GR 107631; (February, 1996) (Digest)
G.R. No. 107631 ; February 26, 1996
NATIONAL POWER CORPORATION, petitioner, vs. HON. COURT OF APPEALS and PECORP, INC. (Formerly Pacific Equipment Corp.), respondents.
FACTS
Petitioner National Power Corporation (NPC) and private respondent PECORP entered into a “Cost-Plus a Percentage” contract for the construction of Mariveles Dam No. 1. The contract included an arbitration clause for any dispute “arising out of this contract.” Subsequently, NPC directly contracted with Philippine Grouting and Guniting Co., Inc. (GROGUN) for the drilling and grouting work, which was originally within PECORP’s scope, thereby depriving PECORP of its fee on that portion. NPC justified this by invoking Article 1725 of the Civil Code, allowing an owner to withdraw from work by indemnifying the contractor.
Years later, PECORP presented four monetary claims to NPC, two of which are contested here: the fee on the cost of the drilling and grouting work and the fee on the minimum guaranteed equipment rental. NPC was willing to arbitrate only the other two undisputed claims. It resisted the first claim, arguing the work was no longer part of the contract due to its “withdrawal,” and the second claim, contending PECORP had withdrawn it via a letter. PECORP filed an action to compel arbitration on all four claims.
ISSUE
Whether PECORP’s two contested claims are arbitrable under the arbitration clause of the NPC-PECORP contract.
RULING
Yes, both claims are arbitrable. The arbitration clause is broad, covering “any dispute, controversy, or differences between the parties arising out of this contract.” The legal logic is straightforward: the existence and interpretation of the claims are inextricably linked to the rights and obligations created by the NPC-PECORP contract. Had there been no contract, the claims would not exist. Therefore, any disagreement regarding their validity or computation is a dispute “arising out of” the contract, falling squarely within the scope of the arbitration agreement.
NPC’s invocation of Article 1725 of the Civil Code to justify removing the work does not transform the dispute into a non-arbitrable one. The core issue—whether such action was proper under or in breach of the contract, and its financial consequences—is precisely the type of contractual dispute the arbitration clause was designed to resolve. Regarding the equipment rental fee, the Court agreed with the Court of Appeals that PECORP’s letter did not constitute a clear and unequivocal withdrawal of the claim from arbitration. Thus, both claims, being disputes arising from the contract, must be submitted to arbitration as per the parties’ agreement.