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Republic of the Philippines

SUPREME COURTManila

THIRD DIVISION

G.R. No. 126619 December 20, 2006

UNIWIDE SALES REALTY AND RESOURCES CORPORATION,petitioner,

vs.

TITAN-IKEDA CONSTRUCTION AND DEVELOPMENTCORPORATION,respondent.

D E C I S I O N

TINGA,J.:

This Petition for Review on Certiorari under Rule 45 seeks the partialreversal of the 21 February 1996 Decision1 of the Court of AppealsFifteenth Division in CA-G.R. SP No. 37957 which modified the 17April 1995 Decision2 of the Construction Industry ArbitrationCommission (CIAC).

The case originated from an action for a sum of money filed by Titan-Ikeda Construction and Development Corporation (Titan) againstUniwide Sales Realty and Resources Corporation (Uniwide) with the

Regional Trial Court (RTC), Branch 119,3 Pasay City arising fromUniwide's non-payment of certain claims billed by Titan aftercompletion of three projects covered by agreements they entered intowith each other. Upon Uniwide's motion to dismiss/suspendproceedings and Titan's open court manifestation agreeing to the

suspension, Civil Case No. 98-0814 was suspended for it to undergoarbitration.4Titan's complaint was thus re-filed with the CIAC.5Beforethe CIAC, Uniwide filed an answer which was later amended and re-amended, denying the material allegations of the complaint, withcounterclaims for refund of overpayments, actual and exemplary

damages, and attorney's fees. The agreements between Titan andUniwide are briefly described below.

PROJECT 1.6

The first agreement (Project 1) was a written "Construction Contract"entered into by Titan and Uniwide sometime in May 1991 wherebyTitan undertook to construct Uniwide's Warehouse Club and

Administration Building in Libis, Quezon City for a fee ofP120,936,591.50, payable in monthly progress billings to be certifiedto by Uniwide's representative.7 The parties stipulated that thebuilding shall be completed not later than 30 November 1991. As

found by the CIAC, the building was eventually finished on 15February 19928and turned over to Uniwide.

PROJECT 2.

Sometime in July 1992, Titan and Uniwide entered into the secondagreement (Project 2) whereby the former agreed to construct an

additional floor and to renovate the latter's warehouse located at theEDSA Central Market Area in Mandaluyong City. There was no writtencontract executed between the parties for this project. Construction

was allegedly to be on the basis of drawings and specificationsprovided by Uniwide's structural engineers. The parties proceeded onthe basis of a cost estimate of P21,301,075.77 inclusive of Titan's20% mark-up. Titan conceded in its complaint to having received

P15,000,000.00 of this amount. This project was completed in thelatter part of October 1992 and turned over to Uniwide.

PROJECT 3.9

The parties executed the third agreement (Project 3) in May 1992. Ina written "Construction Contract," Titan undertook to construct theUniwide Sales Department Store Building in Kalookan City for the

price of P118,000,000.00 payable in progress billings to be certified to

by Uniwide's representative.

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It was stipulated that the project shallbe completed not later than 28 February 1993. The project wascompleted and turned over to Uniwide in June 1993.

Uniwide asserted in its petition that: (a) it overpaid Titan for

unauthorized additional works in Project 1 and Project 3; (b) it is notliable to pay the Value-Added Tax (VAT) for Project 1; (c) it is entitledto liquidated damages for the delay incurred in constructing Project 1

and Project 3; and (d) it should not have been found liable fordeficiencies in the defectively constructed Project 2.

An Arbitral Tribunal consisting of a chairman and two members wascreated in accordance with the CIAC Rules of Procedure GoverningConstruction Arbitration. It conducted a preliminary conference with

the parties and thereafter issued a Terms of Reference (TOR) whichwas signed by the parties. The tribunal also conducted an ocularinspection, hearings, and received the evidence of the partiesconsisting of affidavits which were subject to cross-examination. On

17 April 1995, after the parties submitted their respectivememoranda, the Arbitral Tribunal promulgated a Decision,11 thedecretal portion of which is as follows:

"WHEREFORE, judgment is hereby rendered as follows:

On Project 1 Libis:

[Uniwide] is absolved of any liability for the claims made by[Titan] on this Project.

Project 2 Edsa Central:
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[Uniwide] is absolved of any liability for VAT payment on thisproject, the same being for the account of the [Titan]. On the

other hand, [Titan] is absolved of any liability on thecounterclaim for defective construction of this project.

[Uniwide] is held liable for the unpaid balance in the amount of

P6,301,075.77 which is ordered to be paid to the [Titan] with12% interest per annum commencing from 19 December 1992until the date of payment.

On Project 3 Kalookan:[Uniwide] is held liable for the unpaid balance in the amount of

P5,158,364.63 which is ordered to be paid to the [Titan] with12% interest per annum commencing from 08 September1993 until the date of payment.

[Uniwide] is held liable to pay in full the VAT on this project, insuch amount as may be computed by the Bureau of InternalRevenue to be paid directly thereto. The BIR is hereby notifiedthat [Uniwide] Sales Realty and Resources Corporation hasassumed responsibility and is held liable for VAT payment on

this project. This accordingly exempts Claimant Titan-Ikeda

Construction and Development Corporation from thisobligation.

Let a copy of this Decision be furnished the Honorable AuroraP. Navarette Recina, Presiding Judge, Branch 119, Pasay City,

in Civil Case No. 94-0814 entitled Titan-Ikeda ConstructionDevelopment Corporation, Plaintiff versus Uniwide SalesRealty and Resources Corporation, Defendant, pending beforesaid court for information and proper action.

SO ORDERED."12

Uniwide filed a motion for reconsideration of the 17 April 1995

decision which was denied by the CIAC in its Resolution dated 6 July1995. Uniwide accordingly filed a petition for review with the Court of

Appeals,13which rendered the assailed decision on 21 February 1996.Uniwide's motion for reconsideration was likewise denied by the Courtof Appeals in its assailed Resolution14dated 30 September 1996.

Hence, Uniwide comes to this Court via a petition for review underRule 45. The issues submitted for resolution of this Court are asfollows:15(1) Whether Uniwide is entitled to a return of the amount it

allegedly paid by mistake to Titan for additional works done on Project1; (2) Whether Uniwide is liable for the payment of the Value-AddedTax (VAT) on Project 1; (3) Whether Uniwide is entitled to liquidateddamages for Projects 1 and 3; and (4) Whether Uniwide is liable fordeficiencies in Project 2.

As a rule, findings of fact of administrative agencies and quasi-judicialbodies, which have acquired expertise because their jurisdiction is

confined to specific matters, are generally accorded not only respect,but also finality, especially when affirmed by the Court of Appeals.16In particular, factual findings of construction arbitrators are final andconclusive and not reviewable by this Court on appeal.17 This rule,however admits of certain exceptions.

In David v. Construction Industry and Arbitration Commission,18 we

ruled that, as exceptions, factual findings of construction arbitratorsmay be reviewed by this Court when the petitioner provesaffirmatively that: (1) the award was procured by corruption, fraud or

other undue means; (2) there was evident partiality or corruption ofthe arbitrators or of any of them; (3) the arbitrators were guilty ofmisconduct in refusing to hear evidence pertinent and material to the

controversy; (4) one or more of the arbitrators were disqualified toact as such under Section nine of Republic Act No. 876 and willfullyrefrained from disclosing such disqualifications or of any othermisbehavior by which the rights of any party have been materially

prejudiced; or (5) the arbitrators exceeded their powers, or so

imperfectly executed them, that a mutual, final and definite awardupon the subject matter submitted to them was not made.19

Other recognized exceptions are as follows: (1) when there is a veryclear showing of grave abuse of discretion20resulting in lack or loss of

jurisdiction as when a party was deprived of a fair opportunity topresent its position before the Arbitral Tribunal or when an award isobtained through fraud or the corruption of arbitrators,21(2) when the

findings of the Court of Appeals are contrary to those of the CIAC,22and (3) when a party is deprived of administrative due process.23

Thus, in Hi-Precision Steel Center, Inc. v. Lim Kim Builders, Inc.,24werefused to review the findings of fact of the CIAC for the reason thatpetitioner was requiring the Court to go over each individual claim and

counterclaim submitted by the parties in the CIAC. A review of theCIAC's findings of fact would have had the effect of "setting at naughtthe basic objective of a voluntary arbitration and would reducearbitration to a largely inutile institution." Further, petitioner therein

failed to show any serious error of law amounting to grave abuse ofdiscretion resulting in lack of jurisdiction on the part of the ArbitralTribunal, in either the methods employed or the results reached bythe Arbitral Tribunal, in disposing of the detailed claims of therespective parties. In Metro Construction, Inc. v. Chatham Properties,Inc.,25 we reviewed the findings of fact of the Court of Appealsbecause its findings on the issue of whether petitioner therein was in

delay were contrary to the findings of the CIAC. Finally, in Megaworld
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Globus Asia, Inc. v. DSM Construction and DevelopmentCorporation,26we declined to depart from the findings of the Arbitral

Tribunal considering that the computations, as well as the propriety ofthe awards, are unquestionably factual issues that have beendiscussed by the Arbitral Tribunal and affirmed by the Court ofAppeals.

In the present case, only the first issue presented for resolution ofthis Court is a question of law while the rest are factual in nature.

However, we do not hesitate to inquire into these factual issues forthe reason that the CIAC and the Court of Appeals, in some matters,differed in their findings.

We now proceed to discuss the issues in seriatim.

Payment by Mistake for Project 1

The first issue refers to the P5,823,481.75 paid by Uniwide foradditional works done on Project 1. Uniwide asserts that Titan was notentitled to be paid this amount because the additional works werewithout any written authorization.

It should be noted that the contracts do not contain stipulations on"additional works," Uniwide's liability for "additional works," and prior

approval as a requirement before Titan could perform "additionalworks."

Nonetheless, Uniwide cites Article (Art. ) 1724 of the New Civil Codeas basis for its claim that it is not liable to pay for "additional works" itdid not authorize or agree upon in writing. The provision states:

Art. 1724. The contractor who undertakes to build a structure

or any other work for a stipulated price, in conformity withplans and specifications agreed upon with the landowner, canneither withdraw from the contract nor demand an increase inthe price on account of the higher cost of labor or materials,

save when there has been a change in the plans andspecifications, provided:

(1) Such change has been authorized by the proprietor inwriting; and

(2) The additional price to be paid to the contractor has beendetermined in writing by both parties.

The Court of Appeals did take note of this provision, but deemed it

inapplicable to the case at bar because Uniwide had already paid,albeit with unwritten reservations, for the "additional works." Theprovision would have been operative had Uniwide refused to pay forthe costs of the "additional works." Instead, the Court of Appeals

applied Art. 142327of the New Civil Code and characterized Uniwide'spayment of the said amount as a voluntary fulfillment of a natural

obligation. The situation was characterized as being akin to Uniwide

being a debtor who paid a debt even while it knew that it was notlegally compelled to do so. As such debtor, Uniwide could no longerdemand the refund of the amount already paid.

Uniwide counters that Art. 1724 makes no distinction as to whetherpayment for the "additional works" had already been made. It claims

that it had made the payments, subject to reservations, upon thefalse representation of Titan-Ikeda that the "additional works" wereauthorized in writing. Uniwide characterizes the payment as a

"mistake," and not a "voluntary" fulfillment under Art. 1423 of theCivil Code. Hence, it urges the application, instead, of the principle ofsolutio indebiti under Arts. 215428and 215629of the Civil Code.

To be certain, this Court has not been wont to give an expansive

construction of Art. 1724, denying, for example, claims that it appliesto constructions made of ship vessels,30or that it can validly deny theclaim for payment of professional fees to the architect.31The presentsituation though presents a thornier problem. Clearly, Art. 1724denies, as a matter of right, payment to the contractor for additionalworks which were not authorized in writing by the proprietor, and theadditional price of which was not determined in writing by the parties.

Yet the distinction pointed out by the Court of Appeals is material. Theissue is no longer centered on the right of the contractor to demandpayment for additional works undertaken because payment, whethermistaken or not, was already made by Uniwide. Thus, it would not

anymore be incumbent on Titan to establish that it had the right todemand or receive such payment.

But, even if the Court accepts Art. 1724 as applicable in this case,such recognition does not ipso facto accord Uniwide the right to bereimbursed for payments already made, since Art. 1724 does noteffect such right of reimbursement. It has to be understood that Art.1724 does not preclude the payment to the contractor who performsadditional works without any prior written authorization or agreement

as to the price for such works if the owner decides anyway to makesuch payment. What the provision does preclude is the right of thecontractor to insist upon payment for unauthorized additional works.

Accordingly, Uniwide, as the owner who did pay the contractor forsuch additional works even if they had not been authorized in writing,has to establish its own right to reimbursement not under Art. 1724,but under a different provision of law. Uniwide's burden ofestablishing its legal right to reimbursement becomes even morecrucial in the light of the general presumption contained in Section3(f), Rule 131 of the Rules of Court that "money paid by one toanother was due to the latter."
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Uniwide undertakes such a task before this Court, citing theprovisions on solutio indebiti under Arts. 2154 and 2156 of the Civil

Code. However, it is not enough to prove that the payments made byUniwide to Titan were "not due" because there was no priorauthorization or agreement with respect to additional works. There isa further requirement that the payment by the debtor was made

either through mistake or under a cloud of doubt. In short, for theprovisions on solutio indebiti to apply, there has to be evidence

establishing the frame of mind of the payor at the time the paymentwas made.32

The CIAC refused to acknowledge that the additional works on Project

1 were indeed unauthorized by Uniwide. Neither did the Court ofAppeals arrive at a contrary determination. There would thus be somedifficulty for this Court to agree with this most basic premise

submitted by Uniwide that it did not authorize the additional works onProject 1 undertaken by Titan. Still, Uniwide does cite testimonialevidence from the record alluding to a concession by employees ofTitan that these additional works on Project 1 were either authorizedor documented.33

Yet even conceding that the additional works on Project 1 were notauthorized or committed into writing, the undisputed fact remainsthat Uniwide paid for these additional works. Thus, to claim a refundof payments made under the principle of solutio indebiti, Uniwide

must be able to establish that these payments were made throughmistake. Again, this is a factual matter that would have acquired amantle of invulnerability had it been determined by both the CIAC and

the Court of Appeals. However, both bodies failed to arrive at such aconclusion. Moreover, Uniwide is unable to direct our attention to anypertinent part of the record that would indeed establish that thepayments were made by reason of mistake.

We note that Uniwide alleged in its petition that the CIAC award in

favor of Titan in the amount P5,158,364.63 as the unpaid balance inProject 3 included claims for additional works of P1,087,214.18 forwhich no written authorization was presented. Unfortunately, thisissue was not included in its memorandum as one of the issuessubmitted for the resolution of the Court.

Liability for the Value-Added Tax (VAT)

The second issue takes us into an inquiry on who, under the law, isliable for the payment of the VAT, in the absence of a writtenstipulation on the matter. Uniwide claims that the VAT was alreadyincluded in the contract price for Project 1. Citing Secs. 99 and 102 of

the National Internal Revenue Code, Uniwide asserts that VAT, being

an indirect tax, may be shifted to the buyer by including it in the cash

or selling price and it is entirely up to the buyer to agree or not toagree to absorb the VAT.34 Thus, Uniwide concludes, if there is no

provision in the contract as to who should pay the VAT, it is presumedthat it would be the seller.35

The contract for Project 1 is silent on which party should shoulder the

VAT while the contract for Project 3 contained a provision to the effectthat Uniwide is the party responsible for the payment of the VAT.36Thus, when Uniwide paid the amount of P2,400,000.00 as billed by

Titan for VAT, it assumed that it was the VAT for Project 3. However,the CIAC and the Court of Appeals found that the same was forProject 1.

We agree with the conclusions of both the CIAC and the Court of

Appeals that the amount of P2,400,000.00 was paid by Uniwide asVAT for Project 1. This conclusion was drawn from an Order ofPayment37 dated 7 October 1992 wherein Titan billed Uniwide theamount of P2,400,000.00 as "Value Added Tax based onP60,000,000.00 Contract," computed on the basis of 4% ofP60,000,000.00. Said document which was approved by the Presidentof Uniwide expressly indicated that the project involved was the

"UNIWIDE SALES WAREHOUSE CLUB & ADMIN BLDG." located at "90E. RODRIGUEZ JR. AVE., LIBIS, Q.C." The reduced base for thecomputation of the tax, according to the Court of Appeals, was anindication that the parties agreed to pass the VAT for Project 1 to

Uniwide but based on a lower contract price. Indeed, the CIAC foundas follows:

Without any documentary evidence than Exhibit "H" to showthe extent of tax liability assumed by [Uniwide], the Tribunalholds that the parties is [sic] obliged to pay only a share of the

VAT payment up to P60,000,000.00 out of the total contractprice of P120,936,591.50. As explained by Jimmy Gow,VAT is paid on labor only for construction contracts

since VAT had already been paid on the materialspurchased. Since labor costs is [sic] proportionatelyplaced at 60%-40% of the contract price, simplifiedaccounting computes VAT at 4% of the contract price.

Whatever is the balance for VAT that remains to be paid onProject 1 Libis shall remain the obligation of [Titan].(Emphasis supplied.)38

Liquidated Damages

On the third issue of liquidated damages, the CIAC rejected suchclaim while the Court of Appeals held that the matter should be left

for determination in future proceedings where the issue has been

made clear.
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In rejecting Uniwide's claim for liquidated damages, the CIAC heldthat there is no legal basis for passing upon and resolving Uniwide's

claim for the following reasons: (1) no claim for liquidated damagesarising from the alleged delay was ever made by Uniwide at any timebefore the commencement of Titan's complaint; (2) the claim forliquidated damages was not included in the counterclaims stated in

Uniwide's answer to Titan's complaint; (3) the claim was notformulated as an issue to be resolved by the CIAC in the TOR;39and

(4) no attempt was made to modify the TOR to accommodate thesame as an issue to be resolved.

Uniwide insists that the CIAC should have applied Section 5, Rule 10

of the Rules of Court.40On this matter, the Court of Appeals held thatthe CIAC is an arbitration body, which is not necessarily bound by theRules of Court. Also, the Court of Appeals found that the issue has

never been made concrete enough to make Titan and the CIAC awarethat it will be an issue. In fact, Uniwide only introduced and quantifiedits claim for liquidated damages in its Memorandum submitted to theCIAC at the end of the arbitration proceeding. The Court of Appeals

also noted that the only evidence on record to prove delay in the

construction of Project 1 is the testimony of Titan's engineer regardingthe date of completion of the project while the only evidence of delayin the construction of Project 3 is the affidavit of Uniwide's President.

According to Uniwide, the ruling of the Court of Appeals on the issue

of liquidated damages goes against the established judicial policy thata court should always strive to settle in one proceeding the entirecontroversy leaving no root or branch to bear the seeds of future

litigations.41 Uniwide claims that the required evidence for anaffirmative ruling on its claim is already on the record. It cites thepertinent provisions of the written contracts which containeddeadlines for liquidated damages. Uniwide also noted that theevidence show that Project 1 was completed either on 15 February

1992, as found by the CIAC, or 12 March 1992, as shown by Titan'sown evidence, while Project 3, according to Uniwide's President, was

completed in June 1993. Furthermore, Uniwide asserts, the CIACshould have applied procedural rules such as Section 5, Rule 10 withmore liberality because it was an administrative tribunal free from therigid technicalities of regular courts.42

On this point, the CIAC held:

The Rule of Procedure Governing Construction Arbitrationpromulgated by the CIAC contains no provision on the

application of the Rules of Court to arbitration proceedings,even in a suppletory capacity. Hypothetically admitting that

there is such a provision, suppletory application is made only if

it would not contravene a specific provision in the arbitrationrules and the spirit thereof. The Tribunal holds that suchimportation of the Rules of Court provision onamendment to conform to evidence would contravenethe spirit, if not the letter of the CIAC rules. This is for thereason that the formulation of the Terms of Reference is done

with the active participation of the parties and their counselthemselves. The TOR is further required to be signed by all the

parties, their respective counsel and all the members of theArbitral Tribunal. Unless the issues thus carefully formulated in

the Terms of Reference were expressly showed [sic] to beamended, issues outside thereof may not be resolved. Asalready noted in the Decision, "no attempt was ever made bythe [Uniwide] to modify the TOR in order to accommodate the

issues related to its belated counterclaim" on this issue.(Emphasis supplied.)

Arbitration has been defined as "an arrangement for taking andabiding by the judgment of selected persons in some disputed matter,

instead of carrying it to established tribunals of justice, and is

intended to avoid the formalities, the delay, the expense and vexationof ordinary litigation."43 Voluntary arbitration, on the other hand,involves the reference of a dispute to an impartial body, the membersof which are chosen by the parties themselves, which parties freely

consent in advance to abide by the arbitral award issued afterproceedings where both parties had the opportunity to be heard. Thebasic objective is to provide a speedy and inexpensive method ofsettling disputes by allowing the parties to avoid the formalities,delay, expense and aggravation which commonly accompany ordinarylitigation, especially litigation which goes through the entire hierarchy

of courts.44As an arbitration body, the CIAC can only resolve issuesbrought before it by the parties through the TOR which functions

similarly as a pre-trial brief. Thus, if Uniwide's claim for liquidateddamages was not raised as an issue in the TOR or in any modified oramended version of it, the CIAC cannot make a ruling on it. The Rulesof Court cannot be used to contravene the spirit of the CIAC rules,whose policy and objective is to "provide a fair and expeditious

settlement of construction disputes through a non-judicial processwhich ensures harmonious and friendly relations between or amongthe parties."45

Further, a party may not be deprived of due process of law by anamendment of the complaint as provided in Section 5, Rule 10 of the

Rules of Court. In this case, as noted by the Court of Appeals, Uniwide

only introduced and quantified its claim for liquidated damages in its
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memorandum submitted to the CIAC at the end of the arbitrationproceeding. Verily, Titan was not given a chance to present evidenceto counter Uniwide's claim for liquidated damages.

Uniwide alludes to an alleged judicial admission made by Engr. LuzonTablante wherein he stated that Project 1 was completed on 10 March

1992. It now claims that by virtue of Engr. Tablante's statement,Titan had admitted that it was in delay. We disagree. The testimonyof Engr. Tablante was offered only to prove that Project 1 was indeed

completed. It was not offered to prove the fact of delay. It must beremembered that the purpose for which evidence is offered must bespecified because such evidence may be admissible for several

purposes under the doctrine of multiple admissibility, or may beadmissible for one purpose and not for another, otherwise the adverseparty cannot interpose the proper objection. Evidence submitted for

one purpose may not be considered for any other purpose.46Furthermore, even assuming, for the sake of argument, that saidtestimony on the date of completion of Project 1 is admitted, theestablishment of the mere fact of delay is not sufficient for the

imposition of liquidated damages. It must further be shown that delay

was attributable to the contractor if not otherwise justifiable.Contrarily, Uniwide's belated claim constitutes an admission that thedelay was justified and implies a waiver of its right to such damages.

Project 2: "as-built" plans, overpricing, defective construction

To determine whether or not Uniwide is liable for the unpaid balanceof P6,301,075.77 for Project 2, we need to resolve four sub-issues,namely: (1) whether or not it was necessary for Titan to submit "as-built" plans before it can be paid by Uniwide; (2) whether or not therewas overpricing of the project; (3) whether or not the P15,000,000.00

paid by Uniwide to Titan for Project 2 constitutes full payment; and(4) whether or not Titan can be held liable for defective constructionof Project 2.

The CIAC, as affirmed by the Court of Appeals, held Uniwide liable fordeficiency relating to Project 2 in the amount of P6,301,075.77. It isnonetheless alleged by Uniwide that Titan failed to submit any "as-built" plans for Project 2, such plans allegedly serving as a conditionprecedent for payment. Uniwide further claims that Titan had

substantially overcharged Uniwide for Project 2, there beinguncontradicted expert testimony that the total cost of Project 2 didnot exceed P7,812,123.60. Furthermore, Uniwide alleged that theworks performed were structurally defective, as evidenced by the

structural damage on four columns as observed on ocular inspectionby the CIAC and confirmed by Titan's project manager.

On the necessity of submitting "as-built" plans, this Court rules thatthe submission of such plans is not a pre-requisite for Titan to be paid

by Uniwide. The argument that said plans are required by Section 308of Presidential Decree No. 1098 (National Building Code) and bySection 2.11 of its Implementing Rules before payment can be madeis untenable. The purpose of the law is "to safeguard life, health,

property, and public welfare, consistent with the principles of soundenvironmental management and control." The submission of these

plans is necessary only in furtherance of the law's purpose by settingminimum standards and requirements to control the "location, site,

design, quality of materials, construction, use, occupancy, andmaintenance" of buildings constructed and not as a requirement forpayment to the contractor.47The testimony of Engr. Tablante to theeffect that the "as-built" plans are required before payment can be

claimed by Titan is a mere legal conclusion which is not binding onthis Court.

Uniwide claims that, according to one of its consultants, the true pricefor Project 2 is only P7,812,123.60. The CIAC and the Court of

Appeals, however, found the testimony of this consultant suspect and

ruled that the total contract price for Project 2 is P21,301,075.77. TheCIAC held:

The Cost Estimate for Architectural and Site DevelopmentWorks for the EDSA Central, Dau Branch Project (Exhibit "2-A"

for [Uniwide] and made as a common exhibit by [Titan] whohad it marked at [sic] its own Exhibit "U"), which wasadmittedly prepared by Fermindoza and Associates,

[Uniwide]'s own architects, shows that the amount ofP17,750,896.48 was arrived at. Together with the agreed uponmark-up of 20% on said amount, the total project cost wasP21,301,075.77.

The Tribunal holds that the foregoing document is binding

upon the [Uniwide], it being the mode agreed upon by whichits liability for the project cost was to be determined.48(Emphasis supplied.)

Indeed, Uniwide is bound by the amount indicated in the abovedocument. Claims of connivance or fraudulent conspiracy between

Titan and Uniwide's representatives which, it is alleged, grosslyexaggerated the price may properly be dismissed. As held by theCIAC:

The Tribunal holds that [Uniwide] has not introduced anyevidence to sustain its charge of fraudulent conspiracy. As a

matter of fact, [Uniwide]'s own principal witness, Jimmy Gow,

admitted on cross-examination that he does not have any
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direct evidence to prove his charge of connivance or complicitybetween the [Titan] and his own representatives. He only

made that conclusion by the process of his own "logicalreasoning" arising from his consultation with other contractorswho gave him a much lower estimate for the construction ofthe Dau Project. There is thus no reason to invalidate the

binding character of Exhibit "2-A" which, it is significant topoint out, is [Uniwide]'s own evidence.49(Emphasis supplied.)

Accordingly, deducting the P15,000,000.00 already paid by Uniwidefrom the total contract price of P21,301,075.77, the unpaid balancedue for Project 2 is P6,301,075.77. This is the same amount reflected

in the Order of Payment prepared by Uniwide's representative, LeConsultech, Inc. and signed by no less than four top officers andarchitects of Le Consultech, Inc. endorsing for payment by Uniwide toTitan the amount of P6,301,075.77.50

Uniwide asserts that Titan should not have been allowed to recover onProject 2 because the said project was defective and would requirerepairs in the amount of P800,000.00. It claims that the CIAC and theCourt of Appeals should have applied Nakpil and Sons v. Court of

Appeals

51

and Art. 1723 of the New Civil Code holding a contractorresponsible for damages if the edifice constructed falls within fifteenyears from completion on account of defects in the construction or theuse of materials of inferior quality furnished by him or due to anyviolation of the terms of the contract.

On this matter, the CIAC conducted an ocular inspection of thepremises on 30 January 1995. What transpired in the said ocularinspection is described thus:

On 30 January 1995, an ocular inspection was conducted bythe Arbitral Tribunal as requested by [Uniwide]. Photographswere taken of the alleged construction defects, an actualripping off of the plaster of a certain column to expose the

alleged structural defect that is claimed to have resulted in itsbeing "heavily damaged" was done, clarificatory questionswere asked and manifestations on observations were made bythe parties and their respective counsels. The entireproceedings were recorded on tape and subsequently

transcribed. The photographs and transcript of the ocularinspection form part of the records and considered asevidence.52

And, according to these evidence, the CIAC concluded as follows:

It is likewise the holding of this Tribunal that [Uniwide]'scounterclaim of defective construction has not been sufficiently

proven. The credibility of Engr. Cruz, [Uniwide]'s principal

witness on this issue, has been severely impaired. During theocular inspection of the premises, he gave such assurance of

the soundness of his opinion as an expert that a certaincolumn was heavily damaged judging from the external cracksthat was readily apparent x x x

x x x x

On insistence of the Tribunal, the plaster was chipped off andrevealed a structurally sound column x x x

Further, it turns out that what was being passed off as adefective construction by [Titan], was in fact an old column, asadmitted by Mr. Gow himself x x x x53(Emphasis supplied.)

Uniwide had the burden of proving that there was defective

construction in Project 2 but it failed to discharge this burden. Eventhe credibility of its own witness was severely impaired. Further, itwas found that the concrete slab placed by Titan was not attached tothe old columns where cracks were discovered. The CIAC held thatthe post-tensioning of the new concrete slab could not have causedany of the defects manifested by the old columns. We are bound bythis finding of fact by the CIAC.

It is worthy to stress our ruling in Hi-Precision Steel Center, Inc. v.Lim Kim Steel Builders, Inc.54 which was reiterated in David v.Construction Industry and Arbitration Commission,55that:

x x x Executive Order No. 1008 created an arbitration facilityto which the construction industry in the Philippines can have

recourse. The Executive Order was enacted to encouragethe early and expeditious settlement of disputes in theconstruction industry, a public policy theimplementation of which is necessary and important forthe realization of national development goals.

Aware of the objective of voluntary arbitration in the laborfield, in the construction industry, and in any other area for

that matter, the Court will not assist one or the other or evenboth parties in any effort to subvert or defeat that objective fortheir private purposes. The Court will not review the factualfindings of an arbitral tribunal upon the artful allegation thatsuch body had "misapprehended facts" and will not pass uponissues which are, at bottom, issues of fact, no matter howcleverly disguised they might be as "legal questions." Theparties here had recourse to arbitration and chose thearbitrators themselves; they must have had confidence in such

arbitrators. The Court will not, therefore, permit the parties torelitigate before it the issues of facts previously presented and

argued before the Arbitral Tribunal, save only where a clear
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showing is made that, in reaching its factual conclusions, theArbitral Tribunal committed an error so egregious and hurtful

to one party as to constitute a grave abuse of discretionresulting in lack or loss of jurisdiction. Prototypical exampleswould be factual conclusions of the Tribunal which resulted indeprivation of one or the other party of a fair opportunity to

present its position before the Arbitral Tribunal, and an awardobtained through fraud or the corruption of arbitrators. Any

other, more relaxed rule would result in setting at naught thebasic objective of a voluntary arbitration and would reducearbitration to a largely inutile institution. (Emphasis supplied.)

WHEREFORE, premises considered, the petition is DENIED and theDecision of the Court of Appeals dated 21 February 1996 in CA-G.R.SP No. 37957 is hereby AFFIRMED.

SO ORDERED.

Quisumbing, J., Chairperson, Carpio, Carpio Morales, And Velasco, Jr.,JJ.,concur.


SUPREME COURTManila

SECOND DIVISION

BENGUET CORPORATION, G.R. No. 163101

Petitioner,

Present:

- versus - QUISUMBING, J.,Chairperson,

CARPIO,

CARPIO MORALES,

TINGA, and

DEPARTMENT OF ENVIRONMENT VELASCO, JR.,JJ.

AND NATURAL RESOURCES

-MINES ADJUDICATION BOARD

and J.G. REALTY AND MINING Promulgated:

CORPORATION,

Respondents. February 13, 2008

x-----------------------------------------------------------------------------------------x

D E C I S I O N

VELASCO, JR.,J.:

The instant petition under Rule 65 of the Rules of Court seeksthe annulment of the December 2, 2002 Decision1[1] and March 17,2004 Resolution2[2] of the Department of Environment and Natural

Resources-Mining Adjudication Board (DENR-MAB) in MAB Case No.

0124-01 (Mines Administrative Case No. R-M-2000-01) entitledBenguet Corporation (Benguet)v. J.G. Realty and Mining Corporation(J.G. Realty). The December 2, 2002 Decision upheld the March 19,2001 Decision3[3] of the MAB Panel of Arbitrators (POA) which

canceled the Royalty Agreement with Option to Purchase (RAWOP)dated June 1, 19874[4] between Benguet and J.G. Realty, andexcluded Benguet from the joint Mineral Production SharingAgreement (MPSA) application over four mining claims. The March 17,2004 Resolution denied Benguets Motion for Reconsideration.

The Facts

On June 1, 1987, Benguet and J.G. Realty entered into aRAWOP, wherein J.G. Realty was acknowledged as the owner of fourmining claims respectively named as Bonito-I, Bonito-II, Bonito-III,

and Bonito-IV, with a total area of 288.8656 hectares, situated inBarangay Luklukam, Sitio Bagong Bayan, Municipality of Jose


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Panganiban, Camarines Norte. The parties also executed aSupplemental Agreement5[5] dated June 1, 1987. The mining claims

were covered by MPSA Application No. APSA-V-0009 jointly filed byJ.G. Realty as claimowner and Benguet as operator.

In the RAWOP, Benguet obligated itself to perfect the rights tothe mining claims and/or otherwise acquire the mining rights to themineral claims. Within 24 months from the execution of the RAWOP,

Benguet should also cause the examination of the mining claims forthe purpose of determining whether or not they are worth developingwith reasonable probability of profitable production. Benguetundertook also to furnish J.G. Realty with a report on the

examination, within a reasonable time after the completion of theexamination. Moreover, also within the examination period, Benguetshall conduct all necessary exploration in accordance with a preparedexploration program. If it chooses to do so and before the expirationof the examination period, Benguet may undertake to develop themining claims upon written notice to J.G. Realty. Benguet must thenplace the mining claims into commercial productive stage within 24

months from the written notice.6[6] It is also provided in the RAWOPthat if the mining claims were placed in commercial production byBenguet, J.G. Realty should be entitled to a royalty of five percent(5%) of net realizable value, and to royalty for any production doneby Benguet whether during the examination or development periods.

Thus, on August 9, 1989, the Executive Vice-President ofBenguet, Antonio N. Tachuling, issued a letter informing J.G. Realty ofits intention to develop the mining claims. However, on February 9,1999, J.G. Realty, through its President, Johnny L. Tan, then sent aletter to the President of Benguet informing the latter that it wasterminating the RAWOP on the following grounds:

a. The fact that your company has failed toperform the obligations set forth in the RAWOP, i.e., to

undertake development works within 2 years from theexecution of the Agreement;

b. Violation of the Contract by allowing highgraders to operate on our claim.

c. No stipulation was provided with respectto the term limit of the RAWOP.

d. Non-payment of the royalties thereon asprovided in the RAWOP.7[7]

In response, Benguets Manager for Legal Services, ReynaldoP. Mendoza, wrote J.G. Realty a letter dated March 8, 1999,8[8]therein alleging that Benguet complied with its obligations under the

RAWOP by investing PhP 42.4 million to rehabilitate the mines, and

that the commercial operation was hampered by the non-issuance ofa Mines Temporary Permit by the Mines and Geosciences Bureau(MGB) which must be considered as force majeure, entitling Benguetto an extension of time to prosecute such permit. Benguet furtherclaimed that the high graders mentioned by J.G. Realty were already

operating prior to Benguets taking over of the premises, and that J.G.Realty had the obligation of ejecting such small scale miners. Benguetalso alleged that the nature of the mining business made it difficult tospecify a time limit for the RAWOP. Benguet then argued that the

royalties due to J.G. Realty were in fact in its office and ready to bepicked up at any time. It appeared that, previously, the practice byJ.G. Realty was to pick-up checks from Benguet representing such

royalties. However, starting August 1994, J.G. Realty allegedlyrefused to collect such checks from Benguet. Thus, Benguet posited


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that there was no valid ground for the termination of the RAWOP. Italso reminded J.G. Realty that it should submit the disagreement toarbitration rather than unilaterally terminating the RAWOP.

On June 7, 2000, J.G. Realty filed a Petition for Declaration of

Nullity/Cancellation of the RAWOP9[9] with the Legaspi City POA,Region V, docketed as DENR Case No. 2000-01 and entitled J.G.Realty v. Benguet.

On March 19, 2001, the POA issued a Decision,10[10] dwellingupon the issues of (1) whether the arbitrators had jurisdiction overthe case; and (2) whether Benguet violated the RAWOP justifying the

unilateral cancellation of the RAWOP by J.G. Realty. The dispositiveportion stated:

WHEREFORE, premises considered, the June 01,1987 [RAWOP] and its Supplemental Agreement is

hereby declared cancelled and without effect. BENGUETis hereby excluded from the joint MPSA Application over

the mineral claims denominated as BONITO-I,BONITO-II, BONITO-III and BONITO-IV.

SO ORDERED.

Therefrom, Benguet filed a Notice of Appeal11[11] with the

MAB on April 23, 2001, docketed as Mines Administrative Case No. R-M-2000-01. Thereafter, the MAB issued the assailed December 2,2002 Decision. Benguet then filed a Motion for Reconsideration of the

assailed Decision which was denied in the March 17, 2004 Resolutionof the MAB. Hence, Benguet filed the instant petition.

The Issues

1. There was serious and palpable error whenthe Honorable Board failed to rule that the contractual

obligation of the parties to arbitrate under the RoyaltyAgreement is mandatory.

2. The Honorable Board exceeded itsjurisdiction when it sustained the cancellation of theRoyalty Agreement for alleged breach of contractdespite the absence of evidence.

3. The Questioned Decision of the HonorableBoard in cancelling the RAWOP prejudice[d] the

substantial rights of Benguet under the contract to the

unjust enrichment of JG Realty.12[12]

Restated, the issues are: (1) Should the controversy have firstbeen submitted to arbitration before the POA took cognizance of the

case?; (2) Was the cancellation of the RAWOP supported byevidence?; and (3) Did the cancellation of the RAWOP amount tounjust enrichment of J.G. Realty at the expense of Benguet?

The Courts Ruling

Before we dwell on the substantive issues, we find that the

instant petition can be denied outright as Benguet resorted to animproper remedy.

The last paragraph of Section 79 of Republic Act No. (RA) 7942

or the Philippine Mining Act of 1995 states, A petition for review bycertiorari and question of law may be filed by the aggrieved party with


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the Supreme Court within thirty (30) days from receipt of the order ordecision of the [MAB].

However, this Court has already invalidated such provision inCarpio v. Sulu Resources Development Corp.,13[13] ruling that a

decision of the MAB must first be appealed to the Court of Appeals(CA) under Rule 43 of the Rules of Court, before recourse to thisCourt may be had. We held, thus:

To summarize, there are sufficient legal footingsauthorizing a review of the MAB Decision under Rule 43of the Rules of Court. First, Section 30 of Article VI of

the 1987 Constitution, mandates that [n]o law shall bepassed increasing the appellate jurisdiction of theSupreme Court as provided in this Constitution withoutits advice and consent. On the other hand, Section 79of RA No. 7942 provides that decisions of the MAB maybe reviewed by this Court on a petition for review by

certiorari. This provision is obviously an expansion of

the Courts appellate jurisdiction, an expansion to whichthis Court has not consented. Indiscriminate enactmentof legislation enlarging the appellate jurisdiction of thisCourt would unnecessarily burden it.

Second, when the Supreme Court, in theexercise of its rule-making power, transfers to the CApending cases involving a review of a quasi-judicial

bodys decisions, such transfer relates only toprocedure; hence, it does not impair the substantiveand vested rights of the parties. The aggrieved partysright to appeal is preserved; what is changed is only the

procedure by which the appeal is to be made or

decided. The parties still have a remedy and acompetent tribunal to grant this remedy.

Third, the Revised Rules of Civil Procedureincluded Rule 43 to provide a uniform rule on appealsfrom quasi-judicial agencies. Under the rule, appeals

from their judgments and final orders are now requiredto be brought to the CA on a verified petition for

review. A quasi-judicial agency or body has beendefined as an organ of government, other than a courtor legislature, which affects the rights of private partiesthrough either adjudication or rule-making. MAB falls

under this definition; hence, it is no different from theother quasi-judicial bodies enumerated under Rule 43.

Besides, the introductory words in Section 1 of CircularNo. 1-91among these agencies areindicate that

the enumeration is not exclusive or conclusive andacknowledge the existence of other quasi-judicialagencies which, though not expressly listed, should bedeemed included therein.

Fourth, the Court realizes that under BatasPambansa (BP) Blg. 129 as amended by RA No. 7902,factual controversies are usually involved in decisions ofquasi-judicial bodies; and the CA, which is likewise

tasked to resolve questions of fact, has more elbowroom to resolve them. By including questions of factamong the issues that may be raised in an appeal fromquasi-judicial agencies to the CA, Section 3of Revised

Administrative Circular No. 1-95 and Section 3 of Rule43 explicitly expanded the list of such issues.

According to Section 3 of Rule 43, [a]n appealunder this Rule may be taken to the Court of Appealswithin the period and in the manner herein providedwhether the appeal involves questions of fact, of law, ormixed questions of fact and law. Hence, appeals from

quasi-judicial agencies even only on questions of lawmay be brought to the CA.

Fifth, the judicial policy of observing the

hierarchy of courts dictates that direct resort fromadministrative agencies to this Court will not beentertained, unless the redress desired cannot be

obtained from the appropriate lower tribunals, or unlessexceptional and compelling circumstances justifyavailment of a remedy falling within and calling for the


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exercise of our primary jurisdiction.14[14]

The above principle was reiterated in Asaphil Construction andDevelopment Corporation v. Tuason, Jr. (Asaphil).15[15] However,the Carpio ruling was not applied to Asaphil as the petition in thelatter case was filed in 1999 or three years before the promulgation of

Carpio in 2002. Here, the petition was filed on April 28, 2004 when

the Carpio decision was already applicable, thus Benguet should havefiled the appeal with the CA.

Petitioner having failed to properly appeal to the CA under Rule

43, the decision of the MAB has become final and executory. On thisground alone, the instant petition must be denied.

Even if we entertain the petition although Benguet skirted theappeal to the CA via Rule 43, still, the December 2, 2002 Decision andMarch 17, 2004 Resolution of the DENR-MAB in MAB Case No. 0124-01 should be maintained.

First Issue: The case should have first been brought to

voluntary arbitration before the POA

Secs. 11.01 and 11.02 of the RAWOP pertinently provide:

11.01 Arbitration

Any disputes, differences or disagreementsbetween BENGUET and the OWNER with reference to

anything whatsoever pertaining to this Agreement thatcannot be amicably settled by them shall not be cause

of any action of any kind whatsoever in any court oradministrative agency but shall, upon notice of one

party to the other, be referred to a Board of Arbitratorsconsisting of three (3) members, one to be selected by

BENGUET, another to be selected by the OWNER andthe third to be selected by the aforementioned twoarbitrators so appointed.

x x x x

11.02 Court Action

No action shall be instituted in court as to anymatter in dispute as hereinabove stated, except to

enforce the decision of the majority of theArbitrators.16[16]

Thus, Benguet argues that the POA should have first referredthe case to voluntary arbitration before taking cognizance of the case,citing Sec. 2 of RA 876 on persons and matters subject to arbitration.

On the other hand, in denying such argument, the POA ruledthat:

While the parties may establish such stipulationsclauses, terms and conditions as they may deem

convenient, the same must not be contrary to law andpublic policy. At a glance, there is nothing wrong withthe terms and conditions of the agreement. But to statethat an aggrieved party cannot initiate an action

without going to arbitration would be tying one s handeven if there is a law which allows him to do so.17[17]


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The MAB, meanwhile, denied Benguets contention on theground of estoppel, stating:

Besides, by its own act, Benguet is alreadyestopped in questioning the jurisdiction of the Panel of

Arbitrators to hear and decide the case. As pointed outin the appealed Decision, Benguet initiated and filed anAdverse Claim docketed as MAC-R-M-2000-02 over the

same mining claims without undergoing contractualarbitration. In this particular case (MAC-R-M-2000-02)now subject of the appeal, Benguet is likewise inestoppel from questioning the competence of the Panel

of Arbitrators to hear and decide in the summaryproceedings J.G. Realtys petition, when Benguet itselfdid not merely move for the dismissal of the case butalso filed an Answer with counterclaim seekingaffirmative reliefs from the Panel of Arbitrators.18[18]

Moreover, the MAB ruled that the contractual provision onarbitration merely provides for an additional forum or venue and doesnot divest the POA of the jurisdiction to hear the case.19[19]

In its July 20, 2004 Comment,20[20] J.G. Realty reiterated theabove rulings of the POA and MAB. It argued that RA 7942 or the

Philippine Mining Act of 1995 is a special law which should prevailover the stipulations of the parties and over a general law, such as RA876. It also argued that the POA cannot be considered as a courtunder the contemplation of RA 876 and that jurisprudence saying that

there must be prior resort to arbitration before filing a case with thecourts is inapplicable to the instant case as the POA is itself alreadyengaged in arbitration.

On this issue, we rule for Benguet.

Sec. 2 of RA 876 elucidates the scope of arbitration:

Section 2. Persons and matters subject to

arbitration.Two or more persons or parties maysubmit to the arbitration of one or morearbitrators any controversy existing betweenthem at the time of the submission and which

may be the subject of an action, or the parties toany contract may in such contract agree to settleby arbitration a controversy thereafter arisingbetween them. Such submission or contract shall

be valid, enforceable and irrevocable, save uponsuch grounds as exist at law for the revocation ofany contract.

Such submission or contract may include

question[s] arising out of valuations, appraisals or othercontroversies which may be collateral, incidental,precedent or subsequent to any issue between theparties. (Emphasis supplied.)

In RA 9285 or the Alternative Dispute Resolution Act of 2004,the Congress reiterated the efficacy of arbitration as an alternativemode of dispute resolution by stating in Sec. 32 thereof that domesticarbitration shall still be governed by RA 876. Clearly, a contractual

stipulation that requires prior resort to voluntary arbitration beforethe parties can go directly to court is not illegal and is in factpromoted by the State. Thus, petitioner correctly cites several caseswhereby arbitration clauses have been upheld by this Court.21[21]


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Moreover, the contention that RA 7942 prevails over RA 876presupposes a conflict between the two laws. Such is not the case

here. To reiterate, availment of voluntary arbitration before resort ismade to the courts or quasi-judicial agencies of the government is avalid contractual stipulation that must be adhered to by the parties.As stated in Secs. 6 and 7 of RA 876:

Section 6. Hearing by court.A party

aggrieved by the failure, neglect or refusal ofanother to perform under an agreement in writingproviding for arbitration may petition the courtfor an order directing that such arbitration

proceed in the manner provided for in suchagreement. Five days notice in writing of the hearingof such application shall be served either personally orby registered mail upon the party in default. The court

shall hear the parties, and upon being satisfiedthat the making of the agreement or such failureto comply therewith is not in issue, shall make anorder directing the parties to proceed toarbitration in accordance with the terms of theagreement. If the making of the agreement ordefault be in issue the court shall proceed to

summarily hear such issue. If the finding be thatno agreement in writing providing for arbitrationwas made, or that there is no default in the

proceeding thereunder, the proceeding shall bedismissed. If the finding be that a writtenprovision for arbitration was made and there is adefault in proceeding thereunder, an order shall

be made summarily directing the parties to

proceed with the arbitration in accordance withthe terms thereof.

x x x x

Section 7. Stay of civil action.If any suit orproceeding be brought upon an issue arising out of an

agreement providing for the arbitration thereof, thecourt in which such suit or proceeding is pending, uponbeing satisfied that the issue involved in such suit orproceeding is referable to arbitration, shall stay the

action or proceeding until an arbitration has been had in

accordance with the terms of the agreement: Provided,That the applicant, for the stay is not in default inproceeding with such arbitration. (Emphasis supplied.)

In other words, in the event a case that should properly be thesubject of voluntary arbitration is erroneously filed with the courts orquasi-judicial agencies, on motion of the defendant, the court or

quasi-judicial agency shall determine whether such contractualprovision for arbitration is sufficient and effective. If in affirmative,

the court or quasi-judicial agency shall then order the enforcement ofsaid provision. Besides, in BF Corporation v. Court of Appeals, wealready ruled:

In this connection, it bears stressing that thelower court has not lost its jurisdiction over the case.

Section 7 of Republic Act No. 876 provides thatproceedings therein have only been stayed. After thespecial proceeding of arbitration has been pursued andcompleted, then the lower court may confirm the awardmade by the arbitrator.22[22]

J.G. Realtys contention, that prior resort to arbitration isunavailing in the instant case because the POAs mandate is toarbitrate disputes involving mineral agreements, is misplaced. Adistinction must be made between voluntary and compulsoryarbitration. In Ludo and Luym Corporation v. Saordino, the Court hadthe occasion to distinguish between the two types of arbitrations:

Comparatively, in Reformist Union of R.B. Liner, Inc. vs.NLRC, compulsory arbitration has been defined both as

the process of settlement of labor disputes by agovernment agency which has the authority toinvestigate and to make an award which is bindingon all the parties, and as a mode of arbitration wherethe parties are compelled to accept the resolution of

their dispute through arbitration by a third party. While


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a voluntary arbitrator is not part of thegovernmental unit or labor departmentspersonnel, said arbitrator renders arbitration servicesprovided for under labor laws.23[23] (Emphasissupplied.)

There is a clear distinction between compulsory and voluntary

arbitration. The arbitration provided by the POA is compulsory, whilethe nature of the arbitration provision in the RAWOP is voluntary, not

involving any government agency. Thus, J.G. Realtys argument onthis matter must fail.

As to J.G. Realtys contention that the provisions of RA 876cannot apply to the instant case which involves an administrativeagency, it must be pointed out that Section 11.01 of the RAWOPstates that:

[Any controversy with regard to the contract]

shall not be cause of any action of any kind whatsoeverin any court or administrative agencybut shall, upon

notice of one party to the other, be referred to a Boardof Arbitrators consisting of three (3) members, one tobe selected by BENGUET, another to be selected by theOWNER and the third to be selected by the

aforementioned two arbiters so appointed.24[24](Emphasis supplied.)

There can be no quibbling that POA is a quasi-judicial bodywhich forms part of the DENR, an administrative agency. Hence, theprovision on mandatory resort to arbitration, freely entered into by

the parties, must be held binding against them.25[25]

In sum, on the issue of whether POA should have referred thecase to voluntary arbitration, we find that, indeed, POA has nojurisdiction over the dispute which is governed by RA 876, thearbitration law.

However, we find that Benguet is already estopped fromquestioning the POAs jurisdiction. As it were, when J.G. Realty filed

DENR Case No. 2000-01, Benguet filed its answer and participated inthe proceedings before the POA, Region V. Secondly, when the

adverse March 19, 2001 POA Decision was rendered, it filed an appealwith the MAB in Mines Administrative Case No. R-M-2000-01 andagain participated in the MAB proceedings. When the adverse

December 2, 2002 MAB Decision was promulgated, it filed a motionfor reconsideration with the MAB. When the adverse March 17, 2004MAB Resolution was issued, Benguet filed a petition with this Courtpursuant to Sec. 79 of RA 7942 impliedly recognizing MABs

jurisdiction. In this factual milieu, the Court rules that the jurisdictionof POA and that of MAB can no longer be questioned by Benguet atthis late hour. What Benguet should have done was to immediatelychallenge the POAs jurisdiction by a special civil action for certiorariwhen POA ruled that it has jurisdiction over the dispute. To redo theproceedings fully participated in by the parties after the lapse of

seven years from date of institution of the original action with the POAwould be anathema to the speedy and efficient administration ofjustice.

Second Issue: The cancellation of the RAWOP

was supported by evidence

The cancellation of the RAWOP by the POA was based on two

grounds: (1) Benguets failure to pay J.G. Realtys royalties for themining claims; and (2) Benguets failure to seriously pursue MPSAApplication No. APSA-V-0009 over the mining claims.

As to the royalties, Benguet claims that the checks

representing payments for the royalties of J.G. Realty were availablefor pick-up in its office and it is the latter which refused to claimthem. Benguet then thus concludes that it did not violate the RAWOP


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for nonpayment of royalties. Further, Benguet reasons that J.G.Realty has the burden of proving that the former did not pay such

royalties following the principle that the complainants must provetheir affirmative allegations.

With regard to the failure to pursue the MPSA application,Benguet claims that the lengthy time of approval of the application isdue to the failure of the MGB to approve it. In other words, Benguet

argues that the approval of the application is solely in the hands ofthe MGB.

Benguets arguments are bereft of merit.

Sec. 14.05 of the RAWOP provides:

14.05 Bank Account

OWNER shall maintain a bank account at

___________ or any other bank from time to time

selected by OWNER with notice in writing to BENGUETwhere BENGUET shall deposit to the OWNERs creditany and all advances and payments which may become

due the OWNER under this Agreement as well as thepurchase price herein agreed upon in the event thatBENGUET shall exercise the option to purchase providedfor in the Agreement. Any and all deposits so madeby BENGUET shall be a full and completeacquittance and release to [sic] BENGUET fromany further liability to the OWNER of the amountsrepresented by such deposits. (Emphasis supplied.)

Evidently, the RAWOP itself provides for the mode of royalty

payment by Benguet. The fact that there was the previous practicewhereby J.G. Realty picked-up the checks from Benguet is unavailing.The mode of payment is embodied in a contract between the parties.As such, the contract must be considered as the law between theparties and binding on both.26[26] Thus, after J.G. Realty informed

Benguet of the bank account where deposits of its royalties may bemade, Benguet had the obligation to deposit the checks. J.G. Realty

had no obligation to furnish Benguet with a Board Resolutionconsidering that the RAWOP itself provided for such payment scheme.

Notably, Benguets claim that J.G. Realty must provenonpayment of its royalties is both illogical and unsupported by lawand jurisprudence.

The allegation of nonpayment is not a positive allegation asclaimed by Benguet. Rather, such is a negative allegation that doesnot require proof and in fact transfers the burden of proof to Benguet.

Thus, this Court ruled in Jimenez v. National Labor RelationsCommission:

As a general rule, one who pleads payment hasthe burden of proving it. Even where the plaintiff must

allege non-payment, the general rule is that the burdenrests on the defendant to prove payment, rather thanon the plaintiff to prove non-payment. The debtor has

the burden of showing with legal certainty thatthe obligation has been discharged bypayment.27[27](Emphasis supplied.)

In the instant case, the obligation of Benguet to pay royaltiesto J.G. Realty has been admitted and supported by the provisions ofthe RAWOP. Thus, the burden to prove such obligation rests onBenguet.

It should also be borne in mind that MPSA Application No.

APSA-V-0009 has been pending with the MGB for a considerablelength of time. Benguet, in the RAWOP, obligated itself to perfect therights to the mining claims and/or otherwise acquire the mining rights

to the mineral claims but failed to present any evidence showing thatit exerted efforts to speed up and have the application approved. Infact, Benguet never even alleged that it continuously followed-up the


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application with the MGB and that it was in constant communicationwith the government agency for the expeditious resolution of the

application. Such allegations would show that, indeed, Benguet wasremiss in prosecuting the MPSA application and clearly failed tocomply with its obligation in the RAWOP.

Third Issue: There is no unjust enrichment in the instant case

Based on the foregoing discussion, the cancellation of theRAWOP was based on valid grounds and is, therefore, justified. Thenecessary implication of the cancellation is the cessation of Benguetsright to prosecute MPSA Application No. APSA-V-0009 and to furtherdevelop such mining claims.

In Car Cool Philippines, Inc. v. Ushio Realty and DevelopmentCorporation, we defined unjust enrichment, as follows:

We have held that [t]here is unjust enrichmentwhen a person unjustlyretains a benefit to the loss of

another, or when a person retains money or property ofanother against the fundamental principles of justice,equity and good conscience. Article 22 of the CivilCode provides that [e]very person who through an act

of performance by another, or any other means,acquires or comes into possession of something at theexpense of the latter without just or legal ground, shallreturn the same to him. The principle of unjustenrichment under Article 22 requires two conditions:(1) that a person is benefited without a valid basis orjustification, and (2) that such benefit is derived at

anothers expense or damage.

There is no unjust enrichment when theperson who will benefit has a valid claim to suchbenefit.28[28] (Emphasis supplied.)

Clearly, there is no unjust enrichment in the instant case asthe cancellation of the RAWOP, which left Benguet without any legal

right to participate in further developing the mining claims, wasbrought about by its violation of the RAWOP. Hence, Benguet has noone to blame but itself for its predicament.

WHEREFORE, we DISMISS the petition, and AFFIRM theDecember 2, 2002 Decision and March 17, 2004 Resolution of the

DENR-MAB in MAB Case No. 0124-01 upholding the cancellation of theJune 1, 1987 RAWOP. No costs.

SO ORDERED.


SUPREME COURT

Manila

SECOND DIVISION

KOREA TECHNOLOGIES CO., G.R. No. 143581

LTD.,

Petitioner,

Present:

- versus - QUISUMBING, J.,Chairperson,

CARPIO,

CARPIO MORALES,

HON. ALBERTO A. LERMA, in TINGA, and

his capacity as Presiding Judge of VELASCO, JR., JJ.

Branch 256 of Regional Trial

Court of Muntinlupa City, and

PACIFIC GENERAL STEEL Promulgated:

MANUFACTURING

CORPORATION,

Respondents. January 7, 2008

x-----------------------------------------------------------------------------------------x


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D E C I S I O N

VELASCO, JR.,J.:

In our jurisdiction, the policy is to favor alternative methods ofresolving disputes, particularly in civil and commercial disputes.

Arbitration along with mediation, conciliation, and negotiation, beinginexpensive, speedy and less hostile methods have long been favoredby this Court. The petition before us puts at issue an arbitrationclause in a contract mutually agreed upon by the parties stipulating

that they would submit themselves to arbitration in a foreign country.Regrettably, instead of hastening the resolution of their dispute, theparties wittingly or unwittingly prolonged the controversy.

Petitioner Korea Technologies Co., Ltd. (KOGIES) is a Koreancorporation which is engaged in the supply and installation ofLiquefied Petroleum Gas (LPG) Cylinder manufacturing plants, while

private respondent Pacific General Steel Manufacturing Corp. (PGSMC)is a domestic corporation.

On March 5, 1997, PGSMC and KOGIES executed aContract29[1] whereby KOGIES would set up an LPG CylinderManufacturing Plant in Carmona, Cavite. The contract was executedin the Philippines. On April 7, 1997, the parties executed, in Korea,an Amendment for Contract No. KLP-970301 dated March 5,

199730[2] amending the terms of payment. The contract and itsamendment stipulated that KOGIES will ship the machinery andfacilities necessary for manufacturing LPG cylinders for which PGSMCwould pay USD 1,224,000. KOGIES would install and initiate the

operation of the plant for which PGSMC bound itself to pay USD306,000 upon the plants production of the 11-kg. LPG cylindersamples. Thus, the total contract price amounted to USD 1,530,000.

On October 14, 1997, PGSMC entered into a Contract ofLease31[3] with Worth Properties, Inc. (Worth) for use of Worths5,079-square meter property with a 4,032-square meter warehousebuilding to house the LPG manufacturing plant. The monthly rental

was PhP 322,560 commencing on January 1, 1998 with a 10% annualincrement clause. Subsequently, the machineries, equipment, andfacilities for the manufacture of LPG cylinders were shipped, delivered,

and installed in the Carmona plant. PGSMC paid KOGIES USD1,224,000.

However, gleaned from the Certificate32[4] executed by theparties on January 22, 1998, after the installation of the plant, the

initial operation could not be conducted as PGSMC encounteredfinancial difficulties affecting the supply of materials, thus forcing theparties to agree that KOGIES would be deemed to have completelycomplied with the terms and conditions of the March 5, 1997 contract.

For the remaining balance of USD306,000 for the installationand initial operation of the plant, PGSMC issued two postdatedchecks: (1) BPI Check No. 0316412 dated January 30, 1998 for PhP4,500,000; and (2) BPI Check No. 0316413 dated March 30, 1998 forPhP 4,500,000.33[5]

When KOGIES deposited the checks, these were dishonored for

the reason PAYMENT STOPPED. Thus, on May 8, 1998, KOGIESsent a demand letter34[6] to PGSMC threatening criminal action for


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violation of Batas Pambansa Blg.22 in case of nonpayment. On thesame date, the wife of PGSMCs President faxed a letter dated May 7,

1998 to KOGIES President who was then staying at a Makati Cityhotel. She complained that not only did KOGIES deliver a differentbrand of hydraulic press from that agreed upon but it had notdelivered several equipment parts already paid for.

On May 14, 1998, PGSMC replied that the two checks it issued

KOGIES were fully funded but the payments were stopped for reasonspreviously made known to KOGIES.35[7]

On June 1, 1998, PGSMC informed KOGIES that PGSMC was

canceling their Contract dated March 5, 1997 on the ground thatKOGIES had altered the quantity and lowered the quality of themachineries and equipment it delivered to PGSMC, and that PGSMCwould dismantle and transfer the machineries, equipment, andfacilities installed in the Carmona plant. Five days later, PGSMC filedbefore the Office of the Public Prosecutor an Affidavit-Complaint for

Estafa docketed as I.S. No. 98-03813 against Mr. Dae H

ADR - Friday

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