Title
Datem, Inc. vs. Alphaland Makati Place, Inc.
Case
G.R. No. 242904-05
Decision Date
Feb 10, 2021
Construction dispute over unpaid claims and retention money; CIAC's jurisdiction upheld despite non-compliance with amicable settlement precondition.
construction company
real estate developer
unpaid bills
A

Case Summary (G.R. No. 188794)

Factual Background

The dispute arose from a construction agreement by which DATEM Incorporated undertook civil, structural, and architectural works for three towers constructed atop a podium at the Alphaland Makati Place condominium project. The total contract price was PHP 1,260,000,000.00. During performance, DATEM submitted progress billings for Main Works and Change Orders, of which Alphaland approved and paid substantial sums but left an unpaid balance of PHP 34,076,747.09. Work completion experienced delays attributed by DATEM to causes beyond its control, leading DATEM to seek nine claims for time extensions, six of which were granted by Alphaland’s construction manager until 30 September 2015. Towers 1 and 2 were completed and accepted on 06 September 2015, but unresolved design issues affected Tower 3 and Alphaland deducted from DATEM’s contract the balance of Tower 3 works in the amount of PHP 72,396,659.29.

Claims and Alleged Damages

DATEM asserted that upon completion it remained entitled to release of retention money totaling PHP 121,930,996.35 and payment of unpaid billings and claims including extended preliminaries in the aggregate amounts it itemized. After Alphaland allegedly refused to settle these demands, DATEM invoked the arbitration clause in the construction agreement and filed a complaint with the Construction Industry Arbitration Commission (CIAC).

Arbitration Clause and Preconditions

The parties’ construction agreement contained Article 13 providing for dispute settlement by amicable meetings within prescribed timeframes and, failing settlement within thirty calendar days, submission to arbitration in accordance with the arbitration rules of the Construction Industry Authority of the Philippines. The clause further provided that unresolved issues submitted for arbitration would not, save limited exceptions, justify suspension of work or extension of time except as authorized in writing by the owner.

Proceedings Before the CIAC

Alphaland moved to dismiss before the CIAC, contending that the parties had not complied with the arbitration clause’s precondition of meeting to attempt amicable settlement. The CIAC denied the motion in an Omnibus Order dated 25 August 2017 and denied reconsideration. During CIAC proceedings, the tribunal followed the CIAC Rules by giving the parties reasonable periods to negotiate and to file their answers, and counsel for Alphaland acknowledged on record that negotiations were ongoing and requested additional time to pursue settlement.

Arbitral Final Award

Pending resolution of a certiorari petition filed by Alphaland, the CIAC arbitral tribunal rendered a Final Award dated 05 April 2018 in favor of DATEM Incorporated, awarding a total of PHP 235,901,940.49 composed of awards for release of retention, progress billings, return of unjustified deductions, an award on extended preliminaries and related items, partial interest, attorney’s fees, and costs, with additional interest at 6% per annum upon finality.

Proceedings Before the Court of Appeals

Alphaland filed a petition for certiorari with the Court of Appeals in CA-G.R. SP No. 152827 challenging the CIAC’s jurisdiction on the ground that DATEM failed to satisfy the arbitration clause’s precondition requiring meetings for amicable settlement. The CA consolidated that petition with a subsequent petition attacking the Final Award and, on 25 October 2018, annulled the CIAC Omnibus Order and set aside the Final Award for lack of jurisdiction, ordering dismissal of CIAC Case No. 21-2017.

Issue on Review

The central issue before the Supreme Court was whether the Court of Appeals erred in finding that the CIAC lacked jurisdiction over the dispute because the parties allegedly failed to comply with a contractual precondition to arbitration.

Petitioner's Contentions

DATEM Incorporated argued that jurisdiction of the CIAC is conferred by law under Executive Order No. 1008 and vests automatically when a construction contract contains an arbitration clause; therefore, non-compliance with any stipulated precondition cannot oust or diminish CIAC jurisdiction.

Respondents' Contentions

Alphaland maintained that the arbitration clause imposed a condition precedent—mandatory meetings to attempt amicable settlement—which DATEM did not fulfill before initiating arbitration; on that basis, Alphaland contended the CIAC lacked jurisdiction and the arbitral proceedings should have been dismissed.

The Court’s Analysis on Verification and Procedural Formalities

The Court first addressed Alphaland’s contention that DATEM’s petition to the Supreme Court was fatally defective because the verification bore a date earlier than the petition’s filing date. The Court held that verification is a formal and not jurisdictional requirement, and that noncompliance or a variance in dates does not necessarily render a pleading fatally defective. The Court applied established guidelines that allow correction or acceptance of a defective verification where the petitioner has substantial compliance and the circumstances justify dispensing with strict formality. DATEM satisfactorily explained the variance and substantially complied with the purpose of the verification rule.

The Court’s Analysis on CIAC Jurisdiction

The Court reaffirmed that under Section 4 of Executive Order No. 1008, the CIAC has original and exclusive jurisdiction over disputes arising from or connected with construction contracts and that the Board acquires jurisdiction when the parties agree to submit the dispute to voluntary arbitration. The Court emphasized that the mere existence of an arbitration clause in a construction contract is sufficient, by law, to vest the CIAC with jurisdiction and that such jurisdiction is conferred by statute and cannot be subjected to conditions, waived, or diminished by stipulation, act, or omission of the parties.

CIAC Rules on Contractual Preconditions

The Court noted that the CIAC Revised Rules of Procedure expressly contemplate situations of non-compliance with contractual preconditions. Those Rules require a claimant in private construction contracts to show good faith compliance with preconditions or exemptions and direct that, in case of non-compliance without justifiable reasons, the tribunal shall suspend proceedings pending compliance within a reasonable period. The Court found that the CIAC applied these procedures by allowing reasonable time for negotiation and settlement and by repeatedly granting extensions to the parties.

The Court’s Conclusion on the CA’s Error

The Court concluded that the Court of Appeals erred in declaring that the CIAC lacked jurisdiction due to alleged noncompliance with the arbitration clause’s precondition. The CA’s invocation of a condit

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