More severe

This case is another example of liberality in the application of the rules of procedure in the interest of substantive due process. This is the case of a joint venture building contractor (SK-KG) and an electrical contractor (RI).

SK-KG engaged the services of RI under a Sub-Contract Agreement for the electrical works needed in the construction of the superstructure of a medical center. Original date of completion was set on September 18, 2003 but changes in the specified contracted works led to an extension of 101 days. SK-KG also incurred delays in the payment to RI and in the delivery of equipment to RI prompting the latter to do crash programs.

Eventually RI completed the contracted works but SK-KG refused to pay its obligations to RI and did not issue a certificate of completion for the subcontracted works. When efforts to reach an amicable settlement failed, RI filed a complaint with the Construction Industry Arbitration Commission (CIAC) on August 18, 2004. On September 20, 2004 SK-KG filed its answer with counter-claim to which RI did not file its reply.

So, during the hearings, when RI tried to present evidence to controvert the counterclaims of SK-KG, the Arbitration Panel did not allow RI to do so on the ground that its failure to file a reply to the answer was deemed an admission of SK-KG’s counterclaims. RI also filed a motion to submit additional evidence but it was denied by the CIAC. Then on March 3, 2005, CIAC rendered its decision finding that the total amount due to RI was P7.99 million while the total due to SK-KG in its counterclaim was P37.7 million. Hence in the offsetting RI still owed SK-KG P29.78 million. Was the CIAC correct?

No. The Court of Appeals (CA) on appeal by RI modified the decision of the CIAC increasing the award in favor of RI with an additional P33.8 million aside from the P7.9 million. At the same time, the CA also annulled the awards granted by the CIAC on the counterclaims of SK-KG for having been clearly rendered in disregard of the right of RI to due process. And this ruling was affirmed by the Supreme Court (SC).

According to the SC, the CIAC is completely mistaken in denying the attempt of RI to present evidence against the counterclaims of the SK-KG on the ground that its failure to reply to SK-KG’s answer was already an admission of the counterclaims in said answer.

The SC said that there is no basis for such a conclusion. Even under the Rules of Court (Rule 6, Section 10) which are stricter than those of quasi-judicial bodies, if a party fails to file such reply, all the new matters alleged in the answer are deemed controverted. If, in administrative proceedings, these technical rules of procedure and evidence are not supposed to be strictly applied and administrative due process should not be fully equated with due process in its strict judicial sense, then it is completely unreasonable for an administrative body like the CIAC to be even more severe than the courts when it comes to the filing of a reply. To be sure, CIAC rules even explicitly direct them to use every reasonable means to ascertain the facts in each case speedily and objectively without regard to technicalities, all in the interest of substantive due process. So the CIAC should not have taken the evidence of SK-KG hook line and sinker and should have used all means to ascertain all the facts in interest of substantial justice. The CA decision annulling the award for SK-KG’s counterclaim is therefore correct as it is in violation of RI’s right to due process.

But SK-KG may still assert its claims against RI and the latter may refute them. Since these claims rest on different provisions of the contract and relate to amounts/ obligations separate and distinct from those being claimed by RI in its complaint, they are permissive counterclaims and considered separate actions in themselves that may be severed from RI’s main action.

The SC also affirmed the CA judgment increasing the award in favor of RI. According to the SC, although the CIAC findings are entitled to respect, the CA is not always bound thereby. The CA necessarily has the power to affirm, modify or reverse the findings of facts of the CIAC if the evidence so warrants: otherwise appeals would be inutile. Review of the CIAC award may involve either questions of fact or of law or of both fact and law (Suma Kumagai etc vs. Romago Inc., G.R. 177210, April 7, 2009).

 Note: Books containing compilation of my articles on Labor Law and Criminal Law (Vols. I and II) are now available. Call tel. 7249445.

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