Case Summary (G.R. No. 230112)
Contract and Origin of Dispute
– GMCLI contracted RSII to build its Cabuyao, Laguna hospital for ₱248.5 million.
– Contract provided for 15% down payment; balance paid monthly based on work accomplished.
– Contractor’s invoices (Progress Billings 1–15) were subject to a 2% Creditable Withholding Tax (CWT) to be withheld by GMCLI.
– GMCLI failed to withhold CWT on Billings 1–14 and in April 2015 withheld and remitted 2% on the cumulative amount of Billings 1–15, prompting dispute.
Proceedings Before the CIAC
– RSII filed arbitration on August 6, 2015, claiming improper CWT withholding and unpaid balance on Progress Billing 15.
– CIAC Final Award (May 10, 2016):
• CIAC has exclusive jurisdiction.
• GMCLI erred in withholding and remitting 2% CWT on the cumulative amount across Billings 1–15.
• RSII not entitled to release of the ₱4,884,778.92 withheld.
• No moral damages or attorneys’ fees awarded; arbitration costs split proportionally.
CA Decision (Oct. 28, 2016)
– RSII’s Rule 43 petition to CA on questions of fact and law.
– CA affirmed CIAC except it held:
• RSII entitled to ₱1,088,214.83 balance (after deducting 2% CWT on Billings 1–15 and prior payments).
– Motions for reconsideration denied (Feb. 21, 2017).
Consolidated SC Petitions (Rule 45)
GMCLI: Seek full reinstatement of CIAC Award (denying the P1.088 M).
RSII: Claim not only the P1.088 M but also ₱3,815,996.50 (improperly withheld CWT on Billings 1–14), or alternatively require issuance of BIR Form 2307.
Issues
- Is RSII entitled to the 2% CWT on Billings 1–14 (₱3.815 M) in addition to ₱1.088 M?
- Must GMCLI be ordered to issue BIR Form 2307 to RSII?
- What is the proper mode and scope of judicial review of CIAC arbitral awards?
Applicable Law
Philippine Constitution (1987) – judicial power; SC appellate jurisdiction.
EO 1008 (CIAC Law, 1985) – establishes CIAC; Section 19 limits appeals to SC on pure questions of law.
RA 876 (1953) – general Arbitration Law; Sections 24–25: limited grounds to vacate or correct arbitral awards.
RA 9285 (ADR Act, 2004) – incorporates CIAC Law; Chapter 6 governs construction arbitration.
Special ADR Rules (A.M. 07-11-08-SC, 2009) – restrict court review of arbitral awards.
Rules of Court – Rule 43 (CA appeals from quasi-judicial agencies) and Rule 45 (SC review on certiorari, questions of law); Rule 65 (certiorari, grave abuse).
RR 2-98 – Credit-withholding tax rules.
SC Ruling on Procedure (En Banc)
- CIAC arbitral awards are subject to two distinct appellate tracks:
a. Rule 45 (SC, certiorari): direct appeal on PURE QUESTIONS OF LAW only.
b. Rule 65 (CA petition for certiorari): exceptional factual review, LIMITED TO:
“Integrity” of the arbitral tribunal (fraud, corruption, partiality, misconduct, disqualification, excess of power).
Violation of the Constitution or positive law by the tribunal. - Rule 43 appeals (questions of fact, mixed issues) before the CA are proscribed PROSPECTIVELY; pending Rule 43 petitions remain governed by the old rules.
- Other procedural rules (Revised Circular 1-95, Special ADR Rules, CIAC Rules) are deemed amended to conform.
SC Ruling on Merits
CIAC and CA correctly held GMCLI had no authority to withhold CWT on the cumulative amount.
RSII not entitled to the rebutted balance of ₱4,8
Case Syllabus (G.R. No. 230112)
Factual Antecedents
- Global Medical Center of Laguna, Inc. (GMCLI) entered into a P248.5 million construction contract with Ross Systems International, Inc. (RSII), with 15 percent down payment and progress billings thereafter.
- Section 9 of the contract made all taxes on services the contractor’s responsibility, and an arbitration clause provided for CIAC jurisdiction over disputes.
- RSII submitted Progress Billing No. 15 (79.31 percent accomplished) but GMCLI evaluated it at 78.84 percent, leading to competing amounts (P9.23 million inclusive of VAT versus P7.04 million).
- An internal audit revealed GMCLI’s failure to withhold 2 percent Creditable Withholding Tax (CWT) on Progress Billings Nos. 1–14.
- On April 29, 2015, GMCLI withheld 2 percent CWT on the cumulative P197 million owed for Billings 1–15 (instead of only Billing 15), remitting P3.94 million to the BIR and paying RSII P3.10 million.
- RSII demanded release of P4.88 million (the difference between its claimed P8.13 million due and P3.10 million paid), asserting GMCLI should have withheld CWT only on Billing 15.
Proceedings Before the CIAC
- RSII filed for arbitration before CIAC on August 6, 2015; GMCLI moved to dismiss for lack of jurisdiction.
- Hearings, management and preliminary conferences led to Terms of Reference; both parties submitted evidence and witnesses.
- On May 10, 2016, the CIAC promulgated its Final Award:
• Confirmed its jurisdiction over the construction dispute.
• Held GMCLI lacked authority to withhold CWT on cumulative Billings 1–15.
• Denied RSII’s claim to P4.88 million balance.
• Ruled RSII still owed income tax on the payments at the time GMCLI remitted the cumulative CWT, invoking Last Clear Chance to bar RSII’s recovery of the amount.
• Denied moral damages and attorney’s fees to both parties; apportioned arbitration costs in proportion to claims.
Proceedings Before the Court of Appeals (CA)
- RSII filed a Rule 43 petition for review, disputing CIAC’s refusal to release P4.88 million and denial of attorney’s fees.
- October 28, 2016 CA Decision (with modification):
• Affirmed the CIAC award except that RSII was entitled to P1,088,214.83 (balance after deducting 2 percent CWT on Billings 1–15 and amounts already paid).
• Reasoned it would be unjust to force GMCLI to bear the amount of CWT already remitted by RSII’s legal obligation. - Motions for reconsideration by both parties were denied on
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