G.R. No. 264268 - Normandy vs. Cabailo

Case Summary (G.R. No. 264268)

Factual Background

Mary Ann Cabailo contracted with Chris Art L. Normandy to construct a second floor in her house in Estanzia Subdivision, Bacolod City, for a contract price of PHP 1.2 million. Construction commenced on May 3, 2016. Normandy ceased work in November 2017, asserting completion, while Cabailo alleged defective and incomplete work and refused full payment. Cabailo engaged Engineer William S. Ibardo II to inspect the work; his assessment reported substandard materials, poor workmanship, and incomplete construction. Cabailo discovered that Normandy was not a duly licensed contractor under the Philippine Contractors Accreditation Board (PCAB) and alleged misrepresentation that his DTI business registration authorized contracting activities.

Proceedings Before the DTI Adjudication Officer

Cabailo filed a complaint with the DTI Regional Office VI alleging violation of Section 35, Republic Act No. 4566 for engaging in contracting without a PCAB license and claiming deceptive practices. The Acting Adjudication Officer conducted proceedings and on August 3, 2018 found Normandy not guilty of violating the Consumer Act but guilty of violating RA No. 4566 for engaging in contracting without a PCAB license. The Adjudication Officer ordered Normandy and/or Valkyrie Construction to cease and desist, cancellation or withholding of business name registration, and imposition of a one-time administrative fine of PHP 50,000 plus daily fines for continuing violation. Normandy’s motion for partial reconsideration was denied.

Appeal to the Office of the Secretary of Trade and Industry

Normandy appealed to the Office of the Secretary of the DTI, contending lack of DTI jurisdiction and prescription. The Office of the Secretary relied on DTI DAO No. 07-06, particularly Rule III, Section 3, to conclude that complaints involving persons engaging in construction without a valid PCAB license constitute violations of trade and industry law and therefore fall within DTI jurisdiction. The Secretary’s Office also held that the complaint was timely filed within a two-year prescriptive period measured from the consummation of the transaction, as reflected in the administrative findings. Normandy’s motion for reconsideration with manifestation was denied on the ground that no motion for reconsideration is allowed for cases of violation of the Consumer Act.

Proceedings in the Regional Trial Court and Parallel Litigation

Normandy instituted a Complaint for Recovery of Sum of Money against Cabailo in the Regional Trial Court, which the parties resolved by a compromise agreement resulting in dismissal. Normandy later learned that Cabailo had already filed the DTI complaint during negotiations for settlement before the RTC.

Court of Appeals Decisions

Normandy filed a petition under Rule 43, Rules of Court with the Court of Appeals (CA). In a Decision dated September 30, 2021, the CA granted the petition, held that the DTI lacked jurisdiction over Cabailo’s complaint, and reversed and set aside the DTI Decision, thereby dismissing the complaint. The CA affirmed the Adjudication Officer’s finding that there was no proof of misrepresentation about possession of a PCAB license. Upon motion for reconsideration by Cabailo, the CA in an Amended Decision dated August 24, 2022 granted reconsideration, reversed its earlier judgment, and affirmed the Secretary of DTI’s Decision and the Adjudication Officer’s Decision, reasoning that DTI DAO No. 07-06 treated violations involving construction without a PCAB license as trade and industry law violations and that administrative issuances of the DTI have the force of law.

Issue Presented

Whether the Court of Appeals erred in affirming that the DTI had subject matter jurisdiction over the complaint against Chris Art L. Normandy for engaging in contracting without a PCAB license under Section 35, Republic Act No. 4566.

Ruling of the Supreme Court

The Supreme Court granted the petition. It held that the DTI lacked subject matter jurisdiction to adjudicate the complaint invoking Section 35 of Republic Act No. 4566. The Court reversed the Amended Decision of the Court of Appeals dated August 24, 2022 and dismissed the complaint against Chris Art L. Normandy on the ground of lack of jurisdiction of the DTI.

Legal Basis and Reasoning

The Court began by restating the fundamental principle that jurisdiction is the power to hear, try, and decide a case and that subject matter jurisdiction is essential before adjudication on the merits may proceed. The Court examined the text and structure of the Contractors’ License Law, RA No. 4566, including Sections 5, 9(b), 29, and 35, and the Implementing Rules and Regulations. The Court emphasized that the statute vests the PCAB with authority to investigate the action of “any contractor” and to investigate violations of the Act. The Court interpreted the statutory phrase “any contractor” and Section 35’s penal clause to include persons who undertake contracting activities without securing a license. The Court rejected the Court of Appeals’ earlier view that PCAB jurisdiction requires that the person complained of be a licensee, explaining that the statute’s plain language did not limit PCAB jurisdiction to licensed contractors and that the phrase “without first securing a license” presupposes inclusion of unlicensed practitioners within the statute’s ambit.

The Court further noted that the IRR of RA No. 4566, sec. 11.3, explicitly listed as within the Board’s jurisdiction offenses that include undertaking contracting without first securing a license. On the issue of conflicting administrative issuances, the Court applied the settled rule that a statute prevails over administrative o

Case Syllabus (G.R. No. 264268)

Parties and Posture

Chris Art L. Normandy filed a Petition for Review on Certiorari under Rule 45, Rules of Court assailing the Amended Decision of the Court of Appeals in CA-G.R. SP No. 14190.
Mary Ann Cabailo was the complainant before the Department of Trade and Industry Regional Office VI alleging violation of Republic Act No. 4566.
The Court of Appeals initially granted Normandy's Rule 43 petition but later issued an Amended Decision affirming the DTI decisions that Normandy violated Section 35 of RA 4566 and that the DTI had jurisdiction.
The Supreme Court, through the petition, determined the primary question to be whether the DTI had subject matter jurisdiction over the complaint.

Key Facts

Mary Ann Cabailo contracted Chris Art L. Normandy, owner of Valkyrie Construction, to construct the second floor of her house for a contract price of PHP 1.2 million.
Construction commenced on May 3, 2016, and Normandy halted works in November 2017 contending the project was complete while Cabailo alleged defective and incomplete work.
Engineer William S. Ibardo II assessed the works and reported the use of substandard materials, defective workmanship, and incompletion.
Cabailo discovered that Normandy did not possess a PCAB license and alleged misrepresentation that his DTI business registration authorized contracting.
A Certificate of Occupancy dated January 24, 2017, and a Certificate of Completion dated June 14, 2018, were issued while Cabailo withheld a balance of PHP 581,500.00.
Normandy filed a Recovery of Sum of Money case in the Regional Trial Court which was dismissed after the parties entered into a compromise agreement.

Procedural History

DTI Regional Office VI received Cabailo's complaint alleging violation of Section 35, RA 4566 and the Consumer Act, and the Acting Adjudication Officer rendered a Decision on August 3, 2018.
The Acting Adjudication Officer found Normandy not guilty of violating the deceptive sales provisions of the Consumer Act but guilty of violating RA 4566, Sec. 35, and ordered cease and desist, cancellation and withholding of business registration, and imposition of an administrative fine of PHP 50,000 plus PHP 1,000 per day.
Normandy's Motion for Partial Reconsideration was denied, and the Office of the Secretary of the DTI affirmed jurisdiction and timeliness under DTI DAO No. 07-06 and the two-year prescriptive rule.
Normandy filed a Petition under Rule 43 with the Court of Appeals, which initially granted the petition and dismissed the complaint on September 30, 2021.
Cabailo filed a Motion for Reconsideration, and the CA issued an Amended Decision on August 24, 2022, granting the motion and affirming the DTI decisions, prompting the Rule 45 petition to the Supreme Court.

Issue

Whether the Court of Appeals erred in affirming that the Department of Trade and Industry had jurisdiction over the complaint filed against Chris Art L. Normandy for allegedly engaging in contracting without a PCAB license.

Contentions

Normandy contended that the DTI lacked subject matter jurisdiction and that the action was prescribed.
The DTI and Cabailo contended that DTI DAO No. 07-06 vested jurisdiction in the DTI over persons or entities engaging in construction without a valid PCAB license and that the complaint was timely filed.
The Court of Appeals in its Amended Decision relied on DTI DAO No. 07-06 and administrative rulem