BF Corporation v. Court of Appeals
REITERATIONFacts
The Antecedents: Petitioner BF Corporation (BF) and respondent Shangri-La Properties, Inc. (SPI) entered into an agreement for the construction of the EDSA Plaza Project. Construction was underway when SPI engaged BF again for an expansion, leading to a formal agreement for the main contract works. BF allegedly incurred delays, which SPI considered serious and substantial. BF, however, attributed delays to a fire that damaged Phase I. The parties renegotiated and entered into a written agreement on May 30, 1991, denominated as "Agreement for the Execution of Builder's Work for the EDSA Plaza Project," covering construction until completion. Procedural History: SPI alleged that BF failed to complete the construction and abandoned the project, leading to disagreements over liabilities. A conference on July 12, 1993, failed to resolve the dispute. On July 14, 1993, BF filed a complaint for collection of the balance due. SPI and its co-defendants filed a motion to suspend proceedings, citing an arbitration clause in the formal trade contract. BF opposed, arguing no formal contract with an arbitration clause existed. The Regional Trial Court (RTC) initially denied the motion to suspend, finding doubt as to the binding nature of the arbitration clause due to the 'Conditions of Contract' not being duly signed by the parties, and also ruled that SPI was "too late in the day" to invoke arbitration. SPI filed a petition for certiorari with the Court of Appeals (CA), which granted, annulled the RTC orders, and stayed the proceedings, holding that the arbitration clause was binding and SPI was not in default. The Petition: BF Corporation filed a petition for review on certiorari before the Supreme Court, assailing the CA's decision, primarily arguing that the CA erred in issuing a writ of certiorari when appeal was available and in finding grave abuse of discretion in the RTC's factual findings regarding the existence of the arbitration agreement and whether SPI was in default.
Issue(s)
Whether the Court of Appeals erred in issuing a writ of certiorari when the remedy of appeal was available. Whether the Court of Appeals erred in finding grave abuse of discretion in the trial court's findings that the parties did not enter into an agreement to arbitrate. Whether the Court of Appeals erred in finding that the respondents were not in default in invoking the arbitration agreement.
Ruling
The Supreme Court affirmed the decision of the Court of Appeals, denying the petition for certiorari and holding that the arbitration clause was valid and binding, and that the respondents were not in default in invoking it. The decision is immediately executory.
Ratio Decidendi
On the propriety of the writ of certiorari: The Court held that while certiorari is generally not a substitute for appeal, it is available to correct errors of jurisdiction or grave abuse of discretion. In this case, the issue of whether the lower court prematurely assumed jurisdiction by denying the motion to suspend proceedings, which hinged on the existence of an arbitration clause, was a proper subject for certiorari. Furthermore, the Court noted that a rigid application of the rule against certiorari as a substitute for appeal could lead to a miscarriage of justice if the arbitration clause was not resolved in accordance with the evidence. Therefore, the Court found that the CA did not err in entertaining the petition for certiorari. On the existence of the arbitration clause: The Court found that the arbitration clause was valid and binding. Republic Act No. 876 requires arbitration agreements to be in writing and subscribed by the parties. The Articles of Agreement, which incorporated the 'Conditions of Contract' containing the arbitration clause by reference, were signed by the representatives of both parties and duly notarized. The Court clarified that a contract need not be in a single writing and can be collected from several instruments. The subscription of the principal agreement effectively covered the incorporated documents, even if the 'Conditions of Contract' itself was only initialed by BF's representatives. The Court rejected BF's argument that the contract was a "hodge-podge" of documents, emphasizing that the Articles of Agreement, as the principal and signed document, made the incorporated 'Conditions of Contract' an integral part of the agreement. On whether the respondents were in default in invoking the arbitration clause: The Court ruled that the respondents were not in default. The arbitration clause required demand for arbitration to be made within a reasonable time after disputes arose and amicable settlement attempts failed, but not later than the time of final payment. The Court considered the circumstances, including SPI's alleged failure to pay and BF's subsequent filing of a collection case. SPI's initiative to call for a conference and its subsequent request for arbitration within one month after the failed conference were deemed reasonable. The Court found that BF's denial of the arbitration clause and its hasty filing of the court case contributed to the delay, and that SPI's resort to arbitration was within a reasonable time under the circumstances.
Main Doctrine
The existence of an arbitration clause, even if incorporated by reference in a signed agreement, is binding upon the parties. Resort to arbitration must be made within a reasonable time after disputes arise and amicable settlement attempts fail, and failure to do so may result in being considered in default of the obligation to arbitrate.