A D R C ASE D IGESTS 2015

Heirs of Augusto Salas v Laperal Realty

Salas, Jr. then executed a Special Power of

Corporation

Attorney in favor of Respondent Laperal Realty

Upon whom is an agreement to submit to

to exercise general control, Page

supervision
number and

arbitration binding?

management of the sale of his land, for cash or

G.R. NO. 135362 (December 13, 1999)

DE LEON, JR., J.:

on

installment

basis.

By

virtue

thereof,

Respondent Laperal Realty subdivided said land

and sold portions thereof to Respondents
Rockway Real Estate Corporation and South
FACTS:

Ridge Village, Inc. in 1990; to Respondent

Augusto Salas, Jr. was the registered owner of a

spouses Abrajano and Lava and Oscar Dacillo

vast tract of land in Lipa City, Batangas. He

in 1991; and to Respondents Eduardo Vacuna,

entered

Florante de la Cruz and Jesus Vicente Capalan

into

Agreement with

an Owner-Contractor

Respondent

Laperal

Realty

in 1996 (Respondent Lot Buyers hereinafter).

Corporation to render and provide complete

Back in 1989, Salas, Jr. left his home in the

(horizontal) construction services on his land.

morning for a business trip to Nueva Ecija. He,

Said

however, never returned on that unfaithful

agreement

contains

an

arbitration

morning. Seven years later or in 1996, his wife,

clause, to wit:

Teresita Diaz-Salas filed with the RTC of Makati

City a verified Petition for the Declaration of
ARTICLE VI. ARBITRATION.

Presumptive Death, which Petition was granted.

In 1998, Petitioners, as heirs of Salas, Jr. filed in

All cases of dispute between CONTRACTOR

and OWNERS representative shall be referred
to the committee represented by:

the RTC of Lipa City a Complaint for Declaration

of Nullity of Sale, Reconveyance, Cancellation of
Contract,

Accounting

and

Damages against

Respondents.
Respondent Laperal Realty filed a Motion to

1.

One

representative

of

the

OWNER;

2. One representative of the CONTRACTOR;

3. One representative acceptable to both
OWNER and CONTRACTOR.

Dismiss on the ground that Petitioners failed to

submit their grievance to arbitration as required
under

Article

VI

of

the Owner-Contractor

Agreement. Respondent spouses Abrajano and

Lava

and

Joint Answer

Respondent
with

Dacillo

Counterclaim

filed

a
and

Crossclaim praying for dismissal of Petitioners

Complaint for the same reason.

pg. 1

A D R C ASE D IGESTS 2015

The RTC then issued the herein assailed Order

Petitioners claim that they suffered lesion of

dismissing

non-

more than one-fourth (1/4) of the value of Salas,

compliance with the foregoing arbitration clause.

Jr.s land when RespondentPage

Laperal
Realty
number

Petitioners

Complaint

for

Hence the present Petition for Review on

Certiorari under Rule 45.

subdivided it and sold portions thereof to

Respondent Lot Buyers. Thus, they instituted
action against both Respondent Laperal Realty
and Respondent Lot Buyers for rescission of the

ISSUE:

sale transactions and reconveyance to them of

the subdivided lots. They argue that rescission,
being their cause of action, falls under the

Whether or not the arbitration clause under

exception clause in Sec. 2 ofRepublic Act No.

Article VI of the Owner-Contractor Agreement

876 which provides that such submission [to] or

is binding upon the Respondent Lot Buyers?

contract

[of

arbitration]

shall

be

valid,

enforceable and irrevocable, save upon such

grounds as exist at law for the revocation of any
ARGUMENTS:
Petitioners argue that (1) their causes of action
did not emanate from the Owner-Contractor
Agreement, (2) that their causes of action for
cancellation of contract and accounting are
covered by the exception under the Arbitration
Law, and (3) that failure to arbitrate is not a
ground for dismissal.

pg. 2

contract.

A D R C ASE D IGESTS 2015

RULING: NO. Respondent Lot Buyers are

In a catena of cases inspired by Justice

neither parties to the Agreement nor the latters

Malcolms provocative dissent in Vega v. San

assigns or heirs. Consequently, the right to

Carlos Milling Co. [1924], the SC

hasnumber
recognized
Page

arbitrate as provided in Article VI of the

arbitration

agreements

as

valid,

binding,

Agreement was never vested in Respondent Lot

enforceable and not contrary to public policy so

Buyers. Respondent Laperal Realty, on the

much so that when there obtains a written

other hand, as a contracting party to the

provision for arbitration which is not complied

Agreement, has the right to compel Petitioners

with,

the

trial

court

should

suspend

the

to first arbitrate before seeking judicial

proceedings and order the parties to proceed to

relief. However, to split the proceedings into

arbitration in accordance with the terms of their

arbitration for Respondent Laperal Realty and

agreement. Arbitration is the wave of the future

trial for the Respondent Lot Buyers, or to hold

in

trial in abeyance pending arbitration between

contractual agreement calling for arbitration in

Petitioners and Respondent Laperal Realty,

case of disagreement between parties would be

would in effect result in multiplicity of suits,

a step backward.

duplicitous procedure and unnecessary

delay. On the other hand, it would be in the
interest of justice if the trial court hears the
complaint against all herein Respondents and
adjudicates Petitioners rights as against theirs
in a single and complete proceeding.

Petition is GRANTED. The assailed Order of

RTC of Lipa City is NULLIFIED and SET ASIDE.

RATIO DECIDENDI:

pg. 3

dispute

resolution.

To

brush

aside

A D R C ASE D IGESTS 2015

A submission to arbitration is a contract. As

In the same vein, Petitioners contention that

such, the Agreement, containing the stipulation

rescission, being their cause of action, falls

on arbitration, binds the parties thereto, as well

under the exception clause in Sec.

of Republic
Page2number

as

Act

their

assigns

and

heirs.

But

only

No.

876 is

without

merit.

For

while

they. Petitioners, as heirs of Salas, Jr., and

rescission, as a general rule, is an arbitrable

Respondent Laperal Realty are certainly bound

issue, they impleaded in the suit for rescission

by the Agreement.

If Respondent Laperal

the Respondent Lot Buyers who are neither

Realty, had assigned its rights under the

parties to the Agreement nor the latters assigns

Agreement to a third party, making the former,

or heirs. Consequently, the right to arbitrate as

the assignor, and the latter, the assignee, such

provided in Article VI of the Agreement was

assignee would also be bound by the arbitration

never vested in Respondent Lot Buyers.

provision

since

assignment

involves

such

Tuna Processing Inc v Phil. Kingford Inc.

transfer of rights as to vest in the assignee the

May a foreign corporation not licensed to do

power to enforce them to the same extent as the

business in the Philippines, but which collects

assignor could have enforced them against the

royalties from entities in the Philippines, sue

debtor or, in this case, against the heirs of the

here to enforce a foreign arbitral award?

original party to the Agreement.

However,

Respondent Lot Buyers are NOT assignees of

G.R. No. 185582 (February 29, 2012)

PEREZ, J.:

the rights of Respondent Laperal Realty under

the Agreement to develop Salas, Jr.s land and
sell the same. They are, rather, buyers of the

FACTS:

land that Respondent Laperal Realty was given

Kanemitsu Yamaoka, co-patentee of a US

the authority to develop and sell under the

Patent,

Agreement. As such, they are NOT assigns

Indonesian Patent, entered into a Memorandum

contemplated in Art. 1311 of the New Civil Code

of Agreement (MOA) with five Philippine tuna

which provides that contracts take effect only

processors including

between the parties, their assigns and heirs.

Kingford, Inc. (KINGFORD). The MOA provides

Philippine

Letters

Patent,

Respondent

and

an

Philippine

for the enforcing of the abovementioned patents,

granting licenses under the same, and collecting
royalties, and for the establishment of herein
Petitioner Tuna Processors, Inc. (TPI).

pg. 4

A D R C ASE D IGESTS 2015

Due to a series of events not mentioned in the

Whether or not a foreign corporation not

Petition,

licensed to do business in the Philippines, but

the

Respondent

tuna

processors,

KINGFORD,

including

withdrew

from

which collects royalties fromPage

entities
in the
number

Petitioner TPI and correspondingly reneged on

Philippines, sue here to enforce a foreign arbitral

their obligations. Petitioner TPI submitted the

award?

dispute for arbitration before the International

Centre for Dispute Resolution in the State of
ARGUMENT:

California, United States and won the case

against Respondent KINGFORD.

Petitioner TPI contends that it is entitled to seek

To enforce the award, Petitioner TPI filed

for the recognition and enforcement of the

a Petition for Confirmation, Recognition, and

subject foreign arbitral award in accordance

Enforcement of Foreign Arbitral Award before

with RA

the RTC of Makati City. Respondent KINGFORD

Resolution Act of 2004), the Convention on the

filed a Motion to Dismiss, which the RTC denied

Recognition and Enforcement of Foreign Arbitral

for lack of merit. Respondent KINGFORD then

Awards drafted

sought for the inhibition of the RTC judge, Judge

Conference

Alameda, and moved for the reconsideration of

Arbitration in 1958 (New York Convention), and

the order denying the Motion. Judge Alameda

the UNCITRAL Model Law on International

inhibited

himself

[t]he

Commercial Arbitration (Model Law), as none of

unfounded

allegations

unsubstantiated

these specifically requires that the party seeking

assertions in the motion. Judge Ruiz, to which

for the enforcement should have legal capacity

the case was re-raffled, in turn, granted

to sue.

Respondent

notwithstanding
and

KINGFORDSs Motion

No.

9285

during

on

(Alternative

the

United

International

Dispute

Nations

Commercial

for

Reconsideration and dismissed the Petition on

RULING:

the ground that Petitioner TPI lacked legal

capacity to sue in the Philippines. Petitioner TPI

YES. Petitioner TPI, although not licensed to do

is a corporation established in the State of

business

California and not licensed to do business in the

recognition and enforcement of the foreign

Philippines.

arbitral award in accordance with the provisions

Hence, the present Petition for Review on

of the Alternative Dispute Resolution Act of

Certiorari under Rule 45.

2004. A foreign corporations capacity to sue in

in

the

Philippines,

may

seek

the Philippines is not material insofar as the

recognition and enforcement of a foreign arbitral
ISSUE:

pg. 5

award is concerned.

A D R C ASE D IGESTS 2015

The Resolution of the RTC is REVERSED and

c. The award deals with a difference not

SET ASIDE.

contemplated by or not falling within the terms of

the submission to arbitration, orPage
it contains
number

decisions on matters beyond the scope of the

RATIO DECIDENDI:

submission to arbitration, provided that, if the

Sec. 45 of the Alternative Dispute Resolution Act

decisions on matters submitted to arbitration can

of 2004 provides that the opposing party in an

be separated from those not so submitted, that

application for recognition and enforcement of

part of the award which contains decisions on

the arbitral award may raise only those grounds

matters submitted to arbitration may be

that were enumerated under Article V of

recognized and enforced;

the New York Convention, to wit:

d. The composition of the arbitral authority or the
Article V

arbitral procedure was not in accordance with

the agreement of the parties, or, failing such
agreement, was not in accordance with the law

1. Recognition and enforcement of the award

of the country where the arbitration took place;

may be refused, at the request of the party

or

against whom it is invoked, only if that party

furnishes to the competent authority where the
recognition and enforcement is sought, proof

e. The award has not yet become binding on the

that:

parties, or has been set aside or suspended by

a competent authority of the country in which, or
under the law of which, that award was made.

a. The parties to the agreement referred to in

Article II were, under the law applicable to them,
under some incapacity, or the said agreement is

2. Recognition and enforcement of an arbitral

not valid under the law to which the parties have

award may also be refused if the competent

subjected it or, failing any indication thereon,

authority in the country where recognition and

under the law of the country where the award

enforcement is sought finds that:

was made;
a. The subject matter of the difference is not
b. The party against whom the award is invoked

capable of settlement by arbitration under the

was not given proper notice of the appointment

law of that country; or

of the arbitrator or of the arbitration proceedings

or was otherwise unable to present his case;

pg. 6

A D R C ASE D IGESTS 2015

b. The recognition or enforcement of the award

Indeed, it is in the best interest of justice that

would be contrary to the public policy of that

in the enforcement of a foreign arbitral award,

country.

the

Court

deny Page number

availment

by the losing party of the rule that bars

foreign corporations not licensed to do business
Not one of the abovementioned exclusive

in the Philippines from maintaining a suit in

grounds touched on the capacity to sue of the

Philippine

party seeking the recognition and enforcement

into a contract containing a foreign arbitratio

of the award.

n clause and, as in this case, in fact submits

Pertinent provisions of the Special Rules of

itself to arbitration, it

Court on Alternative Dispute Resolution, which

contract, by the arbitration and by the result of

was promulgated

arbitration, conceding thereby the capacity of

by the

Supreme

Court,

other

courts.

When

party

enters

becomes bound by the

likewise support this position.

the

party to enter into the contract,

Rule 13.1 of the Special Rules provides that

participate in the arbitration and cause the

[a]ny party to a foreign arbitration may petition

implementation of the result. Although not on all

the court to recognize and enforce a foreign

fours with the instant case, also worthy to

arbitral award. The contents of such petition

consider is the wisdom of then Associate Justice

are enumerated in Rule 13.5. Capacity to sue is

Flerida Ruth P. Romero in her Dissenting

not included. Oppositely, in the rule on local

Opinion in Asset Privatization Trust v. Court of

arbitral awards or arbitrations in instances where

Appeals [1998], to wit:

the place of arbitration is in the Philippines, it is

specifically required that a petition to determine
any question concerning the existence, validity
and enforceability of such arbitration agreement
available

to

the

parties

before

the

commencement of arbitration and/or a petition

for judicial relief from the ruling of the arbitral
tribunal on a preliminary question upholding or
declining its jurisdiction after arbitration has
already commenced should state [t]he facts
showing that the persons named as petitioner or

xxx Arbitration, as an alternative mode of

settlement, is gaining adherents in legal and
judicial circles here and abroad. If its tested
mechanism can simply be ignored by an
aggrieved party, one who, it must be stressed,
voluntarily and actively participated in the
arbitration proceedings from the very beginning,
it will destroy the very essence of mutuality
inherent in consensual contracts.

respondent have legal capacity to sue or be

Clearly, on the matter of capacity to sue, a

sued.

foreign arbitral award should be respected not

because it is favored over domestic laws and
procedures,

but

because Republic

Act No.

9285 has certainly erased any conflict of law

question.

pg. 7

A D R C ASE D IGESTS 2015

Finally, even assuming, only for the sake of

Koppel Inc. v Makati Rotary Club Foundation

argument, that the RTC correctly observed that

Inc.

theModel Law, not the New York Convention,

Will the disagreement between

parties
to a
Page
number

governs the subject arbitral award, Petitioner

contract be rendered non-arbitrable if, in the

TPI may still seek recognition and enforcement

arbitration thereof, the validity of the contract

of the award in Philippine court, since the Model

itself will have to be determined?

Law prescribes substantially identical exclusive

May a party to a contract invoke the arbitration

grounds for refusing recognition or enforcement.

clause thereof and, at the same time, impugn

the validity of the contract itself?

Is it necessary for a party seeking arbitration to
first file a request or an application therefor
with the court to render an arbitration clause
operational?
If parties to a contract already underwent
Judicial Dispute Resolution (JDR) proceedings
before the court, may they still refer their dispute
to arbitration?
G.R. No. 198075 (September 04, 2013)
PEREZ, J.:

FACTS:

In 1975, Fedders Koppel, Incorporated (FKI)

bequeathed a parcel of land exclusive of
improvements thereon in favor of Respondent
Makati Rotary Club Foundation, Inc. by way of
aconditional donation. Respondent accepted the
donation with all of its conditions. On 26 May
1975, FKI and the Respondent executed a Deed
of Donation evidencing their consensus.

pg. 8

A D R C ASE D IGESTS 2015

One of the conditions of the donation required

Verily, by virtue of the lease agreement

the Respondent to lease the subject land back

contained

to FKI under terms specified in their Deed of

Donation and Amended Deed Page

of Donation,
number FKI

Donation. With the Respondents acceptance of

was able to continue in its possession and use

the donation, a lease agreement between them

of the subject land.

was,

therefore,

effectively

incorporated

in

the Deed of Donation.

in

the Deed

of

Two (2) days before the lease incorporated in

the Deed of Donation and Amended Deed of
Donation was set to expire, or on 23 May 2000,

Pertinent terms of such lease agreement, as

provided in the Deed of Donation, were as

FKI and Respondent executed another contract

of lease (2000 Lease Contract) covering the
subject land. In this 2000 Lease Contract, FKI

follows:

and Respondent agreed on a new five-year

1. The period of the lease is for twenty-five (25)
years,

or

until

the

th

25 of

May

2000;

2. The amount of rent to be paid by FKI for the

first

twenty-five

(25)

years

is

lease to take effect on the 26th of May 2000, with

annual rents ranging from P4M for the first year
up to P4.9M for the fifth year.

P40,126.00

perannum.
The 2000 Lease Contract also contained an
arbitration clause enforceable in the event the
The Deed of Donation also stipulated that the

parties

lease over the subject property is renewable for

interpretation, application and execution of the

another period of twenty-five (25) years upon

lease.

come

to

disagreement

about

the

mutual agreement of FKI and the Respondent.

In which case, the amount of rent shall be
determined in accordance with item 2(g) of

After the 2000 Lease Contract expired, FKI and

the Deed of Donation.

Respondent agreed to renew their lease for

another five (5) years. This new lease (2005
Lease Contract) required FKI to pay a fixed

In October 1976, FKI and the Respondent

annual rent of P4.2M.In addition to paying the

executed an Amended Deed of Donation that

fixed

reiterated

of

Contract also obligated FKI to make a yearly

Donation, including those relating to the lease of

donation of money to the Respondent. Such

the subject land.

donations ranged from P3M for the first year up

the

provisions

of

the Deed

rent,

however,

to P3.9M for the fifth year.

pg. 9

the 2005

Lease

A D R C ASE D IGESTS 2015

Notably, the 2005 Lease Contract contained an

The following year, Petitioner discontinued the

arbitration clause similar to that in the 2000

payment of the rent and donation under the

Lease Contract, to wit:

2005Lease Contract.

Page number 10

19. Governing Law The provisions of this

[2005 Lease Contract] shall be governed,
interpreted and construed in all aspects in
accordance with the laws of the Republic of the
Philippines.

Petitioners refusal to pay such rent and

donation emanated from its belief that the
rental stipulations of the 2005 Lease Contract,
and even of the 2000 Lease Contract, cannot be
given effect because they violated one of the

Any disagreement as to the interpretation,

application or execution of this [2005 Lease
Contract] shall be submitted to a board of three

material conditions of the donation of the

subject

land,

as

stated

in

the Deed

of

Donation and Amended Deed of Donation.

(3) arbitrators constituted in accordance with the

arbitration law of the Philippines. The decision of
the majority of the arbitrators shall be binding
upon

[FKI

and

Respondent]. (Emphasis

supplied)

According

to

Petitioner,

Donation and Amended

the Deed

of

Deed

of

Donation actually established not only one but

two (2) lease agreements between FKI and
Respondent, i.e., one lease for the first twenty-

From 2005 to 2008, FKI faithfully paid the

rentals and donations due it per the 2005
Lease Contract. But in June of 2008, FKI sold all
its rights and properties relative to its business in
favor of herein Petitioner Koppel, Incorporated.

On 29 August 2008, FKI and Petitioner executed

an Assignment and Assumption of Lease and
Donationwherein FKI, with the conformity of
the Respondent, formally assigned all of its
interests and obligations under the Amended
Deed

of

Donation and

Contract in favor of Petitioner.

the 2005

Lease

five (25) years or from 1975 to 2000, and

another lease for the next twenty-five (25) years
thereafter or from 2000 to 2025. Both leases are
material conditions of the donation of the subject
land.

Petitioner points out that while a definite amount

of rent for the second twenty-five (25) year lease
was

not

fixed

in

the Deed

of

Donation and Amended Deed of Donation, both

deeds

nevertheless

limitations

by

prescribed

which

the

same

rules

and

may

be

determined. Such rules and limitations ought to

be

observed

in

any

succeeding

lease

agreements between Petitioner and Respondent

for they are, in themselves, material conditions
of the donation of the subject land.

pg. 10

A D R C ASE D IGESTS 2015

In this connection, Petitioner cites item 2(g) of

Petitioner refused to comply with the demands

the Deed of Donation and Amended Deed of

of the Respondent. Instead, on 30 September

Donation that supposedly limits the amount of

2009, Petitioner filed with the Page

RTC number
of Paraaque

rent for the lease over the second twenty-five

City

(25) years to only three percent (3%) of the fair

Cancellation

market value of the [subject] land excluding the

Donation and Amended

improvements.

Donation against the Respondent.

11

On

a Complaint

for

the

of

October

2009,

Rescission

or

the Deed

of

Deed
Respondent

of
filed

an Unlawful Detainer case against the Petitioner

For Petitioner then, the rental stipulations of both
the 2000

Lease

Contract and 2005

before the MeTC of Paraaque City.

Lease

Contract cannot be enforced as they are clearly,

in view of their exorbitant exactions, in violation

On 4 November 2009, Petitioner filed an Answer

of the aforementioned threshold in item 2(g) of

with Compulsory Counterclaim.In it, Petitioner

the Deed of Donation and Amended Deed of

reiterated

Donation. Consequently, Petitioner insists that

stipulations of the 2005 Lease Contract for being

the amount of rent it has to pay thereon is and

violative of the material conditions of the Deed of

must still be governed by the limitations

Donation and Amended Deed of Donation.

prescribed

in

the Deed

its

objection

over

the

rental

of

Donation and Amended Deed of Donation.

On 27 April 2010, the MeTC rendered judgment
Respondent

then

sent Demand

Letters to

Petitioners notifying the latter of its default,

demanding for the settlement of the rent and
donations due for the year 2009. Respondent
intimated

of

cancelling

the 2005

Lease

Contract should Petitioner fail to settle the said

obligations. In its last sent Demand Letter,

in favor of the Petitioner. While the MeTC

refused to dismiss the action on the ground that
the

dispute

is

subject

to

arbitration,

it

nonetheless sided with the Petitioner with

respect to the issues regarding the insufficiency
of the Respondents demand and the nullity of
the 2005 Lease Contract.

Respondent demand Petitioner to immediately

vacate the leased premises should it fail to pay
such obligations within seven (7) days from its

The Respondent appealed to the RTC which

receipt of the letter.

reversed the MeTCs decision.

Aggrieved, the Petitioner appealed to the CA

which affirmed the decision of the RTC.
Hence, the present Petition for Review on
Certiorari under Rule 45.

pg. 11

A D R C ASE D IGESTS 2015

ISSUE:

Contract while,

at

the

same

time,

impugn such contracts validity.

Page number 12

Whether or not the present dispute is arbitrable

under the Arbitration Clause of the 2005 Lease
Agreement Contract?

3. Even assuming that it can invoke the

arbitration clause whilst denying the
validity of the2005 Lease Contract,
Petitioner still did not file a formal

ARGUMENTS:

application before the MeTC so as to

render

At different points in the proceedings of this

case, the following arguments were offered
against the application of the arbitration clause
of the 2005 Lease Contract:
1. The disagreement
Petitioner

such

arbitration

clause

operational. Section 24 of Republic Act

No. 9285 requires the party seeking
arbitration to first file a request or an
application therefor with the court not
later than the preliminary conference.

between

the

and Respondent is non-

arbitrable as it will inevitably touch upon

4. Petitioner

and

Respondent

already

the issue of the validity of the 2005

underwent JDR proceedings before the

Lease Contract. It was submitted that

RTC. Hence, a further referral of the

one of the reasons offered by the

dispute to arbitration would only be

Petitioner in justifying its failure to pay

circuitous. Moreover, an ejectment case,

under the 2005 Lease Contract was the

in view of its summary nature, already

nullity of such contract for being contrary

fulfills

to law and public policy. The Supreme

arbitration, i.e., to provide parties in

Court, in Gonzales v. Climax Mining,

conflict with an expedient method for the

Ltd. [2005], held that the validity of

resolution of their dispute. Arbitration

contract cannot be subject of arbitration

then would no longer be necessary in

proceedings as such questions are

this case.

legal

in

nature

and

require

the

prime

purpose

of

the

application and interpretation of laws

and jurisprudence which is necessarily a
judicial function.

2. The Petitioner cannot validly invoke the

arbitration clause of the 2005 Lease

RULING:YES.

None

of

the

above-

mentioned arguments have any merit.

The MeTC, RTC and CA all erred in
overlooking

the

significance

arbitration

clause

of

the

incorporated

in

the 2005 Lease Contract. As the SC

sees it, that is a fatal mistake.Hence, the

pg. 12

A D R C ASE D IGESTS 2015

Petition is GRANTED and thus referring

RATIO DECIDENDI:

the Petitioner and the Respondent to

arbitration pursuant to the arbitration
clause of the 2005 Lease Contract,
repeatedly included in the 2000 Lease

Contract stipulates that any disagreement as to

Contract

the interpretation, application or execution of

and

in

the

Amended Deed of Donation.

1976

arbitration

clause

of

Page number 13

The

the 2005

Lease

the 2005 Lease Contract ought to be submitted

to arbitration. To the mind of the Court, such
stipulation is clear and is comprehensive enough
so as to include virtually any kind of conflict or
dispute that may arise from the 2005 Lease
Contractincluding the one that presently besets
Petitioner and Respondent.

First. The disagreement between the Petitioner

and

Respondent

falls

within

the

all-

encompassing terms of the arbitration clause of

the 2005 Lease Contract. While it may be
conceded

that in

the

arbitration

of

such

disagreement, the validity of the 2005 Lease

Contract, or at least, of such contracts rental
stipulations would have to be determined, the
same would not render such disagreement nonarbitrable. The quotation from Gonzales case
that was used to justify the contrary position was
taken out of context.

The pivotal issue that confronted the Court in

the Gonzales case was whether the complaint
for arbitration raises arbitrable issues that the
Panel

of

Arbitrators

Geosciences
cognizance of.

pg. 13

Bureau

of

the

(PA-MGB)

Mines

and

can

take

A D R C ASE D IGESTS 2015

Gonzales decided the issue in the negative. In

jurisprudence which is necessarily a judicial

holding that the PA-MGB was devoid of any

function. (Emphasis supplied)

jurisdiction to take cognizance of the complaint

for arbitration, this Court pointed out to the
provisions of R.A. No. 7942, or the Mining Act of
1995, which granted the PA-MGB with exclusive
original jurisdiction only over mining disputes,
i.e., disputes involving rights to mining areas,
mineral agreements or permits, and surface
owners,

occupants,

concessionaires

claimholders

requiring

the

or

technical

knowledge and experience of mining authorities

in order to be resolved. Accordingly, since the
complaint for arbitration in Gonzales did not
raise mining disputes as contemplated under
R.A. No. 7942 but only issues relating to the
validity of certain mining related agreements, SC
held that such complaint could not be arbitrated
before the PA-MGB. It is in this context that SC
made

the

pronouncement

discussion.Arbitration

before

the

now

in

Panel

of

Arbitrators is proper only when there is a

disagreement between the parties as to some
provisions of the contract between them, which
needs the interpretation and the application of
that

particular

knowledge

and

expertise

possessed by members of that Panel. It is not

proper when one of the parties repudiates the
existence

or

validity

of

such

contract or

agreement on the ground of fraud or oppression

as in this case. The validity of the contract
cannot

be

subject

of

arbitration

proceedings. Allegations of fraud and duress in

the execution of a contract are matters within the
jurisdiction of the ordinary courts of law. These
questions are legal in nature and require the
application and interpretation of laws and

pg. 14

Page number 14

A D R C ASE D IGESTS 2015

SC in Gonzales did not simply base its rejection

complaint for declaration of nullity/or termination

of the complaint for arbitration on the ground

of the subject contracts on the grounds of fraud

that the issue raised therein, i.e., the validity of

and oppression attendant to the

execution
Page
number of the

contracts, is per se non-arbitrable. The real

addendum contract and the other contracts

consideration behind the ruling was the limitation

emanating from it, and that the complaint should

that was placed by R.A. No. 7942 upon the

have been filed with the regular courts as it

jurisdiction of the PA-MGB as an arbitral

involved issues which are judicial in nature.

body. Gonzales rejected

the

complaint

15

for

arbitration because the issue raised therein is

not a mining dispute per R.A. No. 7942 and it is

Such argument is misplaced and respondent

for this reason, and only for this reason, that

cannot rely on the Gonzales case to support its

such issue is rendered non-arbitrable before the

argument. (Emphasis ours)

PA-MGB. As stated beforehand, R.A. No. 7942

clearly limited the jurisdiction of the PA-MGB
only tomining disputes.Much more instructive for
our purposes, on the other hand, is the recent
case of Cargill Philippines, Inc. v. San Fernando
Regal

Trading,

Inc [2011].

In Cargill,

SC

answered the question of whether issues

Second.
arbitration

Petitioner
clause

may
of

still

invoke

the 2005

the

Lease

Contractnotwithstanding the fact that it assails

the validity of such contract. This is due to
the doctrine of separability.

involving the rescission of a contract are

arbitrable.

The

respondent

in Cargill argued

Under the doctrine of separability, an arbitration

against arbitrability, also citing therein Gonzales.

agreement is considered as independent of the

After dissecting Gonzales, SC ruled in favor of

main contract. Being a separate contract in

arbitrability.

held:Respondent

itself, the arbitration agreement may thus be

contends that assuming that the existence of the

invoked regardless of the possible nullity or

contract and the arbitration clause is conceded,

invalidity of the main contract.

Thus,

SC

the CAs decision declining referral of the

parties dispute to arbitration is still correct. It
claims that its complaint in the RTC presents the

Once again instructive is Cargill, wherein SC

issue of whether under the facts alleged, it is

held that, as a further consequence of the

entitled to rescind the contract with damages;

doctrine of separability, even the very party who

and that issue constitutes a judicial question or

repudiates the main contract may invoke its

one that requires the exercise of judicial function

arbitration clause.

and cannot be the subject of an arbitration

proceeding. Respondent cites our ruling in
Gonzales, wherein we held that a panel of
arbitrator is bereft of jurisdiction over the

pg. 15

A D R C ASE D IGESTS 2015

Third. The operation of the arbitration clause in

Rule 4.2. When to make request. (A) Where

this case is not at all defeated by the failure of

the arbitration agreement exists before the

the Petitioner to file a formal request or

action is filed. The request Page

for referral
shall be
number

application therefor with the MeTC. SC finds that

made not later than the pre-trial conference.

the filing of a request pursuant to Section 24

After the pre-trial conference, the court will only

of R.A. No. 9285 is not the sole means by which

act upon the request for referral if it is made with

an arbitration clause may be validly invoked in a

the agreement of all parties to the case.

16

pending suit.
Section 24 of R.A. No. 9285 reads:
(B) Submission agreement. If there is no
existing arbitration agreement at the time the
SEC. 24. Referral to Arbitration. A court before

case is filed but the parties subsequently enter

which an action is brought in a matter which is

into an arbitration agreement, they may request

the subject matter of an arbitration agreement

the court to refer their dispute to arbitration at

shall, if at least one party so requestsnot later

any time during the proceedings.

that the pre-trial conference, or upon the request

of both parties thereafter, refer the parties to
arbitration unless it finds that the arbitration

Rule 4.3. Contents of request. The request for

agreement is null and void, inoperative or

referral shall be in the form of a motion, which

incapable of being performed. [Emphasis ours;

shall state that the dispute is covered by an

italics original]

arbitration agreement.

The request referred to in the above provision

is, in turn, implemented by Rules 4.1 to 4.3

Apart from other submissions, the movant shall

ofA.M. No. 07-11-08-SC or the Special Rules of

attach to his motion an authentic copy of the

Court on Alternative Dispute Resolution (Special

arbitration agreement.

ADR Rules):
The request shall contain a notice of hearing
RULE 4: REFERRAL TO ADR

addressed to all parties specifying the date and

time when it would be heard. The party making
the request shall serve it upon the respondent to

Rule 4.1. Who makes the request. A party to a

pending action filed in violation of the arbitration
agreement, whether contained in an arbitration
clause

or

in

submission

agreement, may request the court to refer the

parties to arbitration in accordance with such
agreement.

pg. 16

give him the opportunity to file a comment or

opposition as provided in the immediately
succeeding Rule before the hearing. [Emphasis
ours; italics original]

A D R C ASE D IGESTS 2015

Attention must be paid, however, to the salient

The JDR framework is based on the processes

wordings of Rule 4.1. It reads: [a] party to a

of mediation,

pending action filed in violation of the arbitration

evaluation which entails thePage

submission
number of a

agreement x x x may request the court to refer

dispute before a JDR judge who shall merely

the parties to arbitration in accordance with such

facilitate settlement between the parties in

agreement.

conflict or make a non-binding evaluation or

In using the word may to qualify the act of filing

a request under Section 24 of R.A. No. 9285,
the Special ADR Rules clearly did not intend to
limit the invocation of an arbitration agreement in
a pending suit solely via such request. After all,
non-compliance with an arbitration agreement is
a valid defense to any offending suit and, as
such, may even be raised in an answer as
provided in our ordinary rules of procedure.

In this case, it is conceded that Petitioner was

not able to file a separate request of arbitration
before the MeTC. However, it is equally
conceded that the Petitioner, as early as in
its Answer

with

Counterclaim,

had

already

apprised the MeTC of the existence of the

arbitration

clause

in

the 2005

Lease

Contract and, more significantly, of its desire to

have the same enforced in this case. This act of

conciliation or early

neutral

17

assessment of the chances of each partys

case. Thus in JDR, the JDR judge lacks the
authority to render a resolution of the dispute
that is binding upon the parties in conflict. In
arbitration, on the other hand, the dispute is
submitted to an arbitrator/sa neutral third
person or a group of thereofwho shall have
the authority to render a resolution binding upon
the parties.

Clearly, the mere submission of a dispute to

JDR proceedings would not necessarily render
the subsequent conduct of arbitration a mere
surplusage. The failure of the parties in conflict
to reach an amicable settlement before the JDR
may, in fact, be supplemented by their resort to
arbitration where a binding resolution to the
dispute could finally be achieved. This situation
precisely finds application to the case at bench.

Petitioner is enough valid invocation of his right

to arbitrate.

Neither would the summary nature of ejectment

cases be a valid reason to disregard the

Fourth.

The

fact

that

the

Petitioner

and

Respondent already underwent through JDR

proceedings before the RTC, will not make the
subsequent conduct of arbitration between the
parties unnecessary or circuitous. The JDR
system is substantially different from arbitration
proceedings.

pg. 17

enforcement of the arbitration clause of the 2005

Lease Contract. Notwithstanding the summary
nature of ejectment cases, arbitration still
remains relevant as it aims not only to afford the
parties an expeditious method of resolving their
dispute.

A D R C ASE D IGESTS 2015

A pivotal feature of arbitration as an alternative

Section 7. Stay of civil action. If any suit or

mode of dispute resolution is that it is, first and

proceeding be brought upon an issue arising out

foremost, a product of party autonomy or the

of an agreement providing Page

for the
arbitration
number

freedom of the parties to make their own

thereof, the court in which such suit or

arrangements to resolve their own disputes.

proceeding is pending, upon being satisfied that

Arbitration agreements manifest not only the

the issue involved in such suit or proceeding is

desire of the parties in conflict for an expeditious

referable to arbitration, shall stay the action or

resolution of their dispute. They also represent,

proceeding until an arbitration has been had in

if not more so, the parties mutual aspiration to

accordance with the terms of the agreement:

achieve such resolution outside of judicial

Provided, That the applicant for the stay is not in

auspices,

default in proceeding with such arbitration.

in

more

informal

and

less

antagonistic environment under the terms of

their choosing. Needless to state, this critical
feature can never be satisfied in an ejectment

18

[Emphasis supplied]
R.A. No. 9285

case no matter how summary it may be.

Section 24. Referral to Arbitration. A court
Legal Effect of the Application of the Arbitration
Clause

before which an action is brought in a matter

which is the subject matter of an arbitration
agreement shall, if at least one party so requests
not later that the pre-trial conference, or upon

Since there really are no legal impediments to

the application of the arbitration clause of
the 2005 Contract of Lease in this case, We find
that the instant unlawful detainer action was
instituted in violation of such clause. The Law,

the request of both parties thereafter, refer the

parties to arbitration unless it finds that the
arbitration

agreement

is

null

and

void,

inoperative or incapable of being performed.

[Emphasis supplied]

therefore, should have governed the fate of the

parties and this suit:
R.A. No. 876

It is clear that under the law, the instant unlawful

detainer action should have been stayed; the
Petitioner and the Respondent should have
been referred to arbitration pursuant to the
arbitration clause of the 2005 Lease Contract.
The MeTC, however, did not do so in violation of
the lawwhich violation was, in turn, affirmed by
the RTC and Court of Appeals on appeal.

pg. 18

A D R C ASE D IGESTS 2015

The violation by the MeTC of the clear directives

The project, costing P42M, was to be completed

under R.A. Nos. 876 and 9285 renders invalid all

within one year or 365 days reckoned from the

proceedings it undertook in the ejectment

first calendar day after signing

of number
the Notice of
Page

case after the filing by Petitioner of its Answer

Award and Notice to Proceed and receipt of

with

the

down payment (20% of contract price). The

Petitioner and the Respondent should have

P8.4M down payment was fully paid on January

been referred to arbitration. This case must,

14, 2008. Payment of the balance of the contract

therefore, be remanded to the MeTC and be

price will be based on actual work finished within

suspended

the

15 days from receipt of the monthly progress

decisions of the MeTC, RTC and the Court of

billings. Per the agreed work schedule, the

Appeals must all be vacated and set aside.

completion date of the project was December

Counterclaimthe

at

said

point

point.

when

Inevitably,

19

2008.

Mabunay

required Performance

also

submitted

the

Bond issued

by

The Petitioner and the Respondent must then be

Respondent Utility Assurance Corporation in the

referred to arbitration pursuant to the arbitration

amount equivalent to 20% down payment or

clause of the 2005 Lease Contract.

P8.4M.

J Plus Asia Corporation v Utility Assurance

Corporation
Does CA have jurisdiction to review arbitral
awards?

Mabunay commenced work at the project site on

January 7, 2008. Petitioner paid up to the 7th
monthly progress billing sent by Mabunay. As of

G.R. No. 199650 (June 26, 2013)

September 16, 2008, Petitioner had paid the

VILLARAMA, JR., J.:

total amount of P15.98M inclusive of the 20%

down payment.

Mabunay had accomplished only 27.5% of the

FACTS:
Petitioner J Plus Asia Development Corporation
and

Martin

aConstruction

E.

Mabunay

Agreement on

entered

into

December

24,

2007 whereby the latter undertook to build the

formers 72-room condominium/hotel located in
Boracay Island.

However, as of said date,

project. It was later found out by the joint

inspection and evaluation by the Petitioner and
Mabunay that, as of November 14, 2008, the
project was only 31.39% complete and that the
uncompleted portion was 68.61%.
On November 19, 2008, Petitioner terminated
the

contract

Mabunay and
demands

went

and

sent Demand

Respondent
unheeded,

Letters to

surety.

As its

Petitioner

filed

a Request for Arbitrationbefore the Construction

Industry Arbitration Commission (CIAC).

pg. 19

A D R C ASE D IGESTS 2015

In his Answer, Mabunay claimed that the delay

In its Answer Ex Abundante Ad Cautelam with

was caused by retrofitting and other revision

Compulsory Counterclaims and Cross-claims,

works ordered by Petitioner. He asserted that

Respondent

argued

he actually had until April 30, 2009 to finish the

Bond merely

guaranteed

project since the 365 days period of completion

payment and not the entire obligation of

started only on May 2, 2008 after clearing the

Mabunay

retrofitted old structure. Hence, the termination

Agreement. Since the value of the projects

of the contract by Petitioner was premature and

accomplishment already exceeded the said

the filing of the Complaint against him was

amount,

baseless, malicious and in bad faith.

thePerformance

Respondent, on the other hand, filed a Motion to

extinguished. As to the claim for alleged

Dismiss on the ground that Petitioner has no

overpayment

cause of action and the complaint states no

contended that it should not be credited against

cause of action against it. The CIAC denied

the 20% down payment which was already

the Motion to Dismiss.

exhausted and such application by Petitioner is

20

that Page
thenumber
Performance
the

under

down

the Construction

Respondents

obligation

Bond had
to

20%

under

been

Mabunay,

fully

Respondent

tantamount to reviving an obligation that had

been

legally

extinguished

by

payment. Respondent also set up a cross-claim

against Mabunay who executed in its favor
an Indemnity

Agreement whereby

Mabunay

undertook to indemnify Respondent for whatever

amounts it may be adjudged liable to pay
Petitioner under the surety bond.

On February 2, 2010, CIAC rendered its

Decision

and

Petitioner.

made

CIAC ruled

Awards
that

in

favor

Mabunay

of
had

incurred delay which entitled Petitioner to the

stipulated liquidated damages and unrecouped
down payment.
Dissatisfied,

Respondent

filed

in

the

CA

a Petition for Review under Rule 43 of the 1997

Rules of Civil Procedure, as amended, which
reversed the CIACs ruling.

pg. 20

A D R C ASE D IGESTS 2015

Hence, the present Petition for Review on
Certiorari under Rule 45 seeking to reverse the
CA insofar as it denied its claims under
the Performance Bond and to reinstate in its
entirety the February 2, 2010 CIAC Decision.

RATIO DECIDENDI:
SC holds that RA No. 9285 did not confer on

Page number 21

RTCs jurisdiction to review awards or decisions

of the CIAC in construction disputes. On the
contrary, Section 40 thereof expressly declares
that confirmation by the RTC is NOT required,
thus:

ISSUE:
Whether

or

not

the Alternative

Dispute

Resolution Act of 2004 and the Special ADR

SEC. 40.

Rules have stripped the CA of jurisdiction to

confirmation of a domestic arbitral award shall

review arbitral awards?

be governed by Section 23 of R.A. 876.

ARGUMENT:
Petitioner

contends

institutionalization

that

of

Confirmation

of

Award.

The

A domestic arbitral award when confirmed shall

that

alternative

with

the

dispute

be enforced in the same manner as final and

executory decisions of the Regional Trial Court.

resolution under RA No. 9285, otherwise known

as the Alternative Dispute Resolution Act of
2004, the CA was divested of jurisdiction to
review the decisions or awards of the CIAC.

The confirmation of a domestic award shall be

made by the regional trial court in accordance
with the Rules of Procedure to be promulgated
by the Supreme Court.

RULING:
NO. The Petitioners contention is without merit.

A CIAC arbitral award need not be confirmed by

Petitioner erroneously relied on the provision

the regional trial court to be executory as

in RA No. 9285 allowing any party to a domestic

provided under E.O. No. 1008. (Emphasis

arbitration to file in the RTC a petition either to

supplied.)

confirm, correct or vacate a domestic arbitral

award.

The

Petition

is

GRANTED.

The

assailed

decision of the CA is REVERSED and SET

ASIDE.

The

Award

made

in

the

Decision rendered by CIAC dated February 2,

2010 is REINSTATED with MODIFICATIONS.

pg. 21

A D R C ASE D IGESTS 2015

EO No. 1008 vests upon the CIAC original and

SECTION 18.2 Petition for review. A petition

exclusive jurisdiction over disputes arising from,

for review from a final award may be taken by

or connected with, contracts entered into by

any of the parties within fifteen

days from
Page(15)
number

parties

receipt thereof in accordance with the provisions

involved

in

construction

in

the

Philippines, whether the dispute arises before or

22

of Rule 43 of the Rules of Court.

after the completion of the contract, or after the

abandonment or breach thereof. By express
provision of Section 19 thereof, the arbitral
award of the CIAC is final and unappealable,
except

on

questions

of

law,

which

are

appealable to the Supreme Court. With the

amendments introduced by RA No. 7902 and
promulgation

of

the 1997

Rules

of

Civil

Procedure, as amended, the CIAC was included

in the enumeration of quasi- judicial agencies
whose decisions or awards may be appealed to
the CA in a Petition for Review under Rule
43.

Such review of the CIAC award may

involve either questions of fact, of law, or of fact

and

law.Petitioner

misread

the

NIA V CA
Does the Construction Industry Arbitration
Commission (CIAC) have jurisdiction over
construction contracts entered into between
parties before the creation of said Commission
in 1985?
When a construction contract contains an
arbitration clause, is it still necessary for the
parties thereto to agree to submit disputes
arising therefrom specifically to the CIAC for the
latter to acquire jurisdiction?
G.R. No. 129169 (November 17, 1999)
DAVIDE, JR., C.J.:

provisions

of A.M. No. 07-11-08-SC (Special ADR Rules)

promulgated by the SC and which took effect on
October 30, 2009. Since RA No. 9285 explicitly
excluded CIAC awards from domestic arbitration
awards that need to be confirmed to be
executory,

said

awards

are

therefore not

covered by Rule 11 of the Special ADR Rules,

as they continue to be governed byEO No.
1008, as amended and the rules of procedure of
the

CIAC. The

Procedure

CIAC

Revised

Governing

Rules

of

Construction

Arbitration provide for the manner and mode of

appeal from CIAC decisions or awards in
Section 18 thereof, which reads:

FACTS:
In a competitive bidding held by Petitioner NIA,
Hydro

Resources

(HYDRO)

was

Contractors

Corporation

awarded Contract for

the

construction of the main civil works of the Magat

River

Multi-Purpose

Project.

The

contract

provided that Respondent HYDRO would be

paid partly in Philippine pesos and partly in U.S.
dollars.

Respondent

HYDRO

substantially

completed the works under the contract in 1982

and final acceptance by Petitioner NIA was
made in 1984. Respondent HYDRO thereafter
determined that it still had an account receivable
from Petitioner NIA representing the dollar rate
differential of the price escalation for the
contract.

pg. 22

A D R C ASE D IGESTS 2015

After unsuccessfully pursuing its case with

ISSUE:

Petitioner NIA, Respondent HYDRO filed with

Page number 23

the CIAC a Request for Adjudication of the

aforesaid

claim.

Petitioner

NIA

filed

its Answer wherein it questioned the jurisdiction

Whether or not CIAC has jurisdiction to hear and

try the dispute between the parties?

of the CIAC alleging lack of cause of action,

laches and estoppel in view of Respondent

ARGUMENTS:

HYDROs alleged failure to avail of its right to

submit the dispute to arbitration within the

Petitioner NIA alleged that CIAC has no

prescribed period as provided in the contract.

jurisdiction to hear and try the dispute between

to

the parties as EO No. 1008 had no retroactive

Dismiss alleging lack of jurisdiction over the

effect. It contended that there was no agreement

disputes.

with Respondent HYDRO to submit the dispute

The arbitral body constituted by both parties

to CIAC for arbitration considering that the

issued

the

construction contract was executed in 1978 and

determination of the Motion to Dismiss and

the project completed in 1982, whereas the

resolved to proceed with the hearing of the case

Construction Industry Arbitration Law creating

on the merits as the grounds cited by Petitioner

CIAC was signed only in 1985; and that while

NIA did not seem to be indubitable. Petitioner

they have agreed to arbitration as a mode of

NIA filed a Motion for Reconsideration of the

settlement of disputes, they could not have

aforesaid Order. CIAC in denying the Motion for

contemplated submission of their disputes to

Reconsideration ruled that it has jurisdiction over

CIAC. Petitioner NIA further argued that records

the Respondent HYDROs claim over Petitioner

show that it had not voluntarily submitted itself to

NIA pursuant to E.O 1008 and that the hearing

arbitration by CIAC. Petitioner NIA contended

should proceed as scheduled. CIAC then

that the CIAC did not acquire jurisdiction over

rendered a decision in the main case in favor of

the dispute since it was only Respondent

Respondent HYDRO.

HYDRO that requested for arbitration. It asserts

Petitioner NIA filed with the CA an Original

that to acquire jurisdiction over a case, as

Action of Certiorari and Prohibition with prayer

provided under E.O. 1008, the request for

for Restraining Order and/or Injunction which

arbitration filed with CIAC should be made by

dismissed the same.

both parties, and hence the request by one party

Hence, the present Petition for Certiorari and

is not enough.

Later,

Petitioner

an

NIA

order

filed

which

a Motion

deferred

Prohibition with urgent prayer for Temporary

Restraining Order and Writ of Preliminary

RULING:YES. Contrary to the claim of Petitioner

Injunction.

NIA,

the

CIAC

controversy.

pg. 23

has

jurisdiction

over

the

A D R C ASE D IGESTS 2015

The instant Petition is DISMISSED for lack of

The complaint of Respondent HYDRO against

merit.

Petitioner NIA on the basis of the contract

executed

between

24 7

them Page
was number
filed on

December 1994, during the effectivity of E.O.

RATIO DECIDENDI:

No. 1008. Hence, it is well within the jurisdiction

the

of CIAC. The jurisdiction of a court is determined

Construction Industry Arbitration Law which

by the law in force at the time of the

was promulgated on 4 February 1985, vests

commencement of the action. Petitioner NIAs

upon CIAC original and exclusive jurisdiction

argument that CIAC had no jurisdiction to

over disputes arising from, or connected with

arbitrate

contracts entered into by parties involved in

existence is untenable. E.O. 1008 is clear that

construction in the Philippines, whether the

the CIAC has jurisdiction over all disputes

dispute arises before or after the completion of

arising from or connected with construction

the contract, or after the abandonment or breach

contract whether the dispute arises BEFORE or

thereof. The disputes may involve government

AFTER the completion of the contract. Thus, the

or private contracts. For the Board to acquire

date the parties entered into a contract and the

jurisdiction, the parties to a dispute must agree

date of completion of the same, even if these

to submit the same to voluntary arbitration.

occurred before the constitution of the CIAC, did

EO No.

1008,

otherwise

known

as

on

contract

which

preceded

its

not automatically divest the CIAC of jurisdiction

as long as the dispute submitted for arbitration
arose after the constitution of the CIAC. Stated
differently, the jurisdiction of CIAC is over the
dispute, not the contract; and the instant dispute
having

arisen

when

CIAC

was

already

constituted, the arbitral board was actually

exercising current, not retroactive, jurisdiction.
It is undisputed that the contracts between
Respondent
contained

HYDRO

anarbitration

and

Petitioner

NIA

clause wherein

they

agreed to submit to arbitration any dispute

between them that may arise before or after the
termination of the agreement. Consequently, the
claim of Respondent HYDRO having arisen from
the contract is arbitrable. Petitioner NIAs
reliance with the ruling on the case of Tesco
Services Incorporated v. Vera, is misplaced.

pg. 24

A D R C ASE D IGESTS 2015

The 1988 CIAC Rules of Procedure which were

Under the present Rules of Procedure, for a

applied by this Court in the Tesco case had

particular construction contract to fall within the

been duly amended by CIAC Resolutions No. 2-

jurisdiction of CIAC, it is merely

required
that the
Page
number

91 and 3-93, Section 1 of Article III of which read

parties agree to submit the same to voluntary

as follows:

arbitration. Unlike in the original version of

25

Section 1, as applied in the Tesco case, the law

as it now stands does not provide that the
Submission

to

CIAC

An

parties should agree to submit disputes arising

arbitration clause in a construction contract or a

from their agreement specifically to the CIAC for

submission to arbitration of a construction

the latter to acquire jurisdiction over the same.

contract or a submission to arbitration of a

Rather, it is plain and clear that as long as the

construction

an

parties agree to submit to voluntary arbitration,

agreement to submit an existing or future

regardless of what forum they may choose, their

controversy to CIAC jurisdiction, notwithstanding

agreement will fall within the jurisdiction of the

the reference to a different arbitration institution

CIAC, such that, even if they specifically choose

or arbitral body in such contract or submission.

another forum, the parties will not be precluded

When a contract contains a clause for the

from electing to submit their dispute before the

submission of a future controversy to arbitration,

CIAC because this right has been vested upon

it is not necessary for the parties to enter into a

each party by law, i.e., E.O. No. 1008.

dispute

Jurisdiction

shall

be

deemed

submission agreement before the claimant may

invoke the jurisdiction of CIAC.
Moreover, it is undeniable that Petitioner NIA
agreed to submit the dispute for arbitration to the
CIAC. Petitioner NIA through its counsel actively
participated in the arbitration proceedings by
filing an Answer with Counterclaim, as well as its
compliance wherein it nominated arbitrators to
the

proposed

panel,

participating

in

the

deliberations on, and the formulation of, the

Terms

of

Reference

of

the

arbitration

proceeding, and examining the documents

submitted

by

Respondent

HYDRO

after

Petitioner NIA asked for the originals of the said

documents.

pg. 25

A D R C ASE D IGESTS 2015

LM POWER ENGINEERING CORP V CAPITOL

RTC denied the Motion to Dismiss on the

INDUSTRIAL

ground that the dispute did not involve the

Is there a need to file first a Formal Request for

interpretation or the implementation

Page numberof the

Arbitration with the Construction Industry

Agreement and was, therefore, not covered by

Arbitration Commission (CIAC) in order to vest it

the arbitral clause. The RTC ruled that the take-

with jurisdiction to decide a construction

over of some work items by Respondent was not

dispute?

equivalent

G.R. No. 141833 (March 26, 2003)

to

termination,

but

mere

modification, of the Subcontract. The latter was

PANGANIBAN, J.:

ordered to give full payment for the work

FACTS:

Petitioner and

26

completed by Petitioner.

Respondent

entered

into

On appeal, the CA reversed the RTC and

Subcontract Agreement involving electrical

ordered the referral of the case to arbitration.

work at the Third Port of Zamboanga. Two years

The CA held as arbitrable the issue of whether

thereafter, Respondent took over some of the

Respondents take-over of some work items had

work contracted to Petitioner. Allegedly, the

been intended to be a termination of the original

latter had failed to finish it because of its inability

contract under Letter K of the Subcontract.

to procure materials.

Hence,

Upon completing its task under the Contract,

Certiorari under Rule 45.

this Petition

Petitioner billed Respondent in the amount of

P6.7M. Respondent, however, refused to pay

for

Review

on

ISSUES:
1. Whether

or

not

there

exists

and contested the accuracy of the amount of

controversy/dispute between Petitioner

advances and billable accomplishments listed by

and

Petitioner. Respondent also took refuge in the

interpretation and implementation of the

termination clause of the Agreement.

Subcontract Agreement that requires

That

clause allowed it to set off the cost of the work

Respondent

regarding

the

prior recourse to voluntary arbitration?;

that Petitioner had failed to undertake due to

2. In the affirmative, whether or not there is

termination or take-over against the amount it

a need to file a request first with the

owed the latter.

CIAC in order to vest it with jurisdiction

Because of the dispute, Petitioner filed with the

to decide a construction dispute?

RTC of Makati a Complaint for Collection of the

amount representing the alleged balance due it
under the Subcontract. Instead of submitting
anAnswer,
Dismiss,

Respondent
alleging

that

filed
the

a Motion

to

Complaint was

premature because there was no prior recourse

to arbitration.

pg. 26

A D R C ASE D IGESTS 2015

ARGUMENTS:

NO. SC is not persuaded with Petitioners

1.

contention. Section 1 of Article III of the NEW

Petitioner claims that there is no conflict

Rules of Procedure Governing

Construction
Page number

regarding

the

Arbitration has dispensed with the requirement

implementation of the Agreement. Thus, without

to submit a request for arbitration. Recourse to

having to resort to prior arbitration, it is entitled

the CIAC may now be availed of whenever a

to collect the value of the services it rendered

contract contains a clause for the submission of

through an ordinary action for the collection of a

a future controversy to arbitration.

the

interpretation

or

27

sum of money from Respondent.

RATIO DECIDENDI:

On the other hand, Respondent contends that

1.

there is a need for prior arbitration as provided in

In the instant case, the Subcontract has the

the Agreement. This is because there are some

following arbitral clause:

disparities

6. The Parties hereto agree that any dispute or

between

the

parties

positions

regarding the extent of the work done, the

conflict

amount

billable

implementation of this Agreement which cannot

accomplishments, and the set off of expenses

be settled between [respondent] and [petitioner]

incurred by Respondent in its take-over of

amicably shall be settled by means of arbitration

Petitioners work.

x x x.

of

advances

and

as

regards

to

interpretation

and

2.

Clearly, the resolution of the dispute between

According to Petitioner, assuming arguendo that

the parties herein requires a referral to the

the dispute is arbitrable, the failure to file a

provisions of their Agreement. Within the scope

formal request for arbitration with the CIAC

of the arbitration clause are discrepancies as to

precluded the latter from acquiring jurisdiction

the

over the question.

accomplishments,
RULING:

The

Petition

is

unmeritorious;

amount

of

advances
the

and

application

billable
of

the

provision on termination, and the consequent

hence,

set-off of expenses.

DENIED. The assailed Decision of the CA is

A review of the factual allegations of the parties

AFFIRMED.

reveals
1.

that

they

differ

on

the

following

questions, the resolutions of which lies in the

YES. SC sides with Respondent. The instant

interpretation

of

the

case involves technical discrepancies that are

Subcontract Agreement:

provisions

of

better left to an arbitral body that has expertise

1. Did a take-over/termination occur?

in those areas.

2. May
2.

the

expenses

incurred

the

by

Respondent in the take-over be set off

against the amounts it owed Petitioner?
3. How much were the advances and
billable accomplishments?

pg. 27

A D R C ASE D IGESTS 2015

Being an inexpensive, speedy and amicable

As clearly explained in China Chang Jiang

method of settling disputes, arbitration along

Energy

with mediation, conciliation and negotiation is

Infrastructure Builders et Page

al. (an
extended
number

encouraged by the SC. Aside from unclogging

unsigned Resolution) and reiterated in National

judicial dockets, arbitration also hastens the

Irrigation Administration v. Court of Appeals

resolution

[1999], from which SC quote thus:

of

disputes,

especially

of

the

Corporation

(Philippines)

v.

Rosal

28

commercial kind. It is thus regarded as the

Under the present Rules of Procedure, for a

wave of the future in international civil and

particular construction contract to fall within the

commercial

jurisdiction of CIAC, it is merely required that the

contractual agreement calling for arbitration

parties agree to submit the same to voluntary

between the parties would be a step backward.

arbitration unlike in the original version of

Consistent with the above-mentioned policy of

Section 1, as applied in the Tesco case, the law

encouraging

resolution

as it now stands does not provide that the

construe

parties should agree to submit disputes arising

arbitration clauses. Provided such clause is

from their agreement specifically to the CIAC for

susceptible of an interpretation that covers the

the latter to acquire jurisdiction over the same.

asserted dispute, an order to arbitrate should be

Rather, it is plain and clear that as long as the

granted. Any doubt should be resolved in favor

parties agree to submit to voluntary arbitration,

of arbitration.

regardless of what forum they may choose, their

methods,

disputes.

Brushing

alternative

courts

should

aside

dispute
liberally

2.

agreement will fall within the jurisdiction of the

Section 1 of Article III of the NEW Rules of

CIAC, such that, even if they specifically choose

Procedure Governing Construction Arbitration

another forum, the parties will not be precluded

provides:

from electing to submit their dispute before the

SECTION 1. Submission to CIAC Jurisdiction

CIAC because this right has been vested upon

An arbitration clause in a construction

each party by law, i.e., E.O. No. 1008.

contract or a submission to arbitration of a

Clearly, there is no more need to file a request

construction

with the CIAC in order to vest it with jurisdiction

dispute

shall

be

deemed

an

agreement to submit an existing or future

to decide a construction dispute.

controversy to CIAC jurisdiction, notwithstanding

The arbitral clause in the Agreement is a

the reference to a different arbitration institution

commitment on the part of the parties to submit

or arbitral body in such contract or submission.

to arbitration the disputes covered therein.

When a contract contains a clause for the

Because that clause is binding, they are

submission of a future controversy to arbitration,

expected to abide by it in good faith. And

it is not necessary for the parties to enter into a

because it covers the dispute between the

submission agreement before the claimant may

parties in the present case, either of them may

invoke the jurisdiction of CIAC.

compel the other to arbitrate.

pg. 28