364 Phil. 240
PURISIMA, J.:
"xxx On Nov. 18, 1992, petitioner-defendant Edward Wilkom Enterprises Inc. (EWEI for brevity) together with one Ramiro Construction and respondent-petitioner National Steel Corporation (NSC for short) executed a contract whereby the former jointly undertook the Contract for Site Development (Exhs. "3" & "D") for the latter's Integrated Iron and Steel Mills Complex to be established at Iligan City.The Regional Trial Court of Lanao del Norte Branch 2, Iligan City through Judge Maximo B. Ratunil, rendered judgment as follows:
Sometime in the year 1983, the services of Ramiro Construction was terminated and on March 7, 1983, petitioner-defendant EWEI took over Ramiro's contractual obligation. Due to this and to other causes deemed sufficient by EWEI, extensions of time for the termination of the project, initially agreed to be finished on July 17, 1983, were granted by NSC.
Differences later arose, Plaintiff-defendant EWEI filed Civil Case No. 1615 before the Regional Trial Court of Lanao del Norte, Branch 06, (Exhs. "A" and "1") praying essentially for the payments of P458,381.001 with interest from the time of delay; the price adjustment as provided by PD 1594; and exemplary damages in the amount of P50,000.00 and attorney's fees.
Defendant-petitioner NSC filed an answer with counterclaim to plaintiff's complaints on May 18, 1990.
On August 21, 1990, the Honorable Court through Presiding Judge Valario M. Salazar upon joint motion of both parties had issued an order (Exhs. "C" and "3") dismissing the said complaint and counterclaim x x x in view of the desire of both parties to implement Sec. 19 of the contract, providing for a resolution of any conflict by arbitration x x x . ( underscoring supplied).
In accordance with the aforesaid order, and pursuant to Sec. 19 of the Contract for Site Development (id) the herein parties constituted an Arbitration Board composed of the following:(a) Engr. Pafnucio M. Mejia as Chairman, who was nominated by the two arbitrators earlier nominated by EWEI and NSC with an Oath of Office (Exh. "E");After series of hearings, the Arbitrators rendered the decision (Exh. "H" & "4") which is the subject matter of these present causes of action, both initiated separately by the herein contending parties, substantial portion of which directs NSC to pay EWEI, as follows:
(b) Engr. Eutaquio 0. Lagapa, Jr., member, who was nominated by EWEI with an oath office (Exh. "F")
(c) Engr. Gil A. Aberilia, a member who was nominated by NSC, with an Oath of Office (Exh. "G").(a) P458,381.00 representing EWEI's last billing No. 16 with interest thereon at the rate of 1-1/4% per month from January 1, 1985 to actual date of payment;
(b) P1,335,514.20 representing price escalation adjustment under PD No. 1594, with interest thereon at the rate of 1-1/4 % per month from January 1, 1985 to actual date of payment;
(c) P50,000 as and for exemplary damages;
(d) P350,000 as and for attorney's fees.; and
(e) P35,000.00 as and for cost of arbitration."[1]
(1) In Civil Case No. 11-2198, declaring the award of the Board of Arbitrators, dated April 21, 1992 to be duly AFFIRMED and CONFIRMED "en toto" ; that an entry of judgment be entered therewith pursuant to Republic Act No. 876 (the Arbitration Law); and costs against respondent National Steel Corporation.With the denial on October 18, 1996 of its Motion for Reconsideration, the National Steel Corporation (NSC) has come to this court via the present petition.
(2) In Special Proceeding No. 11-2206, ordering the petition to vacate the aforesaid award be DISMISSED.
SO ORDERED.[2] "
"Paragraph 19. ARBITRATION. All disputes questions or differences which may at any time arise between the parties hereto in connection with or relating to this Agreement or the subject matter hereof, including questions of interpretation or construction, shall be referred to an Arbitration Board composed of three (3) arbitrators, one to be appointed by each party, and the third, to be appointed by the two (2) arbitrators. The appointment of arbitrators and procedure for arbitration shall be governed by the provisions of the Arbitration Law (Republic Act No. 876). The Board shall apply Philippine Law in adjudicating the dispute. The decision of a majority of the members of the Arbitration Board shall be valid, binding, final and conclusive upon the parties, and from which there will be no appeal, subject to the provisions on vacating, modifying, or correcting an award under the said Republic Act No. 876.[3]Thereunder, if a dispute should arise from the contract, the Arbitration Board shall assume jurisdiction and conduct hearings. After the Board comes up with a decision, the parties may immediately implement the same by treating it as an amicable settlement. However, if one of the parties refuses to comply or is dissatisfied with the decision, he may file a Petition to Vacate the Arbitrator's decision before the trial court. On the other hand, the winning party may ask the trial court's confirmation to have such decision enforced.
"Sec. 24 GROUNDS FOR VACATING THE AWARD - In any one of the following cases, the court must make an order vacating the award upon the petition of any party to the controversy when such party proves affirmatively that in the arbitration proceedings:The grounds relied upon by the petitioner were the following (a) That there was evident partiality in the assailed decision of the Arbitrators in favor of the respondent; and (b) That there was mistaken appreciation of the facts and application of the law by the Arbitrators. These were the very same grounds alleged by NSC before the trial court in their Petition to Vacate the Arbitration Award and which petitioner is reiterating in this petition under scrutiny.
(a) The award was procured by corruption, fraud or other undue means;
(b) That there was evident partiality or corruption in the arbitrators of any of them; or
(c) That the arbitrators were guilty of misconduct in refusing to postpone the hearing upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy; that one or more of the arbitrators was disqualified to act as such under section nine hereof, and wilfully refrained from disclosing such disqualification or of any other misbehavior by which the rights of any party have been materially prejudiced; or
(d) That the arbitrators exceeded their powers, or so imperfectly executed them, that a mutual, final and definite award upon the subject matter submitted to them was not made. xxx"
"Thirdly, this Court cannot find its way to support NSC's contention that there was evident partiality in the assailed Award of the Arbitrator in favor of the respondent because the conclusion of the Board, which the Court found to be well-founded, is fully supported by substantial evidence, as follows:Indeed, the allegation of evident partiality is not well-taken because the petitioner failed to substantiate the same."xxx The testimonies of witnesses from both parties were heard to clarify facts and to threash (sic) out the dispute in the hearings. Upon motion by NSC counsel, the hearing of testimony from witnesses was terminated on 22 January 1992. To end the testimonies in the hearing both litigant parties upon query by Arbitrator-Chairman freely declared that there has been no partiality in the manner the Arbitrators conducted the hearing, that there has been no instance, where Arbitrators refused to postpone requested or to hear/accept evidence pertinent and material to the dispute. xxx (underscoring supplied)Parentethically, and in the light of the record above-mentioned, this Court hereby holds that the Board of Arbitrators did not commit any 'evident partiality' imputed by petitioner NSC. Above all, this Court must sustain the said decision for it is a well settled rule that the actual findings of an administrative body should be affirmed if there is substantial evidence to support them and the conclusions stated in the decision are not clearly against the law and jurisprudence similar to the instant case. Henceforth, every reasonable intendment will be indulged to give effect such proceedings and in favor of the regulatory and integrity of the arbitrators act. (Corpus Juris, Vol. 5, p. 20)"[8]
"To authenticate the extent of unfinished work, quantity, unit cost differential and amount, NSC was required to submit copies of payment vouchers and/or job awards extended to the other contractor engaged to complete the works. The best efforts by NSC despite the multiplicity of accounting/auditing/engineering records required in a corporate complex failed to produce documentary proofs from their Iligan or Makati office despite repeated requests. NSC failed to substantiate such allusion of completion by another contractor three unfinished items of works, actual quantities accomplished and unit cost differential paid chargeable against EWEI.Furthermore, under the contract sued upon, it is clear that should the Owner feel that the work agreed upon was not completed by the contractor, it is incumbent upon the OWNER to send to CONTRACTOR a letter within seven (7) days after completion of the inspection to specify the objections thereto[9] NSC failed to comply with such requirement, and therefore it would be unfair to refuse payment to EWEI, considering that the latter had faithfully submitted Final Billing No.16 believing that its work had been completed because NSC did not call its attention to any objectionable aspect of their project.xxx xxx xxx
The latest evaluation on record of the items of work completed by EWEI under the contract is drawn from the NSC report (Exhibit "11-d") dated 12 November 1985 submitted with the EWEI Billing No. 16-Final in the course of processing claim on items of work accomplished. There is no such report or mention of unfinished work of 90,000 MT of dumped riprap, 100,000 cu. m. of site grading and 300,000 cu. m. of spreading common excavated materials in the EWEI contract alluded to by the NSC as unfinished work otherwise EWEI Billing No. 16-Final would not have passed processing for payment unless there is really no such unfinished work NSC evaluation report with no adverse findings of unfinished work consider the contract as completed.
To affirm the work items, quantity, unit cost differential and amount of unfinished work left behind by EWEI, NSC in serving notice of contract termination to EWEI should have instead specifically cited these obligations in detail for EWEI to perform/comply within 30 days, such failure to perform/comply should have constituted as an event in default that would have justified termination of contract of NSC with EWEI. If at all, this unfinished work may be additional/extra work awarded in 1984 to another contractor at prices higher than the unit price tendered by EWEI in 1982 and/or the discrepancy between actual quantities of work accomplished per plans versus estimated quantities of work covered by separate contract as expansion of the original project."xxx xxx xxx
IN VIEW OF THE FOREGOING, THE SO-CALLED UNFINISHED WORKS IN THE CONTRACT BY EWEI ALLUDED TO BY NSC IS NOT CONSIDERED AN OBLIGATION TO PERFORM/COMPLY THUS ABSOLVING EWEI OF ANY FAILURE TO PERFORM/COMPLY AND THEREFORE CANNOT BE AVAILED OF AS A RIGHT OR REMEDY BY NSC TO RECOVER UNIT DIFFERENTIAL COST FROM EWEI FOR THE SAME UNSUBSTANTIATED WORK DONE BY ANOTHER CONTRACTOR." (ANNEX "C" ARBITRATION, page 86-88 of Rollo.)
2. CONTRACT PRICE -The phrase "prices above fixed" means that the contract price of the work shall be that agreed upon by the parties at the time of the execution of the contract, which is the law between them provided it is not contrary to law, morals, good customs, public order, or public policy. (Article 1306, New Civil Code). It cannot be inferred therefrom, however, that the parties are prohibited from imposing future increases or price escalation. It is a cardinal rule in the interpretation of contracts that "if the terms of a contract are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of its stipulations shall control."[11]
xxx xxx
The applicable unit prices above fixed are based on the assumption that the disposal areas for cleared, grubbed materials, debris, excess filling materials and other matters that are to be disposed of or are within the boundary limits of the site, as designated in Annex A hereof. In the event that disposal areas fixed and designated in Annex A are diverted and transferred to such other areas as would be outside the limits of the site as would require additional costs to the contractor, then Owner shall be liable for such additional hauling costs of P1.45/km/m3." (Annex "A", Contract for Site Development, page 55 of Rollo)
"On the other hand, there was documentary evidence presented that NSC granted Geo Transport and Construction, Inc. (GTCI), the other favored contractor working side by side with EWEI on the site development project during the same period the GTCE was granted upon request and paid by NSC an actual sum of P6.9 million as price adjustment compensation even without the benefit of escalation provision in the contract but allowed in accordance with PD NO. 1594 enforceable among government controlled or owned corporation. The statement is embodied in an affidavit (Exhibit "111-h") submitted by affiant Jose M. Mesina, Asst. to the President and Legal Counsel of GTCI, submitted to the Arbitrators upon solicitation of EWEI, copy to NSC, on 3 October 1991. NSC did not assail the affidavit upon receipt of such document as evidence until the hearing of 19 December 1991 when the affidavit was branded by NSC counsel as incorrect and hearsay. Within 7 days reglamentary period after receipt of affidavit in 3 October 1991, the NSC had the recourse to contest the affidavit even preferably charge the affiant for slander if NSC could disprove the statements as untrue."[12]If Petitioner seeks to refute such evidence, it should have done so before the Board of Arbitrators, during the hearings. To raise the issue now is futile.