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4 - NSC v. LANAO

The Supreme Court modified an arbitration award regarding a contract dispute between National Steel Corporation and E. Willkom Enterprises. The Court found the trial court abused its discretion by fully adopting the arbitration award. While National Steel was liable to pay the final billing and price adjustment with 6% interest, the exemplary damages and attorney's fees awarded by the arbitrators were removed. The Court determined National Steel's refusal to pay the final billing was not in bad faith, as it believed the work was incomplete.

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90 views

4 - NSC v. LANAO

The Supreme Court modified an arbitration award regarding a contract dispute between National Steel Corporation and E. Willkom Enterprises. The Court found the trial court abused its discretion by fully adopting the arbitration award. While National Steel was liable to pay the final billing and price adjustment with 6% interest, the exemplary damages and attorney's fees awarded by the arbitrators were removed. The Court determined National Steel's refusal to pay the final billing was not in bad faith, as it believed the work was incomplete.

Uploaded by

QM Distura
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 PDF, TXT or read online on Scribd
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NATIONAL STEEL CORPORATION (NSC) v. RTC OF LANAO DEL NORTE and E.

WILLKOM ENTERPRISES, INC.


G.R. No. 127004; March 11, 1999
PURISIMA, J.:

DOCTRINES:
 In a Petition to Vacate Arbitrator's Decision before the trial court, regularity in the
performance of official functions is presumed and the complaining party has the burden of
proving the existence of any of the grounds for vacating the award provided for by Sec. 24 of
Arbitration Law.
 Evident Partiality

FACTS: Respondent Edward Willkom Enterprises Inc. (EWEI) together with one Ramiro
Construction and petitioner NSC executed a contract whereby the former jointly undertook the
Contract for Site Development for the latter's Integrated Iron and Steel Mills Complex to be
established at Iligan City.

Sometime in the year 1983, the services of Ramiro Construction was terminated and 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.

The parties in the present case, upon entering into a Contract for Site Development, mutually agreed
that any dispute arising from the said contract shall be submitted for arbitration in the contract’s
Paragraph 19.

Differences later arose, EWEI filed a civil case before the RTC of Lanao del Norte praying essentially
for the payments of P458,381.00 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.

RTC: dismissed the complaint and counterclaim in view of the desire of both parties to implement
Sec. 19 of the contract, providing for a resolution of any conflict by arbitration.

After series of hearings, the Arbitrators rendered a decision which directs NSC to pay EWEI last
billing No. 16 and other damages. The RTC of Lanao del Norte rendered judgment declaring the award
of the Board of Arbitrators duly AFFIRMED and CONFIRMED in toto against respondent National
Steel Corporation and it ordered dismissed the petition to vacate the aforesaid award.

ISSUE: Whether or not the lower court acted with grave abuse of discretion in not vacating the
arbitrator's award.

HELD: Yes. The trial court acted with grave abuse of discretion when it adopted the award by the
Board of Arbitrators in toto.

WHEREFORE, the awards made by the Board of Arbitrators which the trial court adopted in its
decision of July 31, 1996, are modified, thus:
1) The award of P474,780.23 for Billing No. 16-Final and P1,335,514.20 for price adjustment
shall be paid with legal interest of 6% percent per annum;
2) The award for exemplary damages and attorney's fees of P350,000 are deleted; and
3) The cost of arbitration of P35,000 to supplement arbitration agreement has to be paid.

DISCUSSION:
It should be stressed that voluntary arbitrators, by the nature of their functions, act in a quasi-judicial
capacity. As a rule, findings of facts by quasi-judicial bodies, which have acquired expertise because
their jurisdiction is confined to specific matters, are accorded not only respect but even finality if
supported by substantial evidence.

As the petitioner has availed of Rule 65, the Court will not review the facts found nor even of the law
as interpreted or applied by the arbitrator unless the supposed errors of facts or of law are so patent
and gross and prejudicial as to amount to a grave abuse of discretion.
Thus, in a Petition to Vacate Arbitrator's Decision before the trial court, regularity in the performance
of official functions is presumed and the complaining party has the burden of proving the existence of
any of the grounds for vacating the award, as provided for by Section 24 of the Arbitration Law, to wit:
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. . . .

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. Petitioner's
allegation that there was evident partiality is untenable. It is anemic of evidentiary
support. Here, petitioner merely averred evident partiality without any proof to back
it up. Petitioner was never deprived of the right to present evidence nor was there any
showing that the Board showed signs of any bias in favor of EWEI. Indeed, the allegation
of evident partiality is not well-taken because the petitioner failed to substantiate the same.

Whether there was failure on the part of EWEI to complete the work agreed upon. This will
determine whether Final Billing No. 16 can be made chargeable to the cost differential paid by NSC
to another contractor: After a series of hearings, the Board of Arbitrators concluded that the work was
completed by EWEI.

NSC is liable to pay EWEI because:


 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 7 days after completion of the inspection to specify the
objections thereto. NSC failed to comply with such requirement.
 During the hearings conducted by the Board of Arbitrators, there was presented documentary
evidence to show that NSC, despite its being allegedly an asset acquired corporation, allowed
price escalation to another contractor, Geo Transport and Construction, Inc.
 The exemplary damages and attorneys fees awarded by the Board of Arbitrators should be
deleted in light of the circumstances surrounding the case.

EWEI cannot claim that NSC acted in bad faith or in a wanton manner when it refused payment of the
Final Billing No. 16. The belief that the work was never completed by EWEI and that it (NSC) had the
right to make it chargeable to the cost differential paid by the latter to another contractor was neither
wanton nor done in evident bad faith. The payment of legal rate of interest will suffice to compensate
EWEI of whatever prejudice it suffered by reason of the delay caused by NSC.

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