Santiago vs. Gonzalez

An arbitration award may be confirmed by the trial court without receiving additional evidence where the movant's motion for reconsideration fails to specifically and concretely point out the arbitrators' errors or to offer new evidence with affidavits of merit showing that admission of such evidence would probably change the result of the award.

Severo J. Santiago (owner) and Eugenio Juan Gonzalez (contractor) were parties to a construction contract for a residential house at White Plains Subdivision, Quezon City, executed on March 15, 1963. When a payment dispute arose, Gonzalez stopped construction on October 11, 1963, and notified Santiago. Santiago responded by rescinding the contract in a letter dated October 12, 1963, and the parties subsequently agreed on December 28, 1963 to submit their dispute to arbitration under a written agreement (Annex "A"). The arbitration proceedings were governed by Republic Act No. 876, the Arbitration Law, which provides in Section 29 that appeals in arbitration proceedings are by certiorari and limited to questions of law.

On March 15, 1963, Severo J. Santiago and Eugenio Juan Gonzalez entered into an agreement whereby Gonzalez undertook to construct a residential house for Santiago at White Plains Subdivision, Quezon City, for a certain amount. Before the construction was completed, a controversy arose between the parties, Gonzalez alleging that he had not been paid on time. Gonzalez stopped the construction on October 11, 1963, and notified Santiago of the stoppage.

Santiago responded by letter dated October 12, 1963, advising Gonzalez that the building contract between them was rescinded upon receipt of the letter. In that same letter, Santiago designated his chief legal counsel Atty. Dominador E. Chipeco, assisted by his certified public accountant Col. Isidro Astillero and his engineer Mr. Benjamin Ponce de Leon, to confer with Gonzalez immediately for the equitable liquidation of the contract. The records likewise revealed that it was Santiago who continued the construction of his house after the rescission.

To resolve the controversy arising from the rescission, Santiago and Gonzalez entered into an agreement on December 28, 1963, to submit their dispute to arbitration (Annex "A"). Under the terms of the agreement, the Arbitration Board was to be constituted not later than ten days from the signing date and was to complete the proceedings and render an award within thirty days from its constitution. The manner of conducting the arbitration proceedings was left entirely to the discretion of the Board members, who had the right to summon the parties, make ocular inspections of the construction site, and conduct such tests acceptable in engineering practice as necessary. The decision or award was to be recorded and made in writing and served upon the parties or their counsel, and was to be final unless either party asked for reconsideration within fifteen days from receipt of a copy thereof.

The Arbitration Board, consisting of three members, was duly constituted and conducted proceedings from December 28, 1963 until July 6, 1964, when it rendered and promulgated its award. Copy of the award was received by Gonzalez on July 25, 1964, and by Santiago on August 10, 1964. The Board considered the evidence of the parties, the results of an ocular inspection of the construction site, conferences, numerous letters with documentary annexes offered mostly by Santiago, and a detailed estimate and breakdown of payments and the extent of construction undertaken by Gonzalez up to the time he stopped work. The Board also authorized its Chairman to make an independent estimate of the whole project based on the plans and specifications embodied in the contract. The award declared that the balance due to Gonzalez from Santiago was P49,594.63. One of the three arbitrators, Mr. Concio, did not sign the decision, though he did not dissent from it.

On August 24, 1964, Santiago filed a motion for reconsideration with the Arbitration Board, which the Board failed to decide within the ten-day period prescribed by the agreement. Santiago then filed a petition on September 9, 1964, to vacate the award on several grounds. At the hearing set by the Court, it was suggested that Gonzalez file a motion for confirmation of the award, which he did. The trial court, after considering the numerous documents presented by both parties, confirmed the award in a decision dated January 11, 1965, and denied Santiago's motion for reconsideration on the ground that Santiago had not specifically or concretely pointed out how the Board had erred or acted with fraud or partiality, nor had he offered any evidence, documentary or oral, in his motion for reconsideration, nor submitted affidavits of merit showing that admission of such evidence would probably change the result.

• Confirmation Without Additional Evidence: Petitioner argued that the court a quo erred in confirming the arbitration award and deciding the case without receiving additional evidence in a hearing before it.
• Validity of the Award: Petitioner assailed the validity of the award on the ground that Mr. Concio, one of the three arbitrators, did not sign the decision.
• Right to Stop Construction: Petitioner argued that the lower court erred in not finding the appellee to be without any right to stop the construction in violation of Articles 1721, 1725, and 1726 of the Civil Code of the Philippines.
• Due Process: Petitioner complained that he was deprived of due process by the Arbitration Board.

• Confirmation of Award: Whether the court a quo acted correctly in confirming the arbitration award and deciding the case without receiving additional evidence in a hearing before it.
• Validity of Award Without Unanimous Signature: Whether the arbitration award was valid despite one arbitrator (Mr. Concio) not having signed the decision.
• Right to Stop Construction: Whether the lower court committed reversible error in not finding that Gonzalez had no right to stop the construction under Articles 1721, 1725, and 1726 of the Civil Code.

• Confirmation of Award: Yes. The lower court correctly confirmed the award without receiving additional evidence, the petitioner having failed to specifically and concretely point out the Board's errors or to offer new evidence with affidavits of merit in his motion for reconsideration.
• Validity of Award Without Unanimous Signature: No error found. Section 20 of the Arbitration Law requires only that the award be signed and acknowledged by a majority of the arbitrators, and the parties' agreement did not require unanimity; moreover, Mr. Concio did not dissent from the award.
• Right to Stop Construction: Moot. Santiago himself rescinded the contract by his letter dated October 12, 1963, and continued the construction thereafter, so the submission to arbitration was the outcome of that rescission.

• Confirmation of Award: An examination of the proceedings before the Arbitration Board showed that ample opportunity was afforded Santiago to adduce proof in support of his contentions. The Board considered numerous documents presented by Santiago, conducted an ocular inspection, and authorized an independent estimate of the project. Neither in the motion for reconsideration nor in the petition to vacate did Santiago point specifically and concretely in what way the Board had erred or acted with fraud or partiality. No evidence, documentary or oral, was offered in the motion for reconsideration. The lower court correctly held that a motion for reconsideration must specifically state what evidence had not been taken into consideration or what error had been committed, and that if further evidence was sought to be introduced, the substance of that evidence must be stated under oath with copies of documents attached — in short, affidavits of merit were required. This was consistent with the Court's prior holding that a motion must not only state what part of the decision is contrary to law or evidence but also point out why it is so. Because Santiago contented himself with general allegations of fraud and vague statements of the Board's refusal to receive further evidence, without specifying what documents or testimony would consist of such evidence, the lower court committed no reversible error in confirming the award.

• Validity of Award Without Unanimous Signature: Section 20 of the Arbitration Law provides that the award must be signed and acknowledged by a majority of the arbitrators. The agreement of the parties did not require that all three arbitrators concur. Mr. Concio, while not having signed the award, did not dissent from it. The failure of one arbitrator to sign therefore did not invalidate the award, as the legal requirement of majority signature was satisfied.

• Right to Stop Construction: While Gonzalez had stopped construction by notifying Santiago on grounds of delay in agreed payments, the records clearly showed that Santiago, in a reply letter dated October 12, 1963, advised Gonzalez that the building contract was rescinded upon receipt thereof. Santiago then continued the construction himself. The submission to arbitration was the outcome of this rescission. Santiago's own letter manifested a clear intention to withdraw from the building contract, designating representatives to confer with Gonzalez for the equitable liquidation of the contract. The lower court therefore did not commit reversible error in not ruling on Gonzalez's right to stop construction, as the issue was overtaken by Santiago's own rescission.

• Requirements for a Motion for Reconsideration of an Arbitration Award — A motion for reconsideration of an arbitration award must specifically and concretely state what evidence had not been taken into consideration or what error had been committed by the arbitrators. If further evidence is sought to be introduced, the substance of that evidence must be stated under oath, together with copies of documents sought to be introduced — i.e., affidavits of merit are required. The evidence to be offered must be such that if admitted, it will probably change the result of the award. General allegations of fraud or error, or vague statements of refusal to receive evidence, are insufficient. The Court relied on the doctrine that "it is not enough that a motion should state what part of the decision is contrary to law or the evidence; it should also point out why they are so."

• Majority Signature Requirement for Arbitration Awards — Under Section 20 of the Arbitration Law (R.A. No. 876), an arbitration award must be signed and acknowledged by a majority of the arbitrators. Unless the parties' agreement requires unanimity, the failure of one arbitrator to sign does not invalidate the award, particularly where the non-signing arbitrator has not dissented from the award.

• "Neither in the motion for reconsideration nor in the petition to vacate has the petitioner pointed specifically and concretely in what way the Board of Arbitration had erred or had acted with fraud or partiality in within the award. In the motion for reconsideration filed by the petitioner there was no offer of any evidence, documentary or oral." — This passage states the ratio decidendi for affirming the confirmation of the award: the petitioner's failure to specify errors or offer new evidence justified the lower court's refusal to receive additional evidence.

• "The fact that Mr. Concio did not sign the decision does not mean this he was not consulted, or that it is not the act of the Board. Section 20 of the Arbitration Law provides that the award must be signed and acknowledged by a majority of the arbitrators." — This passage defines the controlling rule on the sufficiency of majority signature for arbitration awards and explains why the non-signature of one arbitrator did not invalidate the award.

• "it is not enough that a motion should state what part of the decision is contrary to law or the evidence; it should also point out why they are so ..." — This is the canonical formulation of the requirement for specificity in motions for reconsideration, cited from prior jurisprudence and applied to arbitration proceedings.

• Luzon Stevedoring Co. Inc. vs. CIR, et al., 8 SCRA 447, 450, 454 — Cited as controlling authority for the proposition that a motion for reconsideration must not only state what part of the decision is contrary to law or evidence but also point out why it is so. Followed and applied to the arbitration context.

• Phil. Advertising Counselors Inc. vs. Revilla, 52 SCRA 246, 253-254 — Cited alongside Luzon Stevedoring for the same proposition regarding the specificity required in motions for reconsideration. Followed.

• Section 29, Republic Act No. 876 (The Arbitration Law) — Provides that appeals in arbitration proceedings are by certiorari and that the issues shall be limited to questions of law. Applied as the jurisdictional basis for the Supreme Court's review of the case, as certified by the Court of Appeals.

• Section 20, Republic Act No. 876 (The Arbitration Law) — Provides that the arbitration award must be signed and acknowledged by a majority of the arbitrators. Applied to uphold the validity of the award despite one arbitrator's failure to sign, since the parties' agreement did not require unanimity and the non-signing arbitrator did not dissent.

• Articles 1721, 1725, and 1726, Civil Code of the Philippines — Cited by the petitioner as provisions allegedly violated by Gonzalez's stoppage of construction. The Court did not rule on these provisions on the merits, finding the issue moot because Santiago himself rescinded the contract.

Teehankee (Chairman), Makasiar, Muñoz Palma, Martin, and Guerrero, JJ., concurred.