DR.

LUCAS ADAMSON AND ADAMSON MANAGEMENT CORP VS CA AND

APAC HOLDINGS
GR NO. 106879
ADAMSON petitioners
CA AND APAC HOLDINGS respondent
DOCTRINE/S:

ARBITRATORS RESORT TO CONTRACT INTERPRETATION IS NOT A

GROUND FOR VACATING AN AWARD - That the award was unfavorable
to petitioners herein did not prove evident partiality. That the arbitrators
resorted to contract interpretation neither constituted a ground for vacating
the award because under the circumstances, the same was necessary to
settle the controversy between the parties regarding the among of the NAV.
In any case, this Court finds that the interpretation made by the arbitrators
did not create a new contract, as alleged by herein petitioners but was a
faithful application of the provisions of the Agreement. Neither was the
award arbitrary for it was based on the statements prepared by the SGV
which was chosen by both parties to be the "auditors."|||

MISAPPREHENSION OF AGREEMENT NOT A GROUND FOR REFUSAL

TO PERFORM OBLIGATION THEREUNDER - e note herein that during
the arbitration proceedings, the parties agreed that the contract as prepared
by private respondent, was submitted to petitioners for approval. Petitioners,
therefore, are presumed to have studied the provisions of the Agreement
and agreed to its import when they approved and signed the same. When it
was submitted to arbitration to settle the issue regarding the computation of
the NAV, petitioners agreed to be bound by the judgment of the arbitration
committee, except in cases where the grounds for vacating the award
existed. Petitioners cannot now refuse to perform its obligation after
realizing that it had erred in its understanding of the Agreement

JUDICAL REVIEW OF ARBITRATORS AWARDS - "It is stated expressly

under Art. 2044 of the Civil Code that the finality of the arbitrators' award is
not absolute and without exceptions. Where the conditions described in
Articles 2038, 2039 and 2040 applicable to both compromises and
arbitrations are obtaining, the arbitrators' award may be annulled or
rescinded. Additionally, under Sections 24 and 25 of the Arbitration Law,
there are grounds for vacating, modifying or rescinding an arbitrators'
award. Thus, if and when the factual circumstances referred to in the abovecited provisions are present, judicial review of the award is properly
warranted." Clearly, though recourse to the courts may be availed of by
parties aggrieved by decisions or awards rendered by arbitrator/s, the extent
of such is neither absolute nor all encompassing

Dugs & Diane

FACTS

June 15, 1990 Adamson Management Corp (AMC) and Lucas Adamson
(Adamson) on the one hand and APAC Holdings Limited on the other hand
entered into a contract whereby AMC sold 99.97% of the OCS of AMC and
Adamson to APAC for P24,384,600 + Net Asset Value of Adamson
BUT the parties FAILED to agree on a reasonable net asset value (NAV)
Submitted the case for arbitration in accordance with RA 876 (arbitration
law)
1991 Arbitration Committee rendered a decision finding that NAV of
company is P167,188.00 which was computed on the basis of a pro-forma
balance sheet submitted by SGV
Arbitration Committee disregarded the Adamsons arguments that there was
a fix NAV amounting to P5,146,000.00
According to the Committee, however, the amount of P5,146,000.00 which
was claimed as initial NAV by petitioners, was merely an estimate of the
Company's NAV as of February 28, 1990 which was still subject to financial
developments until June 19, 1990, the cut-off date
The basis for this ruling was Clause 3(B) of the Agreement which fixed the
said amount; Clause 1(A) which defined NAV and provided that it should be
computed in accordance with Clause 7(A); Clause 7(A) which directed the
auditors to prepare in accordance with good accounting principles a balance
sheet as of cut-off date which would include the goodwill and intangible
assets (P19,116,000.00), the value of tangible assets excluding the land as
per Cuervo appraisal, the adjustment agreed upon by the parties, and the
cost of redeeming preferred shares; and Clause 5(E).
The Committee pointed out that although Adamson contested the
adjustments, they were, however, not able to prove that these were not
valid, except with respect to the tax savings.|||
The Committee also held that any ambiguity in the contract should not be
interpreted against APAC because the parties themselves had stipulated
the draft of the agreement and was submitted to Adamson for approval and
that Adamson even incorporated changes which were eventually
incorporated in the final form of the agreement
APAC filed a petition for CONFIRMATION of the arbitration award before
the RTC of Makati
Adamson opposed the petition and prayed for nullification, modification
and/or correction of the same alleging that the arbitrators committed
EVIDENT PARTIALITY AND GAD
RTC rendered a decision VACATING the arbitral award
CA reversed decision of RTC
Adamson alleges that CA erred and acted in GAD

ISSUE:
W/N the CA erred in affirming the arbitration award and in reversing the decision of the
TC NO!
W/N the arbitrators were not impartial NO

W/N settled arbitration awards are subject to judicial review - YES

HELD:

The CA was correct in affirming the arbitration award and in reversing

the decision of the TC
Section 24 of arbitration law provides the grounds for vacating award:
o
The award was procured by corruption, fraud or other undue
means; or
o
That there was evident partiality or corruption in the arbitrators or
any of them; or
o
That the arbitrators were guilty of misconduct in refusing to
postpone the hearing upon sufficient cause shown, or in refusing
to hear evidence pertinent and material to the controversy; that
one or more of the arbitrators was disqualified to act as such
under section nine hereof, and willfully refrained from disclosing
such disqualifications or any other misbehavior by which the
rights of any party have been materially prejudiced; or
o
That the arbitrators exceeded their powers, or so imperfectly
executed them, that a mutual, final and definite award upon the
subject matter submitted to them was not made.
ADAMSON FAILED TO PROVE THEIR ALLEGATION OF PARTIALITY
OF THE ARBITRATORS
Proofs other than mere inferences are needed to establish evident partiality
It is clear therefore that the TC vacated the award not because of evident
partiality but because the arbitrator interpreted the contract in a way which
was not favorable to Adamson and because it considered that APAC, by
submitting the controversy to arbitration was seeking to renege on its
obligation under the contract
That the award was unfavorable to Adamson did NOT prove evident
partiality
In any case, this Court finds that the interpretation made by the arbitrators
did not create a new contract, as alleged by herein petitioners but was a
faithful application of the provisions of the Agreement.
Neither was the award arbitrary for it was based on the statements prepared
by the SGV which was chosen by both parties to be the "auditors
Adamson cannot claim that the consideration for private respondent's
acquisition of the outstanding common shares of stock was grossly
inadequate. If the NAV as computed was small, the result was not due to
error in the computations made by the arbitrators but due to the extent of
the liabilities being borne by the Adamson. During the arbitration
proceedings, the committee found that petitioner has been suffering losses
since 1983, a fact which was not denied by petitioner.
Arbitration awards are subject to judicial review - The CA reversed the
trial court not because the latter reviewed the arbitration award involved
herein, but because the respondent appellate court found that the trial court
had no legal basis for vacating the award

Dugs & Diane

HEUNGHWA INDUSTRY CO LTD VS DJ BUILDERS CORPORATION

GR NO. 169095

HEUNGHWA INDUSTRY CO LTD PETITIONER

DJ BUILDERS CORPORATION RESPONDENT
DOCTRINE/S:

There are 2 acts which may vest the CIAC with jurisdiction over a
construction dispute:
1. Presence of an arbitration clause in a construction contract
2. Agreement by the parties to submit the dispute to the CIAC

The proceedings in the CIAC cannot then be voided merely because of the
non-participation of petitioner. Section 4.2 of the CIAC Rules is clear and it
leaves no room for interpretation
FACTS:

HEUNGHWA INDUSTRY (HI) = Korean corporation doing business in the

PH

DJ Builders corp = corporation duly organized under the laws of the PH

HI was able to secure a contract with DPWH to construct Roxas-Langogan

Road in Palawan

HI entered into a subcontract agreement with DJ builders to do earthwork

and box culvert of the said project in the amount of 112,228.918.00

The agreement contained an arbitration clause

The agreed price was not fully paid ! hence DJ builders filed before the
RTC of Puerto Princesa a complaint for breach contract, collection of sum
of money with PI, Preliminary Attachment and Prayer for TRO and
damages

HI averred that it was not liable to pay DJ builders because DJ caused the
stoppage of the work

HI also claims that it failed to collect from DPWH due to DJ builders poor
equipment performance

HI filed a counterclaim for P24M

Sept. 27, 2000 the parties filed a joint motion to submit the following
issues to the CIAC:
o
Manpower and equipment stanby time
o
Unrecouped mobilization expenses
o
Retention
o
Discrepancy of billing
o
Price escalation for fuel and oil usage

RTC issued order GRANTING motion

HI filed an urgent manifestation praying that additional matters be referred

to CIAC for arbitration
o
Additional mobilization costs

Dugs & Diane

ISSUE:
1.
2.
3.

o
Propriety of liquidated damages
o
Propriety of downtime costs
DJ builders filed with CIAC a request for adjudication ! HI filed a
reply/manifestation stating that t was abandoning the submission to the
CIAC and pursuing the case before the RTC
CIAC issued an order denying the motion to dismiss filed by HI and holding
that the CIAC has jurisdiction over the case ! MR denied ! Certiorari
W/N the CIAC has jurisdiction over the case YES
W/N the petitioners claim that it would have been estopped is
premature YES
W/N the proceedings in the CIAC were valid YES

HELD
1. YES, the CIAC has jurisdiction over the case

CIAC has jurisdiction over the construction dispute because of the

mere presence of the arbitration clause in the subcontract agreement.
Thus, the CIAC did not commit any patent grave abuse of discretion, nor did
it act without jurisdiction when it issued the assailed Order denying
petitioner's motion to dismiss. |

Submission to CIAC Jurisdiction An arbitration clause in a construction

contract or a submission to arbitration of a construction dispute shall be
deemed an agreement to submit an existing or future controversy to CIAC
jurisdiction, notwithstanding the reference to a different arbitration institution
or arbitral body in such contract or submission. 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

Based on the foregoing, there are two acts which may vest the CIAC
with jurisdiction over a construction dispute.
o
One is the presence of an arbitration clause in a construction
contract,
o
and the other is the agreement by the parties to submit the
dispute to the CIAC.

||| The first acts is applicable to the case at bar

The bare fact that the parties incorporated an arbitration clause in their
contract is sufficient to vest the CIAC with jurisdiction over any construction
controversy or claim between the parties. The rule is explicit that the CIAC
has jurisdiction notwithstanding any reference made to another arbitral body

It is well-settled that jurisdiction is conferred by law and cannot be waived by

agreement or acts of the parties. Thus, the contention of petitioner that it
never authorized its lawyer to submit the case for arbitration must likewise
fail. Petitioner argues that notwithstanding the presence of an arbitration
clause, there must be a subsequent consent by the parties to submit the
case for arbitration. To stress, the CIAC was already vested with jurisdiction

the moment both parties agreed to incorporate an arbitration clause in the

sub-contract agreement. Thus, a subsequent consent by the parties would
be superfluous and unnecessary.|||
2. YES

3. YES

Petitioner had its chance and lost it, more importantly so, by its own choice.
This Court will not afford a relief that is apparently inconsistent with the law.

Reliance of the CA on NIA ruling is inaacurate

In the case at bar, the only participation that can be attributed to petitioner is
the joint referral of specific issues to the CIAC and the manifestation praying
that additional matters be referred to the CIAC. Both acts, however, have
been disputed by petitioner because said acts were performed by their
lawyer who was not authorized to submit the case for arbitration. And even
if these were duly authorized, this would still not change the correct finding
of the CA that the CIAC had jurisdiction over the dispute because, as has
been earlier stressed, the arbitration clause in the subcontract
agreement ipso facto vested the CIAC with jurisdiction.|||
It puzzles this Court why petitioner would insist that the RTC should hear
the case when the CIAC has the required skill and expertise in addressing
construction disputes.
Petitioner cannot presume that it would have been estopped from
questioning the jurisdiction of the CIAC had it participated in the
proceedings. In fact, estoppel is a matter for the court to consider
Given that petitioner questioned the jurisdiction of the CIAC from the
beginning, it was not remiss in enforcing its right. Hence, petitioner's claim
that it would have been estopped is premature
This Court finds that the CIAC simply followed its rules when it proceeded
with the hearing of the dispute notwithstanding that petitioner refused to
participate therein.
The proceedings before the CIAC were valid, for the same had been
conducted within its authority and jurisdiction and in accordance with the
rules of procedure provided by Section 4.2 of the CIAC Rules.
o
SEC. 4.2 Failure or refusal to arbitrate. Where the jurisdiction
of CIAC is properly invoked by the filing of a Request for
Arbitration in accordance with these Rules, the failure
despite due notice which amounts to a refusal of the
Respondent to arbitrate, shall not stay the proceedings
notwithstanding the absence or lack of participation of the
Respondent. In such case, CIAC shall appoint the arbitrator/s in
accordance with these Rules. Arbitration proceedings shall
continue, and the award shall be made after receiving the
evidence of the Claimant. (Emphasis and underscoring supplied)||
CA did not issue the TRO promptly so as to divest the CIAC of jurisdiction
The proceedings cannot then be voided merely because of the nonparticipation of petitioner. Section 4.2 of the CIAC Rules is clear and it
leaves no room for interpretation
Therefore, petitioner's prayer that the case be remanded to CIAC in order
that it may be given an opportunity to present evidence is untenable.

Dugs & Diane

KOREA TECHNOLOGIES CO.,

G.R. No. 143581
LTD.,
Petitioner,
- versus HON. ALBERTO A. LERMA, in
TINGA, and
his capacity as Presiding Judge of
VELASCO, JR., JJ.
Branch 256 of Regional Trial
Court of Muntinlupa City, and
PACIFIC GENERAL STEEL
MANUFACTURING
CORPORATION,
Respondents.
January 7, 2008
x-----------------------------------------------------------------------------------------x
FACTS
Petitioner Korea Technologies Co., Ltd. (KOGIES) is a Korean corporation which is
engaged in the supply and installation of Liquefied Petroleum Gas (LPG) Cylinder
manufacturing plants, while private respondent Pacific General Steel Manufacturing
Corp. (PGSMC) is a domestic corporation.
On March 5, 1997, PGSMC and KOGIES executed a contract in the Philippines
whereby KOGIES would set up an LPG Cylinder Manufacturing Plant in Carmona,
Cavite. On April 7, 1997, in Korea, the parties executed Contract No. KLP-970301
dated March 5, 1997 amending the terms of payment. On October 14, 1997, PGSMC
entered into a Contract of Lease with Worth Properties, Inc. (Worth) for use of Worths
5,079-square meter property with a 4,032-square meter warehouse building to house
the LPG manufacturing plant.
On January 22, 1998, it was shown in the Certificate that, after the installation of the
plant, the initial operation could not be conducted as PGSMC encountered financial
difficulties affecting the supply of materials, thus forcing the parties to agree that
KOGIES would be deemed to have completely complied with the terms and conditions
of the March 5, 1997 contract.
For the remaining balance of USD306,000 for the installation and initial operation of
the plant, PGSMC issued two postdated checks. When KOGIES deposited the
checks, these were dishonored for the reason "PAYMENT STOPPED." Thus, on May
8, 1998, KOGIES sent a demand letter to PGSMC threatening criminal action for
violation of Batas Pambansa Blg. 22 in case of nonpayment. On the same date, the
wife of PGSMCs President faxed a letter dated May 7, 1998 to KOGIES President
who was then staying at a Makati City hotel. She complained that not only did
KOGIES deliver a different brand of hydraulic press from that agreed upon but it had
not delivered several equipment parts already paid for.

On May 14, 1998, PGSMC replied that the two checks it issued KOGIES were fully
funded but the payments were stopped for reasons previously made known to
KOGIES.
On June 1, 1998, PGSMC informed KOGIES that PGSMC was canceling their
Contract dated March 5, 1997 on the ground that KOGIES had altered the quantity
and lowered the quality of the machineries and equipment it delivered to PGSMC, and
that PGSMC would dismantle and transfer the machineries, equipment, and facilities
installed in the Carmona plant. Five days later, PGSMC filed before the Office of the
Public Prosecutor an Affidavit-Complaint for Estafa docketed as I.S. No. 98-03813
against Mr. Dae Hyun Kang, President of KOGIES.
On June 15, 1998, KOGIES wrote PGSMC informing the latter that PGSMC could not
unilaterally rescind their contract nor dismantle and transfer the machineries and
equipment on mere imagined violations by KOGIES. It also insisted that their disputes
should be settled by arbitration as agreed upon in Article 15, the arbitration clause of
their contract.
On June 23, 1998, PGSMC again wrote KOGIES reiterating the contents of its June 1,
1998 letter threatening that the machineries, equipment, and facilities installed in the
plant would be dismantled and transferred on July 4, 1998. Thus, on July 1, 1998,
KOGIES instituted an Application for Arbitration before the Korean Commercial
Arbitration Board (KCAB) in Seoul, Korea pursuant to Art. 15 of the Contract as
amended.
On July 3, 1998, KOGIES filed a Complaint for Specific Performance, against PGSMC
before the Muntinlupa City Regional Trial Court (RTC). The RTC granted a temporary
restraining order. In its complaint, KOGIES alleged that PGSMC had initially admitted
that the checks that were stopped were not funded but later on claimed that it stopped
payment of the checks for the reason that "their value was not received" as the former
allegedly breached their contract by "altering the quantity and lowering the quality of
the machinery and equipment" installed in the plant and failed to make the plant
operational although it earlier certified to the contrary as shown in a January 22, 1998
Certificate. Likewise, KOGIES averred that PGSMC violated Art. 15 of their Contract,
as amended, by unilaterally rescinding the contract without resorting to arbitration.
KOGIES also asked that PGSMC be restrained from dismantling and transferring the
machinery and equipment installed in the plant which the latter threatened to do on
July 4, 1998.
On July 9, 1998, PGSMC filed an opposition to the TRO arguing that KOGIES was not
entitled to the TRO since Art. 15, the arbitration clause, was null and void for being
against public policy as it ousts the local courts of jurisdiction over the instant
controversy.
On July 23, 1998, the RTC issued an Order denying the application for a writ of
preliminary injunction, reasoning that PGSMC had paid KOGIES USD 1,224,000, the

Dugs & Diane

value of the machineries and equipment as shown in the contract such that KOGIES
no longer had proprietary rights over them. And finally, the RTC held that Art. 15 of the
Contract as amended was invalid as it tended to oust the trial court or any other court
jurisdiction over any dispute that may arise between the parties. KOGIES prayer for
an injunctive writ was denied.
PGSMC filed a Motion for Inspection of Things to determine whether there was indeed
alteration of the quantity and lowering of quality of the machineries and equipment,
and whether these were properly installed. KOGIES opposed the motion positing that
the queries and issues raised in the motion for inspection fell under the coverage of
the arbitration clause in their contract. KOGIES asserted that the Branch Sheriff did
not have the technical expertise to ascertain whether or not the machineries and
equipment conformed to the specifications in the contract and were properly installed.
The trial court granted the motion. On November 11, 1998, the Branch Sheriff filed his
Sheriffs Report finding that the enumerated machineries and equipment were not
fully and properly installed.
Court of Appeals affirmed the trial court and declared the arbitration clause against
public policy.
ISSUE

W/N the arbitration clause is against public policy

HELD
No. Established in this jurisdiction is the rule that the law of the place where the
contract is made governs. Lex loci contractus. The contract in this case was perfected
here in the Philippines. Therefore, our laws ought to govern. Nonetheless, Art. 2044 of
the Civil Code sanctions the validity of mutually agreed arbitral clause or the finality
and binding effect of an arbitral award. Art. 2044 provides, "Any stipulation that the
arbitrators award or decision shall be final, is valid, without prejudice to Articles
2038, 2039 and 2040." (Emphasis supplied.)
Arbitration clause not contrary to public policy: The arbitration clause which
stipulates that the arbitration must be done in Seoul, Korea in accordance with the
Commercial Arbitration Rules of the KCAB, and that the arbitral award is final and
binding, is not contrary to public policy.
Having said that the instant arbitration clause is not against public policy, we come to
the question on what governs an arbitration clause specifying that in case of any
dispute arising from the contract, an arbitral panel will be constituted in a foreign
country and the arbitration rules of the foreign country would govern and its award
shall be final and binding.
RA 9285 incorporated the UNCITRAL Model law to which we are a signatory:
For domestic arbitration proceedings, we have particular agencies to arbitrate disputes
arising from contractual relations. In case a foreign arbitral body is chosen by the
parties, the arbitration rules of our domestic arbitration bodies would not be applied.

Dugs & Diane

As signatory to the Arbitration Rules of the UNCITRAL Model Law on International

Commercial Arbitration of the United Nations Commission on International Trade Law
(UNCITRAL) in the New York Convention on June 21, 1985, the Philippines
committed itself to be bound by the Model Law. We have even incorporated the Model
Law in Republic Act No. (RA) 9285, otherwise known as the Alternative Dispute
Resolution Act of 2004 entitled An Act to Institutionalize the Use of an Alternative
Dispute Resolution System in the Philippines and to Establish the Office for Alternative
Dispute Resolution, and for Other Purposes, promulgated on April 2, 2004. And while
RA 9285 was passed only in 2004, it nonetheless applies in the instant case since it is
a procedural law which has a retroactive effect.
Among the pertinent features of RA 9285 applying and incorporating the UNCITRAL
Model Law are the following:
(1) The RTC must refer to arbitration in proper cases
(2) Foreign arbitral awards must be confirmed by the RTC
(3) The RTC has jurisdiction to review foreign arbitral awards
(4) Grounds for judicial review different in domestic and foreign arbitral
awards
(5) RTC decision of assailed foreign arbitral award appealable
PGSMC has remedies to protect its interests: Thus, based on the foregoing
features of RA 9285, PGSMC must submit to the foreign arbitration as it bound itself
through the subject contract. While it may have misgivings on the foreign arbitration
done in Korea by the KCAB, it has available remedies under RA 9285. Its interests are
duly protected by the law which requires that the arbitral award that may be rendered
by KCAB must be confirmed here by the RTC before it can be enforced.
With our disquisition above, petitioner is correct in its contention that an arbitration
clause, stipulating that the arbitral award is final and binding, does not oust our courts
of jurisdiction as the international arbitral award, the award of which is not absolute
and without exceptions, is still judicially reviewable under certain conditions provided
for by the UNCITRAL Model Law on ICA as applied and incorporated in RA 9285.
Finally, it must be noted that there is nothing in the subject Contract which provides
that the parties may dispense with the arbitration clause.
Unilateral rescission improper and illegal: Having ruled that the arbitration clause
of the subject contract is valid and binding on the parties, and not contrary to public
policy; consequently, being bound to the contract of arbitration, a party may not
unilaterally rescind or terminate the contract for whatever cause without first resorting
to arbitration.
In addition, whatever findings and conclusions made by the RTC Branch Sheriff from
the inspection made on October 28, 1998, as ordered by the trial court on October 19,
1998, is of no worth as said Sheriff is not technically competent to ascertain the actual
status of the equipment and machineries as installed in the plant.

RTC has interim jurisdiction to protect the rights of the parties: While the issue of
the proper installation of the equipment and machineries might well be under the
primary jurisdiction of the arbitral body to decide, yet the RTC under Sec. 28 of RA
9285 has jurisdiction to hear and grant interim measures to protect vested rights of the
parties
While the KCAB can rule on motions or petitions relating to the preservation or
transfer of the equipment and machineries as an interim measure, yet on hindsight,
the July 23, 1998 Order of the RTC allowing the transfer of the equipment and
machineries given the non-recognition by the lower courts of the arbitral clause, has
accorded an interim measure of protection to PGSMC which would otherwise been
irreparably damaged. KOGIES is not unjustly prejudiced as it has already been paid a
substantial amount based on the contract. Moreover, KOGIES is amply protected by
the arbitral action it has instituted before the KCAB, the award of which can be
enforced in our jurisdiction through the RTC. Besides, by our decision, PGSMC is
compelled to submit to arbitration pursuant to the valid arbitration clause of its contract
with KOGIES.
PGSMC to preserve the subject equipment and machineries: While PGSMC may
have been granted the right to dismantle and transfer the subject equipment and
machineries, it does not have the right to convey or dispose of the same considering
the pending arbitral proceedings to settle the differences of the parties. PGSMC
therefore must preserve and maintain the subject equipment and machineries with the
diligence of a good father of a family until final resolution of the arbitral proceedings
and enforcement of the award, if any.

Dugs & Diane

ABS-CBN BROADCASTING
CORPORATION,
Petitioner,
-versus-

G.R. No. 169332

February 11, 2008

WORLD INTERACTIVE
NETWORK SYSTEMS (WINS)
JAPAN CO., LTD.,
Respondent.
x--------------------------------------------------x
FACTS
On September 27, 1999, petitioner ABS-CBN Broadcasting Corporation
entered into a licensing agreement with respondent World Interactive Network
Systems (WINS) Japan Co., Ltd., a foreign corporation licensed under the laws of
Japan. Under the agreement, respondent was granted the exclusive license to
distribute and sublicense the distribution of the television service known as The
Filipino Channel (TFC) in Japan. By virtue thereof, petitioner undertook to transmit the
TFC programming signals to respondent which the latter received through its
decoders and distributed to its subscribers.
A dispute arose between the parties when petitioner accused respondent of
inserting nine episodes of WINS WEEKLY, a weekly 35-minute community news
program for Filipinos in Japan, into the TFC programming from March to May 2002.
Petitioner claimed that these were unauthorized insertions constituting a material
breach of their agreement. Consequently, petitioner notified respondent of its
intention to terminate the agreement effective June 10, 2002.
Thereafter, respondent filed an arbitration suit pursuant to the arbitration
clause of its agreement with petitioner.
Respondents contentions: (1.) airing of WINS WEEKLY was made with petitioner's
prior approval; (2.) petitioner only threatened to terminate their agreement because it
wanted to renegotiate the terms thereof to allow it to demand higher fee. Respondent
also prayed for damages for petitioner's alleged grant of an exclusive distribution
license to another entity, NHK (Japan Broadcasting Corporation).
The parties appointed Professor Alfredo F. Tadiar to act as sole arbitrator.
They stipulated on the following issues in their terms of reference (TOR):
1.
Was the broadcast of WINS WEEKLY by the claimant duly authorized by the
respondent [herein petitioner]?
2.
Did such broadcast constitute a material breach of the agreement that is a
ground for termination of the agreement in accordance with Section 13 (a) thereof?

Dugs & Diane

3.
If so, was the breach seasonably cured under the same contractual provision of
Section 13 (a)?
4.
Which party is entitled to the payment of damages they claim and to the other
reliefs prayed for?
The arbitrator found in favor of respondent. He held that (1.) petitioner gave
its approval to respondent for the airing of WINS WEEKLY as shown by a series of
written exchanges between the parties; (2.) had there really been a material breach of
the agreement, petitioner should have terminated the same instead of sending a mere
notice to terminate said agreement; (3.) petitioner threatened to terminate the
agreement due to its desire to compel respondent to re-negotiate the terms thereof for
higher fees. He then allowed respondent to recover temperate damages, attorney's
fees and one-half of the amount it paid as arbitrator's fee.
Petitioner filed in the CA a petition for review under Rule 43 of the Rules of
Court or, in the alternative, a petition for certiorari under Rule 65 of the same Rules,
with application for temporary restraining order and writ of preliminary injunction.
Respondent, on the other hand, filed a petition for confirmation of arbitral
award before the Regional Trial Court (RTC) of Quezon City.
Consequently, petitioner filed a supplemental petition in the CA seeking to
enjoin the RTC of Quezon City from further proceeding with the hearing of
respondent's petition for confirmation of arbitral award which was granted.
On February 16, 2005, the CA rendered the assailed decision dismissing
ABS-CBNs petition for lack of jurisdiction. It stated that as the TOR itself provided
that the arbitrator's decision shall be final and unappealable. It ruled that it is the
RTC which has jurisdiction over questions relating to arbitration. It held that the only
instance it can exercise jurisdiction over an arbitral award is an appeal from the trial
court's decision confirming, vacating or modifying the arbitral award. It further stated
that a petition for certiorari under Rule 65 of the Rules of Court is proper in arbitration
cases only if the courts refuse or neglect to inquire into the facts of an arbitrator's
award.
Petitioner then filed for a petition for review on certiorari under Rule 45 and
contends that the CA, in effect, ruled that: (a) it should have first filed a petition to
vacate the award in the RTC and only in case of denial could it elevate the matter to
the CA via a petition for review under Rule 43 and (b) the assailed decision implied
that an aggrieved party to an arbitral award does not have the option of directly filing a
petition for review under Rule 43 or a petition for certiorari under Rule 65 with the CA
even if the issues raised pertain to errors of fact and law or grave abuse of discretion,
as the case may be, and not dependent upon such grounds as enumerated under
Section 24 (petition to vacate an arbitral award) of RA 876 (the Arbitration Law).
Petitioner alleged serious error on the part of the CA.

ISSUE:
Whether or not an aggrieved party in a voluntary arbitration
dispute may avail of, directly in the CA, a petition for review under Rule 43 or a petition
for certiorari under Rule 65 of the Rules of Court, instead of filing a petition to vacate
the award in the RTC when the grounds invoked to overturn the arbitrators decision
are other than those for a petition to vacate an arbitral award enumerated under RA
876.
HELD:
Yes. RA 876 itself mandates that it is the RTC which has jurisdiction over questions
relating to arbitration such as a petition to vacate an arbitral award.
Section 24 of RA 876 provides for the specific grounds for a petition to
vacate an award made by an arbitrator:
Sec. 24. Grounds for vacating award. - In any one of the following cases,
the court must make an order vacating the award upon the petition of any party to
the controversy when such party proves affirmatively that in the arbitration
proceedings:

In cases not falling under any of the aforementioned grounds to vacate an

award, the Court has already made several pronouncements that a petition for review
under Rule 43 or a petition for certiorari under Rule 65 may be availed of in the CA.
Which one would depend on the grounds relied upon by petitioner.
In Luzon Development Bank v. Association of Luzon Development Bank
Employees, the Court held that a voluntary arbitrator is properly classified as a quasijudicial instrumentality and is, thus, within the ambit of Section 9 (3) of the Judiciary
Reorganization Act, as amended. As such, decisions handed down by voluntary
arbitrators fall within the exclusive appellate jurisdiction of the CA. This decision was
taken into consideration in approving Section 1 of Rule 43 of the Rules of Court.
This rule was cited in Sevilla Trading Company v. Semana, Manila Midtown
Hotel v. Borromeo, and Nippon Paint Employees Union-Olalia v. Court of Appeals.
These cases held that the proper remedy from the adverse decision of a voluntary
arbitrator, if errors of fact and/or law are raised, is a petition for review under Rule 43
of the Rules of Court. Thus, petitioner's contention that it may avail of a petition for
review under Rule 43 under the circumstances of this case is correct.
DECISION OF ARBITRATOR MAY BE SUBJECT OF JUDICIAL REVIEW

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

Section 1 of Article VIII of the 1987 Constitution provides that:

them; or
(c) That the arbitrators were guilty of misconduct in refusing to postpone the
hearing upon sufficient cause shown, or in refusing to hear evidence pertinent and
material to the controversy; that one or more of the arbitrators was disqualified to act
as such under section nine hereof, and willfully refrained from disclosing such
disqualifications or of any other misbehavior by which the rights of any party have
been materially prejudiced; or
(d) That the arbitrators exceeded their powers, or so imperfectly executed
them, that a mutual, final and definite award upon the subject matter submitted to
them was not made.
The law itself clearly provides that the RTC must issue an order vacating an arbitral
award only in any one of the cases enumerated therein. Under the legal maxim in
statutory construction expressio unius est exclusio alterius, the explicit mention of one
thing in a statute means the elimination of others not specifically mentioned. As RA
876 did not expressly provide for errors of fact and/or law and grave abuse of
discretion (proper grounds for a petition for review under Rule 43 and a petition for
certiorari under Rule 65, respectively) as grounds for maintaining a petition to vacate
an arbitral award in the RTC, it necessarily follows that a party may not avail of the
latter remedy on the grounds of errors of fact and/or law or grave abuse of discretion
to overturn an arbitral award.

Dugs & Diane

SECTION 1. The judicial power shall be vested in one Supreme Court and
in such lower courts as may be established by law.
Judicial power includes the duty of the courts of justice to settle actual
controversies involving rights which are legally demandable and enforceable, and to
determine whether or not there has been a grave abuse of discretion amounting
to lack or excess of jurisdiction on the part of any branch or instrumentality of
the Government.
As may be gleaned from the above stated provision, it is well within the
power and jurisdiction of the Court to inquire whether any instrumentality of the
Government, such as a voluntary arbitrator, has gravely abused its discretion in the
exercise of its functions and prerogatives. Any agreement stipulating that the
decision of the arbitrator shall be final and unappealable and that no further
judicial recourse if either party disagrees with the whole or any part of the
arbitrator's award may be availed of cannot be held to preclude in proper cases
the power of judicial review which is inherent in courts.
Significantly, Insular Savings Bank v. Far East Bank and Trust Company definitively
outlined several judicial remedies an aggrieved party to an arbitral award may
undertake:

(1)
a petition in the proper RTC to issue an order to vacate the award on the
grounds provided for in Section 24 of RA 876;
(2)
a petition for review in the CA under Rule 43 of the Rules of Court on
questions of fact, of law, or mixed questions of fact and law; and
(3)
a petition for certiorari under Rule 65 of the Rules of Court should the
arbitrator have acted without or in excess of his jurisdiction or with grave abuse of
discretion amounting to lack or excess of jurisdiction.
Nevertheless, although petitioners position on the judicial remedies
available to it was correct, we sustain the dismissal of its petition by the CA. The
remedy petitioner availed of, entitled alternative petition for review under Rule 43 or
petition for certiorari under Rule 65, was wrong.
APPEAL AND CERTIORARI
The remedies of appeal and certiorari are mutually exclusive and not
alternative or successive.
Proper issues that may be raised in a petition for review under Rule 43
pertain to errors of fact, law or mixed questions of fact and law, while a
petition for certiorari under Rule 65 should only limit itself to errors of
jurisdiction, that is, grave abuse of discretion amounting to a lack or excess
of jurisdiction.
Certiorari cannot be availed of where appeal is the proper remedy or as a
substitute for a lapsed appeal.
A careful reading of the assigned errors reveals that the real issues calling
for the CA's resolution were less the alleged grave abuse of discretion exercised by
the arbitrator and more about the arbitrators appreciation of the issues and evidence
presented by the parties. Therefore, the issues clearly fall under the classification of
errors of fact and law questions which may be passed upon by the CA via a petition
for review under Rule 43. Petitioner cleverly crafted its assignment of errors in such a
way as to straddle both judicial remedies, that is, by alleging serious errors of fact and
law (in which case a petition for review under Rule 43 would be proper) and grave
abuse of discretion (because of which a petition for certiorari under Rule 65 would be
permissible).
An appeal taken either to the SC or the CA by the wrong or inappropriate mode shall
be dismissed. Thus, the alternative petition filed in the CA, being an inappropriate
mode of appeal, should have been dismissed outright by the CA.

Dugs & Diane

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