[ GR No. 96283, Feb 25, 1992 ]CHUNG FU INDUSTRIES INC. v. CA
FACTS:
On May 17, 1989, petitioner Chung Fu Industries and private
respondent Roblecor Philippines, Inc. forged a construction agreement whereby
respondent contractor committed to construct and finish on December 31, 1989,
petitioner corporation's industrial/factory complex in Tanawan, Tanza, Cavite
for and in consideration of P42,000,000.00. In the event of disputes arising
from the performance of subject contract, it was stipulated therein that the
issue(s) shall be submitted for resolution before a single arbitrator chosen by
both parties.
Apart from the aforesaid construction agreement, Chung Fu
and Roblecor entered into 2 other ancillary contracts: (1) for the construction
of a dormitory and support facilities with a contract price of P3,875,285.00,
to be completed on or before October 31, 1989; and the other (2) for the
installation of electrical, water and hydrant systems at the plant site,
commanding a price of P12.1 million and requiring completion thereof one month
after civil works have been finished.
However, respondent Roblecor failed to complete the work
despite the extension of time allowed it by Chung Fu. Subsequently, the latter
had to take over the construction when it had become evident that Roblecor was
not in a position to fulfill its obligation.
Claiming an unsatisfied account of P10,500,000.00 and unpaid
progress billings of P2,370,179.23, Roblecor, filed a petition for Compulsory
Arbitration with prayer for Temporary Restraining Order before the RTC,
pursuant to the arbitration clause in the construction agreement.
Subsequent negotiations between the parties eventually led
to the formulation of an arbitration agreement which, among others, provides:
Xxx
The parties mutually agree that the decision of the
arbitrator shall be final and unappealable. Therefore, there shall be no
further judicial recourse if either party disagrees with the whole or any part
of the arbitrator's award.
Xxx
On June 30, 1990, Arbitrator Asuncion ordered petitioners to
immediately pay respondent contractor, the sum of P16,108,801.00. He further
declared the award as final and unappealable, pursuant to the Arbitration
Agreement precluding judicial review of the award.
Consequently, Roblecor moved for the confirmation of said
award. On the other hand, Chung Fu moved to remand the case for further hearing
and asked for a reconsideration of the judgment award claiming that Arbitrator
Asuncion committed 12 instances of grave error by disregarding the provisions
of the parties' contract.
The RTC denied Chung Fu's Motion to Remand and granted
Roblecor's Motion for Confirmation of Award. Moreover, it granted the motion
for the issuance of a writ of execution filed by respondent.
Upon appeal to the CA, the appellate court concurred with
the findings and conclusions of respondent trial court.
Hence, the instant petition.
ISSUE:
Whether or not the petitioners are estopped from questioning
the arbitration award allegedly in view of the stipulations in the parties'
arbitration agreement that "the decision of the arbitrator shall be final
and unappealable" and that "there shall be no further judicial
recourse if either party disagrees with the whole or any part of the arbitrator's
award
RULING:
Absent an agreement of the parties to resolve their disputes
via a particular mode, it is the regular courts that remain the fora to resolve
such matters. However, the parties may opt for recourse to third parties,
exercising their basic freedom to "establish such stipulations, clauses,
terms and conditions as they may deem convenient, provided they are not
contrary to law, morals, good customs, public order or public policy." In
such a case, resort to the arbitration process may be spelled out by them in a
contract in anticipation of disputes that may arise between them. Or this may
be stipulated in a submission agreement when they are actually confronted by a
dispute. Whatever be the case, such recourse to an extrajudicial means of
settlement is not intended to completely deprive the courts of jurisdiction. In
fact, the early cases on arbitration carefully spelled out the prevailing
doctrine at the time, thus: ". . . a clause in a contract providing that
all matters in dispute between the parties shall be referred to arbitrators and
to them alone is contrary to public policy and cannot oust the courts of
jurisdiction.
The stipulation to refer all future disputes to an
arbitrator or to submit an ongoing dispute to one is valid. Being part of a
contract between the parties, it is binding and enforceable in court in case
one of them neglects, fails or refuses to arbitrate. Going a step further, in
the event that they declare their intention to refer their differences to
arbitration first before taking court action, this constitutes a condition
precedent, such that where a suit has been instituted prematurely, the court
shall suspend the same and the parties shall be directed forthwith to proceed
to arbitration.
Article 2044 of the Civil Code states that:
"Any stipulation that the arbitrators' award or
decision shall be final is valid, without prejudice to Articles 2038, 2039 and
2040."
Similarly, the Construction Industry Arbitration Law
provides that the arbitral award "shall be final and inappealable except
on questions of law which shall be appealable to the Supreme Court."
It is stated explicitly under Art. 2044 of the Civil Code
that the finality of the arbitrators' award is not absolute and without
exceptions. Where the conditions described in Articles 2038, 2039 and 2040
applicable to both compromises and arbitrations are obtaining, the arbitrators'
award may be annulled or rescinded. Additionally, under Sections 24 and 25 of
the Arbitration Law, there are grounds for vacating, modifying or rescinding an
arbitrator's award. Thus, if and when the factual circumstances referred to in
the above-cited provisions are present, judicial review of the award is
properly warranted.
It should be stressed too, that voluntary arbitrators, by
the nature of their functions, act in a quasi-judicial capacity. It stands to
reason, therefore, that their decisions should not be beyond the scope of the
power of judicial review of this Court.
Petitioners have amply made out a case where the voluntary
arbitrator failed to apply the terms and provisions of the Construction
Agreement which forms part of the law applicable as between the parties, thus
committing a grave abuse of discretion. Furthermore, in granting unjustified
extra compensation to respondent for several items, he exceeded his powers --
all of which would have constituted ground for vacating the award under Section
24 (d) of the Arbitration Law.
Comments
Post a Comment