Case Digest (G.R. No. 245617)
Facts:
El Dorado Consulting Realty and Development Group Corp. v. Pacific Union Insurance Company, G.R. Nos. 245617 & 245836, November 10, 2020, Supreme Court First Division, Carandang, J., writing for the Court.El Dorado (petitioner/owner) contracted with ASPF Construction and Development, Inc. for the construction of a seven‑storey condominium hotel for a contract price of P170,000,000.00. Prior to and during the project, ASPF Construction obtained Performance Bonds from Pacific Union Insurance Company (PUIC): an original bond of P19,641,807.80 and, after amendment to cover Phase 1, an additional bond so that the total bonded amount was P98,209,039.20 (PUIC issued P78,567,231.20 for the increased portion).
During construction El Dorado issued multiple notices to ASPF for delayed works, safety violations, defects, and noncompliance. ASPF sought to change the schedule-of-payment arrangement to cash due to liquidity problems; El Dorado refused. After continuing disputes, El Dorado issued a Notice of Default and Termination on April 30, 2015, and on May 6, 2015 submitted a Notice of Claim to PUIC seeking the full P98,209,039.20 under the Performance Bonds. PUIC informed El Dorado on June 25, 2015 that the Performance Bonds had been cancelled for nonpayment of premiums.
On July 13, 2016, El Dorado filed a Request for Arbitration before the Construction Industry Arbitration Commission (CIAC) against PUIC (without impleading ASPF) claiming, among others, return of an unliquidated down payment of P17,000,000.00 and P21,538,294.76 as liquidated damages. PUIC, in its Answer with Compulsory Counterclaim, challenged CIAC’s jurisdiction over it (arguing it was not a party to the Owner‑Contractor Agreement that contained the arbitration clause) and sought exemplary damages and attorney’s fees.
The CIAC issued a Final Award on March 6, 2017, concluding it had jurisdiction because the dispute was connected with the Owner‑Contractor Agreement; it found El Dorado could not recover the P17,000,000 down payment (after computing performance percentages), denied the retrofitting claim, but awarded El Dorado P1,700,000.00 as liquidated damages and ordered parties to share arbitration costs; PUIC’s claims for exemplary damages and attorney’s fees were denied. Both parties appealed to the Court of Appeals (CA).
In its July 23, 2018 Consolidated Decision the CA affirmed the CIAC insofar as El Dorado was not entitled to recovery of the unliquidated down payment, retrofitting costs, and arbitration interests/costs, but deleted the CIAC’s P1,700,000.00 liquidated damages award on grounds of insufficient proof of delay and El Dorado’s own contractual breaches. El Dorado’s motion for partial reconside...(Subscriber-Only)
Issues:
- Did the CIAC have jurisdiction to adjudicate El Dorado’s Request for Arbitration against PUIC, a surety who issued performance bonds but was not a signatory to the Owner‑Contractor Agreement?
- If the CIAC had jurisdiction, did the Court of Appeals correctly affirm with modification the CIAC’s award (specifically the CA’s deletion of liquidated da...(Subscriber-Only)
Ruling:
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Ratio:
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Doctrine:
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