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G.R. No. 211504 FEDERAL BUILDERS, INC., Petitioner

The case involved a dispute between Federal Builders, Inc. and Power Factors, Inc. over unpaid amounts for work Power Factors performed as a subcontractor for Federal Builders. Power Factors filed for arbitration with the Construction Industry Arbitration Commission (CIAC). Federal Builders argued the CIAC lacked jurisdiction as there was no signed contract with an arbitration agreement. The CIAC and Court of Appeals found the parties had an effective agreement to submit to voluntary arbitration, giving the CIAC jurisdiction. The Court of Appeals modified the damages awarded but otherwise affirmed the CIAC's decision. The Supreme Court also affirmed, finding the CIAC had proper jurisdiction and the Court of Appeals' modified damages amounts were correct.

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177 views2 pages

G.R. No. 211504 FEDERAL BUILDERS, INC., Petitioner

The case involved a dispute between Federal Builders, Inc. and Power Factors, Inc. over unpaid amounts for work Power Factors performed as a subcontractor for Federal Builders. Power Factors filed for arbitration with the Construction Industry Arbitration Commission (CIAC). Federal Builders argued the CIAC lacked jurisdiction as there was no signed contract with an arbitration agreement. The CIAC and Court of Appeals found the parties had an effective agreement to submit to voluntary arbitration, giving the CIAC jurisdiction. The Court of Appeals modified the damages awarded but otherwise affirmed the CIAC's decision. The Supreme Court also affirmed, finding the CIAC had proper jurisdiction and the Court of Appeals' modified damages amounts were correct.

Uploaded by

Rigor Arjay
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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G.R. No.

211504

FEDERAL BUILDERS, INC., Petitioner


vs POWER FACTORS, INC., Respondent

Facts

Federal was the general contractor of the Bullion Mall under a construction agreement with Bullion
Investment and Development Corporation (BIDC). In 2004, Federal engaged respondent Power
Factors Inc. (Power) as its subcontractor for the electric works at the Bullion Mall and the Precinct
Building for ₱l8,000,000.00.

On February 19, 2008, Power sent a demand letter to Federal claiming the unpaid amount of
₱ll,444,658.97 for work done by Power for the Bullion Mall and the Precinct Building. Federal
replied that its outstanding balance under the original contract only amounted to ₱1,641,513.94,
and that the demand for payment for work done by Power after June 21, 2005 should be addressed
directly to BIDC. Nonetheless, Power made several demands on Federal to no avail.

On October 29, 2009, Power filed a request for arbitration in the CIAC invoking the arbitration
clause of the Contract of Service which states that all disputes, controversies or differences, which
may arise between the parties herein, out of or in relation to or in connection with this Agreement,
or for breach thereof shall be settled by the Construction Industry Arbitration Commission (CIAC)
which shall have original and exclusive jurisdiction over the aforementioned disputes.

Federal, counsel (Domingo, Dizon, Leonardo and Rodillas Law Office), moved to dismiss the case
on the ground that CIAC had no jurisdiction over the case inasmuch as the Contract of Service
between Federal and Power had been a mere draft that was never finalized or signed by the parties.
Federal contended that in the absence of the agreement for arbitration, the CIAC had no
jurisdiction to hear and decide the case.

On February 8, 2010, the CIAC issued an order setting the case for hearing, and directing that
Federal's motion to dismiss be resolved after the reception of evidence of the parties.

Federal did not thereafter participate in the proceedings until the CIAC rendered the Final Award
dated May 12, 2010, disposing to pay claimant Power Factors an amount of ₱9 ,369,238.87

Federal appealed the award to the CA insisting that the CIAC had no jurisdiction to hear and
decide the case; and that the amounts thereby awarded to Power lacked legal and factual bases.

The CA affirmed the CIAC's decision with modification. As modified, FEDERAL BUILDERS, INC.
is ordered to pay POWER FACTORS, an amount of P.7, 140,728.07.
Issue

The issues to be resolved are:

(a) whether the CA erred in upholding CIAC's jurisdiction over the present case; and

(b) whether the CA erred in holding that Federal was liable to pay Power the amount of
₱7,140,728.07.

Ruling of the Court

a. The parties had an effective agreement to submit to voluntary arbitration; hence, the CIAC
had jurisdiction
The need to establish a proper arbitral machinery to settle disputes expeditiously was
recognized by the Government in order to promote and maintain the development of the
country's construction industry. With such recognition came the creation of the CIAC
through Executive Order No. 1008 (E.O. No. 1008), also known as The Construction Industry
Arbitration Law. Section 4 of E.O. No. 1008 provides:
Sec. 4. Jurisdiction. - The CIAC shall have original and exclusive jurisdiction over disputes
arising from, or connected with, contracts entered into by parties involved in construction
in the Philippines, whether the dispute arises before or after the completion of the contract,
or after the abandonment or breach thereof. These disputes may involve government or
private contracts. For the Board to acquire jurisdiction, the parties to a dispute must agree
to submit the same to voluntary arbitration.
b. Amounts as modified by the CA are correct
The amounts as modified by the CA. Power did not sufficiently establish that the change or
increase of the cost of materials and labor was to be separately determined and approved
by both parties as provided under Article 1724 of the Civil Code. As such, Federal should not
be held liable for the labor cost escalation. The Court AFFIRMS the decision promulgated
on August 12, 2013; and ORDERS the petitioner to pay the costs of suit.

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