Asian Construction v. Sumitomo
REITERATIONFacts
1. The Antecedents: Asian Construction and Development Corporation (Asian Construction) and Sumitomo Corporation (Sumitomo) entered into an Agreement for the construction of a portion of the Light Rail Transit System. The Agreement stipulated that it would be governed by New York State Law and that any disputes would be settled by arbitration. Sumitomo terminated the Agreement due to Asian Construction's alleged failures in performance, traffic management, and payment to suppliers. Asian Construction, in turn, claimed unpaid work and various other claims. 2. Procedural History: Asian Construction filed a complaint with the Construction Industry Arbitration Commission (CIAC) seeking payment for alleged losses. Sumitomo moved to dismiss, questioning the CIAC's jurisdiction, but the motion was denied. The Arbitral Tribunal issued a Partial Award dismissing both claims and counterclaims as prescribed under New York State Law. Subsequently, the Arbitral Tribunal issued a Final Award granting Sumitomo attorney's fees. Asian Construction appealed the Partial Award to the Court of Appeals (CA), which dismissed the appeal for forum shopping. Asian Construction also appealed the Final Award to the CA, which modified the award by deleting the attorney's fees granted to Sumitomo. Sumitomo then appealed the CA's decision regarding the Final Award. 3. The Petition: The Supreme Court is presented with two consolidated petitions. G.R. No. 196723, filed by Asian Construction, seeks to annul the CA's dismissal of its appeal from the Partial Award due to forum shopping and the premature resort to a petition for review of a partial award. G.R. No. 196728, filed by Sumitomo, seeks to annul the CA's modification of the Final Award, arguing that the award was final and unappealable and that the CA erred in reviewing it. The Court considers whether the CA erred in dismissing Asian Construction's petition for forum shopping and whether the CA erred in reviewing and modifying the Final Award.
Issue(s)
Whether the Court of Appeals erred in dismissing Asian Construction's First CA Petition on the ground of forum shopping. Whether the Court of Appeals erred in reviewing and modifying the Final Award, and whether Sumitomo's claim that the Final Award is final and unappealable is tenable.
Ruling
The Supreme Court denied both petitions. It affirmed the Court of Appeals' dismissal of Asian Construction's petition assailing the Partial Award on the ground of forum shopping and its affirmation of the CA's modification of the Final Award, deleting the award of attorney's fees in favor of Sumitomo.
Ratio Decidendi
On the dismissal of Asian Construction's First CA Petition for forum shopping: The Court found that the CA committed no reversible error in dismissing Asian Construction's First CA Petition on the ground of forum shopping. The relief sought in the petition, which was the reconsideration of the Partial Award, and the allegations stated therein were identical to those in its opposition to Sumitomo's claim for costs filed before the Arbitral Tribunal while the case was still pending. This constituted the first kind of forum shopping, which warrants dismissal on the ground of litis pendentia. The Court rejected Asian Construction's argument that it was merely complying with the Arbitral Tribunal's directive, noting that its opposition went beyond submitting proof of costs and instead sought the reversal of the Partial Award. Furthermore, the Court observed that the First CA Petition remained dismissible because the CIAC Revised Rules provide for a petition for review only against a final arbitral award, not a partial award. On the review and modification of the Final Award: The Court held that Sumitomo's argument that the Final Award was final and unappealable was untenable. While arbitration agreements often stipulate finality, the Court has consistently held that arbitral awards are not absolutely insulated from judicial review. Executive Order No. 1008, which created the CIAC, initially stated that awards were final and inappealable except on questions of law, but subsequent Supreme Court circulars and the CIAC Revised Rules allowed appeals on questions of fact, law, or mixed questions of fact and law via a petition for review under Rule 43. The Court further found that the CA correctly reviewed and modified the Final Award concerning the award of attorney's fees. Jurisprudence dictates that attorney's fees may be awarded only in cases of gross and evident bad faith, as embodied in Article 2208 of the Civil Code. Although the parties had a stipulation on attorney's fees, it was rendered inoperative because the claims and counterclaims had prescribed under New York State Law, and the dispute did not concern the interpretation of the Agreement's provisions. The Court found no gross and evident bad faith on the part of Asian Construction in filing its complaint or in refusing Sumitomo's compromise offer, as these actions were within its rights and not indicative of bad faith. Therefore, Sumitomo was not entitled to attorney's fees.
Main Doctrine
A petition for review of a partial arbitral award is dismissible on the ground of forum shopping if the same relief and allegations were raised in a prior pleading before the arbitral tribunal while the case was still pending. Furthermore, a petition for review under Rule 43 of the Rules of Court is only applicable to final arbitral awards, not partial ones. An award of attorney's fees requires a finding of gross and evident bad faith, which was absent in this case.