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PHILIPPINE RACE HORSE TRAINER'S ASSOCIATION v. PIEDRAS NEGRAS CONSTRUCTION

FACTS:

The petitioner, Philippine Race Horse Trainer's Association, Inc. (PRHTAI), entered into a series of contracts with Fil-Estate Properties, Inc. (Fil-Estate) and its subcontractor, Piedras Negras Construction & Development Corporation (PNCDC), for the development of a housing project. The first contract was signed on October 3, 2000, followed by a second contract on October 13, 2004, and a third contract on August 23, 2005. The third contract had a revised amount of P101,150,000.00, with a remaining balance due to PNCDC of P58,281,951.80.

After completing the project, PNCDC issued a Certificate of Completion and Acceptance in favor of PRHTAI. However, PRHTAI encountered financial difficulties and was unable to pay the remaining balance. PNCDC filed a request for arbitration/complaint with the Construction Industry Arbitration Commission (CIAC) seeking payment of P14,571,618.24.

On July 30, 2009, the CIAC ruled in favor of PRHTAI, declaring the third contract unenforceable and finding an overpayment by PRHTAI in the amount of P14,351,484.61. The CIAC ordered PNCDC to pay PRHTAI the overpayment amount and other legal expenses.

On March 18, 2010, the Court of Appeals (CA) reversed the CIAC ruling and ordered PRHTAI to pay PNCDC the remaining balance of the third contract. The CA also held PRHTAI liable for the payment of arbitration expenses. PRHTAI filed a motion for reconsideration, which was denied, prompting them to file this petition for review. The issues for the Court to decide on include the jurisdiction of the CIAC, the enforceability of the third contract, and the existence of overpayment on PRHTAI's part.

ISSUES:

  1. Whether the letter sent by the new board of directors of PRHTAI to PNCDC can be considered as an acknowledgment or ratification of the debt.

  2. Whether the doctrine of apparent authority applies in this case.

RULING:

  1. The letter sent by the new board of directors of PRHTAI to PNCDC cannot be considered as an acknowledgment or ratification of the debt. The letter merely requested copies of certain documents and did not imply an acknowledgment of the debt. The acceptance of the Certificate of Completion and Acceptance by the same person whose authority is being challenged cannot be considered as a valid ratification.

  2. The doctrine of apparent authority does not apply in this case. The board of directors, not the president, exercises corporate power. The circumstances necessary to establish apparent authority, such as the knowledge and reliance of a third party in good faith, are lacking. Moreover, the housing project entered into by PRHTAI is not within its ordinary course of business.

  3. The Supreme Court held that the CA did not err in affirming the RTC's decision. The Court ruled that the petitioner was indeed unlawfully restrained from taking further legal action against the NPS. The Court emphasized that the NPS cannot claim that it is exempt from administrative liability and that the petitioner should first seek remedies within the NPS hierarchy before resorting to the courts. The Court also held that the NPS' refusal to act on the petitioner's request for reconsideration amounted to grave abuse of discretion.

PRINCIPLES:

  • The Court is not a trier of facts but may review the findings of fact of the CA when they are contrary to those of the CIAC. (Metro Construction, Inc. v. Chatham Properties, Inc.)

  • The Court may sustain the findings of the Arbitral Tribunal when the issues involved are factual in nature and have been thoroughly discussed by the Tribunal and affirmed by the CA. (Megaworld Globus Asia, Inc. v. DSM Construction and Development Corporation)

  • Factual determinations are within the expertise of the CIAC.

  • An acknowledgment or ratification of a debt must be clear and unequivocal.

  • The doctrine of apparent authority applies when a corporation knowingly permits an officer or agent to act within the scope of an apparent authority.

  • Apparent authority can be derived from the general manner in which the corporation holds out the officer or agent as having the power to act, or from the acquiescence in his acts of a particular nature.

  • The doctrine of apparent authority does not apply if the principal did not commit any act or conduct which a third party knew and relied upon in good faith.

  • The doctrine of exhaustion of administrative remedies requires that before a party may seek judicial intervention, he or she must exhaust all administrative remedies available to him or her within the administrative machinery of the agency concerned.

  • Subjudice, a Latin term, means the pendency of a particular action. It refers to the condition of a matter which is still the subject of judicial action and therefore prohibited from public discussion outside of court.