G.R. No. 250539 - DHY Realty and Development Corp. vs. Court of Appeals, Special 6th Division

Case Summary (G.R. No. 250539)

Factual Background

DHY Realty and Wing-An entered into a Construction Contract Agreement on June 24, 2014, under which Wing-An undertook to construct a warehouse building with a canteen for DHY Realty at M. Eusebio Avenue, Barangay San Miguel, Pasig City. The contract contained an arbitration clause requiring submission of disputes to arbitration.

Wing-An began construction on January 10, 2014 and targeted completion in August 2014. DHY Realty engaged Richard N. Santos & Associates (RNS) as construction manager. During performance, Wing-An submitted a proposal to construct a high fence near the canteen measuring 114.11 x 2.0 meters and quoted a contract price of PHP 12,284,069.54, which DHY Realty accepted and approved. Wing-An later asserted that DHY Realty refused to pay the agreed fence contract price and instead demanded that the fence height be increased by 1.5 meters. Wing-An claimed it agreed to the increase but received only PHP 600,000.00 despite DHY Realty’s promise to pay the full contract price upon completion of the additional fence work.

Wing-An sent demand letters, including a letter dated October 4, 2014 for payment of partial billings for additional works, and another dated January 20, 2015, notifying DHY Realty that it would impose 3% interest per month on unpaid billing due to a purported loan from China Banking Corporation (China Bank). The parties and RNS held meetings to address Wing-An’s payment demand, and they allegedly agreed that Wing-An would cease most construction work, with certain identified works continuing under agreed cost and monitoring arrangements. RNS was also to evaluate Wing-An’s works, prepare a report of additional works, and endorse payment of the total amount due. Wing-An claimed DHY Realty reneged, and after further exchanges, no agreement was reached on Wing-An’s claims. Wing-An eventually sent a final demand letter dated October 27, 2015 for PHP 15,864,178.01 plus interest at 3%, reckoned from the third day of DHY Realty’s receipt of the final demand. DHY Realty did not comply.

CIAC Arbitration Proceedings and Notices

On September 29, 2016, Wing-An filed its Complaint dated June 17, 2016, and a Request for Arbitration dated September 29, 2016 with the CIAC. Wing-An sought solidarity liability against DHY Realty and Yap for PHP 15,864,178.01 representing claims for additional works, change orders, and variation orders with 3% interest, plus PHP 1,000,000.00 in exemplary damages, and arbitration-related fees. In the Complaint, Wing-An stated that DHY Realty and Domingo H. Yap (Yap) could be served with “summons and other legal processes” at their Makati address at Bel-air Soho Condominium Corp., #45 Polaris Corner Badajos St., Poblacion, Makati City (Makati Address).

On September 30, 2016, CIAC Executive Director Kathryn Josephine T. Dela Cruz sent a letter dated September 30, 2016 to Yap informing him that Wing-An had filed the Complaint and Request for Arbitration. The letter required DHY Realty and Yap to answer and nominate six arbitrators within fifteen days, warning that failure would lead CIAC to proceed with the arbitration. Copies of the Complaint, Request for Arbitration, and annexes were attached and sent via courier to the Makati Address. CIAC then sent letters to Wing-An’s nominated arbitrators, and those nominees accepted their appointment.

CIAC issued an Order dated January 10, 2017 setting a preliminary conference on January 31, 2017, and served it on the parties using the Makati Address. Subsequently, on January 20, 2017, CIAC issued another Order reflecting that the Letter-Notice had been delivered on October 1, 2016 to a person named Sheena Garcia, and that CIAC had not been notified by the courier that the documents were returned. The Order also noted that later communications were returned with reasons related to consignees or guards being unable to locate the recipients and stating “consignee unknown” and similar delivery failures. CIAC then required Wing-An to determine whether DHY Realty and Yap had moved out from the Makati Address and to report the correct principal address so that subsequent arbitral communications could be served.

In response, Wing-An submitted DHY Realty’s Amended Articles of Incorporation (AOI) and General Information Sheet (GIS) dated September 22, 2016, showing DHY Realty’s principal official address as the Makati Address. The preliminary conference pushed through on February 17, 2017. Only Wing-An and its counsel appeared. Under the Terms of Reference issued during the preliminary conference, Wing-An filed its judicial affidavit and documentary evidence, but DHY Realty and Yap filed neither witness statements nor other evidence. The CIAC held an evidentiary hearing on March 31, 2017 with only Wing-An in attendance. After the hearing, Wing-An filed its formal offer of documentary evidence and memorandum.

CIAC Final Award and Execution Measures

The CIAC Tribunal issued its Final Award and determined, among others, that DHY Realty and Yap were properly served with notices and communications. It relied on the Makati Address being consistent with DHY Realty’s letterhead used in a letter dated June 25, 2015 and with a prior CIAC letter to Yap informing him of the filing of the Complaint and Request for Arbitration. The CIAC Tribunal also stated it had no duty to verify the respondents’ address beyond assuming that the address in the Complaint was correct.

The Tribunal emphasized extra care in evaluating Wing-An’s evidence despite DHY Realty’s and Yap’s absence. The Tribunal ordered DHY Realty to pay PHP 9,160,000.00 as the value of extra or additional works/change and variation orders accomplished by Wing-An, plus interest at 6% per annum from the date of finality until fully paid; awarded PHP 300,000.00 attorney’s fees; and PHP 487,043.07 for cost of arbitration. It denied exemplary damages for lack of merit. The Tribunal issued a Notice of Award on the same date, and these were served on DHY Realty using the Makati Address. Wing-An filed a motion for correction of computation and/or reconsideration, dated May 24, 2017, which the Tribunal denied in an order dated May 30, 2017.

Wing-An then filed a Petition for Review with the Court of Appeals under Rule 43, seeking an increased award to PHP 15,864,178.01. The petition was served on DHY Realty through the Makati Address. The Court of Appeals later denied Wing-An’s petition on January 29, 2019 and affirmed the Final Award. The Court of Appeals also denied Wing-An’s motion for reconsideration.

After appellate affirmance, the CIAC issued a Writ of Execution on August 15, 2019 directing Sheriff Allan R. Amon (Ex-Officio Sheriff of the CIAC) to execute the Final Award. On October 8, 2019, a Notice of Garnishment was served to China Bank. On October 30, 2019, DHY Realty filed a formal entry of appearance with an omnibus motion to quash the writ of execution and lift the notice of garnishment. DHY Realty alleged it learned of the arbitration only through China Bank’s notice, asserted that the Makati Address used in service was wrong, and claimed denial of due process because it allegedly was not properly served in the arbitration and subsequent proceedings. It contended its principal address was at the Pasig address.

The CIAC heard the omnibus motion and, in an order dated December 4, 2019, denied DHY Realty’s pleas. It held that the Court of Appeals decision affirming the Final Award had become final and executory, ending CIAC’s jurisdiction over the dispute and limiting its role to enforcement, and that DHY Realty’s remedy lay in court rather than before the Tribunal.

DHY Realty’s Petition and Wing-An’s Responses

On December 10, 2019, DHY Realty filed its Rule 65 Petition with an application for a temporary restraining order and/or preliminary injunction. DHY Realty argued that it did not receive CIAC notices leading to its non-participation in the arbitral proceedings because the Makati Address used for service was erroneous. It alleged bad faith on Wing-An’s part in not disclosing the Pasig Address and claimed Wing-An and the CIAC disregarded directives requiring determination of DHY Realty’s correct principal address. DHY Realty further contended that the Court of Appeals likewise committed grave abuse of discretion when it allowed substituted service in reliance on Wing-An’s representation regarding DHY Realty’s principal address, thereby continuing the due process violation.

Wing-An opposed. It argued that DHY Realty failed to file a motion for reconsideration before resorting to certiorari, and it asserted that the finality of the Court of Appeals decision and the Final Award required enforcement. Substantively, Wing-An maintained that DHY Realty did not prove that the Pasig Address was its principal office, and that the Pasig address related to the construction project location rather than DHY Realty’s office. Wing-An insisted it reasonably relied on DHY Realty’s latest AOI and GIS filed on September 22, 2016. Wing-An also invoked Resolution No. 11-2010 of the CIAC, emphasizing that CIAC required delivery to the party’s last known address by personal delivery or courier, as opposed to the Rules of Court approach to summons.

Sheriff Amon also commented that enforcement of the writ of execution was ministerial and should proceed with reasonable promptness unless a court restrained him. CIAC, in turn, manifested it did not file a comment because it was not an active combatant in the review of its rulings, and the Court granted CIAC’s prayer to be excused.

Issues Raised

The Court framed two core issues: first, whether certiorari under Rule 65 was the correct remedy to challenge the alleged invalidity of the assailed CIAC and Court of Appeals issuances; and second, whether DHY Realty was properly served with CIAC Tribunal notices during the arbitration.

The Court’s Ruling on the Proper Remedy Under Rule 65

The Court anchored its procedural analysis on the later decision

Case Syllabus (G.R. No. 250539)

Parties and Procedural Posture

DHY Realty & Development Corporation filed a Petition for Certiorari under Rule 65 to nullify multiple issuances of the Court of Appeals and the Construction Industry Arbitration Commission (CIAC).
The respondents were the Court of Appeals-Special Sixth Division, the CIAC, the CIAC Ex-Officio Sheriff, and Wing-An Construction Development Corporation.
Wing-An initiated CIAC proceedings arising from a construction contract and later obtained a Final Award, which the Court of Appeals affirmed.
After the CIAC issued a Writ of Execution and a Notice of Garnishment, DHY Realty sought relief through a CIAC omnibus motion, which the CIAC denied on the ground of finality and executory status.
DHY Realty then elevated the matter to the Supreme Court via Rule 65, questioning both the validity of service in the CIAC proceedings and the procedural rulings of the Court of Appeals.
The Supreme Court dismissed the petition and affirmed all assailed issuances.

Key Contract and Project Facts

The parties executed a Construction Contract Agreement on June 24, 2014 for the construction of a warehouse building with a canteen in Pasig City.
The contract included an arbitration clause requiring disputes arising from the contract to be submitted to arbitration.
Wing-An started work on January 10, 2014, intending to complete all works in August 2014.
DHY Realty engaged Richard N. Santos & Associates (RNS) as Construction Manager for the project.
Wing-An proposed constructing a 114.11 x 2.0 meters high fence near the canteen and quoted a contract price of PHP 12,284,069.54, which DHY Realty accepted and approved.
Wing-An later demanded payment but alleged that DHY Realty refused full payment and demanded that the fence height be increased by 1.5 meters.
Wing-An claimed it increased the fence height but received only PHP 600,000.00 despite DHY Realty’s promise to fully pay upon completion of the additional work.
Wing-An sought payment of additional works through a sequence of letters, including a 3% monthly interest demand on unpaid billings.
After further disagreements, Wing-An sent a final demand letter for PHP 15,864,178.01 plus interest at 3%, which DHY Realty did not pay.

CIAC Complaint and Service Issues

Wing-An filed its Complaint dated June 17, 2016 and a Request for Arbitration on September 29, 2016 before the CIAC.
Wing-An prayed that DHY Realty and Domingo H. Yap (Yap) be held solidarily liable for PHP 15,864,178.01, PHP 1,000,000.00 as exemplary damages, and arbitration costs and fees.
In its pleading, Wing-An stated that DHY Realty and Yap may be served with summons and legal processes at the Makati Address in Makati City.
The CIAC Executive Director sent a Letter-Notice on September 30, 2016 to Yap as President, informing him of the filing of the complaint and request for arbitration and requiring answer and nomination of arbitrators within the prescribed period.
The CIAC also sent notices to the nominated arbitrators, which they accepted, and it issued an order setting a preliminary conference on January 31, 2017.
Subsequent CIAC documentation showed that some notices were returned by courier due to “consignee unknown” and “returned shipment due to move out.”
On January 20, 2017, the CIAC ordered Wing-An to confirm whether DHY Realty had moved out and to provide the CIAC Secretariat with the correct principal address, to avoid due process challenges.
In compliance, Wing-An submitted DHY Realty’s Amended Articles of Incorporation (AOI) and a General Information Sheet (GIS) dated September 22, 2016.
The GIS reflected that the principal office address was the Makati Address, which the CIAC treated as the last known address for service of subsequent communications.
The preliminary conference proceeded on February 17, 2017, but only Wing-An appeared; DHY Realty and Yap did not file witnesses or other evidence.
The evidentiary hearing on March 31, 2017 likewise had only Wing-An, and after the hearing Wing-An submitted formal documentary offers and memoranda.
The CIAC found that service was proper, emphasizing that the CIAC had no duty to independently verify the respondent’s correct address beyond relying on the complaint’s address and the later confirmed GIS.

CIAC Final Award and Related Proceedings

The CIAC promulgated the Final Award in May 2017, granting monetary relief to Wing-An.
The CIAC awarded PHP 9,160,000.00 representing the value of extra or additional works/change and variation orders, with interest at 6% per annum from the finality of the Final Award until fully paid.
The CIAC awarded PHP 300,000.00 as attorney’s fees and PHP 487,043.07 as cost of arbitration.
The CIAC denied the claim for exemplary damages for lack of merit and denied all other claims not disposed of in the Final Award.
On May 24, 2017, Wing-An filed a Motion for Correction of Computation and/or Reconsideration, which the CIAC denied in an Order dated May 30, 2017.
Wing-An filed a Petition for Review with the Court of Appeals under Rule 43 seeking an increase of the award amount to PHP 15,864,178.01.
The Court of Appeals decisions and resolutions later addressed the method and completeness of service of the Petition for Review and subsequent CA resolutions on DHY Realty.

Court of Appeals Handling of Service

The Court of Appeals issued resolutions in favor of substituted service, authorizing service on the CA Clerk of Court under Section 3 of Rule 18 of the Rules of Court.
The Court of Appeals found that Wing-An complied with the substituted service directive by filing the Petition for Review and annexes with the Clerk of Court.
The Court of Appeals further held that substituted service was deemed complete once delivered to the Division Clerk of Court pursuant to Section 8, Rule 13 of the Revised Rules of Court.
The Court of Appeals ordered that a later CA resolution dated July 5, 2017 be personally served, because earlier registered mail service had failed.
When personal service and registered mail service of the July 5, 2017 Resolution failed because the addressees were “unknown” at the address, the CA treated service as complete at the time of delivery to the division clerk on May 31, 2018.
The CA required DHY Realty to show cause why the petition should not be deemed submitted for decision without comment, and it later resolved that due to no comment filed, the case was deemed submitted for decision.

Supreme Court Issues Framed

The Supreme Court identified whether Rule 65 certiorari was the correct remedy to challenge the alleged invalidity of the assailed CIAC and CA issuances.
The Supreme Court also addressed whether DHY Realty was properly served with CIAC Tribunal notices pertaining to the arbitral proceedings.

Remedy and Certiorari Requirements

The Court emphasized that a Rule 65 certiorari petition is an extraordinary remedy that corrects errors of jurisdict