BF CORPORATION vs.
COURT OF APPEALS
G.R. No. 120105 March 27, 1998
FACTS:
BF Corporation (BF) and respondent Shangri-La Properties, Inc. (SPI)
entered into the 1st agreement whereby Shang engaged BF to construct the
main structure of the EDSA Plaza Project – the EDSA Shangri-La Mall – in
Mandaluyong City. - While the construction work was in progress SPI once
again hired BF for the expansion of the project, the 2nd agreement. BF
incurred delay in the construction work that SPI considered as serious and
substantial. BF contended that they had faithfully complied with the first
agreement until a fire broke out on Nov 30, 1990 damaging phase 1 of the
project, Hence SPI proposed the renegotiation of the agreement between
them.
Parties entered into another agreement named “Agreement for the Execution
of Builders Work for the EDSA Plaza Project” (3rd agreement) that would
cover the construction work on said project as of May 1, 1991 until its
eventual completion. Upon SPI's initiative, the parties' respective
representatives met in conference but they failed to come to an agreement.
Because of this, BF filed with the RTC of Pasig a complaint for the collection
of the balance due under the construction agreement. Named Defendants
therein were SPI and members of its board of directors.
SPI and its co-defendants filed a motion to suspend proceedings instead of
filing an answer. Motion was anchored on the defendants allegation that the
formal trade contract of the the construction project provided for a clause
requiring prior resort to arbitration before judicial intervention. SPI
submitted a copy of the condition of the contract containing arbitration
clause that it failed to attach its motion to suspend proceedings. BF opposed
said motion stating that there was no formal contract between the parties
although they entered into an agreement. They emphasized that the
agreement did not provide for an arbitration thus cannot deprive the court of
its jurisdiction. SPI insisted that there was an arbitration clause in the
existing contract between them. It alleged that the suspension would not
deprive the court of its jurisdiction and would expedite the settlement
proceedings rather than delay it.
In a rejoinder, BF reiterated that there was no arbitration clause in the
contract bewtween the parties. It averred that if there was an arbitration
clause, suspension of the proceedings was no longer proper and that
defendants should be declared in default for failure to answer within the
reglementary period.
In its sur-rejoinder, SPI pointed out the significance of the petitioners
admission of the due execution of the Articles of Agreement. It was shown
that the Signature of Colayco (SPI President) and Bayani Fernando (BF
President) was in such agreement and was even duly notarized.
The RTC found that the arbitration clause did exist, however the lower court
denied motion to suspend proceedings and ruled in favor of BF. This was
because: (1) despite the fact there was an arbitration agreement, the
Conditions of Contract only the initials of Bayani Fernando was present,
while no signature on the part of SPI; (2) There were no signed documents
to prove SPI’s claims thus there is serious doubt to the validity of the
arbitration clause found in the Conditions of Contract; and (3) Assuming that
the arbitration clause was valid and binding, it was too late for SPI to invoke
arbitration because the demand should have been made before the time of
final payment except as otherwise expressly stipulated in the contract. The
court found that the project was to be completed on Oct 31, 1991 and any
delays would incur 80K for each day of delay from Nov 1, 1991 with liquefied
damages up to a maximum of 5% of the total contract price the court found
out that the project was completed in accordance with the agreement and
SPI had took possession and started operations thereof by opening the same
to the public. BF billed SPI the total amount of P110,883,101.52 contained in
a demand letter sent on Feb 17, 1993. Instead of paying the amound
demanded, SPI set up its own claim of P220,000,000.00 and scheduled a
conference on that claim for July 12, 1993. The conference took place but
was futile.
SPI filed a motion for reconsideration but was denied because of lack of
merit and directed the other defendants to file their responsive pleading
within the reglementary period.
Instead of filing an answer to the complaint, SPI filed a petition for Certiorari
under Rule 65 before the Court of appeals. The Court of Appeals granted the
petition and annulled and set aside the orders and stayed the proceedings in
the lower court.
According to the contract the project manager and the contractor should
coordinate with the owner, should there be failure to resolve differences,
dispute shall be submitted for arbitration. Although it was only the initials of
Bayani Fernando and De La Cruz present and none from SPI, it does not
affect its effectivity. BF categorically admitted that the document is the
agreement bewtween the parties, the initial signature of BF representative to
signify conformity to arbitration is no longer necessary. The parties should
be allowed to submit their dispute to arbitration in accordance with their
agreement. Demand for arbitration was made within a reasonable time after
the dispute has arisen and attempts to settle amicably has failed. This was
evidenced by the fact that such demands were acted upon only months.
ISSUE:
Whether the contract for the construction of the EDSA Plaza between
petitioner BF Corporation and respondent Shangri-la Properties, Inc.
embodies an arbitration clause in case of disagreement between the parties
in the implementation of contractual provisions.
HELD:
Yes, according to Sec 4 of R.A. 876 a contract to arbitrate a controversy
thereafter arising between the parties, as well as a submission to arbitrate
an existing controversy, shall be in writing and subscribed by the party
sought to be charged, or by his lawful agent. The making of a contract or
submission for arbitration described in section two hereof, providing for
arbitration of any controversy, shall be deemed a consent of the parties of
the province or city where any of the parties resides, to enforce such
contract of submission.
The formal requirements of an agreement to arbitrate are therefore
the following: (a) it must be in writing and (b) it must be subscribed
by the parties or their representatives. There is no denying that the
parties entered into a written contract that was submitted in evidence before
the lower court. To subscribe means to write underneath, as ones name; to
sign at the end of a document. That word may sometimes be construed to
mean to give consent to or to attest.
The Court finds that, upon a scrutiny of the records of this case, these
requisites were complied with in the contract in question. The Articles of
Agreement, which incorporates all the other contracts and agreements
between the parties, was signed by representatives of both parties and duly
notarized. The failure of the private respondents representative to initial the
`Conditions of Contract would therefore not affect compliance with the
formal requirements for arbitration agreements because that particular
portion of the covenants between the parties was included by reference in
the Articles of Agreement. Petitioners contention that there was no
arbitration clause because the contract incorporating said provision is part of
a hodge-podge document, is therefore untenable. A contract need not be
contained in a single writing. It may be collected from several different
writings which do not conflict with each other and which, when connected,
show the parties, subject matter, terms and consideration, as in contracts
entered into by correspondence.
A contract may be encompassed in several instruments even though every
instrument is not signed by the parties, since it is sufficient if the unsigned
instruments are clearly identified or referred to and made part of the signed
instrument or instruments. Similarly, a written agreement of which there are
two copies, one signed by each of the parties, is binding on both to the same
extent as though there had been only one copy of the agreement and both
had signed it.
The Supreme Court thereby affirms the decision of the Court of Appeals.
