Hutama-Rsea Joint Operations v. Citra Metro Manila Tollways
REITERATIONFacts
The Antecedents: Petitioner HUTAMA-RSEA Joint Operations, Inc. (Hutama-RSEA) and respondent Citra Metro Manila Tollways Corporation (Citra) entered into an Engineering Procurement Construction Contract (EPCC) for the construction of Stage 1 of the Skyway Project. Citra was the general contractor and operator, while Hutama-RSEA was the sub-contractor. The EPCC stipulated a total payment of US$369,510,304.00. Hutama-RSEA claimed that Citra partially paid its interim billings and failed to pay the outstanding balance, as well as an agreed "Early Completion Bonus." Despite demands and subsequent negotiations, no amicable settlement was reached. Procedural History: Hutama-RSEA filed a Request for Arbitration with the Construction Industry Arbitration Commission (CIAC), docketed as CIAC Case No. 17-2005, seeking payment of its money claims. Citra moved to dismiss, arguing that CIAC lacked jurisdiction because Hutama-RSEA failed to comply with Clause 20.4 of the EPCC, which required prior referral of the dispute to a Dispute Adjudication Board (DAB). The CIAC denied Citra's motion, asserting its jurisdiction and stating that compliance with Clause 20.4 was a factual issue. Citra's subsequent motions for reconsideration and its special civil action for certiorari and prohibition with the Court of Appeals were also denied. The Court of Appeals, however, granted Citra's petition, annulling the CIAC's order and enjoining it from proceeding until the dispute was referred to and decided by the DAB. The Petition: Hutama-RSEA filed a Petition for Review on Certiorari before the Supreme Court, raising the sole issue of whether the CIAC has jurisdiction over CIAC Case No. 17-2005.
Issue(s)
Whether the Construction Industry Arbitration Commission (CIAC) has jurisdiction over the dispute despite the parties' failure to initially refer the matter to the Dispute Adjudication Board (DAB) as stipulated in Clause 20.4 of the Engineering Procurement Construction Contract (EPCC), considering the presence of an arbitration clause. Whether the stipulation for prior referral to the DAB constitutes a condition precedent that deprives the CIAC of jurisdiction, and the implications of enforcing such a condition on the CIAC's mandate to expeditiously settle construction disputes.
Ruling
The Supreme Court granted the petition, reversed and set aside the decision and resolution of the Court of Appeals, and remanded the case to the CIAC for resolution with dispatch. The Court ruled that the CIAC has jurisdiction over the dispute.
Ratio Decidendi
On the jurisdiction of the CIAC and the effect of the arbitration clause: The Court held that the mere existence of an arbitration clause in a construction contract is sufficient to vest the CIAC with jurisdiction over any construction controversy or claim between the parties. This is based on Section 4 of Executive Order No. 1008 and Section 1, Article III of the CIAC Rules of Procedure Governing Construction Arbitration, which state that an arbitration clause is deemed an agreement to submit to CIAC jurisdiction, notwithstanding any reference to a different arbitration institution or arbitral body. The Court emphasized that the jurisdiction of the CIAC is conferred by law and cannot be subjected to any condition, nor can it be waived or diminished by the stipulation, act, or omission of the parties, as long as they agreed to submit their construction contract dispute to arbitration or if an arbitration clause exists. The rule applies regardless of whether the parties specifically choose another forum or make reference to another arbitral body, as the law automatically provides the CIAC as an alternative forum. On the condition precedent of prior referral to the DAB: The Court ruled that the stipulation in Clause 20.4 of the EPCC requiring prior referral of the dispute to the DAB does not deprive the CIAC of its jurisdiction. While Clause 20.4 mandates initial referral to the DAB, the Court found that this condition precedent, or more appropriately, non-compliance therewith, should not divest the CIAC of its jurisdiction. Affirming such a condition precedent would conflict with the recognized intention of the law and rules to automatically vest CIAC with jurisdiction when an arbitration clause is present in the construction contract. The Court reasoned that requiring the parties to first appoint a DAB and refer their dispute to it before submitting to the CIAC would be circuitous and dilatory, especially since the dispute had been lingering for years and negotiations had failed. This would entail unnecessary delays and expenses, defeating the purpose for which the CIAC was created, which is to expeditiously settle construction industry disputes.
Main Doctrine
The existence of an arbitration clause in a construction contract is sufficient to vest the Construction Industry Arbitration Commission (CIAC) with jurisdiction over any construction controversy or claim between the parties, regardless of any stipulated condition precedent such as prior referral to a Dispute Adjudication Board (DAB).