Chung Fu Industries v. CA (G.R. No. 96283)

Facts:

Petitioner Chung Fu Industries (Philippines) and private respondent Roblecor Philippines, Inc. forged a construction agreement whereby respondent contractor committed to construct and finish petitioner corporation’s industrial/factory complex. In the event of disputes arising from the performance of subject contract, it was stipulated therein that the issue(s) shall be submitted for resolution before a single arbitrator chosen by both parties. Roblecor filed a petition for Compulsory Arbitration with prayer for Temporary Restraining Order before respondent RTC to claim the unsatisfied account and unpaid progress billings. Chung Fu moved to dismiss the petition and further prayed for the quashing of the restraining order. Subsequent negotiations between the parties eventually led to the formulation of an arbitration agreement which, among others, provides: The parties mutually agree that the decision of the arbitrator shall be final and unappealable. Therefore, there shall be no further judicial recourse if either party disagrees with the whole or any part of the arbitrator’s award. Respondent RTC approved the arbitration agreement and thereafter, Engr. Willardo Asuncion was appointed as the sole arbitrator. Arbitrator Asuncion ordered petitioner to immediately pay respondent contractor and further declared the award as final and unappealable. Roblecor then moved for the confirmation of said award which was accordingly confirmed and a writ of execution granted to it. Meanwhile, Chung Fu moved to remand the case for further hearing and asked for a reconsideration of the judgment award claiming that Arbitrator Asuncion committed twelve (12) instances of grave error by disregarding the provisions of the parties’ contract. Chung Fu’s Motion was denied and similarly its motion for reconsiderationn. Chung Fu elevated the case via a petition for certiorari to respondent CA. The respondent appellate court concurred with the findings and conclusions of respondent trial court. A motion for reconsideration of said resolution was filed by petitioner, but was similarly denied.

Issue:

Whether or not petitioners are estopped from questioning the arbitration award allegedly in view of the stipulations in the parties’ arbitration agreement that “the decision of the arbitrator shall be final and unappealable” and that “there shall be no further judicial recourse if either party disagrees with the whole or any part of the arbitrator’s award.”

Ruling:

We rule in the negative. It is stated explicitly under Art. 2044 of the Civil Code that the finality of the arbitrators’ award is not absolute and without exceptions. Where the conditions described in Articles 2038, 2039 and 2040 applicable to both compromises and arbitrations are obtaining, the arbitrators’ award may be annulled or rescinded. Additionally, under Sections 24 and 25 of the Arbitration Law, there are grounds for vacating, modifying or rescinding an arbitrator’s award. Thus, if and when the factual circumstances referred to in the above-cited provisions are present, judicial review of the award is properly warranted.

This is where the proper remedy is certiorari under Rule 65 of the Revised Rules of Court. It is to be borne in mind, however, that this action will lie only where a grave abuse of discretion or an act without or in excess of jurisdiction on the part of the voluntary arbitrator is clearly shown. It should be stressed, too, that voluntary arbitrators, by the nature of their functions, act in a quasi-judicial capacity. It stands to reason, therefore, that their decisions should not be beyond the scope of the power of judicial review of this Court.

In the case at bar, petitioners assailed the arbitral award on the following grounds, most of which allege error on the part of the arbitrator in granting compensation for various items which apparently are disputed by said petitioners. After closely studying the list of errors, as well as petitioners’ discussion of the same in their Motion to Remand Case For Further Hearing and Reconsideration and Opposition to Motion for Confirmation of Award, we find that petitioners have amply made out a case where the voluntary arbitrator failed to apply the terms and provisions of the Construction Agreement which forms part of the law applicable as between the parties, thus committing a grave abuse of discretion. Furthermore, in granting unjustified extra compensation to respondent for several items, he exceeded his powers — all of which would have constituted ground for vacating the award under Section 24 (d) of the Arbitration Law.

Wherefore, the petition is granted. The Resolutions of the CA as well as the Orders of respondent RTC are hereby SET ASIDE. Accordingly, this case is REMANDED to the court of origin for further hearing on this matter. All incidents arising therefrom are reverted to the status quo ante until such time as the trial court shall have passed upon the merits of this case.

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