FACTS:

The case involved a dispute between El Dorado Consulting Realty and Development Group Corporation (El Dorado) and ASPF Construction and Development, Inc. (ASPF Construction) over a construction agreement for a condominium hotel project called "The Ritz." El Dorado had a Performance Bond with Pacific Union Insurance Company (PUIC) to ensure compliance with the agreement. El Dorado sent notices to ASPF Construction regarding various issues, including a refusal to revise the schedule of payments. Upon ASPF Construction's request for a revision, El Dorado sent a Notice of Default, Termination of Agreement, and Demand for Return of Unliquidated Down Payment to ASPF. El Dorado also filed a Notice of Claim to PUIC for the release of the full amount under the Performance Bonds but was informed that the Performance Bonds were canceled. El Dorado then filed a Request for Arbitration against PUIC before the Construction Industry Arbitration Commission (CIAC), seeking various claims. The CIAC issued a Final Award denying reimbursement of the down payment and retrofitting costs but awarded liquidated damages. El Dorado and PUIC appealed the CIAC's ruling to the Court of Appeals (CA), which affirmed the ruling with modifications. El Dorado subsequently filed a Petition for Review on Certiorari before the Supreme Court, challenging the CA's decision.

ISSUES:

1. Whether the Construction Industry Arbitration Commission (CIAC) has jurisdiction over a surety that issued a performance bond to guarantee the performance of a contractor under a construction agreement

2. Whether a court judgment rendered without jurisdiction is null and void

3. Whether the performance bond is incorporated into the Owner-Contractor Agreement.

4. Whether the petitioner can invoke the arbitration clause.

RULING:

1. The CIAC has jurisdiction over a surety that issued a performance bond. The Supreme Court held that a performance bond is an accessory contract dependent on the principal obligation guaranteed by it. In this case, the performance bond was connected to the construction contract and was relied upon for the construction project to proceed. Thus, any dispute arising from or connected with the performance bond falls within the jurisdiction of the CIAC.

2. A court judgment rendered without jurisdiction is null and void. It has no legal effect and may be attacked anytime. Any acts performed or claims emanating from a void judgment have no legal effect.

3. The performance bond is not incorporated into the Owner-Contractor Agreement. The performance bond merely references the contract entered into by the parties. Thus, the parties to the construction agreement, and not the petitioner, are bound by the performance bond.

4. The petitioner cannot invoke the arbitration clause. The petitioner is not a party to the construction agreement and, therefore, cannot invoke the jurisdiction of the CIAC. The principle that contracts take effect only between the parties, their assigns, and heirs applies in this case.

PRINCIPLES:

• Jurisdiction over the subject matter is conferred by law and not by the consent or acquiescence of the parties. A court or tribunal without jurisdiction over the subject matter can only dismiss the action.

• A judgment rendered by a court without jurisdiction is null and void. It creates no rights and produces no effect.

• A performance bond is an accessory contract that guarantees the supply of labor, materials, and necessary supervision to complete a construction project. It is significantly connected to the construction contract and cannot be severed from it.

• The CIAC has jurisdiction over any dispute arising from or connected with a construction contract, including disputes involving a surety that issued a performance bond.

• Contracts take effect only between the parties, their assigns, and heirs.

• Performance bonds need to be expressly incorporated into the contract in order to bind all parties to the agreement.

• Only parties to the contract who agreed to the arbitration clause can invoke the same.