ALTERNATIVE DISPUTE RESOLUTION | LM POWER ENGINEERING CORP., V. CAPITOL INDUSTRIAL CONSTRUCTION GROUP G.R. NO. 141833, MARCH 26, 2003

LM POWER ENGINEERING CORP., V. CAPITOL INDUSTRIAL CONSTRUCTION GROUP

G.R. NO. 141833, MARCH 26, 2003

 

TOPIC/DOCTRINE

Brushing aside a contractual agreement calling for arbitration between the parties would be a step backward.

 

FACTS

Petitioner LM Power Engineering Corporation and Respondent Capitol Industrial Construction Groups, Inc. entered into a “Subcontract Agreement” involving electrical work at the Third Port of Zamboanga. Respondent took over some of the work contracted to petitioner. Allegedly, the latter had failed to finish it because of its inability to procure materials.

Upon completing its task under the Contract, petitioner billed respondent in the amount of P6,711,813.90.8 Contesting the accuracy of the amount of advances and billable accomplishments listed by the former, the latter refused to pay. Respondent also took refuge in the termination clause of the Agreement. That clause allowed it to set off the cost of the work that petitioner had failed to undertake—due to termination or take-over—against the amount it owed the latter.

Petitioner filed with the Regional Trial Court (RTC) a Complaint for the collection of the amount representing the alleged balance due it under the Subcontract. Respondent filed a Motion to Dismiss, alleging that the Complaint was premature, because there was no prior recourse to arbitration. the RTC denied the Motion on the ground that the dispute did not involve the interpretation or the implementation of the Agreement and was, therefore, not covered by the arbitral clause.

In the case before us, the Subcontract has the following arbitral clause:

The Parties hereto agree that any dispute or conflict as regards to interpretation and implementation of this Agreement which cannot be settled between [respondent] and [petitioner] amicably shall be settled by means of arbitration x x x.

 

ISSUE

Whether Dispute Is Arbitrable.

 

RULING

Yes.

The court held that it sides with respondent. Essentially, the dispute arose from the parties’ incongruent positions on whether certain provisions of their Agreement could be applied to the facts. The instant case involves technical discrepancies that are better left to an arbitral body that has expertise in those areas. In any event, the inclusion of an arbitration clause in a contract does not ipso facto divest the courts of jurisdiction to pass upon the findings of arbitral bodies, because the awards are still judicially reviewable under certain conditions. Aside from unclogging judicial dockets, arbitration also hastens the resolution of disputes, especially of the commercial kind. It is thus regarded as the “wave of the future” in international civil and commercial disputes. Clearly, the resolution of the dispute between the parties herein requires a referral to the provisions of their Agreement. Within the scope of the arbitration clause are discrepancies as to the amount of advances and billable accomplishments, the application of the provision on termination, and the consequent set-off of expenses. Brushing aside a contractual agreement calling for arbitration between the parties would be a step backward.







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