THIRD DIVISION
G.R. No. 238322. October 13, 2021
METRO ILOILO WATER DISTRICT, Petitioner, v. FLO WATER RESOURCES [ILOILO], INC., Respondent.
D E C I S I O N
ZALAMEDA, J.:
The Court resolves instant petition for review on certiorari seeks to reverse and set aside the Decision dated 27 February 2018 of the Court of Appeals (CA) Cebu in CA-G.R. CEB SP No. 11053.1 The CA denied petitioner's appeal assailing the arbitral award dated 25 May 2017,2 issued by the ad hoc tribunal in the arbitration case docketed as Case No. 001-2015 entitled "Flo Water Resources (Iloilo), Inc. v. Metro Iloilo Water District."
It is a basic principle in contract law in this jurisdiction that the intention of the parties to a contract shall prevail when the express terms and conditions of the contract suffer from any ambiguity. Hence, the ambiguity in the terms and conditions of the BWSC, either caused by the ostensible lack of express "take-or-pay" designations or otherwise, should be resolved by looking to [sic] the evident intention of the parties in entering into the BWSC.Aggrieved, MIWD filed a petition for review with the CA under Rule 43 of the Rules of Court.20chanRoblesvirtualLawlibrary
In this regard, the Arbitral Tribunal finds that it was the intention of the Parties to enter into a take-or-pay contractual arrangement, through their contemporaneous and subsequent acts. In particular, the following acts of MIWD, which were contemporaneous or subsequent to the execution of the BWSC, must be considered: (1) [T]he amount of liquidated damages assessed and enforced against Flo Water by MIWD was computed using the formula set forth in Article XIV, Section 1 of the BWSC, which explicitly uses 15,000 cu.m./day as base. Thus, MIWD clearly intended to accept delivery of, and/or pay for, bulk water in the volume of 15,000 cu. m./day when it considered to be the minimum guaranteed volume of water subject of the BWSC; (2) [A]side from liquidated damages against Flo Water on the basis of the formula set forth in Article XIV, Section 1 of the BWSC, MIWD also applied for interim measures of protection in [sic] July 2015 with the Regional Trial Court in relation to these arbitration proceedings. The interim relief prayed for by MIWD sought to compel Flo Water to deliver bulk water volume amounting to 15,000 cu. m./day. This confirms that MIWD had the intention to pay for and compel delivery of bulk in the volume of 15,000 cu. m./day as the minimum guaranteed volume of which it could compel delivery, and for which it had the obligation to pay pursuant to the terms and conditions of the BWSC.
xxx xxx
Plainly, the technical incapacity and deficiency of Injection Point No. 3 was the precise reason MIWD failed to accept the delivery of the contested 9,000 cu. m./day bulk water and the direct cause for Flo Water's failure to deliver the said bulk water volume. Consequently, Flo Water should not suffer from the consequences of MIWD's failure to accept the 9,000 cu. m./day bulk water volume and be deemed to have delivered the entire guaranteed maximum volume of 15,000 cu. m./day. Under Article 1186 of the New Civil Code a condition in a contract shall be deemed fulfilled when the obligor voluntarily prevents its fulfillment. Thus, MIWD is obliged to pay Flo Water for the whole volume of 15,000 cu. m./day of bulk water delivered to MIWD from February 16, 2013 to April 30, 2016.19 (Citations omitted)
WHEREFORE, the petition is DISMISSED. The Arbitral Award dated 25 May 2017 issued by the Ad Hoc Tribunal in Iloilo City in the arbitration case docketed as Case No. 01-2015 entitled "Flo Water Resources (Iloilo), Inc. v. Metro Iloilo Water District," ordering petitioner Metro Iloilo Water District to pay respondent Flo Water Resources (Iloilo), Inc. the amount of One Hundred Sixty-Four Million Five Hundred Forty-Two Thousand Six Hundred Twenty-Three Pesos and Seventy-Five Centavos (P164,542,623.75) representing the unpaid principal amount (plus stipulated interest of 12% per annum) for the bulk water supplied by Flo Water from 16 February 2013 up to 20 April 2016 is hereby AFFIRMED.The CA held that MIWD availed of the wrong remedy by filing a petition pursuant to Rule 43 of the Rules of Court, in relation to the GPRA, and its 2016 Implementing Rules and Regulations. Citing Fruehauf Electronics Philippines Corporation v. Technology Electronics Assembly and Management Pacific Corporation,22 it explained that "an arbitral award is not appealable via Rule 43 because: (1) there is no statutory basis for an appeal from the final award of arbitrators; (2) arbitrators are not quasi-judicial bodies; and (3) the Special ADR Rules specifically prohibit the filing of an appeal to question the merits of an arbitral award."
SO ORDERED.21 (Emphasis on the original)
SEC. 59. Arbitration. – Any and all disputes arising from the implementation of a contract covered by this Act shall be submitted to arbitration in the Philippines according to the provisions of Republic Act No. 876, otherwise known as the "Arbitration Law": Provided, however, That, disputes that are within the competence of the Construction Industry Arbitration Commission to resolve shall be referred thereto. The process of arbitration shall be incorporated as a provision in the contract that will be executed pursuant to the provisions of this Act: Provided, That by mutual agreement, the parties may agree in writing to resort to alternative modes of dispute resolution.Thereafter, RA 9285, otherwise known as the Alternative Dispute Resolution Act of 2004 was enacted. Section 41 thereof provides that a domestic arbitral award may be questioned before the RTC in accordance with the rules of procedure to be promulgated by the Supreme Court based only on the grounds enumerated under Section 25 of RA 876.
SEC. 60. Appeals. – The arbitral award and any decision rendered in accordance with the foregoing Section shall be appealable by way of a petition for review to the Court of Appeals. The petition shall raise pure questions of law and shall be governed by the Rules of Court.
While there is uniformity between appeals of the different quasi-judicial agencies, Rule 43 does not automatically apply to all appeals of arbitral awards. Fruehauf Electronics Philippines Corporation v. Technology Electronics Assembly and Management Pacific Corporation has since distinguished between commercial arbitration, construction arbitration, and voluntary arbitration under Article 219 (n) of the Labor Code. Fruehauf Electronics Philippines Corporation declared that commercial arbitration tribunals are not quasi-judicial agencies, but "purely ad hoc bodies operating through contractual consent and as they intend to serve private, proprietary interests." A commercial arbitration tribunal is a "creature of contract" that becomes functus officio once the arbitral award attains finality.From the foregoing, it may be discernible that a petition under Rule 43 of the Rules of Court may be filed depending on the nature of the ad hoc tribunal which renders the award. If it is a quasi-judicial agency such as the Construction Industry Arbitration Commission mentioned in Section 59 of the GPRA,32 a petition under Rule 43 of the Rules of Court may be filed with the CA. However, if it is an ad hoc tribunal formed merely through the consent of the parties, Rule 43 of the Rules of Court will not apply.
However, the jurisdiction of construction arbitration tribunals and voluntary arbitrators is vested by statute. This jurisdiction exists independently of the will of the contracting parties due to the public interest inherent in their respective spheres[.] (Emphasis supplied and citations omitted)
Aware of the objective of voluntary arbitration in the labor field, in the construction industry, and in any other area for that matter, the Court will not assist one or the other or even both parties in any effort to subvert or defeat that objective for their private purposes. The Court will not review the factual findings of an arbitral tribunal upon the artful allegation that such body had "misapprehended the facts'' and will not pass upon issues which are, at bottom, issues of fact, no matter how cleverly disguised they might be as "legal questions." The parties here had recourse to arbitration and chose the arbitrators themselves; they must have had confidence in such arbitrators. The Court will not, therefore. permit the parties to relitigate before it the issues of facts previously presented and argued before the Arbitral Tribunal, save only where a very clear showing is made that, in reaching its factual conclusions, the Arbitral Tribunal committed an error so egregious and hurtful to one party as to constitute a grave abuse of discretion resulting in lack or loss of jurisdiction. Prototypical examples would be factual conclusions of the Tribunal which resulted in deprivation of one or the other party of a fair opportunity to present its position before the Arbitral Tribunal, and an award obtained through fraud or the corruption of arbitrators. Any other, more relaxed, rule would result in setting at naught the basic objective of a voluntary arbitration and would reduce arbitration to a largely inutile institution.37 (Citations omitted)Notably, the issues raised by MIWD primarily question the ad hoc tribunal's finding that the BWSC is a "take or pay" contact. It is clear however that this goes into the merits of the arbitral award and discussing the same would necessarily lead to a review of not only the legal conclusions, but also the factual findings of the ad hoc tribunal.
Endnotes:
* Carandang, J., on official leave per Special Order No. 2851 dated 07 October 2021.
** Dimaampao, J., designated additional member per Special Order no. 2839.
1 Rollo, Vol. 1, pp. 47-61; penned by Associate Justice Louis P. Acosta and concurred in by Associate Justices Edgardo L. Delos Santos (a retired Member of this Court) and Edward B. Contreras.
2 Id. at 126-186.
3 Id. at 12.
4 Id. at 408-512.
5 Id. at 12-13.
6 Id. at 13.
7 Rollo, Vol. 2, p. 892.
8 Rollo, Vol. 1, pp. 62-78.
9 Rollo, Vol. 2, p. 893.
10 Rollo, Vol. 1, pp. 14-15.
11 Id. at 15.
12 Id. at 15-16.
13 Id. at 97-103.
14 Id. at 18 and 102.
15 Id. at 94-96.
16 Id. at 104-125.
17 XVI. DISPUTES AND JURISDICTION
Any dispute, controversy or claim arising out of or relating to this contract or the breach, termination, or invalidity thereof, if the same cannot be settled amicably, may be submitted for arbitration in accordance with Republic Act 9285, otherwise known as the "Alternative Dispute Resolution Act of 2004" and the place of arbitration shall be in the City of Iloilo, Philippines, otherwise said dispute or controversy arising out of the contract or breach thereof shall be submitted to a court of law in Iloilo City to the exclusions of all other venue.
18 Rollo, pp. 126-186.
19 Id. at 175-179.
20 Id. at 187-209.
21 Id. at 60-61.
22 800 Phil. 721 (2016).
23 Rollo, Vol. 1, pp. 52-53.
24 Rollo, Vol. 2, p. 1306.
25 Id. at 1455-1461.
26 Id. at 345-353.
27 Id. at 1550-1552.
28 Id. at 1554.
29 A.M. No. 07-11-08-SC, Rule 19.7.
30 Rule 11.4. Grounds. - (A) To vacate an arbitral award. - The arbitral award may be vacated on the following grounds:
a. The arbitral award was procured through corruption, fraud or other undue means;
b. There was evident partiality or corruption in the arbitral tribunal or any of its members;
c. The arbitral tribunal was guilty of misconduct or any form of misbehavior that has materially prejudiced the rights of any party such as refusing to postpone a hearing upon sufficient cause shown or to hear evidence pertinent and material to the controversy;
d. One or more of the arbitrators was disqualified to act as such under the law and willfully refrained from disclosing such disqualification; or
e. The arbitral tribunal exceeded its powers, or so imperfectly executed them, such that a complete, final and definite award upon the subject matter submitted to them was not made.
The award may also be vacated on any or all of the following grounds:
a. The arbitration agreement did not exist, or is invalid for any ground for the revocation of a contract or is otherwise unenforceable; or
b. A party to arbitration is a minor or a person judicially declared to be incompetent.
xxx xxx
(B) To correct/modify an arbitral award. - The Court may correct/modify or order the arbitral tribunal to correct/modify the arbitral award in the following cases:
a. Where there was an evident miscalculation of figures or an evident mistake in the description of any person, thing or property referred to in the award;
b. Where the arbitrators have awarded upon a matter not submitted to them, not affecting the merits of the decision upon the matter submitted;
c. Where the arbitrators have omitted to resolve an issue submitted to them for resolution; or
d. Where the award is imperfect in a matter of form not affecting the merits of the controversy, and if it had been a commissioner's report, the defect could have been amended or disregarded by the Court.
31 G.R. No. 202430, 06 March 2019, citing Fruehauf Electronics Philippines Corporation v. Technology Electronics Assembly and Management Pacific Corporation, supra at note 13.
32 Department of Public Works and Highways v. CMC/Monark/Pacific/Hi-Tri Joint Venture, 818 Phil. 27 (2017).
33 Fruehauf Electronics Philippines Corp. v. Technology Electronics Assembly and Management Pacific Corp., supra at note 13.
34 Tirol, Jr. v. Del Rosario, 376 Phil. 115 (1999).
35 Global Medical Center of Laguna, Inc. v. Ross Systems International, Inc., G.R. Nos. 230112 & 230119, 11 May 2021.
36 298-A Phil. 361 (1993).
37 Id. at 373-374.
38 Asset Privitization Trust v. Court of Appeals, 360 Phil. 768 (1998).cralawredlibrary