LM POWER vs.

CAPITOL INDUSTRIAL

HELD:
AFFIRMATIVE.

Facts:
This is a Petition for Review on Certiorari filed by the petitioner LM Power
against Respondent Capitol Industrial seeking to set aside the decision of
CA.
Petitioner LM Power Engineering Corporation and Respondent Capitol
Industrial Construction Groups Inc. entered into a Subcontract Agreement
involving electrical work at the Third Port of Zamboanga. Due to the inability
of the petitioner to procure materials, Capitol Industial took over some of the
work contracted to the former. After the completion of the contract, petitioner
billed respondent in the amount of P6, 711,813.90 but the respondent
refused to pay.

Petitioner filed with the RTC of Makati a Complaint for the collection of the
amount representing the alleged balance due it under the subcontract.
Respondent filed a Motion to Dismiss, alleging that the Complaint was
premature, due to the absence of prior recourse to arbitration.

RTC denied the Motion on the ground that the dispute did not involve the
interpretation or the implementation of the Agreement and was not covered
by the arbitral clause and ruled in favor of the petitioner.
Respondent appealed to the CA, the latter reversed the decision of the RTC
and ordered the referral of the case to arbitration.

Hence, this Petition.

ISSUE:
WON there is a need for the prior arbitration before filing of the complaint
with the court.

SC ruled that in the case at hand it involves technical discrepancies that are
better left to an arbitral body that has expertise in the subject matter.
Moreover, the agreement between the parties contains arbitral clause that
any dispute or conflict as regards to interpretation and implementation of this
agreement which cannot be settled between respondent and petitioner
amicably shall be settled by means of arbitration. The resolution of the
dispute between the parties herein requires a referral to the provisions of
their agreement. Within the scope of the arbitration clause are discrepancies
as to the amount of advances and billable accomplishments, the application
of the provision on termination, and the consequent set-off of expenses.
With respect to the disputes on the take-over/termination and the expenses
incurred by respondent in the take-over, the SC ruled that the agreement
provides specific provisions that any delay, expenses and any other acts in
violation to such agreement, the respondent can terminate and can set off
the amount it incurred in the completion of the contract.

SC tackled also that theres no need for the prior request for arbitration by
the parties with the Construction Industry Arbitration Commission (CIAC) in
order for it to acquire jurisdiction. Because pursuant to Section 1 of Article
III of the new Rules of Procedure Governing Construction Arbitration,
when a contract contains a clause for the submission of a future controversy
to arbitration, it is not necessary for the parties to enter into a submission
agreement before the claimant may invoke the jurisdiction of CIAC.
Furthermore, the arbitral clause in the agreement is a commitment on the
part of the parties to submit to arbitration the disputes covered therein.
Because that clause is binding, they are expected to abide by it in good faith.
Since a complaint with the RTC has been filed without prior recourse to
arbitration, under RA 876 (Arbitration Law) the proper procedure is to request
the stay or suspension of such action in order to settle the dispute with the
CIAC.