G.R. No. 243477-78 - ASEC Development and Construction Corp. vs. Toyota Alabang, Inc.

Case Summary (G.R. No. 243477-78)

Factual Background

The dispute arose from the construction of the seven‑story Toyota Alabang Showroom Project, located at the corner of Filinvest Avenue and Alabang‑Zapote Road, for which ASEC Development submitted a winning bid of P399,000,000.00 accepted June 26, 2013. During bidding and clarification, disagreement developed over whether ASEC Development had priced and thus contracted to supply “Low‑E” glass or only clear tempered glass for specified doors and windows and for certain penthouse areas. Toyota Alabang later announced the removal of glass and aluminum works from ASEC Development’s scope to be awarded to another contractor, and deducted differing sums from the contract price, prompting contention over the appropriate deductive amount.

First Arbitration (CIAC Case No. 07‑2014)

ASEC Development filed a request for arbitration before the Construction Industry Arbitration Commission, docketed CIAC Case No. 07‑2014, to recover the differential allegedly wrongfully deducted from its contract. After hearings the first arbitral tribunal rendered its Final Award on June 30, 2014. The tribunal held that the correct amount deductible for the glass and aluminum works was PhP32,540,329.98, consisting of PhP25,451,311.98 for tempered glass and PhP7,053,018.00 for sun baffle and canopy, and that because Toyota Alabang had deducted PhP52,000,000.00, a differential of approximately PhP19,459,670.02 was due ASEC Development. The tribunal found CIAC had jurisdiction and ordered the award of costs and interest as set forth in the dispositive portion.

Concurrent Events and Commencement of Second Arbitration

While Toyota Alabang filed a petition for review of the First Arbitral Award with the Court of Appeals, it issued a Notice of Termination of the construction contract to ASEC Development for alleged failure to complete the scope of works. ASEC Development denied fault. Toyota Alabang engaged Langdon & Seah Philippines, Inc. to act as quantity surveyor; Langdon & Seah produced a construction audit report stating ASEC Development had completed only 91.54% of the project. Meanwhile ASEC Development filed a second request for arbitration at CIAC, docketed CIAC Case No. 03‑2015, seeking final payment for unpaid billings and variation works worth PhP78,968,626.83 and related reliefs.

Second Arbitration (CIAC Case No. 03‑2015)

The second arbitral tribunal heard evidence on final payment, variation orders, delay, and termination. In its Final Award dated October 5, 2015, the tribunal found that ASEC Development incurred delay from June 1, 2014 to August 3, 2015, failed to achieve practical completion by the extended completion date, and that Toyota Alabang validly terminated the contract effective August 4, 2015. The tribunal concluded that deductive change orders for Glass and Aluminum Works amounted to PhP51,022,240.00 and for Air‑conditioning Units PhP12,009,101.00, resulting in adjustments to the contract price and a final computation that produced an awarded balance and set‑offs. The tribunal also allowed certain counterclaims for exemplary or corrective damages and other sums while denying claims for attorney’s fees, moral damages, and certain other items.

Court of Appeals Proceedings and Ruling

Toyota Alabang and ASEC Development’s petitions for review were consolidated before the Court of Appeals. On October 10, 2018 the Court of Appeals issued a decision that set aside the First Arbitral Award and affirmed the Second Arbitral Award. The Court of Appeals reconciled contract documents and concluded that clear tempered glass and Low‑E tempered glass were not inconsistent and that ASEC Development was deemed to have included the cost of Low‑E glass in its bid. Accordingly, the Court of Appeals held that Toyota Alabang could deduct PhP51,022,240.00 for glass and aluminum works and upheld the second tribunal’s findings on termination, delay, and liquidated damages, relying in part on Langdon & Seah’s audit report that established 91.54% completion.

Parties’ Contentions before the Supreme Court

In the petition under Rule 45, ASEC Development argued that the Court of Appeals erred in setting aside the First Arbitral Award and in supplanting the factual findings of the CIAC tribunal with its own findings, stressing that arbitral awards are final and binding and are reviewable only on questions of law. ASEC Development asserted that the Second Arbitral Award was void insofar as it resolved an issue already finally decided by the First Arbitral Award and that the second tribunal violated the doctrine of noninterference among coequal arbitral tribunals. ASEC Development further contended that the Court of Appeals misapplied the order of priority of contract documents and that the finding of delay and the reliance on Langdon & Seah were erroneous. Toyota Alabang countered that appeals under Rule 43 may raise questions of fact and law, that the first tribunal gravely erred by ordering payment for works not supplied, that ASEC Development knew Low‑E glass was required, and that the Court of Appeals correctly affirmed the second tribunal’s findings and awards.

Issues Presented to the Supreme Court

The Supreme Court identified the central issues as: (1) whether the Court of Appeals erred in modifying the factual findings of the Construction Industry Arbitration Commission’s arbitral tribunals; and (2) whether the Second Arbitral Award should be set aside for having reversed factual findings rendered by a coequal arbitral tribunal.

Supreme Court Ruling — Disposition

The Supreme Court partially granted the petition. It reversed and set aside the Court of Appeals’ October 10, 2018 Decision and December 10, 2018 Resolution. The Court reinstated the June 30, 2014 First Arbitral Award in its entirety insofar as that award determined the proper deduction for glass and aluminum works to be PhP32,540,329.98, and it partly vacated the October 5, 2015 Second Arbitral Award insofar as the second tribunal ruled that PhP51,022,240.00 should be deducted for glass and aluminum works. The case was remanded to the Construction Industry Arbitration Commission for a recomputation of the parties’ final claims consistent with the reinstated deductive amount. The opinion was rendered by Justice Leonen and concurred in by Justices M. Lopez, J. Lopez, and Kho, Jr.

Legal Basis and Reasoning

The Court grounded its ruling on the principle that arbitral awards of the CIAC are final and binding under Executive Order No. 1008, Section 19, which declares awards final and inappealable except on questions of law. The Court recognized that Rule 43 historically allows appeals from CIAC awards on questions of fact and law but explained that the Supreme Court’s recent en banc guidance in Global Medical Center of Laguna, Inc. v. Ross Systems International, Inc. applies prospectively and does not deprive parties of previously available relief. Notwithstanding, the Court reiterated established doctrine that CIAC arbitral tribunals enjoy technical expertise and that courts must defer to their factual findings except on very limited grounds that impugn the integrity or jurisdiction of the tribunal, such as corruption, fraud, evident partiality, misconduct, disqualification, or excess of powers as set out in Section 24, Republic Act No. 876, and as refined in cases including CE Construction Corporation v. Araneta, Wyeth Philippines, Inc. v. Construction Industry Arbitration Commission, and Spouses David v. Construction Industry and Arbitration Commission. The Court emphasized Rule 19.10 of the Special ADR Rules and the line of cases warning against expanding judicial review into the merits of arbitral findings, citing Fruehauf Electronics v. Technology Electronics. Applying those principles, the Court held that the Court of Appeals improperly supplanted the first tribunal’s fact

Case Syllabus (G.R. No. 243477-78)

Parties and Procedural Posture

ASEC Development Construction Corporation filed a Petition for Review on Certiorari under Rule 45 assailing the Court of Appeals' decision that set aside one CIAC award and affirmed another.
Toyota Alabang, Inc. initially filed a Petition for Review before the Court of Appeals to contest the First Arbitral Award rendered by the Construction Industry Arbitration Commission.
The Court of Appeals consolidated CA-G.R. SP Nos. 136270 and 142699 and issued an October 10, 2018 Decision setting aside the First Arbitral Award and affirming the Second Arbitral Award.
ASEC Development moved for reconsideration in the Court of Appeals, which the court denied in its December 10, 2018 Resolution.
ASEC Development brought the present petition to the Supreme Court under Rule 45 to challenge the Court of Appeals' factual modification of CIAC findings and the second tribunal’s reversal of a coequal tribunal’s ruling.

Key Factual Allegations

ASEC Development submitted the lowest bid of P399,000,000.00 and entered into a construction contract with Toyota for a seven-story Toyota Alabang Showroom.
A dispute arose over whether ASEC Development bid for clear tempered glass only or for Low-E tempered glass, with conflicting interpretations among the bidder, the consultant ME Paragua, and the project architect.
Toyota removed glass and aluminum works from the contract to be awarded to another contractor and deducted an amount it computed as P58,868,716.00 or approximated as P52,000,000.00 from the contract price.
ASEC Development contended that only P32,540,329.98 (composed of P25,451,311.98 for tempered glass and P7,053,018.00 for sun baffle and canopy) should be deducted.
Toyota later terminated the contract and commissioned Langdon & Seah Philippines, Inc. to audit completion, which reported that ASEC Development had completed 91.54% of the Project.

Arbitral Proceedings and Awards

The first arbitration, docketed CIAC Case No. 07-2014, culminated in a Final Award dated June 30, 2014 that found CIAC jurisdiction and awarded ASEC Development PhP19,459,670.02 plus related sums and interest, concluding that only PhP32,540,329.98 was deductible for glass and aluminum works.
The second arbitration, docketed CIAC Case No. 03-2015, produced a Final Award dated October 5, 2015 that found ASEC Development delayed, validated Toyota’s termination, deducted PhP51,022,240.00 for glass and aluminum works, and computed an adjusted contract price and net amounts due, together with awarded counterclaims and set-off and retention conditions.
The second tribunal expressly addressed entitlement to unpaid progress billings, variation orders, liquidated damages, and retention release in its dispositive portion.

Issues Presented

Whether the Court of Appeals erred in modifying the factual findings of the Construction Industry Arbitration Commission’s arbitral tribunals.
Whether the Second Arbitral Award should be set aside for reversing the factual findings of a coequal arbitral tribunal.

Contentions of Petitioner

ASEC Development argued that the Court of Appeals improperly supplanted CIAC factual findings and violated the rule that arbitral awards are final and binding except on questions of law.
ASEC Development maintained that the Second Arbitral Award was void for deciding an issue not submitted to it and for colliding with the First Arbitral Award, thereby breaching the doctrine of noninterference among coequal tribunals.
ASEC Development contended that the Court of Appeals misapplied the contract document priority and that clear tempered glass and Low-E glass are distinct and not interchangeable.
ASEC Development asserted entitlement to unpaid variati