Doctrine
The Construction Industry Arbitration Commission (CIAC) has the authority to determine who should receive the judgment award it granted to a corporation that has already been dissolved.
Facts
William Golangco Construction Corporation (WGCC) was incorporated on May 6, 1963, with a 50-year corporate term expiring on May 6, 2013. On October 20, 1989, WGCC entered into a construction contract with the Philippine Commercial and Industrial Bank (PCIB, later merged with BDO) for the construction of PCIB Tower II’s extension. The project involved, among other things, the application of a granite wash-out finish on the building’s exterior walls. WGCC turned over the completed project on June 1, 1992, and submitted a one-year guarantee bond from Malayan Insurance to cover potential defects.
In 1993, parts of the granite finish peeled off and fell. WGCC made minor repairs, but the defects persisted. PCIB later contracted Brains and Brawn Construction to redo the work after WGCC admitted it could no longer undertake the new finishing job, though it was willing to share part of the cost. PCIB spent Php11,665,000.00 for the repairs.
PCIB filed a request for arbitration with the Construction Industry Arbitration Commission (CIAC) to recover its repair costs, while WGCC counterclaimed PHP5,777,157.84 for material cost adjustments. The CIAC awarded PCIB PHP9,741,829.00 as reimbursement and granted WGCC’s counterclaim in full.
WGCC sought the inclusion of 6% legal interest on its award from June 21, 1996. The CIAC initially issued a Writ of Execution for Php5,777,157.84 without interest, prompting WGCC to move for amendment. CIAC later modified the writ, granting 12% interest from April 27, 2006, but denied WGCC’s motion for reconsideration.
On appeal, the Court of Appeals (CA) partially granted WGCC’s petition, ruling that 6% interest should apply from June 21, 1996, until full payment. Both parties sought reconsideration, which the CA denied. WGCC and PCIB then filed separate petitions before the Supreme Court.
BDO, on behalf of PCIB, issued two checks to WGCC totaling Php7,742,974.29 in March 2009. In its Decision in G.R. Nos. 195372 and 195375, the Supreme Court granted PCIB’s petition, denied WGCC’s, and later issued an Entry of Judgment dated December 27, 2019. The Court directed CIAC to compute PCIB’s remaining liability and ensure payment within 30 days from receipt of records.
In 2022, WGCC filed a Manifestation with Motion for Computation of Liability and Writ of Execution with the CIAC. CIAC granted the motion, computed the remaining amount, and ordered its execution.
Subsequently, WGCC filed a Motion for Clarification and/or Correction of the CIAC Order and submitted its updated computation. It also filed a Manifestation with Motion to Approve Payment Arrangement, and revealed that during the pendency of the case in G.R. Nos. 195372 and 195375, WGCC had ceased to exist upon expiration of its corporate term in 2013, had liquidated its assets, and distributed proceeds among 13 stockholders. It provided the list of stockholders and their successors-in-interest, and their corresponding pro rata percentage of shares in BDO’s remaining liability.
CIAC then denied WGCC’s motion for clarification and consignation, as well as its later motion to include 6% legal interest until full payment. CIAC maintained that only compensatory interest up to the finality of judgment applied.
WGCC filed the present Petition for Review on Certiorari before the Supreme Court, arguing that CIAC erred by excluding the 6% legal interest from finality of judgment until full satisfaction, contrary to Supreme Court precedent recognizing a final money award as a forbearance of credit.
BDO countered that it was ready to pay Php10,109,650.64 as of September 30, 2022, but payment was delayed because WGCC only disclosed its corporate dissolution nearly ten years late. BDO contended that WGCC’s failure to timely inform CIAC caused the delay and that further interest would unjustly enrich WGCC. It also challenged the validity of WGCC’s petition, arguing that unauthorized persons signed the Verification and Certification Against Forum Shopping on behalf of a dissolved corporation.
WGCC maintained that CIAC has the authority to determine the rightful stockholders or heirs entitled to receive payment as part of its execution powers. It reiterated that under the Supreme Court’s ruling, the 6% legal interest from finality until full payment must be included, and that its counsel and signatories were duly authorized to act for the dissolved corporation.
ISSUE: Whether or not the CIAC has authority to determine the rightful recipients of a judgment award of a dissolved corporation.
Ruling
Yes, the CIAC has the authority to determine the rightful recipients of a judgment award of a dissolved corporation.
Based on Section 4 of EO No. 1008 and Rule 2, Section 2.1 of the CIAC Revised Rules, there are three essential requisites for the CIAC to acquire jurisdiction over a case, these include: (1) a dispute arising from or connected with a construction contract; (2) such contract must have been entered into by parties involved in construction in the Philippines; and (3) an agreement by the parties to submit their dispute to arbitration.
In examining whether the CIAC has authority to determine the rightful recipients of a judgment award in favor of petitioner, this Court is guided by Section 18.8 of the CIAC Revised Rules of Procedure Governing Construction Arbitration:
SECTION 18.8. Executory Powers – The Arbitral Tribunal (or the surviving/remaining member/s, or the Commission, if there are no remaining/surviving appointed arbitrators) shall have the authority and power to decide matters and issue appropriate orders which are necessary and related to the execution of the Award, including but not limited to the determination of sufficiency of the bond, approval of the surety or bonding company, satisfaction of the award, quashal of the execution, partial execution, issuance of alias writs, assessment of properties levied, appointment of a quantity surveyor or assessor, examination of, and issuance of subpoena ad testificandum and subpoena duces tecum to banks, debtors of the judgment debtor and any person holding properties or assets of the judgment debtor.
The foregoing provision enumerated several functions that are covered by the broad executory powers of the CIAC, including the issuance of orders that are necessary and related to its award. Necessarily included in the powers of the CIAC is the authority to determine the entity or individuals to whom the award must be given. In this case, the assets and claims of petitioner, a dissolved corporation, have already been distributed to its stockholders, and necessarily, the successors-in-interest of the deceased stockholders.
Considering that respondent only challenges the authority of the CIAC to identify the recipients of the judgment award in favor of petitioner and not the accuracy of the stockholders and their respective shares in the judgment award, this Court finds no reason to depart from the determination made by the CIAC. Further, the respondent has already made partial payments to several identified recipients, which is an implied admission of the correctness of the CIAC award to the stockholders and their successors-in-interest.