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HEUNGHWA INDUSTRY CO. v. DJ BUILDERS CORPORATION

FACTS:

The petitioner, Heunghwa Industry Co., Ltd., is a Korean corporation doing business in the Philippines. The respondent, DJ Builders Corporation, is a corporation organized under Philippine laws. The petitioner entered into a subcontract agreement with the respondent to perform construction work for a project contracted with the Department of Public Works and Highways (DPWH). However, the agreed price was not fully paid, prompting the respondent to file a complaint for breach of contract and collection of sum of money before the Regional Trial Court (RTC) of Puerto Princesa.

The parties agreed to submit specific issues to the Construction Industry Arbitration Commission (CIAC) for arbitration. However, the petitioner later sought to withdraw the referral to the CIAC, asserting that the RTC had jurisdiction over the case. The CIAC denied the petitioner's motion to dismiss and set a preliminary conference. Subsequent proceedings between the RTC and CIAC involved motions to suspend, recall, reconsider, and dismiss the case.

The petitioner filed a complaint in the RTC, but the respondent filed a motion to dismiss the case without prejudice to filing the proper complaint with the CIAC. The RTC granted the motion but the petitioner moved for reconsideration, claiming denial of due process. The CIAC suspended the proceedings but did not rule on the petitioner's motion. The CIAC conducted a preliminary conference. The RTC declared the earlier order dismissing the case as null and void, and set the case for hearing. The petitioner questioned the CIAC's authority to hear the case but the CIAC denied the motion to dismiss. The parties filed separate petitions for certiorari in the CA, which ruled in favor of the CIAC's jurisdiction. The petitioner filed a petition before the Supreme Court.

ISSUES:

  1. Whether the Regional Trial Court (RTC) or the Construction Industry Arbitration Commission (CIAC) had authority to hear the case.

  2. Whether the denial by the CIAC of the motion to dismiss constituted a patent grave abuse of discretion.

  3. Whether the presence of an arbitration clause in a construction contract is sufficient to vest the Construction Industry Arbitration Commission (CIAC) with jurisdiction over any construction controversy or claim between the parties.

  4. Whether a subsequent consent by the parties to submit the case for arbitration is necessary, despite the presence of an arbitration clause in the contract.

  5. Whether or not petitioner's acts of joint referral and manifestation amount to participation in the arbitration proceedings.

  6. Whether or not the CIAC had jurisdiction over the construction dispute.

  7. Whether or not petitioner would have been estopped from questioning the jurisdiction of the CIAC if they had participated in the proceedings.

  8. Whether the respondent should have pursued a motion for reconsideration before appealing to the National Appellate Board (NAB).

  9. Whether the respondent should be given the opportunity to fully ventilate his arguments against the factual findings of the PNP Chief.

RULING:

  1. The CIAC has jurisdiction over the dispute. The issue of jurisdiction between the RTC and the CIAC is a question of law. The CIAC's jurisdiction is based on Executive Order No. 1008, which grants it original and exclusive jurisdiction over disputes arising from construction contracts. In this case, the RTC initially allowed the referral of specific issues to the CIAC, indicating that it recognized the CIAC's jurisdiction. The recall of the case by the RTC did not deprive the CIAC of its jurisdiction. Therefore, the CIAC acted within its jurisdiction in denying the motion to dismiss.

  2. The denial by the CIAC of the motion to dismiss did not constitute a patent grave abuse of discretion. An order denying a motion to dismiss is generally not subject to a petition for certiorari. However, there are exceptions, such as when the trial court issued the order without or in excess of jurisdiction or when there is patent grave abuse of discretion. In this case, the denial of the motion to dismiss by the CIAC was not a patent grave abuse of discretion because the CIAC acted within its jurisdiction in denying the motion.

  3. Yes, the presence of an arbitration clause in a construction contract is sufficient to vest the CIAC with jurisdiction over any construction controversy or claim between the parties. The CIAC has jurisdiction over a construction dispute when there is an arbitration clause present, regardless of any reference made to another arbitral body. Jurisdiction is conferred by law and cannot be waived by agreement or acts of the parties. A subsequent consent by the parties to submit the case for arbitration is unnecessary and superfluous.

  4. No, a subsequent consent by the parties to submit the case for arbitration is not necessary, despite the presence of an arbitration clause in the contract. The CIAC was already vested with jurisdiction the moment both parties agreed to incorporate an arbitration clause in their agreement. The CIAC's jurisdiction is not dependent on a subsequent consent by the parties.

  5. The acts of joint referral and manifestation performed by petitioner's lawyer, even if duly authorized, do not amount to participation in the arbitration proceedings. However, the Court emphasized that the CIAC had jurisdiction over the dispute based on the arbitration clause in the subcontract agreement.

  6. The Court upheld the authority of the CIAC to hear the case, even if the RTC recognized it as an administrative tribunal with the required skill and expertise in addressing construction disputes.

  7. Petitioner cannot presume that they would have been estopped from questioning the jurisdiction of the CIAC if they had participated in the proceedings. The doctrine of estoppel is a matter for the court to consider, and in this case, petitioner had consistently questioned the jurisdiction of the CIAC from the beginning.

  8. The respondent should be given the opportunity to pursue an appeal before the NAB instead of filing a petition for certiorari with the trial court. The confusion as to which body had jurisdiction over the case was understandable, and in similar circumstances in a previous case, the Court allowed the respondent to appeal his case before the proper agency.

  9. The respondent should be given the opportunity to fully ventilate his arguments against the factual findings of the PNP Chief. In the higher interest of substantial justice, the opportunity to pursue an appeal should be deemed available to the respondent.

PRINCIPLES:

  • Whether the subject matter falls within the exclusive jurisdiction of a quasi-judicial agency is a question of law.

  • The term "grave abuse of discretion" connotes a capricious, despotic, oppressive, or whimsical exercise of judgment as is equivalent to lack of jurisdiction.

  • The jurisdiction of the CIAC over construction disputes is based on Executive Order No. 1008.

  • The CIAC's jurisdiction is determined by the agreement of the parties, not by the referral order of the court.

  • An order denying a motion to dismiss is generally not subject to a petition for certiorari, but there are exceptions when the trial court acted without or in excess of jurisdiction, or when there is patent grave abuse of discretion.

  • The presence of an arbitration clause in a construction contract is sufficient to vest the CIAC with jurisdiction over any construction controversy or claim between the parties, regardless of any reference made to another arbitral body.

  • Jurisdiction is conferred by law and cannot be waived by agreement or acts of the parties.

  • A subsequent consent by the parties to submit the case for arbitration is unnecessary and superfluous once an arbitration clause is present in the contract.

  • The jurisdiction of the CIAC is vested through an arbitration clause in a contract.

  • Courts will not resolve a controversy within the jurisdiction of an administrative tribunal, especially where the question demands the exercise of special knowledge, experience, and services of the tribunal to determine technical and intricate matters of fact.

  • The doctrine of laches is based on grounds of public policy, requiring the discouragement of stale claims.

  • Estoppel is a matter for the court to consider and depends on the attendant circumstances of the case.

  • The CIAC may proceed with the arbitration proceedings even if a respondent refuses or fails to participate.

  • The proper agency should be determined in accordance with the law and supporting jurisprudence. (Lastimoso case)

  • The opportunity to fully ventilate arguments should not be deprived, especially when it pertains to factual findings. (Quiambao case)

  • The non-participation of a party does not void the proceedings if there is a clear provision in the rules. (Section 4.2 of the CIAC Rules)

  • The court will not grant relief that is inconsistent with the law.