David v. Construction Industry and Arbitration Commission
REITERATIONFacts
The Antecedents: Spouses Narciso and Aida Quiambao engaged the services of Coordinated Group, Inc. (CGI), represented by its President Roberto David and Treasurer Evelyn David, to design and construct a five-storey office/residential building. The contract stipulated a payment of P7,309,821.51 for construction and P200,000.00 for design, with a completion period of nine months. However, CGI allegedly failed to adhere to the agreed specifications and plans, leading the Quiambaos to demand corrections. When CGI failed to act, the Quiambaos rescinded the contract on October 31, 1998, after paying 74.84% of the construction cost. An inspection revealed deviations from the structural plan without the Quiambaos' approval. Procedural History: The Quiambaos initially filed a breach of contract case against CGI and the Davids before the Regional Trial Court (RTC) of Manila. The parties agreed to submit the dispute to arbitration before the Construction Industry Arbitration Commission (CIAC). The RTC dismissed the case and transmitted the records to the CIAC. The CIAC, through its sole arbitrator, rendered an award against CGI and the Davids for P4,073,229.94, plus interest, while crediting CGI for 80% work accomplishment and materials left on site. The petitioners appealed to the Court of Appeals, which affirmed the CIAC's decision but deleted the award for lost rentals. The Petition: Petitioners Spouses Roberto & Evelyn David and Coordinated Group, Inc. filed a petition for review on certiorari under Rule 45 of the Revised Rules of Court. They contend that the Court of Appeals erred in affirming the rescission of the contract, arguing substantial performance, and in holding the Davids jointly and severally liable with CGI, violating the principle of separate juridical personality. The Supreme Court found that the issues raised were primarily questions of fact, which are generally not reviewable on appeal from arbitral awards, and that the petitioners failed to demonstrate any of the exceptions allowing such review.
Issue(s)
Whether the Court of Appeals erred in affirming the CIAC's finding that the respondents were justified in unilaterally rescinding the Design/Build Contract. Whether the Court of Appeals erred in holding petitioner-spouses David jointly and severally liable with petitioner CGI, in violation of the doctrine of separate juridical personality.
Ruling
The petition is DISMISSED for lack of merit. The Court affirmed the decision of the Court of Appeals, which upheld the arbitral award of the CIAC.
Ratio Decidendi
On the issue of rescission of the contract: The Court held that the issues raised by the petitioners regarding substantial performance and compliance with contract specifications constitute questions of fact. Under Section 19 of Executive Order No. 1008, arbitral awards from the CIAC are appealable to the Supreme Court only on questions of law. The Court reiterated the distinction between questions of law (doubt as to what the law is) and questions of fact (doubt as to the truth or falsity of alleged facts). Petitioners' claims that they had completed 80% of the work and that modifications were with consent are factual assertions refuted by evidence. The Court emphasized that factual findings of construction arbitrators are final and conclusive and not subject to review by the Supreme Court, unless the petitioner affirmatively shows one of the exceptions provided in Section 24 of Republic Act No. 876, none of which were demonstrated by the petitioners. The Court found that the arbitrator and the Court of Appeals correctly upheld the factual findings that CGI deviated from approved plans and specifications, including the construction of additional columns that restricted the use of the basement and altered building dimensions, and that concrete and steel bar tests failed. These deviations, along with the under-design of the cistern and the construction of a portion of the building outside the property line, provided a sufficient legal and factual basis for the Quiambaos' decision to terminate the contract. The Court noted that CGI's own letter admitting deficiencies requiring correction served as an admission of defects. On the issue of joint and several liability of the spouses David: The Court found that this issue also involved questions of fact, specifically whether the spouses David, as corporate officers, were grossly negligent in ordering revisions to the construction plan without the consent of the respondents. The Court of Appeals affirmed the arbitrator's factual findings that Engr. Roberto J. David requested the revision of plans to significantly reduce construction costs, which led to the construction of additional columns. This action was deemed a serious breach of contract justifying termination. The Court reiterated that personal liability of corporate officers may attach when they assent to patently unlawful acts or act in bad faith or gross negligence in directing the corporation's affairs. The arbitrator's finding that Engr. David's request for plan revisions to reduce costs constituted such gross negligence was affirmed. The Court concluded that petitioners failed to show any of the exceptions that would allow a review of the factual findings of the arbitrator, thus upholding the joint and several liability.
Main Doctrine
Factual findings of construction arbitrators are final and conclusive and not reviewable by the Supreme Court on appeal, except in specific instances of fraud, corruption, evident partiality, misconduct, excess of powers, or grave abuse of discretion resulting in lack or loss of jurisdiction. Issues raised in an appeal that involve examination of probative value of evidence or veracity of alleged facts constitute questions of fact, which are beyond the scope of appellate review by the Supreme Court.