G.R. No. 238322 - Metro Iloilo Water District vs. Flo Water Resources , Inc.

Metro Iloilo Water District (MIWD) is a government-owned and controlled corporation created under Presidential Decree No. 198, with the purpose of supplying potable water to Iloilo City and adjacent municipalities.
In 2011, MIWD embarked on a Bulk Water Supply Project and issued invitations to bid for water delivery at specific injection points as required for its operational service area.

MIWD held a pre-bid conference on February 9, 2011, and the bidding was conducted on May 17, 2011, pursuant to relevant procurement laws including Republic Act No. 9184 (Government Procurement Reform Act).
Solarex emerged as the winner of the bid and subsequently, Solarex, Prime Water, and Flo Water Resources (Iloilo), Inc. formed a joint venture which later became the respondent in this case.

Execution of the Bulk Water Supply Contract (BWSC) and Subsequent Developments

On August 24, 2011, MIWD and Flo Water executed the BWSC with a Notice to Proceed issued on September 12, 2011, specifying that water delivery for Injection Point (IP) 3 was to commence within six months.
Both parties coordinated for the design, fabrication, and construction works to ensure that IP 3 could handle a volume of 15,000 cubic meters per day.

MIWD raised concerns over Flo Water’s performance, noting that only about 6,000 cubic meters per day were delivered instead of the contracted 15,000 cubic meters per day, due to the 200 mm transmission pipeline being technically incapacitated.
MIWD alleged a shortage of 9,000 cubic meters per day from February 16, 2013, to April 30, 2016, and argued that payment should correspond only to the volume actually received.

Flo Water demanded payment for the undelivered 9,000 cubic meters per day, asserting that the BWSC constituted a “take or pay” contract.
MIWD, invoking its consultation with the Office of the Government Corporate Counsel (OGCC), maintained that the BWSC did not oblige payment for undelivered volumes.
A subsequent opinion by the Department of Justice (DOJ) on November 4, 2014, however, concluded that MIWD was bound to pay for the full 15,000 cubic meters per day, given the contractual intention evidenced in the documents and actions of the parties.

Flo Water served a Demand for Arbitration on MIWD on April 21, 2015. MIWD consented to arbitrate by filing a reply on May 21, 2015.
On May 25, 2017, the ad hoc tribunal issued an arbitral award ordering MIWD to pay Flo Water the sum of P164,542,623.75 plus stipulated interest, thus holding that the BWSC was indeed a “take or pay” contract based on the parties’ conduct and contractual provisions.

MIWD appealed the arbitral award by filing a petition for review under Rule 43 of the Rules of Court with the Court of Appeals (CA), arguing both the improper remedy and substantive issues regarding the contract and alleged unjust enrichment.
On February 27, 2018, the CA affirmed the arbitral award and held that MIWD’s petition was filed under the wrong remedy, noting that an appeal under Rule 43 was not appropriate where the tribunal was an ad hoc body created by the mutual consent of the parties.

Whether MIWD availed itself of an improper remedy by filing its petition under Rule 43 of the Rules of Court instead of seeking a petition to vacate or correct the arbitral award with the Regional Trial Court (RTC).

Whether the arbitral tribunal erred in interpreting the BWSC as a “take or pay” contract, thereby obligating MIWD to pay for the minimum guaranteed volume despite the technical incapacity at Injection Point No. 3.

Whether the CA erred in affirming the arbitral award by not addressing MIWD’s contention that the award was subject to issues of fact and unjust enrichment, particularly given the results of the DOJ and the parties’ subsequent conduct.