VOL.

206, FEBRUARY 25, 1992 545

Chung Fu Industries (Phils.), Inc. vs. Court of
Appeals
*
G.R. No. 96283. February 25, 1992.

CHUNG FU INDUSTRIES (PHILIPPINES), INC., its Directors and Officers namely: HUANG
KUO-CHANG, HUANG AN-CHUNG, JAMES J.R. CHEN, TRISTAN A. CATINDIG, VICENTE
B. AMADOR, ROCK A.C. HUANG, JEM S.C. HUANG, MARIA TERESA SOLIVEN and
VIRGILIO M. DEL ROSARIO, petitioners,  vs.  COURT OF APPEALS, HON. FRANCISCO X.
VELEZ (Presiding Judge, Regional Trial Court of Makati [Branch 57]) and ROBLECOR
PHILIPPINES, INC., respondents.

Civil Law; Arbitration; The finality of the arbitrator’s award is not absolute and without exceptions.—It
is stated explicitly under Art. 2044 of the Civil Code that the finality of the arbitrators’ award is not
absolute and without exceptions. Where the conditions described in Articles 2038, 2039 and 2040 applicable
to both compromises and arbitrations are obtaining, the arbitrators’ award may be annulled or rescinded.
Additionally, under Sections 24 and 25 of the Arbitration Law, there are grounds for vacating, modifying or
rescinding an arbitrator’ award. Thus, if and when the factual circumstances referred to in the above-cited
provisions are present, judicial review of the award is properly warranted.

Same; Same; Even decisions of administrative agencies which are declared “final” by law are not exempt
from judicial review when so warranted.—Even decisions of administrative agencies which are declared
“final” by law are not exempt from judicial review when so warranted. Thus, in the case of  Oceanic Bic
Division (FFW), et al. v. Flerida Ruth P. Romero, et al., this Court had occasion to rule that: “x x x x Inspite
of statutory provisions making ‘final’ the decisions of certain administrative agencies,  we have taken
cognizance of petitions questioning these decisions where want of jurisdiction, grave abuse of discretion,
violation of due process, denial of substantial justice or erroneous interpretation of the law were brought to
our attention.

Same; Same; Voluntary arbitrators by the nature of their functions act in a quasi-judicial capacity.—It

should be stressed too, that voluntary arbitrators, by the nature of their functions, act in a quasi-

_______________

* THIRD DIVISION.

546

546 SUPREME COURT REPORTS

ANNOTATED

Chung Fu Industries (Phils.), Inc. vs. Court of

Appeals
 judicial capacity. It stands to reason, therefore, that their decisions should not be beyond the scope of
the power of judicial review of this Court.

SPECIAL CIVIL ACTION for certiorari to review the resolutions of the Court of Appeals.
Campos, Jr., J.

The facts are stated in the opinion of the Court.

ROMERO, J.:

This is **a special civil action for certiorari seeking to annul the Resolutions of the Court of
Appeals  dated October 22, 1990 and December 3, 1990 upholding the Orders of July 31, 1990
and August 23, 1990 of the Regional Trial Court of Makati, Branch 57, in Civil Case No. 90-1335.
Respondent Court of Appeals affirmed the ruling of the trial court that herein petitioners, after
submitting themselves for arbitration and agreeing to the terms and conditions thereof, providing
that the arbitration award shall be final and unappealable, are precluded from seeking judicial
review of subject arbitration award.
It appears that on May 17, 1989, petitioner Chung Fu Industries (Philippines) (Chung Fu for
brevity) and private respondent
1
Roblecor Philippines, Inc. (Roblecor for short) forged a
construction agreement   whereby respondent contractor committed to construct and finish on
December 31, 1989, petitioner corporation’s industrial/factory complex in Tanawan, Tanza,
Cavite for and in consideration of P42,000,000.00. In the event of disputes arising from the
performance of subject contract, it was stipulated therein that the issue(s) shall be submitted for
resolution before a single arbitrator chosen by both parties.
Apart from the aforesaid construction agreement, Chung Fu and Roblecor entered into two (2)
other ancillary contracts, to wit: one dated June 23, 1989, for the construction of a dormitory and
support
2
facilities with a contract price of P3,875,285.00, to be completed on or before October 31,
1989;  and the other

_______________
** Justice
Jose C. Campos, Jr., ponente, with Justices Oscar M. Herrera and Abelardo M. Dayrit concurring.
1 Annex “K” to the petition, Rollo, pp. 146-155.
2 Annex “L;” Rollo pp. 156-161.

547

VOL. 206, FEBRUARY 25, 1992 547

Chung Fu Industries (Phils.), Inc. vs. Court of
Appeals

dated August 12, 1989, for the installation of electrical, water and hydrant systems at the plant
site, commanding a price 3of P12.1 million and requiring completion thereof one month after civil
works have been finished.
However, respondent Roblecor failed to complete the work despite the extension of time
allowed it by Chung Fu. Subsequently, the latter had to take over the construction when it had
become evident that Roblecor was not in a position to fulfill its obligation.
Claiming an unsatisfied account of P10,500,000.00 and unpaid progress billings of
P2,370,179.23, Roblecor on May 18, 1990, filed a petition for Compulsory Arbitration with prayer
for Temporary Restraining Order before respondent Regional Trial Court, pursuant to the
arbitration clause in the construction agreement. Chung Fu moved to dismiss the petition and
further prayed for the quashing of the restraining order.
Subsequent negotiations between the parties eventually led to the formulation of an
arbitration agreement which, among others, provides:
“2. The parties mutually agree that the arbitration shall proceed in accordance with the following terms and
conditions:—

‘xxx      xxx      xxx

‘d. The parties mutually agree that they will abide by the decision of the arbitrator including any amount that may
be awarded to either party as compensation, consequential damage and/or interest thereon;
‘e. The parties mutually agree that the decision of the arbitrator shall be final and unappealable. Therefore, there
shall be no further judicial recourse if either party disagrees with the whole or any part of the arbitrator’s award.
‘f. As an exception to sub-paragraph (e), above, the parties mutually agree that either party is entitled to seek
judicial assistance for purposes of enforcing the arbitrator’s award;
4
xxx      xxx      xxx.’ ”

(Italics supplied)

_______________
3 Annex “M;” Rollo pp. 162-166.
4 Annex “O;” Rollo pp. 172-175.

548

548 SUPREME COURT REPORTS ANNOTATED

Chung Fu Industries (Phils.), Inc. vs. Court of
Appeals

Respondent Regional Trial Court approved the arbitration agreement thru its Order of May 30,
1990. Thereafter, Engr. Willardo Asuncion was appointed as the sole arbitrator.
On June 30, 1990, Arbitrator Asuncion ordered petitioners to immediately pay respondent
contractor, the sum of P16,108,801.00. He further declared the award as final and unappealable,
pursuant to the Arbitration Agreement precluding judicial review of the award.
Consequently, Roblecor moved for the confirmation of said award. On the other hand, Chung
Fu moved to remand the case for further hearing and asked for a reconsideration of the judgment
award claiming that Arbitrator Asuncion committed twelve (12) instances of grave error by
disregarding the provisions of the parties’ contract.
Respondent lower court denied Chung Fu’s Motion to Remand thus compelling it to seek
reconsideration therefrom but to no avail. The trial court granted Roblecor’s Motion for
Confirmation of Award and accordingly, entered judgment in conformity therewith. Moreover, it
granted the motion for the issuance of a writ of execution filed by respondent.
Chung Fu elevated the case via a petition for certiorari to respondent Court of Appeals. On
October 22, 1990 the assailed resolution was issued. The respondent appellate court concurred
with the findings and conclusions of respondent trial court resolving that Chung Fu and its
officers, as signatories to the Arbitration Agreement are bound to observe the stipulations thereof
providing for the finality of the award and precluding any appeal therefrom.
A motion for reconsideration of said resolution was filed by petitioner, but it was similarly
denied by respondent Court of Appeals thru its questioned resolution of December 3, 1990.
Hence, the instant petition anchored on the following grounds:
 First

Respondents Court of Appeals and trial Judge gravely abused their discretion and/or exceeded their
jurisdiction, as well as denied due process and substantial justice to petitioners,—(a) by refusing to exercise
their judicial authority and legal duty to review the arbitration award, and (b) by declaring that petitioners
are estopped from questioning the arbitration award allegedly in view of the stipulations

549

VOL. 206, FEBRUARY 25, 1992 549

Chung Fu Industries (Phils.), Inc. vs. Court of
Appeals

in the parties’ arbitration agreement that “the decision of the arbitrator shall be final, and unappealable”
and that “there shall be no further judicial recourse if either party disagrees with the whole or any part of
the arbitrator’s award.”

Second

Respondent Court of Appeals and trial Judge gravely abused their discretion and/or exceeded their
jurisdiction, as well as denied due process and substantial justice to petitioner, by not vacating and
annulling the award dated 30 June 1990 of the Arbitrator, on the ground that the Arbitrator grossly
departed from the terms of the parties’ contracts and misapplied the law, and thereby exceeded the
authority and power delegated to him. (Rollo, p. 17)

Allow us to take a leaf from history and briefly trace the evolution of arbitration as a mode of
dispute settlement. Because conflict is inherent in human society, much effort has been expended
by men and institutions in devising ways of resolving the same. With the progress of civilization,
physical combat has been ruled out and instead, more specific means have been evolved, such as
recourse to the good offices of a disinterested third party, whether this be a court or a private
individual or individuals.
Legal history discloses that “the early judges called upon to solve private conflicts were
primarily the arbiters, persons not specially trained but in whose morality, probity and good
sense the parties in conflict reposed full trust. Thus, in Republican
Rome, arbiter and judge (judex) were synonymous. The magistrate or praetor, after noting down
the conflicting claims of litigants, and clarifying the issues, referred them for decision to a private
person designated by the parties, by common agreement, or selected by them from an apposite
listing (the  album judicium) or else by having the arbiter chosen by lot. The judges proper, as
specially trained state officials endowed with own power and jurisdiction, and taking cognizance
of litigations from
5
beginning to end, only appeared under the Empire, by the so-called  cognitio
extra ordinem.”

_______________
5 Reyes, J.B.L., Voluntary Arbitration (Proceedings of the Second Conference on Voluntary Arbitration—1980), p. 6.

550

550 SUPREME COURT REPORTS ANNOTATED

Chung Fu Industries (Phils.), Inc. vs. Court of
Appeals
Such means of referring a6 dispute to a third party has also long been an accepted alternative to
litigation at common law.
Sparse though the law and jurisprudence may be on the subject of arbitration in the
Philippines, it was nonetheless recognized in the Spanish Civil Code; specifically,7 the provisions
on compromises made applicable to arbitrations under Articles 1820 and 1821.   Although said
provisions 8 were repealed by implication with the repeal of the Spanish 9
Law of Civil
Procedure,  these and additional ones were reinstated in the present Civil Code.
Arbitration found a fertile field in the resolution of labor-management disputes in the
Philippines. Although early on, Commonwealth Act 103 (1936) provided for compulsory
arbitration as the state policy to be administered by the Court of Industrial Relations, in time
such a modality gave way to voluntary arbitration. While not completely supplanting compulsory
arbitration which until today is practiced by government officials, the Industrial Peace Act which
was passed in 1953 as Republic Act No. 875, favored the policy of free collec-

_______________
6 Under Chan Linte v. Law Union and Rock Insurance Co., etc., G.R. No. 16398, 14 December 1921, 42 Phil. 548, citing
C.J. vol. 5, p. 16.

“[t]he settlement of controversies by arbitration is an ancient practice at common law. In its broad sense it is a substitution, by consent
of parties, of another tribunal for the tribunals provided by the ordinary processes of law; x x x. Its object is the final disposition, in a
speedy and inexpensive way, of the matters involved, so that they may not become the subject of future litigation between the parties.”
7  “Article1820. Persons capable of making a compromise may also submit their contentions to a third person for
decision.
Article 1821. The provisions of the next preceding chapter with respect to compromises shall also be applicable to
arbitrations.
With regard to the form of procedure in arbitration and to the extent and effects thereof, the provisions of the Law of
Civil Procedure shall be observed.”
8 Cordoba v. Conde, 2 Phil. 445 (1903).
9 Articles 2042-2046, Republic Act No. 386 which was passed on June 18, 1949.

551

VOL. 206, FEBRUARY 25, 1992 551

Chung Fu Industries (Phils.), Inc. vs. Court of
Appeals

tive bargaining, in general, and resort to grievance procedure, in particular, as the preferred
mode of settling disputes in industry. It was accepted and enunciated more explicitly in the Labor
Code, which was passed on November 1, 1974 as Presidential Decree No. 442, with the
amendments later introduced by Republic Act No. 6715 (1989).
Whether utilized in business transactions or in employer-employee relations, arbitration was
gaining wide acceptance. A consensual process, it was preferred to orders imposed by government
upon the disputants. Moreover, court litigations tended to be time-consuming, costly, and
inflexible due to their scrupulous observance of the due process of law doctrine and their strict
adherence to rules of evidence.
As early as the 1920’s, this Court declared:
“In the Philippines fortunately, the attitude of the courts toward arbitration agreements is slowly
crystallizing into definite and workable form . . . The rule now is that unless the agreement is such as
absolutely to close the doors of the courts against the parties, which agreement would be void, the courts will
look with favor upon such amicable arrangements
10
and will only with great reluctance interfere to anticipate
or nullify the action of the arbitrator.”
That there was a growing need for a law regulating arbitration in general was acknowledged
when Republic Act No. 876 (1953), otherwise known as the Arbitration Law, was passed. “Said
Act was obviously adopted to supplement—not to supplant—the New Civil Code on arbitration. It
expressly declares that ‘the 11provisions of chapters one and two, Title XIV, Book IV of the Civil
Code shall remain in force.’ ”
In recognition of the pressing need for an arbitral machinery for the early and expeditious
settlement of disputes in the construction industry, a Construction Industry Arbitration
Commission (CIAC) was created by Executive Order No. 1008, enacted on February 4, 1985.

_______________
10 Malcolm,  J.  dissenting, in  Vega v. San Carlos Milling Co.,  51 Phil. 908  (1924);  Manila Electric Co. v. Pasay
Transportation Co., 57 Phil. 600(1932).
11 Umbao v. Yap, 100 Phil. 1008 (1957).

552

552 SUPREME COURT REPORTS ANNOTATED

Chung Fu Industries (Phils.), Inc. vs. Court of
Appeals

In practice nowadays, absent an agreement of the parties to resolve their disputes via a
particular mode, it is the regular courts that remain the fora to resolve such matters. However,
the parties may opt for recourse to third parties, exercising their basic freedom to “establish such
stipulations, clauses, terms and conditions as they may deem convenient,
12
provided they are not
contrary to law, morals, good customs, public order or public policy.”  In such a case, resort to the
arbitration process may be spelled out by them in a contract in anticipation of disputes that may
arise between them. Or this may be stipulated in a submission agreement when they are actually
confronted by a dispute. Whatever be the case, such recourse to an extrajudicial means of
settlement is not intended to completely deprive the courts of jurisdiction. In fact, the early cases
on arbitration carefully spelled out the prevailing doctrine at the time, thus: “. . . a clause in a
contract providing that all matters in dispute between the parties shall be referred to arbitrators
13
and to them alone is contrary to public policy and cannot oust the courts of jurisdiction.”
But certainly, the stipulation to refer all future disputes to an arbitrator or to submit an
ongoing dispute to one is valid. Being part of a contract between the parties, it is binding and
enforceable in court in case one of them neglects, fails or refuses to arbitrate. Going a step
further, in the event that they declare their intention to refer their differences to arbitration first
before taking court action, this constitutes a condition precedent, such that where a suit has been
instituted prematurely, the court14shall suspend the same and the parties shall be directed
forthwith to proceed to arbitration.
A court
15
action may likewise be proper where the arbitrator has not been selected by the
parties.
Under present law, may the parties who agree to submit their

_______________
12 Civil Code, Article 1306.
13  Wahl, et al. v. Donaldson, Sims and Co.,  2 Phil. 301  (1903);  Puentebella v. Negros Coal Co.,  50 Phil.
69 (1927); Cordoba v. Conde, 2 Phil. 445 (1903); and Labayen v. Hernaez, 1 Phil. 587 (1902).
14 Bengson v. Chan, No. L-27283, July 29, 1977, 78 SCRA 113.
15 Supra, footnote 11.
 553

VOL. 206, FEBRUARY 25, 1992 553

Chung Fu Industries (Phils.), Inc. vs. Court of
Appeals

disputes to arbitration further provide that the arbitrators’ award shall be final, unappealable
and executory?
Article 2044 of the Civil Code recognizes the validity of such stipulation, thus:
“Any stipulation that the arbitrators’ award or decision shall be final is valid, without prejudice to Articles
2038, 2039 and 2040.”

Similarly, the Construction Industry Arbitration Law provides that the arbitral award “shall be
final and
16
inappealable except on questions of law which shall be appealable to the Supreme
Court.”
Under the original Labor Code, voluntary arbitration awards or decisions were final,
unappealable and executory. “However, voluntary arbitration awards or decisions on money
claims, involving an amount exceeding One Hundred Thousand Pesos (P100,000.00) or forty-
percent (40%) of the paid-up capital of the respondent employer, whichever is lower, may be
appealed to the National Labor Relations 17Commission on any of the following grounds: (a) abuse
of discretion; and (b) gross incompetence.”  It is to be noted that the appeal in the instances cited
were to be made to the National Labor Relations Commission and not to the courts.
With the subsequent deletion of the above-cited provision from the Labor Code, the voluntary
arbitrator is now mandated to render an award or decision within twenty (20) calendar days from
the date of submission of the dispute and such decision shall be final and executory
18
after ten (10)
calendar days from receipt of the copy of the award or decision by the parties.
Where the parties agree that the decision of the arbitrator shall be final and unappealable as
in the instant case, the pivotal inquiry is whether subject arbitration award is indeed beyond the
ambit of the court’s power of judicial review.
We rule in the negative. It is stated explicitly under Art. 2044 of the Civil Code that the
finality of the arbitrators’ award is not

_______________
16 ExecutiveOrder No. 1008, Section 19.
17 Labor Code, Article 262.
18 Labor Code, Article 262-A.

554

554 SUPREME COURT REPORTS ANNOTATED

Chung Fu Industries (Phils.), Inc. vs. Court of
Appeals

absolute and without exceptions. Where the conditions described in Articles 2038, 2039 and 2040
applicable to both compromises
19
and arbitrations are obtaining, the arbitrators’ award may be
annulled or rescinded. Additionally, under Sections 24 and 25 of the20
Arbitration Law, there are
grounds for vacating, modifying or rescinding an arbitrator’s award.  Thus,
_______________
19 “Article 2038. A compromise in which there is mistake, fraud, violence, intimidation, undue influence, or falsity of
documents, is subject to the provisions of article 1330 of this Code.
However, one of the parties cannot set up a mistake of fact as against the other if the latter, by virtue of the
compromise, has withdrawn from a litigation already commenced.”
“Article 2039. When the parties compromise generally on all differences which they might have with each other, the
discovery of documents referring to one or more but not to all of the questions settled shall not itself be a cause for
annulment or rescission of the compromise, unless said documents have been concealed by one of the parties.
But the compromise may be annulled or rescinded if it refers only to one thing to which one of the parties has no right,
as shown by the newly-discovered documents.”
“Article 2040. If after a litigation has been decided by a final judgment, a compromise should be agreed upon, either or
both parties being unaware of the existence of the final judgment, the compromise may be rescinded.
Ignorance of a judgment which may be revoked or set aside is not a valid ground for attacking a compromise.”
20 Section 24. Grounds for vacating award.—In any one of the following cases, the court must make an order vacating

the award upon the petition of any party to the controversy when such party proves affirmatively that in the arbitration
proceedings:

(a) The award was procured by corruption, fraud, or other undue means; or
(b) That there was evident partiality or corruption in the arbitrators or 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 disqualifications
or of any other misbehavior by

555

VOL. 206, FEBRUARY 25, 1992 555

Chung Fu Industries (Phils.), Inc. vs. Court of
Appeals

if and when the factual circumstances referred to in the above-cited provisions are present,
judicial review of the award is properly warranted.
What if courts refuse or neglect to inquire into the factual milieu of an arbitrator’s award to
determine whether it is in accordance with law or within the scope of his authority? How may the
power of judicial review be invoked?

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. Where an award is vacated, the court, in its discretion, may direct a new
hearing either before the same arbitrators or before a new arbitrator or arbitrators chosen in the manner provided in the
submission or contract for the selection of the original arbitrator or arbitrators, and any provision limiting the time in which the
arbitrators may make a decision shall be deemed applicable to the new arbitration and to commence from the date of the court’s
order.

Where the court vacates an award, costs, not exceeding fifty pesos and disbursements may be awarded to the prevailing party and the
payment thereof may be enforced in like manner as the payment of costs upon the motion in an action.”

Section 25. Grounds for modifying or correcting award.—In any one of the following cases, the court must make an
order modifying or correcting the award, upon the application of any party to the controversy which was arbitrated:

(a) Where there was an evident miscalculation of figures, or an evident mistake in the description of any person,
thing or property referred to in the award; or
(b) Where the arbitrators have awarded upon a matter not submitted to them, not affecting the merits of the decision
upon the matter submitted; or
(c) Where the award is imperfect in a matter of form not affecting the merits of the controversy, and if it had been a
commissioner’s report, the defect could have been amended or disregarded by the court.
 The order may modify and correct the award so as to effect the intent thereof and promote justice between the parties.”

556

556 SUPREME COURT REPORTS ANNOTATED

Chung Fu Industries (Phils.), Inc. vs. Court of
Appeals

This is where the proper remedy is certiorari under Rule 65 of the Revised Rules of Court. It is to
be borne in mind, however, that this action will lie only where a grave abuse of discretion or an
act without or in excess of jurisdiction on the part of the voluntary arbitrator is clearly shown.
For “the writ of certiorari is an extraordinary remedy and that certiorari jurisdiction is not to be
equated with appellate jurisdiction. In a special civil action of certiorari, the Court will not
engage in a review of the facts found nor even of the law as interpreted or applied by the
arbitrator unless the supposed errors of fact or of law are so patent and gross and prejudicial21
as
to amount to a grave abuse of discretion or an exces de pouvoir on the part of the arbitrator.”
Even decisions of administrative agencies which are declared “final” by law are not exempt
from judicial review when so warranted.
22
Thus, in the case of Oceanic Bic Division (FFW), et al. v.
Flerida Ruth P. Romero, et al., this Court had occasion to rule that:
“x x x x Inspite of statutory provisions making ‘final’ the decisions of certain administrative agencies,  we
have taken cognizance of petitions questioning these decisions where want of jurisdiction, grave abuse of
discretion, violation of due process,
23
denial of substantial justice or erroneous interpretation of the law were
brought to our attention x x x.”  (Italics ours.)

It should be stressed too,

24
that voluntary arbitrators, by the nature of their functions, act in a
quasi-judicial capacity. It stands to reason, therefore, that their decisions should not be beyond
the scope of the power of judicial review of this Court.
In the case at bar, petitioners assailed the arbitral award on the following grounds, most of
which allege error on the part of the arbitrator in granting compensation for various items which

_______________
21 Sime Darby Pilipinas, Inc. v. Magsalin, G.R. No. 90426, December 15, 1989, 180 SCRA 177.
22 G.R. No. L-43890, July 16, 1984, 130 SCRA 392.
23 130 SCRA at 399.
24 Ibid; Mantrade/FMMC Division Employees and Workers Union v. Bacungan, No. L-48437, September 30, 1986, 144

SCRA 510.

557

VOL. 206, FEBRUARY 25, 1992 557

Chung Fu Industries (Phils.), Inc. vs. Court of
Appeals

apparently are disputed by said petitioners:

1. The Honorable Arbitrator committed grave error in failing to apply the terms and
conditions of the Construction Agreement, Dormitory Contract and Electrical Contract,
and in using instead the “practices” in the construction industry;
 The Honorable Arbitrator committed grave error in granting extra compensation to
2. Roblecor for loss of productivity due to adverse weather conditions;
3. The Honorable Arbitrator committed grave error in granting extra compensation to
Roblecor for loss due to delayed payment of progress billings;
4. The Honorable Arbitrator committed grave error in granting extra compensation to
Roblecor for loss of productivity due to the cement crisis;
5. The Honorable Arbitrator committed grave error in granting extra compensation to
Roblecor for losses allegedly sustained on account of the failed coup d’ etat;
6. The Honorable Arbitrator committed grave error in granting to Roblecor the amount
representing the alleged unpaid billings of Chung Fu;
7. The Honorable Arbitrator committed grave error in granting to Roblecor the amount
representing the alleged extended overhead expenses;
8. The Honorable Arbitrator committed grave error in granting to Roblecor the amount
representing expenses for change order for site development outside the area of
responsibility of Roblecor;
9. The Honorable Arbitrator committed grave error in granting to Roblecor the cost of
warehouse No. 2;
10. The Honorable Arbitrator committed grave error in granting to Roblecor extra
compensation for airduct change in dimension;
11. The Honorable Arbitrator committed grave error in granting to Roblecor extra
compensation for airduct plastering; and
12. The Honorable Arbitrator committed grave error in awarding to Roblecor attorney’s fees.

After closely studying the list of errors, as well as petitioners’ discussion of the same in their
Motion to Remand Case For Further Hearing and Reconsideration and Opposition to Motion for
Confirmation of Award, we find that petitioners have amply made out a case where the voluntary
arbitrator failed to apply the terms and provisions of the Construction Agreement which forms
part of the law applicable as between the parties,
558

558 SUPREME COURT REPORTS ANNOTATED

Chung Fu Industries (Phils.), Inc. vs. Court of
Appeals

thus committing a grave abuse of discretion. Furthermore, in granting unjustified extra

compensation to respondent for several items, he exceeded his powers—all of which would have
constituted ground for vacating the award under Section 24 (d) of the Arbitration Law.
But the respondent trial court’s refusal to look into the merits of the case, despite  prima
facie  showing of the existence of grounds warranting judicial review, effectively deprived
petitioners of their opportunity to prove or substantiate their allegations. In so doing, the trial
court itself committed grave abuse of discretion. Likewise, the appellate court, in not giving due
course to the petition, committed grave abuse of discretion. Respondent courts should not shirk
from exercising their power to review, where under the applicable laws and jurisprudence, such
power may be rightfully exercised; more so where the objections raised against an arbitration
award may properly constitute grounds for annulling, vacating or modifying said award under
the laws on arbitration.
 WHEREFORE, the petition is GRANTED. The Resolutions of the Court of Appeals dated
October 22, 1990 and December 3, 1990 as well as the Orders of respondent Regional Trial Court
dated July 31, 1990 and August 23, 1990, including the writ of execution issued pursuant thereto,
are hereby SET ASIDE. Accordingly, this case is REMANDED to the court of origin for further
hearing on this matter. All incidents arising therefrom are reverted to the status quo ante until
such time as the trial court shall have passed upon the merits of this case. No costs.
SO ORDERED.

     Gutierrez, Jr., Feliciano, Bidin and Davide, Jr., JJ.,concur.

Petition granted; resolutions set aside. Case remanded to the court of origin for further hearing
on the matter.

——o0o——
559