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Metropolitan Cebu Water District vs. Mactan Rock Industries, Inc.

 
Immutability of Final Judgments; A final and executory
judgment, no matter how erroneous, cannot be changed, even by
this Court. Nothing is more settled in law than that once a
G.R. No. 172438. July 4, 2012.* judgment attains finality, it thereby becomes immutable and
METROPOLITAN CEBU WATER DISTRICT, petitioner, unalterable.—This Court has held time and again that a final and
vs. MACTAN ROCK INDUSTRIES, INC., respondent. executory judgment, no matter how erroneous, cannot be changed,
even by this Court. Nothing is more settled in law than that once
a judgment attains finality, it thereby becomes immutable and
Construction Industry Arbitration Commission (CIAC);
unalterable. It may no longer be modified in any respect, even if
Arbitration; The Construction Industry Arbitration Commission
such modification is meant to correct what is perceived to be an
(CIAC) was created in 1985 under Executive Order (E.O.) No. 1008
erroneous conclusion of fact or law, and regardless of whether the
(Creating an Arbitration Machinery for the Philippine
modification is attempted to be made by the court rendering it or
Construction Industry), in recognition of the need to establish an
by the highest court of the land.
arbitral machinery that would expeditiously settle construction
industry disputes.—The Construction Industry Arbitration Civil Procedure; Litis Pendentia; Litis pendentia is predicated
Commission (CIAC) was created in 1985 under Executive Order on the principle that a party should not be allowed to vex another
(E.O.) No. 1008 (Creating an Arbitration Machinery for the more than once regarding the same subject matter and for the
Philippine Construction Industry), in recognition of the need to same cause of action.—Litis pendentia is predicated on the
establish an arbitral machinery that would expeditiously settle principle that a party should not be allowed to vex another more
construction industry disputes. The prompt resolution of problems than once regarding the same subject matter and for the same
arising from, or connected to, the construction industry was cause of action. It is founded on the public policy that the same
considered necessary and vital for the fulfillment of national subject matter should not be the subject of controversy in courts
development goals, as the construction industry provided more than once, in order that possible conflicting judgments may
employment to a large segment of the national labor force, and be avoided for the sake of the stability of the rights and status of
was a leading contributor to the gross national product. persons, and also to avoid the costs and expenses incident to
numerous suits.
Same; Jurisdiction; The jurisdiction of the Construction
Industry Arbitration Commission (CIAC) as a quasi-judicial body Same; Same; Test to determine whether there is identity of the
is confined to construction disputes, that is, those arising from, or rights asserted and reliefs prayed for.—To determine whether
connected to, contracts involving “all on-site works on buildings or there is identity of the rights asserted and reliefs prayed for,
altering structures from land clearance through completion grounded on the same facts and bases, the following tests may be
including excavation, erection and assembly and installation of utilized: (1) whether the same evidence would support and
components and equipment.”—The jurisdiction of the CIAC as a sustain both the first and the second causes of action, also known
quasi-judicial body is confined to construction disputes, that is, as the “same evidence” test; or (2) whether the defenses in one
those arising from, or connected to, contracts involving “all on-site case may be used to substantiate the complaint in the other. Also
works on buildings or altering structures from land clearance fundamental is the test of determining whether the cause of
through completion including excavation, erection and assembly action in the second case existed at the time of the filing of the
and installation of components and equipment.” The CIAC has first case.
jurisdiction over all such disputes whether the dispute arises Construction Industry Arbitration Commission (CIAC);
before or after the completion of the contract. Arbitration; The Court held that the Construction Industry
Arbitration Commission (CIAC) retained jurisdiction even if both
_______________ parties had withdrawn their consent to arbitrate.—This Court has
held that the CIAC has jurisdiction over a dispute arising from a
* THIRD DIVISION.
construction

578 579

578 SUPREME COURT REPORTS ANNOTATED VOL. 675, JULY 4, 2012 579
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The Facts
Metropolitan Cebu Water District vs. Mactan Rock Industries, Inc.
Petitioner Metropolitan Cebu Water District (MCWD) is
contract even though only one of the parties requested for a government-owned and controlled corporation (GOCC)
arbitration. In fact, in Philrock, Inc. v. Construction Industry created pursuant to Presidential Decree (PD) No. 198,3 as
Arbitration Commission, 359 SCRA 632 (2001), the Court held amended, with its principal office address at the MCWD
that the CIAC retained jurisdiction even if both parties had Building, Magallanes corner Lapu-Lapu Streets, Cebu
withdrawn their consent to arbitrate. City.4 It is mandated to supply water within its service
area in the cities of Cebu, Talisay, Mandaue, and Lapu-
Civil Procedure; Judgments; Where there is a conflict between
Lapu and the municipalities of Compostela, Liloan,
the fallo, or the dispositive part, and the body of the decision or
Consolacion, and Cordova in the Province of Cebu.5
order, the fallo prevails on the theory that the fallo is the final
Respondent Metro Rock Industries, Inc. (MRII) is a
order and becomes the subject of execution, while the body of the
domestic corporation with principal office address at the
decision merely contains the reasons or conclusions of the court
2nd Level of the Waterfront Cebu Hotel and Casino, Lahug,
ordering nothing.—The general rule is that where there is a
Cebu City.6
conflict between the fallo, or the dispositive part, and the body of
On May 19, 1997, MCWD entered into a Water Supply
the decision or order, the fallo prevails on the theory that the fallo
Contract7 (the Contract) with MRII wherein it was agreed
is the final order and becomes the subject of execution, while the
that the latter would supply MCWD with potable water, in
body of the decision merely contains the reasons or conclusions of
accordance with the World Health Organization (WHO)
the court ordering nothing. However, where one can clearly and
standard or the Philippine national standard, with a
unquestionably conclude from the body of the decision that there
minimum guaranteed annual volume.8
was a mistake in the dispositive portion, the body of the decision
On March 15, 2004, MRII filed a Complaint9 against
will prevail.
MCWD with the Construction Industry Arbitration
PETITION for review on certiorari of the decision and Commission(CIAC), citing the arbitration clause (Clause
resolution of the Court of Appeals. 18)10  of the
   The facts are stated in the opinion of the Court.
  The Office of the Government Corporate Counsel for _______________
petitioner. 2   Id., at pp. 43-44.
  Follosco, Morallos & Herce for respondent. 3   Provincial Water Utilities Act of 1973.
  Arlene G. Lapuz-Ureta for garnishee Merchants 4   Rollo, p. 2.
Savings Bank & Loan Association. 5   Id., at p. 24.
6   Id., at pp. 2-3.
MENDOZA, J.: 7   Id., at pp. 45-50.
This is a petition for review on certiorari under Rule 45 8   Id., at p. 24.
assailing the February 20, 2006 Decision1 and the March
9   Id., at pp. 51-68.
30,
10  “V. DISPUTES AND JURISDICTION:

_______________ 581
1  Rollo, pp. 23-31. Nineteenth Division, penned by Associate Justice
Isaias P. Dicdican, with Associate Justice Ramon M. Bato, Jr. and
VOL. 675, JULY 4, 2012 581
Associate Justice Apolinario D. Bruselas, Jr., concurring.
Metropolitan Cebu Water District vs. Mactan Rock
580 Industries, Inc.

580 SUPREME COURT REPORTS ANNOTATED Contract. The case was docketed as CIAC Case No. 12-
2004. In the said complaint, MRII sought the reformation
Metropolitan Cebu Water District vs. Mactan Rock
of Clause 17 of the Contract, or the Price Escalation/De-
Industries, Inc.
Escalation Clause, in order to include Capital Cost
Recovery in the price escalation formula, and to have such
2006 Resolution2 of the Court of Appeals (CA) in CA-G.R. revised formula applied from 1996 when the bidding was
CEB SP. No. 00623. conducted, instead of from the first day when MRII started

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selling water to MCWD. It also sought the payment of the On August 27, 2004, MRII submitted its Formal Offer of
unpaid price escalation/ Evidence and its memorandum of arguments in the form of
adjustment, and the payment of unpaid variation/extra a proposed/draft decision. MCWD did not attend the
work order and interest/cost of money up to December 31, hearings. It did not submit evidence other than those
2003.11 annexed to its Answer. Neither did it file a formal offer of
On May 7, 2002, MCWD filed its Answer12  dated April evidence, or a memorandum of legal arguments.17 
27, 2004, which included a motion to dismiss the complaint Decision of the CIAC
on the ground that the CIAC had no jurisdiction over the The CIAC promulgated its Decision18  on April 14, 2005,
case, as the Contract was not one for construction or the dispositive portion of which reads:
infrastructure.
The CIAC thereafter issued an order13  denying “WHEREFORE[,] premises considered, judgment is hereby rendered
MCWD’s motion to dismiss, and calling the parties to a as follows:
preliminary conference for the review and signing of the 1. Ordering the reformation of Clause 17 of the Water Supply
Terms of Reference.14 Contract to read:
MCWD, thus, filed a petition for certiorari15  under Rule 17[.] Price Escalation and/or De-Escalation shall be based on
65 with the CA, questioning the jurisdiction of the CIAC. the parametric formula:
The 17.1 Power Rate Price Adjustment/Power Cost Adjustment
Current Power Rate – Base Power Rate x 30% of base selling price of water
                       Base Power Rate
_______________
18. Any dispute, controversy or claim arising out of or relating to this
contract or the breach, termination or invalidity thereof, if the same _______________
cannot be settled amicably, may be submitted for arbitration to an 16  Id., at p. 25.
Arbitration Tribunal in accordance with Executive Order No. 1008 dated 4 17  Id.
February 1985, otherwise known as the Construction Industry Arbitration 18  Id., at pp. 101-120, with Chairperson Guadalupe O. Mansueto and
Law and the place of arbitration shall be the City of Cebu, Philippines, Eliseo I. Evangelista, concurring and Federico Y. Alikpala, Jr., dissenting.
otherwise said dispute or controversy arising out of the contract or breach
583
thereof shall be submitted to the court of law having jurisdiction thereof
(sic) where MCWD is located.”
11  Rollo, pp. 66-67. VOL. 675, JULY 4, 2012 583
12  Id., at pp. 69-82. Metropolitan Cebu Water District vs. Mactan Rock
13  Id., at pp. 83-84. Industries, Inc.
14  Id., at pp. 85-90.
15  Id., at pp. 91-100. 17.2 Consumer Price Index (CPI) Adjustment/Operating Cost
Adjustment:
582
Current CPI – Base CPI x 40% of base selling price of water
             Base CPI

582 SUPREME COURT REPORTS ANNOTATED 17.3 Capital Cost Recovery Adjustment:
Current Peso to Base Peso to US$
Metropolitan Cebu Water District vs. Mactan Rock
     US$ Exchange Rate – Exchange Rate x 30% of base selling price of water
Industries, Inc.
        Base Peso to US $ Exchange Rate

Price escalation shall be reckoned from January 1999 when the

petition was docketed as CA-G.R. SP. No. 85579 (First water was first delivered by Mactan Rock Industries, Inc. to the
Petition). MCWD facilities in Mactan. The base CPI, base US$ Exchange
Meanwhile, the CIAC proceeded with the preliminary Rate and the Base Power Rate shall be the prevailing rate in
conference scheduled on June 10 and July 22, 2004 which January 1999, while the Base Selling Price of water shall mean
MWCD opted not to attend. MRII and the CIAC both the 1996 rate per cubic meter of water as provided for in the
signed the Terms of Reference. Pursuant to the Terms of Water Supply Contract.
Reference and the CIAC Order dated July 22, 2004, MRII 2. Ordering Respondent Metropolitan Cebu Water District to pay
submitted its documentary evidence and affidavits of its Claimant, Mactan Rock Industries, Inc[.] under the reformed
witnesses.16 Clause 17 of the Water Supply Contract, the net amount of
Php12,126,296.70 plus legal interest of six percent (6%) per

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annum from the (sic) March 15, 2004, the date of filling (sic) of the construe arbitration clauses. Provided such clause is susceptible
case with the Construction Industry Arbitration Commission, the of an interpretation that covers the asserted dispute, an order to
rate increased to twelve percent (12%) per annum from the date arbitrate should be granted. Any doubt should be resolved in
the herein Decision have (sic) become final and executory until the favor of arbitration. It is to be highlighted that the dispute in the
foregoing amounts shall have been fully paid[.] case at bar arose from the parties’ incongruent positions with
3. Claimant Mactan Rock Industries, Inc. and Metropolitan Cebu regard to clause 17 of the Water Supply Contract[,] specifically
Water District shall share equally the cost of arbitration. the price escalation/adjustment. The instant case involves
SO ORDERED.”19  technical discrepancies that are

Decision of the CA in CA-G.R. SP _______________

No. 85579—Petition for certiorari 20  Id., at pp. 131-138. Eighteenth Division, penned by Executive Justice
under Rule 65 with the Court of Ap- Mercedes Gozo-Dadole, with Associate Justice Pampio A. Abarintos and Associate
peals questioning the jurisdiction of Justice Enrico A. Lanzanas, concurring.
the CIAC 21  Id., at p. 135.
22  412 Phil. 236; 359 SCRA 632 (2001), cited at Rollo, p. 135.
_______________ 23  Rollo, p. 135.
19  Id., at pp. 119-120.
585
584
VOL. 675, JULY 4, 2012 585
584 SUPREME COURT REPORTS ANNOTATED Metropolitan Cebu Water District vs. Mactan Rock Industries, Inc.
Metropolitan Cebu Water District vs. Mactan Rock
Industries, Inc. better left to an arbitral body that has expertise in those areas.
Nevertheless, in any event, the inclusion of an arbitration clause
in a contract does not ipso facto divest the courts of jurisdiction to
 
pass upon the findings of arbitral bodies, because the awards are
Meanwhile, on October 28, 2005, the CA in its
still judicially reviewable under certain conditions.”24  (Citations
decision20  in the First Petition upheld the jurisdiction of
omitted.)
the CIAC over the case. The CA held that when parties
agree to settle their disputes arising from or connected MCWD’s motion for reconsideration of the decision in
with construction contracts, the CIAC acquires primary the First Petition was still pending when it filed the
jurisdiction.21  Citing Philrock Inc. v. Construction Industry petition for review25  under Rule 43 (Second Petition)
Arbitration Commission,22  the CA stated that the CIAC appealing the decision of the CIAC. The motion for
may resolve not only the merits of such controversies, but reconsideration was eventually denied in a Resolution26 
may also award damages, interest, attorney’s fees, and dated May 3, 2006. MCWD did not appeal from the denial
expenses of litigation, when appropriate.23  of the motion. It, thus, became final and executory.27 
Second, the CA held that the claims in question fall Decision of the CA in CA-G.R.
under the jurisdiction of the CIAC. Thus: CEB SP. No. 00623—Petition for
review under Rule 43 appealing the
“Xxx Section 4 of Executive Order No. 1008, otherwise known
decision of the CIAC
as the Construction Industry Arbitration Law delineates CIAC’s
Aggrieved by the CIAC Decision, MCWD filed a petition
jurisdiction as “original and exclusive jurisdiction over disputes
for review under Rule 43 with the CA which was docketed
arising from, or connected with, contracts entered into by parties
as CA-G.R. CEB SP. No. 00623.
involved in construction in the Philippines, whether the disputes
The CA, however, dismissed the petition in its Decision
arise before or after the completion of the contract, or after
dated February 20, 2006. The Court therein stated that the
abandonment thereof.” Moreover, Section 5 (k) of Republic Act No.
issue of jurisdiction had already been resolved by the 18th
9184 otherwise known as [the] Government Procurement Reform
Division in the First Petition, where the CA upheld the
Act expressly defines “infrastructure project” as including “water
jurisdiction of the CIAC over Arbitration Case No. 12-2004.
supply[,]” construction, rehabilitation[,] demolition, repair,
Citing jurisprudence, the CA also ruled that there being
restoration and maintenance.
an arbitration clause in the Contract, the action for
Consistent with the above-mentioned policy of encouraging
reformation of contract instituted by MRII in this case fell
alternative dispute resolution methods, courts should liberally
squarely within the jurisdiction of the CIAC, not the courts.
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In relation to this, the CA noted that the present rule is 28  Rollo, p. 28.
that courts will look 29  Id., at pp. 29-30.

587
_______________
24  Id., at pp. 137-138.
VOL. 675, JULY 4, 2012 587
25  CA Rollo, pp. 2-18.
26  Rollo, pp. 203-204. Metropolitan Cebu Water District vs. Mactan Rock Industries, Inc.
27  Id., at pp. 171 and 394.
 
586 MAY A PARTY, WHO IS A SIGNATORY TO THE WATER
SUPPLY CONTRACT[,] IN EFFECT SUBMITTING ITSELF
TO THE JURISDICTION OF THE CONSTRUCTION
586 SUPREME COURT REPORTS ANNOTATED
INDUSTRY ARBITRATION COMMISSION, QUESTION
Metropolitan Cebu Water District vs. Mactan Rock THE JURISDICTION OF [THE] CIAC?
Industries, Inc. DOES THE CONSTRUCTION INDUSTRY ARBITRATION
COMMISSION HAVE THE (SIC) JURISDICTION OVER A
with favor upon amicable agreements to settle disputes COMPLAINT PRAYING FOR A REFORMATION OF A
through arbitration, and will only interfere with great WATER SUPPLY CONTRACT?
reluctance to anticipate or nullify the action of the MAY THE COURT OF APPEALS REFUSE TO RENDER A
arbitrator. MCWD being a signatory and a party to the [SIC] JUDGMENT ON AN ISSUE BECAUSE THIS HAS
Water Supply Contract, it cannot escape its obligation BEEN ALREADY SETTLED IN A DECISION RENDERED
under the arbitration clause.28  BY ANOTHER DIVISION OF THE COURT OF APPEALS IN
The CA also held that the CIAC did not err in finding A PETITION FOR CERTIORARI, EVEN IF THE SAID
that the Water Supply Contract is clear on the matter of DECISION HAS NOT YET BEEN (SIC) FINAL DUE TO A
the reckoning period for the computation of the escalation TIMELY FILING OF A MOTION FOR
cost from January 9, 1999, or the first day of delivery of RECONSIDERATION?30
water. Moreover, the CA found that the CIAC did not err in
ruling that the contract be reformed to include Capital Cost Ruling of the Court
Recovery in the parametric formula for price escalation.
Neither did it err in holding that the Capital Cost Recovery Creation of the CIAC
shall be 30% of the Base Selling Price of water as a The Construction Industry Arbitration Commission
consequence of the reformation of Clause 17. (CIAC) was created in 1985 under Executive Order (E.O.)
Finally, the CA stressed that “factual findings of No. 1008 (Creating an Arbitration Machinery for the
administrative agencies which are deemed to have acquired Philippine Construction Industry), in recognition of the
expertise in matters within their respective jurisdictions need to establish an arbitral machinery that would
are generally accorded not only respect but even finality expeditiously settle construction industry disputes. The
when supported by substantial evidence.”29  prompt resolution of problems arising from, or connected
MCWD filed a motion for reconsideration but it was to, the construction industry was considered necessary and
denied in the CA Resolution dated March 30, 2006. vital for the fulfillment of national development goals, as
Thus, this petition. the construction industry provided employment to a large
segment of the national labor force, and was a leading
Issues contributor to the gross national product.31 

MCWD raises the following issues in its petition for _______________

review: 30  Id., at pp. 10-11.
31  Licomcen Incorporated v. Foundation Specialists, Inc., G.R. Nos.
MAY THE CONSTRUCTION INDUSTRY [ARBITRATION]
167022 and 169678, April 4, 2011, 647 SCRA 83, 96.
COMMISSION EXERCISE JURISDICTION OVER
DISPUTES ARISING FROM A WATER SUPPLY 588
CONTRACT?

_______________
588 SUPREME COURT REPORTS ANNOTATED

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Metropolitan Cebu Water District vs. Mactan Rock jurisdiction over all such disputes whether the dispute
Industries, Inc. arises before or after the completion of the contract.34 
Whether the CIAC has jurisdiction
Under Section 4 of E.O. No. 1008, the CIAC’s over the dispute
jurisdiction was specifically delineated as follows: As earlier stated, following the denial of its motion to
dismiss by CIAC, MCWD filed the First Petition with the
“SECTION 4. Jurisdiction.—The CIAC shall have original CA, which decided in favor of MRII and upheld the
and exclusive jurisdiction over disputes arising from, or connected jurisdiction of the CIAC.
with, contracts entered into by parties involved in construction in Not being in conformity, MCWD filed a motion for
the Philippines, whether the disputes arise before or after the reconsideration.
completion of the contract, or after the abandonment or breach While the said motion was pending with the CA, MCWD
thereof. These disputes may involve government or private filed the Second Petition with the same court. Eventually,
contracts. For the Board to acquire jurisdiction, the parties to a the motion was denied, and MCWD never appealed the
dispute must agree to submit the same to voluntary arbitration. case. Thus, the decision of the CA in the First Petition
The jurisdiction of the CIAC may include but is not limited to became final and executory.
violation of specifications for materials and workmanship; The question now is whether such final and executory
violation of the terms of agreement; interpretation and/or decision is binding such that courts are generally precluded
application of contractual provisions; amount of damages and from passing judgment on the issue of jurisdiction in the
penalties; commencement time and delays; maintenance and present petition.
defects; payment default of employer or contractor and changes in The Court finds in the affirmative.
contract cost. This Court has held time and again that a final and
Excluded from the coverage of this law are disputes arising executory judgment, no matter how erroneous, cannot be
from employer-employee relationships which shall continue to be changed, even by this Court. Nothing is more settled in law
covered by the Labor Code of the Philippines.” (Underscoring than that once a judgment attains finality, it thereby
supplied) becomes immutable and unalterable. It may no longer be
modified in any respect, even if such modification is meant
The jurisdiction of the CIAC as a quasi-judicial body is
to correct what is perceived to be an erroneous conclusion
confined to construction disputes,32  that is, those arising
of fact or law, and regardless of whether the modification is
from, or connected to, contracts involving “all on-site works
attempted to be
on buildings or altering structures from land clearance
through completion including excavation, erection and
_______________
assembly and installation of components and
34  National Irrigation Administration v. Court of Appeals, 376 Phil.
equipment.”33  The CIAC has
362, 373; 318 SCRA 255, 266 (1999).

_______________ 590
32  National Housing Authority v. First United Constructors
Corporation, G.R. No. 176535, September 7, 2011, 657 SCRA 175, 210-
590 SUPREME COURT REPORTS ANNOTATED
211.
33  Fort Bonifacio Development Corporation v. Sorongon, G.R. No. Metropolitan Cebu Water District vs. Mactan Rock
176709, May 8, 2009, 587 SCRA 613, 621, citing Gammon Philippines, Inc. Industries, Inc.
v. Metro Rail Transit Development Corporation, 516 Phil. 561, 569; 481
SCRA 209, 218-219 (2006). See also Fort Bonifacio Development made by the court rendering it or by the highest court of
Corporation v. Domingo, G.R. No. 180765, February 27, 2009, 580 SCRA the land.35 
397, 407. In its Decision in the First Petition, the CA affirmed the
arbitral body’s finding in CIAC Case No. 12-2004 that the
589 case was within its jurisdiction. Such decision having
become final, it is beyond the jurisdiction of this Court, or
VOL. 675, JULY 4, 2012 589 any court or body, for that matter, to review or modify,
even supposing for the sake of argument, that it is indeed
Metropolitan Cebu Water District vs. Mactan Rock erroneous.
Industries, Inc. Also, the parties apparently characterized the Contract
as one involving construction, as its arbitration clause
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specifically refers disputes, controversies or claims arising The Court rules in the negative.
out of or relating to the Contract or the breach, termination The 19th Division was correct in refusing to render
or validity thereof, if the same cannot be settled amicably, judgment on the issue of jurisdiction as, at that time, the
to an arbitration tribunal, in accordance with E.O. No. issue was still pending before another division of the CA.
1008, or the Construction Industry Arbitration Law: Litis pendentia is predicated on the principle that a
party should not be allowed to vex another more than once
“V. DISPUTES AND JURISDICTION: regarding the same subject matter and for the same cause
18. Any dispute, controversy or claim arising out of or of action. It is founded on the public policy that the same
relating to this contract or the breach, termination or invalidity subject matter should not be the subject of controversy in
thereof, if the same cannot be settled amicably, may be submitted courts more than once, in order that possible conflicting
for arbitration to an Arbitration Tribunal in accordance with judgments may be avoided for the sake of the stability of
Executive Order No. 1008 dated 4 February 1985, otherwise the rights and status of persons, and also to avoid the costs
known as the Construction Industry Arbitration Law and the and expenses incident to numerous suits.37
place of arbitration shall be the City of Cebu, Philippines, With the two petitions then pending before the CA, all
otherwise said dispute or controversy arising out of the contract the elements of litis pendentia were present, that is,
or breach thereof shall be submitted to the court of law having identity of the parties in the two actions, substantial
jurisdiction thereof in the city where MCWD is located.”36  identity in the
Had the parties been of the mutual understanding that
the Contract was not of construction, they could have _______________
instead referred the matter to arbitration citing Republic 37  Subic Telecommunications Co., Inc. v. Subic Bay Metropolitan
Act (R.A.) No. 876, or The Arbitration Law. Having been Authority, G.R. No. 185159, October 12, 2009, 603 SCRA 470, 481-482.
passed into law
592

_______________
35  Heirs of Maximino Derla v. Heirs of Catalina Derla Vda. De 592 SUPREME COURT REPORTS ANNOTATED
Hipolito, G.R. No. 157717, April 13, 2011, 648 SCRA 638, 653, citing Metropolitan Cebu Water District vs. Mactan Rock
Dapar v. Biascan, 482 Phil. 385, 405; 439 SCRA 179, 199 (2004). Industries, Inc.
36  Rollo, p. 49.
causes of action and in the reliefs sought by the parties,
591
and identity between the two actions such that any
judgment that may be rendered in one case, regardless of
VOL. 675, JULY 4, 2012 591 which party is successful, would amount to res judicata in
Metropolitan Cebu Water District vs. Mactan Rock the other.38 
Industries, Inc. In both cases, MCWD was the petitioner and MRII, the
respondent. Although they differ in form, in essence, the
two cases involved a common issue, that is, MCWD’s
in 1953, the said statute was already in existence at the
challenge to the jurisdiction of the CIAC over the
time the contract was entered into, and could have been
arbitration proceedings arising from the Water Supply
applied to arbitration proceedings other than those
Contract between the petitioner and respondent.
specifically within the arbitral jurisdiction of the CIAC.
To determine whether there is identity of the rights
Whether the CA erred in refus-
asserted and reliefs prayed for, grounded on the same facts
ing to render judgment on the
and bases, the following tests may be utilized: (1) whether
issue of jurisdiction
the same evidence would support and sustain both the first
On a related matter, MWCD also raises the issue of
and the second causes of action, also known as the “same
whether the 19th Division of the CA, Cebu City, erred in
evidence” test; or (2) whether the defenses in one case may
refusing to render judgment on the issue of jurisdiction
be used to substantiate the complaint in the other.39  Also
raised in the Second Petition on the ground that it had
fundamental is the test of determining whether the cause
already been settled by the 18th Division in its decision in
of action in the second case existed at the time of the filing
the First Petition, even if the 18th Division decision had
of the first case.40
not yet become final due to a timely filing of a motion for
reconsideration.
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In the First Petition, MCWD argued that the CIAC’s “WHEREFORE, PREMISES CONSIDERED, it is most
issuance of its Order41  dated May 28, 2004 was tainted respectfully prayed of the Honorable Court that a Judgment be
with grave abuse of discretion amounting to excess or lack issued reversing the findings of the Arbitral Tribunal of the
of jurisdiction. Thus, MCWD stated in its prayer: Construction Industry Arbitration Commission in its Decision
dated April 14, 2005, as far as the order of reformation of the
“WHEREFORE, in light of the premises laid down, petitioner water supply contract and in granting the monetary award.
most respectfully prays:
_______________
_______________
42  Id., at p. 98.
38  Umale v. Canoga Park Development Corporation, G.R. No. 167246, July 20,
43  CA Rollo, p. 9.
2011, 654 SCRA 155, 161.
39  Cabreza, Jr. v. Cabreza, G.R. No. 181962, January 16, 2012 and Umale v. 594
Canoga Park Development Corporation, G.R. No. 167246, July 20, 2011, 654 SCRA
155, 162. (Citations omitted in both cases.) 594 SUPREME COURT REPORTS ANNOTATED
40  Umale v. Canoga Park Development Corporation, supra note 38.
Metropolitan Cebu Water District vs. Mactan Rock Industries, Inc.
41  Rollo, pp. 83-84.

593  
It is further prayed that the decision rendered by the Arbitral
Tribunal be declared invalid for want of jurisdiction to arbitrate
VOL. 675, JULY 4, 2012 593
and to order the reformation of the water supply contract;
Metropolitan Cebu Water District vs. Mactan Rock Industries, Inc. It is also prayed that the decision awarding money to the
respondent be strike (sic) down as erroneous and without legal
  basis for lack of jurisdiction by the Arbitral Tribunal, which
1. Upon the filing of this Petition, a Writ of Preliminary rendered the Decision.
Injunction or restraining order be issued forthwith, It is also prayed that a Temporary Restraining Order and a
enjoining the respondent from proceeding with the hearing Writ of Preliminary Injunction be issued at the outset, ordering
of the case until further orders from the Honorable Court of the stay of execution pending the resolution of the issues raised in
Appeals; the Petition.
2. After consideration, petitioner also prays that the Other measures of relief, which are just and equitable, are also
Order dated May 28, 2004, denying petitioner’s motion to prayed for.”44
dismiss be declared without force and effect;
3. Petitioner also prays that the Construction Industry In both cases, the parties also necessarily relied on the
Arbitration Commission be barred from hearing the case same laws and arguments in support of their respective
filed by Mactan Rock Industries, Inc., private respondent positions on the matter of jurisdiction.
herein. In the First Petition, in support of its argument, that the
Other measures of relief, which are just and equitable under CIAC had no jurisdiction to arbitrate the causes of action
the foregoing premise are also prayed for.”42 raised by MRII, MCWD cited the portions of the Contract
on the obligations of the water supplier, E.O. No. 1008
The Second Petition, on the other hand, raised the (specifically Section 4 on jurisdiction), the Rules of
following issues: Procedure Governing Construction Arbitration (Section 1,
a. Whether or not the Arbitral Tribunal of CIAC gravely
Article III). It also alleged that in issuing the order denying
erred in taking and exercising jurisdiction over the complaint filed
its motion to dismiss, the CIAC misread the provisions of
by the respondent;
LOI No. 1186 and R.A. No. 9184 on the definition of an
b. Whether or not the Arbitral Tribunal of CIAC gravely
infrastructure project.45
erred in reforming Clause 17 of the Contract;
MRII, however, opined that the CIAC had jurisdiction
c. Whether or not the same tribunal gravely committed an
over the complaint and, therefore, correctly denied
error in considering Capital Cost Recovery Adjustment in
petitioner’s motion to dismiss. MRII argued that certiorari
awarding in favor of the complainant, when the same is
was not a proper remedy in case of denial of a motion to
extraneous to the provisions of the contract;43 
dismiss and that the claims fell squarely under CIAC’s
original and exclusive jurisdiction. MRII, in support of its
Thus, it prayed: position, cited Section 1 of LOI No. 1186 and Section 5(k) of
R.A. No. 9184. MRII
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_______________ 596
44  Id., at p. 15.
45  Rollo, pp. 94-96.
596 SUPREME COURT REPORTS ANNOTATED
595 Metropolitan Cebu Water District vs. Mactan Rock
Industries, Inc.
VOL. 675, JULY 4, 2012 595
filed by MRII with the CIAC, and its Answer to the said
Metropolitan Cebu Water District vs. Mactan Rock
complaint. On the other hand, MRII presented Addendum
Industries, Inc.
No. 1 to the Water Supply Contract and its Technical and
Financial Proposals.
further proposed that, as shown by MCWD’s pro-forma Moreover, the first cause of action in the Second
Water Supply Contract, Specifications, Invitation to Petition, that is, the CIAC’s having assumed jurisdiction,
Submit Proposal, Pre-Bid Conference minutes, Addendum allegedly unlawfully, over the dispute arising from the
No. 1, and MRII’s Technical and Financial Proposals, the Water Supply Contract, obviously existed at the time the
undertaking contemplated by the parties is one of First Petition was filed, as the latter case dealt with the
infrastructure and of works, rather than one of supply or jurisdiction of the CIAC over the complaint filed.
mere services.46 Finally, any judgment that may be rendered in the First
In the Second Petition, in support of the issue of Petition on the matter of whether the CIAC has jurisdiction
jurisdiction, MCWD again relied on Section 4 of E.O. No. over the arbitration proceedings, regardless of which party
1008 and Section 1, Article III of the Rules of Procedure was successful, would amount to res judicata in the Second
Governing Construction Arbitration. It also brought to fore Petition, insofar as the issue of jurisdiction is concerned. In
the alleged faulty conclusion of MRII that a water supply fact, what MCWD should have done was to appeal to the
contract is subsumed under the definition of an Court after the denial of its motion for reconsideration in
infrastructure project under LOI 1186.47 the First Petition. For not having done so, the decision
In its Comment, MRII reiterated and adopted its therein became final and, therefore, immutable.
arguments before the CIAC, and insisted that the Thus, following the above discussion, the 19th Division
undertaking contemplated by the parties was one of was correct in refusing to render judgment on the issue of
infrastructure and of works, as distinguished from “mere jurisdiction in the Second Petition.
supply from off-the-shelf or from mere services.”48  Section Whether the CIAC had jurisdic-
1 of LOI No. 1186, to define “infrastructure” and Section tion to order the reformation of
5(k) of R.A. No. 9184 to include “water supply,” were again the Water Supply Contract
cited. In support of its arguments, MRII cited anew The jurisdiction of courts and quasi-judicial bodies is
MCWD’s pro-forma Water Supply Contract, Specifications determined by the Constitution and the law.50  It cannot be
(in its Invitation to Submit Proposal), pronouncements at fixed
the Pre-Bid Conference, Addendum No. 1, and MRII’s
Technical and Financial Proposals. MRII further
_______________
extensively reproduced the content of the joint affidavit of
50  Licomcen Incorporated v. Foundation Specialists, Inc., supra note
Messrs. Antonio P. Tompar and Lito R. Maderazo, MRII’s
31 at p. 97. See also HUTAMA-RSEA Joint Operations, Inc. v. Citra Metro
President/CEO and Financial Manager, respectively.49 
Manila Tollways Corporation, G.R. No. 180640, April 24, 2009, 586 SCRA
Given that the same arguments were raised on the
746, 761, cited in William Golangco Construction Corporation v. Ray
matter of CIAC jurisdiction, the parties thus relied on
Burton Development Corporation, G.R. No. 163582, August 9, 2010, 627
substantially the same evidence in both petitions. MCWD
annexed to both petitions copies of the Water Supply SCRA 74.

Contract, the complaint 597

_______________
46  Id., at pp. 211-214. VOL. 675, JULY 4, 2012 597
47  CA Rollo, pp. 9-10. Metropolitan Cebu Water District vs. Mactan Rock
48  Id., at p. 137. Industries, Inc.
49  Id., at pp. 116-130; 153-171.

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by the will of the parties to the dispute, nor can it be split of jurisdiction, as stated in Peña v. Government
expanded or diminished by stipulation or agreement.51  The Service Insurance System.54 
text of Section 4 of E.O. No. 1008 is broad enough to cover In Peña, the Court held that although the complaint for
any dispute arising from, or connected with, construction specific performance, annulment of mortgage, and damages
contracts, whether these involve mere contractual money filed by the petitioner against the respondent included title
claims or execution of the works. This jurisdiction cannot to, possession of, or interest in, real estate, it was well
be altered by stipulations restricting the nature of within the jurisdiction of the Housing and Land Use
construction disputes, appointing another arbitral body, or Regulatory Board (HLURB), a quasi-judicial body, as it
making that body’s decision final and binding.52  involved a claim against the subdivision developer, Queen’s
Thus, unless specifically excluded, all incidents and Row Subdivision, Inc., as well as the Government Service
matters relating to construction contracts are deemed to be Insurance System (GSIS).
within the jurisdiction of the CIAC. Based on the This case was later cited in Badillo v. Court of
previously cited provision outlining the CIAC’s jurisdiction, Appeals,55  where the Court concluded that the HLURB
it is clear that with regard to contracts over which it has had jurisdiction over complaints for annulment of title. The
jurisdiction, the only matters that have been excluded by Court also held that courts will not determine a
law are disputes arising from employer-employee controversy where the issues for resolution demand the
relationships, which continue to be governed by the Labor exercise of sound administrative discretion, such as that of
Code of the Philippines. Moreover, this is consistent with the HLURB, the sole regulatory body for housing and land
the policy against split jurisdiction. development. It was further pointed out that the extent to
In fact, in National Irrigation Administration v. Court of which an administrative agency may exercise its powers
Appeals,53  it was held that the CIAC had jurisdiction over depends on the provisions of the statute creating such
the dispute, and not the contract. Therefore, even if the agency.
contract preceded the existence of the CIAC, since the The ponencia further quoted from C.T. Torres
dispute arose when the CIAC had already been constituted, Enterprises, Inc. v. Hibionada:56 
the arbitral board was exercising current, and not
retroactive, jurisdiction. In the same case, it was held that “The argument that only courts of justice can adjudicate claims
as long as the parties agree to submit to voluntary resoluble under the provisions of the Civil Code is out of step with
arbitration, regardless of what forum they may choose, the fast-changing times. There are hundreds of administrative
their agreement will fall within the jurisdiction of the bodies now performing this function by virtue of a valid
CIAC, such that, even if they specifically choose another authorization from the legislature. This quasi-judicial function, as
forum, the parties will not be precluded from electing to it is called, is exercised by them as an incident of the principal
submit their dispute to the CIAC because this right has power entrusted
been vested upon each party by law.
_______________
54  G.R. No. 159520, September 19, 2006, 502 SCRA 383.
_______________
55  G.R. No. 131903, June 26, 2008, 555 SCRA 435.
51  Id.
56  G.R. No. 80916, November 9, 1990, 191 SCRA 268, 272-273.
52  Id.
53  376 Phil. 362; 318 SCRA 255 (1999). 599

598
VOL. 675, JULY 4, 2012 599
Metropolitan Cebu Water District vs. Mactan Rock Industries, Inc.
598 SUPREME COURT REPORTS ANNOTATED
Metropolitan Cebu Water District vs. Mactan Rock to them of regulating certain activities falling under their
Industries, Inc. particular expertise.
In the Solid Homes case for example the Court affirmed the
This is consistent with the principle that when an competence of the Housing and Land Use Regulatory Board to
administrative agency or body is conferred quasi-judicial award damages although this is an essentially judicial power
functions, all controversies relating to the subject matter exercisable ordinarily only by the courts of justice. This departure
pertaining to its specialization are deemed to be included from the traditional allocation of governmental powers is justified
within its jurisdiction since the law does not sanction a by expediency, or the need of the government to respond swiftly
and competently to the pressing problems of the modern world.”
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In Bagunu v. Spouses Aggabao,57  the Court ruled that whether the CIAC could proceed with the case even if the
the RTC must defer the exercise of its jurisdiction on MCWD refused to participate in the arbitration
related issues involving the same subject matter properly proceedings.
within its jurisdiction, such as the distinct cause of action The Court rules in the affirmative. Though one party
for reformation of contracts involving the same property, can refuse to participate in the arbitration proceedings,
since the DENR assumed jurisdiction over the lot in this cannot prevent the CIAC from proceeding with the
question, pursuant to its mandate. case and issuing an award in favor of one of the parties.
In National Housing Authority v. First United Section 4.2 of the Revised Rules of Procedure Governing
Constructors Corporation,58  the Court held that there was Construction Arbitration (CIAC Rules) specifically provides
no basis for the exclusion of claims for business losses from that where the jurisdiction of the CIAC is properly invoked
the jurisdiction of the CIAC because E.O. No. 1008 by the filing of a Request for Arbitration in accordance with
“excludes from the coverage of the law only those disputes CIAC Rules, the failure of a respondent to appear, which
arising from employer-employee relationships which are amounts to refusal to arbitrate, will not stay the
covered by the Labor Code, conveying an intention to proceedings, notwithstanding the absence of the
encompass a broad range of arbitrable issues within the respondent or the lack of participation of such party. In
jurisdiction of CIAC.”59  Section 4 provides that “(t)he such cases, the CIAC is mandated to appoint the
jurisdiction of the CIAC may include but is not limited to arbitrator/s in accordance with the Rules, and the
x x x,” underscoring the expansive character of the CIAC’s arbitration proceedings shall continue. The
jurisdiction. Very clearly, the CIAC has jurisdiction over a
broad range of issues and claims arising from construction _______________
disputes, including but not limited to claims for unrealized 60  Id., at p. 242.
profits and opportunity or business losses. What
601

_______________
57  G.R. No. 186487, August 15, 2011, 655 SCRA 413. VOL. 675, JULY 4, 2012 601
58  G.R. No. 176535, September 7, 2011, 657 SCRA 175.
Metropolitan Cebu Water District vs. Mactan Rock
59  Id., at p. 241.
Industries, Inc.
600
award shall then be made after receiving the evidence of
the claimant.
600 SUPREME COURT REPORTS ANNOTATED
In such a case, all is not lost for the party who did not
Metropolitan Cebu Water District vs. Mactan Rock participate. Even after failing to appear, a respondent is
Industries, Inc. still given the opportunity, under the CIAC Rules, to have
the proceedings reopened and be allowed to present
E.O. No. 1008 emphatically excludes is only disputes evidence, although with the qualification that this is done
arising from employer-employee relationships.60  before an award is issued:
Where the law does not delineate, neither should we.
Neither the provisions of the Civil Code on reformation of “4.2.1 In the event that, before award, the Respondent who
contracts nor the law creating the CIAC exclude the had not earlier questioned the jurisdiction of the Tribunal,
reformation of contracts from its jurisdiction. appears and offers to present his evidence, the Arbitral Tribunal
Jurisprudence further dictates that the grant of may, for reasons that justifies (sic) the failure to appear, reopen
jurisdiction over related and incidental matters is implied the proceedings, require him to file his answer with or without
by law. Therefore, because the CIAC has been held to have counterclaims, pay the fees, where required under these Rules,
jurisdiction over the Contract, it follows that it has and allow him to present his evidence, with limited right to cross
jurisdiction to order the reformation of the Contract as examine witnesses already in the discretion of the Tribunal.
well. Evidence already admitted shall remain. The Tribunal shall
Whether MCWD can validly decide the effect of such controverting evidence presented by the
refuse to participate in the Respondent on evidence already admitted prior to such belated
arbitration proceedings appearance.”
In light of the finality of the CA decision on the matter
of jurisdiction, the only remaining issue to be disposed of is
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Thus, under the CIAC Rules, even without the Recovery, was inadvertently left out in this parametric
participation of one of the parties in the proceedings, the formula. Thus, the Contract should be reformed
CIAC is still required to proceed with the hearing of the accordingly to reflect the intention of the parties to include
construction dispute.61 in the price escalation formula the Capital Cost Recovery
This Court has held that the CIAC has jurisdiction over Adjustment. These conclusions were affirmed by the CA in
a dispute arising from a construction contract even though the assailed decision of February 20, 2006.
only one of the parties requested for arbitration.62  In fact, As noted by MCWD in its reply, however, the dispositive
in Philrock, Inc. v. Construction Industry Arbitration portion of the CIAC decision reforming the price escalation
Commission,63  the Court held that the CIAC retained formula is inconsistent with what was stated in the body of
jurisdiction even if both parties had withdrawn their the decision. The formula contained in the body of the
consent to arbitrate. decision is as follows:

603
_______________
61  Heunghwa Industry Co., Ltd. v. DJ Builders Corporation, G.R. No.
169095, December 8, 2008, 573 SCRA 240, 263. VOL. 675, JULY 4, 2012 603
62  National Irrigation Administration v. Court of Appeals, 376 Phil. Metropolitan Cebu Water District vs. Mactan Rock
362, 374; 318 SCRA 255, 267 (1999). Industries, Inc.
63  412 Phil. 236; 359 SCRA 632 (2001).

602  

PRICE ADJUSTMENT COMPUTATION

602 SUPREME COURT REPORTS ANNOTATED Based on Reformed Clause 17 of the Water Supply
Contract
Metropolitan Cebu Water District vs. Mactan Rock
1. Power Cost Adjustment:
Industries, Inc.
  xxx
Current Power Rate – Base Power Rate x 30% of Base Selling Price of water
                 Base Power Rate
In this case, there being a valid arbitration clause xxx
mutually stipulated by the parties, they are both 2. Operating Cost Adjustment – Local
contractually bound to settle their dispute through xxx
arbitration before the CIAC. MCWD refused to participate, Current CPI – Base CPI x 30% of 40% of Base Selling Price of Water
but this should not affect the authority of the CIAC to      Base CPI
conduct the proceedings, and, thereafter, issue an arbitral xxx
award. 3. Operating Cost Adjustment – Foreign
Now, with the CIAC decision being questioned by xxx
MCWD, the Court takes a cursory reading of the said Current Forex – Base Forex x 70% of 40% of Base Selling Price of Water
decision. It reveals that the conclusions arrived at by CIAC         Base Forex
are supported by facts and the law. Article 1359 of the Civil xxx
Code states that when there has been a meeting of the 4. Capital Cost Adjustment – Local
minds of the parties to a contract, but their true intention xxx
is not expressed in the instrument purporting to embody Current CPI – Base CPI x 30% of 30% of Base Selling Price of Water
the agreement by reason of mistake, fraud, inequitable         Base CPI
conduct or accident, one of the parties may ask for the xxx
reformation of the instrument to the end that such true 5. Capital Cost Adjustment – Foreign
intention may be expressed. The CIAC, in this case, found xxx
that the parametric formula for price escalation reflected in Current Forex – Base Forex x 70% of 30% of Base Selling Price of Water
the Water Supply Contract involved two items: Power Rate          Base Forex
Price Adjustment (30% of the base selling price of water) xxx64 
and Consumer Price Index Adjustment (40% of the base
selling price of water). The remaining 30% of the selling The dispositive portion of the decision, however, reads:
price of water, which should have been for Capital Cost

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_______________ VOL. 675, JULY 4, 2012 605

64  Rollo, pp. 114-117. The portions that were inadvertently deleted in
Metropolitan Cebu Water District vs. Mactan Rock
the dispositive portion appear in bold italics. Industries, Inc.
604
and (3) Capital Cost Adjustment (30% of the base selling
price of water).
604 SUPREME COURT REPORTS ANNOTATED In turn, the second component—Operating Cost
Metropolitan Cebu Water District vs. Mactan Rock Adjustment—is computed based on Local Operating Cost
Industries, Inc. Adjustment (30%), and Foreign Operating Cost Adjustment
(70%).
  Capital Cost Adjustment, on the other hand, is
composed of Local Capital Cost Adjustment (30%), and
“WHEREFORE[,] premises considered, judgment is hereby rendered Foreign Capital Cost Adjustment (70%).
as follows: This is consistent with the formula set forth in the body
1. Ordering the reformation of Clause 17 of the Water Supply of the CIAC decision. If the formula in the dispositive
Contract to read: portion were to be followed, Operating Cost Adjustment
17[.] Price Escalation and/or De-Escalation shall be based on would be computed with the Local Operating Cost
the parametric formula: Adjustment representing the entire 40% of the base selling
17.1 Power Rate Price Adjustment/Power Cost Adjustment price of water instead of just 30% of the Operating Cost
Current Power Rate – Base Power Rate x 30% of Base Selling Price of water Adjustment. Moreover, if the Capital Cost Recovery
          Base Power Rate Adjustment were to be computed based solely on Foreign
17.2 Consumer Price Index (CPI) Adjustment/ Capital Cost Recovery Adjustment, it would represent the
Operatiing (sic) Cost Adjustment: entire 30% of the base selling price of water, and not just
Current CPI – Base CPI x 40% of Base Selling Price of Water 70% of the Capital Cost Recovery Adjustment. The
           Base CPI omission of the marked portions of the formula as stated in
17.3 Capital Cost Recovery Adjustment: the body of the CIAC decision represents substantial
Current Peso to Base Peso to US$ changes to the formula for price escalation. It is thus clear
US$ Exchange Rate – Exchange Rate x 30% of base selling price of water that the formula as stated in the body of the decision
    Base Peso to US $ Exchange Rate should govern.
WHEREFORE, the petition is DENIED. The Decision
The general rule is that where there is a conflict and Resolution of the Court of Appeals in C.A.-G.R. CEB
between the fallo, or the dispositive part, and the body of SP. No. 00623 are AFFIRMED with the modification that
the decision or order, the fallo prevails on the theory that the formula for the computation of the Capital Cost
the fallo is the final order and becomes the subject of Recovery Adjustment in the fallo of the CIAC decision
execution, while the body of the decision merely contains should be amended to read as follows:
the reasons or conclusions of the court ordering nothing.
However, where one can clearly and unquestionably “WHEREFORE, premises considered, judgment is hereby rendered
conclude from the body of the decision that there was a as follows:
mistake in the dispositive portion, the body of the decision 1. Ordering the reformation of Clause 17 of the Water Supply
will prevail.65  Contract to read:
Following the reasoning of the CIAC in this case, there 17. Price Escalation and/or De-Escalation shall be based on
are three components to price adjustment: (1) Power Cost the parametric formula:
Adjustment (30% of the base selling price of water); (2) 606
Operating Cost Adjustment (40% of the base selling price of
water);
606 SUPREME COURT REPORTS ANNOTATED
_______________ Metropolitan Cebu Water District vs. Mactan Rock
65  Cobbarubias v. People, G.R. No. 160610, August 14, 2009, 596 Industries, Inc.
SCRA 77, 89-90.
17.1. Power Rate Price Adjustment/Power Cost
605
Adjustment

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Current Power Rate - Base Power Rate x 30% of base selling price of water Court agrees with Construction Industry Arbitration
         Base Power Rate Commission’s (CIAC’s) application of Article 1234 of the
17.2 Consumer Price Index (CPI) Adjustment/ Civil Code, which provides that if the obligation has been
Operating Cost Adjustment: substantially performed in good faith, the obligor may
Current CPI – Base CPI x 30% of 40% of base selling price of water recover as though there had been in strict and complete
            Base CPI fulfillment, less damage suffered by the obligee. (Id.)
17.3 Capital Cost Recovery Adjustment: ——o0o—— 
Current Peso to Base Peso to US$
US$ Exchange Rate – Exchange Rate x 70% of 30% of base selling price of water
_______________
Base Peso to US $ Exchange Rate
**  Designated Acting Member in lieu of Associate Justice Roberto A.
Price escalation shall be reckoned from January 1999 when the Abad, per Special Order No. 1244 dated June 26, 2012.
water was first delivered by Mactan Rock Industries, Inc. to the
MCWD facilities in Mactan. The base CPI, base US$ Exchange
Rate and the Base Power Rate shall be the prevailing rate in
January 1999, while the Base Selling Price of water shall mean
the 1996 rate per cubic meter of water as provided for in the
Water Supply Contract.
2. Ordering Respondent Metropolitan Cebu Water District to © Copyright 2021 Central Book Supply, Inc. All rights reserved.
pay Claimant, Mactan Rock Industries, Inc. under the
reformed Clause 17 of the Water Supply Contract, the net
amount of Php12,126,296.70 plus legal interest of six
percent (6%) per annum from March 15, 2004, the date of
filing of the case with the Construction Industry Arbitration
Commission, and twelve percent (12%) per annum from the
date this Decision becomes final and executory, until the
foregoing amounts shall have been fully paid.
3. Claimant Mactan Rock Industries, Inc. and Metropolitan
Cebu Water District shall share the cost of arbitration
equally.

607

VOL. 675, JULY 4, 2012 607

Metropolitan Cebu Water District vs. Mactan Rock
Industries, Inc.

SO ORDERED.

Velasco, Jr. (Chairperson), Peralta, Reyes** and Perlas-

Bernabe, JJ., concur.

Petition denied, judgment and resolution affirmed with

modification.

Notes.—There is substantial completion when the

Contractor completes 95% of the work provided that the
remaining work and the performance of the work necessary
to complete the work shall not prevent the normal use of
the completed portion. (Transcept Construction and
Management Professionals, Inc. vs. Aguilar, 637 SCRA 574
[2010])

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