Fort Bonifacio Development v. Domingo
REITERATIONFacts
The Antecedents: Fort Bonifacio Development Corporation (FBDI) entered into a Trade Contract with L and M Maxco Specialist Engineering Construction (LMM Construction) for construction work. FBDI had the right to retain 5% of the contract price for one year after project completion to cover defects. LMM Construction allegedly performed defectively and with delays, leading FBDI to terminate the contract and hire another contractor. Subsequently, LMM Construction assigned its receivables from FBDI, specifically the retention money, to Manuel N. Domingo (Domingo) to settle an alleged debt of P804,068.21. However, FBDI also received multiple notices of garnishment against LMM Construction's receivables from various creditors, including Asia-Con Builders, Nicolas Consigna, and Concrete Masters, Inc. Procedural History: Domingo, as the assignee, sent a letter to FBDI inquiring about the retention money. FBDI acknowledged the retention money but stated it was not yet due and demandable, and that it was subject to garnishments by other creditors. Domingo asserted his right to the assigned portion. Subsequently, Domingo filed a collection case against LMM Construction and FBDI before the Regional Trial Court (RTC) of Pasay City. FBDI filed a Motion to Dismiss, arguing that the RTC lacked jurisdiction and that the dispute should be settled by the Construction Industry Arbitration Commission (CIAC) due to the arbitration clause in the Trade Contract. The RTC denied the Motion to Dismiss, finding a full-blown trial necessary. FBDI then filed a Petition for Certiorari with the Court of Appeals (CA), which affirmed the RTC's denial, holding that Domingo, as a third-party assignee, was not bound by the arbitration clause and that money claims of third persons are within the jurisdiction of regular courts. The CA denied FBDI's motion for reconsideration. The Petition: FBDI filed this Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court, seeking to reverse the CA's decision and resolution, and ultimately to dismiss Domingo's collection case. FBDI argues that the CA erred in not considering that Domingo, as the assignee of LMM Construction's receivables, stepped into the shoes of LMM Construction and should therefore be bound by the arbitration clause in the Trade Contract, invoking Article 1311 of the Civil Code on the relativity of contracts. The core issue presented to the Supreme Court is whether the RTC has jurisdiction over Civil Case No. 06-0200-CFM, with FBDI contending that the dispute falls under the exclusive jurisdiction of the CIAC.
Issue(s)
Whether the Regional Trial Court (RTC) has jurisdiction over Civil Case No. 06-0200-CFM. Whether the respondent, as an assignee of receivables from a construction contract, is bound by the arbitration clause stipulated in the said contract.
Ruling
The Supreme Court denied the petition and affirmed the decision of the Court of Appeals, upholding the jurisdiction of the Regional Trial Court over the collection case filed by the respondent.
Ratio Decidendi
On Whether the RTC has jurisdiction over Civil Case No. 06-0200-CFM: The Court held that the jurisdiction of a court over the subject matter is determined by the allegations in the complaint, irrespective of the defenses raised. In this case, the respondent's complaint alleged that LMM Construction had an outstanding obligation to him, which was settled by assigning its receivables from FBDI. Despite notice of this assignment, FBDI allegedly refused to deliver the assigned amount, giving preference to other garnishing creditors of LMM Construction. The respondent's cause of action, therefore, stemmed not from a violation of the Trade Contract, but from the non-payment of LMM Construction's monetary obligation to him and FBDI's alleged arbitrary preference of other creditors over his assigned claim. This nature of the claim, involving obligations, assignments, and potentially preference of credits, is more appropriately handled by a regular court after a full-blown trial, rather than by the CIAC, which specializes in construction-related disputes. On Whether the respondent, as an assignee of receivables from a construction contract, is bound by the arbitration clause stipulated in the said contract: The Court reiterated that while Article 1311 of the Civil Code on the relativity of contracts applies, the respondent, as an assignee, stepped into the shoes of LMM Construction regarding the receivables. However, the dispute in Civil Case No. 06-0200-CFM was not about enforcing a right under the Trade Contract itself, but about the alleged arbitrary exercise of discretion by FBDI in prioritizing other creditors over the assigned receivables. The respondent's claim did not require the technical expertise of the CIAC, as it was fundamentally a claim for payment of a debt and the proper application of assignment and preference of credits laws. The Court emphasized that the CIAC's jurisdiction is limited to disputes arising from or connected with construction contracts, and money claims of third persons against contractors, developers, or owners are generally lodged in regular courts. The nature of the respondent's claim, as pleaded, did not fall within the exclusive jurisdiction of the CIAC.
Main Doctrine
A claim by an assignee for payment of a monetary obligation, even if the underlying obligation arose from a construction contract, is a matter for the regular courts, not the Construction Industry Arbitration Commission (CIAC), if the cause of action is the non-payment of the debt and the alleged arbitrary preference given to other creditors, rather than a dispute directly arising from the construction contract itself.