Case Digest (G.R. No. 251463)
Case Digest (G.R. No. 251463)
Facts:
Grandspan Development Corporation v. Franklin Baker, Inc. and Advance Engineering Corporation, G.R. No. 251463, August 02, 2023, the Supreme Court Third Division, Gaerlan, J., writing for the Court.Petitioner Grandspan Development Corporation (GDC) was subcontractor to Advance Engineering Corporation (AEC), which in turn was contractor under a Construction Contract with Franklin Baker, Inc. (FBI) for the construction of an Integrated Coconut Products Processing Plant; the Construction Contract was notarized July 8, 2015 and fixed the contract price at P465 million and contained an arbitration clause referring disputes to the Philippine Dispute Resolution Center, Inc. (PDRCI) in Makati. AEC executed a Subcontractor’s Agreement with petitioner dated June 9, 2015 for structural works (contract price P59,875,046.52) whose Item 29 provided that disputes arising under that subcontract be submitted to arbitration before the Construction Industry Arbitration Commission (CIAC) under the Construction Industry Arbitration Law.
Petitioner claimed that the subcontract’s revised price became P97,843,917.00 and that payments totaling P44,975,009.30 left an unpaid balance of P53,206,359.76; after a final demand on November 29, 2016, petitioner filed a Complaint for Sum of Money on April 25, 2017 against AEC and impleaded FBI under Article 1729 of the Civil Code (R.A. No. 386), asserting that Article 1729 creates a right of action against the owner up to the amount owing to the contractor.
FBI moved to dismiss, invoking the arbitration clause in the Construction Contract and arguing that petitioner failed to show that FBI owed AEC any amount; AEC answered, filed a cross-claim against FBI and likewise invoked CIAC primary jurisdiction under Item 29 of the subcontract. The Regional Trial Court (RTC), Makati City, Branch 66, granted the motions to dismiss and dismissed the complaint and cross-claim without prejudice in an Order dated December 13, 2017, holding that the parties must first undergo arbitration. The RTC denied petitioner’s motion for reconsideration in an Order dated March 7, 2018 and stayed proceedings pending CIAC determination.
Petitioner appealed to the Court of Appeals (CA). In a Decision dated March 15, 2019 the CA dismissed the appeal, modified the RTC orders and directed dismissal of the case with referral of the construction disputes among GDC, AEC and FBI to arbitration before the CIAC; its Resolution of January 15, 2020 denied petitioner’s motion for reconsideration. Petitioner filed a Petition for Review on Certiorari under Rule 45 assailing the CA rulings; the Supreme Court Third Division resolved the petition in this decision. AEC’s right to file a comment in the Supreme Court was later deemed waived by the Court in a March 29, 2023 Resolution.
Issues:
- Whether petitioner’s Complaint against AEC is subject to CIAC jurisdiction.
- Whether petitioner could validly implead FBI in the same complaint pursuant to Article 1729 of the Civil Code.
Ruling:
- (Subscriber-Only)
Ratio:
- (Subscriber-Only)
Doctrine:
- (Subscriber-Only)