ALTERNATIVE DISPUTE RESOLUTION | METROPOLITAN CEBU WATER DISTRICT VS. MACTAN ROCK INDUSTRIES INC. G.R. NO. 172438, JULY 4, 2012

METROPOLITAN CEBU WATER DISTRICT VS. MACTAN ROCK INDUSTRIES INC.

G.R. NO. 172438, JULY 4, 2012

 

TOPIC/DOCTRINE

Section 2.1, Rule 2 of the Construction Industry Arbitration Commission (CIAC) Revised Rules particularly specifies that the CIAC has original and exclusive jurisdiction over construction disputes, whether such disputes arise from or are merely connected with the construction contracts entered into by parties, and whether such disputes arise before or after the completion of the contracts. The jurisdiction of the Construction Industry Arbitration Commission (CIAC) as a quasi-judicial body is confined to construction disputes, that is, those arising from, or connected to, contracts involving “all on-site works on buildings or altering structures from land clearance through completion including excavation, erection and assembly and installation of components and equipment.” The Court held that the Construction Industry Arbitration Commission (CIAC) retained jurisdiction even if both parties had withdrawn their consent to arbitrate.

FACTS

MCWD entered into a Water Supply Contract (the Contract) with MRII wherein it was agreed that the latter would supply MCWD with potable water,

On March 15, 2004, MRII filed a Complaint against MCWD with the Construction Industry Arbitration Commission (CIAC), citing the arbitration clause (Clause 18) of the Contract. In the said complaint, MRII sought the reformation of Clause 17 of the Contract, or the Price Escalation/De-Escalation Clause, in order to include Capital Cost Recovery in the price escalation formula, and to have such revised formula applied from 1996 when the bidding was conducted, instead of from the first day when MRII started selling water to MCWD. It also sought the payment of the unpaid price escalation/adjustment, and the payment of unpaid variation/extra work order and interest/cost of money up to December 31, 2003. ‚rÎ

MCWD filed its Answer, which included a motion to dismiss the complaint on the ground that the CIAC had no jurisdiction over the case, as the Contract was not one for construction or infrastructure.

CIAC denied the motion to dismiss and MWCD appealed to the CA (First petition). While such appeal was pending, CIAC decided on the main case against MWCD. This was also appealed to the CA (second petition). Both petitions for review were dismissed by the appellate court.

 

ISSUE

1.    Whether or not CIAC has jurisdiction over the dispute.

2.    Whether or not the CIAC could proceed with the case even if the MCWD refused to participate in the arbitration proceedings.

RULING

Yes.

The court ruled that the jurisdiction of the Construction Industry Arbitration Commission (CIAC) as a quasi-judicial body is confined to construction disputes, that is, those arising from, or connected to, contracts involving “all on-site works on buildings or altering structures from land clearance through completion including excavation, erection and assembly and installation of components and equipment.” The Court held that the Construction Industry Arbitration Commission (CIAC) retained jurisdiction even if both parties had withdrawn their consent to arbitrate. The jurisdiction of the CIAC may include but is not limited to violation of specifications for materials and workmanship; violation of the terms of agreement; interpretation and/or application of contractual provisions; amount of damages and penalties; commencement time and delays; maintenance and defects; payment default of employer or contractor and changes in contract cost. Excluded from the coverage of this law are disputes arising from employer-employee relationships which shall continue to be covered by the Labor Code of the Philippines.

Here, the parties apparently characterized the Contract as one involving construction, as its arbitration clause specifically refers disputes, controversies or claims arising out of or relating to the Contract or the breach, termination or validity thereof, if the same cannot be settled amicably, to an arbitration tribunal, in accordance with E.O. No. 1008, or the Construction Industry Arbitration Law. Had the parties been of the mutual understanding that the Contract was not of construction, they could have instead referred the matter to arbitration citing Republic Act (R.A.) No. 876, or The Arbitration Law. Having been passed into law in 1953, the said statute was already in existence at the time the contract was entered into, and could have been applied to arbitration proceedings other than those specifically within the arbitral jurisdiction of the CIAC.

Yes.

The court ruled that though one party can refuse to participate in the arbitration proceedings, this cannot prevent the CIAC from proceeding with the case and issuing an award in favor of one of the parties. Section 4.2 of the Revised Rules of Procedure Governing Construction Arbitration (CIAC Rules) specifically provides that where the jurisdiction of the CIAC is properly invoked by the filing of a Request for Arbitration in accordance with CIAC Rules, the failure of a respondent to appear, which amounts to refusal to arbitrate, will not stay the proceedings, notwithstanding the absence of the respondent or the lack of participation of such party. In such cases, the CIAC is mandated to appoint the arbitrator/s in accordance with the Rules, and the arbitration proceedings shall continue. The award shall then be made after receiving the evidence of the claimant. In such a case, all is not lost for the party who did not participate. Even after failing to appear, a respondent is still given the opportunity, under the CIAC Rules, to have the proceedings reopened and be allowed to present evidence, although with the qualification that this is done before an award is issued







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