Philippine Race Horse Trainer's Association, Inc. vs. Piedras Negras Construction and Development Corporation

A construction contract signed by a corporate president without board authorization and without subsequent ratification or apparent authority is unenforceable against the corporation, even where prior contracts involved the same project, where the price was substantially increased without justification and the contractor failed to exercise ordinary prudence in verifying authority.

Philippine Race Horse Trainer's Association, Inc. is an association of professional horse trainers organized as a non-stock corporation committed to uplifting the economic condition of workers in the racing industry. Piedras Negras Construction and Development Corporation is a construction contractor that had completed over eighty contracts and became subcontractor-assignee for a 170-unit Royal Homes Subdivision housing project in Bulacnin, Lipa City, Batangas. Executive Order No. 1008, the Construction Industry Arbitration Law, vests the Construction Industry Arbitration Commission with original and exclusive jurisdiction over disputes arising from or connected with construction contracts submitted to voluntary arbitration.

On October 3, 2000, Philippine Race Horse Trainer's Association, Inc., through its president Rogelio J. Catajan, entered into a first contract with Fil-Estate Properties, Inc. for development of the Royal Homes Subdivision Project involving 170 housing units on Fil-Estate property in Bulacnin, Lipa City, Batangas for ₱67,453,000.00. Fil-Estate later assigned its rights and obligations to its subcontractor Piedras Negras Construction and Development Corporation. Thereafter, on October 13, 2004, the association and Piedras Negras Construction and Development Corporation forged a second contract for the same 170 units for ₱80,324,788.00. Less than a year later, on August 23, 2005, they signed a third contract for the same 170 units for the revised amount of ₱101,150,000.00, from which advances of ₱42,868,048.21 were deducted to leave a stated balance of ₱58,281,951.80.

On April 25, 2007, Piedras Negras Construction and Development Corporation issued a Certificate of Completion and Acceptance in favor of the association, accepted by Catajan. On January 18, 2008, the contractor demanded payment of the remaining balance, which the association acknowledged while pleading financial difficulties. Meanwhile, on April 28, 2008, a new set of directors and officers was elected; they requested copies of project documents from former officers, employees, and lending institutions after discovering that vital housing-project records were missing from office files. On May 27, 2008, association president Pablito L. Guce wrote to Francisco Maristela requesting loan and contract agreements, deeds, receipts, titles, Development Bank of the Philippines contracts, and other documents to understand its undertakings and obligations.

Unable to collect, the contractor filed for CIAC arbitration on March 4, 2009. The CIAC found the September 26, 2000 Board Resolution authorized Catajan only to sign a Memorandum of Agreement with Fil-Estate, found the March 1, 2005 Secretary's Certificate to be falsified and unsupported by inspection of the resolution, and found no proof of due execution or authentication of an April 24, 2006 resolution and no ratification in the May 5, 2008 organizational minutes or May 27, 2008 letter. Sustaining the CIAC's payment computation as expert and evidence-supported, the Court of Appeals nevertheless enforced the third contract on consent, ratification, and apparent authority grounds.

• CIAC Jurisdiction: Whether the CIAC has jurisdiction to pass upon the enforceability of the contract between PRHTAI and PNCDC.
• Enforceability of Third Contract: Whether the third and final contract between PRHTAI and PNCDC is unenforceable.
• Overpayment: Whether there is overpayment on PRHTAI's part.

• CIAC Jurisdiction: Yes. CIAC jurisdiction under Executive Order No. 1008 covers any dispute arising from or connected with construction contracts, including enforceability and payment issues submitted to voluntary arbitration.
• Enforceability of Third Contract: Yes, unenforceable. Catajan lacked board authority to execute the August 23, 2005 contract, and neither ratification nor apparent authority was established.
• Overpayment: Yes. The CIAC's computation of overpayment, sustained by the Court of Appeals as expert and evidence-supported, was affirmed and reinstated.

• CIAC Jurisdiction: Jurisdiction is derived from law and is broad enough to cover any dispute arising from or connected with construction contracts, whether involving contractual money claims or execution of works, before or after completion, abandonment, or breach, provided the parties agreed to submit to voluntary arbitration. The enumeration including violation of terms, payment, default, and changes in contract cost is non-exclusive, with only employer-employee disputes excluded.
• Enforceability of Third Contract: The September 26, 2000 Resolution expressly authorized Catajan only to enter, act, and sign the Memorandum of Agreement with Fil-Estate, resulting in the October 3, 2000 contract; it could not authorize a contract with PNCDC more than four years later at a price increased from ₱67,453,000.00 to ₱80,324,788.00 and then to ₱101,150,000.00 without shown justification. Reliance on the March 1, 2005 Secretary's Certificate was grossly negligent because the certificate on its face invited suspicion, was found falsified and inconsistent with the actual resolution, and its signatory admitted not inspecting the resolution; the April 24, 2006 resolution was never proved, identified, or authenticated, and the May 5, 2008 minutes merely noted reconstruction of loan contracts and turnover of 170 houses at the new board's first meeting without knowledge of the unauthorized act. The May 27, 2008 letter was a mere request for missing documents, not acknowledgment or ratification, and Catajan's own acceptance of the Certificate of Completion and Acceptance could not ratify his own unauthorized act. Apparent authority failed because corporate power is exercised by the board, the president's presumed authority is confined to the general objectives and usual duties of the business, a massive ₱101,150,000.00 housing project was not in the ordinary course of a horse-trainers association, and PNCDC neither acted in good faith nor showed the required holding-out, acquiescence with knowledge, or similar acts vesting power to bind.
• Overpayment: Factual findings of construction arbitrators are final, conclusive, and generally accorded respect and finality due to specialized expertise, reviewable only for corruption, fraud, undue means, evident partiality, misconduct in refusing material evidence, disqualification under Republic Act No. 876, excess or imperfect execution of powers, very clear grave abuse of discretion, deprivation of administrative due process, or contrariety between Court of Appeals and CIAC findings. The appellate court itself found the CIAC's extensive discussion of claims and counterclaims adequately supported by evidence and saw no cogent reason to disturb the computation; the contrariety on enforceability therefore required re-examination, and the expert computation supporting overpayment in the amount of ₱14,351,484.61 was left intact.

• CIAC jurisdiction over construction disputes — The CIAC has original and exclusive jurisdiction over disputes arising from or connected with contracts entered into by parties involved in construction in the Philippines, whether before or after completion, abandonment, or breach, covering government or private contracts where parties agreed to voluntary arbitration, including but not limited to specifications, terms, time, defects, payment, default, and changes in cost. Applied to sustain authority to decide enforceability of the third construction contract as connected with payment claims.
• Finality of CIAC factual findings and exceptions — Findings of fact of quasi-judicial bodies with confined expertise, particularly construction arbitrators, are generally accorded respect and finality and are not reviewable on appeal, except where the award was procured by corruption, fraud, or undue means; evident partiality or corruption; misconduct in refusing pertinent material evidence; disqualification under Section 9 of Republic Act No. 876 willfully undisclosed or other prejudicial misbehavior; excess or imperfect execution of powers; very clear grave abuse of discretion; deprivation of administrative due process; or contrariety between Court of Appeals and CIAC findings. Applied to uphold the CIAC payment computation while permitting review because the Court of Appeals disregarded the tribunal's award on enforceability.
• Corporate powers exercised by the board; limits of presidential authority — Corporate powers are exercised by the board of directors, not the president; while the president is presumed to have authority absent a contrary charter or bylaw, the act must still be within the general objectives of the company's business and the scope of usual duties. Applied to reject binding effect of Catajan's execution of a ₱101,150,000.00 housing contract far outside the ordinary business of a non-stock association of horse trainers.
• Apparent authority — A corporation is estopped from denying an agent's authority if it knowingly permits the officer to act under apparent authority or holds him out as possessing such power, ascertained through the general manner of holding out or acquiescence with actual or constructive knowledge in acts of a particular nature, requiring evidence of similar acts vesting power to bind rather than mere quantity of acts; the doctrine does not apply absent a principal's act or conduct relied upon in good faith through reasonable prudence. Applied to deny estoppel because the requisite holding-out, acquiescence, similar acts, and good-faith reliance were lacking and PNCDC was grossly negligent.
• Legal interest on monetary awards — Pursuant to Bangko Sentral ng Pilipinas Circular No. 799, Series of 2013, the rate of interest on amounts due is six percent (6%) per annum. Applied to modify the CIAC award's twelve percent post-finality rate to six percent from finality until full satisfaction.

• "The CIAC shall have original and exclusive jurisdiction over disputes arising from, or connected with, contracts entered into by parties involved in construction in the Philippines, whether the dispute arises before or after the completion of the contract, or after the abandonment or breach thereof." — States the statutory grant under Executive Order No. 1008 supporting jurisdiction over enforceability connected to construction payment claims.
• "It is settled that findings of fact of quasi-judicial bodies, like the CIAC, which have acquired expertise because their jurisdiction is confined to specific matters, are generally accorded, not only respect, but also finality." — Defines the deference rule for construction arbitrators and frames why the payment computation was sustained.
• "It requires presentation of evidence of similar acts executed either in its favor or in favor of other parties." — States an evidentiary requirement for apparent authority, used to reject estoppel against the association.
• "While in the absence of a charter or bylaw provision to the contrary the president is presumed to have authority, the questioned act should still be within the domain of the general objectives of the company's business and within the scope of his or her usual duties." — Limits presidential power and supports holding that the housing contract did not bind the non-stock association.

• Shinryo (Phils.) Company, Inc. vs. RRN Incorporated, 648 Phil. 342 (2010) — Followed as basis for breadth of CIAC jurisdiction and for the rule on finality of CIAC factual findings and its exceptions.
• Metro Construction, Inc. vs. Chatham Properties, Inc., 418 Phil. 176 (2001) — Followed where the Court reviewed facts because the Court of Appeals ruling on delay was contrary to CIAC findings; analogous justification for re-examining evidence here.
• Megaworld Globus Asia, Inc. vs. DSM Construction and Development Corporation, 468 Phil. 305 (2004) — Cited for sustaining thoroughly discussed Arbitral Tribunal findings on unquestionably factual issues, contrasting with the present contrariety requiring review.
• Uniwide Sales Realty and Resources Corp. vs. Titan-Ikeda Construction and Dev't Corp., 540 Phil. 350 (2006) — Cited alongside Megaworld for affirmance of tribunal findings on factual construction issues.
• Advance Paper Corporation vs. Arma Traders Corporation, G.R. No. 176897, December 11, 2013, 712 SCRA 313, 330 — Followed for apparent-authority doctrine, its limits requiring good-faith reliance after reasonable prudence, and limits of presidential authority.
• People's Aircargo and Warehousing Co., Inc. vs. Court of Appeals, 357 Phil. 850, 864 (1998) — Followed for the two modes of ascertaining apparent authority through holding out or acquiescence and vesting of power to bind.
• Safic Alcan & Cie vs. Imperial Vegetable Oil Co., Inc., 407 Phil. 884, 899 (2001) — Followed for the rule that corporate powers are exercised by the board, not the president.
• Nacar vs. Gallery Frames, G.R. No. 189871, August 13, 2013, 703 SCRA 439, 459 — Followed to reduce post-finality interest to six percent per annum under Bangko Sentral ng Pilipinas Circular No. 799, Series of 2013.
• Eastern Shipping Lines, Inc. vs. Court of Appeals, et al. (243 SCRA 78 [1994]) — Quoted in the CIAC award for interest during interim forbearance of credit; superseded in rate by the modification to six percent.

• Section 4, Executive Order No. 1008 (Construction Industry Arbitration Law) — Grants CIAC original and exclusive jurisdiction over construction-connected disputes submitted to voluntary arbitration; applied to uphold jurisdiction over enforceability and payment.
• Section 9, Republic Act No. 876 — Referenced as a ground for vacating an award where a disqualified arbitrator willfully refrained from disclosing disqualification; listed among narrow exceptions to finality of arbitral factual findings.
• Bangko Sentral ng Pilipinas Circular No. 799, Series of 2013 — Sets the legal interest rate at six percent per annum; applied to modify the CIAC award's twelve percent post-finality interest to six percent until full satisfaction.

Chief Justice Maria Lourdes P.A. Sereno (Chairperson), Associate Justice Lucas P. Bersamin, Associate Justice Martin S. Villarama, Jr., and Associate Justice Estela M. Perlas-Bernabe concurred. No separate concurring reasoning of significance appears in the text.