William Golangco Construction Corporation, as contractor, entered into a contract for the construction of the Elizabeth Place, an office and residential condominium. The contract contained an arbitration clause. Under Clause 17.1.1, any dispute arising in the course of the execution of the contract by reason of differences in interpretation of the contract documents which the owner and the contractor could not resolve between themselves would be submitted to a Board of Arbitrators composed of three members. Under Clause 17.2, matters not otherwise provided for in the contract or by special agreement would be governed by the Construction Arbitration Law, and, as a last resort, any dispute not resolved by the Board of Arbitrators would be submitted to the Construction Arbitration Authority created by the government.

On March 18, 2002, the construction firm filed a complaint with a request for arbitration before the Construction Industry Arbitration Commission, praying for payment of the unpaid balance on the contract price, the unpaid balance on the labor cost adjustment, the unpaid balance of additive works, extended overhead expenses, materials cost adjustment and trade contractors' utilities expenses, and interest charges on unpaid overdue billings, for a total of 53,667,219 pesos and 45 centavos, plus interest at prevailing bank rates from March 1, 2002 until fully paid.

The owner moved to dismiss on April 12, 2002, arguing that the Commission acquires jurisdiction only when the parties agree to submit the dispute to voluntary arbitration, and that under their contract only disputes arising from differences in interpretation of the contract documents were deemed subject to arbitration. The construction firm opposed, averring that its claims required contract interpretation and were cognizable by the Commission under the arbitration clause, and that even assuming otherwise, the clause mandated their direct filing with the Commission. The Commission denied the motion to dismiss and later denied the motion to suspend proceedings.

Issues

• Whether or not the Court of Appeals acted with grave abuse of discretion in failing to dismiss outright the owner's petition for certiorari, in view of the owner's failure to file a motion for reconsideration of the Commission's order and its failure to attach the relevant pleadings in the arbitration case.
• Whether or not the Court of Appeals gravely erred in ruling that the Construction Industry Arbitration Commission had no jurisdiction over the construction firm's complaint.

Applicable Provisions

Section 1 of Rule 65 of the Rules of Court provides:

SECTION 1. Petition for certiorari. - When any tribunal, board or officer exercising judicial or quasi-judicial functions has acted without or in excess of its or his jurisdiction, or with grave abuse of discretion amounting to lack or excess of its or his jurisdiction, and there is no appeal, or any plain, speedy, and adequate remedy in the ordinary course of law, a person aggrieved thereby may file a verified petition in the proper court, alleging the facts with certainty and praying that judgment be rendered annulling or modifying the proceedings of such tribunal, board or officer, and granting such incidental reliefs as law and justice may require.

The petition shall be accompanied by a certified true copy of the judgment, order or resolution subject thereof, copies of all pleadings and documents relevant and pertinent thereto, and a sworn certification of non-forum shopping as provided in the third paragraph of Section 3, Rule 46.

This provision supplies the very ground on which the owner's petition before the Court of Appeals should have been dismissed, because the owner omitted the relevant pleadings from its petition.

Section 3 of Rule 46 provides:

SEC. 3. Contents and filing of petition; effect of non-compliance with requirements. - The petition shall contain the full names and actual addresses of all the petitioners and respondents, a concise statement of the matters involved, the factual background of the case, and the grounds relied upon for the relief prayed for.

In actions filed under Rule 65, the petition shall further indicate the material dates showing when notice of the judgment or final order or resolution subject thereof was received, when a motion for new trial or reconsideration, if any, was filed and when notice of the denial thereof was received.

It shall be filed in seven (7) clearly legible copies together with proof of service thereof on the respondent with the original copy intended for the court indicated as such by the petitioner and shall be accompanied by a clearly legible duplicate original or certified true copy of the judgment, order, resolution, or ruling subject thereof, such material portions of the record as are referred to therein, and other documents relevant or pertinent thereto. The certification shall be accomplished by the proper clerk of court or by his duly-authorized representative, or by the proper officer of the court, tribunal, agency or office involved or by his duly authorized representative. The other requisite number of copies of the petition shall be accompanied by clearly legible plain copies of all documents attached to the original.

The failure of the petitioner to comply with any of the foregoing requirements shall be sufficient ground for the dismissal of the petition.

This provision makes dismissal mandatory upon non-compliance, and the Court applies it against the owner.

Section 4 of Executive Order No. 1008, the Construction Industry Arbitration Law, is the jurisdictional anchor discussed in the decision, under which the Commission has original and exclusive jurisdiction over disputes arising from, or connected with, contracts entered into by parties involved in construction in the Philippines, and all that is needed for it to acquire jurisdiction is for the parties to agree to submit the same to voluntary arbitration.

Section 1 of Article III of the CIAC Rules of Procedure Governing Construction Arbitration provides:

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

This rule means that the arbitration clause alone vests jurisdiction, even though the contract refers to a Board of Arbitrators and to a Construction Arbitration Authority.

Ruling

On the first issue, the Court held that the Court of Appeals erred in giving due course to the owner's petition despite its failure to attach copies of the relevant pleadings in the arbitration case, such as the complaint, the motion to dismiss, the comment and opposition, and the motion to suspend proceedings. The Court stressed that the rules are plain and unmistakable, and that failure to comply with the requirement that the petition be accompanied by a duplicate original or certified true copy of the judgment, order, resolution or ruling being challenged, and by the relevant pleadings, is sufficient ground for dismissal. The Court noted that the Court of Appeals itself had earlier ordered the submission of copies of pleadings relevant to the petition, which showed their necessity for a judicious resolution of the issues, and that the appellate court gave no convincing reason to relax the rule.

On the second issue, the Court held that the Court of Appeals erred in ruling that the Commission had no jurisdiction. Reading Clauses 17.1.1 and 17.2 together, the Court found that the parties agreed to submit disputes arising from differences in interpretation of the contract to a Board of Arbitrators, and, as a last resort, any unresolved dispute to the Construction Arbitration Authority created by the government, which is no other than the Commission. The Court held that the construction firm's claims for payment, refuted by the owner, involve a dispute arising from differences in interpretation of the contract, because ascertaining the duties and obligations of the parties under their contract all involve interpretation of its provisions. The Court also noted the owner's letter of February 14, 2000, which itself described disputed items of work as unresolved disputes as to the proper interpretation of their respective obligations under the contract.

The Court further held that under Section 4 of Executive Order No. 1008, all that is needed for the Commission to acquire jurisdiction is the parties' agreement to submit the dispute to voluntary arbitration, and that under Section 1 of Article III of the CIAC Rules, an arbitration clause is deemed an agreement to submit to the Commission's jurisdiction notwithstanding a reference to a different arbitral body. Thus, even without a prior submission to a Board of Arbitrators, the Commission was not divested of jurisdiction. The Court quoted its earlier ruling that the arbitration clause in the construction contract ipso facto vested the Commission with jurisdiction, that this jurisdiction is conferred by law and cannot be subjected to any condition nor waived or diminished by the stipulation, act or omission of the parties, and that to affirm a condition precedent would conflict with the law's intention to automatically vest jurisdiction.

Doctrine

First, a petition for certiorari must be accompanied by a certified true copy of the judgment, order or resolution subject thereof and by copies of all pleadings and documents relevant and pertinent thereto; failure to comply is a sufficient ground for dismissal, and the Court of Appeals commits grave abuse of discretion in giving the petition due course notwithstanding such failure.

Second, the mere existence of an arbitration clause in a construction contract is deemed by law as an agreement by the parties to submit existing or future controversies to the jurisdiction of the Construction Industry Arbitration Commission, without any qualification or condition precedent. The Commission's jurisdiction is conferred by law, is original and exclusive over disputes arising from or connected with construction contracts, and cannot be subjected to any condition, nor waived or diminished by the stipulation, act or omission of the parties.

Third, a claim for payment under a construction contract, when refuted by the other party, is a dispute arising from differences in interpretation of the contract, because it requires ascertaining the duties and obligations of the parties and the valuation of the work.

Disposition

The petition was granted; the decision and resolution of the Court of Appeals were reversed and set aside, and the order of the Construction Industry Arbitration Commission was reinstated.

Remember This

Memorize this line: the bare arbitration clause in a construction contract ipso facto vests the Construction Industry Arbitration Commission with jurisdiction, which the parties cannot condition, waive, or diminish. Examiners use this case to test the mandatory attachment requirement for a petition for certiorari and the automatic vesting of the Commission's jurisdiction despite a reference to another arbitral body.