G.R. No. 199705, April 3, 2019
Republic of the Philippines, represented by the Department of Public Works and Highways (DPWH), Petitioner, vs. Roguza Development Corporation (RDC), Respondent

FACTS

Respondent Roguza Development Corporation (RDC) was awarded the construction of the Rosario-Pugo-Baguio Road Rehabilitation Project by petitioner DPWH. The Notice to Proceed was issued on May 15, 1997, and RDC commenced work on May 24, 1997. However, the project was suspended effective June 4, 1997, due to DPWH’s failure to secure the required Environmental Clearance Certificate and settle right-of-way problems. The suspension lasted almost 32 months until a Resume Order was issued on February 8, 2001. The project was completed on September 6, 2001.
RDC claimed compensation from DPWH for idle equipment and other expenses during the suspension, amounting to ₱93,782,093.64, based on Clause 42.2 in relation to Clause 54.1 of the Conditions of Contract (FIDIC). The equipment rental component was based on rates from the Association of Carriers and Equipment Lessors, Inc. (ACEL). A DPWH Ad Hoc Committee later recommended payment of a reduced amount of ₱26,142,577.09, computed using the lower bare rental rates from RDC’s bid documents, not the ACEL rates. This recommendation was approved, and RDC, claiming financial distress, accepted the amount through a Letter-Waiver dated November 14, 2006. RDC later demanded payment of the balance of its claim, which DPWH denied.
RDC filed a collection case (CIAC Case No. 05-2008) before the Construction Industry Arbitration Commission (CIAC). The CIAC Arbitral Tribunal rendered an Award dated July 17, 2008, granting RDC’s claim in the further reduced amount of ₱22,409,500.00. The Tribunal found the Letter-Waiver “inefficacious” due to RDC’s financial distress but held that the parties agreed to bare rental rates and that only four bulldozers (not five) were contracted. It computed the total claim for idle time and other expenses at ₱50,179,577.00. After deducting the ₱27,770,077.00 RDC had received (the ₱26,142,577.09 plus interest), the balance was ₱22,409,500.00.
DPWH filed a petition for review (CA-G.R. SP No. 104920) before the Court of Appeals (CA) assailing the Arbitral Award. Separately, RDC filed a motion for reconsideration (First CIAC MR) of the Award, which the CIAC denied as filed out of time via an Order dated December 8, 2008 (First CIAC Order), signed only by CIAC Chairman Alfredo Tadiar. RDC’s subsequent motion for reconsideration of that order (Second CIAC MR) was also denied via an Order dated January 26, 2009 (Second CIAC Order), again signed only by Chairman Tadiar. RDC then filed its own petition for review before the CA (CA-G.R. SP No. 107412), assailing the CIAC Orders for being signed by only one arbitrator and contesting the computation of the Award.
The CA, in its assailed Decision dated April 26, 2011, and Resolution dated December 14, 2011, in CA-G.R. SP No. 107412: (i) increased the Arbitral Award from ₱22,409,500.00 to ₱61,748,346.00; and (ii) set aside the First and Second CIAC Orders for having been issued under the signature of only one member of the three-member Arbitral Tribunal. DPWH elevated the case to the Supreme Court via a Petition for Review on Certiorari.

ISSUE

Whether the Court of Appeals erred in modifying the factual findings and recomputing the award of the CIAC Arbitral Tribunal, and in nullifying the CIAC’s orders for being signed by only one arbitrator.

RULING

The Supreme Court GRANTED the petition. The Court of Appeals’ Decision and Resolution were SET ASIDE. The CIAC Arbitral Award dated July 17, 2008, was REINSTATED.
1. On the Propriety of the CA’s Review of the CIAC Award: The Supreme Court held that the CA exceeded its jurisdiction. Judicial review of CIAC arbitral awards is limited to questions of law. The CA’s authority under Rule 43 of the Rules of Court does not extend to re-examining the sufficiency of evidence or substituting its own factual findings for those of the arbitral tribunal, absent a clear showing of grave abuse of discretion, fraud, or violation of due process. The CA erred in recalculating the award based on its own appreciation of the evidence (e.g., using ACEL rates instead of the bare rental rates found by the CIAC, and finding five bulldozers were used instead of four). These were factual determinations within the exclusive province of the CIAC, whose expertise in construction disputes is recognized. The CIAC’s findings were based on the evidence, particularly RDC’s own Daywork and Equipment Utilization Schedule submitted during bidding, which indicated bare rental rates and the number of equipment.
2. On the Validity of the CIAC Orders (First and Second CIAC Orders): The Supreme Court held that the CA correctly nullified the First and Second CIAC Orders for being signed by only the Chairman. Under the 1988 CIAC Rules of Procedure governing the case, a “motion for correction of final award” (which includes a motion for reconsideration) must be “acted upon by the Arbitral Tribunal or the surviving/remaining members.” The term “acted upon” necessitates a collective deliberation and decision by the tribunal. An order resolving such a motion, being a continuation of the arbitral process and affecting the finality of the award, is a formal arbitral act that requires the concurrence of the majority of the tribunal. The issuance of the orders by a single arbitrator, without the participation or authority of the full tribunal, was a violation of the governing rules and due process. Therefore, these orders were void and produced no legal effect.
Final Disposition: The Supreme Court reinstated the original CIAC Arbitral Award of ₱22,409,500.00, as it was rendered by the proper tribunal and based on its factual findings, which are final and binding. The void CIAC Orders were set aside, but this did not affect the finality of the valid Arbitral Award.